Alaska Supreme Court Opinions made Available by Touch N' Go Systems and Bright Solutions

Touch N' Go, the DeskTop In-and-Out Board makes your office run smoother. Visit Touch N' Go's Website.
  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Rush v. State, Department of Natural Resources (09/17/2004) sp-5831

Rush v. State, Department of Natural Resources (09/17/2004) sp-5831

     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,
     e-mail corrections@appellate.courts.state.ak.us.


            THE SUPREME COURT OF THE STATE OF ALASKA

EVELYN RUSH,                  )
                              )    Supreme Court No. S-10926
             Appellant,            )
                              )    Superior Court No.
     v.                       )    3AN-01-10235 CI
                              )
STATE OF ALASKA,              )    O P I N I O N
DEPARTMENT OF NATURAL    )
RESOURCES, PAT POURCHOT, )    [No. 5831 - September 17, 2004]
Commissioner,                 )
                              )
             Appellee.             )
                              )



          Appeal  from the Superior Court of the  State
          of    Alaska,   Third   Judicial    District,
          Anchorage, Sen K. Tan, Judge.

          Appearances:  Geoffrey Y. Parker, Law  Office
          of   Geoffrey   Y.  Parker,  Anchorage,   for
          Appellant.  John T. Baker, Assistant Attorney
          General,  Anchorage,  and  Gregg  D.  Renkes,
          Attorney General, Juneau, for Appellee.

          Before:   Bryner,  Chief  Justice,  Matthews,
          Eastaugh, Fabe, and Carpeneti, Justices.

          FABE, Justice.


I.   INTRODUCTION

          Mat-Su  Resource Conservation and Development,  a  non-

profit corporation, owns the buildings that make up the Big  Lake

Hatchery  and  leases  from  the  state  the  land  under   those

buildings.  The Alaska Department of Natural Resources  plans  to

auction the land.  It intends to run the auction according to the

terms  of  AS 38.05.090 as that statute read when the corporation

took  on  the lease, which will require any buyer of the land  to

also  purchase the buildings from the corporation.   The  statute

has  since been amended.  The appellant, Evelyn Rush, argues that

the  auction and the disposition of the buildings must follow the

current  version of the statute, but the state claims that  doing

so would unlawfully give the statute retroactive effect.  We hold

that  applying  the current statute would have  an  impermissible

retroactive effect on property rights.

II.  FACTS AND PROCEEDINGS

     A.   Factual History

          The  ten-acre  parcel, home to the Big  Lake  Hatchery,

lies  on Meadow Creek in the Matanuska-Susitna Borough.  In  1975

the  Department of Natural Resources (DNR) leased the  parcel  to

the  Alaska Department of Fish and Game (ADF&G) under  a  twenty-

year  lease so that ADF&G could start a fish hatchery.  The lease

incorporated  some,  but  not  all,  of  the  provisions  of   AS

38.05.090,  a  statute governing the disposition of  improvements

upon  the  termination of a lease of state land.  In  1993  ADF&G

stopped  operating the hatchery, which by that time consisted  of

several  buildings on about ten acres, and assigned the lease  to

the Matanuska-Susitna Borough (the Borough).  The Borough and Mat-

Su  Resource  Conservation and Development (RC&D),  a  non-profit

corporation, agreed that RC&D would provide a caretaker  for  the

site.

          The Borough accepted the assignment from ADF&G on April

26,  1994; DNR approved the transaction a month later.   Also  on

April  26, 1994, the state transferred the buildings on the  site

to  the Borough.  Under the transfer agreement, the Borough could

not  convey  an  interest in the buildings for two  years,  after

which  it would automatically gain unconditional title.  Also  on

that   day,   RC&D  and  the  Borough  extended  their  caretaker

agreement, granting RC&D the right to manage and conduct its  own

business  in  and  from the hatchery, and  the  Borough  and  DNR

extended  the  term of the lease to 2015.  In  1996  the  Borough

assigned the lease to RC&D, with DNRs approval.

          In  1998  confusion arose over who owned the buildings.

The president of RC&D wrote to the Borough manager, claiming that

the buildings were included with the lease assignment because the

various April 26, 1994 agreements consolidated the buildings  and

land  into one package.  The letter offered no documentation  for

this   understanding  of  the  transactions.    A   DNR   staffer

acknowledged the confusion over ownership but did not resolve it.

          In  1999 RC&D applied to purchase the land.  DNR  found

that  selling the parcel at auction would be in the best interest

of  the  state, a prerequisite to the sale under AS 38.05.035(e).

