City of Jefferson v. Trustees of Martin Inst. , 199 Ga. 71 ( 1945 )

1. Where the plaintiff, a municipal corporation, in count 2 of its petition, sought to establish title to certain realty and funds derived from insurance on account of the loss by fire of a building and other property located on the realty, and asserted its right to the same by virtue of an alleged dedication of the property to the municipality for public school purposes, and, in the same count, admitted that it had recognized the defendant's ownership of the property by becoming its lessee under three different leases, executed in 1913, 1929, and 1939, each for a term of years, the lease last executed being in force at the time of the fire, such recognition of the defendant's title was not nullified by allegations that, prior to the execution of the leases, the property had been dedicated to the municipality for public-school purposes, and that the leases had been executed under a mistake of fact, since said count on its face disclosed a lack of the diligence essential to assert a mistake of fact, and the court did not err in sustaining the general demurrer to this count of the petition.

2. On the trial of the issue under count 1 of the petition, in which there was no reference to the leases, and in which the plaintiff also sought to establish title to the realty and to funds derived from insurance collected because of the loss by fire of the school building, and asserted its right thereto by virtue of a dedication of the property to the plaintiff for public-school purposes, and the defendant introduced in evidence a lease contract to the premises, the validity of which was not disputed by the plaintiff, and the terms of which disclosed that the plaintiff was the tenant of the defendant, the direction of a verdict for the defendant was not error.

(a) Nor will the plaintiff be heard to dispute the equitable title of his landlord to the use and beneficial interest of the premises, when it appears that the plaintiff is the lessee of the landlord to the use and beneficial interest in the premises.

3. The exceptions to the charge of the court are without merit.

Nos. 15072, 15073. FEBRUARY 7, 1945. REHEARING DENIED MARCH 7, 1945. When this case was previously before this court (City ofJefferson v. Holder, 195 Ga. 346, 24 S.E.2d 187), it was held that the Trustees of Martin Institute as a corporation, should have been made a party to the action. Following that decision, the City of Jefferson, certain individuals as members of its board of education, and other individuals as members of the board of education of Jackson County, filed a petition against the Trustees of Martin Institute as a corporation, Clifford Story Jr. as clerk of the superior court, and First National Bank of Jefferson. The suit grew out of a fire that destroyed a school building, as a result of which, the proceeds of fire-insurance policies on the building amounting to $66,500 were collected. The City of Jefferson and the Trustees of Martin Institute each claimed title to the school property and to the funds derived from the insurance on the building. While the previous case was pending, by consent of the parties the court directed that the funds arising from the fire-insurance policies be turned over to Clifford T. Story Jr., as register of the superior court of Jackson County. Story deposited the funds in the First National Bank of Jefferson, Georgia.

