Petition for Writ of Certiorari — L. A. Development v. City of Sherwood

9Y9S576 OCI 41999.

OFFICE OF THE CLERK

No. ;

In the

Supreme Court of the United States

October Term, 1999

+

L.A. DEVELOPMENT,

Petitioner

v.

CITY OF SHERWOOD,

Respondent

¢

Petition For Writ of Certiorari

To the Oregon Supreme Court

a

PETITION FOR WRIT OF CERTIORARI

¢

*William C. Cox

Gary P. Shepherd

*Counsel of Record

0244 SW California Street

Portland, Oregon 97219

Telephone: (503) 246-5499

Attorneys for Petitioner

ernie etl Mane

QUESTIONS PRESENTED FOR REVIEW

This case presents the question of

whether a local government is permitted, as a

matter of law, to impose a condition on

development approval that results in an

unconstitutional exaction and then avail

itself of the defense of estoppel to defeat a

request to have the excessive exaction

reimbursed. In other words, is it permissible

for a local government, after violating an

individual's constitutional rights, to rely on

estoppel to defeat a claim which seeks redress

from the unlawful action. This question has a

direct bearing on the force and effect of this

Court's decision in Dolan v. City of Tigard,

512 U.S. 374 (1994).

i |

ii

Le PEN PR OREN ONRED

PARTIES TO THE PROCEEDING

The parties to this proceeding are as

follows. Petitioner is L.A. DEVELOPMENT, a

general partnership consisting of Louis J.

Fasano and Arthur and Associates Real Estate,

Inc.. Respondents are CITY OF SHERWOOD, a

municipal corporation, and Jane Aamold, Bill

Boyle, Barry Kennedy, Mark Cottle, and Mayor

Walt Hitchcock.

iii

TABLE OF CONTENTS

tmp OF AUTHORITIES CITED. 2. ccc ccccsccccnes iv

CRE MEMO s wc ceed etch sbessceaeeceseucnne 1

PUMA EEUN 656 CORA CON ROR WESC ODE OK OOOO 2

CONSTITUTIONAL PROVISIONS AT ISSUE........... 2

Mamemeree GCF THE CADR ccc ccc ccc e es wccsnececcce 2

REASONS FOR GRANTING THE WRIT................ 6

iv

TABLES OF AUTHORITIES CITED

Cases

Castle Homes & Development v. Brier City, 882

P2d 1172 (Wash.App. Div. 1 1994)...... 10, 11

Crotty v. Union Mut. L. Ins. Co., 144 U.S.

G2E ChB Re i kin e.0h ak S469 des 6a eR eA 9

. :

Daniels v. Tearney, 102 U.S. 415 (1880)...... 9

Dolan v. City of Tigard, 512 U.S. 374 (1994).7

Dunn v. City of Redmond, 303 Or 201,

Tao BoE GOP (ESSE) cassaasekexestesskaecans 5

Herring v. Volume Merchandise, Inc., 113 SE2d

BAS (HC 2RGG) civics tack bie ae Ke btntee eure vee 9

Loretto v. Teleprompter Manhattan CATV Corp.,

SO8 U.S. SLD CR 6a 5044 ae Fe ear nee ekacen 7

Meyers v. Moody, 693 F.2d 1196 (1982)..... 8, 9

Nollan v. California Coastal Commission, 483

Ae RS gs Se re ree ree a ax ae

Robertson v. Federal Election Commission, 310

0.3. Ape. 3.0. 1635, 65 Fi. dG SEG CASS) os ace ss 9

Kadrmas v. Dickinson Pub. Schools, 487 U.S.

See tee bok eke Chae ee wee eke eee eee anes 9

Roberts v. Roberts, 185 P2d 381 (Cal.App.

si eer rr rrr rT. TT rr Terre Tere Te ee 9

Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S.

249, ren don 323 U.S. Gil (3945) 2. cccesates 8

Rules and Regulations

£0 Uibila BO BAST ta) 66h obo os 6S eRe RETO 2

TABLES OF AUTHORITIES CITED - continued

United States Constitution

PE EG BOUMOINS 6 a. neck ose cceke sab deededesnanen 2

Fourteenth AMONGMONE. 6.66 csveursnecevercresense 2

Miscellaneous

Sh Cid. Be BS BPs cccssacvescranersavssdanvenas 8, 9

“a

No.

In the

Supreme Court of the United States

October Term, 1999

*

L.A. DEVELOPMENT,

Petitioner

v.

CITY OF SHERWOOD,

Respondent

2

Petition For Writ of Certiorari

To the Oregon Supreme Court

¢

PETITION FOR WRIT OF CERTIORARI

, .

