Savannah R-III School District v. Public School Retirement System

950 S.W.2d 854, 1997 Mo. LEXIS 66, 1997 WL 471936

• Court: Supreme Court of Missouri
• Decided: August 19, 1997
• Docket: 79280
• Status: Published

Opinions

HOLSTEIN, Judge.

This is an appeal from the dismissal of a class action suit brought by various public school districts against the Missouri Public School Retirement System. The school districts sued the retirement system for a refund of overpayments made to the retirement system and for a declaration that a 1996 amendment to the statute on which contributions were based, sec. 169.030.3,¹ is unconstitutional. The trial court determined that the 1996 amendment to sec. 169.030.3 is constitutional and that the amendment mooted the school districts’ claim for a refund. Accordingly, the trial court dismissed the case.

The issue before this Court on appeal is whether the 1996 amendment to see. 169.030.3 violates several provisions of our state constitution. First, the school districts argue that the amendment violates the constitutional prohibition of retrospective laws. Second, the school districts urge that the amendment unconstitutionally impairs a contract. Third, the school districts argue that the amendment contravenes the constitutional separation of powers. Finally, the school districts contend that the amendment violates the constitutional prohibition of special laws. Because this case involves the validity of a statute, this Court has jurisdiction. Mo. Const, art. V, sec. 3. Section 169.030.3, as amended in 1996, does not violate our constitution in any of the respects raised. The judgment of the trial court is affirmed.

I.

Defendant, the Public School Retirement System of Missouri, administers a pension plan for teachers working in public school districts with a population under 400,000. See. 169.020. The retirement system was created and is governed by secs. 169.010 through 169.141. Plaintiffs are several public school districts representing a certified class consisting of public school district teacher members of the retirement system and employing school districts who contributed retirement funding to the retirement system pursuant to sec. 169.030 after April 3, 1983. There are approximately 573 school districts and 58,000 teachers in the class. Notwithstanding the certification of the class purporting to represent all teachers, several associations representing the interests of retired and active teachers and school administrators covered by the plan were all permitted to intervene as defendants.² In addition, a number of individual active and retired teachers filed a document characterized as a “petition” in which they objected to the relief sought by the school districts and requested decertification of the class.

The retirement system is funded solely through employer and employee contributions. Sec. 169.030.1. Public school teachers contribute a percentage of their “salary rate” to the retirement system. Sec. 169.030.3. Employing school districts match their teachers’ contributions. Sec. 169.030.1. Contribution rates are established by the board of trustees of the retirement system within certain limits set forth in sec. 169.030.4. With the collected money and interest derived from its investment, the retirement system pays allowances to retired teachers. Sec. 169.030.1. Upon retirement, teachers may choose from various formulas to determine the amount of their monthly allowance. Sec. 169.070. Retirement benefits are based upon a percentage of the teacher’s “final average salary,” which is defined as “the total compensation payable to a member for any five consecutive years of creditable service, as elected by the member, divided by sixty.” Secs. 169.010(8), 169.070. If a teacher and his or her designated beneficiary die before receiving a full return of the teacher’s contributions plus interest, the balance is paid to the teacher’s estate. Sec. 169.070.4.

In 1970, the retirement system began notifying school districts that the value of fringe benefits, including health insurance, provided to teachers should be included as part of each teacher’s salary rate from which the contribution amount is calculated. Most of the school districts complied with the retirement system’s direction.

However, in 1982 the retirement system discovered that some districts were not complying with this direction and were not in-eluding fringe benefits in their teachers’ salary rates. The retirement system sued these school districts to enforce universal compliance., The circuit court concluded that no justiciable controversy existed because the retirement system had failed to adopt a rule officially promulgating its interpretation of the statute. Accordingly, the circuit court dismissed the suit without prejudice on November 19,1986.

