Robert Schalkenbach Foundation v. Lincoln Foundation, Inc.

• Decision Date: 17 June 2004
• Docket Number: No. 1 CA-CV 02-0208, No. 1 CA-CV 02-0780.
• Citation: Robert Schalkenbach Foundation v. Lincoln Foundation, Inc., 91 P.3d 1019, 208 Ariz. 176 (Ariz. App. 2004)
• Parties: ROBERT SCHALKENBACH FOUNDATION; Stanley Sapiro; E.C. Redepenning; Carol Mauch; Elaine Coons; Wayne Wuertz; Common Ground-USA, Center for the Study of Economics; Henry George Foundation of America; Henry George School of Social Science of Los Angeles; Henry George School of Northern California; Tax Reform Australia, Inc.; The Association for Good Government; The Henry George Foundation Ltd. of New South Wales; The Danish Henry George Society; Resource Rentals for Revenue Association; South African Constitutional Property Rights Trust; Canadian Henry George School of Economic Science and Social Philosophy; Geonomy Society; International Union for Land Value Taxation and Free Trade; and The Henry George Institute, Petitioners-Appellants, v. LINCOLN FOUNDATION, INC.; Lincoln Institute of Land Policy, Inc.; David C. Lincoln; Kathryn Lincoln; John G. Lincoln, III; Lillian Lincoln Howell; Ronald Smith; H. James Brown; Karl W. Case; David E. Dowall; Richard A. Kahan; Wallace E. Oates; Carolina Barco de Botero; Jean Hocker; Therese J. McGuire; Evelyn Lord; Lester Simon; David R. Fullmer; Gary Cornia; Earl Blumenaur; Arizona Attorney General, Respondents-Appellees. The Henry George School of Social Science, New York, New York, Petitioner-Appellant, v. Lincoln Foundation, Inc. and The Lincoln Institute of Land Policy, Inc., Respondents-Appellees.
• Court: Arizona Court of Appeals

91 P.3d 1019

208 Ariz. 176

ROBERT SCHALKENBACH FOUNDATION; Stanley Sapiro; E.C. Redepenning; Carol Mauch; Elaine Coons; Wayne Wuertz; Common Ground-USA, Center for the Study of Economics; Henry George Foundation of America; Henry George School of Social Science of Los Angeles; Henry George School of Northern California; Tax Reform Australia, Inc.; The Association for Good Government; The Henry George Foundation Ltd. of New South Wales; The Danish Henry George Society; Resource Rentals for Revenue Association; South African Constitutional Property Rights Trust; Canadian Henry George School of Economic Science and Social Philosophy; Geonomy Society; International Union for Land Value Taxation and Free Trade; and The Henry George Institute, Petitioners-Appellants, v. LINCOLN FOUNDATION, INC.; Lincoln Institute of Land Policy, Inc.; David C. Lincoln; Kathryn Lincoln; John G. Lincoln, III; Lillian Lincoln Howell; Ronald Smith; H. James Brown; Karl W. Case; David E. Dowall; Richard A. Kahan; Wallace E. Oates; Carolina Barco de Botero; Jean Hocker; Therese J. McGuire; Evelyn Lord; Lester Simon; David R. Fullmer; Gary Cornia; Earl Blumenaur; Arizona Attorney General, Respondents-Appellees.

The Henry George School of Social Science, New York, New York, Petitioner-Appellant, v. Lincoln Foundation, Inc. and The Lincoln Institute of Land Policy, Inc., Respondents-Appellees.

Nos. -0208, -0780.

Court of Appeals of Arizona, Division 1, Department B.

June 17, 2004.

As Amended July 9, 2004.

Brooks & Affiliates, P.L.C. by David P. Brooks, Mesa, and Christopher J. Raboin, Phoenix, Co-Counsel for Petitioners-Appellants.

Snell & Wilmer, L.L.P., Patricia Lee Refo, Robert M.J. Kort, Phoenix, Attorneys for Respondent-Appellee Lincoln Foundation, Inc.

Meyer, Hendricks & Bivens, P.A., Donald W. Bivens, Ed Henricks, Jr., Phoenix, Attorney for Respondent-Appellee Lincoln Institute of Land Policy.

Terry Goddard, Attorney General by Kathryn L. Leonard, Assistant Attorney General, Consumer Protection and Advocacy Section, Phoenix, Attorney for Respondents-Appellees State of Arizona.

OPINION

KESSLER, Judge.

¶ 1 In this consolidated appeal, Appellants Robert Schalkenbach Foundation, Inc., et al. (the "Schalkenbach Appellants") and the Henry George School of Social Science, New York, New York (the "New York School") (collectively, "Appellants") assert that two probate judges erred by dismissing their petitions for failure to state a claim upon which relief can be granted. Specifically, Appellants take issue with the probate judges' decisions to: (1) dismiss their complaints for lack of standing to enforce a charitable trust; and (2) refuse to grant their writ of mandamus to compel the Attorney General to enforce a charitable trust or, in the alternative, to designate them as relators to act on behalf of the Attorney General. Adopting the "special interest" test for standing, we uphold the probate courts' decisions.

Factual and Procedural History

CV 1999-016329

¶ 2 The Schalkenbach Appellants filed a complaint in a prior case in 1999 to: (1) compel the Lincoln Foundation, Inc. (the "Foundation") to honor the charitable trust under which it holds assets and to abide by its Articles of Incorporation; (2) replace the Foundation's officers and directors with persons interested in carrying out the terms of the charitable trust; and (3) require the reimbursement of improper expenditures made by the Foundation (hereafter, "CV 1999-016329").

