Filed 5/19/14; modified and certified for publication 5/29/14 (see orders foll. opn.)
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
FAY STANIFORTH et al., D064111
Plaintiffs and Appellants,
v. (Super. Ct. No. 37-2012-00093475-CU-MC-CTL) THE JUDGES' RETIREMENT SYSTEM,
Defendant and Respondent;
JOHN CHIANG, as State Controller, etc.,
Real Party in Interest and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County, Joel M.
Pressman, Judge. Affirmed in part and reversed in part.
Jorn S. Rossi and Paul G. Mast for all Plaintiffs and Appellants except William
Reppy, Jr.
William Reppy, Jr., in pro. per.
Reed Smith, Harvey L. Leiderman and Jeffrey R. Rieger for Defendant and
Respondent.
No appearance for Real Party in Interest and Respondent. Plaintiff Faye Staniforth filed this action, on behalf of herself and similarly
situated persons (collectively pensioners), alleging numerous claims against defendant
and respondent the Judges' Retirement System (JRS). The principal claim raised by
pensioners' action was that JRS had not adhered to its obligations to pensioners under
Olson v. Cory (1980) 27 Cal.3d 532 (Olson I) and, as a result, pension payments
stretching back over three decades had been underpaid to pensioners (Olson I claims).
This action sought a declaratory judgment that, under Olson I, jurists who served on
California's trial court or appellate court bench during the time Government Code1
section 68203 provided for unlimited cost of living adjustments (COLA's) were entitled
to have their (or their surviving beneficiaries') pensions adjusted upward based on the
applicable COLA for each year, and that the cap on the amount of COLA's (enacted by
legislation that amended § 68203 and took effect on January 1, 1977) could not
constitutionally be applied to pensions earned by jurists who served on California's trial
court or appellate court bench during the time that section 68203 provided for unlimited
COLA's. The petition also sought a writ of mandate compelling JRS to adhere to Olson I
and to recalculate the amount of judicial pensions owed to pensioners using uncapped
COLA's, and to pay arrearages and interest for the decades of underpaid pension
payments.
JRS demurred to pensioners' Olson I claims. JRS argued pensioners' Olson I
claims were in direct conflict with a correct reading of Olson I and that, contrary to
1 All further statutory references are to the Government Code unless otherwise specified. 2 pensioners' claims, JRS had correctly applied the teaching of Olson I to these pensioners
and had correctly calculated judicial pensions since Olson I. The trial court agreed and
sustained JRS's demurrer to pensioners' Olson I claims without leave to amend. The
court also denied pensioners' subsequent motion to vacate in part the order sustaining the
demurrer to pensioner's Olson I claims without leave to amend and, after dismissing
pensioners' remaining claims for failure to exhaust administrative remedies, entered
judgment in favor of JRS. Pensioners appealed.
On appeal, pensioners limit the claims of error to (1) the order sustaining JRS's
demurrer to pensioner's Olson I claims without leave to amend, and (2) the court's denial
of pensioners' subsequent motion, which in effect sought leave to amend to separately
state (and thereby preserve) certain claims by certain pensioners. The propriety of the
first order turns on an interpretation of the impact of Olson I, as amplified in both Olson
v. Cory (1982) 134 Cal.App.3d 85 (Olson II) and Olson v. Cory (1983) 35 Cal.3d 390
(Olson III), on judicial pensions. The propriety of the second order involves distinct
issues requiring a separate but interdependent analysis.
I
OLSON I AND JUDICIAL PENSIONS
A. The Competing Claims
JRS contends Olson I held the only class of active jurists to whom the legislative
cap on COLA's could not be constitutionally applied were active jurists whose terms
began prior to January 1, 1977, and who had some number of years left on their terms
during which they were entitled to earn a salary increased by the uncapped COLA's (the
3 so-called "protected term," see Olson II, supra, 134 Cal.App.3d at p. 90). JRS also
contends Olson I was equally clear the legislative cap on COLA's could constitutionally
be applied to a salary earned by a jurist (after completion of the protected term) to new
terms of office commencing January 1, 1977. (Olson I, supra, 27 Cal.3d at pp. 538-540.)
JRS asserts Olson I further made clear that the only class of retired jurists to whom the
legislative cap on COLA's could not constitutionally be applied were jurists who retired
between 1970 and 1976 to the extent their pensions were measured as a percentage of the
salary payable to an active jurist during a protected term. JRS argues that, under the
correct reading of Olson I, it was entitled to calculate and pay pensioners the appropriate
percentage of the relevant active jurist's salary payable for terms of office to which the
cap on COLA's was lawful, e.g. terms of office commencing January 1, 1977.
Pensioners' competing contention rests on a different reading of Olson I.
