State ex rel. Smith v. Annuity & Pension Bd. of Milwaukee

• Decision Date: 08 December 1942
• Citation: 241 Wis. 625,6 N.W.2d 676
• Parties: STATE ex rel. SMITH v. ANNUITY AND PENSION BOARD OF CITY OF MILWAUKEE et al.
• Court: Wisconsin Supreme Court

241 Wis. 625

6 N.W.2d 676

STATE ex rel. SMITH

v.ANNUITY AND PENSION BOARD OF CITY OF MILWAUKEE et al.

Supreme Court of Wisconsin.

Dec. 8, 1942.

Appeal from an order of the Circuit Court for Milwaukee County; Gustave G. Gehrz, Judge.

Reversed.

This appeal is from an order of the circuit court for Milwaukee county, entered on the 26th day of June, 1942, overruling a motion of appellants to quash an alternative writ of mandamus. On February 6, 1942, the petitioner, Charles J. Smith, filed a petition in the circuit court for Milwaukee county, praying that a peremptory writ of mandamus be issued out of said court, requiring the members of the Annuity and Pension Board of the employees' retirement system of the city of Milwaukee to certify and pay to the petitioner an additional monthly retirement allowance of $20.09 per month from January 1, 1941, to February 1, 1942; and a retirement allowance of $48.25 from February 1, 1942, by reason of the adoption of ch. 308, Laws of 1941, amending the employees' retirement system of the city of Milwaukee (ch. 396, Laws of 1937), providing, among other things, that all persons who were formerly active members of the employees' retirement system and who were compulsorily retired on or after January 1, 1941, receive an additional retirement allowance equal to $3 per month for each creditable year of service.

The appellants moved to quash the alternative writ of mandamus. From an order entered June 26, 1942, denying appellants' motion to quash, they appeal. The material facts will be stated in the opinion.

Walter J. Mattison, City Atty., and John J. Dolan, Asst. City Atty., both of Milwaukee, for appellant.

Paul Gauer, Robert J. Buer, and A. W. Richter, all of Milwaukee, for respondent.

MARTIN, Justice.

The respondent Charles J. Smith entered the employ of the city of Milwaukee on November 10, 1924, as a ward laborer in the department of public works and continued to be so employed up to January 1, 1941. After the enactment of ch. 396, Laws of 1937, respondent applied for membership in the employees' retirement system of the city of Milwaukee and was accepted as a member under the terms and conditions as provided in ch. 396, Laws of 1937, which became effective on January 1, 1938.

Section 5(1) (a) of ch. 396, Laws of 1937, provided that all members in active service be retired forthwith upon reaching the age of seventy. This compulsory retirement provision did not take effect until January 1, 1941. Respondent had on January 1, 1941, reached the age of seventy-five, and he, with other members of the retirement system, was retired as of that date. It is conceded that under the then existing law respondent became entitled to and was awarded a monthly retirement allowance of $28.16, which monthly allowance he has received and accepted each month since January 1, 1941. Respondent has rendered no further services for the city, on contract of hire or otherwise, since his retirement.

On June 28, 1941, the legislature passed ch. 308, Laws of 1941, amending various provisions of the employees' retirement system of the city of Milwaukee. The act provided that its provisions would become effective on the Monday following its adoption by the common council. On October 6, 1941, the common council, by resolution, adopted the provisions of ch. 308, effective on Monday, October 13, 1941. Chapter 308 amended sec. 5 of ch. 396, Laws of 1937, creating three new subdivisions of sub. (1) (b). Subdivision (4) provides:

“If the retirement allowance of a member entitled to prior service is less than $60 per month, the pension shall be increased so that the retirement allowance is equal to $3 per month for each creditable year of service, provided that such increase shall not result in a total retirement allowance in excess of $60 per month.”

Subdivision (5) provides: “The provisions of subdivision 4 of this paragraph shall apply to all persons who were formerly active members of the system and who were compulsorily retired on or after January 1, 1941.”

After the adoption of ch. 308, Laws of 1941, respondent and others requested adjustment of their retirement allowances in accordance with the provisions of said chapter. The annuity and pension board of the employees' retirement system refused to make the requested adjustment.

