Farmers Inv. Co. v. Arizona State Land Dept., 1
| Decision Date | 14 October 1982 |
| Docket Number | CA-CIV,No. 1,1 |
| Citation | 136 Ariz. 369,666 P.2d 469 |
| Parties | FARMERS INVESTMENT COMPANY, a corporation, Plaintiff-Appellee, v. ARIZONA STATE LAND DEPARTMENT and Joe Fallini, State Land Commissioner; Cyprus Pima Mining Company, an Arizona corporation, Defendants-Appellants. 5461. |
| Court | Arizona Court of Appeals |
This is an appeal by defendants-appellants Arizona State Land Department and Joe Fallini as State Land Commissioner (Department) and Cyprus Pima Mining Company (Cyprus Pima) from the order of the trial court which granted summary judgment to plaintiff-appellee Farmers Investment Company (FICO). The trial court granted FICO's request for a declaratory judgment that a public auction sale of groundwater from state land was void because the Department could not impose as a condition of the sale that the purchaser of the groundwater reimburse the Department for improvements which had been made to the overlying land.
The facts are not in dispute. On October 24, 1966, the Department executed a 10-year lease herein designated as Lease No. 906, whereby 319 acres within the Sahaurita-Continental Critical Groundwater Area were leased to the Pima Mining Company (now Cyprus Pima). The lease by its terms provided that Pima Mining Company would pay $10 per year or one cent per 1,000 gallons of water removed, whichever is greater. FICO owns and farms approximately 7,000 acres within the Critical Groundwater Area. In a prior action, FICO alleged that Lease No. 906 was void as contrary to Arizona's Constitution and Enabling Act. In an opinion issued June 19, 1974, the Arizona Supreme Court agreed with FICO's contentions:
We expressly hold that the State Land Department Lease No. 906, being in violation of the Arizona Constitution and the Act of Congress as expressed in Arizona's Enabling Act is null and void.
Farmers Investment Company v. Pima Mining Company, 111 Ariz. 56, 58-59, 523 P.2d 487, 489-90 (1974). The Court held that Lease No. 906 provided for an illegal sale of water. The court found that this sale was in contravention of those provisions of Arizona's Constitution and Enabling Act which require that natural products of state land acquired pursuant to the Enabling Act must be sold only to the highest and best bidder at a public auction.
On June 26, 1974, Cyprus Pima filed an application for a commercial lease of the same land covered by the void Lease No. 906. This new lease was executed on January 14, 1975 and provided in part as follows:
That it is further understood and agreed that this lease is issued for the purpose of:
Gathering tank, collecting and distribution water pipelines; booster pumps and booster pump building, electrical power substations and power lines to be used in connection with lessee's mining, milling and processing operations. May also be used for grazing.
This lease is issued subject to adequate ingress and egress for lease numbered C-906 or any successor thereof.
From December 24, 1974 through February 25, 1975, the Department prepared to hold a public auction of the groundwater by publishing a "Notice of Public Auction Sale No. 669--Groundwater" pursuant to A.R.S. § 37-237. The notice provided in part as follows:
The ground waters are appraised at a net price of $5.00 per acre foot and improvements claimed by the Cyprus Pima Mining Company, upon said lands necessary for the extraction, removal or use of said waters subject to sale are appraised at $1,271,000.00. Said improvements consist of Pump house, pipe lines, substation, wells and appurtenances thereto.
If the successful bidder is not the owner of the improvements, he must pay to the State Land Department ten percent (10%) of the appraised value of the improvements at the time of the sale and the balance within thirty (30) days.
FICO filed the complaint in the present action on January 29, 1975, seeking a declaratory judgment that the auction notice was void as imposing unlawful conditions upon bidders and that any sale held pursuant thereto would be void.
The public auction sale was scheduled for March 5, 1975. FICO appeared at the auction on that date and entered a protest to the sale as imposing an illegal condition that the purchaser reimburse Cyprus Pima for the improvements valued at $1,271,000. The City of Tucson filed a similar protest. The auction was continued to March 12, 1975.
