If the North Dakota Board of University and School Lands has lands that didn't lease at the first auction, can it hold a second auction, and does the second auction have to be at the county seat?

Plain-English summary

North Dakota holds over three million acres of state-owned land in trust for the public schools, dating back to the federal Enabling Act of 1889. The Board of University and School Lands, sitting in Bismarck, manages those acres on behalf of the Trust Fund beneficiaries. The Board leases parcels in five-year terms for pasturage and meadow purposes. Article IX, section 8 of the state constitution requires the initial lease to happen at a public auction. Section 15-04-10 of the Century Code then specifies the procedure: auction to the highest bidder, held at the county seat of the county where the land sits.

Commissioner Joseph Heringer asked the AG what happens to parcels that nobody bids on at the first auction. Section 15-04-14 gives the Board permission to "make contracts of lease for the lands with the first applicant therefor at not less than the minimum price." Is that the only option, or can the Board call a second auction? And if a second auction is held, does it also have to be at the county seat?

AG Drew Wrigley's answer:

1. The word "may" in § 15-04-14 is permissive, not mandatory. The Board has discretion. It can lease unleased parcels by direct first-come contract, or it can hold another public auction, whichever serves the Trust Fund best. The Board's fiduciary duty to obtain "the most advantageous terms possible" for the beneficiaries supports reading the statute as giving the Board this flexibility. A second auction is consistent with both Article IX, section 8 and § 15-04-10.
2. If the Board chooses a second auction, § 15-04-10 still applies, and that statute says the auction "must be held at the county seat." The word "must" carries the same force as "shall," and the Supreme Court has read it as imposing a mandatory duty. So a second auction has to be in the county seat of the county where the parcel sits.

The opinion is a Letter Opinion (2022-L-02), issued under § 54-12-01. It governs the actions of public officials until a court rules otherwise.

What this means for you

If you serve on or advise the North Dakota Board of University and School Lands

The opinion concludes the Board has discretion to lease previously unleased trust lands either by first-applicant direct contract under N.D.C.C. § 15-04-14 or by a subsequent public auction under § 15-04-10. The opinion grounds the discretion in the Board's fiduciary duty to obtain "the most advantageous terms possible" for the Trust Fund beneficiaries and on the permissive "may" in § 15-04-14.

If you are planning to bid at, or coordinate, a second auction of trust lands

The opinion concludes that any subsequent public auction must be held at the county seat of the county in which the tract is situated, because § 15-04-10's "must be held at the county seat" is a mandatory directive under the rule that "must" carries the same meaning as "shall." The opinion does not address holding the auction elsewhere.

If you are reviewing the constitutional posture of the statutory scheme

The opinion treats § 15-04-14 as consistent with N.D. Const. art. IX, § 8 because that section governs the initial public-auction method, and § 15-04-14 fills the gap for parcels that did not lease at the initial auction. The opinion is issued under N.D.C.C. § 54-12-01 and governs the actions of public officials until a court rules otherwise.

Common questions

Q: Why isn't a second auction unconstitutional, given Article IX says lands "shall only be leased . . . at a public auction"?
A: The AG reads the constitutional language as setting the rule for the initial lease method, with § 15-04-14 filling the gap for parcels that did not lease. A second auction is itself a public auction and so satisfies the constitutional preference. Direct contracts under § 15-04-14 are also permitted because they happen only after the public-auction process has tried first.

Q: What about Article IX, section 6 — does the county-seat rule come from there?
A: Section 6 specifies the county-seat requirement for sales of trust lands, not leases. The lease county-seat rule comes from the statute (§ 15-04-10), not the Constitution. The AG cites both to show that the Legislature has long treated location consistently for both transactions.

Q: Can the Board hold a third auction if the second one fails?
A: The opinion does not directly address it but the same logic would extend. Section 15-04-14 is silent on how many auctions can occur; the discretionary nature of the choice means the Board can keep trying within its fiduciary judgment. A direct contract under § 15-04-14 is also always available as a fallback.

Q: What is the minimum price at a second auction?
A: Section 15-04-14 says contracts for previously unleased lands must be "at not less than the minimum price fixed by the board as provided in this chapter." A second auction would use the same minimum-price framework the Board set for the initial offering.

Q: Is the auction location flexible if the county seat is impractical?
A: The statute is plain: it "must be held at the county seat." The AG specifically reads "must" as mandatory under State v. Glaser. Holding the auction elsewhere would not satisfy § 15-04-10.

Background and statutory framework

The North Dakota Enabling Act of 1889 granted the new state more than three million acres of federal land in trust for the public school system. The state accepted that grant subject to the trust conditions, and Article IX of the state constitution sets out the framework: a permanent school fund (§ 1), a Board of University and School Lands as trustee (§ 3), and specific rules for the sale and lease of the lands.

