Bd. of Retirement of County of Fresno Employees Retirement Assn.
Filed
7/16/13 Chisom v. Bd. of Retirement of
County of Fresno Employees Retirement Assn. CA5
NOT
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Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
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as specified by rule 8.1115(b). This
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
GERALDINE CHISOM et al.,
Plaintiffs and
Appellants,
v.
BOARD OF RETIREMENT OF COUNTY
OF FRESNO EMPLOYEES’ RETIREMENT ASSOCIATION et al.,
Defendants and
Respondents.
F064259
(Super.
Ct. No. 10CECG02372)
APPEAL from
a judgment of the Superior Court of
County. Sharon Elizabeth Mettler,
Judge. (Retired judge of the Kern Super.
Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the
Cal. Const.)
Thomas J.
Tusan and Russell D. Cook for Plaintiffs and Appellants.
Reed Smith,
Harvey L. Leiderman and Jeffrey R. Rieger for Defendants and Respondents Board
of Retirement of County of Fresno Employees’ Retirement Association and Fresno
County Employees’ Retirement Association.
Lozano
Smith, Gregory A. Wedner and Scott G. Cross for Defendants and Respondents
County of Fresno, Clovis Veterans Memorial District, Fresno Mosquito &
Vector Control District and Superior Court of California for the County of
Fresno.
-ooOoo-
Appellants
are retired public employees and members of the Fresno County Employees’
Retirement Association (FCERA). From
2001 to 2009, if a member of FCERA qualified for a non-service-connected
disability retirement, the amount of his or her monthly retirement allowance
was calculated based on an “enhanced†benefits formula that exceeded the
formula provided in the statutes governing such matters as found in the County
Employees Retirement Law of 1937 (Gov. Code, § 31450 et seq. (CERL)).
formula was an interoffice letter by the chief deputy county counsel stating
that, in his opinion, a 2000 settlement agreement (the settlement agreement),
which resolved certain claims against the County of Fresno (the County), FCERA,
and others, relating to retirement benefits, was intended to include an
enhancement of disability retirement benefits.
The letter advised that disability retirement allowances should be
increased according to a formula attached to the letter. FCERA followed that advice, even though the
settlement agreement had enhanced only “service†retirement benefits and was
silent as to disability retirement benefits.
In 2009, the governing board of FCERA, known as the board of retirement
(the Board), reexamined the issue and concluded that it had been erroneously
using the enhanced benefits formula to calculate non-service-connected disability
retirement, and it voted to discontinue that practice. Appellants then filed the present action
against the Board, FCERA, the County, and other plan sponsors (collectively
respondents), to require them to resume the use of the enhanced benefits formula. Respondents demurred. After allowing several opportunities to
amend, the trial court sustained respondents’ demurrer to appellants’ third
amended petition without leave to amend on the ground that, as a matter of law,
the settlement agreement did not include the enhanced benefits formula for
disability retirement. Appellants appeal
from the resulting judgment, arguing that under the recent Supreme Court case
of Retired Employees Assn. of Orange
County, Inc. v. County of Orange (2011) 52 Cal.4th 1171 (
benefits formula for disability retirement was arguably an implied term of the settlement agreement. We disagree and will affirm the judgment of
the trial court.
BACKGROUND AND PROCEDURAL HISTORY
CERL—The Statutory
Backdrop
FCERA is a public retirement
trust that exists to administer benefits for active and retired public
employees in Fresno County. It operates
under the provisions of CERL. (
County Employees’ Retirement Assn. (2011) 198 Cal.App.4th 1355, 1360.) Upon satisfying age and service requirements,
members of a county retirement system governed by CERL (such as FCERA) qualify
to receive a service retirement allowance.
A member’s service retirement allowance is determined under one of the
statutory formulas set forth in CERL (e.g., § 31676.14), upon adoption
thereof by a county’s board of supervisors.
