KESSLER, Judge.
¶ 1 Defendant/Appellant Maria Baier, Arizona State Land Commissioner ("Commissioner"), appeals the trial court's summary judgment for Plaintiffs/Appellees Rae Ann Rumery, John Skarhus, and Cartwright Elementary School District.
¶ 2 In 1910, Congress granted Arizona over 10.7 million acres of land to be held in trust for enumerated beneficiaries, with the "common schools" being the largest beneficiary.
¶ 4 In 2009, the legislature passed HB 2014, now codified in A.R.S. § 37-527, which set up the Trust Land Management Fund ("Management Fund"). 2009 Ariz. Sess. Laws, ch. 5, § 9 (3d Spec. Sess.). Section 37-527 provides that up to ten percent of both 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 "exclusively to manage trust lands." The money in the Management Fund is appropriated to the Arizona State Land Department, the agency that manages the trust lands. A.R.S. § 37-102 (Supp. 2010); Forest Guardians v. Wells, 201 Ariz. 255, 257, ¶ 2, 34 P.3d 364, 366 (2001). The Commissioner administers the Management Fund. A.R.S. § 37-527(D). Section 37-527(F) provides that it "does not prevent the legislature from appropriating state general fund monies for the purposes" of paying for the costs to manage the trust lands.
¶ 5 In passing HB 2014, the Legislature also appropriated over $9.7 million in fiscal year 2010 from proceeds derived from trust land, thereby diverting some money from entering the trust into the Management Fund. 2009 Ariz. Sess. Laws, ch. 5, § 18 (3d Spec. Sess.). For fiscal year 2011, the Commissioner designated the full ten percent of funds allowed by A.R.S. § 37-527, approximately $10.5 million, for deposit in the Management Fund. As the Commissioner conceded at oral argument on appeal, other than possibly its fiduciary duties, nothing would prevent the Legislature from passing a statute taking ninety percent or more of the funds to pay to manage the trust lands.
¶ 6 Plaintiffs filed suit alleging the legislature violated Section 28 of the Enabling Act (regulating the deposit of proceeds derived from state trust lands); Article 10, Section 7, of the Arizona Constitution (same); and the voter-protection provisions of the Arizona Constitution.
¶ 7 Plaintiffs and the Commissioner filed motions for summary judgment. The trial court granted Plaintiffs' motion, holding that A.R.S. § 37-527 violated Article 10, Section 7, as well as Article 4, Part 1, Section 1(6)(D), of the Arizona Constitution. In so holding, the court rejected the Commissioner's argument that common-law principles of trust law apply. The court held that "the language of Art. 10, § 7 is clear and unambiguous" and thus resorting "to [common-law] principles to modify or clarify the language is contrary to established Arizona law." It also held the "appropriation of proceeds from state trust lands for trust administrative expenses clearly diverts money from the permanent state school fund specified in [A.R.S.] § 37-521," and the legislature's doing so without a three-quarters vote violated the voter-protection provisions. The court did not address whether the law violated the Enabling Act.
¶ 8 The trial court enjoined the Commissioner "from designating any amount of state trust land proceeds for deposit into the State Trust Land Management Fund," ordered the state treasurer to "deposit all state trust land proceeds into the appropriate permanent funds," and ordered "all amounts previously transferred from state trust land proceeds to the Trust Land Management Fund, whether expended or not, be repaid by the ... Commissioner to the State Treasurer for deposit into the separate permanent funds." The court also awarded Plaintiffs their attorneys' fees and costs and denied the Commissioner's motion to stay injunctive relief pending appeal.
¶ 9 The Commissioner filed a timely notice of appeal. We granted a stay of the trial court's order pending appeal, which terminated on June 30, 2011. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).
¶ 10 We review de novo "a grant of summary judgment determining the constitutionality of legislation and interpretation of statutes." Ariz. Farm Bureau Fed'n v.
¶ 11 The issue before us is whether the Arizona Constitution allows the cost of managing state trust lands to be paid from proceeds derived from those lands. Such diversion of trust land proceeds violates Article 10, Section 7, because it deprives the trust beneficiaries of the full benefit of the trust without express permission. If the Legislature desires to use the proceeds from trust lands to pay for managing trust lands, it must obtain permission from the people of Arizona in the form of a constitutional amendment.
¶ 12 Because our constitution's provisions regarding the distribution and use of trust lands are more restrictive than the current Enabling Act's provisions, we decide this case solely based on provisions in Arizona's Constitution.
