Court Opinion

ID: 7876077
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:10:53.677107+00
Date Added: 2024-06-11T16:31:23.996200
License: Public Domain

HENDERSON, Justice
(dissenting).
Plaintiffs were awarded attorney’s fees by the trial court. The majority opinion reverses, citing SDCL 15-17-7 for the proposition that no statutory authorization exists upon which an award of attorney’s fees can be based. We are informed that this trust is not one that is administered through the courts therefore preventing an award of attorney’s fees pursuant to SDCL 15-17-7. I do not agree.
Lands deeded to the State of South Dakota comprise the corpus of an educational trust. The State is trustee, and the legislature is charged with the duty “to direct and control the management of such trust.” Heston v. Mayhew, 9 S.D. 501, 502, 70 N.W. 635, 636 (1897). See Kanaly I, 368 N.W.2d at 823-24. Management of the trust must always comport to Enabling Act and State Constitutional provisions. See id. at 823 (citing In re State Bonds, 7 S.D. 42, 63 N.W. 223 (1895); Heston, 9 S.D. 501, 70 N.W. 635). In discussing the educational trust, we observed:
*555That it is no ordinary trust seems set-tled_ “The state appears in this action in its capacity of trustee, and must be treated as a natural person, acting in the same capacity; regard being had to the character of the trust, and the spirit of the constitutional provisions relating thereto. The rules which regulate ordinary trustees mil need to be so applied as to secure and promote the ends contemplated by the constitution. It is the duty of each branch of the state government to regard the sacred character of this important trust, and to insist upon the utmost fidelity in its management. ”
Schelle v. Foss, 76 S.D. 620, 626-27, 83 N.W.2d 847, 851 (1957) (quoting State v. Ruth, 9 S.D. 84, 90, 68 N.W. 189, 190 (1896)) (emphasis added).
In Kanaly I, this Court unanimously ruled that our legislature, via Senate Bill 221, “violat[ed] the permanent trust fund provisions of the Enabling Act and South Dakota Constitution Article VIII, § 7” when it “transferred] ... trust property to another state governmental agency, without compensating or reimbursing the trust fund for the full market value of the transferred property_” 368 N.W.2d at 829, 824.1 We decided that the legislature must reimburse the trust fund for the full market value of property and interests transferred, and this Court remanded the case to the trial court to conduct hearings for this purpose. Id. at 829.
This scenario is illustrative of my reasons for writing this dissent. The legislature was not, is not, and never will be separately and singularly charged with absolute control of this trust. The State is trustee and “[i]t is the duty of each branch of the state government to regard the sacred character of this important trust, and to insist upon the utmost fidelity in its management.” Schelle, 76 S.D. at 626-27, 83 N.W.2d at 851 (quoting Ruth, 9 S.D. at 90, 68 N.W. at 190). Granted, our legislature is primary caretaker of this trust, and its sphere of control is large indeed; but its power is not limitless nor its discretion unbridled. When legislative dealings regarding trust fund property are legally challenged in our courts and subsequently declared unlawful, trust control within the narrow parameters of the mismanagement, and rectification thereof, shifts to the judicial branch. In this fashion, I contend that the educational trust becomes one that is “administered through the court” and attorney’s fees may be awarded pursuant to SDCL 15-17-7, as part of the judicial branches’ correction, to the greatest extent possible, of legislative trust fund mismanagement.
I am also persuaded, largely by the trial court’s Memorandum Decision, that the common law provides sufficient grounds upon which Plaintiffs may be awarded their attorney’s fees. I refer specifically to the “substantial benefit” rule which is summarized by the United States Supreme Court in Mills v. Electric Auto-Lite Co., 396 U.S. 375, 393-97, 90 S.Ct. 616, 626-28, 24 L.Ed.2d 593, 607-09 (1970), and discussed by this Court in Van Emmerik v. Montana Dakota Utils. Co., 332 N.W.2d 279, 283, 284-85 (S.D.1983) (Dunn and Henderson, JJ., dissenting). This doctrine permits reimbursement of a successful party’s attorney’s fees if the litigation (1) “conferred a substantial benefit on the members of an ascertainable class”; and (2) “where the court’s jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.” Mills, 396 U.S. at 393-94, 90 S.Ct. at 626, 24 L.Ed.2d at 607. See D. Dobbs, Handbook on the Law of Remedies, § 3.8, at 200 (1973); Annot., 89 A.L.R.3d 690 (1979).
In this case, “[t]he beneficiaries of this trust ... are the various educational insti*556tutions of this state,” Kanaly I, 368 N.W.2d at 823-24 (citing Schelle, 76 S.D. 620, 83 N.W.2d 847), and they have received a substantial benefit as a result of litigation commenced by Plaintiffs. This author agrees wholeheartedly with the trial court that:
Were it not for the actions of plaintiffs, the perpetual trust fund would not have been reimbursed. The declaration by the South Dakota Supreme Court that the transfer of the USD/Springfield property from the Board of Regents to the Board of Charities and Corrections without compensation violated Article VIII, Section 7 of the South Dakota Constitution, has brought the value of the land, buildings and personal property within the jurisdiction of this Court. At the very least, an equitable fund has been created. This Court can find no reason why the award of attorneys’ fees cannot be made from this fund.
Trial Court Memorandum Decision, at 7, filed September 9, 1985.2
Plaintiffs, in my opinion, should be reimbursed for their attorney’s fees. Our state statutes do not prohibit recovery and the common law is laced with ample authority to permit same. Plaintiffs have done this state a great service by acting to protect a vital and “sacred” educational trust and reimbursement should be made from the fund they were so successful in preserving.3

. Kanaly I was not the first case involving unconstitutional manipulations of the educational trust fund. See Schelle, 76 S.D. 620, 83 N.W.2d 847 (in which this Court prohibited the sale, at a loss, of United States Bonds); In re State Bonds, 7 S.D. 42, 63 N.W. 223 (where this Court identified the state’s duty to repay the educational trust when defalcation by a state treasurer had occurred).

. On October 15, 1985, a supplemental hearing was held at which evidence was received on the subject of attorney’s fees. On November 20, 1985, the trial court ruled that Plaintiffs should receive $17,919.87 ($15,941.25 as reasonable attorney’s fees, $1,978.62 in costs and related expenses). This award represents less than 1% of the fund preserved by Plaintiffs. Plaintiffs’ additional reimbursement to compensate them for legal fees incurred on appeal, which amount when combined with the trial court award above, represents less than 2% of the fund preserved by Plaintiffs.

. I find the reasoning of dissenting Justice Dunn in Van Emmerik, 332 N.W.2d at 284-85, as persuasive today as when I joined his dissent in 1983. Although equally inapplicable in this case, as it was in Van Emmerik, SDCL 15-17-18 conveys an underlying rationale "that reimbursing attorney fees, costs and expenses was intended ‘to make the aggressive taxpayer whole and to avoid imposing on him the penalty of personally paying his attorneys in an action brought in behalf of all other taxpayers to redress a public wrong.' ’’ Van Emmerik, 332 N.W.2d at 285 (quoting Carlson v. City of Faith, 75 S.D. 432, 436-37, 67 N.W.2d 149, 151 (1954)). This "reimbursement" concept is sound logic and has obvious application in the present situation.