Appeal, No. 290, March T., 1954, from order of Court of Common Pleas of Allegheny County, Oct. T., 1953, No. 3255, in case of J. H. Jameson v. City of Pittsburgh et al. Order affirmed; reargument refused May 3, 1955.
J. Frank McKenna, Jr., City Solicitor, with him David Stahl, Assistant City Solicitor and Nicholas R. Stone, Solicitor for Pension Board, for appellants.
John A. Metz, Jr., with him Metz & Metz, for intervening appellants.
Paul R. Obert, for appellee.
Elder W. Marshall, with him Carl E. Glock, Jr. and Reed, Smith, Shaw & McClay, as amicus curiae.
Before Stern, C.j., Stearne, Jones, Bell, Chidsey, Musmanno and Arnold, JJ.
OPINION BY MR. JUSTICE ARNOLD
In this action in equity defendants appeal from the order of the court below refusing their motion for judgment on the pleadings. Involved is the constitutionality of the Act of 1953, P.L. 1255, 53 PS § 9414
(d).*fn1 Plaintiff-taxpayer of the city of Pittsburgh seeks to enjoin defendants "from taking any action pursuant to the term of said statute," contending that it violates Article III, Section 11 of the Pennsylvania Constitution.*fn2 The court below refused defendants' motion, holding that the Act violates Article III, Section 7,*fn3 and Article III, Section 11, of the Constitution.
The Act, in subsection (d) provides:
"The pension board of any city of the second class is hereby authorized to establish a program whereby any beneficiary under the pension fund, upon payment into the fund of the sum of two hundred dollars ..., shall be entitled to receive from the fund, annually and for life, in addition to his regular pension as determined as to the date of his retirement from service ... an additional annuity, ... sufficient in amount so that the total monthly payments received by him for regular pension and additional annuity combined shall equal the amount of the regular pension which he would have been entitled to receive if he had retired from service in the city and as of August 1, 1953, and having earned for the past five (5) years the average rate of pay received during the last five (5) years of his actual employment ..."
Defendants and intervenors contend that the voluntary contribution of $200 by the pensioner in return
for the annuity creates a contractual relation between him and the pension board, and is not "extra compensation" prohibited by the Constitution; that the cash contribution coupled with the "moral obligation" on the part of the governing body to provide adequate allowances to pensioners constitute valid consideration for the increased annuities.
We have heretofore held that "as of the time he joined the fund, hie [the pensioner's] right to continued membership therein, under the same rules and regulations existing at the time of his employment, was complete and vested": Baker v. Retirement Board of Allegheny County, 374 Pa. 165, 169, 97 A.2d 231. The same rule applies to the other of the contracting parties - the governing body. In Koehnlein v. Allegheny County Employees' Retirement System, 373 Pa. 535, 97 A.2d 88, we held that the Act amending the retirement system so as to increase retirement allowances to an employe retired before passage of the Act was unconstitutional under Article III, Section 11. We there said, at pages 538, 542 and 543: "By section 322 of The General Count Law [16 PS § 312] ... the retirement allowance was fixed in terms of dollars and not purchasing power. There is nothing in the provisions governing the county's retirement system to justify a retirement allowance based on earned compensation adjusted to a 'cost of living' index or other standard related to the buying power of money ... The constitutional inhibition against legislative augmentation of municipal pensions or retirement allowances after an employe has been retired is the same as it is with respect to the original granting of a pension or retirement allowance ... The plight of retired municipal employees because of the inadequacy of their retirement allowances in relation to the increased cost of living, particularly in the past few years, is regrettable to say
the least. But, sympathy for their distress affords no justification for ignoring established constitutional restraints. If legislative inroads upon retirement funds by way of gratuitous disbursements therefrom were to be tolerated, it would not be long before retirement systems in general would be imperiled, if not destroyed, to the detriment not only of the retired employees intended to be benefited by the unconstitutionally increased retirement allowances but also of the current contributors to retirement funds who are still in the service of the municipality ... The very arbitrariness of the amendatory Act here under consideration precludes any thought that it was enacted in an exercise of the legislature's power to 'render intact the actuarial soundness of the system so as to strengthen its fibers'... Retirement Board v. McGovern (316 Pa. 161, 176, 174 A. 400) ..." (Italics supplied). Thus, any "moral obligation" alone has been determined by us to be insufficient to sustain the right to change the retirement allowances.
Does the voluntary contribution of $200 remove this Act from the constitutional inhibition? We think not. The same problems still exist as were pointed to in Koehnlein v. Allegheny County Employees' Retirement System, supra. The increased pension - though termed an "annuity" - is still a "gratuitous disbursement" from the found, to which the pensioner was not entitled when "he joined the fund."
Appellants cite Hickey v. Pittsburgh Pension Board, 378 Pa. 300, 106 A.2d 233, as authority for their position. This upon the following quotation from the opinion in that case, at page 311: "The plaintiff is also entitled to such amounts as may be due him by the amending Acts of 1951, P.L. 1091 and 1952, P.L.
, with regard to cost of living increases, as claimed in Paragraph 9 of his Complaint." But their constitutionality was neither raised nor passed upon. This being so, the statement depended upon cannot be used as authority in the instant case - where the matter is specifically raised. The Hickey case turned solely on the question whether or not the plaintiff's pension rights had become vested and whether, if vested, they could be altered or destroyed thereafter by legislative enactment. We did not intend in any way, in the Hickey case, to deviate from the policy and rules laid down in the Koehnlein case. Further in the Hickey case, we declared at pages 309, 310: "The Legislature may strengthen the actuarial fibers but it cannot break the bonds of contractual obligations. The permissible changes, amendments and alterations provided for by the Legislature can apply only to conditions in the future, and never to the past. According to the cardinal principle of justice and fair dealings between government and man, ... the parties shall know prior to entering into a business relationship the conditions which shall govern that relationship ... the impairment of contractual obligations by the Legislature is ... abhorrent because such impairment changes the blueprint of a bridge construction when the spans are half way across the stream ... Thomas Hickey is entitled to be paid according to the contract of 1915 [pension rights as established by the Act of 1915, P.L. 596, 53 PS Section 9411]." (Italics supplied)
Further, in the Koehnlein case, we cited and quoted with approval from State ex rel. Thomson v. Giessel, 262 Wis. 51 53 N.W.2d 726. The Wisconsin Supreme Court was there confronted with the same problem, including a like constitutional inhibition against "extra compensation," as is present in the instant case. That
Court determined, and we think rightly so, that despite the payments intended to be made by the petitioner, such an increase in the pension payments should be made not by the Legislature, but by ...