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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Laverty v. Alaska Railroad Corporation (12/1/00) sp-5338

Laverty v. Alaska Railroad Corporation (12/1/00) sp-5338

     Notice:  This opinion is subject to correction before publication in
the Pacific Reporter.  Readers are requested to bring errors to the attention of the
Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907)
264-0608, fax (907) 264-0878.


PAUL LAVERTY,                 )
                              )    Supreme Court Nos. S-8951/
          Appellant and       )    9071/9081
          Cross-Appellee,     )  
                              )    Superior Court No.
     v.                       )    3AN-97-1567 CI
an Alaska Public Corporation, )    O P I N I O N
PARTNERSHIP, an Alaska        )    [No. 5338 - December 1, 2000]
Partnership,                  )
          Appellees and       )
          Cross-Appellants.   )

          Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Anchorage,
                    Brian C. Shortell, Judge.

          Appearances:  Thomas E. Meacham, Anchorage,
for Appellant/Cross-Appellee.  William R. Hupprich, Anchorage, for
Appellee/Cross-Appellant Alaska Railroad Corporation.  Robert J.
Sato, Middleton & Timme, P.C., Anchorage, for Appellee/Cross-
Appellant Flamingo Brothers Partnership.

          Before:  Eastaugh, Fabe, Bryner, and
Carpeneti, Justices.  [Matthews, Chief Justice, not participating.]

          BRYNER, Justice.

          Paul Laverty sued to block a contract allowing the
Flamingo Brothers Partnership to extract gravel from Alaska
Railroad Corporation (ARRC) land, alleging that the contract
disposed of state land without prior public notice, in violation of
the Alaska Constitution's Public Notice Clause.  The superior court
ruled that the constitution bars ARRC from disposing of its lands
without public notice because they are "state lands" under the
constitution.  But the court denied declaratory relief, finding
that the public received adequate notice through Flamingo Brothers'
participation in the process of obtaining a conditional use permit
to extract its gravel.  The court also denied injunctive relief,
finding that laches applied because Laverty failed to sue before
Flamingo Brothers incurred substantial costs in the permitting
process.  Laverty appeals; ARRC and Flamingo Brothers cross-appeal. 
We affirm the court's decision on laches and its declaration that
the Public Notice Clause applies to ARRC lands.  But we reverse its
finding on the issue of notice, holding that the permitting process
failed to give adequate "prior" notice of the contract, as the
constitution requires.  
          The Government Hill neighborhood in the Municipality of
Anchorage is home to an abandoned apartment complex, an ARRC rail
yard, and valuable gravel deposits.  Paul Laverty resides in
Government Hill.  He participated in a task force, chaired by an
ARRC representative, that was to make recommendations regarding
ways to redevelop the abandoned apartments.  One option the task
force considered was to offset the cost of demolishing the
apartments by selling gravel from the underlying property.
          In October 1995, while the task force had the
demolition/gravel-excavation plan under advisement, ARRC and
Flamingo Brothers signed a four-year "license agreement" giving
Flamingo Brothers the right to enter the nearby ARRC rail yard to
extract 670,000 cubic yards of gravel, over a four-year period, in
exchange for a royalty.  Beginning in December 1995, Flamingo
Brothers sought approval from the Municipality of Anchorage for a
zoning change and a conditional use permit allowing gravel
excavation on the ARRC parcel.  The permitting process consumed
more than a year, and Laverty participated in some of the permit
hearings, opposing the application.  The municipality nevertheless
approved the new zoning and the conditional use permit in
June 1997.
          Laverty took other steps to block the contract.  Between
January 1 and February 2, 1996, he consulted a lawyer, appeared
before the ARRC board, and wrote his state legislators.  The lawyer
told him that the ARRC/Flamingo Brothers contract probably violated
article VIII, section 10 of the Alaska Constitution (the Public
Notice Clause), which provides: "No disposals or leases of state
lands, or interests therein, shall be made without prior public
notice and other safeguards of the public interest as may be
prescribed by law."  The ARRC Board noted Laverty's comments but
promised no action.  The legislature initiated an audit. 
Ultimately, none of these actions led to recission of the contract. 
          On February 25, 1997, more than fifteen months after he
learned that ARRC and Flamingo Brothers had signed the contract,
Laverty filed his superior court action.  He alleged that ARRC had
violated the Public Notice Clause by disposing of an interest in
state lands without prior public notice.  Laverty sought an
injunction blocking the contract as well as a declaration that it
violated the Public Notice Clause. [Fn. 1] 
          The parties filed cross-motions for summary judgment,
which the superior court decided in February 1998.  The court
concluded that ARRC lands are state lands under the Public Notice
Clause because of ARRC's "substantial and intimate connections to
the state."  Nevertheless, the court denied Laverty injunctive and
declaratory relief.  The court found that Laverty's claim for
injunctive relief was barred by laches.  It reasoned that even
though Laverty was advised that he had a viable constitutional
cause of action soon after the gravel contract was signed, he
waited over a year to file suit.  During that time, he tried to
block the gravel contract by appearing before the ARRC board and by
asking his legislators to look into the matter.   At the same time,
he participated in municipal hearings relating to the Flamingo
Brothers' conditional use permit, knowing that the company had to
pay for an expensive geotechnical study to win the municipality's
approval.  The court judged Laverty's delay to be unreasonable
under the circumstances, and concluded that it unfairly prejudiced
Flamingo Brothers. 
          The superior court also found that, although the Public
Notice Clause applied to the gravel extension contract, Flamingo
Brothers' participation in the land use permit application process
gave the necessary constitutional notice.  The court ruled that
this notice occurred prior to the disposal of ARRC's interest in
its lands because, in the court's view, obtaining the needed
permits was a condition precedent to the transfer.
          Based on these rulings, the superior court entered
judgment in favor of ARRC and Flamingo Brothers, dismissing
Laverty's complaint with prejudice.  Although the court concluded
that the defendants had prevailed in the litigation, it declined to
award them attorney's fees, finding that Laverty was a public
interest litigant.
          On appeal, Laverty argues that the superior court erred
in denying injunctive relief and in declining to enter a
declaratory judgment.  He also contends that, since he prevailed on
his claim that the Public Notice Clause applies to ARRC lands, the
court should have awarded him prevailing-party attorney's fees.  On
cross-appeal, ARRC and Flamingo Brothers contend that the superior
court erred in declaring that the Public Notice Clause applies to
ARRC lands; they also contend that the doctrine of laches should
have precluded the court from declaring the law on this issue. 
     A.   Laches
          Laverty learned of the disputed contract shortly after it
was signed in October 1995, knew of his constitutional cause of
action against ARRC by January 1996, but failed to file suit until
February 1997.  Both ARRC and Flamingo Brothers raised the
affirmative defense of laches against Laverty's claim.  On summary
judgment, the superior court applied laches to deny Laverty
injunctive relief but concluded that the defense did not bar
declaratory relief. 
          Whether laches bars a suit is a question properly
addressed to the trial court's discretion; we will not overturn its
decision unless our review of the record leaves us with a definite
and firm conviction that a mistake has been committed. [Fn. 2]  To
mount a laches defense, "the defendant must show, (1) that the
plaintiff has unreasonably delayed in bringing the action, and (2)
that this unreasonable delay has caused undue harm or prejudice to
the defendant." [Fn. 3]
          The superior court ruled that laches barred Laverty's
request for an injunction against performance of the gravel
contract because Laverty knew, over the course of his one-year
delay in bringing suit, that Flamingo Brothers was spending large
amounts of time and money on geotechnical studies to support its
land use permit applications.  Relying on our decision in the
similar case of City and Borough of Juneau v. Breck, [Fn. 4] the
superior court reasoned that the lost time and money caused by an
injunction would unduly prejudice the Flamingo Brothers. 
          We see no valid reason to disturb this ruling.  Laverty
knew of his cause of action over a year before he brought it. 
While he made several ineffective attempts to resolve his
grievances without litigation, they were exhausted more than four
months before he brought suit, when a legislative audit report
issued without affecting the contract.  In the meantime, Laverty
knew that Flamingo Brothers had undertaken an expensive rezoning
and conditional use permit application process.  In these
circumstances, we are left with no definite and firm conviction
that the superior court abused its discretion in applying laches as
a defense to Laverty's request to enjoin performance of the gravel
          We must separately examine the superior court's further
conclusion that laches did not bar Laverty's claim for declaratory
relief.  The court reached this conclusion because it found that
declaring ARRC lands to be subject to the Public Notice Clause
would not result in "any harm or prejudice to the defendants in
this particular case." 
          Alaska's Declaratory Judgment Act gives courts the
authority to declare rights without granting a separate legal or
equitable remedy.
          In case of an actual controversy in the state,

