Price v. United States

• Decision Date: 30 December 1959
• Docket Number: Civ. A. No. 2803.
• Citation: 179 F. Supp. 309
• Parties: William H. PRICE, Jr., Plaintiff, v. UNITED STATES of America and Guy L. Caterina, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

179 F. Supp. 309

William H. PRICE, Jr., Plaintiff, v. UNITED STATES of America and Guy L. Caterina, Defendant.

Civ. A. No. 2803.

United States District Court E. D. Virginia, Norfolk Division.

December 30, 1959.

Gordon E. Campbell, Norfolk, Va., for plaintiff.

John M. Hollis, U. S. Atty., W. Farley Powers, Jr., Asst. U. S. Atty., Norfolk, Va., for defendant.

WALTER E. HOFFMAN, District Judge.

In its memorandum of May 13, 1959, this Court made a tentative total award of $96,800 in favor of the plaintiff in his action instituted under the Federal Tort Claims Act, 28 U.S.C.A. §§ 1346, 2671 et seq., but reserved for further determination the question as to the propriety of crediting against the award the present value of disability benefits in the sum of $164 per month which the plaintiff has been receiving, and will continue to receive subject to certain conditions, during the balance of his life, in the form of an annuity. Additionally, certain survivorship benefits are reserved for the wife of plaintiff in the event plaintiff predeceases his said wife. The benefits paid and to be paid are pursuant to the pertinent provisions of the Civil Service Retirement Act of 1956, 70 Stat. 743, 5 U.S.C.A. § 2251 et seq.

In arriving at the total award payable to plaintiff under the Federal Tort Claims Act, the Court admittedly capitalized plaintiff's loss of earning capacity to the extent of $2,500 per year which, when computed on a basis of "earning" life expectancy discounted at 3½%, resulted in a total loss of earnings of $45,000.

The United States contends that, as to the loss of earnings, the present value of the disability benefits should be offset against the total award, at least to the extent of the amount allocated for loss of earnings, by reason of the language in Brooks v. United States, 337 U.S. 49, 53, 54, 69 S.Ct. 918, 921, 93 L.Ed. 1200, wherein it is said:

"* * * we now see no indication that Congress meant the United States to pay twice for the same injury. Certain elements of tort damages may be the equivalent of elements taken into account in providing disability payments."

For the reasons herein stated, we do not agree with the theory advanced by the United States as applied to the facts of this case, although it is recognized that the point is not free from doubt.

The Government concedes that plaintiff, in his capacity as a crane operator at the Norfolk Naval Shipyard, contributed a total of $2,331.85 into the fund as of December 1, 1958. Plaintiff's contribution to the fund will be exhausted as of April, 1960, and, according to the Government, it is at that time that the offset should be made effective.

Under the Civil Service Retirement Act, when an employee has been so employed in excess of five years, as in the case of plaintiff, he is entitled to certain disability benefits in the form of an annuity as provided by 5 U.S.C.A. § 2259. In this case the amount was determined at forty per cent of plaintiff's average salary over the preceding five years of his service which aggregated $1,995.20. For a consideration of $22.20 per annum, plaintiff elected, pursuant to the rights granted him, to take survivorship benefits. If his wife survives him, the wife will receive $37 per month for the balance of her life. There remained the sum of $1,973 which, when divided by twelve rounded out to the nearest dollar, left $164 per month payable to plaintiff.

By way of mandatory deductions from his salary, plaintiff's base salary was reduced to the extent of 6% until October 1, 1956, which deduction was thereafter increased to 6½%. Participation under the Civil Service Retirement Act was compulsory upon plaintiff, although the plan may be voluntary as to certain specified federal employees under § 2252. The Government, since June 30, 1957, has contributed an equal percentage of plaintiff's wages to the fund from which the benefits are now being paid. Legislative history reveals that Congress was intent upon a plan which would provide maximum benefits consistent with sound actuarial and financial principles. Conference Report No. 2935, July 26, 1956, 2 U.S.Code, Cong. and Adm.News, 84th Cong., 2nd Session, 1956, pp. 3742-3744.

The percentage of wages thus respectively contributed by the plaintiff and the agency or department employing said plaintiff was deposited in the Treasury of the United States as a credit to the "fund" as provided by 5 U.S.C.A. § 2254 (a). Every employee is deemed to consent and agree to the deductions from his basic salary. The "fund" is defined by § 2251(f) to mean the "civil service retirement and disability fund created by the Act of May 22, 1920". The Secretary of the Treasury is commanded, by § 2267(c), to immediately invest that portion of the fund which is not immediately required for the payment of benefits, in interest bearing securities of the United States, and the income derived therefrom becomes a part of the "fund". In short, the "fund" is comprised of moneys (1) deducted from the employee, (2) paid by the employer agency or department, (3) gifts, (4) bequests, (5) additional voluntary deposits of the employee, (6) interest from investments, and (7) appropriations as necessary to maintain the "fund" on a normal cost plus interest basis.