¶ 13 While "[t]he Enabling Act is one of the fundamental laws of the State of Arizona and is superior to the Constitution of the State of Arizona," Gladden Farms, Inc. v. State, 129 Ariz. 516, 518, 633 P.2d 325, 327 (1981), our constitution "may establish even more stringent ... requirements than those demanded by the minimum requirements of the Enabling Act," Forest Guardians, 201 Ariz. at 259, ¶ 11, 34 P.3d at 368. In fact, the "Enabling Act, as interpreted in Lassen, merely sets out the minimum protection for our state trust land," but "our state constitution does much more." Deer Valley Unified Sch. Dist. v. Superior Court, 157 Ariz. 537, 541, 760 P.2d 537, 541 (1988).
¶ 14 Section 28 of the current Enabling Act requires:
¶ 15 In turn, Arizona's Constitution sets forth parameters to protect the trust and its beneficiaries, including creating permanent funds for each of the "objects" (beneficiaries). Ariz. Const. art. 10, § 7(A). The Constitution provides:
Id. at § 7(A), (B). The above quoted sections of the Arizona Constitution were also included in the original Enabling Act, but in 1957 Congress deleted such language. New Mexico-Arizona Enabling Act, amendments, Pub. L. No. 85-180, 71 Stat. 457-58 (1957). It did so not to permit Arizona to use trust fund proceeds to manage state trust lands, but rather to allow greater flexibility for investing funds.
¶ 16 The Commissioner asserts that A.R.S. § 37-527 is constitutional under Article 10, Section 7, for three reasons. First, she argues the state trust lands were granted to support the enumerated beneficiaries, and any expenditure to manage and dispose of those lands (as part of the State Land Department's budget) also supports the beneficiaries. Second, she contends the framers intended for management costs to be paid from trust assets because other state courts had already permitted such use of similar trust assets, and the framers would have explicitly provided otherwise if they did not agree with those decisions. She also relies on one federal court decision that interpreted the Enabling Act to permit such use of trust assets under common-law principles. Third, the legislature allowed "payment of expenses of timber sales on university lands from the university's permanent fund" in 1915; thus, it believed it could use trust proceeds to fund trust management.
¶ 17 We agree with the trial court that Article 10, Sections 7(A) and (B) are unambiguous. The provisions require any money derived from trust assets to be deposited in the permanent fund and forbid the money from being used for any purpose other than that for which the land was granted or confirmed. Both the United States Supreme Court and the Arizona Supreme Court have held that the purpose of the land grant was to support the beneficiaries with the full benefit of the trust assets. Lassen, 385 U.S. at 467-68, 87 S.Ct. 584; Fain Land & Cattle Co. v. Hassell, 163 Ariz. 587, 595, 790 P.2d 242, 250 (1990). Diverting money from the permanent funds for management of the trust lands does not confer the full benefit of the trust proceeds on the beneficiaries.
¶ 18 "When interpreting the scope and meaning of a constitutional provision ... [o]ur primary purpose is to effectuate the intent of those who framed the provision...." Jett v. City of Tucson, 180 Ariz. 115, 119, 882 P.2d 426, 430 (1994). "To this end, we first examine the plain language of the provision," and if "the language is clear and unambiguous, we generally must follow the text of the provision as written." Id. (citation omitted). We do not permit extrinsic evidence "to support a construction that would vary" the apparent meaning of a constitutional provision. Id. In cases dealing with trust lands, "all doubts must be resolved in favor of protecting and preserving trust purposes." Kadish, 155 Ariz. at 495, 747 P.2d at 1194.
¶ 19 While we are not interpreting the Enabling Act, its history tracks that of the
¶ 20 In passing the Enabling Act, Congress intended that "the general powers of sale and lease given [Arizona] by the Act [be used] to accumulate funds with which [Arizona] could support its schools." Lassen, 385 U.S. at 463, 87 S.Ct. 584. All the Act's enumerated restrictions "indicate Congress' concern ... that the grants provide the most substantial support possible to the beneficiaries and that only those beneficiaries profit from the trust." Id. at 467, 87 S.Ct. 584 (emphasis added). Thus, the "purposes of Congress require that the Act's designated beneficiaries derive the full benefit of the grant." Id. at 468, 87 S.Ct. 584 (citation and internal quotation marks omitted) (emphasis added). "The purpose of the restrictions in article 10 of our constitution is the same" as the Enabling Act's purpose: "to ensure that the trust receives the most benefit possible from the trust lands." Fain, 163 Ariz. at 595, 790 P.2d at 250.