the superior court, upon the filing of an appropriate pleading, may
declare the rights and legal relations of an interested party
seeking the declaration, whether or not further relief is or could
be sought.  The declaration has the force and effect of a final
judgment or decree and is reviewable as such.  Further necessary or
proper relief based on a declaratory judgment or decree may be
granted, after reasonable notice and hearing, against an adverse
party whose rights have been determined by the judgment.[ [Fn. 5]]
This provision requires declaratory judgment actions to be
associated with an actual case or controversy; they do not open the
door for hypothetical adjudications, advisory opinions, or answers
to moot questions.  Nevertheless, we have noted that "declaratory
relief may be sought to determine the validity and construction of
statutes and public acts." [Fn. 6]  
          Courts in other jurisdictions have described the
declaratory judgment as a sui generis form of relief, arising
neither at law nor at equity. [Fn. 7]  We have similarly described
the Declaratory Judgment Act as adding "another remedy to existing
legal and equitable remedies." [Fn. 8]  These characterizations
cause a problem when the affirmative defense of laches is raised
against a claim for declaratory relief, since laches is an
equitable defense against equitable causes of action, but not a
legal defense against actions at law. [Fn. 9]  Courts often resolve
this problem by looking to the circumstances surrounding the claim
and applying laches if the claim would have arisen in equity before
declaratory judgment was available. [Fn. 10]  
          Here, Laverty sought a declaration and a parallel
injunction, which might lead courts in some jurisdictions to treat
the declaration as equitable relief, subject to laches.  In Alaska,
however, the issue is complicated by the broad right of standing
that our law confers on citizen-taxpayers.  Unlike many
jurisdictions, Alaska permits citizen-taxpayer standing when a case
raises issues of "public significance" and the person bringing the
case is an "appropriate" party to raise the issue.  Our law thus
recognizes that declaratory relief is often the simplest and most
effective form of judgment in cases involving significant public
interest brought pursuant to citizen-taxpayer standing. [Fn. 11]  
          Laverty's claim that ARRC violates the Alaska
Constitution when it disposes of its lands without prior public
notice falls squarely within this category.  But because Laverty
simultaneously requested declaratory and injunctive relief, his
interest in placing this important question before the courts
potentially competes with the underlying interest promoted by the
defense of laches -- avoiding unfair prejudice that results from
unreasonable delay.  Courts should harmonize these competing
interests when possible. [Fn. 12]  Accordingly, a finding that
injunctive relief would be blocked by laches does not necessarily
mean that an accompanying claim for declaratory relief should also
be blocked.  Rather, courts should independently examine each cause
of action to determine whether laches should apply.  In the present
case, the superior court recognized this when it found that a
declaration of ARRC's constitutional duty to notify the public
before disposing of its land would not, by itself, prejudice the
          The record supports this finding.  Having raised the
affirmative defense of laches, ARRC and Flamingo Brothers bore the
burden of demonstrating that both elements of the defense --
unreasonable delay and undue prejudice -- weighed against issuing
a declaratory judgment. [Fn. 13]  While Flamingo Brothers
persuasively argued that an injunction barring performance of the
disputed contract would cause serious prejudice, the company never
specified how a bare declaration of ARRC's constitutional duty to
comply with the Public Notice Clause -- that is, a declaratory
judgment addressing the constitutional issue but declining to
enjoin contractual performance -- would have exposed either party
to harm in this case.  Moreover, ARRC pursued the defense of laches
only by joining in Flamingo Brothers' laches argument.  Yet
Flamingo Brothers' claim of prejudice addressed only Flamingo
Brothers' own interests -- the time and money the company had
expended in the permitting process.  Flamingo Brothers did not
establish -- or even claim -- that entry of a judgment declaring
ARRC's duty to comply with the Public Notice Clause would cause
ARRC any prejudice.  Since the record provides no basis for
concluding that a declaratory judgment against ARRC would have
unduly prejudiced ARRC's interests in this case, the superior court
did not abuse its discretion in concluding that laches did not bar
declaratory relief.
     B.   The Public Notice Clause
          Next we turn to ARRC's claim that its lands are not state
lands subject to the Public Notice Clause.  Because the Public
Notice Clause prohibits disposal of "state lands, or interests
therein, . . . without prior public notice," [Fn. 14] we must
consider whether ARRC's lands are "state lands," whether the
disputed contract for extraction of gravel amounts to a "disposal"
of the land "or interests therein," and whether there was "prior
public notice" of the disposal.  In reviewing these questions of
law, we apply our independent judgment. [Fn. 15] 
          1.   ARRC's lands are state lands.
          ARRC argues that because the Alaska Railroad Corporation
Act gives it "a legal existence independent of and separate from
the state," [Fn. 16] its lands cannot be considered "state lands." 
But the same section of the Act that declares ARRC's independent
and separate existence also makes ARRC "an instrumentality of the
State within the Department of Commerce and Economic Development."
[Fn. 17]  Given this language, as well as other provisions of the
Act, we conclude that ARRC may not evade the strictures of the
Public Notice Clause by "resorting to the corporate form." [Fn. 18] 

