Case Information
*1 Filed 12/12/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT
WILLIAM BAXTER et al., H042680
(Monterey County Plaintiffs and Respondents, Super. Ct. No. M127193) v.
CALIFORNIA STATE TEACHERS’
RETIREMENT SYSTEM,
Defendant and Appellant.
Eleven retired teachers (Teachers) who had been employed in the Salinas Unified High School District (District), disputed attempts by appellant California State Teachers’ Retirement System (CalSTRS) to recoup retirement benefit overpayments. The overpayments were the result of a years-long miscalculation by the District of the monthly retirement benefits to which the Teachers were entitled. The parties do not dispute that the District miscalculated Teachers’ monthly benefit amounts. But Teachers contend that the statute of limitations bars CalSTRS’s efforts to recoup prior overpayments and to reduce future monthly benefits to the proper amounts.
The dispute stems back to 1999, when the District and the Teachers’ union entered into a collective bargaining agreement that purported to create a separate class of employees for teachers who elected to work an extra (sixth) period. Some years later— on August 18, 2005, after three Teachers had retired—a District employee sent a memorandum to the Monterey County Office of Education (MCOE), which arguably alerted MCOE to the potential overpayment of retirement benefits to teachers in the *2 District who had worked a sixth period. In December 2008, CalSTRS was advised by its outside auditing firm that Teachers had been overpaid for several years due to the District’s improper inclusion of certain earnings in the calculation of their monthly benefits. In July 2010, CalSTRS directed the District to correct its calculations and remit prior overpayment amounts to CalSTRS. Teachers and the District appealed the audit findings of CalSTRS and requested an administrative hearing. In April 2012, before any such hearing, CalSTRS began reducing Teachers’ monthly payments.
In February 2013, an administrative law judge (ALJ) rejected the challenges of Teachers and the District, upholding CalSTRS’s conclusion that Teachers had been overpaid in the past and that their monthly benefits should be reduced to reflect the proper amounts going forward and should reflect deductions for prior overpayments. The ALJ rejected the statute of limitations defense asserted by Teachers and the District, i.e., that CalSTRS’s efforts to recoup prior overpayments and reduce future benefits were time-barred. The Appeals Committee of CalSTRS (Committee), which reviewed the ALJ’s order, ultimately rendered a decision in CalSTRS’s favor. Teachers successfully brought a petition for peremptory writ of administrative mandamus in the superior court compelling CalSTRS to resume paying them at the original monthly amounts. The trial court found that CalSTRS was barred by the applicable statute of limitations from either recouping previous overpayments or reducing future payments to reflect the allegedly correct amount of monthly benefits.
In this appeal, we interpret certain provisions of Education Code section 22008 [1] — a statute that has not been the subject of any prior appellate decisions. Under section 22008, subdivision (c) (§ 22008(c)), the three-year statute of limitations applicable for CalSTRS to bring an action to recoup the overpayments commenced with *3 its “discovery of the incorrect payment.” We conclude, contrary to the trial court’s decision, that “discovery” means the date CalSTRS actually discovered, or in the exercise of reasonable diligence should have discovered, the incorrect payment. We hold that August 18, 2005, the date of the District’s memorandum to the MCOE, was the correct accrual date of the statute of limitations here because the memorandum gave CalSTRS (through its ostensible agent, MCOE) inquiry notice of the overpayment issue.
We also address what action by CalSTRS constituted commencement of an “action” for purposes of determining whether the three-year statute of limitations under section 22008, subdivision (a) (§ 22008(a)) was satisfied. We conclude that, contrary to the trial court’s decision, the action was commenced on July 6, 2012, when CalSTRS filed the statement of issues to initiate the administrative proceeding.
The trial court incorrectly concluded that CalSTRS’s action to rectify the error for all monthly payments, past and future, was time-barred. Although the trial court correctly found that CalSTRS had not satisfied the three-year statute of limitations because it had commenced the action more than three years after its claim accrued, under the continuous accrual theory, the statute of limitations for periodic payments such as Teachers’ monthly retirement benefits here commenced with the due date of each payment. Therefore, only payments due more than three years prior to CalSTRS’s commencement of the action on July 6, 2012, were subject to Teachers’ statute of limitations defense. Accordingly, we will reverse the judgment and remand the matter for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background [2] Teachers [3] are 11 former teachers who taught within the District before retiring and becoming members of CalSTRS. CalSTRS is the state agency responsible for managing contributions made by employees and member school districts to the State Teachers’ Retirement Fund. (See § 22000 et seq.) Schools within the District utilized a six period schedule. Teachers within the District typically taught five of those periods and used the additional period to prepare prospective lesson plans. Some of them, however, including Teachers, agreed to teach during their sixth period time for additional compensation, and to shift their preparation time to before or after the regular school day. Teachers believed that this additional compensation would be credited toward their retirement plan, the so- called “Defined Benefit” plan administered by CalSTRS.
Teachers’ understanding stemmed, in part, from the District’s belief that such sixth period compensation was creditable. On September 29, 1999, the District and the Salinas Valley Federation of Teachers (“SVFT”) entered into a tentative collective bargaining agreement for the 1998-1999 and 1999-2000 school years. That agreement included an additional schedule for teachers who taught a sixth period, and changed the definition of a normal workday to include the extra period for all sixth period teachers. Each subsequent iteration of the collective bargaining agreement “contained provisions defining the sixth period teachers as a separate class of employees and the district has developed two distinct salary schedules that reflect the compensation paid to the two classes of certificated employees.”
*5 From September 29, 2008, until October 1, 2008, Mayer Hoffman McCann P.C.
(“MHM”), an accounting firm commissioned by CalSTRS, performed an audit of District records. CalSTRS received the auditor’s findings on December 1, 2008. The audit findings revealed the District’s practice of coding Teachers’ sixth period earnings as creditable was improper. CalSTRS issued a draft audit report on May 27, 2010, adopting MHM’s conclusion that the District had incorrectly coded Teachers’ sixth period earnings, causing Teachers to receive a larger monthly retirement benefit than that to which they were entitled. [4]
CalSTRS issued its final audit report on July 30, 2010, upholding the draft report’s finding. The audit concluded with two corrective orders. First, CalSTRS demanded that, within 60 days, the District submit corrections to CalSTRS to reverse the improperly credited compensation. Once the District submitted corrections, CalSTRS would recalculate the relevant retired teachers’ retirement allowances based on the correct final compensation and adjustment notification letters would be sent to affected teachers. Second, the District was ordered to “remit the total overpayments to CalSTRS for the retired members.”
The District failed to either submit corrections or remit the amount of the overpayments to CalSTRS. Consequently, on March 2, 2012, CalSTRS sent letters notifying each of the Teachers that, because the District had failed to comply with the corrective orders, CalSTRS would begin reducing Teachers’ respective monthly retirement benefit to the correct amount, effective April 1, 2012. In addition, Teachers’ *6 respective monthly payment was reduced by 5%, the statutory limit, to repay CalSTRS for the overpayments made to date. (See § 24617.) [5]
Teachers appealed the final audit findings on or before December 3, 2010. CalSTRS filed a statement of issues with the Office of Administrative Hearings on July 6, 2012. [6] An administrative hearing was conducted between February 11-15, 2013. All parties appeared. On July 18, 2013, the administrative law judge (“ALJ”) issued a proposed decision. The ALJ found in favor of CalSTRS, stated that the District had erred, and held that the District was responsible for reimbursing CalSTRS for the District’s reporting errors. On September 9, 2013, the Committee opted to reject the proposed decision, solicit additional briefing from all parties, and reconsider the administrative record and existing evidence. On January 23, 2014, the Committee issued a decision in favor of CalSTRS.
II. Procedural History
Following the entry of the Committee’s decision, on March 24, 2014, Teachers filed a petition for a peremptory writ of administrative mandamus under Code of Civil Procedure section 1094.5, naming CalSTRS as respondent and the District as real party in interest. Teachers’ arguments included the assertion that insufficient evidence supported the Committee’s decision. They sought a writ of mandamus requiring CalSTRS to (1) resume paying them at the monthly benefit levels existing before April 1, 2012, (2) cease any reductions in monthly payments for recoupment of alleged overpayments, *7 and (3) restore all monies withheld since April 1, 2012, due to reductions in monthly benefits that were improper.
