October 22, 2012 – Ping Lu, Jill McKeon, Richard McKeon, Stephen Spencer, Spencer Stopa, and Judy C. Winnegar, on their own behalf and on behalf of a class of similarly situated persons v. The Education Trust Board of New Mexico, The Education Plan Trust of New Mexico, and the State of New Mexico, No. 31,363

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: _______________
Filing Date: October 22, 2012
NO. 31,363
PING LU, JILL MCKEON, RICHARD
MCKEON, STEPHEN SPENCER, SPENCER
STOPA, and JUDY C. WINNEGAR, on their
own behalf and on behalf of a class of similarly
situated persons,
Plaintiffs-Appellants,
v.
THE EDUCATION TRUST BOARD OF
NEW MEXICO, THE EDUCATION PLAN
TRUST OF NEW MEXICO, and THE STATE
OF NEW MEXICO,
Defendants-Appellees.
APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
Stephen D. Pfeffer, District Judge
Rothstein, Donatelli, Hughes, Dahlstrom,
Schoenburg & Bienvenu, LLP
John C. Bienvenu
Kristina Martinez
Brendan K. Egan
Santa Fe, NM

Keller Rohrback LLP
Benjamin Gould
Seattle, WA
for Appellants
Gary K. King, Attorney General
Matthew E. Jackson, Assistant Attorney General
Santa Fe, NM
for Appellees
Freedman Boyd Hollander Goldberg
Ives & Duncan, P.A.
Joseph Goldberg
John W. Boyd
Vincent J. Ward
for Amici Curiae

OPINION
VANZI, Judge.
{1} 	In this appeal, we consider whether the district court properly dismissed the
State of New Mexico as a defendant in a class action suit for breach of contract on the
basis of sovereign immunity. The district court dismissed the State after determining
that a specific statutory provision of the Education Trust Act (the Act), NMSA 1978,
Sections 21-21K-1 to -7 (1997, as amended through 2011), addressing sources of
monetary recovery for liabilities or contractual obligations arising under the Act
amounted to sovereign immunity for the State. See § 21-21K-3(C). We conclude that
the district court erred in granting the State’s motion to dismiss on this basis.
Accordingly, we reverse.
BACKGROUND
{2} 	Plaintiffs represent a class of investors in the State of New Mexico’s qualified
higher education tuition programs. Established by the Act, these programs are tax-
advantaged college savings plans established in compliance with Section 529 of the
Internal Revenue Code of 1986 and are thus commonly known as “529 plans.” In
New Mexico, the Education Trust Board (the Board) is the entity responsible for
administering the State’s 529 plans, and the Education Trust Fund (the Fund), located
within the State treasury, holds “all money received pursuant to college investment

2
agreements and prepaid tuition contracts” under the State’s 529 plans. Sections 21-
21K-3(A), -4(A). In addition, the Board has established a trust (the Trust) which is
“a vehicle for the [B]oard to carry out the provisions of the [A]ct and . . . to protect the
financial integrity of the . . . [F]und.” 	5.7.30.8(A) NMAC (11/15/2001) (internal
quotation marks omitted).
{3} 	In 2009, Plaintiffs initiated a class action lawsuit for breach of contract against
the Board and the Education Plan Trust of New Mexico. Plaintiffs later amended their
complaint to add the State of New Mexico as a defendant. Plaintiffs alleged in their
amended complaint that they had entered into written contracts with Defendants in
order to participate in the State’s 529 plans and that Defendants breached these
contracts by mismanaging Plaintiffs’ investments and wrongfully investing in high
risk ventures rather than the conservative fixed-income investments that Plaintiffs had
contracted for. 	In addition to seeking compensatory damages for the breach of
contract claim, Plaintiffs sought injunctive and declaratory relief.
{4} 	After it was added as a defendant, the State moved to dismiss by filing a Rule
1-012(B)(1) NMRA motion for lack of subject matter jurisdiction. 	The State’s
primary argument for dismissal involved a sentence within Section 21-21K-3(C) of
the Act providing that “[n]othing in the . . . Act creates any obligation, legal, moral
or otherwise, to fulfill the terms of any college investment agreement or prepaid
tuition contract out of any source other than the . . . [F]und.” The State argued that

