Northeast Phoenix Holdings v. Winkleman
| Decision Date | 22 April 2008 |
| Docket Number | No. 1 CA-SA 08-0011.,1 CA-SA 08-0011. |
| Parties | NORTHEAST PHOENIX HOLDINGS, LLC, Petitioner, v. Mark WINKLEMAN, in his official capacity as State Land Commissioner, Respondent, and Jaren Associates # 4, Intervenor. |
| Court | Arizona Court of Appeals |
¶ 1 Northeast Phoenix Holdings, LLC ("Petitioner") filed for special action review of the denial of its protest to the proposed auction of school trust lands by the State Land Commissioner ("Commissioner"). For the following reasons, we accept jurisdiction but deny relief.1
¶ 2 This special action involves the proposed disposition of various rights-of-way ("ROWs") associated with a 112-acre parcel ("Parcel 3A") of state trust land. The ROWs are perpetual easements for various public roads, underground utilities, and drainage. Parcel 3A is part of a larger proposed master-planned development located on the border of north Phoenix and Scottsdale, known as Paradise Ridge, on land currently held in trust by the State of Arizona. The Commissioner and the Arizona State Land Department ("Department") are responsible for the management and revenue production of the trust land on behalf of the trust beneficiaries. See Ariz.Rev.Stat. ("A.R.S.") §§ 37-102, -132 (Supp.2007).
¶ 3 In January 2007, Jaren Associates # 4 ("Jaren") applied to the Department for a ninety-nine year commercial lease of Parcel 3A, an undeveloped lot containing no existing improvements, for the purpose of developing a regional shopping center.2 Because Jaren's lease request exceeded ten years, a public auction was required. See A.R.S. § 37-281.02(A) (2003).
¶ 4 In preparation for the public auction, the Department contracted for an independent appraisal of Parcel 3A.3 The appraisal instructions noted that the successful bidder would "incur an obligation to fund $59,144,823 of the required offsite infrastructure costs."4 According to the independent appraisal, prepared by Sean Kelly, the assessed value of Parcel 3A was $29,280,000 to $32,940,000. The Department's Appraisal Section Manager, Stanley Toal, recommended that the Department accept the appraisal report as written. In August 2007, a commercial recommendations sheet was completed and signed on behalf of the Commissioner.5 The commercial recommendations sheet included the acreage for the ninety-nine year lease of Parcel 3A and the 128 acres of ROWs and indicated an appraised value/minimum bid of $32,000,000. On September 13, 2007, the Department's Board of Appeals ("Board") approved the commercial recommendations sheet. An auction was set for October 29, 2007, and notice was published as required by law. Petitioner filed an auction protest, asserting that the proposed infrastructure agreement was incomplete because it was only in draft form. Thereafter, the Commissioner cancelled the auction and denied the protest as moot.
¶ 5 After making minor revisions to the infrastructure agreement, the Commissioner issued a second commercial recommendations sheet that superseded the first sheet. The revised document provided in pertinent part as follows:
Sean M. Kelly, MAI State of Arizona Certified General Real Estate Appraiser, provided an Opinion of Market Value RANGE of the Lease Property, $29,280,000.00 to $32,940,000.00. The State Land Commissioner has established the Appraised Value/minimum bid for the Lease and ROW's at $32,000,000. Rent over the 99 year term yields a minimum of approximately 8.24% on ALV of $32,000,000. Successful bidder required to sign an Escrow & Infrastructure Agreement and deposit twenty million dollars by way of cashier's checks and/or letters of credit into an escrow account, which requires Lessee to construct significant infrastructure.
(Emphasis added.)
¶ 6 On November 8, 2007, the Board approved the second commercial recommendations sheet. The Department then set a new auction date of January 23, 2008. The auction notice stated that Parcel 3A had been appraised at $32,000,000 and that "the value of the Rights of Way have been assigned to this Parcel." The notice further provided that "[t]he successful bidder and/or assigns shall be responsible for the design, engineering, construction and installation of the Minimum Infrastructure (water and wastewater improvements estimated to cost $10,000,000.00) and the Maximum Infrastructure (streets, bridges, and drainage improvements estimated to cost $57,000,000.00) on, under, or within the Rights of Way . . . ."
¶ 7 On December 10, 2007, Petitioner filed its second auction protest, asserting that the Department had failed to conduct an appraisal of the 128 acres of ROWs or otherwise properly value the ROWs. Alternatively, Petitioner contended that the Department failed to obtain an independent appraisal of the ROWs and improperly attempted to assign a "zero-value" to the ROWs. On January 3, 2008, Petitioner requested that the Department conduct a hearing on its protest in accordance with A.R.S. § 37-301 (2003). On January 16, 2008, the Commissioner rejected Petitioner's request for a hearing and denied the auction protest. In his order rejecting the protest, the Commissioner determined he had properly appraised the ROWs and exercised his discretion by incorporating them into the values of the lease.
