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decided: November 5, 1986.


Appeal from the Opinion and Appellee Order of the Commonwealth Court of Pennsylvania entered at 896 v. C.D. 1982, reversing the order of the State Employes' Retirement Board dated March 24, 1982. 85 Pa. Commw. Ct. 50; Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Nix, C.j., did not participate in the consideration or decision of this case. Larsen, J., files a dissenting opinion which McDermott, J., joins.

Author: Flaherty

[ 512 Pa. Page 380]


On January 9, 1981, Francis J. McGovern retired after thirty years of service with the Delaware Joint Toll Bridge Commission. In December of 1980, just prior to his retirement, Mr. McGovern executed and filed a retirement application in which he selected two of several options for payout under the retirement plan offered by his employer. Under the options selected by Mr. McGovern, he would receive a lump sum payment of $27,105, a joint survivor annuity paying him $750 monthly for life, and if he predeceased his wife, she would receive a survivor's annuity of $375 monthly for life.

Mrs. McGovern, who had been ill with Hodgkins disease since 1979, died of cancer on January 23, 1981. Five days later, on January 28, 1981, Mr. McGovern died. The Board determined that Mr. McGovern's estate was due the lump sum of $27,105.00 plus $499.92, a portion of the first month's annuity payment. Had Mr. McGovern chosen a living survivor annuitant, or no beneficiary at all, the sum of $151,311.45 would have been available to the living beneficiary or his estate.

Michael J. McGovern, Mr. McGovern's son, requested that the Board review the amount payable to the estate, on the grounds that his father was not mentally competent when he executed the retirement papers. According to testimony of Michael McGovern, his sister, and friends of the elder Mr. McGovern, Mr. McGovern suffered during the last year of his life from alcoholism and apparent distress at the state of his wife's health. Although Mrs. McGovern was told in March of 1980 that she was terminally ill, Mr. McGovern, refused to acknowledge that his wife was going to die. Occasionally, Mr. McGovern would admit that his wife was seriously ill, but Mr. McGovern's friends testified that he was so sensitive to any conversation concerning his wife's health that they would never mention it unless he introduced the subject. When Mrs. McGovern was hospitalized

[ 512 Pa. Page 381]

    for almost two months during the last year of her life, Mr. McGovern visited her only once, for five minutes, and would sometimes insist that his wife was malingering, or that she had a bleeding ulcer. Additionally, although Mr. McGovern had an alcohol problem for many years, when his wife's illness became apparent, he drank more heavily, even to the point of missing work and being too drunk to keep appointments. Finally, there was some evidence that Mr. McGovern was not always attuned to reality in other ways: after he retired, he would, on occasion, dress in his uniform and demand to be taken to work, and after his wife died, Mr. McGovern refused to eat and was heard having conversations with his dead father.

The Board advised the junior Mr. McGovern that his father's retirement documents were binding and could not be changed. On November 25, 1981, an administrative hearing was conducted at which Mr. McGovern contended that on December 17, 1980, the day his father completed his retirement application forms, his father did not have the requisite mental capacity to execute a retirement application. After hearing testimony from Mr. McGovern's friends and family, including a letter from the family doctor, and evidence from the retirement official who dealt with Mr. McGovern, a hearing examiner rejected this claim. The Board affirmed the hearing officer, based on its conclusion that Mr. McGovern did, in fact, possess the requisite mental capacity on the day in question and that he understood the nature of the transaction. Commonwealth Court reversed the Board, holding that it capriciously disregarded the evidence of Mr. McGovern's incapacity, 85 Pa. Commw. 50, 481 A.2d 981. We granted allocatur to examine whether Commonwealth Court applied the appropriate standard of review of the Board's findings of fact and whether that court's statement of the law of capacity to enter into a legally binding contract was correct.

Commonwealth Court stated its standard of review as follows:

[ 512 Pa. Page 382]

Our scope of review where the decision of the Board is against the appellant-claimant is to determine whether the board's findings of fact are consistent with each other and with its conclusions of law, and can be sustained without a capricious disregard of the evidence. Brayo v. Workmen's Compensation Appeal Board, 62 Pa. Commonwealth Ct. 234, 435 A.2d 1346 (1981).

The Brayo case, cited as authority for this standard of review, states:

Where, as here, the Claimant is the party with the burden of proof and fails to carry that burden, our Court has held that our scope of review is to determine whether the findings of fact are consistent with each other and with the conclusions of law and can be sustained without a capricious disregard of competent evidence which is the willful, deliberate disbelief of an apparently trustworthy witness, whose testimony one could not possibly challenge. Jones and Laughlin Steel Corp. v. Workmen's Compensation Appeal Board, 52 Pa. Commonwealth Ct. 436, 415 A.2d 1275 (1980).

Brayo v. W.C.A.B. et. al., 62 Pa. Commonwealth Ct. 234, 236-37, 435 A.2d 1346, 1347 (1981).

The Administrative Agency Law, on the other hand, which concerns appeals taken by persons aggrieved by an adjudication of a Commonwealth Agency, 2 Pa.C.S.A. § 702, provides a different scope of review of agency decisions:

After hearing, the court shall affirm the adjudication unless it shall find that the adjudication is in violation of the constitutional rights of the appellant, or is not in accordance with law, or that the provisions of Subchapter A of Chapter 5 (relating to practice and procedure of Commonwealth agencies) have been violated in the proceedings before the agency, or that any finding of fact made by the agency and necessary to support its adjudication is not supported by substantial evidence.

2 Pa.C.S.A. § 704. (Emphasis added.) Because the standard of review articulated by Commonwealth Court in this case finds no support in the Commonwealth Agency Act, we

[ 512 Pa. Page 383]

    hold that Commonwealth Court's review of the present case was conducted pursuant to an improper and illegal standard. The proper standard is that articulated in Section 704 of the Administrative Agency Act, supra.

Since there is no allegation in this case that any party's constitutional rights have been violated or that the proceedings were irregular, the question on review is whether the agency's adjudication is supported by findings of fact which are, in turn, supported by substantial evidence.

The Board determined, in essence, that Mr. McGovern was mentally competent to execute his retirement papers and that he understood the nature of the transaction. In support of this adjudication, the Board found that although Mr. McGovern had an alcohol problem and was distressed about his wife's illness with cancer, Mr. McGovern, some two months before his retirement, executed a will which even his son believed to be competently executed; he conducted his job over the years in a controlled and responsible fashion; he sometimes admitted and sometimes denied the seriousness of his wife's illness; he appeared coherent and responsive to the retirement official on December 17, 1980 during the meeting at which he selected his retirement options; and after the meeting of December 17, he sent a check to the retirement fund, as discussed at that meeting, to purchase his military buy-back retirement time.

Whether these facts support a conclusion that Mr. McGovern was legally competent to execute his retirement papers on the day in question will depend on the legal definition of competence.

It is well established that the State Employee's Retirement System creates a contract between the Commonwealth and its employees. Kline v. Morrison, 353 Pa. 79, 44 A.2d 267 (1945). When a member retires and elects a retirement option, he enters into a contract with the Board. Bowers v. State ...

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