Knutson v. Bronner

• Decision Date: 24 July 1998
• Citation: 721 So.2d 678
• Parties: Gerald KNUTSON et al. v. David G. BRONNER, individually and as chief executive officer of the Retirement Systems of Alabama. David G. BRONNER, individually and as chief executive officer of the Retirement Systems of Alabama v. Gerald KNUTSON et al.
• Court: Alabama Supreme Court

721 So.2d 678

Gerald KNUTSON et al. v. David G. BRONNER, individually and as chief executive officer of the Retirement Systems of Alabama.

David G. BRONNER, individually and as chief executive officer of the Retirement Systems of Alabama v. Gerald KNUTSON et al.

1951233, 1951355.

Supreme Court of Alabama.

July 24, 1998.

George C. Douglas, Jr., Birmingham, for appellants/cross appellees Gerald Knutson et al.

William T. Stephens, general counsel, and William F. Kelley, Jr., associate counsel, Retirement Systems of Alabama, for appellee/cross appellant David G. Bronner, individually and as chief executive officer of the Retirement Systems of Alabama.

PER CURIAM.

The main issue presented by these appeals is whether citizen taxpayers and a political committee have standing to sue the chief executive officer of the Retirement Systems of Alabama ("RSA") for an alleged misuse of RSA funds to encourage RSA members living in Montgomery County to vote in a local referendum to increase taxes. That depends on whether funds of the RSA are "state funds."

Facts

Two individuals, Gerald Knutson and Terry Smith, as citizens and taxpayers of the State of Alabama; and a political committee, the Taxpayers' Defense Force, sued David Bronner, the chief executive officer of the RSA. They sought to recover what they alleged were "state funds" that they claimed Bronner had expended in violation of § 17-1-7, Ala.Code 1975.¹ In their complaint, the plaintiffs asked the trial court to order Bronner to reimburse the RSA approximately $6,000 and to enjoin him permanently from engaging in any future political activity in violation of § 17-1-7. Bronner counterclaimed, seeking to recover from the plaintiffs a fine provided by § 17-22A-22, Ala. Code 1975, for an alleged violation of the Fair Campaign Practices Act. The trial court entered a summary judgment in favor of Bronner on the plaintiffs' claims, holding that the plaintiffs did not have standing to challenge the expenditure of RSA funds, but also entered a summary judgment in favor of the plaintiffs on Bronner's counterclaim, on the ground that the court did not have jurisdiction to enforce a criminal fine in a civil lawsuit. Because we hold that the plaintiffs did not have standing in this case, and because we hold that Bronner may not in a civil action enforce a statute assessing a criminal fine, we affirm both the summary judgments.

Bronner distributed a memorandum on RSA stationery in June 1994, over his signature as chief executive officer of the RSA, in which he urged RSA members living in Montgomery County to vote, in a local referendum, in favor of increasing ad valorem taxes for the support of public education. It is undisputed that RSA employees copied the memorandum and mailed it to RSA members and in doing so used postage purchased by the RSA.

Bronner's counterclaim alleged that, on June 17, 1994, the Taxpayers Defense Force received a $15,000 contribution for the express purpose of campaigning against the ad valorem tax increase, and that the Taxpayers Defense Force had not filed a statement of organization of a political committee, as required by the Fair Campaign Practices Act. See § 17-22A-5, Ala.Code 1975.² Because they had not filed the reports required by law, Bronner asserted that the plaintiffs were liable for the statutory fine imposed by § 17-22A-22, and, that, under § 6-5-50, he was entitled to recover the statutory penalty on behalf of the State.

Do the Plaintiffs Have Standing?

We first discuss whether the plaintiffs have standing to sue. The plaintiffs' main argument is that RSA funds are "state funds" and that they, therefore, have standing to prevent the illegal expenditure of those funds. Bronner counters that RSA funds are not "state funds," as that phrase has been used in our cases dealing with taxpayer standing. Bronner points out that neither of the individual plaintiffs nor the political committee is a member of the RSA with a vested interest in RSA funds, and he thus argues they have no cognizable interest sufficient to authorize them to sue. The plaintiffs rely on Lee v. Bronner, 404 So.2d 627 (Ala.1987), to support their argument that they have standing to sue. In Lee, this Court held that a member of the RSA, who had a direct pecuniary interest in RSA funds, had standing to sue. This Court also noted in that case that a taxpayer's standing is broad and that taxpayers are often the only persons who can bring a suit challenging the expenditure of state funds. Id. at 628-29. In Lee, however, this Court did not have to reach the specific issue presented here — whether a taxpayer who is not a member of the RSA has standing to bring an action against the chief executive officer of the RSA.

