Board of Educ. of Lamar County v. Hudson, 07-CA-58804

• Decision Date: 31 July 1991
• Docket Number: No. 07-CA-58804,07-CA-58804
• Citation: 585 So.2d 683
• Parties: 69 Ed. Law Rep. 1217 BOARD OF EDUCATION OF LAMAR COUNTY, Mississippi v. John T. HUDSON.
• Court: Mississippi Supreme Court

Page 683

585 So.2d 683

69 Ed. Law Rep. 1217

BOARD OF EDUCATION OF LAMAR COUNTY, Mississippi v. John T. HUDSON.

No. 07-CA-58804.

Supreme Court of Mississippi.

July 31, 1991.

Rehearing Denied Sept. 18, 1991.

William E. Andrews III, Purvis, for appellant.

Moran M. Pope, III, Pope & Pope, Hattiesburg, for appellee.

Kenneth A. Rutherford, Irene C. Howard, Thomas Price, Alston Jones & Davis, Mike C. Moore, Atty. Gen., Larry E. Clark, Asst. Atty. Gen., James O. Nelson, II, Jackson, for amici curiae.

En Banc.

PRATHER, Justice, for the Court:

I. INTRODUCTION

A.

The Lamar County Board of Education (Board) filed this suit on December 19, 1986, in the Lamar County Chancery Court, seeking to void John Hudson's leasehold of Sixteenth-Section School Trust Land which had been originally leased by another individual for a fee alleged to be unconscionably and unconstitutionally low. Specifically, 3.5 acres of land had been leased by E.S. Myatt in 1956 for ninety-nine years at a one-time fee of $150.00. Hudson acquired 2.5 of Myatt's 3.5 acres for a one-time fee of $45,000. ¹ Subsequent to Hudson's acquisition and prior to the filing of this suit, he (Hudson) conveyed approximately .45 of his 2.5 acres; this left him with a leasehold of approximately 1.8 acres, the tract which is the subject of this suit. The Board contended specifically that Hudson's leasehold should be declared void since the original conveyance to Myatt was so low that it constituted a donation in violation of article IV, Sec. 95, of the Mississippi Constitution.

Hudson answered and posited several affirmative defenses including: (1) He was an innocent (bona fide) purchaser (assignee) for value without notice of any alleged defect; (2) Pursuant to the doctrine of equitable estoppel, the Board may not have the lease voided; (3) The Board was guilty of laches; and (4) The law applicable at the time the land was leased was fully complied with and the $150 fee paid was reasonable. Hudson also counterclaimed--seeking a confirmation of the lease or, alternatively, for an account and judgment.

After a hearing on the merits, the chancellor denied the relief sought by the Board and confirmed Hudson's leasehold. From this decision, the Board appealed.

This Court holds that the chancellor erred in view of well established law. Hudson's lease is void on constitutional and other grounds, and the decision is therefore reversed.

B.

On January 10, 1956, the Lamar County Board of Supervisors approved E.S. Myatt's application for a ninety-nine-year lease on 3.5 acres of sixteenth-section land ² in Purvis. For the lease, Myatt paid a lump-sum fee of $150.00; this breaks down to approximately 46cents per acre per year.

In 1979, John T. Hudson acquired 2.5 of the 3.5 acres for a one-time fee of $45,000. Hudson then sold improvements--a motel, a gas station, and a home--which were located on the 2.5 acres for approximately $7,500. In 1983, Hudson conveyed a portion of his 2.5 acres to a fast-food restaurant for a one-time fee of $10,000 and a one-third share of the restaurant's profits, which amounted to approximately $93,576 during a subsequent four-year period. This left Hudson with a leasehold of 1.8 acres. In 1986, he subleased to the United States Postal Service a building he constructed; the building was leased for a ten-year period for an annual fee of $27,100 with four five-year options to renew at an annual fee ranging from $29,500 to $39,500.

On December 19, 1986, the Lamar County Board of Education filed suit in the Lamar County Chancery Court and requested At trial, Hudson testified that he acquired his leasehold knowing the land was designated "sixteenth section"; however, he also testified that he was unaware of the controversy concerning the constitutionality of "donative" leasing of these lands held by the State in trust. He allegedly lacked awareness--notwithstanding that he had had an attorney do a title search prior to acquiring the leasehold and that he had been involved in land investment (including the acquisition of a leasehold of a seventy-acre tract of sixteenth-section land) all his life. In short, Hudson contended that he was an innocent (bona fide) purchaser (assignee) for value without notice of any alleged defect; therefore, the lease should be deemed valid.

that Hudson's lease of the 1.8 acres (on which the Post Office is located) be declared void. As noted in the preceding section, the Board based its request on the state constitution which prohibits donations of public lands.

The Board countered that Hudson should be charged with actual or constructive knowledge of the "trust nature" of sixteenth-section lands and the breach of trust which occurred when the 3.5 acres were leased to Myatt in 1956 for a grossly inadequate fee (consideration). The Board noted that Hudson should be charged with knowledge by virtue of the state constitution, numerous statutes, and case law.

