By Jennifer Dobner
(Reuters) - A communal land trust once run by jailed U.S. polygamist leader Warren Jeffs should not be turned back to leaders of his breakaway Mormon sect because they were too late filing a legal challenge against Utah's takeover of the assets, a federal appeals court ruled on Monday.
The decision by a three-judge panel on the 10th Circuit Court of Appeals in Denver could help bring an end to a years-long battle for control of the land and homes of Jeffs followers in the Fundamentalist Church of Jesus Christ of Latter Day Saints.
The trust is valued at $114 million and was seized by Utah's courts in 2005 amid allegations that Jeffs and other sect leaders had mismanaged its assets. Sect members sued in 2008 to regain control of the land, claiming the takeover violated the constitutional guarantee of separation of church and state.
In reversing a 2011 finding by a Salt Lake City federal judge, the panel said the judge should never have heard the case nor issued an injunction to stop the state from conducting trust business because the timing of the sect's challenge to state control of the trust precluded it from pursuing a federal suit.
U.S. District Court Judge Dee Benson had said in her earlier ruling that the state had violated the sect's constitutional rights and wrongly carved its religious principles out of the legal documents that form the trust.
"We conclude that the district court erred," the panel said its ruling on Monday, noting that the decision followed specific input the judges sought from Utah's Supreme Court about the timely filing of legal challenges under state law. The ruling sends the case back to Benson for dismissal.
The disputed trust holds most of the property in the twin border towns of Colorado City, Arizona, and Hildale, Utah, where most church members have historically lived. Other assets are in British Columbia.
In 2010, Utah's high court dismissed the state case, saying the FLDS had waited too long to challenge the trust takeover. That dismissal should have precluded Benson from hearing the case at all, the appeals court judges said in their ruling.
Salt Lake City attorney Rod Parker, who represents the sect, said he was not sure what the church would do next. It could seek a rehearing of the case before the full appeals court or file an appeal with the U.S. Supreme Court.
"I don't think this necessarily ends the federal litigation," Parker told Reuters.
Jeffs, 56, is incarcerated in Texas after being sentenced to life plus 20 years in 2011 on sexual assault convictions related to his underage marriages with two sect girls. Despite incarceration, Jeffs is said to remain in control of the sect.
The sect practices polygamy in arranged marriages and has an estimated 10,000 followers in North America. It shares religious roots with the Salt Lake City-based Church of Jesus Christ of Latter-day Saints, but the mainstream Mormon church denounced polygamy in 1890 as a condition of Utah's statehood and does not affiliate with the FLDS or any other polygamous sect.
(Editing by Cynthia Johnston and Paul Simao)