¶ 8 Petitioner then filed a petition for special action in this court challenging the Commissioner's decision. Petitioner also requested a stay of the January 23, 2008 auction. We denied that request without prejudice when the Commissioner's counsel informed us the Commissioner had postponed the auction. Based on its claimed preference right, Jaren filed a motion to intervene and we granted the request.
¶ 9 We must accept jurisdiction of this special action because Petitioner has sought relief pursuant to A.R.S. § 37-301(C). See Foster v. Anable, 199 Ariz. 489, 491, ¶ 3, 19 P.3d 630, 632 (App.2001).
¶ 10 Petitioner argues that the Commissioner has exceeded his authority by proposing to auction the 128 acres of ROWs because no appraisal had been obtained on those ROWs pursuant to the Enabling Act and the Arizona Constitution. Petitioner maintains that the only appraisal conducted by the Department was Mr. Kelly's independent appraisal, which pertained only to Parcel 3A.
¶ 11 In 1910, the United States Congress passed the Arizona-New Mexico Enabling Act ("Enabling Act"), which in part allowed the residents of the Arizona territory to form a state government. Act of June 20, 1910, Pub.L. No. 219 (ch. 310), 36 Stat. 557; see also Fain Land & Cattle Co. v. Hassell, 163 Ariz. 587, 588, 790 P.2d 242, 243 (1990). Part of the Enabling Act granted certain federal land to Arizona at the time of Arizona's admission to the United States for the purpose of supporting Arizona's public schools.6 Fain Land & Cattle Co., 163 Ariz. at 588-89, 790 P.2d at 243-44. Additionally, Congress required that Arizona hold the granted land in trust and placed restrictions on the disposition of the land so the trust assets would not be "improvidently managed." Id. at 589, 790 P.2d at 244.
¶ 12 Section 28 of the Enabling Act provides in pertinent part as follows: "All lands, leaseholds, timber and other products of land, before being offered, shall be appraised at their true value, and no sale or other disposal thereof shall be made for a consideration less than the value so ascertained ...." (Emphasis added.) If the sale or lease is not made in substantial conformity with the provisions of the Enabling Act, the sale or lease is null and void. Id. The limitations of Section 28 were explicitly incorporated into Article 10, Section 4 of the Arizona Constitution, which contains identical language. Thus, the Enabling Act became part of the law of Arizona when the people of Arizona ratified the proposed state constitution. Fain Land & Cattle Co., 163 Ariz. at 589, 790 P.2d at 244.
¶ 13 When Congress passed the Enabling Act, it intended to severely circumscribe the power of state government to deal with the assets of the trust, and "all doubts must be resolved in favor of protecting and preserving trust purposes." Kadish, 155 Ariz. at 487, 495, 747 P.2d at 1186, 1194 (citing United States v. New Mexico, 536 F.2d 1324, 1326-27 (10th Cir.1976)). The restrictions of the Enabling Act were intended to prevent private sales at unreasonably low prices and to ensure that the trust receives appropriate compensation for trust lands. Lassen v. Arizona ex rel. Ariz. Highway Dep't, 385 U.S. 458, 464, 87 S.Ct. 584, 17 L.Ed.2d 515 (1967).
¶ 14 The Enabling Act does not address, however, the specifics of the appraisal; it simply requires that the lands and leaseholds be appraised at their true value. Princess Plaza Partners v. State, 187 Ariz. 214, 220, 928 P.2d 638, 644 (App.1995). Furthermore, none of the cases cited by Petitioner suggest that the Enabling Act requires that any particular appraisal method be used by the Commissioner when appraising ROWs. Rather, the specifics regarding administration of the Enabling Act are left to statute.7 Bettwy v. Black Canyon Greyhound Park, Inc., 119 Ariz. 227, 229, 580 P.2d 365, 367 (App.1978), superseded by statute, 1981 Ariz. Sess. Laws, ch. 1, § 12, as recognized in Rail N Ranch Corp. v. Hassell, 177 Ariz. 487, 492 n. 2, 868 P.2d 1070, 1075 n. 2 (App.1994).
¶ 15 One of the duties of the Commissioner is to "[c]lassify and appraise all state lands, together with the improvements on state lands, for the purpose of sale, lease or grant of rights-of-way." A.R.S. § 37-132(A)(5). "The Commissioner has both the...
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State v. Lewandowski
...Ariz. R. Civ.App. P., we have addressed those in a separately filed memorandum decision. See Ne. Phoenix Holdings, LLC v. Winkleman, 219 Ariz. 82, n. 1, 193 P.3d 776, 777 n. 1 (App.2008). Although not directly relevant to the issue discussed here, we provide the facts and procedural backgro......