Bellus v. City of Eureka

• Decision Date: 13 September 1968
• Docket Number: S.F. 22236
• Citation: 444 P.2d 711,69 Cal.2d 336,71 Cal.Rptr. 135
• Court: California Supreme Court
• Parties: , 444 P.2d 711 Loid D. BELLUS et al., Plaintiffs and Respondents, v. CITY OF EUREKA, Defendant and Appellant.

Page 135

71 Cal.Rptr. 135

69 Cal.2d 336, 444 P.2d 711

Loid D. BELLUS et al., Plaintiffs and Respondents, v. CITY OF EUREKA, Defendant and Appellant.

S.F. 22236.

Supreme Court of California,

In Bank.

Sept. 13, 1968.

Rehearing Denied Oct. 9, 1968.

Melvin S. Johnsen, City Atty., Eureka, for defendant and appellant.

Hill & Neville and Robert W. Hill, Eureka, for plaintiffs and respondents.

TOBRINER, Justice.

Plaintiffs, members of the Police and Fire Departments of the City of Eureka suing on behalf of themselves individually and as representatives of the other members of the two departments, sought a declaratory judgment that the pension payments directed to be made by Ordinance No. 2262, as amended, constitute a general obligation of the defendant, City of Eureka. The trial court found for plaintiffs. The City of Eureka appeals, contending that the pension payments are to be made solely from funds assigned to the retirement fund.

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 matching contributions by the City as) mentioned therein.'

Plaintiffs contend that any deficit in the retirement fund must be met by the City. The City argues that under express limitations of the State Pension Act (now Gov.Code, §§ 45300--45317) and of the city ordinance itself, it can be required to do no more than match the contributions of the members of the pension plan. In support of its contention, the City points to the parties' stipulation that the ordinance was adopted 'under and in pursuance of the authority of Chapter 321 of the Statutes of 1937, as amended by Chapter 1080 of Statutes of 1941 (hereinafter the 'State Pension Act'), to which statutes reference is made in Section 17 of said ordinance; * * *' As we explain below, the ordinance, which is set out in the margin, ¹ may have adopted only the procedural provisions of the State Pension Act, and, secondly, even if the ordinance incorporates the substantive as well as the procedural provisions of the state act, the substantive provisions as incorporated into the pension ordinance must be construed in light of the well-established rule of liberal construction of pension plans to protect the reasonable expectations of the employees. Applying this rule to the State Pension Act as incorporated into the ordinance, we conclude that the absence of any express limitation of the City's liability to the amount in the fund renders it liable for the full amount of benefits provided by the pension plan.

1. Adoption of the Ordinance Pursuant to the State Pension Act.

Three resolutions of the city council and an ordinance adopted by that council providing for submitting the pension ordinance to the electorate mention the State Pension Act. Resolution No. 3339, adopted May 4, 1943, states in its title, 'Establishing a Retirement Fund in Accordance with Chapter 321 of the Statutes of 1937 as amended by Chapter 1080 of the Statutes of 1941.' The only other reference to the state act in the resolution is as follows: 'Whereas, under and by virtue of Chapter 1080 of the Statutes of 1941, before said proposed Ordinance can be presented for passage, a vote by secret ballot must be taken by the members of each Department separate from the other for their approval or disapproval of such retirement proposal.'

Resolution No. 3341, adopted on May 10, 1943, declaring that an ordinance should be drafted to be placed on the ballot at the general municipal election to be held June 21, 1943, contains only the following reference (in addition to that made in the title) to the state act: 'Whereas, in accordance with the Statute in such case made and provided, the proposed Ordinance was submitted to the Eureka Paid Fire Department for a vote thereon and to the Eureka Paid Police Department for their vote thereon, by Resolution No. 3339, * * *'

Ordinance No. 2256, adopted on May 18, 1943, provides for a general municipal election submitting to the electorate in ordinance establishing a contributory retirement system for members of the police and fire departments. The only reference to the state act in this ordinance is as follows: 'That the General Laws of the State of California, Chapter 321 of the Statutes of 1937, as amended by Chapter 1080 of the Statutes of 1941, provides that Ordinances may be passed by Incorporated Cities, either by the Council by a two-thirds majority vote or by a majority vote of the Electorate of the City, for the establishment of a Retirement and Pension System * * *. That in accordance with such General Laws, an Ordinance was proposed to carry into effect the provisions thereof for the Eureka Paid Fire Department and Eureka Paid Police Department. That after said Ordinance had been proposed, Resolution No. 3339 was duly passed * * * the proposed Ordinance * * * establishing a Retirement Fund for the members of the Eureka Paid Fire Department and the members of the Eureka Paid Police Department in accordance with Chapter 321 of the Statutes of 1937, as amended by Chapter 1080 of the Statutes of 1941.' (§ 3.)