DECISIONS BELOW

The order of the Oregon Supreme Court

denying review of the decision of the Oregon

Court of Appeals is reproduced as Appendix

(App. A). The decision of the Oregon Court of

Appeals, 159 Or App 125 (1999) is reproduced

as Appendix B. The Appellate Judgment of the

Oregon Court of Appeals is reproduced as

Appendix C.

JURISDICTION

The decision of the Oregon Supreme Court,

denying review, was entered on July 6, 1999.

This Court has jurisdiction over this matter

pursuant to 28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISIONS AT ISSUE

The federal constitutional provisions at

issue in this matter are the Fifth and

Fourteenth Amendments to the United States

Constitution. The Fifth Amendment provides in

part: "(NJor shall private property be taken

for public use without just compensation."

The Fourteenth Amendment provides in part:

"(NJor shall any state deprive any person of

life, liberty, or property, without due

process of law."

STATEMENT OF THE CASE

This inverse condemnation action for just

compensation was brought in Washington County

Circuit Court, State of Oregon. Petitioner

developed two land projects in the City of

Sherwood, Oregon. The first project, Kathy

Park, having 46 lots, was developed in two

phases. Petitioner received preliminary

approval, with conditions, for both Kathy Park

phases. One condition of approval required

the installation of an on-site storm water

detention system to serve all 46 lots. During

k

&

construction of phase one, petitioner 7

installed and respondent approved the mandated

on-site storm water detention system

sufficient to serve all 46 lots. When

petitioner requested final plat approval for

the second phase of the development,

petitioner was required to sign an addendum to

its subdivision compliance agreement. That

addendum required petitioner to pay the City

for what the City referred to as petitioner’s

fair share of a regional storm water detention

facility. The amount of its "fair share" was

calculated by reference to the total number of

lots in Kathy Park, even though half of them

had already received final approval and been

developed. The "fair share" charge was in

addition to the on-site storm water detention

System already determined by respondent to be

sufficient to serve the entire project.

Petitioner objected to the charge as being

unfair and in violation of its understanding

at the time it purchased the land from

respondent, at the time of preliminary and

final plat approvals, and after installation

of the on-site system. If petitioner refused

to comply with the addendum, it would have

been denied the right to develop its second

phase.

A second project, William Park, located

adjacent to the Kathy Park project, received

NOME ea eI

final approval in February 1995. Asa

condition of approval, respondent required

petitioner to dedicate land for a city park.

Respondent indicated it would reimburse

petitioner for the cost of constructing City

mandated improvements to Roy and William

Streets where those streets abutted the

dedicated parkland. Respondent subsequently

refused to reimburse petitioner for those

improvements.

Before final approval of the

developments, petitioner openly objected to

several other conditions imposed and exactions

demanded by respondent as being excessive and

not reasonably related to the impacts of the

projects on public facilities. Petitioner

repeatedly informed respondent that the

exactions were far in excess of what could

legally be imposed. Respondent ignored those

protests and imposed the conditions anyway.

Rather than administratively appealing the

decisions and losing its substantial

investment as a result of delays caused by an

appeal, petitioner proceeded with and

completed the projects.

In January 1996, petitioner demanded

refund of the excessive exactions of which it

had complained. In May 1996, after having its

demands refused, petitioner filed an inverse

condemnation claim. Petitioner did not seek

reversal or modification of the development

approval, but rather sought financial

reimbursement for the excessive and

unconstitutional exactions.

In response to petitioner's complaint,

respondent raised the defense of estoppel,

citing that petitioner had proceeded with

development instead of appealing the contested

conditions to the Land Use Board of Appeals.?

Respondents also claimed petitioner had

accepted benefits allegedly conferred on

petitioner by the granting of development

permits. On respondent's motion for summary

judgment the circuit court granted and the

Court of Appeals affirmed that petitioner, as

a matter of law, was estopped to assert a

claim for just compensation. The Oregon

Supreme Court denied review.

Throughout the proceedings below,

petitioner asserted that estoppel, as a matter

* The Land Use Board of Appeals is an

administrative hearings body consisting of 3

attorneys, appointed by the Governor of Oregon,

with exclusive jurisdiction over appeals of land

use decisions made by local governments.

The Land Use Board of Appeals does not have

jurisdiction over claims for just compensation. If

a landowner claims to be entitled to financial

compensation for a "taking," such claims must be

pursued in circuit court. Dunn v. City of Redmond,

303 Or 201, 204, 735 P2d 609 (1987).

of law, cannot apply in this case because the

City had unlawfully exacted more than that

which was constitutionally permissible.

