Smith Petroleum, Inc. v. Lamar County School District ( 2019 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2018-CA-00325-SCT
SMITH PETROLEUM, INC. f/k/a MISSISSIPPI
OIL, INC.
v.
LAMAR COUNTY SCHOOL DISTRICT
DATE OF JUDGMENT: 02/05/2018
TRIAL JUDGE: HON. JOHNNY LEE WILLIAMS
TRIAL COURT ATTORNEYS: SHIRLEY M. MOORE
CRAIG N. ORR
RICHARD D. NORTON
WILLIAM A. WHITEHEAD, JR
COURT FROM WHICH APPEALED: LAMAR COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: SHIRLEY M. MOORE
CRAIG N. ORR
ATTORNEYS FOR APPELLEE: WILLIAM A. WHITEHEAD, JR.
RICHARD D. NORTON
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: AFFIRMED - 05/30/2019
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE RANDOLPH, C.J., COLEMAN AND CHAMBERLIN, JJ.
RANDOLPH, CHIEF JUSTICE, FOR THE COURT:
¶1. The Lamar County School District denied a request by Smith Petroleum to erect and
construct an LED advertising billboard on its Sixteenth Section leasehold located on Old
Highway 11 in Hattiesburg, Mississippi. Smith Petroleum filed its Notice of Appeal and Bill
of Exceptions in the Chancery Court of Lamar County. The chancellor affirmed the School
District’s denial of Smith Petroleum’s request to erect and construct the LED billboard.
Finding no error, we affirm the judgment of the chancery court.
FACTS AND PROCEDURAL HISTORY
¶2. The Lamar County Board of Education, N.B. Royals, and Kirk Frazier, as tenants in
common, executed a Sixteenth Section Land Lease and Contract for a term of forty years for
property located at 4041 Old Highway 11 in Hattiesburg, Mississippi. The lease contained
the following provision:
SUBLEASING OR ASSIGNMENT OF LEASE
Lessee covenants and agrees not to sublease, assign, transfer, or convey
by warranty deed, quitclaim deed, or any other conveying instrument the herein
described leased property and the leasehold interest therein without the
expressed prior consent of the Lessor. In the event the Lessee requests and the
Lessor approves any subleasing, transfer, or assignment of this lease or any
portion thereof, then the Lessor may, in its discretion, require all parties to the
transaction to obtain new leases as to each individual interest.
After obtaining approval from the School District, Frazier and Royals assigned the property
to Mississippi Oil, Inc., by quitclaim deed. Subsequently, Mississippi Oil merged with Smith
Petroleum.
¶3. Smith Petroleum then entered into an exclusive agreement with Busby Outdoor, LLC,
to erect and construct an advertising billboard depicted as an “LED Showcase Sign” on 2,945
square feet (0.07 acres) of the leased property. Under the agreement, Busby was to market
advertising and to pay Smith Petroleum royalties for the forty-year term1 of the agreement.
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The agreement stated the following:
2. Term. The term of this Lease shall commence upon the erection of the
LED structures, and shall be for an initial period of forty (40) years “Term.”
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Busby was also granted exclusive rights to construct and erect future billboards on the
property, “including necessary supporting structures, devices, illumination facilities and
connections, service ladders and other appurtenances thereon.” Busby was responsible for
all power bills, internet, and insurance expenses, in addition to all maintenance of the
physical structure, including the upkeep, painting, and illumination of the billboard.
¶4. Busby agreed to cover all initial costs of erecting and constructing the billboard,
including all “permitting costs, materials, labor for construction, maintenance, shipping costs,
attorney’s fees, and any other associated construction costs.” Although the parties agreed that
Smith Petroleum would be the owner of the billboard, Smith Petroleum could only move the
billboard and other improvements at the expiration of the forty-year lease.
¶5. Busby, on behalf of Smith Petroleum, sought a sign permit from the City of
Hattiesburg. The members of the Hattiesburg Planning Commission voted to approve the
permit.
¶6. During construction, the Lamar County School Board contacted Busby and asked that
construction stop and that Busby attend the May 9, 2017, Board meeting, because the
construction of the billboard needed to be addressed and approved by the Board. In addition
to Busby, representatives of Lamar Outdoor and Headrick’s Signs attended the meeting to
discuss the installation of billboards along Old Highway 11. Before the May 9, 2017,
meeting, Lamar Outdoor had sought the Board’s approval for the placement of a sign across
This Agreement may be renewed by mutual agreement and further negotiation
of the parties year to year after the expiration of the initial term.
