Title: STATE ex rel. BOARD OF REGENTS v. McCLOSKEY BROTHERS, INC.

State: oklahoma

Issuer: Oklahoma Supreme Court

Document:

STATE ex rel. BOARD OF REGENTS v. McCLOSKEY BROTHERS, INC.  STATE ex rel. BOARD OF REGENTS v. McCLOSKEY BROTHERS, INC. 2009 OK 90 227 P.3d 133 Case Number: 105228 Decided: 12/08/2009 THE SUPREME COURT OF THE STATE OF OKLAHOMA THE STATE OF OKLAHOMA ex rel. BOARD OF REGENTS for the OKLAHOMA AGRICULTURAL AND MECHANICAL COLLEGES, Plaintiff/Appellee v. McCLOSKEY BROTHERS, Inc. an Oklahoma Corporation; Defendant/Appellant, BANK OF NICHOLS HILLS and COUNTY TREASURER OF PAYNE COUNTY, STATE OF OKLAHOMA. CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION II Honorable Donald Worthington, Trial Judge ¶0 The appellee, Regents for Oklahoma State University brought an eminent domain proceeding to take the real property of the appellant, McCloskey Brothers, Inc. The landowner challenged the taking by arguing that the Regents were unconstitutionally formed. The trial court, the Honorable Donald Worthington, determined that the landowner lacked standing to raise such an argument and the court confirmed the report of the commissioners. The landowner appealed and the Court of Civil Appeals affirmed. We hold that: 1) the landowner's failure to appeal an interlocutory order regarding standing was not preclusive insofar as being raised as an issue in this appeal; 2) although the landowner has standing to challenge the taking generally, such standing does not include the right to collaterally attack the qualifications of the Regents; and even if it did, the Regents' actions were valid as de facto Regents; 3) the taking was for a valid public purpose; and 4) the Regents negotiated in good faith. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED Randall Elliott, Pryor, Oklahoma, Barry Kent Roberts, Norman, Oklahoma, for Plaintiff/Appellee. Harlan Gene Hentges, Edmond, Oklahoma, for Defendant/Appellant. KAUGER, J.: ¶1 This cause concerns an eminent domain proceeding brought by the Board of Regents for the Oklahoma Agricultural Colleges (appellee/Regents), against the McCloskey Brothers, Inc. (appellant/the landowner/McCloskey Brothers). The dispositive issues presented on certiorari ¶2 We hold that: 1) the landowner's decision not to appeal the interlocutory order regarding standing is not preclusive; 2) the landowner has standing to dispute the taking, but such standing does not include the ability to challenge the composition of the Board of Regents. This right is reserved to quo warranto proceedings initiated by the State. Regardless, the Regents' actions were valid because they were de facto Regents approved by the Governor and confirmed by the Senate. We further hold that: 1) the taking of land for an athletic village was for a valid public purpose; and 2) the Regents acted in good faith. FACTS ¶3 On September 13, 2005, the appellant, the McCloskey Brothers, a corporation owned by brothers Keven and Joel McCloskey, purchased a small rental house located approximately one half of a block away from the north and east side of the Oklahoma State University (the University) campus in Stillwater, Oklahoma. ¶4 At about the same time that the landowner acquired the property, information began circulating in the community that the University was interested in a large area on the east side of campus and across the street north, to create what it had labeled an "athletic village." The proposed village area was located directly north of the current football stadium where the University planned to build athletic training fields, indoor and outdoor training facilities, and a parking garage. By December 2005, the University, through its Foundation and an acquisition agent, had already begun acquiring properties from property owners. In a letter dated December 23, 2005, the University's Foundation offered to purchase the property from the McCloskey Brothers for $50,000.00, ¶5 The McCloskey Brothers, in a letter dated May 6, 2006, responded to the December 23, 2005, letter, rejected the offer, and suggested that the property was really worth closer to $103,120.98. ¶6 Finally, on July 28, 2006, the appellee, the Regents for the University, passed a resolution recognizing that negotiations with the landowner had failed and that the property should be acquired through eminent domain proceedings. ¶7 On September 15, 2006, the trial court appointed three commissioners and issued instructions for determining the fair market value of the property. The commissioners filed their report on October 10, 2006, valuing the property at $84,000.00. On November 8, 2006, the landowner filed its exception to the commissioners' report arguing that: 1) the Regents could not legally exercise the power of eminent domain because a majority of the Regents were not farmers as required by the Oklahoma Constitution; ¶8 The Regents responded to the landowner's allegations and sought to confirm the commissioners' report. On June 12, 2007, the trial court ruled that the landowner did not have standing to challenge the legality of the appointment of the individual members of the Regents. ¶9 It is from this July 23, 2007, order which the landowner appealed. The Court of Civil Appeals affirmed the trial court, but it neglected to address any claims which were resolved by the trial court's June 12, 2007, order because the landowner did not appeal from that order. We granted certiorari on October 12, 2009. I. ¶10 FAILURE TO APPEAL AN INTERLOCUTORY ORDER REGARDING STANDING IS NOT PRECLUSIVE OF THE ISSUE IN THIS APPEAL. ¶11 The Court of Civil Appeals, sua sponte, determined that because the landowner did not appeal the trial court's June 12, 2007 order, certain issues were precluded from review in this appeal. This Court reviews final orders, II. ¶12 THE LANDOWNER'S STANDING TO CHALLENGE THE TAKING DOES NOT INCLUDE THE ISSUE OF WHETHER THE REGENTS WERE PROPERLY, CONSTITUTIONALLY FORMED. REGARDLESS, BECAUSE THEY WERE ACTING AS DE FACTO REGENTS, THEIR ACTIONS WERE VALID. ¶13 The landowners challenge the commissioners' report by arguing that: 1) the