Opinion ID: 1909832
Heading Depth: 2
Heading Rank: 1

Heading: Constitutionality of the 2001 Act

Text: In its brief to this Court, the City argues that the State defendants concocted and passed a blatantly unconstitutional act, attempting to absolve themselves of liability for violating Alabama law. The City argues that a vested right existed in what they describe as earmarked funds so long as the statutory mandate of § 28-3-74 remained in place and to the extent the funds were available for distribution. According to the City, the 2001 Act did not simply make procedural changesit altered and affected the City's vested rights. The City argues that the 2001 Act violates §§ 95 and 213 of the Alabama Constitution of 1901. The City cites Childree v. Hubbert, 524 So.2d 336 (Ala.1988), for the proposition that the Legislature has no authority to unearmark revenue sources by appropriating those revenues in a manner contrary to the earmarking. Alternatively, the City argues that the 2001 Act appears to prohibit only future actions because it includes a savings clause with respect to the instant action. The State defendants argue that the 2001 Act validly changed the earmarking formula of § 28-3-74; that it prohibited future transfers from the ABC Board's operating funds to the general fund; and that it validated the distributions made in the prior years referenced in the 2001 Act. Therefore, according to the State defendants, the City's argument that the distributions in prior years were invalid is moot because any arguable defects in the distributions were cured by the 2001 Act. The State defendants argue that the alleged defects were the result of the Legislature's failure to follow the proper procedure in the prior years. They contend that the Legislature had the power to divert the funds and that it could have accomplished this diversion by amending § 28-3-74 to permanently change or eliminate the earmarking formula or by altering the distribution for a single year by an appropriation act that complied with the formalities of §§ 45 and 71 of the State constitution. We agree. We first address the principles that guide us in determining the validity and constitutionality of the 2001 Act. In Alabama State Federation of Labor v. McAdory, 246 Ala. 1, 9, 18 So.2d 810, 814-15 (1944), this Court discussed the principles of statutory construction: Uniformly, the courts recognize that [the power to invalidate a legislative act] is a delicate one, and to be used with great caution. It should be borne in mind, also, that legislative power is not derived either from the state or federal constitutions. These instruments are only limitations upon the power. Apart from limitations imposed by these fundamental charters of government, the power of the legislature has no bounds and is as plenary as that of the British Parliament. It follows that, in passing upon the constitutionality of a legislative act, the courts uniformly approach the question with every presumption and intendment in favor of its validity, and seek to sustain rather than strike down the enactment of a coordinate branch of the government. All these principles are embraced in the simple statement that it is the recognized duty of the court to sustain the act unless it is clear beyond reasonable doubt that it is violative of the fundamental law. State ex rel. Wilkinson v. Murphy, 237 Ala. 332, 186 So. 487 [ (1939) ], 121 A.L.R. 283. (Emphasis added.) Because we must presume that the 2001 Act is valid, the burden rests upon the City to prove its invalidity beyond a reasonable doubt. Weaver v. Palmer Bros., 270 U.S. 402, 410, 46 S.Ct. 320, 70 L.Ed. 654 (1926). In pertinent language, the 2001 Act provides that the transfers from the operating funds of the ABC Board between the fiscal years 1989-1990 through 2001-2002 shall be in lieu of the distribution required by Section 28-3-74 for each of those fiscal years. The 2001 Act also reduces the percentages of net profits allocated to various beneficiaries, including the percentage allocated to the City. According to the State defendants, the 2001 Act eliminated the annual lump-sum distributions to the State general fund. The 2001 Act offsets this elimination of annual distributions by increasing the percentage of net profits allocated to the State general fund. The alleged improper distributions the 2001 Act purportedly cured were made pursuant to annual appropriation acts. The State defendants included in their reply brief to this Court three appropriation acts for the fiscal years 1998 through 2000. See Act No. 98-496, Ala. Acts 1998; Act No. 99-434, Ala. Acts 1999; and Act No. 2000-408, Ala. Acts 2000. Those appropriation acts carved out a sum certain from the operating funds of the ABC Board for payment to the State general fund with the proviso that the transfer shall not affect any distribution of revenue generated from the sale of alcoholic beverages. We take judicial notice that the general appropriation acts beginning in the year 1988 all include the same proviso. See Act No. 88-953, Ala. Acts 1988; Act No. 89-350, Ala. Acts 1989; Act No. 90-764, Ala. Acts 1990; Act No. 91-738, Ala. Acts 1991; Act No. 92-621, Ala. Acts 1992; Act No. 93-771, Ala. Acts 1993; Act No. 94-486, Ala. Acts 1994; Act No. 95-740, Ala. Acts 1995; Act No. 96-819, Ala. Acts 1996; Act No. 97-933, Ala. Acts 1997. [4] See also Folsom v. Wynn, 631 So.2d 890, 902 (Ala. 1993) (judicial notice taken of legislative