M ORE L AW
LEXAPEDIA
Salus Populi Suprema Lex Esto

Information
About MoreLaw
Contact MoreLaw

Please E-mail suggested additions, comments and/or corrections to Kent@MoreLaw.Com.

Date: 01-21-2018

Case Style: William Baxter v. California State Teachers' Retirement System

Case Number: H042680

Judge: Walsh

Court: California Court of Appeals Sixth Appellate District on appeal from the Superior Court, Monterey County

Plaintiff's Attorney: Sergio H Parra

Defendant's Attorney: Robert J. Stumpf, Jr.

Description: 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 220081—
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

1 All further statutory references are to the Education Code unless otherwise
specified.
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.
4
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background2
Teachers3
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 socalled
“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.”

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.
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’

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.
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,

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
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 timebarred,
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.)
8
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) 4 Cal.3d 130, 143, fn. omitted.) In other cases in which the decision does
not substantially affect vested fundamental rights, the trial court “must still review the
entire administrative record to determine whether the findings are supported by
substantial evidence.” (Id. at p. 144.) Even where the independent judgment standard is
applicable, the trial court affords the agency’s decision considerable weight: “[A] trial
court must afford a strong presumption of correctness concerning the administrative
findings, and the party challenging the administrative decision bears the burden of
convincing the court that the administrative findings are contrary to the weight of the
evidence.” (Fukuda v. City of Angels (1999) 20 Cal.4th 805, 817 (Fukuda).)
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) 11 Cal.3d 28, 45.) Accordingly, as the trial court here properly
recognized, it was required to independently review the agency’s factual findings. (See
Molina v. Board of Admin., California Public Employees’ Retirement System (2011)

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).)
9
200 Cal.App.4th 53, 61; O’Connor v. State Teachers’ Retirement System (1996)
43 Cal.App.4th 1610, 1620 [retired teachers have fundamental vested right in retirement
fund in the amount to which they are entitled under the law].)8

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, supra, 20 Cal.4th at p. 824.) “[D]epending on whether the trial court exercised
independent judgment or applied the substantial evidence test, the appellate court will
review the record to determine whether either the trial court’s judgment or the agency’s
findings, respectively, are supported by substantial evidence. [Citation.] If a
fundamental vested right was involved and the trial court therefore exercised independent
judgment, it is the trial court’s judgment that is the subject of appellate court review.
[Citations.]” (JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142
Cal.App.4th 1046, 1058 (JKH Enterprises).)
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) 20 Cal.4th 509,
531.) In such instances, the appellate court is not “bound by the findings of the trial
court. [Citations.]” (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.) Pure legal
questions include the interpretation of statutes (People ex rel. Lockyer v. Shamrock Foods
Co. (2000) 24 Cal.4th 415, 432 (Shamrock Foods)), California Rules of Court (Mercury
Interactive Corp. v. Klein (2007) 158 Cal.App.4th 60, 81), and municipal laws (Woo v.
Superior Court (2000) 83 Cal.App.4th 967, 974). Thus, although a determination of
whether a claim is barred by the applicable statute of limitations is typically one of fact

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.
10
(Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1112 (Jolly)), when “the relevant facts
are not in dispute, the application of the statute of limitations may be decided as a
question of law. [Citation.]” (International Engine Parts, Inc. v. Feddersen & Co. (1995)
9 Cal.4th 606, 611-612; see also Aryeh v. Canon Business Solutions, Inc. (2013)
55 Cal.4th 1185, 1191 (Aryeh) [application of statutes of limitations to undisputed facts is
purely legal question reviewed de novo by appellate court].)
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)
106 Cal.App.4th 204, 219), and “an administrative agency’s interpretation of its own
regulation . . . deserves great weight [citation]” (Carmona v. Division of Industrial Safety
(1975) 13 Cal.3d 303, 310.), it is ultimately “ ‘ “for the courts, not for administrative
agencies, to lay down the governing principles of law.” ’ ” (Garamendi v. Mission Ins.
Co. (2005) 131 Cal.App.4th 30, 41 (Garamendi).) “Courts must . . . independently judge
the text of the statute, taking into account and respecting the agency’s interpretation of its
meaning, of course, whether embodied in a formal rule or less formal representation.
Where the meaning and legal effect of a statute is the issue, an agency’s interpretation is
one among several tools available to the court.” (Yamaha Corp. of America v. State Bd.
of Equalization (1998) 19 Cal.4th 1, 7-8 (Yamaha Corp.).)
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, supra, 232 Cal.App.4th at p. 385,
original italics.)
12
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.

