The rationale for whether the bidding process is chilled or not

In Campana v. Arizona State Land Dep't, 176 Ariz. 288, 291-92, 860 P.2d 1341, 1344-45 (Ct. App. 1993), the Petitioner Campana instituted a special action to contest the auctions by respondents, Commissioner of the Arizona State Land Department and real party in interest developer, claiming that the auctions were unfair because they sought a master bidder with the resources to install the necessary infrastructure.
 
The protestor claimed that the overall circumstances of the auction created discrimination between the bidders because the core lessee as master developer was preferred over the residential developer. The court on review disagreed and found that the bidding process was not chilled. The court held that, as long as the proposed sale terms were justified by the best interests of the state trust, did not include conditions that would exclude eligible bidders were not intended to favor a particular bidder, and were not otherwise contrary to law, the commissioner had discretionary authority to determine the structure of a proposed sale. The court affirmed the hearing officer's decisions except as to the rental adjustment clause, which was severed from the lease and the remainder of the lease remained in effect.
 
Campana argued that the bidding was chilled by the relationship of the commercial leases to the land sale. He claimed that as a general rule, “... any act of the auctioneer, or of the party selling, or of third parties as purchasers, which prevents a fair, free, and open sale, or which diminishes competition and stifles or chills the sale, is contrary to public policy and vitiates the sale.” Campana v. Arizona State Land Dep't, 176 Ariz. 288, 291-92, 860 P.2d 1341, 1344-45 (Ct. App. 1993) (quoting 7A C.J.S. Auctions and Auctioneers § 14 (1980)). He further claimed that the totality of the auction circumstances unfairly discriminated between a potential core lessee bidder and a residential bidder, because the core lessee as master developer was preferred over the residential developer. He also claimed that this difference stifled competition and chilled the bidding process. The Department and Northeast Phoenix Partners argued that there was no evidence that the bidding process was so chilled to which the court agreed.
 
“Pursuant to Berry v. Arizona State Land Dept., 133 Ariz. 325, 651 P.2d 853 (1982), the Commissioner is obligated to manage trust lands for the benefit of the trust and its beneficiaries.” Id . “He has the duty to maximize revenue to the trust.” Id. (citing Gladden Farms, Inc. v. State, 129 Ariz. 516, 520, 633 P.2d 325, 329 (1981)). “However, immediate revenue is not the sole consideration in determining the best interests of the trust.” Id. (citing Havasu Heights v. Desert Valley Wood, 167 Ariz. 383, 392, 807 P.2d 1119, 1128 (App.1990), review denied, April 23, 1991). Further, “[t]he Commissioner has great discretion concerning the disposition of trust lands and has authority to devise detailed plans for the sale, lease, and use of state land. These decisions will not be overturned absent illegal action, an abuse of discretion, or an unfair bidding.” Id. (Havasu Heights at 391–92, 807 P.2d at 1127–28).
 
“In a recent decision of this court, Martori v. Arizona State Land Dept., 176 Ariz. 420, 861 P.2d 1182 (App.1993), we found a distinction between terms of sale that are in the best interest of the trust, although discouraging certain bidders, and terms that improperly limit the universe of potential bidders to one.”  Id. (Martori at 425, 861 P.2d at 1187).
 
The standard laid down in Martori for evaluating whether bidding was chilled is as follows:
“[a]s long as the proposed sale terms are justified by the best interests of the state trust, do not include conditions that would exclude eligible bidders, are not intended to favor a particular bidder, and are not otherwise contrary to law, the Commissioner has discretionary authority to determine the structure of a proposed sale.” Martori. at 426, 861 P.2d at 1188.
 
The court held that there was no evidence in record of any illegal deals or preferential negotiations of any sort occurring prior to the auctions or any evidence showing that one bidder was encouraged or favored over other potential bidders. There was no evidence that the Department showed any preference to the Northeast Phoenix Partners before or during the auction process and the fact that only one entity bid at the auction was irrelevant and explainable by a host of reasons from lack of interest to lack of money. The court concluded that the record supports the hearing officer's ruling that the bidding was not chilled.