Meyers v. Retirement Fund of Federated City Employees CA6 , 223 Cal. App. 4th 1201 ( 2014 )

Filed 1/22/14 Meyers v. Retirement Fund of Federated City Employees CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
WILLIAM MEYERS, H037933
(Santa Clara County
Plaintiff and Appellant, Super. Ct. No. 1-11-PR169420)
v.
THE RETIREMENT FUND OF THE
FED. CITY EMPLOYEES,
Defendant and Respondent.
Plaintiff William Meyers, a former City of San Jose employee, petitioned under
Probate Code sections 15642 and 172001 for an order removing certain trustees of
defendant The Retirement Fund of the Federated City Employees (Retirement Fund), the
retirement system for the City of San Jose. The superior court dismissed the petition on
the grounds the Retirement Fund is expressly excluded from the definition of a “trust”
under section 82, and thus a petition to remove trustees under the Probate Code may not
be maintained against it.
On appeal, Meyers argues the judgment must be reversed, despite the exclusionary
language of section 82, because: (1) the California Constitution mandates that “[t]he
assets of a public pension or retirement system are trust funds” (Cal. Const., art. XVI, §
17, subd. (a) (section 17)); and (2) section 15003, subdivision (c) (section 15003(c))
specifically allows for the application of trust law to public pension funds.
1
Further unspecified statutory references are to the Probate Code.
We disagree and shall affirm the judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND2
A. Verified petition to remove trustees
In August 2011, Meyers filed his verified petition to remove trustees (Sup. Ct.
Santa Clara County, 2011, No. 1-11-PR-169420). In that petition, Meyers alleged he
began working for the City of San Jose as an associate construction inspector in 2001,
remaining in that position for approximately four years. In February 2003, he was
injured in the course and scope of his employment and underwent cervical fusion surgery.
In September 2009 and April 2010, Meyers applied to the Retirement Fund for
service-connected disability retirement benefits, submitting the opinions of “at least
eighteen (18) different medical professionals, all of whom were in agreement” that
Meyers was disabled as a consequence of the injury he suffered in 2003. The physician
paid by the City of San Jose to evaluate disability claims, however, did not agree and the
Retirement Fund denied Meyers’ applications.3
In his petition, Meyers claimed the Retirement Fund trustees have breached their
fiduciary duties to him and other beneficiaries “by unreasonably delaying the beneficiary
claim process, by refusing to consider relevant medical evidence, by withholding
information from beneficiaries, and by essentially ‘rubber-stamping’ the opinion of the
City [of San Jose] physician and disregarding all other competent evidence regarding the
service-connected disabilities of beneficiaries.” Meyers alleged the trustees are refusing
2
For the purposes of this appeal, we derive the facts from the allegations of
Meyers’ verified petition to remove trustees (Sup. Ct. Santa Clara County, 2011, No. 1-
11-PR-169420) and other documents contained in the record.
3
The record on appeal in this case includes a copy of Meyers’ July 15, 2010
petition for writ of administrative mandate (Sup. Ct. Santa Clara County, 2011, No. 1-10-
CV-177077; hereafter, Case No. 177077) seeking to overturn the Retirement Fund’s
decision denying his application for disability retirement. According to Meyers, the
petition in Case No. 177077 is the subject of a separate appeal (H038351) pending before
this court.
2
to disburse benefits to disabled City of San Jose employees “because the City’s current
budget crisis has made it politically unpopular to award disability pensions.” Meyers
further alleged, on information and belief, that in 2000, the Retirement Fund trustees
approved six out of seven disability retirement applications, but in 2010 and 2011, only
two out of 14 applicants were approved for disability retirement.
In his prayer for relief, Meyers sought: (1) an order removing certain named
Retirement Fund trustees, specifically Matt Loesch, Edward F. Overton, Arn Andrews,
Michael Armstrong, Lara Druyan, Stuart Odell and Martin Dirks; (2) an order appointing
a receiver or temporary trustee to administer the trust until new trustees are appointed;
and (3) attorney fees and costs.
B. Ex parte application and opposition
In November 2011, in connection with the petition to remove trustees, Meyers
brought an ex parte application for an order requiring the Retirement Fund to provide
notice of hearing to all the beneficiaries. In that application, Meyers stated he is not
aware of the names and addresses of the beneficiaries to the Retirement Fund, each of
whom is entitled to notice of hearing on his petition to remove the trustees. Accordingly,
the Retirement Fund, which has the necessary contact information, should be ordered to
provide the required notice.
