Kerner v. State Employees' Retirement System

• Decision Date: 21 October 1977
• Docket Number: No. 14306,14306
• Citation: 11 Ill.Dec. 510,368 N.E.2d 1118,53 Ill.App.3d 747
• Parties: , 11 Ill.Dec. 510 Otto KERNER by Anton Kerner, his representative, Plaintiff-Appellee, v. STATE EMPLOYEES' RETIREMENT SYSTEM of Illinois, Elliott Epstein, Director of Finance of the State of Illinois and Trustee and Acting Chairman of the Board of Trustees of the State Employees' Retirement System of Illinois, George Lindberg, Comptroller of the State of Illinois and Trustee of the Board of Trustees of the State Employees' Retirement System of Illinois, Clascenna Hinton Harvey, Trustee of the Board of Trustees of the State Employees' Retirement System of Illinois, Michael L. Mory, Secretary of the Board of Trustees of the State Employees' Retirement System of Illinois, and Alan J. Dixon, Treasurer of the State of Illinois and Treasurer of the State Employees' Retirement System of Illinois, Defendants- Appellants.
• Court: United States Appellate Court of Illinois

Page 1118

368 N.E.2d 1118

53 Ill.App.3d 747, 11 Ill.Dec. 510

Otto KERNER by Anton Kerner, his representative, Plaintiff-Appellee, v. STATE EMPLOYEES' RETIREMENT SYSTEM of Illinois, Elliott Epstein, Director of Finance of the State of Illinois and Trustee and Acting Chairman of the Board of Trustees of the State Employees' Retirement System of Illinois, George Lindberg, Comptroller of the State of Illinois and Trustee of the Board of Trustees of the State Employees' Retirement System of Illinois, Clascenna Hinton Harvey, Trustee of the Board of Trustees of the State Employees' Retirement System of Illinois, Michael L. Mory, Secretary of the Board of Trustees of the State Employees' Retirement System of Illinois, and Alan J. Dixon, Treasurer of the State of Illinois and Treasurer of the State Employees' Retirement System of Illinois, Defendants- Appellants.

No. 14306.

Appellate Court of Illinois, Fourth District.

Oct. 21, 1977.

William J. Scott, Atty. Gen., State of Illinois, Mary F. Stafford, Asst. Atty. Gen., Chicago, for defendants-appellants.

Robert Weiner, Springfield, for plaintiff-appellee.

WEBBER, Justice:

This appeal involves the state pension rights of the late Otto Kerner, one-time governor of Illinois.

The essential facts are not in serious dispute. On September 28, 1965, Otto Kerner (herein for convenience referred to as "Kerner"), then Governor of Illinois, applied for membership in the State Employees' Retirement System (herein "System"). Under an option then existing, Kerner paid into the System $11,048.34, which included 4% Compound interest, and obtained service credits retroactively to the date of his taking office, viz., January 9, 1961.

On May 19, 1968, Kerner resigned as Governor to become a Judge of the United States Court of Appeals for the Seventh Circuit, and on May 2, 1969, applied for a retirement allowance. On June 16, 1969, the System granted the allowance retroactively to January 19, 1969, by paying $1,534.88, and thereafter monthly allowances of $335.08 each, through June 1973. At the time of the initial payment Kerner was notified that his contributions to the System, excluding interest, totalled $16,815.71. Payments were stopped commencing with the month of July 1973; three additional payments were made at various times thereafter, and Kerner's total payments from the System are agreed to be $18,927.82.

Kerner was convicted of one or more felonies under the United States Code in the United States District Court for the Northern District of Illinois, Eastern Division. These convictions were affirmed on appeal. They related to Kerner's service as an employee of the State of Illinois.

On October 3, 1975, Kerner filed a demand with the System for resumption of payments. A hearing was convened before a hearing officer, who rendered his decision on April 26, 1976, recommending such resumption. On May 3 and 5, 1976, the board of trustees of the System reviewed the hearing officer's report, held further hearings and overruled the hearing officer.

Kerner died in May 1976, and his representative filed an administrative review proceeding in the circuit court of Sangamon County, asking in effect that the finding of the System be reversed and Kerner's estate be awarded payments from July 1973, through May 1976, totalling $9,382.24. The circuit court reversed the System and this appeal ensued.

Fundamental and central to the solution of the problem presented is the construction of section 14-199 of the Illinois Pension Code (Ill.Rev.Stat.1975, ch. 108 1/2, par. 14-199). Equally fundamental is the effect, if any, upon section 14-199 of article XIII, section 5, of the Illinois Constitution of 1970.

The statutory section in question, section 14-199, reads as follows:

"None of the benefits herein provided for shall be paid to any person who is convicted of any felony relating to or arising out of or in connection with his service as an employee.

This section shall not operate to impair any contract or vested right heretofore acquired under any law or laws continued in this Article nor to preclude the right to a refund.

