Perdue v. Callan Assocs., Inc. (Ex parte Callan Assocs., Inc.), 1081683.

CourtSupreme Court of Alabama
Writing for the CourtSHAW
Citation87 So.3d 1161
PartiesEx parte CALLAN ASSOCIATES, INC. (In re Carol M. Perdue, as next friend and legal guardian of Anna K. Perdue, as designated beneficiary of and on behalf of the Prepaid Affordable College Tuition Trust Fund a/k/a The Wallace–Folsom Prepaid College Trust Fund v. Callan Associates, Inc., et al.).
Decision Date20 January 2012
Docket Number1081683.

87 So.3d 1161

Ex parte CALLAN ASSOCIATES, INC.
(In re Carol M. Perdue, as next friend and legal guardian of Anna K. Perdue, as designated beneficiary of and on behalf of the Prepaid Affordable College Tuition Trust Fund a/k/a The Wallace–Folsom Prepaid College Trust Fund
v.
Callan Associates, Inc., et al.).

1081683.

Supreme Court of Alabama.

Sept. 9, 2011.
Rehearing Denied Jan. 20, 2012.


[87 So.3d 1162]


Matthew H. Lembke and Andrew L. Brasher of Bradley Arant Boult Cummings LLP, Birmingham; and William C. McGowin of Bradley Arant Boult Cummings LLP, Montgomery, for petitioner.

Richard H. Gill, George W. Walker III, and C. Nelson Gill of Copeland, Franco, Screws & Gill, P.A., Montgomery; and C. Neal Pope of Pope, McGlamry, Kilpatrick, Morrison & Norwood, LLP, Columbus, Georgia, for respondent.


SHAW, Justice.

Callan Associates, Inc. (“Callan”), petitions this Court for a writ of mandamus directing the Montgomery Circuit Court to dismiss the underlying action filed by Carol M. Perdue, “as next friend and legal guardian of Anna K. Perdue, as designated beneficiary of and on behalf of the Prepaid Affordable College Tuition Trust Fund a/k/a The Wallace–Folsom Prepaid College Trust Fund.” For the reasons stated below, we grant the petition and issue the writ.

Facts and Procedural History

In 1990, the Alabama Legislature established the Alabama Prepaid Affordable College Tuition (“PACT”) program as part of the Wallace–Folsom College Savings Investment Plan, see §§ 16–33C–1 to –8, Ala.Code 1975. As explained by the Court of Civil Appeals in Johnson v. Taylor, 770 So.2d 1103 (Ala.Civ.App.1999), the purpose of the PACT program is

“to assist payment of college tuition costs by allowing a person to purchase PACT contracts in advance of a child's attending college. The PACT program obligates the state to pay tuition in accordance with the contract if the minor child attends a state college or university. § 16–33C–1. The purchase price of a PACT contract is determined actuarially. § 16–33C–6(f). Payments received become public funds, which the state invests to generate assets to fund the child's education. § 16–33C–6(d).”

770 So.2d at 1104.


Pursuant to the statutory scheme, the PACT program is overseen by a “PACT board,” which serves as both “[t]he board of directors and trustees of the PACT Trust Fund.”

[87 So.3d 1163]

§ 16–33C–3(14), Ala.Code 1975.1 Also pursuant to statute, the members of the PACT board are specifically empowered “[t]o invest as [the board] deems appropriate any funds in the PACT Trust Fund....” § 16–33C–5(3), Ala.Code 1975. In fulfilling that responsibility, including decisions relating to “acquiring, investing, reinvesting, exchanging, retaining, selling, and managing property of the PACT Trust Fund,” both “the PACT board and any person or investment manager to whom the PACT board delegates any of its investment authority” is charged with “exercis[ing] the judgment and care under the circumstances then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but to permanent disposition of funds, considering the probable income as well as the safety of their capital.” § 16–33C–6(d), Ala.Code 1975.

In 2002, Carol M. Perdue (“Carol”) entered into a PACT contract for the benefit of her daughter, Anna K. Perdue (“Anna”), pursuant to which Carol agreed to make 60 monthly payments of $240 in exchange for benefits consisting of the future payment for Anna of qualified in-state tuition and mandatory fees from the PACT Trust Fund into which all such payments from all purchasers of PACT contracts are pooled and then invested. It is undisputed both that Anna is the “designated beneficiary” of the PACT contract purchased by Carol and that Carol has paid all the amounts due under that contract. See § 16–33C–3(10) (defining “designated beneficiary” as “[t]he person designated at the time the PACT contract is entered into ... as the person who benefits from payments of qualified higher education costs at eligible educational institutions, or that person's replacement”). It is also undisputed that Anna has not made a demand for tuition benefits under the PACT contract of which she is the designated beneficiary.