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.
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,
supra, 24 Cal.4th at p. 432.)
14
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) 197 Cal.App.4th 1462, 1474-1475, internal citations omitted.)
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)
18 Cal.3d 538, 561-562 [statute [Pen. Code, § 800] requiring filing of indictment or
information for grand theft “within three years after its discovery” construed to mean
actual or inquiry notice of the crime; conclusion based in part on legislative history
indicating “discovery” was to take same meaning as under statute of limitations for
fraud].) In the absence of legislative history to guide us, we consider how courts have
construed and applied the term “discovery” in the context of other statutes of limitations,
including consideration of the “discovery rule,” which is an important aspect of the
statute of limitations body of law.
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

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) 186 Cal.App.4th 1298, 1307, fn. 4 [appellate court takes judicial notice of
legislative history materials].) CalSTRS’s counsel stated that legislative history offered
little guidance as to the meaning of “discovery” in section 22008(c). Teachers’
counsel—although he presented a discussion of the legislative history of section 22008
and its predecessor statutes—did not point to anything in the legislative history that, in
our view, would provide guidance as to the meaning of the term “discovery.”
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) 51 Cal.4th 788, 797 (Pooshs), quoting Johnson v. Railway Express Agency
(1975) 421 U.S. 454, 463-464.)
The date the statute commences is a “[c]ritical” aspect of a statute of limitations
analysis. (Pooshs, supra, 51 Cal.4th at p. 797.) Typically, a party must bring suit within
the specified time period after the claim accrues, meaning “ ‘when [it] is complete with
all of its elements’—those elements being wrongdoing, harm, and causation. [Citation.]”
(Ibid.) But the discovery rule is an exception to that general rule of accrual,
“postpon[ing] accrual of a cause of action until the plaintiff discovers, or has reason to
discover, the cause of action. [Citations.]” (Norgart v. Upjohn Co. (1999) 21 Cal.4th
383, 397 (Norgart); see also Fox v. Ethicon Endo–Surgery, Inc. (2005) 35 Cal.4th 797,
803.) Stated otherwise, “the limitations period begins once the plaintiff ‘ “ ‘has notice or
information of circumstances to put a reasonable person on inquiry.’ ” ’ ” (Jolly, supra,
44 Cal.3d at pp. 1110-1111.) A plaintiff has reason to discover a cause of action when he
or she “ ‘has reason at least to suspect a factual basis for its elements,’ ” that is, the
“ ‘generic’ elements of wrongdoing, causation, and harm.” (Fox, at p. 807.) “[T]he
discovery rule ‘may be expressed by the Legislature or implied by the courts’ and is the ‘
“most important” ’ exception to the general rule that a cause of action accrues when the
allegedly wrongful result occurs. [Citations.]” (Samuels v. Mix (1999) 22 Cal.4th 1, 9
(Samuels); see also Pooshs, at p. 797.)
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, supra, 51 Cal.4th at pp. 797-798, quoting
Buttram v. Owens–Corning Fiberglas Corp. (1997) 16 Cal.4th 520, 531.) For example,
courts have implied a discovery rule for the three-year statute of limitations (Code Civ.
Proc., § 338, subd. (b)) for trespass or injury to real property (Angeles Chemical Co. v.
Spencer & Jones (1996) 44 Cal.App.4th 112, 119); the three-year statute of limitations
(Code Civ. Proc., § 338, sub. (g)) for slander of title (Arthur v. Davis (1981) 126
Cal.App.3d 684, 690-692); the four-year statute of limitations (Code Civ. Proc., § 343)
applicable to, among other claims, breach of fiduciary duty based upon concealment
(Stalberg v. Western Title Ins. Co. (1991) 230 Cal.App.3d 1223, 1230); and the one-year
statute of limitations (Code Civ. Proc., § 340, subd. (a)) for a claim based upon statute for
a penalty (Prudential Home Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th
1236, 1248 [claim for statutory penalty based upon lenders’ failure to record deed of
reconveyance after loan payoff in violation of Civ. Code, § 2941]).
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].)
18
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) 31 Cal.App.4th 1513, 1525.) Although the statute
does not expressly provide that the claim will accrue based upon either actual or inquiry
notice of the claimant, California courts have long construed it in such a fashion. Under
subdivision (d) of Code of Civil Procedure section 338, a “plaintiff must affirmatively
excuse his [or her] failure to discover the fraud within three years after it took place, by
establishing facts showing that he [or she] was not negligent in failing to make the
discovery sooner and that he [or she] had no actual or presumptive knowledge of facts
