Metropolitan Park District v. State , 85 Wash. 2d 821 ( 1975 )

Hunter, J.

This case involves the right of the State of Washington, appellant herein, to cancel a use deed granted to the Metropolitan Park District of Tacoma, respondent (hereinafter referred to as the District), for the use of certain tidelands.

In 1916, the Tacoma Yacht Club acquired certain properties on Puget Sound in the city of Tacoma somewhat adjacent to the Tacoma Smelter and Point Defiance Park. The property had come into existence due to the dumping of slag into the water by the Tacoma Smelter, eventually causing the formation of a spit on the existing tidelands. The tidelands and the newly formed spit were originally conveyed, by use deed by the legislature, to the District for park and playground purposes. The District then allowed the Yacht Club to make use of the property for marina purposes. Since that time, with the State’s knowledge, the Yacht Club has provided marine services for its members and the public at large.

In 1931, the Tacoma Yacht Club constructed a clubhouse on the property and, in 1932, the District entered into a formal lease with the Yacht Club in regard to the entire area covered by the use deed. At this time, both the District and the State were under the mistaken belief that the land in question was within the outer harbor limits. The original clubhouse remained on the land acquired under the 1916 use deed until 1971, when the present clubhouse was erected.

In 1961, the State, the District, and the Yacht Club became aware of the fact that the area leased to the club by the District, including all of the slag dump, was outside of the then existing harbor lines. The Harbor Commission platted new lines, which, in effect, created new tidelands over which the State had full ownership. These new tidelands were designated as “Block A,” and divided into three tracts: (1) tract 1 was the area in which the old Yacht Club was located, as well as the berths for boats; (2) tract 2 contained principally the slag dump; and (3) tract 3 contained open water, the northeast corner of the slag dump, the public float area, a public launching area, and the Washington State Ferry landing.

Negotiations commenced between the District and the State with a citizen committee being formed in compliance with BCW 79.08.080, the Washington use deed statute, which provides:

Whenever application is made to the commissoner of public lands by any incorporated city or town or metropolitan park district for the use of any state owned tide or shore lands within the corporate limits of said city or town or metropolitan park district for municipal park and/or playground purposes, he shall cause such application to be entered in the records of his office, and shall then forward the same to the governor, who shall appoint a committee of five representative citizens of said city or town, in addition to the commissioner of public lands and the director of conservation and development, both of whom shall be ex officio members of said committee, to investigate said lands and determine whether they are suitable and needed for such purposes; and, if they so find, the land commissioner shall certify to the governor that the property shall be deeded to the said city or town or metropolitan park district and the governor shall then execute a deed in the name of the state of Washington, attested by the secretary of state, conveying the use of such lands to said city or town or metropolitan park district for said purposes for so long as it shall continue to hold, use and maintain said lands for such purposes.

The committee made extensive investigations and considered the possibility of selling the tidelands, conveying them by use deed, or some combination of the two. As provided in RCW 79.08.080, Mr. Bert Cole, the Commissioner of Public Lands, did serve as an ex officio member of the committee and, in that capacity, Mr. Cole did view the area under consideration, and did meet with representatives of the District and the Yacht Club in order to discuss their plans. According to the finding of the trial court, supported by the record, the committee was aware, or should have been aware, of the past use of this land, as well as the future plans for expansion by the Yacht Club. Finally, in 1964, the State agreed to sell tracts 1 and 2 to the District for $75,000, and to convey tract 3 to the District under a use deed. This deed was finally executed in January of 1965. The District in return leased the entire area to the Yacht Club under a similar arrangement as that entered into between the parties in 1932. At this time, the Yacht Club and the District were under the belief that all of the slag dump was contained in those tracts purchased by the District, since otherwise the tip of the slag dump would be landlocked.

