Moreno v. Cal. State Teachers' Retirement System ( 2020 )

Filed 6/26/20; Modified and certified for pub. 7/21/20 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
ERNEST H. MORENO,
Plaintiff and Appellant, C089558
v. (Super. Ct. No. 34-2018-
80002822-CUWMGDS)
CALIFORNIA STATE TEACHERS' RETIREMENT
SYSTEM,
Defendant and Respondent.
The California State Teachers’ Retirement System (CalSTRS) determined that
Ernest H. Moreno’s retirement benefits had been incorrectly calculated and initiated
action to adjust Moreno’s retirement benefits and collect the overpayment. The trial
court denied Moreno’s petition for writ of administrative mandamus challenging the
CalSTRS actions, and Moreno appeals.
1
Moreno contends (1) CalSTRS’s adjustment of his retirement benefits and
collection of the overpayment are barred by the statute of limitations found in
Education Code section 22008, subdivision (c)1 because CalSTRS was on inquiry notice
of the problem as early as 2008, and (2) CalSTRS must be equitably estopped from
adjusting his retirement benefits and collecting the overpayments. We conclude
(1) CalSTRS was not on inquiry notice of the reporting error that led to overpayment
until December 2014 when it began an audit of Moreno’s retirement benefits, and,
therefore, CalSTRS’s adjustments to Moreno’s retirement benefits and collection of
overpayments were not barred by the statute of limitations; and (2) CalSTRS is not
equitably estopped because CalSTRS was not apprised of (or on notice about) the
overpayments until December 2014.
Accordingly, we will affirm the judgment.
BACKGROUND
The parties do not dispute what happened, but instead disagree about the
inferences to be drawn and the legal effect of the undisputed facts. Our summary of the
background is derived mainly from the trial court’s recitation of the facts.
Moreno served as president of East Los Angeles College in the Los Angeles
Community College District (District). In 2006, he entered into a contract with the
District to be the interim president of Los Angeles Mission College for the 2006-2007
school year. The contract entitled Moreno to a one-time $25,000 payment for the
additional work and allowed Moreno to elect when to receive the payment. The District
renewed the contract with Moreno for the 2007-2008 school year, and he chose to take
both one-time payments, totaling $50,000, during the 2007-2008 school year.
1 Undesignated statutory references are to the Education Code.
2
In September 2008, Moreno met with Jennifer Helfend, a benefits counselor
employed by the District but trained by CalSTRS, to discuss retirement. Helfend told
Moreno that his projected final, one-year compensation reported to CalSTRS by the
District for the 2007-2008 school year was $196,962. Moreno disputed that figure,
telling Helfend that it should be $50,000 higher. Helfend contacted CalSTRS and was
told that the CalSTRS system showed only $196,962 for that year. Helfend did not have
any information on how Moreno’s compensation was calculated and was not trained on
how to analyze the accuracy of the CalSTRS data. Helfend told Moreno to contact the
District to correct any reporting error. She noted on Moreno’s file: “Major reporting
errors. Member to speak w/ district. And will return for rest of retirement appointment.”
Helfend meant that she advised Moreno to talk to the District about any reporting errors.
Moreno spoke to the District and later met again with Helfend in February 2009.
Helfend checked the CalSTRS system and found that Moreno’s one-year compensation
was increased to $246,962. Moreno met with CalSTRS benefits counselor Ed Brostoff in
2010 and 2011, and they reviewed a benefit counseling preparation sheet showing
Moreno’s one-year compensation as $246,962. Brostoff made a handwritten note on
Moreno’s benefit counseling preparation sheet that appears to state: “Does have
exception salary ok.” Moreno retired in August 2011.
In 2012, CalSTRS’s Compensation Review Unit received a report from its
Information Technology Services Unit containing the names of retired members with
high salaries, high increases in salary, or high special compensation. These reports are
generated annually and contain about 10,000 names. The Compensation Review Unit
does not audit all retired members on the list.
In December 2014, the Compensation Review Unit selected Moreno for audit.
The process began with CalSTRS’s request for documentation, including contracts, from
the District to determine whether the District correctly reported Moreno’s compensation
level. While CalSTRS was reviewing the documentation on Moreno’s compensation
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level, it received an anonymous tip that Moreno’s compensation had been “spiked.”
Based on the Compensation Review Unit’s review of Moreno’s compensation level,
CalSTRS determined that the additional $50,000 Moreno received had been incorrectly
reported and credited to his defined benefits account instead of his defined benefits
supplement account, resulting in an inflated compensation report.
CalSTRS notified Moreno of the discrepancy and necessary adjustments in
February 2015. Moreno appealed CalSTRS’s decision, and an administrative law judge
denied the appeal, directing CalSTRS to correct Moreno’s retirement benefit and collect
the overpayment. CalSTRS adopted the administrative law judge’s decision in
November 2017.