When a
member of FCERA is incapacitated due to a disability, he or she may be entitled
to receive a disability retirement allowance from FCERA. (See § 31720 et seq.) If the disability was not in the course of or
caused by the member’s employment, the member may be entitled to what is called
a “non-service-connected†disability retirement allowance. (See §§ 31726 [general members], 31726.5
[“safety†members].) If a member
qualifies for a non-service-connected disability retirement, the monthly
allowance is calculated under a formula that appears in the applicable section
of CERL. (See §§ 31727 [general
members], 31727.2 [“safety†members].) A
separate statutory formula is used for service-connected disability. (§ 31727.4.) Service connected-disability is not at issue
in this case.
The
As
noted, appellants contend that monthly retirement allowances paid by FCERA for
non-service-connected disabilities must be calculated under an enhanced
benefits formula that is greater than the CERL formula. Appellants argue they acquired such rights as
an implied term of the settlement agreement.
Before we discuss the settlement agreement itself, it is necessary as
background to briefly note the Supreme Court decision of Ventura County Deputy Sheriffs’ Assn. v. Board of Retirement (1997) 16 Cal.4th 483 (Ventura), since that decision was the basis for the class action
claims that were settled in the settlement agreement.
In Ventura, the Supreme Court engaged in extensive statutory analysis
of certain sections of CERL to interpret the meaning of “‘compensation’†and
“‘compensation earnable’†in order to ascertain what must be included in an
employee’s “‘final compensation’†for purposes of calculating his or her
retirement pension under CERL. (Ventura,
supra, 16 Cal.4th at pp.
487-505.) The Supreme Court held that in
addition to an employee’s base salary, other forms of cash remuneration
(excluding overtime) had to be included in calculating his or her final
compensation for purposes of a CERL retirement pension, such as educational
pay, bilingual pay, payments in lieu of accrued vacation time, uniform maintenance
allowances, etc. (Ibid.) In so holding, the
Supreme Court disapproved a longstanding Court of Appeal decision upon which
Ventura County, among many other counties, had relied in making actuarial
calculations. (Id. at pp. 505-507.)
The Supreme Court concluded its opinion in Ventura with the following remedial directives: “There may be unanticipated costs to Ventura
County if the pensions of the individual plaintiffs and the employees the
association represents must be recalculated and adjusted upward. If so, to comply with the financial
provisions of CERL [citation] and accommodate future increases, the county may
have to make a supplemental appropriation and adjust the future annual
appropriation for its contribution to the pension fund to cover the increase in
future retiree pensions that results from inclusion of additional items of
‘compensation’ in ‘compensation earnable.’â€
(Id. at p. 507.)
In the aftermath of
lawsuits were filed in various counties, alleging noncompliance with
benefits and seeking to make the Ventura
decision retroactive. Several such class
action lawsuits were filed in Fresno County Superior Court against FCERA and/or
the County, which cases were consolidated and coordinated to San Francisco
County Superior Court. These cases were
(and are) collectively referred to as Ventura
II litigation. The parties to the
Fresno County Ventura II litigation
reached a final settlement pursuant to a settlement agreement that is described
below.
The Settlement
Agreement
The
settlement of the Fresno County Ventura
II litigation entailed two consecutive settlement agreements, the first of
which was executed in July-August 2000 (the first agreement), but it was short-lived. The first agreement provided, among other
things, that “[a]ll parties agree to an enhanced formula for service retirement
benefits for both general and safety members†in accordance with an attachment
thereto. It also required the parties
“to cooperate in facilitating the passage of enabling amendment of [CERL]
necessary to provide the enhanced formula.â€
A notice was sent to all class members to advise them of the terms of
the settlement, and San Francisco County Superior Court approved the class
action settlement. However, when the
proposed enabling legislation was vetoed by the Governor, it rendered the first
agreement null and void.
