Filed 1/22/14 Meyers v. Retirement Fund of Federated City Employees CA6 NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SIXTH APPELLATE DISTRICT
WILLIAM MEYERS, Plaintiff and Appellant,

v.
THE RETIREMENT FUND OF THE FED. CITY EMPLOYEES, Defendant and Respondent. H037933 (Santa Clara County Super. Ct . No. 1-11-PR169420)

Plaintiff William Meyers, a former City of San Jose empl oyee, petitioned under Probate Code sections 15642 and 17200 1 for an order removing certain trustees of defendant The Retiremen t Fund of the Federated City Em ployees (Retirement Fund), the retirement system for the City of San Jose. The superior court dismissed the petition on the grounds the Retirement Fund is expressl y excluded from the definition of a “trust” under section 82, and t hus a petition to remove trustees under the Probate Code may not be maintained against it. On appeal, Meyers argues the judgment mu st be reversed, despite the exclusionary language of section 82, because: (1) the California Constitution mandates that “[t]he assets of a public pension or retirement syst em are trust funds” (C al. Const., art. XVI, § 17, subd. (a) (section 17)); and (2) secti on 15003, subdivision (c) (section 15003(c)) specifically allows for the application of trust law to public pension funds.

1 Further unspecified statutory refe rences are to the Probate Code.2 We disagree and shall affirm the judgment. I. F ACTUAL AND P ROCEDURAL B ACKGROUND 2

A

. Verified petition to remove trustees In August 2011, Meyers filed his verifi ed petition to remove trustees (Sup. Ct. Santa Clara County, 2011, No. 1-11-PR-169420). In that petition, Meyers alleged he began working for the City of San Jose as an associate constructi on inspector in 2001, remaining in that position for approximately four years. In February 2003, he was injured in the course and scope of his employme nt and underwent cervical fusion surgery. In September 2009 and April 2010, Meyers applied to the Retirement Fund for service-connected disability retirement bene fits, submitting the opinions of “at least eighteen (18) different medical professionals , all of whom were in agreement” that Meyers was disabled as a consequence of the injury he suffered in 2003. The physician paid by the City of San Jose to evaluate disability claims , however, did not agree and the Retirement Fund denied Meyers’ applications. 3 In his petition, Meyers claimed the Retirem ent Fund trustees have breached their fiduciary duties to him and ot her beneficiaries “by unreasona bly delaying the beneficiary claim process, by refusing to consider re levant medical evidence, by withholding information from beneficiaries, and by esse ntially ‘rubber-stamping’ the opinion of the City [of San Jose] physician and disregarding all other competent evidence regarding the service-connected disabilities of beneficiaries. ” Meyers alleged the trustees are refusing

2 For the purposes of this appeal, we de rive the facts from the allegations of Meyers’ verified petition to remove trustees (Sup. Ct. Santa Clar a County, 2011, No. 1- 11-PR-169420) and other documents contained in the record. 3 The record on appeal in this case in cludes a copy of Meyers’ July 15, 2010 petition for writ of administrative mandate (Sup. Ct. Santa Clara County, 2011, No. 1-10- CV-177077; hereafter, Case No. 177077) s eeking to overturn th e Retirement Fund’s decision denying his application for disability retiremen t. According to Meyers, the petition in Case No. 177077 is the subject of a separate appeal (H03 8351) pending before this court.3 to disburse benefits to disabled City of Sa n Jose employees “because the City’s current budget crisis has made it po litically unpopular to award disa bility pensions.” Meyers further alleged, on informati on and belief, that in 2000, th e Retirement Fund trustees approved six out of seven disa bility retirement applications, but in 2010 and 2011, only two out of 14 applicants were approved for disa bility retirement. In his prayer for relief, Meyers sough t: (1) an order removing certain named Retirement Fund trustees, specifically Matt Lo esch, Edward F. Overton, Arn Andrews, Michael Armstrong, Lara Druyan, Stuart Odell and Martin Dirks; (2) an order appointing a receiver or temporary trustee to administer the trust until new trustees are appointed; and (3) attorney fees and costs.
B

. Ex parte application and opposition In November 2011, in connection with the petition to remove trustees, Meyers brought an ex parte application for an orde r requiring the Retirem ent Fund to provide notice of hearing to all the beneficiaries. In that application, Meyers stated he is not aware of the names and addresses of the bene ficiaries to the Retir ement Fund, each of whom is entitled to notice of h earing on his petition to remove the trustees. Accordingly, the Retirement Fund, which has the necessary contact informa tion, should be ordered to provide the required notice. The Retirement Fund opposed the ex parte application, and in that opposition further argued Meyers’ petition should be dismissed because, am ong other reasons, the Retirement Fund is not a trust under secti on 82, subdivision (b)(13) (section 82(b)(13)), 4 thus the court lacked jurisdiction over the ma tter. The trial court set a hearing on the jurisdictional issue, and gave Meyers an opportunity to brief the matter.

