Case Name: BOARD OF EDUCATION OF LAMAR COUNTY, Mississippi v. John T. HUDSON
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1991-07-31
Citations: 585 So. 2d 683
Docket Number: No. 07-CA-58804
Parties: BOARD OF EDUCATION OF LAMAR COUNTY, Mississippi v. John T. HUDSON.
Judges: DAN M. LEE, P.J., and ROBERTSON, and McRAE, JJ., concur.
Reporter: Southern Reporter, Second Series
Volume: 585
Pages: 683–693

Head Matter:
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, Hat-tiesburg, 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 0. Nelson, II, Jackson, for amici curiae.

Opinion:
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. 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, § 95, of the Mississippi Constitution.
Hudson answered and posited several affirmative defenses including: (1) He was an innocent (bona fide) purchaser (assign-ee) 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 in Purvis. For the lease, Myatt paid a lump-sum fee of $150.00; this breaks down to approximately 46$ 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 re quested 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.
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.
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 50<p 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 es-topped 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 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); Hitt 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. § 29-3-1(1) (Supp.1988).
A. Disposition of All Issues
1.
This Court must first decide whether the Myatt leasehold constituted an unconstitutional donation. See MISS. CONST, art. IV, § 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, § 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 Hitt, 564 So.2d at 7-8; see also MISS.CODE ANN. § 29-3-1 (Supp. 1988) ("Reform Act of 1978" requires inclusion of escalation clauses in sixteenth-section-land leases).
In the case sub judice, the Lamar County Board of Supervisors — upon receiving Myatt's application — appointed three disinterested appraisers to determine the market value of the 3.5 acres. The appraisers concluded, without explanation, that a onetime fee of $150 would be "fair and reasonable" consideration for a ninety-nine-year lease. The Board affirmed the appraiser's conclusion and approved Myatt's application.
As noted in a preceding section of this opinion, the fee Myatt paid breaks down to approximately 46o per acre per year on a tract of land whose value at the time of the lease was, according to Hudson's own expert (Geiger), $3,575. Thus, Mississippi's public school system received an annual return of approximately one one-hundredth of one percent (l/100th of 1%) of the appraisal provided by Hudson's expert. Cox's feeble attempt to justify the appraisal of $150 — i.e., that the amount was established "between willing lessees and willing lessors, that other sixteenth-section lands were leased for comparable amounts, and that the appraisers were not duty-bound to determine the market value — disregarded controlling legal principles. See, e.g., Hitt, 564 So.2d at 9.
Pursuant to common law, the Board, acting as trustee, was unauthorized to lease the 3.5 acres for substantially less than the fair market value. Id. at 9; Tatty, 323 So.2d at 550. The spirit of the common law is embodied in this state's constitution which prohibits donation of public land no matter what legislative procedure is mandated. MISS. CONST. Art. 4, § 95 (1890). Koonce v. Board of Supervisors of Greña- da County, 202 Miss. 473, 477-78, 32 So.2d 264, 265 (1947) (this Court held that supervisors had no authority to lease sixteenth-section land at such a grossly inadequate price as to violate Section 95 of the Constitution); State v. Dear, 209 Miss. 268, 279, 46 So.2d 100, 104 (1950) (this Court held that it was beyond the power of the Board of Supervisors to sell sixteenth-section timber for such a grossly inadequate price that it amounted to a donation); see also Hill, 564 So.2d at 9 ("This Court knows of no rule of law whereby the substantive prohibition of Section 95 may be violated if only certain forms or procedures are met.").
In sum, the voluminous law applied to the facts of the case sub judice leads this Court to conclude that the Myatt lease amounted to an unconstitutional donation and, therefore, was voidable at the option of the school board. Hill, supra. See also Keys, 318 So.2d at 864 (lease of a 320-acre, sixteenth-section tract for an annual fee of $170 amounted to an unconstitutional donation since the fair market value was $4,000 per year) (citing Saxon v. Harvey, 190 So.2d 901 (Miss.1966), and Coleman v. Shipp, 223 Miss. 516, 78 So.2d 778 (1955)); Holmes v. Jones, 318 So.2d 865, 869 (Miss.1975) (sixteenth-section land leased for a grossly inadequate consideration was viola-tive of the state constitution); Edwards v. Harper, 321 So.2d 301, 303 (Miss.1975) (school lands having a fair market value of $22,500, where leased for ninety-nine years for $400, were deemed donated in violation of the constitution); Tally, 323 So.2d at 550 ("where the consideration paid for a lease [i.e., 40$ per acre] is so small as to amount to a donation of the property, the lease is void"); Saxon v. Harvey, 190 So.2d 901 (Miss.1966); Coleman v. Shipp, 223 Miss. 516, 78 So.2d 778 (1955); State v. Dear, 212 Miss. 620, 630-31, 55 So.2d 370 (1951) (sale of sixteenth-section timber by County Board of Supervisors for $500.00 and which was resold for $4,000.00 held, prima facie, consideration was grossly inadequate); Dear, 209 Miss, at 281, 46 So.2d at 105 ("value does not have to be proved with certainty as to the amount in order to show that the consideration is grossly inadequate."); cf. Tally, 323 So.2d at 551 ("We can take judicial notice that little, if any, land in the State of Mississippi could have been purchased on the open market for its reasonable value at such a low price_").
