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RICHARD C. HILL, SUPERINTENDENT OF EDUCATION; FRED BAGLEY, PRESIDENT OF FOREST MUNICIPAL SEPARATE SCHOOL DISTRICT BOARD; AND BURT ATKINSON, EDDIE LEE JOHNSON, ROLAND HARRIS, AND MRS. GEORGE TAYLOR, JR., MEMBERS OF THE FOREST MUNICIPAL SEPARATE SCHOOL DISTRICT BOARD v. WILLIAM C. THOMPSON

OCTOBER 11, 1989

RICHARD C. HILL, SUPERINTENDENT OF EDUCATION; FRED BAGLEY, PRESIDENT OF FOREST MUNICIPAL SEPARATE SCHOOL DISTRICT BOARD; AND BURT ATKINSON, EDDIE LEE JOHNSON, ROLAND HARRIS, AND MRS. GEORGE TAYLOR, JR., MEMBERS OF THE FOREST MUNICIPAL SEPARATE SCHOOL DISTRICT BOARD
v.
WILLIAM C. THOMPSON



EN BANC

PRATHER, JUSTICE, FOR THE COURT:

This appeal challenges a Sixteenth Section School Lands Trust lease under the Mississippi Constitution which prohibits the donation of state lands to private individuals. The case concerns a commercial property in downtown Forest, Mississippi, that for years and until recently was used as a gasoline and motor vehicle service station. The lot was leased for a one-time payment of $7.50 for a ninety-nine year term and the assertion is made that this consideration is so grossly inadequate that it violates the donation clause of Article 4, Section 95, Mississippi Constitution. Additionally, issues relating to the applicability of 1978 Reform Act retrospectively, statutory requirements of appraisals of trust lands, and trial procedures are also presented for resolution.

The case began by William C. Thompson (Thompson) filing a complaint in the Chancery Court of Scott County for confirmation of his title to a leasehold interest of Sixteenth Section School Trust land. The suit named as defendants the State of Mississippi, a body politic, whose agent for process in this cause was: the Superintendent and the members of the Board of Trustees of the Forest Municipal Separate School District, the president and members of the Board of Supervisors of Scott County, and the Scott County Board of Education, all in their official capacities. *fn1 The Chancery Court confirmed title of the lease in the complainant Thompson and imposed a sanction for recovery of attorney's fees in Thompson's favor against the Forest Municipal Separate School District for Seven Thousand Five Hundred Dollars ($7,500.00) and court costs. From this judgment, the School Board and Richard C. Hill, its Superintendent, appeal and present twelve assignments of error, not all of which need to be addressed, for reasons that will presently appear.

 On this appeal, briefs were filed by Edwin Lloyd Pittman, then-Attorney General, on behalf of Dick Molpus, Secretary of State, and by Mississippi Valley Title Insurance Company, as Amici Curiae.

 I.

 The real estate involved in this lawsuit is described as Lot 6, Block 7 of Section 16, Township 6 North, Range 8 East, Scott County, Mississippi (hereinafter referred to as Lot 6). It measures forty (40) feet north and south and eighty-five (85) feet east and west and lies within the city limits of Forest, Mississippi and within the Forest Municipal Separate School District. By use and zoning, the lot has long been classified commercial.

 The record of this case shows a partial history of the lot at issue. On May 9, 1859, the Board of Police of Scott County, Mississippi leased the northeast quarter and east half of the northwest quarter of Section 16, Township 6, Range 8, Scott County, consisting of 240 acres, at a consideration of $88.00 for a period of 99 years. Per acre, per year, the consideration was about $0.0037037. Lot 6 is a part of that 1859 lease. The various subsequent lease transfers before 1943 are unimportant to the deposition of this case.

 In January, 1943, in the case of Davenport Et al. v. All Persons, Etc., Cause No. 5,076, the Chancery Court of Scott County confirmed the unexpired 1859 leasehold interest in Lot 6 in Standard Oil Company against all persons claiming any legal or equitable title.

 On March 21, 1955, with a little over four years remaining on the original 99 year lease, Standard Oil conveyed its interest in Lot 6 to H. L. Lackey, reserving all service station equipment to itself with removal rights to the same. Shortly thereafter on May 2, 1955, Lackey obtained a new Sixteenth Section Lease to the property from the Scott County Board of Supervisors, acting under the purported authority of 1948 Mississippi Laws, Chapter 497, again for 99 years. The consideration for this new lease was a one time payment of $7.50. On July 5, 1960, the transaction was repeated as another 99 year lease was issued to Lackey, again for a gross sum rental of $7.50, under the authority of the 1956 Mississippi Laws, Chapter 290. After H. L. Lackey's death his heirs conveyed his leasehold interest to Kenneth Haden, et ux., the purchase price of which was secured by a deed of trust in favor of Lackey's heirs. Apparently Haden defaulted, as the deed of trust was foreclosed by the trustee on January 25, 1985, and the leasehold interest was purchased by William C. Thompson, the

 plaintiff, for a consideration of $7,000.00. The Trustee's deed conveyed" Lot 6 "and did not mention the leasehold interest nor the reservation of the service station equipment, except by reference to the Deed of Trust which is not a part of the record.

