Case Title: David U. Rhone, Sr., et al. v. N.Q. Adams, individually and in his capacity as trustee of the W.T. Neal Trust, et al.

Citation: 

Docket Number: 1060482

State: alabama

Court: Alabama Supreme Court

Date: 2007-10-12T00:00:00Z

Document:
REL: 10/12/07
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
 OCTOBER TERM, 2007-2008
_________________________
1060482
_________________________
David U. Rhone, Sr., et al. 
v.
N.Q. Adams, individually and in his capacity as trustee of
the W.T. Neal Trust, et al.
Appeal from Escambia Circuit Court
(CV-00-71)
WOODALL, Justice.
St. Paul A.M.E. Church ("St. Paul Church"), through its
pastor, trustees, and steward, and Mayhaw School Community
Organization, Inc. ("Mayhaw School"), appeal from an order
dismissing their action against the trustees of the W.T. Neal
1060482
2
Trust ("the Trust") and others "to enforce the Trust and for
restitution to the Trust for the benefit of the class of
beneficiaries designated by the Trust."  Appellants' brief, at
22.  The trial court concluded that St. Paul Church and Mayhaw
School do not have standing to bring the action, and we agree.
Consequently, we affirm.
"Because the facts are not in dispute and because we are
presented with pure questions of law, the trial court's
judgment is accorded no presumption of correctness.  This
Court's review of the application of the law to the undisputed
facts is de novo."  Lyons v. Norris, 829 So. 2d 748, 750 (Ala.
2002).  The relevant facts are well stated by St. Paul Church
and Mayhaw School:
"St. Paul Church, a nonprofit, religious and
charitable unincorporated organization, through its
pastor, trustees and steward named as parties
plaintiff, and Mayhaw School, a not for profit
educational and charitable corporation, both located
in Calhoun County, Florida, brought this action each
for itself individually and on behalf of a class of
charitable corporations, trusts, organizations, or
individuals 
in 
Calhoun County, Florida and/or
Escambia County, Alabama, parties designated in the
W.T. 
Neal 
Will 
as 
entitled 
to 
be 
income
beneficiaries from the W.T. Neal Trust.
"The Trust was established under the terms of
the Will of W.T. Neal who died on July 23, 1950
('Will').  The current trustees of the Trust are
1060482
3
N.Q. Adams, Kate Neal McNeel and Lauren Neal Shepard
('Trustees'). ... 
"Item IV of the Will which creates the Trust
directs that 'the balance of the net income from
said Trust [after $6,000 annual payment to family
members] shall be paid [to the trustees] for the
sole purpose of paying for the education of my son,
W.T. Neal, Jr., ...
"'and 
of 
making 
contributions 
to 
a
corporation, trust or community chest fund
or 
foundation 
organized 
and 
operated
exclusively 
for 
religious, 
charitable,
scientific, 
literary 
or 
educational
purposes, or for the prevention of cruelty
to children or animals, no part of the net
earnings of which inures to the benefit of
any private shareholder or individual, and
no substantial part of the activities of
which 
is 
carrying 
on 
propaganda 
or
otherwise 
attempting 
to 
influence
legislation; or to a domestic fraternal
society, order or association operating
under 
the 
lodge 
system, 
to 
be 
used
exclusively 
for 
religious, 
charitable,
scientific, 
literary 
or 
educational
purposes, or for the prevention of cruelty
to children or animals; or to an individual
or individuals exclusively for religious,
charitable, 
scientific, 
literary 
or
educational 
purposes 
-- 
such 
contributions,
to whomsoever made, to be used exclusively,
in the County of Escambia, State of
Alabama, and the County of Calhoun in the
State of Florida.'
"Plaintiffs St. Paul Church and Mayhaw School
are among the numerous individuals and entities that
could, 
in 
the 
Trustees' 
discretion, 
receive
charitable contributions under the Trust created by
the Will of W.T. Neal, deceased."
1060482
4
Appellants' brief, at 14-16 (footnotes, citations to clerk's
record, and emphasis omitted).
The Trust has been the subject of litigation for many
years; it was, in fact, previously considered by this Court in
Neal v. Neal, 856 So. 2d 766 (Ala. 2002).  In our prior
decision, we noted that the Trust "does not name or describe
any identifiable beneficiary of [its] largess" and stated that
the Trust "does not vest in any named or identifiable person
