Campbell v. First Baptist Church

HEDRICK, Judge. The first question presented by this appeal is whether the Redevelopment Commission complied with the applicable statutory provisions in disposing of the “Markham Property” by exchange with the First Baptist Church. G.S. § 160-462(6) [now G.S. § 160A-512(6)] contains a specific grant of power to a — 127 — redevelopment commission enabling it to sell, exchange, transfer or otherwise dispose of real property “subject to the provisions of G.S. § 160-464, and with the approval of the local governing body.” Plaintiff contends that the conveyances effecting the exchange of properties are void because the Commission acted outside the authority granted to it under G.S. § 160-462(6) by its failure to comply with the statutory procecures contained in G.S. § 160464(e)(4), [now G.S. § 160A-514(e)(4)] which provides: In carrying out a redevelopment project, the commission may: (4) After a public hearing advertised in accordance with the provisions of G.S. 160463(e), and subject to the approval of the governing body of the municipality, convey [real property] to a nonprofit association or corporation . . . Such conveyance shall be for such consideration as may be agreed upon by the Commission and the association or corporation, which shall not be less than the fair value of the property agreed upon by a committee of three professional real estate appraisers currently practicing in the State . . . The defendants contend that the exchange is governed by G.S. § 160464(c) [now G.S. § 160A-514(c)], which provides: A commission may sell, exchange, or otherwise transfer real property or any interest therein in a redevelopment project area to any redeveloper for residential, recreational, commercial, industrial or other uses or for public use in accordance with the redevelopment plan, subject to such covenants, conditions and restrictions as may be deemed to be in the public interest or to carry out the purposes of this Article; provided that such sale, exchange or other transfer, and any agreement relating thereto, may be made only after, or subject to, the approval of the redevelopment plan by the governing body of the municipality and after public notice and award as specified in subsection (d) below. Defendants argue that the transaction involved is an “exchange” and is to be distinguished from a “sale” or a “private sale” and thus the proviso contained in subsection (c) is not ap — 128 — plicable since it refers to subsection (d), which deals only with the statutory requirements where the disposal is by a “sale” or “private sale” and nowhere mentions “exchanges”. G.S. § 160-464 (d) [now G.S. § 160A-514(d)] provides in part: Except as hereinafter specified, no sale of any property by the commission or agreement relating thereto shall be effected except after advertisement, bids and award as hereinafter set out . . . Nothing herein, however, shall prevent the sale at a private sale without advertisement and bids to the municipality or other public body, or to a nonprofit association or corporation operated exclusively for educational, scientific, literary, cultural, charitable or religious purposes, of such property as is specified in divisions (1), (2), (3), or (4) of subsection (e) of this section, provided that such sale is in accordance with the provisions of said subdivisions . . . Defendants further contend that G.S. § 160-464(e)(4) is not applicable because it is merely one method by which a redevelopment commission may dispose of property and not the exclusive method. In essence, defendants argue that the Redevelopment Commission has authority to “exchange” property with a “redeveloper” such as the First Baptist Church without complying with any of the statutory procedures required where the disposal of land is by a sale, either public or private. In Campbell v. First Baptist Church, 19 N.C. App. at 346, 199 S.E. 2d at 36, Chief Judge Brock speaking for this Court stated: It appears that compliance with the terms of the statute [G.S. § 160464(e)(4)] by the Redevelopment Commission is necessary before it can legally make an exchange as described by plaintiff’s evidence. Therefore, if the Redevelopment Commission makes such an exchange without effectively complying with the statute, it acts outside of its authority. (Emphasis supplied.) We hold that the “exchange” of property between a redevelopment commission and a “redeveloper” such as the First Baptist Church in this case, is nothing more than a “private sale” of real property to “a nonprofit association or corporation operated excusively for educational, scientific, literary, cultural, — 129 — charitable or religious purposes” as described in G.S. § 160464(d) and that such exchange must be in compliance with all of the requirements of G.S. § 160464(e)(4). Before it can lawfully convey property to such a “nonprofit association or corporation,” a redevelopment commission must: (1) hold a public hearing on the proposed conveyance after proper advertisement, (2) get approval for the proposed conveyance from the governing body of the municipality, and (3) agree with the proposed transferee on the consideration for the conveyance which is not less than the fair value of the property as determined by a committee of three professional real estate appraisers. With regard to the proposed exchange in the present case, the parties stipulated to the following facts: The Redevelopment Commission of the City of Durham approved the exchange with the First Baptist Church and adopted Resolution No. 421 (P. T. 8) on February 4, 1970, and this action was confirmed by the Commission at its meeting held on February 4, 1972. Thereafter, the City Council of the City of Durham approved the transaction at its meeting held on the 16th day of October, 1972. Thereafter the Redevelopment Commission of the City of Durham caused to be published the advertisement (P. T. 13) which was, in fact, published in the Durham Morning Herald, a local newspaper published in Durham County, on November 7 and 14, 1972. It is apparent from the parties’ stipulation that the Redevelopment Commission in the present case had already determined to exchange the land at the time it published the advertisement. It is clear from the statute that the advertisement must precede the public hearing on the proposed conveyance. The parties also stipulated that the appraisals on which the Redevelopment Commission based its determination of fair market value “were made individually and not as a committee.” The statute provides that the conveyance shall not be for “less than the fair value of the property agreed upon by a committee of three professional real estate appraisers.” A redevelopment commission, like a municipal