In October
2000, the parties negotiated and executed a second settlement agreement that
was later approved by San Francisco Superior Court. This became the operative settlement
agreement between the parties and is referred to herein as the settlement
agreement. Section 6 of the settlement
agreement provided that “[a]ll parties agree that the County Board of Supervisors
will (1) adopt by resolution the service retirement formula for general
members provided by … section 31676.14, to be effective January 1, 2001; …
[and] (2) adopt a resolution provided by section 31678.2 (effective
January 1, 2001) to make the section 31676.14 formula retroactive for all
service credit earned by employees retiring on or after January 1,
2001.†Section 6 further provided that
only class members retiring on or after January 1, 2001, would be entitled
to the benefits provided in section 6.
Additionally, in section 7 of the settlement agreement, the parties
agreed “to cooperate in facilitating passage of an enabling amendment of [CERL]
to provide an enhanced formula for service retirement benefits equal to ‘two
and one half percent at age 55’ … for general members and ‘two and one half
percent at age 50’ … for safety members.
[¶] … [U]pon the effective date
of such amendment, benefits for employees retiring on and after January 1,
2001 shall be provided under that enhanced formula rather than as provided in
section 6.â€
title="">[2] Persons who retired before January 1, 2001,
would not be entitled to the benefits indicated in sections 6 or 7, but would
receive an increase of “$15.00 per month service benefit for each full year of
service subject to a maximum of 30 years service, i.e., a maximum of
$450.†As with the first agreement, the
settlement agreement expressly mentioned and enhanced only “service†retirement benefits; it was completely silent as to
disability retirement.
By its
terms, the settlement agreement purported to be a compromise that was meant to
fully resolve and settle all of the Fresno County Ventura II lawsuits and all issues between the parties therein, and
it included mutual waivers and releases, along with a promise to forbear from
any future lawsuit or claim relating to the scope of the Ventura Supreme Court opinion or to the items of compensation to be
included for purposes of CERL. Not only
was the settlement agreement intended to settle “all issues among the
[p]arties,†but it was expressly agreed that it was “complete and final†with
respect to those issues.
Moreover, section 19 of the
settlement agreement stated as follows:
“This Settlement Agreement constitutes the entire agreement among the
[p]arties. The [p]
agreements, arrangements, or understandings exist among them that are not
expressed in this Settlement Agreement.â€
(Italics added.) In section 20,
the parties acknowledged that the settlement agreement was “clear and
unambiguous,†was reviewed by all counsel, and it was agreed that no “parol or
other evidence outside this agreement†may be used “to explain, construe,
contradict, or clarify the terms of the Settlement Agreement, the intent of the
[p]arties or their counsel, or the circumstances under which the Settlement
Agreement was made or executed.†In
section 21, the parties further agreed the settlement agreement could only
be amended, modified or expanded by written agreement of those parties affected
by the particular amendment sought.
After all
members of the class action were notified of the terms of the settlement
agreement, the trial court approved it and a judgment was entered thereon. Approximately 20 signatures were affixed to
the settlement agreement, most of which were the signatures of attorneys who
had reviewed the document on behalf of their respective client or clients, and
by signing indicated approval and acceptance thereof. Among the attorneys who signed the settlement
agreement was J. Wesley Merritt of the Fresno County Counsel’s
office. He had also signed the first
agreement.
The Opinion Letter
On October
19, 2001, in response to a request from the Fresno County Auditor-Controller
for a legal opinion on the issue of “computing disability retirement benefits
following the settlement of the Ventura II class action litigation,†Chief
Deputy County Counsel J. Wesley Merritt wrote a confidential letter
stating as follows:
“We conclude that post-settlement disability retirement
benefits should be computed based on an enhanced formula commensurate with the
enhanced benefits extended to service retirees under the settlement agreement.
“In Ventura[,
California Supreme Court expanded what must be included in an employee’s compensation
for purposes of computing retirement benefits.
