Dadisman v. Moore

• Decision Date: 27 December 1988
• Docket Number: No. 18343,18343
• Citation: 384 S.E.2d 816,181 W.Va. 779
• Court: West Virginia Supreme Court
• Parties: Ira DADISMAN, Chairman of the Public Employees Retirement System Assoc. v. Arch A. MOORE, Jr., Governor, et al.

Page 816

384 S.E.2d 816

181 W.Va. 779

Ira DADISMAN, Chairman of the Public Employees Retirement System Assoc. v. Arch A. MOORE, Jr., Governor, et al.

No. 18343.

Supreme Court of Appeals of

West Virginia.

Dec. 27, 1988.

Rehearing Granted and Opinion

Modified March 17, 1989.

Syllabus by the Court

1. "To entitle one to a writ of mandamus, the party seeking the writ must show a clear legal right thereto and a corresponding duty on the respondent to perform the act demanded." Syl. Pt. 2, State ex rel. Cooke v. Jarrell, 154 W.Va. 542, 177 S.E.2d 214 (1970).

2. A "trust" is a legal relation between two or more persons by virtue of which one is bound to hold property to which he has the legal title, for the use or benefit of the other or others who have an equitable title or interest. It is a right, enforceable in equity, to the beneficial enjoyment of property, real or personal, of which the legal title is in another. The person so holding the legal title or interest is called the "trustee," and the one having the equitable interest and entitled to the benefit is the beneficiary or "cestui que trust." The person creating the trust is called the "trustor" or "settlor." An essential feature of trusts is the division of the title to property, the vesting of the legal title in the trustee and of the equitable title or beneficial interest in the cestui que trust.

3. The "body corporate" of the public employees retirement system constitutes a trust. The terms of the trust contract are spelled out in the PERS statute. W.Va.Code § 5-10-1 et seq.

4. When a public employee renders services he earns the employers' matching contribution to the retirement trust fund, and his contributions and these earned employer contributions, plus the accrued interest from both, constitute the corpus of the pension trust, and the retirement entitlements earned are deferred compensation for these public employees.

5. The PERS Trustees have the highest fiduciary duty to maintain the terms of the trust, as spelled out in the statute.

6. "The word 'shall', in the absence of language in the statute showing a contrary intent on the part of the legislature, should be afforded a mandatory connotation." Syl. Pt. 2, Terry v. Sencindiver, 153 W.Va. 651, 171 S.E.2d 480 (1969).

7. The mandate of the statute, W.Va.Code § 5-10-32(a), creates a ministerial duty in the Governor to include the actuarially determined amounts of contributions earned for the trust by State employees to the PERS in his proposed budget submitted to the Legislature.

8. "A peremptory writ of mandamus will issue to require the discharge by a public official of a non-discretionary duty," Syl. Pt. 4, Glover v. Sims, 121 W.Va. 407, 3 S.E.2d 612 (1939).

9. It is the duty of the Governor to prepare for the Legislature a budget consistent with statutory law and our Constitution, W.Va. Const. art. VI, § 51, and failure to do so supports issuance of a writ of mandamus.

10. "Section 51, Article VI, West Virginia Constitution, commonly known as the 'Budget Amendment', is couched in mandatory terms, and clearly embraces a mandate of the electorate of this State governing the Legislature in the appropriation of funds." Syl. Pt. 2, State ex rel. Trent v. Sims, 138 W.Va. 244, 77 S.E.2d 122 (1953).

11. It is the responsibility of the President of the Senate and the Speaker of the House of Delegates under article six, section fifty-one of our Constitution to take whatever steps are necessary, including the institution of a mandamus action, to insure that the Governor's Budget Bill is as prescribed by law.

12. By the terms of Code § 12-3-12, appropriations may not be expired until the end of the fiscal year for which the appropriations are made; the actions of the Legislature to "transfer and expire" the pension trust fund appropriations, which represent moneys earned for the trust by State employees, prior to the end of the relevant fiscal years are invalid, unlawful, and void.

13. It is fundamental to our constitutional law and we affirm that the Legislature cannot amend general substantive statutes with budgetary language. Compare and contrast W.Va. Const. art. VI, §§ 28-31 the procedure for enacting general law with W.Va. Const. art. VI, § 51 the procedure for enacting budget and supplementary appropriation bills.