acts that provided additional appropriations to the judicial branch); State v. White, 116 Ala. 202, 209, 23 So. 31, 33 (1898) (judicial notice taken of a legislative act that directed appropriations in contemplation of established schools and experiment stations). For each year contested in the present action, the general appropriation act allocated the remaining net profits, after the payment of the stated sums, to be distributed under the allocated percentages of § 28-3-74. It is undisputed that the appropriation acts deprived the City of part of the net profits it received in the contested years by carving out sums for other purposes from the operating funds of the ABC Board. A reduction of the operating funds obviously resulted in a reduction of net profits available to the City. For example, the City presented the ABC Board's 1997-1998 annual report, which stated that [p]rofits are reduced by $7,001,121.00 [in] specific appropriation transfers which were to be made from operating funds. While the State defendants contest the City's amount of $76,000,000, as the alleged total transfer diversion, the amount of net profits received by the City was reduced by the annual appropriation acts. Both the City and the State defendants recognize that an act that is expressly retroactive will be given retroactive effect unless it impairs vested rights. See Ex parte Bonner, 676 So.2d 925 (Ala.1995); Courtner v. Etheredge, 149 Ala. 78, 43 So. 368 (1907). The 2001 Act expressly provides for retroactive application, stating in § 5 that [i]t is the intent of the Legislature that this act be construed as retroactive and curative. Thus, unless the City establishes that it had a vested right to a percentage of the net profits of the ABC Board, we must uphold the curative effect of the 2001 Act. The City contends in its brief that it had a vested right to a percentage of the net profits collected by the ABC Board because, it argues, the net profits were to be administered, handled[,] and distributed in accordance to [the] well-defined priority system of § 28-3-74. At oral argument, the City referred to the express language of § 28-3-74, noting that the statute provides that the net profits shall be paid according to the percentages allocated therein. The City, however, fails to cite authority for the proposition that it had a vested right in a percentage of the net profits; instead, it supports that proposition by attempting to distinguish Ballenger Construction Co. v. State Board of Adjustment, 234 Ala. 377, 175 So. 387 (1937). In Ballenger, the State Highway Commission had found that the appellant was entitled to receive only part of its claim in a breach-of-contract action against the State Highway Department. 234 Ala. at 379, 175 So. at 389. The contract at issue stipulated that the decision of the State Highway Commission upon any question connected with the execution of the contract shall be final and conclusive. 234 Ala. at 379, 175 So. at 388. The appellant appealed to the State Board of Adjustment (the Board), and the Board concluded that it lacked jurisdiction to hear the claim. 234 Ala. at 379, 175 So. at 388. The appellant filed in the circuit court a petition for a writ of mandamus to compel the Board to hear its claim. 234 Ala. at 379, 175 So. at 388. After the action was commenced, the Legislature amended the act that created the Board and empowered it to hear all claims made against State agencies and to order payment from previously appropriated funds to pay damages arising under the claims. 234 Ala. at 379, 175 So. at 388. Under the amended act, the Board no longer had jurisdiction over disagreements arising out of contracts made with the State Highway Department. 234 Ala. at 379, 175 So. at 388-89. This Court stated that the Legislature could repeal the whole appropriation out of which claims may be paid as allowed by the [Board], and no one could gainsay that right.... 234 Ala. at 380, 175 So. at 389. This Court held: [W]e find that no vested cause of action was created by law in favor of appellant, and that the right to present and have its claim heard, and if within the statute allowed and paid, was not a contract right, though the claim arose out of contract, but a privilege conferred, and did not become vested so as to destroy the right of the Legislature at a later date to annul it as a claim against the appropriation. 234 Ala. at 381, 175 So. at 390 (emphasis added). According to the City, Ballenger stands for the proposition that an appropriation is always subject to repeal, and, thus, that beneficiaries of appropriations have no vested interest in continued appropriations. The City argues that the holding of Ballenger was limited to disavowing interests in future appropriations. However, in Ballenger, the Legislature annulled the appellant's claim against previously appropriated funds by divesting the Board of jurisdiction. 234 Ala. at 380, 175 So. at 389. Therefore, this Court in Ballenger recognized that the Legislature has the plenary power to divest, before payment, the right to receive appropriated funds and that an appropriation can never be a debt of the State with respect to § 213 of the State Constitution. 