Successor Ventura II lawsuits were then filed … seeking to make the
Ventura [] decision retroactive and add additional items to an employee’s
compensation for purposes of computing retirement benefits. [¶] … [¶]
“We first attempted settlement of these [Fresno County
executed in July and August 2000. That
initial agreement called for enhanced service retirement benefits at
2 1/2% at age 55 for general members and 2 1/2% at age 50 for safety
members, to be accomplished by amendment of [CERL]. [¶] At
the time of that initial agreement, the retirement system actuaries also
drafted proposed amendments to [CERL] for enhanced disability retirement
benefits (copy attached). The proposed
amendments prescribed a disability retirement benefits formula commensurate
with the enhanced retirement benefits extended to service retirees under the
settlement agreement. However, contrary
to enhanced service retirement benefits, the proposed statutory
amendments for enhanced disability retirement benefits were never
finalized for submission to the Governor.
“The Governor vetoed the enabling service retirement
legislation proposed under the initial settlement agreement. The parties then negotiated and executed a
second settlement agreement. Under that
second agreement, the same enhanced service retirement benefits were
provided .… However, the second
agreement is silent on disability retirement benefits.
“It was obviously the intent of the parties to the
second settlement agreement to include enhanced disability retirement benefits
equal to those proposed under the initial agreement. We therefore advise that you compute
post-settlement disability retirement benefits under the attached enhanced
formula drafted by the actuaries for the initial agreement, i.e., disability
retirement benefits commensurate with the enhanced benefits for service
retirees. We also advise that you pursue
enactment of the disability formula into [CERL] just as we are pursuing
statutory enactment of the service retirement benefit tables.â€
Mr.
Merritt’s letter indicated he was under the impression that the first agreement
included an enhancement of disability benefits.
We note that, in reality, neither the first agreement nor the settlement
agreement did so—at least not expressly.
The attachment to Mr. Merritt’s letter appears to be a photocopy of
section 31727.1 of CERL with some handwritten notations on it. Where the photocopy of the existing statute
set forth the formula as “[n]inety percent of one-fiftieth of his final
compensation multiplied by the number of years of service credited to him,†the
word “one-fiftieth†was crossed out where it appeared in the statute and was
replaced by a handwritten insertion of the word “one-fortieth.†This was the enhanced benefits formula that
Mr. Merritt advised should be used in computing non-service-connected
disability retirement. In reliance on
the advice of county counsel, FCERA paid non-service-connected disability
benefits in accordance with this enhanced benefits formula from approximately
2001 to 2009.
Events in 2008-2009
In late
2008, new counsel for the Board reviewed the matter and advised the Board that
it could no longer use the enhanced formula for paying non-service-connected
disability retirement. After a series of
public meetings were held concerning the issue, the Board elected to
discontinue use of the enhanced benefits formula for non-service-connected disability,
effective as of June 30, 2009. As of
that date, the Board would pay a retirement allowance for non-service-connected
disability in accordance with the provisions of CERL. The Board also decided it would waive any
recovery of past overpayments.
Proceedings in the
Trial Court
Appellants
then filed the present lawsuit, seeking to compel respondents to resume the use
of the enhanced formula for calculating non-service-connected disability
retirement benefits. After a series of
demurrers and opportunities to amend, appellants filed their third amended
petition on July 1, 2011. The
attachments to the third amended petition included the first agreement, the
court order approving it, the settlement agreement, the court order approving
it, and Mr. Merritt’s opinion letter.
The third
amended petition set forth five causes of action: A first and second cause of action for writ
of mandate, a third cause of action for reformation of contract, a fourth cause
of action for breach of contract, and a fifth cause of action for rights under
the Ventura case. The first through fourth causes of action
claimed that appellants were entitled to the enhanced benefits formula for
disability retirement based on the
settlement agreement. In essence,
the first through fourth causes of action were premised on appellants’
assertion that the right to receive the enhanced disability benefits was an
implied term of the settlement agreement.
The fifth cause of action claimed, in the alternative, that if the
settlement agreement did not create such rights, then appellants were entitled
to such rights under the principles of the Ventura
case.
