D'Arcy v. Galperin CA2/4 ( 2015 )

Filed 10/22/15 D’Arcy v. Galperin CA2/4
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
BRIAN D’ARCY, as Trustee, etc., B256016
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BS146924)
v.
RON GALPERIN, as Controller, etc., et
al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of Los Angeles County,
James C. Chalfant, Judge. Affirmed.
Law Offices of Robert S. Gerstein and Robert S. Gerstein; Schwartz,
Steinsapir, Dohrmann & Summers, D. William Heine and Daniel E. Curry, for
Plaintiff and Appellant.
Michael N. Feuer, City Attorney, James P. Clark, Chief Deputy City
Attorney, Thomas H. Peters, Chief Assistant City Attorney, Valerie L. Flores and
Gregory P. Orland, Deputy City Attorneys, for Defendants and Respondents.
In the underlying action, appellant Brian D’Arcy, in his capacity as union
trustee of two institutes established by the Los Angeles Department of Water and
Power (DWP) and International Brotherhood of Electrical Workers, Local 18,
AFL-CIO (Local 18), filed a petition for writ of prohibition or mandamus against
respondent Ron Galperin, in his capacity as Controller of the City of Los Angeles
(Controller). Appellant sought to quash subpoenas issued by the Controller in
order to conduct an audit of the two institutes. The trial court declined to quash the
subpoenas and denied the petition. We conclude that the instruments establishing
the institutes as trusts authorized respondent’s audit, and thus affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Background
Respondent City of Los Angeles (City) is a charter city.1 Under the City’s
charter, the Controller is the “‘auditor and general accountant of the City.’” (L.A.
Charter, § 260.) The Controller exercises general supervision of all City
departments charged with the receipt, collection, or disbursement of City money,
including the DWP. (L.A. Charter, § 260.) Section 20.55 of the Los Angeles
Administrative Code further authorizes the Controller to “inspect and audit the
books, accounts, funds and securities of every person charged in any way with the
safe-keeping or disbursement of public money or securities,” and section 20.60 of
that code empowers the Fraud, Waste and Abuse Unit in the Controller’s office “to
identify and prevent losses of City funds and resources . . . .”
1
A charter city “is constitutionally entitled to exercise exclusive authority over all
matters deemed to be ‘municipal affairs.’ (Cal. Const., art. XI, § 5.)” (DeVita v. County
of Napa (1995) 9 Cal.4th 763, 783.) Generally, a charter city’s electorate may determine
the charter’s provisions, subject to certain constitutional and statutory limitations.
(Howard Jarvis Taxpayers Assn. v. City of San Diego (2004) 120 Cal.App.4th 374, 385.)
2
B. The Institutes
The DWP and Local 18 initiated the creation of the institutes through
collective bargaining to improve the safety and training of DWP employees. Each
institute was intended to be an independent irrevocable trust, governed by a board
of trustees made up of equal numbers of trustees appointed by the DWP and Local
18.
1. Joint Safety Institute
The Joint Safety Institute (JSI) was established in 2000. In July 2000, the
DWP/Local 18 Joint Labor/Management Resolution Board executed a letter of
agreement amending the existing memorandum of understanding, stating: “‘[T]he
JSI shall be an established trust -- an institutionalized and contract-based
independent body advocating promotion of worker safety through more focused
information sharing, training, and mentoring and a strategic partnership which
furthers the overall safety effort of the [DWP].’”2 The letter of agreement obliged
the DWP to provide a minimum of $1.2 million per fiscal year to fund the JSI. On
October 3, 2000, the Board of Water and Power Commissioners -- the DWP’s
governing body -- approved the proposed “Agreement and Declaration of Trust of
JSI” (JSI trust agreement), and authorized DWP’s manager to execute it.
On October 10, 2000, the Los Angeles City Council adopted Ordinance
173560, which declared: “‘The [JSI trust agreement] . . . establishing a non-profit,
independent entity . . . as an irrevocable trust jointly managed and operated by the
parties through a duly-constituted [b]oard of [t]rustees acting for the benefit and in
the fiduciary interest of those DWP employees represented by Local 18 is hereby
2
At appellant’s request, we hereby take judicial notice of the parties’ memorandum
of understanding. (Curcini v. County of Alameda (2008) 164 Cal.App.4th 629, 647, fn.
