Eric Clark v. Stephen D. Lee Foundation

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2002-CA-00197-SCT
ERIC CLARK, SECRETARY OF STATE, STATE OF
MISSISSIPPI
v.
STEPHEN D. LEE FOUNDATION, A NON-PROFIT
CORPORATION
ON MOTION FOR REHEARING
DATE OF JUDGMENT: 1/16/2002
TRIAL JUDGE: HON. JASON H. FLOYD, JR.
COURT FROM WHICH APPEALED: LOWNDES COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANT: ALAN M. PURDIE
JAN F. GADOW
DION JEFFERY SHANLEY
ATTORNEY FOR APPELLEE: KATHERINE S. KERBY
NATURE OF THE CASE: CIVIL - REAL PROPERTY
DISPOSITION: REVERSED AND REMANDED - 12/02/2004
MOTION FOR REHEARING FILED: 4/17/2003
MANDATE ISSUED:
EN BANC.
COBB, PRESIDING JUSTICE, FOR THE COURT:
¶1. The motion for rehearing is granted. The original opinion is withdrawn, and this opinion
is substituted therefor.
¶2. The Stephen D. Lee Foundation, a non-profit corporation, filed a complaint to confirm
leasehold title of certain sixteenth section land against Secretary of State Eric Clark,
requesting that a lease contract entered into between the Foundation and the Board of the
Columbus Municipal Separate School District be confirmed and ratified. The lease concerns
the Stephen D. Lee property, which has been operated for historic and educational purposes
by the Foundation for decades. The Lowndes County Chancery Court entered summary
judgment in favor of the Foundation thereby ratifying the lease. The Secretary of State
appealed. Finding that there is insufficient information in the record to support the chancery
court's finding of adequate consideration for the lease, we reverse the grant of summary
judgment and remand for a trial to determine: (1) the ownership of the Lee Home, (2) the
market value of the sixteenth section land on which the Lee Home is situated, depending on
the disposition of issue (1)1, and (3) the adequacy of consideration for the lease of the land on
which the Lee Home is situated, based on the resolution of issues (1) and (2). Should the trial
court determine that the School District is the owner of the Lee Home, any equitable claim
brought by the Lee Foundation concerning the home should be resolved.
FACTS AND PROCEDURAL HISTORY
¶3. The property with which we are concerned is situated on Square 17 north of Main Street
in the City of Columbus, which is part of Section 16, Township 18 South, Range 18 West,
Lowndes County, Mississippi. In 1835, the Trustees of Franklin Academy leased the land to
David Wright for 99 years and renewable forever.2 On July 15, 1916, the heirs of Stephen D.
1
The market value of the land will be dependent on whether the home is owned by the Lee
Foundation or the School District. The inclusion of the Lee home on the National Historic Register should
also be taken into consideration in determining the market value of the land.
2
In 1830, the Legislature authorized the Trustees of Franklin Academy, in their capacity as trustees
of sixteenth section land, to make all of the Columbus leases at issue renewable forever. Id. at 502. The
act, approved December 30, 1830, stated in pertinent part the following regarding renewability:
2
Lee, successors in title of David Wright and holders of the sixteenth section leasehold title,
conveyed the unexpired term of their 99-year renewable forever lease dated August 1, 1821,3
covering Square 17, to the City of Columbus for the use of the Columbus Separate School
District4. On July 23, 1920, seven days prior to expiration, the Mayor and City Council of
Columbus, as successors to the Trustees of Franklin Academy, executed a 99-year renewal
lease, in favor of the City of Columbus for the use of the Columbus Separate School District,
on the property on which the Stephen D. Lee High School and Stephen D. Lee Junior High
School were constructed. These school buildings were attached to a preexisting structure on
the land, namely, the Stephen D. Lee home built in 1847.5
¶4. On December 14, 1959, a fire destroyed the two school buildings and heavily damaged
That the Trustees of said Franklin Academy, be, and they are hereby authorized to lay off
and lease lots, not to consist of more than ten acres each, for the same time, and in like
manner, and on like condition with those in the present plan of the town of Columbus,
throughout the section; and that said Trustees be, and are hereby authorized to make out
all leases for the lots of said section, for ninety nine years, dating from the first leasing of
lots in said town of Columbus, renewable forever.
1830 Miss. Laws 14th Sess., ch. II (emphasis added). Lessees were subsequently allowed to require the
trustees of Columbus school lands to execute deeds for less than one-fourth of one acre. 1846 Miss. Laws
ch. 143. The Lee home was constructed the next year.