Rather than focus on the City's unlawful

actions in conditioning development approval,

the Oregon courts chose to focus on

petitioner's failure to stop its development

and administratively appeal the excessive

exactions.

REASONS FOR GRANTING REVIEW

Supreme Court Rule 10.1(c) lists among

the considerations governing review on

certiorari the circumstance when a state court

has decided an important question of federal

law that has not been, but should be settled

by this Court, and has decided an important

federal question in a way that conflicts with

relevant decisions of this Court. Those bases

for review are present in this case.

This Petition should be granted because

this case involves an important federal

question and by their decision below, the

Oregon Courts have redefined Constitutional

takings jurisprudence and have set a

precedence which infringes upon property

rights protected by the Constitution and

previously recognized by this Court. The

|

precedent established by the decisions below

subjects land use applicants to government

coercion and requires applicants to choose

between their constitutionally protected

rights and the fate of their business

undertaking.

Petitioner LA Development brought this

action against the City of Sherwood contending

the City's imposition of exactions violated,

in part, the 5‘™ and 14*? Amendments to the U.S.

Constitution and this Court's "takings"

jurisprudence. Exactions imposed as a

condition to receiving a development permit

can result in a regulatory talking in

violation of the Fifth Amendment. See Dolan

v. City of Tigard, 512 U.S. 374 (1994)*; Nollan

v. California Coastal Commission, 483 U.S. 825

(1987); Loretto v. Teleprompter Manhattan CATV

Corp., 458 U.S. 419 (1982). In defense, the

City claimed petitioner was estopped from

* Dolan deals with the question of when and whether

a condition of development that affects a property

interest in certain ways, and that a governmental

body attaches to a developmental approval,

constitutes a "taking." To avoid being one, the

condition must have an "essential nexus" to a

legitimate governmental interest and must be

related in its nature and extent to the impacts of

the development. The test that Dolan establishes

for that relationship is one of "rough

proportionality" between the condition and the

developmental impacts.

a tte - _ a i

‘

;

asserting its claim for just compensation.

Petitioner countered, that as a matter of law,

the City could not avail itself of the defense )

of estoppel because of the City's unclean

hands.

Petitioner does not dispute that one can

be estopped from asserting constitutional

rights. That is not the issue in this case.

The issue presented to this Court is whether

the local government can effectively steal

petitioner's money and property, violate the

Constitution, and then hide behind the defense

of estoppel to defeat a claim for just

compensation.

While it is well established law that one

can be estopped from asserting a

constitutional rights violation, it is equally

well established law that the equitable

defense of estoppel is not available to a

party who does not have the requisite clean

hands. Equitable defenses cannot be used to

successfully avoid the requirements of

legislation and public policy enacted for the

public protection. See Scott Paper Co. v.

Marcalus Mfg. Co., 326 U.S. 249, 257, reh den

323 U.S. 811 (1945). "The doctrine of

estoppel is for the protection of innocent

persons, and only the innocent may invoke it."

Meyers v. Moody, 693 F.2d 1196, 1208 (1982);

— >a —

31 C.J.S. § 89. Equitable defenses, including

the doctrine of estoppel, can never be

asserted to uphold an injustice or wrong of

any character. Crotty v. Union Mut. L. Ins.

Co., 144 U.S. 621 (1892); Daniels v. Tearney,

102 U.S. 415, 420 (1880). Estoppel is to be

applied against wrongdoers, not victims of a

wrong. Roberts v. Roberts, 185 P2d 381, 387

(Cal.App. 1947). Equity will not enable a

person to make a profit that could not

otherwise be obtained by estopping another

from asserting a legal right. Herring v.

Volume Merchandise, Inc., 113 SE2d 814, 816

(NC 1960). A person may not assert estoppel

for the purpose of making effective, obtaining

the benefit, or shielding him/herself from the

results of their own violation of law,

derelict of duty, inequitable conduct or

wrongful act. Meyers, supra; 31 C.J.S. §89.

As the United States Court of Appeals for the

District of Columbia stated:

"The doctrine of constitutional estoppel

has its limits. The government may

not interpose the doctrine as a defense

if a party wishes to challenge an

unconstitutional condition which is

imposed on the receipt of federal

funds." Robertson v. Federal Election

Commission, 310 U.S. App. D.c. 185, 45

F.3d 486 (1995) (citing Kadrmas v.

Dickinson Pub. Schools, 487 U.S. 450,

456-57 (1988).

