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Reversal: Floyd County loses title to criminal justice center over lease dispute

May 22, 2019

A split Indiana Court of Appeals has reversed the award to Floyd County of the title to its criminal justice center after concluding that the building authority that financed the center never had the authority to agree to certain provisions in its lease with the county.

In 1992, Floyd County entered a 15-year lease with the New Albany Floyd County Indiana Building Authority, in which the county agreed to lease the Criminal Justice Center and the City of New Albany would sublease from the county.

That lease included a turn-over provision that stated, in part, that if the county did not purchase the center or exercise its option to renew the lease, then “upon expiration of this Lease and upon full performance by [the County] of its obligations under this Lease, the [Center] shall become the absolute property of [the County], and, upon [the County’s] request, [the Building Authority] shall execute proper instruments conveying to [the County] all of [the Building Authority’s] title thereto.”

Ten years after the lease expired, the county requested that the Building Authority transfer to it the title of the center pursuant to the turn-over provision. The Building Authority refused, and a lawsuit ensued that resulted in the county’s favor.

The Floyd Superior Court granted the county’s motion for declaratory judgment, holding that the lease’s turn-over provision was valid pursuant to Indiana Code section 36-9- 13-22(a)(6).

The trial court also concluded that the center was statutorily the county’s property, and thus ordered that title of the center be divested from the Building Authority and vested in the county pursuant to Indiana Trial Rule 70.

But the Indiana Court of Appeals took issue with that decision, reversing and remanding in City of New Albany v. Board of Commissioners of the County of Floyd, New Albany Floyd County Indiana Building Authority, 18A-MI-162.

A divided appellate panel consisting of Judges Cale Bradford, L. Mark Bailey, and Elaine Brown disagreed as to whether the trial court erroneously interpreted the statute to permit the Building Authority to agree to the turn-over provision, with the majority concluding that it did not because the center was not acquired “by gift, devise, or bequest.”

“The County argues that the General Assembly’s use of ‘that’ should be interpreted to refer to any real or personal property that is acquired by a building authority regardless of how it was acquired. This argument fails for multiple reasons,” Bradford wrote for the majority.

“First, the County’s interpretation would make the use of the words ‘gift, devise, or bequest’ mere surplusage, which we presume was not the General Assembly’s intent. Moreover, if Indiana Code section 36-9-13-22(a)(6) permitted building authorities to dispose of any real or personal property regardless of the way in which it was acquired, as the County suggests, it would render the other dispositional powers granted to building authorities in Indiana Code chapter 36-9-13 irrelevant.”

It further rejected the county’s argument that the Building Authority maintained authority to agree to the turn-over provision pursuant to I.C. 36- 1-11, finding that statute was in irreconcilable conflict with I.C. 36-9- 13.

In a separate opinion, Judge Brown concurred in part and dissented in part, arguing that the statutes were not in conflict and that the county should be able to rely on the authority granted to the Board Authority in I.C. 36-1-11-8 as a governmental entity.

“Further, Ind. Code § 36-1-11-8 contemplates a transfer or exchange of property made specifically to ‘a governmental entity,’ a condition which is not present in Ind. Code § 36-9-13- 22(a)(6),” Brown opined.

But the appellate court collectively agreed that the county could still buy the center’s title pursuant to the purchase option in the lease, since it had continued to occupy the center as a holdover tenant after the lease had expired.

The case was therefore remanded for the trial court to vacate its order granting title of the center to the county, keeping the latter option in mind.

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