2.
This Court must now decide whether the "defect" in Myatt's leasehold affects Hudson's leasehold.
The law of this state dictates that, generally speaking, one who acquires real property takes it subject to whatever claims lie against it and whatever title defects may exist (i.e., The purchaser steps into the shoes of the seller.). Hardy v. Wheaton, 374 So.2d 790, 791 (Miss.1979). However, a purchaser may be deemed "bona fide" if he or she acquired title in good faith for valuable consideration and without notice of adverse claims or existing defects. Collier v. Shell Oil Co., 534 So.2d 1015, 1018 (Miss.1988).
Applying the law to the facts in the case sub judice, this Court holds that the consideration Myatt paid for his leasehold is so unconscionably inadequate that it defeats any challenge by anyone claiming to be a bona fide purchaser. The title defect cannot be deemed "hidden." Hudson is charged, at the very least, with constructive knowledge of the unconstitutionality of the Myatt leasehold. Peoples Bank & Trust Co. v. L & T Developers, 434 So.2d 699, 708 (Miss.1983); West Center Apartments, Ltd. v. Keyes, 371 So.2d 854, 856 (Miss.1979). As stated long ago in Baldwin v. Anderson, 103 Miss. 462, 60 So. 578 (1913):
Inadequacy of consideration, whether in the deed to the purchaser or in the deed to his grantor, is material in ascertaining whether a purchaser shall be charged with constructive notice of defects in the title; and the fact that such consideration is grossly inadequate may under some circumstances alone be sufficient to charge a purchaser with notice of defects in the title....
A slight investigation would have [provided] him [with] knowledge of the true state of the title; consequently, he must be charged with knowledge thereof, for "whatever is enough to excite attention, or put a party on inquiry, is notice of everything to which such attention or inquiry might reasonably lead."
103 Miss, at 467-68, 60 So. at 580 (citation omitted); cf. Dear, 209 Miss. at 276, 46 So.2d at 103 ("The defendant . is presumed under law to have known that the Board of Supervisors was selling this timber as agent of the State . and was in duty bound not to sell the same for a grossly inadequate consideration, virtually amounting to a donation, in violation of Section 95 of the State Constitution."); see also Annotation, 42 A.L.R.2d 1088, 1089-90 (1955); 77 Am.Jur.2d Vendor and Purchaser § 696 (1975). Caveat emptor still reigns. Hill, 564 So.2d at 11 (citing authoritative support).
In sum, this Court holds that, as a matter of law, a one-time leasehold fee of a nominal 46$ per acre per year is inadequate consideration and is essentially an illegal donation of land held in the public trust. Mere compliance with statutory formalities and procedures does not vitiate substantive violation of constitutional prohibitions. Pursuant to state constitutional dictates, the common law of trusts, and prior decisions of this Court, the chancellor's judgment is reversed and Hudson's leasehold is hereby declared void. See id. at 11-12 ("[Tjhere has been a century of disregard of this constitutional mandate and of widespread and long continued acceptance of this practice by former officials."); Trans-america Co. v. Paine Supply Co., 194 So.2d 490, 491 (Miss.1967) ("[W]e know of no way in which custom can change the law as written."); Johnson v. Hinds County, 524 So.2d 947, 955 (Miss.1988) (same); State Tax Comm'n v. Fondren, 387 So.2d 712 (Miss.1980) (same).
This case is remanded to the Board for a new determination of the present market value of Hudson's leasehold. During the appraisal process, Hudson shall remain in possession of the leasehold and have the right of first refusal. Hill, 564 So.2d at 12.
3.
