Ruling benefits IP, affirms state’s tidelands lease authority

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Published: October 30,2006

The long-running, often acrimonious legal battle between the IP Hotel and Casino and the Mississippi Secretary of State Eric Clark’s office over the ownership of the land used to build the IP (formerly known as Imperial Palace) has concluded with a Mississippi Supreme Court ruling that both sides are calling a victory.

The unanimous Supreme Court ruling in October upheld the Secretary’s authority for collecting rent on tidelands used by the casino. But, the IP Casino also ended up with the ability to claim clear ownership of three acres of its 10-acre site that a lower court had ruled was previously filled tidelands and subject to tidelands lease payments. The case was remanded back to Chancellor Donald B. Patterson to determine the actual shoreline boundaries.

David Blount, spokesman for the Mississippi Secretary of State’s office, said the ruling affirms that the tidelands belong to the people of Mississippi and that they are entitled to a fair return for the use of their property.

“IP had challenged the basic right of the state to collect rent for the use of its property, as well as the county’s authority to collect taxes,” Blount said. “That argument was unanimously rejected.”

The Mississippi Supreme Court said the Secretary of State’s office erred in using maps dating back to 1817 to establish boundaries between private and state ownership. The court said that a map from July 1, 1973, should have been the starting point to establish the boundary lines.

The case dates from August 1995 when IP disagreed with the Secretary of State over how much of the IP site was previously filled tidelands — for which tidelands rent would have to be paid — and how much was privately owned.

“The Secretary of State had claimed that the entire IP site was historically tidelands that had been filled in,” said IP attorney Britt Singletary. “IP countered that by dating oak trees on the site and establishing that a Native American site was on the property, indicating that part was not filled in tidelands.”

Chancellor Patterson ruled seven acres were owned by IP, but that three acres in the northeast corner of the property had been filled in through the years. This was property that housed the Biloxi Canning Company for about 80 years. IP argued that industries such as seafood are considered to be pursuant to the public trust, and if tidelands were filled pursuant to the public trust, then tidelands lease rent doesn’t need to be paid.

The three acres were filled from between 1880 to 1940 when the seafood industry on the Coast slowed. Singletary said IP showed photos of oyster shells piled two stories high on the site to prove it was being used for seafood processing.

Oyster processors were required to keep the oysters shells to be sent back to replenish oyster reefs. They were also required to give some of the shells to the state, which used crushed oyster shells to pave many roads in the area.

“The state argues that the land had been extended seaward by these accretions (the shoreline has undisputedly changed over many years) and that the portion of the land created by artificial accretions, as well as the accompanying littoral rights, should be vested in the state,” the Supreme Court ruling stated. “After a lengthy trial, the chancellor agreed with the state. For the reasons stated, we reverse the final judgment entered by the Chancery Court for the Second Judicial District of Harrison County, and remand this case to the chancellor with directions to enter an appropriate judgment after conducting further proceedings consistent with this opinion.’

The Supreme Court ruling stated that if a landowner artificially accreted to his land to provide environmental protection or to allow docking of vessels and make fishing more efficient, this would serve a higher public purpose of the trust. “In such cases, such an artificial accretion would be authorized and vest to the uplands title holder,” the ruling stated.

After the lower court ruled that the three acres were owned by the state, IP tried to buy the three acres for $4 million. Singletary said that offer was rejected by the Secretary of State as too low.

“Now IP has title to those three acres and is $4 million ahead,” Singletary said. “Absolutely, that is a victory.”
Singletary said the Secretary’s office at one time referred to IP as a “renegade” for fighting the over the tidelands issues. Singletary has described the Secretary’s actions as “a money grab.”

“Just because everyone else lines up to get bit by a rattlesnake, I’ll be damned if I’m going to do the same,” Singletary said. “Clark didn’t have economic leverage on IP that he had with the others because the other casinos couldn’t handle having a cloud on their title. They couldn’t have borrowed money and built. Ralph Engelstad (the late owner of IP casino) built IP with his own money so he didn’t have to worry about a cloud on his title. I’m glad someone down here had the guts to stand up. And the IP has always done that. It was worth fighting over. We fought and we prevailed over it.”

The IP also challenged assessments by Harrison County as excessively high. Singletary said by winning the dispute over disparate tax assessment, IP saved $5.9 million over four years. He said the Beau Rivage saved $14 million.
The case also resulted in the unexpected windfall of finding out the IP has claim to 6.5 acres of waterbottoms.

“The Supreme Court also found that we own about 6.5 acres of the waterbottoms in front of our north bulkhead through a patent in 1926,” Singletary said. “A patent is like a deed from the government. The Secretary of State refused to recognize it, but the Mississippi Supreme Court said the governor signed the patent, and a deal is a deal. A contract is a contract.”

The issue of the 6.5 acres of waterbottoms would not have come to light except for help from an unlikely source—local historian Ray Bellande of Ocean Springs. Singletary learned from information provided by Bellande that the owner of the Biloxi Canning Company was using the property to moor schooners and other types of fishing boats prior to processing the seafood brought in by the boats. The owner foresaw the time when the state might charge for 26 boats to be moored there, or might not allow it at all, and hence sought the patent.

Singletary said he was eating lunch at a Mexican restaurant when he read the information from Bellande.

“I liked to have choked on my taco,” he said. “IP could build a marina on that property and wouldn’t have to pay the Secretary of State a lease to do it. There are probably another six to 10 patents out there on the books. There are other people who could benefit from that. Just about every one of the canneries did that.”

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

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