Cianfrani v. Com., State Employees' Retirement Bd.

• Decision Date: 28 June 1984
• Citation: 479 A.2d 468,505 Pa. 294
• Parties: Henry J. CIANFRANI, Individually, and on behalf of the State Employees' Retirement System Beneficiaries, Appellants, v. COMMONWEALTH, STATE EMPLOYEES' RETIREMENT BOARD, Appellees.
• Court: Pennsylvania Supreme Court

Page 468

479 A.2d 468

505 Pa. 294

Henry J. CIANFRANI, Individually, and on behalf of the State Employees' Retirement System Beneficiaries, Appellants, v. COMMONWEALTH, STATE EMPLOYEES' RETIREMENT BOARD, Appellees.

Supreme Court of Pennsylvania.

Submitted May 14, 1984.

Decided June 28, 1984.

[505 Pa. 296] Charles M. Golden, Philadelphia, for appellants.

LeRoy S. Zimmerman, Atty. Gen., Susan J. Forney, Allen C. Warshaw, Deputy Atty. Gen., for appellees.

Before NIX, C.J., and LARSEN, FLAHERTY, McDERMOTT, HUTCHINSON, ZAPPALA and PAPADAKOS, JJ.

OPINION OF THE COURT

FLAHERTY, Justice.

This is an appeal from an opinion and order of the Commonwealth Court ¹ sustaining the demurrer of the State Employees' Retirement Board ("Board"), to the petition of Henry J. Cianfrani seeking, inter alia, interest on retirement benefits withheld by the Board in compliance with the Public Employee Pension Forfeiture Act, Act of July 8, 1978, P.L. 752, No. 140, § 1 et seq., 43 P.S. § 1311 et seq., ("Act 140"), subsequently held by this Court to be unconstitutional as applied to Cianfrani, Cianfrani v. Comm., State Employees Retirement Board, 498 Pa. 204, 445 A.2d 737 (1982) ("Cianfrani I").

This action was commenced by Cianfrani as a class action seeking to represent "all former Commonwealth employees who were members of the System whose retirement and benefit rights had vested prior to July 8, 1978 and whose benefits were wrongfully withheld by Respondent [Board] under Act 140." Before a hearing on the validity of the putative class was heard by the court as provided by Pa.R.C.P. No. 1707, the Board filed preliminary objections in the nature of a motion to strike and in the nature of a demurrer to the substance of the petition, the latter of which was sustained by Commonwealth Court and the case dismissed. From that disposition, direct appeal was taken to this Court. We affirm.

A preliminary objection in the nature of a demurrer is not to be sustained and the complaint dismissed unless the law says with certainty that no recovery is possible. Hoffman v. Misericordia Hosp. of Phila., 439 Pa. 501, 267 A.2d 867 (1970). Therefore, if any theory of law will support the claim raised by the petition, a dismissal is improper. Because the claim for interest presented by Cianfrani is unsupportable on either a statutory basis, a contractual basis or as a matter of the common law of interest, we hold that the Commonwealth Court correctly sustained the Board's demurrer.

For the purpose of our review of a dismissal on the pleadings in the nature of a demurrer, the averments of Cianfrani's petition, except to the extent that they constitute conclusions of law, must be taken as true, Freezer Storage, Inc. v. Armstrong Cork Co., 476 Pa. 270, 382 A.2d 715 (1978). The petition thus viewed avers that subsequent to July 8, 1978, the effective date of Act 140, Cianfrani and all other members of the class he seeks to represent, were notified that their retirement benefits had been terminated pursuant to Act 140. Their accrued contributions were withheld and segregated by the Board into a separate fund until the ruling of this Court on May 28, 1982, in Cianfrani I, supra, holding that Act 140 was unconstitutional as applied to Cianfrani whose pension had vested prior to July 8, 1978, the effective date of Act 140. While the Board repaid the accumulated withheld benefits to Cianfrani, the Board "did not pay the accrued interest thereon," related to the period during which retirement and pension benefits were withheld by the Board. Cianfrani presented a demand for payment of interest which was denied by the Board by letter dated October 19, 1982, whereupon Cianfrani then commenced this action in the Commonwealth Court in which he sought "compensatory damages ... in an amount equal to the interest illegally withheld ..." on behalf of himself and other members of the class, as well as counsel fees and costs.