After a trial on the petition on April 2, 2015, the court issued its intended decision on May 1, 2015. The trial court concluded that CalSTRS’s claims against Teachers to recover monies paid erroneously due to miscalculation of retirement benefits were time- barred, and CalSTRS was further barred from reducing Teachers’ future monthly benefits. A judgment granting issuance of a peremptory writ of mandate was entered on June 3, 2015, (1) reversing the administrative decision of the Committee, (2) barring CalSTRS from further withholding or reducing Teachers’ monthly defined benefit retirement payments, (3) directing CalSTRS to reimburse Teachers all retirement amounts previously withheld, plus interest, and (4) directing CalSTRS to reimburse the District for any amounts the District paid to CalSTRS under the administrative decision, plus interest. CalSTRS appealed.
DISCUSSION
I. Administrative Mandamus
Under Code of Civil Procedure section 1094.5, a party may file a petition for writ of administrative mandamus “for the purpose of inquiring into the validity of any final administrative order or decision made as the result of a proceeding in which by law a hearing is required to be given, evidence is required to be taken, and discretion in the determination of facts is vested in the inferior tribunal, corporation, board, or officer.” (§ 1094.5, subd. (a).) Where the decision occurs as a result of a proceeding in which a hearing is required in which evidence is to be taken and the administrative tribunal is vested with discretion to determine the facts, administrative mandamus under section 1094.5 is the exclusive remedy for judicial review of the quasi-adjudicatory administrative action of state-level agencies. ( People v. Tulare County (1955) 45 Cal.2d 317, 319.)
The Legislature has identified two different standards by which the trial court
determines whether administrative findings are supported by the evidence—i.e., the
independent judgment and substantial evidence standards—without stating which
standard applies in a given case. (Code Civ. Proc., § 1094.5, subd. (c).)
[7]
But the
California Supreme Court has explained that in the case of “administrative decisions
which substantially affect vested, fundamental rights,” the trial court “exercises its
independent judgment upon the evidence disclosed in a limited trial de novo.” (
Bixby v.
Pierno
(1971)
Retirement benefits have long been included in the class of vested fundamental
rights as to which a superior court independently reviews an agency’s findings
substantially affecting such rights. (See
Strumsky v. San Diego County Employees
Retirement Assn.
(1974)
II. Standard of Review
An appellate court—regardless of whether the trial court independently reviews
administrative findings or reviews them for substantial evidence—reviews the trial
court’s findings in administrative mandamus proceedings for substantial evidence.
(
Fukuda
, ,
Pure questions of law decided by the trial court are reviewed de novo by the court
of appeal. (
Regents of University of California v. Superior Court
(1999)
Although the agency’s interpretation of a statute or ordinance is given deference
by the court (
MHC Operating Limited Partnership v. City of San Jose
(2003)
III. Teachers’ Retirement Law
We briefly describe the state teachers’ retirement system at issue to provide context to this appeal, liberally borrowing from a discussion presented in an opinion of the First District Court of Appeal, Division 4. “CalSTRS was created by the Legislature in 1913 as a retirement system for credentialed California teachers and administrators in kindergarten through community college. (See § 22000 et seq. (Teachers’ Retirement Law).)” ( Duarte v. California State Teachers’ Retirement System (2014) 232 Cal.App.4th 370, 384-385 ( Duarte ).) The Legislature created CalSTRS “to provide a financially sound plan for retirement, with adequate retirement allowances, of teachers in *11 the public schools of this state, teachers in schools supported by this state, and other persons employed in connection with the schools.” (§ 22001.) “The CalSTRS Board is responsible for the administration of CalSTRS, including implementation of the State Teachers’ Retirement Plan (plan), and ‘shall set policy and shall have the sole power and authority to hear and determine all facts pertaining to application for benefits under the plan or any matters pertaining to administration of the plan and [CalSTRS].’ (§ 22201, subd. (a); see §§ 22200, 22219, subd. (a); see also § 22208 [CalSTRS Board may delegate powers to a committee].) The CalSTRS Board has fiduciary obligations—both statutory and constitutional—to soundly administer the plan and maintain its fiscal integrity. (See § 22250 [providing that CalSTRS Board must discharge its duties under the Teachers’ Retirement Law ‘solely in the interest of the members and beneficiaries’ and for the ‘exclusive purpose’ of providing benefits and defraying administrative expenses]; see also Cal. Const., art. XVI, § 17, subd. (b) [‘[n]otwithstanding any other provisions of law,’ a retirement board for a public pension or retirement system must discharge its duties ‘solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system’].)” ( Duarte , at pp. 384-385.)
“The constitutional obligations of a public retirement board such as the CalSTRS
Board have been interpreted to include a duty ‘to “ensure the rights of members and
retirees to their full,
earned
benefits.” ’ [Citation.] Such obligations therefore do not
permit the payment of benefits not otherwise authorized. [Citation.] Rather, ‘the
statutory scheme governs the scope of the benefits earned.’ [Citation.] Thus, while
‘ “[p]ension provisions should be broadly construed in favor of those who were intended
to be benefited thereby . . . [,] they cannot be construed so as to confer benefits on
persons not entitled thereto.” ’ [Citation.]” (
Duarte
, ,
IV. Statute of Limitations: Education Code Section 22008 A. Summary
We will first consider when the statute of limitations under section 22008(c) commences, i.e., when the claim under the statute accrues. The statute specifies that the three-year period of limitation for adjustment of errors with respect to the Defined Benefit Program “shall commence with the discovery of the incorrect payment.” ( Ibid. ) The question is the meaning of “discovery.” Does it mean (as the trial court held) the date the party seeking the adjustment (the claimant) has actual knowledge of the incorrect payment? Alternatively, does the statute of limitations commence when the claimant knows about, or has reason to suspect the existence of the incorrect payment? [9] After concluding that the statute commences when the claimant has actual or inquiry notice of the incorrect payment, we will consider whether the trial court correctly identified the commencement date of the statute of limitations in this instance. We find that the court, although it applied the incorrect legal standard, correctly held that the claim accrued on August 18, 2005.
Second, we will consider the meaning of the language “action may be commenced” in section 22008(a) to determine what constitutes an “action” for purposes of satisfying the three-year statute of limitations. [10] Contrary to the trial court’s conclusion that CalSTRS commenced an action in April 2012 when it began reducing Teachers’ monthly retirement payments, we hold that CalSTRS commenced the action on July 6, 2012, when it filed the statement of issues to initiate the administrative proceeding.
*13 Third, although we find that the trial court correctly held that CalSTRS had not commenced the action within the three-year statute of limitations under section 22008, we conclude the court erred by rejecting CalSTRS’s contention that a portion of its action concerning overpayments was not time-barred upon application of the continuous accrual doctrine. Under that doctrine, claims arising out of incorrect periodic payments, such as the pension payments here, accrue when each payment is due. Accordingly, only CalSTRS’s attempts to address incorrect periodic payments that were due more than three years prior to July 6, 2012, were time-barred under section 22008.
B. Accrual Under Education Code 22008(c), Generally Section 22008(a) provides that an action seeking adjustments for erroneous payments under the Defined Benefit Program or the Defined Benefit Supplement Program must be brought within “three years after all obligations . . . have been discharged.” Under section 22008(c), “[i]f an incorrect payment is due to lack of information or inaccurate information regarding the eligibility of a member, former member, beneficiary, or annuity beneficiary to receive benefits under the Defined Benefit Program or Defined Benefit Supplement Program, the period of limitations shall commence with the discovery of the incorrect payment.”
Teachers argued below that “discovery” under section 22008(c) includes not only
actual discovery, but circumstances where the party has reason to suspect the existence of
the incorrect payment. This is the “discovery rule” exception to the normal rule of
accrual of causes of action discussed,
post.