          We find guidance in the United States Supreme Court's
decision in a closely analogous case, Lebron v. National Railroad
Passenger Corp. [Fn. 19]  In Lebron, the Court addressed the
application of the United States Constitution to the National
Passenger Rail Corporation (Amtrak).  Lebron contended that Amtrak,
as a government entity, violated his First Amendment rights by
blocking his display of a politically-charged advertisement on
Amtrak trains.  Amtrak responded that it was not a government
entity because Congress had given it independent corporate status. 
But the Court rejected this response, holding that, while Congress
could give Amtrak independent corporate status in matters within
Congress's control, it could not determine Amtrak's status as a
government entity under the Constitution: 
          If Amtrak is, by its very nature, what the
Constitution regards as the Government, congressional pronouncement
that it is not such can no more relieve it of its First Amendment
restrictions than a similar pronouncement could exempt the Federal
Bureau of Investigation from the Fourth Amendment.  The
Constitution constrains governmental action "by whatever
instruments or in whatever modes that action may be taken."[ [Fn.
          The Court thus concluded that Amtrak was bound to honor
Lebron's First Amendment rights because, despite its
Congressionally given independent status, it "is an agency or
instrumentality of the United States for the purpose of individual
rights guaranteed against the Government by the Constitution." [Fn.
          The statutory basis and management structure of the
Alaska Railroad Corporation parallels that of Amtrak as described
by the Supreme Court.  Both were created by special statute. 
Amtrak was created "explicitly for the furtherance of federal
governmental goals;" [Fn. 22] the ARRC was created for the
"continued operation of the Alaska Railroad[,] [which is] an
essential government function of the state." [Fn. 23]  Amtrak's
board of directors consists of nine members, eight of whom are
politically appointed. [Fn. 24]  ARRC's board of directors
"consists of the commissioner of community and economic
development, the commissioner of transportation and public
facilities, and five members appointed by the governor." [Fn. 25] 
As with Amtrak, a portion of the appointed members must be
confirmed by the legislature. [Fn. 26]  And Alaska's control over
ARRC's board is more pronounced than the federal government's
control over Amtrak's, since ARRC directors serve their five-year
terms "at the pleasure of the governor." [Fn. 27]  
          Like Amtrak, ARRC is not merely in the temporary control
of Alaska, "as a private corporation whose stock comes into [state]
ownership might be," [Fn. 28] but was created by the legislature to
carry out the "essential government function" of operating the
Alaska Railroad. [Fn. 29]  In its agreement with Flamingo Brothers
the railroad refers to itself as a "governmental authority." [Fn.
30]  Finally, AS 42.40.940 provides that state ownership of the
railroad may end only if "(1) it can be assured that the railroad
will continue to operate after the sale or lease; and (2) under the
terms of the sale or lease, the state will receive the amount of
money it has spent in connection with the Alaska Railroad." [Fn.
31]  Such a sale is subject to approval by the legislature. [Fn.
32]  In the event the corporation is dissolved other than through
such a sale, its assets revert to the state. [Fn. 33]
          ARRC nevertheless points to evidence that the legislature
intended to grant it an unusual amount of independence.  For
example, under the Alaska Railroad Corporation Act, ARRC has the
independent capacity to sue and be sued, independent management
structure, exemption from many laws that apply to the other
branches of the state, and an independent budget. 
          But these provisions grant independence from the state in
matters that are within the legislature's control.  ARRC does not
explain how the legislative intent to confer independence in these
matters exempts ARRC from burdens that originate in the
constitution and that apply to it as an instrumentality of the
state.  Because the railroad remains, "by its very nature, what the
Constitution considers to be government," [Fn. 34] we conclude that
it must satisfy the constitutional restrictions imposed by the
Public Notice Clause.  
          Contrary to ARRC's contention, this conclusion does not
"render much of [the Alaska Railroad Corporation Act] superfluous."
ARRC claims, for instance, that its exemption from the Alaska Land
Act [Fn. 35] -- granted at AS 42.40.920(b)(11) -- becomes
meaningless if its lands are subject to the Public Notice Clause. 
But this exemption simply allows ARRC to develop its own procedures
for complying with the Public Notice Clause, which need not mirror
the rigorous procedural safeguards set out in the Alaska Lands Act. 
          ARRC insists, however, that the legislature has the power
to declare that ARRC's lands are not "state lands," just as it
legislated the status of ARRC's employees and debt: "[I]f the
legislature has the authority to determine that ARRC employees are
not 'state employees'[ [Fn. 36]] and that ARRC debts are not 'state
