Court Says Religious Sect Had Priority in School Sale

Reversing a lower court decision, a state appellate panel has ruled that an Orthodox Jewish school was entitled to buy an unused campus from the Westminster School District ahead of private bidders because of a law intended to aid nonprofit organizations.

In a ruling released Thursday, the 4th District Court of Appeal in Santa Ana found that the district had “blatantly refused” to follow a priority list established by the state Legislature that allows public colleges, government agencies and charitable organizations the first opportunity to buy property put up for sale by school districts--even if their bids are lower than those of private parties.

If upheld, the decision means that the Hebrew Academy-Lubavitch, which has been renting the Clara O. Cook School from the Westminster district since 1977, may purchase the site for $1.6 million instead of $1.8 million.

The three-member panel’s unanimous ruling, written by Justice Sheila Prell Sonenshine, was based on a complicated formula for the sale of excess school district-owned properties that is contained in the state Education Code

Under the formula, the court found, “priority” entities such as the Hebrew school are entitled to bid first, as long as their bids are no lower than the minimum set by the school district.

In this case, the district set $1.4 million as the minimum bid when it put the school up for sale in 1983. The Hebrew school offered that much as its initial bid.

If private, “non-priority” bidders submit offers, the priority bidder is entitled to buy the property for 5% more than the highest non-priority bid, the court ruled.

In the Cook school case, a private developer, Stellrecht Co., submitted a $1.5-million bid for the property. When the Hebrew Academy raised its bid to $1.6 million, the district should have sold it the site, the court said.

Instead, the district continued to take bids from both the Hebrew school and the developer; the Hebrew school eventually won the property, but for a price of $1.8 million.

Although it had won the bidding war, the Hebrew school protested the district’s handling of the sale and filed suit to gain the lower price.

The court said the Westminster school trustees apparently “were attempting to obtain the highest possible price for the benefit of the district.” The justices found that a “laudable goal” but said it did not excuse the district from following Education Code priorities.

Attorneys for both sides said the court had taken a middle stance between their opposing positions.

Gerald W. Newhouse, who represented the Hebrew school, said he had tried to convince the court that “the Stellrecht bid should not have been considered, period.”

“We were trying to get $375,000 off the price, not $200,000,” he said. Nonetheless, Newhouse said, he doubted that his client would appeal. “Half a loaf is better than none,” he reasoned.

An attorney for the school district, David C. Larsen, said the decision “appears to be a compromise,” but added that he and his client had yet to decide if they would appeal.

The Hebrew Academy-Lubavitch is operated by the Orthodox Jewish sect of Lubavitch Chabad.

The Lubavitchers are followers of Chassidism, a movement started by Jewish mystics in Eastern Europe of the 18th Century. The group is characterized by strict observance of biblical commandments and by their enthusiastic celebrations of the Sabbath and Jewish holidays, which often include much singing and dancing.

Led by a rabbinical dynasty, Chabad is an international organization now headquartered in Brooklyn, N.Y.