The trial court agreed with CalSTRS’s
position that only actual knowledge of the incorrect payment triggered the statute of
limitations under section 22008(c), holding that “[t]he plain language of the statute
requires actual as opposed to inquiry notice.” The question being an interpretation of the
statutory language, we review the trial court’s decision de novo. (
Shamrock Foods
,
,
We are guided by familiar principles of statutory construction, which we have
previously summarized—drawing from six California Supreme Court cases—as follows:
“In cases of statutory interpretation, ‘where the language is clear, its plain meaning
should be followed.’ We will ‘give effect to statutes “according to the usual, ordinary
import of the language employed in framing them” ’ and ‘will apply common sense to the
language at hand and interpret the statute to make it workable and reasonable.’ Where
the language of the statute is clear and unambiguous, we need not look to the
Legislature’s intent; however, we are not precluded by this ‘ “plain meaning” rule’ from
ascertaining whether a literal interpretation of the statute is consistent with its purpose.
[¶] The legislative intent of a statute may be revealed from a review of ‘[b]oth the
legislative history of the statute and the wider historical circumstances of its enactment.’
‘The words of the statute must be construed in context, keeping in mind the statutory
purpose, and statutes or statutory sections relating to the same subject must be
harmonized, both internally and with each other, to the extent possible.’ And in cases
where the meaning of the statutory language is uncertain, the court ‘ “may also consider
the consequences of a particular interpretation, including its impact on public policy.” ’
And ‘the statute should be interpreted to avoid an absurd result.’ ” (
Giorgianni v.
Crowley
(2011)
The meaning of the phrase “discovery of the incorrect payment” in section
22008(c) is not so plain as to preclude further inquiry in construing the statute. The term
“discovery” is not defined in section 22008 or elsewhere in the Teachers’ Retirement
Law, and, specifically, is not among the 150-plus definitions of terms and phrases found
in the statute. (See §§ 22100 through 22177.) And we are unaware of—and the parties
were unable to present us with—any legislative history that would assist us in
*15
interpreting the term “discovery” in the statute.
[11]
(Cf.
People v. Zamora
(1976)
Our Supreme Court has explained the competing policy interests inherent in a
statute of limitations defense. “A statute of limitations strikes a balance among
conflicting interests. If it is unfair to bar a plaintiff from recovering on a meritorious
claim, it is also unfair to require a defendant to defend against possibly false allegations
concerning long-forgotten events, when important evidence may no longer be available.
Thus, statutes of limitations are not mere technical defenses, allowing wrongdoers to
avoid accountability. [Citation.] Rather, they mark the point where, in the judgment of
the legislature, the equities tip in favor of the defendant (who may be innocent of
*16
wrongdoing) and against the plaintiff (who failed to take prompt action): ‘[T]he period
allowed for instituting suit inevitably reflects a value judgment concerning the point at
which the interests in favor of protecting valid claims are outweighed by the interests in
prohibiting the prosecution of stale ones.’ [Citation.]” (
Pooshs v. Philip Morris USA,
Inc.
(2011)
The date the statute commences is a “[c]ritical” aspect of a statute of limitations
analysis. (
Pooshs
,
supra
,
There are many instances in which courts have impliedly incorporated the
discovery rule into statutes that provide without qualification that accrual is from the date
of injury. This is done “ ‘to ameliorate a harsh rule that would allow the limitations
period for filing suit to expire before a plaintiff has or should have learned of the latent
*17
injury and its cause.’ [Citation.]” (
Pooshs
, , 51 Cal.4th at pp. 797-798, quoting
Buttram v. Owens–Corning Fiberglas Corp.
(1997)
Some statutes of limitation expressly provide for accrual when the plaintiff has actual or inquiry notice of the claim. (See, e.g., Code Civ. Proc., § 340.2 [claim for asbestos-related injury must be at the latest, one year after plaintiff “knew, or through the exercise of reasonable diligence should have known, that such disability was caused or contributed to by such exposure”]; id. , § 340.6 [legal malpractice claim commences the earlier of “one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission”].) Other statutes—such as section 22008(c) at issue here—provide that the claim shall be deemed to accrue upon its “discovery” by the aggrieved party, without specifying whether inquiry notice is sufficient to constitute such discovery. (See, e.g., Code Civ. Proc., § 338, subd. (d) [action based upon fraud or mistake accrues from discovery of facts]; id. , § 339, subd. (1) [action on oral contract accrues from discovery of loss].)
One statute using the word “discovery” to identify the date of accrual is Code of
Civil Procedure section 338, subdivision (d). It provides that the claim shall “not to be
deemed to have accrued until the discovery, by the aggrieved party . . . of the facts
constituting the fraud or mistake.” (
Ibid.
) “ ‘Literally interpreted, this language would
give the plaintiff an unlimited period to sue if [he or s]he could establish ignorance of the
facts.’ ” (
Parsons v. Tickner
(1995)
A similar analysis has been applied to Code of Civil Procedure section 339,
subdivision (1). It calls for a two-year statute of limitations, and provides, in part, that a
cause of action based “upon a contract, obligation or liability not founded upon an
instrument of writing . . . shall not be deemed to have accrued until the discovery of the
loss or damage suffered.” (
Ibid.
) Courts have applied the discovery rule to varying
claims governed by this statute, resulting in the limitation period commencing when the
plaintiff discovers or reasonably should have discovered the harm was caused by the
defendant. (See, e.g.,
William L. Lyon & Associates, Inc. v. Superior Court
(2012) 204
Cal.App.4th 1294, 1314 [negligence claim against broker];
Apple Valley Unified School
Dist. v. Vavrinek, Trine, Day & Co.
(2002)
The court in
Debro v. Los Angeles Raiders
(2001)
We are persuaded by authorities that have construed “discovery” statutes similar
to section 22008(c) here—such as Code of Civil Procedure sections 338, subdivision (d)
and 339, subdivision (1), and Government Code section 12654, subdivision (a)—as
providing that the limitations period commences when the plaintiff has knowledge of the
facts supporting the claim, either based on actual
or inquiry
notice. This construction
subserves the policies underlying the statute of limitations. It is consistent with the
principle that “statutes of limitations are intended to run against those who fail to exercise
reasonable care in the protection and enforcement of their rights; therefore, those statutes
should not be interpreted so as to bar a victim of wrongful conduct from asserting a cause
of action before he [or she] could reasonably be expected to discover its existence.
[Citations.]” (
Saliter v. Pierce Brothers Mortuaries
(1978)
Moreover, we conclude that interpreting section 22008(c) to incorporate the
discovery rule does not place an undue burden on the party claiming the existence of an
incorrect benefit payment. “Every person who has actual notice of circumstances
sufficient to put a prudent [person] upon inquiry as to a particular fact, has constructive
notice of the fact itself in all cases in which, by prosecuting such inquiry, he [or she]
might have learned such fact.” (Civ. Code, § 19.) Charging CalSTRS here, as claimant,
with knowledge of an overpayment based upon inquiry notice where the entity, in the
exercise of reasonable diligence, should have discovered it, is entirely proper. (See
§ 22250, subd. (b) [CalSTRS Board has fiduciary duty to use “care, skill, prudence, and
diligence” in management of system]; see also
Duarte
, ,
The trial court relied upon
Eisenbaum v. Western Energy Resources, Inc.
(1990)
Eisenbaum
, ,
We agree with the analysis in
Deveny
and apply it here. Regardless of the merits
of
Eisenbaum
’s conclusion that Corporations Code section 25507, subdivision (a)
requires actual notice, there is no reasoned basis for applying that conclusion here to
section 22008(c). A claim based upon a violation of securities laws by a fiduciary is far
different from a claim to adjust an incorrectly calculated pension benefit payment.
