Opinion ID: 891708
Heading Depth: 2
Heading Rank: 2

Heading: fiduciary duties of the land commissioner

Text: {100} New Mexico Constitution Article XIII, Section 2 delegates to the commissioner of public lands the responsibility to select, locate, classify and have the direction, control, care and disposition of all public lands, under the provisions of the acts of congress relating thereto and such regulations as may be provided by law. [6] To carry out these constitutional responsibilities, the Legislature empowered the Commissioner to make rules and regulations for the control, management, disposition, lease and sale of state lands. NMSA 1978, § 19-1-2 (1953). See also State ex rel. Otto v. Field, 31 N.M. 120, 133, 241 P. 1027, 1032 (1925) (The commissioner was given ample power to make rules and regulations `for the control, management, disposition, lease and sale of state lands.'). On August 5, 1992, the Land Commissioner adopted State Land Office Rule 21, which specifically addresses land exchanges. 19.2.21 NMAC (recodified 12/13/02). The Commissioner is also authorized by statute to execute and authenticate for the state all deeds, leases, contracts or other instruments affecting state lands. Section 19-1-2. {101} The New Mexico Enabling Act declares that all lands granted to the State of New Mexico are to be held in trust. 36 Stat. 557, Sec. 10 (1910). [T]he emergence of the trust concept was originally initiated by the states, and Congress influenced by these practices, incorporated trust language into the last enabling act that created the states of New Mexico and Arizona. Sean E. O'Day, School Trust Lands: The Land Manager's Dilemma Between Educational Funding and Environmental Conservation, a Hobson's Choice?, 8 N.Y.U. Envtl. L.J. 163, 184 (1999) (footnotes omitted). The trust concept arose because although some trust land was lost due to incompetence or corruption, most of the land was lost because states regularly chose to rapidly sell the lands for the purpose of funding schools. Sally K. Fairfax, et al., School Trust Lands: A Fresh Look at Conventional Wisdom, 22 Envtl. L. 797, 807 (1992). However, states began to recognize that liquidating trust lands would make sustaining a continuing source of funding difficult. O'Day, supra, at 182. As a result, the trend in the states shifted from dissipating the trust lands they had been granted by the federal government to retaining those lands. Id. at 181. One consequence of this gradual and implicit evolution toward land retention is that the states continue to have a choice regarding whether to sell or retain the lands. Even today, like the federal government, the states continue to engage in land sales and exchanges. Hence, the shift to retention does not imply that no state trust lands will ever be sold, but rather that the presumption is in favor of retaining rather than disposing of the lands. Fairfax, supra, at 824 & 824 n. 93 (footnotes omitted) (State trust land managers tend to maintain a portfolio of lands for investment and management purposes. . . . All states except California engage in land exchanges to block in their scattered sections. Oregon and Arizona have moved particularly effectively in this direction.). {102} New Mexico has interpreted the trust language in the Enabling Act as creating a charitable trust with the beneficiaries comprised of the citizens of New Mexico. Forest Guardians v. Powell, 2001-NMCA-028, ¶¶ 9-10, 130 N.M. 368, 24 P.3d 803. However, the Land Commissioner's undivided loyalty is to the designated beneficiaries and not the State as a whole. State ex rel. Shepard v. Mechem, 56 N.M. 762, 770, 250 P.2d 897, 902 (1952) (funds from lands granted by the Enabling Act may not be used to defray general government expenses). In Ervien v. United States, 251 U.S. 41, 48, 40 S.Ct. 75, 64 L.Ed. 128 (1919), the United States Supreme Court held that the New Mexico Land Commissioner could not expend money derived from the sale of trust lands to promote the state. The Court reasoned that [t]here is in the Enabling Act a specific enumeration of the purposes for which the lands were granted and the enumeration is necessarily exclusive of any other purpose. Id. at 47, 40 S.Ct. 75; see also Lassen v. Arizona ex rel. Arizona Highway Dep't, 385 U.S. 458, 468, 87 S.Ct. 584, 17 L.Ed.2d 515 (1967) (the purposes of Congress require that the Act's designated beneficiaries `derive the full benefit' of the grant (citation and footnote omitted)); Cnty. of Skamania v. State, 102 Wash.2d 127, 685 P.2d 576, 580 (1984) (en banc) (A trustee must act with undivided loyalty to the trust beneficiaries, to the exclusion of all other interests.). The beneficiaries of the trust lands at issue are identified as the public schools in New Mexico, New Mexico State University, Las Vegas Medical Center, New Mexico Military Institute, New Mexico Tech, New Mexico School for the Deaf, the State Penitentiary, Miners' Colfax Medical Center, the School for the Blind, and charitable and penal reform. {103} The Commissioner is subject to the same fiduciary obligations as any private trustee. Cnty. of