Nelson v. City of Lake Oswego ( 1994 )

WARREN, J.

Plaintiffs Nelson applied to defendant city for a permit to construct a house. In reviewing the application, city personnel found a problem with the property description and informed plaintiffs that a permit could be granted only if they applied for and obtained a lot line adjustment between their property and their neighbors’, the Reises.¹ Plaintiffs and the Reises applied for the adjustment, and the city manager allowed it, subject to the requirement that the applicants execute “nonremonstrance” agreements, pledging that they would not oppose future street improvements or the inclusion of the property in a local improvement district. The city manager also required plaintiffs to convey a 55-foot drainage easement as a condition of development. That requirement was included in the order allowing the lot line adjustment and in the subsequent order allowing the permit for the house. Plaintiffs did not appeal the city manager’s decisions to the city council, as they could have under applicable city code provisions. They conveyed the easement to the city before completing construction of the house.

Plaintiffs brought this circuit court action, stating eight claims. The first six assert that the nonremonstrance requirement violates the state and federal constitutions and is also contrary to state and federal statutes. In the remaining claims, plaintiffs contend that the drainage easement is a taking of their property, for which they seek, inter alia, monetary compensation. Their theory is that the city’s requirement of and acquisition of the easement does not bear the necessary relationship to the impacts of what it permitted to satisfy the tests articulated in Nollan v. California Coastal Comm’n, 483 US 825, 107 S Ct 3141, 97 L Ed 2d 677 (1987), and, therefore, it violates the takings provisions of the federal and state constitutions.

The city moved to dismiss the action, contending that it arises out of a land use decision and that exclusive jurisdiction for review resides in the Land Use Board of Appeals. The trial court granted the motion as to the claims involving the nonremonstrance agreements and entered an ORCP 67B judgment dismissing those claims. In case number CA A76358, plaintiffs appeal from that judgment. We agree with the trial court that those claims arise out of a land use decision, and that all of the issues that they present, including the constitutional issues, are subject to LUBA’s exclusive jurisdiction. Ackerley Communications, Inc. v. Mult. Co., 72 Or App 617, 620, 696 P2d 1140 (1985), rev dismissed 303 Or 165, 734 P2d 885 (1987); see also Dunn v. City of Redmond, 303 Or 201, 735 P2d 609 (1987).

The trial court denied the motion to dismiss the taking claims “to the extent [they apply] to compensation.” On the merits of those claims, the court subsequently granted the city’s motion for summary judgment. Plaintiffs appeal from that judgment in case number CA A78257. The city argues, in a cross-assignment in that appeal, that the court erred by denying the motion to dismiss the taking claims. It contends that those claims, too, are subject to LUBA’s exclusive jurisdiction. We disagree. The circuit courts have jurisdiction over inverse condemnation actions arising out of land use decisions, concurrent with LUBA’s jurisdiction to consider taking arguments in its review of land use decisions. Springer v. City of Bend, 111 Or App 136, 826 P2d 1, rev den 313 Or 354 (1992); see also Dunn v. City of Redmond, supra.²

The city also argues that the inverse condemnation claims are barred because plaintiffs did not appeal to the city council from the city manager’s requirement that they convey the easements as a condition of permitting the building. Therefore, the city asserts, plaintiffs failed to “exhaust administrative remedies” and are precluded from prosecuting their taking claims. The city relies principally on Fifth Avenue Corp. v. Washington Co., 282 Or 591, 581 P2d 50 (1978). However, that case does not assist the city, because it differs from this one in two critical respects. First, although the court in Fifth Avenue used “exhaustion of remedies” terminology, it did not use the term in the sense that a landowner must pursue available local appeals before bringing an inverse condemnation action, and that is not what the court required. Rather, what Fifth Avenue and related Oregon and federal cases hold — under the doctrine that is more commonly called “ripeness” than “exhaustion” in takings jurisprudence — is that a landowner cannot base a regulatory taking action on a predictive assertion that local or other government regulations, when applied to his property, will prevent any beneficial use of it. Generally, the landowner cannot base such an action on an actual local decision that denies or restricts one particular use. As a general rule, before seeking a judicial remedy, the owner must first seek permission at the local level to conduct alternative productive uses, or must seek local variances from or amendments to the regulations under which the use initially intended was denied or restricted. In short, Fifth Avenue and related cases are not concerned with an owner’s pursuit of all available local appeals on his application for a particular use or land use decision, but with whether the owner has applied for enough uses or decisions so that the scope of what the local regulations permit or prohibit can be known.

