Halpin v. Nebraska State Patrolmen's Retirement System

• Decision Date: 18 June 1982
• Docket Number: No. 44186,44186
• Citation: 211 Neb. 892,320 N.W.2d 910
• Parties: Stewart E. HALPIN et al., Appellants, v. The NEBRASKA STATE PATROLMEN'S RETIREMENT SYSTEM et al., Appellees.
• Court: Nebraska Supreme Court

Page 910

320 N.W.2d 910

211 Neb. 892

Stewart E. HALPIN et al., Appellants, v. The NEBRASKA STATE PATROLMEN'S RETIREMENT SYSTEM et al., Appellees.

No. 44186.

Supreme Court of Nebraska.

June 18, 1982.

Syllabus by the Court

1. State Patrolmen: Pensions. Retirement benefits paid under the Nebraska State Patrolmen's Retirement System are not a gratuity but are deferred compensation.

2. State Patrolmen: Pensions. The right of a state patrolman to receive benefits under the Nebraska State Patrolmen's Retirement System is contractual in nature and is protected against unconstitutional impairment.

3. State Patrolmen: Pensions. The final average monthly salary of a state patrolman who was a member of the State Patrol on or before January 4, 1979, should be calculated by including the payment received upon retirement for unused vacation and sick leave accumulated during the final 3 years of service.

4. Case Overruled. To the extent that Lickert v. City of Omaha, 144 Neb. 75, 12 N.W.2d 644 (1944), is in conflict with this opinion, it is overruled.

Dwyer, O'Leary & Martin, P. C., and Steven E. Achelpohl, Omaha, for appellants.

Paul L. Douglas, Atty. Gen., and Ralph H. Gillan, Asst. Atty. Gen., Lincoln, for appellees.

Heard before KRIVOSHA, C. J., BOSLAUGH, McCOWN, CLINTON, WHITE, HASTINGS, and CAPORALE, JJ.

BOSLAUGH, Justice.

The plaintiff Stewart E. Halpin was a member of the Nebraska State Patrol from October 15, 1947, until December 31, 1979, when he retired from the State Patrol. He is a member of the Nebraska State Patrolmen's Retirement System and is receiving benefits as a retired patrolman. He brought this action on his own behalf and on behalf of every present member of the patrol who was a member prior to January 4, 1979, and every retired patrolman who retired on or after January 4, 1979, and is receiving benefits under the retirement system.

The plaintiffs sought a declaratory judgment that the final average monthly salary of a retiring patrolman should include the lump sum payment received for accumulated but unused vacation and sick leave.

Upon retirement a patrolman is entitled to receive an annuity which is a percentage of his final average monthly salary. Final average monthly salary is defined by statute as the sum of the patrolman's total salary during his final 3 years of service divided by 36. Neb.Rev.Stat. § 60-452.01 (Reissue 1978). From 1969 until January 4, 1979, the final average monthly salary of a patrolman was calculated by including the payment received for unused vacation and sick leave.

Commencing January 4, 1979, a patrolman's final average monthly salary was calculated by excluding the payment received for unused vacation and sick leave. This action was brought to determine that the payment received for unused vacation and sick leave should be included in the final average monthly salary.

Both parties filed motions for summary judgment. The trial court found that the payment for unused vacation and sick leave should not be included in the final average monthly salary. The defendants' motion for summary judgment was sustained and the petition dismissed. The plaintiffs have appealed.

The facts are not in dispute. The Nebraska State Patrolmen's Retirement System was created in 1947. Section 60-452.01 provides: "Any patrolman qualified for an annuity ... shall be entitled to receive a monthly annuity for the remainder of his life. The amount of the annuity shall be a percentage of his final average monthly salary.... For purposes of this computation, final average monthly salary is defined to be the sum of the patrolman's total salary during his final three years of service as a patrolman divided by thirty-six." Upon retirement patrolmen are entitled to be paid in a lump sum for one-fourth of their accumulated unused sick leave and for all of their accumulated unused vacation leave. Neb.Rev.Stat. §§ 81-1325, 81-1328 (Reissue 1976).

The computation of patrolmen's retirement annuities on the basis of a percentage of final average monthly salary began in 1969. From that time until January 4, 1979, the lump sum payments for unused vacation and sick leave were included in the computation of "final average monthly salary." After January 4, 1979, the defendant Public Employees Retirement Board, on the basis of an Attorney General's opinion dated December 26, 1978, excluded these lump sum payments from the computation of retiring patrolmen's "final average monthly salary."

