BELLUS v. CITY OF EUREKA

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Court of Appeal, First District, Division 1, California.

Loid D. BELLUS, Kenneth Cringle, Robert W. Whitmire, and Robert State, Plaintiffs and Respondents, v. CITY OF EUREKA, a Governmental Corporation, Defendant and Appellant.

Civ. 23418.

Decided: January 19, 1968

Melvin S. Johnsen, City Atty., City of Eureka, Eureka, for appellant. Hill & Neville, Eureka, for respondents.

The City of Eureka, defendant below, appeals from an adverse judgment entered in an action for declaratory relief. Plaintiffs, who are members of defendant's police and fire departments, brought the action on behalf of themselves individually and as representatives of the other members of their respective departments.

The complaint sought a determination of the rights and duties of the parties under a City of Eureka ordinance numbered 2262, as amended. The ordinance relates to a policeman and fireman retirement fund. A report of professional actuaries estimated that, as of October 31, 1964, the retirement fund had an unfunded liability, in the sum of $2,742,899, not covered by total assets of $445,677.

The complaint alleged ‘That an actual controversy has arisen between the parties in relation to the interpretation of said ordinance in that the parties are in dispute as to whether, under said ordinance and amendments thereto, the said ordinance creates a general tax liability of the City of Eureka from which benefits to plaintiffs and those similarly situated are to be paid, or whether said fund created by said ordinance is to be financed solely by contributions from the members of each Department [and the City of Eureka as] mentioned therein.’

The plaintiff members contended that they were entitled upon retirement to a fixed pension (one-half of salary of rank held during year preceding retirement) and that any deficit in the retirement fund must be met by the City of Eureka. The City of Eureka contended that it was required to do no more than match the contributions of the members, and that if the retirement fund was insufficient for payment of pensions, such pensions must be reduced, pro rata.

The case was tried on stipulated facts. The judgment declared that the ordinance ‘creates a general tax obligation of the City of Eureka and that under the terms of said ordinance should any deficit occur in said fund, such deficit should be paid by the City of Eureka of funds raised by a general tax levy.’

Ordinance 2262 was enacted in 1943, and amended in 1948 and 1951. It was codified as part of the Eureka Municipal Code1 in 1963. It presents serious problems of interpretation. Admittedly it is ambiguous. The trial judge below referred to it as a ‘most unworkable device,’ the drafting of which gas led to ‘rather paradoxical results.’

Section 3 of the ordinance provides conditions for the retirement of members of the police and fire departments. It then states: ‘* * * he shall thereafter be retired during his lifetime and shall be paid from such Fund a yearly pension, in semi-monthly installments, equal to one-half the amount of salary attached to the rank which he may have held * * * for a period of One (1) Year next preceding the date of his retirement. That said one-half payable is the basic rata and shall be determined by the Commission in accordance with the amount of money in the Fund, as hereinafter provided; * * *.'2

We are aided in our interpretation of the ordinance by several decisions of the appellate courts of this state.

England v. City of Long Beach, 27 Cal.2d 343, 348, 163 P.2d 865, 868, states: ‘We must, of course, reject any theory that the provisions of the charter were designed to create an appearance of granting pensions while at the same time withholding the benefits by providing inadequate funds. Cf. Gibson v. City of San Diego, 25 Cal.2d 930, 935, 156 P.2d 737, where the court said it was satisfied that the drafters of a charter did not intend to insert a clause which was either meaningless or fraudulent in design. The insufficiency of the fund may have resulted simply from a mistaken belief that the fund would be adequate or from an intent that it should constitute but a partial source of pension payments with the balance to be made up out of the city's general revenues.

‘The injustice that would prevail if the provisions relating to the fund were construed to be a limitation on the obligation to pay pensions is apparent. The existence of a pension plan is of course a strong factor inducing persons to enter into or remain in a particular employment. Moreover, the employee involved here was required to contribute a portion of his salary to the pension fund.’