13; Evid. Code, §§ 452, 459.)
3
approved and ratified by the City in all particulars not contrary to law.’” On
October 17, 2000, Mayor Richard Riordan approved the ordinance.
2. Joint Training Institute
The creation of the Joint Training Institute (JTI) in 2002 followed a similar
pattern. In April 2002, the DWP/Local 18 Joint Labor/Management Resolution
Board executed a letter of agreement amending the existing memorandum of
understanding, stating that Local 18 and the DWP intended to create the JTI “‘as
an independent and advisory body that will review and recommend the feasibility
of and requirements for institutionalized preparatory and competency-based
training and learning opportunities that create a flexible and skilled workforce that
is committed to excellence in public service.’” In May 2002, the Board of Water
and Power Commissioners authorized the execution of the proposed agreement and
declaration of trust regarding the JTI (JTI trust agreement).
On August 7, 2002, the Los Angeles City Council adopted Ordinance
174771, which declared: “‘The [JTI trust agreement] . . . establishing a non-profit,
independent entity . . . as an irrevocable trust jointly managed and operated by the
parties through a duly-constituted [b]oard of [t]rustees acting for the benefit and in
the fiduciary interest of those DWP employees represented by Local 18 is hereby
approved and ratified by the City in all particulars not contrary to law.’” The
ordinance noted the DWP’s obligation to provide $6 million to fund the JTI during
the first three years of its operation. On August 14, 2002, Mayor James Hahn
approved the ordinance.
C. Events Preceding Underlying Action
Prior to September 2013, the Controller’s office never sought to audit the
institutes. Beginning on September 19, 2013, the Los Angeles Times published a
4
series of articles regarding the institutes, alleging that they lacked transparency and
were apparently inefficacious, and that the DWP had little information regarding
how the funds it had contributed to them had been spent. On September 20, 2013,
the Controller announced that he was initiating an audit of the institutes. On the
same date, the Controller informed the DWP of his intent to carry out an audit,
asserting that Section 12 of an article entitled “Miscellaneous” (section 12) found
in each trust agreement authorized such an audit. That provision states in pertinent
part: “Either the DWP or [Local 18], or both, may at any time, but not more often
than once every calendar year, require that the [t]rust be audited either by an
independent certified public accounting firm or by the Controller . . . .”
On October 15, 2013, Local 18 provided notice to the DWP and the trustees
of the institutes that it was exercising its prerogative under section 12 to require
that the institutes be audited in 2013 by Miller Kaplan Arase LLP, a certified
public accounting firm (Miller firm). Later, after the Board of Water and Power
Commissioners approved a resolution requesting the Controller to audit the
institutes, the Controller informed the institutes’ trustees of his intent to conduct an
audit, and asked them to pick an “‘audit liaison’” to assist his office. The
Controller asserted that his audit was authorized by his power “‘to inspect and
audit the books . . . of every person charged in any way with the safe-keeping or
disbursement of public money’” (L.A. Admin. Code, § 20.55), and by the request
for an audit by the DWP’s governing body.
On December 13, 2013, the trustees deadlocked over whether to designate
the audit liaison. The union trustees maintained that the Controller lacked the
authority to audit the trusts except as provided in the trust agreements, and the
DWP trustees asserted that the Controller had the authority to conduct an audit.
Notwithstanding the deadlock, the Controller informed the trustees that he intended
5
to audit the institutes, and scheduled an “audit entrance conference” for January 8,
2014.
On the first day of 2014, Local 18 provided notice by e-mail to the DWP and
the trustees of the institutes that it was exercising its prerogative under section 12
to require that the institutes be audited in 2014 by the Miller firm. The following
day, at the opening of business, written notices of that decision were hand
delivered to the DWP and the trustees.
On January 8, 2014, the union trustees informed the Controller that they
would not participate in the audit entrance conference scheduled for that day.
