Court Opinion

ID: 2677155
Source: CourtListenerOpinion
Date Created: 2014-06-04 22:01:17.664968+00
Date Added: 2024-06-11T13:11:26.766093
License: Public Domain

Filed 6/4/14 Original version and modification and certification orders (5/29/14) attached
                   COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                               DIVISION ONE

                                        STATE OF CALIFORNIA

FAY STANIFORTH et al.,                                           D064111

         Plaintiffs and Appellants,

         v.                                                      (Super. Ct. No.
                                                                  37-2012-00093475-CU-MC-CTL)
THE JUDGES' RETIREMENT SYSTEM,

         Defendant and Respondent;                               ORDER MODIFYING OPINION

JOHN CHIANG, as State Controller, etc.,

         Real Party in Interest and Respondent.

THE COURT:

         It is ordered that the opinion filed herein on May 19, 2014, be modified as follows:

         On page 18, in the first and second sentences of the second full paragraph, the

word "July" is replaced with the word "January" so the sentences read:

         "Pensioners' motion argued the action pleaded claims on behalf of seven trial

judges whose retirement allowances should have been (but were not) calculated and paid

based on the salary of an active trial court jurist as increased by an uncapped COLA until

January 5, 1981, consistent with the trial court's construction of Olson I. Pensioners also

asserted the action pleaded claims on behalf of three appellate court justices whose

retirement allowances should have been (but were not) calculated and paid based on the
salary of an active appellate court jurist as increased by an uncapped COLA until

January 5, 1987, again consistent with the trial court's construction of Olson I."

       There is no change in the judgment.

                                                                 McDONALD, Acting P. J.

Copies to: All parties

                                             2
Filed 5/19/14; as modified and certified for publication 5/29/14 (see orders foll. opn.)

                   COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                DIVISION ONE

                                         STATE OF CALIFORNIA

FAY STANIFORTH et al.,                                            D064111

         Plaintiffs and Appellants,

         v.                                                       (Super. Ct. No.
                                                                   37-2012-00093475-CU-MC-CTL)
THE JUDGES' RETIREMENT SYSTEM,

         Defendant and Respondent;

JOHN CHIANG, as State Controller, etc.,

         Real Party in Interest and Respondent.

         APPEAL from a judgment of the Superior Court of San Diego County, Joel M.

Pressman, Judge. Affirmed in part and reversed in part.

         Jorn S. Rossi and Paul G. Mast for all Plaintiffs and Appellants except William

Reppy, Jr.

         William Reppy, Jr., in pro. per.

         Reed Smith, Harvey L. Leiderman and Jeffrey R. Rieger for Defendant and

Respondent.

         No appearance for Real Party in Interest and Respondent.
       Plaintiff Faye Staniforth filed this action, on behalf of herself and similarly

situated persons (collectively pensioners), alleging numerous claims against defendant

and respondent the Judges' Retirement System (JRS). The principal claim raised by

pensioners' action was that JRS had not adhered to its obligations to pensioners under

Olson v. Cory (1980) 27 Cal. 3d 532 (Olson I) and, as a result, pension payments

stretching back over three decades had been underpaid to pensioners (Olson I claims).

This action sought a declaratory judgment that, under Olson I, jurists who served on

California's trial court or appellate court bench during the time Government Code1

section 68203 provided for unlimited cost of living adjustments (COLA's) were entitled

to have their (or their surviving beneficiaries') pensions adjusted upward based on the

applicable COLA for each year, and that the cap on the amount of COLA's (enacted by

legislation that amended § 68203 and took effect on January 1, 1977) could not

constitutionally be applied to pensions earned by jurists who served on California's trial

court or appellate court bench during the time that section 68203 provided for unlimited

COLA's. The petition also sought a writ of mandate compelling JRS to adhere to Olson I

and to recalculate the amount of judicial pensions owed to pensioners using uncapped

COLA's, and to pay arrearages and interest for the decades of underpaid pension

payments.

       JRS demurred to pensioners' Olson I claims. JRS argued pensioners' Olson I

claims were in direct conflict with a correct reading of Olson I and that, contrary to

1      All further statutory references are to the Government Code unless otherwise
specified.
                                               2
pensioners' claims, JRS had correctly applied the teaching of Olson I to these pensioners

and had correctly calculated judicial pensions since Olson I. The trial court agreed and

sustained JRS's demurrer to pensioners' Olson I claims without leave to amend. The

court also denied pensioners' subsequent motion to vacate in part the order sustaining the

demurrer to pensioner's Olson I claims without leave to amend and, after dismissing

pensioners' remaining claims for failure to exhaust administrative remedies, entered

judgment in favor of JRS. Pensioners appealed.

       On appeal, pensioners limit the claims of error to (1) the order sustaining JRS's

demurrer to pensioner's Olson I claims without leave to amend, and (2) the court's denial

of pensioners' subsequent motion, which in effect sought leave to amend to separately

state (and thereby preserve) certain claims by certain pensioners. The propriety of the

first order turns on an interpretation of the impact of Olson I, as amplified in both Olson

v. Cory (1982) 134 Cal. App. 3d 85 (Olson II) and Olson v. Cory (1983) 35 Cal. 3d 390

(Olson III), on judicial pensions. The propriety of the second order involves distinct

issues requiring a separate but interdependent analysis.