¶ 21 "The Enabling Act unequivocally demands ... that any funds received be employed only for the purposes for which the land was given." Lassen, 385 U.S. at 466, 87 S.Ct. 584 (emphasis added). To accomplish these purposes, the Enabling Act "imposes a series of careful restrictions upon the use of trust funds," and the Act's specific "enumeration of the purposes for which the lands were granted ... is necessarily exclusive of any other purpose." Id. at 467, 87 S.Ct. 584 (quoting Ervien v. United States, 251 U.S. 41, 47, 40 S.Ct. 75, 64 L.Ed. 128 (1919)) (emphasis added); Kadish, 155 Ariz. at 487, 747 P.2d at 1186 (stating Congress "intended the Enabling Act to severely circumscribe the power of state government to deal with the assets of the common school trust"). The provisions in the Enabling Act governing disposition of lands and proceeds derived therefrom "preclude[s] any license of construction or liberties of inference." Ervien, 251 U.S. at 47, 40 S.Ct. 75.
¶ 22 The Arizona Constitution is very specific in setting forth the assets that comprise the permanent funds and the rules for the management of each fund's assets. Ariz. Const. art. 10, § 7(B)-(G). As noted above, the key provisions in this case, Article 10, Sections 7(A) and (B), provide:
¶ 23 Taking funds that the Arizona Constitution requires be deposited in the trust to pay for managing the trust lands deprives the beneficiaries of "the most substantial support possible" and "full benefit of the grant." Lassen, 385 U.S. at 467, 468, 87 S.Ct. 584; see also Fain, 163 Ariz. at 595, 790 P.2d at 250. Section 37-527 allows the use of trust proceeds to assist the State in reducing budget deficits. In doing so, it diverts money from the trusts' permanent funds, depriving the trusts of the value of lands sold and products derived from such lands, as well as interest earned on those proceeds. It is a paramount requirement that the trusts must be fully compensated for any lands or products lost from the trust through sales. See Lassen, 385 U.S. at 465, 87 S.Ct. 584 (stating the "trust will be protected, and its purposes entirely satisfied, if the State is required to provide full compensation for the land it uses"). Diverting ten percent of annual proceeds of the trust lands and all sales of natural products or property from the trust lands deprives the beneficiaries of the full benefit of the trust land.
¶ 25 Given the express provisions requiring any money derived from trust assets be deposited in the permanent funds and prohibiting using trust assets for any purpose other than for the beneficiaries, Article 10, Sections 7(A) and (B), are unambiguous.
¶ 26 Thus, we reject the Commissioner's first argument that diversion of trust assets to offset management costs fulfills the constitutional mandate to fully benefit the beneficiaries of the trust lands. If the legislature wishes to fund the management of state trust lands from proceeds of the trust, it should refer a proposition to Arizona's voters as it has done in the past when it both successfully and unsuccessfully sought to change how state trust lands were managed, used, or invested.
¶ 27 Our conclusion is further supported by the most recent decision on this issue. In 1977, the Idaho Supreme Court also addressed the issue of diversion of trust fund assets. The court declared unconstitutional the transfer of interest income of the public school endowment fund (the equivalent of our permanent school fund) from the Investment Board, tasked with investing the fund's assets, to a separate expense fund to pay the Board's expenses of investing the trust's assets. Moon v. Inv. Bd., 98 Idaho 200, 560 P.2d 871, 872 (1977) (per curiam). At the time, Idaho's constitution provided:
Idaho Const. art. 9, § 3 (pre-1998).
¶ 28 The Commissioner's reliance on common-law trust principles, the decisions of other state courts prior to approval of our constitution, and a law similar to section 37-527 passed in 1915, is misplaced. The Commissioner argues the constitutional framers intended to impute the common-law practice of paying expenses of trust management from the trust assets because other state courts had already held it constitutional to do so. She argues that if the framers did not agree with those state's decisions, they would have explicitly provided otherwise.
¶ 29 We disagree with the Commissioner because the two courts that decided this issue prior to Arizona statehood disagreed as to the constitutionality of the provisions before them. Thus, the law was unsettled when our framers drafted our constitution and, if they were aware of the decisions of other states, they presumably would have added language to Article 10 to permit such diversion of trust assets. In any event, "little or no precedent exists, in acts pursuant to which other states were admitted into the Union or in decisions or legislative enactments
¶ 30 Prior to the drafting of the Arizona Constitution, two states—Nevada and Oklahoma—had addressed the use of state trust land proceeds to pay for the management of the trust lands. Nevada ex rel. Greenbaum v. Rhoades, 4 Nev. 312 (1868); Betts v. Comm'rs of the Land Office, 27 Okla. 64, 110 P. 766 (1910). The courts of these states disagreed as to the constitutionality of using trust assets to pay for the maintenance of trust lands.