They asserted that section 12 of the trust instruments permitted no more than one
audit per calendar year, and that the New Year’s Day request by Local 18 thus
precluded any audit at the request of the DWP for the calendar year 2014. They
further maintained that section 20.55 of the Los Angeles Administrative Code did
not authorize the audit because the institutes were not charged with the safekeeping
or disbursement of public funds.
On January 8, 2014, after receiving the union letter, the Controller requested
that the City Clerk issue subpoenas to appellant as union trustee for the institutes
and the institutes’ custodians of records. On January 16, 2014, at the Controller’s
request, the City Clerk withdrew those subpoenas, and issued new subpoenas
directed to appellant as union trustee for the institutes and the institutes’ custodians
of records. On January 17, 2014, counsel for appellant and the City Attorney, on
behalf of the Controller, reached an agreement providing for acceptance of service
and a stay of the subpoenas pending a resolution of the dispute in superior court.
6
D. Underlying Action
On January 23, 2014, appellant filed a petition for a writ of prohibition or
mandate, seeking to quash the subpoenas. Shortly thereafter, appellant filed a
motion to quash the subpoenas. On March 25, 2014, following a hearing, the trial
court declined to do so. The court concluded that section 12 of the trust
instruments did not authorize the Controller’s audit for the calendar years 2013 and
2014 because Local 18 had elected to have the Miller firm perform that task, but
that section 20.55 of the Los Angeles Administrative Code empowered the
Controller to audit the institutes. A judgment denying appellant’s petition and
motion to quash the subpoenas was entered on April 22, 2014. This appeal
followed.3
DISCUSSION
Appellant asserts that the trial court erred in declining to quash the
subpoenas, contending primarily that section 20.55 of the Los Angeles
Administrative Code does not authorize the Controller’s audit of the institutes. As
explained below, it is unnecessary for us to examine that contention because we
conclude that section 12 of the trust instruments empowered the Controller to
conduct the audit at the DWP’s request, notwithstanding Local 18’s election to
have the Miller firm conduct audits of the institutes for the calendar years 2013 and
2014. For that reason, appellant has established no basis for relief by writ of
mandate.
3
In May 2014, while the appeal was pending, appellant filed a petition for writ of
supersedeas to stay enforcement of the judgment. On June 18, 2014, after issuing a
temporary stay, we granted the petition, ordered that the appeal proceed as an expedited
matter, and dissolved the temporary stay.
7
A. Standard of Review4
Traditional mandamus (Code Civ. Proc., § 1085) lies to correct an abuse of
discretion. (Rando v. Harris (2014) 228 Cal.App.4th 868, 876 (Rando); Khan v.
Los Angeles City Employees’ Retirement (2010) 187 Cal.App.4th 98, 108 (Khan).)
Under the City’s charter, the Controller may direct the issuance of subpoenas in the
course of an investigation. (L. A. Charter, § 217(b).) The question thus presented
to the trial court was whether the issuance of the subpoenas constituted an abuse of
discretion, that is, whether the decision to issue them “was arbitrary, capricious,
entirely lacking in evidentiary support, unlawful, or procedurally unfair.” (Khan,
supra, 187 Cal.App.4th at p. 106.) To resolve that question, the trial court
examined whether section 12 of the trust instruments or the City’s Charter and
Administrative Code authorized the Controller’s proposed audit.
Because the trial court and appellate court perform the same function in
mandamus actions, we do not review the trial court’s findings or conclusions, but
independently examine whether the issuance of the subpoenas was an abuse of
discretion. (Rando, supra, 228 Cal.App.4th at p. 876; Khan, supra, 187
Cal.App.4th at pp. 105-106; Friends of the Old Trees v. Department of Forestry &
Fire Protection (1997) 52 Cal.App.4th 1383, 1393.) As discussed further below
(see pt. B., post), to the extent the Controller’s decision to issue the subpoenas
relied on section 12 of the trust instruments, the decision presents a question of law
4
Although appellant sought a writ of prohibition as an alternative to traditional
mandamus, the trial court determined that a writ of prohibition was not an appropriate
remedy regarding the issuance of the subpoenas. Because appellant does not challenge
that aspect of the trial court’s ruling on appeal, he has forfeited any contention of error
concerning it.
