Opinion ID: 891708
Heading Depth: 3
Heading Rank: 5

Heading: Public Auction Purpose Frustrated

Text: {82} In addition to the lack of competition, the challenged exchanges and the State Land Office's exchange process frustrate the intended purpose of a public auction as well as the purpose of the Enabling Act's inclusion of the public auction sales requirement. As we discussed, supra, the purpose of an auction is to obtain the highest financial gain, and the purpose of Congress's requirement that an auction be the mechanism used for public land sales was to require an objective means of sale, eliminating the possibility of private favoritism. {83} We should be candid about the objectives of these particular exchanges. They were designed to achieve a predetermined result. The exchanges were for the purpose of addressing specific land management problems in specific geographical regions checkerboard areasthat could only be resolved by privately negotiated exchanges with neighboring landowners. Only certain land, however, along the checkerboard border could be exchanged in a manner that would ameliorate land management problems of both the State Land Office and its neighbors. Outside land (land from somewhere else) might be worth more, even a lot more, but it could not address the checkerboarding issue; it would only replace one owner for another into the same checkerboarding problem. It is no stretch for us to recognize that these problems could only be resolved through a privately negotiated exchange, which is exactly what the parties attempted to accomplish. {84} For example, the Stanley Ranch exchange would provide the ability to fulfill the State Land Office's plan for an access road and campsites, all part of creating a prime recreational and quality hunting area. The UU Bar Ranch proposal was of interest because it offered in-fill parcels. The CS Ranch exchange would allow construction of a loop road and would fill in land holdings. The Galloway proposal would provide in-fill parcels and an access road. {85} The State Land Office frankly states in its Brief in Opposition, at page 40, that [t]he checkerboarding problems in the White Peak area created a compelling reason for the Commissioner to target specific lands for exchange in order to consolidate, or unitize, the existing state trust lands in the area, thereby increasing the value of those lands by more than $13 million, enhancing the Commissioner's ability to protect that land, increasing the recreational opportunities available within the area, increasing access to the trust lands, and augmenting grazing revenues. (Emphasis added.) Not only were the lands targeted for exchange, but the State Land Office describes the exchanges as the Land Commissioner exercising his power to manage lands through exchanges designed to address the checkerboarding problems in various parts of the state. (Emphasis added.) The State Land Office's exchange rules, in fact, state that the commissioner . . . may select the proposal or proposals he determines are the highest and best, that is, the proposal or proposals that he believes will be most beneficial to the trust in accordance with the standards set forth in Subsection A and C of 19.2.21.8 NMAC. 19.2.21.10 NMAC (6/15/2004). Subsection A provides that [t]he commissioner may enter into an exchange when the commissioner determines that the exchange will result in a material benefit to the trust and the purpose of the exchange would serve the best interests of the trust. 19.2.21.8(A) NMAC (6/15/2004). Subsection C, similarly, allows the commissioner [to] select another method of determining true value [one that does not involve a qualified appraiser] if he determines that such method is in the best interests of the trust and conform to law. 19.2.21.8(C) NMAC. According to the State Land Office Rules, the purposes of land exchanges are subjectively defined by the Land Commissioner, and financial advantage to the trust is not emphasized as the priority. In line with these rules, both the Stanley Ranch and the UU Bar Ranch bid specifications vested the Land Commissioner with discretion to select the winning bid, based on subjective factors rather than absolute financial benefit to the trust fund. The Selection of the Winning Bid provision of the Bid Information Packets for both exchanges provided, in full: The Commissioner will exercise his discretion in selecting the exchange proposal which is in the best interest of the State trust, considering the following factors: (1) the extent to which the appraised value of the Offered Lands, as determined by the Commissioner, exceeds the appraised value of the Exchange Lands; (2) the effect, if any, that the bidder's proposed use of the Exchange Lands would have on the utility and value of any adjacent state trust lands; (3) the proximity of the Offered Lands to other state trust lands, and any land management issues; (4) the difference in acreage between the Offered Lands and the Exchange lands; (5) any other benefits accruing to, or detriments to, the state trust from the proposed acquisition. None of the five factors provides an objective, measurable means of distinguishing between bids. Even if a bid were highest in monetary value and demonstrably superior in all respects under factors (1)-(4), factor (5) would give the Land Commissioner discretion to reject that bid based essentially on anything he determined to be in the best interest of the trust. Such opportunity for discretion is a direct affront to the purposes of the public auction requirement. {86} In sum, the four challenged exchanges and the State Land Office exchange procedures, in general, preclude the existence of a public auction. As a matter of law, private negotiation negates the required competition. Further, the Land Commissioner's discretion to select a buyer negates the safeguards intended by the Enabling Act's auction requirement. Without the benefit of an auction's objective means of sale, awards of land only for the highest financial return to the state trust, there is no protection against favoritism. Therefore, such private land exchanges represent a departure from the Land Commissioner's ministerial duties under the Enabling Act. When the Land Commissioner chooses to dispose of land, he must do so by a true public auction.