Campbell v. Michigan Judges Retirement Bd.

• Decision Date: 19 July 1966
• Docket Number: No. 8,8
• Citation: 143 N.W.2d 755,378 Mich. 169
• Parties: Howard L. CAMPBELL et al., Plaintiffs, v. MICHIGAN JUDGES RETIREMENT BOARD, Defendants.
• Court: Michigan Supreme Court

Page 755

143 N.W.2d 755

378 Mich. 169

Howard L. CAMPBELL et al., Plaintiffs, v. MICHIGAN JUDGES RETIREMENT BOARD, Defendants.

No. 8.

Supreme Court of Michigan.

July 19, 1966.

Fred Roland Allaben, Grand Rapids, for plaintiffs.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Eugene Krasicky, James J. Wood, Asst. Attys. Gen., for defendant Michigan Judges Retirement Board.

Before the Entire Bench.

DETHMERS, Justice.

Plaintiffs had been judges and members of the Michigan judges retirement system. All of them retired from their judicial offices before January 1, 1960. They brought these original mandamus proceedings in this Court on September 29, 1964, to compel defendant board to increase the pension payments to them from the $6,250 per annum they were receiving to $7,500, commencing from September 6, 1963, the effective date of P.A.1963, No. 172, which raised the salaries of circuit judges from $12,500 to $15,000 annually.

P.A.1951, No. 198 (C.L.S.1961, § 38.801 et seq. (Stat.Ann. § 27.125(1) et seq.)), created the retirement system for those supreme court justices, circuit judges, recorders judges and superior court judges who, as the act provided should elect to become members of the system.

Section 11 of that retirement act provides that members of the system shall be the judges who agree to become members. A written agreement is required on a form to be provided by defendant board. Thus, membership is not compulsory but voluntary on the part of the judges.

Each of the plaintiffs voluntarily executed the necessary form of agreement to become a member and thereafter, through salary deductions by the State, made voluntary contributions to the system in the amounts provided for by the act. By reference, the provisions of the act were made a part of the agreement.

As of January 1, 1960, each plaintiff, having retired, was receiving an annuity of $6,250, being one-half of the amount of the $12,500 salary then currently being paid to circuit judges. This was in accord with the requirement of section 14 of the retirement act as amended by P.A.1956, No. 224, which called for pension payments in amounts equal to one-half of the salary currently being paid to circuit judges. This 1956 amendment as to amounts of pension payments has been referred to as the escalator clause, because it tied the amount of the pension to the increases which might from time to time be granted in salaries to circuit judges.

In 1961, by P.A. No. 169, the act was again amended, to eliminate the escalator clause. It provided for pension payments in the amount of one-half of the salary being paid by the State to the judge at the time of his retirement.

By P.A.1963, No. 172, the annual salary to be paid by the State to circuit judges was increased from $12,500 to $15,000. Thereupon defendant board was confronted with the question of whether plaintiffs' rights to an annual pension were to be considered increased in amount by the 1963 salary increase for circuit judges in accord with the escalator clause of the 1956 amendment or barred therefrom by the 1961 amendment eliminating the escalator clause from the retirement act. Acting on the advice of the attorney general, defendant board declined to pay plaintiffs the increase. Hence, this suit.

Plaintiffs' contention is that they acquired a vested interest in the rights conferred by the retirement act, including the 1956 amendment creating rights under the escalator clause. This would apply not only to those retiring during the time the escalator clause stood unrepealed as a part of the statute (1956--1961) but also to those to whom, by the act's own terms, it was expressly made applicable, namely, those who had theretofore retired. These rights, so plaintiffs say, cannot be abrogated by giving retroactive effect to the subsequent 1961 amendment eliminating the escalator clause after plaintiffs already had retired and started receiving benefits in accord with the act.