The petition was in two counts. The first count alleged in substance, that by the terms of the act approved November 20, 1818 (Ga. L. 1818, p. 9), a corporation was created under the name and style of "Trustees of Jackson County Academy;" that prior to that time public-spirited citizens had made provision for a school to operate under that title; that in 1859 William D. Martin, by will, gave the "Trustees of Jefferson Academy" 150 shares of Georgia Railroad Banking Company stock, the will making no other reference to the stock, nor to any provisions for a trust. It also alleged that, by the act approved December 9, 1859 (Ga. L. 1859, p. 77), the act of 1818 was amended by declaring that the trustees appointed by the act of 1818 were dead; that no regular books or records were kept; that William D. Martin had given the Georgia Railroad Banking Company stock to the "Trustees of Jefferson Academy;" that the Jefferson Academy and the Jackson County Academy were one and the same; and that the act changed the name of the corporation to "The Trustees of Martin Institute." It further alleged that, on April 14, 1886, Mrs. Fannie E. R. Howard executed a deed to A. J. Kelley and others, Trustees of Martin Institute, by which the grantor, "for and in consideration of the sum of $1500, heretofore stipulated to be paid, the receipt whereof is hereby acknowledged, does sell and convey unto the said A. J. Kelley [and others], Trustees Martin Institute, their successors in office, and assigns, a certain tract or lot of land." This was the tract of land on which the school building, subsequently erected, was burned. It was also alleged in this count that it was never intended by Mrs. Howard or the individuals named in said deed that they "should take any beneficial interest or title to the property . . or that title should vest in the Trustees of the Martin Institute as a private corporation, but on the contrary it was the intention of all parties to said deed that the property was to be and was subsequently and continuously used for school purposes, and [it] was never intended by any of the parties that it should be used for any other purpose." It was also alleged that from the time said deed was made until the date of the fire. January 13, 1942, the property had been continuously used for school purposes and a public school had been in continuous operation thereon; that in 1886 the city advanced $5000, which was used either to pay the consideration for the Howard deed or to construct and equip a school building thereon; that in August, 1886, the Trustees of Martin Institute made a deed to the land in question to secure the payment of bonds in the sum of $10,000, which sum, together with the $5000 above referred to as advanced by the city, was used for paying the consideration of the deed and placing a school building on the land; and that the city later paid $5000 of this bonded indebtedness. Other allegations were, that in 1913 the city advanced $5000 for a heating plant for the school building; that prior to the year 1929 the city voted bonds in the sum of $20,000 to erect additional buildings on the land, and also advanced $5000 for equipment; and that prior to 1929 the County Board of Education also advanced $5000 for the purchase of school equipment.

It was also alleged that, on January 13, 1942, a part of the school building, together with the major portion of the equipment, was destroyed as a result of a fire, and that various insurance companies had issued checks in settlement of policies, as follows: to the Trustees of Martin Institute, $32,000; to the Trustees of Martin Institute, City Board of Education, and County Board of Education, $31,500; and to the City Board of Education and County Board of Education, $3000; and that the premiums for all the above insurance were paid by the City and County Boards of Education.

It was alleged that the name of the school, operated on the property for more than forty years, had been "Martin Institute," but that no part of the expense of operation in the last twenty years had been paid by the Trustees of Martin Institute, and that the lands and property had been used by the city for public-school purposes for more than twenty years.

The petitioners asserted that the right and title to the property destroyed by fire were in them, and that the insurance money ($66,500) in equity and good conscience belonged to and should be turned over to them; but that certain individuals claimed to be the successors of the grantees named in the deed made by Mrs. Howard, and asserted title to the property and all of the insurance; that the Trustees of Martin Institute never owned any other property except the bequest of the Georgia Railroad Banking Company stock and donations made by public-spirited citizens; that the proceeds of the sale of the stock were lost about 1905 in a bad investment; and that such donations as were made were upon the condition that they would be used for school purposes. It was further alleged that whatever legal title was ever in the persons named in the deed from Mrs. Howard had passed into the City of Jefferson by dedication for public-school purposes. The prayers were: for process; that a rule nisi be issued to C. T. Story Jr. and the First National Bank, requiring them to show cause why the $66,500 should not be turned over to the plaintiffs; that they be enjoined from paying out any of the money; that the title to the real estate be decreed to be in the City of Jefferson in trust for school purposes; and for general relief.

Count 2 of the petition included the same allegations as count 1, and in addition set forth the substance of three lease contracts wherein the City and County Boards of education had leased the school premises from the Trustees of Martin Institute. The first lease agreement was executed in 1913 between the City Board of education and the Trustees of Martin Institute; the second lease, executed in 1929, was between both the City and County Boards of education and the Trustees of Martin Institute; and the third lease, dated in 1939, between both the City and County Boards of education and the Trustees of Martin Institute. Under each of the foregoing agreements, the Trustees of Martin Institute were the lessors or landlords, and the boards of education were the lessees or tenants. The lease executed in 1939 was in force at the time of the fire in 1942. Count 2 further alleged: "The possession of the property never changed hands by virtue of either of the leases, but continued in the City of Jefferson for public-school purposes, and it did not acquire any additional possession by reason of either of the instruments referred to. These instruments were executed by a mistake of fact in believing that the Trustees of Martin Institute held legal title to said property, whereas, in truth and in fact, the right and title to all of said property had, long before either of said leases were attempted, vested in the City of Jefferson by dedication for public-school purposes, this dedication being made first by Fannie E. R. Howard, and her successors in title, and then by the Trustees of Martin Institute."

