Appeal from the Circuit Court of Cook County; the Hon. David
J. Shields, Judge, presiding.
JUSTICE HARTMAN DELIVERED THE OPINION OF THE COURT:
Rehearing denied November 12, 1986.
The issues emanating from this appeal are whether: (1) the city of Chicago can retain for its own use all interest and income derived from certain pension fund taxes during the first 30 days after their receipt by the city; and (2) plaintiffs are entitled to restitution of all interest earned on pension tax funds withheld by the city of Chicago between January 1, 1979, and October 10, 1984.
Pursuant to statute, defendant city of Chicago (city) maintains four pension funds (pension funds): Policemen's Annuity and Benefit Fund; Firemen's Annuity and Benefit Fund; Municipal Employees', Officers' and Officials' Annuity and Benefit Fund; and Laborers' and Retirement Board Employees' Annuity and Benefit Fund (Ill. Rev. Stat. 1985, ch. 108 1/2, pars. 5-101, 6-101, 8-101, 11-101), which are funded by employee and city contributions (Ill. Rev. Stat. 1985, ch. 108 1/2, pars. 5-168, 6-165, 8-173(a), 11-169(a)). Each year the city levies a special property tax to finance its portion of the pension funds. (Ill. Rev. Stat. 1985, ch. 108 1/2, pars. 5-168, 6-165, 8-173(a), 11-169(a).) Nothing in the Illinois Pension Code (Ill. Rev. Stat. 1985, ch. 108 1/2, par. 1-101 et seq.) (the Code) requires the city to maintain the special property tax receipts in a segregated account; instead, the Code prescribes that the city treasurer hold the proceeds "for the benefit" of the pension funds. Ill. Rev. Stat. 1985, ch. 108 1/2, pars. 5-168, 6-165, 8-173, 11-169.
Property taxes in Cook County are collected by the Cook County collector twice per year for all taxing entities, including the city. The city treasurer receives the city's portion of the collected taxes, including the special levy pension fund taxes, from the collector. The tax receipts are issued to the city in a lump sum and the city comptroller then determines the portion that each of the city funds is entitled to receive. Once that determination is made, the comptroller allocates a dollar amount to each fund, including the pension funds.
The city makes payments to the pension funds throughout the year, but the payments have not always been made at the time that the tax receipts were allocated. Instead, the city has often kept the pension fund tax receipts in its aggregate funds account even after allocation. All interest earned by the pension fund has been retained by the city.
The city attempted to pay the full amount allocated to the pension funds by the end of the year in which the taxes were received and includes interest according to the Code's rate (3% or 4% accordingly) (Ill. Rev. Stat. 1985, ch. 108 1/2, pars. 5-120, 8-124, 11-123) for money held by the city after the employees' contributions to the pension fund are made. According to deposition testimony of both the current and the preceding comptrollers, the city's withholding of payment to the pension fund was never due to an inability to pay but, rather, merely concerned cash flow considerations. The city has thereby received $8.6 million in interest on pension fund money retained more than 30 days after receipt for the period between January 1, 1979, and April 18, 1984, specifically excluding interest earned on the pension fund money during the first 30 days after receipt of the taxes from the collector. *fn1
On January 13, 1983, plaintiff Martin Ryan, a retired Chicago policeman and a participant in the police pension fund, filed an action in chancery for himself and as the representative of a class consisting of participants in all four city pension funds. The complaint alleged that the timing of the city's payment of property tax receipts to the pension funds was in violation of the Code; the city was required to contribute to the pension funds "as soon as possible or practicable"; and the city violated that proscription delaying its contribution and using the interest earned on the pension fund tax receipts for the city's general purposes. Ryan sought declaratory and injunctive relief and an accounting of interest earned and retained by the city on pension fund tax receipts. The circuit court denied class certification and the case proceeded as a derivative action by Ryan and on behalf of the police pension fund. On December 6, 1983, plaintiffs Bernard McKay, Walter Rucinski, Joseph Coglianese, and Louis Eisen intervened on behalf of the three remaining city pension funds.
On March 7, 1984, plaintiffs filed a motion for summary judgment requesting that the court: (1) order an accounting of the interest the city earned on the pension fund tax receipts; (2) order the city to turn over that interest; (3) order the city to segregate the pension fund tax receipts; and (4) order the city to pay over all interest to be earned in the future on pension fund tax receipts. On May 4, 1984, the court ordered the city to make a full accounting of all investment and interest income earned on pension fund tax receipts held more than 30 days between January 1, 1982, and April 19, 1984, and to create and maintain segregated pension fund accounts, but declined to rule on the validity of the city's payment practices and on the ownership of the investment and interest income.
In an order made effective October 10, 1984, the court ruled that the city acted as a fiduciary of the pension funds in receiving pension fund tax receipts. The court ordered the city to pay interest to the pension funds on pension fund tax receipts held beyond 30 days, but declined to order the city to alter its payment scheduling, and reserved for later ruling the issue of restitution of interest previously earned and retained by the city.
On January 8, 1985, plaintiffs filed a motion seeking full retroactive relief and a determination that the city must pay over all interest earned on pension fund tax receipts to the pension funds, which was denied on August 7, 1985. Relying on Chevron Oil Co. v. Huson (1971), 404 U.S. 97, 30 L.Ed.2d 296, 92 S.Ct. 349, the court refused to give its October 10, 1984, order retroactive effect and also rejected plaintiffs' contention that section 1 of "An Act in relation to the deposit of public funds" (Ill. Rev. Stat. 1985, ch. 102, par. 34) required the city to pay the pension funds all the interest earned on the pension fund tax receipts.
Pursuant to Supreme Court Rule 304(a) (103 Ill.2d R. 304(a)), the circuit court found no just reason to delay appeal as to two issues:
"i) whether Plaintiffs are entitled to retrospective relief, restitution of all profits earned by the City since January 1, 1979 on all withheld pension taxes; and
ii) whether prospectively from October 10, 1984, the City is required to pay to the Funds interest on withheld pension tax receipts earned during the first ...