City of Costa Mesa v. McKenzie

• Decision Date: 22 February 1973
• Citation: 30 Cal.App.3d 763,106 Cal.Rptr. 569
• Court: California Court of Appeals Court of Appeals
• Parties: The CITY OF COSTA MESA, etc., Plaintiff and Appellant, v. Arthur R. McKENZIE, Defendant and Respondent. Civ. 12096.

Page 569

106 Cal.Rptr. 569

30 Cal.App.3d 763

The CITY OF COSTA MESA, etc., Plaintiff and Appellant, v. Arthur R. McKENZIE, Defendant and Respondent.

Civ. 12096.

Court of Appeal, Fourth District, Division 2, California.

Feb. 22, 1973.

[30 Cal.App.3d 765] Roy E. June, City Atty., and Ellis J. Horvitz, Los Angeles, for plaintiff and appellant.

Barnes, Schag, Johnson & Kennedy, and William S. Hunter, Newport Beach, for defendant and respondent.

OPINION

TAMURA, Associate Justice.

This is an action for declaratory relief by the City of Costa Mesa against defendant McKenzie, a retired city employee, for a judicial declaration respecting the city's obligation to pay a disability retirement allowance under City Ordinance No. 64--45. The case was tried on an agreed statement of facts and resulted in a judgment decreeing that McKenzie is entitled to monthly disability benefits under the ordinance in the amount of $1,109 in addition to $664.51 per month under the city's retirement plan and $227.50 per month in workmen's compensation benefits for a total sum of $2,001.01 per month. The city appeals from the judgment.

The facts are as follows:

Nine years after its incorporation in 1953 as a general law city, Costa Mesa through its city council created an actuarially sound retirement plan for city employees pursuant to Government Code sections 45341--45345. ¹ As adopted, the plan only provided for retirement benefits based upon length of service and a specified retirement age. It covered only those employees who volunteered to contribute 7 percent to 10 percent of their monthly wages. Under the plan the monthly benefit was, and remains 1 1/2 percent of the final average salary ² for each year of service prior to the adoption of the plan and 2 percent for each year of service thereafter.

A year later the plan was amended by the addition of a provision for retirement for disability whether work related or otherwise. Monthly benefits under the disability retirement provision were the same as for service retirement except that the salary in effect on the date of disability is used in computing benefits instead of the final average salary. Participation in this portion of the plan was only available to present members of the plan and to future members after five years membership. Only about 100 of the city's 300 employees were covered by the disability provision.

Sometime prior to September 1964 a Newport Beach police officer was killed in the course of his employment and much publicity was given to the financial plight of his widow and children who suffered because of an alleged lack of adequate benefits. Numerous City of Costa Mesa employees informed the defendant, who at the time was City Director of Public Safety, of their concern about the adequacy of benefits payable in the event of death or disability incurred in the course of employment and expressed their belief that disability benefits in such circumstances should be as close as possible to the current take home pay of the employee at the date of disability or retirement. Defendant recommended to the city manager that Costa Mesa adopt a disability plan to bring about the payment of such benefits to its employees.

Thereafter the city council enacted Ordinance No. 64--45 which provides in relevant part: 'On and after September 21, 1964, in all cases where sickness, injury or death is incurred in the performance of duty, full time employees shall be entitled to the following benefits beyond the periods provided for in Sections 2730 through 2735 (of the Municipal Code of Costa Mesa) hereof: ( ) (a) Injury on Duty--Disability. A monthly allowance will be paid if a disability is determined by the Injury on Duty Accident Committee and the City Physician to be incurred in the performance of duty. The allowance shall be fifty per cent (50%) of the employee's final compensation (based on current monthly salary). This allowance shall continue during the lifetime of the employee, or until it has been determined by the Injury on Duty Accident Committee and the City Physician that the employee is physically able to return to duty. ( ) (b) Injury on Duty--Death. A monthly allowance will be paid to the widow, or if there is no widow, to the employee's children under the age of 18. Such sum shall be paid until the youngest surviving child reaches 18 years of age. If death is determined by the Injury on Duty Accident Committee and the City Physician to have arisen out of an injury or disability incurred in the performance of duty, the allowance shall be fifty per cent (50%) of the employee's final compensation (based on his current monthly salary), and is payable to his widow until death or remarriage. In the event of death or remarriage of the widow, the allowance will be paid to the surviving children. ( ) Section 2. This Ordinance is hereby declared to be an urgency ordinance immediately necessary for the preservation of the public welfare and shall become effective upon its adoption. The facts constituting the urgency are as follows: More than two hundred employees of the City are without protection in the event of injury or death in the performance of duty.'