corporation, is created by and invested only with such powers as is given to it by statute. If such a commission or municipal corporation fails to — 130 — follow the procedures required by statute it acts outside of its authority and any such act is null and void ab initio. Bagwell v. Brevard, 267 N.C. 604, 148 S.E. 2d 635 (1966). In the present case, the Redevelopment Commission did not meet the statutory requirements set out in G.S. § 160-464(e)(4); consequently, the purported conveyance of the Markham property by it to the Church was null and void from its inception. We further hold that G.S. § .160-472 (now G.S. § 160A-522), providing that “[a]ny instrument executed by a commission and purporting to convey any right, title or interest in any property under this Article shall be conclusive evidence of compliance with the provisions of this Article” is not available to revive an instrument that was void from its inception. To allow G.S. § 160-472 to provide the Church with good title in this case would effectively result in nullifying the detailed statutory requirements delineating the authority of redevelopment commissions to dispose of property by public or private sale. We hold that the trial court erred in concluding that the exchange of property between the Redevelopment Commission and the First Baptist Church “were lawful conveyances” and that “the First Baptist Church, in any event, was a bona fide purchaser; and the provisions of G.S. 160A-522 are applicable.” With respect to plaintiff’s first cause of action, the judgment is reversed and the cause is remanded to the Superior Court of Durham County for further proceedings not inconsistent with this opinion. The second question presented by this appeal is whether the Cooperation Agreement entered into between the City of Durham and the Redevelopment Commission pledges the faith and credit of the City in violation of Art. VII, § 6 of the North Carolina Constitution.2 Plaintiff argues that the Cooperation Agreement must be interpreted on the date it was entered into by the City and the Redevelopment Commission; that on that date, 25 July 1968, the City assumed an obligation to provide funding for one-third of the cost of the urban renewal plan; that should the City fail to accumulate sufficient non-cash grants-in-aid, it would then be re — 131 — quired to spend public funds in order to meet its obligation to provide one-third of the cost of the plan; and that any such spending of public funds would be unconstitutional because it was not for a “necessary” purpose and had not been approved by the voters. The provisions of North Carolina Constitution, Art. VII, § 6, in force on 25 July 1968 when the Cooperation Agreement was entered into by the Redevelopment Commission and the City, are as follows: No county, city, town, or other municipal corporation shall contract any debt, pledge its faith or loan its credit, nor shall any tax be levied or collected by any officers of the same except for the necessary expenses thereof, unless approved by a majority of those who shall vote thereon in any election held for such purpose. This section of the State Constitution forbids the expenditure of tax funds for unnecessary purposes without voter approval and prohibits a pledge of the faith and credit of a municipality to be fulfilled from future receipts regardless of their source. Yokley v. Clark, 262 N.C. 218, 136 S.E. 2d 564 (1964). In Horton v. Redevelopment Commission, 262 N.C. 306, 137 S.E. 2d 115 (1964), our Supreme Court was confronted with a similar challenge to the urban redevelopment plan for the City of High Point. The Court held that while taxes could not be levied to fund an urban redevelopment project, the City was not required to submit the approval or disapproval of the project to the voters, provided the City’s obligations under the plan could be financed from sources other than taxes. The City had agreed to finance its portion of the cost of the plan through certain local grants-in-aid. The Court held that should it be determined on remand that one or more of the local grants-in-aid were invalid, impossible of accomplishment, or incapable of certainty of accomplishment, the City would be permitted to modify the plan in three possible ways: (1) by substituting valid and feasible grants-in-aid for those found to be invalid or impossible of accomplishment; (2) by reducing the redevelopment area so as to exclude areas requiring objectionable expenditures; or (3) by submitting a workable plan to the electors of the City. — 132 — We think that the Cooperation Agreement in the present case does not constitute an unconstitutional pledge of the City’s faith and credit or an unpermitted use of tax revenues. Plaintiff’s argument that the estimated grants-in-aid may ultimately be inadequate to meet the City’s obligation is without merit since under Horton v. Redevelopment Commission, supra, the City is permitted to substitute a valid grant-in-aid for one that is invalid or deficient in some way. In order to prevail, we think plaintiff must show that the City would be unable to meet its obligations under the Cooperation Agreement except by spending public funds for unnecessary purposes. Plaintiff has failed to show either that the City has made any improper expenditures or that should any of the grants-in-aid be insufficient that the City could not substitute a valid grant-in-aid to cover the deficiency. Even if the plaintiff were able to show that one or more of the local grants-in-aid was somehow deficient, the proper remedy would not be a permanent injunction against completion of the redevelopment plan, as requested by plaintiff, but would be, according to the decision in Horton v. Redevelopment Commission, supra, modification of the agreement or submission of the proposed expenditures to the voters. We note that at the time plaintiff commenced his lawsuit in 1973, substantial progress toward completion of the urban redevelopment plan had been made. At the time of trial, the only parts of the plan not completed were one parking facility and storm drainage. “[I]t requires no authority to sustain the proposition that if the act has been committed it cannot be restrained.” Yount v. Setzer, 155 N.C. 213, 71 S.E. 209 (1911). With regard to plaintiff’s second cause of action, the judgment is affirmed. Reversed and remanded in part, affirmed in part. Chief Judge BROCK and Judge MITCHELL concur. Footnotes [2] Although plaintiff’s complaint, filed on 7 February 1973, alleged that the Cooperation Agreement violated the provisions of Art. V, §§ 2(5) and 4(2) of the North Carolina Constitution, quoted at id.., Art. VII, § 6 is the provision that was in effect at the time the Cooperation Agreement was executed.