Under 5 U.S.C.A. § 2257(c), plaintiff is subject to an annual physical examination to determine whether he has recovered from his disability. As plaintiff lost an arm it is, of course, conceded that he cannot recover. Nevertheless, as provided by 5 U.S.C.A. § 2257(d), if plaintiff, before reaching age sixty, "is restored to an earning capacity fairly comparable to the current rate of compensation of the position occupied at the time of retirement, payment of the annuity shall cease". It is not essential that plaintiff be reemployed by the Government. Earning capacity is deemed restored if, in two succeeding calendar years, the plaintiff's income from wages or self-employment, or both, shall equal 80% of the current rate of compensation of the position occupied immediately prior to retirement. Upon such cessation of annuity payments, plaintiff would be entitled, at age 62 but not before, to receive "deferred annuity" payments on the normal retirement basis of $73 per month.

There is no statutory authority for the allowance of setoff here sought by the Government. This is, of course, a matter of Congressional determination. If any setoff is permitted, it must be under the authority of United States v. Brooks, 4 Cir., 176 F.2d 482, 484, following the suggestion of the United States Supreme Court on remand of the same case, 337 U.S. 49, 69 S.Ct. 918, 93 L.Ed. 1200.

It should be noted at the outset that Brooks relates only to certain veteran's benefits which are, without exception, deemed to be gratuities which the Government may withdraw or modify at will as the recipient has no property or vested right in such benefits. Walton v. Cotton, 19 How. 355, 60 U.S. 355, 15 L. Ed. 658; United States ex rel. Burnett v. Teller, 107 U.S. 64, 68, 2 S.Ct. 39, 27 L.Ed. 352; Frisbie v. United States, 157 U.S. 160, 166, 15 S.Ct. 586, 39 L.Ed. 657; United States v. Cook, 257 U.S. 523, 42 S.Ct. 200, 66 L.Ed. 350; Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434. While there is some division of opinion on the subject, Civil Service Retirement annuities are not generally classified as gratuities. Dismuke v. United States, 297 U.S. 167, 56 S.Ct. 400, 80 L.Ed. 561; Miller v. Commissioner of Internal Revenue, 4 Cir., 144 F.2d 287; 32 Op.Atty.Gen. 552 (1921).¹

In Dismuke v. United States, supra 297 U.S. 400, 56 S.Ct. 402, the plaintiff instituted an action in the District Court, under the Tucker Act, to recover an annuity claimed to be due him under the Civil Service Retirement Act. The Supreme Court held, inter alia, that the action was properly maintained under the Tucker Act since such annuities are not pensions, salaries, or claims from compensation within the meaning of the exclusionary provisions of the Tucker Act prohibiting suit on such claims. The Court stated that an annuity under the Civil Service Retirement Act was not a "pension" since that term is applicable "to the gratuities paid by the government in recognition of past services in the Army or Navy".

There is, however, authority to the contrary in the recent case of Steinberg v. United States, Ct.Cl., 163 F.Supp. 590, 591, wherein the majority opinion held that an annuity under the Civil Service Retirement Act was not based upon a contract and was "more in the nature of a gratuity granted in appreciation for long and faithful service".²

In Miller v. Commissioner of Internal Revenue, supra 144 F.2d 289, the Court of Appeals for the Fourth Circuit was called upon to determine whether the compulsory amounts deducted under the Civil Service Retirement Act constituted income to the taxpayer. In holding that such deductions were income, the Court quoted at length, with approval, from the opinion of the Tax Court (2 T.C. 267):

"These aspects of the retirement plan seem to us to demonstrate that there have been purchased by the employee substantial rights * *. They are * * * comparable to, and for our purposes indistinguishable from, an annuity contract, of which the employer constitutes itself the issuer, setting aside reserves for that purpose and making investments thereof comparable to those which would be employed by companies engaged in that business."³

These authorities compel us to hold that an annuity under the Civil Service Retirement Act is not a gratuity like veterans' benefits, and, therefore, the holding in Brooks v. United States, supra, is at least of dubious application to this case.⁴

The Steinberg case arising in the Court of Claims had for consideration the constitutionality of 5 U.S.C.A. § 740d which purported to deny annuities or retirement pay to any federal employee claiming the privilege of the Fifth Amendment. In holding the controverted section...