3
this language in Section 21-21K-3(C) overrides NMSA 1978, Section 37-1-23(A)
(1976), the statute granting governmental immunity from contract actions not “based
on a valid written contract.” 	The State also made arguments grounded in public
policy, contending that the Act should be read to limit the State’s liability in order to
protect the public fisc.
{5} 	After a hearing, the district court granted the State’s motion. In its oral ruling
from the bench, the district court explained that:
I agree with the State there’s no purpose in that second sentence [of
Section 21-21K-3(C)] other than to make it clear that it is only the . . .
[F]und that is a source for a recovery. . . . It’s the [c]ourt’s belief and
finding that [Section] 21-21K-3[(C)] is a specific statute regarding
liabilities of the State which overrides any general provision such as
[Section] 37-1-23. 	And as such, there is no waiver of sovereign
immunity.
The court subsequently entered a written order dismissing the State as a party to the
lawsuit and finding that “the . . . Fund is the only potential source of recovery from
State funds in this case.”
{6} 	The court certified the order for interlocutory appeal, noting that the case
involved a “controlling question of law as to which there is substantial ground for
difference of opinion.” See NMSA 1978, § 39-3-4(A) (1999). Plaintiffs subsequently
filed an application for interlocutory appeal with this Court. However, we determined
that the district court’s order of dismissal constituted a final, appealable order with
respect to the State and, therefore, the dismissal conferred an appeal as of right. See

4
Rule 1-054(B)(2) NMRA (“When multiple parties are involved, judgment may be
entered adjudicating all issues as to one or more, but fewer than all parties. 	Such
judgment shall be a final one unless the court . . . expressly provides otherwise.”).
Plaintiffs and the State thereafter submitted briefing to this Court, and we permitted
the Board to file an amicus brief on its behalf although it is not a party to this appeal.
DISCUSSION
{7} 	On appeal, Plaintiffs contend that the district court erroneously granted the
State’s Rule 1-012(B)(1) motion to dismiss based on the State’s claim of sovereign
immunity. We apply de novo review to a district court’s ruling on a Rule 1-012(B)(1)
motion to dismiss for lack of subject matter jurisdiction. 	Tri-State Generation &
Transmission Ass’n, Inc. v. King, 2003-NMSC-029, ¶ 4, 134 N.M. 467, 78 P.3d 1226;
Holguin v. Tsay Corp., 2009-NMCA-056, ¶ 9, 146 N.M. 346, 210 P.3d 243. 	In
addition, to the extent that this appeal involves interpretation of the Act, our standard
of review is de novo. 	N.M. Indus. Energy Consumers v. N.M. Pub. Regulation
Comm’n, 	2007-NMSC-053, 	¶ 	19, 	142 	N.M. 	533, 	168 	P.3d 	105 	(“Statutory
interpretation is an issue of law, which we review de novo.”).
{8} 	It is a well-established and oft-repeated principle in our judicial system that
subject matter jurisdiction is “the power to adjudicate the general questions involved
in the claim and is not dependent upon the state of facts which may appear in a
particular case, or the ultimate existence of a valid cause of action.” 	Gonzales v.

5
Surgidev Corp., 120 N.M. 133, 138, 899 P.2d 576, 581 (1995); Lyndoe v. D.R.
Horton, Inc., 2012-NMCA-___, ¶ 12, ___ P.3d ___, (No. 30,663, July 24, 2012)
(defining subject matter jurisdiction as the “power of a court to hear and determine
cases”). 	Our Supreme Court has directed that “[t]he only relevant inquiry in
determining whether the court has subject matter jurisdiction is to ask whether the
matter before the court falls within the general scope of authority conferred upon such
court by the constitution or statute.” State v. Chavarria, 2009-NMSC-020, ¶ 11, 146
N.M. 251, 208 P.3d 896 (alteration, internal quotation marks, and citation omitted);
see Marchman v. NCNB Tex. Nat’l Bank, 120 N.M. 74, 83, 898 P.2d 709, 718 (1995)
(stating that a “court has subject matter jurisdiction in an action if the case is within
the general class of cases that the court has been empowered, by constitution or
statute, to hear and determine”); see also 2 James W. Moore, Moore’s Federal
Practice § 12.30, at 12-35 (3d ed. 2010) (noting that “subject matter jurisdiction
[motions] challenge[] the court’s statutory or constitutional power to adjudicate the
case”).
{9} 	The source of a district court’s subject matter jurisdiction derives from the New
Mexico Constitution. Lyndoe, 2012-NMCA-___, ¶ 12. “New Mexico district courts
are courts of general jurisdiction having the power to hear all matters not excepted by
the constitution and those matters conferred by law.” Id. In the present case, we are
concerned with the district court’s subject matter jurisdiction over a breach of contract