The Retirement Fund opposed the ex parte application, and in that opposition
further argued Meyers’ petition should be dismissed because, among other reasons, the
Retirement Fund is not a trust under section 82, subdivision (b)(13) (section 82(b)(13)),4
thus the court lacked jurisdiction over the matter. The trial court set a hearing on the
jurisdictional issue, and gave Meyers an opportunity to brief the matter.
4
Section 82, subdivision (b) provides in relevant part: “ ‘Trust’ excludes the
following: [¶] . . . [¶] (13) Trusts for the primary purpose of paying debts, dividends,
interest, salaries, wages, profits, pensions, or employee benefits of any kind.” (Italics
added.)
3
At the hearing, Meyers contended section 15003(c)5 specifically allows for the
application of trust law to pension funds, despite the fact that pension funds are otherwise
excluded from the definition of a trust by operation of section 82(b)(13). The trial court
found, however, that the Retirement Fund was not a trust “for the purposes of application
of the Probate Code,” relying on the exclusionary language of section 82, and dismissed
Meyers’ petition.
Meyers timely appealed.
II. DISCUSSION
A. Standard of review
In this appeal, we examine the scope and application of certain statutes,
specifically sections 82 and 15003, as well as section 17 of the California Constitution.
Questions of statutory interpretation are subject to de novo review. (California Teachers
Assn. v. San Diego Community College Dist. (1981) 28 Cal. 3d 692, 699.) That review is
guided by settled rules, all of which are designed to ascertain the intent of the lawmakers
and avoid an interpretation that would lead to absurd consequences. (Cypress
Semiconductor Corp. v. Superior Court (2008) 163 Cal. App. 4th 575, 581.)
We begin with the statutory language, giving the words their usual and ordinary
meaning. (Day v. City of Fontana (2001) 25 Cal. 4th 268, 272.) “If [the statutory
language] is clear and unambiguous our inquiry ends. There is no need for judicial
construction and a court may not indulge in it.” (Diamond Multimedia Systems, Inc. v.
Superior Court (1999) 19 Cal. 4th 1036, 1047.) We must also “if possible, . . . give effect
and significance to every word and phrase of a statute.” (Garcia v. McCutchen (1997) 16
5
Section 15003(c) provides: “Nothing in this division or in Section 82 is intended
to prevent the application of all or part of the principles or procedures of this division to
an entity or relationship that is excluded from the definition of ‘trust’ provided by Section
82 where these principles or procedures are applied pursuant to statutory or common law
principles, by court order or rule, or by contract.”
4
Cal. 4th 469, 476.) When two provisions touch upon a common subject, “we must
construe them ‘in reference to each other, so as to “harmonize the two in such a way that
no part of either becomes surplusage.” ’ ” (Ibid., quoting DeVita v. County of Napa
(1995) 9 Cal. 4th 763, 778-779.) “We must presume that the Legislature intended ‘every
word, phrase and provision . . . in a statute . . . to have meaning and to perform a useful
function.’ ” (Garcia v. McCutchen, supra, at p. 476, quoting Clements v. T. R. Bechtel
Co. (1954) 43 Cal. 2d 227, 233.)
B. The Retirement Fund is not subject to the trust law for purposes of petitions
to remove trustees for breach of fiduciary duty
Section 82, which the trial court relied on in dismissing Meyers’ petition is found
in part 2 of division 1 of the Probate Code, a part entitled “Definitions,”6 and defines the
word “trust” as used in the Probate Code. Pursuant to section 82, subdivision (a), the
word “trust” includes: “(1) An express trust, private or charitable, with additions thereto,
wherever and however created[; and] (2) A trust created or determined by a judgment or
decree under which the trust is to be administered in the manner of an express trust.”
Section 82, subdivision (b), provides in pertinent part: “ ‘Trust’ excludes the following:
[¶] . . . [¶] (13) Trusts for the primary purpose of paying debts, dividends, interest,
salaries, wages, profits, pensions, or employee benefits of any kind.”
Because the Retirement Fund is a pension plan, the plain language of section
82(b)(13) would appear to foreclose any attempt to subject it to the Probate Code. The
trial court found this to be the case and duly dismissed Meyers’ petition.
As he did below, Meyers asserts that, notwithstanding the express language of
section 82, the trust law is applicable to public pensions by operation of the California
6
Section 20 provides “[u]nless the provision or context otherwise requires, the
definitions in this part [i.e., Part 2] govern the construction of this code.”
5
Constitution (specifically section 17) and section 15003(c). We examine each of these
provisions in turn.
