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Posts from August 2013.

There have been many cases where a property owner has claimed that an action of a local government damaged his or her property.  One of the better known recent cases is Vokoun v. City of Lake Oswego, 335 OR 19 (2002).  In that case, the property owners claimed a city storm drain caused a landslide damaging their property and they filed a claim of inverse condemnation against the city.  Inverse condemnation arises when the property owner recovers just compensation from the government taking of its property even though the government did not institute a condemnation proceeding.  The property owner does not need to show the government’s actions deprived it of all use and enjoyment of the property; “substantial interference” is sufficient.  The landslide in Vokoun was certainly a “substantial interference” of the owners’ use and enjoyment of their property.

The property owners in Vokoun prevailed at trial.  The Court of Appeals reversed the trial court’s decision but, on further appeal, the Oregon Supreme Court reversed the Court of Appeals decision.  The Supreme Court confirmed the longstanding opinion that a claim for inverse condemnation requires a showing that the governmental act causing the “taking” was done with the intent to take the property for a public use.  You might assume that all the government may need to show is that it did not intend to cause the landslide and hence there was no taking.  But you would be wrong.  The Vokoun Court phrased the issue as: “the question is whether plaintiffs presented evidence from which a jury could find that the natural and ordinary consequences of the city’s construction of the storm drain was to destabilize plaintiffs’ property, causing the landslide.”  That is, the property owners did not need to show the government intended to cause a slide that resulted in the damage, only that the government intended to do the public project – i.e., construct the storm drainage – and the “natural and ordinary consequences” of constructing the storm drain, in the manner in which it did, resulted in the damage.

So how do you prove the natural and ordinary consequences of the government’s public project is the damage to the subject property?  You hire an expert who will review the government’s project and say so.  And what does the government do in response? It hires an expert who will testify that the government’s project had nothing to do with the damage.  That is what happened in a recent case in Benton County, Flake v. Benton County.  In this case a storm drain had been in place uphill from the plaintiffs’ property for many years and was purportedly working well.  The county approved a development uphill that increased the impervious area and did some road work including placing a culvert that directed the water onto the plaintiffs’ property.  In January 2012 the plaintiffs’ house began to move and, ultimately, slide down the hill.

The plaintiffs hired an expert who concluded that the natural and ordinary consequences of the County’s actions was to cause increased saturation of the uphill ground that led to the plaintiffs’ house sliding downhill.  The plaintiffs sued the County for inverse condemnation.  But the County hired its own expert who, not surprisingly, disagreed as to any contribution the County’s project may have had to the plaintiffs’ house slide.  The County’s expert concluded there were other factors, unrelated to the County’s actions, which led to the slide.

When there is a battle of the experts who decides who is right?  The non-experts, i.e., the jurors.  In this case the jury went with the County’s expert and concluded that the slide was not the natural and ordinary consequences of the County’s work.  This was a factual decision left up to the jury to decide and, barring any legal mistakes that might have occurred during the course of the trial, this is the final decision.

In Vokoun the jury went with the plaintiffs, and in Flake the jury went with the government.  The issue of whether inverse condemnation has occurred in these matters ultimately comes down to the facts and, probably more importantly, whose expert is more credible to the jury.

Metes and bounds legal descriptions are often indecipherable. Finding the points of beginning and then following the compass direction for the stated distances is difficult to translate from words to the ground. That’s why surveys and surveyors exist. I won’t even try to follow a metes and bounds legal description without first unrolling a large and detailed survey to guide me through the process. But surveys cost money, and are often impractical to acquire, especially before bidding at a non-judicial trustee’s sale. So how does a potential bidder at a nonjudicial foreclosure know exactly what’s for sale?

While this uncertainty exists, both lenders and debtors seek to maximize the prices bid at foreclosure sales, so the loans in default get paid off from the sale of the collateral. Debtors obviously want to receive as much of a credit against their debt as possible. Most lenders avoid becoming property owners. Very few banks see ownership of foreclosed property as a profit center, preferring to be repaid so they can make new loans; and uncertainty about a property’s dimensions is the enemy of robust bidding at trustee’s sales.

The Washington Court of Appeals, Division I, recently considered reforming a trial court ruling allowing a Trustee’s Deed, after a nonjudicial foreclosure, to add additional property to a legal description of property conveyed. Glepco, LLC v. Reinstra, ____ Wn App. ___, Case No. 67934-1-1 (WA Ct. App., Jul. 22, 2013). As the Court described it, the Grantee brought “a quiet title action involving property purportedly sold at a nonjudicial foreclosure sale. At the sale, the [Grantee] made a successful bid on the appellant’s property, believing, based on the address and other references in the deed of trust and notice of trustee’s sale, that they were bidding on a three-acre lot with a house. After the sale, however, the buyers discovered that the legal description of the property in those documents described only the drain filed portion of the land.”

