Applicability of Probate Code2461 Second Avenue Sacramento, CA 95818 Dear Ms. Gillan: Section 17(a), Article XVI of the California Constitution defines the assets of a public retirement system as "trust" funds. Subsection (h) defines the retirement board as a board of "trustees." Section 15642(b)(2) of the California Probate Code provides that insolvency is grounds for the removal of a trustee. Section 15643(f) indicates the office of trustee becomes vacant if the trustee files a petition for bankruptcy. So, CalPERS board members are trustees and can be removed, or their offices declared vacant, if they file for bankruptcy. The intent and applicability of the law seems clear. However, when I spoke with you today, you mentioned there is another piece to this puzzle that exempts the CalPERS Board from the provisions of the Probate Code. Please provide me with that citation or court decision. If you are correct, it seems odd that someone who has declared personal bankruptcy presents too great a risk to serve as a trustee for Uncle Bob's $50,000 estate, for example, but they can serve as a trustee for the nation's largest public pension fund which holds $120 billion in trust for a million members. I see this matter cannot easily be taken care of by going to the Legislature. Section 17(f), Article XVI of the California Constitution solidifies the number, terms, and method of selection or removal of members of the retirement board as those in effect on July 1, 1991. Any required change would have to be put to the voters as a Constitutional amendment. I would like to take a look at your citation to see if it is as applicable as you seem to believe. Thank you for your prompt attention. Sincerely, James McRitchie URL: http://www.corpgov.net/calpers-mcritchie.html
From: "Gillan, Kayla" Kayla_Gillan@CalPERS.CA.GOV This is in response to your e-mail of Monday, Sept. 29. Probate Code section 82(b)(13) excludes from the definition of "trust" trusts which have the primary purpose of paying, inter alia, pensions, or employee benefits of any kind. Probate Code section 20 provides that this definition applies to the entire Probate Code, unless otherwise required. Therefore, the section that you cite (concerning grounds for removal of "trustees", including the ground of "insolvency") does not apply to CalPERS. As a separate note, Art. XVI, sec. 17(h) does not define the CalPERS Board of Admin. to be a "board of 'trustees'". This section defines a "retirement board" to be, alternatively, a "board of administration, board of trustees, board of directors, or other governing body." In the case of CalPERS, the governing body is the Board of Administration. (Gov. Code secs. 20090, 20120.) Under common trust law, this body is "the trustee."
To: "Gillan, Kayla" Kayla_Gillan@CalPERS.CA.GOV Thanks for your prompt response. While you raise interesting technicalities, they provide no resolution to the question of Mr. Valdes' eligibility to remain in office. You cite Probate Code section 82(b)(13) as excluding CalPERS from the definition of "trust." However, section 15003(c) brings it right back in. "Nothing in this division or in Section 82 is intended to prevent the application of all or part of the principles or procedures of this division to an entity or relationship that is excluded from the definition of "trust" provided by Section 82 where these principles or procedures are applied pursuant to statutory or common law principles, by court order or rule, or by contract." In addition, section 15002 makes clear that common law rules govern trusts in California, unless modified by statute. One way to resolve the issue would be to request an opinion from the Attorney General. I don't have standing to make such a request, but CalPERS does. Has the Board considered making such a request? I would think they would want to remove any cloud of doubt concerning this matter. |