STATE BOARD OF REGENTS FOR OKLAHOMA AGRICULTURAL AND MECHANICAL COLLEGES v. Bank of Nichols Hills and County Treasurer of Payne County, State of Oklahoma. (2009)

¶ 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 landowner 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 resistence 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 ascertaining the compensation to be paid for property to be appropriated.²⁵

¶ 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.²⁶ A governmental body subordinate to the State may not exercise, create, extend, or expand a power of eminent domain in the absence of statutory authority.²⁷ When such an entity properly employs the power of eminent domain, it acquires an interest in the property ranging from an easement to fee simple title, for which the entity must pay the landowner just compensation.²⁸

¶ 16 Pursuant to the Oklahoma Constitution, art. 6, § 31A and 70 O.S.2001 § 3411,²⁹ the Regents as a public body corporate possess the power of eminent domain. Oklahoma State University³⁰ is a public corporation,³¹ and it is led by its Board of Regents.³² The Regents are public officers³³ and their eligibility and terms of appointment are provided by 70 O.S. Supp.2003 § 3409.³⁴ Among the Regents' many powers and duties is the authority to acquire and take title to real property through legal proceedings,³⁵ including the authority to exercise the power of eminent domain/condemnation.³⁶

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.⁴⁰ “Standing” is the right to commence litigation, to take the initial step that frames legal issues for ultimate adjudication by a court or jury.⁴¹ When standing of a party is brought into issue, the focus is on the party seeking to get the complaint before the court, and not on the issues the party wishes to have adjudicated.⁴²

¶ 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.⁴³ The common law writ of quo warranto was abolished in 1903, but the statutes provided remedies obtainable in the nature of quo warranto by civil action.⁴⁴ An action in the nature of quo warranto challenges the right to hold public office or the legal existence of a corporation, and it may be brought in the Supreme Court or district court.⁴⁵ Only where the issue raised is held to be publici juris, will the Supreme court assume original jurisdiction.⁴⁶ Quo warranto requires the attorney general, district attorney, or a contestant for the office to challenge the incumbent's title,⁴⁷ and a collateral attack by a private individual is not permitted.⁴⁸

¶ 21 In Macy v. Oklahoma City School District No. 89, 1998 OK 58, ¶¶ 14-16, 961 P.2d 804, a resident of a former school district brought a declaratory judgment action seeking a determination regarding an election controversy. We addressed a plaintiff's standing to contest such a controversy. We examined: 1) the type of claim made; and 2) the interest of the party pressing that claim. Citing with approval from the Supreme Court of Kansas,⁴⁹ we explained that ordinarily it is no justiciable concern of private individuals that these public subdivisions and organizations of the state may have some infirmity in their organization, nor do such individuals have a right to equitable relief to void an election organizing a school district.⁵⁰

¶ 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.⁵¹

¶ 23 A de facto officer is similarly treated like a de facto corporation. For example, in Ajax Contractors, Inc. v. H.L. Myatt, 1967 OK 19, ¶ 16, 424 P.2d 30, a taxpayer brought an action to challenge city officials' award of a contract to a particular bidder. The basis of the challenge was that the city council proceeding was void because one council member had moved and was thus unqualified to vote. The Court recognized that, regardless of whether the council member had become disqualified, the member was an officer de facto who was not subject to collateral attack. Relying on Hatfield v. Jimerson, 1961 OK 250, ¶ 9, 365 P.2d 980, a case in which we held that de facto officers could not be collaterally attacked, the Court stated that a de facto officer is one whose acts, though not those of a lawful officer, the law, upon principles of policy and justice, will hold valid so far as they involve the interest of the public and third persons. Where the functions of the office are exercised by one who was in the actual possession of it under color of title, even if the officer may not be properly qualified in accordance with the law, his or her acts will be upheld as valid and cannot be collaterally attacked.

¶ 24 The same result has been applied whether the challenge was brought in the context of a member of a school board,⁵² a municipal corporation,⁵³ a union graded school district,⁵⁴ a City's board of adjustment,⁵⁵ or a county's board of equalization.⁵⁶ In City of Bethany v. Mason, 1949 OK 190, ¶ 20, 210 P.2d 353, a case in which a city attempted to maintain a quo warranto action to challenge the validity of the incorporation of another municipality, the Court recognized that when a municipal corporation exists de facto, the validity of an incorporation and the legal existence of the municipality cannot be questioned in the proceedings in any action between a private citizen-even if the action involves the taking of land by eminent domain. This has been the well settled rule of law for at least a century and a half.⁵⁷ In a suit to condemn land, where a corporation is de facto, the right to contest its existence may not be collaterally questioned in an eminent domain proceeding.⁵⁸ Rather, right to contest a corporation's existence belongs only in a proceeding for that purpose brought by the state.⁵⁹

¶ 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;⁶⁰ 2) a bona fide attempt has been made to organize under such law; 3) all of the Regents were in actual possession of the office under color of title; and 4) they exercised their corporate powers in good faith. The Regents, collectively, as a corporate entity were de facto, and the Regents, individually, as officers of that entity were de facto. The fact that this is an eminent domain proceeding is of no consequence. Accordingly, we hold that the standing is two-pronged: although the landowner has standing to challenge the taking, such standing does not include the issue of whether the Regents were formed in compliance with the Oklahoma Constitution. And, even if it did, the Regents' actions were valid as de facto Regents.

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, §§ 23-24⁶¹ because the land was to be used as an “athletic village” instead of some use which would further the academic goals of the University. The Regents argue that the proposed use is a public use/public purpose. The question of whether a proposed taking is for a “public use” is a judicial question.⁶² Nevertheless, here, the Legislature has already expressly declared such use a public use by its enactment of 70 O.S.2001 § 4001,⁶³ in which the Regents are authorized to take land for the construction of, among other things, field houses, stadiums, and other revenue-producing buildings. The proposed “athletic village” fits squarely within this stated purpose and a review of the record reveals no other evidence which would convince us that the proposed use does not qualify for a public use/purpose.

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.

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.

KAUGER, J.

EDMONDSON, C.J., HARGRAVE, OPALA, KAUGER, WINCHESTER, REIF, JJ., SUMMERS, S.J., concur. COLBERT, J., concurs in result.