234 Ala. at 380, 175 So. at 389. In the present action, a promise to distribute revenues is also not enforceable as a debt. Under § 28-3-74, the City was designated as a beneficiary to receive a percentage of net profits, just as the appellant in Ballenger was entitled to funds payable from an appropriation. In Ballenger, the Legislature annulled the appellant's claim to an appropriation because no funds had been paid. 234 Ala. at 380, 175 So. at 389. It is clear that the Legislature had the power under the 2001 Act to retroactively cure and validate its prior appropriations without violating a vested right because the funds were never paid to the City and the State never owed a debt to the City. For all that appears, the City could have received no proceeds under § 28-3-74, even if the Legislature had never included in the annual appropriations acts provisions for transfers from the operating funds of the ABC Board, if the operating expenses of the ABC Board exceeded its revenues in any particular year. It is well settled in this State that it is within legislative competency by an act to ratify the doing of that which has already been done, the doing of which it had the power to authorize in the first instance, where no contract rights or vested rights are in any way violated or impaired. [5] Courtner, 149 Ala. at 85, 43 So. at 371; Ballenger, 234 Ala. at 381, 175 So. at 390 (the Legislature has full power to take away rights conferred by statute which have not become vested). The City has failed to prove that it had a vested right in the funds; therefore, the Legislature had the full authority to retroactively cure under the 2001 Act its prior distributions. The City also contends that the Legislature's transfers from operating funds pursuant to the annual appropriation acts created a new debt in violation of § 213, Alabama Constitution of 1901. Section 213 provides that no new debt shall be created against, or incurred by this state, or its authority. This Court has held that debt, within the context of § 213, means that which the state in any event is bound to pay, an obligation secured by the general faith and credit of the state. Alabama State Bridge Corp. v. Smith, 217 Ala. 311, 316, 116 So. 695, 699 (1928). In Opinion of the Justices No. 346, 665 So.2d 1357, 1361-63 (Ala.1995), this Court opined that the provisions of a particular house bill that attempted to divert funds, which were constitutionally required to be paid initially to the State general fund, violated § 213. However, this Court also acknowledged that a new debt may be created without violating § 213 if no obligation is imposed on the state to pay money. 665 So.2d at 1361. In the present action, the promise to distribute a percentage of net profits was not enforceable as a debt, because the funds were not constitutionally required to be paid to the City. Moreover, in this case no debt under § 213 existed because any amount paid to the City would be paid solely on the basis of an annual determination of the ABC Board's net profits. In Opinion of the Justices No. 100, 252 Ala. 465, 41 So.2d 761 (1949), this Court opined that a proposed bill did not violate the Alabama Constitution: [The bill] assumes the authority of the Legislature to authorize the State to make annual contracts to lease space for its functions with no obligation other than an annual agreement, if and when made, to pay the amount of rentals which may be agreed upon for that year out of current funds available for that purpose; and recognizes the principle that each fiscal year is a fiscal unit and that the State must take care of its obligation each year to pay out of the funds available and appropriated that year for that purpose. That status does not conflict with section 213 of the Constitution as amended since there is no appropriation contemplated to be made for future years payable in contravention of the principle of Hall v. Blan, 227 Ala. 64, 148 So. 601, 607 [ (1933) ], nor a contract to that effect; and that it neither makes nor contemplates an obligation of the State further than such as is `within the revenues levied and assessed, and in process of collection' for the current year or such as may have been already collected for that year. In re Opinions of Justices, 251 Ala. 91, 36 So.2d 475 [(1948)]; Brown v. Gay-Padgett, 188 Ala. 423, 66 So. 161 [(1914)]; In re Opinions of Justices, 238 Ala. 293, 191 So. 82 [ (1939) ]. 252 Ala. at 467, 41 So.2d at 763. See also Hillard v. City of Mobile, 253 Ala. 676, 683, 47 So.2d 162, 168 (1950). The allocation of a percentage of net profits under § 28-3-74 was to be made annually, without contemplating future transfers or obligating specific sums. The City has failed to prove that it was legally entitled to the funds; thus, the transfers did not violate § 213 because the State was never obligated to pay an amount to the City. Furthermore, the 2001 Act does not violate § 95, Alabama Constitution of 1901, which provides that the Legislature may not take away a cause of action after an action has been filed. Because no vested right was affected, the 2001 Act may be applied to the instant action, even though it became effective while this action was pending. Ballenger, 234 Ala. at 379-80, 175 So. at 389-90. The City also contends that the Legislature had no authority to unearmark revenue sources by appropriating those revenues in a manner contrary to the earmarking in § 28-3-74. In Childree, supra, this Court was presented with, among others, the issue whether an appropriation in a general appropriation act to state agencies from the Alabama Special Education Trust Fund (ASETF) violated §§ 45 and 71, Alabama Constitution of 1901. 