or entity in Florida or elsewhere any enforceable right to any
... of the income.  856 So. 2d at 779.  "Indeed," as we noted,
"this nonidentification [of any beneficiary] is the feature
that constitutes the charitable aspect of the trust."  856 So.
2d at 780 (citing State ex rel. Carmichael v. Bibb, 234 Ala.
46, 51, 173 So. 74, 78 (1937), and Moseley v. Smiley, 171 Ala.
593, 596, 55 So. 143, 143 (1911)).  
Consistent with our statements in Neal, St. Paul Church
and Mayhaw School concede that they "have no standing to seek
an award of benefits to themselves (or any other specific
class member) as opposed to other charities or to challenge
the 
Trustees' 
exercise 
of 
discretion 
in 
selecting
beneficiaries to receive the net income required to be paid by
1060482
5
the Trustees."  Appellants' brief, at 28-29.  However, they
claim that they do "have standing as putative class plaintiffs
to enforce the Trust, to seek restitution on behalf of the
entire charitable class, and to recover on behalf of the
charitable class for the misdeeds and mismanagement of the
Trustees."  Appellants' brief, at 29.  We disagree.
In Jones v. Grant, 344 So. 2d 1210 (Ala. 1977), this
Court was called upon to address an issue of first impression,
namely, whether anyone other than the attorney general has
standing to institute a suit against a charitable trust.  More
specifically, in Jones, "[t]he sole issue [was] whether
members of the faculty, staff and student body of a charitable
institution have standing to institute a class action against
that institution, its president and board of directors for
misuse of federal and church funds."  344 So. 2d at 1211.  The
Court held that the students, faculty, and staff had standing,
and adopted a "sufficient special interest" standard for
standing:
"'The prevailing view of other jurisdictions is
that the Attorney General does not have exclusive
power to enforce a charitable trust and that a ...
person having a sufficient special interest may also
bring an action for this purpose.'  Holt v. College
of Osteopathic  Physicians and Surgeons, 61 Cal.2d
1060482
6
750, 40 Cal. Rptr. 244, 394 P.2d 932 (1964)(footnote
omitted)(citing Thurlow v. Berry, 247 Ala. 631, 25
So. 2d 726 (1946)).  See Paterson v. Paterson Gen.
Hosp., 97 N.J.Super. 514, 235 A.2d 487 (1967);
Restatement (Second) of Trusts § 391 (1959); 4 A.
Scott, The Law of Trusts § 391 (3d ed. 1967); 15 Am.
Jur.2d Charities § 145 (1976); 14 C.J.S. Charities
§ 58 (1939).
"Beneficiaries of a charitable trust have a
right to maintain a suit to enforce the trust or
prevent diversion of the funds.  Annot., 62 A.L.R.
881 (1929).  See Holt, supra; Duffee v. Jones, 208
Ga. 639, 68 S.E.2d 699 (1952);  Greenway v. Irvine's
Trustee, 279 Ky. 632, 131 S.W.2d 705 (1939); G.
Bogert & G. Bogert, The Law of Trusts and Trustees
§ 414 (2d ed. 1964).
"The students of a charitable institution are
beneficiaries of a charitable trust.  See Montclair
Nat'l Bank & Trust Co. v. Seton Hall College, 90
N.J. Super. 419, 217 A.2d 897 (1966); Ettlinger v.
Trustees, 31 F.2d 869 (4th Cir. 1929); Eckles v.
Lounsberry, 253 Iowa 172, 111 N.W.2d 638 (1961).
Where the grants and loans were for the purpose of
upgrading the staff and faculty, as well as the
student body, members of the staff and faculty also
are beneficiaries.
"Where permitted, courts have generally found
that the plaintiff had some special interest which
would entitle him or her to sue without making the
attorney general a party.  Bogert, supra.  We find
that the interest of the students, staff and faculty
as beneficiaries in the financing of the educational
institution with which they are associated is a
sufficient special interest to entitle them to bring
suit.
"As stated in Paterson, supra,
1060482
The right to sue a trust incorporated as a nonprofit
1
corporation is now governed by statute, as acknowledged in
Cook v. Lloyd Noland Foundation, Inc., 825 So. 2d 83, 86-87
(Ala. 2001).  This case, of course, does not involve such an
entity.
7
"'It 
must 
be 
conceded 
that 
...
throughout the country ... supervision of
the administration of charities has been
neglected. ... The manifold duties of [the
attorney 
general] 
make 
readily
understandable 
the 
fact 
that 
such
supervision is necessarily sporadic. ...
While 
public 
supervision 
of 
the
administration 
of 
charities 
remains
inadequate, a liberal rule as to the
