Marsh v. Atkins

104 Arizona Cases Digest 14

536 P.3d 811

Timothy MARSH, Appellant,

v.Lisa ATKINS, et al., Appellees.

No. 1 CA-CV 22-0555

Court of Appeals of Arizona, Division 1.

Filed August 31, 2023

Fennemore Craig, P.C., Phoenix, By Norman D. James, Tyler D. Carlton, Counsel for Appellant

Arizona Attorney General's Office, Phoenix, By Paul Katz, David F. Jacobs, Counsel for Appellees

Rose Law Group, PC, Scottsdale, By Andrew B. Turk, Logan V. Elia, Counsel for Amicus Curiae Arizona Sonoran Copper Company USA

Judge Anni Hill Foster delivered the opinion of the Court, in which Presiding Judge Samuel A. Thumma and Judge Randall M. Howe joined.

FOSTER, Judge:

¶1 Dr. Timothy Marsh appeals the superior court's order affirming the Arizona State Land Department's ("Department" or "ASLD") decision to deny two of Marsh's mineral exploration permit ("MEP") applications. For the following reasons, the order is affirmed.

FACTS AND PROCEDURAL HISTORY

¶2 In September 2019, Marsh applied for eighteen MEPs with the ASLD. Two of those applications are the subject of this appeal (the "applications"). As part of the application process, the ASLD was required to give Marsh written notice by late-October 2019 of "the state land that is described in the application," the rental price, and whether a bond would be required. A.R.S. § 27-251(B). The ASLD, however, did not issue the written notices until July 2020. Those notices denied the applications.

¶3 Elim Mining and LKY Copper Mountain Investment owned the land subject to the MEPs sought in the applications. The ownership rights of Elim Mining and LKY Copper Mountain Investment were derived from a state patent that the ASLD issued in 1995. That patent reserved all mineral rights for the state but, pursuant to A.R.S. § 37-231, the surface owner of the land "shall have the first right of refusal to acquire" MEPs for the land. Given the first right of refusal provision, the ASLD informed Elim Mining and LKY Copper Mountain Investment about Marsh's pending MEP applications.

¶4 Following the July 2020 denial, Marsh timely appealed, seeking an administrative hearing. See A.R.S. § 41-1092.03(B). On or about March 1, 2021, the parties entered settlement discussions during which the ASLD determined that its reasons for denying the applications were insufficient. However, the ASLD provided no new written notice of denial to Marsh. A few days later, on March 5, 2021, Elim Mining sent a letter to the ASLD exercising its first right of refusal. Three days later, LKY Copper Mountain Investment sent a letter to the ASLD asserting its first right of refusal. Around this time, the ASLD orally informed Marsh that they had a new basis to deny the applications: the surface owner's exercise of their first rights of refusal, as described in A.R.S. § 37-231(E)(2).

¶5 About two weeks later, an Administrative Law Judge ("ALJ") from the Office of Administrative Hearings held a hearing on Marsh's appeal of the application denials. Based on the evidence presented at that hearing, the ALJ determined that the ASLD erred by not giving Marsh written notice about its new reasoning for denying the applications, relying on Carlson v. Ariz. State Personnel Bd ., 214 Ariz. 426, 153 P.3d 1055 (App. 2007). The ALJ stated that "[b]ecause the Department has rescinded its stated reasons for denying Dr. Marsh's applications and has acknowledged that MEPs can be issued for the land at issue, there is no basis in this record on which the applications may be denied." The ALJ recommended that Marsh's MEP applications be granted.

¶6 Pursuant to the Administrative Procedure Act ("APA"), the ALJ's recommendations went to the ASLD for final disposition. A.R.S. § 41-1092.08(B).¹ In May 2021, the ASLD rejected the ALJ's decision with the justification that Elim Mining and LKY Copper Mountain Investment properly exercised their first rights of refusal. The ASLD modified the ALJ's findings, noting the right of first refusal communications with Elim Mining and LKY Copper Mountain Investment. Marsh timely appealed the ASLD's decision to the superior court. See A.R.S. § 12-904(A).

¶7 In July 2022, after full briefing and oral argument, the superior court affirmed the ASLD's decision to deny the applications because the surface owners exercised their statutory first rights of refusal. Marsh appeals, and this Court has jurisdiction under A.R.S. § 12-913 and Arizona Rule of Procedure for Judicial Review of Administrative Decisions 13.

DISCUSSION

¶8 At issue here is the denial of MEPs and the interplay of the APA with the rights of owners of land held under a state land patent. Though Marsh seemingly raises only one issue on appeal—whether the ASLD wrongfully relied on section 37-231(E)(2) rather than section 27-251(B) in denying his MEP applications—he also challenges the procedures followed by the ASLD by alleging that the ASLD's "post hoc justification" for denial was in error.