The plaintiffs also rely on Hunt v. Windom, 604 So.2d 395 (Ala.1992), in support of their argument on the standing question. In Hunt, "[t]he plaintiff, Ralph Windom, as a citizen and taxpayer of the State of Alabama, sued Governor Guy Hunt, alleging that he used state funds and resources to maintain a ministry and that his doing so violated the Constitution of Alabama." Id. at 395. In that case, this Court, relying on Zeigler v. Baker, 344 So.2d 761, 763 (Ala.1977), reaffirmed its long line of cases regarding taxpayer standing, and held that the taxpayer had standing.³

To determine whether a taxpayer has standing, under the standard set out in Zeigler and in Goode v. Tyler, 237 Ala. 106, 186 So. 129 (1939) (cited in note 3), we first must determine whether the expenditures challenged in this case were from "state funds," as they clearly were in both of those cases. If RSA funds are not "state funds" within the meaning of Alabama's Constitution and statutes, then the principles of law applied in Zeigler and Goode v. Tyler would not apply here.

The plaintiffs claim that the funds in question are state funds because, they say, §§ 36-27-2(b) and 16-25-2(b) describe the RSA as an "instrumentalit[y] of the state funded by the state," and because that phrase is included in clauses that grant the RSA and its officers the same immunity the state and its officers have. The plaintiffs also rely upon the fact that employees of the RSA are state employees eligible for state retirement benefits.

The argument of the plaintiffs is a plausible one, but we believe we cannot look only to the cases of this Court where the nature of the funds involved was clear; we must also examine the constitutional provisions that govern the RSA and the funds held by the RSA, to determine the character of those funds. We begin by looking at the constitutional provision that governs the management, investment, and distribution of RSA funds.

In Amendment 472 of the Alabama Constitution of 1901, the people provided the following:

"All of the assets, proceeds or income of the teachers', employees', state police, public and judicial retirement systems of Alabama, or any successor systems thereto, and all contributions and payments made to such systems to provide for retirement and related benefits thereunder, shall be held, invested as authorized by law, or disbursed as in trust for the exclusive purpose of providing for such benefits, refunds and administrative expenses under the management of the boards of control of the aforementioned retirement systems; and, none of such assets, proceeds, income, contributions or payments shall be used, loaned, encumbered or diverted to or for any other purpose whatsoever."

(Emphasis added.) Examining Amendment 472, we note that the people specifically provided that RSA assets and income are "held... in trust ... under the management of the boards of control." We also note that the statutes creating the RSA and setting out its powers, which pre-date Amendment 427, provide that the RSA is a public corporation with a fiduciary duty to hold and invest its assets in trust for its members.⁴

Although it might appear that the main question in this case — whether funds held by the RSA are "state funds" — was decided adversely to Bronner by this Court in Lee, the plaintiffs' reliance on Lee is misplaced, because the plaintiff in Lee had standing as a potential beneficiary of the trust. Goode v. Tyler is also distinguishable. A comparison of Goode with this present case helps to clarify the principal reason the plaintiffs in this case do not have standing. In Goode, a taxpayer sued, alleging that the commissioner of agriculture and industries had expended funds from the Agriculture Fund that were not authorized by law. The Agriculture Fund was established by Article 37 of the Agricultural Code of Alabama of 1927. Expenditures from the Agriculture Fund were under the control of the State Board of Agriculture. Agr.Code 1927, § 488. The Agriculture Fund was created by the Legislature for the sole purpose of paying for the "expenses of the regulatory control and administrative work of the Agricultural Section of the Department of Agriculture and Industries." Agr.Code 1927, § 487. In Goode, this Court recognized the standing of a taxpayer to challenge certain expenditures from the Agriculture Fund that had been authorized by the State Board of Agriculture.

Goode, however, presented a factual situation that is fundamentally distinct from that of the present case. In Goode, the Agriculture Fund was established by the Legislature, it existed at the will of the Legislature, and it was to be used for legislatively determined purposes, in accordance with procedures established by legislation. Agr.Code 1927, § 484 et seq. It follows, therefore, that the Legislature could have determined that, for whatever reason, it no longer wished for the Agriculture Fund to exist and it then could have terminated that fund through legislation. Here, the people, through their constitution, Amendment 472, have placed the funds of the RSA in trust; because of that constitutional provision, we hold that the funds in question in this case are not "state funds" as this Court has used that...