In 2003, the PACT board entered into an “Investment Consultant Agreement” with Callan, pursuant to which Callan was to provide “professional investment consulting services to ... the PACT Board.” See § 16–33C–5(7), Ala.Code 1975 (expressly granting the PACT board the authority “[t]o contract for necessary goods and services, to employ necessary personnel, and to engage the services of qualified persons and entities for administrative and technical assistance in carrying out the responsibilities of the plan”). That contract was renewed in 2006.

On February 27, 2009, Kay Ivey, then state treasurer and, by virtue of that office, chairman of the PACT board, issued a letter to the purchasers (holders) of PACT contracts informing them that a downturn in the stock market had negatively impacted the assets of the PACT Trust Fund but indicating that the PACT board remained

[87 So.3d 1164]

committed to honoring the PACT contracts and that the PACT board was investigating options and exploring opportunities that would “allow PACT benefits to be consistently paid.” Subsequently, on May 7, 2009, Carol filed the underlying litigation on behalf of Anna, as a designated beneficiary of the PACT Trust Fund, alleging “that the Trust has lost millions of dollars as a result of Callan's and the Trustees' mismanagement.” Specifically, Carol's complaint named as defendants both Callan and the members of the PACT board (solely in their official capacities) and alleged that the defendants “failed to meet [the applicable] standard of care by investing 70% or more of the Trust assets in equities ... and by projecting and seeking unrealistic rates of return which necessarily required speculative and risky investments, and which resulted in greater risk to the portfolio and the ultimate significant loss of capital.” 2

Callan moved to dismiss Carol's claims, arguing, among other things, that a purported beneficiary of a trust could not maintain an action against a third party on behalf of the trust without first demanding that the trustee act or show a sufficient reason for the failure to make such a demand.3 The PACT board also filed a motion to dismiss, asserting defenses unique to the PACT board, including immunity, but also adopting Callan's argument related to Carol's purported inability to pursue the asserted claims on behalf of the PACT Trust Fund. On August 19, 2009, following a hearing, the Montgomery Circuit Court issued an order denying Callan's and the PACT board's motions to dismiss, which included, in pertinent part, the following:

“Defendants' first argument is that Plaintiff lacks standing to bring these claims. The Court finds this argument to be without merit. Defendants also contend that Plaintiff's claims are not ripe because to date all beneficiaries have had their tuition paid. Perhaps anticipating such an obstacle, Plaintiff notes that she sues not for any unpaid tuition but on behalf of the PACT trust to collect the money lost as a result of alleged mismanagement. In that posture, the Court finds Plaintiff's claim to be ripe.”
Callan subsequently filed the present petition seeking a writ of mandamus directing the trial court to dismiss Carol's action against it, and this Court ordered answers and briefs.
4

Standard of Review

“ ‘ “The writ of mandamus is a drastic and extraordinary writ, to be ‘issued only when there is: 1) a clear legal right in the petitioner to the

[87 So.3d 1165]

order sought; 2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; 3) the lack of another adequate remedy; and 4) properly invoked jurisdiction of the court.’ Ex parte United Serv. Stations, Inc., 628 So.2d 501, 503 (Ala.1993); see also Ex parte Ziglar, 669 So.2d 133, 134 (Ala.1995).” Ex parte Carter, [807 So.2d 534,] 536 [ (Ala.2001) ].'

Ex parte McWilliams, 812 So.2d 318, 321 (Ala.2001).”

Ex parte Carson, 945 So.2d 448, 449 (Ala.2006).

Discussion

In its petition, Callan contends, among other things, that it is entitled to a writ of mandamus because, it says, the trial court erred in concluding that Carol has “standing” to pursue her stated claims on behalf of the PACT Trust Fund. More specifically, Callan maintains that Carol lacks “standing” to sue because she failed, before filing the underlying complaint, to first demand that the PACT board sue Callan. Because we agree with Callan that Carol's failure to first demand that the PACT board file an action deprived her of the ability to initiate the underlying action, we issue the writ on that ground and pretermit discussion of Callan's remaining claims.

