Fain Land & Cattle Co. v. Hassell

• Court: Arizona Supreme Court
• Writing for the Court: FELDMAN; GORDON, C.J., and MOELLER; CORCORAN; CAMERON
• Citation: Fain Land & Cattle Co. v. Hassell, 790 P.2d 242, 163 Ariz. 587 (Ariz. 1990)
• Decision Date: 30 March 1990
• Docket Number: No. CV-89-0186-SA,CV-89-0186-SA
• Parties: FAIN LAND & CATTLE COMPANY, an Arizona corporation, Petitioner, v. M.J. HASSELL, as State Land Commissioner; The Arizona State Land Department, an agency of The State of Arizona, Respondents.

Page 242

790 P.2d 242

163 Ariz. 587

FAIN LAND & CATTLE COMPANY, an Arizona corporation, Petitioner, v. M.J. HASSELL, as State Land Commissioner; The Arizona State Land Department, an agency of The State of Arizona, Respondents.

No. CV-89-0186-SA.

Supreme Court of Arizona, In Banc.

March 30, 1990.

Reconsideration Denied May 8, 1990.

[163 Ariz. 588] Gammage & Burnham by Karen L. Schroeder and Cameron C. Artigue, Phoenix, for petitioner.

Robert K. Corbin, Atty. Gen., and Anthony B. Ching, Sol. Gen. by Theresa M. Craig and Charles S. Pierson, Phoenix, for respondents.

OPINION

FELDMAN, Vice Chief Justice.

Fain Land & Cattle Company (Fain) brought this action against M.J. Hassell, State Land Commissioner (Commissioner), and the Arizona State Land Department (Department) seeking to require the Department to complete an exchange of state school trust lands for privately held lands pursuant to A.R.S. § 37-604 et seq. We must determine whether the transaction permitted by this statute violates the provisions of article 10 of the Arizona Constitution. See Rule 3, Ariz.R.P.Spec.Act., 17B A.R.S. We have jurisdiction under Ariz. Const. art. 6, § 5(1).

FACTS AND PROCEDURAL HISTORY

On September 16, 1985, Fain applied under A.R.S. § 37-604 et seq. to exchange private land it owned for state school trust land. All the land in question is located in Yavapai County. On March 24, 1988, the Commissioner and three members of the State Selection Board approved the exchange of 874 acres owned by Fain for 635 acres of state school trust land. The basis upon which the exchange was approved was that it was "in the interest of the State for reasons of proper management, control, protection or public use of State land" and that "the selected State lands are substantially equal in value." Petition for Special Action (filed in Sup.Ct. May 31, 1989), at 2. On August 8, 1988, the Department informed Fain that it would not take any further action on the exchange, based on advice from the attorney general's office that this court's decision in Deer Valley Unified School Dist. v. Superior Court, 157 Ariz. 537, 760 P.2d 537 (1988), prohibited such exchanges.

On May 19, 1989, counsel for Fain sent a letter to the Commissioner demanding that the Department proceed with the exchange. After the Department refused to proceed on this demand, Fain filed this petition for special action, ¹ requesting that this court hold that article 10 did not prohibit the exchange of state school trust lands. He also sought an order compelling the Commissioner to complete the exchange.

DISCUSSION

A. Historical Setting: Interplay of the Arizona Enabling Act and Arizona Constitution

In 1910, Congress passed the Arizona-New Mexico Enabling Act, which authorized the residents of those territories to form state governments. Act of June 20, 1910, Pub.L. No. 219 (ch. 310), 36 Stat. 557 (hereafter Enabling Act). Sections 19 through 35 apply to Arizona. One provision of the Enabling Act granted Arizona certain federal land for the purpose of sup porting public schools in the new state. Enabling Act § 24. Congress required Arizona to hold the granted land in trust, and only allowed disposal of the trust land subject to very specific and restrictive conditions. See Kadish v. Arizona State Land Dep't, 155 Ariz. 484, 487, 747 P.2d 1183, 1186 (1987), aff'd, 490 U.S. 605, 109 S.Ct. 2037, 104 L.Ed.2d 696 (1989).

The state may only sell or lease trust land to the highest bidder at public auction after public notice. Enabling Act § 28. No sale or other disposal may be made unless the land is first appraised for its "true value," and the state receives consideration equal to, or greater than, the appraised value. Id. In addition, the Enabling Act provides that any disposition of trust land not in substantial conformity with its provisions is "null and void." Id. The rationale behind these strict requirements is that prior land grants to other states were improvidently managed, to put it mildly, and Congress wanted to ensure that the legislatures of Arizona and New Mexico would not dissipate the granted land. ² See Kadish, 155 Ariz. at 486-88, 747 P.2d at 1185-87; Murphy v. State, 65 Ariz. 338, 350-53, 181 P.2d 336, 344-46 (1947) (recounting history of abuses that led Congress to insert the restrictions in the Arizona-New Mexico Enabling Act).