 II.

 Procedurally, this case comes to this Court in the following manner. On March 17, 1986, William C. Thompson filed his complaint for confirmation of his sixteenth section school trust lease for a 99 year period to run from July 5, 1960, the date of the last lease to H. L. Lackey.

 The defendant School Board filed its answer denying that Thompson had good title. The basis for its position was that, because both the 1955 and 1960 leases were issued for a one-time payment of $7.50 for a ninety-nine (99) year period, the consideration was so grossly inadequate as to constitute a donation of public land in violation of the Mississippi Constitution and applicable statutes. The Board's counterclaim sought voiding of both 1955 and 1960 leases and confirmation of title, free of any lease, in the State of Mississippi in trust for the public schools.

 On May 8, 1987 the Chancery Court entered final judgment which confirmed title in William C. Thompson to an unexpired ninety-nine (99) year Sixteenth Section Leasehold title in Lot 6 to terminate at midnight July 4, 2059. Further, the Chancery Court assessed sanctions in the form of attorney's fees against the Forest Municipal Separate School District, its Superintendent, Board of Trustees and their successors in office in the sum of seven thousand five hundred dollars ($7,500.00) with legal interest, on grounds that the School Board had filed a frivolous defense and counterclaim. Rule 11 (b), M.R.C.P. The counterclaim of the defendant Board, which sought to confirm leasehold title in the State of Mississippi in trust for the public schools, was dismissed with prejudice.

 III.

 As this is another case involving Sixteenth Section School Trust lands, a reiteration of the historical facts will be helpful before analyzing their legal significance. Such a concise history can be found in the recent case of Papasan v. Allain, 478 U.S. 265, 106 S. Ct. 2932, 92 L.Ed.2d 209 (1986), which arises from a Mississippi controversy.

 The history of public school lands in the United States stretches back over 200 years. Even before the ratification of the Constitution, the

 Congress of the Confederation initiated a practice with regard to the Northwest Territory which was followed with most other public lands that eventually became States and were admitted to the Union. In particular, the Land Ordinance of 1785, which provided for the survey and sale of the Northwest Territory," reserved the lot No. 16, of every township, for the maintenance of public schools within the said township. . . . "1 Laws of the United States 565 (1815). In 1802, when the eastern portion of the Northwest Territory became what is now the State of Ohio, Congress granted Ohio the lands that had been previously reserved under the 1785 Ordinance for the use of public schools in the State. 2 Stat 175.

 Following the Ohio example of reserving lands for the maintenance of public schools," `grants were made for common school purposes to each of the public land States admitted to the Union. Between the years of 1802 and 1846 the grants were of every section sixteen, and, thereafter, of sections sixteen and thirty-six. In some instances, additional sections have been granted.\rquote "Andrus v. Utah, 446 U.S. 500, 506-507, n 7, 64 L.Ed.2d 458, 100 S. Ct. 1803 (1980) (quoting United States v. Morrison, 240 U.S. 192, 198, 60 L.Ed. 599, 36 S. Ct. 326 (1916) (footnotes omitted)). Thus, the basic Ohio example has been followed with respect to all but a few of the States admitted since then. 446 U.S. at 522-523, n 4, 64 L.Ed.2d 458, 100 S. Ct. 1803 (Powell, J., dissenting). In addition to the school lands designated in this manner, Congress made provision for townships in which the pertinent section or sections were not available for one reason or another. Thus, Congress generally indemnified States for the missing designated sections, allowing the States to select lands in an amount equal to and in lieu of the designated but unavailable lands. See, e.g., Ch. 83, 4 Stat. 179 (1826). See generally Andrus v. Utah, supra, at 507-508, 64 L.Ed.2d 458, 100 S. Ct. 1803; Morrison, supra, at 200-202, 60 L.Ed. 599, 36 S. Ct. 326.