sufficient to put him [or her] on inquiry. [Citations.]” (Hobart v. Hobart Estate Co.
(1945) 26 Cal.2d 412, 437; see also Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, 874-
875.)
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) 98 Cal.App.4th 934, 942-943 [accounting
malpractice claim]; Seelenfreund v. Terminix of Northern Cal., Inc. (1978) 84 Cal.App.3d
133, 138-139 [negligence claim against pest control inspector].)
19
The court in Debro v. Los Angeles Raiders (2001) 92 Cal.App.4th 940, 948-953
(Debro) reached a similar result in determining whether the plaintiff’s qui tam lawsuit to
recover civil penalties and damages under the False Claims Act was time-barred under
Government Code section 12654, subdivision (a). The statute provides that “[a] civil
action under [Government Code] Section 12652 may not be filed more than three years
after the date of discovery by the official of the state or political subdivision charged with
responsibility to act in the circumstances . . .” The Debro court held that the statute was
satisfied by either actual or inquiry notice, relying in part upon judicial construction of
similar “discovery” language of Code of Civil Procedure section 338, subdivision (d).
(Debro, at p. 950.) It concluded that “this interpretation balances the policy of avoiding
stale lawsuits with the policy of providing a reasonable time for a plaintiff to discover a
false claim. Furthermore, our interpretation is consistent with the tenets of Civil Code
section 19 . . . . Consequently, circumstances which put a reasonable person on inquiry of
a false claim are constructive notice of the false claim itself.” (Ibid.)
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) 81 Cal.App.3d 292, 297.)
Applying the inquiry notice rule here also promotes the policy of preventing the
unfairness of “requir[ing] a defendant to defend against possibly false allegations
20
concerning long-forgotten events, when important evidence may no longer be available.”
(Pooshs, supra, 51 Cal.4th at p. 797; see also Bernson v. Browning-Ferris Industries
(1994) 7 Cal.4th 926, 935.)
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, supra, 232 Cal.App.4th at p. 385
[Board has duty to ensure payment to members of full earned benefits and to avoid
payment of benefits not earned].)
The trial court relied upon Eisenbaum v. Western Energy Resources, Inc. (1990)
218 Cal.App.3d 314 (Eisenbaum) in support of its holding that section 22008(c) required
actual knowledge of the incorrect payment. There, the plaintiff brought suit based upon
an unlawful sale of securities in violation of Corporations Code section 25510, such suit
being authorized under Corporations Code section 25503. (Eisenbaum, at p. 318.) The
appellate court addressed whether the plaintiff’s claim under Corporations Code section
25503 was time-barred under the applicable statute of limitations, which provided that
such claim be “ ‘brought before the expiration of two years after the violation upon which
it is based or the expiration of one year after the discovery by the plaintiff of the facts
constituting such violation, whichever shall first expire.’ ” (Eisenbaum, at p. 321,
quoting Corp. Code, § 25507, subd. (a), italics omitted.) The court in Eisenbaum
concluded that the statute required the plaintiff’s actual knowledge of the violation: “By
21
its plain language, the statute requires actual knowledge, not just ‘inquiry notice.’ ”
(Eisenbaum, at p. 325.)
Eisenbaum, supra, 218 Cal.App.3d 314 is not persuasive. In Deveny v. Entropin,
Inc. (2006) 139 Cal.App.4th 408 (Deveny), the court chose not to follow Eisenbaum. In
Deveny, the court was concerned with the statute of limitations under former
Corporations Code section 25506, which contained language similar to that found in
Corporations Code section 25507, subdivision (a) at issue in Eisenbaum. (Deveny, at
p. 419.)12
The court in Deveny concluded, following several federal decisions which held
that under the language of former Corporations Code section 25506 (“discovery by the
plaintiff of the facts constituting the violation”), inquiry notice was sufficient to trigger
the statute of limitations. (Deveny, at pp. 419-423.) The Deveny court reasoned, in part,
that (1) Eisenbaum was distinguishable because it involved claims against a fiduciary,
and (2) Eisenbaum’s holding that actual notice was required under Corporations Code
section 25507, subdivision (a) was mere dicta. (Deveny, at pp. 421-422.) Moreover, the
court explained that former Corporations Code section 25506—as well as Corporations
Code section 25507—“postdated other statutes of limitations that included the term
‘discovery’ and that had been judicially construed as establishing an inquiry notice
standard. (E.g., Code Civ. Proc., § 338, subd. (d); Pen.Code §§ 801.5, 803, subd. (c).) . . .
‘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 a violation. [Citation.]’ ” (Deveny, at pp. 422-423,