To the foregoing petition the defendants filed demurrers. The court sustained the general demurrer to court 2, to which ruling exceptions pendente lite were filed. The defendants filed an answer, denying the allegations in the petition which sought to establish any claim or title to the land or money, and asserting title to both.

The case was submitted to a jury, and both sides produced evidence. In charging the jury, the court submitted a form of verdict in the nature of questions to be answered, and directed a verdict as to some of the questions, to wit: 1. Was there a dedication of the lands to public use for public-school purposes? The court directed that the question be answered, "No." 2. Who is entitled to the proceeds of the fire-insurance policies? The court here instructed the jury to find not less than $3000 in favor of the City and County Boards of education, and not less than $40,000 in favor of the Trustees of Martin Institute. The jury found in favor of the City and County Boards of education, $26,500, and in favor of the Trustees of Martin Institute, $40,000. 3. Did the Trustees of Martin Institute threaten to divert any of the funds arising from the fire-insurance policies? Answer, "Yes."

A decree was issued, awarding the funds as provided in the verdict, and enjoining the Trustees of Martin Institute from using the $40,000 decreed to them in any way except for school purposes. The title to the realty was decreed to be in the Trustees of Martin Institute. Other provisions of the decree need not be related.

The City and County boards of education filed a motion for new trial upon the general grounds, which was amended on three grounds, each alleging error in the charge of the court; and to the overruling of this motion the case comes by writ of error to this court. The defendant filed a cross-bill of exceptions, relating to exceptions pendente lite. 1. The first question for consideration is the ruling of the court sustaining the general demurrer to count 2 of the plaintiffs' petition. Whether the allegations relating to dedication, which are substantially the same as those contained in the first count, are sufficient to set forth a cause of action for the realty or the proceeds of the insurance policies, need not, in view of the ruling hereinafter made, be determined. Assuming but not deciding that, standing alone, they would be sufficient, yet, the same count sets forth the terms of a lease, under which the plaintiffs were tenants of the defendants at the time of the fire, and two previous leases, which cover a period of almost thirty years. The plaintiffs seek to nullify the effects of being estopped to dispute the title, by asserting that these leases were executed under a mistake of fact. Whether the leases create the relation of landlord and tenant under the Code, § 61-101, et seq., or lessor and lessee under § 85-801 et seq., in either event the rights of the plaintiffs under the instruments were derived from the Trustees of Martin Institute. The allegations in count 2 of the petition, admitting the execution of these leases, would necessarily act as an estoppel as to the other averments relating to a dedication, unless there were additional sufficient allegations showing the lease to have been executed under a mistake of fact.

As to the latter, paragraph 26 states: "On or about the 19th day of June, 1913, the board of education of the City of Jefferson, laboring under a mistake of fact that title to said property was in "The Trustees of Martin Institute,' as a corporation, undertook to enter into an agreement between itself and certain persons claiming to be the Trustees of Martin Institute and to represent it as a corporation, whereby they undertook to lease the property above described for public-school purposes." The petition then recites the execution of two other leases, one dated January 28, 1929, for a term of ten years, and the other August 29, 1939, for a term of twenty years. In paragraph 34, it is further alleged: "These instruments were executed by mistake of fact in believing that the the Trustees of Martin Institute held legal title to said property, whereas, in truth and in fact the right and title to all of said property had, long before either of said leases were attempted, vested in the City of Jefferson by dedication for public-school purposes." "In all cases of mistake of fact material to the contract or other matter affected by it, if the party complaining applies within a reasonable time, equity will relieve." Code, § 37-206. "Ignorance by both parties of a fact shall not justify the interference of the court." § 37-210. "If a party, by reasonable diligence, could have had knowledge of the truth, equity shall not relieve; nor shall the ignorance of a fact, known to the opposite party, justify an interference, if there has been no misplaced confidence, nor misrepresentation, nor other fraudulent act." § 37-211.