                                              I

                         OLSON I AND JUDICIAL PENSIONS

       A. The Competing Claims

       JRS contends Olson I held the only class of active jurists to whom the legislative

cap on COLA's could not be constitutionally applied were active jurists whose terms

began prior to January 1, 1977, and who had some number of years left on their terms

during which they were entitled to earn a salary increased by the uncapped COLA's (the

                                             3
so-called "protected term," see Olson II, supra, 134 Cal.App.3d at p. 90). JRS also

contends Olson I was equally clear the legislative cap on COLA's could constitutionally

be applied to a salary earned by a jurist (after completion of the protected term) to new

terms of office commencing January 1, 1977. (Olson I, supra, 27 Cal.3d at pp. 538-540.)

JRS asserts Olson I further made clear that the only class of retired jurists to whom the

legislative cap on COLA's could not constitutionally be applied were jurists who retired

between 1970 and 1976 to the extent their pensions were measured as a percentage of the

salary payable to an active jurist during a protected term. JRS argues that, under the

correct reading of Olson I, it was entitled to calculate and pay pensioners the appropriate

percentage of the relevant active jurist's salary payable for terms of office to which the

cap on COLA's was lawful, e.g. terms of office commencing January 1, 1977.

       Pensioners' competing contention rests on a different reading of Olson I.

Pensioners' argument rests on an extrapolation from Olson I's statement that the 1977 cap

statute was "unconstitutional as to certain judicial pensioners." (Olson I, supra, 27

Cal.3d at p. 541.) Pensioners contend the import of that phrase from Olson I was that

jurists who retired during the period between 1970 to 1976, when section 68203 provided

for unlimited COLA's that indirectly increased their pensions, acquired a vested right to

unlimited COLA's, and the cap on the amount of COLA's that took effect on January 1,

1977, could not constitutionally be applied to constrain the growth of their pensions.

Pensioners also assert jurists who retired after 1976 but nevertheless earned some of their

pension rights by serving on California's trial court or appellate court bench prior to 1976

enjoy the same constitutional rights to unlimited COLA's as do the 1970-1976 retirees

                                              4
under the application of Olson I's principles in the decisions of In re Marriage of Alarcon

(1983) 149 Cal. App. 3d 544 and Legislature v. Eu (1991) 54 Cal. 3d 492. Under this

construction, pensioners assert JRS has underpaid pensioners for nearly three decades

because JRS improperly paid them a percentage of the salary payable to actual active

jurists (e.g. jurists whose salary was constitutionally subjected to limited COLA

increases), because pensioners appear to argue JRS should have paid them a percentage

of the salary an active jurist would have hypothetically earned if that active jurist's salary

had continued to rise based on unlimited COLA's after January 1, 1977.

           In the proceedings below, JRS demurred to the causes of action of the complaint

insofar as they were based on Olson I, arguing those claims were in direct conflict with

Olson I and therefore did not state claims on which relief could be granted. Pensioners

conceded the only issues on their Olson I claims involved questions of law. The trial

court agreed with JRS's analysis of Olson I, and sustained JRS's demurrer to the causes of

action of the complaint based on Olson I without leave to amend. Pensioners challenge

that ruling, asserting the trial court misapplied the teaching of Olson I.

           B. Olson I

           Because judicial pensions are derivative from the salaries payable to a currently

active judge (§ 75000 et seq.), an understanding of the impact of Olson I on pensions

necessarily commences with an examination of the scheme for salaries payable to active

jurists.

           Since 1964, judicial salaries have been prescribed by sections 68200 through

68202, subject to increases provided in section 68203. Section 68203, as amended in

                                                 5
1969, provided: "In addition to the increase provided under this section on September 1,

1968, on the effective date of the 1969 amendments to this section and on September 1 of

each year thereafter the salary of each justice and judge named in Sections 68200 to

68202, inclusive, shall be increased by that amount which is produced by multiplying the

then current salary of each justice or judge by the percentage by which the figure

representing the California consumer price index as compiled and reported by the

California Department of Industrial Relations has increased in the previous calendar

year." (Stats. 1969, ch. 1507, § 1.) However, section 68203 was again amended in 1976,

effective January 1, 1977, to provide: "On July 1, 1978, and on July 1 of each year

thereafter the salary of each justice and judge named in Sections 68200 to 68202,

inclusive, shall be increased by that amount which is produced by multiplying the then

current salary of each justice or judge by the percentage by which the figure representing

the California consumer price index as compiled and reported by the California

Department of Industrial Relations has increased in the previous calendar year, but not to

exceed five percent (5%)." (Stats. 1976, ch. 1183, § 4, italics added.)

       The impact of the 1976 amendment on the salaries payable to active jurists, and on

the pensions derivatively paid to retired jurists, was the focus of Olson I. A class of

plaintiffs brought an action in 1977 alleging they, as active jurists and as recipients of

judicial pensions, were entitled to a declaration that the 1976 amendment was

unconstitutional and they therefore were entitled to salary and pension increases in

accordance with the version of section 68203 in effect prior to the amendment. (Olson

                                              6
III, supra, 35 Cal.3d at p. 396.) In 1978, the trial court rendered judgment declaring the

1976 amendment to section 68203 was unconstitutional as to this class. (Ibid.)

