Olson v. Cory

• Decision Date: 27 March 1980
• Parties: , 609 P.2d 991 Lester E. OLSON et al., Plaintiffs and Respondents, v. Kenneth CORY, as State Controller, et al., Defendants and Appellants. L.A. 31142.
• Court: California Supreme Court

Page 217

164 Cal.Rptr. 217

27 Cal.3d 203, 609 P.2d 991

Lester E. OLSON et al., Plaintiffs and Respondents, v. Kenneth CORY, as State Controller, et al., Defendants and Appellants.

L.A. 31142.

Supreme Court of California, In Bank.

March 27, 1980.

As Modified on Denial of Rehearing

May 30, 1980.

William H. Levit, Stroock & Stroock & Lavan, Gibson, Dunn & Crutcher, Richard Chernick, Wayne W. Smith and Daniel Q. Callister, Los Angeles, for plaintiffs and respondents.

CLARK, Justice.

Defendants, Controller of the State of California and Auditor-Controller of the County of Los Angeles, appeal from judgment declaring unconstitutional 1976 legislation purporting to place a limit on cost-of-living increases previously provided for judicial salaries. ¹ The statute as amended Defendants contend that placing a limit on current provisions providing for cost-of-living increases to judicial salaries does not impair the vested or contractual rights of judges in office or of judicial pensioners. Additionally, defendants contend that the amendment to section 68203 does not reduce judicial salaries in violation of Proposition 6. We reject defendants' contentions and affirm in part the judgment of the superior court.

was held unconstitutional by the superior court on grounds it constitutes an impermissible impairment of [27 Cal.3d 537] vested contractual rights (U.S.Const., art. I, § 10; Cal.Const., art. I, § 9) and conflicts with California Constitution, article III, section 4. ²

In amending section 68203 the Legislature attempted in effect first to maintain judicial salaries at the 1 September 1976 level for 22 months, and then to limit prospective increases beginning on 1 July 1978 to 5 percent regardless of the actual increase in the California consumer price index (hereinafter CPI). (See fn. 1, ante.) Without the amendment judges would have been entitled to a 5.327 percent increase beginning on 1 September 1977. After the defendant Controller announced he would not pay such an increase, plaintiffs judges in office and judicial pensioners commenced this action for declaratory relief.

CONFLICT OF INTEREST

We consider first whether we may hear and adjudicate the cause, recognizing each member of this court is financially interested in the outcome. The rule of necessity provides that a judge is not disqualified from adjudicating a cause because of personal financial interest if there is no other judge or court available to hear and resolve the cause. (See Atkins v. United States (1977) 556 F.2d 1028, 214 Ct.Cl. 186.) It is immediately apparent that all California judges have at least an involuntary financial interest in this case. To disqualify one would disqualify all, depriving them and their surviving spouses of opportunity to litigate their case. This court as now constituted is qualified to hear and determine the issues before us.

ABRIDGEMENT OF VESTED OR CONTRACTUAL RIGHTS OF JUDGES IN OFFICE

We recognize the often quoted language that public employment is not held by contract and therefore is not protected by the contract clause. (Markman v. County of Los Angeles (1973) 35 Cal.App.3d 132, 134-135, 110 Cal.Rptr. 610; see also Butterworth v. Boyd (1938) 12 Cal.2d 140, 150, 82 P.2d 434.) Those and other cases involve purported rights to remain in office or to continued public employment. On the other hand, we deal here with the right to compensation by persons serving their term of public office to which they have undisputed rights. "(P)ublic employment gives rise to certain obligations which are protected by the contract clause of the Constitution. . . ." (Kern v. City of Long Beach (1947) 29 Cal.2d 848, 852-853, 179 P.2d 799, 802; see also California League of City Employee Associations v. Palos Verdes Library Dist. (1978) 87 Cal.App.3d 135, 139, 150 Cal.Rptr. 739.) Promised compensation is one such protected right. (Sonoma County Prior to the 1976 amendment judges had a vested right not only to their office for a certain term but also to an annual increase in salary equal to the full increase in the CPI during the prior calendar year. With the 1976 amendment the state purported to withdraw that right unilaterally thus impairing a vested interest. ³ The question remaining is whether in the circumstances of this case the impairment is in some way permissible.

