Section 707 of the Public School Code Authorizing Sale of School Property; Power of Court to Reverse Approval of Private Sale and Direct Public Sale
Issues:
The Supreme Court granted allocatur to decide:
- Whether the Commonwealth Court had the authority under the Public School Code to order the public sale of Millcreek Township School District property pursuant to 24 P.S. § 7-707?
- Whether the Commonwealth Court erred in reversing the decision of the Court of Common Pleas approving the private sale of Millcreek Township School District property under 24 P.S. § 7-707?
Background:
Millcreek Township School District in Erie County closed Ridgefield Elementary School for lack of use in 2013 and listed the property for sale. The property was zoned residential and included 7.9 acres with a playground, a parking lot and open space. In August 2014, Montessori Regional Charter School offered to purchase the entire Ridgefield property for $1.1 million in cash. The School District rejected the offer. On December 4, 2014, VNet offered to purchase a portion of the property for $1.1 million, contingent upon the property being rezoned so that VNet could use the school building for a commercial business. On December 16, 2014, the School District filed an application with the township to subdivide the Ridgefield property. Ultimately, the School District requested approval to subdivide the property into three lots. Lot 1, measuring 5.9 acres, contains the former school building and parking lots. Lots 2 and 3 each measure approximately one acre and contain vacant fields. The school district eventually accepted an offer from VNet for Lot 1, after several rounds of offers from Montessori and VNet in which Montessori continued to offer to purchase the entire original tract including Lots 2 and 3 and VNet sought to purchase only Lot 1. During the process, the school district placed a restrictive covenant in the deed to Lot 1 to prohibit the sale or lease of the empty school building to a charter school.
Section 707 of the Public School Code allows a school district to sell unused real property through one of three methods: (1) at public auction; (2) via sealed bids; or (3) in a private sale subject to the approval of the court of common pleas, which must find that the private sale nets a better price for the property than could be obtained at a public sale. The school district petitioned the court for approval of the proposed sale of Lot 1 to VNet, and after a hearing in which Montessori participated and made another competing offer for the entire property including Lots 2 and 3, the court approved the sale of Lot 1 to VNet.
The Commonwealth Court reversed, finding that the trial court abused its discretion:
Given Montessori’s longstanding interest in purchasing the Ridgefield property and its offer in an amount substantially higher than that offered by VNet, there is no support for the trial court’s finding that the private sale would realize a higher price than would be obtained at a public sale. Consistent with Section 707 of the Public School Code … Montessori’s substantially higher offer should have stopped the proceedings. The trial court should have, at a minimum, disapproved the sale to VNet and ordered more negotiations between Montessori and the School District. The better course of action, in light of the School District’s repeated refusal to negotiate with Montessori, would have been for the trial court to order a public sale of either the entire Ridgefield property or Lot 1 since a public sale is the preferred way to do a sale of unused school property under Section 707 of the Public School Code…. In short, the trial court erred and abused its discretion in concluding that the proposed sale to VNet served the public interest by giving a lopsided view of the record in favor of the School District.
143 A.3d at 1045-1046.
The Commonwealth Court remanded with instructions to the trial court to order a public sale through auction or sealed bid of either (1) all three lots comprising the Ridgefield property, or (2) Lot 1 if the School District wishes to retain ownership of the two one-acre lots adjacent to Lot 1.
Senior Judge Pellegrini, in dissent, focused on the choice of the school district to sell only Lot 1 and the limits on the statutory power of the courts under the School Code:
While it may or may not be advantageous for the School District to sell all the property, that is not a decision for us to make but for the School District (i.e., its elected School Board) which is given the power to make those choices regarding which and how much of its property it desires to sell. See 24 P.S. § 7–703. Simply, Section 707(3) of the Public School Code, 24 P.S. § 7–707(3), only instills a court with the power of “approval” and its corollary refusal. As we explained in Swift v. Abington School District, 7 Pa.Cmwlth. 26, 297 A.2d 538 (1972), “[t]he statute gives the court power to approve or disapprove a private sale made by the board. The statute gives the court no power to negotiate for a better price, make a new sale or conduct an auction.” Id. at 540 (citing McKees Rocks Borough School District Petition, 360 Pa. 285, 62 A.2d 20 (1948)).
Because this matter involves the School District’s petition to privately sell Lot 1 to VNet, the trial court was only permitted to determine whether VNet’s exclusive purchase of Lot 1 for $1.1 million complies with 24 P.S. § 7–707(3). Any purported offer by Montessori to buy the entire Ridgefield Property is irrelevant when calculating the best price obtainable for Lot 1 only. Because VNet has offered two affidavits and multiple testimonies stating that the proposal complies with 24 P.S. § 7–707(3) and because VNet is the only potential buyer to make an offer to exclusively purchase Lot 1, I would affirm the trial court’s approval of the School District’s private sale of that property.
143 A.3d at 1049-1050.
For more information, contact Kevin McKeon or Dennis Whitaker.