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.)
22
quoting Debro, supra, 92 Cal.App.4th at p. 953; see also State ex rel. Metz v. CCC
Information Services, Inc. (2007) 149 Cal.App.4th 402, 415-417 [Ins. Code, § 1871.7
limitations period of “three years after the discovery of the facts constituting the grounds
for commencing the action” construed to include knowledge based upon inquiry, as well
as actual notice].)
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 198813 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, supra, 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

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.”
23
(Garamendi, supra, 131 Cal.App.4th at p. 41), “to independently judge the text of the
statute” (Yamaha Corp., supra, 19 Cal.4th at p. 7), and to construe the statute, using the
“agency’s interpretation [as] one among several tools available” (ibid.).
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) 78 Cal.App.4th 1267, 1280 [respondent presented no evidence to
rebut presumption it received mailed notice].) The trial court’s finding that MCOE
received the Fellows memorandum is supported by substantial evidence. (Fukuda, supra,
20 Cal.4th at p. 824; JKH Enterprises, supra, 142 Cal.App.4th at p. 1058.) For the
reasons we discuss next, because the court was justified in concluding that MCOE
received the memorandum, it is immaterial whether CalSTRS itself received it.
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.”
26
“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) 13 Cal.3d 374, 399.)
Ostensible agency cannot be based solely upon representations or conduct of the
purported agent; rather, the statements or acts causing the belief in the existence of such
agency are generally those of the principal. (Lindsay-Field v. Friendly (1995)
36 Cal.App.4th 1728, 1734.) “ ‘Liability of the principal for the acts of an ostensible
agent rests on the doctrine of “estoppel,” the essential elements of which are
representations made by the principal, justifiable reliance by a third party, and a change
of position from such reliance resulting in injury. [Citation.]’ [Citation.]” (Kaplan v.
Coldwell Banker Residential Affiliates, Inc. (1997) 59 Cal.App.4th 741, 747 [ostensible
agency based on principal’s representations to public in general, on which the plaintiff
relied].)
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) 149 Cal.App.4th 836, 852 [“conclusory
presentation” in appellate brief may be treated as an abandoned issue].)
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) 165 Cal. 326, 329.) “[T]he principal is chargeable with, and is bound
by the knowledge of, or notice to, [its] agent, received while the agent is acting within the
scope of [its] authority, and which is in reference to a matter over which [its] authority
extends. [Citations.]” (Trane Co. v. Gilbert (1968) 267 Cal.App.2d 720, 727.) “One
who acts through an agent will be presumed to know all that the latter learns concerning
the transaction, whether it is actually communicated to the principal or not. There is no
difference in this respect between actual and constructive notice. It is of no avail that the
agent failed to communicate to his principal what he had ascertained.” (Shapiro v.
Equitable Life Assur. Soc. of U.S. (1946) 76 Cal.App.2d 75, 87.) Included among the
types of information that may be imputed from agent to principal are facts used to
determine the date of accrual of a statute of limitations. (Santillan v. Roman Catholic
Bishop of Fresno (2008) 163 Cal.App.4th 4, 11.)
28
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,
232 Cal.App.4th at p. 385)—had, through the Fellows memorandum, “ ‘ “ ‘notice or
information of circumstances to put a reasonable person on inquiry’ ” ’ ” (Jolly, supra,
30
44 Cal.3d at pp. 1110-1111) that certain retired teachers in the District were having their
benefits incorrectly calculated.14
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.

