Costco Wholesale Corp. v. City of Beaverton

136 P.3d 1219

206 Or. App. 380

COSTCO WHOLESALE CORPORATION, Petitioner below, and Henry Kane, Intervenor-Petitioner below, v. CITY OF BEAVERTON, Respondent below.

Wells Real Estate Funds, Inc., Petitioner, v. City of Beaverton, Respondent.

Bold, LLC, Petitioner, and Henry Kane, Intervenor-Petitioner below, v. City of Beaverton, Respondent.

C.E. John Company, Inc., Petitioner below, and Henry Kane, Intervenor-Petitioner below, v. City of Beaverton, Respondent below.

2005-044.

2005-046.

2005-050.

2005-053.

A130488.

Court of Appeals of Oregon.

Argued and Submitted January 18, 2006.

Decided June 14, 2006.

Jack L. Orchard, Portland, argued the cause for petitioners. With him on the brief were Dana L. Krawczuk and Ball Janik LLP.

Alan A. Rappleyea, Hillsboro, argued the cause for respondent. With him on the brief was Theodore R. Naemura, Portland.

Thomas Sponsler, Gresham, Spencer Q. Parsons, and Beery, Elsner & Hammond, LLP filed the brief amicus curiae for League of Oregon Cities.

Before HASELTON, Presiding Judge, and ARMSTRONG and ROSENBLUM, Judges.

HASELTON, P.J.

Petitioners on review Wells Real Estate Funds, Inc. (Wells), and Bold, LLC (Bold), seek judicial review of an order of the Land Use Board of Appeals (LUBA) that affirmed the decision of the City of Beaverton (city) that annexed certain parcels of land pursuant to the "island annexation" statute, ORS 222.750.¹ Petitioners argue, in part, that LUBA erroneously construed ORS 222.750 to authorize annexation of property without the consent of affected landowners where (a) the property is part of a larger area that is completely encompassed by a city's boundaries; but (b) the city elects not to annex that entire larger area. For the reasons set forth below, we agree with petitioners that LUBA so erred. Accordingly, we affirm in part and reverse in part, and remand for further proceedings.

Before describing the material facts pertaining to petitioners' properties, it is useful to "foreshadow" the statutory issue that permeates this dispute. In general under Oregon law, cities, to annex new territory, must do so either through elections or by obtaining consents from affected landowners. See generally ORS 222.111-222.183. However, and in derogation of that general principle, ORS 222.750 authorizes unilateral annexation under the following circumstances:

"When territory not within a city is surrounded by the corporate boundaries of the city, or by the corporate boundaries of the city and the ocean shore or a stream, bay, lake or other body of water, it is within the power and authority of that city to annex such territory. However, this section does not apply when the territory not within a city is surrounded entirely by water. Unless otherwise required by its charter, annexation by a city under this section shall be by ordinance or resolution subject to referendum, with or without the consent of any owner of property within the territory or resident in the territory."²

(Emphasis added.)

Central to this dispute is the meaning of "surrounded by" as used in ORS 222.750. To frame the analysis that follows, and by way of gross illustration, we offer the following:

Here, all parties agree that if, as shown in Figure 1, an area is encompassed on all sides by corporate boundaries of a city, the city can annex that entire area ("A") under ORS 222.750. The dispute, however, is over the applicability of ORS 222.750 to the circumstances illustrated in Figures 2 and 3: If the city does not elect to annex all of the encompassed area ("A")—including parcel "B," which lies within "A"—but, instead, opts to annex only "B," does ORS 222.750 authorize the annexation of "B" alone?³

Against that backdrop, we return to the facts presented here. In early 2005, the city held hearings on four proposed ordinances authorizing annexation of territories pursuant to ORS 222.750. One of those ordinances, No. 4338, authorized annexation of an area in which some of petitioner Wells's properties are located, and another ordinance, No. 4339, authorized annexation of the area in which petitioner Bold's property lies.

In particular, Wells's properties are located near the northwest boundary of the city in the area of Southwest Jenkins Road, 158th Avenue, and Baseline Road, with some of that property lying immediately adjacent to the "campus" headquarters of Nike, Inc. As originally proposed, the annexation would have included Nike's property, as well; however, the ordinance was amended after the hearing to exclude the Nike property, as well as certain parcels owned by Wells and leased to Nike. As shown on the "annexation hearing map" presented by the city, the area including both the Wells and Nike properties was completely encompassed by the city's corporate boundaries, i.e., by properties within the city limits and by rights-of-way owned by the city. Thus, consistently with that map and as ultimately approved, the annexation of Wells's properties corresponded (very roughly) to the circumstances depicted in Figure 3: The area encompassed by the city's boundaries ("A") included both Wells's and Nike's properties, and, while the Wells property touched in part on the city's boundary, it also touched in part on Nike's property, which was not annexed. In sum, the city purported to annex some, but not all, of the area encompassed by the city's boundaries.

