Fox v. Kneip, 12980

• Citation: 294 N.W.2d 657
• Decision Date: 16 July 1980
• Docket Number: No. 12980,12980
• Parties: Lloyd FOX and Howard Jensen, Plaintiffs and Respondents, v. Richard F. KNEIP, George Kane, and Alice Kundert, as members of the Board ofSchool and Public Lands, and George Kane, as Commissioner of School and PublicLands, Defendants and Appellants.
• Court: Supreme Court of South Dakota

Page 657

294 N.W.2d 657

Lloyd FOX and Howard Jensen, Plaintiffs and Respondents, v. Richard F. KNEIP, George Kane, and Alice Kundert, as members

of the Board ofSchool and Public Lands, and George

Kane, as Commissioner of School and

PublicLands, Defendants and

Appellants.

No. 12980.

Supreme Court of South Dakota.

Argued May 22, 1980.

Decided July 16, 1980.

Donn Bennett, Belle Fourche, for plaintiffs and respondents.

Judith A. Atkinson, Asst. Atty. Gen., Pierre, for defendants and appellants; Mark V. Meierhenry, Atty. Gen., Pierre, on brief.

DUNN, Justice.

This appeal is taken from an order of the circuit court denying damages to the State. We reverse.

The facts of this case are fully set forth in Fox v. Kneip, 260 N.W.2d 371 (S.D. 1977), which we will summarize briefly. In the spring of 1976 the Commissioner of School and Public Lands (Commissioner) set the minimum annual rental rate per acre of the school and public land in South Dakota at $4.50 AUM (animal unit per month) for 1976 pursuant to SDCL 5-5-10.4. Plaintiffs Fox and Jensen obtained an interlocutory injunction to prevent the increase from $1.58 AUM (the previous year's price) to $4.50 AUM. These plaintiffs filed an injunction bond in the amount of $116,503.04 for such damages that the State might sustain. All school and public lands leased in March 1976 were leased at the starting bid of $1.58 AUM.

In Fox, supra, we reversed the circuit court and held that the Commissioner has the authority to set the minimum acceptable bid for school and public lands. We remanded to the circuit court to determine what damage, if any, the State had suffered.

At the damages hearing, Mr. Kane, Commissioner in 1976, testified that in the past, year in and year out, 98% of the unimproved school lands offered for lease were leased at the first offering. In 1977, when lessees paid a total of $4.50 AUM, 98% of school lands were leased at the first offering. The cost of management was the same in 1976 as in 1977. Mr. Kane further testified that he compared the leasing of unimproved school lands to grazing leases in arriving at the fair market value. Plaintiffs' expert witness testified that he also compared the rental rates of various types of property to determine fair market value.

We agree that comparison between the leasing of school land and private grazing leases is the proper way to determine the fair market value. Mr. Kane testified that he gathered information from ranchers throughout the state concerning the proper rental rate. Mr. Kane also testified that he took into account the fact that private leases usually involve improvements and upkeep on these improvements, and he made adjustments accordingly in order to justify the comparison between a private lease and a lease of unimproved school land.

It is important to note, as we set out in Fox, supra, that the reason fair market value is not reached through the bidding process is due to the presence of grazing associations. These associations consist of ranchers who agree not to bid against one another. Rather, they designate one rancher to bid the minimum and then parcel the land among themselves.

We find that the circuit court erred in refusing to be bound by the fair market value set by the Commissioner. We clearly stated in Fox, supra, that, the authority to set such value belongs solely to the Commissioner, absent any showing of fraud or misconduct. There is no claim by plaintiffs that the Commissioner was guilty of fraud or misconduct in reaching the value of $4.50 AUM, and thus we must accept this figure.

The only remaining question on the issue of damages is whether the State proved that the lands could have been leased at $4.50 AUM had the injunction not been issued. We find that the State...