4 Section 82, subdivision (b) provides in relevant part: “ ‘Trust’ excludes the following: [¶] . . . [¶] (13) Tr usts for the primary purpose of paying debts, dividends, interest, salaries, wages, profits, pensions , or employee benefits of any kind .” (Italics added.)4 At the hearing, Meyers contended section 15003(c) 5 specifically allows for the application of trust law to pens ion funds, despite the fact th at pension funds are otherwise excluded from the definition of a trust by opera tion of section 82(b)(13). The trial court found, however, that the Retirem ent Fund was not a trust “for the purposes of application of the Probate Code,” relying on the exclusio nary language of section 82, and dismissed Meyers’ petition. Meyers timely appealed. II. D ISCUSSION A

. Standard of review In this appeal, we examine the scope and application of certain statutes, specifically sections 82 and 1 5003, as well as se ction 17 of the California Constitution. Questions of statutory interpretation are subject to de novo review. ( California Teachers
Assn

. v

. San Diego Community College Dist . (1981) 28 Cal.3d 692, 69 9.) That review is guided by settled rules, all of which are designed to ascertai n the intent of the lawmakers and avoid an interpretation that woul d lead to absurd consequences. ( Cypress Semiconductor Corp

. v

. Superior Court (2008) 163 Cal.App.4th 575, 581.) We begin with the statutory language, gi ving the words their usual and ordinary meaning. ( Day v

. City of Fontana (2001) 25 Cal.4th 268, 27 2.) “If [the statutory language] is clear and unambiguous our inquiry ends. There is no need for judicial construction and a court may not indulge in it.” ( Diamond Multimedia Systems , Inc

. v

. Superior Court (1999) 19 Cal.4th 1036, 1047.) We must also “if possible, . . . give effect and significance to every word and phrase of a statute.” ( Garcia v

. McCutchen (1997) 16

5 Section 15003(c) provides: “Nothing in th is division or in Section 82 is intended to prevent the application of all or part of th e principles or procedures of this division to an entity or relationship that is excluded from the definition of ‘trust’ provided by Section 82 where these principles or procedures are applied pursuant to st atutory or common law principles, by court order or rule, or by contract.”5 Cal.4th 469, 476.) When two provisions touch upon a common subject, “we must construe them ‘in reference to each other, so as to “harmonize the tw o in such a way that no part of either becomes surplusage.” ’ ” ( Ibid ., quoting DeVita v

. County of Napa (1995) 9 Cal.4th 763, 778-779.) “We must pr esume that the Legislature intended ‘every word, phrase and provision . . . in a statute . . . to have meaning and to perform a useful function.’ ” ( Garcia v

. McCutchen , supra , at p. 476, quoting Clements v

. T

. R

. Bechtel
Co . (1954) 43 Cal.2d 227, 233.)

B

. The Retirement Fund is not subject to the trust law for purposes of petitions to remove trustees for breach of fiduciary duty
Section 82, which the trial court relied on in dismissing Meyers’ petition is found in part 2 of division 1 of the Pr obate Code, a part entitled “Definitions,” 6 and defines the word “trust” as used in the Probate Code. Pursuant to section 82, subdivision (a), the word “trust” includes: “(1) An express trust, private or charitable, with additions thereto, wherever and however created[; and] (2) A trust created or determined by a judgment or decree under which the trust is to be administ ered in the manner of an express trust.” Section 82, subdivision (b), provides in pertin ent part: “ ‘Trust’ excludes the following: [¶] . . . [¶] (13) Trusts for the primary pu rpose of paying debts, dividends, interest, salaries, wages, profits, pensions, or employee benefits of any kind.” Because the Retirement Fund is a pensio n plan, the plain la nguage of section 82(b)(13) would appear to fore close any attempt to subject it to the Probate Code. The trial court found this to be the case and duly dismissed Meyers’ petition. As he did below, Meyers asserts that , notwithstanding the express language of section 82, the trust law is applicable to p ublic pensions by opera tion of the California

6 Section 20 provides “[u]nless the provis ion or context otherwise requires, the definitions in this part [i.e., Part 2] govern the constructi on of this code.”6 Constitution (specifically secti on 17) and section 15003(c). We examine each of these provisions in turn.
1