Respondents demurred to the third
amended petition on the ground that it failed to state a cause of action
because the settlement agreement did not include disability retirement benefits
and because the clear terms of the settlement agreement foreclosed all of
appellant’s claims. The trial court
agreed and sustained the demurrer without leave to amend.
The trial court’s order
explained: “The manifest intent of the
parties to the contract was to have an agreement that would not be subject to
attack. They included every waiver and
finding known to the law at the time to avoid future litigating of any Ventura
issues. It was clearly the intent to
have this agreement be the end. Permitting
Count four to proceed would be ignoring this intent and depriving defendants of
the benefit of the bargain. [¶] Through two court hearings and agreements the
non-service connected disability (NSCD) retirees were not included in the
agreement. Fresno County Chief Deputy
County Counsel J. Wesley Merritt signed this contract that contains
waivers and asserts there are no ambiguities.
The terms of his later letter to the Fresno County Auditor Controller make
clear that he realized that the agreement he signed did not cover the NSCD
retirees and that a change in the law was necessary for them to be
covered.… [¶] There is nothing in the legal record that
warrants a finding of ambiguity in the terms of the contract and the contract
clearly waives future modifications for omitted terms.â€
After the demurrer was sustained
without leave to amend, the third amended petition was dismissed with prejudice
and judgment entered for respondents.
Appellants appealed from the judgment.
DISCUSSION
Standard of
Review
“In reviewing
the sufficiency of a complaint against a general demurrer, we are guided by
long-settled rules. ‘We treat the demurrer as admitting all
material facts properly pleaded, but not contentions, deductions or conclusions
of fact or law. [Citation.] We also consider matters which may be
judicially noticed.’ [Citation.] Further, we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context. [Citation.]
When a demurrer is sustained, we determine whether the complaint states
facts sufficient to constitute a cause of action. [Citation.]
And when it is sustained without leave to amend, we decide whether there
is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its
discretion and we reverse; if not, there has been no abuse of discretion and we
affirm. [Citations.] The burden of proving such reasonable
possibility is squarely on the plaintiff.
[Citation.]†(
If the allegations in the complaint conflict with attached exhibits, we
rely on and accept as true the contents and legal effect of the exhibits. (SC
Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 83;
(2001) 90 Cal.App.4th 500, 505.)
However, “if the exhibits are ambiguous and can be construed in the
manner suggested by plaintiff, then we must accept the construction offered by
plaintiff.†(SC Manufactured Homes, Inc. v. Liebert, supra, at p. 83.) “‘So long
as the pleading does not place a clearly erroneous construction upon the
provisions of the contract, in passing upon the sufficiency of the complaint,
we must accept as correct plaintiff’s allegations as to the meaning of the
agreement.’ [Citation.]†(Aragon-Haas
v. Family Security Ins. Services, Inc. (1991) 231 Cal.App.3d 232, 239.)
The Demurrer Was Correctly Sustained
Appellants do not deny that the
settlement agreement was silent about disability benefits. They do not claim to state a cause of action
for breach of an express term of a
contract. Rather, appellants argue the
trial court erred in sustaining the demurrer without leave to amend because,
under the principles set forth in the recent Supreme Court case of
Cal.4th 1171, they stated a cause of action for an implied contract term to provide disability retirement under the
enhanced benefits formula. In order to
assess the merits of appellants’ argument, we begin our discussion with an
overview of the Retired Employees
decision.
Employees, supra, 52 Cal.4th 1171
In Retired Employees, the Supreme Court was asked by the United States
Court of Appeals for the Ninth Circuit to address the abstract question of
“‘[w]hether, as a matter of California law, a California county and its
employees can form an implied contract that confers vested rights to health
benefits on retired county employees.’â€
(Retired Employees, supra, 52
Cal.4th at p. 1176.) The Supreme
Court concluded that under certain circumstances and as long as no statute or
ordinance would prohibit such arrangements, a county may be bound by an implied
contract. (Id. at pp. 1176, 1194.)
