Koepnick v. Arizona State Land Department (CA1 2/26/09)

You still can’t fight City Hall – especially when its County and State Hall.

Koepnick leased state trust land between Apache Junction and Florence for agricultural use. Pinal County wanted a right-of-way over the property for a new road. But to get one it would have had to pay Koepnick over $750,000 for improvements he had built that would be disrupted by it. Then the Commissioner of the State Land Department – our friend Mr. Winkleman from a few posts ago – decided to reclassify the land as “commercial” rather than “agricultural.” This had the effect of cancelling the lease and allowing the County to do what the documents arguably showed it wanted to do: get the right-of-way without paying Koepnick anything. Koepnick cried foul but the Arizona Land Board of Appeals and the Superior Court affirmed the decision, hence this appeal.

Koepnick’s principal argument, apparently, was that the Commissioner couldn’t declare the land “commercial” because that was the wrong category. The County envisioned that it would largely be given over to residential use. The statutes have three categories: “commercial,” “agricultural,” and “homesite.” Koepnick argued that “homesite” was therefore the proper category.

The court reasoned that before you can live in a house someone first has to build it, building houses is a commercial enterprise, therefore land to be used for homesites is “commercial,” not “homesite.” That is the Land Department’s interpretation of the statutes; the court adopted it, which it may do if the construction is “reasonable and consistent with statutory language.” How the Land Department’s view is more reasonable and consistent than Koepnick’s is not crystal clear.

Koepnick argued that the government’s activity was the result of a deal between the County and the State to cheat him. But various government employees who had written notes to that effect testified that they were wrong, or misunderstood, or that they don’t think that they meant that though they can’t really recall. Those of you who do government litigation have heard that sort of thing before. If you don’t, you may wonder how it could ever pass the smell test; the answer is that its easier when there’s no jury to do the sniffing.

Koepnick also argued that the Commissioner violated his constitutional and statutory obligations to ensure that Koepnick be compensated for the improvements; under the circumstances of this reclassification, there is apparently no particular prospect of that happening. The court decided that there was a “conflict” between the Commissioner’s duties to the trust and to the lessee that the Commissioner had in this case “resolved” in a manner within his discretion. How the Commissioner’s voluntary act creates a conflict in his duties that allows him to ignore some of them is a bit murky.

This decision seems to have been pretty much a foregone conclusion after both the Board of Appeals and the Superior Court upheld the Commissioner. The court on appeal had to accept the facts established below. Courts routinely adopt the relevant agency’s interpretations of the statutes it works with. Does that mean that Max Koepnick wasn’t shafted by crafty bureaucrats? Well, appellate decisions don’t answer every question.