Opinion ID: 1239050
Heading Depth: 5
Heading Rank: 2

Heading: Risks of continued litigation

Text: In assessing the likely result of continued litigation with regard to land, the superior court divided the land in the original trust into categories and assigned each category a litigation risk. [14] The categories in dispute are: (i) land held by third-party purchasers; (ii) municipality entitlements; (iii) legislatively designated areas (LDAs) and lands transferred to other state agencies; and (iv) pre-1978 disposals. [15]
The superior court concluded that the litigation risk of recovering land purchased by third parties would be very high. It reasoned that the land conveyed to third parties would probably be considered sold under Weiss. It also determined that, because most of the purchasers did not buy the land with knowledge of the breach of trust, these sales would probably be upheld under basic principles of trust law. [16] The trial court further noted that such purchasers might also raise other valid defenses, such as the statute of limitations. Weiss argues that this analysis is incorrect. He asserts that under a long-standing per se rule ... conveyances of federal trust lands in breach of trust are void, regardless of the actual state of knowledge of the conveyees. Weiss supports this position by citing cases from Nebraska and Arizona dealing with land granted by Congress to states for the purpose of supporting public schools. This argument is not persuasive. The trial court reasonably interpreted Weiss as supporting the view that land transferred to third parties would be considered sold for purposes of reconstituting the trust. It also did not err in concluding that under the bona fide purchaser doctrine many if not most of these sales would be valid because the purchasers had neither actual nor constructive notice of any breach of trust. Precedent relied on by Weiss involving school land trusts in Nebraska and Arizona does not contradict this conclusion. The holdings in those cases rely on the detailed procedures for disposal of trust land contained in the enabling acts and state constitutional provisions governing those land trusts. E.g. Gladden Farms, Inc. v. State, 129 Ariz. 516, 633 P.2d 325, 327-30 (1981); Murphy v. State, 65 Ariz. 338, 181 P.2d 336, 353-54 (1947); State ex rel. Ebke v. Board of Educ. Lands & Funds, 154 Neb. 244, 47 N.W.2d 520, 522-23 (1951). The AMHEA differs from these laws because it explicitly permits trust lands to be sold, leased, mortgaged, exchanged, or otherwise disposed of in such manner as the Legislature of Alaska may provide. AMHEA § 202; see also State v. University of Alaska, 624 P.2d 807, 815 n. 11 (Alaska 1981) (noting that the Nebraska Constitution specifically provides for a method of management and disposal of school lands, while the Alaska Constitution has left these determinations to the legislature). While we noted in Weiss that precedent involving school trust land supported our reliance on basic trust law principles, Weiss, 706 P.2d at 683 n. 3, this reliance does not imply that application of such principles yields the same result regardless of the nature of the trust at issue. The superior court properly applied basic principles of trust law under the specific terms of the AMHEA to determine that the plaintiffs would face a high risk of recovering land conveyed to many third-party purchasers.
The superior court estimated that the litigation risk that the trust will recover land set aside by the legislature for other uses since 1978 would be high. The court based this conclusion on its determination that, in accord with State v. University of Alaska, 624 P.2d 807 (Alaska 1981), these lands would probably be deemed sold under Weiss. Weiss argues that the term sold in Weiss does not refer to lands still held by the State. In University of Alaska, we considered a 1929 grant of 100,000 acres by the federal government to the Territory of Alaska for the exclusive use and benefit of the University of Alaska. 624 P.2d at 810-11. The State, without paying compensation, placed about 5,000 acres of the land into Chugach State Park. Id. at 809-10. We concluded that the State breached the trust by redesignating the land, but declined to invalidate the State's action. Id. at 814-15. Instead, we held that the State must compensate the university for the land by paying it fair market value or by agreeing to a land exchange. Id. at 816. In Weiss, we distinguished University of Alaska on the grounds that the 1978 redesignation legislation did not involve a disposition of a portion of trust lands for a specific use and therefore could not support an inference of legislative intent to pay for the trust land. Weiss, 706 P.2d at 684. However, unlike the 1978 redesignation legislation, the State's transfer of land to legislatively designated areas or for the use of state agencies is a disposition of ... trust lands for a specific use. Id. The State's action with respect to such land is thus similar to the action permitted under University of Alaska. The superior court therefore reasonably concluded that, under that case, the plaintiffs would face a high risk of not recovering this land through further litigation.
The superior court evaluated the litigation risk associated with recovery of original trust lands selected by municipalities under the municipality entitlement program, AS 29.65, as medium. It based this conclusion partly on its evaluation of the argument that the transfers would be upheld under University of Alaska and partly on the fact that many of the lands have been resold to individuals who may be bona fide purchasers. Weiss argues that this finding is contradicted by City of Sierra Vista v. Babbitt, 129 Ariz. 524, 633 P.2d 333, 334 (1981), in which a sale of school trust land to a municipality was invalidated. [17] In contrast to the case before us, however, City of Sierra Vista relies on the specific requirement in the Arizona Enabling Act that school trust lands be sold to the highest and best bidder. Id. Therefore, Weiss's reliance on this case is misplaced. Weiss also argues that the superior court erred by including sales by municipalities to third-party purchasers in this category because those sales had already been considered by the court in its specific discussion of sales to third-party purchasers. However, the superior court's finding that the plaintiffs face a medium risk of recovering municipal entitlement lands through continued litigation is amply supported by University of Alaska regardless of whether such lands were resold to third parties.
The superior court evaluated the plaintiffs' risk of recovering lands disposed of prior to the 1978 redesignation legislation as very high. The court reasoned that because [n]othing in Weiss would require that they be included in the reconstituted trust, [18] the plaintiffs would have to prove a breach of trust or other invalidity other than the enactment of the redesignation legislation. It concluded that, under University of Alaska and the legislature's power under the AMHEA to dispose of trust lands, the plaintiffs would be unlikely to succeed in forcing the State to return this land. Weiss contends that the plaintiffs would have little difficulty in establishing that the pre-1978 transfers were in breach of trust. The lands disposed of prior to 1978 include both purchases by third parties and land designated for other uses. As discussed above, the trial court reasonably found the risk of recovering land in these two categories as very high and high, respectively. This analysis applies with equal force to the pre-1978 disposals. Thus the superior court did not err in its evaluation of the risk with respect to recovering this category of land.