1. Section 17
Section 17 grants retirement boards of public pension systems “sole and exclusive
fiduciary responsibility over the assets of the public pension or retirement system[; . . .
and] sole and exclusive responsibility to administer the system in a manner that will
assure prompt delivery of benefits and related services to the participants and their
beneficiaries.” (Cal. Const., art. XVI, § 17, subd. (a).) It further provides that “[t]he
assets of a public pension or retirement system are trust funds and shall be held for the
exclusive purposes of providing benefits to participants in the pension or retirement
system and their beneficiaries and defraying reasonable expenses of administering the
system.” (Ibid.)
Section 17 also directs how a retirement board should employ its plenary
authority. For example, a retirement board must exercise its duties in the interest of
participants and beneficiaries, minimizing employer contributions, and defraying
reasonable expenses of administering the system. (Cal. Const., art. XVI, § 17, subd. (b).)
Additionally, a retirement board must diversify the investments of the system so as to
minimize the risk of loss and maximize the rate of return. (Id., art. XVI, § 17, subd. (d).)
The legislature may prohibit certain investments by a retirement board in the public
interest. (Id., art. XVI, § 17, subd. (g).)
Meyers reads section 17’s phrase “[t]he assets of a public pension or retirement
system are trust funds” as a constitutional mandate overriding the statutory language of
section 82. We disagree.
In his brief, Meyers argues there is no need to examine the history of section 17,
because the plain meaning of its reference to public pension assets as “trust funds” is
clear. The problem with this approach is that, while the dictionary definition of the word
“trust” may be clear, its meaning under the Probate Code is not. For example, a number
6
of entities which bear the name “trusts” are, in fact, expressly excluded from the
definition of “trust” under the Probate Code. Among the “trusts” that are not “trusts”
pursuant to section 82, subdivision (b) are: “[c]onstructive trusts . . .” (§ 82, subd.
(b)(1)), “[b]usiness trusts . . .” (id., subd. (b)(6)), “[i]nvestment trusts . . .” (id., subd.
(b)(7)), “[c]ommon trust funds” (id., subd. (b)(8)), “[v]oting trusts” (id., subd. (b)(9)),
and “[l]iquidation trusts” (id., subd. (b)(12)). Consequently, simply because something is
referred to as a “trust” or as a “trust fund,” even if that reference appears as part of the
California Constitution, does not mean that entity or relationship is necessarily subject to
the trust law provisions of the Probate Code.
Accordingly, we turn to the history of section 17 and the reasons expressed in
support of its addition to the California Constitution. Section 17’s reference to public
pension assets as “trust funds” was added to the California Constitution in 1984 by the
passage of Proposition 21. (Claypool v. Wilson (1992) 4 Cal. App. 4th 646, 674
(Claypool).) The intent of this ballot measure was to “give public pension assets full
constitutional protection as trust funds” and “guarantee[] that neither the Governor nor
future Legislatures will ever be able to use this money for other purposes.” (Ballot
Pamp., argument in favor of Prop. 21 Prim. Elec. (June 5, 1984) p. 26.) Under
Proposition 21, “the only purpose for which these trust assets can be used is the delivery
of retirement benefits.” (Ibid., italics omitted.) The measure’s proponents argued the
constitutional amendment would “[e]nact[] the sole and exclusive purpose rule which
imposes on fund trustees the legal obligation to perform their duties solely in the interest
of plan beneficiaries.” (Ibid., italics omitted.)
There is no mention, however, of either trust law or the Probate Code in the ballot
pamphlet issued to voters in connection with Proposition 21. The bulk of section 17, in
fact, provides guidance for retirement boards in administering pension funds and clarifies
their fiduciary obligations to plan members and beneficiaries. When read as a whole,
particularly in light of the ballot arguments made both for and against Proposition 21, the
7
intent behind its characterization of public pension assets as “trusts” was not to override
the exclusionary language of section 82(b)(13). Instead, the intent was to impose
fiduciary obligations on retirement boards in relation to their administration of pension
funds, as well as protect those assets from appropriation or diversion by the Governor or
the Legislature.
Meyers’ reliance on Claypool to support his constitutional argument is unavailing.
In Claypool, members of the state’s Public Employees’ Retirement System (PERS)
challenged certain statutory provisions governing the administration of the PERS system
including a provision that assigned the retirement board’s actuarial duties to an outside
actuary appointed by the Governor. (Claypool, supra, 4 Cal.App.4th at pp. 652-653.)