14. The PERS Board, as trustee of retirement funds, must dispose of them according to the law. The board has a fiduciary duty to protect the fund and the interests of all beneficiaries thereof, and it must exercise due care, diligence, and skill in administering the trust.

15. "A 'property interest' includes not only the traditional notions of real and personal property, but also extends to those benefits to which an individual may be deemed to have a legitimate claim of entitlement under existing rules or understandings." Syl. Pt. 3, Waite v. Civil Service Commission, 161 W.Va. 154, 241 S.E.2d 164 (1977).

16. Retired and active PERS plan participants have contractually vested property rights created by the pension statute, and such property rights are enforceable and cannot be impaired or diminished by the State.

17. While the law recognizes that states retain some reserve power to modify by statute existing contractual pension relationships when the public interest so requires, such modifications must be reasonable and necessary to serve important public purposes. Legislative modifications to a pension plan must be reasonable, and the test for reasonableness is whether the alteration to the pension scheme serves to keep the system sound and flexible.

18. The realization and protection of public employees' pension property rights is a constitutional obligation of the State. The State cannot divest the plan participants of their rights except by due process, although prospective modifications which do not run afoul of the federal or State impairment clauses are possible.

19. The payment of statutorily promised pension benefits, on maturity, is a general and moral obligation of the State.

20. "The moneys, investments and all other assets of the retirement system shall be used for the sole purpose of meeting the disbursements for annuities and other payments authorized by this article, and shall be used for no other purpose whatsoever." W.Va.Code § 5-10-40.

21. Moneys earned by public employees and contributed to a public employees' retirement plan, including the employers' contribution which has been earned by the public employees, become part of the corpus of the trust and are not thereafter state funds for expropriation or use for any purpose other than that for which the moneys were entrusted.

22. The funds in the PERS trust are an equitable estate, property held in common for the benefit of each member and retirant, and dedicated to private ends. The trust funds are not taxpayers' money. The trust funds have been earned by public employees for the benefit of the trust, thus, the funds are not public property. Any use by the Legislature of the PERS trust funds for a purpose unrelated to that for which the contributions were entrusted is an adverse modification of vested rights of the PERS participants and constitutes an expropriation.

23. The amounts expropriated from the retirement trust funds for purposes other than those for which the funds were collected constitute a public debt owed by the state to the trust funds, and such expropriation must be remedied by recompense through appropriation.

24. Members, retirants, and other beneficiaries are only entitled to participate in the retirement system as defined by the statutory contract. If the Legislature modifies the contract so as to result in new or additional benefits, whether out of gratitude, compassion, or any other motivation, it must provide additional funding to pay for those benefits and beneficiaries.

25. The Board of Investments has a fiduciary relation with the PERS trust and participants and must invest employee earned pension system assets consistently with the highest standards of fiduciary duty. It must utilize competent, educated, and trained financial managers to seek and manage high quality investments and to avoid speculative commercial and industrial ventures and schemes.

George C. Duffield, Charleston, for appellant.

Kenneth E. Knopf, Asst. Atty. Gen., for the Governor.

Steven Herndon, Sol. Gen., for the Bd. of Public Works.

Silas B. Taylor, Deputy Atty. Gen., for the Legislature.

Webster J. Arceneaux, amicus curiae, American Federation of State, County and Municipal Employees.

McGRAW, Justice:

The Petitioner, a retirant and the Chairman of the Public Employees Retirement Association, brings this action based on this Court's original jurisdiction. He prays that we issue the necessary and appropriate writs which would insure the proper funding of the Public Employees Retirement System as well as require that the System be managed in such a way as to maintain the fiscal soundness of that System.

The Respondents include the highest officials of the executive and legislative branches of our State's government, ¹ and we have given their arguments appropriately serious consideration. The Petitioner seeks writs of mandamus against these officials. ² The Respondents mount numerous pleas and motions not connected with the merits of the cause of action and question the propriety or timing of the remedies sought. At common law, these pleas and motions could have been termed dilatory, because they aim to delay or defeat the present litigation, leaving the cause of action unsettled.

The Respondents do not argue that the Petitioner has no rights in this matter. Their arguments generally do not reach or impeach the central issues raised by the Petitioner. Rather, their arguments simply attempt to evade responsibility for problems with the Retirement System. Where these arguments raise colorable procedural questions, we have addressed them in the relevant portions of this opinion. ...