State Ex Rel. Anderson v. Brand, Trustee , 214 Ind. 347 ( 1937 )

DISSENTING OPINION. I cannot agree with the reasoning and result reached by the majority of the Court for two reasons.

(1) The 1933 Amendment to the Teachers' Tenure Act should be given a prospective effect in accordance with the well recognized rule that statutes "are construed as operating only in cases or on facts which come into existence after the statutes were passed unless a retrospective effect be clearly intended."¹

(2) If, in order to give effect to legislative intent, the 1933 Amendment must be construed to operate retrospectively the legislative enactment violates the inhibitions of the United States Constitution and the Indiana Constitution against impairment of contracts.

No rule of statutory interpretation is more generally taken for granted than the rule that statutes will be treated as prospective rather than retrospective. Such a rule is supported by a sense of justice and fair dealing and is in accord with the elementary distinction between judicially and legislatively declared rules. Normally a legislatively declared rule applies to future conduct; while a judicially declared rule governs past as well as future conduct. Consequently when a statute attaches certain legal consequences to certain stated conduct, no court would tolerate the suggestion that such consequences would attach to conduct which occurred prior to the effective date of the statute, unless the statute requires such retroactive effect either by express provisions or by necessary implication.

The English cases consistently give effect to the presumption that statutes operate prospectively rather than retrospectively; and these cases emphasize the inherent validity and justice of the presumption since the English courts are under no constitutional pressure to deny a retroactive effect to statutes in order to avoid a construction which would render the statute invalid because of violation of a constitutional inhibition against impairment of contract. It is stated in the leading English authority on interpretation of statutes that "It is a fundamental rule of English law that no statute shall be construed to have a retrospective operation unless such a construction appears very clearly in the terms of the Act, or arises by necessary and distinct implication."² The foregoing rule is supported by the following statement of a leading English case. "No rule of construction is more firmly established than this: that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only."³

The statements of American courts are substantially the same as those of the English courts. It is stated in Lewis' Sutherland Statutory Construction that "The general rule is that statutes will be construed to operate prospectively only, unless an intent to the contrary clearly appears."⁴ In support of the foregoing statement numerous excerpts of decisions of state courts are quoted; of which excerpts the following is typical: "The rule is that statutes are prospective, and will not be construed to have retroactive operation unless the language employed in the enactment is so clear it will admit of no other construction."⁵

The objections which are urged against retrospective operation of a new statute apply with equal validity to the repeal of a statute when a retrospective operation would have the effect of destroying legally protected interests which have been created by operation of the statute. "A law can be repealed by the law-giver; but the rights which have been acquired under it while it was in force do not thereby cease. It would be an act of absolute injustice to abolish with a law all the effects which it had produced."⁶ Consequently in the case of a repeal of an existing statute, the same as in the case of an enactment of a new statute, courts have assumed that the legislative intent was not to give a retrospective operation, unless the contrary was clearly indicated by the terms of the repealing act.

By the terms of the Teachers' Tenure Act of 1927 (Acts 1927, c. 97, p. 259) township school corporations were included within its scope; and the 1933 Amending Act (Acts 1933, c. 116, p. 716) excludes township school corporations merely by omitting the words "any school corporation" and substituting therefor "any school city corporation or . . . any school town corporation." There is nowhere in the Amending Act of 1933 any express declaration of an intention of the General Assembly to give the Amending Act retrospective effect.

The General Assembly enacted the repealing act with knowledge that this Court follows the rule that statutes are presumed to operate prospectively rather than retrospectively; and this Court should assume that the legislative intent was for this presumption to prevail, since nothing to the contrary appears in the Act. And since there appears to be no reason why the constitutionality of the Amending Act would be imperiled by construing it to operate prospectively only, this Court is under no compulsion to construe it to operate retrospectively in order to save its constitutionality. Consequently, this Court, being under no compulsion to favor retrospective operation, is under a compulsion to follow the general rule that a statute should be construed to operate prospectively in the absence of any indication in the Act itself of the legislative intention that it operate retrospectively.

In accordance with the foregoing it is my belief that the Amending Act of 1933 should be construed to operate prospectively, and to leave unimpaired the rights and privileges of township teachers which were acquired under their indefinite contracts prior to the effective date of the Amending Act of the 1933 General Assembly.

But if the Amending Act must be construed to operate retrospectively, I am of the opinion that it violates Article 1, Sec. 24 of the Indiana Constitution, and Article 1, Sec. 10 of the Federal Constitution.