Oklahoma Constitution, art. 6, §31A a. The Oklahoma State University Board of Regents is a public corporation with the legal authority to acquire and take title to real property through the power of eminent domain/condemnation. ¶14 The inherent power of an entity to take private property for public use is called the power of eminent domain. ¶15 The power of eminent domain remains dormant until the Legislature, by specific enactment, delineates the manner by which and the entity through which it may be exercised. ¶16 Pursuant to the Oklahoma Constitution, art. 6, §31A and b. Standing to challenge the taking of real property by condemnation/eminent domain does not include the authority to collaterally attack the legality of a corporation's existence when it is acting as a de facto corporation. ¶17 Standing refers to the legal right of a person to challenge the conduct of another in a judicial forum.37 An initial inquiry must reveal that: 1) an actual or threatened injury has occurred; 2) some relief for the harm can be given; and 3) the interest to be guarded is within a statutorily or constitutionally protected zone.38 Not only is standing confined to those whose interest in the controversy is direct, immediate and substantial, a litigant must also have a personal stake in the outcome.39 ¶18 When standing is placed in issue in a case, the question to be answered is whether the person whose standing is challenged is a proper party to request an adjudication of a particular issue -- not whether the issue itself is justiciable. ¶19 We have no doubt, nor is it disputed, that the landowner has standing to challenge the taking because they suffered injury to a legally protected interest as contemplated by statutory or constitutional provisions. However, this does not address the question of whether such standing includes the issue the landowners wish to have adjudicated -- the legality of the existence of the Regents because they may not all be farmers. ¶20 Where the question of right or title to office is put in issue, the appropriate remedy is an action in the nature of quo warranto. ¶21 In Macy v. Oklahoma City School District No. 89, ¶22 The rule that private individuals may not do indirectly or collaterally what they cannot do directly has been illustrated in the doctrine of de facto corporations and de facto officers. Under the de facto doctrine, a corporation's or municipal corporation's actions will be upheld as valid when: 1) a valid law exists authorizing the corporation; 2) a bone fide attempt to organize under such law is made; and 3) an actual good faith exercise of corporate powers. ¶23 A de facto officer is similarly treated like a de facto corporation. For example, in Ajax Contractors, Inc. v. H.L. Myatt, ¶24 The same result has been applied whether the challenge was brought in the context of a member of a school board, ¶25 The same rationale is applicable here, where: 1) the corporate body, the Regents, are undisputedly a public corporation which validly exists pursuant to the Okla. Const. art 6, §31A; III. ¶26 THE TAKING WAS FOR A VALID PUBLIC PURPOSE. ¶27 The landowner argues that the taking was not for a proper public purpose as required by the Oklahoma Const. art 2, §§23-24 IV. THE REGENTS NEGOTIATED IN GOOD FAITH. ¶28 Finally, the landowner insists that the Regents negotiated in bad faith because they: 1) they used third parties to initiate negotiations; 2) and held a public meeting announcing that it would resort to eminent domain proceedings if necessary. The Regents contend that they have acted in good faith. A review of the record reflects that the gravamen of the landowners' complaint has more to do with the fact that the Regents did not readily succumb to their demands or that the Regents may have paid some other landowners more than the market value. Whether the Regents paid two, three, or four times the market value for any particular property has nothing to do with the issue of bad faith as far as negotiation with the McCloskey Brothers is concerned. As long as the Regents met the minimum constitutional standards for compensation and did not violate any other state law, there was nothing to preclude them from paying as much as they wanted for properties, but paying more than market value does not in and of itself constitute bad faith. There was no evidence presented which reflects bad faith behavior on behalf of the Regents. The landowners' argument is this regard is unpersuasive. CONCLUSION ¶29 The landowner's decision not to appeal from an interlocutory order regarding standing is not preclusive of the issue in this appeal. However, the landowner's standing to challenge the taking does not include standing to raise the issue of whether the regents were properly, constitutionally formed. Rather, any challenge to the qualifications of the Regents must be brought by the proper parties in a proceeding quo warranto. Regardless of whether the issue may be collaterally attacked, the Regents were de facto Regents and their actions are valid. The taking of the property for an athletic village was for a valid public purpose. The Regents did not act in bad faith in negotiating to purchase the landowner's property. Accordingly, the trial court is affirmed, but because both parties demanded a jury trial on the issue of sufficiency of compensation, the cause is remanded for a jury trial. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS VACATED; TRIAL COURT AFFIRMED AND CAUSE REMANDED TO PROCEED TO JURY TRIAL ON THE ISSUE OF COMPENSATION. EDMONDSON, C.J., HARGRAVE, OPALA, KAUGER, WINCHESTER, REIF, JJ., SUMMERS, S.J., concur. COLBERT, J., concurs in result. WATT, J., dissenting: I dissent from the majority opinion which reaches the same result as did the Court of Civil Appeals. My dissent is consistent with my original vote to deny certiorari. Rather than issuing an opinion from this Court on the facts presented, I would vote to deny certiorari and order that the Court of Civil Appeals' opinion be ordered for publication by this Court and anointed with precedential value. TAYLOR, V.C.J., recused. FOOT