Banks v. State , 181 Neb. 106 ( 1966 )

Smith, J.

The Board of Educational Lands and Funds took steps to sell school land occupied by plaintiffs under an expiring lease. This controversy followed in the form of a disputed title to permanent improvements on the land. The district court rendered a responsive declaratory judgment. It quieted the title in plaintiffs to a stock well, other structures, and a growing crop. It quieted also the title in the board to loading chutes, corrals, a board windbreak, and land leveling.

The parties relate their assignments of error on appeal and cross-appeal to these' topics: Statutory authority for improvements; necessity for administrative approval of proposed improvements; and existence of requisite approval. We study also the nature of an outgoing-tenant’s property interest.

The dispute sprang from a major change in legislative policy. For a long time leases had been common and sales rare. The 1965 Legislature directed the board to sell the school lands at the expiration of current leases. In doing so, it made no reference to improvements or to an outgoing-tenant’s interest. §§ 72-257 and 72-258, R. S. Supp., 1965. Legislative policy is interwoven with the evidence, which is undisputed.

The board leased 320 acres in Chase County, Nebraska, to plaintiffs on October 16, 1953, for a 12-year term ending December 31, 1965. In connection with the lease plaintiffs paid the outgoing tenant for a house, barn, granary, and the stock well and tower, all of which had been built in 1943. The lease provided that plaintiffs would commit no waste and that the state would have a lien on all improvements as security for performance.

Plaintiffs themselves made improvements. In the beginning they built fences, a loading chute, and a corral. In 1964 they erected the board windbreak. During 1963-1965 they leveled 150 acres of land for irrigation. Subsequent to August 16, 1965, the date of the passage of the sales law, they planted 25 acres in wheat, which was unmatured at the expiration of the lease.

The factual issue of approval by the board is limited to the land leveling; lack of approval for other improvements in question is admitted. Plaintiffs proposed to drill an irrigation well and to irrigate 100 acres in 1963. The estimate of cost was $3,300 for the well and $35 per acre for land leveling. A soil conservationist recommended the leveling.

The board met March 11, 1963. The agenda contained this description of plaintiffs’ proposal: “Lessee requests permission to drill an irrigation well on this lease at an approximate cost of 3300, the plan has been approved by the Soil Conservation Service.”

The record does not show any action on the proposal for leveling, but a permissible inference of approval is argued. The secretary of the board discussed the proposal in correspondence prior to the meeting but not afterward. A subsequent notification simply stated that the board had approved the request to drill an irrigation well at an approximate cost of $3,300.

In December 1965, the board published notice of public sale on January 6, 1966. To be sold was the land with “All improvements * * * placed (on it) * * * without the approval of the Board * * *, including * * * house, outbuildings, stock well, fencing, also including all growing crops * * * at the time of sale.” Plaintiffs commenced the present action on December 29, 1965. We assume that the board is withholding the land from sale pending final judgment. There is no direct evidence of possession in 1966.

Statutes operating on the date of plaintiffs’ lease provided a right and a remedy. If the outgoing lessee and the incoming lessee were unable to agree on the value of improvements, an appraisal was made. It included all buildings, fencing, wells, windmills, irrigation improvements, dams, drainage ditches, trees, plowing for future crops, and growing crops. The incoming lessee was required to- pay the appraised value for the benefit of his predecessor. Laws 1953, c. 255, § 1, p. 862; former § 72-240.06, R. R. S. 1943.

Other statutes provided as follows:

“Before any buildings, wells, irrigation improvements, dams, or drainage ditches are placed upon school lands by a lessee, written approval must be obtained from the Board * * * except necessary improvements for the temporary handling and sheltering of livestock. Any such improvements placed upon school lands after September 14, 1953, where written approval * * *was not obtained * * * shall be considered improvements of the land and the lessee shall not be entitled to reimbursement therefor.” § 72-240.07, R. R. S. 1943.

“All improvements put on leased public land shall be assessed to the owner of such improvements as personal property, * * *.” Laws 1911, c. 104, § 4, p. 372; former § 77-1209, R. R. S. 1943.

In 1957 the Legislature added: “All authorized improvements * * * shall become the property of new lessees in all instances, and payment shall be made to the old lessees * * Laws 1957, c. 303, § 1, p. 1107; § 72-240.06 (1), R. S'. Supp., 1965.

The board contends that the 1943 structures were unauthorized. It relies on the unconstitutionality of the appraisal statute that preceded the 1953 act. In Watkins v. Dodson, 159 Neb. 745, 68 N. W. 2d 508, an outgoing tenant was deprived of procedural due process; the statute failed to require notification of hearing before the appraisers. Without much explanation we later decided that an outgoing tenant had an interest in structural improvements, notwithstanding the unconstitutionality of the whole statute. Mara v. Norman, 162 Neb. 845, 77 N. W. 2d 569.