Prior to the enactment of the Teachers' Tenure Act of 1927 the employment relationship between a school corporation and a teacher was created and governed by a contract, and was legally binding upon both teacher and school corporation. The ordinary contract was for a fixed period; usually for a single term of school. In view of numerous decisions of the Supreme and Appellate Courts of this state it is clear that such a contract carried with it all the rights and duties of contracts generally. Since such contracts were for personal services the only remedy which a teacher had in case of breach of contract by the school corporation was to sue for damages. In such a suit the usual rules regulating recovery of damages for breach of contract were applied by the courts. While it was often said that a school corporation could dismiss a teacher for cause, this necessarily could have meant, under the decided cases, only that a school corporation could abrogate its contractual relations with the teacher if the teacher was unable or unwilling to substantially perform his contract. This was merely an application of the general rule that one party to a contract can rescind in case of failure of performance by the other party.

The Tenure Act did not change the method of creating the employer-employee relationship between school corporations and teachers, but only changed the incidents of the contract which creates the relationship. As long as the contract which creates the employer-employee relationship between a school corporation and a teacher has not ripened into an indefinite contract, the school corporation can repudiate the contract and the only recourse that the teacher has is to sue for damages. But Section 1 of the Act of 1927, supra, expressly provides that an indefinite contract "shall remain in force unless succeeded by a new contract signed by both parties or unless it shall be cancelled as provided . . ." in the act. This deprives the school corporation of the legal power to repudiate indefinite contracts of employment with permanent teachers and gives to the teacher the legal right to continue in the employer-employee relationship with the school corporation under the terms and conditions of the indefinite contract. The legal result is that the teacher has a legally protected tenure of position until the same is terminated in accordance with the provisions of the statute.

When a court of competent jurisdiction decides that a school corporation unlawfully has declared the cancellation of an indefinite contract, the factual and legal result is that the indefinite contract has not been cancelled, but is in full force and effect. And when the court further adjudges that the order purporting to cancel the contract should be set aside, and that the teacher should be reinstated in her position, the factual consequence is that the school corporation is being compelled specifically to perform its contract to continue the teacher in the employer-employee relationship.

In short, under an indefinite contract, a permanent teacher enjoys a legally enforceable right to be continued in his position as a teacher. This right is of equal validity with the right to recover damages for breach of a non-tenure contract; and is equally the creation of a contract. There are at present thousands of teachers in Indiana who have not become permanent teachers under an indefinite contract but are employed under a contract for a definite period of service. If the present General Assembly should decide to change the policy of authorizing school corporations to contract with teachers and to substitute the policy of appointing teachers at pleasure; and in pursuance of that policy should deprive school corporations of the power to enter into contracts of employment with teachers; and should further provide that all contracts heretofore entered into should be abrogated, it is not conceivable that such action could deprive a non-tenure teacher of his right to recover damages for breach of contract in case his employing school corporation, acting under such statute, should refuse to carry out the existing contract of employment in accordance with its terms. It seems to the writer equally inconceivable that the General Assembly can abrogate an existing indefinite contract and thereby destroy the valid legally enforceable right of tenure which is a legal incident of the contract; and which, as above pointed out, is as essential an element of the indefinite contract as the right to recover damages is of a non-tenure contract.

The majority opinion assumes that the legal quality of the so-called "indefinite" contract is vitiated by its indefiniteness. But it is indefinite only in respect to the life of the contract, which is not limited to a definite and fixed period of time, although the Act provides for a definite method of ending the contract relation. At any particular time in the life of the contract all the terms which affect its performance are definite. It is true that provision is made in the statute for changes by mutual consent of school corporation and teacher, and for some changes without the consent of the teacher. But many contracts between private persons have provisions which authorize change in the manner and time of performance, and it has never been supposed that such provisions affect the legal quality of the contract. The contractual relationship which arises as a result of the mutual agreement of the parties remains legally unimpaired, although the mutual obligations of the parties may have been varied by modification of the original terms and conditions of the contract. And if we grant that the General Assembly has the constitutional power to authorize school corporations and teachers to enter into a contractual relationship of indefinite duration, it necessarily follows that the fact of indefiniteness of duration can not, in and of itself, qualify the contractual rights of the contracting parties. The only purpose and effect of the statutory requirement that the contract should continue for an indefinite period of time is to avoid setting an arbitrary limit to the time element of tenure. Instead of authorizing and requiring an indefinite contract the General Assembly might have provided that the last contract of the probationary period of service should continue for ten years; in which case the legally enforceable period of tenure would be definitely limited to ten years. Whether tenure is protected and made legally enforceable for an indefinite period of time, or only for a fixed and definite period of time, can make no difference in the legal quality of the contract.

