Oklahoma Education Ass'n, Inc. v. Nigh , 642 P.2d 230 ( 1982 )

SIMMS, Justice,

dissenting:

I must dissent. We have no facts before us in this action. A majority of the Court voted to assume jurisdiction of this matter without any factual determination having been made or any stipulation of facts agreed on, for the “sole purpose” of deciding the constitutionality of five statutes. I dissented to taking jurisdiction of this cause as it was framed, or more accurately — as it was not framed- — and I believe the problems inherent in a decision rendered in the abstract are evident from the face of the majority opinion.¹

The opinion is not based on proven facts, but on assumptions of facts which may or may not be valid or accurate. Some of those assumptions are:

(1) The Commissioners of the Land Office do not charge more than 3% of the appraised value of land for agricultural leases;

(2) Leases for “but 3%” of appraised value are not bringing the trust a good and fair return on its land;

(3) The Commissioners do not require competitive bidding in leasing, and in fact cannot require bidding under the statutes.

These things may or may not be true. We do not know how the Commissioners lease land or how they establish rental price. We also do not know what a “good” lease rate is for agricultural land. It may be that 3% is a very fair return for land of this type. It may also be that the financial loss, if any, to the trust results not from the statutory rental provisions, but from the method and manner of appraising the land.

No less important is the fact that the majority’s opinion on the constitutionality of these statutes ignores all relevant rules controlling that decision making process. It is axiomatic that statutes are presumed to be constitutional and the burden of showing the unconstitutionality rests on the party asserting it. Also that where a statute is capable of two constructions, one which would render it invalid and the other valid, the construction which will uphold its validity must be adopted. The cardinal rule in the construction of statutes is that the legislative intent must govern, and to ascertain that intent all the various portions of the legislative enactments upon the particular subject, should be construed together in light of the general purposes of the Act and given effect as a whole. Additionally, when a statute is susceptible of two interpretations, that one giving it effect intended by the legislature should be adopted. None of this was done in this case.

I do not agree with the majority’s determination that 64 O.S.1971, § 86.1 establishes a maximum lease-value rate of 8%. Another statutory provision reveals the clear legislative demand that 3% is a minimum, not maximum, rental rate. 64 O.S.1971, § 87a(g) provides in pertinent part:

“. .. Such appraisment shall be used and followed by the Commissioners of the Land Office in fixing the annual rental value of all such preference right, lease lands and all such lands may be leased by the Commissioners of the Land Office for a term of five years, at an annual rental of not less than three per cent (3%) of the appraised value of such lands, exclusive of improvements.”

Words can be supplied or modified by the Court to give a statute the effect intended by the legislature. See, e.g., Curtis v. Registered Dentists of Oklahoma, 193 Okl. 233, 143 P.2d 427 (1943). Gathering the intent of the legislature from all the enactments— assuring adequate income to the trust by requiring a minimum rate of 3% — -the provision of § 86.1 can, and should, be read to require “rental equal to at least 3%", consistent with § 87a(g).

The majority rejects the Commissioner’s argument that § 259 repealed § 86.1 and § 89 by implication, based on the rule that repeals by implication are not favored and will not be indulged if another reasonable construction will allow all statutes to be given effect. I do not believe that being stricken for unconstitutionality is being “given effect” within the contemplation of the rule. I would not find § 86.1 repealed, but would, as discussed above, hold that it requires a minimum rental of 3%. I would hold that § 89 was repealed by implication. I would find that the statute which impliedly repealed it was § 87a(g) however, not § 259.

Section 89 was enacted in 1935 (Laws 1935, p. 116, § 25) and § 87a(g) in 1941. (Laws 1941, p. 299) The differences between the two sections cannot be reconciled. They cannot be construed harmoniously as § 86.1 and § 87a(g) can be, because the specific provisions are in conflict. Section 89 provides for rent floating between 2% and 4%, and § 87a(g) for a minimum rent of 3%.

The majority assumes that competitive bidding will allow the trust a fair rate of return commensurate with the market value of the property and strikes §§ 86.1 and 89 because, in the majority’s view, they prohibit bidding and limit potential return by imposing a percentage ceiling.²

Even taking these things as true, still under the majority’s own reasoning, its striking of § 260.2 for its failure to also expressly require competitive bidding is unnecessary. Section 260.2 does not contain any method of establishing lease price. It is wholly dependent upon the provisions for appraisal and determination of percentage rental price stricken by the majority for failure to require bidding. . Using its own analysis, the majority has already cured the problem of absence of statutory requirement for competitive bidding by striking §§ 86.1 and 89, but strikes § 260.2 anyway. The requirement for bidding imposed by this opinion, of necessity, will carry over and be added as a separate and necessary prerequisite to obtaining a preference lease.

