Krolikowski v. San Diego City Employees' Ret. Sys.

Decision Date23 May 2018
Docket NumberD071119
Citation234 Cal.Rptr.3d 499,24 Cal.App.5th 537
CourtCalifornia Court of Appeals Court of Appeals
Parties Vincent KROLIKOWSKI, Plaintiff and Appellant, v. SAN DIEGO CITY EMPLOYEES' RETIREMENT SYSTEM, Defendant and Respondent. Connie Van Putten, Plaintiff and Appellant, v. San Diego City Employees' Retirement System, Defendant and Respondent.

Law Office of Michael A. Conger and Michael Conger for Plaintiffs and Appellants.

Noonan Lance Boyer & Banach, David J. Noonan and Genevieve M. Ruch ; The Law Office of Steven W. Sanchez and Steven W. Sanchez for Defendant and Respondent.

IRION, J.

Appellants Vincent Krolikowski and Connie Van Putten (collectively appellants) are former employees of the City of San Diego (the City) and members of the San Diego City Employees' Retirement System (SDCERS) who receive monthly pension payments from SDCERS, the administrator of the City's pension plan. Krolikowski and Van Putten separately filed lawsuits against SDCERS after SDCERS discovered an error in calculating their monthly pension benefits and took action to recoup the past overpayments. In their now-consolidated lawsuits, Krolikowski and Van Putten assert causes of action for conversion, breach of fiduciary duty, writ of mandate ( Code Civ. Proc., § 1085 ) and declaratory relief, all of which challenge SDCERS's ability to implement a recoupment procedure to collect the overpayments from Krolikowski and Van Putten. After a bench trial, the trial court entered judgment in favor of SDCERS.

Krolikowski and Van Putten contend that the trial court erred in (1) sustaining SDCERS's demurrer to the conversion and breach of fiduciary duty causes of action; and (2) finding in favor of SDCERS after conducting a bench trial on the remaining causes of action for writ of mandate and declaratory relief. As we will explain, we conclude that appellants' arguments are without merit, and we accordingly affirm the judgment.

I.FACTUAL AND PROCEDURAL BACKGROUND

Van Putten worked for the City's police department from 1965 to 1988, having reached the rank of police lieutenant. Van Putten then worked for the Union City police department, and deferred her retirement from the City until she retired from the Union City police department in December 2000, at which time she began receiving monthly pension payments from SDCERS.1

Krolikowski worked for the City's police department from 1972 to 1990, having reached the rank of detective. Krolikowski then worked for the County of San Diego as an investigator for the District Attorney's office, and deferred his retirement from the City until he retired from the County of San Diego in 2006, at which time he began receiving monthly pension payments from SDCERS.

As Krolikowski and Van Putten testified, before they retired they both consulted with SDCERS about the amount of the pension benefit they would receive from their employment with the City, and they used that information in deciding when to retire.

In 2013, SDCERS performed an audit of the pension benefits that it was paying to Krolikowski and Van Putten, and it discovered that it made an error in calculating the monthly payments that Krolikowski and Van Putten had been receiving since they retired. With respect to both Van Putten and Krolikowski, SDCERS had used the wrong retirement factor, in that it did not use the retirement factor that corresponded with the date that Van Putten and Krolikowski left their employment with the City. As to Van Putten, SDCERS also discovered that it had used the wrong annuity factor.

SDCERS determined that, without accrued interest, the overpayments were $18,739.88 for Krolikowski and $17,049.48 for Van Putten.2 If SDCERS had correctly calculated the pension benefits when Krolikowski and Van Putten retired, Van Putten would have received approximately $295 per month less at the time she started to collect her pension in 2001, and Krolikowski would have received $191.74 less per month at the time he started to collect his pension in 2006.

In 2013, after discovering the errors, SDCERS contacted Van Putten and Krolikowski to explain that they would be required to pay back the overpayments.3 SDCERS also explained that, going forward, Van Putten's and Krolikowski's monthly pension benefit would be reduced to reflect the correct calculation of benefits. SDCERS gave Van Putten and Krolikowski the option of making the repayment of the past overpayments by either (1) having a specific amount deducted from their monthly pension payments over time, while incurring interest on the unpaid balance; or (2) making a lump sum payment to SDCERS, which would stop the accrual of interest on the amount owed. SDCERS also explained to Van Putten and Krolikowski that they had the right to file an administrative appeal to dispute the fact that an overpayment occurred or the amount of the overpayment.