¶9 In a challenge to an agency action, a court's role is to review the record to determine if the agency's final "action is contrary to law, is not supported by substantial evidence, is arbitrary and capricious or is an abuse of discretion." A.R.S. § 12-910(F). See also Ariz. Comm'n of Agric. and Horticulture v. Jones, 91 Ariz. 183, 187, 370 P.2d 665 (1962). A court is limited to affirming, reversing, modifying or vacating and remanding the agency action. A.R.S. § 12-910(F).

¶10 For factual determinations "[this Court must] review the record to determine whether substantial evidence supports the agency's decision and whether the agency exercised its discretion reasonably and with due consideration," see State ex rel. Winkleman v. Ariz. Navigable Stream Adjudication Comm'n , 224 Ariz. 230, 238, ¶ 14, 229 P.3d 242, 250 (App. 2010). But in reviewing the evidence, no deference can be given to the agency's factual findings. see A.R.S. § 12-910(F). "Any legal issues addressed by the agency or the superior court" are reviewed de novo or without deference to the agency's interpretation of the law. A.R.S. § 12-910(F) ; Holcomb v. Ariz. Dep't of Real Estate , 247 Ariz. 439, 443, ¶ 9, 451 P.3d 795, 799 (App. 2019) ; accord. Cooke v. Ariz. Dep't of Econ. Sec. , 232 Ariz. 141, 144, ¶ 13, 302 P.3d 666, 669 (App. 2013).

I. SECTION 27-251(B) AND SECTION 37-231(E)(2) MUST BE READ TOGETHER.

¶11 The Legislature delegated to the ASLD the authority and responsibility to "administer all laws relating to lands owned by, belonging to and under the control of this state." A.R.S. § 37-102(A). As a trustee, the Commissioner of the ASLD has a fiduciary obligation to manage the portfolio to the benefit of the state land trust established by Arizona's enabling clause. See Forest Guardians v. Wells , 201 Ariz. 255, 260, ¶¶ 2, 13, 34 P.3d 364, 369(2001). With this responsibility, the Legislature outlined specific processes and procedures that dictate and limit the Commissioner's and the Department's authority. Much of the delegated authority and responsibility can be found in Title 37, Public Lands , but other titles also define the ASLD's and the Commissioner's authority. (See A.R.S. Title 27, Chapter 2, Mining Rights in Land ; Title 38, Public Officers and Employees ; Title 39, Public Records, Printing and Notices ; and Title 41, State Government .)

¶12 As part of its duties to administer state land, the ASLD is tasked with issuing MEPs, which allow individuals to survey state-owned land for potential mineral deposits that, if found, can then be mined under a mineral lease. The process for obtaining an MEP is outlined in section 27-251 of the Arizona Revised Statutes. It allows for any person to seek an MEP—even if they are not the property owner. A.R.S. § 27-251(A). The statute also states, "The application shall have priority over any other application for a mineral exploration permit involving the same state land which may be filed with the department subsequent to such time and date, and such land shall be deemed withdrawn as long as the application is pending." A.R.S. § 27-251(A).

¶13 Correspondingly, the ASLD is tasked with disposing of state land. When state land is sold to a purchaser, that purchaser is entitled to a patent demonstrating ownership of that parcel. A.R.S. § 37-251(A). A patent is the highest evidence of title and cannot be attacked in a collateral proceeding. See State v. Crawford , 7 Ariz. App. 551, 554-55, 441 P.2d 586 (1968). Land patents, though, are subject to reservations of subsurface materials that are retained by the state and provide a first right of refusal for MEPs. A.R.S. § 37-231(E). Specifically, section 37-231(E)(2) states in part that the ASLD "may issue" MEPs "provided that the surface owner or owners shall have the first right of refusal to acquire such mineral exploration permits." (Emphasis added.)

¶14 "When construing two statutes, this Court will read them in such a way as to harmonize and give effect to all of the provisions involved." State v. Bowsher , 225 Ariz. 586, 589, ¶ 14, 242 P.3d 1055, 1058 (2010) (citations omitted). "[I]f statutes relate[d] to the same subject and are thus in pari materia [upon the same matter], they should be construed together with other related statutes as though they constituted one law." Pima County by City of Tucson v. Maya Constr. Co. , 158 Ariz. 151, 155, 761 P.2d 1055, 1059 (1988). Statutes should be construed to give effect to their objects. A.R.S. § 1-211(B). "In construing the meaning of the several statutes they should be read together to give effect to all if possible." Ordway v. Pickrell , 112 Ariz. 456, 459, 543 P.2d 444, 447 (1975) (citations omitted).

¶15 Both sections 27-251(B) and 37-231(E)(2) relate to mineral exploration permits for state land, and both provide bases for the ASLD to deny an application for an MEP. Section 27-251(B) provides five specific reasons for denying an application for an MEP but also requires that the ASLD Commissioner "find[ ] that issuing the permit is in the best interest of the trust" before...