Court Opinion

ID: 867321
Source: CourtListenerOpinion
Date Created: 2013-05-11 22:43:31.422238+00
Date Added: 2024-06-11T09:12:48.480747
License: Public Domain

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

easements.

¶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 -