The Board and Hudson each presented a real-estate expert to support their respective positions regarding adequacy of the consideration paid by Myatt. James K. Cox testified for the Board; he concluded that the market value of the land in January 1956 was $2,800 and that 65-75% of the market value would have been adequate consideration. Jack T. Geiger testified for Hudson; he concluded that the market value of the land--absent oil, gas, and mineral rights--was $3,575. However, Geiger noted that the one-time fee of $150 should be deemed adequate because it was comparable to the fees paid by other lessees for similarly-situated, sixteenth-section lands. He compared Myatt's lease to others which involved fees of less than 50cents per acre per year. Geiger also noted that the fee should be deemed adequate because it was established "between willing lessees and willing lessors." All this aside, Geiger contended, without explanation, that the market value of the 3.5-acre leasehold was not important in view of the "prevailing economic and social conditions of the day." The appraisers, according to Geiger, were simply not duty-bound to establish actual market value.

The chancellor "accepted" both experts' opinions as "reasonable" and concluded that "experts, who are also reasonable men [or women], provide ... very little specific guidance." Thus, the chancellor did not resolve whether $150 was adequate consideration. Instead, the chancellor determined that Hudson was an innocent (bona fide) purchaser (assignee) for value without notice of any alleged defect in title of the lease. The chancellor also found: (1) that Hudson detrimentally relied upon the Board's "representation"--from 1956 to 1986--that the Myatt lease was valid; and thus (2) the Board should be equitably estopped from challenging the adequacy of consideration. Finally, the chancellor found the Board to have been guilty of laches.

C.

In sum, the chancellor found for Hudson and confirmed the ninety-nine-year lease for $150. The Board appealed and presented the following issues:

(1) Did the chancellor err by failing to find the consideration for the 1956 E.S. Myatt Lease inadequate and a donation in violation of Section 95 of the Mississippi Constitution of 1890?

(2) Did the chancellor err by holding that John T. Hudson was a bona fide purchaser of the leasehold?

(3) Did the chancellor err by applying the doctrine of equitable estoppel, by finding the Board guilty of laches, and by confirming the lease?

II. ANALYSIS

Understanding the two-hundred-year history of Sixteenth Section School Trust A. Disposition of All Issues

Land is paramount to disposition of the issues in this case. Historical analyses have been published in a plethora of recent cases and, thus, re-publication is unnecessary. See, e.g., Papasan v. Allain, 478 U.S. 265, 268-72, 106 S.Ct. 2932, 2935-37, 92 L.Ed.2d 209, 220-23 (1986) (involving a Mississippi controversy); Hill v. Thompson, 564 So.2d 1, 4-7 (Miss.1989); see County of Oneida, N.Y. v. Oneida Indian Nations, 470 U.S. 226, 233-37, 238, 246-48, 105 S.Ct. 1245, 1250-52, 1253, 1257-59, 84 L.Ed.2d 169, 178-80, 181, 186-87 (1985); Turney v. Marion County Bd. of Educ., 481 So.2d 770 (Miss.1985), Tally v. Board of Supervisors of Smith County, 323 So.2d 547, 550 (Miss.1975); Holmes v. Jones, 318 So.2d 865, 868 (Miss.1975); Keys v. Carter, 318 So.2d 862, 864 (Miss.1975); Lambert v. State, 211 Miss. 129, 137, 51 So.2d 201, 203 (1951); Humble Oil & Refining Co. v. State, 206 Miss. 847, 854, 41 So.2d 26, 27 (1949); Pace v. State ex rel Rice, 191 Miss. 780, 798, 4 So.2d 270, 274 (1941); Washington County v. Riverside Drainage Dist., 159 Miss. 102, 131 So. 644, 645 (1931); Jefferson Davis County v. James-Sumrall Lumber Co., 94 Miss. 530, 535-36, 49 So. 611, 612 (1909); Jones v. Madison County, 72 Miss. 777, 800, 18 So. 87, 91 (1885); see also MISS.CODE ANN. Sec. 29-3-1(1) (Supp.1988).

1.

This Court must first decide whether the Myatt leasehold constituted an unconstitutional donation. See MISS. CONST. art. IV, Sec. 95 ("Lands belonging to, or under the control of the state, shall never be donated directly or indirectly, to private corporations or individuals."); see also id. art. VIII, Sec. 211 ("The Legislature ... shall provide that the sixteenth section lands reserved for the support of township schools ... shall not be sold nor shall they be leased for a longer term than ten (10) years for lands situated outside of municipalities and for lands situated within municipalities for a longer term than ninety-nine (99) years, for a gross sum.").

The Mississippi Legislature has delineated procedures for valuation and leasing of sixteenth-section lands. In short, an estimated value of the land must be provided by three disinterested appraisers. The County Board of Supervisors is then authorized to lease the land for seventy-five percent (75%) of the appraiser's estimate--which must be a "reasonable amount." See generally Hill, 564 So.2d at 7-8; see also MISS.CODE ANN. Sec. 29-3-1 (Supp.1988) ...