Skamania, 685 P.2d at 580. All powers of trusteeship are held in the trustee's fiduciary capacity and must be exercised in good faith and to serve the interests of the beneficiaries. Restatement (Third) of Trusts § 86, cmt. b (2007). A trustee's duties include the protection and management of the trust property to provide returns or other benefits to the trust, id. § 76; duty of prudence, id. § 77; and loyalty, id. § 78. To carry out these duties, the Commissioner must decide whether it is better for the trust beneficiary to sell the lands and invest the receipts or retain and manage the lands. When the Commissioner retains and manages trust lands, he must also be concerned about the allocation of personnel and management resources to make the land productive, maintain fences and roads, prevent overgrazing, control soil erosion, minimize trespass damage and the risk of fires, and enhance wildlife habitat, among other duties. The benefit to the trust is maximizing revenues and profits while minimizing the costs incurred to manage the property. Accordingly, the Commissioner should have the flexibility to manage the land in a manner that enhances the opportunity for the largest return consistent with the beneficiaries' objectives. The objectives of the beneficiaries can hardly be said to be the consumption of the entire trust corpus. {104} The flexibility required to manage the land necessarily calls for the exercise of discretion consistent with the terms and purpose of the trust or as required by the exercise of the trustee's fiduciary duties. Id. § 87. A court should not interfere with a trustee's exercise of a discretionary power when that exercise is reasonable and consistent with the trust purposes and the trustee's fiduciary duties. Id. The purpose of the Enabling Act is to prevent the sale of land at unreasonably low prices. Lassen, 385 U.S. at 464, 87 S.Ct. 584. Indeed, written into Section 10 of the Enabling Act is the requirement that no sale or other disposal of trust property be made for a consideration less than the true appraised value of the trust property. Id. Thus, one of the express purposes of the Enabling Act is to obtain the fair market value of the property being sold. Branson Sch. Dist. RE-82 v. Romer, 161 F.3d 619, 637 (10th Cir.1998). {105} We have held that the Land Commissioner has broad discretion to decide the policy question of how he or she will offer trust lands for sale and the quantity of land to sell. Stovall v. Vesely, 38 N.M. 415, 418-19, 34 P.2d 862, 864-65 (1934) (citing Field, 31 N.M. at 149-50, 241 P. at 1039). It seems to us that this language is in accord with our view that, under the Enabling Act, Constitution, and statutes of New Mexico, the commissioner may sell or hold the state lands as his judgment and discretion may dictate, and that he may exercise `entire discretion as to the time of selling these lands and the extent to which they should be sold,' and that no one has the right to compel the commissioner to sell the lands in its [sic] entirety or otherwise, and that, if he elects to sell the land otherwise than in its entirety, he is within his jurisdiction to do so. To hold otherwise would lead to an absurd result.    As we have seen, the commissioner was given almost unlimited power with respect to the public lands owned by the state `except as may be otherwise specifically provided by law.'    Nowhere in the statute is any provision made for any supervisory control over the acts of the commissioner excepting in the case of contest concerning lands when an appeal may be taken from the decision of the commissioner to the district court. He is responsible alone to the electorate for any lack of proper business capacity or any misdoings in office. Id. at 419, 34 P.2d at 864-65 (quoting Field, 31 N.M. at 150-56, 241 P. at 1039-41). {106} The Field Court's interpretation of the broad discretion enjoyed by the Commissioner is consistent with that of other jurisdictions. See Campana v. Arizona State Land Dep't, 176 Ariz. 288, 860 P.2d 1341, 1344 (App.1993) (land commissioner can establish the terms of sale that are in the trust's best interests and has discretion as to how to structure the proposed sale); Pike v. State Bd. of Land Comm'rs, 19 Idaho 268, 113 P. 447, 454-55 (1911) (commissioner did not abuse discretion in advertising for auction 24,000 acres of land without allowing bids for smaller parcels); Big Island Small Ranchers Ass'n v. State, 60 Haw. 228, 588 P.2d 430, 437 (1978) (commissioner did not abuse his discretion by auctioning 42,000 acres of land at one time). In addition, when a power is granted by statute, everything necessary to carry out the power will be implied. Kennecott Copper Corp. v. Emp't Sec. Comm'n, 78 N.M. 398, 402, 432 P.2d 109, 113 (1967). This Court has held that the general power granted to the Land Commissioner should not be limited by implication unless its exercise would interfere with, frustrate, or to some extent defeat the purpose for which the power was granted. Field, 31 N.M. at 154, 241 P. at 1041 (internal quotation marks and citation omitted).