debts,'[ [Fn. 37]] it certainly has the authority to determine that
ARRC land is not 'state land.'"  In asserting that the legislature
defined its lands not to be state lands, ARRC directs us to several
scattered sections of the Alaska Railroad Corporation Act.  These
include ARRC's exemption from the State Lands Act, [Fn. 38]
provisions authorizing ARRC to use "state land" adjacent to its
rights of way in an emergency, [Fn. 39] and provisions allowing
municipalities or the state to request authorization for public use
of railroad land. [Fn. 40] 
          Yet the state's obligation to "state employees," its
authority to incur "state debts," and its duty regarding disposal
of "state lands" are regulated by separate constitutional
provisions. [Fn. 41]  Hence, just because the legislature has
authority to define ARRC employees as non-state employees and to
preclude ARRC from incurring state debt, it hardly follows, as ARRC
argues it does, that the legislature "certainly has the authority
to determine that ARRC land is not 'state land.'" [Fn. 42] 
Moreover, unlike the Act's explicit provisions dealing with "state
employee" and "state debt," [Fn. 43] ARRC's proposed definition of
"state lands" would have to be gleaned by implication from various
non-definitional provisions.  We decline to recognize by
implication a Public Notice Clause exemption for all of ARRC's
          As further proof that its lands are not state lands, ARRC
seeks to invoke "a series of Alaska Supreme Court decisions that
support ARRC's contention that the term 'state' as used in the
Alaska Constitution does not include public corporations such as
ARRC."  But the cases cited by ARRC are readily distinguishable:
each concerns either an action by a public corporation that we
determined was constitutionally permissible -- regardless of
corporate status [Fn. 44] -- or a public corporation's authority to
exercise a government power or immunity that the legislature had
denied it. [Fn. 45]  None of these cases relates to a government
corporation's power to take action that would be constitutionally
impermissible by the state.  Our precedent thus fits into the
Lebron framework: public corporations, particularly those
significantly controlled by the state, must meet constitutional
mandates, but may be regulated by statute separately from other
government entities.     
          Next, ARRC argues that the Alaska Department of Natural
Resources (DNR) does not consider ARRC's lands to be state lands. 
ARRC builds this argument on AS 38.04.060, which requires the
Commissioner of DNR to compile and maintain an inventory of "all
state land."  Because DNR does not list ARRC's land on this
inventory, ARRC reasons that the lands must not be state lands. 
ARRC urges us to defer to DNR's determination.  
          But the question at hand is whether ARRC lands come under
the constitutional, not the statutory, meaning of "state lands."
Since DNR has no expertise in determining constitutional meaning or
authority to do so, we see no ground for deference. [Fn. 46] 
Moreover, the record fails to establish that omission of ARRC lands
from the statutory inventory actually signals the state's belief
that those lands are not "state lands" for purposes of the Public
Notice Clause.  An affidavit of a DNR Section Chief explicitly
disavows any such implication.  And as Laverty frequently notes,
the Alaska Attorney General has issued an Informal Opinion
declaring that ARRC must provide prior notice before disposing of
its lands. [Fn. 47] 
          Finally, ARRC contends that its lands cannot be state
lands because the federal government conveyed them directly to
ARRC, and ARRC holds title to them in its own name.  But the Alaska
Railroad Transfer Act shows just the opposite, establishing that
Congress transferred railroad ownership to Alaska in a way that
made federal railroad lands state lands.  The Act gave the
Secretary of Transportation authority to "transfer all rail
properties of the Alaska Railroad to the State," [Fn. 48] defining
"State" to mean, "the State of Alaska or the State-owned railroad
as the context requires." [Fn. 49]  In essence, then, the
transaction was a federal-to-state grant: the federal government
gave Alaska all of the federal railroad's lands, allowing the state
to designate the form of the state entity that would receive them. 
The way the state chose to take title, hold, and manage those lands
is immaterial to whether they are governed by the Alaska
Constitution's mandate. 
          In short, the superior court correctly ruled that,
"[w]hile ARRC enjoys a considerable degree of autonomy in running
the railroad and managing its assets, its substantial and intimate
connections to the state ultimately make ARRC lands 'state lands'
for the purposes of [the Public Notice Clause]."
          2.   The gravel contract disposed of an interest in land.
          ARRC argued below and argues here that "the ARRC/Flamingo
license does not constitute a disposal of an interest in land
within the scope of Section 10."  Whether the Flamingo Brothers'
gravel contract disposed of an interest in land depends on the
terms of the agreement.  The relevant language of the contract
          In consideration of the payment of royalties