Lesem v. Board of Retirement, 183 Cal.App.2d 289, 298, 6 Cal.Rptr. 608, 614, summarizes the rules relating to the construction of retirement ordinances as follows:

‘It has been repeatedly recognized that all pension laws are to be liberally construed to carry out their beneficent purposes. England v. City of Long Beach [supra], 27 Cal.2d 343, 346, 163 P.2d 865; Adams v. City of Modesto, 53 Cal.2d 833 [840], 3 Cal.Rptr. 561 [350 P.2d 529]. Any ambiguities in pension laws should be resolved in favor of the applicant. Wendland v. City of Alameda, 46 Cal.2d 786, 298 P.2d 863; Gray v. Bolger, 157 Cal.App.2d 583, 321 P.2d 485. In the application of statutory law, statutes are to be construed according to the intent of the Legislature. If the language of the statute is plain and certain so that no doubt arises as to its meaning, a bare reading thereof is sufficient, and there is no need for construction. Where two constructions are possible and interpretation becomes necessary, the court will follow the rule of finding that construction which leads to the more reasonable result. The legislative purpose and policy should be promoted and in ascertaining the legislative intent, the purpose sought to be achieved and the evils to be eliminated will be considered. The mere literal construction will not prevail over the apparent legislative intent. Freedland v. Greco, 45 Cal.2d 462, 467, 289 P.2d 463; Pritchard v. Sully-Miller Contracting Co., 178 Cal.App.2d 246, 256, 2 Cal.Rptr. 830 [hearing denied by the Supreme Court April 20, 1960]; Blevins v. Palmer, 172 Cal.App.2d 324, 328, 342 P.2d 356. A statute is to be construed in such a way as to render it reasonable, fair and harmonious with its manifest purpose and in such a way as will avoid mischief or absurd consequences. Uhl v. Badaracco, 199 Cal. 270, 284, 248 P. 917; Dickey v. Raisin Proration Zone No. 1, 24 Cal.2d 796, 812, 151 P.2d 505, 157 A.L.R. 324.’

It is in the light of these rules that we now consider the contentions of the parties.

As indicated, section 3 provides that a retired policeman or fireman ‘shall be paid from such Fund a yearly pension * * * equal to one-half the amount of salary’ of the rank last held by him. (Italics added.) This positive language is then followed by the uncertain provision that the ‘one-half payable is the basic rate and shall be determined * * * in accordance with the amount of money in the Fund, as hereinafter provided.’ Section 11 then provides that if ‘there shall not be sufficient moneys in the Fund to make the payments herein provided, then such payments shall be reduced pro rata to an amount payments can be made from the Fund. That said pro rata reduction in the pensions or payments herein provided can only be made by a majority vote of the members of each Department and the City Council and only in an amount agreed upon by said three Departments. Each shall hold separate vote.’ (Emphasis added.) Taken together we construe the above mentioned sections as follows: Each retired policeman and fireman, during his lifetime, shall be paid from the retirement fund a yearly pension in semimonthly installments equal to one-half of the amount of salary attached to the rank which he may have held for a period of one year next preceding the date of his retirement; provided that if there shall not be sufficient money in the retirement fund to make such pension payments, and in the event, and only in the event, that a majority of the members of the police department, the fire department and the council of the City of Eureka, each by a separate majority vote, shall agree to a pro rata reduction of such pension payments, such pension payments shall be reduced pro rata in an amount agreed upon by each of such separate majority votes.

Since we must reject any theory that ordinance 2262 as designed to create an appearance of granting pensions while at the same time withholding all or part of such pension benefits by providing inadequate funds (England v. City of Long Beach, supra, 27 Cal.2d 343, 348, 263 P.2d 865) it seems reasonably to follow that the intent of the ordinance was that the City of Eureka furnish any additional funds necessary to meet the pension commitments. This interpretation is strengthened by the provisions of section 10 of the ordinance.

Section 10 requires a deduction from active (unretired) member's salaries in the fixed amount of 7 percent which under section 11 may not be increased or decreased unless the police department, fire department and city council, each by a separate majority vote, agree thereto. Unless so agreed the members' contributions remain fixed at 7 percent. However, the contributions of the City of Eureka are not so fixed. Section 10 requires that the city council shall place in the fund ‘not less' than the amounts contributed by the members. If the intent of the ordinance was that the City of Eureka should place in the fund not more than, or an amount equal to, that contributed by the members (as contended by City of Eureka) it is unlikely that the words ‘not less' would have been used. This provision of section 10 in the light of section 11 and the requirement of section 3 that a fixed pension of one-half of salary ‘shall be paid,’ must also be construed to require the City of Eureka to pay into the fund such additional sums as are necessary to meet the ordinance's pension commitments.

We note also the provisions of sections 7 and 12 providing, under certain circumstances, for return of the total contributions made by a member, and section 19 which states that each person entitled to such return has ‘a property interest therein.’ Such a vested property interest is inconsistent with defendant's theory which would allow depletion of the fund for pensions or return of contributions without obligation of the City of Eureka to maintain it, at least to the extent necessary for the protection of the active members' vested interests. We paraphrase comment of the trial judge, ‘I am a fireman and then I put a thousand dollars into the fund which is actuarially unsound. The commission takes eight hundred of my thousand to pay a policeman who has retired. They are interfering with my vested interest, aren't they? Can you read it any other way?’

