Tanner Companies v. Arizona State Land Dept.

Decision Date18 July 1984
Docket NumberCA-CIV
Citation688 P.2d 1075,142 Ariz. 183
PartiesThe TANNER COMPANIES and Clinton Campbell Contractor, Inc., dba Phoenix Brick Yard, Arizona corporations, Plaintiffs/Appellees, v. The ARIZONA STATE LAND DEPARTMENT and The Arizona State Land Commissioner, Defendants/Appellants. 24798.
CourtArizona Court of Appeals
Fennemore, Craig, von Ammon, Udall & Powers, P.C. by Calvin H. Udall and John Torres, Phoenix, for plaintiffs/appellees
OPINION

HOWARD, Judge.

This is an appeal from a judgment entered in favor of appellees after a trial de novo in an administrative appeal pursuant to former A.R.S. § 37-134 and § 37-214(D). The record shows that Tanner Companies (Tanner) held a 20-year mineral lease on state trust land, lease No. M-908. Clinton Campbell held similar leases, M-1022, M-1456 and M-1457. The mineral compound involved in the leases was Pantano clays. The Pantano formation is a lake deposit, as distinguished from a stream deposit, of ordinary clay and clay materials. It only appears in a small area of Pima County. Pantano clays have a high alumina content and a low content of alkali salts, which make them suitable for use in the manufacture of Portland cement, face bricks, tile and other high quality fired structural products. The Pantano clays have never been used by the plaintiffs for purposes such as road or embankment construction, or in a binder with sands or gravels for borrow, fill, ballast or for similar earth work or construction purposes.

Lease M-908 was orally assigned by Tanner to Clinton Campbell Contractor, Inc. (Phoenix Brick), Tanner agreeing to renew the lease when it expired and reassign it to Phoenix Brick. Prior to the expiration of its lease, Tanner filed a renewal application with the land department, and made advance rental and royalty payments which were accepted by the department. Campbell also filed an application for the renewal of lease M-1022 prior to the time of its expiration. The renewal applications for leases M-1456 and M-1457 were not made until August 1981, after the filing of the appeal in this case. The land department agreed to wait for the outcome of this case before acting on their renewal. Lease M-908 had been scheduled to expire on July 18, 1978, but prior to the expiration of the lease, Tanner received a renewed lease M-908 for a term expiring July 18, 1998. It executed the renewed lease and submitted it to the land department, but it was never signed by the state land commissioner.

On May 17, 1979, the commissioner issued a decision and order denying Tanner's application for renewal of lease M-908 because he was of the opinion that Pantano clays were a common mineral product not subject to lease as a mineral claim.

Pursuant to Rule R-12-5-03, Arizona Compilation of Rules and Regulations (ACRR), a rehearing of the commissioner's order was held before a hearing officer who recommended that the lease be terminated.

On November 6, 1979, the commissioner adopted the hearing officer's recommendation and denied Tanner's application to renew lease M-908 and ordered Tanner's interest in the lease terminated.

The commissioner did not and had not as of the time of the trial de novo made any decision on the applications to renew the other leases.

On November 20, 1979, appellees filed a notice of appeal of the commissioner's decision not to renew lease M-908.

Because of threats by employees of the land department that the other leases would not be renewed, that the department would issue a cease and desist order as to lease M-1022 and that the state would file criminal charges against appellees and sue them for trespass, conversion and punitive damages, appellees secured a restraining order against appellants and were permitted by the trial court to file, in the appeal, a "supplemental and amended complaint" seeking a declaration that Phoenix Brick was entitled to a renewal of leases M-1022, M-1456 and M-1457. At the time the motion was filed, leases M-1456 and M-1457 had not yet expired, and lease M-1022 had expired on July 23, 1979.