In my view, striking § 260.2 is also unnecessary for a different reason. The Commissioners are fully empowered to do just what they did: adopt the requirement for competitive bidding on leases by rule. The statutes do not limit the authority of the Commission, a constitutionally created body, to implement those rules necessary to protect the trust and prudently manage the leasing and income therefrom. To the contrary, §§ 259 and 260 provide:

“Any lands leased by the Commissioners of the Land Office for agricultural and/or grazing purposes shall be leased for a period not to exceed five years under such terms and conditions and at such annual rental as may be fixed by the Commissioners of the Land Office.” 64 O.S.1971, § 259.

“The Commissioners of the Land Office are hereby authorized and empowered to make and promulgate rules and regulations relating to the appraisement of land and any improvements located upon such land as may be owned by the State, leasing and subleasing such lands and improvements, reservation of rights and interests, collection of rentals, conservation and preservation of such lands and the fertility thereof and any other rules and regulations necessary in order that the purposes for which such lands are owned and held by the State may be accomplished.” 64 O.S.1971, § 260.

Given the majority’s position that the statutes actually prohibit a competitive bidding requirement for leasing, it is unnecessary to set out the plan the Commissioners did adopt and examine it.

The point is not what the plan says, but the fact that there is a plan. That plan, it occurs to me, rather than the constitutionality of these statutes, should be the focal point of this action. If adequate, it would render this matter moot (assuming it was ever viable). Instead it goes unmentioned.

Assume that prior to this action being filed, an unhappy lessee had brought an action complaining about the Commissioners’ adoption of the competitive bidding requirements, asserting the Commissioners had no power to do so. I doubt that the Court would have sustained that position. This Court certainly rejected such a contention in a similar case in State, ex rel., Commissioners v. Wall, 204 Okl. 665, 232 P.2d 940 (1951). There a lessee contended that the Commissioners did not have the power or authority to appraise lands without being expressly and specifically directed to do so by the legislature. Various statutory provisions (including §§ 86.1 and 89) were examined and it was held that specific direction to appraise and reappraise land was not necessary to confer such power on the Commissioners. The Court stated:

“A careful study of the various acts of the legislature, and the constitutional provision above set forth, convinces us that the power of appraisal of state lands, in order to arrive at the amount of a reasonable rental therefor, was a necessary incident to the management, leasing, and disposal of said lands vested in the Commissioners of the Land Office by [art. 6, sec. 32] ... ”

“It is inconceivable to us that a commission composed of five of the highest officials of the state, entrusted with the duty of managing said lands to effectuate the purposes for which they were granted to the state, that is, to provide funds for the use of the common schools of the state, should be so hampered and restricted in management and operation of such properties that they were not permitted to place a valuation upon the lands for the purpose of renting them for agricultural purposes unless they were expressly authorized to do so by the legislature. We find nothing in the Constitution or laws of the state prohibiting the exercise of such power by the Commissioners, and as above stated, it was necessarily incident to the proper performance of their trust. By the exercise of this power the state is assured of adequate rentals on the leased lands, regardless of the fluctuating value thereof.” 232 P.2d at 943-944.

Likewise, providing for bidding procedures is a necessary incident to the management and leasing powers vested in the Commissioners by art. 6, sec. 32.

I disagree with the majority’s conclusion that the statutes prohibit competitive bidding. I find the statutes, when properly construed, are clearly compatible with a competitive bidding requirement implemented by the Commissioners, and that the statutes recognize such power vested in the Commissioners. I would hold that consistent with §§ 259 and 260, the Commissioners exercised their vested power to create leasing procedures they deemed most beneficial to the trust. As concluded by the majority, competitive bidding or competitive bonus offers would be compatible with the statutes and function of the trust.

I would hold that §§ 86.1 and 87a(g) impose a minimum income requirement on rental, so that whatever procedure for establishing rent is used, the Commissioners must receive a minimum rate of at least 3% of the value of the land they lease. Section 260.2 need not be stricken; the rental provisions of the other statutes control that requirement.

Preference right leases may not even be a real problem. There may not be such a thing any longer. More than slight doubt is cast on their continued viability by 64 O.S. Supp.1977, § 253(D), which provides:

“Hereafter no preference right lease may be created by the School Land Commission.”

Perhaps, then every preference right to re-lease is extinguished when the lease period expires and much of this lawsuit has been over nothing.

