Police Pension and Relief Bd. of City and County of Denver v. McPhail

• Decision Date: 04 May 1959
• Docket Number: No. 18555,18555
• Citation: 338 P.2d 694,139 Colo. 330
• Parties: POLICE PENSION AND RELIEF BOARD OF the CITY AND COUNTY OF DENVER, and Edward O. Geer, James T. O'Donnell, Joseph Bruce, Timothy Crow and Ivan Eldher, as members thereof, and Thomas G. Currigan, Auditor of the City and County of Denver, Plaintiffs in Error, v. Paul O. McPHAIL, William E. Flor, Verne E. McCoy, Joseph P. Reilly, O. E. Alumbaugh, and Cornelius F. O'Farrel, on behalf of themselves and all other persons similarly situated, Defendants in Error.
• Court: Colorado Supreme Court

Page 694

338 P.2d 694

139 Colo. 330

POLICE PENSION AND RELIEF BOARD OF the CITY AND COUNTY OF DENVER, and Edward O. Geer, James T. O'Donnell, Joseph Bruce, Timothy Crow and Ivan Eldher, as members thereof, and Thomas G. Currigan, Auditor of the City and County of Denver, Plaintiffs in Error, v. Paul O. McPHAIL, William E. Flor, Verne E. McCoy, Joseph P Reilly, O. E. Alumbaugh, and Cornelius F O'Farrel, on behalf of themselves and all other persons similarly situated, Defendants in Error.

No. 18555.

Supreme Court of Colorado, En Banc.

May 4, 1959.

John C. Banks, W. Keith Peterson, Denver, for plaintiffs in error.

Donaldson, Hoffman & Goldstein, Denver, for defendants in error.

DOYLE, Justice.

Plaintiffs in error were defendants in the district court and will be referred to herein as defendants. They are the members of the Police Pension and Relief Board (of Denver); also named is Thomas G. Currigan, Auditor of the City and County of Denver. The defendants in error were the plaintiffs below and are representatives of a class consisting of all of those retired members of the Police Department of Denver who have served 25 years or more and have satisfied the other requirements of the pension system prior to April 1, 1956, the effective date of the Charter Amendment which would change their status.

The question presented is the validity of the provision of an amendment to the Charter of the City and County of Denver which increased the salaries of the Police Department and the Fire Department and at the same time repealed a provision which had been in force since 1919 which geared pension increases to salary increases of members of the department.

The action seeks a declaratory judgment that the 1956 Charter Amendment which eliminated the automatic increase in the amount of the pension is invalid and void, together with an award of arrearage computed in accordance with the increase. Various grounds are set forth in the complaint and in the briefs in support of the contention that this section is unlawful, unenforcible as to plaintiffs and is separable from the remainder of the Charter Amendment.

The measure was submitted to the electors of the City and County of Denver by the City Council pursuant to Ordinance No. 34, Series of 1956, 'A proposal for the Amendment of Section 319 of the Charter of the City and County of Denver Concerning the Police Department and Fire Department, the Authorized Positions and Qualifications, Salaries, Duties and Retirement Rights and Benefits of the Members and Former Members Thereof.' It was approved at the election held March 20, 1956.

Sub-Section 10, the controversial provision, changes the 1947 Amendment as follows:

'(10) Members of the Classified Service of the Police Department who have retired prior to the effective date of this amendment shall not have added to their pension benefits or allotments one-half of any increases in pay granted by this amendment for the ranks which they held at the time of retirement, whether such increases are granted by paragraph (3) or by paragraph (9) of this Section 1.

'Further, on and after April 1, 1956 Section 133 of the Charter of the City

and County of Denver (1953 Compilation) shall be and the same is hereby amended by repeal and deletion of that portion of said Section which reads as follows:

"In the event that salaries in the Denver Police Department shall be raised after the effective date of this amendment and those members of said department who shall have previously been retired from active service and who are receiving a pension shall be entitled to an increase in the amount of their pension equal to one-half of the raise in pay granted in the rank said member held at the time he was retired.' 'provided that, nothing herein shall be construed or considered as affecting the right of any retired member or any dependent of any deceased retired member to continue to receive the amount of pension benefit or allotments due or being paid to any such persons as of March 31, 1956, without reduction thereof.'

