Oglesby v. McCoy , 41 N.C. App. 735 ( 1979 )

255 S.E.2d 773 (1979) 41 N.C. App. 735

David E. OGLESBY
v.
Edward G. McCOY, Director of the Marine Fisheries of the North Carolina Department of Natural and Economic Resources and Howard Lee, Secretary of the North Carolina Department of Natural and Economic Resources.

No. 783SC855.

Court of Appeals of North Carolina.

June 19, 1979.

Bennett, McConkey & Thompson by Thomas S. Bennett, Morehead City, for plaintiff-appellant.

Atty. Gen. Rufus L. Edmisten by Sp. Deputy Atty. Gen. W. A. Raney, Jr., and Asst. Atty. Gen. Daniel C. Oakley, Raleigh, for defendants-appellees.

CARLTON, Judge.

The primary question for determination is whether the legislature, in enacting G.S. 113-202(j) in 1967, violated the constitutional prohibition of statutes impairing the obligation of contracts. We hold that it did not.

Contracts to which a state is a party are within the constitutional prohibition against the impairment of the obligation of contracts. An act of a legislature may be an obligation of the state within the constitutional prohibition, and whatever rights are created by such act a subsequent legislature cannot impair. It is a well established principle that a contract to which a state, or a subdivision thereof, is a party is as much within the constitutional prohibition of statutes impairing the obligation of contracts as a contract between individuals, particularly with respect to contracts previously entered into by the state in its proprietary capacity. 16 C.J.S. Constitutional Law § 285, p. 1301.

Clearly, under the stated rule, the passage of G.S. 113-202(j) in 1967 would violate the constitutional prohibition of statutes impairing the obligation of contracts, as applied to the lease in question, if the legislature had intended for the statute to apply to leases which had not expired or which had been properly renewed pursuant to the terms of the lease. Such, however, is not the situation in the case at bar.

At the time the tendered new lease was submitted to plaintiff in 1976, the original lease had not been renewed since 1962. Pursuant to the terms of the lease, therefore, the lease had expired in 1972. Plaintiff argues, however, that the terms of the lease effectively gave him a perpetual lease and that the State was bound to renew it every 10 years at his request; therefore, the 1967 statute impaired the obligation of his continuing contract with the State. We do not believe this to be the prevailing law.

We adopt the majority view that the law does not favor perpetual leases and that the intention to create one must appear in clear and unequivocal language, and accordingly, a lease will not be construed to create a right to perpetual renewal unless the language employed indicates clearly and unambiguously that it was the intention and purpose of the parties to do so. See 50 Am.Jur.2d, Landlord and Tenant, § 1171, p. 56. Moreover, leases providing for successive renewals, without other qualifying language, will be construed as providing for but one renewal. 31 A.L.R.2d 607. The latter rule is based on the principle that courts do not favor perpetuities, and unless the lease, expressly or by clear implication, provides that the second lease shall contain a covenant for future renewals, it will be construed as providing for but a single renewal.

Applying the stated rules to the facts disclosed by the record, we think the parties clearly did not intend a perpetual lease in light of the language of the lease and the circumstances surrounding the transaction. The 1942 lease provided for a period of 20 years "with the right of renewal as set forth in the statute regulating the leasing of Oyster and Clam bottoms." By referring to the statute in the renewal clause in the lease, the parties anticipated that statutory changes would be operative on the right to renewal.

Moreover, nowhere in the instrument do we find any language indicating an instrument in perpetuity. In light of the State's vested interest in oyster and clam bottoms, we think our legislative and executive branches of government would have used appropriate and apt words to create a perpetual lease had such been intended. See Geyer v. Lietzan, 230 Ind. 404, 103 N.E.2d 199 (1952). Since neither the statute nor the lease employed clear and unambiguous language indicating an intent to create a lease in perpetuity, we hold that such was not the intent of the parties. Renewal of the lease in question in 1972 was therefore in the discretion of the State and must be in compliance with G.S. 113-202(j) requiring a $5 per acre per year rental fee for "renewals of leases entered into after said date [1 July 1965]." Put another way, the requested increase in the rental fee, pursuant to statutory authorization, after the first renewal term had ended, was constitutionally permissible.

Plaintiffs contend that the case at bar is completely controlled by a former decision of our Supreme Court in Oglesby v. Adams, 268 N.C. 272, 150 S.E.2d 383 (1966). There, plaintiff entered into an oyster bottom lease in 1953 with the State for a 20 year period with rights to renewal similar to the lease in question here. The rental fee was $1 per acre per year and plaintiffs' tender of rent at that rate prior to 1 April 1965 was refused by the State under the authority of a statute enacted by the legislature in 1965 increasing the rental fee to $5 per acre per year. Our Supreme Court held that the statute violated the rights conferred upon the plaintiff by the lease, citing the constitutional prohibition of statutes impairing the obligation of contracts.

Our decision is not in conflict with that decision of our Supreme Court. There, the initial 20-year lease had not expired and the act of the legislature attempted to increase the rental fee during the term of an existing lease. Here, in light of the rule enunciated above, no lease was existing at the time the state attempted to increase the rental fee in 1976.

We note finally that our legislature amended the 1965 statute following the Oglesby decision in 1966. It is obvious from a comparison of the 1965 and 1967 legislation that our legislature intended for all renewals after 1 July 1965 to be subject to an annual rental of $5 per acre per year. We hold that our legislature effectively raised the rental rate for oyster and clam bottoms for renewals subsequent to 1 July 1965. The rental increase is effective provided that the renewal in question is not a first renewal under a lease similar to the one in question, in which event the rental could not be raised by the State until the lessee attempted to exercise a renewal for a second term. In the instant case, the lessee had already exercised his first and second renewals and a third renewal was therefore in the discretion of the State. Since no lease was existing at the time, the State had the right to give effect to the statute and request an increase in the rental rate from the plaintiff.

For the reasons stated above, the decision of the trial court is

Affirmed.

VAUGHN and CLARK, JJ., concur.