as set forth in paragraph 4 below, ARRC grants to Licensee
[Flamingo Brothers] the exclusive right and privilege, at any and
all times during the term of this agreement, to enter upon,
produce, excavate, screen and remove gravel from all or any part of
that certain real estate situated in the Anchorage Recording
District, Third Judicial District, State of Alaska, shown
highlighted in yellow on the attached Exhibit A (the "Property"). 
ARRC shall provide reasonable access to the Property from existing
public areas.
The contract goes on to say:
          ARRC further grants to Licensee the right to

use all or any portion of the Property for the purpose of erecting
any and all equipment that may be used by Licensee in the
production of gravel, and the right to grade roads or trails to any
and all points on the Property necessary or useful in the
production of gravel from the Property.  Licensee shall not,
however, stockpile product on the Property other than temporarily.
          Although the gravel contract declares itself a "License
Agreement," these terms do not describe a license, but a form of
easement.  The Restatement of Property (First) describes a license
as denoting
          an interest in land in the possession of

another which 
          (a)  entitles the owner of the interest to a
use of the land, and 

          (b)  arises from the consent of the one whose
interest in the land used is affected thereby, and

          (c)  is not incident to an estate in the land,

          (d)  is not an easement.[ [Fn. 50]] 
The distinction between an easement and a license is best explained
by the Restatement's illustrations:

               . . . . 

               2.   A, the owner and possessor of

Whiteacre, gives to B the privilege of entering upon Whiteacre and
taking as much coal as B needs for his smelter located on Blackacre
as long as the smelter remains in operation.  The privilege of
removing the coal is an easement[ [Fn. 51]] and is not a license.
               3.   A, the owner and possessor of White-
          acre, sells to B a car of coal already mined

and standing on Whiteacre, which is owned and possessed by A.  If
there is an effective sale of the coal, B has a license coupled
with an interest to go on Whiteacre to remove the coal.[ [Fn. 52]]
Because the agreement in this case gave Flamingo Brothers the
privilege of entering upon ARRC's land and mining gravel, it is a
kind of easement, specifically a "profit." [Fn. 53]  The
distinction between a license and a profit is important because
this court's precedent suggests that a mere license ordinarily may
not be an interest in land sufficient to trigger the Public Notice
Clause. [Fn. 54]         ARRC champions a different view of the
contract, suggesting that it might be characterized as a brokerage
agreement.  ARRC draws this suggestion from the legislative audit
which described the contract as follows:
          This contract appears similar to a

broker/client relationship.  Through the contract, ARRC, in
substance, has hired a broker to find a market for the railroad's
gravel and then extract it and transport it to the buyer; 
[Flamingo Brothers] is simply a conduit between ARRC and the
buyers.  Such an agency relationship cannot, in our opinion, be
construed to be a "disposal of real property," as stated above.[[Fn. 55]]
          But the auditor gave this description as part of a
broader statement alleging that ARRC had improperly circumvented
its procurement rules. [Fn. 56]  In responding to the auditor's
draft report, ARRC advanced a very different argument from the one
it offers here.  Defending its decision to bypass its procurement
rules in agreeing to the Flamingo Brothers' contract, ARRC
insisted, "we continue to believe a credible argument can be made
that a contract appurtenant to a disposal of real property comes
within the [procurement rule] exemption." 
          ARRC cannot have it both ways: either it disposed of real
property and was not subject to procurement rules, as it claimed
when it dealt with the auditor, or it violated its own procurement
rules by arranging this contract.  Since ARRC acknowledged to the
auditor that it structured the Flamingo Brothers' contract as a
land disposal to avoid its procurement rules, it cannot plausibly
claim here, as a theory for exempting itself from the
constitutional standard for disposing of land, that all it did was
procure gravel brokerage services.
          ARRC additionally maintains that, by authorizing certain
negotiated sales of gravel without "advertisement" under
AS 38.05.115, the legislature has effectively determined that the
sale of gravel is not a disposal of an interest in land.  This
argument fails because AS 38.05.115 would have no application to
the Flamingo Brothers' contract.  The statute, which deals with
disposal of timber and "other materials," does permit the
Commissioner of DNR to negotiate certain contracts without
advertisement, [Fn. 57] but, with respect to "other materials,"
limits the commissioner's negotiating authority to contracts
involving 25,000 cubic yards per year -- a far smaller quantity
than the four-year, 670,000 cubic-yard Flamingo Brothers' contract.
[Fn. 58]  
          3.   The municipal permitting process did not provide
"prior public notice" of the Flamingo Brothers' contract.