Callan cites authority indicating, which authority Carol does not dispute, that any cause of action initiated on behalf of a trust for conduct damaging the assets of the trust belongs to the trustee of that trust and that before a beneficiary may proceed with filing a derivative claim on behalf of the trust, the beneficiary “must first move the trustee to act, or show some sufficient reason for the failure to do so.” Blackburn v. Fitzgerald, 130 Ala. 584, 588, 30 So. 568, 568 (1901) (citing Bailey v. Selden, 112 Ala. 593, 605, 20 So. 854, 857 (1896) (“[C]omplainants had no right to institute proceedings in equity to enforce their equitable rights ... without first having moved the trustee to act, resulting in failure to procure action by her.”); and Arnett v. Bailey, 60 Ala. 435, 438 (1877) (“Neither can the bill be maintained to recover possession of the lands, without averment, not found in this record, that Word, who holds the legal title in trust, refuses to bring an action for its recovery.”)). Cf. James v. James, 768 So.2d 356, 360 (Ala.2000) (“Before a shareholder can be awarded damages on a derivative claim,...

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5 practice notes
  • Perdue v. Green, 1101337 and 1101506.
    • United States
    • Supreme Court of Alabama
    • April 19, 2013
    ...1 We vacate the trial court's judgment and remand the case.Facts and Procedural History This Court, in Ex parte Callan Associates, Inc., 87 So.3d 1161 (Ala.2011), explained the pertinent history of the PACT program, as it led to the underlying class-action litigation and to other litigation......
  • Ladd v. Stockham, 1140365
    • United States
    • Supreme Court of Alabama
    • March 25, 2016
    ...perform his duty to protect the trust, the beneficiaries may sue in equity to protect their rights.' Ex parte Callan Associates, Inc., 87 So.3d 1161, 1166 (Ala.2011) (emphasis in original; alterations and quotations omitted). Because Ladd was in a position to challenge SVI's failure to rede......
  • Ira v. Taylor, Case No. 3:13–cv–166–MEF.
    • United States
    • United States District Courts. 11th Circuit. Middle District of Alabama
    • March 19, 2014
    ...places his property in an active trust, the grantor's legal title to that property passes to the trustee.” Ex Parte Callan Assoc., Inc., 87 So.3d 1161, 1166–67 (Ala.2011). As such, the trustee has title to the trust property, usually has possession and a right to continue in possession, and......
  • Yocum v. Nationstar Mortg., LLC, Case No.: 2:14-cv-00970-SGC
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • August 24, 2017
    ...places his property in an active trust, the grantor's legal title to that property passes to the trustee." Ex Parte Callan Assoc., Inc., 87 So. 3d 1161, 1166-67 (Ala. 2011). The trustee has title to the trust property and has all powers necessary to make the trust productive and safe; indee......
  • Request a trial to view additional results
5 cases
  • Perdue v. Green, 1101337 and 1101506.
    • United States
    • Supreme Court of Alabama
    • April 19, 2013
    ...1 We vacate the trial court's judgment and remand the case.Facts and Procedural History This Court, in Ex parte Callan Associates, Inc., 87 So.3d 1161 (Ala.2011), explained the pertinent history of the PACT program, as it led to the underlying class-action litigation and to other litigation......
  • Ladd v. Stockham, 1140365
    • United States
    • Supreme Court of Alabama
    • March 25, 2016
    ...perform his duty to protect the trust, the beneficiaries may sue in equity to protect their rights.' Ex parte Callan Associates, Inc., 87 So.3d 1161, 1166 (Ala.2011) (emphasis in original; alterations and quotations omitted). Because Ladd was in a position to challenge SVI's failure to rede......
  • Ira v. Taylor, Case No. 3:13–cv–166–MEF.
    • United States
    • United States District Courts. 11th Circuit. Middle District of Alabama
    • March 19, 2014
    ...places his property in an active trust, the grantor's legal title to that property passes to the trustee.” Ex Parte Callan Assoc., Inc., 87 So.3d 1161, 1166–67 (Ala.2011). As such, the trustee has title to the trust property, usually has possession and a right to continue in possession, and......
  • Yocum v. Nationstar Mortg., LLC, Case No.: 2:14-cv-00970-SGC
    • United States
    • United States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
    • August 24, 2017
    ...places his property in an active trust, the grantor's legal title to that property passes to the trustee." Ex Parte Callan Assoc., Inc., 87 So. 3d 1161, 1166-67 (Ala. 2011). The trustee has title to the trust property and has all powers necessary to make the trust productive and safe; indee......
  • Request a trial to view additional results

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