Bonelli v. State of California

• Decision Date: 30 June 1977
• Citation: 139 Cal.Rptr. 486,71 Cal.App.3d 459
• Court: California Court of Appeals Court of Appeals
• Parties: Mary P. BONELLI, Plaintiff and Respondent, v. STATE of California, and Houston Flournoy, Controller of the State of California, et al., Defendants and Appellants. The PEOPLE of the State of California on the relation of Alan CRANSTON, Controller of the State of California, Plaintiff and Appellant, v. William G. BONELLI, Defendant and Respondent. Benjamin P. BONELLI, as Executor of the will of William G. Bonelli, Deceased, Cross-Complainant and Respondent, v. The STATE of California and Houston Flournoy et al., Cross-Defendants and Appellants. Civ. 14089, 14378.

Page 486

139 Cal.Rptr. 486

71 Cal.App.3d 459

Mary P. BONELLI, Plaintiff and Respondent, v. STATE of California, and Houston Flournoy, Controller of the State of California, et al., Defendants and Appellants.

The PEOPLE of the State of California on the relation of Alan CRANSTON, Controller of the State of California, Plaintiff and Appellant, v. William G. BONELLI, Defendant and Respondent.

Benjamin P. BONELLI, as Executor of the will of William G. Bonelli, Deceased, Cross-Complainant and Respondent, v. The STATE of California and Houston Flournoy et al., Cross-Defendants and Appellants.

Civ. 14089, 14378.

Court of Appeal, Third District, California.

June 30, 1977.

As Modified on Denial of Rehearing July 27, 1977.

Hearing Denied Oct. 13, 1977.

Robert E. Hannon, Castro Valley, for plaintiff and respondent in No. 14089 and for defendant and respondent and cross-complainant and respondent in No. 14378.

Evelle J. Younger, Atty. Gen., Elizabeth Palmer, Asst. Atty. Gen., and William J. Power, Deputy Atty. Gen., for defendants and appellants in No. 14089.

Evelle J. Younger, Atty. Gen., Elizabeth Palmer, Asst. Atty. Gen., and Edmund E. White, Deputy Atty. Gen., for plaintiff and appellant and cross-defendants and appellants in No. 14378.

JANES, Associate Justice.

In these consolidated appeals we review trial court determinations of the parties' conflicting claims to the following monies, all of which have been intercepted and withheld by the State Controller: (1) pension benefits due William G. Bonelli (now deceased) and Mary P. Bonelli, his widow; (2) a $15,000 security deposit posted by the Bonellis with the Franchise Tax Board pending resolution of their tax liability for the years 1952 and 1953; and (3) the sum of $4,591 found due the Bonellis as an income tax refund upon resolution of their 1952 and 1953 tax liability. The state and its controller (hereinafter 'controller') appeal from judgments which favor the Bonellis on all issues.

In 3 Civil 14089 the appeal is from a judgment declaring that alleged bribe money received by Bonelli may not be set off against the widow's pension benefits to which Mrs. Bonelli is entitled; in 3 Civil 14378 the appeal is from a judgment on the pleadings which denied the People request for an accounting from Bonelli of $250,000 assertedly received from liquor licensees as bribes while he was a member of the Board of Equalization and from judgment on a cross-complaint which ordered the controller to pay to the estate of William G. Bonelli (1) pension benefits due him and accrued prior to his death, (2) the $15,000 security deposit, and (3) the $4,591 state income tax refund. The judgment further provided for interest at the legal rate of seven percent. ¹

FACTS

The following relevant facts are undisputed.

The Pension Benefits

Bonelli was elected to the Assembly in November of 1930 and served until 1933. In 1935 he became Director of the Department of Professional and Vocational Standards and served until April of 1938. On April 3, 1938, he was appointed to the State Board of Equalization and was elected to successive four-year terms until defeated for reelection in 1954.

In 1954 Bonelli was indicted by the San Diego County Grand Jury for conspiring to commit the crime of soliciting and receiving contributions, in return for favorable treatment, from applicants and persons licensed by the Board of Equalization to sell alcoholic beverages. From 1955, and until his death, Bonelli was a fugitive from justice living in Mexico. (See Bonelli v. Flournoy (1967) 250 Cal.App.2d 495, 497, 58 Cal.Rptr. 535.)

During the foregoing terms of office, Bonelli was a member of the Legislators' Retirement System. On December 15, 1958, having attained the age of 63 years, he filed a written application for his retirement benefits. On January 8, 1959, the Board of Administration of the State Employees' Retirement System granted Bonelli his retirement and advised him that his first warrant would be mailed to him early in February 1959.