3
The 99-year term was to begin from the "dating from the first leasing of lots. . . ." 1830 Miss.
Laws 14th Sess., ch. II.
4
The specifics of this conveyance are not included in the record. At that time, the Stephen D. Lee
home was situated on the land.
5
The Foundation describes the home as "an antebellum residential structure with historic Italianate
architecture which also served as the home of General Stephen D. Lee, the first President of Mississippi
State University." The home is also a National Historic Landmark.
3
the home. Having no need for the Lee home and no intention of rebuilding the school buildings
and recognizing the potential liability of having a fire-damaged structure in town, the Trustees
of the Columbus Municipal Separate School District abandoned the home and leased the
property6 on October 11, 1960, to the Stephen D. Lee Foundation. 7 The sub-lease8, purportedly
entered into pursuant to Miss. Code Ann. § 37-7-473, provided that the School District was
“willing to abandon the Home and allow others to save it provided the School District could
save the costs of demolishing the remains of the mansion and avoid liability for it while it was
being preserved and restored by others.” The nominal rental fee was $1.00 per year for five
years with certain renewal rights. Additionally, the Lee Foundation had the responsibility for
the restoration, maintenance and operation of the Lee Home.
¶5. On April 2, 1997, the City of Columbus, holding leasehold title by virtue of the 1920
renewal, quitclaimed its interest in all of Square 17, except for the portion on which the
Columbus-Lowndes Public Library is situated, to the Board of Trustees of the Columbus
Municipal Separate School District. The Board, by resolution dated March 15, 1999, entered
into a new five-year lease with the Foundation beginning April 1, 1999, at $1.00 per year and
renewable for one additional term of five years. The lease expressly provided: "Lessor does
6
This information is taken from the minutes of the Columbus Municipal School District Duly
Convened Special Meeting, March 15, 1999.
7
The Stephen D. Lee Foundation is an entity formed by the Association of the Preservation of
Antiquities of Columbus and Lowndes County and the Lowndes County Historical Society.
8
This transaction is alternately referred to as a lease and a sub-lease. It appears to be a sub-lease
of the 99 year lease renewed by the City of Columbus.
4
hereby lease and rent unto Lessee, as a donation pursuant to Miss. Code Ann. §§ 37-7-47,9
through 37-7-483, the land on which the Stephen D. Lee Home, [sic] is located, such land
being classified 'commercial land' under the Sixteenth Section Law of the State . . . ."
(emphasis added).
¶6. After correspondence between the respective counsel for the Secretary of State and the
School District regarding the legality of the March 15 lease came to an impasse, the
Foundation filed its complaint to confirm leasehold title on July 30, 1999. When all of the
chancellors in Lowndes County recused themselves, Judge Jason H. Floyd, Jr. Was appointed
to serve as special judge. The Foundation then amended its complaint, adding that the home
was the equitable property of the Foundation and that the leasing of the land was in furtherance
of the educational purposes of the School District.
¶7. The Columbus Municipal Separate School District was thereafter joined as an
indispensable party. The School District responded that the lease was based on conclusions
recited in its March 15, 1999, minutes with respect to the adequacy of consideration and that
the actions of the School District are presumed valid.
¶8. The Foundation moved for summary judgment, requesting that the lease agreement of
March 15, 1999 be ratified as valid, and that the leasehold title in the Stephen D. Lee
Foundation be confirmed on the basis that the actions, expenditures and contributions of the
Lee Foundation to the public welfare of the school children and other citizens of the
9
There is no Miss. Code Ann. § 37-7-47, so we presume the lease meant to refer to Miss. Code
Ann. § 37-7-471.
5
community of Columbus, Mississippi, constitute adequate consideration for the renewal lease,
as determined by the School Board as documented in the March 15, 1999 School Board
minutes. The trial court granted the Foundation's motion for summary judgment and held:
As the Court previously found, in its Order of February 1, 2000, the only
material question of fact remaining is whether or not the compensation provided
is considered to be adequate. . . . Specifically, the Court finds that the
restoration and renovation of the Stephen D. Lee home; it's [sic] maintenance
as a museum and civic, social and community center; and the continued
maintenance and operation of the property for civic benefit constitutes adequate
consideration.
The Secretary of State now appeals from that summary judgment.