Krolikowski and Van Putten both pursued unsuccessful administrative appeals of SDCERS's decision to recoup the overpayments from them. An administrative appeal of SDCERS's decision to recoup overpayments consists of several steps: (1) the filing of a written appeal with SDCERS's member services director; (2) a review by SDCERS's Chief Executive Officer (CEO); (3) an appearance before SDCERS's Business and Governance Committee at a regularly scheduled meeting; and (4) a final decision by SDCERS's Board based on a recommendation of the Business and Governance Committee.4 As the final step of the appeal process, SDCERS's Board of Administration denied Krolikowski's appeal on November 14, 2014, and denied Van Putten's appeal on May 8, 2015.

After the appeal process was over, to stop the accrual of further interest Van Putten made a lump sum payment to SDCERS in May 2015, under protest, in the amount of $21,512.54. In March 2015, SDCERS began making monthly deductions from Krolikowski's monthly pension payment in the amount of $269.25 to recoup the overpayment.

On February 24, 2015, Krolikowski filed a complaint against SDCERS challenging its recoupment of the overpayments of his pension benefits, and on June 22, 2015, he filed a first amended complaint. The first amended complaint contained causes of action for (1) declaratory relief; (2) writ of mandate ( Code Civ. Proc., § 1085 ); (3) breach of fiduciary duty, based on both common law and "constitutional" grounds ( Cal. Const. art. XVI, § 17 ); and (4) conversion. The writ of mandate and declaratory relief causes of action both presented the issue of whether "SDCERS is subject to, at most, a three-year statute of limitations and therefore may not collect any arrears overpayments;" and whether "SDCERS is subject to California law exempting pensions from levy or attachment (e.g., Code Civ. Proc., §§ 695.040, 704.11, sub[d.] (b) ) and therefore may not simply take money from Krolikowski's pension." The breach of fiduciary duty cause of action was based on SDCERS's alleged wrongful "refusal to follow California law regarding the statute of limitations and exempting pensions from levy or attachment." The conversion cause of action was based on the allegation that SDCERS "intentionally and substantially interfered with Krolikowski's property by taking possession of funds that should have been paid to Krolikowski, by preventing Krolikowski from having access to these funds, and by refusing to return these funds to Krolikowski after he demanded the return of these funds."

On June 23, 2015, Van Putten filed a complaint against SDCERS that contained the same causes of action as Krolikowski's first amended complaint and asserted the same legal theories, using largely identical language.5 Both cases were assigned to the same trial court department.

SDCERS filed a demurrer to each of the causes of action in Krolikowski's first amended complaint. The trial court overruled the demurrer to the declaratory relief and writ of mandate causes of action. However, it sustained the demurrer to the breach of fiduciary duty and conversion causes of action. In explaining its ruling sustaining the demurrer to those causes of action, the trial court stated that "SDCERS had an obligation to comply with the law and correct errors in benefit payments.... The exercise of attempting to correct an error in benefit payments cannot subject defendant to tort liability." SDCERS also had demurred to the breach of fiduciary duty and conversion causes of action on the ground that SDCERS was protected by immunity for tort liability for its employees' discretionary acts. However, the trial court did not rule on that ground for the demurrer.

Because of the similarity of the Krolikowski and Van Putten complaints, the parties stipulated that the trial court's ruling on the demurrer to Krolikowski's complaint "shall be applicable to" Van Putten's case, and the parties reserved all rights to appeal in Van Putten's case as if the trial court had made the demurrer ruling in that case as well.

The trial court later granted a motion to consolidate the Krolikowski and Van Putten cases, and it then considered cross-motions for summary judgment that were filed in the consolidated actions.

At issue in the summary judgment motions were the remaining causes of action for writ of mandate and declaratory relief, both of which raised the issue of (1) whether SDCERS was subject, at most, to a three-year statute of limitations to collect any overpayments; and (2) whether SDCERS's actions to recoup the overpayments were prohibited because they constituted an illegal levy or attachment. Krolikowski and Van Putten further argued in their summary judgment motions that SDCERS was barred by the doctrines of equitable estoppel and laches from recovering the overpayments. SDCERS pointed out in opposition that the doctrines of equitable estoppel and laches were not pled in the operative complaints. However, in ruling on the summary judgment motions, the trial court concluded that Krolikowski and Van Putten would be permitted to pursue those issues as part of its...

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