AGO 1960 No. 150 - Oct 7 1960
LANDS - PUBLIC - THE CONSTITUTIONALITY OF STATUTE PROVIDING THAT LEASES AND SALES OF SCHOOL LANDS SHALL PROVIDE FOR REIMBURSEMENT TO THE STATE OF CERTAIN COSTS.
The legislature may require in all leases and grazing permits for the use of public lands, and all contracts for the sale of valuable materials from public lands, including school lands granted to the state of Washington under § 10 of the Enabling Act, a provision for reimbursement to the state of costs of administration and land conservation measures without violating the terms of the grant or Article IX, § 3, of the Constitution.
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October 7, 1960
Honorable Donald C. Sampson
Olympia, Washington Cite as: AGO 59-60 No. 150
By letter previously acknowledged you have requested our advice concerning the validity of legislation such as is embodied in House Bill No. 323 introduced during the 36th Regular Session of the Legislature (January 30, 1959) insofar as it affects school lands granted to the State of Washington by the federal government.
Section 1 of the bill, as amended (together with an additional amendment under consideration by the Legislative Council), reads as follows:
"There is added to chapter 255, Laws of 1927 and to chapter 79.01 RCW a new section to read as follows:
"All leases and grazing permits for the use of public lands, and all contracts for the sale of valuable materials from public lands shall include a provision for the reimbursement by the lessee, permittee, or purchaser for the cost of making and administering such lease, permit, or sale, and for the cost of adequate land conservation measures, as determined [[Orig. Op. Page 2]] by the board of natural resources: PROVIDED, That the amount of such reimbursement cost shall be specified as notice of sale: PROVIDED FURTHER, That such costs shall not exceed twenty percent of the amount payable for the lease, permit or contract of sale." (That portion of the foregoing section which is underlined is the further amendment proposed by the Legislative Council.)
Specifically, you have requested our opinion on a question which we paraphrase as follows:
May school lands granted to the State of Washington under section 10 of the Enabling Act be made subject to the provisions of a statute containing the foregoing provisions without violating either: (1) The terms of the grant, or (2) Article IX, Section 3, of our Constitution?
We answer this question in the affirmative.
I. House Bill No. 323, if enacted into law, would not violate the terms of the grant of school lands under the Enabling Act.
The policy of the federal government has been a generous one with respect to grants of public lands to the several states for school purposes. Johanson v. Washington, 190 U.S. 179, 23 S.Ct. 825, 47 L.Ed. 1008 (1903). On admission of the State of Washington to the Union, congress granted to it sections sixteen and thirty-six in each township for the support of the common schools. Enabling Act, Section 10. The State of Washington has accepted the grant (Constitution, Article XVI) and now holds legal title to the lands as trustee to fulfill the purposes of the grant. Toomey v. State Board of Land Commissioners, 106 Mont. 547, 81 P. (2d) 407 (1938); State Highway Commission v. State, 70 N.D. 673, 297 N.W. 194 (1941); Constitution, Article XVI.
In the execution of the trust imposed under such a grant, it is now well settled that a state, acting in its role as trustee, has an inherent equitable right to reimbursement from the trust for all charges and expenses necessarily incurred in the execution of the trust where there is no provision to the contrary in the grant creating the trust. United States v. Swope (C.C.A. 8th Cir.), 16 F. (2d) 215 (1926); State ex rel. Greenbaum v. Rhoades, 4 Nev. 312 (1868); Betts v. Commissioners of the Land Office, 27 Okl. 64, 110 Pac. 766 (1910); Bourne v. Cole. 53 Wyo. 31, 77 P. (2d) 617 (1938). We think this rule is applicable to the trust imposed by the grant of school lands to this state for there is no provision in the Enabling Act which requires the state to bear the costs of administration from its general revenues.
[[Orig. Op. Page 3]]
House Bill No. 323 is simply a proposal to relieve the general fund of the state from the full burden of costs necessarily incurred in administering leases and grazing permits and in making sales of valuable materials. Its application to granted school lands does no violation to the terms of the grant in the Enabling Act.
II. House Bill No. 323, if enacted into law, would not violate the restrictions imposed by Article IX, Section 3, of our Constitution.
We now direct our attention to the question of whether the provisions of a statute such as was proposed in House Bill No. 323 would violate the restrictions of Article IX, Section 3, of our Constitution upon the disposition of the proceeds from the sale of valuable materials or the rentals from leases and grazing permits where granted school lands are concerned.