Before concluding, the issues regarding laches and equitable estoppel will be addressed summarily. This Court recently iterated that inadequacy of consideration may be challenged in cases involving sixteenth-section leaseholds "entered both before or after the Reform Act of 1978." Hill, 564 So.2d at 13 (citing MISS.CODE ANN. § 29-3-25 (1972)). Restated, well-settled Mississippi law holds "that the state is n[either] subject to any statutes of limitations" nor "chargeable with the laches of its officials." Id. at (citing MISS. CONST. art. 4, § 104; Monroe County Bd. of Educ. v. Rye, 521 So.2d 900, 908 (Miss.1988); Cinque Bambini Partnership v. State, 491 So.2d 508, 521 (Miss.1986); Chill v. Mississippi Hosp. Reimbursement Comm'n, 429 So.2d 574, 585 (Miss.1983); Board of Educ. of Itawamba County v. Loague, 405 So.2d 122, 124-25 (Miss.1981); Gibson v. State Land Comm'r, 374 So.2d 212, 217 (Miss.1979); Alexander v. Mayor & Bd. of Aldermen of City of Natchez, 219 Miss. 78, 94, 68 So.2d 434, 441 (1953); Aetna Ins. Co. v. Robertson, 131 Miss. 343, 377, 94 So. 7, 10 (1922); City of Bay St. Louis v. Hancock County, 80 Miss. 364, 371-72, 32 So. 54 (1902); Josselyn v. Stone, 28 Miss. 753, 763 (1855)). Logic therefore dictates that the Board in the case sub judice was not guilty of laches, and the chancellor's decision in this regard is reversed. See Hill, 564 So.2d at 14 ("The principle that a governmental entity is not chargeable with the laches of its officials is also well settled.").
On the other hand, the state and its political subdivisions "may be equitably estopped under the proper circumstances." Monroe County Bd. of Educ. v. Rye, 521 So.2d 900, 908-909 (Miss.1988); Suggs v. Town of Caledonia, 470 So.2d 1055 (Miss.1985); Covington County v. Page, 456 So.2d 739 (Miss.1984); State v. Stockett, 249 So.2d 388 (Miss.1971). But no estoppel may be enforced "against the state or its counties where the acts of their officers were unauthorized." Oktibbeha County Bd. of Educ. v. Town of Sturgis, 531 So.2d 585, 589 (Miss.1988) (involving a sixteenth- section lease which this Court declared void).
On at least two occasions, this Court has held:
Private individuals who negligently fail to ascertain the value of their own property may, in the absence of fraud, bind themselves by conveyances thereof for a grossly inadequate price, but this is not true of public officials dealing with property held by the state, either in fee simple or as trustee, and especially as trustee where the price is so grossly inadequate as to virtually amount to a donation, in violation of our State Constitution.
Dear, 209 Miss. at 279, 46 So.2d at 104; Koonce, 202 Miss. at 478, 32 So.2d at 265-66; see also Dear, 212 Miss. at 632, 55 So.2d at 374.
In Pace v. State ex rel Rice, this Court held that:
The State cannot abdicate its duty as trustee of property in which the whole people are interested, such as sixteenth section land held by the state as trustee for schools, any more than the state can surrender its police power in the administration of government and in the preservation of peace and order.
191 Miss. 780, 804, 4 So.2d 270, 277 (1940) (citing numerous United States Supreme Court decisions). The point was repeated in Dear, 212 Miss, at 630, 55 So.2d at 374. See also Hill, 564 So.2d at 14-15 (citing American Oil Co. v. Marion County, 187 Miss. 148, 192 So. 296 (1939); Gift v. Love, 164 Miss. 442, 144 So. 562, 86 A.L.R. 63 (1932); Eastman Oil Mills v. State, 130 Miss. 63, 93 So. 484 (1922); Lancaster v. City of Columbus, 333 F.Supp. 1012 (N.D.Miss.1971); Reliance Mfg. Co. v. Barr, 245 Miss. 86, 146 So.2d 569 (1962); 28 Am.Jur.2d Estoppel and Waiver, § 127 (1966); 31 C.J.S. Estoppel § 142-43 (1964)).
Having held in a preceding section of this opinion that the consideration was grossly inadequate, this Court also holds that equitable estoppel is inapplicable. The chancellor is therefore reversed in this regard. Accord Hill, 564 So.2d at 15.
REVERSED AND RENDERED AS TO VALIDITY OF THE LEASE; REVERSED AND REMANDED TO BOARD OF EDUCATION OF LAMAR COUNTY FOR INITIATION OF APPRAISAL PROCEDURE; REVERSED AS TO CHANCERY COURT COSTS WHICH WERE TAXED TO THE BOARD OF EDUCATION; ALL COURT COSTS TAXED TO HUDSON.
DAN M. LEE, P.J., and ROBERTSON, and McRAE, JJ., concur.
HAWKINS, P.J., dissents by separate written opinion, joined by SULLIVAN, and BANKS, JJ.
ROY NOBLE LEE, C.J., and PITTMAN, J., not participating.
. Hudson actually acquired the 2.5 acres from assignee N.Q. Hickman. Whether Hickman acquired the acreage directly from Myatt or from one of Myatt's assignees is unclear but irrelevant to the disposition of this case.
. The land Myatt leased is a flat parcel with frontage on U.S. Highway 11 and School Street.