The members argued that such an assignment would violate section 17 “which declares
that PERS assets are trust assets.” (Claypool, supra, at p. 661.) According to the
members, the terms of section 17 “constitutionalize[d] the law of trusts,” and the
Legislature’s attempt to assign the board’s actuarial functions to an outside actuary
presents a conflict of interest that would preclude the actuary from acting as a fiduciary to
the beneficiaries of PERS. (Claypool, supra, at p. 675.) The Claypool court, after first
adopting the members’ assumption about the application of trust law, rejected their
conflict of interest argument, finding there were sufficient safeguards to ensure that an
actuary was not inappropriately influenced or controlled by the Governor and could
exercise fiduciary duties. (Id., at pp. 677-678.)
As noted above, the Claypool court assumed, as urged by the petitioners in that
case, that “[S]ection 17[] imports the existing law of trusts,” but undertook no analysis to
support that assumption. (Claypool, supra, 4 Cal.App.4th at p. 676.) It did not discuss
section 82’s exclusion of pensions from the definition of “trust” under the Probate Code
let alone attempt to reconcile any conflict between that statute and section 17. It simply
applied principles of trust law to reject the members’ claim that the transfer of actuarial
duties from PERS itself to an actuary appointed by the Governor created a categorical
8
conflict of interest. Accordingly, we do not find Claypool instructive nor are we bound
by the dicta contained therein.
2. Section 15003
We now examine section 15003 to determine if, as Meyers contends, that statute
operates to overcome the exclusionary language of section 82. Section 15003(c)
provides, in pertinent part: “Nothing in this division or in Section 82 is intended to
prevent the application of all or part of the principles or procedures of this division to an
entity or relationship that is excluded from the definition of ‘trust’ provided by Section 82
where these principles or procedures are applied pursuant to statutory or common law
principles, by court order or rule, or by contract.”
According to Meyers, the plain language of section 15003 allows for the
application of trust law to things that would otherwise be excluded from the definition of
“trust” by section 82.
In its brief, Retirement Fund makes a convoluted, and rather confusing, argument
regarding the interpretation of section 15003. From what we can glean, Retirement Fund
contends the language of section 15003 means “Trust Law may be applied to entities
listed in Section 82[, subdivision] (b) only when a Section 82[, subdivision] (b) entity has
some kind of bearing or relationship to a true ‘trust’ defined by Section 82[, subdivision]
(a),” citing Estate of Mullins (1988) 206 Cal. App. 3d 924 (Mullins). We fail to see how
Mullins supports that proposition.
In Mullins, the petitioner, who was the niece of the decedent’s predeceased
husband, requested that the probate court impose a constructive trust on the assets of a
trust that was created by the decedent. (Mullins, supra, 206 Cal.App.3d at pp. 925-926.)
Though she was not named as a beneficiary to the decedent’s trust, the niece argued she
was entitled to a share of the trust’s assets under the decedent’s prior oral agreement.
(Id., at p. 925.) The Mullins court held that the probate court lacked jurisdiction over the
niece’s lawsuit because the niece was not a beneficiary of the express trust created by the
9
decedent. (Id., at p. 931.) Probate jurisdiction was also lacking because the niece’s claim
was not a challenge to either the will or the trust created by the decedent, but was instead
a contractual claim unrelated to those instruments. (Ibid.) The court noted that under
section 82, subdivision (b)(1), a constructive trust is not a “trust” under the trust law and
also noted that section 15003, subdivision (a) provides “ ‘[n]othing in this division affects
the law relating to constructive . . . trusts.’ ” (Mullins, supra, at p. 931.) In dicta, the
Mullins court further said that probate courts lack jurisdiction to impose equitable
remedies, such as a constructive trust. (Ibid.)
In 1990, in response to this dicta in Mullins, the Legislature amended section
15003, subdivision (a) to clarify that there is no such limitation on the authority of a
probate court to fashion appropriate remedies in proceedings under the trust law. (Cal.
Law Revision Com. com., 54 West’s Ann. Prob. Code (1991 ed.) foll. § 15003, p. 486.)
Retirement Fund notes “even after the amendment, Section 15003 does not, by itself,
provide for application of the Trust Law to Section 82[, subdivision] (b) entities absent
some relationship to an entity that is properly subject to the Trust Law. This
interpretation is confirmed by the fact that Section 82[, subdivision] (b) was not amended
after Mullins.” There are two problems with this interpretation of Mullins.