Pensioners' argument rests on an extrapolation from Olson I's statement that the 1977 cap
statute was "unconstitutional as to certain judicial pensioners." (Olson I, supra, 27
Cal.3d at p. 541.) Pensioners contend the import of that phrase from Olson I was that
jurists who retired during the period between 1970 to 1976, when section 68203 provided
for unlimited COLA's that indirectly increased their pensions, acquired a vested right to
unlimited COLA's, and the cap on the amount of COLA's that took effect on January 1,
1977, could not constitutionally be applied to constrain the growth of their pensions.
Pensioners also assert jurists who retired after 1976 but nevertheless earned some of their
pension rights by serving on California's trial court or appellate court bench prior to 1976
enjoy the same constitutional rights to unlimited COLA's as do the 1970-1976 retirees
4 under the application of Olson I's principles in the decisions of In re Marriage of Alarcon
(1983) 149 Cal.App.3d 544 and Legislature v. Eu (1991) 54 Cal.3d 492. Under this
construction, pensioners assert JRS has underpaid pensioners for nearly three decades
because JRS improperly paid them a percentage of the salary payable to actual active
jurists (e.g. jurists whose salary was constitutionally subjected to limited COLA
increases), because pensioners appear to argue JRS should have paid them a percentage
of the salary an active jurist would have hypothetically earned if that active jurist's salary
had continued to rise based on unlimited COLA's after January 1, 1977.
In the proceedings below, JRS demurred to the causes of action of the complaint
insofar as they were based on Olson I, arguing those claims were in direct conflict with
Olson I and therefore did not state claims on which relief could be granted. Pensioners
conceded the only issues on their Olson I claims involved questions of law. The trial
court agreed with JRS's analysis of Olson I, and sustained JRS's demurrer to the causes of
action of the complaint based on Olson I without leave to amend. Pensioners challenge
that ruling, asserting the trial court misapplied the teaching of Olson I.
B. Olson I
Because judicial pensions are derivative from the salaries payable to a currently
active judge (§ 75000 et seq.), an understanding of the impact of Olson I on pensions
necessarily commences with an examination of the scheme for salaries payable to active
jurists.
Since 1964, judicial salaries have been prescribed by sections 68200 through
68202, subject to increases provided in section 68203. Section 68203, as amended in
5 1969, provided: "In addition to the increase provided under this section on September 1,
1968, on the effective date of the 1969 amendments to this section and on September 1 of
each year thereafter the salary of each justice and judge named in Sections 68200 to
68202, inclusive, shall be increased by that amount which is produced by multiplying the
then current salary of each justice or judge by the percentage by which the figure
representing the California consumer price index as compiled and reported by the
California Department of Industrial Relations has increased in the previous calendar
year." (Stats. 1969, ch. 1507, § 1.) However, section 68203 was again amended in 1976,
effective January 1, 1977, to provide: "On July 1, 1978, and on July 1 of each year
thereafter the salary of each justice and judge named in Sections 68200 to 68202,
inclusive, shall be increased by that amount which is produced by multiplying the then
current salary of each justice or judge by the percentage by which the figure representing
the California consumer price index as compiled and reported by the California
Department of Industrial Relations has increased in the previous calendar year, but not to
exceed five percent (5%)." (Stats. 1976, ch. 1183, § 4, italics added.)
The impact of the 1976 amendment on the salaries payable to active jurists, and on
the pensions derivatively paid to retired jurists, was the focus of Olson I. A class of
plaintiffs brought an action in 1977 alleging they, as active jurists and as recipients of
judicial pensions, were entitled to a declaration that the 1976 amendment was
unconstitutional and they therefore were entitled to salary and pension increases in
accordance with the version of section 68203 in effect prior to the amendment. (Olson
6 III, supra, 35 Cal.3d at p. 396.) In 1978, the trial court rendered judgment declaring the
1976 amendment to section 68203 was unconstitutional as to this class. (Ibid.)
Olson I began by examining the permissible application of the 1976 amendment
for salaries payable to active jurists. Olson I noted the 1976 amendment purported to
apply to limit salary increases for all jurists, including those who had commenced a term
of office before January 1, 1977 (the effective date of the 1976 amendment) and had
some years remaining on that term after the effective date of the 1976 amendment.
(Olson I, supra, 27 Cal.3d at pp. 537-538.) The court concluded judges who had
commenced a term before January 1, 1977, had a vested right to the compensation
promised to them when they entered their term of office, including the right to uncapped
COLA's, and even if "salary benefits are diminished by the Legislature during a judge's
term, or during the unexpired term of a predecessor judge [citations], the judge is
nevertheless entitled to the contracted-for benefits during the remainder of such term.