On December 29, 1987, the retirement system issued a rule, 16 CSR 10-3.010(8), which defined “salary rate” as used in sec. 169.030.3 to include the value of health insurance premiums or annuities purchased in lieu thereof. Consequently, the school districts filed this lawsuit on April 7, 1988, generally seeking declaratory and injunctive relief on the ground that the rule was contrary to sec. 169.030.3. The school districts also sought a refund of prior contributions based upon health insurance benefits. The circuit court certified the case as a class action, upheld the rule, and granted summary judgment in favor of the retirement system.

The judgment of the circuit court was reversed on appeal. Savannah R-III Sch. Dist. v. Public Sch. Retirement Sys., 912 S.W.2d 574 (Mo.App.1995) (per curiam) (Savannah I). In Savannah I, the court of appeals concluded that the term “salary rate” of sec. 169.030.3, RSMo 1994, did not include any fringe benefits such as health insurance or annuities purchased in lieu thereof. The court also found 16 CSR 10-3.010(8) to be arbitrary and contrary to the statute’s plain and ordinary meaning. The court of appeals reversed the circuit court’s grant of summary judgment and remanded the ease for further proceedings. Id. at 577.

While the case was pending in the circuit court following remand, the legislature amended sec. 169.010, to redefine the term “salary rate” to specifically include employer paid medical benefits. 1996 Mo. Laws 386. The legislature also added the following language to sec. 169.030.3 in an apparent attempt to put to rest the pending litigation:

Contributions transmitted to the retirement system before the effective date of this act [February 20,1996], based on salary rates which either included or excluded employer paid medical benefits for members, shall be deemed to have been in compliance with this section. The retirement system shall not refund or adjust contributions or adjust benefitdetermina-tions with respect to any period before [February 20, 1996], solely because of the treatment of employer paid medical benefits for members.

1996 Mo. Laws 387.

The retirement system filed a motion to dismiss the case on the ground that the 1996 amendment to sec. 169.030.3 mooted the controversy. The school districts filed a third amended petition, which added challenges to the constitutionality of the 1996 amendment and sought a declaration of rights and duties. The school districts then filed a motion for summary judgment as to its constitutional challenges to the 1996 amendment. Upholding the constitutionality of sec. 169.030.3, as amended in 1996, the circuit court denied the school districts’ motion for summary judgment and granted the retirement system’s motion to dismiss. Upon judgment for dismissal, this appeal was taken.

II.

The school districts argue that the 1996 amendment to sec. 169.030.3 impairs an obligation of contract in violation of article I, sec. 13 of the Missouri Constitution. This argument lacks merit. There is no contractual relationship between the retirement system and the school districts. Any legal obligation between the retirement system and the school districts is purely statutory.

The school districts further argue that the amendment to sec. 169.030.3 unconstitutionally impairs a contractual relationship existing between the teacher class members and the retirement system. We need not address the merits of this argument. Plaintiffs lack standing to assert the rights of teachers because all of the representatives of the class are school districts.³ Named plaintiffs who represent a class must allege and show that they personally have been injured, not that injury has been suffered by other members of the class which they purportedly represent. Harris v. Union Elec. Co., 766 S.W.2d 80, 86 n. 10 (Mo. banc), cert. denied, 492 U.S. 919, 109 S.Ct. 8245, 106 L.Ed.2d 592 (1989).

III.

Article I, see. 13 of the Missouri Constitution also prohibits the enactment of any law “retrospective in its operation.” The school districts contend that the 1996 amendment to sec. 169.030.3 violates this constitutional provision.

Because the retrospective law prohibition was intended to protect citizens and not the state, the legislature may constitutionally pass retrospective laws that waive the rights of the state. State ex rel. Meyer v. Cobb, 467 S.W.2d 854, 856 (Mo.1971); Graham Paper Co. v. Gehner, 332 Mo. 155, 59 S.W.2d 49, 51-52 (banc 1933). All of the representative plaintiffs are school districts. “School districts are bodies corporate, instrumentalities of the state established by statute to facilitate effectual discharge of the General Assembly’s constitutional mandate to establish and maintain free public schools.... ” State ex rel. Independence Sch. Dist. v. Jones, 653 S.W.2d 178, 185 (Mo. banc 1983) (quotation omitted). As “creatures of the legislature,” the rights and responsibilities of school districts are created and governed by the legislature. Id. Hence, the legislature may waive or impair the vested rights of school districts without violating the retrospective law prohibition. Dye v. School Dist. No. 32, 355 Mo. 231, 195 S.W.2d 874, 879 (bane 1946). The analysis of this constitutional claim would be different had any one of the named parties been a teacher.

