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. The court held that they had standing as taxpayers: “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). The school’s trust lands and funds themselves were moved by a separate 1985 enactment, sustained in Merkwan v. State by and through Janklow, 375 N.W.2d 624 (S.D. 1985).
Holding. The South Dakota Supreme Court held that the school-trust provisions of the South Dakota Constitution 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 restoration remedy is operative. The court did not merely declare the transfer unlawful; it required reimbursement. It held that “the legislature will have to reimburse the trust fund for the full market value of the property and interests transferred,” left the mechanism to the legislature, remanded for hearings on the nature, extent and value of the transfer, and set a deadline: 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” (824). Two years later the court recorded that the reimbursement had been made — Kanaly v. State by and through Janklow, 403 N.W.2d 33 (S.D. 1987) (per curiam): “This has been done.” That sequel is the rarest thing in this field, a published record that a restoration remedy was actually carried out.
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.
How Kanaly fits the broader case-law map. Kanaly is part of the South Dakota doctrinal line that begins with Schelle v. Foss, 76 S.D. 620, 83 N.W.2d 847 (1957) (blocking a creative principal-impairment scheme), runs through Matthews v. State (1959, enforcing the public-auction substance over its form), Fox v. State (1977, protecting fair-market-value lease pricing), and includes Kanaly itself, Olson (2009 reaffirmation), and the 1997 administrative-cost-loophole opinion. South Dakota is widely regarded — including in the Library’s Schools of the Republic — as the state with the most reliably-enforced school-trust doctrine in the country, and Kanaly is one of the central reasons.
Cited in. South Dakota trust-lands jurisprudence; cited as persuasive authority by courts in other states for the perpetuity formulation and for the breadth-of-corpus principle — the Washington Supreme Court cited it in Conservation Northwest v. Commissioner of Public Lands, 200 Wn.2d 8 (2022), for the proposition that the highest courts of the 1889 Enabling Act states have held that the Act created a trust. 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: 2026-08-20.