The City of Eureka insists that the language of section 3, the ‘one-half payable is the basic rate and shall be determined * * * in accordance with the amount of money in the Fund,’ manifests an intent that the pension payments be reduced if the amount of money in the fund is insufficient. We cannot construe this awkward language as qualifying the immediately preceding directive of section 3 that a yearly pension equal to one-half of salary ‘shall be paid’ and the provisions of section 11 that pensions cannot be reduced without the required tripartite consent.

The interpretation for which the City of Eureka contends is contrary to the manifest purpose of the ordinance. An active policeman or fireman, although making his contributions therefor, could never be assured what pension, if any, he would receive upon his retirement. As said in England v. City of Long Beach, supra, 27 Cal.2d 343, 348, 163 P.2d 865, 868, ‘It would be obviously unjust to make the payment of pensions dependent upon the solvency of a particular fund, thereby depriving employees of the benefits of the system, unless we were compelled to do so by a clear, positive command * * *.’

The City of Eureka urges an additional point, not raised below, relating to its charter, which we shall now consider.

Prior to and since 1917 the charter has had a provision reading: ‘All improvements, actions, proceedings, matters, and things not otherwise provided for in this charter shall be taken, had, and conducted under and pursuance of the provisions of the laws of the State of California applicable thereto, in force at the time such improvements, actions, proceedings, matters, and things are taken and had.’ The charter was amended in 1917 to take advantage of the ‘home rule’ provisions of section 6 of article XI of the state Constitution. It is pointed out that the amendment provided: ‘* * * said City shall have the power to make and enforce any and all laws and regulations in respect to municipal affairs, subject only to the restrictions and limitations provided in this Charter as the same now is or as it may be hereafter amended.’ (Emphasis added.)

It is argued that since the charter charter itself contains no police and fireman pension provisions, ordinance 2262 is governed by the ‘laws of the State of California’ insofar as they may differ from the ordinance. Government Code sections 45300–45317 (codifying Stats.1937, ch. 321, p. 699, amended by Stats.1941, ch. 1080, p. 2778), relate generally to municipal retirement systems. Section 45309 provides that the contribution to the pension fund by the city ‘shall not exceed the total contribution paid * * * by the officers and employees.’ (Emphasis added.) This provision, it is contended, must be considered as included in ordinance 2262.

In City of San Jose v. Lynch, 4 Cal.2d 760, 52 P.2d 919, a similar contention was made and rejected. There the court said (p. 765, 52 P.2d p. 921): ‘We cannot accept the interpretation placed by respondent upon the proviso appearing in section 2a, supra [the ‘home rule’ amendment to the San Jose Charter]. The proviso is couched in the express language of the constitutional provision, supra, which authorizes ‘home rule’ for municipalities, ‘subject only to the restrictions and limitations provided in their several charters.’ The framers of section 2a could not have intended that any other or different meaning be given the proviso than that intended therefor in the constitutional provision and it should not be given any greater significance. The proviso was unnecessary to section 2a, for without it the section would still be subject to the clause as used in the Constitution; the latter being the mode and measure of the power. With the proviso out of section 2a, but the section still subject to it as used in the Constitution, the inescapable conclusion from the broad language employed in the balance of the section is that it was intended to invest in the city complete and exclusive power of legislation and control over purely municipal affairs. * * *' (Emphasis added.)

The City of Eureka points out that the language of its charter reading, ‘subject only to the restrictions and limitations provided in this charter as the same now is or as it may be hereafter amended,’ is different from that emphasized by us in the above quotation from City of San Jose v. Lynch, supra. We cannot find any significant difference in meaning in the two phrases.

Our examination of the 1917 amendment to the Charter of the City of Eureka (Stats.1917, pp. 1742–1752) discloses language not pointed out in the briefs. Following the language quoted by the City of Eureka appears: ‘* * * and to do and perform all acts and things appropriate to a municipal corporation, or which may be for the general welfare and good of its inhabitants, which are not specifically forbidden by the Constitution of the State of California, or which now or hereafter it would be lawful to specifically enumerate in this Charter; and no enumeration or specific statement herein of any particular powers shall be held to be exclusive or a limitation of the foregoing general grant of powers. * * * The Council shall have power to pass ordinances: * * * To regulate and maintain a Fire Department; and to regulate and maintain a Police Department. * * * To make all ordinances, by-laws, rules, and regulations necessary and proper for carrying into execution the foregoing powers, * * *.’ We construe the foregoing language to be a valid grant of power enabling the City of Eureka to enact a police and fire department pension ordinance unaffected by the provisions of Government Code section 45309.