¶ 3 The Schalkenbach Appellants asserted that the Foundation is a charitable trust that was founded, organized and funded by John C. Lincoln for the purpose of teaching, expounding and propagating the ideas of Henry George.¹ The Schalkenbach Appellants identified themselves as longtime supporters of the ideas of Henry George or nonprofit associations and corporations organized to teach and expound the ideas of Henry George.²

¶ 4 The Schalkenbach Appellants alleged that: the Foundation improperly paid money to entities that did not follow the trust's purpose; the Foundation created the Lincoln Institute of Land Policy (the "Institute") and improperly transferred money to the Institute; and the Foundation's officers and directors did not accept the teachings of Henry George.

¶ 5 The Foundation moved to dismiss the complaint under Arizona Rule of Civil Procedure 12(b)(6) claiming, in part, that the Schalkenbach Appellants lacked standing under both the Arizona Nonprofit Corporations Act and the common law of trusts and that their claims were time barred. The court dismissed the Schalkenbach Appellants' complaint without prejudice after finding that the Schalkenbach Appellants did not have a "special interest" in the charitable trust and, therefore, they were unable to enforce the trust under the common law.

¶ 6 The Schalkenbach Appellants moved to amend their complaint to add the Attorney General as a defendant and to compel the Attorney General to enforce the trust, or to appoint the Schalkenbach Appellants as relators to enforce the trust on the Attorney General's behalf. The trial court refused to grant the amendment, stating it would be futile. The trial court entered another order, again dismissing the complaint without prejudice. The Schalkenbach Appellants did not appeal from any of the above orders.

PB XXXX-XXXXX

¶ 7 Instead, in 2001, the Schalkenbach Appellants filed a petition in probate court, which is the subject of this consolidated appeal, (hereafter, "PB XXXX-XXXXX") to enforce the public charitable trust established by the will (the "Petition"). In the Petition, the Schalkenbach Appellants alleged almost identical facts and legal theories as those set forth in their 1999 complaint with two pertinent differences. The Petition: (1) named the Attorney General as a defendant and requested a writ of mandamus to require the Attorney General to enforce the trust or allow the Schalkenbach Appellants to be designated relators to act on the Attorney General's behalf; and (2) referred to John C. Lincoln's will³ and claimed the probate court could proceed pursuant to Arizona Revised Statutes ("A.R.S.") §§ 14-7201, -1401 (1995).

¶ 8 The Foundation and the Attorney General moved to dismiss the Petition on the grounds of issue preclusion/res judicata, lack of standing, and failure to state a claim upon which relief could be granted.⁴

¶ 9 The probate court dismissed the petition without prejudice. The court found that in CV 1999-016329 the trial court had already determined that the Schalkenbach Appellants lacked standing to enforce the charitable trust and, therefore, issue preclusion barred the Schalkenbach Appellants from again raising this issue in PB XXXX-XXXXX. The court noted that while the existence of the will might support the existence of such a trust, this was unimportant to the trial court's ruling in CV 1999-016329 and, therefore, did not undermine the validity of the prior ruling. ¶ 10 The probate court also found that the Schalkenbach Appellants lacked standing under A.R.S. § 14-7201 because they were not interested parties. The court did not hold that the writ of mandamus and relator issues were precluded by res judicata, but adopted the reasoning of the trial court in CV 1999-016329 to find that these claims against the Attorney General should be dismissed for failure to state a claim upon which relief could be granted. Ultimately, the court dismissed the Schalkenbach's Petition without prejudice.

PB XXXX-XXXXXX

¶ 11 In 2002, the New York School filed its probate court petition (the "New York School Petition"), which is also the subject of this consolidated appeal, to enforce the charitable trust established through John C. Lincoln's will (hereafter "PB XXXX-XXXXXX"). The New York School Petition set forth essentially the same allegations as the Schalkenbach Petition in PB XXXX-XXXXX, except it asserted that, as a nonprofit organization that is dedicated to the teachings of Henry George, it had received substantial assistance from the Foundation from the 1950s through the 1970s and it had been a named beneficiary in the Foundation's Articles of Incorporation from 1969 until 1992.

¶ 12 The Foundation moved to dismiss the New York School's Petition for failure to state a claim. The probate court granted that motion and dismissed the New York School's Petition without prejudice.

¶ 13 The Schalkenbach Appellants timely filed their appeal in PB XXXX-XXXXXX and it was docketed as our case 1 CA-CV 02-0208. New York School timely filed its appeal in PB XXXX-XXXXX and it was docketed as our case 1 CA-CV 02-0780. This Court consolidated the two appeals. Despite both orders of dismissal being without prejudice, we have jurisdiction pursuant to Arizona Constitution, Article VI, Section 9 and A.R.S. § 12-2101(D) (2003); State v. Boehringer, 16 Ariz. 48, 51-52, 141 P. 126, 127 (1914); Flynn v. Johnson, 3 Ariz.App. 369, 373, 414 P.2d 757, 761 (1966).

¶ 14 Collectively, Appellants assert the probate court erred by dismissing their petitions because they had standing to enforce the charitable trust under A.R.S. §§ 14-7201 and 12-2021, and under common law. The Schalkenbach Appellants also assert that they should be allowed to proceed against the Attorney General. The Foundation and the Attorney General assert that the probate judges' decisions dismissing the petitions should be upheld.

Appellants Lack Standing to Enforce the Trust

¶ 15 Whether a party has standing to sue is a question of law we review de novo. Alliance Marana v. Groseclose, 191 Ariz. 287, 289, 955 P.2d 43, 45 (App.1997).

A. Issue Preclusion Bars The Schalkenbach Appellants from Relitigating Their Standing to Bring Common Law Claims to Enforce the Charitable Trust.

¶ 16 The probate court held that the Schalkenbach Appellants were barred by issue preclusion from re-litigating whether they had common-law standing to enforce the charitable trust. We affirm that holding on three separate grounds.

¶ 17 First, the...