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POLICE PENSION FUND ASSOCIATION BOARD v. THOMAS P. HESS (06/30/89)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: June 30, 1989.

POLICE PENSION FUND ASSOCIATION BOARD, AN AGENCY OF THE CITY OF READING, PENNSYLVANIA, APPELLANT,
v.
THOMAS P. HESS, APPELLEE. THOMAS P. HESS, APPELLANT, V. POLICE PENSION FUND ASSOCIATION BOARD, AN AGENCY OF THE CITY OF READING, PENNSYLVANIA, APPELLEE

Appeal from COMMON PLEAS Court, Berks County; Honorable Thomas J. Eshelman, Judge.

COUNSEL

Jack A. Linton, City Sol., Peter F. Cianci, First Asst. City Sol., Reading, for appellant/appellee, Police Pension Fund Ass'n Bd., an Agency of the City of Reading, Pa.

Anthony C. Busillo, II, Harrisburg, for appellee/appellant, Thomas P. Hess.

Crumlish, Jr., President Judge, McGinley, J., and Narick, Senior Judge.

Author: Mcginley

[ 127 Pa. Commw. Page 501]

The Police Pension Fund Association Board (Fund) and Police Officer Thomas P. Hess (Hess) cross-filed for summary judgment in the Court of Common Pleas of Berks County (common pleas court). The common pleas court determined that the City of Reading (City) was estopped from denying pension benefits to Hess because he relied on the City's prior representation that he would be eligible for benefits after twenty years service. The common pleas court entered judgment and the Fund and Hess have appealed.

The Fund and Hess entered into a stipulation of facts. Hess was twenty-three (23) years of age at the time he commenced employment with the City on January 23, 1963. When Hess began his employment police officers were eligible to receive pension benefits upon completion of twenty (20) years of service with no minimum age requirement. Hess was expressly informed by representatives of the City that he would be eligible for pension benefits after completion of twenty (20) years of service as a police officer regardless of age. In 1977 the Fraternal Order of Police (FOP), Lodge # 9 and the City met to collectively bargain employment terms and conditions including pensions pursuant to Section 1 of the Act of June 24, 1968, (Act III), P.L. 237.*fn1 When the parties arrived at an impasse*fn2 they proceeded

[ 127 Pa. Commw. Page 502]

    to binding arbitration. After hearing the Arbitrators issued an award which specified that all police officers presently on the force with twenty (20) years or more of service as of 1978 could retire with full pension benefits regardless of age. Those officers who did not meet this requirement would be eligible for full pension benefits after completing twenty (20) years of service and the attainment of fifty (50) years of age. The Fund and Hess agree that the award effectively enhanced the actuarial soundness of the fund.

Pursuant to the Arbitrators' award the City enacted an Ordinance*fn3 which required a minimum age of fifty (50) and twenty (20) years of service as conditions to the receipt of full pension benefits.*fn4 When the Ordinance was enacted

[ 127 Pa. Commw. Page 503]

Hess had approximately sixteen (16) years of service. On September 10, 1985, at the age of forty-six (46) and with twenty-two (22) years of service, Hess applied for full pension benefits. Pursuant to the Ordinance his request was denied.

Our scope of review of the grant of a motion for summary judgment is limited to determining whether there has been an error of law or a manifest abuse of discretion. Miller v. Emelson, 103 Pa. Commw. 437, 520 A.2d 913 (1987). Summary judgment is properly granted where there is no genuine issue of material fact and the moving party has clearly established entitlement to judgment as a matter of law. Kuehner v. Parsons, 107 Pa. Commw. 61, 527 A.2d 627 (1987).

On appeal, the Fund argues that the theory of equitable estoppel does not apply in the present case because the City did not intentionally misrepresent a material fact upon which Hess relied to his detriment. As to Hess' appeal Hess argues that the Arbitrators exceeded their authority in making the pension award and that the City's enactment of the Ordinance resulted in an unconstitutional infringement of his pension rights.*fn5

[ 127 Pa. Commw. Page 504]

The Fund maintains that equitable estoppel is inapplicable because the City did not intentionally or materially misrepresent a material fact upon which Hess relied to his detriment. The Fund asserts that the City did not misrepresent anything to Hess. When he commenced his employment a police officer was entitled to pension benefits after twenty years of service. The Fund argues that a minimum age requirement was properly arbitrated and legislated. Finally, the Fund argues that the application of the doctrine of equitable estoppel would defeat the collective bargaining process because employees will assert reliance on conditions existing at the time of hiring instead of accepting conditions collectively bargained for throughout the employment relationship.

Equitable estoppel is a doctrine that prevents one from doing an act differently than the manner in which another was induced by words or actions to expect. Novelty Knitting Mills, Inc. v. Siskind, 500 Pa. 432, 457 A.2d 502 (1983). The estoppel arises when a party intentionally or negligently misrepresents a material fact, knowing or having cause to know that another will rely on the misrepresentation, and that the other justifiably relies upon the misrepresentation to his detriment. Brog Pharmacy v. Department of Public Welfare, 87 Pa. Commw. 181, 487 A.2d 49 (1985). The elements of estoppel must be proven by clear and convincing evidence, Sepko Appeal, 84 Pa. Commw. 359, 479 A.2d 665 (1984), with the critical elements being misrepresentation and justifiable reliance. Siskind. This is where the common pleas court erred. Herein, the City did not intentionally or negligently misrepresent a material fact to Hess. The City informed Hess that police officers were entitled to a pension after twenty years of service, regardless of age, when Hess joined the force in 1963. This representation was accurate until the Arbitrators' award and the subsequent implementation of the award by City Ordinance. Thereafter, the City did not continue to represent to Hess that he would be eligible for pension benefits after twenty years of service. The City is

