Alexander Loop, LLC v. City of Eugene

• Jurisdiction: Oregon
• Parties: ALEXANDER LOOP, LLC, an Oregon limited liability company; Goodpasture Partners, LLC, an Oregon limited liability company; and BDC-Eugene, LLC, an Oregon limited liability company, Plaintiffs-Appellants Cross-Respondents, v. CITY OF EUGENE, Defendant-Respondent Cross-Appellant.
• Citation: 297 Or.App. 775,444 P.3d 1116
• Docket Number: A166156
• Court: Oregon Court of Appeals
• Decision Date: 30 May 2019

297 Or.App. 775

444 P.3d 1116

ALEXANDER LOOP, LLC, an Oregon limited liability company; Goodpasture Partners, LLC, an Oregon limited liability company; and BDC-Eugene, LLC, an Oregon limited liability company, Plaintiffs-Appellants Cross-Respondents,

v.CITY OF EUGENE, Defendant-Respondent Cross-Appellant.

A166156

Court of Appeals of Oregon.

Argued and submitted November 30, 2018.

May 30, 2019

Heidee Stoller, Portland, argued the cause for appellants-cross-respondents. On the briefs were Cody M. Weston, Courtney R. Peck, Portland, and Perkins Coie LLP.

Lauren Sommers argued the cause and filed the briefs for respondent-cross-appellant.

Before Armstrong, Presiding Judge, and Tookey, Judge, and Shorr, Judge.

SHORR, J.

This case involves claims for breach of contract and unjust enrichment brought by a group of property developers against the City of Eugene. Plaintiffs had received permission from the city to develop a 23-acre property with residential and commercial units. As part of the development process, plaintiffs agreed to undertake certain improvements to the transportation infrastructure near the development. Plaintiffs’ claims are based on allegations that the city failed to fully reimburse plaintiffs, as agreed in a letter, for approximately $ 1.3 million in "system development charges" (SDCs) based on SDC credits that plaintiffs would generate through those infrastructure improvements. The trial court granted the city’s motion for summary judgment on plaintiffs’ claims for breach of contract and unjust enrichment. For the reasons explained below, we affirm, concluding that (1) the letter agreement does not contain a promise by the city to pay plaintiffs $ 1.3 million but only an estimate of the SDC credits that plaintiffs would receive from the infrastructure improvements and (2) the city was not unjustly enriched under the circumstances of this case.¹

I. BACKGROUND

This case turns on whether the city was obligated to reimburse plaintiffs for SDC credits generated during the course of the development project. We begin with an explanation of the applicable laws governing SDCs and SDC credits. We then summarize the material facts, consistently with our standard of review of a grant of summary judgment, in the light most favorable to plaintiffs as the nonmoving party. Evans v. City of Warrenton , 283 Or. App. 256, 258-59, 388 P.3d 1167 (2016).

SDCs are fees that cities may charge developers to account for the increased demand on certain infrastructure systems caused by new development. ORS 223.299(4)(a). Cities typically assess SDCs for "capital improvements" associated with the new development. Capital improvements are defined by statute as public assets or facilities used for the following city infrastructure systems:

"(A) Water supply, treatment and distribution;

"(B) Waste water collection, transmission, treatment and disposal;

"(C) Drainage and flood control;

"(D) Transportation; or

"(E) Parks and recreation."

ORS 223.299(1)(a).

Cities that assess SDCs must also provide developers with credits against those fees for the construction of a "qualified public improvement," i.e. , "a capital improvement that is required as a condition of development approval." ORS 223.304(4). By default, SDC credits offset only like-kind SDCs charged for the type of improvement being constructed. ORS 223.304(5)(a).² In other words, SDC credits are system-specific, and credits generated as a result of a qualified public improvement in one type of system—transportation, wastewater treatment, and so on—cannot be applied to offset SDCs assessed as a result of a development’s effects on a different system. Developers can, however, bank excess credits to offset like-kind SDCs assessed in subsequent phases of the same development. ORS 223.304(5)(c).³ Notwithstanding that default restriction, local governments have the option to establish a system for the transferability of credits between infrastructure systems "if a local government so chooses." Id .

The Eugene City Council has adopted code provisions governing the city’s imposition of SDCs on developers as well as the generation of SDC credits. Eugene Code (EC) 7.700 - 7.740. The city council enacted the city’s SDC scheme to "impose an equitable share of the public cost of capital improvements upon those developments that create the need for or increase the demands on capital improvements." EC 7.700.

