Opinion ID: 1259865
Heading Depth: 1
Heading Rank: 4

Heading: prevented by law exception: appellate and superior court judges

Text: The right to interest under Civil Code section 3287, subdivision (a), is subject to an express exception: the right arises except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt. The Controller contends that this exception precludes recovery of any interest on salaries or pensions withheld by him before, and contrary to, this court's 1980 decision in Olson v. Cory I that the 1976 amendment to section 68203 was invalid as to certain judges and pensioners during certain periods. He relies on constitutional and statutory limitations on his power as a state official. Thus, article XVI, section 7, of the Constitution provides: Money may be drawn from the Treasury only through an appropriation made by law and upon a Controller's duly drawn warrant. Government Code section 12440 provides: The Controller shall draw warrants on the Treasurer for the payment of money directed by law to be paid out of the treasury; but a warrant shall not be drawn unless authorized by law, and unless unexhausted specific appropriations provided by law are available to meet it. The Controller also contends that he was precluded from giving effect to the 1976 amendment of section 68203 by article III, section 3.5 of the Constitution, adopted June 6, 1978, which provides that an administrative agency has no power to refuse to enforce a statute on grounds of constitutional invalidity unless an appellate court has declared it unconstitutional. (12a) Whatever the effect of these restrictions on the Controller's power to pay salary or pension increases in disregard of a statute that was subsequently held unconstitutional, the restrictions are not determinative here. The exception provided by Civil Code section 3287, on which he relies, applies only when the debtor is prevented by law from paying the debt. The Controller is not the debtor. The 1976 amendment of section 68203 was held invalid because it violated the contractual rights of judges and pensioners not against the Controller but against the State of California. (13) When agreements of employment between the state and public employees have been adopted by governing bodies, such agreements are binding and constitutionally protected. [Citation.] In the instant case the Legislature in 1969 adopted the full cost-of-living increase provision, binding the state to pay persons employed at the represented compensation for their terms of office. ( Olson v. Cory I, supra, 27 Cal.3d 532, 538, italics supplied.) (12b) The state is therefore the debtor; moreover, it is subject to claims of interest under Civil Code section 3287, subdivision (a), which states that it is applicable to recovery of damages and interest from any such debtor, including the state, or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state. (14) The only law that might plausibly be claimed to have prevented the state as debtor from paying the debts to plaintiffs on which interest is now claimed was the 1976 amendment to section 68203. But the adoption of that amendment was an act of the state itself that conflicted with its constitutional obligations toward plaintiffs. Regardless of the amendment's effect on the duties of the Controller and other public officials, it would be anomalous to hold that legislation voluntarily promulgated by the debtor itself constitutes a law by which the debtor is prevented from fulfilling its overriding obligations. This conclusion is consistent with Benson v. City of Los Angeles (1963) 60 Cal.2d 355 [33 Cal. Rptr. 257, 384 P.2d 649], where a claimant to widow's pension benefits was awarded interest notwithstanding the defendant city's contention that a city charter amendment purporting to deny the benefits caused the city to be prevented by law from paying them. Emphasizing prejudgment uncertainty over the charter amendment's constitutionality, this court held in effect that the city could not use its own charter provision as a defense to the claim of interest under Civil Code section 3287. Though plaintiffs here cite an Attorney General's opinion (60 Ops.Cal.Atty.Gen. 153 (1977)) to show preexisting doubts over the validity of the 1976 amendment to section 68203, plaintiffs' right to interest does not turn on their ability to establish that any such doubts were brought to the attention of one or more state officials. An invalid statute voluntarily enacted and promulgated by the state is not a defense to its obligation to pay interest under Civil Code section 3287, subdivision (a). The Controller expresses concern that to exclude a constitutionally defective statute as the source of a prevented-by-law defense to a claim for interest accruing against the state prior to the final judicial determination of unconstitutionality may put him in the untenable position of having to foresee at his own risk what that determination will be. But questions of the Controller's duties to pay the disputed amounts during that period are distinct from the obligation of the state to make such payments. A parallel distinction was made in California State Employees' Assn. v. Cory (1981) 123 Cal. App.3d 888 [176 Cal. Rptr. 904]. There, state employees sought a writ of mandate to compel the Controller to pay interest on lump sum salary payments that had accrued while the constitutionality of the bill appropriating funds for the payments was litigated and finally upheld by this court (see Jarvis v. Cory (1980) 28 Cal.3d 562 [170 Cal. Rptr. 11, 620 P.2d 598]). The Controller conceded, and the Court of Appeal apparently agreed, that the plaintiff employees had a right to the interest under Civil Code section 3287. (123 Cal. App.3d at pp. 891, 895.) Nonetheless, it was held that the Controller could not be compelled by mandate to pay the interest in the absence of a legislative appropriation of the amount required. So here, we have concluded that the plaintiffs' rights to interest under Civil Code section 3287 cannot be defeated by a claim that the State of California was prevented by law from paying the full amounts due plaintiffs during that period. That conclusion implies that component organs of state government, including the Legislature, could have made the payments. It does not necessarily follow that the Controller during that period could have been judicially compelled to make the payments or that he incurred personal liability for failing to do so.