After the West Virginia Legislature amended a statute to authorize the Commissioner of Agriculture to cancel certain low-rent state farm leases on 30 days' notice, did that amendment trigger a contractual cancellation clause that the Department's existing leases tied to legislative action that 'impair[s]' the lease?

Official title

Opinion of the Attorney General Concerning Lease Cancellation

Plain-English summary

In January 2017, the outgoing Commissioner of Agriculture signed two long-term leases for state farm property at $1 per acre. The new Commissioner, Kent Leonhardt, took office shortly after and asked the AG whether he could cancel them. A 2017 AG opinion told him no, his office had no inherent authority to cancel contracts the prior administration had signed, but the leases themselves contained a clause allowing cancellation if the Legislature "act[ed] to impair the lease." That 2017 opinion suggested the path forward was through legislation.

In 2021, the Legislature passed H.B. 2633, amending W. Va. Code § 19-12A-5(c)(4) to give the Commissioner authority to cancel any Department of Agriculture lease for less than $5 per acre on 30 days' written notice (provided the lease itself contained an impairment clause). Commissioner Leonhardt then asked whether this 2021 amendment was the legislative "act to impair" his leases referenced.

The AG concluded yes. The 2021 amendment diminished the lessees' rights, the lessees had less property security than before, and that fits the dictionary and Black's Law definition of "impair." Under the leases' own terms, the Department can cancel them without further obligation.

The opinion is careful to flag that it does not address potential constitutional challenges to the statute itself (Contracts Clause issues, for instance).

What this means for you

For state agency heads holding similar low-value leases

Based on this opinion, when the Legislature passes a targeted statute giving an agency head unilateral cancellation authority over a class of pre-existing low-rent leases, and those leases include an "impairment" clause tied to legislative action, the statutory authority can be combined with the contract clause to cancel the lease. The agency does not need to show the statute itself directly cancels the lease, only that it impairs it.

For private parties holding $1-an-acre leases of West Virginia state farm property

Be aware that W. Va. Code § 19-12A-5(c)(4), as amended in 2021, lets the Commissioner of Agriculture cancel your lease on 30 days' written notice if the lease has an impairment-or-cancellation clause and the annual consideration is under $5 per acre. The AG's view is that the very act of passing this amendment supplied the contractual trigger to cancel pre-existing leases. You may want to consult counsel about whether the amendment can constitutionally apply to a contract you signed before its enactment, since the AG opinion expressly does not address that question.

For lawyers drafting state property leases going forward

If you represent a lessee, the "legislature acts to impair" language in standard West Virginia state-lease forms is a much wider escape hatch than it might appear at first read. The AG reads "impair" broadly, anything that diminishes the value of the lease or weakens the lessee's hand. Statutory amendments giving the agency unilateral cancellation power are enough.

If you represent the state, lock in the lessee's understanding that "impair" includes any subsequent legislation that gives the agency new termination rights, even if the cancellation requires an additional executive act.

For the Legislature

The opinion treats § 19-12A-5(c) as authorizing, not requiring, cancellation. The amendment alone did not cancel the leases, the Commissioner still has to act. But the amendment supplied the contractual trigger that allows the Commissioner to act.

Common questions

Q: Why does the lease language matter so much?
Because the leases were valid contracts when signed. The 2017 AG opinion concluded the Commissioner had no inherent authority to walk away from them. The only escape route was the leases' own cancellation clause, which keyed off legislative action. The AG had to find a legislative act that triggered that clause. The 2021 amendment was that act.

Q: Doesn't this raise a Contracts Clause problem? The Constitution forbids states from impairing contracts.
The opinion expressly does not analyze this. It says: "It is beyond the scope of this Opinion whether the statute itself might be subject to any potential challenges." A lessee whose contract is cancelled under this scheme could plausibly argue Contracts Clause violation under U.S. Const. art. I, § 10. The contracts clause analysis would consider whether the impairment is substantial, whether it serves a significant public purpose, and whether the means are reasonable.

Q: What's the difference between "impair" and "cancel"?
The opinion treats them as different things, citing Columbia Gas's rule that contractual terms are presumed to have unique meanings. "Cancel" means to wipe out the contract entirely. "Impair" means to diminish its value short of canceling it. The Legislature's 2021 amendment did not directly cancel the leases (it only authorized the Commissioner to do so), so it counted as impairment, not cancellation.

Q: Could the Department use this opinion to cancel other agency leases?
The opinion is narrowly limited to the Department of Agriculture and to leases under W. Va. Code § 19-12A-5. Other agencies and other lease statutes would need their own analysis.

Q: What about the lessees' improvements? Can they recover for buildings they put up on the leased land?
Not addressed in this opinion. That is a separate question of remedy on cancellation, not a question about the cancellation right itself.