The 1953 act and the amendment determine the legal operation of plaintiffs’ lease. The1 former tenant had a property interest and plaintiffs paid him for it. Despite the obscure rationale Mara v. Norman, supra, answers the argument of the board.

In order to decide whether board approval of other structures was necessary, we construe the 1953 act. The parties agree that the loading chute and board windbreak are fencing under the statute. We add the corral. It has more the characteristics of fencing in the statutory frame of reference. “ £A fence is an inclosing structure, * * * intended to prevent intrusion from without or straying from within.’ ” Shamberg v. City of Lincoln, 174 Neb. 146, 116 N. W. 2d 18. See, also, Webster’s Third New International Dictionary (unabr.) “corral,” p. 511. Because fencing was specified for appraisal but not for approval, plaintiffs were not required to obtain approval.

If our opinion rested entirely on plaintiffs’ interest under the leasing statutes, it would be incomplete. The board expects a new owner, not a new tenant. The immediate question is the meaning of the sales sections, which are conjoined with the leasing sections. 37he answer lies partially in the course of legislation on the general subject.

Under an 1867 act an occupant had an option between receiving the appraised value of his improvements from the purchaser of the school land or removing the improvements within 6 months after sale. G. S., c. 70, § 14, p. 994, § 19, p. 995. The 1897 Legislature made substantial changes. It generally prohibited sales, and it restricted the option between compensation or removal under the leasing policy to moveable improvements. Laws 1897, c. 71, § 1, p. 318, § 5, p. 319. A 1919 statute provided in part: “If the highest bid * * * shall be made by a person other than the lessee the value of all the improvements on the land shall be appraised * * *. The successful bidder * * * shall * * * pay to the county treasurer, for the use of the former lessee, the amount of the appraisement.” Laws 1919, c. 149, § 1, p. 333.

Statutes of 1919 and subsequent years have not restricted compensation to moveable improvements. Moreover, the Legislature has. not permitted a tenant to opt for removal. The statutes on their face declare a compensation policy that has been uninterrupted for almost 50 years. It is too late now for us to say that an outgoing tenant necessarily has no interest whatever.

The property interest resulting from structural improvements comprises either a common law privilege of removal or a right to compensation. Such a privilege ought to fit apparent policy; yet the remedy of compensation in the leasing system is exclusive. Kidder v. Wright, 177 Neb. 222, 128 N. W. 2d 683; O’Neil v. Haarberg, 179 Neb. 531, 139 N. W. 2d 217. The privilege would be an inadequate substitute for compensation. In association with irremoveable improvements such as land leveling and well holes, it would be no substitute at all. Tenants would depart empty-handed because of the difference between lease and sale. We conclude that the privilege is not adaptable.

The common law is also hostile to an interest of a former tenant in unmatured crops. Plaintiffs planted wheat during a tenancy for a definite term and after the date of the passage of the sales law. The crop was growing at the expiration of the lease. In such circumstances at common law a tenant is not entitled to crops. See, Peterson v. Vak, 160 Neb. 450, 70 N. W. 2d 436, 51 A. L. R. 2d 1221; Vance v. Henderson, 141 Neb. 766, 4 N. W. 2d 833; Peterson v. Vak, 169 Neb. 441, 100 N. W. 2d 44.

The Legislature has encouraged good husbandry and continuity in farming operations. O’Neil v. Haarberg, supra; State ex rel. Ebke v. Board of Educational Lands & Funds, 154 Neb. 244, 47 N. W. 2d 520; State v. Platte Valley P. P. & I. Dist., 147 Neb. 289, 23 N. W. 2d 300, 166 A. L. R. 1196. The practice in the western part of Nebraska is to seed a grain crop in the fall and to harvest it in the summer. A calendar year unit serves no functional purpose in a lease, unless a former tenant retains an interest in the growing crop. If we upheld the board, utilization of crop land during the final year of the lease would be adversely affected. “If such land should not be sold * * *, then it shall be offered for lease as the Board * * * shall provide for a period of six years.” § 72-258.01, R. S. Supp., 1965. Few tenants would take that chance.

In our opinion improvements compensable under the leasing statutes are also compensable under the sales statutes. The value of a tenant’s property interest is required to be determined prior to sale of the land. Beneficial interests in the educational trust must of course be protected fully. We reiterate:

“The public school lands of the state are trust property and the state is required to administer them as such for the benefit of the common schools * * *.

“* * * These lands * * * are subject to the rules of law applicable to the handling of trust estates because of the status assigned to them by the Constitution.” State ex rel. Ebke v. Board of Educational Lands & Funds, supra.

Plaintiffs had a property interest resulting from all improvements in question, except the development by land leveling. The judgment is reversed and the cause remanded with directions to render judgment declaring that plaintiffs have a compensable interest resulting from the improvements, except the land leveling, and that the value of their interest is required to be determined prior to the sale. Costs on appeal are taxed to the board.

Reversed and remanded with directions.