Moreno filed a petition for writ of administrative mandamus in the trial court
(Code Civ. Proc., § 1094.5), asserting that CalSTRS’s correction of Moreno’s retirement
benefit and collection of overpayment were barred by the statute of limitations in
section 22008, subdivision (c) and equitably estopped. Moreno did not challenge the
accuracy of CalSTRS’s determinations. The trial court denied Moreno’s petition, finding
that CalSTRS was not on inquiry notice of the reporting error until the Compensation
Review Unit’s audit in December 2014.
STANDARD OF REVIEW
In reviewing a CalSTRS administrative decision to seek repayment, the trial court
must afford a strong presumption of correctness to the administrative findings, and the
party challenging the administrative decision bears the burden of convincing the court
that the administrative findings are contrary to the weight of the evidence. We review the
trial court’s determinations for substantial evidence, but we are not bound by legal
interpretations made by the administrative agency or the trial court; rather, we
independently review questions of law. (Yuba City Unified School Dist. v. State
Teachers’ Retirement System (2017) 18 Cal. App. 5th 648, 654 (Yuba City Unified).)
4
DISCUSSION
I
Moreno contends the CalSTRS adjustment of his retirement benefits and
collection of the overpayment are barred by the statute of limitations found in
section 22008, subdivision (c). He argues CalSTRS was on inquiry notice of the
reporting error when Moreno met with Helfend in 2008 and told her his compensation
was higher or, in the alternative, when Moreno’s name appeared on the list generated by
the CalSTRS Information Technology Services Unit in 2012.
Section 22008 establishes a three-year limitations period in connection with
“payments into or out of the retirement fund for adjustments of errors or omissions
with respect to the Defined Benefit Program or the Defined Benefit Supplement
Program . . . .” (§ 22008, subds. (a)-(c).) “If an incorrect payment is made due to lack of
information or inaccurate information regarding the eligibility of a member . . . , the
period of limitation shall commence with the discovery of the incorrect payment.”
(§ 22008, subd. (c).) Section 22008’s three-year limitations period is triggered by inquiry
notice of an incorrect payment. (Yuba City Unified, supra, 18 Cal.App.5th at p. 656.)
“ ‘Every person who has actual notice of circumstances sufficient to put a prudent
[person] upon inquiry as to a particular fact, has constructive notice of the fact itself in all
cases in which, by prosecuting such inquiry, he [or she] might have learned such fact.’
(Civ. Code, § 19; [citations].)” (Id. at pp. 657-658.)
The trial court rejected Moreno’s inquiry-notice argument, stating: “While
[Helfend] may have been on notice that the District adjusted its reporting of [Moreno’s]
salary, the Court finds this did not place CalSTRS on inquiry notice that the number
being reported by the District in 2009 was incorrect. The same is true of the 2010 and
2011 meetings with a separate CalSTRS employee. [Moreno] has not identified any
discussion during those meetings that would put [CalSTRS] on inquiry notice that there
5
was anything questionable about the District’s reporting of [Moreno’s] compensation.”
(Italics in original.) We agree.
Moreno argues CalSTRS knew there were problems with the calculation of his
compensation as early as 2008, when Moreno met with Helfend and thus CalSTRS
received information that there was a $50,000 discrepancy in the District’s reporting of
Moreno’s one-year compensation. He claims there was a principal-agent relationship
between CalSTRS and the benefits counselors such that information known to the
benefits counselors was known by CalSTRS. We need not decide whether there was a
principal-agent relationship because, even if there was, CalSTRS was not on inquiry
notice based on what the benefits counselors knew. Moreno fails to establish that the
information known to the benefits counselors put CalSTRS on inquiry notice of the
overpayments to Moreno. That there was a discrepancy between the lower salary amount
the District had reported to CalSTRS and the higher amount Moreno believed was correct
did not put CalSTRS on notice that the District’s reporting was incorrect. The District
had the duty to report correctly to CalSTRS, and CalSTRS was entitled to rely on that
reporting to determine Moreno’s retirement benefit. (§ 22456.)
Moreno adds that CalSTRS has a fiduciary duty to its members, and it failed in
that duty by not investigating the salary discrepancy in 2008. We agree CalSTRS has
statutory duties to its members (§ 22250), but Moreno has nevertheless failed to establish
inquiry notice. In 2008, CalSTRS did not have “ ‘actual notice of circumstances
sufficient to put a prudent [person] upon inquiry as to a particular fact.’ ” (Yuba City
Unified, supra, 18 Cal.App.5th at pp. 657-658.)