The right to such benefit accrues to a judge who served during the period beginning 1
January 1970 to 1 January 1977. . . ." (Id. at pp. 539-540.) However, once an active
jurist "completes one term during which he was entitled to unlimited cost-of-living
increases and elects to enter a new term has impliedly agreed to be bound by salary
benefits then offered by the state for the different term. Thus, while a judge is entitled to
a salary based on unmodified [section 68203] throughout a term ending, for instance, in
1978, his salary for a new term beginning on or after the effective date of the 1976
amendment -- 1 January 1977 -- will be governed by the statute as amended. Likewise, a
judge entering office for the first time on or after 1 January 1977, including a judge
7 entering upon his own term or upon the unexpired term of a predecessor judge, cannot
claim any benefit based on section 68203 before the 1976 amendment." (Id. at p. 540.)
Accordingly, Olson I concluded section 68203 "cannot be constitutionally applied to . . .
a judge or justice during any term of office, or unexpired term of office of a predecessor,
if the judge or justice served some portion thereof (a 'protected term') prior to 1 January
1977 . . . ." (Olson I, supra, 27 Cal.3d at p. 546.)
Olson I then addressed the claim that the 1976 amendment abridged vested rights
of judicial pensioners. (Olson I, supra, 27 Cal.3d at p. 540.) The court noted that, during
the period between December 31, 1969, and January 1, 1977, "a judicial pensioner was
entitled to receive benefits based on a specified percentage of the salary of a judge
holding the judicial office to which the retired or deceased judge was last elected or
appointed. [Citation.] The salary for such a judicial office--if the retired or deceased
judge served in office during the period 1970 to 1977--was covenanted to increase
annually with the increase in the CPI. The 1976 limitation on increases in judicial
salaries is, in turn, calculated to diminish benefits otherwise available to those judicial
pensioners. Such modification of pension benefits works to the disadvantage of judicial
pensioners by reducing potential pension increases, and provides no comparable new
benefit." (Id. at p. 541.) Because there was no demonstrated justification for impairing
these rights or any comparable new advantages included, Olson I concluded section
68203 as amended was "unconstitutional as to certain judicial pensioners." (Ibid.) Olson
I then explained why it concluded section 68203 as amended was unconstitutional as to
these "certain judicial pensioners":
8 "Contractually, each judicial pensioner is entitled to some fixed percentage of the salary payable to the judge holding the particular judicial office to which the retired or deceased judge was last elected or appointed. [Citations.] Accordingly, a judicial pensioner cannot claim impairment of a vested right arising out of the 1976 amendment except when the judge holding the particular judicial office could also claim such an impairment. The resolution of pensioner vested rights, then, is dependent on the foregoing resolution of judges' vested rights left unimpaired by the 1976 amendment." (Olson I, supra, 27 Cal.3d at pp. 541-542.)
Although Olson I noted some judicial pensioners (e.g. those whose benefits are
based on judicial services terminating during the time section 68203 provided for
unlimited cost-of-living increases) may have had a "vested" right to a pension benefit that
included a proportionate share of the salary of the judge or justice occupying the
particular judicial office, "including the incumbent judge's or justice's unlimited cost-of-
living increases," but other judicial pensioners (e.g. those whose benefits were based on
judicial services terminating before the effective date of applicable law providing for
unlimited cost-of-living increases) had no "vested" right to benefits resulting therefrom,
Olson I declared it was "not necessary for our purposes to determine a judicial
pensioner's right as being vested. [Original italics.] Vested or not, a pensioner's right
entitles him or her to benefits based on the prevailing salary for the judge or justice
occupying the particular judicial office, regardless of the date of termination of judicial
services giving rise to the pension. Finally, as in the case of judges or justices who enter
upon a new or unexpired term of a predecessor judge after 31 December 1976, benefits of
judicial pensioners based on the salaries of such judges will be governed by the 1976
amendment." (Olson I, supra, 27 Cal.3d at p. 542, italics added, fns. omitted.)
9 Olson I concluded section 68203 "cannot be constitutionally applied to (1) a judge
or justice during any term of office, or unexpired term of office of a predecessor, if the
judge or justice served some portion thereof (a 'protected term') prior to 1 January 1977,
and (2) a judicial pensioner whose benefits are based on some proportionate amount of
the salary of the judge or justice occupying that office." (Olson I, supra, 27 Cal.3d at
p. 546.) Because the trial court's judgment had invalidated any application of the 1976
amendment, Olson I reversed the trial court judgment except "as to any judge or justice
who served any portion of his term or the unexpired term of a predecessor prior to 1
January 1977, and as to judicial pensioners whose benefits are based on the salary of such
a judge or justice." (Id. at p. 548.)
Olson I, reiterating its conclusion as to pensioners, specifically stated that (unlike
the " 'troubling result' " reached in an earlier case in which the pensioner appeared
entitled to a double increment of increase), "[t]he net effect of our holding in the instant
case is to allow a judicial pensioner but one increment of increase, that being the
increment of pro-rata increase in the salary of the judge occupying the office formerly
occupied by the retired or deceased judge." (Olson I, supra, 27 Cal.3d at p. 542, fn. 7.)