10

In the case at bar, petitioners

challenged respondent's imposition of

unconstitutional conditions. Respondent took |

from petitioner that which it was not entitled

sey a

to. Respondent is the wrongdoer, and

petitioner a victim of a wrong. The Oregon

Courts' decisions perpetuate an injustice and

reward a government for violating petitioner's

federal constitutionally protected rights.

A Washington Court of Appeals case denied

the application of the estoppel defense in a

case very similar to the one at bar. In

Castle Homes & Development v. Brier City, 882

Ped 1172 (Wash.App. Div. 1 1994), a developer

entered into a voluntary agreement to pay

impact fees associated with a development.

Later, the developer sought a rebate of fees

imposed claiming the impact fees were not

directly related to the impact of the

development. The Court in Castle Homes ruled

that when impact fees are properly assessed,

the developer would be estopped to assert a

claim, however, “when exacted without

limitation to the direct impact, they are not

appropriate and are in derogation of the law.”

Id. at 1179. The court then denied

application of the estoppel defense stating:

ee |

11

“The doctrine of estoppel is

available to innocent parties only.

Here, like in Henderson Homes,

the City does not have the

requisite clean hands....” Id.

In the case at bar, it was the unlawful

actions of respondent that gave rise to this

litigation. Respondents did not act

innocently and did not have the requisite

clean hands. They should not be permitted to

raise the shield of estoppel to defeat

petitioner's claims for just compensation.

Permitting the Oregon Courts' decisions

to stand will have a profound effect on

subsequent takings claims and litigation and

go far beyond the facts or parties of this

case. Affirming the City's actions will

dilute the force and effect of this Court's

decision in Dolan.

Following the reasoning in the case at

bar, local governments are allowed to hold

developers hostage by forcing them to

involuntarily accept unconstitutional

exactions. When faced with an excessive

exaction, an applicant for a discretionary

land use permit has the option of either

accepting the unlawful condition or ceasing

development operations to immediately

challenge the exaction. The later choice

often results in the loss of their business.

12

As in this case, most developers, especially

smaller ones, will choose to involuntarily

accept the unconstitutional conditions of }

approval rather than lose their businesses and

forfeit their substantial financial >

investments. In effect, a local government |

can force applicants to choose between

bankruptcy or surrendering their

constitutional rights. Since the lesser of

two evils is to forgo financial ruin, the

decision allows local governments to impose

excessive exactions without fear of

retribution.

In light of the Oregon Courts' decisions,

it is of great importance to the citizens of

the United States that this Court grant this

Petition, and reconfirm the meaning of and

protections it established in Dolan. Without

intervention, local governments will be

permitted to raise the shield of estoppel to

prevent claims for just compensation arising

out of their unconstitutional actions. An

otherwise obvious violation of the Fifth

Amendment should not be immune from

constitutional scrutiny merely by being

attached as a condition of approval which a

developer is forced to accept. Such a result

could not be what this Court intended or

anticipated when it protected land use

SME ANe

13

applicants from government overreaching in

Dolan.

CONCLUSION

The decisions of the Oregon Courts

infringe upon and dilute the constitutional

protections this Court has established through

its takings jurisprudence. The purpose of the

United States Constitutions "Takings Clause"

is to "bar Government from forcing some people

alone to bear public burdens which, in all

fairness and justice, should be born by the

public as a whole." Nollan, supra 483 U.S. at

835-36 n.4. The decisions of the courts below

frustrate this purpose.

The decisions below reward the efforts of

a local government to avoid 5° Amendment

requirements. The decisions permit respondent

to take petitioner's private property without

paying just compensation. The protections

afforded by the 5°* Amendment are being

stripped of their force and effect.

Property owners, building interests, and

others who are subjected to excessive

conditions of approval have closely watched

this case. Petitioner respectfully urges this

Court to grant this Petition for Writ of

Certiorari.

14

DATED this 1°* day of October 1999.

Respectfully Submitted,

MP

*William C. fox

Gary P. Shépherd

*Counsel of Record

0244 SW California Street

Portland, Oregon 97219

Telephone: (503) 246-5499

Attorneys for Petitioner

Appendix A

IN THE SUPREME COURT OF THE STATE OF OREGON

L.A. DEVELOPMENT, a general

)

) Washington

Partnership consisting of ) County

Louis J. Fasano and Arthur ) Circuit

and Associates Real Estate, Inc. ) Court No.