Article IX, section 8 authorizes the Legislature to provide for leasing the trust lands, with a five-year maximum term and a public-auction requirement. Section 6 covers sales (with a county-seat location rule). The Legislature implemented section 8 in 1893 through what is now N.D.C.C. ch. 15-04. The relevant pieces:

• Section 15-04-10: leasing must be at public auction to the highest bidder, held at the county seat, with advance notice of the date and time.
• Section 15-04-14: if lands remain unleased after the advertised date, the Board "may make contracts of lease for the lands with the first applicant therefor" at the Board's minimum price.

The Board's fiduciary status is well established in cases like Fuller v. Board of University and School Lands (1911) and State ex rel. Sathre (1935). The Board "acts on behalf of the state" as trustee, with broad discretion over the rental and management of school lands. Disposing of trust property "with the most advantageous terms possible" is the trustee's standard duty.

The AG's interpretive moves rest on familiar statutory-construction rules: presumption of constitutionality (§ 1-02-38(1)), presumption that the entire statute is effective (§ 1-02-38(2)), and the "may"-versus-"must" distinction articulated in State v. Glaser. The result is a workable two-track procedure for unleased trust lands.

Citations

• N.D. Const. art. IX, § 8 (leasing by public auction; five-year maximum)
• N.D. Const. art. IX, § 3 (Board's appraisement, sale, rental, and disposal authority)
• N.D. Const. art. IX, § 6 (sales must occur at the county seat)
• N.D.C.C. § 15-04-10 (lease auction procedure, county seat requirement)
• N.D.C.C. § 15-04-14 (post-auction leasing of unleased lands)
• N.D.C.C. § 54-12-01 (statutory authority for Letter Opinions)
• N.D.C.C. § 1-02-38 (statutory construction presumptions)
• State v. Glaser, 858 N.W.2d 920 (N.D. 2015) (mandatory force of "must"/"shall")
• City of Devils Lake v. Corrigan, 589 N.W.2d 579 (N.D. 1999) ("may" is permissive)
• Fuller v. Board of University and School Lands, 129 N.W. 1029 (N.D. 1911) (Board's trustee status)

Source

• Landing page: https://attorneygeneral.nd.gov/board-authority-to-hold-subsequent-public-auction/
• Original PDF: https://attorneygeneral.nd.gov/wp-content/uploads/2022/12/2022-L-02.pdf

Original opinion text

LETTER OPINION
2022-L-02

Commissioner Joseph Heringer
Department of Trust Lands
PO Box 5523
Bismarck, ND 58506-5523

Dear Commissioner Heringer,

Thank you for your letter requesting an opinion on whether the Board of University and School Lands ("Board") can lease previously unleased lands through a subsequent public auction and whether this subsequent public auction is subject to the requirements of N.D.C.C. § 15-04-10. In my opinion, the Board may lease the lands at a subsequent public auction pursuant to N.D. Constitution Article IX, Section 8 and N.D.C.C. § 15-04-10, and any such public auction must be held at the county seat pursuant to N.D.C.C. § 15-04-10.

ANALYSIS

The Board has wide discretion in managing state-owned lands under its control ("Trust Lands") for the perpetual benefit of the public school systems. The Enabling Act granted to the State of North Dakota more than three million acres of land. North Dakota's acceptance of the grants was made "under the conditions and limitations" of the Enabling Act which directs that "proceeds" from these lands "constitute a permanent school fund" to support "the public schools." In accordance with these mandates, the State of North Dakota accepted the grant, thereby consenting and agreeing to hold title to these lands as trustee. These terms were enacted in law in 1889 as Article IX of the North Dakota Constitution, which also created the Board.

Section 8 of Article IX, N.D. Constitution, authorizes the leasing of the Trust Lands:

The legislative assembly shall have authority to provide by law for the leasing of lands granted to the state for educational and charitable purposes; but no such law shall authorize the leasing of said lands for a longer period than five years. Said lands shall only be leased for pasturage and meadow purposes and at a public auction after notice as heretofore provided in case of sale . . . .

In 1893, the Legislature exacted the statutory requirements for leasing in N.D.C.C. §§ 15-04-09 through 14. Section 15-04-10, N.D.C.C., states:

The commissioner of university and school lands, or such other person appointed by the commissioner, shall conduct the leasing of the lands. The leasing must be at public auction, to the highest bidder, and must be held at the county seat. The auction must commence on the day and time specified in the advertisement for the leasing. Notice must be given when the land is offered for lease that all bids are subject to approval by the board.