       Olson I began by examining the permissible application of the 1976 amendment

for salaries payable to active jurists. Olson I noted the 1976 amendment purported to

apply to limit salary increases for all jurists, including those who had commenced a term

of office before January 1, 1977 (the effective date of the 1976 amendment) and had

some years remaining on that term after the effective date of the 1976 amendment.

(Olson I, supra, 27 Cal.3d at pp. 537-538.) The court concluded judges who had

commenced a term before January 1, 1977, had a vested right to the compensation

promised to them when they entered their term of office, including the right to uncapped

COLA's, and even if "salary benefits are diminished by the Legislature during a judge's

term, or during the unexpired term of a predecessor judge [citations], the judge is

nevertheless entitled to the contracted-for benefits during the remainder of such term.

The right to such benefit accrues to a judge who served during the period beginning 1

January 1970 to 1 January 1977. . . ." (Id. at pp. 539-540.) However, once an active

jurist "completes one term during which he was entitled to unlimited cost-of-living

increases and elects to enter a new term has impliedly agreed to be bound by salary

benefits then offered by the state for the different term. Thus, while a judge is entitled to

a salary based on unmodified [section 68203] throughout a term ending, for instance, in

1978, his salary for a new term beginning on or after the effective date of the 1976

amendment -- 1 January 1977 -- will be governed by the statute as amended. Likewise, a

judge entering office for the first time on or after 1 January 1977, including a judge

                                              7
entering upon his own term or upon the unexpired term of a predecessor judge, cannot

claim any benefit based on section 68203 before the 1976 amendment." (Id. at p. 540.)

Accordingly, Olson I concluded section 68203 "cannot be constitutionally applied to . . .

a judge or justice during any term of office, or unexpired term of office of a predecessor,

if the judge or justice served some portion thereof (a 'protected term') prior to 1 January

1977 . . . ." (Olson I, supra, 27 Cal.3d at p. 546.)

       Olson I then addressed the claim that the 1976 amendment abridged vested rights

of judicial pensioners. (Olson I, supra, 27 Cal.3d at p. 540.) The court noted that, during

the period between December 31, 1969, and January 1, 1977, "a judicial pensioner was

entitled to receive benefits based on a specified percentage of the salary of a judge

holding the judicial office to which the retired or deceased judge was last elected or

appointed. [Citation.] The salary for such a judicial office--if the retired or deceased

judge served in office during the period 1970 to 1977--was covenanted to increase

annually with the increase in the CPI. The 1976 limitation on increases in judicial

salaries is, in turn, calculated to diminish benefits otherwise available to those judicial

pensioners. Such modification of pension benefits works to the disadvantage of judicial

pensioners by reducing potential pension increases, and provides no comparable new

benefit." (Id. at p. 541.) Because there was no demonstrated justification for impairing

these rights or any comparable new advantages included, Olson I concluded section

68203 as amended was "unconstitutional as to certain judicial pensioners." (Ibid.) Olson

I then explained why it concluded section 68203 as amended was unconstitutional as to

these "certain judicial pensioners":

                                              8
          "Contractually, each judicial pensioner is entitled to some fixed
          percentage of the salary payable to the judge holding the particular
          judicial office to which the retired or deceased judge was last elected
          or appointed. [Citations.] Accordingly, a judicial pensioner cannot
          claim impairment of a vested right arising out of the 1976
          amendment except when the judge holding the particular judicial
          office could also claim such an impairment. The resolution of
          pensioner vested rights, then, is dependent on the foregoing
          resolution of judges' vested rights left unimpaired by the 1976
          amendment." (Olson I, supra, 27 Cal.3d at pp. 541-542.)

       Although Olson I noted some judicial pensioners (e.g. those whose benefits are

based on judicial services terminating during the time section 68203 provided for

unlimited cost-of-living increases) may have had a "vested" right to a pension benefit that

included a proportionate share of the salary of the judge or justice occupying the

particular judicial office, "including the incumbent judge's or justice's unlimited cost-of-

living increases," but other judicial pensioners (e.g. those whose benefits were based on

judicial services terminating before the effective date of applicable law providing for

unlimited cost-of-living increases) had no "vested" right to benefits resulting therefrom,

Olson I declared it was "not necessary for our purposes to determine a judicial

pensioner's right as being vested. [Original italics.] Vested or not, a pensioner's right

entitles him or her to benefits based on the prevailing salary for the judge or justice

occupying the particular judicial office, regardless of the date of termination of judicial

services giving rise to the pension. Finally, as in the case of judges or justices who enter

upon a new or unexpired term of a predecessor judge after 31 December 1976, benefits of

judicial pensioners based on the salaries of such judges will be governed by the 1976

amendment." (Olson I, supra, 27 Cal.3d at p. 542, italics added, fns. omitted.)

                                              9
       Olson I concluded section 68203 "cannot be constitutionally applied to (1) a judge

or justice during any term of office, or unexpired term of office of a predecessor, if the

judge or justice served some portion thereof (a 'protected term') prior to 1 January 1977,

and (2) a judicial pensioner whose benefits are based on some proportionate amount of

the salary of the judge or justice occupying that office." (Olson I, supra, 27 Cal.3d at

p. 546.) Because the trial court's judgment had invalidated any application of the 1976

amendment, Olson I reversed the trial court judgment except "as to any judge or justice

who served any portion of his term or the unexpired term of a predecessor prior to 1

January 1977, and as to judicial pensioners whose benefits are based on the salary of such

a judge or justice." (Id. at p. 548.)