The escalation principle which was repealed in the 1956 Charter Amendment has a long history. It was not contained in the original charter provision creating the Police Pension Relief Fund adopted in the year 1906 (Charter Section 133, Denver Municipal Code 1917, p. 87). This provision authorized the City Council to provide a Police Department Relief Fund administered by the Board of Fire and Police. Pursuant to this authorization the Denver City Council adopted legislation which fixed the pension on a percentage basis. Section 1648 of this act provided:

'* * * there shall be paid monthly from said fund to the applicant an amount equal to one-half the average monthly salary he received during the year next before the time of filing said application.' Municipal Code 1917, p. 734.

Section 1645 of this same legislation created the fund from which pensions were to be paid and provided inter alia:

'* * * A monthly assessment of one per cent. upon the monthly salary of such officer, member or employe, to be deducted and withheld therefrom.' Municipal Code 1917, Sec. 1651.

The charter provision continued in the same form, but legislation was adopted in 1919 which incorporated the escalation provision now in question. Section 1577 of the Municipal Code of 1927 provided:

'* * * there shall be paid monthly from said fund to the applicant, an amount equal to one-half the average monthly salary now being paid or hereafter to be paid for the same class of service which the retired member was performing during one year next before the time of filing such application. * * *' (Emphasis supplied.)

In the year 1946 Section 133 of the Charter was amended to authorize optional retirement following 25 years of service. This continued the escalation method:

'* * * and such member shall thereafter, during his life-time, be paid in equal monthly installments from the 'pension and relief fund' a pension equal to one-half (1/2) of the average monthly rate of salary which such member shall have received in such department during the one year preceding the date of the termination of the said member's twenty-five years of active service.'

'* * * In the event that salaries in the Denver police department shall be raised after the effective date of this amendment those members of said department who shall have previously been retired from active service and who are receiving a pension shall be entitled to an increase in the amount of their pension equal to one-half of the raise in pay granted in the rank said member held at the time he was retired.' Revised Municipal Code of the City and County of Denver, Charter pp. 45 and 46.

Thus, each of the plaintiffs served and elected to retire pursuant to the escalation principle.

The only question which needs to be considered arises from the contention that the City of Denver and the Police Pension Board is estopped to assert and enforce the new amendment against the plaintiffs who lived and worked under and whose rights accrued pursuant to the escalation clause. On this point plaintiffs have argued that the escalation clause was a promise held out to members of the department; that it induced them to retire by promising that they would be protected against the inflationary spiral; that plaintiffs changed their positions in reliance on the continuation of this formula and that grave injustice would result from destruction of these expectations. Defendants argue that the estoppel doctrine is not applicable because there was no basis for these expectations--that the gift or gratuity concept of pensions has been long recognized in Colorado and consequently the escalation clause was always subject to legislative change; that no vested rights have accrued under the 1947 amendment to Charter Section 133.

It is important to note that the pension system which is here involved is a so-called contributory system. Section 133 of the Charter creates the Police Pension and Relief Fund from which the police pensions are paid. Various monies are paid into this fund, including fines imposed against members of the Police Department for violations of rules, donations and gifts and annual appropriations from the City Council. In addition, each member of the Police Department contributes 3 1/2% of his salary. The wording of the sub-section is:

'3. Each and every member of the Denver police department in the classified service shall contribute 3 1/2% of his salary or of his compensation when on disability leave.'

It is also noteworthy that the system has been a contributory one through the years although the percentage of the contribution was less prior to 1946. It is by reason of this contributory aspect and the fact that the plaintiffs have completed their service and have acquired their pension status prior to the adoption of the amendment, that they maintain the repeal violates Article II, Section 11 of the Constitution of Colorado which protects vested contract rights from impairment.

Defendants argue that the Court is committed to the gift or gratuity rule and they cite Bedford V. White, 106 Colo. 439, 106 P.2d 469; Board of Trustees of Firemen's Pension Fund, etc. v. People ex rel. Behrman, 119 Colo. 301, 203 P.2d 490, 7 A.L.R.2d 685 and Board of Trustees of Policemen's Pension Fund, etc. v. Koman, 133 Colo. 598, 298 P.2d 737. This is unquestionably true, but is the 'gift' concept an adequate basis or explanation in a fact setting like the present one? The pension in Bedford v. White, supra, was correctly described as a gift or gratuity since it involved an effort by two former Judges of this Court to recover pension payments allegedly due them under an enactment which had become law after their retirement. It was properly held that the General Assembly could validly enact a measure of this nature to compensate for past service but that when it did so the 'pension' was not contractual but was a...