Article IX, Section 3, reads that:
"The principal of the common school fund shall remain permanent and irreducible. The said fund shall be derived from the following named sources, to wit: Appropriations and donations by the state to this fund; donations and bequests by individuals to the state or public for common schools; the proceeds of lands and other property which revert to the state by escheat and forfeiture; the proceeds of all property granted to the state when the purpose of the grant is not specified, or is uncertain; funds accumulated in the treasury of the state for the disbursement of which provision has not been made by law; the proceeds of the sale of timber, stone, minerals, or other property from school and state lands, other than those granted for specific purposes; all moneys received from persons appropriating timber, stone, minerals or other property from school and state lands other than those granted for specific purposes, and all moneys other than rental recovered from persons trespassing on said lands; five per centum of the proceeds of the sale of public lands lying within the state which shall be sold by the United States subsequent to the admission of the state into the Union, as approved by section thirteen of the act of congress enabling the admission of the state into the Union; the principal of all funds arising from the sale of lands and other property which have been, and hereafter may be granted to the state for the support of common schools. The legislature may make further provisions for enlarging said fund. The interest accruing on said fund together with all rentals and other revenues derived therefrom and from lands and other property devoted to the common school fund shall be exclusively applied to the current use of the common schools."
[[Orig. Op. Page 4]]
It will be noted, under the foregoing constitutional provision, that the permanent common school fund shall be derived in part from
". . . the proceeds of the sale of timber, stone, minerals, or other property from school . . . lands . . ."
". . . all rentals and other revenues derived . . . from lands . . . devoted to the common school fund shall be exclusively applied to the current use of the common schools."
Can it be said that our constitutional framers intended, by these provisions, to place restrictions upon the state's inherent equitable right to reimbursement from the trust for necessary charges and expenses incurred in the execution of the trust?
We think not.
In State ex rel. Greenbaum v. Rhoades, 4 Nev. 312 (1868), the Nevada supreme court had this very problem before it under a similar constitutional provision of that state. (Nevada Constitution, Article XI, Section 3, set forth in full in Appendix A to this opinion.) The court's comments on this issue are pertinent:
"It is contended by respondent (Treasurer) that this section, which pledges the several classes of land therein mentioned and all proceeds thereof for educational purposes, and declared that such proceeds shall not be transferred to any other fund for other uses, does in effect prohibit the Legislature from using any portion of the proceeds of sale of these lands to sell other land, and thereby make the trust estate which it holds available for its proper and legitimate uses. Possibly such may have been the intention of the farmers (sic) of our Constitution, for the intent is not very clear. We are, however, inclined to think the Convention did not intend to go so far. Probably the intent was only to prohibit the Legislature from using the funds arising from the sale of these lands for internal improvements or any other branch of State expenditure except that immediately connected with our educational system. They probably had no intention of prohibiting the State from using a part of the trust estate to make the rest available; but if their attention had been called to the subject, would have left the State just where the Act of Congress placed it, in the room of an ordinary trustee with the legal right to use a part of the trust estate to make the balance available.
[[Orig. Op. Page 5]]
"In any event the point is too doubtful and uncertain to authorize this Court to pronounce the Act of the Legislature unconstitutional. . . ." (Pages 316-317; emphasis ours.)
It has been held that the Wyoming constitutional provisions relating to school lands do not prohibit a payment of a percentage of lease rentals to an expert employed by the Attorney General to assist in the recovery of amounts due and owing. Bourne v. Cole, supra; Wyoming Constitution, Article 7, Sections 2 and 6, and Article 18, Section 2. (These provisions are set forth in full in Appendix B to this opinion.)
In State ex rel. Upper Scioto Drainage Etc. District v. Tracy, State Auditor, 125 Ohio St. 399, 181 N.E. 811 (1932), it is suggested that assessments for drainage purposes may be paid from the rentals on granted school lands, although no specific constitutional provision of Ohio's constitution is alluded to.
Our own supreme court has held that section 6 of the sustained yield timber sales act (chapter 175, Laws of 1933), which provides as follows:
RCW 79.56.070 Expense of Administration. "The expense of administering said forest and selling the timber thereon, including the expense of examination and cruising, advertising sales, marking, scaling, protection of timber and general supervision and administration, shall be paid out of the gross proceeds of the timber sales. Books of account and record shall be kept showing such expense, and as proceeds from the sale of timber are received, the amount of such expense shall first be deducted from said proceeds and paid into the funds of the state from which appropriations have been made to cover such expenses, and the balance shall be paid into the state treasury to the credit of the fund entitled to the proceeds from the sale of the timber."
did not violate the provisions of Article IX, Section 3, of our Constitution. State ex rel. Forks Shingle Co. v. Martin, 196 Wash. 494, 83 P. (2d) 755 (1938).