In 1971, 8 months after the Yacht Club had commenced construction of a new $350,000 clubhouse on the tip of the slag dump, a title search revealed that this area fell within tract 3 and was owned by the State and covered by the use deed. Upon notifying the Commissioner, of Public Lands of the mistake, the commissioner caused an order to be issued which cancelled the use deed based on his contention that the Yacht Club’s clubhouse facilities did not comply with the provisions of RCW 79.08.080. Two months later, the commissioner’s office notified the Yacht Club that the State was willing to rent the area' to the Yacht Club for $6,276 per year.

In 1973, following a series of injunctions, the matter came to trial in the Superior Court for Pierce County. The trial court, while refusing to reform the deed for tracts 1 and 2, to include the entire slag dump, held that RCW 79.08.080 had not been violated by the existence of the clubhouse and other Yacht Club facilities, and, irrespective of this, that the State was estopped to plead an illegal use of the property as a basis for the cancellation order. Finally, the court held that the State was enjoined from interfering with the District’s use of the property and their rental arrangement with the Yacht Club. From that decision, the State brings this appeal.

The State contends that the trial court erred in estopping it from asserting purported violations of the statutory purposes of RCW 79.08.080, as grounds for cancelling the 1965 use deed. The State argues that the initial issuance of a use deed constituted an ultra vires act contrary to the statute. This position is without merit.

Ultra vires acts are those done “wholly without legal authorization or in direct violation of existing statutes , . .” Finch v. Matthews, 74 Wn.2d 161, 172, 443 P.2d 833 (1968). RCW 79.08.080 establishes legal authorization for the issuances of use deeds. It provides that when an application is made, the Governor shall appoint a 5-man citizen committee to investigate into the merits of the application in order that it can determine whether the deed should be granted. If the committee satisfies itself that the application meets the requirements, it certifies the same to the Governor who shall execute the deed. This statutory procedure was fully complied with and the committee empowered to make the requisite certification exercised its legal authority in the statutory manner. The accuracy of that committee’s determination may be subject to debate, but that factor does not in any way affect its authority to make it. Therefore, we hold that the use deed in question did not result from ultra vires conduct in derogation of statutory authority.

Initially, the State contends that the theory of equitable estoppel is inapplicable since the issuance of the use deed was predicated on a mistake of law. We disagree. This is not a case where a public official acted without authority or made an erroneous statement of law upon which a party unjustifiably relied. See, e.g., State v. Northwest Magnesite Co., 28 Wn.2d 1, 182 P.2d 643 (1947). As stated earlier in this opinion, the citizen committee was fully authorized to review the District’s application and certify its findings to the Governor. Furthermore, there was never any legal question as to whether the District had to comply with the requirements of RCW 79.08.080, or what those requirements were. Arguably, the committee might have erred in determining that the District’s intended use qualified for a use deed. However, if such a mistake did occur, it was the result of an error in judgment, as opposed to a misconception or misinterpretation of the law. Therefore, the ultimate decision to issue a use deed was premised on the factual determination that the District complied with the applicable law, and the District was fully justified in relying on that decision. State ex rel. Shannon v. Sponburgh, 66 Wn.2d 135, 401 P.2d 635 (1965).

The State next attacks the application of the doctrine of equitable estoppel to the facts of this case on the grounds that its application will limit a public right — the free and unlimited use of public parks and playgrounds. The State argues that it cannot be estopped from ending what it considers to be an unlawful use of the property, specifically, the District’s leasing of the area to the Yacht Club for mixed private and public purposes.

We need not reach the question of whether the land is, in fact, being utilized for public purposes, since this is not a case of this court interfering with the State’s termination of a purported unlawful use. The State does not now, nor has it ever, intended to terminate the Yacht Club’s activities. Rather, the State would, by its action, regain control of tract 3, and be the recipient of the revenues generated from the lease on tract 3. This is verified by the letter of December 3,1971, written by the State to the Yacht Club, offering to lease the same property for $6,276. To summarize, this is not a case of terminating a purported unlawful use, but rather, an attempt to change control of the use. Since the public will not benefit from such an alteration in control over the property, the State cannot assert the public interest as a basis for preventing the District from asserting the doctrine of equitable estoppel.