1For purposes of this appeal, it is undisputed that the parties entered into valid
written contracts. The district court denied an earlier motion to dismiss filed by the
Board in which the Board had argued that the plan agreements entered into between
the parties were not contracts. 	No challenge to this ruling has been raised in this
appeal, and we therefore assume that this case is based on the existence of valid
written contracts.
6
class action involving the State. 	With respect to contract actions brought against
governmental entities in New Mexico, the district court and the parties considered
Section 37-1-23(A), which was enacted in response to the Supreme Court’s
abolishment of common law sovereign immunity. 	Univ. of N.M. Police Officer’s
Ass’n v. Univ. of N.M., 2005-NMSC-030, ¶ 8, 138 N.M. 360, 120 P.3d 442
(discussing Hicks v. State, 88 N.M. 588, 544 P.2d 1153 (1976)), superseded by statute
on other grounds as stated in Gallagher v. Albuquerque Metro. Flood Control Auth.,
90 N.M. 309, 563 P.2d 103 (Ct. App. 1977). 	Section 37-1-23(A) provides that
“[g]overnmental entities are granted immunity from actions based on contract, except
actions based on a valid written contract.” (Emphasis added.) In order to “protect the
public treasury” and “the taxpayer,” Section 37-1-23(A) requires at a minimum that
plaintiffs obtain a valid written contract in order to maintain a lawsuit against the
State. Univ. of N.M. Police Officer’s Ass’n, 2005-NMSC-030, ¶ 21. Because this case
is based on valid written contracts,1 it seems beyond dispute that the district court, on
the basis of its general jurisdiction, had subject matter jurisdiction over this case with
the State as a defendant.

7
{10} 	However, the district court nonetheless relied on a sovereign immunity
argument raised by the State on the basis of Section 21-21K-3(C) to divest itself of
subject matter jurisdiction as to the State. See 5B Charles Alan Wright and Arthur R.
Miller, Federal Practice and Procedure: Civil § 1350, at 70-79 (3d ed. 2004)
(explaining that the Rule 12(B)(1) motion to dismiss may be appropriate “when the
plaintiff’s claim is barred by one of the various aspects of the doctrine of sovereign
immunity”); see also Doe v. Santa Clara Pueblo, 2007-NMSC-008, ¶ 27 n.6, 141
N.M. 269, 154 P.3d 644 (noting in the context of a claim of tribal sovereign immunity
that “[a] waiver of immunity in state court inherently involves a state court’s subject
matter jurisdiction, and immunity waiver claims are often phrased as subject matter
jurisdiction claims”); Handmaker v. Henney, 1999-NMSC-043, ¶ 14, 128 N.M. 328,
992 P.2d 879 (holding that “the issue of governmental immunity under Section 37-1-
23(A) is jurisdictional in nature” (alteration, internal quotation marks, and citation
omitted)). Section 21-21K-3(C) states:
In no event shall any liability of, or contractual obligation incurred by,
the program established pursuant to the provisions of the . . . Act obligate
or encumber any of the [S]tate’s land grant permanent funds, the
severance tax permanent fund or any money that is a part of a
[S]tate-funded financial aid program. Nothing in the . . . Act creates any
obligation, legal, moral or otherwise, to fulfill the terms of any college
investment agreement or prepaid tuition contract out of any source other
than the . . . [F]und.

8
The State argued and the district court agreed that the second sentence of Section 21-
21K-3(C) limited the source of monetary recovery to the Fund and that this language
gave rise to the State’s immunity from suit. As we explain below, we conclude that
the district court’s reasoning and holding were erroneous.
{11} 	Initially, we determine that Section 21-21K-3(C) includes no express grant of
immunity for governmental entities in breach of contract actions. This is evident from
the lack of any express reference in the provision to immunity or to Section 37-1-
23(A). We presume that the Legislature was aware of “Hicks’s sweeping abolition of
[common-law] sovereign immunity,” Torrance Cnty. Mental Health Program, Inc. v.
N.M. Health & Env’t Dep’t, 113 N.M. 593, 597, 830 P.2d 145, 149 (1992), and of
Section 37-1-23(A) when it enacted the Act. See State v. Maestas, 2007-NMSC-001,
¶ 21, 140 N.M. 836, 149 P.3d 933 (noting that when the Legislature enacts a statute,
we presume that it is aware of existing statutes); Incorporated Cnty. of Los Alamos v.
Johnson, 108 N.M. 633, 634, 776 P.2d 1252, 1253 (1989) (“We presume that the
[L]egislature is well informed as to existing statutory and common law.”). 	We
therefore find it significant that the Legislature included no express grant of immunity
from suit for breach of contract actions involving New Mexico’s 529 plans.
{12} 	We are also not persuaded that the language of Section 21-21K-3(C) implies,
or is tantamount to, an immunity from suit for governmental entities in the context of
contract actions involving the State’s 529 plans. 	Although the parties have raised