IV.

The school districts contend that the 1996 amendment to sec. 169.030.3 is a legislative encroachment on the judicial function, violating the separation of powers doctrine.

Section 169.030.3 does not contravene any final adjudication of a court of this state and, therefore, the amendment does not violate the doctrine of separation of powers. See Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 225-27, 115 S.Ct. 1447, 1456-57, 131 L.Ed.2d 328 (1995); see also, McNichol v. United States Mercantile Reporting Agency, 74 Mo. 457, 471 (1881) (declaring that separation of powers prohibits the legislature from revising or overturning the “solemn adjudications” of the judiciary). A final judicial decision resolving an issue is the last word of the judicial department with regard to a particular case or controversy. The separation of powers principle prevents the legislature from declaring that the law applicable in a specific case is something different than what the courts have finally decided. However, if a court has not yet finally adjudicated an issue in a pending case, even a retroactive amendment to the governing law does not constitute a separation of powers violation. See Plant, 514 U.S. at 225-27, 115 S.Ct. at 1456-57.

In Savannah I, the court determined only that the pre-amendment version of sec. 169.030.3 did not authorize the retirement system to collect contributions based on health care benefits. From that holding it does not follow, a fortiori, that the plaintiff school districts had a final adjudication giving them a right to refund of such contributions. The school districts urge the Court to interpret the entire 1996 statutory amendment as an attempt to undo the court’s decision in Savannah I. That is one conceivable interpretation of the first sentence of the statute. However, both sentences must be read together. In addition, this Court must presume that the statute is constitutional. Beatty v. State Tax Comm’n, 912 S.W.2d 492, 495 (Mo. banc 1995). Furthermore, ambiguous statutes that are susceptible to more than one construction should be construed in a manner consistent with the constitution. M & P Enterprises, Inc. v. Transamerica Fin. Servs., 944 S.W.2d 154, 159 (Mo. banc 1997). Applying those principles to the instant ease, the two sentences together have the purpose not to undo Savannah I, but, simply to declare that there shall be no refunds of past contributions based on employer provided medical benefits. Because the amended version of see. 169.030.3 does not abrogate any final adjudication in Savannah I, it does not violate the separation of powers requirement.

While the judicial power is mentioned in Missouri Constitution article II, sec. 1, and article V, sec. 1, its precise outlines are not defined. A constitutional provision is interpreted according to the intent of the voters who adopted it. Keller v. Marion County Ambulance Dist., 820 S.W.2d 301, 302 (Mo. banc 1991). The provisions separating the judicial function from the legislative was not intended to protect turf claimed by judges. Neither was the doctrine intended to prevent all laws that are retrospective in their operation. If that were the case, the provision prohibiting retrospective laws would be a meaningless redundancy. Finally, the separation of powers doctrine was never intended to prohibit statutes designed to resolve legal disputes between two statutory instrumentalities of government. The reason for the separation of powers is to protect the liberty and security of the governed. See Metro. Washington Airports Auth. v. Citizens for the Abatement of Aircraft Noise, Inc., 501 U.S. 252, 272, 111 S.Ct. 2298, 2309-10, 115 L.Ed.2d 236 (1991). In the context of a claimed impingement of the judicial function by the legislature, it is the citizens’ rights, established either by a specific provision in the constitution or by a final adjudication in a court of law, that are protected from legislative diminution. By this standard, the school districts have not demonstrated an encroachment on the judicial function.