Section 15-04-14, N.D.C.C., states:

If any of the lands in any county remain unleased after the date advertised for the leasing, the board of university and school lands may make contracts of lease for the lands with the first applicant therefor at not less than the minimum price fixed by the board as provided in this chapter.

In enacting a statute, it is presumed that compliance with the North Dakota Constitution is intended. It is, of course, also presumed that the entire statute is intended to be effective. "Whenever possible, we construe statutes in harmony with the constitution to avoid constitutional infirmities."

Section 8, art. IX, of the N.D. Constitution and N.D.C.C. § 15-04-10 require that leasing of Trust Lands occur at public auctions. N.D.C.C. § 15-04-14, however, allows the Board to directly contract for lease of the Trust Lands if the land remains unleased after the public auction referred to in N.D.C.C. § 15-04-10. In order to harmonize these provisions, these statutes must be read in the context of the duty assigned to the Board in Article IX of the Constitution.

The Board manages the Trust Lands as well as the trust funds to which they are assigned ("Trust Fund"). It has a fiduciary duty to manage and safeguard the trust property. The Board "acts . . . on behalf of the state" and as the State's "trustee." It holds "full control" over the rental and "management of school lands . . . ." A trustee is required to dispose of trust property with the most advantageous terms possible for the benefit of the trust which he represents. The rule is no different in the leasing of property of a trust estate. As trustee, the Board has the authority to use "a high degree of judgment and discretion" in administering "this greatest of all state funds . . . [.]"

Section 8 of Article IX of the N.D. Constitution establishes leasing by public auction as the method by which the Board initially leases the Trust Lands. However, after that initial mandatory public auction occurs, the Board, as an exercise of its fiduciary duty to the beneficiaries, must attempt to lease the previously unleased lands in the manner it determines will result in the most advantageous terms to the Trust Fund. While the permissive language of N.D.C.C. § 15-04-14 allows the state to make direct contracts of lease for the previously unleased lands, it does not require it. In a statute, the word "may" does not create a mandatory duty. "The word 'may' is usually used 'to imply permissive, optional or discretional, and not mandatory action or conduct.'" The Supreme Court has held the word "may" in a statute is "merely permissive, it does not require action, and it operates simply to confer discretion." Because N.D.C.C. § 15-04-14 states that the Board "may make contracts of lease for the lands," the Board is merely given the option to directly contract for leases; it is not mandated by the statute. The discretion to select the manner of leasing previously unleased lands has been given to the Board.

Section 15-04-14, N.D.C.C., harmonizes with Section 8 of Article IX of the N.D. Constitution because it allows the Board to exercise its fiduciary duty to obtain the optimum result for the benefit of the Trust Fund. Section 8 of Article IX states that "[Trust Lands] shall only be leased . . . at a public auction . . ." however, the Board is initially attempting to lease the Trust Lands at a public auction pursuant to N.D.C.C. § 15-04-10. Section 15-04-14, N.D.C.C., merely serves to fill in those situations where the Board is left with unleased lands after a public auction. Section 15-04-14, N.D.C.C., is able to be harmonized with Section 8 of Article IX of the N.D. Constitution and N.D.C.C. § 15-04-10, and the Board has the authority to lease previously unleased Trust Lands at either a subsequent public auction or by directly making contracts for lease. As an exercise of its fiduciary responsibility, the Board may opt to conduct an additional legally compliant public auction.

Having determined that the Board may, within its discretion, conduct a subsequent public auction, I turn my attention to the question of whether that subsequent auction is required to be held at the county seat. While Article IX of the N.D. Constitution provides for the leasing of the Trust Lands at a public auction, and specifies the notice requirements for the public auction, it does not specify the location of the public auction for the purpose of leasing. Section 3 of Article IX of the N.D. Constitution vests the authority to expand on the procedures set forth in the Constitution for the Board's "appraisement, sale, rental and disposal" of the Trust Lands with the legislative assembly.

Section 15-04-10, N.D.C.C., states "[t]he leasing must be at public auction, to the highest bidder, and must be held at the county seat." "Usually, when the plain meaning of a statute is apparent, it is unwise and unnecessary to delve further." "'Must' has the same meaning as 'shall,' which imposes a mandatory duty." In this statute, it is clear that if Trust Lands are leased at a public auction, the public auction must be held at the county seat of the county in which the segment of land is situated.

It is my opinion that the Board has the legal authority to lease previously unleased Trust Lands at a public auction and that the public auction must be held at the county seat of the county in which the respective tract of land is situated.

Sincerely,

Drew H. Wrigley
Attorney General
AMH/JW

This opinion is issued pursuant to N.D.C.C. § 54-12-01. It governs the actions of public officials until such time as the question presented is decided by the courts.