In that portion of count 2 which seeks to allege a mistake of fact, there are no allegations to establish any misplaced confidence, misrepresentation, or fraudulent acts. Accordingly, in determining whether the allegations are sufficient to set forth a mistake of fact, they must rest entirely upon the sole question of diligence. "Where a party seeks to be relieved in equity, from the effect of a mistake, he must show due diligence on his part." Lamb v. Harris, 8 Ga. 546 (2). Courts of equity grant relief only in favor of the diligent. Rogers v.Kingsbury, 22 Ga. 60; Vaughn v. Fuller, 23 Ga. 366;Smith v. Hornsby, 70 Ga. 552; Redwine v. McAfee,101 Ga. 701 (29 S.E. 428). "While equity will, on seasonable application and under proper circumstances, relieve a party from the injurious consequences of an act done under a mistake of fact, it will not do so if such party could by reasonable diligence have ascertained the truth as to the matter concerning which the mistake was made." Keith v. Brewster, 114 Ga. 176 (39 S.E. 850). Applying the foregoing rules to the allegations of a mistake of fact on the part of the City of Jefferson, where on three different occasions (in 1913, in 1929, and again in 1939) its public officials recognized the ownership of the property to be in the Trustees of Martin Institute by executing leases, each for a period of years, it would be difficult indeed to reconcile such conduct as constituting reasonable diligence, such as would now authorize this long and continuous recognition of the ownership of this property to have been based upon a mistake of fact. On the contrary, the facts disclosed in the petition negative the necessary diligence to avail the plaintiffs of any right to assert a mistake of fact. The recognition of the title of the Trustees of Martin Institute, as disclosed in the leases set forth in the petition, is not nullified by the allegations to establish their execution by a mistake of fact. Accordingly, the trial court did not err in sustaining the general demurrer to count 2 of the petition.

2. On the trial of the case on the first count of the petition, in which there was no reference to any leases, the court submitted questions for the jury to answer, and to the question, "Was there a dedication of the lands to public use for public-school purposes?" the court directed the jury to answer, "No." The city insists that there was evidence which would have authorized a determination of this question by the jury in its favor. The evidence is voluminous and historical, tracing the history of Martin Institute from 1818, and its operation by donations for educational purposes, and also by aid of the city and county authorities. The deed, executed in 1886 from Fannie E. R. Howard to named parties as Trustees of Martin Institute, provided that the grantor, "in consideration of the sum of fifteen hundred dollars heretofore stipulated to be paid, the receipt of which is hereby acknowledged, does sell and convey unto [named persons], Trustees Martin Institute, their successors in office, and assigns, a certain tract or lot of land. . . Said lot being the same the Martin Institute is now located" on. It is insisted by the plaintiffs that this deed conveyed only the legal title to Martin Institute, and that the beneficial interest, either from the payment of the purchase-money or other circumstances, is either wholly or partially in the City of Jefferson, and thereby an implied trust was created — that there was evidence from which the jury could have found the purchase-price to have been paid by the city; that the city and county had expended more than $55,000 in buildings on the premises; and that the Trustees of Martin Institute had at no time invested more than $63,000 thereon; and that this would create an implied trust under various Code sections.

For the jury to have so found, there are many legal obstacles that would have to be overcome. By an act approved August 25, 1885 (Ga. L. 1884-1885, p. 596), the charter of Martin Institute was amended, as follows: "That the board of trustees of Martin Institute, an educational institute at Jefferson, Ga., are hereby authorized and empowered, for the purpose of paying for lot recently purchased, and for the erection thereon of an institute building . . and . . to issue . . bonds." By an act approved July 30, 1912 (Ga. L. 1912, p. 1019), a public-school system was established in the City of Jefferson, and in section 8 of this act it is provided: "The said board of education are authorized and empowered, under such contract as they may make with Martin Institute, located in the City of Jefferson." This act was amended by an act approved August 4, 1914 (Ga. L. 1914, p. 929), which by section 2 provided: "That they have the further right and power if they see fit to rent, lease or take over for a term of ten years, . . school dormitory, and other buildings, equipment . . for school purposes; to liquidate certain debts in consideration of such lease, and to construct other buildings on said leased premises."

