State ex rel. Regents v. McCloskey Bros.

• Decision Date: 08 December 2009
• Docket Number: No. 105,228.,105,228.
• Parties: 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.
• Court: Oklahoma Supreme Court

227 P.3d 133

2009 OK 90

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.

No. 105,228.

Supreme Court of Oklahoma.

December 8, 2009.

CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION 2; 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; TRIAL COURT AFFIRMED AND CAUSE REMANDED TO PROCEED TO JURY TRIAL ON THE ISSUE OF COMPENSATION.

Randall Elliott, Pryor, OK, Barry Kent Roberts, Norman, OK, for Plaintiff/Appellee.

Harlan Gene Hentges, Edmond, OK, 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 certiorari¹ are whether: 1) the Court is precluded from addressing a standing issue because the landowner did not appeal an interlocutory order of the trial court; 2) the landowner may challenge the legitimacy of the taking by alleging that the Regents were not comprised of a majority of farmers in compliance with the Oklahoma Constitution art. 6, § 31A;² 3) the taking of land for an athletic village was for a public purpose; and 4) the Regents negotiated in good faith.

¶ 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.³ The property was previously owned by a Nevada resident, and according to Kevin McCloskey, they paid either $25,000.00 or $25,500.00 for the property, which their bank had appraised for $30,000.00.⁴

¶ 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 or twice the amount the company had paid for the property three months earlier.

¶ 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 The University refused this offer, and at some point in the process, the landowner presented a figure of $89,819.00, which was also declined by the University. Discussions continued between the landowner and the University until July 5, 2006. At this juncture, the University offered the landowner $62,000.00 for the property, which the landowner again rejected.

¶ 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 August 16, 2006, the University, acting through its Regents, filed a petition for condemnation of the landowner's property under the provisions of 66 O.S. 2001 § 57⁸, 70 O.S. 2001 § 3401,⁹ and 70 O.S. Supp. 2005 § 3412.¹⁰

¶ 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;¹¹ 2) the Regents had no authority to exercise the power of eminent domain; 3) the Regents did not legally adopt the resolution of necessity; 4) the proposed use of the property was not a public use or public purpose; and 5) the Regents did not make a good faith effort to purchase the property.¹² On December 7 2006, the Regents demanded a jury trial on the amount of the commissioners' award and the next day, the landowner also demanded jury trial on the amount of the award. The cause has yet to proceed to a jury trial concerning the value of property.

¶ 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.¹³ On July 23, 2007, the trial court held a hearing on the exceptions to the commissioners' report. After the hearing, the court made numerous findings and affirmed the award of the commissioners.

¶ 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,¹⁴ interlocutory orders appealable by right,¹⁵ and certified interlocutory orders.¹⁶ The order of June 12, 2007, did not qualify as one of these orders, but even if it had, an appellant is not precluded from re-asserting errors after a final order is entered.¹⁷ Here, the trial court's order of July 23, 2007, which ruled on exceptions to the commissioners' report was the appealable order.¹⁸ As previously discussed, the land-owner raised the issue in the exception to the commissioners' report. Consequently, any errors which could have been alleged after the previous June 12, 2007, ruling may now also be considered because they were asserted in this appeal.

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, § 31A¹⁹ requires a majority of the nine Regents to be farmers; and 2) because the majority were not farmers, their actions of condemnation are unlawful. The Regents contend that the landowner's resistance to condemnation is nothing more than a collateral attack on their qualifications to hold the office, which is prohibited in eminent domain proceedings. We agree.

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.²⁰ The power of eminent domain is limited by the Fifth Amendment of the United States Constitution,²¹ and art. 2, §§ 23-24 of the Oklahoma Constitution.²² Section 24 requires that: 1) the private property taken be for public use/public purpose; 2) just compensation be paid to the property owner; and 3) that the determination of the character of the use is a judicial question.²³ Condemnation proceedings²⁴ do not involve tort claims and are not civil actions at law or suits in equity. Instead, they are the special statutory proceedings for the purpose of...