Rae Ann RUMERY; John Skarhus; and Cartwright Elementary School District, Plaintiffs/Appellees, v. Maria BAIER, in her capacity as Arizona State Land Commissioner, Defendant/Appellant, and Doug Ducey, in his capacity as State Treasurer, Defendant.
No. CV-11-0358-PR
Supreme Court of Arizona, En Banc.
Jan. 9, 2013.
294 P.3d 113
Thomas C. Horne, Arizona Attorney General by David F. Jacobs, Tucson, Attorney for State Land Commissioner Maria Baier.
Thomas C. Horne, Arizona Attorney General by Rex C. Nowlan, Assistant Attorney General, Eryn McCarthy, Assistant Attorney General, Phoenix, Attorneys for State Treasurer Doug Ducey.
Lasota & Peters PLC by Donald M. Peters Phoenix, Attorney for Amici Curiae Arizona School Boards Association and Arizona Association of School Business Officials.
Fennemore Craig, P.C. by Timothy Berg, Theresa Dwyer-Federhar, Michael J. Phalen, Meredith K. Marder, Phoenix, Attorneys for Amici Curiae Valley Partnership, Arizona Chapter of Associated General Contractors of America, Arizona Chamber of Commerce and Industry, Arizona Mining Association, Arizona Rock Products Association, County Supervisors Association of Arizona, Greater Phoenix Leadership, International Council of Shopping Centers, and League of Arizona Cities and Towns.
Office of the Governor by Joseph Sciarrotta, Jr., Phoenix, Attorney for Amicus Curiae Governor Janice K. Brewer.
Mariscal, Weeks, McIntyre & Friedlander, P.A. by Gary L. Birnbaum, Michael S. Rubin, Phoenix, Attorneys for Amicus Curiae Superintendent of Public Instruction John Huppenthal.
Arizona Education Association by Samantha E. Blevins, Phoenix, Attorney for Amicus Curiae Arizona Education Association.
OPINION
BALES, Vice Chief Justice.
¶ 1 Arizona‘s Constitution directs that “whenever any monies shall be in any manner derived from” state trust lands, the monies “shall be deposited” into a permanent fund to serve the purpose for which the land was granted.
I.
A.
¶ 2 In 1910, Congress passed the
¶ 3 By ratifying our state constitution, Arizona‘s voters accepted the land grants and incorporated the Enabling Act into “the organic law of this state.” Kadish v. Ariz. State Land Dep‘t, 155 Ariz. 484, 486, 747 P.2d 1183, 1185 (1987), aff‘d sub. nom. ASARCO Inc. v. Kadish, 490 U.S. 605 (1989).
¶ 4 Additional restrictions on the use of proceeds from state trust lands are contained in
A. A separate permanent fund shall be established for each of the several objects for which the said grants are made and confirmed by the enabling act to the state, and whenever any monies shall be in any manner derived from any of said lands, the same shall be deposited by the state treasurer in the permanent fund corresponding to the grant under which the particular land producing such monies was, by the enabling act, conveyed or confirmed.
B. No monies shall ever be taken from one permanent fund for deposit in any other, or for any object other than that for which the land producing the same was granted or confirmed.
Sections 7(A) and (B) restate provisions from Section 28 of the original Enabling Act. Although this language was later deleted from the Enabling Act,
¶ 5 Monies deposited into a permanent fund “shall be invested in safe interest-bearing securities and prudent equity securities.”
¶ 6 Trust lands granted for the support of common schools also are governed by statutory provisions. See
¶ 7 The State Land Department is responsible for administering the trust lands, Forest Guardians v. Wells, 201 Ariz. 255, 257 ¶ 2, 34 P.3d 364, 366 (2001), but neither the Enabling Act nor Arizona‘s Constitution identifies how the administrative costs associated with managing the lands will be funded. For nearly 100 years, the legislature appropriated monies from the state‘s general fund to pay the costs for generally administering the trust lands. In 2009, however, the legislature altered the funding scheme by enacting
¶ 8 Section 37-527 allows the costs of administering the state trust lands to be paid from a newly established trust land management fund. The statute provides that, at the discretion of the State Land Commissioner, up to ten percent of the annual proceeds from “[e]ach beneficiary‘s trust lands” and “[a]ll sales of timber, mineral, gravel or other natural products or property from each beneficiary‘s trust lands” are to be deposited into the management fund.
¶ 9 Monies designated for the management fund are separated from trust land proceeds before the remaining proceeds are placed into a permanent fund. For fiscal year 2010, $9,773,500 was diverted to the management fund and appropriated to the State Land Department. Id. § 18. For fiscal year 2011, the State Land Commissioner directed that the full ten percent of proceeds, or $10.5 million, be deposited into the management fund to pay for the operations of the State Land Department.
B.
¶ 10 In 2010, Rae Ann Rumery, John Skarhus, and the Cartwright Elementary School District sued the Commissioner and the Treasurer, alleging that
¶ 11 On cross-motions for summary judgment, the trial court ruled that
¶ 12 The court of appeals affirmed, agreeing with the trial court that
¶ 13 We granted review because whether the Arizona Constitution allows the costs of managing state trust lands to be paid from trust land proceeds is an issue of statewide importance. The Court has jurisdiction under
II.
A.
¶ 14 Our resolution of this case turns on
¶ 15 “The ‘Constitution should be construed so as to ascertain and give effect to the intent and purpose of the framers and the people who adopted it.‘” Brewer v. Burns, 222 Ariz. 234, 239 ¶ 26, 213 P.3d 671, 676 (2009) (quoting State ex rel. Morrison v. Nabours, 79 Ariz. 240, 245, 286 P.2d 752, 755 (1955)). We do so by fairly interpreting the language used and, unless the context suggests otherwise, giving words “their natural, obvious and ordinary meaning.” Id.