 Although the basic pattern of school lands grants was generally consistent from State to State in terms of the reservation and grant of the lands, the specific provisions of the grants

 varied by State and over time. See generally B. Hibbard, A History of the Public Land Policies 314-318 (1939). For example, in Indiana and Alabama, the school lands were expressly granted to the inhabitants of the townships directly. See 3 Stat. 290 (1816) (Indiana); 3 Stat. 491 (1819) (Alabama). In most of the other grants before 1845, the school lands were given instead to the States but were explicitly designated to be for the use of the townships in which they lay. See, e.g., 2 Stat. 233-234 (1803) (Mississippi); 3 Stat. 375 (1817) (same); 5 Stat. 58 (1836) (Arkansas). The Michigan grant in 1836, on the other hand, was simply" to the State for the use of schools. "See 5 Stat. 59. After 1845, the type of grant used in Michigan, granting the lands to the State for the use of its schools generally became the norm. See, e.g., 9 Stat. 58 (1846) (Wisconsin); 11 Stat. 383 (1859) (Oregon). Finally, the most recent grants are phrased not as outright gifts to the States for a specific use but instead as express trusts. These grants also are stated to the States for the support of the schools in those States generally. In addition, though, under these grants the State is specifically designated a trustee, there are explicit restrictions on the management and disposition of the lands in trust, and the Federal Government expressly retains an ongoing oversight responsibility. See, e.g., 36 Stat. 574 (1910) (Arizona and New Mexico).

 The history of the school lands grants in Mississippi generally follows the pattern thus described. In 1798, Congress created the Mississippi Territory, which included what is now about the southern third of the States of Mississippi and Alabama. 1 Stat. 549. In 1803, Congress provided for the sale and survey of all Mississippi Territory lands to which Indian title had been extinguished but excepted" the section number sixteen, which shall be reserved in each township for the support of schools within the same. "Stat. 233-234. In 1804, the Mississippi Territory was extended northward to the southern boundary of Tennessee. 2 Stat. 305. Two years later Congress authorized the selection of lands in lieu of unavailable Sixteenth Sections in the Territory. 2 Stat. 401 (1806). Eventually, in 1817, Mississippi was admitted as a State, and a

 further Land Sales Act provided for the survey and sale of those lands in the northern part of the new State that had not been covered by the 1803 Act. The 1817 Act provided that these lands were to be" surveyed and divided in the manner provided by law for the surveying of the other public lands of the United States in the Mississippi territory; "thus, the Act required that" the section No. 16 in each township . . . shall be reserved for the support of schools therein. "3 Stat. 375 (1817). The Sixteenth Section lands and lands selected in lieu thereof were granted to the State of Mississippi. See Lambert v. State, 211 Miss. 129, 137, 51 So. 2d 201, 203 (1951). . . . .

 From these historical circumstances, the current practice in Mississippi with regard to Sixteenth Section lands has evolved directly. Under state law, these lands, which are still apparently held in large part by the State," constitute property held in trust for the benefit of the public schools and must be treated as such. "Miss. Code Ann. 29-3-1 (1) (Supp. 1985). In providing for the operation of these trusts, the legislature has retained the historical tie of these lands to particular townships in terms of both trust administration and beneficiary status. Thus, the State has delegated the management of this property to local school boards throughout the State: . . . .

 Papasan, 478 U.S. at 268-272, 92 L.Ed.2d at 220-23. Footnotes have been omitted from this quotation. *fn2

 Thus the origin of the school lands trust for the support of public schools goes back to the beginning of our country and antedates the formation of the State of Mississippi. These lands throughout the United States, as well as within our State, have always been held to be trust lands for the benefit of public schools. Miss. Code Ann. 29-3-1 (1) (Supp. 1988), Turney v. Marion County Board of Education, 481 So. 2d 770, (Miss. 1985), Tally v. Board of Supervisors of Smith County, 323 So. 2d 547, 550 (Miss. 1975), Keys v. Carter, 318 So. 2d 862, 864 (Miss. 1975), Washington County v. Riverside Drainage Dist., 159 Miss. 102, 131 So. 644, 645 (1931). The school lands trust was federally created and is federally enforceable. Papasan supra, Plyler v. Doe, 457 U.S. 202, 210, 72 L.Ed.2d 786, 794 (1982), Lassen v. Arizona, 285 U.S. 458, 460, 87 S. Ct. 584, 585, 17 L.Ed.2d 515 (1967), 36 Stat. 574 (1910) (Arizona and New Mexico);

 Turney v. Marion County Board of Education, 481 So. 2d 770, 776 (Miss. 1985).

