Jerrel v. STATE, DEPT. OF NATURAL RESOURCES

• Decision Date: 24 March 2000
• Docket Number: No. S-8436.,S-8436.
• Citation: 999 P.2d 138
• Parties: Dan JERREL and Viola Jerrel, Appellants, v. STATE of Alaska, DEPARTMENT OF NATURAL RESOURCES, Appellee.
• Court: Alaska Supreme Court

999 P.2d 138

Dan JERREL and Viola Jerrel, Appellants, v. STATE of Alaska, DEPARTMENT OF NATURAL RESOURCES, Appellee.

No. S-8436.

Supreme Court of Alaska.

March 24, 2000.

Rehearing Denied May 1, 2000.

Robert C. Erwin, Law Offices of Robert C. Erwin, Anchorage, for Appellants.

John T. Baker, Assistant Attorney General, Anchorage, and Bruce M. Botelho, Attorney General, Juneau, for Appellee.

Before MATTHEWS, Chief Justice, EASTAUGH, FABE, BRYNER, and CARPENETI, Justices.

OPINION

FABE, Justice.

I. INTRODUCTION

State regulations require that holders of state grazing leases mark their livestock. When neighbors complained about the horses on Dan and Viola Jerrel's grazing leases, the Department of Natural Resources terminated the leases on the ground that the Jerrels had failed to brand their horses. Yet neither Alaska statutes nor relevant regulations require that horses be marked with a brand so that these marks may be visible at twenty feet. Because DNR's ad hoc interpretation of the livestock marking requirement is a regulation that was not adopted in accordance with the Administrative Procedure Act, we reverse.

II. FACTS AND PROCEEDINGS

Dan and Viola Jerrel have ranched horses in Alaska since 1963. In that year, the Jerrels entered into a lease with the State for use of ranch land in the Ohlson Mountain area northwest of Homer.¹ During the next eleven years, the Jerrels signed three other leases for land in the same area.² Each lease obligates the Jerrels to abide by state land use regulations.

In 1987 Ohlson Mountain area landowners complained to authorities about loose horses causing property damage and posing a safety hazard on their lands. They alleged that these horses belonged to the Jerrels, but the horses could not be identified definitively because they were not marked.

In January 1988 three DNR officials met with the Jerrels and the complaining landowners to discuss various problems, including identification of the horses. In March DNR notified the Jerrels of the complaints and recommended that they deal with the roaming horses, perhaps by fencing. In April and June DNR officials met with the Jerrels to discuss land conditions and compliance with the lease terms, but they did not discuss marking of the Jerrels' horses.

In November 1989 a neighboring landowner, Ed Bailey, threatened to sue the State for failure to hold the Jerrels responsible for their horses. In December Bailey complained to the State's ombudsman investigator. Bailey also complained to DNR that the Jerrels had not complied with an Alaska regulation requiring that livestock on state grazing leases be marked or branded. In reply DNR informed Bailey that it did not enforce the marking requirements because of the lack of personnel and funding:

You referred to the requirement under regulations [sic] 11 AAC [Alaska Administrative Code] 60.070 to properly identify animals on grazing leases. This regulation has been in effect since 4/16/70 but due to lack of personnel and funding has never been enforced. Statewide enforcement of this regulation would affect reindeer herds as well as conventional grazing, requiring a significant increase in staffing and funding to administer.

In February and March 1990 Bailey wrote to DNR's commissioner requesting that it take action against the Jerrels. On May 14, DNR officials met with Bailey and other area residents to "discuss their concerns."

As a result of its investigation, the state ombudsman chastised DNR for inefficient enforcement of the Jerrels' lease requirements. The ombudsman recommended that DNR review the lease files for violations, and, "[i]f remedial action as stipulated in the lease agreements (30 days after notification) is not taken by the Jerrels, termination proceedings should begin and be followed through diligently."

Prior to receiving the ombudsman's final report, DNR sent notice to the Jerrels on June 28, requiring them to comply with 11 AAC 60.070³ by marking their horses and registering the mark with the State Division of Agriculture. The letter further elaborated that the marks must be visible from a distance of twenty feet:

The Division of Land and Water Management requires (regardless of the method used) that [the] mark must be plainly distinguishable from a distance of 20 feet. Failure to comply within 30 calendar days after service of this written notice shall result in appropriate action including, but not limited to, forfeiture of your leases.

The Jerrels received the letter on July 13.