However, a county’s ability to enter an implied contract regarding
issues of employee compensation is limited by the constraints of section
25300. (Retired Employees, supra,
52 Cal.4th at p. 1184.) That statute
provides as follows: “The board of
supervisors shall prescribe the compensation of all county officers and shall
provide for the number, compensation, tenure, appointment and conditions of
employment of county employees .…
[S]uch action may be taken by resolution of the board of supervisors as
well as by ordinance.†(§ 25300.) The Supreme Court explained the implications
of this statute on implied contracts:
“Although … section 25300 does require that compensation of county
employees be addressed in an ordinance or resolution, the statute does not
prohibit a county from forming a contract with implied terms, inasmuch as
contractual rights may be implied from an ordinance or resolution when the
language or circumstances accompanying its passage clearly evince a legislative
intent to create private rights of a contractual nature enforceable against the
county.†(Retired Employees, supra,
at pp. 1176-1177.) To summarize,
the Supreme Court held that while it is possible that
compensation may be implied from a resolution, the applicable resolution
remains the essential source of the parties’ contractual rights and
obligations. (Id. at p. 1185 [a court “must look to†resolutions to determine
contract rights].)
name="_ftnref3" title="">[3]
In Retired Employees, the facts of the underlying Ninth Circuit case
provided a backdrop for some of the Supreme Court’s discussion of this
issue. We briefly summarize those
underlying facts. Orange County began in
1985 to combine active and retired employees into a single, unified pool for
purposes of calculating health insurance premiums. That practice resulted in lower premiums for
retirees, higher premiums for active employees and increased total
contributions by the county. Orange
County continued the pooling arrangement each year from 1985 through 2007. (Retired
Employees, supra, 52 Cal.4th at
p. 1177.) In doing so, it “relied
on the annual motions and resolutions of the Board [of Supervisors] setting
health premiums during the relevant period, each of which specified health
insurance rates only for that plan year.â€
(Id. at p. 1178.) In 2007, due to budgetary concerns, Orange
County passed a resolution splitting the pool of active and retired employees,
effective January 1, 2008. The Retired
Employees Association of Orange County (REAOC) filed suit in federal court to
compel Orange County to continue the health insurance pooling. REAOC conceded that the express provisions of the various memoranda of understanding
(MOU’s) and the Orange County Board of Supervisors resolutions approving the
MOU’s were silent as to the duration of the unified pool. Nevertheless, REAOC argued that the county’s
long-standing and consistent practice of pooling active and retired employees,
along with the county’s representations to employees regarding a unified pool,
evidenced an implied provision that
the single, unified pool was a vested right.
(Id. at
pp. 1177-1178.) In other words,
REAOC asserted that a vested right to the pooling arrangement was an
approved by the Orange County Board of Supervisors by resolution. This argument for an implied term was an
important distinction noted by the Supreme Court: “REAOC … [sought] recognition only of an
implied term of an existing contract
(and not the recognition of an implied contract). That matters of compensation must be
addressed by resolution does not necessarily bar recognition of implied terms
concerning compensation. Under
California law, contractual rights may be implied from legislative enactments
[e.g., resolutions] under limited circumstances .…†(Id.
at p. 1185.)
The Supreme Court then proceeded to
explain why contractual rights may only be implied from a legislative enactment
in limited circumstances. “A resolution
by a county board does not only—or even primarily—establish contract rights. A resolution is also one of the means by
which a board of supervisors exercises its authority to effect policy. [Citations.]
The judicial determination whether a particular resolution was intended
to create private contractual or vested rights or merely to declare a policy to
be pursued until the legislative body shall ordain otherwise requires
sensitivity to ‘the elementary proposition that the principal function of a
legislature is not to make contracts, but to make laws that establish the
policy of the [governmental body].