standing of a plaintiff to complain about
the administration of a charitable trust
... 
seems 
decidedly 
in 
the 
public
interest.'
"Therefore, we adopt the rule that beneficiaries
with 
a 
sufficient 
special 
interest 
in 
the
enforcement of a charitable trust can institute a
suit as to that trust, and we find that the
plaintiffs here have such an interest and thus have
standing."
Jones, 344 So. 2d at 1212 (emphasis added).1
According to St. Paul Church and Mayhaw School, Jones
"conclusively establishes that [they] have standing to sue for
the enforcement of the ... Trust."  Appellants' brief, at 34.
The trustees, on the other hand, argue that St. Paul Church
and Mayhaw School have no standing to sue to enforce the
Trust, because, the trustees argue, St. Paul Church and Mayhaw
1060482
8
School are not, in the words of Jones, "beneficiaries with a
sufficient special interest in the enforcement" of the Trust.
We agree with the trustees.
In Jones, the students, faculty, and staff of the
charitable institution were readily identifiable as actual
beneficiaries of a charitable trust.  Thus, this Court found
"that the interest of the students, staff and faculty as
beneficiaries in the financing of the educational institution
with which they [were] associated [was] a sufficient special
interest to entitle them to bring suit."   Jones, 344 So. 2d
at 1212 (emphasis added).  Here, on the other hand, St. Paul
Church and Mayhaw School are merely potential beneficiaries of
the Trust and, as such, necessarily do not have the sufficient
special interest in the enforcement of the Trust to entitle
them to bring suit.  Indeed, as the trustees argue, "[t]he
difference in status -- between a person or entity that has a
vested or fixed right to receive a benefit from a charitable
trust and a person or entity that might merely potentially
receive a benefit in the discretion of the trustees -- is at
the very heart of the distinction between one who has a
1060482
9
'special interest' and, thus, standing to sue, and one who
does not."  Trustees' brief, at 24.
Other courts, also applying the special-interest rule,
have held that mere potential beneficiaries, whose interest is
no greater than the interest of all the other members of a
large class of potential beneficiaries of a charitable trust,
have no standing to maintain an action for the enforcement of
the trust.  See, e.g., State ex rel. Nixon v. Hutcherson, 96
S.W.3d 81 (Mo. 2003); Kania v. Chatham, 297 N.C. 290, 254
S.E.2d 528 (1979).  In attempting to distinguish Hutcherson,
St. Paul Church and Mayhaw School merely allege that the
Supreme Court of Missouri "relied on a statute which set forth
the proper parties to bring suit against charitable entities."
Appellants' reply brief, at 21.  However, that court clearly
did not rely upon any such statute.  Instead, after resolving
the question of standing to enforce a testamentary trust under
the special-interest rule, the court merely noted that "[t]he
proper parties to bring suit against charitable corporations
are set out in" statutory provisions.  Hutcherson, 96 S.W.3d
at 85 n.2 (emphasis added).
1060482
10
In attempting to turn the holding in Kania to their
advantage, St. Paul Church and Mayhaw School argue that the
Supreme Court of North Carolina "recognized that ... a
'potential beneficiary' could avail himself of legal process
to enforce the provisions of ... a trust where the relief
sought is based on the mismanagement of the trust."
Appellants' reply brief, at 19.  Although that is true, the
"legal process" referred to was not legal process by the
potential beneficiary, but, instead, was legal process by the
attorney general.  
"We do not mean to imply that a potential
beneficiary of a charitable trust can never avail
himself of legal process to enforce the provisions
of such a trust.  In the absence of a showing of
special 
interest, 
however, 
a 
party 
seeking
enforcement of a charitable trust should have the
Attorney General ... commence an action ... when it
appears that the trust is being mismanaged through
negligence or fraud."
Kania, 297 N.C. at 293, 254 S.E.2d at 530.
For the foregoing reasons, the judgment of the trial
court dismissing the action brought by St. Paul Church and
Mayhaw School for lack of standing is affirmed.
AFFIRMED.
Cobb, C.J., and See, Smith, and Parker, JJ., concur.