Defendant submits that no vested or contractual rights are involved; that, therefore, elimination of the escalator clause was properly within the powers of the legislature and that, accordingly, plaintiffs' rights to benefits are entirely dependent on section 14 as it now stands, namely, as amended in 1961. For this proposition, defendant urges as authority Brown v. City of Highland Park, 320 Mich 108, 30 N.W.2d 798; Wyrzykowski v. Budds, 324 Mich. 731, 37 N.W.2d 686; Attorney General v. Connolly, 193 Mich. 499, 160 N.W. 581; Attorney General v. Chisholm, 245 Mich. 285, 222 N.W. 761; Thiesen v. Dearborn City Council, 320 Mich. 446, 31 N.W.2d 806. In those cases membership of public employees in the retirement system was a condition of employment, compulsory, and deduction from their pay was mandatory, the deductious being placed in a public fund for financing retirement benefits. This Court held that these were not contributions by the employees of their own money but an appropriation of what had at all times been public money, that the employees had not voluntarily entered into an agreement, that, therefore, a contract for retirement benefits had not been made or consummated between the public employing unit of government and the employees, and so, no question of impairment of contracts could be deemed to be presented by a diminishing of benefits under the pension plan. Such decisions relating to retirement plans involving compulsory membership and mandatory contributions to the fund of what was deemed to be public money only although deducted from salaries, have no application to the instant case in which membership and contributions to the fund by the judges are voluntary and a written agreement is entered into between the judges who elect so to do and the judges retirement board acting for the State. Here a contract is created by such mutual action on the part of the two contracting parties, with the judges' own money, earned as part of their salaries, being by their consent and at their direction taken therefrom and placed in the retirement fund as the judges' voluntary contribution thereto and as a consideration for the State's agreement to pay a pension to them. In Johnson v. Douglas, 281 Mich. 247, 256, 274 N.W. 780, 784, this Court said:

'The essential elements of a contract are parties competent to contract, a proper subject-matter, a legal consideration, mutuality of agreement, and mutuality of obligation.'

Here the judge voluntarily agrees to enter the system and pay the contributions, he does pay, and the State agrees to pay certain retirement benefits. There is, then, legal consideration, mutuality of agreement and mutuality of obligation. A contract is made. Accordingly, a problem of impairment of contract is involved here, as contrasted with the above cited Michigan cases relied on by defendant.

Michigan Constitution of 1908, Article II, § 9, followed by Michigan Constitution of 1963, Article I, § 10, and Article I, § 10, of the United States Constitution, prohibit the impairment by State law of the obligation of a contract. Vested rights acquired under contract may not be destroyed by subsequent State legislation or even by an amendment of the State Constitution. See City of Lansing v. Michigan Power Co., 183 Mich. 400, 150 N.W. 250; Ramey v. Michigan Public Service Commission, 296 Mich. 449, 296 N.W. 323; Village of Constantine v. Michigan Gas & Electric Co., 296 Mich. 719, 296 N.W. 847; Michigan Public Service Co. v. City of Cheboygan, 324 Mich. 309, 37 N.W.2d 116.

In this case plaintiffs, who had been judges and contributing members of the judges retirement system, elected to and did retire under the governing act. Under that act and particularly section 12 thereof, they, thereupon, ceased to be members of the system. When they so retired and ceased to be members of the system, their contract was completely executed and their rights thereunder became vested. These could not, thereafter, be diminished or impaired by legislative change of the judges retirement statute. In support hereof see: State ex rel. O'Donald v. City of Jacksonville Beach, Fla.App., 142 So.2d 349 (affirmed Fla., 151 So.2d 430); Bardens v. Board of Trustees of Judges Retirement System, 22 Ill.2d 56, 174 N.E.2d 168; Jensen v. Pritchard, 120 Ind.App. 439, 90 N.E.2d 518, 91 N.E.2d 846; Clarke v. Ireland, 122 Mont. 191, 199 P.2d 965; Ball v. Board of Trustees of Teachers' Retirement Fund, 71 N.J.L. 64, 58 A. 111; Crawford v. Teachers' Retirement Fund Association, 164 Or. 77, 99 P.2d 729; Board of Trustees of Police Pension & Retirement System v. Kern, Okl., 366 P.2d 415.

For annotations of the cases, some involving the compulsory and others the voluntary types of pension systems and, with respect to the compulsory kind some holding one way and some the other, but holding in the main as to the voluntary kind that a contract results which may not be impaired nor benefits diminished by the employing governmental unit, see 52 A.L.R.2d 437--482, superseding the previous 54 A.L.R. 943, 98 A.L.R. 505, 112 A.L.R. 1009, and 137 A.L.R. 249.

We hold that a valid contract was entered into between judges and the State, that the State's agreement thereunder to pay the judges certain benefits created vested rights for the judges upon their retirement, that these are enforceable and cannot be impaired or diminished by the State. This should be deemed to include not only the benefits provided by statute at the time of entry into the contract and of retirement, but, also, those later added by statutory amendment. The legislature may add to but not diminish benefits without running afoul of constitutional prohibition against impairment of the obligation of a contract.

Question has been raised whether this Court has jurisdiction in this original proceeding for mandamus or, otherwise stated, whether there were methods of review of a decision of defendant board provided by statute available to plaintiffs so that their prayer...