       Olson I, reiterating its conclusion as to pensioners, specifically stated that (unlike

the " 'troubling result' " reached in an earlier case in which the pensioner appeared

entitled to a double increment of increase), "[t]he net effect of our holding in the instant

case is to allow a judicial pensioner but one increment of increase, that being the

increment of pro-rata increase in the salary of the judge occupying the office formerly

occupied by the retired or deceased judge." (Olson I, supra, 27 Cal.3d at p. 542, fn. 7.)

       C. Subsequent Case Law

       In Olson III, supra, 35 Cal. 3d 390, the court examined whether interest was due on

the payments owed to active and retired judges under the declaratory judgment entered in

Olson I.2 Indeed, Olson III noted the entitlement to interest was the only unresolved

2      In the interregnum between Olson I and Olson III, the appellate court in Olson II,
supra, 134 Cal. App. 3d 85, addressed an action by the plaintiff class (active and retired
                                           10
issue between the plaintiff and the defendants. (Olson III, supra, 35 Cal.3d at p. 401

["we are assured by plaintiffs, and by counsel speaking for most of the county

defendants, that all issues in this litigation have now been resolved except for the one

now presented to this court -- that of plaintiffs' right to interest"].) In Olson III, the state

contended interest should not be awarded on unpaid salaries and pension payments

because interest was not payable until after Olson I was decided and, until "this court's

1980 decision in Olson v. Cory I [determined] that the 1976 amendment to section 68203

was invalid as to certain judges and pensioners during certain periods" (Olson III, at

p. 403, italics added), the state was prevented from making such payments. The Olson III

court ultimately concluded the plaintiffs were "entitled to interest on judicial pension

payments adjudged in [Olson I]." (Id. at p. 406.)

       D. Analysis

       Pensioners' argument is predicated on the language from Olson I that section

68203 as amended was "unconstitutional as to certain judicial pensioners." (Olson I,

supra, 27 Cal.3d at p. 541.) Although somewhat opaque, pensioners appear to argue this

passage from Olson I necessarily drew a distinction between these "certain judicial

pensioners"--those who retired between 1970 and 1976 and thereby acquired a "vested"

judges) who challenged whether a constitutional amendment, designed to supersede
Olson I and deprive of them of the benefits of the salary boosted by uncapped COLA's
(for active judges) or their share thereof (for the relevant pensioners), was enforceable.
Olson II held, consistent with Olson I, that the amendment could not be enforced against
the plaintiff class. Although largely irrelevant to this proceeding, Olson II did restate that
"[t]he pension to which retired judges and spouses of deceased judges were and are
entitled is a percentage of the salary payable at the time payment of the pension falls due
to the judge holding the judicial office to which such retired or deceased judge was last
elected to or appointed." (Olson II, at p. 90, italics added.)
                                              11
right in having their pensions adjusted based on the unlimited COLA's provided under the

unamended version of section 68203--and all other judicial pensioners (those who retired

before 1970 or after 1976 and hence had "no vested rights to benefits resulting [from the

uncapped COLA's]," Olson I, supra, 27 Cal.3d at p. 542), and claims the " 'vested' right

. . . including . . . unlimited cost-of-living increases" owned by these "certain judicial

pensioners" must necessarily be independent of and in addition to the rights all

pensioners have, i.e. an interest in one of the percentage statutes. Pensioners appear to

assert the additional and independent vested right embedded in the phrase "certain

judicial pensioners" is the right to have their judicial pensions calculated as a percentage

of the salary that hypothetically would have been earned by an active jurist if such jurist's

salary had continued to rise based on unlimited COLA's after January 1, 1977.

       Even assuming pensioners may raise this argument,3 our reading of Olson I

convinces us the meaning ascribed by pensioners to the phrase "certain judicial

3       We have substantial doubt pensioners may now assert they are entitled to have
their judicial pensions calculated as a percentage of the salary of a hypothetical judge,
both under the "claim preclusion" (or bar/merger) feature of res judicata and under the
collateral estoppel feature of res judicata. Claim preclusion operates to bar the
maintenance of a later action if (1) the claim decided in the former action (here, the
extent to which judicial pensions were impacted by the cap on COLA's) is identical to the
claim presented in this action, (2) there was a final judgment on the merits, and (3)
pensioners were a party (or a privy to a party) to the prior adjudication. (Lyons v.
Security Pacific Nat. Bank (1995) 40 Cal. App. 4th 1001, 1015.) The bar/merger aspect of
res judicata applies even if pensioners did not actually articulate every legal theory
available to them in Olson I. (See 7 Witkin, Cal. Procedure (5th ed. 2008) Judgment,
§ 410, p. 1051 [res judicata applies where same primary right is being asserted even
though second action is "framed to present a different legal theory of recovery"]. Thus,
res judicata in its primary aspect would appear to bar pensioners from interposing a new
theory in support of the same claim adjudicated in Olson I.
                                              12
pensioners" cannot be reconciled with either the statutory scheme governing judicial

pensions or with Olson I's treatment of judicial pensions.