)

Plaintiff-Appellant, ) C960575CV

Petitioner on Review, )

) SC S46359

Vv. ) CA A100395

)

CITY OF SHERWOOD, a municipal )

Corporation, JANE AAMOLD, )

BILL BOYLE, BARRY KENNEDY, )

MARK COTTLE, and MAYOR WALT )

HITCHCOCK, ) ORDER

) DENYING

Defendants-Respondents, ) REVIEW

)

Respondents on Review.

This Court has considered the petition for

review and ORDERS that is be denied.

Dated this 6 day of July 1999.

/s/ W. Michael Gillette

W. MICHAEL GILLETTE

PRESIDING JUDGE

c: William C. Cox

Timothy J. Sercombe

Appendix B

FILED: March 17, 1999

IN THE COURT OF APPEALS OF THE STATE OF OREGON

L.A. DEVELOPMENT, a general partnership

consisting of Louis J. Fasano and Arthur and :

Associates Real Estate, Inc.,

Appellant,

Vv.

CITY OF SHERWOOD, a municipal corporation,

Jane Aamold, Bill Boyle, Barry Kennedy, Mark

Cottle and Mayor Walt Hitchcock,

Respondents.

(C960475CV; CA A100395)

Appeal from the Circuit Court, Washington

County

Jon B. Lund, Judge |

Argued and Submitted Nov. 25, 1998.

William C. Cox argued the cause for appellant.

With him on the briefs was Gary P.

Shepherd

Timothy J. Sercombe argued the cause for

respondents. With him on the briefs was

Preston Gates & Ellis LLP.

Before Edmonds, Presiding Judge, and

Armstrong, ;

Judge, and Warren, Senior Judge.

i

EDMUNDS, P.J. |

oe a ef

B-2

After completion of planned unit

development, developer sued city, alleging

city's development charges and fair share

assessments constituted a taking and violated

equal protection. The Circuit Court,

Washington County, Jon B. Lund, J., granted

Summary judgment for city, based on estoppel

defense. Developer appealed. ' The Court of

Appeals, Edmonds, J., held that developer was

estopped from challenging city's charges and

assessments, as developer had reaped the

benefit of gaining city's approval for the

development by choosing not to pursue its

remedy of appealing the charges and

assessments within 21 days of project

approval.

Affirmed.

ZONING AND PLANNING

Developer was estopped from challenging

city's development charges and fair share

assessments for a planned unit development

four years after completion of the

development, as developer had reaped the

benefit of gaining city's approval for the

development by choosing not to pursue its

remedy of appealing the imposition of the

charges and assessments to the Land Use Board

of Appeals (LUBA) within 21 days of city's

project approval. ORS 197.825, 197.830.

B~3

Plaintiff appeals from the dismissal of

its complaint for damages resulting from the

trial court's grant of defendants' summary

judgment motion. ORCP 47. We affirm because

plaintiff is estopped from claiming damages as

a matter of law.

Plaintiff developed two land projects in

the City of Sherwood. The initial subdivision

received approval from the planning commission

in two phases: Kathy Park I in November 1991

and Kathy Park II in November 1992. The final

"planned unit development," William Park,

received preliminary approval through the

adoption of an ordinance by the city council

in April 1994 and final approval from the city

planning commission in February 1995. In

January 1996, plaintiff sent a letter to the

city demanding refund of "excess system

development charges and 'fair share'

assessments" paid for the projects. In May

1996, plaintiff filed a complaint in circuit

court contesting the constitutionality of the

conditions imposed on it by defendants (FN1)

in approving the developments. By that time,

the projects had been completed and were

occupied.

In its complaint, plaintiff does not seek

reversal or modification of the project |

approvals. Rather, it claims damages for the

i

2

5

B-4

cost of complying with the conditions under

the theories that the conditions amounted to:

"(1) [the] taking of private property

without just compensation in violation of

the Oregon Constitution, Article I,

section 18, and the Fifth Amendment of

the U.S. Constitution, made applicable to

the states through the Fourteenth

Amendment; (2)[a] violation of

[plaintiff's] Fourteenth Amendment Equal

Protection rights granted by the U.S.

Constitution; (3) [a] violation of

[plaintiff's] privileges and immunities

granted by the Oregon Constitution,

Article I, Section 20; [and] (4) [a]

violation of [plaintiff's] USC § 1983

Civil rights for the violation of

[plaintiff's] Fifth Amendment and

Fourteenth Amendment rights * * *,"

(Footnotes omitted.)

Defendants raise the affirmative defense

of estoppel.

We review the factual record in the light

most favorable to plaintiff, the non-moving

party in the summary judgment proceeding.

