O'TOOLE v. BD. OF TRUST. OF SD RETIREMENT, 22016.

Decision Date02 July 2002
Docket NumberNo. 22016.,22016.
Citation2002 SD 77,648 N.W.2d 342
PartiesWilliam O'TOOLE and Elisabeth O'Toole, Plaintiffs and Appellants, v. BOARD OF TRUSTEES OF THE SOUTH DAKOTA RETIREMENT SYSTEM, Defendant and Appellee.
CourtSouth Dakota Supreme Court

Sheila S. Woodward of Johnson, Heidepriem, Miner, Marlow and Janklow, Yankton, South Dakota, Attorneys for plaintiffs and appellants.

Mark Barnett, Attorney General, Wade A. Hubbard, Assistant Attorney General, Pierre, South Dakota, Attorneys for defendant and appellee.

LOVRIEN, Circuit Judge.

[¶ 1.] William and Elisabeth O'Toole (O'Tooles) appeal the circuit court's judgment affirming the South Dakota Retirement System Board of Trustee's (Board) determination that O'Tooles were not entitled to an additional refund for the employer contributions made on their behalf. We affirm.

FACTS

[¶ 2.] Elisabeth and William O'Toole were employed with state government until November 1 and August 23, 1996 (respectively). After leaving the state's payroll each had five years to apply for a refund of the contributions they made to the South Dakota Retirement System (System). Each applied for a refund on November 18, 1997 and each was issued a refund on November 26, 1997.

[¶ 3.] On December 5, 1997, Board decided to seek legislative approval of a change to the portability of its retirement benefits. This proposed change would allow vested members to withdraw both their own and their employer's contributions to System. To meet what it considered its fiduciary duty, Board immediately began to notify all interested persons and members that they should wait to remove benefits until the possible changes were approved or rejected.

[¶ 4.] During the 1998 Legislative Session, the legislature approved and the governor signed the bills that granted the change in the portability of benefits. The changes went into effect on July 1, 1998. In addition to allowing the change in portability benefits, the legislature also specifically provided that no member or former member of the system, who had withdrawn contributions from the system before July 1, 1998, could receive any additional refund. SDCL 3-12-77.4.1

[¶ 5.] Approximately eight months later, on March 9, 1999, O'Tooles contacted System to request a refund of employer contributions. The system administrator refused the request. A hearing was held before the Board of Trustees on April 13, 2000. Board affirmed the administrator's decision and O'Tooles filed an appeal with the circuit court. The circuit court affirmed Board's decision.

[¶ 6.] The argument raised by O'Tooles before the administrator, the Board, and the circuit court was that they were entitled to an additional refund from System based on a claim that Board breached its fiduciary duty to them. O'Tooles argued that when they applied for their refund, Board was considering asking the legislature to approve a statute to allow an employee to withdraw contributions made by both the employee and employer. O'Tooles claim that Board had a fiduciary duty to disclose this to them but failed to do so. O'Tooles claim that had they been informed by Board of this possible statutory change, they would have waited to withdraw their contribution and would have received an additional $14,000, representing the contributions made on their behalf by their state employers. [¶ 7.] On appeal, O'Tooles argue that the circuit court erred in applying a "clearly erroneous" standard to Board's findings and that Board breached its fiduciary duty in failing to provide information about a potential change in plan benefits to O'Tooles. Board argues that there is no remedy available for the O'Tooles as there is no provision in state law to make the payment requested by O'Tooles.

[¶ 8.] On close review of the record, we conclude the issue before us is essentially jurisdictional. Under the facts of this case, did the Board have the authority, and thus jurisdiction, to give a refund to O'Tooles based on their claim of breach of fiduciary duty? We conclude that it did not.

STANDARD OF REVIEW

[¶ 9.] The Court reviews agency findings in the same manner required of the circuit court when reviewing a decision from an administrative agency. Associated Sch. Bds. v. Hughes County, 2002 SD 41, ¶ 8, 643 N.W.2d 417. See SDCL 1-26-36. This Court reviews findings of fact under the clearly erroneous standard, whereas questions of law are reviewed under the de novo standard. In re Dorsey & Whitney Trust Co. LLC., 2001 SD 35 ¶ 5, 623 N.W.2d 468, 471 (citing Permann v. Department of Labor, 411 N.W.2d 113, 115-117 (S.D.1987)). The issue on review is a question of law, upon which we apply a de novo standard of review. In re Estate of Galada, 1999 SD 21, ¶ 8, 589 N.W.2d 221, 222, see also Kroupa v. Kroupa, 574 N.W.2d 208, 210 (S.D.1998)

.

ANALYSIS AND DECISION

[¶ 10.] First, did Board have authority to consider O'Tooles' request for a refund of employer contributions? We conclude that it did.

