Board of Managers of Harris County Hospital District v. Pension Board of Pension System for City of Houston

• Decision Date: 31 December 1969
• Docket Number: No. B-1572,B-1572
• Citation: 449 S.W.2d 33
• Parties: BOARD OF MANAGERS OF the HARRIS COUNTY HOSPITAL DISTRICT, Petitioner, v. PENSION BOARD OF the PENSION SYSTEM FOR the CITY OF HOUSTON, et al., Respondents.
• Court: Texas Supreme Court

Page 33

449 S.W.2d 33

BOARD OF MANAGERS OF the HARRIS COUNTY HOSPITAL DISTRICT, Petitioner, v. PENSION BOARD OF the PENSION SYSTEM FOR the CITY OF HOUSTON et al., Respondents.

No. B-1572.

Supreme Court of Texas.

Dec. 31, 1969.

Rehearing Denied Feb. 4, 1970.

Fulbright, Crooker, Freeman, Bates & Jaworski, Robert M. Welch, Jr. and Harry L. Tindall, Dan G. Matthews, Houston, for petitioner.

William A. Olson, City Atty., W. Lawrence Cook, Jr., Senior Asst. City Atty., Houston, for respondents.

CALVERT, Chief Justice.

This suit was filed by petitioner, Board of Managers of the Harris County Hospital District, as plaintiff, against respondents, Pension Board of the Pension System for the City of Houston, et al., as defendants. The parties will be referred to, respectively, as Hospital District, or District, and City of Houston, or City. The purpose of the suit is to compel City of Houston to comply with the requirements of Section 23a, Article 6243g, ¹ by transferring to Hospital District the employer and employee contributions made to the City Pension System by and on behalf of City of Houston employees who were later transferred to the employment of Hospital District.

The trial court rendered summary judgment for Hospital District on the issue of liability; and, thereafter, the amount of the contributions having been stipulated, the court rendered a final judgment for Hospital District for the sum of $1,413,289.05. Holding that the statute directing transfer of the funds is unconstitutional, the Court of Civil Appeals reversed the judgment of the trial court and remanded the cause for further proceedings. Pension Board of the Pension System, etc. v. Board of Managers, etc., 441 S.W.2d 228. We reverse the judgment of the Court of Civil Appeals and affirm the judgment of the trial court.

Article 6243g was enacted in 1943. Acts 1943, 48th Leg., p. 619 ch. 358. As originally enacted, the article created a Municipal Pension System in cities having 384,000 or more inhabitants. The article was amended in 1965. Acts 1965, 59th Leg., p. 246, ch. 107. As amended, it created Municipal Pension Systems in only those cities having 900,000 or more inhabitants 'according to the last preceding or any future Federal Census.' The statute was, and is, applicable to the City of Houston; and, under its terms, employees of the City are included in the City Pension system.

Prior to November 20, 1965, the City of Houston and Harris County jointly operated Jefferson Davis and Ben Taub charity hospitals. For payroll purposes, hospital personnel were considered to be employed by the City of Houston. They were thus subject to the city pension system, and contributions to the system were made by them and were made on their behalf by the City.

In 1965, pursuant to the provisions of Article 4494n, the voters of the City of Houston approved the establishment of Harris County Hospital District. The function of the City of Houston in operating the charity hospitals was assumed by Hospital District, and City employees assigned to the hospitals were transferred En masse from the payroll of City to that of Hospital District.

Section 23a was added to Article 6243g in 1967, and became effective June 8, 1967. Acts 1967, 60th Leg., p. 843, ch. 354. The section is quoted in full in the opinion of the Court of Civil Appeals. 441 S.W.2d 230-231. It provides that in instances in which a governmental subdivision is formed to perform the functions theretofore performed by a department of a city, or jointly by a city with another governmental subdivision, and all of the employees performing the services are transferred en masse to the new subdivision, then

