Haag v. State Bd. of University and School Lands

• Decision Date: 04 June 1974
• Docket Number: No. 8955,8955
• Citation: 219 N.W.2d 121
• Parties: John M. HAAG and Beata Haag, Plaintiffs and Appellees, v. STATE of North Dakota, acting Through the BOARD OF UNIVERSITY AND SCHOOL LANDS, Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 121

219 N.W.2d 121

John M. HAAG and Beata Haag, Plaintiffs and Appellees, v. STATE of North Dakota, acting Through the BOARD OF UNIVERSITY AND SCHOOL LANDS, Defendant and Appellant.

Civ. No. 8955.

Supreme Court of North Dakota.

June 4, 1974.

Syllabus by the Court

1. While the Board of University and School Lands may require the State Engineer to investigate and report to the board as to which common school lands are 'coal lands' and which are not, it is the board which makes the ultimate determination.

2. Report by State Engineer that certain common school lands are 'coal lands' is not conclusive on Board of University and School Lands.

3. Determination by Board of University and School Lands that certain common school lands are not 'coal lands' and the issuance of a contract for deed to a purchaser are conclusive on the State, in the absence of fraud or bad faith, and such determination and contract cannot be defeated by the subsequent discovery of coal on the lands.

4. Supreme Court will uphold findings of fact of trial court unless findings are clearly erroneous.

5. Discovery of commercially valuable coal deposits subsequent to determination by Board of University and School Lands that lands were not 'coal lands' does not retroactively create a mutual mistake of fact which would be ground for avoiding contract for deed.

6. Determination by Board of University and School Lands that common school lands were not 'coal lands' meant that the mining or removal of coal from such lands would not be a commercially profitable venture at time determination was made.

7. Reservation provisions of Section 38--09--01, N.D.C.C., are applicable to all transfers of common school land by Board of University and School Lands after February 20, 1941, and prior to amendment of Section 155 of the North Dakota Constitution by amendment Article 71 on June 28, 1960.

Raymond M. Hagen, Beulah, and Orville A. Schulz, Center, for plaintiffs and appellees.

Thomas O. Smith, Special Asst. Atty. Gen., Bismarck, for defendant and appellant State of North Dakota.

VOGEL, Judge.

This appeal is from a judgment in favor of the plaintiffs in an action to quiet title brought by the purchasers of the Northeast Quarter (NE 1/4) and the Northwest Quarter (NW 1/4) of Section 36, Township 142, Range 84, in Oliver County, purchased from the defendant State of North Dakota. The plaintiffs Haag claim to own the fee title to the property, free of any claims of the State or its lessee to coal underlying the land, while the State claims that its patents to the plaintiffs are void because the land in question was 'coal land' which the State was forbidden to sell by its Constitution or, in the alternative, that the State holds 50 per cent of the coal underlying the land. A second defendant, claiming under the State by a lease to mine coal, defaulted.

The lands in question were originally granted to North Dakota by the United States under Section 10 of The Enabling Act, Chapter 180, 25 U.S. Statutes at Large 676, approved February 22, 1889 (set forth in Volume 13, N.D.C.C.). The lands were granted to the State for the support of the public schools. Upon Statehood, such lands were held subject to Article IX of the Constitution of North Dakota, and subject to sale only as permitted by Section 155 of the State Constitution.

Prior to amendment in 1960, Section 155 read as follows:

'After one year from the assembling of the first legislative assembly the lands granted to the state from the United States for the support of the common schools, may be sold upon the following conditions and no other: No more than one-fourth of all such lands shall be sold within the first five years after the same become salable by virtue of this section. No more than one-half of the remainder within ten years after the same become salable as aforesaid. The residue may be sold at any time after the expiration of said ten years. The legislative assembly shall provide for the sale of all school lands subject to the provisions of this article. The coal lands of the state shall never be sold, but the legislative assembly may be general laws provide for leasing the same. The words coal lands shall include lands bearing lignite coal.'

The two quarter-sections of land here involved were separately sold to the plaintiffs under contracts dated March 23, 1951. Patents were issued pursuant to such contracts upon payment in full in November 1969.

