Morgan v. Board of State Lands , 1976 Utah LEXIS 823 ( 1976 )

MAUGHAN, Justice

(dissenting):

On appeal is a summary judgment of the trial court holding that certain leases, in which plaintiffs were lessees, expired by their own terms on December 31, 1973; for the reason that plaintiffs had failed to comply with terms and conditions, allowing renewal, set forth in a letter of September 1965. We should reverse, and hold that since the actions of the landlord produced such inequitable consequences plaintiffs should have an opportunity, to correct the procedural deficiencies, and complete the conversion of their leases to embrace the new terms.

In 1963 plaintiffs, except Husky Oil Company, became lessees under certain oil shale leases on State lands. The leases had a ten-year term, with an expiration date of December 31, 1973. In 1965, the State Land Board authorized revision of the form of the oil shale lease, together with an application from to amend the lease. Under the revised forms, then present lessees, for a fee of 6 cents per acre could convert old leases to new provisions. The new lease had a term of 20 years, and prescribed a rental of SO cents per acre for the first ten years; $1 per acre for the remainder of the term.

Plaintiffs admit having received a letter, from the State Land Board, dated September 29, 1965. The letter informed them of the amended lease form, and carried with it a copy of the new form; together with a statement that applications to amend would be granted upon receipt of a fully executed application and lease form, together with a tender of 6 cents per acre and a $2 filing fee.

Prior to the receipt of this letter, plaintiff Morgan had assigned the leases to Husky Oil, although he remained record owner; and he had sent the letter together with the enclosed materials to Husky Oil. Plaintiffs concede they did not execute the applications or leases, or remit the fees, prior to the expiration date of the original lease. However in mid-December 1973, plaintiffs received a notice of rentals for 1974, from the Board of State Lands. Included therein was a notice for the rentals of all but two of the leases, and it called for the increased rent viz., from 50 cents to $1 per acre. Defendants claim the notice was sent through clerical error and was not authorized.

In response to this rental notice, plaintiffs remitted the rentals on December 31, 1973. Plaintiffs’ check stood in the amount of $24,258.50, which covered the leases in issue, and others not involved in this action. In February of 1974, plaintiffs tendered a check for $829.78 to pay the 6 cents per acre conversion fee. In mid-March of that year, plaintiffs received a refund check on the rentals in the sum of $13,834. They were informed that since they did not exercise their option to convert the leases or pay the conversion fee prior to the expiration date, the leases had expired and would be offered for bid.

Plaintiffs advance two theories on appeal, both of which were rejected by the trial court. The first theory argues that a contract implied in fact extends the leases; the second theory, that the Board is es-topped to deny the extension of the leases.

Kimball Elevator Company, Inc. v. Elevator Supplies Company, Inc.¹ is cited for its statement that a promise may be inferred wholly or in part from such conduct as justifies the promisee in understanding that the promisor intended to make it. Although the facts aré undisputed, it is claimed there are two reasonable inferences to be drawn from them, and they should have been submitted to a fact finder rather than disposed of by summary judgment. According to plaintiffs, the Board indicated understanding that the leases had been extended by its amending its accounting records; notifying them the rentals under the new rate were due; and thereafter accepting payment and retaining it until mid-March. Also, plaintiffs claim they understood the new form lease was in effect by paying the increased rental required under the new form prior to the expiration date of the old lease.

This theory unavailing for the reason the evidence is undisputed that the Board had no intention, or understanding, the leases could be amended in this manner. There is no evidence the Board did promise, or convey to the plaintiffs, by its conduct, that it would accept the leases. An express contract is one expressed in words, while an implied contract is one where the mutual intent is manifested by particular acts and attendant circumstances. There must be mutual intent.²

Urging the theory of estoppel, it is the contention of plaintiffs the Board under the admitted facts, could reasonably be found to be estopped to deny the extension of the leases. It is plaintiffs’ view the Board induced them to pay the rentals and refrain from any inquiry which would have resulted in their following the procedure required for an extension. A further significant circumstance was the failure of the Board to publish in its rules and regulations the requirements for converting an existing oil shale lease, as required by law.³ Without a regulation specifying the procedure for conversion of the oil leases, one could reasonably rely on the transmittal of the notice of the increased rental as consistent with the conversion of the lease.