At the hearing on the motions for summary judgment, the plaintiffs introduced depositions and affidavits from patrolman-members of the system, which showed that the patrolmen had been advised repeatedly that such lump sum payments would be included in computing their final average monthly salary, and that such advice had constituted a specific incentive for them to join and remain with the State Patrol. There was also testimony that inclusion of the payments in pension computation was seen as a way to discourage abuse of the sick leave policy. In addition, some officers testified that, although they were eligible to retire before the policy change, since they did not retire until after the change, their annuity was lower than they had expected since it was computed without inclusion of the lump sum payments.

The record indicates that the question of inclusion of the lump sum payments was brought to the attention of the defendant Public Employees Retirement Board in 1972 by a letter from Colonel Kruger indicating that such payments were included when computing a retiring patrolman's final average monthly salary. The minutes of the board meeting of May 22, 1972, stated: "Member Morehouse suggested that the computations based on final monthly salary, which includes sick and vacation time for retiring Safety Patrol members, be continued as in the past." By deposition, the director of the board testified that "back in May of 1972 it was determined that the Board had ruled that accrued sick leave and vacation leave could be included in the salary."

In 1978 a report by the Auditor of Public Accounts raised the issue of inclusion of the lump sum payments in computing final average monthly salary and recommended "that the Public Employees Retirement Board review this procedure to determine its equality. We further recommend that clarification be obtained for the calculation of benefits." The board requested an opinion from the Department of Justice on the matter. An Attorney General's opinion of December 26, 1978, recommended that the board cease to include the lump sum payments in pension calculations. Beginning January 4, 1979, the board followed this recommendation with regard to retiring patrolmen.

The District Court's order granting defendants' motion for summary judgment stated: "The court ... finds that the administrative policy [of including the lump sum payments in the final salary calculation] did not create contractual rights in those patrolmen who served while that policy was in effect." The court relied on Lickert v. City of Omaha, 144 Neb. 75, 12 N.W.2d 644 (1944), which held: "The existence of legislation making pension and retirement provisions for members of a police department and the acceptance or retention of employment as a member of a police department does not establish a contract, between the member and the city, that such members will thereafter be granted the retirement and pension benefits provided in such legislation." Id. at 84, 12 N.W.2d at 648-49. The plaintiffs contend that this finding was in error, and that the trial court erred in failing to find that the lump sum payments should be included in calculating patrolmen's retirement benefits.

"Upon a motion for summary judgment the judgment sought shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to a judgment as a matter of law." Manzer v. Pentico, 209 Neb. 364, 366, 307 N.W.2d 812, 813 (1981).

The issues in dispute in the trial court were purely legal issues: (1) Whether the lump sum payments should be included in the computation of a patrolman's final average monthly salary; and (2) Whether the board's 10-year practice of including the payments created an expectation in the patrolmen protected by the law of contracts. The matter was a proper one for decision upon a motion for summary judgment.

This case involves only the rights of patrolmen who were members of the Nebraska State Patrolmen's Retirement System on or before January 4, 1979. We do not consider or determine whether § 60-452.01 requires inclusion of the leave payments in calculating retirement annuities for patrolmen who became members of the system after that date.

The question before the court is whether the board's determination to exclude leave payments from pension calculations after January 4, 1979, constitutes an impairment of contractual rights of retiring members, in violation of the Constitution. "Where ... it is claimed that the contract clause prohibits a state's statutory modification of its own obligations, the court must determine whether contractual obligations within the purview of the contract clause exist; if so, whether the state legislation under attack impaired those obligations; and if there is an impairment of contract, whether it is forbidden by the Constitution." Pineman v. Oechslin, 494 F.Supp. 525, 538 (D.Conn.1980).

At the time Lickert v. City of Omaha, supra, was decided, it was generally held that public employees' pensions were not a matter of contract but a gratuity " 'springing from the appreciation and graciousness of the sovereign.' " Bedford v. White, 106 Colo. 439, 444, 106 P.2d 469, 471 (1940). However, Nebraska has long recognized that such pensions are not gratuities. In Gossman v. State Employees Retirement System, 177 Neb. 326, 331-32, 129 N.W.2d 97,...