Opinion ID: 1706466
Heading Depth: 2
Heading Rank: 1

Heading: Disposition of All Issues

Text: 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 Hill, 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 one-time 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 46¢ 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 (1/100th 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., Hill, 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; Tally, 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 Grenada 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 violative 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... .).
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 ([T]here has been a century of disregard of this constitutional mandate and of widespread and long continued acceptance of this practice by former officials.); Transamerica 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.
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.