The Enabling Act required that the state and its people consent to all its provisions concerning lands granted to the state and that an ordinance be included in the state constitution "in such terms as shall positively preclude the making of any future constitutional amendment or any change or abrogation of the said ordinance in whole or in part without the consent of Congress." Enabling Act § 20. As a result, the framers inserted the following two clauses in the Arizona Constitution accepting the land grant and agreeing to the restrictions of the Enabling Act:

The State of Arizona and its people hereby consent to all and singular the provisions of the Enabling Act ... concerning the lands thereby granted ... to the State, the terms and conditions upon which said grants and confirmations are made, and the means and manner of enforcing such terms and conditions, all in every respect and particular as in the aforesaid Enabling Act provided.

This ordinance is hereby made a part of the Constitution of the State of Arizona, and no future Constitutional amendment shall be made which in any manner changes or abrogates this ordinance in whole or in part without the consent of Congress.

Ariz. Const. art. 20, Pars. 12 and 13.

In addition, the framers explicitly incorporated the restrictions of section 28 of the Enabling Act pertaining to disposal of trust lands into article 10 of the Arizona Constitution. However, article 10 is not merely a rescript of section 28. The framers added their own provisions for disposal of trust lands. For example, the constitution provides in part:

All lands expressly transferred and confirmed to the State by the provisions of the Enabling Act approved June 20, 1910 ... shall be by the State accepted and held in trust to be disposed of in whole or in part, only in manner as in the said Enabling Act and in this Constitution provided....

Ariz. Const. art. 10, § 1 (emphasis added). This language effectively limits dispositions of state trust land to those authorized by both the Enabling Act and the state constitution.

On February 10, 1911, the people of Arizona ratified the proposed constitution, thus making the Enabling Act part of the organic law of this state. See Deer Valley, 157 Ariz. at 539, 760 P.2d at 539; Kadish, 155 Ariz. at 487, 747 P.2d at 1185; Gladden Farms, Inc. v. State, 129 Ariz. 516, 518, 633 P.2d 325, 327 (1981).

From time to time, Congress amended the Enabling Act to allow Arizona greater flexibility in the management and disposal of trust land. Deer Valley, 157 Ariz. at 539, 760 P.2d at 539. In 1934, Congress passed the Taylor Grazing Act, which allowed a state to exchange land located within a federal grazing district for other land. Act of June 28, 1934, ch. 865, 48 Stat. 1269 (codified at 43 U.S.C. §§ 315-316 (1934)). In 1936, Congress amended section 28 of the Enabling Act to permit extended leases and exchanges of school trust land. Act of June 5, 1936, ch. 517, 49 Stat. 1477. The exchange portion of the amendment provided:

The State of Arizona is authorized to exchange any lands owned by it for other lands, public or private, under such regulations as the legislature thereof may prescribe....

Id. (emphasis added). These amendments were intended to liberalize the restrictions on trust lands and allow the state greater freedom to manage the land granted by the Enabling Act. See H.R.Rep. 2615, 74th Cong., 2d Sess. 3 (1936).

In 1937, our state senate considered two concurrent resolutions that would have commenced procedures for amending article 10 of the Arizona Constitution to include the 1936 changes to the Enabling Act. SCR 11 and 12, 13th Legis.Reg.Sess. (1937). Both resolutions died on the calendar. Journal of the Senate, 13th Legis.Reg.Sess. 788 (1937). In 1940, Arizona amended article 10 to include the leasing provisions of the 1936 amendment to the Enabling Act, but did not incorporate the exchange provisions. Ariz. Const. art. 10, § 3 (amendment approved election Nov. 5, 1940, eff. Nov. 27, 1940). The 1936 Enabling Act amendment permitting exchanges has never been incorporated into the Arizona Constitution.

In 1948, without commencing the process for amending the constitution, the state legislature adopted the exchange terms of the Taylor Grazing Act and the broader 1936 exchange amendment. 1948 Ariz.Sess.Laws 633-34 (codified at A.R.S. § 11-1211 (1948)). The legislature ratified all prior land exchanges and passed a law that allowed the land department to exchange school trust land for federal land. Id. In 1971, the legislature enacted A.R.S. § 37-604 et seq., which authorized exchanges of state land, including school trust lands, for private lands. ³ These statutes have no provision for notice and public auction. The exchange proposed in the present case is to be made, therefore, without public auction.

The attorney general formulates the following issue for our consideration: May the state enter into exchange transactions without complying with the public auction requirement of the Arizona Constitution when the transaction is permitted by state statutes passed under the authority of the Enabling Act?

B. Impact of Deer Valley on Land Exchanges

1. Two Levels of Protection

In Deer Valley, this court held that a school district could not condemn state trust lands for school purposes. Deer Valley, 157 Ariz. at 541, 760 P.2d at 541. The Deer Valley school district wanted to obtain a particular parcel of trust land on which to build a new elementary school. The Department refused to hold a public auction and allow the school district an opportunity to purchase the...