8
regarding the interpretation of section 12 that we review de novo. (Rando, supra,
228 Cal.App.4th at p. 876.)5
5
During oral argument, appellant’s counsel contended our focus must be solely on
legal issues likely to recur between the parties -- in particular, the Controller’s claimed
authority to conduct audits of the institutes independent of the trust instruments --
because a settlement agreement between the parties had rendered moot the denial of
appellant’s motion to quash the subpoenas. Generally, “[a]n appeal should be dismissed
as moot when the occurrence of events renders it impossible for the appellate court to
grant appellant any effective relief.” (Cucamongans United for Reasonable Expansion v.
City of Rancho Cucamonga (2000) 82 Cal.App.4th 473, 479.) Nonetheless, “there are
three discretionary exceptions to the rules regarding mootness: (1) when the case presents
an issue of broad public interest that is likely to recur [citation]; (2) when there may be a
recurrence of the controversy between the parties [citation]; and (3) when a material
question remains for the court’s determination [citation].” (Id. at pp. 479-480.)
Although the settlement agreement predated the filing of appellant’s opening brief,
appellant’s briefs do not suggest the settlement agreement required an exercise of our
discretion to address an otherwise moot appeal. Generally, “we need not consider any
issue which, although raised at oral argument, was not adequately raised in the briefs.”
(Sunset Drive Corp. v. City of Redlands (1999) 73 Cal.App.4th 215, 226.) Here,
appellant’s opening brief stated only that the settlement agreement “partly resolv[ed] the
issues in this action.” Respondent’s brief maintained in response that the settlement
agreement concerned “matters not at issue in this appeal.”
Independent of appellant’s failure to raise the issue of mootness adequately in the
briefs, we conclude the settlement agreement does not render moot the denial of
appellant’s motion to quash the subpoenas. The subpoenas in question sought
“information, data, records and reports” related to the institutes covering the period from
July1, 2008 through December 31, 2013. In contrast, the settlement agreement states that
it resolves disputes regarding the City’s auditing of the institutes for a distinct -- albeit,
overlapping -- period, namely, “the fiscal years 2009-2010, 2010-2011, 2011-2012, 2012-
2103, and 2013-2104.” Furthermore, the agreement expressly states that it “shall not
. . . affect the positions or arguments of any party pertaining to any other fiscal year[]” in
the underlying action.” (Italics added.) The settlement agreement therefore does not
render moot the validity of the subpoenas at issue, as they sought information regarding a
period of time outside the scope of the settlement agreement.
9
1. Interpretation of Trust Instruments
Generally, “‘“[i]n construing trust instruments, as in the construction and
interpretation of all documents, the duty of the court is to first ascertain and then, if
possible, give effect to the intent of the maker.” [Citations.]’ [Citation.] ‘[Probate
Code s]ection 21102 provides, “[T]he intention of the transferor as expressed in the
instrument controls the legal effect of the dispositions made in the instrument.”’
[Citations.]” (In re Estate of Cairns (2010) 188 Cal.App.4th 937, 944 (Cairns).) In
interpreting a trust instrument, we seek a construction that respects the language
used (Huscher v. Wells Fargo Bank (2004) 121 Cal.App.4th 956, 972), and avoids
rendering key phrases as surplusage (Comstock v. Corwin (1952) 111 Cal.App.2d
770, 772-773).6
“The interpretation of . . . a . . . trust instrument presents a question of law
unless interpretation turns on the credibility of extrinsic evidence or a conflict
therein.” (Burch, supra, 7 Cal.4th at p. 254.) Here, the material facts surrounding
the execution of the trust instruments are not in dispute, and as the trial court noted,
no extrinsic evidence was submitted bearing on section 12 of the instruments. We
therefore look to the trust agreements themselves to interpret section 12. (Cairns,
supra, 188 Cal.App.4th at p. 944.)
B. JSI and JTI Trust Agreements
The main provisions of the trust agreements are similar in form and content.
