Court Opinion

ID: 9655916
Source: CourtListenerOpinion
Date Created: 2023-08-23 19:25:22.141397+00
Date Added: 2024-06-11T18:13:23.306409
License: Public Domain

Carter, J.,
concurring.
I agree fully with the holdings of the majority opinion. In view of the contentions advanced in the dissenting opinion, it seems necessary that they be answered and that the opinion of the court be clarified as it relates to such contentions.
It is argued that the common law of landlord and tenant controls certain phases of the case, particularly as it relates to the rule that improvements belong to the landlord at the termination of a lease in the absence of an agreement to the contrary. Since 1867, statutes regulating the selling and leasing of the public school lands of the state have been in force. The history of the legislation shows without much question that the legislative purpose was to encourage the making of such improvements to enhance the value of the public school lands for agricultural purposes. Over the years, the state has never assumed the cost or value of improve*121ments but has consistently sought to protect the interests of lessees in placing improvements on school lands during the terms of their leases. This protection has been afforded by requiring a new lessee to pay the old lessee for the latter’s improvements located on the land. In case negotiations failed, the value was to be determined by a board of appraisers subject to a right of appeal to the courts. In any event, the new lessee was required to acquire and pay the old lessee for the improvements. The problem was confused during certain periods of its legislative history when the Legislature provided as an alternative that improvements could be removed by the old lessee within 6 months after the termination of his lease, a provision in conflict with the common law rule that improvements could be removed during the term of the lease if pursuant to an effective agreement. From time to- time the Legislature defined the term “improvements” by adding new forms of land benefits which were not recognized as “improvements” within the common law rules applicable to landlord and tenant. The remedy provided by applicable statutes was a form of compensation, as compulsory as condemnation under eminent domain, if negotiation failed. The state claimed no interest in the improvements and affirmatively preserved a right in the lessee in improvements listed in the statutes. As an example, the Legislature at various times provided that the following were improvements: Irrigation improvements, dams, drainage ditches, plowing for future crops, conservation terraces, assessments paid to any irrigation district, trees, and sod breaking. None of these were recognized as improvements within the common law of landlord and tenant. The imposition of the value of improvements upon a new tenant is contrary to common law rule. I submit that the purpose, spirit, and public policy involved was in complete conflict with the common law of landlord and tenant, is in complete derogation thereof, and that the common law has no application to the issues *122here raised. The rights or liabilities created and the remedies provided are wholly statutory and must be looked to for the solution of the problems before us.
At common law the landlord was the owner of improvements put on the land by the lessee unless an agreement was made for their removal as the property of the lessee and their removal was had during the term of the lease. But here the state has never had any interest in the improvements and has never claimed an interest therein. In fact, the state through legislation has continuously recognized the lessee placing improvements on school lands as having some sort of title or interest in them. The nature of this interest or title is an intriguing one. The lessee certainly does not have what we might term a fee title. He does not have the muniments of such a title under the statutes. He cannot remove improvements at will for the simple reason that many of them cannot be removed. He cannot sell to whom he pleases because his sale is limited to the successor lessee. He cannot demand his price because when negotiations fail he is forced to accept the remedy in existence when he placed them on these public lands, to wit, the appraised value or the amount fixed on appeal to the courts from the appraisement. The interest of the lessee is therefore a limited title or, what would probably be more accurate, a compensable interest in the improvements on the leased lands.
It is suggested in the dissenting opinion that the Legislature may rightfully invoke the common law rules relating to landlord and tenant, and allow the state to proceed to sell the improvements as its own. This cannot be done for two- reasons: First, because the common law is not applicable, and, second, because a recognized compensable interest in a lessee to an incoming lessee cannot be treated as belonging to the state on a sale of the school lands without violating the constitutional requirements of due process. To hold that a lessee has a compensable interest in improvements on a new *123lease to a third party and that he has no compensable interest on a sale to such third party would create a legal anomaly supported neither by logic nor legal sanction.
The dissenting opinion questions the authority of this court to restrain the sale of school lands until the interests of lessees in improvements have been determined. The issue thus raised is a very important one and requires further discussion and clarification. The public school lands of this state are held, in trust for educational purposes. Art. VII, § 9, Constitution of Nebraska. The Constitution having provided that school lands are held in trust for educational purposes, the Legislature is required to administer the trust under the rules of law applicable to trustees acting, in a fiduciary capacity. A breach of the duties and functions imposed upon the state through the Legislature as a trustee by virtue of its constitutional status as such is a violation of the Constitution itself. The Legislature is authorized to provide by statute the terms upon which the public school lands of the state may be sold, but such terms must be consonant with the duties and functions of a trustee acting in a fiduciary capacity. It is the duty and function of a trustee to avoid unnecessary risks of loss and at the same time to obtain a maximum return to the trust estate consistent with the avoidance of such risks. State ex rel. Ebke v. Board of Educational Lands & Funds, 154 Neb. 244, 47 N. W. 2d 520.