Numerous decisions of this Court support the following statement in the majority opinion: "The establishment and maintenance of public schools is a governmental function, jurisdiction over which vests in the General Assembly, whose power, subject to constitutional limitation, is plenary, and whose discretion is not reviewable. This legislative power is not exhausted by exercise, and schools may be continued or discontinued, and the school system changed, or one system substituted for another, as often as the Legislature may deem it necessary or advisable in the public interest." But the foregoing does not validate the conclusion that the General Assembly can destroy the legal consequences of acts which have been performed under the sanction of statutes which have been enacted for the purpose of giving effect to a legislative policy respecting the school system of the state. If the method or system devised by the General Assembly for the purpose of carrying out its educational policies includes the creation of contractual relations between the state, or its sub-divisions, and private persons, it does not follow that the repeal of the statute which authorized such contractual relations destroys the rights of private persons who have entered into contracts with the state or its local agencies. This is pointed out in the following excerpt from an opinion of the Supreme Court of Wisconsin⁷: "InState ex rel. Harbach v. Mayor, etc., decided herewith,189 Wis. 84, 206 N.W. 210, it is held that the entire field of education in this state is one of state affairs and regulations rather than one belonging to the local affairs or government of municipalities. Evidently, therefore, when the State by the law of 1921 expressly required (although undoubtedly the same effect would have been reached by its other provisions were such precise provisions omitted) that the State on the one hand and the teachers complying with the law on the other should come under certain fixed contractual obligations, the State cannot now lawfully withdraw or be relieved from such obligations by subsequent legislation.

"One engaging in teaching in this state and whose services are to be paid for in whole or in part by the state school fund is not a public officer and his valid contracts cannot lawfully be destroyed or impaired by subsequent legislation, because such contracts are within the protection of sec. 12, art. I, Wisconsin constitution, prohibiting the passage of any law impairing the obligation of contracts, as well as by sec. 10, art. I, of the Constitution of the United States, prohibiting any state from passing any such law."

The majority opinion assumes that the General Assembly has the power to revoke all licenses of teachers and that the revocation of tenure teachers' licenses "would of course carry with it the indefinite contract." The opinion continues as follows: "The contract, like the license upon which it rests, is a privilege granted by grace of the sovereign for the purpose of promoting the good order and welfare of the state. The license is broader in its bearing than the contract. Without the license a tenure contract cannot exist. Since there is legislative power to revoke the license and thus destroy the contract, there must necessarily be power to do the lesser thing, and merely revoke the tenure contract without cancelling the license."

Granting that the General Assembly can revoke all existing licenses and that such action would make ineffective all present contracts of teachers, it does not follow that the General Assembly can abrogate all existing contracts, without revoking all licenses. The decided cases which have held that a "mere license" is revocable have all pointed out that "A license has none of the elements of a contract, and does not confer an absolute right, but only a personal privilege to be exercised under existing restrictions and such as may thereafter be reasonably imposed."⁸ Revoking a license does not offend against the state and federal constitutional prohibition against impairment of contract; and while it is true that neither a tenure contract, nor a non-tenure contract, can exist between one who is not licensed to teach and a school corporation, yet the fact remains that at the effective date of the repeal act of 1933 the General Assembly had not revoked licenses and the contracts affected by the repeal were existing and valid contracts.

It is stated in the majority opinion that "The tenure statute was only intended as a limitation upon the plenary power of local school officials to cancel contracts." The foregoing statement is not justified by the decisions of this Court if it must be understood to imply that prior to enactment of the Tenure Act school officials had plenary power to abrogate contractual obligations. Prior to the enactment of the Tenure Act the school officials did have full discretion in the selection of teachers from among qualified applicants; and at the expiration of the usual one school-term contract the school corporation was under no legal obligation to re-employ any particular teacher under a new contract. But school officials have not had at any time plenary power to cancel contracts in the sense that they could end legal liability thereunder.

I can not agree with the implications of the statement in the majority opinion that "The contract, like the license upon which it rests, is a privilege granted by grace of the sovereign for the purpose of promoting the good order and welfare of the state." In a sense all contractual relationship is by the grace of the sovereign, because it is only by grace of the sovereign that the law attaches legally enforceable rights and duties to voluntary agreements which are denominated contracts. And in the case of indefinite contracts between school corporations and teachers it is the voluntary mutual consent of the parties that creates the contractual relationship, although the legal incidents of the relationship are determined by the terms of the statute which authorizes and governs that particular class of contracts. But such a contract is no more "a privilege granted by grace of the sovereign" than is a contract of sale and purchase of a parcel of land.