(Emphasis added.)
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the street from Smith Petroleum’s property. The Board denied that request. At the meeting,
Headrick’s Signs requested that the discussion be tabled to allow additional consideration for
the use of billboards on Old Highway 11.
¶7. The billboard issue was addressed again at the June meeting. After learning that a
written agreement existed between Smith Petroleum and Busby, the Board tabled the issue
once again to allow time for Smith Petroleum to produce the agreement. At the August 14,
2017, meeting, the Board denied the request to construct the sign, citing drivers’ safety and
Smith Petroleum’s failure to seek Board approval before seeking a permit from the City.
¶8. Smith Petroleum later filed its Notice of Appeal and Bill of Exceptions. After hearing
arguments from the Board and Smith Petroleum, the chancellor affirmed:
The title of the agreement between Smith Petroleum and Busby is
immaterial, rather the effect and substance of the agreement appears to be that
of a lease agreement. A close look at the agreement reveals that it is, in fact,
a conveyance of an interest in the leasehold by Smith Petroleum to Busby for
a term of forty (40) years. Such a conveyance of the Sixteenth Section
Leasehold interest requires board approval, as expressly set forth in the
original lease agreement of January 6, 1992.
The Lamar County School Board was within it’s authority by
withholding consent, as it relates to the instrument of conveyance between
Smith Petroleum and Busby. The Board clearly articulated reasons for which
its consent was being withheld and that decision should not be disturbed.
STATEMENT OF THE ISSUES
I. Whether the chancery court erred in finding that Smith
Petroleum’s license agreement with Busby was a sublease that
required Board approval.
II. Whether the Board waived its argument that Smith Petroleum’s
agreement with Busby was a sublease.
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III. Whether the chancery court erred in finding that the Board’s
decision was not arbitrary or capricious and did not deprive Smith
Petroleum of its constitutional rights of equal protection.
STANDARD OF REVIEW
¶9. “With regard to the facts of the case—both the evidentiary facts and the ultimate
facts—our inquiry is limited to a determination of whether there be substantial credible
evidence undergirding the School Board’s findings.” Merchant v. Bd. of Trs. of Pearl Mun.
Separate Sch. Dist., 492 So. 2d 959, 962 (Miss. 1986). If this Court finds substantial credible
evidence, we will accept those findings. Everett v. Bd. of Trs. of Meridian Mun. Separate
Sch. Dist., 492 So. 2d 277, 283 (Miss. 1986). This Court will only intervene when “a school
board has acted in a manner which is arbitrary and capricious and where its actions are not
supported by substantial evidence . . . .” Noxubee Cty. Bd. of Educ. v. Givens, 481 So. 2d
816, 820 (Miss. 1985) (citing Madison Cty. Bd. of Educ. v. Miles, 252 Miss. 711, 173 So.
2d 425 (1965)).
ANALYSIS
I. Whether the chancery court erred in finding that Smith
Petroleum’s license agreement with Busby was a sublease that
required Board approval.
¶10. As provided by Mississippi Code Section 29-3-1, the Board holds Sixteenth Section
lands in trust for the benefit of the public schools. As such, the Board, “shall have control
and jurisdiction of said school trust lands and of all funds arising from any disposition . . .
.” Miss. Code Ann. § 29-3-1(1) (Rev. 2010). The Board is required, “to manage the school
trust lands and all funds arising therefrom as trust property.” Id. The Board “shall assure that
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adequate compensation is received for all uses of the trust lands, except for uses by the
public schools.” Id. (emphasis added).
¶11. This Court must consider whether the erecting and constructing of an “LED Showcase
Sign” and Busby’s ultimate use of the described 2,945 square feet constitutes “use of the trust
land.” Smith Petroleum and Busby argue that they entered into a “license agreement.” The
Board replies that the agreement is a renamed, repackaged sublease that requires prior
approval from the Board.
¶12. The agreement at issue is titled “Exclusive Agreement to License.” While Smith
Petroleum and Busby argue that this document was a license agreement, language within the
document belies their assertion. The term was described as a forty-year lease. Furthermore,
Busby was granted the exclusive right to market, sell, and rent advertising space on
billboards and to collect all revenue generated. Busby would only advertise for Smith
Petroleum in the event space was available, and Smith Petroleum was to receive royalty
payments. Busby also was tasked with maintaining the property and obtaining insurance.
