Mayer Usd v. Mark Winkleman

• Court: Arizona Supreme Court
• Decided: February 13, 2009
• Status: Published

Opinion

SUPREME COURT OF ARIZONA En Banc

MAYER UNIFIED SCHOOL DISTRICT ) Arizona Supreme Court and GADSEN ELEMENTARY SCHOOL ) No. CV-08-0225-PR DISTRICT, ) ) Court of Appeals Plaintiffs/Appellants, ) Division Two ) No. 2 CA-CV 07-0126 v. ) ) Maricopa County MARK WINKLEMAN, in his capacity ) Superior Court as State Land Commissioner; THE ) No. CV2004-020078 ARIZONA STATE LAND DEPARTMENT; ) THE STATE OF ARIZONA; APACHE ) COUNTY; COCHISE COUNTY; COCONINO ) COUNTY; GRAHAM COUNTY; GREENLEE ) O P I N I O N COUNTY; MARICOPA COUNTY; MOHAVE ) COUNTY; NAVAJO COUNTY; PIMA ) COUNTY; PINAL COUNTY; SANTA CRUZ ) COUNTY; YAVAPAI COUNTY; YUMA ) COUNTY; MARICOPA COUNTY FLOOD ) CONTROL DISTRICT; ARIZONA ) DEPARTMENT OF TRANSPORTATION; ) TOWN OF CAREFREE; CITY OF ) TUCSON; CITY OF FLAGSTAFF; TOWN ) OF GILA BEND; CITY OF GLENDALE; ) CITY OF GLOBE; MAGMA FLOOD ) CONTROL DISTRICT; TOWN OF ) MARANA; CITY OF PEORIA; CITY OF ) PHOENIX; CITY OF SCOTTSDALE; ) CITY OF SIERRA VISTA; and CITY ) OF TEMPE, ) ) Defendants/Appellees. ) _________________________________ ) ) MAYER UNIFIED SCHOOL DISTRICT ) and GADSEN ELEMENTARY SCHOOL ) DISTRICT, ) ) Plaintiffs/Appellants/ ) Cross-Appellees, ) ) v. ) CITY OF PEORIA and CITY OF ) SCOTTSDALE, ) ) Defendants/Appellees/ ) Cross-Appellants. ) _________________________________ )

Appeal from the Superior Court in Maricopa County The Honorable Ruth Harris Hilliard, Judge

AFFIRMED ________________________________________________________________

Opinion of the Court of Appeals, Division Two ___ Ariz. ___, ___ P.3d ___ (App. 2008) 2008 WL 2128064 (May 19, 2008)

VACATED ________________________________________________________________

ARIZONA CENTER FOR LAW IN THE PUBLIC INTEREST Phoenix By Timothy M. Hogan Joy E. Herr-Cardillo Tucson Attorneys for Mayer Unified School District and Gadsen Elementary School District

TERRY GODDARD, ARIZONA ATTORNEY GENERAL Phoenix By Kenneth D. Nyman, Assistant Attorney General William A. Richards, Assistant Attorney General Patrick B. Sigl, Assistant Attorney General Attorneys for Mark Winkleman, Arizona State Land Department, and State of Arizona

GALLAGHER & KENNEDY, P.A. Phoenix By Mark A. Fuller Kevin E. O’Malley Kiersten A. Murphy C. Lincoln Combs Attorneys for Arizona Department of Transportation

MOYES SELLERS & SIMS, L.T.D. Phoenix By C. Brad Woodford Jeffrey T. Murray Rebecca N. Lumley Attorneys for Town of Carefree, City of Flagstaff, Town of Gila Bend, City of Glendale, City of Globe, Town of Marana, City of Phoenix, City of Sierra Vista, and City of Tempe

- 2 - STEPHEN M. KEMP, PEORIA CITY ATTORNEY Peoria By Stephen M. Kemp, City Attorney Attorneys for City of Peoria

DEBORAH W. ROBBERSON, SCOTTSDALE CITY ATTORNEY Scottsdale By Robert Bruce Washburn, Senior Assistant City Attorney Attorneys for City of Scottsdale