Here the State acts to dispose of public lands, by lease. It thus acts in its proprietary capacity and equitable estoppel is a proper remedy.⁴ Although a governmental agency cannot be estopped by its ultra vires acts, the distinction between an irregular exercise of a granted power and the total absence, or want of power, must be observed. The agency may be estopped where the act relied on to create the estop-pel was within powers, although the method of exercising the power was irregular, or unauthorized.⁵

Defendant relies on the statute of frauds, Section 25-5-1 and 25-5-4(1), U. C.A.1953, as well as Section 65-1-18 and 65-1-23, which impliedly require all leases of the Board to be in writing. However, the nature of the doctrine of equitable es-toppel is to preclude a party, both in law and equity, from asserting rights which might have otherwise existed against another person; who relied upon the conduct of his adversary, in good faith, and changed his position to his detriment. An estoppel arises where a party by his acts, representations, or admissions, or by his silence when he should speak, intentionally, or through culpable negligence, induces another to believe certain facts exist; and such other properly relies and acts thereon, so that he will be prejudiced if the former is permitted to deny the existence of such facts.⁶

The Doctrine of Equitable Estoppel must be applied against the State, when necessary to prevent manifest injustice, and the exercise of its governmental powers will not thereby- be impaired. In addition to these, before a party can be estopped, the proponent must clearly show:

(1) an admission, statement, or act, inconsistent with a claim afterwards asserted; (2) action by the other party on the faith of such admission, statement, or acts; and (3) injury to such other party arising from permitting the first party to contradict or repudiate such admission, statement or act.⁷

These principles are supported by Kelly v. Richards,⁸ but the factual situation is not nearly so closely allied to the instant matter as is the Metropolitan case cited in footnote seven.

Plaintiffs conceded they received notice of the offer to amend their leases and through inadvertence failed to act on the matter for a period of eight years. However, the failure of the Board to publish the rules and regulations concerning conversion of the oil shale leases combined with the notice of rentals due for 1974 precluded plaintiffs from conducting a prudent inquiry, which would have revealed the requisite procedure. The cardinal point of an estoppel by the conduct of a party is that one shall be bound by the state of facts upon which he has induced another to act.⁹ Whether the conduct was sufficient to warrant the action taken is a judicial question, and not one for the trier of the fact.¹⁰

TUCKETT, J., concurs in the views expressed in the dissenting opinion of MAUGHAN, J.

1 . 2 Utah 2d 289, 272 P.2d 583 (1954).

2 . Gleason v. Salt Lake City et al., 94 Utah 1, 74 P.2d 1225 (1937).

3 . 65-1-96, U.O.A.1953, as amended.

4 . Strand v. State, 16 Wash.2d 107, 132 P.2d 1011 (1943).

5 . State Ex rel. Shell Oil Co. Inc. v. Registrar of State Land Office, 193 La. 883, 192 So. 519 (1939) ; City of Corpus Christi v. Gregg, 155 Tex. 537, 289 S.W.2d 746 (1956).

6 . Ibid, Strand v. State.

7 . Metropolitan Park District of Tacoma v. State Department of Natural Resources, 85 Wash.2d 821, 539 P.2d 854, 859 (1975).

8 . 95 Utah 560, 83 P.2d 731 (1938).

9 . Grover v. Garn, 23 Utah 2d 441, 464 P.2d 598 (1970).

10 . Farmers & Merchants Bank v. Universal C. I. T. Credit Corp., 4 Utah 2d 155, 289 P.2d 1045 (1955).