Woods v. City of Lawton , 64 O.B.A.J. 17 ( 1992 )

LAVENDER, Justice.

A city employee works the requisite number of years as would qualify him for pension benefits. After his retirement, he is convicted for criminal offenses committed against the city while he was employed. A city ordinance dictated forfeiture of all rights and benefits under the retirement system upon conviction of theft or embezzlement if the criminal acts were committed before the employee retired. It is not disputed that this clause was in effect prior to the employee’s eligibility for the benefits. Based on this ordinance, the trial court found the employee’s right to the pension had not vested. We affirm.

I.

Robert L. Woods, worked for the City of Lawton for approximately 29 years and 8 months. He had completed 25 years of service as of April, 1981. The City of Lawton Municipal Code Section 17-98(27) states:

'Early Retirement Date — the first date of the month following both: (a) the date that member (i) has completed ten years of creditable service and attained the age of fifty-two (52) years or (ii) completed twenty-five (25) years of creditable service, regardless of age, whichever of (i) and (ii) is earlier, and (b) the date that such member elects to receive retirement benefits in accordance with the provisions hereof.

Under this early retirement provision, Woods submitted an application to the Board of Commissioners of the Employee Retirement System of the City of Lawton for retirement. He retired in December, 1985 and from January, 1986 until September, 1987 he received $726.97 monthly retirement benefits.

On August 21,1987, Woods pled guilty in the United States District Court for the Western District of Oklahoma to the charge of devising a scheme to defraud and obtain money from the City of Lawton while employed by the City in violation of 18 U.S.C. Sections 1341 and 1342. Law-ton’s city ordinance Section 17-108(f) provided that:

Any member who is found guilty in a court of competent jurisdiction of committing, aiding or abetting any embezzlement or theft from the city, or bribery in connection with the employment committed prior to the retirement, or any member whose employment is terminated by reason of his admitted commitment aiding or abetting an embezzlement or theft from the city or such bribery shall forfeit all rights and benefits under the retirement system except the return of his member’s accumulated contributions as of his date of termination. (Emphasis added).

Accordingly, on September 22, 1987, the Board of Commissioners of the Employee Retirement System of the City of Lawton (Board) voted to terminate Woods’ retirement benefits.

Woods appealed this decision for reconsideration before the Board. He argued that under Oklahoma case law, upon meeting the minimum 25 years of service, his right to the pension “vested” on April, 1981. Because the offenses occurred between October, 1983 and December, 1985 or after such “vesting” occurred, Woods contends that the denial of his benefits for those 25 years under the Lawton code was unconstitutional. The Board voted to deny the request for reinstatement of benefits.

Woods filed a Petition for Declaratory Judgment in district court challenging the constitutionality of the city ordinance. The trial court determined the ordinance valid and constitutional as applied to Woods. The court of appeals reversed citing Board of Trustees v. Weed.¹ That court determined that Woods had fulfilled all pension eligibility requirements prior to the illegal acts, and that his rights had “vested” even though he had not actually retired and that these rights could not be “divested” by his criminal actions. We previously granted certiorari.

II.

“It has generally been held that public employees, who have voluntarily contributed to such a retirement fund, have a vested, contractual right to receive the prescribed benefits from it once their payment becomes due.”² If Woods had an unqualified right to his retirement benefits, then the city ordinance requiring forfeiture of those benefits would be unconstitutional. Okla. Const, art. 2, § 15 provides:

No bill of attainder, ex post facto law, nor any law impairing the obligation of contracts, shall ever be passed. No conviction shall work a corruption of blood or forfeiture of estate: Provided, that this provision shall not prohibit the imposition of pecuniary penalties. (Emphasis added).

Therefore, we must determine whether Woods’ rights were absolute such as would preclude forfeiture.

In Baker v. Oklahoma Firefighters Pension, ³ we stated:

A ‘vested right’ is the power to do certain actions or possess certain things lawfully, and is substantially a property right, and may be created either by common law, by statute, or by contract. And when it has been once created, and has become absolute, it is protected from the invasion of the Legislature by those provisions in the Constitution which apply to such rights. And a failure to exercise a vested right before the passage of a subsequent statute, which seeks to divest it, in no way affects or lessens that right.

[U]nder Oklahoma law, the right to a pension would vest, or become absolute, upon the pension recipient’s becoming eligible for payment of the pension.... We have also stated that the right of a claimant to a pension is controlled by the terms of the statute in effect when the right to a pension vests and have implied that vesting occurs as of the date of retirement.

[I]t is apparent that the view of pension benefit rights taken in this jurisdiction has been that such rights neither vest nor accrue until the contract between the state and the beneficiary comes into existence.

The exact question presented in this case has not been before us, although, we did consider in Board of Trustees v. Weed,⁴ whether a vested right to a pension benefit could be forfeited as a consequence of a felony conviction for offenses committed after retirement. In that case, we concluded that on meeting the requirement of meritorious service prior to retirement, the right to such benefit was a substantial property right and that to divest one of this right was an unconstitutional forfeiture of estate under the Oklahoma Constitution.

III.

Therefore, neither Baker⁵ nor Weed is dispositive of the issue before us today. Woods had performed twenty-five years of service and was eligible for retirement as of 1981. The offenses for which he was subsequently convicted were committed after those twenty-five years of service but prior to his retirement. Woods argues that under Weed, his right to his pension vested at the time he was eligible for retirement or in 1981 and he wants his retirement for those twenty-five years of service.