¶ 16 By its terms,
¶ 17 In interpreting
¶ 18 The Supreme Court long ago held that the Enabling Act prevented New Mexico from using income from its trust lands to promote the state and its resources generally. Ervien v. United States, 251 U.S. 41, 47-48 (1919). New Mexico argued that such payments were appropriate for administering the trust estate because they would foster the sale and leasing of trust lands. Id. at 47. Rejecting this argument, the Supreme Court noted that the Enabling Act specifically enumerated the purposes for which the trust lands had been granted, “and to make assurance doubly sure it was provided that the
¶ 19 In 1967, the Supreme Court reaffirmed Ervien‘s interpretative approach in Lassen. 385 U.S. at 467. There the Court held that the Enabling Act barred Arizona‘s long-standing practice of allowing the State Highway Department to take material sites and rights of way from state trust lands without compensating the trusts. Id. at 466. The rationale for this practice, which our Court had approved, was that the highways constructed across trust lands would enhance the remaining trust lands by at least the value of the property taken. See id. at 460. Without questioning this premise, the Supreme Court held that “[t]he Enabling Act unequivocally demands both that the trust receive the full value of any lands transferred from it and that any funds received be employed only for the purposes for which the land was given.” Id. at 466. To ensure that the beneficiaries “derive the full benefit of the grant,” the Court held that “Arizona must actually compensate the trust in money for the full appraised value of any material sites or rights of way which it obtains on or over trust lands.” Id. at 469 (footnotes and internal quotations omitted).
¶ 20 We have similarly recognized, in dealing with state trust lands, that “all doubts must be resolved in favor of protecting and preserving trust purposes.” Kadish, 155 Ariz. at 495, 747 P.2d at 1194. Applying this principle, Kadish held that a state statute mandating flat-rate royalties for certain mineral leases violated the requirements in the Enabling Act and Arizona Constitution that trust lands be leased for their true, appraised value. Id. at 495-97, 747 P.2d at 1194-96. Although those defending the statute argued that it would promote mineral exploration and development and thereby increase payments to the state, we held that this prospect could not justify departing from the Enabling Act‘s requirements. Id. at 496-97, 747 P.2d at 1195-96.
¶ 21 The Commissioner correctly observes that cases such as Ervien, Lassen, and Kadish did not involve
¶ 22 Because Article 10 retains certain restrictions that were later deleted from the Enabling Act, the latter “merely sets out the minimum protection for our state trust land.” Deer Valley Unified Sch. Dist. v. Superior Court, 157 Ariz. 537, 541, 760 P.2d 537, 541 (1988). Thus, consistent with the approach taken in Ervien, Lassen, and Kadish, we apply Article 10, Section 7 according to its terms and decline to infer unstated exceptions to its restrictions on the use of state trust land proceeds.
B.
¶ 23 In defending
¶ 24 The Constitution‘s silence on the payment of the costs of trust management and the fact that such expenditures might benefit the trusts are not sufficient grounds for reading exceptions into our Constitution and Enabling Act. As explained, supra ¶¶ 16-22, when the Constitution or the Enabling Act specifies a particular disposition of trust assets, we may not infer exceptions to the stated requirements, even if doing so arguably could benefit the trust overall. Here,
¶ 25 The language of Article 10, Section 7(A) also answers the argument based on the common law of trusts. Such law is relevant in defining the Commissioner‘s powers and duties. See, e.g., Forest Guardians, 201 Ariz. at 262 ¶ 20, 34 P.3d at 371. The common law generally allows a trustee to use trust assets to pay trust administration costs. Restatement (Third) of Trusts § 38 (2003) (“A trustee is entitled to indemnity out of the trust estate for expenses properly incurred in the administration of the trust.“). But a trustee‘s common law powers may be limited by the terms of the trust. See id. § 85 (2007) (providing that a trustee‘s powers can be “limited by statute or the terms of the trust“). Here, Article 10, Section 7(A) directs the state treasurer to deposit trust proceeds into a permanent fund. This constitutional language, not being subject to implied exceptions, controls over the common law of trusts. Cf. Ervien, 251 U.S. at 47-48 (noting that the United States, as grantor of lands under Enabling Act, had “impose[d] conditions upon their use“).
¶ 26 For similar reasons, we are not persuaded by the out-of-state cases. In Swope, the United States Court of Appeals upheld a New Mexico statute that allocated twenty percent of the income from state trust lands to a maintenance fund for paying the costs of the state land office. 16 F.2d at 216, 219. Swope held that such payments were not prohibited by the Enabling Act, noting the common law principle of allowing the payment of the costs of trust administration from trust assets. See id. at 217. Swope also cited the 1868 Nevada decision in Rhoades and the 1910 Oklahoma decision in Betts as other cases approving the use of monies derived from trust lands to pay the expenses of managing the lands. Id. at 217-18.
¶ 27 Although Swope interpreted language in the Enabling Act identical to that in Arizona‘s Constitution, the federal decision is neither binding nor persuasive here. Swope gives insufficient weight to the explicit language in
III.
¶ 28 We hold that
CONCURRING: REBECCA WHITE BERCH, Chief Justice, A. JOHN PELANDER, ROBERT M. BRUTINEL, Justices, and VIRGINIA C. KELLY, Judge.*
* Pursuant to