The plaintiffs argued that the trustee’s deed, conveying title to the foreclosed property, and the underlying deed of trust upon which the foreclosure was based, were intended to include the legal description for both the drain field as well as the house and the balance of the three-acre lot. They asked the court to reform those instruments to reflect the parties’ intent based on the doctrine of mutual mistake (of the bank and the former homeowner/appellant) or because the instruments included a scrivener’s error. The plaintiffs requested equitable relief which contended was justified because they acted reasonably in relying on the street address of the house in the deed of trust, the tax parcel number with included the entire three-acre lot, and the assumption that the bank would not foreclose on a portion of a building lot.

The trial court and the Court of Appeals ruled that because the evidence was undisputed, the parties to the deed of trust intended to convey a lien on the entire combined lot including the house and not just the drain field, and that the incorrect legal description was a result of “mutual mistake.” Similarly, the evidence was substantial that the incomplete legal description constituted a “scrivener’s error.” Therefore, the trial court’s discretion in providing the equitable relief of rewriting the deed of trust and trustee’s deed was sustained.

The decision seems to go against the well established doctrine that a party should not be relieved of the obligation to understand legal documents. People have the duty to learn the meaning of their agreements. It isn't a defense, the enforcement of a contract that you didn't understand your obligations, in the absence of fraud. But in the real world, legal descriptions are different from contracts. What mere mortal can really read and understand a metes and bounds legal description without the aid of a survey?

In the context of nonjudicial foreclosures, surveys are very rarely available. Time is usually limited before a sale date, and there are typically a number of variables which make investing in a survey impractical: Will the property actually go to sale? What is the opening bid? Who else will be bidding? Due to the many unknown variables surrounding a potential foreclosure sale, a party rarely considers a bid to order a survey in advance of a sale. However without a survey, the problem faced by the bidder in the Glepco, LLC v. Reinstra case could arise again.

Fortunately, the Skagit County Superior Court ruled for the bidders, acting reasonably, to get the home that they paid for. The Court of Appeals agreed. Let’s hear it for an equitable decision which promotes the interests of a robust public auction process!

By Edward J. Sullivan and Carrie A. Richter

While much of the attention on land use legislation in the 2013 legislature focused upon wineries, employment lands in Hillsboro and budgets, that body also made significant changes to the structure of the Oregon land use program to respond to concerns of its friends and critics.

First, there was the vexed issue of population forecasting and allocations.  These activities are important because they are often the basis for grants of state and federal funds.  Originally, Metro and counties (outside the Metro region) were tasked with both of these responsibilities.  While Metro has dealt with these issues often (because it must, by legislative direction, review its urban growth boundary and underlying population forecasts every five years), counties have had a more difficult time, as there are levels of interest in such forecasts, differing approaches to forecasting and an aversion of county governing bodies to conflict when cities within that county quarrel over their share of the overall county population.  Cities sometimes hired consultants to increase their population projects (and their funds).  The result all too often was that county governing bodies declined to deal with these issues.  Even with some more recent legislative changes, the consensus was that this important cog in the wheel of planning was broken.

The legislature, on the advice of the Department of Land Conservation and Development (“DLCD”) and its advisory committee passed HB 2253, which left the Metro population forecasting role in place, but designated the Portland State University Population Research Center as the agency that would undertake both population forecasts and allocations for all other jurisdictions.  HB 2253 directs the Center to provide notice of these matters, as well as its methodologies and supporting data, so that could be made known.  However, the legislation also purported to make those decisions final and immune from further review, an unlikely result.

Another problem plaguing the land use program was the mortality rate of urban growth boundary changes, whether affecting a few properties or the result of an overall revision of a city plan.  Cases involving Metro and the Cities of Woodburn and McMinnville had too often found the results of years of work and local compromise undone when Land Use Board of Appeals (LUBA) or a court found the rationale failed to meet state statutes, goals and rules.  There was tremendous interest in finding a simpler, legally viable and fact-based way of making these changes.

In response to the advice of DLCD and an advisory committee, the legislature passed HB 2254, which also applies outside the Portland Metro area,  to require the Land Conservation and Development Commission (“LCDC”) to provide for two simpler but optional processes by rule – one applicable to cities of under 10,000 population and another to cities over 10,000 population.  The processes are similar, but not identical.  LCDC is required to design rules that are fact-based so that sufficient buildable lands for needed housing and employment opportunities may be provided over a 14-year period; ensure that cities will not become less efficient in its use of land that urban population per square mile will continue to increase; and the rate of conversion of agricultural and forest lands to urban uses will not increase over time.  A host of considerations and factors are listed to be applied and provision is made against “bait and switch” of lands added to the boundary for one use (such as employment) being diverted to another and for lands not urbanized in the planning period.

The legislation also deals with another significant planning problem.  Special districts often supply one or more urban services (such as water, sewer, firefighting and the like), generally to urban areas outside cities.  State policy has long been to coordinate these services with those of cities, a policy that for many reasons has never been carried out.  HB 2254 adds both incentives and penalties to advance this policy of coordination.  For example, if a service district refuses to negotiate an agreement with a city, the city may remove territory that is within its urban growth boundary and the city, from the district.  A mediation and arbitration process for dispute resolution of conflicts is also provided.

Other important provisions deal with the priority of lands to be included within an urban growth boundary and for review by the Land Use Board of Appeals which is decidedly friendlier to cities and promises to result in more fact-based urban growth boundary changes.