C. Subsequent Case Law
In Olson III, supra, 35 Cal.3d 390, the court examined whether interest was due on
the payments owed to active and retired judges under the declaratory judgment entered in
Olson I.2 Indeed, Olson III noted the entitlement to interest was the only unresolved
2 In the interregnum between Olson I and Olson III, the appellate court in Olson II, supra, 134 Cal.App.3d 85, addressed an action by the plaintiff class (active and retired 10 issue between the plaintiff and the defendants. (Olson III, supra, 35 Cal.3d at p. 401
["we are assured by plaintiffs, and by counsel speaking for most of the county
defendants, that all issues in this litigation have now been resolved except for the one
now presented to this court -- that of plaintiffs' right to interest"].) In Olson III, the state
contended interest should not be awarded on unpaid salaries and pension payments
because interest was not payable until after Olson I was decided and, until "this court's
1980 decision in Olson v. Cory I [determined] that the 1976 amendment to section 68203
was invalid as to certain judges and pensioners during certain periods" (Olson III, at
p. 403, italics added), the state was prevented from making such payments. The Olson III
court ultimately concluded the plaintiffs were "entitled to interest on judicial pension
payments adjudged in [Olson I]." (Id. at p. 406.)
D. Analysis
Pensioners' argument is predicated on the language from Olson I that section
68203 as amended was "unconstitutional as to certain judicial pensioners." (Olson I,
supra, 27 Cal.3d at p. 541.) Although somewhat opaque, pensioners appear to argue this
passage from Olson I necessarily drew a distinction between these "certain judicial
pensioners"--those who retired between 1970 and 1976 and thereby acquired a "vested"
judges) who challenged whether a constitutional amendment, designed to supersede Olson I and deprive of them of the benefits of the salary boosted by uncapped COLA's (for active judges) or their share thereof (for the relevant pensioners), was enforceable. Olson II held, consistent with Olson I, that the amendment could not be enforced against the plaintiff class. Although largely irrelevant to this proceeding, Olson II did restate that "[t]he pension to which retired judges and spouses of deceased judges were and are entitled is a percentage of the salary payable at the time payment of the pension falls due to the judge holding the judicial office to which such retired or deceased judge was last elected to or appointed." (Olson II, at p. 90, italics added.) 11 right in having their pensions adjusted based on the unlimited COLA's provided under the
unamended version of section 68203--and all other judicial pensioners (those who retired
before 1970 or after 1976 and hence had "no vested rights to benefits resulting [from the
uncapped COLA's]," Olson I, supra, 27 Cal.3d at p. 542), and claims the " 'vested' right
. . . including . . . unlimited cost-of-living increases" owned by these "certain judicial
pensioners" must necessarily be independent of and in addition to the rights all
pensioners have, i.e. an interest in one of the percentage statutes. Pensioners appear to
assert the additional and independent vested right embedded in the phrase "certain
judicial pensioners" is the right to have their judicial pensions calculated as a percentage
of the salary that hypothetically would have been earned by an active jurist if such jurist's
salary had continued to rise based on unlimited COLA's after January 1, 1977.
Even assuming pensioners may raise this argument,3 our reading of Olson I
convinces us the meaning ascribed by pensioners to the phrase "certain judicial
3 We have substantial doubt pensioners may now assert they are entitled to have their judicial pensions calculated as a percentage of the salary of a hypothetical judge, both under the "claim preclusion" (or bar/merger) feature of res judicata and under the collateral estoppel feature of res judicata. Claim preclusion operates to bar the maintenance of a later action if (1) the claim decided in the former action (here, the extent to which judicial pensions were impacted by the cap on COLA's) is identical to the claim presented in this action, (2) there was a final judgment on the merits, and (3) pensioners were a party (or a privy to a party) to the prior adjudication. (Lyons v. Security Pacific Nat. Bank (1995) 40 Cal.App.4th 1001, 1015.) The bar/merger aspect of res judicata applies even if pensioners did not actually articulate every legal theory available to them in Olson I. (See 7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 410, p. 1051 [res judicata applies where same primary right is being asserted even though second action is "framed to present a different legal theory of recovery"]. Thus, res judicata in its primary aspect would appear to bar pensioners from interposing a new theory in support of the same claim adjudicated in Olson I. 12 pensioners" cannot be reconciled with either the statutory scheme governing judicial
pensions or with Olson I's treatment of judicial pensions.
The statutory scheme is clear that judicial pensioners are entitled to an allowance
that is calculated as a fixed percentage of whatever salary is payable to the judge holding
the particular judicial office to which the retired judge was last elected or appointed.