Moreover, here, as was true in
Deveny
, the “discovery” language of section 22008 first
appearing in its predecessor statute in 1988
[13]
was created long after “other statutes of
limitations that included the term ‘discovery’ and that had been judicially construed as
establishing an inquiry notice standard. [Citations.] ‘Given the Legislature’s presumed
understanding of the judicial interpretation of the term “discovery” in other statutes of
limitation, it is reasonable to assume that it would have used a word other than
“discovery” if it intended for the limitations period to commence only upon actual
knowledge of ’ ” the existence of the incorrect payment. (
Deveny
, , 139
Cal.App.4th at pp. 422-423.) Furthermore, although we acknowledge that the Committee
reached a contrary conclusion—finding that “discovery” under section 22008(c) requires
actual knowledge of the incorrect payment—it is ultimately this court’s obligation, rather
than the administrative agency, “ ‘ “to lay down the governing principles of law
*23
(
Garamendi
, ,
We therefore hold that the three-year limitations period for asserting a claim related to an incorrect payment due to a lack of information or inaccurate information under section 22008(c) commences upon actual or inquiry notice, i.e., when the claimant discovers, or in the exercise of reasonable diligence should have discovered, the incorrect payment.
C. Accrual of CalSTRS’s Claim Here
1. Background Using the date upon which CalSTRS actually discovered the existence of the overpayments to Teachers as the date of commencement of the statute of limitations—a legal standard we have determined to be erroneous—the trial court concluded that CalSTRS “discovered” the facts regarding the incorrect payments to Teachers on or about August 18, 2005. This was the date a memorandum was sent to MCOE from Cindy Fellows, a District budget analyst (the Fellows memorandum).
The Fellows memorandum, addressed “To Whom it May Concern,” was sent to the Monterey County entity, MCOE, based upon the understanding that CalSTRS did not want communications to go directly to it, but rather wanted them to be sent to MCOE. The memorandum read, in pertinent part: “It has been brought to our attention that there are some questions regarding how the [D]istrict reports a sixth period class. In 1998, the Salinas Valley Federation of Teachers’ Union (SVFT) negotiated to have a separate salary schedule for those certificated employees who worked longer days. [¶] The option is available to the whole certificated class of employees. There are approximately 40 to 50 employees each year that request to work a sixth period option . . . . [¶] Some schools are on a block schedule in which teachers work a total of 5 periods during the year. This is usually 3 periods the first semester and 3 the second semester, which results in a high *24 retirement[] base since they worked the extra period the second half of the year. [¶] One of our employees, who retired this year, worked the extra block the second semester and when her retirement allowance was sent to her, it was based on the 1st semester earnings and not the second for the years 2003 -2004. Any help in this matter would be appreciated . . . . [¶] Attached are the AB1200, union contract and salary schedules for 2003-2004 which reflect the SVFT and the [D]istrict’s agreement to implementing the sixth period salary schedule. (AR 3203.)”
The trial court concluded that the Fellows memorandum provided actual notice to MCOE. Further, it rejected CalSTRS’s contention that the memorandum was of no consequence to the question of notice, because there was no evidence that MCOE ever forwarded the document to CalSTRS. The trial court concluded that from the evidence presented at the administrative hearing, MCOE was the ostensible agent of CalSTRS. Reasoning that notice given to the agent is chargeable to the principal, the court concluded that CalSTRS was charged with knowledge of the information imparted to MCOE in the Fellows memorandum.
CalSTRS challenges these findings, contending that it did not discover the overpayment issue until more than three years later, on December 1, 2008, when its outside auditor, MHM, issued the final audit report. It contends that (1) there was no evidence the Fellows memorandum was actually received by MCOE or CalSTRS, (2) there was no evidence that MCOE was CalSTRS’s agent, and (3) the memorandum, in any event, did not give notice that incorrect payments were being made to Teachers. We address these three contentions below.
2. The Claim Accrued August 18, 2005 a. Receipt
Fellows testified at the administrative hearing that she sent the memorandum to
MCOE along with its attachments. CalSTRS points to no evidence (e.g., testimony from
an MCOE representative) disputing MCOE’s receipt of the Fellows memorandum.
*25
Moreover, a letter properly addressed and mailed is presumed to have been received by
the addressee. (Evid. Code, § 641; see also
Bank of America v. Giant Inland Empire R.V.
Center, Inc.
(2000)
b. Agency The trial court cited certain evidence in the administrative record establishing that MCOE was the agent of CalSTRS. As recited by the court, “CalSTRS[’s] retirement counselors would meet teachers at the relevant county’s office of education, where counselors would access CalSTRS[’s] data through CalSTRS[’s] computer, both to prepare for meetings with teachers and to assist those teachers with retirement calculations. [¶] Moreover, school districts were specifically instructed to contact their local county office of education with questions to ensure that their decisions were consistent with the law. And, while CalSTRS provided guidance on retirement issues through administrative directives, school districts were directed to contact their county’s office of education if they had questions not covered in any such directive. Only if a county office of education could not answer a question was that question forwarded to CalSTRS. Similarly, teachers were advised by CalSTRS[’s] retirement counselors to direct questions to CalSTRS through their school districts. The districts would then forward questions to their county’s office of education. CalSTRS required questions to be routed through the county offices of education for CalSTRS[’s] convenience. CalSTRS explained that there are approximately 1,600 districts statewide and that CalSTRS[’s] staff is too small to respond to the high volume of inquiries it receives from these districts.”
“An agent is one who represents another, called the principal, in dealings with third persons.” (Civ. Code, § 2295.) An agency relationship may exist if it is either one that is actual ostensible. (Civ. Code, § 2298.) An agency is actual when the agent is in fact employed by the principal. (Civ. Code, § 2299.) “ ‘An agency is ostensible when a principal causes a third person to believe another to be his agent, who is really not employed by him. [Citation.]’ ” ( J.L. v. Children’s Institute, Inc. (2009) 177 Cal.App.4th 388, 403, citing Civ. Code, § 2300.)
A party claiming that an ostensible agency exists must satisfy three requirements.
First, it must show that its dealings with the purported agent were based upon a
reasonable belief in the agent’s authority. Second, the principal must have been
responsible through some act or neglect on its part in creating the party’s reasonable
belief in the agent’s authority. Third, the party must not have been negligent in holding
its belief. (
Associated Creditors’ Agency v. Davis
(1975)
We conclude that substantial evidence supported the trial court’s finding that
MCOE was “[a]t minimum,” the ostensible agent of CalSTRS. This evidence included
that (1) CalSTRS’s counselors met with teachers at MCOE offices, where the counselors
would access CalSTRS’s data through its computer to assist teachers with retirement
*27
calculations; (2) school districts were instructed to communicate any questions to their
county education office so that district decisions were consistent with the law; (3) school
districts were instructed to make any inquiries about CalSTRS’s administrative directives
to their local county education office, not CalSTRS; (4) CalSTRS’s retirement counselors
instructed teachers to contact their school district—which in turn contacted its local
county education office—concerning questions the teachers had of CalSTRS; and
(5) CalSTRS’s requirement that questions be directed to local county education offices
was for CalSTRS’s convenience in light of the number of school districts statewide (and,
consequently, the potential volume of teacher and other inquiries). Indeed, while
CalSTRS argues conclusorily on appeal that “suggesting MCOE is CalSTRS[’s] agent
stretches the imagination,” it cites no evidence from the record supporting its position.
(See
Benach v. County of Los Angeles
(2007)
A principal is deemed to have notice of whatever its agent has notice of and
should reasonably communicate to the principal. (Civ. Code, § 2332; see
McKenney v.
Ellsworth
(1913)
Here, information concerning members’ pension benefits was clearly matter of the type that should have been reasonably communicated from the agent, MCOE, to its principal, CalSTRS. Accordingly, whatever information that was imparted in the Fellows memorandum to MCOE was data CalSTRS was presumed to know as well.
c. Notice As noted, the trial court concluded that the Fellows memorandum provided actual notice to MCOE, as ostensible agent of CalSTRS. But applying the correct standard for determining accrual of the statute of limitations under section 22008(c), the proper question is whether the memorandum provided actual or inquiry notice to MCOE of Teachers’ incorrect payments.
The Fellows memorandum alerted MCOE “that there are some questions regarding how the [D]istrict reports a sixth period class.” Fellows explained that as a result of union negotiations, “a separate salary schedule” was established for teachers working longer days, and approximately 40 to 50 teachers in the District had elected to work longer days. She explained further that in the case of some schools that were on a block schedule in which teachers ordinarily worked five periods a year, where an individual teacher elected to work an extra (sixth) period, this “result[ed] in a high retirement[] base since [the teacher] worked the extra period the second half of the year.” Fellows advised that one teacher who had “worked the extra block the second semester” had her retirement allowance calculated based upon her first semester earnings, implying in the memorandum that this calculation was in error. And Fellows requested “[a]ny help” in the matter, attaching to her memorandum the union contract and 2003-2004 salary schedules that “implement[ted] the sixth period salary schedule.”