       The statutory scheme is clear that judicial pensioners are entitled to an allowance

that is calculated as a fixed percentage of whatever salary is payable to the judge holding

the particular judicial office to which the retired judge was last elected or appointed.

(§§ 75032, 75033.5, 75076.) Although the right to the relevant fixed percentage is

vested, and may not be impaired absent comparable new advantages, there is nothing in

the JRS scheme that conferred on judicial pensioners a vested right to be exempted from

changes in the underlying salary structure for active jurists. (Cf. International Assn. of

        Moreover, it also appears the secondary aspect of res judicata--collateral
estoppel--also is operable here. Pensioners not only could have raised this new theory to
support their claim to a pension unencumbered in perpetuity from any cap on COLA's,
but it appears pensioners or their privies in fact did raise that theory, and the Olson I court
nowhere expressly embraced that theory. Collateral estoppel appears present because the
issue sought to be precluded from relitigation (pensions based on COLA's in perpetuity)
is identical to that actually litigated in Olson I, because the Court of Appeal decision
(vacated by the grant of review and ultimately resulting in Olson I) described the
pensioners' contention in the same terms as pensioners now argue. (See Olson v. Cory
(1979) 156 Cal. Rptr. 127, 134 ["Plaintiff pensioners contend that, regardless of the
application of the 1976 amendment to sitting judges, the pensions of judicial pensioners
must be computed by reference to the hypothetical salaries that would have become
payable to active judges in the absence of the 1976 amendment. They argue that
[uncapped COLA's] created an enforceable expectation that judicial pensions would
increase annually with increases in the cost-of-living . . . ."].) Although the underlying
court opinion was vacated, it appears that "[f]or purposes of applying collateral estoppel,
evidence extrinsic to the judgment roll may be used to ascertain what issues were
determined in the former action." (Southwell v. Mallery, Stern Warford (1987) 194
Cal. App. 3d 140, 144; Tevis v. Beigel (1957) 156 Cal. App. 2d 8, 14.) Because it appears
this issue was (1) actually litigated, (2) the decision in Olson I is final and on the merits
and was between the same parties or privy's as are present here (Lucido v. Superior Court
(1990) 51 Cal. 3d 335, 341), and Olson I did not expressly grant judicial pensioners a
right to have their pension decoupled from the salaries earned by actual jurists in favor of
a pension based on a hypothetical salary, the primary aspect of res judicata would also
appear to bar pensioners' present argument.
                                                13
Firefighters v. City of San Diego (1983) 34 Cal. 3d 292, 301, 302-303 [increasing

employee contribution rates is allowed because, although an employee's " 'vested'

contractual rights may not be destroyed or impaired, [the crucial inquiry must] identify

exactly what employee rights are vested under City's retirement system," and because of

system-contemplated increased contribution rates, there is no vested right to be free from

increased contribution].) Although the 1969 amendment to section 68203 (for unlimited

COLA adjustments to active jurists salaries) and the 1976 amendment to section 68203

(placing a cap on COLA adjustments to active jurists' salaries) indirectly impacted

pensioners, it did so only because of (and to the extent that) pensioners' allowances were

derivative of active jurists' salaries, and not because those statutes purported to have any

direct application to the allowances paid to judicial pensioners or purported to confer any

new vested rights on judicial pensioners that were separate and nonderivative from the

rights enjoyed by active jurists.

       This construction of the statutory scheme confirms our understanding that the

import of the holdings of Olson I was not to decouple the rights of judicial pensioners

from the salaries paid to actual active jurists. Instead, we read Olson I as confirming the

allowances for judicial pensioners remained tethered to the salaries paid to actual (rather

than hypothetical) active jurists, and Olson I held the allowances for judicial pensioners

were temporarily exempted from the cap on COLA's because, and only to the extent that,

salaries for some actual active jurists were likewise temporarily exempted from the cap

on COLA's. The Olson I court's analysis began by examining the extent to which salaries

for some actual active jurists (e.g. those whose terms began before January 1, 1977, and

                                             14
had some period remaining during the protected term) were grandfathered under the

unamended section 68203 and its unlimited COLA adjustments, and explained this group

of actual active jurists were entitled to unlimited COLA's for the remainder of the

protected term, but not thereafter, reasoning that such active jurists impliedly understood

and agreed that new and less favorable terms and conditions could be imposed that

diminished their salaries in future years. (Olson I, supra, 27 Cal.3d at pp. 537-540.)

       The Olson I court then turned to the extent to which the 1976 amendment to

section 68203, "in addition to impairing the vested rights of judges in office, also impairs

those of judicial pensioners." (Olson I, supra, 27 Cal.3d at p. 540, fn. omitted.) The

court, noting a judicial pensioner is "entitled to receive benefits based on a specified

percentage of the salary of a judge holding the judicial office to which the retired or

deceased judge was last elected or appointed," recognized that during the period

"[b]etween 31 December 1969 and 1 January 1977, . . . [t]he salary for such a judicial

office . . . was covenanted to increase annually with the increase in the CPI. The 1976

limitation on increases in judicial salaries is, in turn, calculated to diminish benefits

otherwise available to those judicial pensioners. Such modification of pension benefits

works to the disadvantage of judicial pensioners by reducing potential pension increases,

and provides no comparable new benefit." (Id. at p. 541.) Because there was no

demonstrated justification for impairing these rights nor any comparable new advantages

included, Olson I concluded section 68203 as amended was "unconstitutional as to

certain judicial pensioners." (Olson I, at p. 541.) Olson I then expanded on why it