(§§ 75032, 75033.5, 75076.) Although the right to the relevant fixed percentage is
vested, and may not be impaired absent comparable new advantages, there is nothing in
the JRS scheme that conferred on judicial pensioners a vested right to be exempted from
changes in the underlying salary structure for active jurists. (Cf. International Assn. of
Moreover, it also appears the secondary aspect of res judicata--collateral estoppel--also is operable here. Pensioners not only could have raised this new theory to support their claim to a pension unencumbered in perpetuity from any cap on COLA's, but it appears pensioners or their privies in fact did raise that theory, and the Olson I court nowhere expressly embraced that theory. Collateral estoppel appears present because the issue sought to be precluded from relitigation (pensions based on COLA's in perpetuity) is identical to that actually litigated in Olson I, because the Court of Appeal decision (vacated by the grant of review and ultimately resulting in Olson I) described the pensioners' contention in the same terms as pensioners now argue. (See Olson v. Cory (1979) 156 Cal.Rptr. 127, 134 ["Plaintiff pensioners contend that, regardless of the application of the 1976 amendment to sitting judges, the pensions of judicial pensioners must be computed by reference to the hypothetical salaries that would have become payable to active judges in the absence of the 1976 amendment. They argue that [uncapped COLA's] created an enforceable expectation that judicial pensions would increase annually with increases in the cost-of-living . . . ."].) Although the underlying court opinion was vacated, it appears that "[f]or purposes of applying collateral estoppel, evidence extrinsic to the judgment roll may be used to ascertain what issues were determined in the former action." (Southwell v. Mallery, Stern Warford (1987) 194 Cal.App.3d 140, 144; Tevis v. Beigel (1957) 156 Cal.App.2d 8, 14.) Because it appears this issue was (1) actually litigated, (2) the decision in Olson I is final and on the merits and was between the same parties or privy's as are present here (Lucido v. Superior Court (1990) 51 Cal.3d 335, 341), and Olson I did not expressly grant judicial pensioners a right to have their pension decoupled from the salaries earned by actual jurists in favor of a pension based on a hypothetical salary, the primary aspect of res judicata would also appear to bar pensioners' present argument. 13 Firefighters v. City of San Diego (1983) 34 Cal.3d 292, 301, 302-303 [increasing
employee contribution rates is allowed because, although an employee's " 'vested'
contractual rights may not be destroyed or impaired, [the crucial inquiry must] identify
exactly what employee rights are vested under City's retirement system," and because of
system-contemplated increased contribution rates, there is no vested right to be free from
increased contribution].) Although the 1969 amendment to section 68203 (for unlimited
COLA adjustments to active jurists salaries) and the 1976 amendment to section 68203
(placing a cap on COLA adjustments to active jurists' salaries) indirectly impacted
pensioners, it did so only because of (and to the extent that) pensioners' allowances were
derivative of active jurists' salaries, and not because those statutes purported to have any
direct application to the allowances paid to judicial pensioners or purported to confer any
new vested rights on judicial pensioners that were separate and nonderivative from the
rights enjoyed by active jurists.
This construction of the statutory scheme confirms our understanding that the
import of the holdings of Olson I was not to decouple the rights of judicial pensioners
from the salaries paid to actual active jurists. Instead, we read Olson I as confirming the
allowances for judicial pensioners remained tethered to the salaries paid to actual (rather
than hypothetical) active jurists, and Olson I held the allowances for judicial pensioners
were temporarily exempted from the cap on COLA's because, and only to the extent that,
salaries for some actual active jurists were likewise temporarily exempted from the cap
on COLA's. The Olson I court's analysis began by examining the extent to which salaries
for some actual active jurists (e.g. those whose terms began before January 1, 1977, and
14 had some period remaining during the protected term) were grandfathered under the
unamended section 68203 and its unlimited COLA adjustments, and explained this group
of actual active jurists were entitled to unlimited COLA's for the remainder of the
protected term, but not thereafter, reasoning that such active jurists impliedly understood
and agreed that new and less favorable terms and conditions could be imposed that
diminished their salaries in future years. (Olson I, supra, 27 Cal.3d at pp. 537-540.)
The Olson I court then turned to the extent to which the 1976 amendment to
section 68203, "in addition to impairing the vested rights of judges in office, also impairs
those of judicial pensioners." (Olson I, supra, 27 Cal.3d at p. 540, fn. omitted.) The
court, noting a judicial pensioner is "entitled to receive benefits based on a specified
percentage of the salary of a judge holding the judicial office to which the retired or
deceased judge was last elected or appointed," recognized that during the period
"[b]etween 31 December 1969 and 1 January 1977, . . . [t]he salary for such a judicial
office . . . was covenanted to increase annually with the increase in the CPI. The 1976
limitation on increases in judicial salaries is, in turn, calculated to diminish benefits
otherwise available to those judicial pensioners. Such modification of pension benefits
works to the disadvantage of judicial pensioners by reducing potential pension increases,
and provides no comparable new benefit." (Id. at p. 541.) Because there was no
demonstrated justification for impairing these rights nor any comparable new advantages
included, Olson I concluded section 68203 as amended was "unconstitutional as to
certain judicial pensioners." (Olson I, at p. 541.) Olson I then expanded on why it
15 concluded section 68203 as amended was unconstitutional as to these "certain judicial
pensioners":
"Contractually, each judicial pensioner is entitled to some fixed percentage of the salary payable to the judge holding the particular judicial office to which the retired or deceased judge was last elected or appointed. [Citations.] Accordingly, a judicial pensioner cannot claim impairment of a vested right arising out of the 1976 amendment except when the judge holding the particular judicial office could also claim such an impairment. The resolution of pensioner vested rights, then, is dependent on the foregoing resolution of judges' vested rights left unimpaired by the 1976 amendment." (Olson I, at pp. 541-542, second italics added.)