Citing MeNiehol, the school districts argue that any enactment retroactively declaring the law is invalid as a violation of the separation of powers doctrine. See McNichol, 74 Mo. at 471. (“[legislative action cannot be made to retroact upon past controversies, and to reverse decisions which the courts, in the exercise of their undoubted authority, have made.”); see also Kern v. Supreme Council Am. Legion of Honor, 167 Mo. 471, 67 S.W. 252, 255 (1902) (“The 31st general assembly had the power to prescribe what the law should be thereafter, but it was the province of the courts, and not of that session of the assembly, to say what the law was before that time.”). In neither MeNiehol nor Kern did the Court hold a retroactive statute unconstitutional because the legislature violated the separation of powers doctrine. The Kern case in particular, read in its entirety, stands for no more than a restatement of the general rule, discussed in Part III, that statutes affecting vested rights are presumed to be prospective.

V.

Finally, the school districts contend that the 1996 amendment to sec. 169.030.3 violates article III, sec. 40(25), which prohibits the enactment of any “special law” that legalizes an unauthorized or invalid act of any state officer or agent.

A “special law” is a law that “includes less than all who are similarly situated ... but a law is not special if it applies to all of a given class alike and the classification is made on a reasonable basis.” Batek v. Curators of the Univ. of Mo., 920 S.W.2d 895, 899 (Mo. banc 1996) (omission in original) (quoting Blaske v. Smith & Entzeroth, Inc., 821 S.W.2d 822, 831 (Mo. banc 1991)). “In essence, the test for ‘special legislation’ under article III, sec. 40, of the Missouri Constitution, involves the same principles and considerations that are involved in determining whether the statute violates equal protection in a situation where neither fundamental right nor suspect class is involved, i.e., where the rational basis test applies.” Blaske, 821 S.W.2d at 832.

The school districts argue that the 1996 amendment impermissibly imposes disparate treatment on those districts that contributed to the retirement system based on medical benefits when not required to do so by law. The school districts contend that in this regard the amendment violates the special laws prohibition because it arbitrarily and unreasonably calls for dissimilar treatment of two groups who are similarly situated.

It is true, as the school districts argue, that the amendment results in different treatment for those school districts that made overpayments to the retirement system from those that did not. However, this classification is rationally related to several legitimate governmental objectives. First, the legislative enactment may have been an equitable response to those teachers who detrimentally relied on their school district contributions by retiring or planning for their retirement. Second, some excess contributions will already have been distributed to retired or deceased teachers. The legislature may have recognized that many of these distributions will be unrecoverable. To require the retirement system to refund such contribution to school districts would result in an unplanned and inequitable depletion of the retirement fund to the detriment of all teachers covered under the plan. Finally, the legislature may have determined that it was in the public’s interest to end the expenditure of time, money and energy on intragovernmental litigation and to refocus the school districts on educating youth and the retirement system on administering the pension plan.

Each of the above is a rational basis for the enactment of the amended sec. 169.030.3. Thus, there is no violation of the “special legislation” prohibition of article III, sec. 40.

VI.

The 1996 amendment to sec. 169.030.3 does not violate our state constitution in any of the respects raised by the school districts. The judgment of the trial court is affirmed.

COVINGTON, J., and SMITH and CRAHAN, Special Judges, concur. PRICE, J., concurs in result. ROBERTSON, J., dissents in separate opinion filed. LIMBAUGH, J., concurs in separate opinion of ROBERTSON, J. BENTON, C.J., and WHITE, J., not sitting.

1 . All statutory references are to RSMo 1994 with amendments codified in Supp.1996.

2 . The following entities were allowed to intervene as defendants: The Missouri State Teaches Association, The Retired Teachers Association of Missouri, The Missouri National Education Association, Cooperating School Districts of St. Louis Suburban Area, The Missouri Association of School Administrators, The Missouri Association of Elementary School Principals, and The Missouri Association of School Board Officials.

3 . Several organizations representing individual class members were permitted to join the suit as intervenor defendants to oppose the relief requested by the school districts and to seek decer-tification of the class. However, the circuit court dismissed the suit as moot without addressing their objections to class certification. Therefore, this Court need not address the question of whether this class was properly certified under Rule 52.08 because that question is not before us on appeal.