There is some merit to CalSTRS’s position that the memorandum did not provide actual notice of the miscalculation of Teachers’ retirement benefits. Fellows did not identify any of the Teachers by name nor did she specify any particular circumstances involving them that may have resulted in their pension benefits having been incorrect. *29 Indeed, eight of the eleven Teachers had not even retired as of the date of the Fellows memorandum; therefore, such specification, as to eight Teachers, would have been impossible.
But the Fellows memorandum gave ample information to MCOE—and, under agency principles, to CalSTRS as well—giving rise to inquiry notice of the existence of possible errors in the calculation of retirement benefits for certain teachers who had elected to work an additional (sixth) period. Under the inquiry notice standard that is the basis for the discovery rule, “the limitations period begins once the [claimant] ‘ “ ‘has notice or information of circumstances to put a reasonable person on inquiry . . . .’ ” ’ [Citations.] A [claimant] need not be aware of the specific ‘facts’ necessary to establish the claim . . . Once the [claimant] has a suspicion of wrongdoing, and therefore an incentive to sue, [it] must decide whether to file suit or sit on [its] rights. So long as a suspicion exists, it is clear that the [claimant] must go find the facts; [it] cannot wait for the facts to find [it].” ( Jolly , supra , 44 Cal.3d at pp. 1110-1111, original italics.)
Here, at minimum, CalSTRS was made aware, through the Fellows memorandum,
(1) of a potential problem with respect to the manner in which retirement benefits were
being calculated for District teachers who had elected to work an extra period; (2) that,
based upon a union contract dating back a number of years, “a separate salary schedule”
had been established in the District for those teachers; and (3) that there was at least the
assumption that such class of teachers, upon retirement, were entitled to “a high[er]
retirement[] base” because of having worked an extra period. CalSTRS—particularly in
light of its statutory fiduciary duties, including its duty to exercise “due care, skill,
prudence, and diligence” (§ 22250, subd. (b)) and to ensure payment to members of full
earned benefits and to avoid payment of benefits not earned (
Duarte
,
supra
,
Accordingly, notwithstanding the trial court’s error in concluding that CalSTRS had actual notice on August 18, 2005, CalSTRS was placed on inquiry notice as of that date through the Fellows memorandum, thus triggering the three-year statute of limitations under section 22008(c). [15] We will next determine whether CalSTRS commenced an “action” within that three-year limitations period.
*31 D “Action” Commenced Under Education Code Section 22008(a)
1. Introduction
Under section 22008(a), “ [n]o action may be commenced by or against the board, the system, or the plan more than three years after all obligations to or on behalf of the member, former member, beneficiary, or annuity beneficiary have been discharged.” (Italics added.) The parties advanced various arguments below concerning when, in this instance, CalSTRS “commenced” an “action” to satisfy the three-year limitations period. Urging the earliest date, CalSTRS argued below—and renews the argument on appeal— that it took “action” within the meaning of section 22008(a) on July 30, 2010, when it mailed its final audit report. [16] Teachers claim a date nearly two years later—July 6, 2012—contending that CalSTRS initiated an “action” when it filed a statement of issues in the administrative proceeding. The trial court selected neither date. Instead, it concluded that CalSTRS “commenced” an “action” on April 1, 2012, when it “took ‘corrective action’ ” by adjusting downward Teachers’ monthly retirement benefits to address both prospectively and retrospectively the error in calculating those benefits. We will discuss below section 22008(a) and determine the appropriate date that CalSTRS “commenced” an “action” in this instance. [17]
*32 2. Section 22008(a)
Neither the phrase “action may be commenced” nor the term “action” is defined in
section 22008 or elsewhere in the Teachers’ Retirement Law. (See §§ 22100 through
22177 [defining various terms and phrases].) And, as is evident from the submissions of
the parties, there is no legislative history to guide us in interpreting section 22008(a).
[18]
Therefore—although we acknowledge that “[s]tatutes of limitations found in the Code of
Civil Procedure” are inapplicable to administrative proceedings (
Little Co. of Mary Hosp.
v. Belshe
(1997)
Code of Civil Procedure section 312 provides that “[c]ivil actions, without
exception, can only be commenced within the periods prescribed in this title, after the
cause of action shall have accrued, unless where, in special cases, a different limitation is
prescribed by statute.” Title 2 of Part 2 of the Code of Civil Procedure goes on to
provide numerous (approximately 40) statutes specifying the limitation of actions with
respect to various types of civil claims. The term “civil action” in Code of Civil
Procedure section 312 is not defined in Part 2, Title 2, of the Code of Civil Procedure.
(See Code Civ. Proc., §§ 312-366.3.) But “action” is defined elsewhere in the Code of
Civil Procedure as “an ordinary proceeding in a court of justice by which one party
prosecutes another for the declaration, enforcement, or protection of a right, the redress or
prevention of a wrong, or the punishment of a public offense.” (Code Civ. Proc., § 22.)
And “civil action” is defined as one that “is prosecuted by one party against another for
the declaration, enforcement, or protection of a right, or the redress or prevention of a
*33
wrong.” (Code Civ. Proc., § 30.) Code of Civil Procedure section 363 broadens the
definition of “action” under Part 2, Title 2, stating that the term “is to be construed,
whenever it is necessary so to do, as including a special proceeding of a civil nature.”
(See
Allen v. Humboldt County Board of Supervisors
(1963)
Applying the Code of Civil Procedure by analogy here to the statute of limitations specified in the Education Code is a challenging task. We will nonetheless proceed with considering whether any of the three benchmarks respectively identified by the parties and the trial court is the date that CalSTRS “commenced” an “action” within the meaning of section 22008(a).
3. July 30, 2010—Mailing of Final Audit Report CalSTRS argues that the mailing of its final audit report to the District and Teachers on July 30, 2010, constituted commencement of an “action” relative to the incorrect payments. CalSTRS apprised each of the Teachers in separate letters that it had concluded from its final audit that the District had “incorrectly reported (coded) your sixth period teaching assignment (extra duty) earnings totaling approximately [] as creditable compensation to the Defined Benefit (DB) Program for the [] school year ending in your retirement. Under state law, these extra duty assignment payments should have been credited to the Defined Benefit Supplement (DBS) program, thus it does not count toward the calculation of your DB retirement allowance. These reporting errors caused your monthly retirement allowance to be overstated by approximately $[] from [], your retirement benefit effective date.” Each letter advised further that CalSTRS was entitled under the law to recover the overpayment by reducing future payments to each of *34 the Teachers by no more than five percent, because the overpayment was due to error by the school system, but CalSTRS had requested that the District reimburse the overpayments on behalf of each of the Teachers. Lastly, CalSTRS advised each of the Teachers that if he or she disagreed with its determination, he or she was required to appeal it through an administrative hearing process within 90 days of the letter. [19]
CalSTRS asserts that by sending the final audit report, it commenced the administrative proceeding (i.e., commenced an “action”), because Teachers, in response to the final audit, were required, in peril of losing valuable rights (i.e., the right to contest the audit or require an administrative hearing), to request an administrative hearing within 90 days. (See Cal. Code Regs., tit. 5, § 27102, subd. (c).) [20] CalSTRS, accordingly, takes issue with the trial court’s conclusion that “[t]he final audit report letter is analogous to a demand letter made by a party in hopes of avoiding civil litigation. [CalSTRS] demanded that the District take certain action, but a demand is not action.”