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.
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


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.
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) 53 Cal.App.4th 325, 329)—our analysis here is assisted by considering
the more familiar provisions of the Code of Civil Procedure that specify applicable
periods of time for bringing suit.
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

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.”
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) 220 Cal.App.2d 877, 884
[statutes of limitations under Code of Civil Procedure apply to special proceedings such
as certiorari, mandamus and prohibition].) And such civil actions (including special
proceedings) “are commenced when the plaintiff’s complaint or petition is filed with the
court. [Citations.]” (Garcia v. Lacey (2014) 231 Cal.App.4th 402, 411, (Garcia), fn.
omitted, italics added.)
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

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).)
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) 16 Cal.4th 483, 490: “Any
ambiguity or uncertainty in the meaning of pension legislation must be resolved in favor
of the pensioner, but such construction must be consistent with the clear language and
purpose of the statute.”)
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, supra, 22 Cal.4th at p. 13.)
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

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.
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) 15 Cal.App.4th 841, 855,
fn. 9, disapproved on other grounds by Carmel Valley Fire Protection Dist. v. State
(2001) 25 Cal.4th 287, 305, fn. 5.)22

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, supra,
231 Cal.App.4th at p. 411), an agency “initiates” (or “commences”) an administrative
adjudicatory proceeding by filing a statement of issues pursuant to Government Code
section 11504. (See Glen Hill Farm, LLC v. California Horse Racing Bd. (2010)
189 Cal.App.4th 1296, 1301, fn. 3; Capitol Racing v. California Horse Racing Bd. (2008)
161 Cal.App.4th 892, 897.) And the agency, in initiating the proceedings by filing the
statement of issues, is “designated as the ‘complainant.’ ” (Cal. Administrative Hearing

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) 229 Cal.App.2d 124,
130, fn. 1, quoting Gov. Code, § 11500, subd. (c).)
39
Practice (Cont.Ed.Bar 2d ed. 2016) § 3.21, p. 3-18.) We acknowledge the trial court’s
concern that the comparison of the filing of a civil action with the service of a statement
of issues under Government Code section 11504 is imperfect—because CalSTRS’s filing
of the statement of issues was triggered by Teachers’ prior request for a hearing and thus,
as the trial court held, “[CalSTRS’s] procedural posture was more akin to a defendant
than to a plaintiff.” But we nonetheless conclude that, pursuant to Government Code
section 11504, the filing of that pleading was the commencement of an “action” under
section 22008(a). (See Cal. Admin Hearing Practice, supra, § 3.26, p. 3-19 [filing date of
pleading such as statement of issues “may become an important question if the statute of
limitations defense is raised”].)
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.”