Finally, Resolution No. 3348, which declares the pension ordinance to be the law of Eureka, does not mention the State Pension Act. ² The ordinance 'Establishing a Contributory Retirement System for Members of the Fire Department and Police Department of the City of Eureka' does not mention the State Pension Act in its title or in any of its substantive provisions, many of which differ from the state act. ³ The ordinance mentions the state act only in section 17, which governs the extension of the pension plan to other municipal employees. (See fn. 1, supra.)

The only section of the ordinance mentioning the state act thus merely adopts the procedure established by the act for the inclusion of municipal employees into a contributory pension and retirement plan. (See § 2 of the State Pension Act, supra, fn. 3.) Resolution No. 3339, declaring the proposed pension ordinance, follows the notice requirement of section 2 of the act. (See fn. 3, supra.) And Resolution No. 3341, which declares that a pension ordinance should be drafted and placed on the ballot, and Ordinance No. 2256, which provides for the election, follow the requirement in section 1 of the act that the pension system be adopted by a majority vote of the electorate. (See fn. 3, supra.)

The substantive provisions of the pension ordinance, on the other hand, vary from those of the state act. Section 7 of the ordinance gives to the surviving widow, children, or other heirs of a member of the fire or police department who died from a cause unconnected with his employment, a right to part of the contributions of the decedent plus interest. The State Pension Act contains no corresponding provision.

Section 10 of the ordinance requires the City to contribute a sum 'not less than' that contributed by the employees, while section 3, subdivision (c), of the state act provides that the City's mandatory contribution to the fund 'shall not exceed' that contributed by the employees. And more importantly, section 11 of the ordinance, which has no corresponding provision in the state act, provides that in case of insufficient pension funds, employee contributions can be increased and/or pension payments pro rata decreased only by majority vote of the employees. The state act, on the other hand, is completely silent on the effects of insufficient pension funds.

Finally, section 19 of the ordinance, which has no corresponding section in the state act, vests a 'property interest' in each person entitled to the benefits of the ordinance, 'for the purposes of withdrawal, * * * an estate to his dependents and heirs in a sum equivalent to the amount he shall have contributed, * * * and For disability and retirement payments to the full extent of the provisions herein.' (Italics added.)

Reading section 3 of the ordinance, which provides that those entitled to retirement pensions 'shall' receive a pension equal to one-half of the salary attached to the rank held for one year preceding retirement, together with section 10, 11, and 19, one can conclude only that a person entitled to retirement or disability benefits under the ordinance, as well as any beneficiary of the employee, is entitled to the amount specified in the ordinance regardless of the amount in the fund. Therefore, either the city owes a continuing obligation to contribute to the fund those amounts adequate to fulfill current and future claims under the ordinance, or the city bears a general liability under the ordinance unlimited by its statutory obligation to make contributions to the pension fund. Of course, either alternative equally protects the member of the pension plan (and his potential beneficiaries), and both are in line with 'the well-recognized rule that all pension laws are liberally construed to carry out their beneficent policy.' (England v. City of Long Beach (1945) 27 Cal.2d 343, 346--347, 163 P.2d 865, 867; Wendland v. City of Alameda (1956) 46 Cal.2d 786, 791, 298 P.2d 863; Dillard v. City of Los Angeles (1942) 20 Cal.2d 599, 602, 127 P.2d 917, 128 P.2d 537; Klench v. Board of Pension Fd. Commrs. (1926) 79 Cal.App. 171, 187, 249 P. 46.)

Charter cities which possess complete power over municipal affairs may adopt part of a general law in an ordinance governing a municipal affair without thereby being bound by all the provisions of that general law. (City of Redondo Beach v. Taxpayers, Property Owners, etc., City of Redondo Beach (1960) 54 Cal.2d 126, 137, 5 Cal.Rptr....