After a trial without a jury, the court made findings of fact and conclusions of law finding, inter alia, that Pantano clays were subject to a mineral lease and that appellees were entitled to have the leases renewed for another 20 years. The trial court declared that appellees were entitled to have their applications to renew Mineral Leases M-908, M-1022, M-1456 and M-1457 considered and acted upon by appellants as required by law and in accordance with the trial court's findings and conclusions. It also awarded appellees attorney's fees in the sum of $85,000. Appellants contend that (1) the trial court had no jurisdiction over leases M-1022, M-1456 and M-1457; (2) the trial court erred in construing A.R.S. § 27-235(C)(6) as allowing appellees to renew the leases for another 20 years; (3) the trial court erred in the admission and rejection of certain evidence; (4) the trial court erred in concluding that Pantano clays were not common clays; (5) the trial court erred in ordering renewal of lease M-908, since the application for renewal was not timely made and because it was improperly subleased to Phoenix Brick; and (6) the trial court erred in granting the full amount of attorney's fees.

JURISDICTION TO DECIDE THE VALIDITY OF LEASES M-1022, M-1456 and M-1457

This case began in the superior court as an appeal from the commissioner's decision not to renew lease M-908. A.R.S. § 37-134, prior to its amendment in 1980, provided:

"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.

C. Upon service of the notice, the commissioner shall prepare a record of the entire proceedings and transmit it to the clerk of the superior court to which the appeal is taken. The clerk shall docket the appeal in the name of appellant as plaintiff and appellee as defendant and the appeal shall be at issue. The appeal shall be set for trial de novo and heard at the earliest practical time by the court without a jury. The court shall hear evidence, make independent findings of fact and conclusions of law from the evidence submitted, and shall either affirm, reverse or modify the decision of the commissioner. The decision of the superior court may be appealed to the supreme court in the manner final judgments in civil actions are appealable to that court...." 1

Several months after the notice of appeal was filed, the trial court permitted Phoenix Brick to file an amended or supplemental complaint, an interesting procedural feat since there never was a complaint filed in the first instance but merely a notice of appeal. Phoenix Brick, without citing any pertinent authority, contends that since it could have filed an original action for declaratory judgment regarding the validity of leases M-1022, M-1456 and M-1457, there was no reason it could not, in the interest of judicial economy, merely file a supplemental complaint in the appeal and try the appeal together with the action for a declaratory judgment. The fault with this reasoning lies in an incorrect premise, that it could have secured review of the other leases by means of an action for declaratory judgment.

An action for declaratory relief is not appropriate to review an administrative decision when there exists a procedure to appeal from the administrative ruling. Arizona Board of Regents v. Harper, 108 Ariz. 223, 495 P.2d 453 (1972); State v Superior Court of Orange County, 12 Cal.3d 237, 115 Cal.Rptr. 497, 524 P.2d 1281 (1974); Guilbert v. Regents of University of California, 93 Ca.App.3d 233, 155 Cal.Rptr. 583 (1979); Viso v. State, 92 Ca.App.3d 15, 154 Cal.Rptr. 580 (1979); J.R.D. Management Corporation v. New York City Conciliation and Appeals Board, 458 N.Y.S.2d 479, 117 Misc.2d 459 (1983); Greystone Management v. Conciliation and Appeals Board, 462 N.Y.S.2d 13, 94 A.D.2d 614 (1983); and see, 22 Am.Jur.2d Declaratory Judgments, § 31, p. 881.

Furthermore, the declaratory judgment procedure may not be used to preempt or prejudge issues that are committed for initial decision to an administrative body. Public Service Commission v. Wycoff, 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952); Power Authority v. Department of Environmental Conservation, 379 F.Supp. 243 (N.D.N.Y.1974); Schwarze v. Farm-Rite Implement Company, 192 F.Supp. 645 (D.N.D.1960); Dawson v. Department of Transportation, 480 F.Supp. 351 (D.C.W.D.Okla.1979).

Here, the commissioner had taken no action on the renewal of lease M-1022, and the other two leases had not yet come up for renewal. 2

The trial court clearly lacked jurisdiction to grant declaratory relief relative to these three leases and erred in granting appellees the right to file an amended or supplemental complaint.

Appellants contend that this error prejudiced the rest of the case by overemphasizing the one issue common to all the leases, in other words, whether Pantano clays were a common mineral material or a locatable mineral. We do not...

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