DNRs  decision announced that [i]f Mat-Su RC&D is not the highest

bidder for the land, the highest bidder must pay Mat-Su RC&D  for

the  appraised value of the structures.  This directive, as  more

fully  described  below, corresponds to the  requirements  of  AS

38.05.090 as it stood before its amendment in 1997.  Evelyn Rush,

a  neighbor  of the hatchery site, appealed the decision  to  the

Commissioner   of  DNR,  challenging  RC&Ds  ownership   of   the

buildings.  The Commissioner remanded the case to DNR staff for a

determination  of  who  owned  the buildings.   In  response,  on

February  15,  2000, the Borough passed an ordinance  convey[ing]

the buildings, structures, and equipment on the Big Lake Hatchery

to  RC&D.   DNR  then  found that RC&D owned  the  buildings  and

otherwise  affirmed  its  previous  decision.   The  Commissioner

affirmed  the staff decision.  Rush then appealed to the superior

court.

     B.   Procedural History

          On  appeal to the superior court, Rush challenged  DNRs

decision,  advancing  several different reasons  to  support  her

contention  that the sale would not be in the best  interests  of

the  state.   The claims relevant to this appeal argue  that  the

terms  that  DNR  set  out for the auction are  arbitrary.   Rush

claimed  that requiring a bidder to pay Mat-Su RC&D the appraised

value  of  the  buildings is unlawful under  the  version  of  AS

38.05.090 currently in force.  The superior court held  that  the

department  correctly applied the former version of  the  statute

because the 1997 amendments affect[] substantive rights and [are]

not merely procedural.  The trial court affirmed DNR in all other

respects,  but  Rush  appeals only her  claim  that  the  current

version of AS 38.05.090 should apply.

III. DISCUSSION

     A.   Standard of Review

          On  appeal from an administrative agency, we substitute

our  judgment  for that of the agency on questions which  do  not

implicate  agency  expertise.1   This  appeal  presents  a   pure

question of law that requires no such expertise.

     B.   Rush  Did Not Waive Her Claim that the Auction  of  the
          Hatchery Land Should Follow the Present Version  of  AS
          38.05.090.
          
          Two  distinct  questions arise in cases concerning  the

retroactive application of statutes.  First, may the  statute  be

applied  retroactively?  Second, would applying  the  statute  in

this  case be retroactive?  In this case, the answer to the first

question  is beyond dispute.  Alaska law holds that [n]o  statute

is retrospective unless expressly declared therein,2 and there is

no  such  declaration for the amended AS 38.05.090.3  The  second

question,  whether applying the current version  of  the  statute

would have a retroactive effect, engages us here.  If it would be

retroactive, then it may not be applied.

          The  state  claims  that  Rush  raised  the  issue   of

retroactivity  for the first time in her reply brief  before  the

superior  court and therefore waived her claim.  While the  state

          is correct that Rush used the term retroactive for the first time

in  her  superior court reply brief, this does not  constitute  a

waiver  of  any claim because Rush is not claiming that  any  law

should  be  applied retroactively.  The heart of her position  is

that  the  termination  of a lease of  state  land  ought  to  be

governed  by  the  law in effect at the time of the  termination;

that  the previous version imposed different requirements is  not

raised in her claim.  It was the states response that raised  the

issue  of retroactivity, saying that it could not lawfully  apply

the current statute to this lease because doing so would give the

statute retroactive effect.

          Rushs  counter-argument,  raised  in  her  reply  brief

below,  is  that applying the current statute to this lease  will

not  give it retroactive effect.  This is the first point in  the

litigation  at which Rush had any need to refer to retroactivity.

When  this courts case law discusses when the court will or  will

not consider new arguments, we mean entirely new legal theories.4

Rushs reference to retroactivity in her reply brief below was not

a  new  theory.   It  was  an appropriate  reply  to  the  States

argument,  supporting  her basic argument  that  the  current  AS

38.05.090  should apply to this lease termination.   Furthermore,

she  does  not change that line of attack on appeal.   Her  basic

claim  has been the same all along:  The current version  of  the

statute should be applied.  Rush has not waived her claim.

     C.   Applying the Current Version of AS 38.05.090 Would Have
          an  Impermissible  Retroactive Effect  on  Transactions
          Conducted Under the Former Version.
          
          Alaska  Statute  38.05.090 governs the  disposition  of

improvements  placed on state land by lessees of  the  land.   In

1997  the  legislature changed the statute in a number of  ways.5

Two  of the changes are relevant here.  First, the former statute

required  removal of improvements owned by a lessee, so  long  as

removal  would  not damage the land.6  The current  statute  also

requires  removal and provides that lessees must return the  land

to  good  and  marketable condition.7  Under the former  statute,

          improvements or chattels whose value exceeded $10,000 could be

sold at public auction if not removed, with the proceeds going to

the  lessee.8  Most importantly, any subsequent purchaser of  the

land  was  required  to  purchase improvements  that  had  become

fixtures of the land, with the proceeds also going to the  former

lessee.9   Under the current statute, any property  left  on  the

leasehold, whether a fixture or not, becomes the property of  the

state and the lessee receives no compensation,10 unless they  are

[p]rivate  residential improvements.11  The current version  also

includes  stronger  restoration  requirements  than  the   former

statute, which could become important later in the life  of  this

parcel12 but are not implicated directly by the DNR decision from

which Rush appeals.