[Citation.] Policies, unlike
contracts, are inherently subject to revision and repeal, and to construe laws
as contracts when the obligation is not clearly and unequivocally expressed
would be to limit drastically the essential powers of a legislative body.’ [Citations.]
‘Thus, it is presumed that a statutory scheme is not intended to create
private contractual or vested rights and a person who asserts the creation of a
contract with the statute has the burden of overcoming that presumption.’ [Citation.]â€
(Retired Employees, supra, 52
Cal.4th at pp. 1185-1186.)
After reviewing several cases that
applied this presumption, the Supreme Court in Retired Employees then articulated the following rule: “[W]e conclude generally that legislation in
California may be said to create contractual rights when the statutory language
or circumstances accompanying its passage ‘clearly … “evince a legislative
intent to create private rights of a contractual nature enforceable against the
[governmental body].â€â€™
[Citations.]†(
“Although the intent to make a contract must be clear, our case law does
not inexorably require that the intent be express. [Citation.]
A contractual right can be implied from legislation in appropriate circumstances. [Citation.]
Where, for example, the legislation is itself the ratification or
approval of a contract, the intent to make a contract is clearly shown.†(Id.
at p. 1187.)
The Supreme Court’s opinion in
question posed by the Ninth Circuit in the abstract. It did not decide the issue of whether the
vested pooling rights alleged by REAOC could be “implied from Board
resolutions, including those resolutions approving the [MOU’s]†in that
case. (Retired Employees, supra,
52 Cal.4th at p. 1188.) It
such cases to prevent the public (i.e., taxpayers) from being blindsided by
unexpected financial obligations: “A
court charged with deciding whether private contractual rights should be
implied from legislation, however, should ‘proceed cautiously both in
identifying a contract within the language of a … statute and in defining the
contours of any contractual obligation.’
[Citation.] The requirement of a
‘clear showing’ that legislation was intended to create the asserted
contractual obligation [citation] should ensure that neither the governing body
nor the public will be blindsided by unexpected obligations.†(Id.
at pp. 1188-1189.)
B.
No Implied Term Relating to Disability
Retirement Benefits
We now turn to the issue of whether
appellants have stated a cause of action premised on the theory that the
settlement agreement had an implied term requiring payment of disability
retirement under the enhanced benefits formula.
Preliminarily, we accept for
purposes of this appeal that (i) the settlement agreement, as approved by the
County, was tantamount to a resolution
for purposes of invoking the analysis in Retired
Employees and (ii) it was intended to
create contractual rights. (See
itself the ratification or approval of a contract, the intent to make a
contract is clearly shownâ€].) However,
moving past these initial hurdles merely brings us to the real difficulty for
appellants’ theory—the restrictive language
of the settlement agreement. As
may only grant rights concerning employee compensation by means of a resolution
or ordinance (id. at p. 1184;
§ 25300), and this means that a court is required to carefully consider
the language of the relevant resolution or ordinance (here, the settlement
agreement) when a party claims an implied contractual right (
body and the public from being “blindsided by unexpected obligations,†the
asserted contractual obligation must be clearly
shown. (Id. at p. 1189.)
We now turn to the relevant language
of the settlement agreement, applying the rule that when a contract is clear
and explicit, the parties’ intent is determined by reference to the language of
the agreement. (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342,
1385.) The settlement agreement enhanced
or adjusted the formula for service
retirement benefits, but said nothing about disability retirement
benefits. Further, the language of the
settlement agreement clearly and unequivocally expressed that
and resolved solely by what was expressly
set forth therein; and if that were not plain enough, it added that there were
no other or unexpressed agreements. We
briefly reiterate some of the key wording.
