Nat'l Parks Conservation Ass'n v. The Bd. Of Tr.S Of The Sch. And Inst.Al Trust Lands Admin.

• Decision Date: 22 April 2010
• Docket Number: No. 20070835.,20070835.
• Citation: 231 P.3d 1193,2010 UT 13
• Parties: NATIONAL PARKS CONSERVATION ASSOCIATION and William Wolverton, Petitioners,v.The BOARD OF TRUSTEES OF the SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION, State of Utah, and Garfield County, Respondents.
• Court: Utah Supreme Court

231 P.3d 1193

2010 UT 13

NATIONAL PARKS CONSERVATION ASSOCIATION and William Wolverton, Petitioners,v.The BOARD OF TRUSTEES OF the SCHOOL AND INSTITUTIONAL TRUST LANDS ADMINISTRATION, State of Utah, and Garfield County, Respondents.

No. 20070835.

Supreme Court of Utah.

March 2, 2010.

Rehearing Denied April 22, 2010.

Wayne G. Petty, William J. Lockhart, Salt Lake City, for petitioners.

Thomas A. Mitchell, John W. Andrews, Salt Lake City, for respondents the Board of Trustees of the School and Institutional Trust Lands Administration and State of Utah.

Barry L. Huntington, Panguitch, for respondent, Garfield County.

DURRANT, Associate Chief Justice:

INTRODUCTION

¶ 1 This case concerns an exchange of land held by the School and Institutional Trust Lands Administration (“SITLA”) for land owned by Garfield County. The SITLA Director formally approved the exchange, and his decision was challenged by the National Parks Conservation Association and William Wolverton (collectively, “NPCA”) before the SITLA Board of Trustees (the “SITLA Board” or the “Board”). The SITLA Board ruled against NPCA and upheld the Director's decision. NPCA appeals the Board's ruling. Because we conclude that the exchange was consistent with SITLA's obligations as trustee over school trust lands, we affirm the Board's decision.

BACKGROUND

¶ 2 This case has its genesis in a land exchange, first proposed in 1987, between the State of Utah, then acting through SITLA's predecessor, the Division of State Lands and Forestry (the “Division”), and Garfield County. The land at issue is section 16 of Township 34 South, Range 8 East, which is found within the boundaries of Capitol Reef National Park.¹ Section 16 was granted to the state by Congress in the Utah Enabling Act, on the condition that the state manage the land for the benefit of the public school system. ² This grant imposes trust obligations on the state,³ which the state has accepted and acknowledged in both the Utah Constitution ⁴ and by statute.⁵ This appeal requires us to assess whether SITLA's decision to approve the exchange of section 16 is consistent with these obligations.

I. ORIGINS OF THE PROPOSED EXCHANGE AND THIS COURT'S PRIOR DECISION IN NATIONAL PARKS CONSERVATION ASSOCIATION v. BOARD OF STATE LANDS

¶ 3 In 1987, Garfield County approached the Division with a proposal to acquire section 16 in exchange for three parcels of land owned by the County. Garfield County wanted to acquire section 16 so that it could pave a portion of the Burr Trail, which crossed the property. As part of its proposals, Garfield County submitted appraisals of both section 16 and each of the parcels that it offered in exchange. The Division relied on those appraisals in concluding that the exchange was fair and permissible under its trust obligations. On December 24, 1987, Governor Norman H. Bangerter executed a patent conveying section 16 to Garfield County.⁶

¶ 4 NPCA, which had attempted unsuccessfully to intervene in the exchange proceedings, sought review by this court of the Division's decision. NPCA challenged the Division's ruling on a number of grounds, two of which are relevant for purposes of this appeal. First, NPCA contended that the Division had violated its fiduciary duties as trustee of the school trust lands by failing to give priority to scenic, aesthetic, and recreational values in its decision to exchange section 16. Second, NPCA argued that the Division breached its fiduciary duties by relying solely on appraisals commissioned by Garfield County to determine that the land exchange was fair to the school land trust.⁷

¶ 5 In NPCA I, we affirmed the Division's decision to base its assessment of the fairness of the exchange primarily on economic, rather than noneconomic, factors.⁸ But we also determined that the Division had breached its fiduciary duties by failing to commission an independent appraisal of the land values to determine whether the exchange was fair to the school land trust. We stated,

For a trustee to rely on appraisals submitted by a purchaser of trust assets is to leave the trust subject to sharp dealing on the part of the purchaser. For that reason, we hold that a breach of trust occurs when a trustee uses an appraisal submitted by the purchaser as the basis for ascertaining the fair market value of a trust asset. To comply with its fiduciary duties, the Division itself must obtain the appraisals on which it bases its decision. ⁹

Accordingly, we stayed the pending exchange and remanded the case back to the Division “for a determination of whether the appraised values of section 16 and the Garfield County lands offered in exchange represent the full value of those lands.” ¹⁰

II. THE CURRENT DISPUTE

¶ 6 Shortly after our decision in NPCA I, the legislature enacted the School and Institutional Trust Lands Management Act,¹¹ which replaced the Division with SITLA. Perhaps as a result of confusion surrounding this transfer of responsibilities, the independent appraisal and valuation mandated in NPCA I never occurred. The stay we imposed on the exchange of section 16 thus remained in effect.

