95-004841 Waltraund E. Paehler vs. Division Of Retirement Status: Closed Recommended Order on Monday, May 20, 1996.

Summary: Retiree not deemed to be mentally incompetant when retirement application executed; request to change from early to disability retirement denied.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WALTRAUD E. PAEHLER, )

)

Petitioner, )

)

vs. ) CASE NO. 95-4841

)

DIVISION OF RETIREMENT, )

)

Respondent. )

_____________________________)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of

Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on

February 6, 1996, in Jacksonville, Florida.

APPEARANCES

For Petitioner: Mark S. Levine, Esquire

245 East Virginia Street

Tallahassee, Florida 32301-1263

For Respondent: Stanley M. Danek, Esquire

Division of Retirement

2639-C North Monroe Street

Tallahassee, Florida 32399-1560

STATEMENT OF THE ISSUE

The issue in this case is whether petitioner was mentally incapacitated at

the time she chose the early (service) retirement option from the state.

PRELIMINARY STATEMENT

This matter began on September 6, 1995, when respondent, Division of

Retirement, advised petitioner, Waltraud E. Paehler, that her request to change

from service retirement to disability retirement had been denied since she had

already cashed or deposited a retirement benefit. Thereafter, petitioner

requested a formal hearing to contest the agency's action. The matter was

referred by respondent to the Division of Administrative Hearings on October 5,

1995, with a request that a Hearing Officer be assigned to conduct a hearing.

By notice of hearing dated November 13, 1995, a final hearing was scheduled

on February 6, 1996, in Jacksonville, Florida.

At final hearing, petitioner testified on her own behalf and presented the

testimony of her daughter, Gwendolyn R. Harvey. Also, she offered petitioner's

exhibits 1-4. All exhibits were received in evidence. Exhibits 1-3 are the

deposition testimony of Dr. Mark A. Hardin, a board certified general

practictioner and accepted as an expert in the general practice of medicine; Dr.

Seabury D. Stoneburner, Jr., a nephrologist and internist and accepted as an

expert in kidney disease and internal medicine; and Kristina Crenshaw, a

licensed mental health counselor. Respondent presented the testimony of

Patricia G. Brown, an employee at Middleburg High School in Middleburg, Florida;

and Mark Sadler, its disability retirement administrator. Also, it offered

respondent's exhibit 1 which was received in evidence.

The transcript of hearing was filed on March 20, 1996. By agreement of the

parties the time for filing proposed findings of fact and conclusions of law was

extended to May 3, 1996. The same were timely filed by the parties. A ruling

on each proposed finding has been made in the Appendix attached to this

Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are

determined:

1. Petitioner, Waltraud E. Paehler, was a classroom teacher in the Clay

County public school system until 1993, and says she had a total of nineteen

years of service. During that time period, she participated in the Florida

Retirement System, which is administered by respondent, Division of Retirement

(Division).

2. In 1992, petitioner was suffering from a number of illnesses, including

chronic kidney failure and congestive heart failure, which impaired her ability

to continue working as a teacher. She also suffered from depression. These

conditions continued into 1993. During this time period, she was hospitalized

on at least two occasions.

3. Because her work was very stressful, and tended to exacerbate her

medical condition, petitioner accepted her physician's advice and decided to

resign her teaching position effective April 14, 1993. On April 21, 1993, or a

week later, she executed her application for retirement and opted to take early

retirement effective May 1, 1993, when she was fifty-four years of age.

4. Even though the local school board had periodically distributed

information booklets to all teachers, including petitioner, concerning early,

normal and disability types of retirement, and the various retirement options

were discussed annually at each school's in-service training seminar, petitioner

says she was still unaware of the disability retirement option. Thus, she

elected to take early retirement on April 21, 1993. Because of her age, her

retirement benefits were reduced by forty percent, or five percent for each year

under the normal retirement age of sixty-two. Assuming she was qualified, had

she elected to take disability retirement, there would have been no penalty

because of her age.

5. At or about the time petitioner decided to resign her teaching

position, her daughter, who was assisting petitioner in her personal affairs,

telephoned the local school board in an effort to ascertain potential retirement

options for her mother. She spoke with an unknown individual in the school

personnel office who the daughter says was not "very knowledgeable." The two

discussed "in general what (her) mother could do" with respect to retirement,

but the daughter says she received no specifics other than the fact that her

mother would be "entitled to partial pay." She also requested that an

application for service retirement form be mailed to her mother. The daughter

then relayed this sketchy information to her mother.