9
several arguments before this Court as to the correct interpretation of Section 21-21K-
3(C), we need not engage in extensive statutory construction to delineate that the
language of Section 21-21K-3(C) concerns, at most, limits on monetary sources of
recovery for various aspects of the Act. State v. Johnson, 2009-NMSC-049, ¶ 10, 147
N.M. 177, 218 P.3d 863 (“The primary indicator of legislative intent is the plain
language of the statute.”). The first sentence of Section 21-21K-3(C) indicates that
“liabilit[ies] of, or contractual obligation[s] incurred by, the program established”
under the Act shall not “obligate or encumber” three specific state funds. The second
sentence states that “[n]othing in the . . . Act creates any obligation” to fulfill the terms
of investment agreements or prepaid tuition contracts out of any source except for the
Fund. 	Section 21-21K-3(C). 	In our view, Section 21-21K-3(C) places limits on
liability and identifies sources of recovery. This does not, however, wholly foreclose
the possibility of a suit for breach of contract, as the State contends. See Handmaker,
1999-NMSC-043, ¶¶ 13-14 (describing immunity from suit as “an entitlement not to
stand trial or face the other burdens of litigation” (internal quotation marks and
citation omitted)). We disagree with the State’s position that these limits give rise to
governmental immunity from suit; the mere fact that recovery may be limited does not
mean that the State in entitled to complete immunity from suit.
{13} 	Furthermore, we agree with Plaintiffs’ argument that the district court’s
reasoning was flawed in that the court improperly applied the specific/general rule of

10
statutory construction to Section 21-21K-3(C) as a basis for granting immunity to the
State. The general/specific rule provides that when two statutes deal with the same
subject matter, the “statute dealing with a specific subject will be considered an
exception to, and given effect over, [the] more general statute.” Albuquerque
Commons P’ship v. City Council of City of Albuquerque, 2011-NMSC-002, ¶ 23, 149
N.M. 308, 248 P.3d 856 (internal quotation marks and citation omitted); Stinbrink v.
Farmers Ins. Co. of Ariz., 111 N.M. 179, 182, 803 P.2d 664, 667 (1990). In addition,
the general/specific rule applies only when the two statutory provisions are in conflict.
State ex rel. Madrid v. UU Bar Ranch Ltd. P’ship, 2005-NMCA-079, ¶ 20, 137 N.M.
719, 114 P.3d 399; see State v. Santillanes, 2001-NMSC-018, ¶ 11, 130 N.M. 464, 27
P.3d 456 (stating that the “primary goal of the general/specific statute rule is to
determine legislative intent in the context of potentially conflicting laws” and that the
rule “provides a method to resolve an otherwise irreconcilable conflict between
statutes” (emphasis added)). Here, the district court indicated in its oral ruling that it
found that Section 21-21K-3(C) was a specific statute that overrode Section 37-1-
23(A), the general statute regarding governmental immunity for contract actions. We
conclude that it was improper for the district court to apply the general/specific rule
because the statutes do not deal with the same subject matter, nor are the statutes in
conflict.

11
{14} 	We acknowledge that the State has raised a number of arguments grounded in
public policy and legislative intent in an effort to argue that Section 21-21K-3(C)
gives rise to sovereign immunity in this case. In particular, the State has argued in its
answer brief and at oral argument before this Court that imposing liability on the State
in this matter would be against public policy, leads to inequitable results by requiring
conversion of funds of non-party investors, contravenes legislative intent, and
implicates separation of power issues by ultimately requiring an appropriation from
the Legislature in order to satisfy an adverse judgment. After careful consideration
of the State’s arguments, we conclude that these arguments are grounded in liability
and not in governmental immunity from suit. That is, whether Plaintiffs have stated
a claim for which relief can be granted, or as here, for which there is no remedy
because the State alleges that it has immunity from liability, is a legally different
question from whether sovereign immunity exists or whether the district court has
subject matter jurisdiction over the case. Only the latter question is properly before
us in this appeal, and we therefore decline, at this juncture, to delve into an inquiry of
whether dismissal of the State is appropriate because Plaintiffs cannot obtain any
relief from the State.
{15} 	Based on the foregoing, we conclude that Section 21-21K-3(C) includes neither
an express nor an implied grant of sovereign immunity. 	Under the arguments
advanced by the State in its Rule 1-012(B)(1) motion to dismiss, we see no other basis

12
for the district court to lack subject matter jurisdiction over this case. We therefore
hold that the district court erroneously dismissed the State as a defendant on the basis
of sovereign immunity.
CONCLUSION
{16} 	We reverse the district court’s order in its entirety and remand for further
proceedings consistent with this Opinion.
{17} 	IT IS SO ORDERED.
_______________________________
LINDA M. VANZI, Judge
WE CONCUR:
_________________________________
JONATHAN B. SUTIN, Judge
_________________________________
J. MILES HANISEE, Judge