The recitals of the agreement set forth the purposes of each institute. Included
among the recitals is a section entitled “Mission Statement.” Within that section,
the JSI trust agreement states that the JSI is intended to foster workplace health and
6
For interpretative purposes, there is no distinction between inter vivos and
testamentary trusts. (Burch v. George (1994) 7 Cal.4th 246, 254, fn. 5 (Burch); Wells
Fargo Bank v. Huse (1976) 57 Cal.App.3d 927, 932.)
10
safety, and “‘promote open communication and mutual trust and respect between
labor and management on issues of health and safety.’” Within the analogous
section, the JTI trust agreement states that the JTI is intended to advise the DWP
regarding safety, conduct studies regarding desirable training, identify retraining
opportunities, and develop outreach programs.
Also included within the recitals in each agreement is a section entitled
“Philosophy.” Within that section, the JSI trust agreement affirms the parties’
commitment to the value of safety, and states that “[l]abor and management must
continuously work toward mutual trust and respect.” Similarly, within the
analogous section, the JTI trust agreement affirms the parties’ commitment to the
value of training, and again states that “[l]abor and management must continuously
work toward mutual trust and respect.”
In each agreement, the key provisions regarding the structure and funding of
the trusts are set forth in Articles II through X. Articles VI, IX and X set forth the
trustees’ principal duties and powers regarding the funds provided by the DWP,
which are specified in Article VIII. Under Article X, title to the funds is “vested
in” the trustees. Article IX directs the trustees to administer the funds “in a manner
consistent with [the a]greement and applicable law.” Article VI states that the
trustees “are fiduciaries,” and provides: “The [t]rustees shall maintain books,
records, and accounts of all of their transactions as [t]rustees. Such books, records
and accounts of the [t]rustees shall be audited annually, or more often, as the
[t]rustees shall determine, by a certified public accountant.”
Also pertinent here are the provisions regarding governance of the trusts,
which are found in Articles IV and V. Section 1 of Article IV obliges the DWP
and Local 18 to select an equal number of trustees, designated the “[e]mployer”
and “[u]nion” trustees. Section 2 of Article V provides that for purposes of
governing the trust, each group of trustees is allocated a single vote on any given
11
matter. Section 3 of Article V further provides that unless the votes “concur,” the
matter is deadlocked, and is subject to a specified dispute procedure. Section 6 of
Article V states: “In the event of a deadlock . . . , the matter may . . . be referred
. . . for final decision to a neutral person to decide such dispute, and if the [t]rustees
cannot agree upon a neutral person . . . , the [s]uperior [c]ourt . . . may be
petitioned to appoint such neutral person, and the decision of such neutral person
shall be final and binding upon the parties with respect to the matter referred to
such neutral person for decision.”
Section 12, the key provision at issue here, is located in an article entitled
“Miscellaneous.”7 As elaborated below (see pt. D., post), section 12 empowers the
DWP and Local 18 to require audits. Aside from setting forth section 12, section 1
of the article entitled “Miscellaneous” states: “This [t]rust is created and accepted
in California, and all questions pertaining to the validity or construction of the trust
estate and the operation and conduct thereof shall be determined in accordance
with the laws of the State of California . . . .” Section 4 of the article further states
that the institute “is an independent body, and not the agency, subsidiary, or
affiliate of either the DWP or [Local 18].”
C. Analysis
In view of the express terms of the trust agreements, we apply California law
regarding trusts in construing section 12. California applies the common law of
trusts, “[e]xcept to the extent that the common law rules governing trusts [have
been] modified by statute . . . .” (Prob. Code, § 15002.) Thus, when necessary, we
look to the Restatement Third of Trusts for guidance. (Lonely Maiden
7
That article is Article XII in the JSI agreement and Article XI in the JTI
agreement.
12
Productions, LLC. v. GoldenTree Asset Management, LP (2011) 201 Cal.App.4th
368, 379.)
Our inquiry is governed by the established principle that “‘“[i]n construing a
trust instrument, the intent of the trustor prevails and it must be ascertained from
the whole of the trust instrument, not just separate parts of it.” [Citations.]’