Until the abrogation of the doctrine of sovereign immunity by this Court in Mayle v. Pa. Dept. of Highways, 479 Pa. 384, 388 A.2d 709 (1978) the generally established rule regarding the payment of interest by the Commonwealth was that the Commonwealth and its instrumentalities were not liable for interest on a sum unless there was either a statutory or a contractual basis for the interest claim. In re Purdy, 447 Pa. 439, 442, 291 A.2d 93, 95 (1972).

However, in City of Pittsburgh v. Pa. Dept. of Transportation, 490 Pa. 264, 416 A.2d 461 (1980) this rule was viewed as closely akin to the doctrine of sovereign immunity and thus "unfair and unsuited to the times," especially under the circumstances of that case, in which the City was compelled to institute an action in mandamus when Penn DOT refused to pay the City the sum owed, despite a PUC certification of the allocation of costs of reconstruction of a bridge and despite repeated requests by the City for payment.

While this holding is meritorious in the case of a wrongful withholding of a sum due, it is inapplicable to the instant claim for interest. The underlying rationale supporting an award of interest on a contractual claim has long been that interest constitutes payment of damages for wrongful delay in meeting a liquidated liability arising from an established duty to pay:

Interest "is completely due, whenever a liquidated sum of money is unjustly withheld. It is a legal and uniform rate of damages allowed, in the absence of any express contract, when payment is withheld, after it has become the duty of the debtor to discharge the debt " ... "When a definite time is fixed for the payment of money the law imposes the obligation to pay damages by way of interest at the legal rate for the detention of the money after the breach of the contract for its payment" ... "Whenever a fixed sum of money is wrongfully withheld from a party to whom it is properly due such party is entitled to interest" ... "As prerequisites to running of interest, the debt must have been liquidated with some degree of certainty and the duty to pay it must have become fixed."

Nagle Engine and Boiler Works v. Erie, 350 Pa. 158, 165-166, 38 A.2d 225, 228 (1944) (emphasis supplied) (citations omitted). ² Although Cianfrani characterizes the withholding of retirement and pension benefits by the Board as "wrongful," we disagree.

It may be said that inasmuch as an unconstitutional statute is void ab initio, justifying no act performed under it, the withholding of Cianfrani's pension was therefore wrongful. However, the actual existence of the act prior to a determination that it is unconstitutional is not without effect:

Any broad statement of absolute retroactive invalidity must be taken with qualifications ... "The actual existence of a statute, prior to such a determination [i.e., unconstitutionality] is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects .... Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified."

Box Office Pictures, Inc. v. Board of Finance and Review, 402 Pa. 511, 517, 166 A.2d 656, 660 (1961), quoting Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 374, 60 S.Ct. 317, 318, 84 L.Ed. 329, 332-333 (1940) reh. den. 309 U.S. 695, 60 S.Ct. 581, 84 L.Ed. 1035 (1940). Thus, the existence of Act 140, notwithstanding this Court's subsequent declaration of its unconstitutionality as applied to Cianfrani, is an operative fact of consequence in the review of the claims presented.

As previously discussed, awardability of interest as damages for delay rests upon the capability of characterizing the actions of the party so charged as wrongful. The Board, as does any administrative body, acts subject to the authority granted it by statute. From the date of enactment of Act 140, July 8, 1978, the Board was without authority to pay retirement and pension benefits to Cianfrani other than that which was authorized by Act 140 which provided that any public employee within the ambit of the Act was not to receive an annuity but was to be repaid in a lump sum only the contributions by the employee made during active service. 43 P.S. § 1313. Because Cianfrani had, at the time of his retirement prior to July 8, 1978, received his personal contributions in a lump sum, Cianfrani I, 498 Pa. at 207, 445 A.2d at 738, the monthly annuity withheld by the Board was clearly within the mandate of Act 140. Thus, the Board action was not only then lawful, but was affirmatively required by the legislative mandate of Act 140. ³ In this respect, the Board action cannot be characterized as wrongful and, accordingly, this claim for interest cannot proceed under the common law regarding the award of interest damages.

Likewise, it may be said that inasmuch as an unconstitutional statute is void ab initio, a debt therefore existed ab initio. Again, we disagree, as the operative fact of the existence of the statute prior to this Court's declaration prevents characterization of the debt as enforceable; it is not until the...