While the trial court’s demand letter analogy is imperfect, we conclude that
CalSTRS’s act of sending the final audit to Teachers did not constitute the
commencement of an “action” under section 22008(a). The final audit certainly
identified CalSTRS’s position regarding the calculation of Teachers’ monthly retirement
benefits. Its mailing, however, did not initiate a proceeding of any kind. It was not the
*35
commencement of a judicial or administrative proceeding against Teachers concerning
the overpayment controversy. To conclude otherwise would subvert any reasonable
construction of the statutory phrase “action may be commenced.” (See
Ventura County
Deputy Sheriffs’ Assn. v. Board of Retirement
(1997)
Moreover, accepting the position that the final audit’s mailing was the
commencement of an “action” would permit CalSTRS, in theory, to delay for an
indeterminate time taking any action to address alleged overpayments to a retiree, such as
by reducing his or her monthly benefits or bringing an action for restitution of prior
overpayments. Such a position would permit CalSTRS, in an extreme case, to lull the
retiree for years into a false belief that CalSTRS would take no action to recoup the
alleged overpayments or reduce future payments. This consequence would run contrary
to the principle that “ ‘establish[ing] any particular limitations period under any particular
statute of limitations entails the striking of a balance’ between the public policy favoring
extinction of stale claims and that favoring resolution of disputes on their merits.
[Citation.]” (
Samuels
, ,
4. April 1, 2012—Reduction of Monthly Benefits On March 2, 2012, CalSTRS wrote to each of the Teachers to advise that, since the date it had issued its final report, “the District ha[d] not submitted the required corrections” to Teachers’ reported earnings to the Defined Benefit Program; “accordingly, CalSTRS will be making the corrections and adjusting your benefit beginning with your April 1, 2012 retirement benefit. This adjustment will result in a reduction to your ongoing retirement allowance. [The adjustment] will also create an overpayment in benefits previously paid to you.” The letters went on to advise Teachers that CalSTRS would collect prior overpayments at a rate of five percent from future *36 payments. On March 16, 2012, CalSTRS sent separate letters to Teachers advising each of them of the specific overpayment amounts and the reduced monthly benefits that would be paid, commencing with the April 1, 2012 benefit payment.
The trial court concluded that CalSTRS’s act of adjusting downward Teachers’ respective monthly pension benefits on April 1, 2012, constituted commencing an “action” under section 22008(a). In so holding, the court relied on section 24616, which provides that “[a]ny overpayment made to or on behalf of any member . . . shall be deducted from any subsequent benefit that may be made payable under the Defined Benefit Program . . . , except as provided in Section 24616.5. These deductions shall be permitted concurrently with any suit for restitution, and recovery of overpayment by adjustment shall reduce by the amount of the recovery the extent of liability for restitution.” The trial court reasoned that under section 24616, CalSTRS was authorized to use “ ‘self-help’ by adjusting benefit payments to account for overpayments.” The court held that CalSTRS’s doing so here, effective April 1, 2012, was “ ‘corrective action’ ” that constituted “action” within the meaning of section 22008(a) that tolled the statute of limitations. But, the court concluded further, because “[t]his action was taken more than three years” after CalSTRS received actual notice of the overpayments, CalSTRS’s claim was time-barred.
We respectfully disagree with the trial court. CalSTRS’s reduction of future monthly payments to Teachers was not the commencement of an “action” relative to the incorrect payments. While such conduct is indeed a type of “action” in the broadest sense of the word (see Merriam-Webster’s Collegiate Dict. (11th ed. 2009) p. 12, col. 2) [“ action . . . 5 a : a thing done: DEED”]), the unilateral reduction of Teachers’ monthly payments was not the commencement of an “action” analogous to the initiation of a lawsuit satisfying the statute of limitations under the Code of Civil Procedure. (See Code Civ. Proc., § 30 [“[a] civil action is prosecuted by one party against another for the declaration, enforcement, or protection of a right, or the redress or prevention of a *37 wrong”].) [21] We thus conclude that CalSTRS’s reduction of Teachers’ respective monthly payments, effective April 1, 2012, based upon recalculated benefit amounts, together with a deduction for prior overpayments, did not constitute the commencement of an “action” under section 22008(a).
5. July 6, 2012—Filing of Statement of Issues
On July 6, 2012, CalSTRS filed a nine-page pleading entitled “Statement of Issues” with the Office of Administrative Hearings. In the pleading, CalSTRS— identifying itself as “Complainant”—(1) identified the parties, including a specification of the retirement dates of each of the 11 Teachers (each named as a “Respondent” in the pleading); (2) presented a statement of facts; and (3) provided a discussion concerning the grounds upon which CalSTRS asserted that its position should be upheld.
Teachers urge that the filing of the statement of issues was conduct that qualified as CalSTRS’s commencement of an “action” to satisfy section 22008. They argue that “[l]ike a complaint, the filing of a ‘statement of issues’ is the legal action that creates the jurisdiction of the administrative court to hear the legal dispute between the governmental agency and the party affected.” Teachers’ position has merit.
The dispute here was subject to resolution under the Administrative Procedure
Act. (See Gov. Code, §§ 11340 to 11529, incl.) A party aggrieved by a final audit
determination of CalSTRS is entitled to make a timely request for an administrative
hearing, as Teachers did here. (See Cal. Code Regs., tit. 5, § 27102, subd. (c).) The
*38
disposition of such a request is governed by section 22219, subdivision (b) (Cal. Code
Regs., tit. 5, § 27103), which statute provides that the administrative hearing “shall be
conducted in accordance with [Gov. Code, § 11500 et seq.], relating to administrative
adjudication, and the board shall have all of the powers granted in that chapter.” Under
the Administrative Procedure Act, the document that initiates the administrative
adjudicative proceeding is the statement of issues. (
California Radioactive Materials
Management Forum v. Department of Health Services
(1993)
We conclude that, in the context of satisfying a prescribed statute of limitations,
the filing of a statement of issues to initiate administrative proceedings is the closest
analogue to the filing of a civil complaint. Just as a plaintiff commences a civil action
(including a special proceeding) by filing a complaint or a petition (
Garcia
, ,
We therefore hold the filing by CalSTRS of the statement of issues with the Office of Administrative Hearings constituted the commencement of an “action” under section 22008(a).
E. Whether CalSTRS’s Action Is Entirely Time-Barred The trial court concluded in its tentative decision that because CalSTRS did not commence an action within three years of its actual knowledge that incorrect payments had been made to Teachers, CalSTRS was “time-barred from taking corrective action regarding the [Teachers’] overpayments.” In the judgment granting Teachers’ petition for peremptory writ of mandate, the court determined that CalSTRS was barred from taking action to address the miscalculation of Teachers’ respective monthly retirement benefits, including any further withholding or reduction of those benefits, and it ordered CalSTRS to reimburse Teachers any amounts it had previously withheld.
CalSTRS argues that, even if the trial court correctly found that CalSTRS did not commence an action within three years under section 22008, the court erred in concluding that CalSTRS was barred from pursuing any relief as to any monthly payments, past or prospective. CalSTRS contends that under a proper reading of section 22008(c), “each monthly payment triggers a new limitations period.” Therefore, *40 CalSTRS argues, under the continuous accrual theory, [23] the statute of limitations barred its effort to remedy the overpayment problem only as to monthly pension payments made more than three years before it commenced the “action.” Teachers disagree, arguing that (1) CalSTRS is barred from asserting the continuous accrual theory under invited error principles; (2) CalSTRS waived the issue by abandoning the continuous accrual theory in proceedings below; and (3) the continuous accrual theory, in any event, is not applicable in this case.
1. Invited Error/Waiver Teachers claim that counsel for CalSTRS below “unequivocally [declined to assert] the continuous accrual [theory].” Teachers quote a portion of the transcript of the April 2, 2015 hearing in support of their position, contending that CalSTRS is thereby estopped from asserting the continuous accrual theory. They argue, alternatively, that CalSTRS abandoned the argument below and therefore has waived its right to assert it here. Addressing these invited error/waiver contentions requires us to consider the entire context of the briefing and argument below.
In the Committee’s decision, it concluded that “under the plain language of section 22008, subdivision (c) each monthly benefit payment triggers a new limitation period. The cases cited by Teachers in support of the proposition that the ‘continuing accrual’ theory does not apply to section 22008, subdivision (c) are distinguishable . . .” But because the Committee concluded that CalSTRS was timely in commencing an “action” under section 22008, it deemed “the issue of continuing accrual . . . not pertinent to the resolution of the statute of limitations issue.”