          As  described  above,  the question  in  this  case  is

whether  the  current  version  of  AS  38.05.090  would  have  a

retroactive effect if applied to the termination of RC&Ds  lease.

If it would, the statute may not be applied.  [A] statute will be

considered  retroactive  insofar as  it  gives  to  pre-enactment

conduct  a  different legal effect from that which it would  have

had  without  passage of the statute. 13  A statute creates  this

different legal effect if it would impair rights a party had when

he acted, increase a partys liability for past conduct, or impose

new duties with respect to transactions already completed.14

          Under  the  former  statute,  when  a  lessee  acquired

fixtures  by  purchasing  or building them,  among  the  property

rights  he  gained was the right to force any buyer of the  state

land  to  purchase  the fixtures.  Under the  new  statute,  that

property right no longer exists.  The record is not clear  as  to

whether  RC&D acquired the buildings under the old  law  when  it

accepted  the assignment of the lease or under the new  law  when

the  Borough passed its ordinance conveying them.  The timing  of

the  acquisition  does  not matter to the outcome  of  the  case,

however,  because  under either scenario, applying  the  new  law

would alter the consequences of a transaction conducted under the

          former version and therefore have a retroactive effect.

          The  former  statute was in effect in  1996  when  RC&D

accepted assignment of the lease.  If RC&D acquired the buildings

at  that time, then it had the right to force their purchase upon

sale  of  the  land.  Applying the new law would take  away  that

right,  thus  altering  the  legal  effect  of  its  acquisition.

Alternatively,  RC&D may have only acquired the  buildings  as  a

result of the 2000 Borough ordinance, after the law changed.  But

the  Borough acquired the hatchery fixtures from ADF&G  in  1994,

under  the old statute, and therefore its property rights in  the

buildings  included the right to force their sale.  At  the  same

time,  the  Borough  gained the right to transfer  everything  it

owned   the  buildings and all of its property rights it  had  in

them.   The  ability to transfer all rights is a basic aspect  of

property:   A property right consists not merely in its ownership

and possession, but in the unrestricted right of . . . disposal.15

          This principle is most commonly encountered in the  law

of zoning.  A landowner may have a grandfathered right to use his

property in a way that current zoning would not allow because  he

had put the land to that nonconforming use before it was barred.16

When   the  owner  sells  the  land,  the  purchaser  takes   the

grandfathered right to continue the nonconforming use.17

          Similarly,  here  the  right to force  a  sale  of  the

fixtures  was  part  of  what  the  Borough  gave  RC&D  when  it

transferred  the  buildings  via  the  2000  Borough   ordinance.

Applying  the  new statute would deny RC&D that  right  and  thus

diminish the Boroughs right to transfer all that it held, a right

that it gained when it acquired the buildings from ADF&G in 1994.

This  would change the legal effect of the 1994 transaction,  the

mark of a retroactive application.

IV.  CONCLUSION

          Because the current version of AS 38.05.090 may not  be

applied retroactively and because applying it to the sale of this

parcel  would have a retroactive effect regardless of  when  RC&D

          acquired the buildings, we AFFIRM the decision of the superior

court.

_______________________________
     1    Earth Res. Co. of Alaska v. State, Dept of Revenue, 665
P.2d 960, 964-65 (Alaska 1983).

     2    AS 01.10.090.

     3     The  only express declaration of retroactivity at  all
connected to AS 38.05.090 applies to a different part of the  Act
that amended the statute.  Ch. 91,  44, SLA 1997.

     4     See,  e.g., Krossa v. All Alaskan Seafoods,  Inc.,  37
P.3d 411, 418-19 (Alaska 2001) (rejecting as an impermissible new
argument  the plaintiffs claim that contract was void because  he
entered  it  under duress, where his arguments below  all  sought
enforcement of the contract as he interpreted it).

     5     Ch.  91,   21, SLA 1997.  The pre-1997 version  of  AS
38.05.090 provided in relevant part:

               Removal  or  reversion  of  improvements
          upon termination of leases.  (a) Improvements
          owned by a lessee on state land shall, within
          60  days after the termination of the  lease,
          be  removed by the lessee if removal will not
          cause  injury  or damage to  the  land.   The
          director  may  extend the time  for  removing
          improvements  in  cases  where  hardship   is
          proven.   The  retiring lessee  or  permittee
          may,  with the consent of the director,  sell
          improvements  to  the  succeeding  lessee  or
          permittee.
          