. Section 17 Section 17 grants retirement boards of pub lic pension systems “sole and exclusive fiduciary responsibility over the assets of the public pension or retir ement system[; . . . and] sole and exclusive responsibility to ad minister the system in a manner that will assure prompt delivery of benefits and rela ted services to the participants and their beneficiaries.” (Cal. Const., art. XVI, § 17, subd. (a).) It further provides that “[t]he assets of a public pension or retirement syst em are trust funds and shall be held for the exclusive purposes of providing benefits to participants in the pension or retirement system and their beneficiaries and defraying reasonable expenses of administering the system.” ( Ibid .) Section 17 also directs how a retir ement board should employ its plenary authority. For example, a retirement board mu st exercise its duties in the interest of participants and beneficiaries, minimizi ng employer contribu tions, and defraying reasonable expenses of administ ering the system. (Cal. Const ., art. XVI, § 17, subd. (b).) Additionally, a retirement board must diversify the investments of the system so as to minimize the risk of loss and maxi mize the rate of return. ( Id ., art. XVI, § 17, subd. (d).) The legislature may prohibit certain investments by a retirement board in the public interest. ( Id ., art. XVI, § 17, subd. (g).) Meyers reads section 17’s phrase “[t]he assets of a public pension or retirement system are trust funds” as a constitutional ma ndate overriding the statutory language of section 82. We disagree. In his brief, Meyers argues there is no ne ed to examine the history of section 17, because the plain meaning of its reference to public pension assets as “trust funds” is clear. The problem with this approach is that , while the dictionary definition of the word “trust” may be clear, its meaning under the Pr obate Code is not. For example, a number7 of entities which bear the na me “trusts” are, in fact , expressly excluded from the definition of “trust” under the Probate Code. Among the “trusts” that are not “trusts” pursuant to section 82, subdivis ion (b) are: “[c]onstructive trusts . . .” (§ 82, subd. (b)(1)), “[b]usiness trusts . . .” ( id ., subd. (b)(6)), “[i]nvestment trusts . . .” ( id ., subd. (b)(7)), “[c]ommon trust funds” ( id ., subd. (b)(8)), “[v]oting trusts” ( id ., subd. (b)(9)), and “[l]iquidation trusts” ( id ., subd. (b)(12)). Consequently, simply because something is referred to as a “trust” or as a “trust fund,” ev en if that reference appears as part of the California Constitution, does not mean that entity or relationship is necessarily subject to the trust law provisions of the Probate Code. Accordingly, we turn to the history of section 17 and the reasons expressed in support of its addition to the California Cons titution. Section 17’s reference to public pension assets as “trust funds” was adde d to the California Constitution in 1984 by the passage of Proposition 21. ( Claypool v

. Wilson (1992) 4 Cal.App.4th 646, 674 ( Claypool ).) The intent of this ballot measure wa s to “give public pension assets full constitutional protection as trust funds” and “g uarantee[] that neither the Governor nor future Legislatures will ever be able to use this money for other purposes.” (Ballot Pamp., argument in favor of Prop. 21 Prim . Elec. (June 5, 1984) p. 26.) Under Proposition 21, “the only purpose for which thes e trust assets can be used is the delivery of retirement benefits.” ( Ibid ., italics omitted.) The measure’s proponents argued the constitutional amendment would “[e]nact[] the sole and ex clusive purpose rule which imposes on fund trustees the legal obligation to perform their duties so lely in the interest of plan beneficiaries.” ( Ibid ., italics omitted.) There is no mention, however, of either trust law or the Probate Code in the ballot pamphlet issued to voters in connection with Proposition 21. The bulk of section 17, in fact, provides guidance for retirement boards in administering pension funds and clarifies their fiduciary obligations to plan members and beneficiaries. When read as a whole, particularly in light of the ballot arguments made both for and against Proposition 21, the8 intent behind its characterization of public pension assets as “trusts” was not to override the exclusionary language of section 82(b)(13). Instead , the intent was to impose fiduciary obligations on retir ement boards in relation to th eir administration of pension funds, as well as protect those assets from ap propriation or diversi on by the Governor or the Legislature. Meyers’ reliance on Claypool to support his constitutional argument is unavailing.
In Claypool , members of the state’s Public Employees’ Retirement System (PERS) challenged certain statutory provisions govern ing the administration of the PERS system including a provision that assigned the retirem ent board’s actuarial duties to an outside actuary appointed by the Governor. ( Claypool , supra , 4 Cal.App.4th at pp. 652-653.) The members argued that such an assignment would violate section 17 “which declares that PERS assets are trust assets.” ( Claypool , supra , at p. 661.) According to the members, the terms of section 17 “constitutio nalize[d] the law of trusts,” and the Legislature’s attempt to assign the board’s actuarial functions to an outside actuary presents a conflict of interest that would preclude the actuar y from acting as a fiduciary to the beneficiaries of PERS. ( Claypool , supra , at p. 675.) The Claypool court, after first adopting the members’ assumption about the application of trust law, rejected their conflict of interest argument, finding there we re sufficient safeguards to ensure that an actuary was not inappropriately influenced or controlled by the Governor and could exercise fiduciary duties. ( Id ., at pp. 677-678.) As noted above, the Claypool court assumed, as urged by the petitioners in that case, that “[S]ection 17[] imports the existing law of trusts,” but undertook no analysis to support that assumption. ( Claypool , supra , 4 Cal.App.4th at p. 676.) It did not discuss section 82’s exclusion of pens ions from the definition of “t rust” under the Probate Code let alone attempt to reconcile any conflict betw een that statute and section 17. It simply applied principles of trust law to reject the members’ claim that the transfer of actuarial duties from PERS itself to an actuary appointed by the Governor created a categorical9 conflict of interest. Acco rdingly, we do not find Claypool instructive nor are we bound by the dicta contained therein.
2