          Although the superior court declared that the Public
Notice Clause applied to the Flamingo Brothers' contract because
the contract disposed of an interest in state lands, the court
found that the public received adequate constitutional notice
through the extensive notice that accompanied the Flamingo
Brothers' application for a zoning change and conditional use
permit.  Relying on this finding, the superior court dismissed
Laverty's suit and declined to enter a declaratory judgment in his
favor.  On appeal Laverty argues that, because the permitting
process occurred after Flamingo Brothers acquired ARRC's interest,
the process could not have satisfied the constitution's demand that
the public receive notice "prior" to disposal. 
          This argument's validity turns on whether Flamingo
Brothers acquired ARRC's interest when the contract was inked or
when the conditional use permit was issued.  The superior court
found the latter, reasoning that obtaining a permit was a condition
precedent of the Flamingo Brothers' contract.  But the terms of the
contract belie this conclusion.  The first paragraph of the
contract reads:
          In consideration of the payment of royalties
          . . . ARRC grants to [Flamingo Brothers] the

exclusive right and privilege, at any and all times during the term
of this agreement, to enter upon, produce, excavate, screen and
remove gravel from all or any part of that certain real estate
situated in the Anchorage Recording District, Third Judicial
District, State of Alaska, shown highlighted in yellow on the
attached Exhibit A (the "Property").  ARRC shall provide reasonable
access to the Property from existing public areas. 
The contract's fifth paragraph declares that the "term of this
agreement shall be four (4) years, beginning as of October 12,
1995."  Thus, the language of the contract indicates that Flamingo
Brothers had the right to enter onto the ARRC property to prepare
for its operations immediately.  Indeed, the company had to do so
in order to complete geotechnical studies required by the
permitting process.   
          While the contract did oblige Flamingo Brothers to obtain
all necessary and desirable permits, it did not make the transfer
of ARRC's interest in the gravel contingent on their issuance:
          15.  Observance of Laws.  Licensee, at all

times during the term of this agreement, at its own expense, and
with all due diligence, shall observe and comply with all laws,
ordinances, rules, and regulations which are now in effect or may
later be adopted by any governmental authority, including the
Alaska Railroad Corporation, and which may be applicable to the
Licensee's use or occupancy of the Property or of any improvement
on the Property.  Without limiting the generality of the foregoing,
Licensee shall obtain, at its sole expense, any conditional use
permit (which permit will be held in the name of the Licensee),
rezoning, replatting, or other governmental approvals required or
desired as a result of its proposed operations. 
          This provision literally required Flamingo Brothers to
obtain its conditional use permit "during the term of this
agreement," not as a condition precedent thereto.  The contract
thereby placed the risk of failing to secure necessary permits on
the party holding the property right -- Flamingo Brothers.  In so
doing, it necessarily recognized that ARRC's property interest
passed to Flamingo Brothers upon execution.  Indeed, ARRC fails to
explain how Flamingo Brothers could have obtained a conditional use
permit in its own name, as required by Paragraph 15, without
holding a legal interest in the property for which the conditional
use permit would be granted.   
          Based on the terms of the contract, we conclude that ARRC
transferred its interest to Flamingo Brothers upon signing.  Thus,
assuming that the permitting process otherwise sufficed as public
notice of the contract, it failed to satisfy the Public Notice
Clause's requirement that notice occur prior to, not after,
disposal of the state's property interest. 
     C.   Attorney's Fees
          Laverty appeals the superior court's decision denying him
attorney's fees.  Although a trial court's award of attorney's fees
is discretionary and will be overturned only for an abuse of
discretion, [Fn. 59] our decision reversing the court's ruling on
issue of notice requires a remand for entry of a declaratory
judgment for Laverty and against ARRC.  Accordingly, the superior
court will need to revisit the issue of attorney's fees on remand.
[Fn. 60]  We agree with the superior court that Laverty qualifies
as a public interest litigant; barring exceptional circumstances,
he will therefore be entitled to an award of full reasonable fees
against ARRC upon entry of judgment in his favor. [Fn. 61]
          The superior court's decision to bar injunctive relief
under the doctrine of laches is AFFIRMED, as is the court's
declaration that the Alaska Railroad Corporation is subject to
article VIII, section 10 of the Alaska Constitution.  The court's 
finding that the land use permitting process served as adequate
prior public notice is REVERSED.  Accordingly, we VACATE the order
dismissing Laverty's complaint and REMAND this case for entry of a
declaratory judgment in Laverty's favor, and for reconsideration of
the attorney's fees issue.


Footnote 1:

     Laverty also alleged violations of ARRC's procurement rules,
but he later dropped this claim. 

Footnote 2:

     See City and Borough of Juneau v. Breck, 706 P.2d 313, 315
(Alaska 1985) (quoting Moore v. State, 553 P.2d 8, 15 (Alaska

Footnote 3:


Footnote 4:


Footnote 5:

     AS 22.10.020(g).  See also Jefferson v. Asplund, 458 P.2d 995,
996 (Alaska 1969).

Footnote 6:

     Jefferson, 458 P.2d at 999.

Footnote 7:

     See Taft v. United States, 824 F. Supp. 455, 466 n.7 (D. Vt.
1993); Lacy v. Mid-Continent Cas. Co., 247 F. Supp. 667, 673 (S.D.
Tex. 1965); Inland Steel Prods. Co. v. MPH Mfg. Corp., 25 F.R.D.
238, 242 (N.D. Ill. 1959); Cronin v. State Farm Fire & Cas. Co.,
958 S.W.2d 583, 587 (Mo. App. 1997); Main Street Movies v. Wellman,
557 N.W.2d 641, 643 (Neb. 1997); Space Master Int'l, Inc. v. Porta-
Kamp Mfg. Co., 794 S.W.2d 944, 947 (Tex. App. 1990).