Another point must be mentioned in regard to the issue of leasing and rental price. The majority’s conviction that competitive bidding will be the cure needed to fix the assumed ill of land being leased at below fair market rates, rests on shaky ground. Only last year, in Miller v. Corp. Comm., Okl., 635 P.2d 1006 (1981), a majority of this Court held the statutory sealed bid process for leasing oil and gas lands did not represent a sale in the open market and that the bid process, by its very nature, is incompatible with an open market sale. The sealed bid process for oil and gas imposed on the Commissioners of the Land Office by 64 O.S.1971, § 281, is required by sec. 8 of the Enabling Act, cited by the majority here in support of its argument for competitive bidding to insure fair market value.

In Miller, the Court stated:

“The fair market value is one which can neither be inflated nor deflated by reference to special types of sales. The latter are not reflective of open-market conditions. * * *

“By its very nature the sealed-bid process is incompatible with an open market sale. Sealed bidding reflects the seller’s unwillingness to bargain openly in, and yield to the forces of, the open market place. Confrontational interaction of the buyer with the seller is thus avoided. The value obtained for property sold by this process cannot be said to represent the very same price as that which the property would bring if it were sold under the usual and ordinary circumstances. This is so because the sealed-bid process obviously operates to alter those ‘economic forces’ at play which shape the fair market value. In short, the method by which the state is required by statute to exact a price for its leases is not per se co-incidental with the market process in action.

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“The statutorily mandated sealed-bid procedures for leasing state-owned minerals do not represent a sale in the open market. The price secured through that process though not per se indicative of fair market value, may nonetheless be of relevance when it is coupled with some showing that it is co-extensive or co-incidental with fair market value. The record before us does not demonstrate any nexus between the sealed-bid price and a fair market value.” At 1008, 1009.

I also believe the majority has struck too broad a blow in its holding pertaining to the preferences for investment set forth in art. 11, sec. 6. They have rendered the provision nugatory.

The majority holds it is the Commissioners’ responsibility to give the preferences in the “order in which they appear, as long as such preference does not prevent the State as Trustee from fulfilling its duty to obtain the maximum return” from the property.

This creates an impossible situation, for it is common knowledge that a greater return on those funds can be obtained by investing in high yield accounts than is possible from mortgage loans or school bonds.

I feel safe in assuming that this has always been true. I’m confident that at the time the Constitution was adopted, those items given preference were not the best “maximum return” investments available. They did, however, offer maximum security for the funds, and they still do.

The preferences of art. 11, sec. 6, implemented by 64 O.S.1971, § 51, do not benefit only farmers and ranchers. The trust benefits thereby, for there is probably no investment that is more secure than a first mortgage.

The trust property is protected even from the State itself. Liens securing the loans of the Commissioners have priority over tax liens. 68 O.S.1971, § 24346; See, State, ex rel., Commr’s of Land Office v. Passmore, 189 Okl. 232, 115 P.2d 120; 136 ALR 324 (1941).

The people could have adopted a provision requiring the state to obtain the maximum possible return, but they did not. It is obvious that they intended to forego some return in favor of more secure investments, such as mortgages and school bonds, etc. The other relevant provisions of article 11, sections 1, 2, and 5, are clearly weighted in favor of safe and conservative financial management of these funds, consistent with the preferences dictated by art. 11, sec. 6. The security of the investment is of the first and highest importance. This balancing of interests is undone today.

While the majority is obviously correct that trustees have a duty to obtain a good return from the trust property, it is also true that trustees have a duty to act prudently and to make financially responsible decisions. Toward that goal, the State, its Legislature, and Commissioners are bound to follow their constitutional duty imposed by art. 11, sec. 6, and 64 O.S.1971, § 51. The majority makes that duty impossible.

Even conceding that the interest fixed in § 52(c) is, at this time, unconscionable and arbitrarily low, the harm done to the constitution today is of greater importance. The majority acts precipitously in its holding demanding maximum return which will, if followed, lead the Commissioners to ignore the clear demands of the constitution, art. 11, sec. 6, implemented by 64 O.S.1971, § 51.

I am authorized to state that DOOLIN and HARGRAVE, JJ., join in this dissenting opinion, and OPALA, J., concurs in part.

1 . A more thorough discussion of the problems presented by deciding questions in this manner can be found in the dissenting opinion in Okla. Ass’n. of Municipal Attorneys v. State, Okl., 577 P.2d 1310, 1315 (1978).

2 . It should be noted that while it has not been mentioned, rental procedures for commercial leases (64 O.S.1971, § 195) also are included in the majority’s holding.