Olson I found the amendment unenforceable as to some judicial pensioners only to
the extent it was unenforceable as to the active jurists' salary on which the judicial
pensioners' allowance was derivative. Indeed, this conclusion was independent of
whether or not the judicial pensioners' rights were or were not deemed "vested," because
Olson I unequivocally reiterated that it was "not necessary for our purposes to determine
a judicial pensioner's right as being vested. [Original italics.] Vested or not, a
pensioner's right entitles him or her to benefits based on the prevailing salary for the
judge or justice occupying the particular judicial office . . . ." (Olson I, supra, 27 Cal.3d
at p. 542, italics added.) Moreover, Olson I made clear that the grandfathered benefits
enjoyed by some active jurists and (derivatively) by some judicial pensioners were not of
unlimited duration because it noted that, "as in the case of judges or justices who enter
upon a new or unexpired term of a predecessor judge after 31 December 1976, benefits of
judicial pensioners based on the salaries of such judges will be governed by the 1976
amendment." (Ibid., italics added, fn. omitted.)
16 We conclude Olson I merely reaffirmed that judicial pensioners had a right to a
percentage participation in the salaries paid to active jurists, including "the increment of
pro-rata increase in the salary of the judge occupying the office formerly occupied by [the
pensioner, which] salary fluctuates with cost of living increases" (Olson I, supra, 27
Cal.3d at p. 542, fn. 7), but did not confer on or recognize any right of judicial pensioners
to be exempted from changes in the underlying salary structure applicable to such active
jurists, including changes to the COLA's adopted by the 1976 amendment.4 To the
extent pensioners' claims are based on the theory that Olson I held judicial pensioners are
exempted from changes in the underlying salary structure applicable to actual active
jurists, those claims must fail, and the trial court correctly sustained JRS's demurrer
without leave to amend.
4 For this reason, pensioners' reliance on Legislature v. Eu, supra, 54 Cal.3d 492 and In re Marriage of Alarcon, supra, 149 Cal.App.3d 544 is misplaced. Both cases held that promised pension benefits cannot be impaired once they are vested, even if the pensioner later begins a new term of office that (if it was the prospective pensioner's initial term in office) would have been governed by reduced pension benefits. (Legislature v. Eu, at pp. 527-534; Marriage of Alarcon, at pp. 550-553.) However, in Alarcon, the pensioner had been expressly promised that a benefit of his office would be to earn a fully vested (albeit deferred) right to a pension, and the court concluded the amended law purporting to remove that right could not be enforced. (Alarcon, at pp. 551- 554.) Similarly, in Eu, the pensioner had been expressly promised that a benefit of the office included pension benefits that would become vested and successively higher from additional years of service, and the court concluded an amended law purporting to remove those rights could not be enforced against those who had accrued vested rights under the former system. (Eu, at pp. 527-534.) Although these cases are correct, they are of no aid to pensioners because, although " 'vested' contractual rights may not be destroyed or impaired, plaintiff fails to identify exactly what employee rights are vested under [the] retirement system, and thereby misses the crucial distinction . . . ." (International Assn. of Firefighters v. City of San Diego, supra, 34 Cal.3d at p. 301.) The expressly promised and vested rights of pensioners is to receive a pro-rata share of an identified salary (e.g. the salary of the judge occupying the office formerly occupied by the pensioner), not to receive a pro-rata share of a hypothetical salary. 17 II
THE REMAINING ISSUE
After the trial court entered its order sustaining without leave to amend JRS's
demurrer to pensioners' Olson I claims, pensioners moved to partially vacate that order.
This motion asserted that, even under the interpretation of Olson I espoused by JRS and
adopted by the trial court, their action had asserted viable claims on behalf of 10 class
members (the 10 claimants) who were allegedly not paid the amounts due to them under
Olson I as interpreted by the trial court.
Pensioners' motion argued the action pleaded claims on behalf of seven trial
judges whose retirement allowances should have been (but were not) calculated and paid
based on the salary of an active trial court jurist as increased by an uncapped COLA
through July 5, 1981, consistent with the trial court's construction of Olson I. Pensioners
also asserted the action pleaded claims on behalf of three appellate court justices whose
retirement allowances should have been (but were not) calculated and paid based on the
salary of an active appellate court jurist as increased by an uncapped COLA through
July 5, 1987, again consistent with the trial court's construction of Olson I. Pensioners'
motion to vacate argued that, because the complaint alleged these 10 claimants had not
been paid their retirement allowances during the 1970's and 1980's in accordance with
this rate, the demurrer should be overruled as to the claims made by the 10 claimants for
these time periods, or alternatively, that pensioners should be granted leave to amend to
allow the 10 claimants to more clearly and separately plead these claims on behalf of
these claimants.