Background and statutory framework

The West Virginia Department of Agriculture controls institutional farm property and may lease it under W. Va. Code § 19-12A-5(c)(1) for economic-development purposes. The two leases at issue were entered in January 2017 at the controversially low rent of $1 per acre per year, days before the outgoing Commissioner left office.

The leases included a forward-looking escape clause: cancellation was permitted if the Legislature "fail[ed] to appropriate sufficient funds or otherwise act[ed] to impair the lease or cause[d] it to be cancelled." Standard boilerplate for state property leases, written to give the State an out if its priorities change.

In 2021, the Legislature passed H.B. 2633, adding to W. Va. Code § 19-12A-5(c)(4) the language: "Upon 30 days written notice to the lessee, cancel a lease to which the department is a party and which is for annual consideration of less than $5 per acre: Provided, That such lease must contain a provision authorizing cancellation or impairment by the Legislature." That amendment took effect July 5, 2021.

The AG's analysis: the amendment lets the Commissioner cancel the leases at his option. That option, by itself, diminishes what the lessees originally bought, an undisturbed long-term tenancy. Under Black's Law Dictionary, "impair" means to diminish the value of property to the point that a party loses the benefit of the contract. The 2021 amendment fits that definition.

The drafters of the amendment seemed to anticipate exactly this analysis: they required cancellable leases to "contain a provision authorizing cancellation or impairment by the Legislature." That phrasing all but invites the contract-clause-based reading the AG adopts.

Citations

• W. Va. Code § 5-3-1 (Attorney General's authority to issue opinions)
• W. Va. Code § 19-12A-5(c)(1), (c)(4) (Department of Agriculture leasing authority and 2021 cancellation amendment)
• H.B. 2633, 85th Leg., Reg. Sess. (W. Va. 2021), effective July 5, 2021
• April 26, 2017 AG opinion (predecessor opinion concluding Commissioner lacked inherent cancellation authority)
• Sally-Mike Properties v. Yokum, 175 W. Va. 296, 332 S.E.2d 597 (1985)
• Columbia Gas Transmission Corp. v. E.I. du Pont de Nemours & Co., 159 W. Va. 1, 217 S.E.2d 919 (1975)
• State v. Ward, 245 W. Va. 157, 858 S.E.2d 207 (2021)
• Crockett v. Andrews, 153 W. Va. 714, 172 S.E.2d 384 (1970)

Source

• Landing page: https://ago.wv.gov/media/17581/download?inline
• Original PDF: https://ago.wv.gov/media/17581/download?inline

Original opinion text

State of West Virginia
Office of the Attorney General

(304) 558-2021

Patrick Morrisey
Attorney General

Fax (304) 558-0140

February 7, 2022

The Honorable Kent A. Leonhardt
Commissioner
West Virginia Department of Agriculture
1900 Kanawha Blvd. E.
Charleston, WV 25305

Dear Commissioner Leonhardt:

You have asked for an Opinion of the Attorney General about whether last year's amendment of West Virginia Code § 19-12A-5(c)(4) (effective July 5, 2021) grants you authority to cancel the two leases at issue in the 2017 opinion letter our Office issued at your request. This Opinion is being issued under West Virginia Code § 5-3-1, which provides that the Attorney General "shall give written opinions and advice upon questions of law ... whenever required to do so, in writing, by ... the commissioner of agriculture." To the extent this Opinion relies on facts, it is based solely on the factual assertions in your correspondence with the Office of the Attorney General.

On April 26, 2017, our Office issued a legal opinion in response to your queries about two long-term leases for real property that your predecessor signed in January 2017, after your election but before the start of your elected term. See Op. W. Va. Att'y Gen. (Apr. 26, 2017) ("April 2017 Opinion"). The leases involve institutional farm property under the West Virginia Department of Agriculture's control, purposed for economic development under West Virginia Code § 19-12A-5(c)(1). Both leases involve annual consideration of $1 per acre. And both leases contain the following provision:

Lessee understand[s] that the lease can be cancelled without further obligation if the legislature fails to appropriate sufficient funds or otherwise acts to impair the lease or causes it to be cancelled.

Our April 2017 Opinion concluded that your predecessor "possessed the constitutional authority to enter into the leases in question" at the time he did, and that you did "not have any inherent authority to unilaterally cancel existing contracts entered into on behalf of the State by prior administrations." April 2017 Opinion at 2-5. The Opinion also suggested that "the contracts themselves provide one possible alternate avenue for cancellation or revocation, through an act of the State Legislature." Id. at 4. We suggested that your office might "propose legislative rules that could be adopted by the State Legislature to cancel the existing leases," or that "the Legislature could on its own initiative enact a statute to that effect." Id. at 5.