 Title to all lands in the trust was granted to, and resides in, the State of Mississippi. Turney v. Marion County Board of Education, 481 So. 2d 770, 776 (Miss. 1985); Tally v. Board of Supervisors of Smith County, 323 So. 2d 547, 549-550 (Miss. 1975); Lambert v. State, 211 Miss. 129, 137, 51 So. 2d 201, 203 (1951); Pace v. State ex rel Rice, 191 Miss. 780, 798, 4 So. 2d 270, 274 (1941); Jefferson Davis County v. James-Sumrall Lumber Co., 94 Miss. 530, 535-36, 49 So. 611, 612 (1909); Jones v. Madison County, 72 Miss. 770, 800, 18 So. 87, 91 (1985). That title so resides has been affirmed in Papasan, 478 U.S. at 271, 92 L.Ed.2d at 222; See also Gaines v. Nicholson, 50 U.S. (9 How.) 356, 364, 13 L.Ed. 172, 176 (1850).

 The State of Mississippi has historically managed its sixteenth section lands through local authorities, originally through the respective boards of supervisors, and more recently through the school boards. This Court has described the duties of such managing agents in Humble Oil & Refining Co. v. State, 206 Miss. 847, 41 So. 2d 26 (1949)." As such Trustees they were required, like all other fiduciaries, to exercise a higher degree of care with reference to the administration of their trust than in the management of their own individual personal business, and furthermore, even than in attending to the general run of the county's business. "206 Miss. at 854, 41 So. 2d at 27. As record titleholder, the State of Mississippi, through its managing or supervising agent, the Board of Education, has standing to bring or defend actions in federal or state courts respecting these trust lands, the same as any common-law trustee.

 Common-law rules enforceable in the case of private trusts are applied to the public school lands trust. Keys v. Carter, 318 So. 2d 862, 864 (Miss. 1975); Holmes v. Jones, 318 So. 2d 865, 868 (Miss. 1975); United States v. Swope, 16 F.2d 215, 217 (8th Cir. 1926). Common law rules of trust law have been applied to federal lands trust in various contexts. See. County of Oneida, New York v. Oenida Indian Nations, 470 U.S. 226, 105 So. Ct. 1245, 84 L.Ed.2d 169, 178-80, 181, 186-87 (1985) (applying common law remedies because federal act did not establish comprehensive remedial plan).

 At common law, one who holds as trustee is prohibited from giving away, appropriating to his own use, or otherwise, disposing of the corpus of a trust in derogation of the rights of the beneficiaries. This rule applies to the school lands trust. Tally v. Board of Supervisors of Smith County, 323 So. 2d 547, 550 (Miss. 1975); Holmes v. Jones, 318 So. 2d 865, 868-69 (Miss. 1975); See also, State v. Weiss, 706 P.2d 681, 683 (Alaska 1985)

 (relying on Restatement (2d) of Trusts 1959) (when protecting a federally created land trust); State v. University of Alaska, 624 P.2d 803, 813 (Alaska 1981) (relying on Scott, The Law of Trusts (3 ed. 1967), and Bogert, The Law of Trusts and Trustees, (Rev. Ed. 1978) when protecting a federally created land trust).

 One important corollary of this rule is the continuing nature of the trustee's duty to manage the trust corpus so that the income therefrom is reasonably maximized. Restatement (Second) of Trusts, 181 (1959). Indeed, where a reasonable yield is prevented by the trustee's wrongful conduct, this in no way serves to extinguish or ameliorate the trustee's continuing duty to produce a reasonable yield. Bogart, The Law of Trusts and Trustees 703 (2d rev. ed. 1982). The continuing duty of the trustee is enforceable at any time, 4 Pomeroy's Equity Jurisprudence 1067, 1080 (5th ed. 1941); Restatement (Second) of Trusts, 74, Comment c (1959) and may not be avoided because of past defaults. 4 Scott, The Law of Trusts, 392 (3d ed. 1967). Johnson v. Hinds County, 524 So. 2d 947, 955 (Miss. 1988) (failure of enforcement in the past does not render a statute inoperative).

 These common law duties have been made more concrete with respect to the school lands trust in Mississippi, first by the Mississippi Constitution and, second, by legislative enactment. Today's appellants have recognized their responsibilities as trustee and as trust supervisors or managers, and it is in that vein that they have defended the original action to confirm title, asserted their counterclaim, and prosecuted the present appeal. What is important is that these duties of the trustee and as well, the applicability and enforceability of the law of trusts to the school land trusts date back to the year 1817, the date of the creation of the trust. The subsequent constitutional and statutory enactments are but federally permissible supplements and refinements of the law regulating the school lands trust.

 IV.

 WERE THE 1955 AND THE 1960 SIXTEENTH SECTION LEASES VOID FOR ...


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