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, supra, 55 Cal.4th at p. 1192; Howard Jarvis Taxpayers
Ass’n v. City of La Habra (2001) 25 Cal.4th 809, 822 (Howard Jarvis Taxpayers).)
41
In their trial briefs, the parties—in a somewhat circuitous fashion—raised the
theory of continuous accrual. In Teachers’ opening brief, they urged—erroneously24—
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) 18 Cal.2d 427 (Dillon) and Carrick v.
City and County of San Francisco (1962) 202 Cal.App.2d 402 (Carrick)—that the
continuous accrual theory “does not apply to matters pertaining to pension benefits.” The
court heard extensive argument on April 2, 2015. The majority of the hearing was
devoted to the issue of whether the statute of limitations under section 22008 barred
CalSTRS from taking any action on the overpayment issue. Toward the end of the
hearing, the court, after stating it did not believe Teachers’ laches defense applied,
observed that it was “not at all convinced” that the continuous accrual theory applied.
Counsel for CalSTRS responded that Carrick, supra, 202 Cal.App.2d 402, cited by

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.
42
Teachers in support of its position that the theory did not apply here, was distinguishable.
CalSTRS’s counsel then stated—in the passage Teachers urge in support of their invited
error/waiver contentions—as follows: “[T]he continuing accrual document [sic] appears
for the first time in . . . Petitioner’s [sic] reply brief and inappropriately [sic] considered
here.”
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) 9 Cal.App.4th 1677, 1686.)
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) 23 Cal.3d 180, 184-185, fn. 1, original
italics (Doers); see also In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133-1134.)
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)
148 Cal.App.4th 173, 178 [contention not barred by invited error, where error was result
of misapplication of law rather than parties’ misleading conduct].) And the comment of
CalSTRS’s counsel that “the continuing accrual [theory is] inappropriately considered
here,” while ambiguous, appears to have been CalSTRS’s assertion that the trial court
should not consider Teachers’ legal position concerning the theory because they did not
timely raise it in their initial trial brief. Moreover, considering the entire context of the
proceedings, it is plain that CalSTRS did not waive the argument.
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, supra, 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 timebarred
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) 29 Cal.3d 126, 141
[welfare benefits]; Jones v. Tracy School Dist. (1980) 27 Cal.3d 99, 103-107 [back wages
based upon ongoing discrimination]; Dryden v. Board of Pension Commrs. (1936)
6 Cal.2d 575, 580-581 (Dryden) [monthly pension benefits].)
CalSTRS contends that the continuous accrual theory applies here. Relying on
Dryden, supra, 6 Cal.2d 575 and the language of section 22008, it argues that even if its
action is time-barred in some respect, CalSTRS is only barred from initiating any
proceedings relative to pension payments made more than three years prior to the date it
commenced an “action.” Teachers, relying (as they did below) on Dillon, supra,
18 Cal.2d 427 and Carrick, supra, 202 Cal.App.2d 402, assert that the continuous accrual
theory is inapplicable.
In Dryden, supra, 6 Cal.2d at page 577, the petitioner, the surviving spouse of a
police officer, presented a claim for a pension 10 months after her husband’s death,
which was denied by the pension board because the city charter required that such claims
be submitted within a six-month period. After the trial court upheld the board’s decision
(ibid.), the appellate court reversed, concluding that petitioner’s claim was not entirely
barred and that she was entitled to any future pension benefits paid in monthly
installments, as well as any that would have accrued within six months prior to her
application. (Id. at p. 582.) The Supreme Court agreed, reversing the trial court’s
judgment (ibid.) and adopted the opinion of the Court of Appeal, quoting it verbatim (id.
at p. 576).
45
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, 6 Cal.2d at p. 577.)
The court described the pension as “ ‘a periodic[] allowance of money granted by the city
in consideration of services rendered or of loss or injury sustained, and payments actually
made for that purpose.’ ” (Id. at pp. 578-579, original italics.) Another provision of the
charter provided that “ ‘ “all . . . claims or demands shall be presented within six (6)
months) after the last item or the account or claim accrued.” [Citation.]’ ” (Id. at p. 580.)
The court rejected the city’s contention that under this provision, any claim or application
for a pension was required to be filed within six months. Instead, the court observed: “
‘The right to pension payments is a continuing right. Petitioner by her conduct may have