               (b)   If  improvements or  chattels,  or
          both,  having  an  appraised value  exceeding
          $10,000 as determined by the director are not
          removed   within   the  time   allowed,   the
          improvements or chattels or both shall,  upon
          notice to the lessee, be sold at public  sale
          under  the  direction of the  director.   The
          proceeds  of  sale inure to  the  lessee  who
          placed  the improvements or chattels  on  the
          land after paying to the state all rents  due
          and expenses incurred in making the sale.  If
          there  are no other bidders at the sale,  the
          director  may bid in the name of  the  state.
          The bid money shall be taken from the fund to
          which  the  land belongs and the  fund  shall
          receive all money or other value subsequently
          derived  from  the  sale or  leasing  of  the
          improvements or chattels.  The state acquires
          all the rights that any other purchaser could
          acquire by reason of the purchase.
          
               (c)   If  improvements or  chattels,  or
          both, having an appraised value of $10,000 or
          less, as determined by the director, are  not
          removed within the time allowed, they  revert
          to  the state and absolute title vests in the
          state.   The  preference  right  lesseees  of
          grazing   or  forest  land  may  follow   the
          provisions  for removal of improvements  upon
          termination of the lease as authorized in the
          cancelled federal lease or permit.
          
               (d)   Improvements of the  lessee  which
          have  become  fixtures of the land  shall  be
          purchased  by  the  subsequent  purchaser  or
          lessee  of the land if the improvements  were
          authorized in the former lease or  by  permit
          from the director.  Upon the termination of a
          lease,  and at additional times which may  be
          necessary,   the  value  of  the   authorized
          fixtures remaining on the land shall  be  set
          by  agreement between the former  lessee  and
          the  director  or,  if  agreement  cannot  be
          reached, by an independent appraisal made  at
          cost to the former lessee.
          
The current version of AS 38.05.090 provides in relevant part:

               (a)   Unless  otherwise  agreed  to   in
          writing  by the commissioner, a lessee  shall
          remove from a former leasehold
          
               (1)   all  personal property,  including
          above-ground tanks, transportable  buildings,
          equipment, machinery, tools, and other goods,
          not  belonging to the state, within  30  days
          after termination of the lease; and
          
               (2)    all   buildings   and   fixtures,
          including   gravel  pads,  and   below-ground
          tanks,  foundations, and slabs, not belonging
          to   the   state,   within  60   days   after
          termination of the lease.
          
               (b)   Unless  otherwise  agreed  to   in
          writing by the commissioner, the lessee shall
          restore   the  leasehold  to   a   good   and
          marketable  condition,  acceptable   to   the
          commissioner,   within   120    days    after
          termination of the lease.
          
               (c)   If  the  lessee  does  not  remove
          personal property, buildings, and fixtures as
          required within the time specified under  (a)
          of   this  section,  title  to  the  personal
          property, buildings, and fixtures that remain
          automatically vests in the state  unless  the
          commissioner elects to remove and dispose  of
          the  remaining personal property,  buildings,
          and fixtures of the lessee.  The commissioner
          may  assess  upon  the  lessee  the  cost  of
          removing  and disposing of personal property,
          buildings,  and fixtures remaining  upon  the
          land.
          
               (d)   If the lessee does not restore the
          land  within the time period specified  under
          (b)  of  this  section, the commissioner  may
          have  the land restored and assess the  costs
          upon the lessee.
          
               (e)   As part of a lease agreement,  and
          in  order to protect the public interest, the
          commissioner may require terms for removal or
          reversion of improvements additional to those
          specified in (a)  (d) of this section.
          
     6    Former AS 38.05.090(a).

     7    AS 38.05.090(a), (b).

     8    Former AS 38.05.090(b).

     9    Id. at (d).

     10    AS 38.05.090(c).

     11    Id. at (f).

     12     Id.  at  (d), (e).  Neither party makes any  argument
concerning the effect of these provisions on the retroactivity of
the statute as a whole.

     13     Eastwind,  Inc. v. State, 951 P.2d 844,  847  (Alaska
1997) (quoting Norton v. Alcoholic Beverage Control Bd., 695 P.2d
1090, 1093 (Alaska 1985)).

     14     Landgraf v. USI Film Prods., Inc., 511 U.S. 244, 245,
280 (1994).

     15     OConnor  v. City of Moscow, 202 P.2d 401, 404  (Idaho
1949).

     16     See  1  Kenneth H. Young, Andersons American  Law  of
Zoning  6.0-6.06 (4th ed. 1996).

     17    See 8A McQuillins Municipal Corporations  25.183.50 (3d
ed. 2003).