6. Because of financial constraints, and in order to receive her benefits

immediately, petitioner decided to take early retirement rather than wait until

normal retirement age. After selecting the option 1 benefit, which entitled her

to benefits for her lifetime only, petitioner carried the form to her school's

personnel office where she executed it on April 21, 1993, before the principal's

secretary, a notary public. Although the secretary could not recall the

specific event, she affirmed that she would not allow anyone to sign a document

who did not appear to be competent.

7. In selecting option 1, which gave the highest monthly benefits for early

retirement, petitioner acknowledged she understood the ramifications of making

that choice when she did so on April 21, 1993. Thus, on that date she possessed

sufficient mental capacity to know that these benefits would last only during

her lifetime, and her daughters would not receive any benefits after her death.

At final hearing she confirmed that, prior to executing the form, she had

reviewed the various options under early retirement and selected the first

option since she "figure(d) (she had) done enough for them all (of her) life,

they can take care of themselves."

8. In June 1994, petitioner read an article in a teacher trade publication

and learned that a number of states offered disability retirement as an option

and did not penalize retirees for early retirement due to a disability. This

article prompted petitioner the following month to write a letter to the

Division.

9. When petitioner made inquiry with the Division in July 1994 concerning

a change from early (service) to disability retirement, she was told that under

Rule 60S-4.002(4), Florida Administrative Code, she could not do so after

cashing her first check. By then, petitioner had long since cashed the first

retirement check mailed to her at the end of May 1993. That advice prompted her

to eventually challenge the Division's rejection of her claim on the theory that

she was "incapacitated" when she made her decision to take early retirement.

10. In support of her contention that in 1993 she lacked the necessary

mental capacity to make a reasoned decision concerning her retirement,

petitioner presented the testimony of three health professionals from whom she

was receiving care in 1993. Their deposition testimony is found in petitioner's

exhibits 1-3 received in evidence.

11. Dr. Hardin, a family physician, was petitioner's primary treating

physician from February 1992 until April 1993. In the spring of 1993, he

recalled petitioner as being "confused," "in an imbalanced state," suffering

"mental duress," dependent on explicit instructions for appointments, and taking

a variety of prescribed medications for tobacco cessation, chronic renal

failure, congestive cardiac condition, high blood pressure, cardiomyopathy,

tremors, anxiety and migraine headaches. Because of these conditions, Dr.

Hardin found it difficult to believe that she could "handle" a more complicated

matter such as choosing a retirement option. Dr. Hardin acknowledged, however,

that during the spring of 1993, he had little chance "to follow her" since

another physician, Dr. Stoneburner, was managing petitioner's most important

illness, renal failure.

12. Dr. Stoneburner, a nephrologist and internist who has treated

petitioner for a kidney disease since 1985, felt that in the spring of 1993 she

"was not in a very good position to make a competent decision based on her

emotional state." Just prior to her retirement, he observed petitioner as

having "significant depression" and "a lack of desire to work." She was also

taking as many as six or seven medications at one time which could "possibly"

cause "someone to be confused." Based on these circumstances, Dr. Stoneburner

opined that petitioner was not competent to make a rational judgment. However,

Dr. Stoneburner conceded that if petitioner had been given retirement options

explained in layman's terms, and had someone to assist her in explaining the

various options, she could have made an intelligent decision.

13. Kristina Crenshaw, a licensed mental health counselor, met with

petitioner on four occasions between February 18 and April 12, 1993. Ms.

Crenshaw found petitioner to have "significant difficulty with depression," in

an "agitated, very stressed, (and) overwhelmed" condition, and with a "strong

sense of uncertainty about her future." While the witness believed that

petitioner would have understood a pamphlet describing her retirement options,

she would not have "necessarily understood all the implications to her own

personal life." The witness agreed, however, that once petitioner made a

decision to resign her job, she seemed more "upbeat" and "positive." Further,

petitioner had told her by telephone on April 15, 1993, that she felt "much

better" after retiring from her job. The counselor did not know if petitioner

was mentally competent when she opted for early retirement a week later.

