Case Title: Bob Riley et al. v. Luther S. Pate, IV

Citation: 

Docket Number: 1071003

State: alabama

Court: Alabama Supreme Court

Date: 2008-07-03T00:00:00Z

Document:
Rel 07/03/08 Riley v. Pate
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
 SPECIAL TERM, 2008
_________________________
1071003
_________________________
Bob Riley et al.
v.
Luther S. Pate IV
Appeal from Montgomery Circuit Court
(CV-08-477)
WOODALL, Justice.
Governor Bob Riley, State Treasurer Kay Ivey, Finance
Director James Allen Main, and Comptroller Robert L. Childree
(hereinafter referred to collectively as "the officials")
appeal from a preliminary injunction entered against them in
1071003
2
an action filed by Luther S. Pate IV.  The officials argue, in
pertinent part, that Pate does not have standing to maintain
the action.  We agree.  Consequently, we vacate the
preliminary injunction, dismiss the action, and dismiss this
appeal.
I. Factual Background
This dispute arose following this Court's decision in
Exxon Mobil Corp. v. Alabama Department of Conservation &
Natural Resources, [Ms. 1031167, November 1, 2007] ___ So. 2d
___ (Ala. 2007).  That decision affirmed a judgment entered
against Exxon Mobil ("the company") insofar as it awarded
certain compensatory damages for the underpayment of oil and
gas royalties owed to the State of Alabama by the company
under offshore leases.  On remand, the Montgomery Circuit
Court entered a final judgment in the amount of $121,511,231.
Of that amount, $58,174,033 were compensatory damages for the
underpayment of oil and gas royalties.  The remaining
$63,337,198 represented 12% interest due under § 9-17-33, Ala.
Code 1975, and § 8-8-10, Ala. Code 1975.  The company paid the
judgment, and the officials were responsible for allocating
the proceeds to the appropriate State funds.
1071003
Although Amendment No. 450 has been incorporated into the
1
Alabama Constitution of 1901 as § 219.02, for ease of
reference, we will continue to refer to § 219.02 throughout
this opinion as Amendment No. 450. 
3
At the center of this dispute is Amendment No. 450 to the
Alabama Constitution of 1901, which established the Alabama
Trust Fund ("the Trust Fund").   The Trust Fund receives and
1
manages 99% of the oil and gas capital payments derived from
the State's offshore leases for the production of oil, gas, or
other hydrocarbons.  The remaining 1% is paid to the Lands
Division of the Department of Conservation.  Once the oil and
gas capital payments are deposited into the Trust Fund, the
board of trustees of the Trust Fund is responsible for
investing the oil and gas capital payments for the purpose of
"produc[ing] the greatest trust income over the term of such
investments while preserving the trust capital."  Amendment
No. 450, § 5(b).  Ten percent of the trust income must be
reinvested in the Trust Fund.  Amendment No. 450, § 4(c).  The
remaining income, which includes all interest and dividends,
as well as up to 75% of capital gains, is paid directly into
the general fund and, subject to two conditions, is "subject
to 
appropriation 
and 
withdrawal 
by 
the 
legislature."
Amendment No. 450, § 5(a).  In any year in which the income of
1071003
4
the Trust Fund exceeds $60 million, 10% of the income must be
distributed to the Municipal Government Capital Improvement
Fund and 10% must be distributed to the County Government
Capital Improvement Fund.  See § 219.04, Ala. Const. 1901
(formerly Amend. No. 666, Ala. Const. 1901).  Also, 10% of
each year's trust income, not to exceed $15 million, must be
distributed to the Alabama Forever Wild Land Trust.  See §
219.07, Ala. Const. 1901 (formerly Amend. No. 543).  The
current balance of the Trust Fund is approximately $3 billion.
Nine trustees serve on the board of trustees of the Trust
Fund.  Those trustees include the governor, who serves as
chairman; the finance director, who serves as vice chairman;
and the state treasurer, who serves as secretary.  Three other
trustees are appointed by the governor; two others by the
lieutenant governor; and another by the speaker of the house
of representatives.  See Amendment No. 450, § 3(a)-(f).
After the company paid the amount of the judgment,
Finance Director Main requested an opinion from the attorney
general concerning the proper allocation of the proceeds
between the general fund and the Trust Fund.  Consistent with
a written opinion of the attorney general, the officials
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5
deposited the compensatory damages for the underpayment of oil
and gas royalties, less attorney fees and costs, into the
Trust Fund.  Also consistent with that opinion, they deposited
the interest received into the general fund.
