Police Pension Fund Ass'n Bd. v. Hess

• Decision Date: 30 June 1989
• Citation: 127 Pa.Cmwlth. 498,562 A.2d 391
• Court: Pennsylvania Commonwealth Court
• Parties: , 11 Employee Benefits Cas. 1585 POLICE PENSION FUND ASSOCIATION BOARD, an Agency of the City of Reading, Pennsylvania, Appellant, v. Thomas P. HESS, Appellee. Thomas P. HESS, Appellant, v. POLICE PENSION FUND ASSOCIATION BOARD, an Agency of the City of Reading, Pennsylvania, Appellee. 549 C.D. 1988 629 C.D. 1988

Page 391

562 A.2d 391

127 Pa.Cmwlth. 498, 11 Employee Benefits Cas. 1585

POLICE PENSION FUND ASSOCIATION BOARD, an Agency of the City

of Reading, Pennsylvania, Appellant, v. Thomas P. HESS, Appellee.

Thomas P. HESS, Appellant, v. POLICE PENSION FUND ASSOCIATION BOARD, an Agency of the City

of Reading, Pennsylvania, Appellee.

549 C.D. 1988

629 C.D. 1988

Commonwealth Court of Pennsylvania.

Argued Nov. 1, 1988.

Decided June 30, 1989.

Jack A. Linton, City Sol., Peter F. Cianci, First Asst. City Sol., Reading, for appellant/appellee, Police Pension Fund Ass'n Bd., an Agency of the City of Reading, Pa.

Anthony C. Busillo, II, Harrisburg, for appellee/appellant, Thomas P. Hess.

Before CRUMLISH, Jr., President Judge, McGINLEY, J., and NARICK, Senior Judge.

McGINLEY, Judge.

The Police Pension Fund Association Board (Fund) and Police Officer Thomas P. Hess (Hess) cross-filed for summary judgment in the Court of Common Pleas of Berks County (common pleas court). The common pleas court determined that the City of Reading (City) was estopped from denying pension benefits to Hess because he relied on the City's prior representation that he would be eligible for benefits after twenty years service. The common pleas court entered judgment and the Fund and Hess have appealed.

The Fund and Hess entered into a stipulation of facts. Hess was twenty-three (23) years of age at the time he commenced employment with the City on January 23, 1963. When Hess began his employment police officers were eligible to receive pension benefits upon completion of twenty (20) years of service with no minimum age requirement. Hess was expressly informed by representatives of the City that he would be eligible for pension benefits after completion of twenty (20) years of service as a police officer regardless of age. In 1977 the Fraternal Order of Police (FOP), Lodge # 9 and the City met to collectively bargain employment terms and conditions including pensions pursuant to Section 1 of the Act of June 24, 1968, (Act III), P.L. 237. ¹ When the parties arrived at an impasse ² they proceeded to binding arbitration. After hearing the Arbitrators issued an award which specified that all police officers presently on the force with twenty (20) years or more of service as of 1978 could retire with full pension benefits regardless of age. Those officers who did not meet this requirement would be eligible for full pension benefits after completing twenty (20) years of service and the attainment of fifty (50) years of age. The Fund and Hess agree that the award effectively enhanced the actuarial soundness of the fund.

Pursuant to the Arbitrators' award the City enacted an Ordinance ³ which required a minimum age of fifty (50) and twenty (20) years of service as conditions to the receipt of full pension benefits. ⁴ When the Ordinance was enacted Hess had approximately sixteen (16) years of service. On September 10, 1985, at the age of forty-six (46) and with twenty-two (22) years of service, Hess applied for full pension benefits. Pursuant to the Ordinance his request was denied.

Our scope of review of the grant of a motion for summary judgment is limited to determining whether there has been an error of law or a manifest abuse of discretion. Miller v. Emelson, 103 Pa.Cmwlth. 437, 520 A.2d 913 (1987). Summary judgment is properly granted where there is no genuine issue of material fact and the moving party has clearly established entitlement to judgment as a matter of law. Kuehner v. Parsons, 107 Pa.Cmwlth. 61, 527 A.2d 627 (1987).

On appeal, the Fund argues that the theory of equitable estoppel does not apply in the present case because the City did not intentionally misrepresent a material fact upon which Hess relied to his detriment. As to Hess' appeal Hess argues that the Arbitrators exceeded their authority in making the pension award and that the City's enactment of the Ordinance resulted in an unconstitutional infringement of his pension rights. ⁵

The Fund maintains that equitable estoppel is inapplicable because the City did not intentionally or materially misrepresent a material fact upon which Hess relied to his detriment. The Fund asserts that the City did not misrepresent anything to Hess. When he commenced his employment a police officer was entitled to pension benefits after twenty years of service. The Fund argues that a minimum age requirement was properly arbitrated and legislated. Finally, the Fund argues that the application of the doctrine of equitable estoppel would defeat the collective bargaining process because employees will assert reliance on conditions existing at the time of hiring instead of accepting conditions collectively bargained for throughout the employment relationship.