The city’s SDC scheme largely duplicates the scheme provided by state law. Developers in Eugene can accrue SDC credits by making qualified public improvements associated with a development project. EC 7.730(4). As under state law, SDC credits under the city code are awarded on a system-by-system basis and offset only like-kind SDCs associated with burdens on a particular infrastructure system, such as stormwater, wastewater, or, as in this case, transportation. Id . Developers may bank excess credits for subsequent phases of the same development project but cannot transfer credits to other projects or between systems. EC 7.730(6), (7).

Notably for this case, the city code expressly prohibits developers from transferring credits approved for one type of capital improvement to offset SDCs associated with burdens on a different system. EC 7.730(4) ("The credit provided for by this subsection shall apply only to the improvement fee imposed for the type of improvement being constructed."). For example, if a developer generates transportation SDC credits, it may use those credits to offset only transportation SDCs up to but not exceeding the sum total of transportation SDCs assessed for the entire development project. The developer may not use those credits to offset SDCs assessed as a result of effects on other city infrastructure systems, such as wastewater or stormwater sewer systems, even if the total number of SDC credits for any system exceeds the total SDCs for that system. The city did not elect, in other words, to provide for transferability of credits despite having that option under ORS 223.304(5)(c). Thus, although a developer may receive SDC credits in excess of the total SDCs assessed in any particular system over the life of a development project, the city code prohibits the city from reimbursing the developer for credits that exceed the SDCs associated with that system or allowing the developer to transfer those credits to SDCs in other systems. EC 7.730(4), (7).

In this case, the development project consisted of a 23-acre plot known as Goodpasture Island with an apartment complex, a senior-housing facility, and commercial units. The city conditioned its approval of the development project on plaintiffs’ agreement to undertake capital improvements to off-site infrastructure, including widening the Goodpasture Island Bridge and building a new bridge nearby. Under the city code, plaintiffs’ capital improvements would be eligible for SDC credits, in an amount calculated by the city, that plaintiffs could use to offset like-kind SDCs assessed by the city. The bridge improvements qualified for transportation SDC credits.

When they learned that they would be required to undertake the bridge improvements, plaintiffs sought additional funds from their lenders to cover the associated costs. At plaintiffs’ request, the city provided a letter agreement that plaintiffs could share with their lenders, which in part explained that plaintiffs would be assessed SDCs as part of the development project and receive SDC credits for the bridge improvements. The letter agreement, which is discussed in greater detail below, included the city’s "best estimates based on presently available information" of SDCs and SDC credits. The city estimated that the total to be paid by plaintiffs in permits and SDCs for the development project was $ 4,544,046, while the bridge improvements would generate an estimated $ 1.3 million in SDC credits. Those estimates were "subject to further refinement," and the actual amounts would be "determined in the normal course of building permit submittal and approval."

Following completion of the bridge improvements, the city calculated that plaintiffs had earned $ 1,133,643.29 in transportation SDC credits. The city also calculated that the transportation SDCs assessed and collected for the development project totaled only $ 375,768.91. The city informed plaintiffs that, pursuant to the SDC scheme set forth in section 7 of the city code, the city was able to reimburse plaintiffs up to, but not beyond, the total transportation SDCs, notwithstanding that plaintiffs had accrued more than $ 757,000 in additional transportation SDC credits. The city explained that plaintiffs could bank those remaining credits for 10 years for potential future use, but, under the city code, the city was unable to reimburse plaintiffs for credits that exceeded the total system-specific SDC. As a practical matter, however, plaintiffs had no use for the banked SDC transportation credits because plaintiffs had completed the development project and there were no further anticipated transportation SDCs to offset with transportation SDC credits.

After the city limited plaintiffs’ use of the transportation SDC credits, plaintiffs initiated the present action, alleging claims for breach of contract and unjust enrichment. As to the first claim—breach of contract—plaintiffs alleged that the city had entered into a binding agreement to pay plaintiffs for approximately $ 1.3 million in SDC credits in exchange for plaintiffs undertaking the bridge improvements and that the city had breached that agreement when it reimbursed plaintiffs only $ 375,768.91. As to the second claim—unjust enrichment—plaintiffs alleged that the city had obtained benefits from plaintiffs in the form of infrastructure improvements and was unjustly retaining those benefits without having to pay plaintiffs for funding and building those improvements.

The city moved for summary judgment on both claims. With respect to plaintiffs’ breach of...