Pate, an Alabama citizen and taxpayer, filed a "Complaint
for Declaratory Judgment and Injunctive Relief and Petition
for Writ of Mandamus" in the Montgomery Circuit Court,
challenging the deposit of the interest into the general fund.
He 
requested 
declaratory relief, mandamus relief, 
and
preliminary and permanent injunctive relief that would require
the officials to move the interest from the general fund to
the Trust Fund.  Pate filed a motion for a preliminary
injunction, and the officials responded to the motion.  Also,
the officials filed a motion to dismiss.  In both their
response and their motion, the officials raised the issue of
Pate's standing to bring the action.
On April 10, 2008, the trial court held a hearing on
Pate's motion for a preliminary injunction.  Pate presented no
evidence at the hearing.  On April 15, without addressing the
issue of Pate's standing, the trial court granted the
requested preliminary injunctive relief and ordered the
1071003
6
officials "to immediately transfer into the ... Trust Fund all
monies received as part of the Exxon final judgment, less
appropriate legal fees, that have not been heretofore paid
into such trust fund."  The officials timely appealed to this
Court.  See Rule 4(a)(1)(A), Ala. R. App. P.
II. Discussion
"When a party without standing purports to commence an
action, 
the 
trial 
court 
acquires 
no 
subject-matter
jurisdiction."  State v. Property at 2018 Rainbow Drive, 740
So. 2d 1025, 1028 (Ala. 1999).  Action taken by a trial court
lacking subject-matter jurisdiction is void.  740 So. 2d at
1029.  Of course, "a void order or judgment will not support
an appeal."  Gallagher Bassett Servs., Inc. v. Phillips, [Ms.
1070416, April 11, 2008] ___ So. 2d ___, ___ (Ala. 2008).
"[S]tanding turns on whether the party has suffered an
actual injury and whether that injury is to a legally
protected right."  Carey v. Howard, 950 So. 2d 1131, 1135
(Ala. 2006).  A "'"mere 'interest in a problem[,]' no matter
how longstanding the interest and no matter how qualified the
[plaintiff] is in evaluating the problem, is not sufficient by
itself to render the [plaintiff] 'adversely affected' or
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7
'aggrieved' so as to establish standing."'"  Ex parte
Richardson, 957 So. 2d 1119, 1125 (Ala. 2006) (quoting Town of
Cedar Bluff v. Citizens Caring for Children, 904 So. 2d 1253,
1260 (Ala. 2004) (See, J., concurring specially)).  Instead,
an "actual or imminent, particularized, concrete, and palpable
injury ... is required for a showing of standing."  Town of
Cedar Bluff, 904 So. 2d at 1261 (See, J., concurring
specially).
"'The right of a taxpayer to challenge[, either as
unconstitutional or as not conforming to statute,] the
unlawful disbursement of state funds ... is unquestioned.'"
Hunt v. Windom, 604 So. 2d 395, 396 (Ala. 1992) (quoting
Zeigler v. Baker, 344 So. 2d 761, 764 (Ala. 1977)).  However,
recent decisions have emphasized that "'it is the liability to
replenish public funds that gives a taxpayer standing to
sue.'"  Jordan v. Siegelman, 949 So. 2d 887, 891 (Ala. 2006)
(quoting Broxton v. Siegelman, 861 So. 2d 376, 385 (Ala.
2003)).
The Trust Fund is, insofar as its purposes are concerned,
no different than a charitable trust.  See § 19-3B-405(a),
Ala. Code 1975 ("A charitable trust may be created for the
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8
relief of poverty, the advancement of education ..., the
promotion of health, governmental or municipal purposes, or
other purposes the achievement of which is beneficial to the
community.").  Also, the uncertainty of the ultimate
recipients of the income from the Trust Fund closely resembles
a common characteristic of a charitable trust.  See Neal v.
Neal, 856 So. 2d 766, 780 (Ala. 2002).  "'[B]eneficiaries with
a sufficient special interest in the enforcement of a
charitable trust can institute a suit as to that trust.'"
Rhone v. Adams, [Ms. 1060482, October 12, 2007] ___ So. 2d
___, ___ (Ala. 2007) (quoting Jones v. Grant, 344 So. 2d 1210,
1212 (Ala. 1977)).  However, "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." Rhone, ___ So. 2d at ___
(emphasis added).
With these principles in mind, we turn to the issue of
Pate's 
standing 
to 
insist 
that 
the 
interest 
on 
the
compensatory-damages award that was deposited in the general
fund be transferred to the Trust Fund.  Pate alleges that he
1071003
9
has standing both as a taxpayer and as an intended beneficiary
of the Trust Fund to challenge the deposit of the moneys to
the general fund.  However, it is clear that he has no
standing in either capacity.