STANDARD OF REVIEW
¶9. We employ a de novo standard when reviewing whether a trial court properly granted
summary judgment. Conrod v. Holder, 825 So. 2d 16, 18 (Miss. 2002); Stewart v. Hoover,
815 So. 2d 1157, 1159 (Miss. 2002); Bond v. Marion County Bd. of Supervisors, 807 So. 2d
1208, 1213 (Miss. 2001); Certain Underwriters at Lloyd's of London v. Knostman, 783
So. 2d 694, 697 (Miss. 2001).
DISCUSSION
¶10. The sole issue raised by the Secretary of State is whether the trial court erred in
granting the Foundation's motion for summary judgment on the premise that the March 15,
1999, lease was based on adequate consideration and was valid. Based on our review of the
record, we find that additional information is required before this question can be answered,
as will be discussed below.
¶11. The leasing of sixteenth section lands is predominantly governed by two provisions of
6
the 1890 Mississippi Constitution. 10 Section 211 provides the time limits on sixteenth section
leases:
The Legislature . . . shall provide that the sixteenth section lands reserved for the
support of township schools, except as hereinafter provided, shall not be sold
nor shall they be leased for a longer term than ten (10) years for lands situated
outside municipalities and for lands situated within municipalities for a longer
term than ninety-nine (99) years. . . .
Miss. Const. art. 8, § 211 (1890). In addition, Section 95 provides:
Lands belonging to, or under the control of the state, shall never be donated
directly or indirectly, to private corporations or individuals, or to railroad
companies. Nor shall such land be sold to corporations or associations for a
less price than that for which it is subject to sale to individuals.
Miss. Const. art. 4, § 95 (1890) (emphasis added).
¶12. Sixteenth section lands in general are regulated by Miss. Code Ann. §§ 29-3-1 to -183
(Rev. 2000 & Supp. 2004). These lands are held in trust for the benefit of public schools
under the management of the respective boards of education and supervision of the state land
commissioner (now the Secretary of State). Miss. Code Ann. § 29-3-1(1). The boards are
under the affirmative obligation to "assure that adequate compensation is received for all uses
of the trust lands, except for uses by the public schools." Id.
¶13. The Board of Trustees of the Columbus Municipal Separate School District leased the
Lee land pursuant to Miss. Code Ann. § 37-7-471. Chapter 7 of Title 37 establishes the
10
For a comprehensive analysis of the history of Mississippi's sixteenth section regime by the
United States Supreme Court, this Court, and academic commentary, see Papasan v. Allain, 478 U.S.
265, 106 S. Ct. 2932, 92 L. Ed. 2d 209 (1986); Estate of Brown, 624 So. 2d 77, 79-83 (Miss. 1993)
(quoting Papasan); C. Maison Heidelberg, Closing the Book on the School Trust Lands, 45 Vand. L.
Rev. 1581, 1584-91 (1992).
7
organization and authority of school districts and the boards of trustees of school districts.
Sections 37-7-451 through 37-7-457 provide the primary method for disposing of property
no longer needed for school purposes. Land or buildings owned by a School District may be
sold via sealed bids with the property going to the highest bidder for cash. Miss. Code Ann.
§ 37-7-455.
¶14. In addition, Sections 37-7-471 through 37-7-483 provide for an alternative method of
disposition. Under Section 37-7-471, school boards may dispose of land or buildings if doing
so will serve certain stated objectives:
Whenever the school board of any school district shall find and
determine, by resolution duly and lawfully adopted and spread upon its minutes
(a) that any school building, land, property or other school facility is no
longer needed for school or related purposes and is not to be used in the
operation of the schools of the district, (b) that the sale of the property in the
manner otherwise provided by law is not necessary or desirable for the financial
welfare of the school district, and © that the use of the school building, land,
property or other school facility for the purpose for which it is to be sold,
conveyed or leased will promote and foster the development and improvement
of the community in which it is located and the civic, social, educational,
cultural, moral, economic or industrial welfare thereof, the school board of
such school district shall be authorized and empowered, in its discretion, and
upon the conditions set forth in Section 37-7-477, to sell, convey, lease or
otherwise dispose of same for any of the purposes set forth herein. Such sale,
conveyance, lease or other disposition shall be made upon such terms and
conditions and for such consideration, nominal or otherwise, as the school
board may, in its discretion, deem proper in consideration of the benefits which
will inure to the school district or the community in which the school building,
property or other facility is located by the use thereof for the purpose for which
it is to be sold, conveyed, leased or otherwise disposed of.
(emphasis added). The Board's minutes authorizing the lease tracks the language of Section
37-7-471.