In Weed we stated that “[t]he key distinguishing fact among the jurisdictions which have addressed this issue is whether the felony conviction or misconduct occurred while the employee was still actively fulfilling pension eligibility requirements or after the pension benefits were vested.”⁶ In the case at bar, the city of Lawton had an ordinance in effect that required forfeiture of all rights and benefits under the retirement system upon conviction for theft or embezzlement if the offenses were committed prior to retirement. In other words, up until the time Woods retired, he was required to continue fulfilling eligibility requirements, one of which was that he not commit any of the offenses designated in the ordinance or it would result in the forfeiture of his pension. While Woods was “eligible” for retirement in 1981, his right to his pension did not vest because the ordinance in effect precluded vesting if Woods committed certain offenses prior to his retirement which in fact did occur.

The rights of a government employee are defined by the limits of the contract. Certainly, the city may provide that vesting be subject to contingencies which can cause a forfeiture. In Kerner v. State Emp. Retirement System,⁷ a case similar to our’s, the court considered plaintiff’s argument that his rights to those benefits had “vested” since he had begun receiving monthly payments prior to his convictions for offenses committed while in office. The Ker-ner court stated:

The flaw in plaintiff’s reading of the statute was emphasized by the appellate court when it noted that under plaintiff’s theory, an employee need only retire prior to his conviction of a felony in order to render the entire statute meaningless. Certainly such easy circumvention of the law’s purpose cannot have been intended.

Plaintiff urges, however, that this conclusion renders the statute unconstitutional under article XIII, section 5, of the Illinois Constitution of 1970, which provides:

‘Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.’

Plaintiff does not explain how enforcement of this condition, to which the parties agreed and which has existed throughout the duration of the contract, can become an unconstitutional impairment of the benefits of that contract.... Membership in the System was sought with knowledge of this condition, and it clearly cannot be said to impair or diminish the benefits within the meaning of the constitutional provision.⁸

We agree with the Kerner court and apply the holding to our own case. Further, we acknowledge, as did the Kerner court, that any other interpretation would circumvent the intent of the ordinance and render it meaningless.⁹ Woods breached the contractual terms of the ordinance by committing offenses against the city while employed and thereby, forfeiting his right to such benefits. Equally without merit is the contention that because Woods began receiving his pension in 1985 this somehow absolved his criminal actions so as to “vest” his right. Woods’ only right is to the return of his accumulated contributions acquired as of the date of his termination as provided for under the ordinance.¹⁰

Obviously, the purpose of the city ordinance was to discourage criminal activity against the city by its employees by denying an employee, convicted of such offenses, his retirement benefits to which he otherwise would be entitled. Moreover, the ordinance served the dual purpose of promoting the public’s right to faithful service from those holding governmental positions. Indeed, we could cite approvingly to case law from other jurisdictions that have recognized “honorable” service as an implied indispensable requisite for entitlement to a government pension.¹¹

In our case, however, the ordinance on its face mandated such service as would not violate the ordinance for the duration of employment in order to entitle one to a pension upon retirement. The order of the trial court is affirmed.

OPALA, C.J., and SIMMS, HARGRAVE, ALMA WILSON and WATT, JJ., concur. KAUGER, J., concurs in part, dissents in part. HODGES, V.C.J., and SUMMERS, J., dissent.

1 . 719 P.2d 1276 (Okla.1986).

2 . Board of Trustees v. Kern, 366 P.2d 415, 418 (Okla.1961).

3 . 718 P.2d 348, 350-51 (Okla.1986).

4 . 719 P.2d 1276, 1277-79 (Okla.1986).

5 .The Baker case involved the effect of repealed legislation on retirement benefits. The employees were trying to avoid an ex post facto law by keeping an old law in effect that formed part of their employment contract. Woods on the other hand is trying to avoid the terms of his contract.

6 . Weed, 719 P.2d at 1277 (emphasis added).

7 . 72 Ill.2d 507, 21 Ill.Dec. 879, 382 N.E.2d 243 (1978) cert. denied, Kerner v. State Emp. Retirement, 441 U.S. 923, 99 S.Ct. 2032, 60 L.Ed.2d 397 (1979).

8 . Kerner, 21 Ill.Dec. at 882-83, 382 N.E.2d at 246-47 (emphasis added). The Kerner court also considered and dismissed plaintiffs claims of "corruption of blood and forfeiture of estate, cruel and unusual punishment and due process".

9 . Accord Horsley v. BD. of Pen. & Retirement, 519 Pa. 264, 546 A.2d 1115 (1988). In Horsley the court was interpreting the effect of a city ordinance. The court stated:

Unquestionably, the clear intent of the City Council ... was to disqualify those employees who commit crimes while in the City’s employ from receiving retirement benefits. Given this intent the ultimate time of discovery of a person’s felonious acts seems of no moment. To hold otherwise would unfairly advantage those corrupt and felonious City employees who are fortuitous enough to avoid detection of their crimes until after they leave the City’s employ: a result which would be both absurd and unreasonable. Id. [546 A.2d] at 1118. Appellant advances a rather preposterous argument that to accept her interpretation would encourage corrupt officials to retire before they get caught, thereby cleansing the system. We find it impossible to believe that Philadelphia City Council intended such a bonus incentive plan for corrupt City employees. Id. at 1118 n. 10.

10 . Section 17 — 108(f) states that a member is entitled to the return of his accumulated contributions acquired as of his date of termination.

11 . Masse v. Public Employees’ Retire. Sys., 87 NJ. 252, 432 A.2d 1339 (1981); West Virginia Public Employees Retirement System v. Dodd, 183 W.Va. 544, 396 S.E.2d 725 (1990) (even without an express statutory requirement of honorable public service, "'[i]t is, of course, axiomatic that one of the fundamental purposes of the pensioning of civil servants is to secure good behavior and the maintenance of reasonable standards of discipline during service.”’).