The configuration of Bold's property, and the associated annexation, appears to be simpler. Bold describes the location of its property as "south of Highway 26, and * * * bordered to the west by NW Bethany Boulevard, with the curve of NW Cornell Road serving as the southern and eastern boundary[.]" As shown on the "annexation hearing map," the boundaries of Bold's property were completely contiguous with the city's boundaries—as were the boundaries of all other properties annexed under Ordinance No. 4339.⁴ Thus, assuming for now the accuracy of that map, Bold's property corresponded, for analytic purposes, to the circumstances described in Figure 1.⁵

The ordinances at issue went into effect in March 2005. Petitioners, in appeals that LUBA consolidated, raised myriad challenges to the annexations. Before LUBA, as on judicial review, petitioner Wells argued that its properties were not "surrounded by the corporate boundaries of the city" within the meaning of ORS 222.750.⁶ In particular, Wells contended that, under ORS 222.750, the city was required to annex the entire "island" area, and not merely a portion of that area. The LUBA majority rejected that argument, concluding:

"In order for the statute to apply, there must be territory not within the city that touches, or is adjacent to, the city boundaries or a body of water on all sides. However, the statute does not require, as petitioners assert, that the property to be annexed be adjacent to the city boundaries or a body of water on all sides."

Costco Wholesale Corp. v. City of Beaverton, 50 Or. LUBA 476, 484-85 (2005) (emphasis in original);⁷ see also id. at 501 (Holstun, concurring) ("[T]here is nothing in ORS 222.750 that prohibits a city from identifying a territory that qualifies for nonconsensual annexation under ORS 222.750 and then annexing a part of such a surrounded territory now and delaying annexation of the balance of that surrounded territory to a later date.").

Before LUBA, petitioners also raised two other arguments that they renew on judicial review. First, petitioners contended that the city had failed to establish that it had, in prior proceedings, properly annexed the rights-of-way that formed some of the outer perimeters around petitioners' properties, and, thus, the city had failed to establish, as a factual matter, that the properties were "surrounded" for purposes of ORS 222.750. Second, petitioners argued that, in all events, the annexations were "unreasonable" under the test set forth in Portland Gen. Elec. Co. v. City of Estacada, 194 Or. 145, 146, 241 P.2d 1129 (1952). LUBA rejected those arguments.

On judicial review, petitioners, individually or jointly, raise three arguments: (1) Regardless of the proper legal construction and application of ORS 222.750, LUBA erred in rejecting petitioners' argument that, as a factual matter, the city failed to establish that the properties were "surrounded" for purposes of ORS 222.750. That is, even if LUBA and the city were correct in their construction of ORS 222.750, the city failed to establish the factual prerequisites for annexation pursuant to that statute. (2) In all events, under the proper construction and application of ORS 222.750 with respect to petitioner Wells's property, that property is not "surrounded by the corporate boundaries of the city" and, thus, is not subject to annexation. (3) Even if otherwise permissible under ORS 222.750, the annexations authorized pursuant to Ordinance Nos. 4338 and 4339 were "unreasonable" under Portland Gen. Elec. Co.

We turn first to petitioners' factual arguments concerning the validity of the city's reliance on its rights-of-way around the affected properties as establishing the "corporate boundaries" of the city for purposes of ORS 222.750. Petitioners assert that the city failed to establish the validity of some of the predicate "encircling" annexations and, thus, failed to establish as a factual matter that petitioners' properties were "surrounded" under any reasonable construction of that term. If petitioners are correct, that would obviate any need to construe ORS 222.750.

LUBA rejected petitioners' arguments concerning the rights-of-way on the ground that petitioners could not collaterally attack the validity of prior annexations in the present proceeding. In so holding, LUBA concluded that "[t]he annexations that largely encircle the annexation territory at issue in this appeal were accomplished by a series of ordinances for which the appeal period has long run." Costco Wholesale Corp., 50 Or. LUBA at 486 (internal quotation marks omitted).

On...