¶ 31 In Betts, the Oklahoma Supreme Court decided that expenses of managing the state trust lands granted for the common schools could not be paid from money derived from state trust lands under Oklahoma's constitution, except that rental proceeds could be used to pay for the expenses of leasing trust land. 110 P. at 768.
However, the court held Oklahoma's constitution did not bar use of trust proceeds to pay for expenses in managing "public lands set apart to the state by Congress for charitable, penal, and educational purposes." Id.
¶ 32 Oklahoma's constitutional provisions regarding use of trust proceeds designated for the permanent school fund are similar to our provisions governing all permanent funds:
Okla. Const. art. 11, § 2 (emphasis added). Also, another provision provides:
Id. at § 3 (emphasis added). The above language is similar to Article 10, Section 7, and Article 11, Section 8, of the Arizona Constitution.
¶ 33 In Rhoades, the Nevada Supreme Court determined that its constitution permitted the use of proceeds of sales of state trust land to pay general management expenses of the trust. Rhoades, 4 Nev. 312, 1, 3.
4 Nev. at 2 (quoting Nev. Const. art. 11, § 3) (second emphasis added). Noting the framers' intentions were not very clear, the court concluded "[p]robably the intent was only to prohibit the legislature from using the funds... for internal improvements or any other branch of State expenditure except that immediately connected with our educational system." Id. at 3.
¶ 34 Thus, the only courts deciding this issue before 1912 disagreed about the constitutionality of using proceeds of trust lands to pay for managing the lands; therefore, the cases do not inform us of the Arizona framers' intent in drafting Article 10, Section 7(B). Given that Oklahoma and Nevada reached different conclusions, we are not persuaded by the Commissioner's argument that the framers of the Arizona Constitution, presumed to know the law, intended the language of section 7(B) to permit use of trust assets for trust management. Rather, in light of the divided legal landscape, it is more likely that the framers in 1912 would have included an explicit provision in the Constitution to permit such diversion of trust funds and assets if that was their intent. See Empress Adult Video & Bookstore v. City of Tucson, 204 Ariz. 50, 62, ¶ 29, 59 P.3d 814, 826 (App.2002) (stating the constitutional "framers were presumably aware of existing law"), disapproved on other grounds by State v. Stummer, 219 Ariz. 137, 144 n. 6, ¶ 22, 194 P.3d 1043, 1050 n. 6 (2008).
¶ 35 The Commissioner also relies on United States v. Swope, 16 F.2d 215 (8th Cir. 1926), arguing that use of trust proceeds to pay management expenses of trust assets is allowed under common law. In Swope, the court determined the Enabling Act did not prohibit a New Mexico law that allowed the "state lands maintenance fund," derived from twenty percent of the proceeds from any state lands, be used to pay "all salaries and expenses of the state land office,". 16 F.2d at 216, 218. The court applied the common law of trusts, which allows payment of expenses of managing the trust from the corpus of the trust when there is no provision specifying payment of management expenses. Id. at 217-18. In doing so, it relied upon the decisions in Rhoades and Betts and upon the absence of any provision forbidding the use of trust proceeds to pay trust expenses. Id. at 218-19.
¶ 36 The Swope decision is distinguishable. Given our supreme court's restrictive reading of these provisions limiting the use of trust assets, we do not accept the contrary view of a 1926 decision of a federal circuit court. Moreover, Swope is based on an analysis of the Enabling Act, which is not at issue here, and it failed to mention that the Betts court held unconstitutional the same practice. Further, Nevada's constitution does not contain a provision similar to our Article 10, Section 7(B).
¶ 37 Furthermore, in territorial days, Arizona was no stranger to Congressional mandates permitting more diverse use of land granted to it. In 1896, Arizona received authorization to lease lands for educational use. Act to Authorize the Leasing of Lands for Educational Purposes in Arizona, 29 Stat. 90-91 (1896). That authorization included the provision that "all necessary expenses and costs incurred in the leasing, management, and protection of said lands and leases may be paid out of the proceeds derived from such leases." Id. at 91. Even more, Section 27 of the Enabling Act provides:
(Emphasis added.)
¶ 38 Section 27 and the 1896 law indicate the framers knew that express statutory language
¶ 39 Accordingly, we disagree that common-law trust principles were imputed to our trust-land scheme on the theory Congress and the constitutional framers knew of prior courts' decisions that trust land proceeds could pay for management expenses.