Two years after enactment of the ordinance, the defendant (who by now was city manager) upon being informed that the city's potential liability under the ordinance was unfunded, commissioned an actuarial study to recommend a method of adequate funding. The result of the study was a recommendation that the injury section of the ordinance be funded by longterm disability insurance coverage. Pursuant to the recommendation, the city authorized Prudential Insurance Company to prepare a master contract for insurance coverage of the disability section of the ordinance, and in November 1967 the policy was issued. By its terms the policy provides that a scheduled benefit of 65 percent of the employee's monthly earnings up to a maximum of $1,000 will be paid monthly for life in the case of disability and to age 65 for sickness, ³ and that Prudential may take certain offsetting credits against any payment under the policy for other benefits paid by the city to the employee by reason of his disability. On the basis of salary levels and the fact that only one-third of its 300 employees participated in the retirement plan, the city calculated that at the time of initial funding defendant was the only city employee who could have a disability claim under Ordinance No. 64--45 for an amount larger than the maximum benefit of $1,000 payable under the policy. ⁴ The city determined to self-insure its liability under the death benefits section of Ordinance No. 64--45, allocating a sufficient amount of its own money to provide adequate funding.

On March 1, 1970, after 17 years of employment with the city, the defendant suffered a stroke, and was advised by his doctor not to return to work. The city determined that he was totally disabled and that the disability was incurred in the line of duty.

Defendant contended that he was entitled to (1) $664.51 per month under the retirement plan, (2) $1,109 per month under Ordinance No. 64--45, and (3) $227.50 per month under workmen's compensation for a total of $2,001.01 per month. The city contended that defendant is entitled to total benefits of not more than $1,000 per month allocated as follows: Monthly benefits of $664.51 under the retirement plan, $227.50 per month in workmen's compensation benefits, and $107.99 under Prudential's policy. The $107.99 is computed by subtracting from Prudential's maximum liability of $1,000 the $664.51 payable under the retirement plan and the $227.50 workmen's compensation benefits.

There exists a retirement trust fund accumulated by contributions under the retirement plan sufficient to pay all claims of the defendant. However, it was stipulated that based upon actuarial assumptions underlying the plan, payment out of the fund of benefits not provided for in the plan, such as benefits under the ordinance would impair the adequacy of the fund to finance benefits under the plan.

The trial court decreed that the city was obligated to pay retirement and disability benefits in the sum of $1,773.51 per month ($664.51 under the retirement plan and $1,109 under Ordinance No. 64--45) without any offset for workmen's compensation benefits, resulting in total benefits of $2,001.01 per month.

On appeal the city contends that Ordinance No. 64--45 was not intended to provide for disability benefits In addition to benefits under the retirement plan and workmen's compensation benefits but to assure minimum long term disability benefits equal to 50 percent of the employee's compensation during his disability. It is urged that the interpretation placed upon Ordinance No. 64--45 by the court as reflected by the decree would render the retirement plan actuarially unsound and violative of Government Code sections 45342 and 45343. It is further urged that the construction placed upon the ordinance by the trial court could result in an employee recovering greater benefits for disability retirement than the compensation he would have received had he kept working.

I

] Fundamentally, our objective in this case is to ascertain the intention of the city council in enacting Ordinance No. 64--45, a task made difficult by the patchwork character of the city's retirement scheme. We are guided in our efforts, however, by several basic rules of statutory interpretation. First, '(t)he fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law.' (Select Base Materials, Inc. v. Board of Equal., 51 Cal.2d 640, 645, 335 P.2d 672, 675; People v. Superior Court, 70 Cal.2d 123, 132, 74 Cal.Rptr. 294, 449 P.2d 230.) Secondly, "(s)tatutes must be given a reasonable and common sense construction in accordance with the apparent purpose and intention of the lawmakers--one that is practical...