Under the employees' retirement system the employee is required to pay into the fund a rate according to his age when entering the system. If he resigns he withdraws his contribution. If he dies before retirement his beneficiary can withdraw his accumulated contributions. When the employee starts contributing, the city also begins to contribute to the fund. The employee may retire when he reaches the age of sixty, and must retire at the age of seventy. The city matches the employee's con tribution and gives a pension of twenty-five per cent of the employee's final average salary, if the employee has thirty-five years of service to his credit. The annuity plus the pension equals the retirement allowance. Persons in service when the system was established received credit for the prior years of service. The city makes full contribution for such prior service credit. The employee's contribution when made is placed in the annuity savings fund. The city's contribution is placed in the pension accumulation fund to the credit or on account of each member of the system. Upon the employee's retirement the actuary arrives at an annuity which is the actuarial equivalent of the employee's accumulated contributions. He also arrives at the amount of pension which represents the city's contribution placed to such employee's credit in the pension accumulation fund. Upon the employee's retirement, the annuity and pension fund is transferred to a new account in the employee's name in the annuity reserve fund. These funds represent the employee's retirement allowance, payable for life. All funds to the credit of the employee are made obligations of the city of Milwaukee.

Appellants' first contention is that when respondent retired from service on January 1, 1941, under the then existing retirement system as provided in ch. 396, Laws of 1937, which the common council had adopted, there was thereby created contractual obligations between the respondent and the city, which no subsequent act of the legislature or the common council could alter. In State ex rel. O'Neil v. Blied, 188 Wis. 442, 447, 206 N.W. 213, 214, which involved the right of a widow beneficiary under secs. 42.20 to 42.54, under the 1921 teachers state retirement law, whose husband died on March 17, 1925, while in service as principal of the Oshkosh high school, the legislature, by ch. 416, Laws of 1923, amended the 1921 act. The court said:

“It being clear, therefore, that we have here a contractual relationship between the state of Wisconsin and the deceased teacher, Albert B. O'Neil, the rights that accrued to him under the law as it was passed in 1921, and the provisions of which were complied with in all respects by him so as to then entitle him to benefit under its provisions, were of such a nature that it was beyond the rightful power of the Legislature by its amendment by chapter 416 of 1923, supra, to take away or modify without the consent of the other party to the contract.” To same effect see State ex rel. Stafford v. State Annuity and Investment Board, 219 Wis. 31, 33, 261 N.W. 718;Morrison v. Board of Education, 237 Wis. 483, 489, 297 N.W. 383.

The respondent concedes that his rights, by reason of his retirement and becoming a beneficiary under ch. 396, Laws of 1937, are contractual. But he argues that it does not follow that there may be no legislative change either in the employees' retirement system or amounts of benefits. It is clear that respondent's status and his rights are determined under the provisions of the employees' retirement system, as it existed at the time of his retirement. Thereafter he rendered no services to the city and made no contribution to the retirement fund. On June 28, 1941, however, the legislature enacted ch. 308, amending the provisions of ch. 396 of the Laws of 1937. Subdivisions 4 and 5 of the amendments are quoted above. Subdivision 4 provides that if the retirement allowance of a member entitled to prior service is less than $60 per month, the pension shall be increased so that the retirement allowance is equal to $3 per month for each creditable year of service, but limited not to exceed $60 per month. Subdivision 5 provides that the provisions of subd. 4 shall apply to all persons who were formerly active members of the system and who were compulsorily retired on or after January 1, 1941.

Appellants' second contention is that the 1941 amendments to the employees' retirement system amount to appropriating public funds for a private purpose in violation of constitutional prohibition. This is the crucial question. Respondent was neither a city employee, nor a member of the retirement system of the city of Milwaukee at the time of the enactment of the 1941 amendments. Subdivision 6 of sec. 3 provides: “Termination of membership. Should any member in a period of ten consecutive years after last becoming a member be absent from service more than five years, or should he withdraw more than fifty per centum of his accumulated contributions, or should he become a beneficiary or die, he shall thereupon cease to be a member.”

Respondent became a beneficiary under the 1937 law when he was retired on January 1, 1941. He thereupon ceased to be a member of the employees' retirement system. The 1941 amendments did not become effective until adopted by the city council on October 6, 1941, which action of the city council became effective on October 13, 1941.

Respondent claims that he is entitled to an additional pension of $20.09 per month from January 1, 1941, to February 1, 1942, and to a pension of $48.25 thereafter, during life. If his claim is valid, the funds to pay the...