Jones v. General Motors Corp., 325 Or. 404,

420, 939 P.2d 608 (1997). Plaintiff's actions

are uncontested. Plaintiff expressed

displeasure with many, if not all, of the

conditions before final approval of the

developments and did not at any time concede

to the city the legality of the imposed

conditions. Before final approval of the

B-5

William Park project, plaintiff consulted an

attorney and considered the possibility of

contesting the conditions or bringing a suit

against the city after approval occurred.

Plaintiff's representative, Lou Fasano,

acknowledged in an affidavit that he signed

the documents agreeing to the conditions, but

he expressed to others that he did so "under

duress." (FN2) Fasano explained in his

deposition that he entered into agreements

with the city regarding the conditions for

William Park because they had reached a point

where,

"* * * Just let's sign it and get out of

here, or you reach a disagreement here

and you sign it, because it's all been

done.

"Now, in the negotiations as a hostage,

this is the best you can do. Then you

move from there to whatever is available

to you next, whether it's LUBA or

whatever. There was no reason to make an

objection at signing this.

"This was at a point where we had made a

decision to go forward with the project,

aS marginal as it was, because we didn't

have many alternatives. If we don't go

forward with this project, we fold our

business.

"This is a 4l1-lot--William Park is a 41l-

lot subdivision. That's the biggest

project we had ever done. That's a two-

—

B-6

year project for a two-man firm. If it

doesn't go, we're out of business. We're

dead. We have nothing to sustain us for

the next two years. So if you can at all

make this thing work somehow, you do.

That's where we were at this point."

The claim of estoppel arises because

plaintiff had a right to appeal the imposition

of the conditions to the Land Use Board of

Appeals (LUBA) within 21 days of receiving the

notice of final approval for the projects.

See ORS 197.825; ORS 197.830. In addition to

that clearly available avenue of redress that

plaintiff could have pursued, we also assume,

for sake of discussion, that circuit court

remedies might have been available at the same

time or become available to plaintiff along

the way. See 197.825(3); Boise Cascade Corp.

v. Board of Forestry, 325 Or. 185, 196, 935

P.2d 411 (1997). Be that as it may, the time

that some recognized remedy could have been

pursued to challenge or to avoid the

conditions for which plaintiff now seeks

damages came and passed approximately four

years ago. Throughout the period from 1991

through 1995, plaintiff disregarded those

remedies, completed the developments in

compliance with the conditions imposed by the

city and sold lots in the developments.

Plaintiff admits the city constructed a

B=]

regional storm water facility and put ina

well within the Kathy Park project. In

addition, it is uncontroverted that the lots

were sold with right of way and easement

dedications that had been part of the

conditions of approval. Also, Fasano admits

that plaintiff made a profit on the sales.

The issue is whether, in light of these facts,

plaintiff is estopped from claiming damages

for the costs of complying with the

conditions.

In Nelson v. City of Lake Oswego, 126

Or.App. 416, 869 P.2d 350 (1994), we affirmed

the right of landowners challenging

requirements imposed by a city in connection

with a building permit to raise inverse

condemnation claims with the circuit court

rather than appealing administratively. We

distinguished the facts in Nelson from the

facts in Fifth Avenue Corp. v. Washington Co.,

282 Or. 591, 581 P.2d 50 (1978), and Suess

Builders v. City of Beaverton, 294 Or. 254,

656 P.2d 306 (1982). The Oregon Supreme Court

held in those cases that, where administrative

procedures exist for amending zoning plans,

those procedures for seeking relief must be

pursued rather than seeking relief from a

court of law. Suess Builders, 294 Or. at 261,

656 P.2d 306; Fifth Ave., 282 Or. at 622, 581

ee ee

B-8

P.2d 50. We explained in Nelson that, where a

claim is based on a development condition that

results in the actual acquisition of a private

property interest by the government, rather

than a speculative "taking" based on a zoning

plan, the failure to exhaust administrative

remedies is not a bar to litigation. 126

Or.App. at 420, 869 P.2d 350. However, this

case presents an issue that differs from the

issue of whether plaintiff was required to

exhaust its remedies by direct review before

it could bring a claim for damages. Unlike in

Nelson, the city raises the issue of its

reliance on plaintiff's failure to pursue its

other remedies and plaintiff's use of the

benefits that accrued from plaintiff's

compliance with the city's conditions.

There is controlling precedent on the

issue of estoppel by the acceptance of

benefits derived from governmental action. In

State v. Jutstrom Fish Co., 149 Or. 362, 39

P.2d 355 (1934), the state sought payment of a

poundage tax on fish as required by statute.

