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Edward L. Mount v. Trustees of Public Employees'' Retirement System of

Decided: March 5, 1975.


Leonard, Seidman and Bischoff. The opinion of the court was delivered by Seidman, J.A.D.


This appeal presents two issues, both seemingly of first impression in this jurisdiction. At least, counsel have not brought to our attention any reported case on all fours with the matter before us, and our own research has disclosed none.

One issue is whether, in the case of a public employee who retired and is receiving a pension under a retirement system, and is thereafter indicted for offenses allegedly committed during his employment, the trustees of the retirement system may, upon notice and after a hearing, suspend further pension payments pending a determination of the indictment. The other, assuming the existence of the power to suspend, is what must be shown at the hearing to warrant such suspension.

Edward L. Mount was employed by the County of Mercer as county engineer from January 1, 1949, until June 19, 1973, when, having attained the age of 68, he applied for and was awarded a retirement allowance under the Public Employees' Retirement System of New Jersey N.J.S.A. 43:15A-6 et seq. By virtue of his having been in public service for more than 50 years, including prior employment with the City of Trenton, his pension amounted to $1574.53 per month.

On September 16, 1974 Mount was indicted by a federal grand jury sitting in Newark. One count of the indictment charged him, as county engineer, with extorting the sum of

$8,000 from Barrett Paving Company, Inc., a contractor, during the period of 1968 through 1970, in violation of 18 U.S.C.A. ยงยง 1951 and 1952. In three additional counts it was alleged that he filed false income tax returns for the respective years of 1968, 1969, and 1970.

Upon becoming aware of the indictment, the secretary of the retirement system notified Mount by letter dated September 30, 1974 that since the indictment "leaves open the question of whether or not the retirement allowance which has been granted to you is based upon honorable service, a requisite for such retirement," his status would have to be reconsidered by the board of trustees; that it was "very possible" the board would suspend future pension payments pending the outcome of the indictment, and that should the board take that action he would be advised after the October 15 meeting.

There is no need to recount in detail the somewhat tangled procedural history thereafter. It is sufficient simply to note the filing of a verified complaint in Chancery Division of Superior Court seeking to enjoin the board of trustees from taking any action with respect to the pension payments until a final determination of the indictment, the denial of a temporary restraint by the Chancery Division judge, the filing of a motion for leave to appeal, and the application to us for a temporary stay pending the outcome of the motion. These matters all became moot when the board of trustees, at a hearing on October 29, 1974, at which Mount's counsel were present, voted to suspend the pension pending disposition of the criminal charges. An appeal as of right was filed from that determination. R. 2:2-3(a)(2). We heard the appeal on an accelerated basis pursuant to R. 2:9-2.

Appellant contends that (1) the procedure followed by the board violated due process in that the State was required to go beyond the indictment and present substantial evidence in support of the charges in order to justify any interruption of the pension payments; (2) he was entitled to be advised of the specific charges against him; (3) he was deprived of his Sixth Amendment right to confront and

cross-examine witnesses; (4) the indictment was not prima facie evidence of dishonorable service, and (5) the board had no authority to suspend the pension payments absent a conviction, and (6) public policy would not be served by the suspension. The response of the deputy attorney general is that (1) the board has authority to suspend pension payments pending termination of criminal proceedings against a pensioner for alleged offenses occurring during his employment which would constitute dishonorable service, and (2) the board's procedure conformed to the requirements of due process of law.

A public employee's pension rights and benefits are based upon and fall within the scope of a relevant pension statute. Feher v. Bd. of Trustees, Pub. Emp. Retirem. Syst., 68 N.J. Super. 391, 397 (App. Div. 1961). In this case the applicable statute is the Public Employees' Retirement System of New Jersey, N.J.S.A. 43:15A-6 et seq., which is administered by a board of trustees appointed pursuant to N.J.S.A. 43:15A-17.

It has been said that pensions to public officers are mere gratuities bestowed by the sovereign in recognition of previously rendered meritorious service. Watt v. Franklin Mayor and Council, 21 N.J. 274, 279 (1956). A "more modern concept" is that pensions are a form of delayed salary compensating the employee for faithful service. See Id., Salz v. State House Comm'n, 18 N.J. 106, 111-112 (1955); Bd. of Trustees, etc. v. Warren Cty. Bd. of Freeholders, 87 N.J. Super. 187, 194 (Law Div. 1965), aff'd 47 N.J. 132 (1966). However, in Spina v. Consol. Police, etc., Pension Fund Comm'n, 41 N.J. 391, 401 (1964), former Chief Justice Weintraub, writing for the court, stated that "[w]e think there is no profit in dealing in labels such as 'gratuity,' 'compensation,' 'contract,' and 'vested rights.' None fits precisely, and it would be a mistake to choose one and be driven by that choice to some inevitable consequence." He said further:

Government's contribution to a pension fund has several facets. In part it compensates for services already rendered. It is also a reward for services to be rendered over the required minimum number of years, but the employee has no right to be continued in employment for enough years to earn it. In both respects the contribution seems compensatory, at least as of the time of eligibility for retirement. Yet it can be viewed also as noncompensatory payment to further the public employer's own interests, i.e., to permit the employer to release an aged servant who cannot decently be let out if he is unable to meet the necessities of life.

As to the employee's contribution, it seems to be a sum already earned.

In these circumstances, it seems idle to sum up either the public's or the employee's contribution in one crisp word. We have no doubt that pension benefits are not a gratuity within the constitutional ban against the donation of public moneys. * * * And we think the employee has a property interest in an existing fund which the State could not simply confiscate. * * * [at 401-402]

We see no compelling reason to delve further into the nature of a pension or the rights secured to the pensioner. It seems self-evident that a retirement allowance cannot arbitrarily be denied a public employee who qualifies therefor under an existing statutory system. See Ballurio v. Castellini, 29 N.J. Super. 383 (App. Div. 1954). A public employee qualifies for a pension upon satisfying three basic requirements: age, length of service, and honorable service. See Plunkett v. Hoboken Pension Comm'rs, 113 N.J.L. 230, 232-233 (Sup. Ct. 1934), aff'd 114 N.J.L. 273 (E. & A. 1935); Walter v. Trenton Police & Fire, etc., 120 N.J.L. 39 (Sup. Ct. 1938); Ballurio v. Castellini, supra; Hozer v. State, etc., Police & Firemen's Pension Fund, 95 N.J. Super. 196, 199-200 (App. Div. 1967), certif. den. 50 N.J. 285 (1967).

Honorable service is a sine qua non of the grant of a pension. Plunkett v. Hoboken Pension Commr's, supra, 113 N.J.L. at 232. It is that service which is characterized by or in accordance with principles of honor, and one so serving "is scrupulously upright, and shows a fine regard for obligations as to conduct." Id. at 233. A pension is an inducement

to conscientious, efficient and honorable service. Ballurio v. Castellini, supra, 29 N.J. Super. at 389; Fromm v. Bd. Directors of Police, etc., Retirem. Syst., 81 N.J. Super. 138, 142 (App. Div. 1963); Hozer v. State, etc., Police & Firemen's Pension Fund, supra, 95 N.J. Super. at 199. To bestow it upon one "whose record of public service is marred by a conviction for malfeasance in office would be to place a premium upon dishonesty and inefficiency" and "burden the taxpayer with the necessity of ...

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