. Section 15003 We now examine section 15003 to determine if, as Meyers contends, that statute operates to overcome the exclusionary la nguage of section 82. Section 15003(c) provides, in pertinent part: “Nothing in this division or in Section 82 is intended to prevent the application of all or part of the prin ciples or procedures of this division to an entity or relationship that is excluded from the definition of ‘trust’ pr ovided by Section 82 where these principles or procedures are applied pursuant to statutory or common law principles, by court order or rule, or by contract.” According to Meyers, the plain langua ge of section 15003 allows for the application of trust law to th ings that would otherwise be excluded from the definition of “trust” by section 82. In its brief, Retirement Fund makes a conv oluted, and rather confusing, argument regarding the interpretation of section 15003. From what we can glean, Retirement Fund contends the language of section 15003 m eans “Trust Law may be applied to entities listed in Section 82[, subdivision] (b) only wh en a Section 82[, subdiv ision] (b) entity has some kind of bearing or relati onship to a true ‘trust’ define d by Section 82[, subdivision] (a),” citing Estate of Mullins (1988) 206 Cal.App.3d 924 ( Mullins ). We fail to see how Mullins supports that proposition.
In Mullins , the petitioner, who was the niece of the decedent’s predeceased husband, requested that the probate court im pose a constructive trust on the assets of a trust that was created by the decedent. ( Mullins , supra , 206 Cal.App.3d at pp. 925-926.) Though she was not named as a beneficiary to the decedent’s trust, the niece argued she was entitled to a share of the trust’s assets under the decedent’s prior oral agreement. ( Id ., at p. 925.) The Mullins court held that the probate cour t lacked jurisd iction over the niece’s lawsuit because the niece was not a bene ficiary of the express trust created by the10 decedent. ( Id ., at p. 931.) Probate jurisdiction was also lacking because the niece’s claim was not a challenge to either the will or the trust created by the decedent, but was instead a contractual claim unrelated to those instruments. ( Ibid .) The court noted that under section 82, subdivision (b)(1), a constructive trust is not a “t rust” under the trust law and also noted that section 15003, subdivision (a) provides “ ‘[n]othing in this division affects the law relating to constr uctive . . . trusts.’ ” ( Mullins , supra , at p. 931.) In dicta, the Mullins court further said that probate courts lack jurisdiction to impose equitable remedies, such as a constructive trust. ( Ibid .) In 1990, in response to this dicta in Mullins , the Legislature amended section 15003, subdivision (a) to clarify that ther e is no such limitation on the authority of a probate court to fashion appropriate remedies in proceedings under the trust law. (Cal. Law Revision Com. com., 54 West ’s Ann. Prob. Code (1991 ed .) foll. § 15003, p. 486.) Retirement Fund notes “even after the amendment, Sect ion 15003 does not, by itself, provide for application of the Trust Law to Section 82[, subdivision] (b) entities absent some relationship to an entity that is pr operly subject to the Trust Law. This interpretation is confirmed by the fact that Section 82[, subdivision] (b) was not amended after Mullins .” There are two problems with this interpretation of Mullins