COOPER & RUETER, L.L.P. Casa Grande By Stephen R. Cooper Attorneys for Magma Flood Control District

TERENCE C. HANCE, COCONINO COUNTY ATTORNEY Flagstaff By Jean E. Wilcox, Deputy County Attorney Attorneys for Coconino County

GUST ROSENFELD, P.L.C. Phoenix By Richard A. Segal Richard B. Hood Craig A. McCarthy Attorneys for Maricopa County and Flood Control District of Maricopa County ________________________________________________________________

B E R C H, Vice Chief Justice

¶1 We have been asked to decide whether suit will lie

under the Arizona-New Mexico Enabling Act for the State Land

Commissioner’s failure to require compensation for easements and

rights of way over state trust lands conveyed between 1929 and

1967. We hold that the claims are time-barred.

I. FACTUAL AND PROCEDURAL BACKGROUND

¶2 The Arizona-New Mexico Enabling Act granted nearly ten

million acres of land to the State of Arizona to be held in

trust for the support of public schools. See Act of June 20,

1910, ch. 310, §§ 24, 28, 36 Stat. 557, 572-74 (“Enabling Act”).

- 3 - The State Land Commissioner administers the school land trust.

Forest Guardians v. Wells, 201 Ariz. 255, 257, ¶ 2, 34 P.3d 364,

366 (2001). He serves as the trustee of the land trust and must

“manage the trust lands for the benefit of the trust and trust

beneficiaries.” Berry v. Ariz. State Land Dep’t, 133 Ariz. 325,

327, 651 P.2d 853, 855 (1982).

¶3 Beginning in 1929, the Commissioner granted easements

over some of these trust lands to various government entities,

for roads and other public purposes, without requiring

compensation to the school land trust.1 This practice continued

until 1967, when the United States Supreme Court ruled that the

Enabling Act requires compensation to the trust for the full

value of any easements or uses of trust lands. Lassen v. Ariz.

ex rel. Ariz. Highway Dep’t (Lassen II), 385 U.S. 458, 469 &

n.22 (1967).

¶4 Between 1929 and 1967, the Department conveyed more

than nine hundred such easements (the “09 easements”) to

government entities without receiving compensation. Many of

these easements remain in effect, although the trust has never

been compensated for many of them.

¶5 On June 4, 2003, counsel for Plaintiffs Mayer Unified

1 For convenience, we use the term easements to encompass both easements and rights of way. These easements became known as the “09 easements” based on the Land Department’s classification number.

- 4 - School District and Gadsen Elementary School District (the

“Districts”) sent a letter to the Commissioner alleging that the

school land trust had received no consideration for these

easements and requesting further information regarding them.

The Commissioner responded that he needed to review the easement

records before answering. Discussions ensued, but the parties

failed to resolve the issue. The plaintiffs then filed a

complaint on October 15, 2004, more than one year after they

sent the June 4th letter to the Commissioner inquiring about the

status of the easements.2 The complaint named as defendants the

Land Department and its Commissioner and the State of Arizona.

Twenty-eight easement holders were later joined as additional

defendants.

¶6 Various defendants filed motions to dismiss on several

grounds, including laches, nonjusticiability, the statute of

limitations, and lack of standing. They also claimed that

Lassen II should not apply retroactively. The superior court

granted the defendants’ motions to dismiss based on laches. The

court of appeals reversed the superior court’s laches

determination, but affirmed the dismissal on the alternative

ground that Lassen II applied prospectively only, and therefore

2 The original complaint named several parents of Arizona public school children as plaintiffs, but they were later dismissed from the action. An amended complaint, filed in January 2005, added the Districts as additional plaintiffs.

- 5 - the Districts were not entitled to relief. Mayer Unified Sch.

Dist. v. Winkleman, ___ Ariz. ___, ___, ¶¶ 65, 77-78, ___ P.3d

___, ___, 2008 WL 2128064 (App. May 19, 2008).

¶7 We granted review of the issues raised in the

Districts’ petition for review and two issues raised in the

State’s cross-petition to decide questions of statewide

importance. See ARCAP 23(c)(3). We have jurisdiction pursuant

to Article 6, Section 5(3) of the Arizona Constitution and

Arizona Revised Statutes (“A.R.S.”) section 12-120.24 (2003).