[ 127 Pa. Commw. Page 505]

    not equitably estopped from requiring Hess to reach fifty years of age before receiving his pension.*fn6

In Pennsylvania, public retirement benefits are considered deferred compensation Wright v. Retirement Board of Allegheny County, 390 Pa. 75, 134 A.2d 231 (1957). The term "vesting" has traditionally been used when the employee, having made all required contributions, has completed the number of years of service required for eligibility. Hickey v. Pittsburgh Pension Board, 378 Pa. 300, 106 A.2d 233 (1954). Our appellate courts in Catania v. Commonwealth State Employees' Retirement Board (Catania II), 71 Pa. Commw. 393, 455 A.2d 1250 (1983) and Association of Pennsylvania State College and University Faculties v. State System of Higher Education (APSCUF) 505 Pa. 369, 479 A.2d 962 (1984) sought to define the contract rights of the individual employee relative to the public employer in the absence of a collective bargaining agreement establishing such rights. Philadelphia v. District Council 33, 112 Pa. Commw. 90, 535 A.2d 231 (1987). In Catania II, an exhaustive review was conducted of all the major decisions which have considered whether or not statutory changes in pension plan terms can be constitutionally applied to pension plan members before and after vesting. See Catania II, 71 Pa. Commw. at 400-401, 455 A.2d at 1253-1254. Our Court in Catania II, concluded that where a member's rights have been treated as "vested" by reason of attaining the minimum years of tenure, any and all changes which reduce the benefits then applicable are barred.*fn7 As to pension fund members who had

[ 127 Pa. Commw. Page 506]

    commenced employment but not attained minimum tenure before the enactment of the legislative changes, our Supreme Court has reviewed and approved statutory changes in pension plan terms that increased the contribution rate of employees, and established a minimum age, provided the changes enhanced the "actuarial soundness" of the pension fund. See Harvey v. Allegheny County Retirement Board, 392 Pa. 421, 141 A.2d 197 (1958); Eisenberger v. Harrisburg Police Pension Commission, 400 Pa. 418, 162 A.2d 347 (1960); and Geary v. Allegheny County Retirement Board, 426 Pa. 254, 231 A.2d 743 (1967). However, in APSCUF, the Supreme Court went further and held that a unilateral legislative change in the retirement benefits of non-vested members would be prohibited without regard to the Commonwealth's claim of actuarial enhancement.*fn8

In the present case, the FOP and the City met to collectively bargain the pension issue. Section 1 of Act III expressly includes "[t]he right to bargain collectively . . . concerning the terms and conditions of their employment, including . . . pensions." In City of Allentown v. Local 302, International Association of Fire Fighters, 511 Pa. 275, 288, 512 A.2d 1175, 1181 (1986) our Supreme Court reasoned:

It would appear that by including retirement and pensions in the items which policemen and firemen have a right to bargain, the legislature has evidenced an intention that the public employer no longer has exclusive control over the structure of pension systems. Once the matter is included in a collective bargaining agreement, it becomes, like any other contractual provision, binding on the parties to the agreement.

[ 127 Pa. Commw. Page 507]

Therefore, both parties may change the pension plan by mutual consent. However, herein, the FOP and the City reached an impasse concerning the pension issue. There was no mutual consent by the parties to change the pension. The pension issue was submitted to arbitration under Act III as a legitimate term or condition of employment falling within the statutorily permitted scope of collective bargaining. In the Matter of the Arbitration Between the Borough of Cambridge and the Police Department, 53 Pa. Commw. 251, 417 A.2d 291 (1980). The Arbitrators' award modified pension eligibility to require attainment of a minimum age of fifty (50) years in addition to twenty years of service before receipt of pension benefits. This award was objected to by the Police Arbitrator. (Arbitrators' Award, Appellants' Brief at 33.) An Ordinance encompassing the new pension requirement was quickly passed. The common pleas court concluded that the Ordinance was not a unilateral legislative act, but was the result of the collective bargaining process.*fn9 The common pleas court also concluded that Section 4304 of The Third Class City Code (Code)*fn10 did not prohibit the enactment of the ordinance and as such the Arbitrators' award was not in excess of their authority.*fn11 However, Section 4034 of the Code does not address and is not determinative of whether or not the city council or the Arbitrators had authority to retroactively diminish Hess' pension right by requiring that he reach a minimum age.*fn12

[ 127 Pa. Commw. Page 508]

While binding arbitration may be part of the collective bargaining process an arbitrator's award entered as a result of a bargaining impasse is not the equivalent of a mutually bargained agreement. The arbitrators' authority is limited. They cannot mandate that the public employer perform an illegal act, i.e., one which is not statutorily authorized or an act which is prohibited by law. Upper Providence. An arbitration award may only require a public employer to do that which it could do voluntarily. City of Washington v. Police Department of Washington, 436 Pa. 168, 259 A.2d 437 (1969). The Ordinance, without any mutually agreed upon foundation retroactively diminishes the pension rights of those individuals who entered the system prior to January 1, 1978. The minimum age requirement forces Hess to work several more years in order to enjoy his pension rights. The Ordinance cannot be applied so as to diminish Hess' pension rights; the Fund improperly denied benefits to Hess. Hess' contractual pension rights became fixed upon his entry into the system and cannot be subsequently diminished or adversely affected in this manner. APSCUF.*fn13

Accordingly, we affirm the order of the common pleas court for the reason set forth in this opinion.

[ 127 Pa. Commw. Page 509]

ORDER

AND NOW, this 30th day of June, 1989, the order of the Court of Common Pleas of Berks County at No. 113 January 1986, dated February 23, 1988 is affirmed as to the appeal of the Police Pension Fund Association Board and the appeal of Thomas P. Hess is quashed.


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