Citation. 368 N.W.2d 819 (S.D. 1985)
Facts. Senate Bill 221, enacted in March 1984, closed the University of South Dakota at Springfield at the end of the spring 1984 semester, converted the campus into a minimum-security prison, and transferred control of the facilities to the Board of Charities and Corrections without payment. Six resident citizens and taxpayers — among them a student enrolled at the school and a tenured faculty member — sued, contending that the uncompensated transfer violated the permanent trust fund provisions of the federal Enabling Act of 1889 and Article VIII, § 7 of the South Dakota Constitution. On the bond-impairment claim the court held the issue not yet ripe, but reversed the trial court’s ruling that the plaintiffs lacked standing to bring it: “ownership, special interest, or injury is not a prerequisite to litigate a case such as this, involving public funds” (827). It also held that the beneficiaries of the trust are the state’s educational institutions, and “do not include the general public, other governmental institutions, nor the general welfare of this state” (823-24). Shortly before Kanaly was handed down, the legislature had by separate statute transferred the school’s trust land and funds to the remaining state normal schools; the court later said that enactment “obviated any need for plaintiffs’ requested relief from the unconstitutional transfer.” Kanaly v. State ex rel. Janklow, 401 N.W.2d 551, 552 (S.D. 1987) (citing Merkwan v. State by and through Janklow, 375 N.W.2d 624 (S.D. 1985)). [The Library does not hold Merkwan; what it decided is not verified here.]
Holding. The South Dakota Supreme Court held that the Enabling Act and Article VIII, § 7 of the South Dakota Constitution together create a “special, permanent and perpetual trust” over all lands, money, property, and proceeds donated to the state for educational institutions — whether the donation came from the United States or from private donors — and that the state is the trustee. The court further declared “the legislative transfer of trust property to another state governmental agency, without compensating or reimbursing the trust fund for the full market value of the transferred property, to be unconstitutional and in violation of the Enabling Act” (824). The disposition was mixed: affirmed in part, reversed in part, modified in part, and remanded.
Why it matters. Kanaly sits alongside Washington’s Skamania (1984) and Utah’s Plateau Mining (1990) and NPCA v. Board of State Lands (1993) as one of the foundational mid-1980s and early-1990s state-supreme-court articulations of trust-lands doctrine. Three things make it particularly important.
The perpetuity formulation is unusually direct. Many courts have held that the school trust is permanent. The South Dakota court’s language is more emphatic than most:
That these provisions create a special, permanent and perpetual trust of all land, money, property, and proceeds of the same, donated to the state for educational institutions by the United States and individuals alike and that the state is the trustee is beyond question.
The phrase “beyond question” is doing real work. It signals the court’s view that the perpetuity is not a matter on which reasonable judicial disagreement is possible.
The remedy was a declaration and a deadline, not a decree. The court did not merely declare the transfer unlawful — it held that “the legislature will have to reimburse the trust fund for the full market value of the property and interests transferred” (824). But it went no further as a matter of relief. “Whether this should be done through an appropriation or other additional legislation is a determination for the legislature” (824). No injunction issued and no money judgment was entered; the mandate was to affirm in part, reverse in part, modify in part and remand, and the remand itself was confined to “hearings concerning the extent and nature of all property and interests transferred to the Board of Charities and Corrections from the Board of Regents and its full market value” (829). Enforcement was held in reserve: if the legislature did not act by the end of the 1986 session, “proceedings may be commenced to seek appropriate relief from the unconstitutionality of this legislation” (825). Note what the same court said about that remand two years later: it “did not make the educational fund a trust administered through the court… . It remained a trust under the control and management of the legislature.” Kanaly v. State ex rel. Janklow, 401 N.W.2d 551, 554 (S.D. 1987).
And a one-sentence record of compliance. In March 1987 — under two years after Kanaly — the court stated, without findings, that the condition had been satisfied: Kanaly had held that S.B. 221 “would not violate Article VIII, § 7 … so long as the legislature reimbursed the perpetual trust fund … for the full value of the property and interest transferred. This has been done.” Kanaly v. State by and through Janklow, 403 N.W.2d 33 (S.D. 1987) (per curiam). It is the rarest thing in this field — a published acknowledgment that a school trust was made whole after a breach had been declared — but the opinion recites no amount, no date and no mechanism, and the court had earlier attributed the cure to the 1985 statute that moved the school’s trust land and funds to the remaining normal schools rather than to a payment.
The corpus is broad. “All land, money, property, and proceeds of the same” — not just the land itself, not just the original federal grant, but everything that has flowed into the trust corpus from any source over time, including private donations. The breadth matters because trustees who wish to characterize portions of the trust as ordinary state property routinely attempt to narrow the corpus to the federal-grant lands alone. Kanaly says: the corpus is everything that has come in. One qualification travels with that breadth: the two sources are protected, but not by the same instrument. Footnote 1 at 824 records that the gratuitous transfer of federally granted land violated “both the Enabling Act and the South Dakota Constitution,” while the transfer of the privately deeded Burbank land violated “the trust provisions of the South Dakota Constitution only.”
How Kanaly fits the broader case-law map. Kanaly sits in a South Dakota line that begins with Schelle v. Foss, 76 S.D. 620, 83 N.W.2d 847 (1957), where the court prohibited the sale of the fund’s United States bonds at a loss (see Kanaly v. State ex rel. Janklow, 401 N.W.2d 551, 555 n.1 (S.D. 1987) (Henderson, J., dissenting)), and continues through later decisions on public-auction competition, lease pricing and administrative costs. [CITE PENDING — reporter citations for the 1959, 1977, 1997 and 2009 decisions in this line have not been verified against primaries the Library holds, and the Library’s own pages give the 1959 decision two different names, Matthews v. State and Matthews v. Linn.]
Cited in. Conservation Northwest v. Commissioner of Public Lands, 200 Wn.2d 8 (2022) — in a footnote, and expressly “not determinative of DNR’s trust obligations under Washington law,” as one of three sister-state decisions (with Montana and North Dakota) supporting the proposition that the highest court of each 1889 Enabling Act state “has held that the Enabling Act created a trust and that federally granted land was to be held in trust for the beneficiaries enumerated in the act.” The passage the Washington court quoted was Kanaly’s account of the Enabling Act and Article VIII, § 7, pinned at 821-22, not the trust holding at 823. [Further citing references have not yet been catalogued against primaries the Library holds.] Subsequent history in the same litigation: Kanaly v. State ex rel. Janklow, 401 N.W.2d 551 (S.D. 1987) (reversing an attorney-fee award and remanding for costs only; Henderson, J., the author of Kanaly I, dissenting), and Kanaly v. State by and through Janklow, 403 N.W.2d 33 (S.D. 1987) (per curiam) (affirming dismissal of an intervenor’s complaint and recording that the trust fund had been reimbursed). The Kanaly citation at 397 N.W.2d 374 (S.D. 1986) carried in some source materials appears to be erroneous — no opinion in the line is reported there.
Limits of this annotation. This entry is a scholarly summary, not a Shepardized citation analysis, and is not a substitute for current legal research. The quoted passage above has been verified verbatim against the full opinion, which the Library holds; the pin is 368 N.W.2d at 823. Drafted from the Bird 2022 TrustLaw compendium and corrected against the primary. Last updated: 2026-09-10. The full case line, including both 1987 sequels and the pin cautions that go with them, is in Appendix A — South Dakota in the Library’s legal reference manual.