It is evident that the purpose of the indefinite contract provisions of the Act of 1927 was to give to indefinite contracts the legal quality of the ordinary teacher contracts which provide for a definite term of service. And this court has held that one who had become a permanent teacher under an indefinite contract with a township school corporation had acquired a right to hold his teaching position until the indefinite contract should be cancelled in accordance with the provisions of the Act of 1927, and that this right was legally enforceable. Compensated employment is surely a thing of value; and a legally enforceable right to be continued in such employment for even a short period of time is such a vested interest that it cannot be destroyed or impaired by subsequent legislation, even though it is enjoyed under a contract which has been authorized for the public interest.

The school code of California has contained permanent tenure provisions for many years, and the Supreme Court of that state has discussed at length many of the problems involved in the application of the various tenure provisions; and has declared unequivocally that a tenure teacher enjoys vested rights which cannot be taken away by subsequent legislation. The view of the California court is clearly indicated by the following excerpts from its opinions:

"Assuming that petitioner automatically attained permanent tenure prior to August 14, 1931, at which time the repeal of sections 5.500 to 5.502 of the School Code, as they then existed, occurred, that status was not lost by virtue of failure on the part of the Legislature to adopt, as part of the repealing act, a saving clause." Gastineau v. Meyer (1933), 131 Cal. App. 611, 617, 22 P.2d 31, 33.

"Moreover, the last-mentioned section was enacted after the petitioner in this case had acquired permanent tenure by operation of law, and for that reason it could in no way affect his vested right to the enjoyment of that status." Id. p. 618.

"The language of this subdivision has remained substantially the same from its enactment in 1881 to its repeal by the School Code of 1929 (St. 1929, p. 303, § 10.3). Anderson v. Board of Education, 126 Cal. App. 514, 516, 15 P.2d 774, 16 P.2d 272. Of course, any tenure previously acquired by respondent was a vested right and remained unaffected by such repeal. Gastineau v. Meyer, 131 Cal. App. 611, 22 P.2d 31. In fact, section 5 of the preliminary provisions of the 1929 School Code (St. 1929, p. 1) recognized and continued previously acquired tenure." Klein v. Board of Education (1934), 1 Cal. 2d 706, 708, 37 P.2d 74, 75.

It is not clear that the Supreme Court of California entirely relied upon the rule that tenure rights can not be divested by act of the Legislature in deciding the cases in which the language above quoted was used. But the court clearly recognized the legal soundness of the rule that tenure rights are vested and are immune from legislative impairment.

The opinion of the Wisconsin Supreme Court in State ex rel.O'Neil v. Blied, supra, has been referred to, and quoted from, and this case was cited in a later decision of the Wisconsin Court⁹ as holding "That the status of one permanently employed as a teacher under such a system and with the rights so fixed cannot be impaired by subsequent legislation."

In Hall v. Wisconsin¹⁰ the Supreme Court of the United States considered a situation which does not seem to differ in its merits from the instant case. By Act of the Wisconsin Legislature, Hall and two others had been appointed "commissioners" to make a "geological, mineralogical and agricultural survey of the state." By the terms of the Act the governor was required to enter into a written contract with each commissioner. The governor was authorized to fill vacancies in the commission and "to remove any member for incompetency or neglect of duty." On the 29th day of May, 1858, Hall entered into a contract with the governor which bound Hall to perform his duties; and it was stipulated that the contract should " `continue till the third day of March, 1863, unless the said Hall should be removed for incompetency or neglect of duty, . . . or unless a vacancy shall occur in his office by his own act or default.'"

"On the part of the State it was stipulated `that the said Hall shall receive for his compensation and expenses, including the expense of his department of said survey, at the rate of $2,000 per annum. . . . Provided that for such time as said Hall or his assistants shall not be engaged in the prosecution of his duties, according to the terms of said act and of this contract, deduction shall be made, pro rata, from the sum of his annual compensation and expenses.'"

By a subsequent Act of March, 1862, Act of 1856 providing for the survey and appointing Hall a commissioner, and a later Act of 1860 relating to the commission were repealed without qualification. Hall sued to recover for his services from March 1862 to March 3, 1863. The views of the United States Supreme Court, which seem applicable to the present case, are fully disclosed by the following excerpts from the opinion (p. 10):

"In a sound view of the subject it seems to us that the legal position of the plaintiff in error was not materially different from that of parties who, pursuant to law, enter into stipulations limited in point of time, with a State, for the erection, alteration, or repair of public buildings, or to supply the officers or employes who occupy them with fuel, light, stationery, and other things necessary for the public service. The same reasoning is applicable to the countless employes in the same way, under the national government.

"It would be a novel and startling doctrine to all these classes of persons that the government might discard them at pleasure, because their respective employments were public offices, and hence without the protection of contract rights.