Shortly after receiving DNR's letter, David Jerrel, the son of Dan and Viola, met with a DNR official to discuss tagging the horses. David proposed a marking system consisting of large plastic tags attached to the horses' manes with monofilament fishing line. The DNR official believed that David Jerrel was acting in good faith to comply with the regulations, and the hearing officer later agreed that "David Jerrel appears to have put a lot of effort into developing this means of marking and it seems like a feasible method."

But on August 10, in response to the ombudsman's report, DNR informed the ombudsman that if the Jerrels did not register a brand, it would terminate their leases. And just two weeks later, on August 24, the agency informed the Jerrels that it had terminated the Jerrels' leases because they had not marked their horses. The termination letter informed the Jerrels that they could request reconsideration if they registered a mark with the Division of Agriculture and proved that their animals were marked.

In September the Jerrels requested an agency hearing and notified DNR that they had marked their horses and registered the mark with the Division of Agriculture. But the Division of Agriculture rejected the Jerrels' method of marking—plastic tags—as impermanent and informed them that they would have to brand or tattoo their horses instead. The director of the Division of Agriculture specified use of a hot brand "that must be burned into the hide of the animal," but added that if the Jerrels were opposed to branding, "the animals may be permanently tattooed, which satisfies the requirement." In response, the Jerrels then proposed an ear tattoo to satisfy the marking requirement. But after writing to inform the neighboring landowners of this proposal and expressing "hope [that] you find this acceptable," the Division of Agriculture rejected the tattoo proposal. It cited concerns of the neighboring landowners that an ear tattoo was unacceptable because it was not clearly visible from a distance.

After a two-day hearing, Hearing Officer Timothy Middleton issued a decision suggesting that DNR give the Jerrels two months to brand or mark their horses. If they failed to do so, he recommended forfeiture of the leases. The decision discussed the merits of a number of marking and branding methods, including hot branding, "freeze dry" branding, ear and lip tattooing, and tagging. The hearing officer acknowledged testimony presented by the Jerrels that branding decreased the value of show horses. Hearing Officer Middleton proposed that DNR require the Jerrels to hot brand the bulk of their horses but permit them to mark up to eight horses with a plastic tag and a lip tattoo. He also invalidated DNR's requirement that all marks be visible from twenty feet, noting that DNR had never validly promulgated this distance visibility requirement as a regulation.

In November 1993 the Jerrels informed DNR that they had marked the horses. But they failed to provide proof of these markings and eventually said that they had moved the horses to Montana. They offered no verification of the move, and state investigations indicated that the horses probably remained in Alaska.

On November 23, 1994, the commissioner of DNR rejected a number of Hearing Officer Middleton's findings and conclusions and terminated the Jerrels' leases. After they requested reconsideration and their request was denied, the Jerrels appealed the ruling to the superior court. Superior Court Judge Peter A. Michalski affirmed the commissioner's decision. The Jerrels appeal.

III. DISCUSSION

A. Standard of Review

In this case we review whether DNR was required to comply with the procedures prescribed in Alaska's Administrative Procedure Act (APA).⁴ This inquiry requires us to examine the meaning of the term "regulation" as defined by the APA in AS 44.62.640(a)(3).⁵ Statutory interpretation is a question of law to which we apply our independent judgment.⁶ "The standard is appropriate where the knowledge and experience of the agency is of little guidance to the court or where the case concerns `statutory interpretation or other analysis of legal relationships about which courts have specialized knowledge and experience.'"⁷

The dissent argues for the application of the deferential standard of review that is appropriate when we review an agency's interpretation of its own regulation.⁸ But the threshold question in this case is whether the APA applies to DNR's action. Because we must decide whether DNR's twenty-foot visibility requirement is a regulation, we do not defer to the agency's interpretation.⁹

B. Principles of Estoppel Do Not Bar DNR from Enforcing Marking Requirements.

The Jerrels first argue that DNR's failure to enforce the marking regulation for twenty years estops DNR from enforcing it now. DNR responds that it cannot be estopped from enforcing the regulation merely because of its previous inaction. We agree with DNR on this point.

First, the statutory terms of the grazing leases bar the Jerrels' estoppel claims. Each of the leases includes a clause providing that "[n]o failure on the part of Lessor to enforce any covenant or provision herein contained... shall discharge or invalidate such terms or covenants or affect the right of the Lessor to enforce the same in the event of any subsequent breach or default."

Second, Alaska law does not support the Jerrels' claim that DNR is foreclosed...