In section 18, the parties stated that the settlement agreement
“resolves all issues among the [p]arties†and the settlement agreement
was both “complete and final†with respect to those issues. In section 19, the settlement agreement
foreclosed the existence of additional, unexpressed obligations by stating as
follows: “This Settlement Agreement
constitutes the entire agreement among the [p]arties. The [
expressly acknowledge that no other agreements, arrangements, or understandings
exist among them that are not expressed in this Settlement Agreement.†(Italics added.) In section 20, the parties acknowledged that
the settlement agreement was “clear and unambiguous,†was reviewed by all
counsel, and it was agreed that no “parol or other evidence outside this
agreement†may be used “to explain, construe, contradict, or clarify the terms
of the Settlement Agreement, the intent of the [p]arties or their counsel, or
the circumstances under which the Settlement Agreement was made or
executed.†In section 21, the parties
further agreed the settlement agreement could only be amended, modified or
expanded by written agreement of those parties affected by the particular
amendment sought.
By adopting
this restrictive and limiting language of the settlement agreement, the County
unequivocally manifested its intention to approve and authorize
that were expressly set forth in the settlement agreement. The settlement agreement plainly said so, and
it even specified there were no additional unexpressed agreements or
arrangements. Under the circumstances,
were we to allow a claim for an implied additional term conferring
expressly provided in the settlement agreement (i.e., an enhanced benefits
formula as to disability retirement), it would directly contradict the
settlement agreement’s unambiguous express terms and blindside the public with
unexpected obligations. (
Since the language of the
settlement agreement foreclosed the possibility of additional unexpressed
obligations on the part of the County, the trial court correctly held that
appellants could not state a cause of action premised on an implied grant of
other (i.e., disability retirement) enhancements. Were we to hold otherwise, it would violate a fundamental rule of
contract law that an implied term may not be found where it would contradict
the express terms of the contract. (See
Corp. (1986) 187 Cal.App.3d 299, 316; Anderson
v. Savin Corp. (1988) 206 Cal.App.3d 356, 364.)
title="">[4]
Moreover, for purposes of a demurrer, a court is not required to accept
as true a plaintiff’s allegations of contractual terms where, in light of the
written agreement attached to the pleading, such allegations would place a
“clearly erroneous construction upon the provisions†of the attached
agreement. (Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181
Cal.App.3d 122, 128.)
name="_ftnref5" title="">[5] That
is precisely the case here, since for the reasons noted above, the settlement
agreement cannot be reasonably interpreted to include the implied provision for
enhanced disability retirement benefits.
(See Klein v. Chevron U.S.A.,
sustained without leave to amend where plaintiff failed to offer a meaning of
contract language to which it was reasonably susceptible].)
For the reasons set forth above, we
conclude the trial court correctly sustained the demurrer to the first through
fourth causes of action, since these claims were premised on the alleged
implied term of the settlement agreement.
This left only the fifth cause of
action. The fifth cause of action
alleged that, in the event there was no implied contractual right to have
disability retirement benefits determined under the enhanced benefits formula,
appellants allegedly should be granted such an enhancement based on the Supreme
Court’s decision in Ventura,
cause of action is barred by the unambiguous terms of the settlement
agreement. The settlement agreement
provided, in addition to the terms noted above, that it disposes of all claims
and issues among the parties, including
those relating to or arising out of the Ventura
case, and that the parties would forbear from bringing any future suit under
the Ventura case. The forbearance agreement was applicable “to
all items of compensation which were included or which could have been included
in [the Ventura II litigation].†Further, the settlement agreement included
language releasing and discharging all claims that were or could have been
asserted in connection with the Ventura
II litigation. We conclude that, as
a matter of law, appellants have waived and released the claims alleged in the
fifth cause of action.
Finally, no basis for leave to amend
is apparent, and none has been presented to us by appellants. We conclude the demurrer was properly
sustained to the third amended petition without leave to amend.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondents.
_____________________
Kane, J.
WE CONCUR:
_____________________
Cornell, Acting P.J.
_____________________
Franson, J.
name="_ftn1" title="">[1] Unless
otherwise indicated, further statutory references are to the Government Code.
name="_ftn2" title="">[2] We
have not been informed whether such legislation was enacted.