Busby was granted the right to pledge, assign, mortgage, or encumber the agreement in order
to secure financing. Finally, the agreement was subject to transfer by attachment, execution,
proceedings in insolvency or bankruptcy, or receivership.
¶13. The law on licenses and leases in Mississippi is limited. One Mississippi case has
provided that the distinction between a lease of land and a license is that
a lease conveys an interest in land, requires a writing to comply with the statute
of frauds, and transfers possession, while a license merely excuses acts done
by one on the land possession of another that without the license would be a
trespass, and conveys no interest in the land[.]
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Hotel Markham v. Patterson, 202 Miss. 451, 32 So. 2d 255, 256 (1947) (quoting Baseball
Publ’g Co. v. Bruton, 302 Mass. 54, 55, 18 N.E.2d 362, 363 (1938)). The Hotel Markham
Court went on to state that
a license is defined to be an authority to do some act or a series of acts on the
land of another without passing an estate in the land. It amounts to nothing
more than an excuse for the act, which would otherwise be a trespass. A
leasehold is an interest in real property; it carries a present interest and estate
in the land and the main criterion is the right of possession of land.
Id. at 256. A treatise on landlords and tenants also provides
[T]he distinction between a lease and a license is the right of the possession of
the land. If a contract confers exclusive possession of the premises or a portion
thereof as against the whole world, including the owner, it is a lease. If it
merely confers a privilege or permission to use or occupy under the owner, it
is a license.
52 C.J.S. Landlord & Tenant § 340, Westlaw (database updated Mar. 2019) (citations
omitted).
¶14. One primary criterion used to distinguish a lease from a license is the “right of
possession of the land.” The agreement between Smith Petroleum and Busby is an agreement
to erect and construct a permanent structure on Sixteenth Section land. Busby was granted
exclusive access and control of that billboard to the exclusion of Smith Petroleum, which
cannot remove that physical structure until the expiration of the forty-year term. This
agreement attempted to give Busby an undivided interest in the specifically described
Sixteenth Section land without prior approval from the Board. We find that the trial court did
not err in finding that the instrument was a sublease, which required Board approval.
II. Whether the Board waived its argument that Smith Petroleum’s
agreement with Busby was a sublease.
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¶15. Smith Petroleum contends that the Board waived arguing that the agreement was a
sublease. The Board argues that it maintained from the beginning, when it first contacted
Busby and asked that construction cease, that the agreement was a sublease. It requested that
Smith Petroleum and Busby attend the Board’s meeting. Even after receiving the agreement,
the Board still maintained the conveyance was a sublease based on the contents of the
document. We find that the Board did not waive its argument that the agreement was a
sublease.
III. Whether the chancery court erred in finding that the Board’s
decision was not arbitrary or capricious and did not deprive Smith
Petroleum of its constitutional rights of equal protection.
¶16. The minutes of the August 14, 2017, meeting reflect that the Board reasonably
exercised its statutory authority to manage its Sixteenth Section property. The Board
discussed safety concerns, prior decisions denying requests to for similar signs, the glare of
an LED sign, and the close proximity to the roadway. By a unanimous vote, the Board agreed
to deny Smith Petroleum’s request.
¶17. The Board did not act in an arbitrary or capricious manner. The Board expressed
concerns with safety, including the glare emitted by LED billboard, the proximity to the road
traveled by students, and the condition of the road (the curve) where the billboard would be
constructed. Smith Petroleum and Busby were not treated any differently than others who had
requested permission to construct LED billboards. The Board’s decision was consistent with
its previous denials of such requests from Lamar Outdoor and Headrick’s Signs. Smith
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Petroleum’s claim that the Board acted arbitrarily and capriciously and that its decision
deprived Smith Petroleum of its constitutional rights is without merit.
CONCLUSION
¶18. The agreement between Smith Petroleum and Busby was a sublease that required prior
approval of the Board. Once approval was sought, the Board did not act arbitrarily or
capriciously in denying the request to construct an LED billboard on Sixteenth Section land.
The learned chancellor did not err in affirming the findings of the Board, which were
supported by substantial evidence. We affirm the judgment of the chancery court.
¶19. AFFIRMED.
KITCHENS AND KING, P.JJ., COLEMAN, MAXWELL, BEAM,
CHAMBERLIN, ISHEE AND GRIFFIS, JJ., CONCUR.
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