Gonzales v. Public Employees Retirement Bd.

• Decision Date: 29 June 1992
• Docket Number: No. 11479,11479
• Parties: Ruben C. GONZALES, et al., Plaintiffs-Appellants, v. PUBLIC EMPLOYEES RETIREMENT BOARD, Dan Gutierrez, Karleen Boggio, Rudy Lujan, Robert Patterson, Ralph Gallegos, Isidro Delgado, Harroll H. Adams, James B. Lewis, Rebecca Vigil-Giron, K. Rose Wood, and Gerald Grimm, Members of the Public Employees Retirement Board, individually and in their official capacities, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

Page 630

839 P.2d 630

114 N.M. 420

Ruben C. GONZALES, et al., Plaintiffs-Appellants, v. PUBLIC EMPLOYEES RETIREMENT BOARD, Dan Gutierrez, Karleen Boggio, Rudy Lujan, Robert Patterson, Ralph Gallegos, Isidro Delgado, Harroll H. Adams, James B. Lewis, Rebecca Vigil-Giron, K. Rose Wood, and Gerald Grimm, Members of the Public Employees Retirement Board, individually and in their official capacities, Defendants-Appellees.

No. 11479.

Court of Appeals of New Mexico.

June 29, 1992.

Certiorari Denied Aug. 14, 1992.

[114 N.M. 421] Thomas L. Dunigan, Santa Fe, for plaintiffs-appellants.

Tom Udall, Atty. Gen., Michael Dickman, Asst. Atty. Gen., Santa Fe, for defendants-appellees.

OPINION

PICKARD, Judge.

In this case we are asked to decide what retirement benefits fifty-two former long-term state employees are entitled to receive after having resigned from their state jobs in order to work for local government employers for a short time before retirement. More generally, we are asked to choose between differing versions of the facts and equities of this case.

According to the Public Employees Retirement Board (PERB), plaintiffs claim entitlement to a "free lunch," whereby they, through a nonexistent legislative loophole, seek to get what no other state employees are entitled to. According to PERB, all of the plaintiffs, after working for organizations that democratically elected not to opt for a higher retirement formula (and concomitant higher individual contributions), quit their jobs and worked for new employers (that did elect the higher retirement formula) for as little as a few days, thereby paying as little as a few dollars into the retirement association but increasing their retirement annuities by one to two hundred thousand dollars.

According to plaintiffs, the facts and equities are quite different. According to plaintiffs, each of them, nearing retirement, consulted officials of PERB about their options. They were told that the statutes permitted them to switch employers, as they did, to obtain the higher benefits. Plaintiffs calculated their needs, worked as instructed, and then retired, irrevocably choosing certain options at what they thought would be the higher formula. In fact, had plaintiffs waited a few months to retire, their benefits would have been at the higher formula due to intervening legislation setting all employee benefits at the higher formula. But, plaintiffs having retired when they did, PERB took the position that they were entitled only to the lower formula.

The major issues on appeal concern (1) whether the applicable statutes and regulations permit plaintiffs to do what they did to get the higher formula; and (2) if not, whether PERB is estopped to deny plaintiffs the higher benefits. The lower court ruled that the statutes did not permit the result advocated by plaintiffs and that estoppel does not apply. We reverse and hold that as to some plaintiffs, the statutes permit what they did and, as to others, PERB may be estopped to deny them the higher benefits.

While the proceedings below were termed summary judgment, the parties agreed at oral argument that they were more in the nature of a bench trial on partially stipulated facts. While some evidence was taken, most of what was presented below was documents, affidavits, and stipulations that the rest of the evidence would be similar in nature to that presented. The parties agreed, both below and on appeal, that the facts were not in dispute. However, the parties dispute the legal effects of, or inferences to be drawn from, some of those facts. Therefore, we review these proceedings as if they were an appeal from a bench trial and grant relief accordingly.

I. Facts

Each plaintiff was a state employee in 1985 and had been employed by the state for a period of time ranging from fifteen to forty years. All plaintiffs were members of PERA (the retirement association administered by defendant Board), as required by NMSA 1978, Chapter 10 (as amended). PERA membership contributions were deducted from the salary of each plaintiff, and corresponding employer contributions were made by the state on behalf of each plaintiff. Pursuant to NMSA 1978, Sections 10-11-18 to 10-11-21 (as amended), these monies were held in trust by PERB and invested in order to pay future retirement benefits to plaintiffs and their fellow PERA members.