[Citation.]” (Cairns, supra, 188 Cal.App.4th at p. 944.) Under that principle, “in
ascertaining the intention of the trustor[,] the court is not limited to determining
what is meant by any particular phrase[,] but may also consider the necessary
implication arising from the language of the instrument as a whole.” (Brock v.
Hall (1949) 33 Cal.2d 885, 890 (Brock).) Thus, an interpretation to which a
provision may be susceptible when viewed in isolation must be rejected when it is
inconsistent with the apparent purposes of the trust instrument, viewed as a whole,
and would defeat those purposes. (Lawrence v. Wilson (1919) 44 Cal.App. 690,
693; see Brock, supra, 33 Cal.2d at p. 891 [despite absence of specific provision
establishing distribution of trust assets upon dissolution of trust, such distribution
was implied by reference to trustor’s intent, as shown by “four corners” of trust
instrument].) We therefore examine the trust agreements as a whole in construing
section 12.8
Viewed as a totality, the agreements reveal the DWP’s and Local 18’s intent
to establish the institutes as irrevocable trusts. Because the DWP and Local 18
agreed to create the trusts through collective bargaining, each is properly regarded
as a trustor or settlor (1 Rest.3d Trusts, § 3, com. a, p. 36 [“‘trustor’” and
“‘settlor’” designate creators of trust]), even though only the DWP funds the trusts.
8
Generally, “in the field of interpreting trusts and wills, each case depends upon its
own peculiar facts, and ‘“precedents have comparatively small value . . . . ”’” (Wells
Fargo Bank v. Marshall (1993) 20 Cal.App.4th 447, 453, quoting Estate of Lawrence
(1941) 17 Cal.2d 1, 6.)
13
(1 Rest.3d Trusts, § 10, com. g, p. 152 [“If a promise to create a trust is made for a
consideration and the promised trust is thereby or thereafter created, the person
who supplies the consideration is the ‘settlor’ . . . .”]; (Bogert et al., The Law of
Trusts and Trustees (3d ed. 2007) § 41, p. 440, [“One who furnishes the
consideration necessary to induce another to create a trust is the settlor of the trust
when it is created.”].)9 Ordinarily, the trustor, as such, retains no control over an
irrevocable trust. (3 Rest.3d Trusts, § 94, com. d(2), p. 7.) Nonetheless, the terms
of the trust instrument may reserve to the trustor the power to direct or control the
trustees regarding specific matters. (3 Rest.3d Trusts, § 75, p. 51.) When the
power is for the benefit of the trust’s beneficiaries, the power is held by the trustor
in a fiduciary capacity, regardless of whether the trustor is also a beneficiary. (3
Rest.3d Trusts, § 75, com. c(2), p. 55; see Crocker-Citizens National Bank v.
Younger (1971) 4 Cal.3d. 202, 210-211 [power delegated by trustor to committee
intended to advise trustees was fiduciary in character].)
Here, section 12, by its plain language, reserves to the DWP and Local 18
the power to require an audit: “Either the DWP or [Local 18], or both, may at any
time, but not more often than once every calendar year, require that the [t]rust be
audited either by an independent certified public accounting firm or by the
Controller . . . .” As appellant acknowledges, section 12 constitutes an “oversight
provision.” Because section 12 itself confers no pecuniary interest in the trust
funds or control over them on the DWP and Local 18, the power it establishes is
9
As noted in In re Estate of Giraldin (2012) 55 Cal.4th 1058, 1073, we may
consider the treatise cited above in interpreting California trust law.
14
for the benefit of the beneficiaries. (3 Rest.3d Trusts, § 75, com. c(2), pp. 54-55.)
That power is thus held by the DWP and Local 18 in a fiduciary capacity. 10 (Ibid.)
We turn to the central question before us, namely, the precise power granted
to the DWP and Local 18 under section 12. Before the trial court and on appeal,
appellant has argued that the meaning of section 12 is “clear,” namely, only one
audit may be required in a calendar year. On appellant’s proposed interpretation,
therefore, the limiting phrase in section 12 -- namely, “but not more often than
once every calendar year” -- operates to restrict the total number of audits that may
occur in a calendar year.
