US SUPREME COURT DECISIONS

In 1962 Arizona, as lessor, and petitioner, as lessee, executed a 10-year grazing lease of certain tracts of land which had been granted to Arizona to be held in trust under the New Mexico-Arizona Enabling Act. In 1966, the United States filed a condemnation complaint in connection with a flood control dam and reservoir which included the leased tracts. In allocating the stipulated compensation payable by the United States for the tracts, the District Court awarded Arizona a certain amount for its fee interest and petitioner one amount for the improvements and another amount for "its leasehold interest at the time of taking and its reasonable prospective leasehold interest." The Court of Appeals, while recognizing that petitioner was entitled to compensation for the improvements, and finding it unnecessary to determine petitioner's rights based upon the provisions of the lease or upon state law, held that, under the Enabling Act, Arizona, as trustee, had no power to grant a compensable leasehold interest, and that petitioner therefore never acquired a property right for which it is entitled to compensation.

Held:

1. Nothing in the Enabling Act, apart, possibly, from the extent it may incorporate Arizona law by reference, prevents the usual application of Fifth Amendment protection of the outstanding leasehold interest whereby the holder of such an interest is entitled to just compensation for the value of that interest when it is taken upon condemnation by the United States. Pp. 424 U. S. 300-308.

2. To be determined on remand are (1) whether, under state law and the provisions of the lease, petitioner could not possess a compensable leasehold interest upon the federal condemnation; (2) if petitioner did possess such an interest, how it is properly to be evaluated and calculated (with the subsidiary questions of the relevance of possible lease renewals and of possible value additions by reason of petitioner's development of adjoining properties); and (3) if that interest proves to be substantial, whether it is permissible to find from that fact a violation of the chanrobles.com-red

Page 424 U. S. 296

Enabling Act's requirement that a lease, when offered, shall be appraised at its "true value" and be given at not less than that value. Pp. 424 U. S. 308-311.

495 F.2d 12, reversed and remanded.

BLACKMUN, J., delivered the opinion of the Court, in which BURGER, C.J.,and STEWART, MARSHALL, POWELL, and REHNQUIST, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 424 U. S. 311. STEVENS, J., took no part in the consideration or decision of the case.