Prior to sale, the property was advertised pursuant to law (Sec. 15--06--25, N.D.C.C.) in a local newspaper. The notice contained the following language:

'All coal and fifty per cent of all oil, natural gas, or minerals on or underlying such land is reserved by the State. . . .'

On March 23, 1951, the plaintiffs were the successful purchasers and they received two contracts in writing from the Board of University and School Lands, both containing the following language:

'. . . The grantor, however, reserves to itself fifty (50) per cent of all oil, natural gas, or minerals which may be found on or underlying such land as required by Chapter 149 of the Session Laws of North Dakota for 1939 as amended by Chapter 165 S.L. of North Dakota for 1941 (Sec. 38--0901, Code 1943), together with the right of ingress and egress at all times for the purpose of mining, drilling, exploring, operating and developing said land for oil, gas, and other minerals, and storing, handling, transporting and marketing the same therefrom with the right to remove from said land all the Grantor's property and improvements.'

When payment was made in full on the contracts, two patents were issued, dated November 7, 1969, each containing the following:

'. . . reserving and excepting from the operation of this grant all rights and privileges vested in the State of North Dakota under the provisions of the constitution and laws of said state, including but not limited to 50% Of all oil, natural gas and other minerals which may be found on or underlying such land. Both parties hereto specifically intend that the word 'minerals' as used in this reservation includes such clay, coal and uranium as were included within the meaning of that term prior to July 1, 1955.'

The State first contends that the entire sale was invalid, since the land in question was 'coal land' which could not be sold under the provisions of Section 155 of the Constitution of North Dakota, quoted above. Similar contentions by the State in State v. Oster, 61 N.W.2d 276 (N.D.1953), and in Permann v. Knife River Coal Mining Co., 180 N.W.2d 146 (N.D.1970), were unsuccessful. The State attempts to distinguish these cases on the ground that the facts are different, particularly in that the State Engineer, in 1917, had made a determination that this particular and was 'coal land' and had reported this determination to the Board of University and School Lands. The State thus claims that the act of its agency, the Board of University and School Lands, was a nullity because it was forbidden to make the sale in question.

All of the evidence in this case was stipulated. The trial court made findings of fact, among which are the following:

'The Court finds that said State Land Board did by official act of the Board on January 25, 1951, approve the sale of said lands, and that on the 23rd day of March, 1951, offered the land for sale at public auction. Further, that on the 19th day of April, 1951, the Plaintiffs being the successful bidders thereon did enter into the separate Contracts, hereinbefore mentioned, in writing with the Board of University and School Lands of the State of North Dakota for the purchase of these lands.

'That the Court finds that the State Land Board did follow all legal procedures in the selection, advertising, and sale of said lands and did by official act of the Board approve the sale of said lands.

'The Court further finds that after execution and delivery of said Contracts, that the said Plaintiffs herein entered into the possession of said properties and have been in possession thereof ever since. That the Plaintiffs have been in possession of the property under the Contracts and the subsequent Patents for over 21 years.

'That the Court further finds that at some time in the year 1951, after the Plaintiffs had come into possession of the land, the Plaintiff John M. Haag, did while dynamiting for the construction of a spring on the property, discover that there was some coal deposits in the land, and that according to the evidence, such discovery was made subsequent to the sale of said property to the Plaintiffs. That thereafter, the Plaintiffs did use some coal for their personal use, and that the Coal Leases hereinbefore mentioned were acquired and placed upon the property in the year 1961.

'That the Court further finds that at the time of the approval of the sale of this land, the State Board of University and School Lands had in its possession a report of the State Engineer, which is Exhibit #8 in this case. That said report shows that it was filed with the State Land Board on the 12th day of February, 1918.

'That the Court has examined said Exhibit and that there appears thereon the report of the State Engineer regarding the N 1/2 of Section 36, Twp. 142, Range 84. That said report, under the column called indication, does not indicate or designate any specific finding of coal on the property, which is the subject of this action. That the report designates certain coal indications in the general area of the land and reports a show of coal upon Section 30 in the next Township to the East. That said report further concludes and shows that there was no coal in the wells on the said property. That the Court does find that under the column in said report entitled recommendations, that the State Engineer did list this land as coal land.

'That the Court further finds that the State Engineer's report, Exhibit #8, as it applies to this land is vague and indefinite, and that...