                                              15
concluded section 68203 as amended was unconstitutional as to these "certain judicial

pensioners":

          "Contractually, each judicial pensioner is entitled to some fixed
          percentage of the salary payable to the judge holding the particular
          judicial office to which the retired or deceased judge was last elected
          or appointed. [Citations.] Accordingly, a judicial pensioner cannot
          claim impairment of a vested right arising out of the 1976
          amendment except when the judge holding the particular judicial
          office could also claim such an impairment. The resolution of
          pensioner vested rights, then, is dependent on the foregoing
          resolution of judges' vested rights left unimpaired by the 1976
          amendment." (Olson I, at pp. 541-542, second italics added.)

       Olson I found the amendment unenforceable as to some judicial pensioners only to

the extent it was unenforceable as to the active jurists' salary on which the judicial

pensioners' allowance was derivative. Indeed, this conclusion was independent of

whether or not the judicial pensioners' rights were or were not deemed "vested," because

Olson I unequivocally reiterated that it was "not necessary for our purposes to determine

a judicial pensioner's right as being vested. [Original italics.] Vested or not, a

pensioner's right entitles him or her to benefits based on the prevailing salary for the

judge or justice occupying the particular judicial office . . . ." (Olson I, supra, 27 Cal.3d

at p. 542, italics added.) Moreover, Olson I made clear that the grandfathered benefits

enjoyed by some active jurists and (derivatively) by some judicial pensioners were not of

unlimited duration because it noted that, "as in the case of judges or justices who enter

upon a new or unexpired term of a predecessor judge after 31 December 1976, benefits of

judicial pensioners based on the salaries of such judges will be governed by the 1976

amendment." (Ibid., italics added, fn. omitted.)

                                             16
       We conclude Olson I merely reaffirmed that judicial pensioners had a right to a

percentage participation in the salaries paid to active jurists, including "the increment of

pro-rata increase in the salary of the judge occupying the office formerly occupied by [the

pensioner, which] salary fluctuates with cost of living increases" (Olson I, supra, 27

Cal.3d at p. 542, fn. 7), but did not confer on or recognize any right of judicial pensioners

to be exempted from changes in the underlying salary structure applicable to such active

jurists, including changes to the COLA's adopted by the 1976 amendment.4 To the

extent pensioners' claims are based on the theory that Olson I held judicial pensioners are

exempted from changes in the underlying salary structure applicable to actual active

jurists, those claims must fail, and the trial court correctly sustained JRS's demurrer

without leave to amend.

4        For this reason, pensioners' reliance on Legislature v. Eu, supra, 54 Cal. 3d 492
and In re Marriage of Alarcon, supra, 149 Cal. App. 3d 544 is misplaced. Both cases held
that promised pension benefits cannot be impaired once they are vested, even if the
pensioner later begins a new term of office that (if it was the prospective pensioner's
initial term in office) would have been governed by reduced pension benefits.
(Legislature v. Eu, at pp. 527-534; Marriage of Alarcon, at pp. 550-553.) However, in
Alarcon, the pensioner had been expressly promised that a benefit of his office would be
to earn a fully vested (albeit deferred) right to a pension, and the court concluded the
amended law purporting to remove that right could not be enforced. (Alarcon, at pp. 551-
554.) Similarly, in Eu, the pensioner had been expressly promised that a benefit of the
office included pension benefits that would become vested and successively higher from
additional years of service, and the court concluded an amended law purporting to
remove those rights could not be enforced against those who had accrued vested rights
under the former system. (Eu, at pp. 527-534.) Although these cases are correct, they are
of no aid to pensioners because, although " 'vested' contractual rights may not be
destroyed or impaired, plaintiff fails to identify exactly what employee rights are vested
under [the] retirement system, and thereby misses the crucial distinction . . . ."
(International Assn. of Firefighters v. City of San Diego, supra, 34 Cal.3d at p. 301.) The
expressly promised and vested rights of pensioners is to receive a pro-rata share of an
identified salary (e.g. the salary of the judge occupying the office formerly occupied by
the pensioner), not to receive a pro-rata share of a hypothetical salary.
                                               17
                                             II

                                 THE REMAINING ISSUE

       After the trial court entered its order sustaining without leave to amend JRS's

demurrer to pensioners' Olson I claims, pensioners moved to partially vacate that order.

This motion asserted that, even under the interpretation of Olson I espoused by JRS and

adopted by the trial court, their action had asserted viable claims on behalf of 10 class

members (the 10 claimants) who were allegedly not paid the amounts due to them under

Olson I as interpreted by the trial court.

       Pensioners' motion argued the action pleaded claims on behalf of seven trial

judges whose retirement allowances should have been (but were not) calculated and paid

based on the salary of an active trial court jurist as increased by an uncapped COLA

through July 5, 1981, consistent with the trial court's construction of Olson I. Pensioners

also asserted the action pleaded claims on behalf of three appellate court justices whose

retirement allowances should have been (but were not) calculated and paid based on the

salary of an active appellate court jurist as increased by an uncapped COLA through

July 5, 1987, again consistent with the trial court's construction of Olson I. Pensioners'

motion to vacate argued that, because the complaint alleged these 10 claimants had not

been paid their retirement allowances during the 1970's and 1980's in accordance with

this rate, the demurrer should be overruled as to the claims made by the 10 claimants for

these time periods, or alternatively, that pensioners should be granted leave to amend to

allow the 10 claimants to more clearly and separately plead these claims on behalf of

these claimants.