Pate's claim of standing as a taxpayer must fail, because
the Trust Fund receives no tax revenue; it is funded only from
royalties from the production of oil and gas under offshore
leases.  Consequently, as Pate admits, no taxpayer is liable
to replenish any shortfall that might occur in the Trust Fund.
The absence of any such liability defeats a claim of taxpayer
standing.  See Jordan and Broxton, supra.  In attempting to
distinguish Jordan, Pate argues that "Jordan simply does not
control in a situation such as this, where a member of the
class being benefitted by a trust is bringing suit to protect
the capital of that trust from mismanagement."  Pate's brief,
at 21-22.  Although this argument is relevant to Pate's claim
of standing as an intended beneficiary of the Trust Fund, it
is irrelevant to his claim of standing as a taxpayer.
We now turn to Pate's claim of standing as an intended
beneficiary of the Trust Fund.  As stated in Amendment No.
450, § 1, the Trust Fund was created "[f]or the continuing
1071003
10
benefit of the state of Alabama and the citizens thereof."
Thus, according to Pate, he, as does "each and every" Alabama
citizen, has a "vested right" in the moneys derived from the
assets of the Trust Fund.  Pate's brief, at 20, 24.  Pate
admits that the Alabama Constitution does "not promise that
any amount of trust-generated funds will be spent on projects
that personally benefit [him] to a degree greater than other
Alabama citizens."  Pate's brief, at 27.  However, according
to Pate, "any citizen of the State of Alabama is a beneficiary
of the ... Trust Fund [and] has standing to bring suit to
prevent the mismanagement of that trust."  Pate's brief, at
25.  We disagree.
It is obvious that Pate does not allege that he has
suffered the "actual or imminent, particularized, concrete,
and palpable injury," which is necessary to support a finding
of standing.  Town of Cedar Bluff, 904 So. 2d at 1261.
Although Pate may be a member of the community to be benefited
by the Trust Fund, he cannot demonstrate a "sufficient special
interest in [its] enforcement [to entitle him] to institute a
suit as to that trust."  Rhone, ___ So. 2d at ___.  Indeed,
his arguments belie any contention that his interest is
1071003
11
"special" in any way.  By his own admission, Pate's interest
is no greater than that of millions of other Alabamians, all
of whom may benefit, directly or indirectly, from the
expenditure of the income derived from the assets of the Trust
Fund.  "'It is well established that persons are not entitled
to sue if their only benefit from the enforcement of the trust
is that shared by other members of the public.'" Hicks v.
Dowd, 157 P.3d 914, 920 (Wyo. 2007) (quoting In re Clement
Trust, 679 N.W.2d 31, 37 (Iowa 2004)).
In support of his argument that he has standing as a
beneficiary of the Trust Fund, Pate likens his status to that
of the plaintiff in Lee v. Bronner, 404 So. 2d 627 (Ala.
1981).  In that case, this Court held that a "contributing
member of the [State] Employees' Retirement System" had
standing to bring an action alleging "dereliction of duty and
statutory violations concerning the retirement fund."  404 So.
2d at 629.  However, unlike Pate, the member had "contributed
his own money to the retirement fund," and, thus, had a
"direct pecuniary interest" in the management of the fund.
Id.  Indeed, Pate's situation is more analogous to that of the
plaintiff in Knutson v. Bronner, 721 So. 2d 678, 680 (Ala.
1071003
12
1998), in which this Court held that "a taxpayer who is not a
member of the [Retirement Systems of Alabama] has [no]
standing to bring an action against [its] chief executive
officer."
In conclusion, Pate asks: "Finally, who would have
standing to bring suit if not Pate or some other similarly
situated citizen?"  Pate's brief, at 28.  The officials argue
that the direct beneficiary of 1% of the oil and gas capital
payments -- i.e., the Lands Division of the Department of
Conservation -- would suffer "the first and most quantifiable
injury," 
State's 
brief, 
at 
30, 
and 
that 
the 
funds
constitutionally entitled to receive portions of the income
from the Trust Fund would also be injured.  Pate does not
contest the standing of these entities; instead, he merely
questions the strength of their incentives to sue the
officials.  His doubts about their incentives in no way cloak
Pate with standing that otherwise cannot be established.
Although Pate may be quite interested in what he perceives to
be a problem, he has no standing to sue the officials under
the facts of this case.
III. Conclusion   
1071003
13
For the foregoing reasons, the preliminary injunction
entered against the officials is vacated, and the action filed
by Pate is dismissed.  Further, because a void order will not
support an appeal, this appeal is dismissed.