¶ 7 Sometime in 2005, after receiving a third-party request to purchase certain of the lands exchanged by Garfield County for section 16, SITLA realized that neither it nor the Division had ever obtained the independent appraisal required to complete the exchange. Accordingly, it commissioned Stanford S. McConkie of Morley & McConkie, L.C., to conduct an appraisal of section 16 and the lands offered by Garfield County in exchange (the “McConkie Appraisal”). The McConkie Appraisal stated that section 16 was worth $200,000, while the total value of the lands offered by Garfield County in exchange was $661,200.

¶ 8 NPCA questioned the reliability of the McConkie Appraisal and commissioned a review of the appraisal by J. Philip Cook and Virginia H. Hylton (the “Cook Review”). Although the Cook Review determined that the McConkie Appraisal complied with the Uniform Standards for Professional Appraisal Practice (“USPAP”), it proffered a higher estimate of section 16's value, based on a different view of the property's “highest and best use.” NPCA also asserted that because the McConkie Appraisal was a limited restricted use appraisal report (a “limited appraisal”),¹² it was inadequate to assess the actual values of the parcels involved in the exchange.

¶ 9 On September 15, 2006, the SITLA Director formally determined that, according to the McConkie Appraisal and SITLA's own review, the school lands trust had received full value in exchange for section 16. Accordingly, the SITLA Director approved the exchange. NPCA timely appealed the Director's decision to the SITLA Board.¹³

¶ 10 In its petition for review of the Director's approval of the exchange, NPCA argued that (1) SITLA had improperly declined to consider the conflict between economic development and the protection of section 16's unique scenic, paleontological, and archaeological value; (2) the Director's approval of the exchange violated applicable law because section 16 constituted inadequate consideration for the lands Garfield County conveyed in exchange; and (3) the McConkie Appraisal did not satisfy the dictates of our remand in NPCA I because it was a limited appraisal rather than a full narrative appraisal and was methodologically flawed in other respects.

¶ 11 The Board first determined, on two separate grounds, that it lacked jurisdiction to consider NPCA's contention that the exchange of section 16 was invalid because Garfield County received inadequate consideration. First, the Board reasoned that consideration of the issue was beyond the scope of our remand in NPCA I, which the Board concluded “was limited to determination of the adequacy of compensation to the school trust.” Second, the Board found that “the legislature ha[d] not given [the] Board the authority to adjudicate whether Garfield County exceeded its powers by conveying lands for purportedly inadequate consideration.”

¶ 12 Next, the Board determined that the McConkie Appraisal was adequate to satisfy SITLA's fiduciary obligations as outlined in NPCA I. According to the Board, this court's “directive was for an independent review of valuation, which was accomplished.” The Board also determined that the McConkie Appraisal, even though it was a limited appraisal, was nonetheless adequate because it was undisputed that it complied with all professional surveying requirements for limited appraisals. In regard to NPCA's arguments that the McConkie Appraisal was methodologically flawed, the Board found that, under NPCA I and our prior decision in Terracor v. Utah Board of State Lands & Forestry,¹⁴ third parties do not have standing to challenge executive branch real property transactions.

¶ 13 Finally, the Board also rejected NPCA's argument that SITLA breached its fiduciary duties by declining to reject the exchange based on section 16's unique noneconomic value. The SITLA Board stated that “NPCA ha[d] completely misconstrued the obligation placed on SITLA” in NPCA I, and that it required consideration of noneconomic values only in some cases. The Board also determined that NPCA's arguments on this issue were barred by principles of res judicata because this court had determined, in NPCA I, “that the Division had in fact adequately considered aesthetic and recreational values in deciding to exchange section 16” and had also appropriately declined to give such values priority over economic considerations.

¶ 14 Accordingly, the Board ruled that NPCA had failed to establish that the Director's approval of the section 16 exchange was unlawful and dismissed NPCA's appeal. NPCA timely filed a petition for review of final agency action with this court. We have jurisdiction pursuant to section 78A-3-102(3)(e)(iii) of the Utah Code.

STANDARD OF REVIEW

¶ 15 In reviewing a final action of the SITLA Board in a formal adjudicative proceeding, we grant relief only when the “person...