Finally the City of Eureka points out that under stipulated facts ordinance 2262 was adopted in 1943 under the authority of the then existing general laws (Stats.1937, ch. 321, p. 699, amended by Stats.1941, ch. 1080, p. 2778) now codified as Government Code sections 45300–45317. For this reason, it is insisted, the provisions of Government Code section 45309 (formerly § 3c, Stats.1941, ch. 1080) must here apply.

Government Code sections 45300–45317 comprise article 1 of chapter 2, division 5, title 4, of that code. That article, which follows the language of its above mentioned parent statute does not purport to establish an exclusion retirement scheme. Section 45300 states: ‘It is the intent of this article to enable any city to adopt such a retirement system as is adaptable to its size and type.’ Section 45301 provides: ‘By ordinance, any city may establish a retirement system for its officers and employees * * *.’ And section 45316 reads: ‘This article provides an alternative procedure for the establishment of retirement systems in cities.’ Under these statutes clear authority is given to cities, by ordinance, to adopt retirement provisions of their own choice. (See Grace v. City of Los Angeles, 249 A.C.A. 661, 668, 58 Cal.Rptr. 388.)

The judgment is affirmed.

FOOTNOTES

1.  In the Eureka Municipal Code the ordinance is numbered sections 2–5.401 through 2–5.420. We shall, as have counsel in their briefs, refer to the ordinance and to the section numbers of the ordinance. In this opinion any reference to section numbers will relate to ordinance 2262, as amended.

2.  Additionally, as pertinent here, the ordinance provides:(Section 7) ‘Whenever any member of the Fire or Police Department shall die from causes other than as a direct or indirect result of the actual performance of his duty as a Fireman or Policeman, then his widow or children, or if there be no widow or children, then his mother or father, or other heirs, shall be entitled to receive the total contributions made by such member, plus a reasonable rate of interest, to be set by the commission less one-half that amount received as a pension before death. * * *’(Section 10) ‘[T]here shall be deducted from the regular monthly salary of each member of the Fire and Police Department Seven (7%) Percent thereof, as a basic rata, to be placed in said Fund. That the Council of the City of Eureka shall place in said Fund from any suitable funds available a sum not less than the amount contributed each month by each member of said Fire or Police Department. * * *’(Section 11) ‘That in the event there shall not be sufficient moneys in the Fund to pay the amounts in this Ordinance provided by the donations, contributions, the deductions from the salaries of the members of the Departments and contributions by the City of Eureka, then the amount of deductions from the salaries of the members to be placed in said Fund may be increased by a majority vote of the members of the Fire Department, Police Department and Council of the City of Eureka, to be matched by a similar increase by the City of Eureka. Each Department shall hold a secret vote separate from the other, and the City Council shall vote separate from either Department. The increase to be effective must have a majority vote in each Department and in the Council. If no increase is vote and there shall not be sufficient moneys in the Fund to make the payments herein provided, then such payments shall be reduced pro rata to an amount payments can be made from the Fund. That said pro rata reduction in the pensions of payments herein provided can only be made by a majority vote of the members of each Department and the City Council and only in an amount agreed upon by said three Departments. Each shall hold separate vote.’(Section 12) ‘In the event any member of the Eureka Paid Fire Department or the Eureka Paid Police Department shall be permanently separated from the service in such Fire or Police Department, either voluntarily or involuntarily, for any reason whatsoever, and shall not be entitled to retirement benefits under this Act, then all moneys theretofore paid into such Fund, by such member, shall be returned to such member, if alive; otherwise to his widow, if any, and if there be no widow, then to his child or children, if any, and if there be no widow or children, then to his parents, and if there be no parents, then to his heirs at law. That said sum shall bear a reasonable rate of interest, to be set by the Commission. * * *’(Section 19) ‘It is the intent and purpose that each person entitled to the benefits of this Ordinance has a property interest therein for purposes of withdrawal, as provided, and an estate to his dependents and heirs in a sum equivalent to the amount he shall have contributed, plus a reasonable rate of interest, less any deduction provided, and for disability and retirement payments to the full extent of the provisions herein.’

ELKINGTON, Associate Justice.

MOLINARI, P. J., and SIMS, J., concur.