The second difference between this case and Fifth Avenue is that the latter, like other Oregon and federal cases, applies the ripeness principle only in the context of pure regulatory takings claims, where the owner asserts that regulatory restrictions on land use effect a complete deprivation of the beneficial or economically viable use of property that is and remains privately owned. Neither Fifth Avenue nor any other case of which we are aware attaches an exhaustion or ripeness prerequisite to the litigation of claims, like those here, that are based on a development condition that has resulted in the actual acquisition of a private property interest by the government.³

In addition to the fact that Fifth Avenue lends no support to the city’s contentions that exhaustion or ripeness is required under these circumstances, other cases expressly negate those contentions. In Williamson Planning Comm’n v. Hamilton Bank, 473 US 172, 105 S Ct 3108, 87 L Ed 2d 126 (1985), a landowner brought an action for a regulatory taking pursuant to 42 USC § 1983, based on the disapproval of a subdivision plat. The owner had not invoked its right to apply to the same administrative body that had disapproved the plat for a variance from the regulations on which the disapproval was predicated. The Supreme Court adhered to traditional ripeness analysis in concluding that a variance application to “the initial decision-maker” was a necessary prerequisite to the judicial action, but it also specifically noted that exhaustion of available appeals from the first decision-maker to other administrative bodies was not required before judicial relief could be sought. See 473 US at 192-94.⁴

In Suess Builders v. City of Beaverton, 294 Or 254, 656 P2d 306 (1982), the court spoke to the second of the factors that distinguish this case from Fifth Avenue. The court in Suess Builders adhered to the exhaustion/ripeness principle of Fifth Avenue, and held that its requirements were applicable to the regulatory taking aspects of the plaintiffs’ claim. It also concluded, however, that some of the plaintiffs’ other taking allegations went “beyond the simple restrictive effect” of the city’s regulations and, therefore, notwithstanding any failure to exhaust remedies, were sufficient to survive a motion to dismiss. The court explained that the latter allegations were “broad enough to encompass a hypothetical claim that defendants told plaintiffs that the property was certain to be acquired, that it would be useless to pursue any proposals for private development, and that [the government] began to acquire easements [from the plaintiffs] for certain facilities.” 294 Or at 262-63. (Emphasis supplied.)

There is good reason why the courts have not extended the exhaustion/ripeness requirement to cases like this one: They have nothing to do with its purpose. In MacDonald, Sommer & Frates v. Yolo County, 477 US 340, 348, 106 S Ct 2561, 91 L Ed 2d 285 (1986), the Court explained the purpose that the requirement serves in regulatory takings cases:

“It follows from the nature of a regulatory takings claim that an essential prerequisite to its assertion is a final and authoritative determination of the type and intensity of development legally permitted on the subject property. A court cannot determine whether a regulation has gone ‘too far’ unless it knows how far the regulation goes.”

The tests for regulatory takings under the state and federal constitutions are whether the owner is deprived of all substantial beneficial or economically viable use of property. See Lardy v. Washington County, 122 Or App 361, 363, 857 P2d 885, rev den 318 Or 246 (1993). The reason why the exhaustion/ripeness analysis makes sense in that context is that, with rare exceptions, no particular denial of an application for a use can demonstrate the loss of all economic use. That is so for two reasons. First, the fact that one use is impermissible under the regulations does not necessarily mean that other economically productive uses are also precluded; and second, until alternative uses are applied for or alternative means of obtaining permission for the first use are attempted, there can be no conclusive authoritative determination of what is legally permitted by the regulations. Therefore, the courts cannot perform their adjudicative function on a claim predicated on a single denial, because something more must be decided by the local or other regulatory authority before there can be a demonstrable loss of all use and, therefore, a taking. See Suess Builders v. City of Beaverton, supra, 294 Or at 261-62.

