Opinion
No. 41084.
Filed July 6, 1977.
1. Administrative Law: Schools and School Districts: Trusts. The state holds the public school lands, including the income therefrom, as trustee. It is the duty of the trustee to obtain the maximum return to the trust estate from the trust properties under its control. 2. Administrative Law: Schools and School Districts: Statutes: Leases. Sections 72-233 and 72-234, R.R.S. 1943, providing for the selling of public school land leases at public auction, are not mandatory statutes which require that a school land lease be executed and delivered to the highest bidder under any and all circumstances. 3. Administrative Law: Schools and School Districts: Constitutional Law: Trusts. The Constitution of Nebraska requires that the trust property be dealt with in a manner consistent with the duties and functions of a trustee acting in a fiduciary capacity. It thus imposes upon the Board of Educational Lands and Funds the duty of obtaining the highest price possible for all trust property that it may sell. 4. Administrative Law: Schools and School Districts: Constitutional Law: Leases. A fair construction of the statutes, viewed in the light of their constitutional background, requires a holding that the highest bidder at a public sale of school land leases is not entitled to a lease until it has been approved by the Board of Educational Lands and Funds.
Appeal from the District Court for Lancaster County: SAMUEL VAN PELT, Judge. Reversed and dismissed.
Paul L. Douglas, Attorney General, and Bernard L. Packett, for appellants.
Healey, Healey, Brown, Wieland Glynn, for appellee.
Heard before WHITE, C. J., SPENCER, BOSLAUGH, McCOWN, CLINTON, BRODKEY, and WHITE, JJ.
This is an action to require the Board of Educational Lands and Funds to issue a lease of certain school lands to Earl Anderson who was the highest bidder at a public sale. The issue presented is whether the defendant could reject the application for the lease from plaintiff, the highest bidder, and reoffer the land for lease with the post-sale offer as the starting bid. The trial court found the rejection of the bid to be void, vacated the action of the Board, and directed the issuance of a lease to the plaintiff. We reverse.
Pursuant to the provisions of section 72-233, R.R. S. 1943, the Board of Educational Lands and Funds, hereinafter referred to as Board, directed that the lease of certain school lands in Buffalo County be offered for sale. Notice of the lease sale was duly published. The last paragraph of the published notice provided: "All sales of educational land at public auctions are considered to be non-revocable offers, which only upon acceptance and approval by the Board of Educational Lands and Funds meeting in regular session, shall become binding contracts."
Ron Vance, an appraiser for the Board, conducted the sale on January 7, 1976. Plaintiff was the final bidder, with a bonus bid of $10,600. When he closed the sale, Vance informed all present that the final bid was subject to the acceptance and approval of the Board of Educational Lands and Funds, and would be presented to it at its regular meeting on January 12, 1976. After the sale, plaintiff made out and signed an application for a lease, and submitted with it his check in the amount of the first year's rent plus his bonus bid of $10,600.
Prior to the meeting on January 12, the Board received an oral commitment for an upset bonus bid of $11,660 plus the stipulated rental. The Board did not accept plaintiff's application for lease, but directed that the tract be readvertised and the lease offered for sale. It further directed that the bonus bidding start with the bid of $11,660. Plaintiff thereafter filed this action, which stayed further proceedings.
Article VII, section 6, Constitution of Nebraska, so far as material herein, provides: "The general management of all land set apart for educational purposes shall be vested, under the direction of the Legislature, in a board of five members to be known as the Board of Educational Lands and Funds."
The state holds the public school lands, including the income therefrom, as trustee. It is the duty of the trustee to obtain the maximum return to the trust estate from the trust properties under its control. This is subject to the taking of necessary precautions for the preservation of the trust estate. State ex rel. Ebke v. Board of Educational Lands Funds, 154 Neb. 244, 47 N.W.2d 520 (1951).
We have previously held sections 72-233 and 72-234, R.R.S. 1943, providing for the selling of public school land leases at public auction, are not mandatory statutes which require that a school land lease be executed and delivered to the highest bidder under any and all circumstances. State ex rel. Raitt v. Peterson, 156 Neb. 678, 57 N.W.2d 280 (1953).
The Board has the right to exercise its discretion in determining if the sale was fairly conducted and whether the lease sold for a fair and reasonable value. There is no universal test by which directory provisions of the statute may be distinguished from mandatory provisions. Ordinarily, such differences must be determined by the intent of the Legislature as gleaned from the whole statute.
In the present case, the Constitution requires that the trust property be dealt with in a manner consonant with the duties and functions of a trustee acting in a fiduciary capacity. It thus imposes upon the Board the duty of obtaining the highest price possible for all trust property that it may sell. A fair construction of the statutes, viewed in the light of their constitutional background, requires us to hold that the highest bidder at a public sale of school land leases is not entitled to lease until it has been approved by the Board. See, State ex rel. Raitt v. Peterson, supra; State ex rel. Ebke v. Board of Educational Lands Funds, supra.
The notice of sale in this instance advised prospective bidders that all sales would be considered to be nonrevocable offers which would become binding contracts only upon acceptance and approval by the Board meeting in regular session. At the conclusion of the sale, Vance informed all present the final bid was subject to the approval and acceptance of the Board. He also stated that it would be presented to the Board at its next regular meeting on January 12, 1976.
Within the intervening 5 days, Gerald Geisler, who had been a bidder at the sale, submitted a bonus bid of $11,660 as an upset bid. This was an increased bid of 10 percent. He was advised that he was required to also submit a check for $250 to cover the expense of a new sale. This amount would not be refundable. He was also required to send a certified check for the first year's annual rent in the amount of $2,369.20, together with a check for $11,660.
In Raitt, we suggested that the rule governing upset bids at judicial sales was applicable in that case. However, as pointed out in Bessey v. Board of Educational Lands Funds, 185 Neb. 801, 178 N.W.2d 794 (1970), this proceeding is not a judicial sale and the rules applicable thereto are not relevant. That case involved the statute providing for the mandatory sale of school lands. We modify those statements by saying that the rules applied to judicial sales may be helpful in determining questions arising under the present statutes referring to sales by the Board. These sales are within the primary jurisdiction of the Board, and a court should not interfere with the discretion of the Board unless it is apparent that the Board's action is shown to be arbitrary and unreasonable.
In the present case the Board advertised that all bids were subject to its acceptance and approval, and until accepted there would be no binding contract. In its discretion, the Board saw fit to refuse the offer and to order a new sale, initiating the auction at the amount of the upset bid, $11,660, which is 10 percent more than the plaintiff's bid. In Rupe v. Oldenburg, 184 Neb. 229, 166 N.W.2d 417 (1969), this court unanimously approved the setting aside of a petition sale even after the sale had been initially confirmed by the court after a higher upset bid. The amount of the upset bid made after confirmation exceeded the initially confirmed bid by $50 more than 10 percent.
On the record, we cannot say that the action of the Board in rejecting the plaintiff's bid was arbitrary or unreasonable. It is the duty of the Board as trustee of school lands to obtain a maximum return for the trust estate from its sale of school lands or leases. While we do not believe that the Board should be too liberal in accepting an upset bid, we cannot say in this instance that its action was arbitrary or unreasonable. With the new sale, starting with the upset bid, it is very possible a greater sum may be realized. In any event, the Board will receive at least 10 percent more than the bid it refused to accept, and the upset bidder is paying the costs of the resale.
The judgment of the trial court is reversed. Its vacation of the action of the Board is vacated, and the action is dismissed.
REVERSED AND DISMISSED.