8
¶15. However, we find compelling the Secretary of State's argument that Chapter 7 of Title
37 does not apply to sixteenth section lands. The only reasonable interpretation of these
statutes is that they apply to property to which the school district actually holds title. School
districts do not hold title to sixteenth section lands; rather, title to trust lands was granted by
the federal government to, and resides in, the State. Hill v. Thompson, 564 So. 2d 1, 6 (Miss.
1989) (citing Turney v. Marion County Bd. of Educ., 481 So. 2d 770, 776 (Miss. 1985); Tally
v. Bd. of Supervisors of Smith County, 323 So. 2d 547, 549-50 (Miss. 1975); Lambert v.
State, 211 Miss. 129, 137, 51 So. 2d 201, 201 (1951); Pace v. State ex rel. Rice, 191 Miss.
780, 798, 4 So. 2d 270, 274 (1941); Jefferson Davis County v. James-Sumrall Lumber Co.,
94 Miss. 530, 535-36, 49 So. 611, 612 (1909); Jones v. Madison County, 72 Miss. 777, 800,
18 So. 87, 91 (1895)).
¶16. We have consistently invalidated leases on constitutional grounds based on inadequacy
of consideration. See Bd. of Educ. of Lamar County v. Hudson, 585 So. 2d 683 (Miss. 1991)
(finding $150 one-time rental for 99-year lease of 3.5 acres to be inadequate); Hill v.
Thompson, 564 So. 2d 1 (Miss. 1989) (finding consideration of $7.50 for 99-year lease
constituted an impermissible donation); Holmes v. Jones, 318 So. 2d 865 (Miss. 1975)
(voiding lease made to superintendent of education of 150 acres at $.25 per acre per year for
25 years).
¶17. Thus the question before us is the same one that was before the trial court: is there
adequate consideration for the lease of the sixteenth section land upon which the Lee Home
9
is situated. However, we have insufficient facts before us to pass on the adequacy of the
consideration expressed in the 1999 lease.11 The value of the total consideration for the lease
must be properly allocated between the owner of the Lee Home and the School District. The
Lee Foundation amended its original complaint to include a claim of equitable ownership based
on the improvements it has made to the home, but this claim was not resolved by the trial court.
The ownership of the Lee home was not litigated, and no findings were made on this issue by
the trial court. This must be done. If the Lee Foundation is determined to be the owner of the
Lee Home, then at least a portion of its efforts should reasonably be allocated to the benefit
of the Foundation as the home owner. There may, however, be other efforts that should
reasonably be allocated to the benefit of the School District as lessor of the land. The value
of consideration allocated to the School District must be deemed sufficient based on the
reasonable market value of the leased land. Thus the question of ownership of the home and
value of the land must be determined by the trial court before any decision on adequacy of
consideration for the lease of the land is made.
¶18. The record before us is insufficient for this Court to make a ruling on this issue. That
there can be separate ownership of a building and the land on which it is situated is clearly
established in the law of this state. The record indicates that the school district wished to
abandon the home after it burned in 1959, and that the Lee Foundation has contributed hundreds
of thousands of dollars to the restoration, upkeep, and operation of the Lee Home, but there
11
For example, the leases from 1960 through 1999 are not in the record.
10
is no record conveying ownership of the home to the Foundation. The parties should have the
opportunity to develop their respective cases based on the equitable claim made by the Lee
Foundation.
CONCLUSION
¶19. The chancellor manifestly erred in his conclusion that the consideration for the lease
was sufficient under the statutes cited and based on the evidence presented. There is simply
not enough information in the record to determine the full value of the consideration for the
lease. Also, the chancery court should determine the ownership of the Lee Home and the
market value of the land upon which it is situated, since these issues are central to a
determination of the adequacy of the lease amount. We therefore reverse the Lowndes County
Chancery Court's summary judgment in favor of the Stephen D. Lee Foundation and remand
for a trial consistent with this opinion to determine: (1) the ownership of the Lee Home, (2)
the market value of the sixteenth section land on which the Lee Home is situated depending
on the disposition of issue (1), and (3) the adequacy of consideration for the lease of the land
on which the Lee Home is situated based on the resolution of issues (1) and (2). Should the
trial court determine that the School District is the owner of the Lee Home, any equitable
claim brought by the Lee Foundation concerning the home should be resolved.
¶20. REVERSED AND REMANDED.
SMITH, C.J., WALLER, P.J., EASLEY, CARLSON, DICKINSON AND
RANDOLPH, JJ., CONCUR. DIAZ AND GRAVES, JJ., NOT PARTICIPATING.
11