In contrast, before the trial court and on appeal, respondents have maintained
that the limiting phrase merely restricts the number of audits each trustor may
require in a calendar year. They contend that appellant’s proposed interpretation
nullifies the phrase “or both” in section 12, which they argue manifests an intent to
permit both trustors to require an audit in a calendar year. In addition, they argue
that appellant’s proposed interpretation is unreasonable because “it would allow
one party to block perpetually the ability of the other party to conduct an audit by
asking for the audit first each year.”
We agree with respondents that section 12 permits each trustor to require
one audit per year by an independent certified public accounting firm or the
Controller. As discussed above, section 12 must be interpreted in light of the
trustors’ “primary purpose,” as disclosed by the trust agreements as a whole.
(Brock, supra, 33 Cal.2d at p. 891.) For that reason, the correct interpretation of
section 12 cannot be determined merely by examining the phrase “Either the DWP
or [Local 18], or both, . . .” in isolation. Indeed, it is well established that the word
10
Because these determinations regarding the power follow solely from the DWP’s
and Local 18’s status as trustors, it is unnecessary to resolve a dispute between the parties
whether the DWP and Local 18 are also beneficiaries of the trusts.
15
“or” in a written instrument must be construed in a manner that effectuates the
parties’ overall intent. (Universal Sales Corp. v. Cal. Etc. Mfg. Co. (1942) 20
Cal.2d 751, 775-776; Estate of Christen (1965) 238 Cal.App.2d 521, 526, fn. 2;
McNeil v. Graner (1949) 91 Cal.App.2d 858, 864.)
Only respondents’ interpretation of section 12 respects the language and
purposes of the trust instruments. That interpretation comports with the terms of
section 12 itself, as the phrase “either . . . or . . . or both” is commonly used to state
that two alternatives are not exclusive, and that each may occur, notwithstanding
the occurrence of the other. (Merriam-Webster’s Collegiate Dict. (1995) p. 134
[“both” is “used as a function word to indicate and stress the inclusion of each of
two or more things specified by coordinated words”].) Thus, section 12 is
reasonably understood as providing that each trustor “may at any time, but not
more often than once every calendar year, require that the [t]rust be audited . . . .”
Respondents’ interpretation also promotes the purposes of the trust
agreements. The agreements expressly assert the DWP’s and Local 18’s
commitment to “work[ing] together toward mutual trust and respect” through the
institutes. In furtherance of that commitment, the governance of the trusts reflects
a finely balanced structure designed to prevent domination by either side: the
employer trustees and the union trustees are allocated a single vote regarding any
given matter, and in the event of deadlock, the matter is to be resolved by a neutral
third party.
Respondent’s interpretation facilitates the parties’ commitment to
cooperation and the avoidance of domination by permitting each trustor to require
an audit, regardless of the other trustor’s conduct. As explained above, because
section 12 grants each trustor a power of oversight designed to benefit the
beneficiaries, the trustors are “subject to fiduciary duties in the exercise of the
power . . . .” (3 Rest.3d Trusts, § 75, com. e, p. 56.) Respondents’ interpretation
16
thus secures each trustor’s ability to discharge those duties, when necessary, for the
benefit of the beneficiaries.
In contrast, appellant’s proposed interpretation is inconsistent with the
primary purposes of the trust agreements, and operates to defeat them. Under that
interpretation, only the first trustor to request an audit in a calendar year will be
able to exercise its fiduciary oversight power. Such an interpretation compels a
race to request an audit between the trustors that is of no discernible benefit to the
trusts. Indeed, under appellant’s interpretation, the DWP’s only prospect of
securing an audit in 2014 would have been to request one in the first moments of
the new year, prior to Local 18’s e-mail requesting an audit. Nothing in the trust
agreements, viewed as a whole, suggests that the trustors’ intent was to
circumscribe their oversight power in a manner that frustrates cooperation,
facilitates arbitrary domination, and impairs their ability to resolve concerns
regarding the trusts’ operation.