                                             18
       The trial court denied the motion, concluding (1) this category of unpaid pension

payments by the 10 claimants was "not clearly part of the petition," and (2) even if these

claims had been separately pleaded, this category of claims was time-barred by Code of

Civil Procedure section 337.5; and (3) the death of the 10 claimants ended any further

obligations by JRS to this group of retirees under section 20164. Pensioners argue the

ruling on their motion was error.

       We conclude the trial court erred and should have granted pensioners leave to

amend to separately state the alleged claims for the 10 claimants. The first basis for the

court's ruling--that this portion of unpaid pension payments by the 10 claimants was "not

clearly part of the petition"--was erroneous. The petition and complaint below asserted

claims by numerous individuals covering lengthy periods of time, including years the

trial court correctly found were outside the ambit of Olson I's protected periods during

which uncapped COLA adjustments to salaries were owed to certain jurists and

(derivatively) to certain pensioners. However, it appears the exhibits attached to the

complaint also reflected that at least a segment of each of the claims pleaded by the 10

claimants--alleged underpayments during the protected period--were based on

underpayments that would have fallen within the ambit of Olson I's protected periods,

and JRS does not contend otherwise. The incorporation by reference of these exhibits, a

permissible method for asserting factual averments underlying a cause of action (see, e.g.,

Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal. App. 4th 592, 608-609), was

adequate to make this segment of unpaid pension payments by the 10 claimants a part of

the petition, and it was error to find to the contrary. To the extent this aspect of the trial

                                              19
court's ruling was that this segment was not "clearly" alleged, it was error not to grant

leave to amend to allow these 10 claimants to more clearly elucidate this segment of their

claim. (Schifando v. City of Los Angeles (2003) 31 Cal. 4th 1074, 1081.)

       The second ground for the court's denial of the motion was that this segment of the

claims of the 10 claimants was time-barred by Code of Civil Procedure section 337.5,

which places a 10-year statute of limitations on actions on a judgment. (Id. at subd. (b).)

However, a demurrer ordinarily challenges defects on the face of the complaint

(Lazzarone v. Bank of America (1986) 181 Cal. App. 3d 581, 590), and there is nothing on

the face of pensioners' petition revealing any part of this segment of the claims of the 10

claimants was part of a judgment that would have triggered the limitations period under

Code of Civil Procedure section 337.5. Although a court may consider matters outside

the pleading that are subject to a proper request for judicial notice (Lazzarone, at p. 590),

and the trial court here apparently concluded the judgment in Olson I triggered the 10-

year period of limitations,5 the time under Code of Civil Procedure section 337.5 only

begins to run upon entry of a final enforceable judgment (Kertesz v. Ostrovsky (2004)

115 Cal. App. 4th 369, 373), which requires a final determination of the rights of the

parties within the meaning of Code of Civil Procedure section 577 and " ' " 'leaves

nothing to be done but to enforce by execution what has been determined.' " ' " (Center

for Biological Diversity v. California Fish & Game Com. (2011) 195 Cal. App. 4th 128,

5       The trial court, citing Code of Civil Procedure section 337.5, subdivision (b), ruled
that "[a]ny claims by these 10 judges for benefits under Olson v. Cory would have
expired 10 years after Olson v. Cory decision, decided in 1980."
                                               20
141, fn. 7.) As explained by Olson III, Olson I did not result in a final judgment on

which execution could proceed:

          "because the declaratory judgment adjudicated in Olson v. Cory I
          was not in itself enforceable. The purpose of declaratory relief is 'to
          enable the parties to shape their conduct so as to avoid a breach.'
          [Quoting Babb v. Superior Court (1971) 3 Cal. 3d 841, 848.]
          Though declaratory relief may properly be accompanied by coercive
          relief [citation], the judgment in Olson v. Cory I was purely
          declaratory. It contained no enforceable provision, such as one
          directing a particular party to pay a specified sum to another party."
          (Olson III, supra, 35 Cal.3d at p. 400.)

       Because the only judicially noticed judgment was not one on which the 10-year

statute of limitations could have commenced running, and no other subsequent judgment

was introduced below on which the trial court below could properly have concluded all of