Pursuant to the authority conferred by the legislature, the city, in 1913, leased the premises for a term of ten years for a consideration of $5000. The lease was not renewed until 1929, at which time the new lease stated: "At the request of the City Board, . . the County Board . . desires to become interested in the lease of the school property belonging to the Trustees of Martin Institute." The consideration of this lease was recited as $15,000 already spent on old buildings by the city, and $20,000 by the city and $5000 by the county to be spent in new buildings. This lease was for a term of 10 years. Again, in 1939 this lease was renewed for a term of 20 years, for the consideration of one dollar, and other provisions for the carrying of fire insurance to protect the Trustees of Martin Institute.

These leases were introduced in evidence, and no issue was made as to their validity. In view of its recognition of title in the Trustees of Martin Institute, as established by these leases, under the express terms of the Code, § 61-107, providing that, "The tenant may not dispute his landlord's title nor attorn to another claimant while in possession," the city is precluded from asserting title. Where it is established that the relation of landlord and tenant exists, the landlord may recover upon the admission of title which grows out of that relation. Cody v.Quarterman, 12 Ga. 386. A lessee can not deny the title of his landlord. Grizzard v. Roberts, 110 Ga. 41 (2) (35 S.E. 291); Bullard v. Hudson, 125 Ga. 393 (54 S.E. 132);Barnett v. Lewis, 194 Ga. 203 (20 S.E.2d 912).

But able counsel for the plaintiffs in error insist that, while the evidence might establish the legal title to be in the Trustees of Martin Institute, there was evidence sufficient for the jury to determine, on the basis of an implied trust, that the equitable title and beneficial use was in the city. Without determining whether or not there was evidence sufficient to establish a trust in favor of the city, suffice it to say that, as to this theory of the case, the city is met by the same bar to obtaining a verdict for the equitable title and beneficial use as barred it from obtaining a verdict for the title based upon dedication; and that is, the relation of landlord and tenant. The lease in existence at the time of the fire, and the two former leases under which the city had possession of the premises for approximately thirty years, were recognition and admission of the title of the Trustees of Martin Institute to the use and beneficial interest of the premises; and, so recognizing the Trustees of Martin Institute as its landlord, the city could not dispute their title to this use and beneficial interest. The court did not err in directing a verdict on this issue.

3. In reference to the fund of $66,500 derived from the fire insurance, the court charged the jury as follows: "You will also find the amount which the defendants, Trustees of Martin Institute, are entitled to, and you are instructed as a matter of law, that that sum must not be less than $40,000, and for the board of education of City of Jefferson and board of education of Jackson County, the balance of the insurance fund amounting to $26,500, applying to their insurable interest of the property destroyed by the fire. One of the conditions of the lease of 1939, which was in force at the time of the fire required the lessee to . . `carry forty thousand ($40,000) dollars insurance . . of both fire and tornado so as to keep and guarantee the property against loss to the [Trustees of Martin Institute].'" Of the total insurance of $66,500, $10,500 was carried on the equipment and $56,000 on the building. Having thus insured the property and collected the amounts above stated by reason of a fire loss, under the terms of the lease agreement the Trustees of Martin Institute were entitled to have awarded to them the sum of $40,000, and the court did not err for any reason assigned in so instructing the jury.

From what has been said above, it becomes unnecessary to pass on the other objection to the charge relating to the interest of all parties to the balance of the insurance fund amounting to $26,500, inasmuch as the jury found this issue in favor of the plaintiffs, and awarded this fund to them as applying to their insurable interest in the property destroyed by fire.

Judgment affirmed on the main bill of exceptions; cross-billdismissed. All the Justices concur, except Wyatt, J., absentbecause of illness.