*41
In their trial briefs, the parties—in a somewhat circuitous fashion—raised the
theory of continuous accrual. In Teachers’ opening brief, they urged—erroneously
[24]
—
that the Committee had “correctly held that the continuing accrual theory does not
apply,” and they stated that, therefore, they would not address the issue further absent the
court’s request. (Emphasis and capitalization omitted.) CalSTRS did not directly address
the continuous accrual theory in its trial brief. Instead—in what appears to be a
shorthand reference to the theory—it observed that “the plain language of [§ 22008(c)]
triggers a new cause of action each time a new benefit payment is made based on the
‘inaccurate information regarding the eligibility’ of the beneficiaries to receive a benefit.”
Teachers in their reply brief below addressed CalSTRS’s point, arguing that the language
of section 22008(c) did not support “the proposition that an entire new cause of action is
triggered each time a new benefit is paid.” They asserted further—relying on
Dillon v.
Board of Pension Commrs. of Los Angeles
(1941)
The court in its tentative decision did not specifically address whether the continuous accrual theory applied in connection with Teachers’ statute of limitations defense. But in a subsequent (prejudgment) hearing on June 3, 2015, CalSTRS’s counsel raised the applicability of the continuous accrual theory in connection with the parties’ resolution of the appropriate language for the proposed judgment: The court responded that CalSTRS could not “withhold future payments on the same basis that was litigated in this case.” In so concluding, the court specifically held that the continuous accrual theory did not apply.
“Under the doctrine of invited error, when a party by its own conduct induces the
commission of error, it may not claim on appeal that the judgment should be reversed
because of that error. [Citations.]” (
Mary M. v. City of Los Angeles
(1991) 54 Cal.3d
202, 212.) As one court has explained invited error: “[W]here a deliberate trial strategy
results in an outcome disappointing to the advocate, the lawyer may not use that tactical
decision as the basis to claim prejudicial error.” (
Mesecher v. County of San Diego
(1992)
A party may be deemed “to have
waived
a claim of error either by affirmative
conduct or by failure to take proper steps in the trial court to avoid or cure the error.
[Citations.]” (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter
Group 2015) ¶ 8:249, p. 8-178, original italics.) As our high court has explained: “ ‘An
appellate court will ordinarily not consider procedural defects or erroneous rulings, in
connection with relief sought or defenses asserted, where an objection could have been
but was not presented to the lower court by some appropriate method . . . . The
*43
circumstances may involve such intentional acts or acquiescence as to be appropriately
classified under the headings of estoppel or waiver . . . . Often, however, the explanation
is simply that it is
unfair to the trial judge and to the adverse party
to take advantage of
an error on appeal when it could easily have been corrected at the trial.’ [Citation.]”
(
Doers v. Golden Gate Bridge etc. Dist.
(1979)
We disagree with Teachers that CalSTRS is barred from arguing the continuous
accrual theory here due to invited error or waiver. The trial court’s comments on the
record at the two hearings clearly show that it ruled that continuous accrual did not apply
because of its own determination of the merits of the doctrine’s applicability, not because
of the argument of CalSTRS’s counsel. (See
Munoz v. City of Union City
(2007)
2.
Continuous Accrual Theory
As a general rule, a claim accrues for purposes of the commencement of the
statute of limitations, “ ‘ “when it is complete with all of its elements”—those elements
being wrongdoing, harm, and causation.’ [Citations.]” (
Aryeh
, , 55 Cal.4th at
p. 1191.) One equitable exception to this general “last element accrual rule” of the
statute of limitations is the continuous accrual theory. (See
id.
at p. 1192.) Under the
continuous accrual theory, “a series of wrongs or injuries may be viewed as each
triggering its own limitations period, such that a suit for relief may be partially time-
barred as to older events but timely as to those within the applicable limitations period.
*44
[Citation.]” (
Id.
at p. 1192, fn. omitted.) The kinds of cases in which the continuous
accrual theory have been applied—as discussed in
Aryeh
,
supra
, at pages 1198 to 1200—
include a variety of instances in which the plaintiff asserted a right to, or challenged the
assessment of, periodic payments under contract or under California statutes or
regulations. (See, e.g.,
Howard Jarvis Taxpayers
,
supra
, 25 Cal.4th at pp. 818-822
[imposition of monthly municipal taxes];
Green v. Obledo
(1981)
CalSTRS contends that the continuous accrual theory applies here. Relying on
Dryden
,
supra
,
In
Dryden
, ,
The
Dryden
court noted that, under the applicable city charter provision, the
pensioner was entitled to monthly payments based upon a calculation of his average
monthly salary for three years prior to his death. (
Dryden
,
supra
,
The principle enunciated by our high court in Dryden applies to CalSTRS’s claim. We are concerned here with periodic payments to retired school teachers under a defined benefit pension system. The right of each of the Teachers to receive monthly payments, *46 and the obligation of CalSTRS to disburse them, are continuing ones that accrue when such payments become due. ( Dryden , supra , 6 Cal.2d at pp. 580-581.) The language of section 22008(c) is consistent with that principle, in that it provides that “[i]f an incorrect payment is due to lack of information or inaccurate information . . . , the period of limitations shall commence with the discovery of the incorrect payment .” (Italics added.) Had the Legislature intended the continuous accrual theory to be inapplicable in these circumstances, it could have expressly so stated; at minimum, it could have employed language suggesting that a failure to timely commence an action to address incorrect pension benefit payments would bar an action concerning any such payments that were incorrect for the same reason. Further, a contrary conclusion would permit a retiree to receive, potentially for years, monthly pension benefits that were not earned; this would be inconsistent with the principle that although pension provisions are to be broadly construed in favor of the person benefited, “ ‘ “they cannot be construed so as to confer benefits on persons not entitled thereto.” ’ [Citation.]” ( Duarte , supra , 232 Cal.App.4th at p. 385.) Moreover, if the situation were reversed—i.e., if a series of underpayments were made due to a lack of, or inaccurate, information— a contrary holding would permit CalSTRS to escape its obligation to provide full monthly pension benefits to a retired school teacher by holding that the retiree, by failing to bring an action that was timely as to one or more monthly payments, forfeited all rights to complain about any past or future monthly benefits similarly miscalculated.
Dillon
, ,
Teachers’ reliance on
Carrick
, ,
Under
Dryden
, ,
F. Conclusion Teachers argued below that, in addition to CalSTRS’s action being time-barred, it was precluded based upon principles of equitable estoppel and laches. In its decision, the court decided “it [was] unnecessary to address [Teachers’] equitable estoppel, and laches defenses” because of its conclusion that CalSTRS’s claims were time-barred.
Because we have concluded that the trial court erred in determining that CalSTRS’s claims regarding incorrect monthly pension benefits to Teachers were wholly time-barred, the matter must be reversed and remanded. Upon remand, the trial court is directed to consider and decide Teachers’ equitable estoppel and laches defenses.
DISPOSITION The judgment is reversed and remanded for further proceedings consistent with this opinion. Each party shall bear his/her/its own respective costs on appeal.
_________________________________ WALSH, J. [*]
WE CONCUR:
__________________________
Elia, Acting P.J.
__________________________
Premo, J.
Baxter v. California State Teachers’ Retirement System H042680
*50 Trial Court: Monterey County Superior Court Superior Court No.: M127193 Trial Judge: The Honorable Thomas W. Wills Attorneys for Appellant Sheppard, Mullin, Richter & Hampton, California State Teachers’ Retirement LLP
System:
Robert J. Stumpf, Jr. Attorneys for Respondents L+G, LLP William Baxter et al.:
Sergio H. Parra Baxter v. California State Teachers’ Retirement System H042680
Notes
[1] All further statutory references are to the Education Code unless otherwise specified.
[2] The summary of facts is taken from the trial court’s intended decision, which summary is recited verbatim by CalSTRS in its opening brief.
[3] Teachers are William Baxter, Linda Blumenthal, Fredric Bradley, Donna Elder, Nancy Faulconer, Pamela Frees, Jennifer Galeria, Louie Modena, Victor Santora, Gisela Shields, and Doreen Taylor.