All future entrants entering service subsequent to July 9, 1955 shall be deemed to have consented to the provisions of this section as a condition of coverage. " Ill.Rev.Stat.1975, ch. 108 1/2, par. 14-199.

This provision first appeared in 1955 as paragraph 216.2 of chapter 127, Ill.Rev.Stat., and became effective July 9, 1955. In 1963 the legislature codified various pension plans into what is now chapter 108 1/2, Ill.Rev.Stat., and the section was incorporated therein without change except to add to it the words, "subsequent to July 9, 1955."

Before proceeding further, we must lay to rest one matter raised in the briefs. Kerner's brief spends a considerable amount of time and space arguing the proposition that a pension is a contractual right, not a bounty. This is conceded by the System. Some early cases, decided when pension plans were much less common than today, contain language which at least look in the direction of bounty or grace-and-favor, alterable at the will of the sovereign. More recent authority has totally rejected such thinking and pensions are now acknowledged to be contractual in nature. (See Peterson v. Board of Trustees of Firemen's Pension Fund (1973), 54 Ill.2d 260, 296 N.E.2d 721.) Kerner's pension was a contract right and became vested in 1969 when the System granted him an allowance. The actual date of vesting is of little importance since the statute in question was in force at all times since 1955.

In construing the statute the trial court held that until retirement an employee's rights were inchoate, but upon actual retirement such rights became vested. The court read the words "heretofore acquired" in paragraph 2 of section 14-199 of the Pension Code as relating to the date of retirement. Such a construction totally ignores the impact of paragraph 3.

A reading of the statute as passed in 1955 and a further reading of it as amended in 1963 demonstrate clearly that the legislature intended a change in the pension contract for those retiring after July 9, 1955. Paragraph 2 is, in effect, a saving clause and acknowledges that the legislature could not constitutionally impair a previously acquired contract right. "Heretofore" in the 1955 act could only refer by logic and grammar to a time prior to July 9, 1955; all "future entrants" (i. e., those after July 9 1955) are deemed to have consented to the felony divestiture provision as part of the pension contract. The amendment of 1963 further underscores the importance of the date.

The legislative intent is clear: Rights acquired prior to July 9, 1955, could not be divested or impaired and no effort was made to do so; rights acquired after July 9, 1955, could be divested, since the felony conviction condition became part of the pension contract. It is a prime example of a condition subsequent, a familiar feature of contract law.

To pursue the theory of the trial court to its logical conclusion, all an employee need do is to conceal his criminal activity until after retirement and thus render the entire statute meaningless.

In Peterson v. Board of Trustees of Firemen's Pension Fund, 54 Ill.2d 260, 264-65, 296 N.E.2d 721, 724, the court said:

"The language of the Code is clear and there is no need for this court to construe it so as to give it any meaning other than the one which is clearly stated. It is the duty of the court to enforce the law as enacted according to its plain and unmistakable provisions. (Citation.) The legislature could have provided pensions for fire fighters or other full-time appointed employees of the fire department who are no longer capable of performing the duties of their positions because of physical incapacity. It did not do so. We cannot now alter the plain language of the statute and through judicial construction incorporate such a provision in the Code. (Citation.)"

The doctrine applies with force to the case at bar. The statute is plain and clear: Those acquiring pension rights prior to July 9, 1955, may not have them divested by conviction of a felony; those acquiring pension rights after July 9, 1955, forfeit such rights upon such conviction. Any other interpretation tortures the statute and contorts it into an unrecognizable melange. The trial court was in error in its construction.

Since we have decided that the trial court misconstrued the statute, we must next consider the meaning of "any felony." The trial court found that the felonies of which Kerner was convicted were within the ambit of the statute. The System asserts that since no cross-appeal was taken from this finding, the matter is not properly before this court. Village of Arlington Heights v. National Bank of Austin (1st Dist. Gen. No. 76-762 (1977)) Ill.App., 12 Ill.Dec. 5, 369 N.E.2d 502, holds that a specific negative finding below against an appellee is not before an appellate court unless cross-appealed. However, in view of our finding that the trial court erred in construing "heretofore acquired," we must examine the other proposition because, should we also find error in construing "any felony," and find that the felonies involved here are not within the ambit of the statute, the decision of the trial court could be upheld, although not its reasoning.

Since this appears to be a case of first impression, we have no direct precedents to aid us. Kerner lays emphasis on an unpublished opinion of the Attorney General of Illinois to the Director of the Department of Registration and Education under date of February 15, 1966. The subsequent history of that opinion is detailed in Bruni v. Dept. of Registration and Education (1974), 59 Ill.2d 6, 319 N.E.2d 37, cert. denied, 421 U.S. 914, 95 S.Ct. 1373, 43 L.Ed.2d 780. The Attorney General narrowly construed the meaning of "conviction of a felony" in the Medical Practice Act. The legislature responded at its next session by...