18 The trial court denied the motion, concluding (1) this category of unpaid pension
payments by the 10 claimants was "not clearly part of the petition," and (2) even if these
claims had been separately pleaded, this category of claims was time-barred by Code of
Civil Procedure section 337.5; and (3) the death of the 10 claimants ended any further
obligations by JRS to this group of retirees under section 20164. Pensioners argue the
ruling on their motion was error.
We conclude the trial court erred and should have granted pensioners leave to
amend to separately state the alleged claims for the 10 claimants. The first basis for the
court's ruling--that this portion of unpaid pension payments by the 10 claimants was "not
clearly part of the petition"--was erroneous. The petition and complaint below asserted
claims by numerous individuals covering lengthy periods of time, including years the
trial court correctly found were outside the ambit of Olson I's protected periods during
which uncapped COLA adjustments to salaries were owed to certain jurists and
(derivatively) to certain pensioners. However, it appears the exhibits attached to the
complaint also reflected that at least a segment of each of the claims pleaded by the 10
claimants--alleged underpayments during the protected period--were based on
underpayments that would have fallen within the ambit of Olson I's protected periods,
and JRS does not contend otherwise. The incorporation by reference of these exhibits, a
permissible method for asserting factual averments underlying a cause of action (see, e.g.,
Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 608-609), was
adequate to make this segment of unpaid pension payments by the 10 claimants a part of
the petition, and it was error to find to the contrary. To the extent this aspect of the trial
19 court's ruling was that this segment was not "clearly" alleged, it was error not to grant
leave to amend to allow these 10 claimants to more clearly elucidate this segment of their
claim. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)
The second ground for the court's denial of the motion was that this segment of the
claims of the 10 claimants was time-barred by Code of Civil Procedure section 337.5,
which places a 10-year statute of limitations on actions on a judgment. (Id. at subd. (b).)
However, a demurrer ordinarily challenges defects on the face of the complaint
(Lazzarone v. Bank of America (1986) 181 Cal.App.3d 581, 590), and there is nothing on
the face of pensioners' petition revealing any part of this segment of the claims of the 10
claimants was part of a judgment that would have triggered the limitations period under
Code of Civil Procedure section 337.5. Although a court may consider matters outside
the pleading that are subject to a proper request for judicial notice (Lazzarone, at p. 590),
and the trial court here apparently concluded the judgment in Olson I triggered the 10-
year period of limitations,5 the time under Code of Civil Procedure section 337.5 only
begins to run upon entry of a final enforceable judgment (Kertesz v. Ostrovsky (2004)
115 Cal.App.4th 369, 373), which requires a final determination of the rights of the
parties within the meaning of Code of Civil Procedure section 577 and " ' " 'leaves
nothing to be done but to enforce by execution what has been determined.' " ' " (Center
for Biological Diversity v. California Fish & Game Com. (2011) 195 Cal.App.4th 128,
5 The trial court, citing Code of Civil Procedure section 337.5, subdivision (b), ruled that "[a]ny claims by these 10 judges for benefits under Olson v. Cory would have expired 10 years after Olson v. Cory decision, decided in 1980." 20 141, fn. 7.) As explained by Olson III, Olson I did not result in a final judgment on
which execution could proceed:
"because the declaratory judgment adjudicated in Olson v. Cory I was not in itself enforceable. The purpose of declaratory relief is 'to enable the parties to shape their conduct so as to avoid a breach.' [Quoting Babb v. Superior Court (1971) 3 Cal.3d 841, 848.] Though declaratory relief may properly be accompanied by coercive relief [citation], the judgment in Olson v. Cory I was purely declaratory. It contained no enforceable provision, such as one directing a particular party to pay a specified sum to another party." (Olson III, supra, 35 Cal.3d at p. 400.)