ORDER VACATED; ACTION DISMISSED; AND APPEAL DISMISSED.
Cobb, C.J., and Lyons, Stuart, Smith, Parker, and
Murdock, JJ., concur.
Bolin, J., concurs specially.
See, J., concurs in the result.
1071003
14
BOLIN, Justice (concurring specially).
The main opinion states that "[t]he Trust Fund is,
insofar as its purposes are concerned, no different than a
charitable trust."    So. 2d at    .  Inasmuch as Amendment
No. 450 (now § 219.02, Ala. Const. 1901 (Off. Recomp.))
creates an express trust that is not a private trust, I agree
that the Alabama Trust Fund is in the nature of a charitable
trust.  I write specially to comment that, notwithstanding the
fact that Pate in this action alleged and argued only that he
had standing as a taxpayer and/or as a beneficiary of the
Trust Fund, there remains the question of what person or
entity would have standing to enforce the trust as a settlor.
A settlor is defined in § 19-3B-103(16), Ala. Code 1975,
as 
"a person, including a testator, who creates, or
contributes property to, a trust.  If more than one
person creates or contributes property to a trust,
each person is a settlor of the portion of the trust
property attributable to that person's contribution
except to the extent another person has the power to
revoke or withdraw that portion."  
(Emphasis added.)  Assuming that the oil and gas capital
payments obligated to the trust res or trust capital are being
"contributed" by the State of Alabama, that accounts for only
1071003
15
one of the possible types of potential settlors embraced in
the definition above.
The Trust Fund was created not by legislative act, but
rather, by the ratification of Amendment No. 450 by the
citizens/electors of the State.  Amendment No. 450 begins by
stating: "For the continuing benefit of the state of Alabama
and the citizens thereof, there is hereby created an
irrevocable, permanent trust fund named 'the Alabama trust
fund' which shall be funded and administered in accordance
with the provisions of this amendment"; it ends by stating
that "[t]his amendment shall be self-executing ...." (Emphasis
added.)  The legislative act proposing Amendment No. 450 was
wholly ineffectual until it was given life by the electorate
-- the legislature can propose a constitutional amendment, but
cannot ratify one.  See In Re Opinion of the Justices, 252
Ala. 89, 39 So. 2d 665 (Ala. 1949), and Gafford v. Pemberton,
409 So. 2d 1367 (Ala. 1982).  I would submit that the Trust
Fund is an express trust created by the citizens of the State
of Alabama and funded by the sale of State assets, so that
both the citizens and the State are joint settlors of the
trust.
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Contrary to the Restatement (Second) of Trusts, § 391
(1959), the Uniform Trust Code, in § 19-3B-405(c), Ala. Code
1975, specifically provides that "[t]he settlor of a
charitable trust, among others, may maintain a proceeding to
enforce the trust." (Emphasis added.)  The question is
therefore posed: Who has the authority, and attendant
standing, to carry out the power of enforcement conferred by
this section with regard to the Trust Fund?  A trustee is a
fiduciary and has a fiduciary's obligation to marshal and take
possession of all assets that properly belong to the trust
res. Section 19-3B-809, Ala. Code 1975, directs that "[a]
trustee shall take reasonable steps to take control of and
protect the trust property."  Section 19-3B-812 further
directs that "[a] trustee shall take reasonable steps to
compel a ... person to deliver trust property to the trustee.
..."  These sections from the Uniform Trust Code combine to
grant the settlor of a charitable trust the right to maintain
a proceeding to compel a negligent or recalcitrant trustee to
take control of trust property, and, if necessary, to compel
a person to deliver trust property to the trust.  In addition
to the right of a trust beneficiary who has enforcement
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standing by virtue of an "actual or imminent, particularized,
concrete, and palpable injury," Town of Cedar Bluff v.
Citizens Caring for Children, 904 So. 2d 1253, 1261 (Ala.
2004) (See, J., concurring specially), the legislature clearly
granted an additional right to a sole or joint settlor of a
charitable trust to enforce that trust; unfortunately,
however, the legislature was not as clear in setting out what
person or entity actually possesses that standing as a
settlor.
Notwithstanding any ability Pate may have had to bring
suit as a settlor to enforce the trust, either as a member of
the citizenry who created the trust or as a representative of
the same, it could not have been successful.  A suit to
enforce a trustee's duty must be brought against the trustees
of the trust.  In this action, Pate sued only three of the
nine trustees of the Trust Fund -- the governor, the finance
director, and the state treasurer, both in their official
capacities and as trustees of the Trust Fund.  Therefore, even
assuming that Pate would have standing as a settlor, there
would have been a failure to name indispensable parties to the
action.