II. DISCUSSION

A. Enabling Act Background

¶8 The Enabling Act created the school land trust and

provides detailed instructions for disposing of trust lands.

Enabling Act § 28. For example, trust lands must be “appraised

at their true value” and cannot be sold for less than the

appraised amount. Id. Nor may the State sell or lease trust

lands “except to the highest and best bidder at a public

auction.” Id. Disposal of any trust land in a manner not

substantially conforming to the provisions of the Enabling Act

constitutes “a breach of trust” that renders the disposition of

trust lands “null and void.” Id.3

3 For a more detailed exploration of the history of the Enabling Act and its provisions, see Kadish v. Arizona State Land Department, 155 Ariz. 484, 486-88, 747 P.2d 1183, 1185-87 (1987), aff’d sub nom. Asarco Inc. v. Kadish, 490 U.S. 605

- 6 - ¶9 The Enabling Act’s disposition provisions have been

the subject of recurring litigation with respect to easements

granted to public entities. In Grossetta v. Choate, we were

asked to decide whether the Land Department could grant

easements over trust lands in the absence of specific

authorization in the Enabling Act. 51 Ariz. 248, 250-51, 75

P.2d 1031, 1032 (1938). We held that the Enabling Act did not

limit the Legislature’s power “to grant rights of way easements

over the public lands for public highways.” Id. at 254, 75 P.2d

at 1033. Grossetta, however, did not address whether easement

holders had to compensate the school land trust for the

easements.

¶10 We answered that question seven years later in State

ex rel. Conway v. State Land Department, 62 Ariz. 248, 156 P.2d

901 (1945). Conway involved an order by the Commissioner

requiring the State Highway Department to surrender all

easements it held over trust lands. Id. at 249-50, 156 P.2d at

902. These easements would be reissued, at the Commissioner’s

option, as leases. Id. The Highway Department sought a

declaratory judgment that the Commissioner lacked the authority

to issue the order. Id. at 249, 156 P.2d at 901. We agreed and

held that the Highway Department was “not required to pay . . .

(1989), and Murphy v. State, 65 Ariz. 338, 344-53, 181 P.2d 336, 340-46 (1947).

- 7 - for the taking or use” of trust lands for building and

maintaining state highways. Id. at 255-56, 156 P.2d at 904.

¶11 The compensation issue came before this Court once

again in 1965. In State ex rel. Arizona Highway Department v.

Lassen (Lassen I), we addressed whether the Commissioner could

adopt a rule requiring compensation for public highway rights of

way and material sites on trust lands. 99 Ariz. 161, 162, 407

P.2d 747, 747-48 (1965), rev’d 385 U.S. 458 (1967). We

prohibited adoption of the rule and held that the Commissioner

must grant material sites and easements to the Highway

Department without requiring compensation for the public use of

the trust lands. Id. at 168, 407 P.2d at 752.

¶12 The United States Supreme Court granted certiorari and

reversed. Lassen II, 385 U.S. at 470. The Court held that the

Highway Department must pay for the use of the trust lands, even

though it was building and maintaining highways for the public’s

benefit. Id. at 466. After examining the Enabling Act’s

valuation and fund-usage provisions, as well as its background

and legislative history, the Court concluded that Congress

intended the school land trust to “derive the full benefit of

the [federal land] grant.” Id. at 466-68 (citation omitted).

To further this purpose, it held that the Highway Department

must “compensate the trust . . . for the full appraised value of

any material sites or rights of way which it obtains on or over

- 8 - trust lands.” Id. at 469 (footnote omitted).

¶13 The Court therefore permitted the Commissioner to

issue the rule requiring compensation for public highway rights

of way and material sites on trust lands. It explicitly

declined, however, to decide whether compensation was owed for

the more than nine hundred 09 easements that had been granted

between 1929 and the date of its opinion in 1967.4 It is those

easements for which the Districts now seek compensation.

B. Statute of Limitations

¶14 The defendants assert that the statute of limitations

bars the Districts’ claims for compensation for easements

granted between 1929 and 1967. They reason that the Districts’

cause of action accrued in 1967 when the Supreme Court published

its opinion in Lassen II declaring that compensation was

required for the easements.