¶ 40 The Commissioner's last argument is also unpersuasive. She argues the framers intended payment of management expenses from trust proceeds because the legislature allowed "payment of expenses of timber sales on university lands from the university's permanent fund." In 1915, the legislature passed an act providing for "the systematic administration, care and protection of the state lands," and the creation of the State Land Department and the office of Commissioner of State Lands. 1915 Ariz. Sess. Laws, ch. 5, preamble (2d Spec. Sess.). Section 78 of that act, now codified in A.R.S. § 37-482(B) (2003), created the "University Timber Account Fund," from which the "expenses incurred by the commissioner for the care, sale and other administration of timber or timber products, upon lands granted for university purposes, shall be kept by the commissioner in a separate account and said expenses shall be a charge against the said university fund." The Commissioner argues that since the 1915 legislature permitted diversion of some funds derived from trust lands, the constitutional framers must have intended such diversion of funds.
¶ 41 We disagree with the Commissioner. It is more hazardous to infer the intent of constitutional framers by the acts of subsequent legislatures than it is to infer the intent of a legislature from acts of an earlier one. See United States v. Price, 361 U.S. 304, 313, 80 S.Ct. 326, 4 L.Ed.2d 334 (1960) (stating "the views of a subsequent [legislative body] form a hazardous basis for inferring the intent of an earlier one"); Calik v. Kongable, 195 Ariz. 496, 501, ¶ 21, 990 P.2d 1055, 1060 (1999) (stating "the subsequent enacting body is often not the same as the one that enacted the original legislation"); Joffe v. Acacia Mortg. Corp., 211 Ariz. 325, 334, ¶ 38, 121 P.3d 831, 840 (App.2005) (quoting Price, 361 U.S. at 313, 80 S.Ct. 326).
¶ 42 While the 1915 legislature may have impliedly construed Article 10, Section 7, to permit other uses, we give greater consideration to the purpose of the land grant and reasoning behind Congress's restrictive provisions, which Arizona adopted and made more restrictive.
¶ 43 In the twenty-three states that entered the union through acts of admission, organic acts, and enabling acts prior to Arizona's statehood, Congress failed to designate someone "to keep invested funds derived from disposition of granted lands." Murphy, 65 Ariz. at 351, 181 P.2d at 344. Consequently, a scandal erupted in virtually every state because the lands "were so poorly administered" and "so unwisely invested" that the lands dissipated, which was "sanctioned or permitted by the [state] legislatures." Id.
¶ 44 Thus, Congress made sure, "in light of experiences of the past, that such would not occur in the new states of New Mexico and Arizona." Id. Congress effectively "circumscribe[d] the state in its use and disposition of the lands granted in trust to the state by the United States, as well as any proceeds derived from their sale or from sale of natural products thereof." Id. at 350, 181 P.2d at 343-44.
¶ 45 We should not determine the intent of the framers by the actions of the legislature three years later. The restrictive provisions, their cause, and the purpose of the land grant to provide the most substantial benefit possible to the trust beneficiaries, Lassen, 385 U.S. at 467-68, 87 S.Ct. 584, all outweigh the 1915 legislature's implied construction of our constitution. Thus, the Commissioners argument is unpersuasive.
¶ 46 The trial court awarded Plaintiffs attorneys' fees pursuant to A.R.S. §§ 12-2030 (2003) and 35-213(C) (2011) and the private attorney general doctrine set forth by Arnold v. Department of Health Services, 160 Ariz. 593, 775 P.2d 521 (1989). It also awarded Plaintiffs their costs. The Commissioner did not dispute the trial court's method of calculating the award and merely states that if we were to reverse the trial court, Plaintiffs would not be the prevailing party.
¶ 47 Because Plaintiffs prevail on appeal, we affirm the trial court's award of attorneys' fees. The Commissioner concedes that Plaintiffs would be entitled to attorneys' fees on appeal under the private attorney general doctrine if we affirm. We agree and grant Plaintiffs' request for reasonable attorneys' fees and costs on appeal subject to compliance with Arizona Rule of Civil Appellate Procedure 21.
¶ 48 We affirm the trial court's entry of summary judgment for Plaintiffs/Appellees.
CONCURRING: MARGARET H. DOWNIE, Presiding Judge, and PETER B. SWANN, Judge.
(Emphasis added.) Congress deleted the italicized portion in 1957. 71 Stat. 457-58.