14. Nothwithstanding the testimony of the health professionals, the

findings in paragraph 7 are deemed to be more compelling on the critical issue

of competency, and it is found that on April 21, 1993, petitioner understood the

nature and consequences of her acts, and she was capable of binding herself by

the retirement application. Therefore, her request to have rule 60S-4.002(4)

waived, or to have her "contract" with the Division set aside, should be denied.

CONCLUSIONS OF LAW

15. The Division of Administrative Hearings has jurisdiction over the

subject matter and the parties hereto pursuant to Section 120.57(1), Florida

Statutes.

16. As the party seeking a change in her retirement status, petitioner

must prove by the preponderance of the evidence that she is entitled to the

requested relief. See, e. g., Fla. Dep't of Transp. v. J.W.C. Co., Inc., 396

So.2d 778, 788 (Fla. 1st DCA 1981). In this case, she seeks to prove that she

was mentally incapacitated at the time she elected to take early retirement, a

most difficult task.

17. Rule 60S-4.002(4), Florida Administrative Code, is the rule which gave

rise to this dispute. It provides in relevant part as follows:

(4) After a retirement benefit payment

has been cashed or deposited:

* * *

(c) The type of retirement, i.e. normal,

early, or disability, may not be changed . . .

Under the foregoing rule, once a retiree receives and cashes a benefit payment,

the retiree cannot change his or her retirement option. The rule is consistent

with the holding in Arnow v. Williams, 343 So.2d 1309, 1310 (Fla. 1st DCA 1977),

where the court determined that retirement benefits vest at the time of

retirement when the retiree receives his or her first retirement warrant.

18. Petitioner acknowledges receiving a retirement benefit payment and

cashing the same but contends that when she elected to participate in early

retirement in April 1993, she was not of sound mind and capacity to make an

intelligent decision. More specifically, she contends that the application for

service retirement executed on April 21, 1993, was a contract between the

parties, and she lacked the necessary capacity to understand the nature of the

transaction. She asks that the contract be set aside under the rationale found

in Wheat v. Montgomery, 202 S.E. 664 (Ga. App. 1973) and Putnam Lumber Co. et al

v. Berry, 2 So.2d 133 (Fla. 1941). In the latter case, which holds more

precedential value than an out-of-state decision, the court affirmed a finding

by a jury that an injured employee was not bound by a release of liability

executed while heavily addicted to pain killers.

19. The Division takes the position that Rule 60S-4.002(4), Florida

Administrative Code, is controlling, and absent an adjudication of incompetency,

it cannot be waived under any circumstances. Alternatively, it suggests that

the record does not support an administrative determination that petitioner was

legally incompetent, but at best it supports only a finding that in April 1993

she was "medically or emotionally incompetent," a condition not rendering her

incapable of understanding the nature and consequences of her acts.

20. Although there is no judicial precedent on this issue, there are a

number of agency final orders which involve claims by retirees that they were

incompetent when selecting their retirement option. See, e.g., Burns v. Dept.

of Admin., Div. of Retirement, Case No. 91-4652 (Div. of Ret., April 17, 1992);

Day v. Div. of Retirement, Case No. 90-2085 (Div. of Ret., March 18, 1991);

Hutchinson v. Dept. of Admin., Div. of Retirement, Case No. 91-3870 (Div. of

Ret., January 29, 1992); Grantham v. Dept. of Admin., Div. of Retirement, Case

No. 89-2455 (Div. of Ret., January 22, 1990). In each case, the Division has

followed the practice of strictly enforcing rule 60S-4.002(4) unless there was

sufficient proof to make an administrative determination that the retiree was

mentally incompetent when he or she executed the retirement application.

21. In making the foregoing determination, the Division has consistently

followed the well-established rule that in order to make a transaction voidable,

it must be shown that the person was incapable of understanding the character of

the transaction in question. This principle has been described in the following

manner:

A reasonable test for the purpose of deter-

mining whether an infirmity operates to render

a person incapable of binding himself abso-

lutely by a contract is whether his mind has

been so affected as to render him incapable

of understanding the nature and consequences

of his acts, or, more exactly whether his

mental powers have become so far affected as

to make him unable to understand the character

of the transaction in question.

In the determination of whether a person's

mental illness or weakness is sufficient in

itself to render his contracts and conveyances

voidable, a distinction is made between actual

insanity and a weakness of the mind unaccom-

panied by an infirmity overthrowing reason.