524 So.2d at 337. Section 45 provides that [e]ach law shall contain but one subject, which shall be clearly expressed in its title, except general appropriation bills.... The exception for general appropriation bills is limited by § 71, which provides: The general appropriation bill shall embrace nothing but appropriations for the ordinary expenses of the executive, legislative, and judicial departments of the state, for interest on the public debt, and for the public schools.... All other appropriations shall be made by separate bills, each embracing but one subject. This Court acknowledged that the legislative intent in creating the ASETF was that all revenues from the fund were to be used exclusively for educational purposes. 524 So.2d at 339. Therefore, the funds in the ASETF were earmarked for educational purposes, and, before the funds could be appropriated in a general appropriation bill, the earmarking provisions in the statute creating the ASETF would have to be repealed. 524 So.2d at 341. Disregarding the earmarking provision, would, in effect, repeal it and would violate § 71 of the State Constitution, which limits general appropriations bills to the subject of appropriations. 524 So.2d at 341. Moreover, in Childree this Court held that a repeal of an earmarking provision in an appropriation bill would violate § 45, which limits bills to one subject. 524 So.2d at 341. The City argues that under Childree, the Legislature does not have the authority to unearmark revenue sources by appropriating those revenues for expenditure in a manner contrary to the earmarking. However, in Childree, where the plaintiffs sought declaratory relief only, this Court was not presented with a subsequent act that retroactively cured any rights created under the initial act. Assuming that under Childree the transfer of operating funds from the ABC Board violated §§ 45 and 71 of the Alabama Constitution, the Legislature had the plenary power to accomplish such a transfer by other methodssuch as by enacting an act to amend the earmarked percentages of § 28-3-74, as it did in the 2001 Act. At oral argument, the State defendants acknowledged that, procedurally, it would have been much better had the Legislature initially amended the earmarking provisions of § 28-3-74, as opposed to accomplishing this same effect by transferring the funds under general appropriation acts. However, it is clear that the Legislature had the plenary power to prospectively amend the earmarked percentages of § 28-3-74 and to retrospectively cure the distributions in the earlier years. See McGlothren v. Eastern Shore Family Practice, P.C., 742 So.2d 173 (Ala. 1999) (upholding the retroactive application of an act that amended the qualifications for expert witnesses in a pending lawsuit); Riggs v. Brewer, 64 Ala. 282, 285 (1879) (stating that [s]tatutes may be repealed by implication, or by express legislative enactment....); Ballenger, 234 Ala. at 381, 175 So. at 389 (stating that the Legislature can repeal a claim against an unpaid appropriation). The City argues, alternatively, that if the 2001 Act validly cured the improper distribution of the ABC Board's net profits, it includes a savings clause with respect to the instant action. The City contends that the 2001 Act tacitly acknowledges liability in the instant action and authorizes the payment of monetary damages based upon any judgment rendered in favor of the Plaintiff herein. City's Brief at p. 57. We disagree with the City's interpretation that the retroactive application of the 2001 Act had no effect upon the present action. Section 3 of the 2001 Act provides a mechanism to pay a judgment or attorney fees in the event the State defendants are required to pay such fees to the City. The references to this action in the 2001 Act merely address a contingency; they do not recognize the City's right to a monetary award. Furthermore, as the State defendants argue, [m]unicipal powers may be enlarged, abridged or entirely withdrawn at the legislative pleasure. Trailway Oil Co. v. City of Mobile, 271 Ala. 218, 222, 122 So.2d 757, 760 (1960). The State defendants contend that a municipality has no vested right against a legislative enactment that reduces its powers or increases its burdens. See Young Women's Christian Ass'n v. Gunter, 230 Ala. 521, 162 So. 120 (1935); Cullman County v. Blount County, 160 Ala. 319, 49 So. 315 (1909); Alldredge v. Dunlap, 240 Ala. 27, 197 So. 36 (1940). In their reply brief to this Court, the State defendants correctly state that the City fails to address the argument that a municipality cannot acquire vested rights against retroactive legislative changes. We are not required to provide such authority for the City. Rule 28(a)(10), Ala. R.App. P. [6] The Legislature's plenary power to enact the 2001 Act to cure retroactively and thereby to validate the prior years' distributions leads us to the conclude that the 2001 Act did not violate any vested right of the City. We find that the 2001 Act is not unconstitutional. The trial court denied monetary relief to the City because it held that the State defendants were entitled to State immunity. However, because we can affirm a trial court's judgment if it is right on any ground developed in, and supported by, the record, we affirm the trial court's judgment insofar as it denied monetary relief to the City based upon the validity of the 2001 Act. See Ex parte Ramsay, 829 So.2d 146, 155 (Ala.2002).