The City of Tucson was granted the right to intervene as plaintiff in FICO's action on March 7, 1975.
FICO appeared at the auction on March 12, 1975 and submitted a bid of $45 per acre foot of water; however, this bid expressly excluded any agreement to pay the appraised cost of the improvements. FICO's bid was rejected by the Department as nonconforming. Cyprus Pima's bid of $5 per acre foot was the only bid accepted by the Department.
On August 4, 1977, Cyprus Pima filed a motion to dismiss FICO's action as moot. On August 11, 1977, Cyprus Pima filed a motion for summary judgment based on FICO's failure to exhaust administrative remedies. The trial court granted Cyprus Pima's motion to dismiss for mootness; however, this court reversed the trial court's order by memorandum decision filed January 11, 1979.
On September 6, 1979, FICO filed a motion for summary judgment. FICO's motion and Cyprus Pima's motion for summary judgment for failure to exhaust administrative remedies were argued to the trial court on November 9, 1979. On January 29, 1980, the trial court filed a memorandum opinion and order granting FICO's motion for summary judgment and denying Cyprus Pima's motion for summary judgment.
On appeal, the appellants have raised three issues for review:
1. Did the trial court err in not dismissing the action for failure to exhaust administrative remedies?
2. Did the trial court err in finding that the issues in this action were not moot?
3. Did the trial court err in finding that the Department had no authority to impose an improvements reimbursement condition on the public auction sale?
We find that the trial court did not err and, accordingly, we affirm the trial court's order granting summary judgment to FICO.
Appellants contend that FICO is precluded from obtaining judicial review of the Department's decisions regarding public auction sale no. 669 because it failed to use the statutory procedure for appeals from decisions of the State Land Commissioner provided in A.R.S. § 37-134 1:
§ 37-134. Appeal from decision of commissioner; notice; record; trial
A. In addition to appeals from final decisions of the commissioner to the superior court as otherwise authorized by law, an appeal from a final decision of the commissioner other than a final decision relating to the classification or appraisal of lands or improvements, made pursuant to the powers and duties conferred upon him by law, whether relating to the administration of state lands or other departments or agencies of state under his jurisdiction, may be taken by any person adversely affected by the decision to the superior court of the county in which the major portion of the land, property, or rights involved in the decision is located.
B. The appeal shall be taken by filing notice thereof in writing with the commissioner and by serving an adverse party with a copy thereof within thirty days from the date notice of the decision is mailed to the last known post office address of the appellant by the commissioner.
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A.R.S. § 37-133(C) provides that if no appeal is taken by any person in interest within the time provided by § 37-134, the decision of the Commissioner shall be "final and conclusive."
Appellants contend that FICO's action is precluded in two respects. First, they rely on "the long settled rule of judicial administration that no one is entitled to judicial relief for a supposed or threatened injury until the prescribed administrative remedy has been exhausted." Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51, 58 S.Ct. 459, 463, 82 L.Ed. 638 (1938). Appellants argue that because FICO failed to appeal to the superior court from the decision of the Department rejecting their contentions, they are not entitled to judicial relief due to a failure to exhaust administrative remedies. Second, appellants contend that FICO's failure to timely appeal the Department's decision to the superior court rendered the decision "final and conclusive", and, accordingly, that the decision was res judicata, thereby precluding review.
FICO contends that the Department had no power to adjudicate the issue of whether it could impose the reimbursement condition on the auction and that its decision thus cannot be res judicata. FICO further contends that the procedure outlined in § 37-134 is not mandatory because it allows appeals to the superior court "as otherwise authorized by law". FICO argues that its action was properly before the superior court. Finally, FICO argues that this case fits within several recognized exceptions to the exhaustion doctrine and that the issue of whether the action should have been dismissed for failure to exhaust administrative remedies was a question within the discretion of the trial court.
The exhaustion doctrine must be applied in each case with an "understanding of its purposes and of the particular administrative scheme involved." McKart v. United States, 395 U.S. 185, 193, 89 S.Ct. 1657, 1662, 23...
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