Equitable estoppel is a doctrine that prevents one from doing an act differently than the manner in which another was induced by words or actions to expect. Novelty Knitting Mills, Inc. v. Siskind, 500 Pa. 432, 457 A.2d 502 (1983). The estoppel arises when a party intentionally or negligently misrepresents a material fact, knowing or having cause to know that another will rely on the misrepresentation, and that the other justifiably relies upon the misrepresentation to his detriment. Brog Pharmacy v. Department of Public Welfare, 87 Pa.Cmwlth. 181, 487 A.2d 49 (1985). The elements of estoppel must be proven by clear and convincing evidence, Sepko Appeal, 84 Pa.Cmwlth. 359, 479 A.2d 665 (1984), with the critical elements being misrepresentation and justifiable reliance. Siskind. This is where the common pleas court erred. Herein, the City did not intentionally or negligently misrepresent a material fact to Hess. The City informed Hess that police officers were entitled to a pension after twenty years of service, regardless of age, when Hess joined the force in 1963. This representation was accurate until the Arbitrators' award and the subsequent implementation of the award by City Ordinance. Thereafter, the City did not continue to represent to Hess that he would be eligible for pension benefits after twenty years of service. The City is not equitably estopped from requiring Hess to reach fifty years of age before receiving his pension. ⁶

In Pennsylvania, public retirement benefits are considered deferred compensation Wright v. Retirement Board of Allegheny County, 390 Pa. 75, 134 A.2d 231 (1957). The term "vesting" has traditionally been used when the employee, having made all required contributions, has completed the number of years of service required for eligibility. Hickey v. Pittsburgh Pension Board, 378 Pa. 300, 106 A.2d 233 (1954). Our appellate courts in Catania v. Commonwealth State Employees' Retirement Board (Catania II), 71 Pa.Cmwlth. 393, 455 A.2d 1250 (1983) and Association of Pennsylvania State College and University Faculties v. State System of Higher Education (APSCUF) 505 Pa. 369, 479 A.2d 962 (1984) sought to define the contract rights of the individual employee relative to the public employer in the absence of a collective bargaining agreement establishing such rights. Philadelphia v. District Council 33, 112 Pa.Cmwlth. 90, 535 A.2d 231 (1987). In Catania II, an exhaustive review was conducted of all the major decisions which have considered whether or not statutory changes in pension plan terms can be constitutionally applied to pension plan members before and after vesting. See Catania II, 71 Pa.Cmwlth. at 400-401, 455 A.2d at 1253-1254. Our Court in Catania II, concluded that where a member's rights have been treated as "vested" by reason of attaining the minimum years of tenure, any and all changes which reduce the benefits then applicable are barred. ⁷ As to pension fund members who had commenced employment but not attained minimum tenure before the enactment of the legislative changes, our Supreme Court has reviewed and approved statutory changes in pension plan terms that increased the contribution rate of employees, and established a minimum age, provided the changes enhanced the "actuarial soundness" of the pension fund. See Harvey v. Allegheny County Retirement Board, 392 Pa. 421, 141 A.2d 197 (1958); Eisenberger v. Harrisburg Police Pension Commission, 400 Pa. 418, 162 A.2d 347 (1960); and Geary v. Allegheny County Retirement Board, 426 Pa. 254, 231 A.2d 743 (1967). However, in APSCUF, the Supreme Court went further and held that a unilateral legislative change in the retirement benefits of nonvested members would be prohibited without regard to the Commonwealth's claim of actuarial enhancement. ⁸

In the present case, the FOP and the City met to collectively bargain the pension issue. Section 1 of Act III expressly includes "[t]he right to bargain collectively ...concerning the terms and conditions of their employment, including ...pensions." In City of Allentown v. Local 302, International Association of Fire Fighters, 511 Pa. 275, 288, 512 A.2d 1175, 1181 (1986) our Supreme Court reasoned:

It would appear that by including retirement and pensions in the items which policemen and firemen have a right to bargain, the legislature has evidenced an intention that the public employer no longer has exclusive control over the structure of pension systems. Once the matter is included in a collective bargaining agreement, it becomes, like any other contractual provision, binding on the parties to the agreement.

Therefore, both parties may change the pension plan by mutual consent. However herein, the FOP and the City reached an impasse concerning the pension issue. There was no mutual consent by the parties to change the pension. The pension issue was submitted to arbitration under Act III as a legitimate term or condition of employment falling within the statutorily permitted scope of collective bargaining. In the Matter of the Arbitration Between the Borough of Cambridge and the Police Department, 53 Pa.Cmwlth. 251, 417 A.2d 291 (1980). The Arbitrators' award modified pension eligibility to require...