"It is not to be supposed that the plaintiff in error would have turned his back upon like employment, actual or potential, elsewhere, and have stipulated as he did to serve the State of Wisconsin for the period named, if the idea had been presented to his mind that the State had the reserved power to break the relation between them whenever it might choose to do so. Nor is there anything tending to show that those who acted in behalf of the State had any such view at that time. All the facts disclosed point to the opposite conclusion as to both parties."

I do not understand the decision in this case to be placed upon the ground that the abrogation of the indefinite contract was within the police power, although the appellees in State ex rel.Jones v. Kerr, Trustee (1937), 211 Ind. 703, 5 N.E.2d 533, urge that "If the social interest in freedom from permanent contracts in public child education or in township government is paramount to the social interest in permanent contracts for public school teachers, the Legislature in the proper exercise of the police power of the State, may repeal such contracts." The Supreme Court of Indiana and the Supreme Court of the United States recognize that contractual obligations are subject to the police power. But to uphold such legislative subjection in any particular instance courts must be able to say that a vital social interest is protected by the subjection; and that such interest is paramount to "the social interest of the individual in the security and integrity of contractual relations into which he has entered, or the social interest in the general security of legal transactions."¹¹ Furthermore, in the instant case, it would be unreasonable for this Court to assume that public health, morals, safety or even the indefinite general welfare is promoted by eliminating township school corporations and their teachers from the tenure policy in view of the retention of that policy by the General Assembly for city school corporations and town school corporations; and especially since this Court has declared that the Teachers' Tenure Act is based upon the public policy of protecting the educational interests of the state and that the act should be construed liberally to affect its general purpose since it is legislation in which the public at large is interested.¹²

The indefinite contract between appellant-relator Dorothy Anderson and Chester School Township was a valid, existing contract at the effective date of the Amending Act of 1933; and by virtue of that contract the relator had acquired the legally enforceable right to be continued in her position of teacher in the schools of Chester School Township. And in my opinion the Amending Act, under the construction placed upon it by the majority decision, violates Articles 1, Sec. 24 of the Indiana Constitution and Article 1, Sec. 10 of the Federal Constitution. "The law, under which the contract was executed, is to be and remain the only rule by which the contract shall be construed. The obligations shall not be increased, nor the rights diminished, by any Act of future legislation."¹³

¹ Maxwell, Interpretation of Statutes, 7th Ed., p. 186.

² Maxwell, Interpretation of Statutes, 7th Ed., p. 186.

³ Quoted from Athlumney, In re (1898), 2 Q.B.; Wright, J., at pp. 551-552.

Quoting from Maxwell on Interpretation of Statutes at page 187: "It is chiefly where the enactment would prejudicially affect vested rights, or the legality of past transactions, or impair contracts, that the rule in question prevails. Every statute, it has been said, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, or imposes a new duty, or attaches a new disability in respect of transactions or considerations already past, must be presumed, out of respect to the Legislature, to be intended not to have a retrospective operation."

⁴ Sec. 642, p. 1157.

⁵ Quoted from Bauer Grocer Co. v. Zelle (1879), 172 Ill. 407, 50 N.E. 238.

⁶ Lewis' Sutherland Statutory Construction, 2d Ed., p. 547.

⁷ State ex rel. O'Neil v. Blied (1925), 188 Wis. 442, 445, 206 N.W. 213.

⁸ Stone v. Fritts (1907), 169 Ind. 361, 365, 82 N.E. 792.

⁹ State ex rel. Nyberg v. School Directors (1926),190 Wis. 570-575, 209 N.W. 683.

¹⁰ (1880), 103 U.S. 5, 6, 7, 10.

¹¹ Willis, Constitutional Law, p. 745.

"This social interest is really two social interests: first, the social interest in the performance of a contract by a promisor; . . . The first social interest was one of the most important recognized by the common law and was protected by the law of trusts and by what is known as the law of contracts, both of which have been constantly growing and enlarging in scope throughout the centuries. . . .

"The social interest in promised advantages recognized by the common law also received express recognition in the United States Constitution in the clause forbidding the states to impair the obligation of a contract. . . . The due process clause, as we have already seen in this chapter, has also been extended to afford protection against the impairment of the obligation of a contract, so that the social interest in promised advantages has now been recognized by the United States Supreme Court as a limitation on both the federal and the state governments."

¹² State ex rel. Clark v. Stout, Township Trustee (1933),206 Ind. 58, 64, 187 N.E. 267; Whitlatch v. School Township ofMilan (1935), 209 Ind. 75, 198 N.E. 85, 87.

¹³ Lewis v. Brackenridge (1822), 1 Blackf. 220, 221.