Source: http://www.chanrobles.com/usa/us_supremecourt/424/295/case.php
Timestamp: 2020-01-28 07:30:46
Document Index: 782920122

Matched Legal Cases: ['§ 24', '§ 28', '§ 5', '§ 12', '§ 28', '§ 28', '§ 41', '§ 37242', '§ 37', '§ 37', '§ 28', '§ 3183']

US Supreme Court Decisions On-Line> Volume 424 > ALAMO LAND & CATTLE CO., INC. V. ARIZONA, 424 U. S. 295 (1976)
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2. To be determined on remand are (1) whether, under state law and the provisions of the lease, petitioner could not possess a compensable leasehold interest upon the federal condemnation; (2) if petitioner did possess such an interest, how it is properly to be evaluated and calculated (with the subsidiary questions of the relevance of possible lease renewals and of possible value additions by reason of petitioner's development of adjoining properties); and (3) if that interest proves to be substantial, whether it is permissible to find from that fact a violation of the chanrobles.com-red
BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J.,and STEWART, MARSHALL, POWELL, and REHNQUIST, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 424 U. S. 311. STEVENS, J., took no part in the consideration or decision of the case.
Under § 24 [Footnote 1] of the New Mexico-Arizona Enabling Act, 36 Stat. 572 (1910), specified sections of every township in the then proposed State were granted to Arizona "for the support of common schools." By § 28 [Footnote 2] chanrobles.com-red
Among the lands constituting the grant to Arizona were two parcels herein referred to as Tract 304 and Tract 305, respectively. [Footnote 4] On February 8, 1962, Arizona, as lessor, and petitioner Alamo Land and Cattle Company, Inc. (Alamo), as lessee, executed a grazing lease of chanrobles.com-red
At a distribution hearing held to determine the proper allocation of the compensation amounts, the only parties claiming an interest in the awards for the two tracts were respondent Arizona, asserting title through the federal grants to it, and petitioner Alamo, asserting a compensable leasehold interest in the lands and a compensable chanrobles.com-red
The Lassen case was an action instituted by the Arizona Highway Department to prohibit the application by the State Land Commissioner of rules governing the acquisition of rights-of-way and material sites in federally donated lands held by Arizona in trust pursuant to the provisions of the Enabling Act. What was involved, chanrobles.com-red
therefore, was the acquisition of interests in trust lands by the State itself. The Supreme Court of Arizona held that it could be presumed conclusively that highways constructed across trust lands always enhanced the value of the remainder in amounts at least equal to the value of the areas taken, and therefore refused to order the Highway Department to compensate the trust. State v. Lassen, 99 Ariz. 161, 407 P.2d 747 (1965). This Court unanimously reversed. In so doing, it observed that the more recent federal grants to newly admitted States, including Arizona, "make clear that the United States has a continuing interest in the administration of both the lands and the funds which derive from them." 385 U.S. at 385 U. S. 460.
Id. at 463. Sales and leases were intended. The "central problem" was "to devise constraints which would assure that the trust received in full fair compensation for trust lands." Ibid. The Court concluded, for reasons stated in the opinion, that the Act's procedural restrictions did not apply when the State itself sought trust lands for its highway program. chanrobles.com-red
Much of what was said in Lassen had also been said, several decades earlier, in Ervien v. United States, 251 U. S. 41 (1919), when the provisions of the same Enabling Act were under consideration in a federal case from New Mexico. The Court's concern for the integrity of the conditions imposed by the Act, therefore, has long been evident. chanrobles.com-red
It has long been established that the holder of an unexpired leasehold interest in land is entitled, under the Fifth Amendment, [Footnote 8] to just compensation for the value of that interest when it is taken upon condemnation by the United States. United States v. Petty Motor Co., 327 U. S. 372 (1946); A. W. Duckett & Co. v. United States, 266 U. S. 149 (1924). See United States v. General Motors Corp., 323 U. S. 373 (1945); Almota Farmers Elevator & Warehouse Co. v. United States, 409 U. S. 470 (1973); 2 P. Nichols, Eminent Domain § 5.23 (Rev.3d ed.1975); 4 id. § 12.42[1]. It would therefore seem to follow that, when a lease of trust land is made, the trust must receive from the lessee the then fair rental value of the possessory interest transferred by the lease, and that, upon a subsequent condemnation by the United States, the trust must receive the then full value of the reversionary interest that is subject to the outstanding lease, plus, of course, the value of the rental rights under the lease. The trust should not be entitled, in addition to all this, to receive the compensable value, chanrobles.com-red
A difference between the rental specified in the lease and the fair rental value plus the renewal right could arise either because the lease rentals were set initially at less than fair rental value, or because during the term of the lease the value of the land, and consequently its fair rental value, increased. The New Mexico-Arizona Enabling chanrobles.com-red
Arizona, however, suggests that this usually acceptable analysis may not be applied under the New Mexico-Arizona Enabling Act. It argues, as the Court of Appeals held, 495 F.2d 14, that, under that Act, the State, as trustee, has no power to grant a compensable property chanrobles.com-red