First, nowhere in Mullins can we find the holding advanced by Retirement Fund,
i.e., “Trust Law may be applied to entities listed in Section 82[, subdivision] (b) only
when a Section 82[, subdivision] (b) entity has some kind of bearing or relationship to a
true ‘trust’ defined by Section 82[, subdivision] (a).” All Mullins decided was that an
action to impose a constructive trust is not within the jurisdiction of the probate court
because constructive trusts are excluded from the definition of a trust under section 82,
subdivision (b)(1). It buttressed that holding by noting that section 15003, subdivision
(a) expressly provided that the law relating to constructive trusts was not affected by trust
law. (Mullins, supra, 206 Cal.App.3d at p. 931.)
10
Second, Mullins makes no mention of section 15003(c), the relevant subdivision in
the instant case. Instead, the Mullins court addressed section 15003, subdivision (a), and
thus offers limited instruction at best for assisting us in determining the interplay of
section 15003(c) with section 82.
We are also not persuaded by Meyers’ reading of section 15003(c).7 His
interpretation would have us focus exclusively on its expansionary language, and
determine that it overrides the exclusionary language of section 82. We must however
read the statute as a whole, and in so doing, it becomes clear that section 15003(c) is not
unconditional. The statute allows for the application of trust law to “an entity or
relationship that is excluded from the definition of ‘trust’ ” (§ 15003(c)) by section 82,
but only “pursuant to statutory or common law principles, by court order or rule, or by
contract.” (§ 15003(c).)
The Law Revision Commission comments to section 15003 supports this
interpretation: “Subdivision (c) is included to avoid the implication that the provisions of
the Trust Law cannot be applied to entities and relationships that are excluded from the
definition of ‘trust’ as it is used in this division. The Trust Law, by its terms, governs
trusts as defined in Section 82. Under Section 15003, the Trust Law is neutral on the
question whether it may be applied to other types of entities and relationships, such as
those excluded from the definition of ‘trust’ by subdivision (b) of Section 82. The Trust
7
Meyers also devotes several paragraphs in his opening brief attacking the trial
court’s suggestion that section 15003 applies only to situations involving constructive
and resulting trusts because the phrase “constructive and resulting trusts” appears in the
statute’s title. He (correctly) points out the phrase “constructive and resulting trusts”
refers only to subdivision (a) of section 15003, and that the title includes the phrase
“entity or relationship excluded from trust definition” to refer to subdivision (c).
Regardless, the trial court’s mistaken reliance on this phrase is of no moment. “Because
we review the correctness of the order, and not the court’s reasons, we will not consider
the court’s oral comments or use them to undermine the order ultimately entered.” (Whyte
v. Schlage Lock Co. (2002) 101 Cal. App. 4th 1443, 1451.)
11
Law is thus made available when it may appropriately be applied by statute, common
law, court order or rule, or contract.” (Cal. Law Revision Com., com., 54 West’s Ann.
Prob. Code (1991 ed.) foll. § 15003, p. 486, italics added.)
Accordingly, for trust law to apply to Retirement Fund, at least in the context
presented here where Meyers is seeking to remove trustees pursuant to sections 15642
and 17200, there must be some “statutory or common law principle[], . . . court order or
rule, or . . . contract” allowing for its application. (§ 15003(c).) Meyers identified no
such principle, order, rule or contract upon which a court could find a basis to apply trust
law to the Retirement Fund.
Our interpretation of the statute thus avoids nullifying section 82, which would be
the result were we to adopt Meyers’ position. (Hensel Phelps Construction Co. v. San
Diego Unified Port Dist. (2011) 197 Cal. App. 4th 1020, 1034.)
Since neither section 17 nor section 15003(c) operate to override the exclusionary
language of section 82(b)(13), the trial court properly dismissed Meyers’ petition for an
order pursuant to sections 15642 and 17200 removing certain Retirement Fund trustees.
3. Standing and failure to exhaust administrative remedies
Retirement Fund argues two alternative bases for dismissing Meyers’ petition to
remove trustees: (1) he lacks standing to seek such removal as he was not a member or
beneficiary of the retirement system at the time he brought his petition; and (2) he failed
to comply with the process for removal of trustees set forth in the City of San Jose
Municipal Code, thus failing to exhaust his administrative remedy.
As we have determined that the trial court properly dismissed the petition on the
ground that it lacked jurisdiction under the Probate Code, we need not and do not address
these arguments herein.
12
III. DISPOSITION
The judgment is affirmed. The Retirement Fund of the Federated City Employees
shall recover its costs on appeal.
Premo, J.
WE CONCUR:
Rushing, P.J.
Elia, J.
13