Footnote 8:

     Jefferson, 458 P.2d at 997.

Footnote 9:

     See Hanson v. Kake Tribal Corp., 939 P.2d 1320, 1325 n.1
(Alaska 1997).

Footnote 10:

     See, e.g., KLLM, Inc. Employee Health Protection Plan v.
Ontario Community Hosp., 947 F. Supp. 262 (S.D. Miss. 1996)
(examining nature of underlying issues to determine how they would
have arisen had Congress not enacted the Declaratory Judgment Act).

Footnote 11:

     See Baxley v. State, 958 P.2d 422, 428 (Alaska 1998) (seeking
declaration that act authorizing amendment of certain oil and gas
leases violated Uniform Application Clause and Public Notice Clause
of Alaska Constitution); Trustees for Alaska v. State, Dep't of
Natural Resources, 736 P.2d 324, 326 (Alaska 1987) (seeking
declaration that the state's mineral leasing system violated
section of Alaska Statehood Act); Gilman v. Martin, 662 P.2d 120,
123 (Alaska 1983) ("Any resident or taxpayer of a municipality has
a sufficient interest in the disposition of a significant number of
acres of the municipality's land to seek a declaratory judgment as
to the validity of the disposition."). 

Footnote 12:

     See Lake and Peninsula Borough v. Local Boundary Comm'n, 885
P.2d 1059, 1065 (Alaska 1994).  In Lake, we upheld the trial
court's refusal to apply laches against villages that sought
injunctive and declaratory relief against incorporation of the Lake
and Peninsula Borough.  Although the suit was not for damages, we
held that because the parties were "'seeking to enforce a legal
right, as opposed to invoking the discretionary equitable relief of
the courts, the applicable statute of limitations should serve as
the sole line of demarcation for the assertion of that right.'" 
Id. at 1064-65 (quoting Kodiak Elec. Ass'n v. DeLaval Turbine,
Inc., 694 P.2d 150, 157 (Alaska 1984)).  

Footnote 13:

     See Winn v. Mannhalter, 708 P.2d 444, 450 (Alaska 1985).

Footnote 14:

     Alaska Const. art. VIII, sec. 10.

Footnote 15:

     See Laborers Local No. 942 v. Lampkin, 956 P.2d 422, 429 n.4
(Alaska 1998).

Footnote 16:

     AS 42.40.010.

Footnote 17:


Footnote 18:

     Lebron v. National R.R. Passenger Corp., 513 U.S. 374, 397

Footnote 19:


Footnote 20:

     Id. at 392 (quoting Ex parte Virginia, 100 U.S. 339, 346-47

Footnote 21:

     Id. at 394.

Footnote 22:

     Id. at 397.

Footnote 23:

     AS 42.40.010.

Footnote 24:

     See Lebron, 513 U.S. at 397.

Footnote 25:

     AS 42.40.020.

Footnote 26:

     See id. (requiring that the five politically appointed members
be "confirmed by a majority of the members of the legislature in
joint session").

Footnote 27:

     Compare AS 42.40.030 with Lebron, 513 U.S. at 398 ("It is true
that the directors of Amtrak, unlike commissioners of independent
regulatory agencies, are not, by the explicit terms of the statute,
removable by the President for cause, and are not impeachable by

Footnote 28:

     Lebron, 513 U.S. at 398.

Footnote 29:

     AS 42.40.010.

Footnote 30:

     "Licensee . . . shall observe . . . all laws, ordinances,
rules, and regulations which are now in effect or may later be
adopted by any governmental authority, including the Alaska
Railroad Corporation . . . ."  (Emphasis added.)

Footnote 31:

     AS 42.40.940.

Footnote 32:

     See id.

Footnote 33:

     AS 42.40.950.

Footnote 34:

     Lebron, 513 U.S. at 392.

Footnote 35:

     AS 38.05.

Footnote 36:

     See AS 42.40.710 ("Employees of the Alaska Railroad are
employees of the corporation and not of the state.  However,
employees of the corporation shall be treated as employees of the
state for the purposes of AS 39.52.").

Footnote 37:

      AS 42.40.690 ("Credit of state not pledged") reads, in
relevant part:

          (a)  The state and its political subdivisions

are not liable for the debts of the corporation.  Bonds issued
under this chapter are payable solely from the revenue or assets of
the corporation and do not constitute a 
               (1)  debt, liability, or obligation
of the state or of a political subdivision of the state; or

               (2)  pledge of the faith and credit
of the state or of a political subdivision of the state.

          (b)  The corporation may not pledge the credit

or the taxing power of the state or its political subdivisions. 
Each bond issued under this chapter shall contain on its face a
statement that
               (1)  the corporation is not
obligated to pay it or the interest on it except from the revenue
or assets pledged for it; and

               (2)  neither the faith and credit
nor the taxing power of the state or of a political subdivision of
the state is pledged to the payment of it.

Footnote 38:

     See AS 42.40.920(b)(11).

Footnote 39:

     See AS 42.40.380.

Footnote 40:

     See AS 42.40.420.

Footnote 41:

     See Alaska Const. art. XII, sec. 6  ("The legislature shall
establish a system under which the merit principle will govern the
employment of persons by the State."); art. VIII, sec. 10 ("No
disposals or leases of state lands, or interests therein, shall be
made without prior public notice and other safeguards of the public
interest as may be prescribed by law."); and art. IX, sec. 8
state debt to be incurred only when "authorized by law for capital
improvements . . . and ratified by a majority of the qualified
voters of the State who vote on the question"). 