Because the only judicially noticed judgment was not one on which the 10-year
statute of limitations could have commenced running, and no other subsequent judgment
was introduced below on which the trial court below could properly have concluded all of
the claims of the 10 claimants were actually encompassed therein and hence time-
barred,6 it was error to conclude on demurrer that the time bar of Code of Civil
6 Arguably, some final enforceable judgment was subsequently entered by the trial court on remand from Olson III that would have triggered Code of Civil Procedure section 337.5. However, the record below contains no request for judicial notice of any judgment entered by the trial court after remand, much less the actual judgment entered after remand. Accordingly, it is impossible to determine the scope of any judgment actually entered (i.e. for what time periods were damages awarded by the final judgment), or whether any (or all) of these claimants were members of the class in whose favor the judgment awarded monetary compensation for underpayments. (See Olson III, supra, 35 Cal.3d at pp. 398-399 [noting the plaintiffs' 1980 notice of class action advised that " '[i]f you are a member of the class who does not request exclusion and you wish to be included in, obtain the benefits of, and be bound by the final judgments entered in this class action, you need do nothing,' " italics added by Olson III].) Additionally, even assuming these 10 claimants were awarded damages by the final judgment entered after remand, at least three of these claimants pleaded claims in the present action that potentially could not have been barred by an award encompassed in the final judgment entered after remand. Specifically, three of these claimants (Justices Aiso, Friedman and Reppy) appear to be appellate court justices whose Olson I claim alleges they were entitled to be (but were not) paid amounts based on uncapped COLA's through the end of 21 Procedure section 337.5 precluded pensioners from amending their petition to state a
viable cause of action for this segment of the claims of the 10 claimants.
The final ground for the trial court's denial of the motion was that all of JRS's
obligations to these 10 claimants were extinguished under section 20164, subdivision (a).
Although that subdivision specifies the obligations of the system continues "throughout
the lives of the respective retired members, and thereafter until all obligations to their
respective beneficiaries under optional settlements have been discharged," it contains no
explicit statute of limitations for accrued but unpaid pension payments that might form a
chose in action that the decedent's estate or trust might be entitled to assert. Instead, the
only explicit statute of limitations described in section 20164 is the three-year limitations
period7 provided in subdivision (b) "[f]or the purposes of payments into or out of the
retirement fund for adjustment of errors or omissions," which provides three-year
limitation on the system's right to collect for erroneous payments out of the system (id. at
subds. (b)(1) & (b)(3)), but that subdivision also specifies that "[i]n cases where this
system owes money to a member or beneficiary, the period of limitations shall not
apply." (Id. at subd. (b)(2).) Although there are undoubtedly statutes of limitations that
apply when the decedent's heir or trust is authorized to receive the amounts due to a
retired jurist that were accrued and unpaid at the time of the jurist's death (see § 75006),
the limitations are not specified in section 20164.
1986. It is difficult to imagine how a judgment entered after remand in 1983 from Olson III would have encompassed alleged underpayments that had not yet occurred.
7 Section 20164 provides for a longer period when the erroneous payment from the system is the result of fraud by the member. (Id. at subd. (c).) 22 We caution that our conclusion here is a limited one: the trial court should not
have dismissed this segment of the alleged claims for these 10 jurists on demurrer but
instead should have granted pensioners leave to amend to separately state this limited
segment of claims. Whether these claims, once distilled, may be subjected to a motion
for summary judgment based on properly introduced extrinsic evidence, or based on
other statutes of limitations that may be applicable but were not raised below, are matters
that must be determined on remand.
DISPOSITION
The trial court is directed to vacate its order denying pensioners' motion to
partially vacate the order sustaining respondent's demurrer without leave to amend, and to
enter a new and different order permitting pensioners leave to amend the complaint to
separately state claims for alleged underpayment of pensions as described in Part II of
this opinion. In all other respects, the judgment is affirmed. Each party shall bear its
own costs on appeal.
McDONALD, J.
WE CONCUR:
BENKE, Acting P. J.
IRION, J.
23 Filed 5/29/14 COURT OF APPEAL, FOURTH APPELLATE DISTRICT
v. (Super. Ct. No. 37-2012-00093475-CU-MC-CTL) THE JUDGES' RETIREMENT SYSTEM,
Defendant and Respondent; ORDER MODIFYING OPINION
THE COURT:
It is ordered that the opinion filed herein on May 19, 2014, be modified as follows:
On page 18, in the first and second sentences of the second full paragraph, the
word "through" is replaced with the word "until" so the sentences read:
"Pensioners' motion argued the action pleaded claims on behalf of seven trial
judges whose retirement allowances should have been (but were not) calculated and paid
based on the salary of an active trial court jurist as increased by an uncapped COLA until
July 5, 1981, consistent with the trial court's construction of Olson I. Pensioners also
asserted the action pleaded claims on behalf of three appellate court justices whose
retirement allowances should have been (but were not) calculated and paid based on the salary of an active appellate court jurist as increased by an uncapped COLA until July 5,
1987, again consistent with the trial court's construction of Olson I."
There is no change in the judgment.
Copies to: All parties
2 Filed 5/29/14 COURT OF APPEAL, FOURTH APPELLATE DISTRICT
v. (Super. Ct. No. 37-2012-00093475-CU-MC-CTL) THE JUDGES' RETIREMENT SYSTEM,
Defendant and Respondent; ORDER CERTIFYING OPINION FOR PUBLICATION JOHN CHIANG, as State Controller, etc.,
The opinion filed May 19, 2014, is ordered certified for publication.