In administrative law the term jurisdiction has three aspects: (1) personal jurisdiction, referring to the agency's authority over the parties and intervenors involved in the proceedings; (2) subject matter jurisdiction, referring to the agency's power to hear and determine the causes of a general class of cases to which a particular case belongs; and (3) the agency's scope of authority under statute.

2 AmJur 2d Administrative Law § 274 (1994) (internal citations omitted). Board has authority, under SDCL 3-12-56 to SDCL 3-12-58,2 to consider and decide requests for refunds. O'Tooles' request was fully within the scope of the administrator's statutory authority to make a determination.

[¶ 11.] Second, did Board have authority to grant O'Tooles' request for a refund based on a claim of breach of fiduciary duty? We conclude that it did not.

[¶ 12.] It is undisputed that at the time O'Tooles requested a refund, the Board stood in a fiduciary relationship with them. SDCL 3-12-47(33). As a fiduciary, Board had a duty to act in the highest good faith and to refrain from obtaining any undue advantage over members. Ward v. Lange, 1996 SD 113, ¶ 15, 553 N.W.2d 246, 251 (1996). In dealing with a member, Board had a duty to act primarily for the benefit of the member.

[¶ 13.] When a member's request can be decided by Board in one of several ways, each authorized by statute, Board's decision must be consistent with its fiduciary duty to that member. If one decision would be consistent with Board's fiduciary duties but a second decision would not be, and Board makes the second decision, it is proper for the circuit court, on appeal, to review Board's decision in light of Board's fiduciary duty to the member.

[¶ 14.] However, when a member's request can only be decided by Board in one way under the statute, the question of whether the Board's decision is consistent with its fiduciary duties to that member does not arise as a matter for Board consideration. Neither Board nor the circuit court can consider a claim of breach of fiduciary duty as a basis for granting a refund if granting that refund is prohibited by statute. Thus, even if O'Tooles had convinced Board, or the circuit court, that Board had breached its fiduciary duty, the remedy sought by the O'Tooles, a refund of the employer contributions, would still be prohibited by statute and beyond the authority of Board to grant.

[¶ 15.] The Retirement System Board of Trustees has the power to make determinations in controversies, but is limited by the parameters given in state law. The general rule is that administrative agencies have only such adjudicatory jurisdiction as is conferred upon them by statute. Johnson v. Kolman, 412 N.W.2d 109, 112 (S.D.1987) (citing Springville Com. Sch. Dist. v. Iowa Dept. of Pub. Inst., 252 Iowa 907, 109 N.W.2d 213 (1961); Montana Bd. of Nat. Res. & Con. v. Montana Power Co., 166 Mont. 522, 536 P.2d 758 (1975); 2 AmJur2d Administrative Law § 328). Furthermore, "[an administrative agency] may not acquire jurisdiction by estoppel or consent, and, where it acts without jurisdiction, its orders are void." Montana Bd. of Nat. Res. & Con., 536 P.2d at 762 (quoting 73 CJS Public Administrative Bodies and Procedures § 116). See also Pickering v. Illinois Human Rights Com'n, 146 Ill.App.3d 340, 99 Ill.Dec. 885, 496 N.E.2d 746 (1986)

; and Powell v. Khodari-Intergreen Co., 303 N.W.2d 171 (Iowa 1981).

An agency has only such power as expressly or by necessary implication is granted by legislative enactment; agency may not increase its own jurisdiction and, as a creature of statute, has no common-law jurisdiction nor inherent power such as might reside in a court of general jurisdiction.

Lee v. Div. of Fla. Land Sales & Condominiums, 474 So.2d 282, 284 (Fla.App. 5 Dist.1985). [¶ 16.] Under the facts of this case, Board did not have several alternatives from which to decide O'Tooles' request for a refund of employer contributions. It had only one lawful option. It is undisputed that O'Tooles were former members of the system who had withdrawn their contributions from the system before July 1, 1998. Given the provisions of SDCL 3-12-77.4, Board was precluded, by statute, from granting O'Tooles a refund. Thus there was no basis for the Board, or the circuit court, to consider if a possible breach of fiduciary duty by Board mandated one decision, granting a refund, over another decision, not granting a refund. The only decision Board could properly make was to deny the refund, even if a breach of fiduciary duty had occurred. The fact that O'Tooles may or may not have a valid claim of breach of fiduciary duty does not alter this conclusion nor does it confer on Board authority denied by statute.

[¶ 17.] We are also mindful that this Court has long recognized a breach of fiduciary duty as a tort. Hoffman v. Louis Dreyfus Corp., 435 N.W.2d 211, 214 (S.D.1989) (internal citations omitted). Tort claims are properly brought in the circuit court, not...

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