The court did not fully explain its reasoning in connection with this matter, but an examination of the briefs filed by the parties to the action indicates that the argument centered upon the question as to whether the constitution referred to "gross proceeds" from the sale of timber or "net proceeds" from the sale. The latter interpretation was inferentially accepted. We think the court will adhere to this interpretation.
We note in passing that RCW 79.56.070 quoted above has not been the first legislative attempt to make school trust property bear the cost of administration. For example, since 1907 the legislature has expressly allowed the payment of probate fees in closing estates escheated to the state to be held [[Orig. Op. Page 6]] in trust for the common schools by virtue of Article IX, Section 3, of our Constitution. (Section I, Chap. 133, Laws of 1907, (RCW 11.08.021), relating to estates of persons deceased prior to midnight, June 8, 1955; and Section 9, Chap. 254, Laws of 1955, (RCW 11.08.210) relating to estates of persons deceased after June 8, 1955.) Since 1927, the rentals from improved escheat property have been subject to deduction for repairs and rental agent's commissions. Section 154, Chap. 255, Laws of 1927 (RCW 43.12.100).
Under the circumstances, we believe that this long adhered to legislative policy with regard to escheated lands may properly be considered in support of our conclusion.
Finally, we feel obliged to add that our analysis of the question presented with regard to House Bill No. 323 would not be complete without some comment upon the decision in Betts v. Commissioners of the Land Office, supra, and upon the advisory opinion given by the Alabama supreme court in Opinion of the Justices, 254 Ala. 188, 47 So. (2d) 729 (1950).
In the Betts case the Oklahoma supreme court denied the state's right to reimbursement for necessary expenses from the "proceeds" of school lands. The rationale of the opinion, however, was not to deny the rule as set forth in the authorities above, but that the term "proceeds" in the Oklahoma constitution (Article XI, Section 2) had to be construed to mean "gross proceeds" because the succeeding section of the same article made reference to "net income from the leasing" of school lands. The court concluded that if the constitutional framers had meant "net proceeds" they would have said so as they did with regard to "net income". (Article XI, Sections 2 and 3, of the Oklahoma Constitution are set forth in full in Appendix C to this opinion.)
There is nothing in Article IX, Section 3, of the Washington constitution which requires the application of the rationale used in the Betts case.
The Alabama supreme court advised Governor Folsom, in Opinion of the Justices, supra, that the word "income" as used in Article XVI, Section 257, of the Alabama constitution meant "gross income", and that therefore it could not be diminished by process of administering the trust. (The Alabama constitutional provision is set forth in full in Appendix D to this opinion.)
This conclusion is contrary to that which we have reached. However, since the weight of authority seems to be against it and because our court has indicated that it favors the contrary view, we decline to adopt it for this opinion.
We trust that the foregoing comments will be of assistance.
Very truly yours,
JOHN J. O'CONNELL
H. T. HARTINGER
Assistant Attorney General
[[Orig. Op. Page 7]]
NEVADA CONSTITUTION, ARTICLE XI, SECTION 3:
All lands, including the sixteenth and thirty-sixth sections in every township, donated for the benefit of public schools in the Act of the Thirty-eighth Congress, to enable the people of Nevada Territory to form a State government; the thirty thousand acres of public lands granted by an Act of Congress, approved July second, A.D. eighteen hundred and sixty-two, for each Senator and Representative in Congress; and all proceeds of lands that have been, or may hereafter be granted or appropriated by the United States to this State, and also the five hundred thousand acres of land granted to the new States under the Act of Congress distributing the proceeds of the public lands among the several States of the Union, approved A.D. eighteen hundred and forty-one; provided that Congress make provisions for, or authorizes such diversion to be made for the purpose herein contained, all estates that may escheat to the State, all of such per cent as may be granted by Congress on the sale of land, all fines collected under the penal laws of the State, all property given or bequeathed to the State for educational purposes, and all proceeds derived from any or all of said sources, shall be, and the same are hereby solemnly pledged for educational purposes, and shall not be transferred to any other fund for other uses; and the interest thereon shall, from time to time, be apportioned among the several counties in proportion to the ascertained numbers of persons between the ages of six and eighteen years in the different counties; and the Legislature shall provide for the sale of floating land warrants to cover the aforesaid lands, and for the investment of all proceeds derived from any of the above mentioned sources in United States bonds, or the bonds of this state; provided, that the interest only of the aforesaid proceeds shall be used for educational purposes, and any surplus interest shall be added to the principal sum; and, provided further, that such portions of said interest as may be necessary, may be appropriated for the support of the State University.