the claims of the 10 claimants were actually encompassed therein and hence time-

barred,6 it was error to conclude on demurrer that the time bar of Code of Civil

6       Arguably, some final enforceable judgment was subsequently entered by the trial
court on remand from Olson III that would have triggered Code of Civil Procedure
section 337.5. However, the record below contains no request for judicial notice of any
judgment entered by the trial court after remand, much less the actual judgment entered
after remand. Accordingly, it is impossible to determine the scope of any judgment
actually entered (i.e. for what time periods were damages awarded by the final judgment),
or whether any (or all) of these claimants were members of the class in whose favor the
judgment awarded monetary compensation for underpayments. (See Olson III, supra, 35
Cal.3d at pp. 398-399 [noting the plaintiffs' 1980 notice of class action advised that " '[i]f
you are a member of the class who does not request exclusion and you wish to be
included in, obtain the benefits of, and be bound by the final judgments entered in this
class action, you need do nothing,' " italics added by Olson III].) Additionally, even
assuming these 10 claimants were awarded damages by the final judgment entered after
remand, at least three of these claimants pleaded claims in the present action that
potentially could not have been barred by an award encompassed in the final judgment
entered after remand. Specifically, three of these claimants (Justices Aiso, Friedman and
Reppy) appear to be appellate court justices whose Olson I claim alleges they were
entitled to be (but were not) paid amounts based on uncapped COLA's through the end of
                                              21
Procedure section 337.5 precluded pensioners from amending their petition to state a

viable cause of action for this segment of the claims of the 10 claimants.

       The final ground for the trial court's denial of the motion was that all of JRS's

obligations to these 10 claimants were extinguished under section 20164, subdivision (a).

Although that subdivision specifies the obligations of the system continues "throughout

the lives of the respective retired members, and thereafter until all obligations to their

respective beneficiaries under optional settlements have been discharged," it contains no

explicit statute of limitations for accrued but unpaid pension payments that might form a

chose in action that the decedent's estate or trust might be entitled to assert. Instead, the

only explicit statute of limitations described in section 20164 is the three-year limitations

period7 provided in subdivision (b) "[f]or the purposes of payments into or out of the

retirement fund for adjustment of errors or omissions," which provides three-year

limitation on the system's right to collect for erroneous payments out of the system (id. at

subds. (b)(1) & (b)(3)), but that subdivision also specifies that "[i]n cases where this

system owes money to a member or beneficiary, the period of limitations shall not

apply." (Id. at subd. (b)(2).) Although there are undoubtedly statutes of limitations that

apply when the decedent's heir or trust is authorized to receive the amounts due to a

retired jurist that were accrued and unpaid at the time of the jurist's death (see § 75006),

the limitations are not specified in section 20164.

1986. It is difficult to imagine how a judgment entered after remand in 1983 from Olson
III would have encompassed alleged underpayments that had not yet occurred.

7     Section 20164 provides for a longer period when the erroneous payment from the
system is the result of fraud by the member. (Id. at subd. (c).)
                                            22
       We caution that our conclusion here is a limited one: the trial court should not

have dismissed this segment of the alleged claims for these 10 jurists on demurrer but

instead should have granted pensioners leave to amend to separately state this limited

segment of claims. Whether these claims, once distilled, may be subjected to a motion

for summary judgment based on properly introduced extrinsic evidence, or based on

other statutes of limitations that may be applicable but were not raised below, are matters

that must be determined on remand.

                                      DISPOSITION

       The trial court is directed to vacate its order denying pensioners' motion to

partially vacate the order sustaining respondent's demurrer without leave to amend, and to

enter a new and different order permitting pensioners leave to amend the complaint to

separately state claims for alleged underpayment of pensions as described in Part II of

this opinion. In all other respects, the judgment is affirmed. Each party shall bear its

own costs on appeal.

                                                                           McDONALD, J.

WE CONCUR:

BENKE, Acting P. J.

IRION, J.

                                             23
Filed 5/29/14
                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                      DIVISION ONE

                                STATE OF CALIFORNIA

FAY STANIFORTH et al.,                             D064111

        Plaintiffs and Appellants,

        v.                                         (Super. Ct. No.
                                                    37-2012-00093475-CU-MC-CTL)
THE JUDGES' RETIREMENT SYSTEM,

        Defendant and Respondent;                  ORDER MODIFYING OPINION

JOHN CHIANG, as State Controller, etc.,

        Real Party in Interest and Respondent.

THE COURT:

        It is ordered that the opinion filed herein on May 19, 2014, be modified as follows:

        On page 18, in the first and second sentences of the second full paragraph, the

word "through" is replaced with the word "until" so the sentences read:

        "Pensioners' motion argued the action pleaded claims on behalf of seven trial

judges whose retirement allowances should have been (but were not) calculated and paid

based on the salary of an active trial court jurist as increased by an uncapped COLA until

July 5, 1981, consistent with the trial court's construction of Olson I. Pensioners also

asserted the action pleaded claims on behalf of three appellate court justices whose

retirement allowances should have been (but were not) calculated and paid based on the
salary of an active appellate court jurist as increased by an uncapped COLA until July 5,

1987, again consistent with the trial court's construction of Olson I."

       There is no change in the judgment.

                                                                          BENKE, Acting P. J.

Copies to: All parties

                                              2
Filed 5/29/14
                COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                      DIVISION ONE

                                STATE OF CALIFORNIA

FAY STANIFORTH et al.,                             D064111

        Plaintiffs and Appellants,

        v.                                         (Super. Ct. No.
                                                    37-2012-00093475-CU-MC-CTL)
THE JUDGES' RETIREMENT SYSTEM,

        Defendant and Respondent;                  ORDER CERTIFYING OPINION
                                                   FOR PUBLICATION
JOHN CHIANG, as State Controller, etc.,

        Real Party in Interest and Respondent.

THE COURT:

        The opinion filed May 19, 2014, is ordered certified for publication.

                                                                      BENKE, Acting P. J.

Copies to: All parties