barred herself from collecting payments which have accrued, but this does not mean that
she is without means to enforce the right to present and future pension payments, as
distinguished from past and accrued pension payments, provided she proceeds to do so in
the manner required by law. The distinction between a single covenant and a continuing
covenant is well settled in the law. [Citations.]’ ” (Id. at pp. 580-581, original italics.)
The court in Dryden thus held that “ ‘the petitioner is entitled to all those periodic
pension payments which fell due within a period of six months prior to her application to
the Board . . . and to all those periodic pension payments which have accrued since that
date and which will continue to accrue in the future . . .’ ” (Id. at p. 582.) The Supreme
Court later reaffirmed that, under Dryden, a pensioner’s right to receive periodic
payments is a continuing one. (See, e.g., Aryeh, supra, 55 Cal.4th at pp. 1198-1199;
Abbott v. City of Los Angeles (1958) 50 Cal.2d 438, 462; Dillon, supra, 18 Cal.2d at
p. 430.)
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, supra, 18 Cal.2d at p. 427, does not support Teachers’ position. There, the
surviving spouse of a policeman who had committed suicide made a timely application
for a “widow’s pension” under the city charter, which was denied. (Id. at p. 429.) More
than three years later, she filed a mandamus petition that the trial court held was timebarred.
(Ibid.) The Supreme Court affirmed the principle in Dryden, supra, 6 Cal.2d 575
that there is a continuing right to receive periodic pension benefits, and that “any time
limitation upon the right to sue for each instalment necessarily commences to run from
47
the time when that instalment actually falls due.” (Dillon, at p. 430.) The court
distinguished the circumstances in Dillon, noting that “[b]efore [the] plaintiff can claim
these periodic payments, however, she must establish her right to a pension . . . . An
action to determine the existence of the right thus necessarily precedes and is distinct
from an action to recover instalments which have fallen due after the pension has been
granted.” (Ibid.) The court thus upheld the trial court’s conclusion that the plaintiff’s
cause of action was time-barred under Code of Civil Procedure section 338, requiring that
an action upon a liability created by statute be commenced within three years. (Dillon, at
p. 431.) In so concluding, the Supreme Court held that Dryden was factually and
procedurally distinguishable, because there, the inquiry concerned the wording of a
charter provision establishing the accrual of a six-month period for making an
administrative claim, commencing “not [from] the time when the right to the pension first
accrues, but [from] the time at which the last item of the claim accrues. In the case of
pensions, items accrue indefinitely.” (Dillon, at p. 432.)
Teachers’ reliance on Carrick, supra, 202 Cal.App.2d 402 is also misplaced. In
Carrick, the plaintiff, a fire department employee who, upon retirement, began receiving
a pension, brought suit 12 years later, contending that he had been misclassified and his
pension benefits had thereby been understated. (Id. at p. 404.) The appellate court
affirmed the trial court’s holding that the plaintiff’s action was barred by the three-year
statute of limitations of Code of Civil Procedure section 338. (Carrick, at p. 410.) The
court distinguished Dryden on the basis that it involved the accrual of a claim for periodic
pension benefits to which an entitlement had been established, while the plaintiff in
Carrick was challenging his classification—akin to asserting a right to a pension—in
which case the claim accrued on the date of the plaintiff’s retirement. (Carrick, at
pp. 410-411; cf. County of San Diego v. Myers (1983) 147 Cal.App.3d 417, 421, 422
[periodic payment theory did not save plaintiff’s claim; dispute concerned statutory
48
entitlement to reimbursement under Medi-Cal program, not for collection of periodic
payments].)
Under Dryden, supra, 6 Cal.2d 575 and based upon the terms of section 22008, we
conclude that the continuous accrual theory applies to CalSTRS’s action. Accordingly,
although it is time-barred as to any claims relating to pension benefit overpayments made
more than three years prior to the commencement of the “action” on July 6, 2012, section
22008 does not preclude any such action for past or future monthly payments to Teachers
accruing on or after July 6, 2009.
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.

Outcome: 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.

Plaintiff's Experts:

Defendant's Experts:

Comments:



 
 
Home | Add Attorney | Add Expert | Add Court Reporter | Sign In
Find-A-Lawyer By City | Find-A-Lawyer By State and City | Articles | Recent Lawyer Listings
Verdict Corrections | Link Errors | Advertising | Editor | Privacy Statement
© 1996-2018 MoreLaw, Inc. - All rights reserved.