'* * * such newly created governmental subdivision though its governing body may elect to create a pension system for such transferred employees within ninety days of the enactment of this amendatory act or within ninety days of the creation of such newly created governmental subdivision, whichever occurs later, and the Pension Board of the Pension System established by the city shall, within thirty days after being notified by the governing body of the newly created governmental subdivision of its intention to create a pension system for such transferred employees, transfer to such governing body in cash and/or in obligations of the United States Government of equal fair market value at date of transfer all contributions made by the transferred employees to the Pension System of the city prior to their transfer, who were not eligible and had not elected benefits under the Pension System at the time of transfer, together will all contributions made by the city and/or any other governmental subdivision to the Pension System of the city on behalf of such transferred employees, all without interest. Such payment by the Pension Board of the Pension System of the city shall be in full satisfaction of all claims such transferred employees may have on the Pension System of the city. * * *' Hospital District had set up a pension system before enactment of Section 23a. On June 29, 1967, Hospital District adopted a resolution ratifying and confirming its previously expressed intention to create a pension system for the employees transferred from City, and recreating the system. The District gave City notice of the resolution and demanded transfer of the pension contributions, but City refused. This suit followed.

By points of error in its brief in the Court of Civil Appeals, City advanced nine reasons for reversing the trial court's judgment, six of which asserted unconstitutionality of Section 23a. The Court of Civil Appeals sustained three of the points attacking the constitutionality of the section. The principal ground of attack on the constitutionality of the section, sustained by the Court of Civil Appeals, is that it is a retroactive law which deprives the transferred employees of vested rights and of their property in violation of Sections 16 and 19, Article I, Constitution of Texas, Vernon's Ann.St.

Section 16 of Article 6243g, under and by virtue of which the City pension system exists, provides that when any member of the pension system 'shall leave the employment of such city, either voluntarily, or involuntarily,' before becoming eligible for a retirement or disability pension, he shall thereupon cease to be a member of such pension system, but shall be entitled to a refund of the sum of all payments made by him into the pension fund, without interest. Section 16, Article I of the Constitution prohibits the making of a 'retroactive law, or any law impairing the obligation of contracts,' and Section 19, Article I, provides that no citizen of this State shall be deprived of his property 'except by the due course of the law of the land.' The Court of Civil Appeals reasoned that, by virtue of the foregoing statutory and constitutional, provisions, the transferred employees had an absolute and vested right, immediately upon their transfer, to a refund by City of the contributions made by them to City's pension system; and that the Section 23a requirement that such funds be transferred to District, if enforced, would deprive such employees of this vested right and of their property. We do not agree.

Section 7.1 of Article VII of District's Pension Plan provides:

'If any Member's employment with the District is terminated for any cause other than death or retirement for age or disability, * * * such Member shall be paid as a Severance Benefit, his Contribution Accumulation as of the date of such termination, * * *.'

Considering that transfer of the employees from the City payroll to the District payroll did not result in a change of employment, but only in a change of employers; and that such employees would, under District's pension plan, still have an unimpaired right, upon voluntary or involuntary separation from the employment, to full reimbursement of all contributions made by them while in such employment, we fail to see how, in any practical sense, they will have been deprived of their property, or how their vested rights will have been impaired. If District's pension plan did not provide for reimbursement of contributions upon employee separation, we might have an interesting problem of the transferred employees' right, nevertheless, to demand reimbursement of the transferred contributions; but, on the record before us, no such problem is presented.

City's contention that it will be subjected to double liability if it is required to transfer the contributions is without merit. The Act expressly protects City against double liability.

But City argues, and the Court of Civil Appeals has held, that to enforce the transfer will deprive it of a vested property right to retain and administer all of its contributions as a trust for all municipal employees, including former hospital employees who are in retirement; and that diversion of a part of such contributions to Hospital District violates Section 51, Article III of the State Constitution, which prohibits the Legislature from making a grant, and from authorizing the making of a grant, 'of public moneys to any individual, association of individuals, municipal or other corporations whatsoever * * *.' Again, we disagree.

In City of Dallas v. Trammell, 129 Tex. 150, 101 S.W.2d 1009, 112 A.L.R. 997 (1937), we held that employees contributing to and participating in a municipal pension system did so 'in contemplation of the reserved right of the Legislature to amend or to repeal the laws on which the pension systems are founded,' 101 S.W.2d at 1012; and that the...