We turn now to the fundamental issue of whether the State should, in fact, be estopped from alleging purported violations of the statutory purposes of RCW 79.08.080 as grounds for cancelling the use deed. We conclude that the doctrine does preclude the State from making the above mentioned assertions.

We fully recognize that this court must be cautious in applying equitable estoppel against the State, especially when the State is functioning in its governmental, as opposed to proprietary capacity. PUD 1 v. Cooper, 69 Wn.2d 909, 421 P.2d 1002 (1966). However, when the State undertakes to dispose of public lands, either by lease or sale, it then acts in its proprietary capacity. Strand v. State, 16 Wn.2d 107, 132 P.2d 1011 (1943). Furthermore:

The doctrine of equitable estoppel will be applied against the state or against a municipality or other political entity when acting in its governmental as well as when acting in its proprietary capacity, when necessary to prevent a manifest injustice and the exercise of its governmental powers will not be impaired thereby.

Finch v. Matthews, supra at 175. In addition to these fundamental considerations, before a party will be estopped from making out his case without any legal limitations, the proponent of the doctrine must clearly show:

(1) an admission, statement, or act, inconsistent with the claim afterwards asserted; (2) action by the other party on the faith of such admission, statement, or act; and (3) injury to such other party arising from permitting the first party to contradict or repudiate such admission, statement, or act.

Shafer v. State, 83 Wn.2d 618, 623, 521 P.2d 736 (1974).

Applying these three requisite criteria to the instant case, we believe the trial court correctly found that the State granted the District a use deed in 1965, with either actual or constructive knowledge of the intended use to which the property would be put, including the Yacht Club’s intention to expand its clubhouse facilities. This finding is supported by the fact that the District had leased the property to the Yacht Club since 1932, under a similar use deed as that granted in 1965, for the substantially same purposes. Also, the appointed citizen committee made a thorough investigation and had all relevant facts before it prior to certifying to the Governor that the deed should be granted. Secondly, the record discloses that in reliance on the use deed, the District did purchase two tracts of land from the State and entered into a new lease with the Tacoma Yacht Club, and furthermore, the District used this new lease as collateral to procure a loan of $75,000 in order to buy the other two tracts of land. Finally, the third criteria, requiring injury to the relying party, is met in several ways: (1) the District will lose its collateral for the loan; (2) it will lose its reversionary interest in all of the Yacht Club’s facilities which, under the lease, reverts to the District upon expiration of the lease; and (3) it will lose the revenue generated by the lease which supports other park and playground facilities within the District’s jurisdiction. These facts clearly meet the requisites for applying the doctrine of equitable estoppel to this case. It must be remembered that when the State functions in its proprietary capacity, it will receive no better treatment than any two private individuals who bring their dispute before the courts for final resolution. State ex rel. Washington Paving Co. v. Clausen, 90 Wash. 450, 156 P. 554 (1916); Finch v. Matthews, supra. In fact:

The conduct of government should always be scrupulously just in dealing with its citizens; and where a public official, acting within his authority and with knowledge of the pertinent facts, has made a commitment and the party to whom it was made has acted to his detriment in reliance on that commitment, the official should not be permitted to revoke that commitment.

State ex rel. Shannon v. Sponburgh, 66 Wn.2d 135, 143-44, 401 P.2d 635 (1965). Therefore, it is evident that more forthrightness is demanded of the State than of the average citizen. In the instant case, such a commitment was made by the State and detrimentally relied upon by the District. It would be both inequitable and grossly unconscionable to now allow the State, under the facts of this case, to rescind that commitment.

The judgment of the trial court is affirmed.

Finley, Rosellini, Hamilton, and Wright, JJ., and Henry, J. Pro Tern., concur.