WYOMING CONSTITUTION, ARTICLE 7, SECTION 2:
The following are declared to be perpetual funds for school purposes, of which the annual income only can be appropriated, to-wit: Such per centum as has been or may hereafter be granted by congress on the sale of lands in this state; all moneys arising from the sale or lease of sections number sixteen and thirty-six in each township in the state, and the lands selected or that may be selected in lieu thereof; the proceeds of all lands that have been or may hereafter be granted to this state, where by the terms and conditions of the grant, the same are not to be otherwise appropriated; the net proceeds of lands and other property and effects that may come to the state by escheat or forfeiture, or from unclaimed dividends or distributive shares of the estates of deceased persons; all moneys, stocks, bonds, lands and other property now belonging to the common school funds. Provided, that the rents for the ordinary use of said lands shall be applied to the support of public schools [[Orig. Op. Page 9]] and when authorized by general law, not to exceed thirty-three and one third (33 1/3) per centum of oil, gas, coal, or other mineral royalties arising from the lease of any said school lands may be so applied.
WYOMING CONSTITUTION, ARTICLE 7, SECTION 6:
All funds belonging to the state for public school purposes, the interest and income of which only are to be used, shall be deemed trust funds in the care of the state, which shall keep them for the exclusive benefit of the public schools, and shall make good any losses that may in any manner occur, so that the same shall remain forever inviolate and undiminished. None of such fund shall ever be invested or loaned except on the bonds issued by school districts, or county bonds of the state, or state securities of this state, or of the United States, or on first mortgages on farm lands or such other securities as may be authorized by law.
WYOMING CONSTITUTION, ARTICLE 18, SECTION 2:
The proceeds from the same and rental of all lands and other property donated, granted or received, or that may hereafter be donated, granted or received, from the United States or any other source, shall be inviolably appropriated and applied to the specific purposes specified in the original grant or gifts.
OKLAHOMA CONSTITUTION, ARTICLE XI, SECTION 2:
All proceeds of the sale of public lands that have heretofore been or may be hereafter given by the United States for the use and benefit of the common schools of this State, all such per centum as may be granted by the United States on the sales of public lands, the sum of five million dollars appropriated to the State for the use and benefit of the common schools in lieu of sections sixteen and thirty-six, and other lands of the Indian Territory, the proceeds of all property that shall fall to the State by escheat, the proceeds of all gifts or donations to the State for common schools not otherwise appropriated by the terms of the gifts, and such other appropriations, gifts, or donations as shall be made by the Legislature for the benefit of the common schools, shall constitute the permanent school fund, the income from which shall be used for the maintenance of the common schools in the State. The principal shall be deemed a trust fund held by the State, and shall forever remain inviolate. It may be increased, but shall never be diminished. The State shall reimburse said permanent school fund for all losses thereof which may in any manner occur, and no portion of said fund shall be diverted for any other use or purpose.
[[Orig. Op. Page 9]]
OKLAHOMA CONSTITUTION, ARTICLE XI, SECTION 3:
The interest and income of the permanent school fund, the net income from the leasing of public lands which have been or may be granted by the United States to the State for the use and benefit of the common schools, together with any revenues derived from taxes authorized to be levied for such purposes, and any other sums which may be added thereto by law, shall be used and applied each year for the benefit of the common schools of the State, and shall be, for this purpose, apportioned among and between all the several common school districts of the State in proportion to the school population of the several districts, and no part of the fund shall ever be diverted from this purpose, or used for any other purpose than the support and maintenance of common schools for the equal benefit of all the people [[people]]of the State.
ALABAMA CONSTITUTION, ARTICLE XIV, SECTION 257:
The principal of all funds arising from the sale or other disposition of lands or other property, which has been or may hereafter be granted or entrusted to this state or given by the United States for educational purposes shall be preserved inviolate and undiminished; and the income arising therefrom shall be faithfully applied to the specific object of the original grants or appropriations.