Appellant maintains that we must accept his interpretation of section 12 for
the reasons stated by the trial court. In ruling on appellant’s petition and motion to
quash, the court agreed with appellant’s interpretation, concluding the phrase “or
both” merely authorized the parties’ joint direction for a single audit, not two
separate audits. The court reasoned that because Article VI requires the trustees to
conduct at least one annual audit, respondents’ interpretation of section 12 “would
permit three audits per year, not two, without any good cause requirement for
doing so.” Pointing to the court’s rationale, appellant contends his interpretation
provides a “commonsense understanding” of section 12, arguing that the limitation
on audits the interpretation proposes “is tempered by the independent provision of
a regular annual audit . . . . It is reasonable . . . to read the [a]greements to . . .
permit two audits a year . . . but not three or more audits in the same year.” We
disagree.
17
As explained above, section 12 must be regarded as granting each trustor the
right to request an audit, beyond the annual audit performed by the trustees.
Appellant’s suggestion that the existence of the annual audit provided for in Article
VI satisfies the need for oversight ignores the fact that the trust expressly permits a
trustor to initiate another audit in addition to the Article VI audit. Moreover, the
absence of an express “good cause requirement” for an audit does not necessitate
interpreting section 12 to permit only one audit in order to limit the number of
potentially unjustified trustor-initiated audits. Because the trustors’ oversight
powers are fiduciary in character, they are subject to fiduciary duties in exercising
that power “comparable to those of a trustee . . . .” (3 Rest.3d Trusts, § 75, com. e,
p. 56.) As trustees are generally required to act “solely in the interest of the
beneficiaries” and with reasonable care (Prob. Code, §§ 16002, subd. (a), 16040,
subd. (a)), the trustors may not require an audit without due attention to the
beneficiaries’ interests.11
11
In a related contention, appellant contends we must accept the trial court’s
conclusion regarding the interpretation of section 12 because respondents failed to notice
a cross-appeal regarding that conclusion. However, as noted above (see pt. A., ante), we
independently review the Controller’s decision to issue the subpoenas in assessing
whether to affirm the judgment. Furthermore, respondents seek affirmance of the
judgment on a theory not relied upon by the trial court, rather than reversal of a
substantive portion of the judgment. To do so, respondents need not have noticed a
cross-appeal. (Central Manufacturing District, Inc. v. Board of Supervisors (1960) 176
Cal.App.2d 850, 857.) Indeed, on appeal, “[w]e do not review the trial court’s reasoning,
but rather its ruling. A trial court’s order is affirmed if correct on any theory . . . .
[Citations].” (J.B. Aguerre, Inc. v. American Guarantee & Liability Ins. Co. (1997) 59
Cal.App.4th 6, 15-16.) Thus, we may affirm a ruling “on any basis presented by the
record whether or not relied upon by the trial court.” (Day v. Alta Bates Medical Center
(2002) 98 Cal.App.4th 243, 252, fn. 1.) The decisions upon which appellant relies are
distinguishable, as in each case the respondent effectively sought the reversal of a
substantive aspect of the judgment without noticing a cross-appeal. (Estate of Powell
(2000) 83 Cal.App.4th 1434, 1439; Kardly v. State Farm Mut. Auto. Ins. Co. (1995) 31
Cal.App.4th 1746, 1748-1749, fn. 1; California State Employeess’ Assn. v. State
Personnel Bd. (1986) 178 Cal.App.3d 372, 382, fn. 7.)
18
In view of our conclusions, it is unnecessary to address appellants’
remaining contentions regarding whether, independent of section 12 of the trust
agreements, section 20.55 of the Los Angeles Administrative Code, taken together
with the City Charter and the other provisions of the trust agreements, support the
Controller’s audit. As explained above, section 12 authorized the DWP’s 2013
request for an audit of the institutes by the Controller, regardless of Local 18’s
requests for an audit in 2013 and 2014. The Controller thus did not abuse his
discretion in directing the issuance of the pertinent subpoenas. In sum, the petition
for writ of mandate and motion to quash were properly denied.
19
DISPOSITION
The judgment is affirmed. Respondents are awarded their costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
MANELLA, J.
We concur:
WILLHITE, Acting P. J.
COLLINS, J.
20