interest to Alamo, as lessee. It bases this thesis on the Enabling Act's provision in § 28 that no "mortgage or other encumbrance" of trust land shall be valid, and it claims that a lease is an encumbrance, citing, among other cases, Hecketsweiler v. Parrett, 185 Ore. 46, 52, 200 P.2d 971, 974 (1948) (agreement to sell real estate free and clear of encumbrances), and Hartman v. Drake, 166 Neb. 87, 91, 87 N.W.2d 895, 898 (1958) (partition). One seemingly apparent and complete answer to this argument is that § 28 goes on to authorize specifically a lease of trust land for grazing purposes for a term of 10 years or less, and further provides that a leasehold, before being offered, shall be appraised at "true value." See n 2, supra. These provisions thus plainly contemplate the possibility of a lease of trust land and, in so doing, intimate that such a lease is not a prohibited "mortgage or other encumbrance." [Footnote 10] Furthermore, Arizona statutes in other contexts specifically protect the lessee's interest. Ariz.Rev.Stat.Ann. §§ 41-511.06, 37-291 (1974). See Ehle v. Tenney Trading Co., 56 Ariz. 241. 107 P.2d 10 (1940). To this the State responds that, while a lease is possible, it falls short of being a compensable interest when the property is sold because the Act prohibits the sale unless the trust receive the full appraised value of the land. The argument assumes that such compensation is to be measured by the entire land value despite the presence of the outstanding lease. That approach overlooks the actuality of a two-step disposition chanrobles.com-red
Alamo suggests that the Court of Appeals' decision is at odds with the above-cited case of Nebraska v. United States, 164 F.2d 866 (CA8 1947), cert. denied, 334 U.S. 815 (1948). There, in the face of a totality claim like that made by Arizona here, the Eighth Circuit ruled that trust lands in Nebraska were to be treated as any other property, and that condemnation proceeds were subject to allocation between the State as trustee and the holder of an outstanding agricultural lease. The Nebraska Enabling Act of April 19, 1864, c. 59, 13 Stat. 47, was an earlier edition of this type of statute, and was adopted chanrobles.com-red
more than four decades before the New Mexico-Arizona Act. It did not contain the detailed restrictive provisions that appear in the 1910 Act and that were developed and utilized as passing years and experience demonstrated a need for them. Because of this, one may say, as Arizona does, that the Nebraska case is distinguishable from the present one. But the decision is not devoid of precedential value, for it is consistent with our analysis of the New Mexico-Arizona Act in its recognition of the possibility of a compensable leasehold interest in trust land upon federal condemnation, and it demonstrates that the existence of that interest is not incompatible with the trust land concept. See also United States v. 78.61 Acres of Land, 265 F.Supp. 564 (Neb.1967), a post-Lassen case; United States v. 40,021.64 Acres of Land, 387 F.Supp. 839, 848-849 (NM 1975).
Finally, the Court of Appeals observed, but only in passing, 495 F.2d 14, that the lease recited that it was made subject to the laws of Arizona; that, if the State "relinquished" the property to the United States, the lease "shall be null and void as it may pertain to the land so relinquished"; and that no provision of the lease "shall create any vested right in the lessee." The court also observed, ibid., that Ariz Rev.Stat.Ann. § 37242 and 37-293 [Footnote 11] restrict a lessee's participation in the chanrobles.com-red
proceeds of a sale of public land to the value of improvements. Having made these observations, however, the court thereupon concluded that it did not find it necessary chanrobles.com-red
"to determine the rights of Alamo based upon these lease provisions or the state law." 495 F.2d 14.
The significance of the provisions referred to and of the cited statutes will now be for determination upon remand. We note only that the land in question was condemned, and thus does not appear to have been technically "relinquished" by Arizona to the United States; that we are not at all sure that there is language of restriction in §§ 37-242 and 37-293; and that Ariz.Rev.Stat.Ann. §§ 37-288 and 37-290, respectively, permit forfeiture for violation of the conditions of a lease or for nonpayment of rent, and cancellation of a lease if the leased land is reclassified to a higher use, and thus could explain the lease's provision against vesting in the technical sense that it is not subject to any contingency whatsoever. chanrobles.com-red
The question in this case is whether, under § 28 of the chanrobles.com-red
A lease, if not terminable at will by the State or terminable automatically upon sale or condemnation, is clearly an "encumbrance." 7 G. Thompson, Real Property § 3183, p. 277 (1962); 2 Bouvier's Law Dictionary 1530 (8th ed.1914). A lease not so terminable is, therefore expressly prohibited by the Act. The majority opinion, however, finds implicit in the Act an exception to the express ban on encumbrances in the case of leases for terms of 10 years or less. It points to the fact that 10-year leases of school trust lands are expressly permitted by the Act, and states that to treat a lease as an "encumbrance" under the circumstances would be to "downgrade a 10-year grazing lease, fully recognized and permitted by the Act, into a lease terminable at will or into one automatically terminated whenever the State sells the property or it is condemned." Ante at 424 U. S. 307. Treating the lease as an encumbrance would certainly have the effect which the majority says it would. The majority does not disclose, however, why such an effect is contrary to the intent of the Act. Apparently, it simply finds illogical chanrobles.com-red
45 Cong.Rec. 8227 (1910). The Oklahoma Enabling Act prevents the creation of a compensable interest in a lessee of school trust lands except to the extent of improvements placed thereon by him. A literal application of the New Mexico-Arizona Enabling Act at issue here reaches the same result. The latter Act, passed only four years after the Oklahoma Enabling Act, had purposes similar to those of the former. I cannot but conclude that it should also be chanrobles.com-red
H.R.Rep. No. 152, 61st Cong., 2d Sess., 2-3 (1910). If leases were permitted to encumber school trust lands chanrobles.com-red
65 Stat. 52. The Act provides for no other kind of compensation to the lessee of lands sold. Under the majority opinion, a lessee could, if the value of the lands increased after the lease was entered into, and if the lease had not expired at the time of any sale or condemnation, receive a portion of the sale or condemnation price over and above the value of any improvements. In @ 385 U. S. 466 (1967), we said that Act "unequivocally demands . . . that the trust receive the full value of lands transferred from it." The majority now construes the Act to authorize a result contrary to the Act's "unequivocal demand" and, accordingly, I dissent.