In cases like this one, conversely, the condition has been imposed and the easement has been acquired by the city. There is nothing left to happen at the local or administrative level in order for the claim to be susceptible to adjudication; the only question is whether what has occurred is a taking under the legal test that the condition must bear a reasonable relationship to the impacts of the use to which the city has attached it. Dolan v. City of Tigard, 317 Or 110, 854 P2d 437, cert granted _ US _ (1993). The facts on both sides of the equation are readily susceptible to conventional judicial proof, and the adjudication of the facts and of the applicable law is well within the judicial competence.

The city contends further, in support of its exhaustion argument, that, had plaintiffs appealed the city manager’s decision to the council, it “might have removed the condition for which plaintiffs now seek damages,” and “judicial intervention may [have] become unnecessary.” That contention alters nothing. The city does not suggest that it has not acquired the easement, that the city manager was not authorized to make a decision resulting in the acquisition or that the acquisition was impermissible without city council approval. All that the city does is speculate that things might have been different if plaintiffs had taken an action that, under the decisions of the United States and Oregon Supreme Courts, they were not required to take as a condition precedent to bringing these claims. We reject the city’s exhaustion argument,⁵ and turn to the merits.

Plaintiffs contend that there is no “reasonable relationship” or “essential nexus” between the lot line adjustment and the drainage easement and, therefore, the easement condition is an uncompensated taking under Nollan v. California Coastal Comm’n, supra. See also Dolan v. City of Tigard, supra. The argument begs the question. The easement was also a condition of the house permit-, plaintiffs have constructed the house, and they did not convey the easement until after that permit was issued and construction had begun. The lot line adjustment has no independent bearing on the merits of the taking claims. As we made clear in Lardy v. Washington County, supra, 122 Or App at 364-65, plaintiffs are not free to seek the answer that they want by misdefining the question. As a matter of law, the only relevant inquiry can be whether the easement condition is sufficiently related to the impacts of the house development to survive scrutiny under Nollan and Dolan. Assuming that plaintiffs’ argument is adequate to enable us to address that decisive question, we hold that the summary judgment record demonstrates conclusively that the drainage easement condition is reasonably related to the impacts of the development that the city permitted subject to the condition.⁶

Affirmed on both appeals.

1 Notwithstanding the contrary indication in the caption, the Reises were not p^fas below and are not parties to the appeal. We use the term “plaintiffs” to refer to 3 Nelsons only.

2 We use the terms “inverse condemnation” and “taking” interchangeably in describing the two claims in question. Technically, “inverse condemnation” is the label for a judicial proceeding brought by a property owner to remedy an alleged “taking” that results from governmental actions other than the exercise of the eminent domain power.

3 We are aware that “impacts” versus “exactions” issues, of the kind presented in Nollan and here, have sometimes been labeled as regulatory taking problems. The label does not disturb our distinction or analysis. An “exaction” of a property interest as a condition of development entails a governmental or public acquisition of the interest, and, as we discuss, different problems and constitutional tests arise from those when the pristine question is presented of whether a regulation denies all beneficial or economically viable use of property.

4 Here, as in Williamson, the plaintiffs allege a violation of 42 USC § 1983 and of the Fifth Amendment.

5 Under the statutes governing appeals to LUBA, exhaustion of local remedies is made jurisdictional. ORS 197.825(2)(a). There is no correspondingjurisdictional limitation on inverse condemnation actions.

6 Plaintiffs seem also to suggest that Nollan requires a more demanding test than a “reasonable relationship” between “exactions” and impacts. After the parties submitted their briefs, the Oregon Supreme Court held otherwise in Dolan. In any event, because plaintiffs do not propose any comparison of the “exaction” of the easement with the impacts of the permitted development, their argument could not suffice to show any operational difference that a different legal test might make here, even if their reading of Nollan were correct.