On April 28, 2021, Governor Justice signed into law House Bill 2633, which made the following change to W. Va. Code § 19-12A-5:

(c) The commissioner [of agriculture] is hereby authorized and empowered to:

(4) Upon 30 days written notice to the lessee, cancel a lease to which the department is a party and which is for annual consideration of less than $5 per acre: Provided, That such lease must contain a provision authorizing cancellation or impairment by the Legislature ....

H.B. 2633, 85th Leg., Reg. Sess. (W. Va. 2021). The amendment went into effect on July 5, 2021. See id.

Your letter raises the following legal question:

Did the Legislature "act[] to impair" the two leases at issue by amending West Virginia Code § 19-12A-5 to "authorize[] and empower[] the Commissioner to cancel the leases at his discretion after 30 days written notice?

We conclude that it did. A lease subject to unilateral, discretionary cancellation has less value than one that is not, and so the amendment satisfies the leases' caveat for legislative actions that "impair" a lease.

Discussion

We have no reason to doubt that each lease at issue here is "[a] valid written instrument which expresses the intent of the parties in plain and unambiguous language." Sally-Mike Properties v. Yokum, 175 W. Va. 296, 298, 332 S.E.2d 597, 598 (1985) (citation omitted). Thus, the leases are "not subject to judicial construction or interpretation" and should be "applied and enforced according to such intent." Id. By signing these leases, each lessee stated its "understand[ing] that the lease can be cancelled without further obligation if the legislature", presumably the West Virginia Legislature, though not explicitly defined, "fails to appropriate sufficient funds," "acts to impair the lease," or "causes [the lease] to be cancelled."

Nothing in your letter suggests that any fund-appropriation decision by the Legislature has affected these leases. And we do not consider the change to Section 19-12A-5(c)(4) to be an "act[]" by the Legislature that itself "causes" the leases "to be cancelled." Section 19-12A-5(c) addresses only what the Commissioner is "authorized and empowered to" do; it does not require the Commissioner to take affirmative action. The question we are left with, then, is whether the Legislature's change to Section 19-12A-5(c)(4) can be considered an "act[] to impair the lease[s]" at issue here. We conclude that it can.

The contractual terms "cancel[]" and "impair" are each "presumed to have a unique meaning and, thus," neither term "is to be treated as a redundancy." Syl. pt. 6, Columbia Gas Transmission Corp. v. E.I. du Pont de Nemours & Co., 159 W. Va. 1, 2, 217 S.E.2d 919, 920-21 (1975). In other words, the lessees agreed that this contractual provision could be triggered by an act of the Legislature either to cancel the lease or to impair it, outright cancellation and actions less severe can qualify equally.

"Impair" means "[t]o diminish the value of (property or a property right)," as in "diminishing the value of a contractual obligation to the point that the contract becomes invalid or a party loses the benefit of the contract." Impair, BLACK'S LAW DICTIONARY (11th ed. 2019); see also impair, MERRIAM-WEBSTER, https://www.merriam-webster.com/dictionary/impair (last visited Feb. 7, 2022) ("to diminish in function, ability, or quality; to weaken or make worse"). The language the Legislature added to Section 19-12A-5(c)(4) "is free from ambiguity," so this "plain meaning is to be accepted and applied without resort to interpretation." State v. Ward, 245 W. Va. 157, 858 S.E.2d 207, 211 (2021) (quoting syl. pt. 2, Crockett v. Andrews, 153 W. Va. 714, 172 S.E.2d 384 (1970)).

By authorizing and empowering the Commissioner to cancel these and other qualifying leases "[u]pon 30 days written notice," W. Va. Code § 19-12A-5(c), the Legislature has "diminish[ed] the value of [the] property or property right" lessees would otherwise enjoy "to the point that ... [they] lose[] the benefit of the contract." Impair, BLACK'S LAW DICTIONARY (11th ed. 2019). Indeed, the Legislature made its intent to "impair" such leases especially clear by requiring leases subject to the Commissioner's new authority to "contain a provision authorizing cancellation or impairment by the Legislature." W. Va. Code § 19-12A-5(c)(4) (emphasis added). Linking the statute to this contractual term underscores that the Legislature knew what it was doing: The amendment "impair[ed]" qualifying contracts.

Finally, we note that this Opinion analyzes only whether the change to Section 19-12A-5 impaired the two leases on the facts you provided us. It is beyond the scope of this Opinion whether the statute itself might be subject to any potential challenges.

In short, we conclude that the change to West Virginia Code § 19-12A-5(c)(4) constitutes a legislative "act[] to impair the lease[s]." Under the leases' express terms, this means they "can be cancelled without further obligation."

Sincerely,

Patrick Morrisey
Attorney General

Lindsay See
Solicitor General