¶15 The parties do not dispute that A.R.S. § 12-821 states

4 Immediately following its holding, the Supreme Court noted the following:

We are informed by counsel that over a period of years Arizona has obtained the use of large areas of trust lands on bases that may not have accorded with those set forth in this opinion. We wish to make it plain that we do not reach either the validity of any such transfers or the obligations of the State, if any, with respect thereto.

Lassen II, 385 U.S. at 469 n.22.

- 9 - the applicable limitations period.5 Section 12-821 requires that

actions against a government entity “be brought within one year

after the cause of action accrues and not afterward.” A.R.S.

§ 12-821 (2003) (current version of statute). “[A] cause of

action accrues when the damaged party realizes he or she has

been damaged and knows or reasonably should know the cause,

source, act, event, instrumentality or condition which caused or

contributed to the damage.” Id. § 12-821.01(B). The Districts

filed their complaint on October 15, 2004. Therefore, the

complaint is not timely unless the Districts’ cause of action

accrued after October 15, 2003.

C. When the Districts’ Cause of Action Accrued

¶16 The Districts’ cause of action stems from the

uncompensated conveyance of easements over trust lands between

5 We assume, therefore, that § 12-821 applies. We note, however, that the current version of that section was first enacted in 1994. See 1994 Ariz. Sess. Laws, ch. 162, § 1 (2d Reg. Sess.). But limitations statutes with similar provisions were in effect at all times relevant to this action, alleviating any harm in applying the terms of § 12-821. See, e.g., A.R.S. § 12-821 (1992) (repealed 1993) (twelve month statute of limitations for claims against a public entity); § 12-550 (1956) (four year general limitations period when no limitation is otherwise prescribed). In any event, once the new limitations statute became effective, the Districts had at most one year thereafter to bring their claims. See A.R.S. § 12-505(B) (2003); see also City of Tucson v. Clear Channel Outdoor, Inc., 209 Ariz. 544, 554, ¶ 42, 105 P.3d 1163, 1173 (2005). Finally, the Districts have not questioned the applicability of the statute of limitations to them. Cf. Tucson Unified Sch. Dist. v. Owens-Corning Fiberglas Corp., 174 Ariz. 336, 337, 849 P.2d 790, 791 (1993) (exempting school district from limitations period).

- 10 - 1929 and 1967. Because this Court had held that no compensation

was owed for the 09 easements, however, the Districts had no

reason between 1929 and 1967 to know that the school trust had

been damaged. See Lassen I, 99 Ariz. at 166, 168, 407 P.2d at

750, 752; Conway, 62 Ariz. at 255-56, 156 P.2d at 904.6

¶17 But the Districts should reasonably have known that

compensation for the easements was required and had not been

paid by January 10, 1967, when the Supreme Court issued its

opinion in Lassen II, 385 U.S. 458, which held that government

entities that acquire trust lands, even for uses that benefit

the public, must compensate the school trust. Id. at 468-69.

Our opinions in Grossetta, 51 Ariz. at 254, 75 P.2d at 1033,

Conway, 62 Ariz. at 251, 255-56, 156 P.2d at 902, 904, and

Lassen I, 99 Ariz. at 168, 407 P.2d at 752, should have alerted

the Districts that the Commissioner had granted easements to

public entities without requiring compensation to the school

trust between 1929 and 1965. These opinions put all trust

6 Indeed, in Lassen I, we suggested that the highways built on the easements enhanced the value of the trust lands:

Certainly, if the highways had not been established the values of these lands would have been much less. Nor does [the Commissioner] state whether the values estimated are those when the easements were first granted or as of the present time, after the values have been enhanced by the building of a highway system throughout this state.

99 Ariz. at 166, 407 P.2d at 750.

- 11 - beneficiaries, including the Districts, on notice that unpaid-

for easements existed.