On March 3, 1959, the controller made a demand upon Bonelli that he account for monies improperly received from liquor licensees and advised him that his pension payments were being intercepted and impounded by the controller in a special 'William G. Bonelli' deposit fund in the state treasury until there was a balancing of accounts, the controller taking the position that these monies were owed to the state. Bonelli disregarded the controller's demand and no pension payments were ever received by him. The impoundment continued until Bonelli's death on November 21, 1970. ²

In making application for retirement, Bonelli had elected to receive his allowance under Option No. 3 of the Legislators' Retirement System, naming his wife as the beneficiary to whom the payments were to be made after his death. On January 4, 1971, she as his widow filed a claim for retirement benefits. On August 17, 1971, the administrator of the retirement system approved the claim. Beginning September 1, 1971, the retirement system commenced drawing monthly warrants for payment to her and has done so on a monthly basis since that date. However, each month the warrants have been intercepted by the controller and deposited by him in the 'Mary P. Bonelli Special Deposit Fund' in the state treasury. His purpose was to offset an indebtedness in the sum of $59,300 assertedly owed to the state by Bonelli.

The Security Deposit and Tax Refund

On February 27, 1959, the Franchise Tax Board notified the Bonellis that deficiencies for 1952 and 1953 had been found upon examination of their income tax returns. The Bonellis were notified that they could 'stay collection and prevent the assessment from becoming final' by filing a petition for reassessment accompanied by security. Pursuant to that advice, the Bonellis, on March 9, 1959, filed with the Board a petition for reassessment and a cashier's check in the sum of $15,000 payable to the Board. On June 8, 1966, the Bonellis were notified that their tax liability had been reconsidered and the deficiency assessment withdrawn. They immediately demanded the return of their $15,000 and the $4,591 state income tax refund due them for the years in question, together with interest on the refund.

Prior to notice to the Bonellis of the results of the tax audit, the controller, on May 26, 1966, advised them that he had intercepted and impounded both the $15,000 deposit and the $4,591 tax refund and was holding said funds in trust for them pending an accounting between Bonelli and the state.

DISCUSSION

The controller's principal contention is that Government Code section 12419.5 ³ allows him to offset from the amount intercepted and held by him a sum equal to the amount of the bribes. The contention assumes that monies received as bribes are the property of the state, and therefore are sums 'due a state agency from a person . . . (which may be offset) against any amount owing such person . . . by any state agency.' (§ 12419.5.)

For the purpose of this decision, we indulge the same assumption, since--as to the pension benefits--the offset issue will be controlled by our resolution of the conflict between sections 12419.5 and 9359.3, and--as to the security deposit and tax refund--the offset statute is inapplicable because those funds have always been (and the controller so concedes) the property of the Bonellis. The latter funds, held in trust for them by the state, simply fail to qualify under the offset provision as 'any amount Owing . . . by any state agency.' (Emphasis added.) ⁴

The Pension Benefits

Section 9359.3 provides as follows: 'The right of a person to any benefit or other right under this chapter and the money in the Legislators' Retirement Fund are not subject to execution, garnishment, attachment, or any other process whatsoever,' and forbids insofar as here relevant, any assignment of such money.

'It is well settled that retirement benefit rights--including pensions whether for age and service, disability or death--are vested (citations).' (Dickey v. Retirement Board (1976) 16 Cal.3d 745, 748, 129 Cal.Rptr. 289, 291, 548 P.2d 689, 691.) The strong public policy opposing interference with such vested pension rights, even in the face of official wrongdoing, was reaffirmed by the California Supreme Court in Willens v. Commission on Judicial Qualifications (1973) 10 Cal.3d 451, 110 Cal.Rptr. 713, 516 P.2d 1. In Willens, disabled judge who was removed from office for official misconduct involving bribery and criminal conspiracy was held entitled to receive disability retirement benefits. The court stated:

'Since pension rights of this nature may be considered 'vested' rights (Pearson v County of Los Angeles, 49 Cal.2d 523, 543, 319 P.2d 624, 637; Allen v. City of Long Beach, 45 Cal.2d 128, 131, 287 P.2d 765; Wallace v. City of Fresno, supra, 42 Cal.2d 180, 183, 265 P.2d 884), the following rule would appear to govern: 'In the absence of a valid . . . provision enacted prior to eligibility for retirement which provides for forfeiture, once a person who has undertaken public employment . . . becomes eligible for retirement, his right to a pension cannot be destroyed merely because he is subsequently removed from office for his own misconduct. (Citation.) It is statutory law that 'No conviction of any person for a crime works any forfeiture of any property, except in cases in which a forfeiture is expressly imposed by law . . ..' (Pen.Code, § 2604.)' (Pearson v. County of Los Angeles, supra, 49 Cal.2d at p. 543, 319 P.2d (624) at p. 637.)' (10 Cal.3d at pp. 458--459, 110 Cal.Rptr. at p. 717, 516 P.2d at p. 5.)

In an opinion dealing with the Legislators' Retirement Law, the Attorney General, citing Willens, and after an analysis of Pearson and its antecedents, concluded that the perjury conviction of a former Lieutenant Governor 'would have no effect upon the Lieutenant Governor's retirement benefits' (57 Ops.Cal.Atty.Gen. 374, 375,...