In 1985, the legislature amended the public employee retirement statutes, in part creating a new type of retirement annuity. Prior to 1985, only superannuation formula "A" was available to plaintiffs. After 1985, the greater superannuation formula "AA" became available to state employees such as plaintiffs, but only if the new formula was adopted by a majority of their fellow state members in a special election. See NMSA 1978, Sec. 10-11-18(A) (Cum.Supp.1986). The adoption would have increased retirement benefits substantially, but employee membership contributions would also have more than doubled, from 3.83% to 8.93% of the salary. See id. In an election that included plaintiffs, state membership defeated adoption of superannuation formula AA by majority vote. However, in separate elections, the respective memberships of certain New Mexico municipalities and local governmental entities voted to adopt the increased membership contributions and the correspondingly higher formula AA benefits.

After defeat of formula AA by state employees, each plaintiff resigned from his or her long-term state position and obtained brief employment with a local government whose membership had voted to adopt retirement formula AA. PERB accepted PERA contributions from plaintiffs and their new employers at the AA contribution rate. After a few days or weeks at the new job, each plaintiff "retired" from the local government position. Fifty of the fifty-two plaintiffs worked at hourly rates ranging from less than one-half to one-tenth of the hourly rates previously paid to them in their state jobs. A number of plaintiffs subsequently repaid all or part of their salaries to their municipal or county employers. The record further reflects that plaintiffs were candid about the purpose of their new employments, that being solely to obtain formula AA retirement annuities and increase their retirement benefits by approximately 25% each.

Because plaintiffs were very concerned about the amount of benefits they would be receiving upon retirement, most of them conferred with one or more PERB officials before accepting municipal employment. They were told that their plan to resign from the state, work a short while for local government, and thereby obtain formula AA retirement benefits was "legal" or "legally permissible" and would entitle them to retire with the higher benefits. Plaintiffs were informed that if they retired from the state, they would be compensated according to the A retirement formula (2% of final average salary per year of work). PERB officials assured plaintiffs, however, that they could resign from the state, go to work for a municipal employer who had adopted the AA benefit formula, and subsequently retire with eligibility for AA benefits (2.5% of final average salary per year of work). Plaintiffs were specifically told that PERB would pay the higher benefits upon retirement from a local government AA employer, and they were given specific figures as to the amount of monthly retirement benefits that would be paid to them under the AA formula. In addition, PERB officials told plaintiffs that no specific or minimum service credit or period of employment with an AA municipal employer was necessary in order to qualify for the higher benefits.

Other evidence indicated that the assistant attorney general who was serving as PERB's counsel at the time confirmed to one PERB official that the agency position regarding the availability of AA benefits to state employees who resigned from state employment and established short-term AA municipal employment as outlined above was correct. As a group, however, the state membership was not informed collectively or systematically about the availability of this "loophole" for increasing retirement benefits. In fact, during the same period of time that plaintiffs retired, about five hundred of their fellow state employees also did so, but under formula A with its lower benefits. Many of these other retirees had also discussed their proposed retirement plans with PERB employees, but they were not given information about qualifying for AA benefits through employment with local government, apparently because they did not ask for such information.

PERB processed plaintiffs' retirement applications and initiated payment of AA benefits to each of them for periods ranging from three to seventeen months. When PERB granted approval for and initiated the payments, it was aware that plaintiffs were former state employees who had resigned from state employment and undertaken AA municipal employment pursuant to the assurances they had received from PERB officials respecting the availability of AA benefits upon retirement from such employment. Moreover, at the time of retirement, plaintiffs irrevocably committed to benefit payment options, such as survivor benefits and lump sum payment plans, based upon their anticipation of receiving the greater monthly AA formula annuity payments. PERB "ratified" payment of AA benefits to the first fifteen plaintiffs to retire. Then, on or about June 30, 1987, PERB changed its position regarding payment of AA benefits to plaintiffs and discontinued them, based on advice from the new attorney general. Had plaintiffs worked for their state employers until October 1986, however, they would have become eligible for AA benefits from the state by operation of law.

In granting judgment to defendants, the court found that PERB officials did make representations to plaintiffs upon which plaintiffs relied to their detriment. The court also found that while the...