Organization of Public Employees v. County of Sonoma (1979) 23 Cal.3d 296, 308-309, 152 Cal.Rptr. 903, 591 P.2d 1.) Once vested, the right to compensation cannot be eliminated without unconstitutionally impairing the contract obligation. (Id., at p. 314, 152 Cal.Rptr. 903, 591 P.2d 1.) When agreements of employment between the state and public employees have been adopted by governing bodies, such agreements are binding and constitutionally protected. (Sonoma County Organization of Public Employees v. County of Sonoma, supra, 23 Cal.3d 296, 304, 152 Cal.Rptr. 903, 591 P.2d 1, quoting from Glendale City Employees Assn., Inc. v. City of Glendale (1975) 15 Cal.3d 328, 337-338, 124 Cal.Rptr. 513, 540 P.2d 609.) In the instant case the Legislature in 1969 adopted the full cost-of-living increase provision, binding the state to pay persons employed at the represented compensation for their terms of office.

In Sonoma County Organization of Public Employees v. County of Sonoma, supra, 23 Cal.3d 296, 152 Cal.Rptr. 903, 591 P.2d 1, this court reiterated the four factors identified by the United States Supreme Court in Home Building and Loan Assn. v. Blaisdell (1934) 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, warranting legislative impairment of vested contract rights. Those factors are: (1) the enactment serves to protect basic interests of society, (2) there is an emergency justification for the enactment, (3) the enactment is appropriate for the emergency, and (4) the enactment is designed as a temporary measure, during which time the vested contract rights are not lost but merely deferred for a brief period, interest running during the temporary deferment. (23 Cal.3d, at pp. 305-306, 152 Cal.Rptr. 903, 591 P.2d 1.)

In applying these standards the enactment's severity must be measured to determine "the height of the hurdle the state legislation must clear." (Allied Structural Steel Co. v. Spannaus (1978) 438 U.S. 234, 98 S.Ct. 2716, 57 L.Ed.2d 727.) This court stated in Sonoma County that impairing a granted increase in wages goes to the heart of the employment contract and is therefore severe and permanent. (Sonoma County Organization of Public Employees v. County of Sonoma, supra, 23 Cal.3d 296, 308-309, 152 Cal.Rptr. 903, 591 P.2d 1.) Therefore the state's hurdle in applying the four factors in the instant case is heightened because section 68203 is an impairment affecting the heart of the employment contract.

Defendants, offering no reason or justification for the state action, fail even to approach their burden of demonstrating the impairment of plaintiffs' rights is warranted by an "emergency" serving to protect a "basic interest of society."

A judge entering office is deemed to do so in consideration of at least in part A judge who 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 Government Code 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 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.

salary benefits then offered by the state for that office. If salary benefits are diminished by the legislature during a judge's term, or during the unexpired term of a predecessor judge (see Cal.Const., art. VI, § 16; Gov.Code, §§ 71145, 71180), 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, [27 Cal.3d 540] whether his term of office commenced prior to or during that time period. "An employee's contractual pension expectations are measured by benefits which are in effect not only when employment commences, but which are thereafter conferred during the employee's subsequent tenure." (Betts v. Board of Administration, supra, 21 Cal.3d 859, 866, 148 Cal.Rptr. 158, 163, 582 P.2d 614, 619.) ⁴

As will be seen, our conclusions based on the contract clause as affecting salaries of judges in office are consistent with our conclusions regarding Proposition 6.

ABRIDGEMENT OF VESTED OR CONTRACTUAL RIGHTS OF JUDICIAL PENSIONERS

The 1976 amendment, in addition to impairing the vested rights of judges in office, also impairs those of judicial pensioners. ⁵ A long line of this court's decisions has reiterated the principle that a public employee's pension rights are an integral element of compensation and a vested contractual right accruing upon acceptance of employment. (Betts v. Board of Administration, supra, 21 Cal.3d 859, 863, 148 Cal.Rptr. 158, 582 P.2d 614; Kern v. City of Long Beach, supra, 29 Cal.2d 848, 852-853, 179 P.2d 799.) In Betts, this court held that a former state treasurer who had served in that office from 1959 to 1967 was entitled to a pension on the basis of the law in effect at the time of his termination rather than the modified law in effect at the time of his application for pension benefits in 1976. (Id., at pp. 867-868, 148 Cal.Rptr. 158, 582 P.2d 614.) The statute in effect in 1976 purported to withdraw benefits to which he had earned a vested contractual right while employed....