The fact that a person is physically incapable

to look after his property, or that his mind

is enfeebled because of age or disease, is not

sufficient to affect the validity of his con-

tract or conveyance, where he still retains a

full comprehension of the meaning, design,

and effect of his acts at the time of its

execution. However, mental weakness, even

though not amounting to incapacity, is mat-

erial where the question arises whether a

fraud has been perpetrated on, or an undue

advantage taken of, one contracting party

by the other.

29 Fla. Jur.2d, Incompetent Persons, s. 158

22. The more credible and persuasive evidence supports a conclusion that

petitioner understood the nature of her retirement decision on April 21, 1993,

and thus she cannot prevail on her claim. In reaching this conclusion, the

undersigned has considered the evidence, as reflected in finding of fact 7, that

when petitioner took early retirement in April 1993, she had the capacity to

recognize the distinction between the various options available under that form

of retirement. More specifically, she clearly understood that by taking option

1, her monthly benefits would be maximized, and her daughters would receive no

benefits after her death. The regrettable fact that petitioner had no knowledge

of, or failed to inquire about, a disability retirement option does not alter

this conclusion.

23. At the same time, the undersigned has considered the deposition

testimony presented by the three health professionals. While it supports a

finding that petitioner was extremely sick, and she was in a confused, stressed

and agitated state of mind due to a number of medications being injested at the

same time and a documented diagnosis of depression, as noted in paragraphs 11-

13, it did not support a finding that she was incapable of understanding the

nature and consequences of her acts. Unfortunately, therefore, petitioner's

requested relief must be denied.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that the Division of Retirement enter a Final Order determining

that petitioner was mentally competent when she elected to take early retirement

and that her request to have rule 60S-4.0002(4) waived so as to permit her to

file a request for disability retirement be denied.

DONE AND ENTERED this 20th day of May, 1996, in Tallahassee, Florida.

____________________________________

DONALD R. ALEXANDER, Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of May, 1996.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-4841

Petitioner:

1. Partially accepted in finding of fact 1.

2. Rejected as being unnecessary.

3. Partially accepted in finding of fact 12.

4-5. Partially accepted in finding of fact 2.

6-7. Partially accepted in finding of fact 3.

8-9. Partially accepted in finding of fact 4.

10-11. Partially accepted in finding of fact 8.

12. Partially accepted in finding of fact 9.

13. Covered in preliminary statement.

14-20. Partially accepted in finding of fact 12.

21-24. Partially accepted in finding of fact 11.

25-31. Partially accepted in finding of fact 13.

32-37. Partially accepted in finding of fact 6.

38-39. Partially accepted in finding of fact 5.

40. Covered in preliminary statement.

41-43. Rejected as being unnecessary.

Respondent:

1. Rejected since the evidence shows that petitioner was employed by the Clay

County School Board and not the Duval County School Board. Also, the only

evidence of record as to years of service is the testimony of petitioner that

she had nineteen years of service. However, this fact is not necessary to

resolve the dispute.

2. Partially accepted in finding of fact 8.

3. Partially accepted in findings of fact 8 and 9.

4. Partially accepted in finding of fact 9.

5. Partially accepted in finding of fact 10.

6-7. Partially accepted in finding of fact 12.

8-9. Partially accepted in finding of fact 11.

10-12. Partially accepted in finding of fact 13.

13. Partially accepted in finding of fact 5.

14. Partially accepted in finding of fact 6.

15. Rejected as being unnecessary.

Note - Where a proposed finding of fact has been partially accepted, the

remainder has been rejected as being irrelevant, unnecessary for the resolution

of the issues, not supported by the evidence, cumulative, or a conclusion of

law.

COPIES FURNISHED:

Mark H. Levine, Esquire

245 East Virginia Street

Tallahassee, Florida 32301-1263

Stanley M. Danek, Esquire

Division of Retirement

2639-C North Monroe Street

Tallahassee, Florida 32399-1560

A. J. McMullian, III, Director

Division of Retirement

2639-C North Monroe Street

Tallahassee, Florida 32399-1560

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this

Recommended Order. All agencies allow each party at least ten days in which to

submit written exceptions. Some agencies allow a larger period within which to

submit written exceptions. You should contact the agency that will issue the

Final Order in this case concerning agency rules on the deadline for filing

exceptions to this Recommended Order. Any exceptions to this Recommended Order

should be filed with the agency that will issue the Final Order in this case.