In the instant case, a tract of school land was offered for public sale. Included in the sale were the improvements on the land in which the state had no monetary interest. The sále of improvements by the state under such circumstances could well result in a loss to the state and a depletion of the trust funds. Such a sale amounts to a conversion of the improvements by the state. The sale by the state of the lessee’s compensable interest in the improvements, the value thereof to be determined at some future time, dould well result in *124great benefit to the lessee and a corresponding loss to the trust fund. In the exercise of its power to protect the interests of beneficiaries of trusts, and particularly the beneficiaries, of a public trust, the court is authorized and, I think, required to determine the method of sale in the instanst case be enjoined. To- permit the continuance of such sale, and thus allow intervening, rights of bidders and others to accrue, is not for the best interests of the trust. The sale of lands: by the state along with improvements not owned by the state, especially before their value is determined, constitutes an unreasonable risk of depletion of the trust fund. The possibility of bid chilling, and other factors tending to reduce the return of the sale, is alone sufficient to warrant the intervention of a court of equity.
A requirement that the value of the improvements must be determined prior to a public sale of school lands immediately raises the question as to how it can be done. It would seem that the Board of Educational Lands and Funds has a sufficient interest, on a failure of negotiation, to have the issue determined in a declaratory judgment proceeding between the board and an outgoing lessee. Or the Legislature could provide a new remedy meeting the requirements of due process. The more important issue is the determination of the compensable interest of the lessee and the type of evidence required to support a judgment.
I am of the opinion that the cost of the improvements to the occupying lessee is generally of little evidentiary value, although it may constitute a maximum that may be recovered. The determination of the value of improvements on a cost basis overlooks, depreciation, obsolescence, overimprovement, and a possible want of benefit to the land. Some of the improvements, listed by the statute may be paid for in whole or in part by the government as a matter of public policy, and should not accrue to the benefit of the occupying lessee. Certainly any value added to the land itself, as distinguished from *125the actual value of the improvements, is the property of the trustee. The compensable interest of the lessee should not be permitted to exceed the value of the improvements to the land at the time of the termination of the occupying tenant’s lease. Compensation for improvements must be consistent with the overall purpose, spirit, and public policy involved. Any judgment which in effect invades the trust res cannot be sustained. An examination of the legislative history of the applicable statutes reveals that the Legislature never intended that the state would ever become liable for the cost or value of improvements or that the trust fund should become liable for any part thereof, directly or indirectly.
The dissent expresses a fear that the trust fund will be depleted because of the necessity of determining the value of the improvements before a sale of the school land on which they are located. The danger of a depletion of the value of the school lands or the amounts received from their sale is a matter of extreme concern to the majority as well as the minority. But to merely affirm the holding of the trial court that occupying lessees have a financial interest in the improvements and permit the public sale to continue will lead the state into possible loss to the state from which it cannot extricate itself. The state, then, will have sold the improvements which it does not own and obligate itself to the payment of whatever amount subsequent determination may develop. That such a subsequent determination may be in excess of any reasonable amount contemplated by the trustee is one of the fears; that can be eliminated before sale only. The time to protect against such possible losses to the trust property is before the sale, and not after. The labyrinth of statutes on the subject, and the interpretations to which they are subject, is reason enough for a determination of rights before liabilities have been assumed. It seems to me that the protection of the trust res is the ultimate objective *126of both the majority and the minority. The differences arise only in the manner of accomplishing this result.
I have the view that the problems must be largely determined before sale in order that the trustee will have an opportunity to determine their actual value; bidders will know with some certainty what they are buying; and occupying tenants will have their rights determined without the necessity of subsequent costly litigation. It is my opinion that, unless such a disposition is made, the entanglements will become more complex and, in all likelihood, with great loss to the common schools of the state. The scope of the powers of a court of equity over trusts has been stated as follows: “A court of equity has been said to have the capacity of a universal trustee. The scope of such judicial supervisory control includes, of necessity, any matter which concerns the integrity of the trust res—its administration, its preservation and its disposition, and any other matter wherein its officers (trustees) are affected in the discharge of their duties.” 54 Am. Jur., Trusts, § 276, p. 219.
Some contention has been made that occupying lessees' have had very advantageous, lease agreements over the years and that this mitigates the interest of such lessees. That this has been permitted to occur cannot be disputed. But this does not mean that all lessees have profited at the expense of the trust in this manner. The rent paid on a lease and the amount due for improvements, have no legal relation one to the other, and the low rent leases received by some cannot operate to the disadvantage of all lessees who have placed improvements on school lands in reliance on existing statutes.
It is’ my conclusion that the courts have a duty and responsibility to guard the public school lands, and the funds derived from their sale and rental, against loss. This duty includes any procedure which involves any unreasonable risk or leads the-trustee into the expense of subsequent litigation. It is the duty of the state to avoid costly pitfalls that' can result in the depletion of *127the trust fund. The responsibility also rests upon the courts to see that the state performs its duty as a trustee. Since the majority opinion is consistent with these views, I support it as a correct disposition of the case before us.
Boslaugh and McCown, JJ., join in this concurrence.