The defendant, Jutstrom Fish Company, had

executed a bond guaranteeing payment of the

tax in order to obtain a wholesale dealer's

license. After receiving the license, the

defendant operated as a wholesale fish dealer

for at least two years but failed to pay the

B-9

poundage tax. In response to the state's

complaint seeking to collect the tax, the

defendant claimed that the statute providing

for the tax was unconstitutional and void on

its face. The court did not reach the merits

of that claim:

"The defendants are not in a position

to assert that the statute imposing a

poundage tax on fish purchased or

received, regardless of where they were

caught or taken, is unconstitutional.

The statute was known to them when the

bond was executed. In other words, the

State was induced to issue a license to

the Jutstrom Fish Co. by reason of the

bond guaranteeing payment of the poundage

tax, and both principal and surety are

estopped to assert its invalidity. As

stated in United States v. Hodson, 10

Wall. 395, 19 L.Ed. 937, and cited with

approval in Daniels v. Tearney, 102 U.S.

415, 26 L.Ed. 187:

Cae ee ee ae eee eS ee PY ee

" "When a bond is voluntarily entered

into and the principal enjoys the

benefits it was intended to secure, and a

breach occurs, it is then too late to

raise the question of its validity. The

parties are estopped from availing

themselves of such a defense.' ™ 149 Or.

at 367, 39 P.2d 355.

ins ear nv eye b> wR YeS Y Vat tM i Ty hie

Alin bra 2 AIS ids Me dO ola 5

The holding in Warren Construction Co. v.

Grant, 137 Or. 410, 299 P. 686, 2 P.2d 1118

(1931), also supports the city's argument.

Sl AeA ARNG NARA tld

Grant and the other defendants sought to F

enjoin Warren and the highway commission from

B-10

building a certain portion of highway in Polk

county. A trial court granted Grant's (FN3)

motion for a restraining order enjoining

Warren from proceeding on the construction

work, contingent on Grant executing a bond

from which damages would be paid to Warren if

the injunction was later found to be wrongful.

Grant executed the bond and Warren was forced

to close down its rock crushing and paving

plant for the project. The injunction was

ultimately dissolved. Two years later, Warren

sued Grant for damages stemming from the

imposition of the injunction. In their

answer, Grant denied the existence of the

injunction and that Warren had been damaged.

The court held that Grant, "having

accomplished their purpose and obtained an

advantage by the order, even if irregularly

issued, should now be estopped from denying

the efficacy thereof or liability for damages

directly caused by their own acts." Warren,

137 Or. at 416, 299 P. 686.

Here, plaintiff had legal remedies

available, chose not to pursue them and, as a

result, reaped benefits by not pursuing those

remedies. Under similar circumstances,

private parties have been held estopped in

their transactions when they have failed to

avail themselves of potential remedies and as

B-11

a result, received benefits. For instance, in

Kittleson v. Tennant Agency, 242 Or. 610, 411

P.2d 94 (1966), when a holder of a note sought

to obtain judgment against a corporation, the

corporation claimed that the persons who had

executed the note had done so without

authority. The court noted that, in the year

between the execution of the note and the

commencement of the suit, the corporation had

not pursued any legal proceedings to disavow

the note but had the benefit of the monies

represented by the note. As a result, the

court held that, "[{w]hen a corporation, with

full knowledge of the facts, accepts and

retains the benefits of an unauthorized

contract, it will be bound thereby."

Kittleson, 242 Or. 610, 411 P.2d 94.

Similarly, in Fast v. DeRaeve, 78 Or.App.

97, 714 P.2d 1077 (1986), we held that the

plaintiffs were estopped from enjoining the

defendants from flooding their land and from

recovering damage for loss of use of their

property because the defendants had made

improvements based on the flooding. In light

of those precedents, we know of no reason why

estoppel should not also apply to the legal

consequences arising from agreements with a

public or governmental body. (FN4) Just as

Grant and Jutstrom Fish Company were estopped

B-12

from denying the effect of the legal benefits

that they had procured, so too is plaintiff

estopped from claiming damages when it

benefited from the city's approval by

refraining from pursuing its rights under ORS

chapter 197. Accordingly, the trial court did

not err in granting defendants' motion for

summary judgment based on the affirmative

defense of estoppel.

Affirmed.

FN1. Defendants include the City of Sherwood

and the Mayor and city council members of

Sherwood at the time preliminary approval was

given for William Park, with the exception of

Jane Aamold who was not a city council member

at that time. Apparently, Aamold became a

member afterwards, during the period plaintiff

argues that other developers received more

favorable treatment.