¶18 The Supreme Court confirmed the existence of such

easements in Lassen II, 385 U.S. at 469 n.22. Although Lassen

II required the Highway Department to compensate the trust for

future easements granted over trust lands, the Court refrained

from deciding whether compensation was required for the 09

easements. Id. Thus, the Lassen II opinion placed the

Districts on notice of past acquisitions of trust lands for

which compensation might be owed but had not been paid. The

repeated references by both this Court and the United States

Supreme Court to the existence of easements conveyed without

compensation lead us to conclude that reasonable persons either

knew or should have known of such easements at the time of the

Lassen II decision. The Districts’ cause of action thus accrued

at that time.7

¶19 The Districts maintain that their claim should

nonetheless not be barred because the Commissioner, as the

7 Although we conclude that the cause of action accrued in 1967, it is indisputable that the Districts had actual notice of the 09 easements, and of the Commissioner’s failure to obtain compensation for them, by June 2003, when the Districts’ counsel sent a letter to the Commissioner stating his understanding that “none of the 985 [09] easements and rights of way issued by the Department to governmental and public entities were made in exchange for any financial consideration.” Therefore, at the very latest, the Districts’ cause of action accrued on June 4, 2003, more than one year before a complaint was filed.

- 12 - trustee of the school land trust, has an ongoing duty to remedy

violations of the Enabling Act. The Commissioner’s failure to

obtain compensation for the use of the easements constitutes a

continuing violation that renders the statute of limitations

inapplicable, the Districts assert, because a new claim arises

each moment that the Commissioner fails to obtain value for the

¶20 We disagree. We find persuasive the opinion in

Mitchell v. United States, 13 Cl. Ct. 474 (1987). In that case,

the court considered a similar “continuing violation” claim in

the context of a trustee’s duty to obtain adequate compensation

for the use of trust lands. Id. at 478. There, the Bureau of

Indian Affairs (the “BIA”) served as the statutory trustee of a

trust that benefited allottees of the Quinault Indian

Reservation. Id. at 476. The allottees alleged that the BIA

“collected inadequate fees from the logging companies for the

private use of roads crossing the allottees’ lands.” Id. Like

the Districts here, the allottees did not file suit within the

statutory limitations period. Id. at 478-79. In an attempt to

revive their time-barred claim, the allottees argued that even

if they had constructive notice of the inadequate compensation

claim, the statute of limitations should not preclude the claim

because the trustee had a continuing duty to collect adequate

compensation from the logging companies as timber was

- 13 - transported over rights of way on the allottees’ lands. Id. at

479. The court rejected the allottees’ continuing violation

theory, reasoning that “the duty to secure compensation for a

right-of-way arises only once – at the time the right-of-way is

granted.” Id. at 480. We agree that the violation here also

occurred once, when the 09 easements were granted, even though

the cause of action did not accrue until 1967.

¶21 Because the Districts filed their complaint more than

one year after their cause of action accrued, we hold that their

claims are time-barred.

III. CONCLUSION

¶22 For the foregoing reasons, we vacate the opinion of

the court of appeals and affirm the judgment of the superior

court.

_______________________________________ Rebecca White Berch, Vice Chief Justice

CONCURRING:

_______________________________________ Ruth V. McGregor, Chief Justice

_______________________________________ Michael D. Ryan, Justice

_______________________________________ W. Scott Bales, Justice

- 14 - H U R W I T Z, Justice, concurring in part and concurring in the result

¶23 The majority concludes that the Districts’ cause of

action accrued when the Supreme Court of the United States

decided Lassen v. Ariz. ex rel. Ariz. Highway Dep’t (Lassen II),

385 U.S. 458 (1967). I do not doubt that the relevant statute

of limitations expired years before this suit was filed. But I

do not believe that we need to decide today that a “reasonable

person” would have received constructive notice of potential

claims on the very day Lassen II was decided from a footnote in

that opinion. As the Court notes, by June 4, 2003, the

Districts’ counsel had actual knowledge of the facts underlying

their claims. Op. ¶ 18 n.8. Because this suit was filed more

than a year later, I find it unnecessary to rely on a

constructive notice fiction to set a precise earlier date of

accrual. I therefore concur in ¶¶ 1-16 and 19-22 of the

majority opinion and in the result.

________________________________ Andrew D. Hurwitz, Justice

- 15 -