The new building and schoolyard had been rented out by the village committee to the auto dealer for 10 years for 1.75 million yuan.

The village committee said that a high-speed railway about 20 meters from the school grounds is a threat to the students' safety and the sound of passing trains disturbed the classes.

"In addition, the village owed money to the construction crew, so the village committee decided to temporarily rent the school out to get money to pay the builders," said Li Wusheng, director of the village's supervision committee.

Liang Jun, a lawyer for the auto dealer, said the company did not know the building and yard were built with donations, otherwise they would not have leased it.

"We signed the lease with Zhaocun village committee in August, 2010, and have invested more than 10 million yuan to build the showrooms, repair workshops and warehouses in the school for car business. We hope the government departments involved will safeguard the legitimate interests of both the villagers and our company," Liang said.

The villagers were angry about the leasing contract, and one of the them, Li Xiuxiu, said that the classrooms in the old school were unstable and the ground would shift and sink during rainy days.

According to the administrative committee of Weinan Hi-Tech Development Zone, where the village is located, the former village leader has been suspended and the village committee's three-year term is coming to an end.

"The school's lease and any negotiations involved in the matter should be dealt with after the election of a new village committee, and we will urge that committee to correct it as soon as possible," Yan said.

"China's Education Law clearly states that donated property should be used in accordance with the purpose that was intended," said Zeng Jia, deputy director of Law School in Northwest University in Xi'an, capital of Shaanxi province.

Xinhua contributed to this story.