FN2. James Harris, an engineer retained by

plaintiff for the projects, Says in his

affidavit that Fasano "indicated on several

occasion[s] at meetings with City staff and

our firm that he was being forced to do

something which he felt was unfair and that

the City had put him into a situation which

required him to go along or lose his project.

He indicated he was being forced to go along

under duress."

B-13

FN3. Apparently, Grant was not the only party

seeking the injunction nor the only party

later sued by Warren Construction. For ease

of explanation in this opinion, we use "Grant"

to refer to those parties collectively.

FN4. Other jurisdictions have reached the same

conclusion under similar facts. In Pfeiffer

v. City of La Mesa, 69 Cal.App.3d 74, 78 137

Cal.Rptr. 804, 806 (1977), a property owner

sued a city for inverse condemnation after the

owner dedicated an easement and constructed a

storm drain as conditions imposed for a

building permit. The owner alleged that it

was compelled by business necessity to accept

the invalid conditions. The California court

held:

"(T]he compulsion was of their own

making. They signed the lease agreement

and unilaterally decided it was to their

economic advantage to proceed with the

construction to meet its requirements

rather than make use of the orderly

procedure which has been provided to

resolve such controversies. * * * If

every owner who disagrees with the

conditions of a permit could unilaterally

decide to comply with them under protest,

do the work, and file an action in

inverse condemnation on the theory of

economic coercion, complete chaos would

result in the administration of this

important aspect of municipal affairs.

"It is fundamental that a landowner who

accepts a building permit and complies

B-14

with its conditions waives the right to

assert the invalidity of the conditions

and sue the issuing public entity for the

costs of complying with them. * * * By

declining to avail themselves of

{mandamus] procedures, plaintiffs cannot

convert that right into a cause of action

in inverse condemnation." 69 Cal.App.3d

at 78, 137 Cal.Rptr. 804.

See also Covington Court, Ltd. v. Village of

Oak Brook, 77 F.3d 177, 180 (7th Cir.1996)

(holding that failure to contest negotiated

development conditions bars later taking claim

because developer "reaped the benefit of its

bargain"); Trimen Development Co. v. King

County, 65 Wash.App. 692, 702, 829 P.2d 226,

231 (1992) aff'd. on other grounds, 124

Wash.2d 261, 877 P.2d 187 (1994) (concluding

that developer's claims were barred by

estoppel because the court could not

"countenance allowing a developer to reap the

advantages of final plat approval obtained

without challenge to the approval conditions,

and only bring a challenge to those conditions

after the municipality has lost any ability to

negotiate a solution to the problem other than

refund of the fee"); Schott v. City of

Kingman, 461 F.2d 593, 594 (9th Cir.), cert

den 409 U.S. 981, 93 S.Ct. 315, 34 L.Ed.2da 245

(1972) (developer cannot obtain compensation

for water line easements as condition of

B-15

subdivision approval "after having enjoyed the

benefits and profits of dedication").

a a

Appendix C

FILED: March 17, 1999

IN THE COURT OF APPEALS OF THE STATE OF OREGON

L.A. DEVELOPMENT, a general partnership

consisting of Louis J. Fasano and Arthur and

Associates Real Estate, Inc.,

Appellant,

Vv.

CITY OF SHERWOOD, a municipal corporation,

Jane Aamold, Bill Boyle, Barry Kennedy, Mark

Cottle and Mayor Walt Hitchcock,

Respondents.

(C960475CV; CA A100395)

Appeal from the Circuit Court, Washington

County

Jon B. Lund, Judge

Argued and Submitted Nov. 25, 1998.

William C. Cox argued the cause for appellant.

With him on the briefs was Gary P.

Shepherd

Timothy J. Sercombe argued the cause for

respondents. With him on the briefs was

Preston Gates & Ellis LLP.

Before Edmonds, Presiding Judge, and

Armstrong,

Judge, and Warren, Senior Judge.

EDMUNDS, P.J.

Affirmed.

DESIGNATION OF PREVAILING PARTY AND AWARD OF

COSTS

Prevailing Party. Respondents

[X] Costs allowed, payable by: Appellant

MONEY JUDGMENT

Judgment #1

Creditor(s): City of Sherwood: Jane Aamold;

Bill Boyle; Barry Kennedy;

Mark Cottle; Mayor Walt

Hitchcock

Debtor(s): L.A. Developmdent

Costs: $184.00

TOTAL AMOUNT: $184.00

Interest: Simple, 9% per annum, from the date

of this appellate judgment.

Appellate Judgment COURT OF APPEALS

Effective Date: August 24, 1999 (seal)