Footnote 42:

     Notably, the Alaska Constitution generally prohibits incurring
state debt.  See Alaska Const. art. IX, sec. 8; cf. DeArmond v.
State Dev. Corp., 376 P.2d 717, 722 (Alaska 1962).  And the
legislature had little choice but to exclude ARRC employees from
the state's employment system at ARRC's inception, since the
Federal Railroad Transfer Act guaranteed Alaska Railroad's federal
employees the rights they held as federal employees for two years
after the railroad's transfer to ARRC.  See 45 U.S.C. sec. 1206

Footnote 43:

     See AS 42.40.690, .710.

Footnote 44:

     See Walker v. Alaska State Mortgage Ass'n, 416 P.2d 245, 253
(Alaska 1966); DeArmond, 376 P.2d at 719-20.

Footnote 45:

     See City of Nome v. Block No. H, Lots 5, 6 & 7, 502 P.2d 124,
125 (Alaska 1972); Bridges v. Alaska State Hous. Auth., 349 P.2d
149 (Alaska 1959).

Footnote 46:

      See, e.g., Carr-Gottstein Properties v. State, 899 P.2d 136,
139-40 (Alaska 1995) (courts defer to agency decisions involving
agency expertise).

Footnote 47:

     See Cissna v. Stout, 931 P.2d 363, 368 (Alaska 1996) ("While
opinions of the attorney general are entitled to some deference,
they are not controlling on matters of statutory interpretation.").

Footnote 48:

     45 U.S.C. sec. 1203 (1994).

Footnote 49:

     45 U.S.C. sec. 1202(13) (1994).  The Act further defines
"State-owned railroad" to mean "the authority, agency, corporation
other entity which the State of Alaska designates or contracts with
to own, operate or manage the rail properties of the Alaska
Railroad or, as the context requires, the railroad owned, operated,
or managed by such authority, agency, corporation, or other
entity."  Id. at sec. 1202(14). 

Footnote 50:

     Restatement (First) of Property: Servitudes sec. 512 (1944)
(emphasis added).

Footnote 51:

     Specifically a "profit."  See Restatement (Third) of Property:
Servitudes sec. 1.2 (2000).  Where an interest in land entitles the
holder to take something from the land, it is accurately described
as a "profit," which the Restatement (Third) of Property would
reintroduce into the Restatement:

          A profit  prendre is an easement that confers

the right to enter and remove timber, minerals, oil, gas, game, or
other substances from land in the possession of another.  It is
referred to as a "profit" in this Restatement.
Restatement (Third) of Property: Servitudes sec. 1.2 (2000).

Footnote 52:

     Restatement (First) of Property: Servitudes sec. 513 (1944).

Footnote 53:

     See supra note 51.

Footnote 54:

     Compare, e.g., Mertz v. J.M. Covington Corp., 470 P.2d 532,
535 (Alaska 1970) ("It is an almost universal rule of law today
that a license is not an interest in real property within the terms
of the statute of frauds relating to the transfer of interests in
real property."); with Northern Alaska Envtl. Ctr. v. State, Dep't
of Natural Resources, 2 P.3d 629, 634 (Alaska 2000) (holding that
"grants of rights-of-way or easements for electric utility lines
are disposals of an interest of land under AS 38.05.035(e) subject
to the best interest finding requirement"). 

Footnote 55:

     Randy S. Welker, Legislative Budget & Audit Comm., Dep't of
Commerce & Econ. Dev., Alaska Railroad Corp., Anchorage Gravel
Activities, Audit Control No. 08-4547-96, at 10 (1996) (footnotes

Footnote 56:

     ARRC Procurement Rule 2000.1(4) declares that those rules
"apply to every expenditure of ARRC funds . . . except that these
rules do not apply to . . . acquisitions or disposals of real
property or an interest in real property . . . ."

Footnote 57:

     AS 38.05.115.

Footnote 58:

     AS 38.05.115(a) provides, in relevant part:

               The commissioner shall determine the
timber and other materials to be sold, and the limitations,
conditions and terms of sale.  The limitations, conditions and
terms shall include the utilization, development and maintenance of
the sustained yield principle, subject to preference among other
beneficial uses.  The commissioner may negotiate sales of timber or
materials without advertisement and on the limitations, conditions,
and terms that are considered to be in the best interests of the
state.  Within a one-year period, the commissioner may not
negotiate a sale without advertisement to the same purchaser of

               . . . .

               (2) except as provided in (3) of this
section, more than 25,000 cubic yards of materials[.]

          We note, moreover, that this statute speaks of
"advertisement," not public notice.  For AS 38.05.115 to support
ARRC's argument, ARRC would have to establish that, by allowing
certain timber and material sales without advertisement, the
legislature intended to exempt DNR from giving prior public notice
of those sales.  Here, ARRC has not shown that DNR fails to provide
constitutional notice when it negotiates sales under AS 38.05.115. 

Footnote 59:

     See Municipality of Anchorage v. Baugh Constr. and Eng'g Co.,
722 P.2d 919, 929 (Alaska 1986).

Footnote 60:

     See Tenala, Ltd. v. Fowler, 921 P.2d 1114, 1124 (Alaska 1996).

Footnote 61:

     See Hunsicker v. Thompson, 717 P.2d 358, 359 (Alaska 1986); 
Dansereau v. Ulmer, 955 P.2d 916, 919 (Alaska 1998).