Time will tell whether the concerns of critics regarding population forecasts and allocations and urban growth boundary changes will be met by this legislation – LCDC has yet to adopt rules to implement this new direction – but there has been no shortage of thought and effort applied to meet these problems.

Contractual clauses to help limit the impacts of the Discovery of Historical Structures or Items during Construction

Over the last sixty years, significant legislation has been enacted with the underlying goal of preserving our historic heritage. Following the passage of the National Historic Preservation Act in 1966 at the federal level, many states and tribes enacted state and tribal level legislation to create the position of State Historic Preservation Officer (SHPO) or the Tribal Historic Preservation Officer (THPO) as contemplated by NHPA. The SHPO or THPO is responsible for administering the state or tribal level program and coordinating with a number of federal agencies consistent with the responsibilities established under NHPA. While many potential statutes are implicated by discovery of historical items, this post focuses on one portion of the NHPA.

One of the significant portions of NHPA is the review contemplated by Section 106 of NHPA (often referred to as a Section 106 review). This review is often part of the planning process on any federal project (typically during the reviews required by the National Environmental Protection Act), but it is also required on any project which receives federal funding – meaning that a project funded in part by federal grants or federal loans will also need to comply with the Section 106 requirement.

When triggered, a Section 106 review is a requirement during the planning process, and the related regulations are focused on evaluation, coordination, and planning during that phase. In very broad terms, Section 106 contemplates identification of historic properties, analysis of whether they will be adversely effected by the project, and consideration of alternatives or other methods of avoiding, minimizing, or mitigating any adverse effect.

Section 106 contains several key definitions that expand the review process significantly. The first is Section 106’s broad reach. The historic properties analyzed under Section 106 extend beyond just those historic structures that are included on the National Register they also incorporate those that are eligible for inclusion. One of the first steps (after identification) is analysis. If a structure is deemed eligible, even if it is not a “recognized” historic structure, the potential for adverse effects must be evaluated. Of next significance is the scope of adverse effect, which includes more than just the obvious adverse effect of demolition, but also extends to anything that would “diminish the integrity of the Property’s location, design, setting, materials, workmanship, feeling, or association.” This means that alterations to the surrounding property – including the viewshed or the audio experience – can create an adverse effect, even if the structure itself is not touched.

If no finding of adverse effect is issued by the agency official, and no objection is received within the requisite timeframes, the project can move forward. If the agency official determines there is an adverse effect, then continued consultation is necessary to consider alternatives or modifications that can “avoid, minimize, or mitigate” the adverse effects.

Historical Brick Wall.When adverse effects are recognized during the planning process, they are easier to manage. Although they may significantly alter the project, considering these evaluations during the planning process maximizes the options available. Presuming a Memorandum of Agreement (or a programmatic agreement when discovery is contemplated) is reached between the various agencies, the agreement(s) may address the process if additional items are discovered during the project. These provisions help mitigate the risks associated with discovery during the project.

More and more the annual Oregon land use legislative update is a story about the legislature dabbling around the edges of land use controversy that results in legislative spot zoning.

For example, House Bill 3098 started out as the Young Life Church bill to allow expansion of summer camp facilities at the Rajneeshpuram property.  It was amended to allow youth camps on low quality farmland throughout eastern Oregon.  While critics of bills that are aimed at special projects, like the Young Life Church (or another failed bill for Project Azalea - Senate Bill 845),  may claim victory, other farmland preservationists may view House Bill 3098 as eroding farmland protections because of its breadth.

One notable bill that did not pass was an industrial supersiting bill, House Bill 3267, aimed at areas outside the urban growth boundary in Malheur County because critics faulted the House’s passage of the bill without a public hearing.  A few industrial supersiting bills did pass – Senate Bills 246 and 253 that set forth standards for supersiting, and more industrial lands bills are expected in next year’s session.

Senate Bill 77 started out as a bill that would have meant mayhem for parties to LUBA appeals because it called for abnormal timelines for argument before LUBA based on where an application was in the local review process.  Fortunately, for land use practitioners, amendments were made to the bill to omit any of these process changes.  Instead, the bill retained a number of statistical gathering requirements for LUBA to track and report statistics on its website:

  • The number of reviews commenced.
  • The number of reviews commenced for which a petition is filed.
  • In relation to each of those numbers, the rate at which the reviews result in a decision of the board to uphold, reverse or remand the land use decision or limited land use decision.
  • A list of petitioners, the number of reviews commenced and the rate at which the petitioner’s reviews have resulted in decisions of the board to uphold, reverse or remand the land use decision or limited land use decision.
  • A list of respondents, the number of reviews involving each respondent and the rate at which reviews involving the respondent have resulted in decisions of the board to uphold, reverse or remand the land use decision or limited land use decision.
  • Additionally, when a respondent is the local government that made the land use decision or limited land use decision, the board shall track whether the local government appears before the board.
  • A list of reviews, and a brief summary of the circumstances in each review, under which the board exercises its discretion to require a losing party to pay the attorney fees of the prevailing party.

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