Moreno also claims CalSTRS was on inquiry notice when Moreno’s name
appeared on the list generated by the CalSTRS Information Technology Services Unit in
2012. But there is no evidence Moreno appeared on the list for any reason other than
being a high-salary earner. Although a person could be added to the list based on an
anonymous tip, as counsel for Moreno argued in the trial court, there is no evidence of an
6
anonymous tip about Moreno until after the Compensation Review Unit had begun its
audit in December 2014. CalSTRS completed the audit and notified Moreno about the
overpayments in 2015, within the three-year limitations period.
Finally, Moreno asserts CalSTRS is solely responsible for the alleged
overpayments. But the record does not support his assertion. According to the record,
the District revised its compensation report based on urging by Moreno and reported the
incorrect increased compensation to CalSTRS.
We conclude the evidence supports the trial court’s determination that CalSTRS
was not on inquiry notice of the overpayments to Moreno before December 2014.
II
Moreno further contends CalSTRS must be equitably estopped from adjusting his
retirement benefits and collecting the overpayments.
“ ‘The doctrine of equitable estoppel is founded on notions of equity and fair
dealing and provides that a person may not deny the existence of a state of facts if that
person has intentionally led others to believe a particular circumstance to be true and to
rely upon such belief to their detriment. . . . “ ‘Generally speaking, four elements must be
present in order to apply the doctrine of equitable estoppel: (1) the party to be estopped
must be apprised of the facts; (2) [the party] must intend that his [or her] conduct shall be
acted upon, or must so act that the party asserting the estoppel had a right to believe it
was so intended; (3) the other party must be ignorant of the true state of facts; and (4) [the
other party] must rely upon the conduct to his [or her] injury.’ ” ’ ” (Krolikowski v. San
Diego City Employees' Retirement System (2018) 24 Cal. App. 5th 537, 564-565.)
In this case, Moreno’s attempt to invoke equitable estoppel fails on the first
element because CalSTRS was not apprised that Moreno’s retirement benefits were
incorrectly calculated until at least December 2014 when CalSTRS audited Moreno’s
retirement benefits. As Moreno recognizes, equitable estoppel does not apply here unless
CalSTRS was on notice before December 2014.
7
Therefore, CalSTRS was not equitably estopped from adjusting Moreno’s
retirement benefits and collecting the overpayment.
DISPOSITION
The judgment is affirmed. CalSTRS is awarded its costs on appeal. (Cal. Rules
of Court, rule 8.278(a).)
/S/
MAURO, J.
We concur:
/S/
ROBIE, Acting P. J.
/S/
HOCH, J.
8
Filed 7/21/20
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
ERNEST H. MORENO,
Plaintiff and Appellant, C089558
v. (Super. Ct. No. 34-2018-
80002822-CUWMGDS)
CALIFORNIA STATE TEACHERS' RETIREMENT
SYSTEM,
ORDER MODIFYING
Defendant and Respondent. OPINION AND GRANTING
REQUEST TO PUBLISH
[NO CHANGE IN
JUDGMENT]
APPEAL from a judgment of the Superior Court of Sacramento County,
Richard K. Sueyoshi, Judge. Affirmed.
Bennett, Sharpe & Bennett and Ann M. Bennett for Plaintiff and Appellant.
Pillsbury Winthrop Shaw Pittman, Dianne L. Sweeney and Ryan Selness for
Defendant and Respondent.
THE COURT:
The opinion in the above-entitled matter filed on June 26, 2020, was not certified
for publication in the Official Reports. For good cause it now appears that the opinion
should be published in the Official Reports and it is so ordered.
1
It is also ordered that the opinion filed in this case on June 26, 2020, be modified
as follows:
At page 2, remove the first two paragraphs, including the footnote, and replace
with the following paragraphs, including the footnote:
“Moreno contends the CalSTRS adjustment of his retirement benefits and its
collection of the overpayment are barred by the statute of limitations found in
Education Code section 22008, subdivision (c),1 because CalSTRS was on inquiry notice
of the problem as early as 2008. He also claims CalSTRS is equitably estopped from
adjusting his retirement benefits and collecting the overpayments.
“Because CalSTRS was entitled to rely on the income reporting it received from
Moreno’s employer, and had no reason to suspect a problem until it began its audit in
December 2014, CalSTRS was not on inquiry notice until the audit began and, therefore,
the CalSTRS adjustments to Moreno’s retirement benefits and its collection of
overpayments were not barred by the statute of limitations. In addition, CalSTRS is not
equitably estopped because it was not on inquiry notice until December 2014.
“We will affirm the judgment.
1 Undesignated statutory references are to the Education Code.”
This modification does not change the judgment.
FOR THE COURT:
/S/
ROBIE, Acting P. J.
/S/
MAURO, J.
/S/
HOCH, J.
2