. First, nowhere in Mullins can we find the holding ad vanced by Retirement Fund, i.e., “Trust Law may be applied to entities listed in Section 82[, subdivision] (b) only when a Section 82[, subdivision] (b) entity has some kind of bearing or relationship to a true ‘trust’ defined by Secti on 82[, subdivision] (a).” All Mullins decided was that an action to impose a constructive trust is not w ithin the jurisdiction of the probate court because constructive trusts are excluded from the definition of a trust under section 82, subdivision (b)(1). It buttressed that holdi ng by noting that secti on 15003, subdivision (a) expressly provided that the law relating to constructive trus ts was not affected by trust law. ( Mullins , supra , 206 Cal.App.3d at p. 931.)11 Second, Mullins makes no mention of section 15003( c), the relevant subdivision in the instant case. Instead, the Mullins court addressed section 15003, subdivision (a), and thus offers limited instruction at best for as sisting us in determining the interplay of section 15003(c) with section 82. We are also not persuaded by Me yers’ reading of section 15003(c). 7 His interpretation would have us focus exclus ively on its expansionary language, and determine that it overrides the exclusionary la nguage of section 82. We must however read the statute as a whole, and in so doing , it becomes clear that section 15003(c) is not unconditional. The statute allows for the application of trust law to “an entity or relationship that is excluded from the definitio n of ‘trust’ ” (§ 1 5003(c)) by section 82, but only “pursuant to statutory or common law pr inciples, by court order or rule, or by contract.” (§ 15003(c).) The Law Revision Commission comments to section 15003 supports this interpretation: “Subdivision (c) is included to avoid the implication that the provisions of the Trust Law cannot be applied to entities a nd relationships that are excluded from the definition of ‘trust’ as it is used in this division. The Trust Law, by its terms, governs trusts as defined in Section 82. Under Se ction 15003, the Trust Law is neutral on the question whether it may be applied to other t ypes of entities and re lationships, such as those excluded from the definition of ‘t rust’ by subdivision (b) of Section 82. The Trust

7 Meyers also devotes several paragraphs in his opening brief attacking the trial court’s suggestion that section 15003 applie s only to situations involving constructive and resulting trusts because the phrase “cons tructive and resulting trusts” appears in the statute’s title. He (correctly) points out the phrase “constructive and resulting trusts” refers only to subdivision (a) of section 15003, and that the title includes the phrase “entity or relationship excluded from trust definition” to refer to subdivision (c). Regardless, the trial court’s mistaken relianc e on this phrase is of no moment. “Because we review the correctness of the order, and no t the court’s reasons, we will not consider the court’s oral comments or use them to undermine the order ultimately entered.” ( Whyte
v

. Schlage Lock Co . (2002) 101 Cal.App.4th 1443, 1451.)12 Law is thus made available when it ma y appropriately be applied by statute , common law , court order or rule , or contract .” (Cal. Law Revision Co m., com., 54 West’s Ann. Prob. Code (1991 ed.) foll. § 15003, p. 486, italics added.) Accordingly, for trust law to apply to Retirement Fund, at least in the context presented here where Meyers is seeking to remove trustees pursuant to sections 15642 and 17200, there must be some “statutory or common law prin ciple[], . . . court order or rule, or . . . contract” allowing for its app lication. (§ 15003(c).) Meyers identified no such principle, order, rule or contract upon which a court could find a basis to apply trust law to the Retirement Fund. Our interpretation of the statute thus av oids nullifying section 82, which would be the result were we to adopt Meyers’ position. ( Hensel Phelps Construction Co

. v

. San Diego Unified Port Dist

. (2011) 197 Cal.App.4th 1020, 1034.) Since neither section 17 nor section 15003 (c) operate to override the exclusionary language of section 82(b)(13), the trial court properly dismissed Meyers’ petition for an order pursuant to sections 15642 and 17200 removing cert ain Retirement Fund trustees. 3

. Standing and failure to exhaust administrative remedies Retirement Fund argues two alternative bases for dismissing Meyers’ petition to remove trustees: (1) he lacks standing to s eek such removal as he was not a member or beneficiary of the retirement system at the ti me he brought his petition; and (2) he failed to comply with the pr ocess for removal of trustees set forth in the City of San Jose Municipal Code, thus fa iling to exhaust his administrative remedy. As we have determined that the tria l court properly dismis sed the petition on the ground that it lacked jurisdiction under the Pr obate Code, we need not and do not address these arguments herein.13 III. D ISPOSITION The judgment is affirmed. The Retiremen t Fund of the Federa ted City Employees shall recover its costs on appeal.

Premo, J.

WE CONCUR:

Rushing, P.J.

Elia, J.