Rae Ann Rumery v. Maria baier/doug Ducey
294 P.3d 113
Ariz.2013Background
- Arizona Constitution Article 10, Section 7(A) requires monies derived from state trust lands to be deposited into the corresponding permanent fund.
- The Enabling Act restrictions and case law require trust land proceeds to benefit the beneficiaries for whom the lands were granted.
- A 2009 Arizona statute, A.R.S. § 37-527, created a trust land management fund and directed up to 10% of annual trust land proceeds there.
- The management fund proceeds are separatively diverted before the remaining proceeds are deposited into the permanent fund.
- Rumery, Skarhus, and Cartwright Elementary School District sued the State Land Commissioner and State Treasurer alleging § 37-527 violates the Enabling Act and Arizona Constitution.
- The trial court granted summary judgment for the appellees; the court of appeals affirmed on the Article 10, Section 7(A) issue; the Supreme Court granted review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 37-527 violate Article 10, Section 7(A)? | Rumery argues proceeds must go to permanent fund, not management. | Baier argues common law allows trust assets to cover management costs. | Yes; § 37-527 violates 7(A) by diverting proceeds to management. |
| May constitutional language be read to permit management costs via common-law trusts? | Constitutional text prohibits diversion to management funds. | Common law permits indemnity for administration costs from trust assets. | No; constitutional text controls; no implied exception for management funding. |
Key Cases Cited
- Lassen v. Arizona ex rel. Ariz. Highway Dep’t, 385 U.S. 458 (1967) (trust proceeds must serve defined enabling-act purposes)
- Kadish v. Ariz. State Land Dep’t, 155 Ariz. 484 (1987) (strictly apply Enabling Act restrictions on disposal of school trust assets)
- Ervien v. United States, 251 U.S. 41 (1919) (Enabling Act restrictions prohibit funds used for purposes beyond enumerated trusts)
- Murphy v. State, 65 Ariz. 338 (1947) (court-struck down acts circumventing Enabling Act provisions)
- Deer Valley Unified Sch. Dist. v. Superior Court, 157 Ariz. 537 (1988) (trust-land restrictions are to be read strictly in protecting trust purposes)