[4] The record does not disclose an explanation for the passage of time of more than 17 months between the issuance of MHM’s audit findings and CalSTRS’s adoption of the findings of its outside auditor.
[5] Under the Education Code, the District is responsible for repaying the remainder of the overpayment, the difference between the total amount of the overpayments and the actuarial present value of the Teachers’ expected payments. (See §§ 24616, 24616.5, 24617.)
[6] The record does not disclose an explanation for the passage of time of more than 19 months between the filing of Teachers’ appeals and CalSTRS’s filing of its statement of issues.
[7] “Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the court determines that the findings are not supported by the weight of the evidence. In all other cases, abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in the light of the whole record.” (Code Civ. Proc., § 1094.5, subd. (c).)
[8] CalSTRS below and in its opening brief urged that review of the agency’s findings was under the substantial evidence standard. It abandoned that position in its reply brief, asserting that the independent standard of review applied.
[9] This “knows or has reason to suspect” standard is often referred to as the discovery rule. We will sometimes refer to “reason to suspect” as inquiry notice.
[10] In interpreting section 22008 concerning the meaning of the term “discovery” and phrase “action may be commenced” in subdivisions (c) and (a), respectively, we note that the statute has not been interpreted or even discussed in any California published decision.
[11]
Because the parties provided no legislative history in their appellate briefs, we
requested supplemental briefing concerning the legislative history of section 22008,
specifically in reference to interpreting the phrase “action to be commenced” in
subdivision (a) and the term “discovery” in subdivision (c) of the statute. We appreciate
the supplemental letter briefs received from the parties in response to our request. And
we grant Teachers’ unopposed request for judicial notice of the legislative materials
accompanying their letter brief concerning the legislative history of section 22008.
(Evid. Code, §§ 452, 459, subd. (a); see
California School Boards Ass’n v. State Bd. of
Educ.
(2010)
[12] “No action shall be maintained to enforce any liability created under Section 25500, 25501, or 25502 (or Section 25504 or Section 25504.1 insofar as they related to those sections) unless brought before the expiration of four years after the act or transaction constituting the violation or the expiration of one year after the discovery by the plaintiff of the facts constituting the violation, whichever shall first expire.” (Former Corp. Code, § 25506, amended by Stats. 2004, ch. 575, § 3, p. 4614.)
[13] See former section 22007, subd. (c) (Stats. 1988, ch. 739, § 1, p. 2437): “In cases where the payment is erroneous due to lack of information or inaccurate information regardint the eligibility of a member, disabilitant, retirant, beneficiary, child, or dependent parent to receive benefits under this part, the period of limitation shall commence with the discovery of the erroneous payment.”
[14] In its appellate briefs, CalSTRS asserts that the Fellows memorandum “[a]t most, . . . gives rise to inquiry notice, which is insufficient to constitute ‘actual notice.’ ” Counsel for CalSTRS reiterated this position at oral argument, stating that he did not concede the Fellows memorandum gave rise to inquiry notice. While not a concession, CalSTRS’s position at least recognizes that the memorandum provided some information that may have been sufficient to put the recipient on inquiry notice.
[15] Teachers argued below that CalSTRS discovered the incorrect payments on dates earlier than August 18, 2005: in 1999 (when the District and the teachers’ union [SVFT] entered into a collective bargaining agreement); in 2002 (when a CalSTRS counselor, Ken Thomas, informed CalSTRS of the District’s dual salary schedules used for retirement); and in 2003 (when a former teacher in the District, Michael Welsh, retired, became a CalSTRS counselor, and received retirement benefits based upon compensation earned while teaching an additional (sixth) period. The trial court did not decide whether CalSTRS had actual notice of the incorrect payments prior to August 18, 2005. Instead, it concluded that, because CalSTRS had actual notice at least as early as August 2005, and that this was more than three years before CalSTRS brought an “action,” it was “unnecessary” to reach Teachers’ arguments. Because we have held that the trial court erred in concluding that actual discovery is required to trigger the statute of limitations under section 22008(c), we would ordinarily require the trial court on remand to consider, applying the correct legal standard, whether CalSTRS had actual or inquiry notice of the incorrect payments at any time prior to August 2005 as urged by Teachers. But because we conclude that CalSTRS brought an “action” more than three years after inquiry notice of the issue (through the Fellows memorandum), it is unnecessary for the trial court to consider these alternative dates on remand.
[16] It is apparent from the record that on July 30, 2010, CalSTRS (1) sent the final audit report to the District along with an explanatory letter, and (2) sent letters to Teachers advising them that it had completed its final audit report and informing Teachers of its substance (but not enclosing it). For simplicity of discussion here, we will refer generally to July 30, 2010, as the date CalSTRS sent the final audit report to the District and Teachers.
[17] We note that all three dates are more than three years after August 18, 2005, the date we have determined to have been the date of accrual of CalSTRS’s claim under section 22008(c). But the date when the “action was commenced” by CalSTRS is not an academic matter. Because we conclude, post , that CalSTRS is not barred from pursuing any action on all past or future overpayments, regardless of when they became (or become) due, the date the action was commenced is significant to the issue of whether the statute of limitations bars CalSTRS from taking action as to specific periodic monthly benefit payments.
[18] See footnote 11, ante . CalSTRS stated in its letter brief that legislative history provided little assistance concerning the meaning of the phrase “action may be commenced” in section 22008(a). Teachers did not identify anything in the legislative history that would aid us in interpreting the phrase “action may be commenced.”
[19] Similarly, in its letter to the District enclosing the final audit report, CalSTRS advised that the District had “[i]ncorrectly reported (coded) 15 members’ extra duty earnings to [the] Defined Benefit Program rather than to the Defined Benefit Supplement Program,” and the District could “submit an appeal through the administrative hearing process” within 90 days of the letter.
[20] “If an applicant [member, former member, participant, former participant, or beneficiary] or entity disagrees with the final audit Determination, the applicant or entity may request an administrative hearing . . . within ninety (90) days from the date of the final audit Determination . . . . If an applicant or entity fails to request an administrative hearing within the time prescribed, such Determination or action shall be final and the right to an administrative hearing shall be deemed waived.” (Cal. Code Regs., tit. 5, § 27102, subd. (c).)
[21] We note further that even were we to deem CalSTRS’s deduction of prior overpayments in Teachers’ monthly payments commencing April 1, 2012, as the commencement of an “action,” this conclusion would address only one aspect of CalSTRS’s conduct. CalSTRS both deducted prior overpayments and issued reduced current monthly payments based upon a recalculation of Teachers’ respective monthly benefits. While section 22616 authorized CalSTRS to deduct from future benefits any amounts previously overpaid, that statute did not address CalSTRS’s recalculation and reduction of future monthly benefits.
[22]
The relevant statute reads in part as follows: “A hearing to determine whether a
right, authority, license or privilege should be granted, issued or renewed shall be
initiated
by filing a statement of issues. The statement of issues shall be a written
statement specifying the statutes and rules with which the respondent must show
compliance by producing proof at the hearing and, in addition, any particular matters that
have come to the attention of the initiating party and that would authorize the denial of
the agency action sought.” (Gov. Code. § 11504, italics added.) “ ‘ “Respondent” means
any person . . . against whom a statement of issues is filed pursuant to [Gov. Code]
Section 11504.’ ” (
Savelli v. Board of Medical Examiners
(1964)
[23]
The theory is identified by the parties as “the continuous accrual doctrine” and
“continuing accrual doctrine.” We adopt the name “continuous accrual theory” used by
the Supreme Court. (See
Aryeh
, ,
[24] The Committee found the continuous accrual theory inapplicable based upon its holding that CalSTRS’s claim regarding the overpayments in toto was not time-barred. The Committee did not address the issue we face here: whether, under the continuous accrual theory, although CalSTRS may be time-barred as to pension payments made more than three years after it commenced the action, CalSTRS is nonetheless entitled to assert claims as to any monthly periodic pension benefits payable less than three years before it brought the action.
[*] Judge of the Santa Clara County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.