Alto v. State By and Through State Fire Marshal

• Decision Date: 27 October 1993
• Citation: 121 Or.App. 543,855 P.2d 649
• Parties: John F. ALTO, W.D. Tuininga, Glenn H. Lucas, Robert C. Peck, Barry Desbiens, Gary W. Collins, Arnold Donnelly, R.J. Barman, George De Hart, and Herbert L. Thompson, Respondents-Cross-Appellants, v. The STATE of Oregon, By and Through the STATE FIRE MARSHAL, Susan M. Browning, acting State Fire Marshal, Appellant-Cross-Respondent, and Metrofueling, Inc., Intervenor-Appellant-Cross-Respondent. 9009-05766; CA A67834. . *
• Court: Oregon Court of Appeals

Page 649

855 P.2d 649

121 Or.App. 543

John F. ALTO, W.D. Tuininga, Glenn H. Lucas, Robert C. Peck Barry Desbiens, Gary W. Collins, Arnold Donnelly R.J. Barman, George De Hart, and Herbert L. Thompson Respondents-Cross-Appellants, v. The STATE of Oregon, By and Through the STATE FIRE MARSHAL Susan M. Browning, acting State Fire Marshal, Appellant-Cross-Respondent, and Metrofueling, Inc., Intervenor-Appellant-Cross-Respondent.

9009-05766; CA A67834.

Court of Appeals of Oregon, In Banc. ^*

Argued and Submitted Oct. 23, 1992.

Decided July 7, 1993.

Reconsideration Denied October 27, 1993.

Janet A. Metcalf, Asst. Atty. Gen., Salem, argued the cause for appellant-cross-respondent. With her on the briefs were Dave Frohnmayer, Atty. Gen., and Virginia L. Linder, Sol. Gen., Salem.

Phil Goldsmith, Portland, argued the cause for respondents-cross-appellants. With him on the briefs were Roger K. Harris and James & Denecke, Portland.

James N. Westwood, Portland, argued the cause for intervenor-appellant-cross-respondent. With him on the briefs were Dennis P. Rawlinson and Miller, Nash, Wiener, Hager & Carlsen, Portland.

DURHAM, Judge.

Plaintiffs, retail gasoline dealers, brought this action to obtain a declaratory judgment interpreting ORS 480.330 and ORS 480.340, which relate to cardlock gasoline stations. They also sought an injunction against allegedly discriminatory enforcement of the statutes and rules by the State Fire Marshal, and reasonable attorney fees. Metrofueling, Inc., a cardlock dealer, intervened and joined the State of Oregon as a defendant. ¹ Pursuant to the parties' stipulation, the court consolidated the preliminary injunction hearing with the trial on the merits. The court granted a declaration that the Fire Marshal's rules interpreting those statutes are invalid and requiring the Fire Marshal to enforce the statutes according to plaintiffs' interpretation of them. The court denied plaintiffs' claim for reasonable attorney fees. Defendants appeal, and plaintiffs cross-appeal. We affirm on appeal and reverse and remand on cross-appeal.

The dispute revolves around the meaning of "at retail" in two statutes. ORS 480.330 provides:

"No owner, operator or employee of any filling station, service station, garage or other dispensary where Class 1 flammable liquids are dispensed at retail, shall permit any person other than the owner, operator or employee to use or manipulate any pump, hose, pipe or other device for dispensing such liquids into the fuel tank of a motor vehicle or other retail container."

ORS 480.340 provides, in part:

"No owner, operator or employee of any filling station, service station, garage or other dispensary where Class 1 flammable liquids are dispensed at retail, shall install or use, or permit the use of, any coin-operated or self-service dispensing device for such liquids."

The Fire Marshal promulgated rules defining "at retail" in a somewhat backhanded manner. OAR 837-20-035(6) defines a "non-retail" facility as one that, inter alia, "[d]oes not market or sell flammable liquids to the general public." OAR 837-20-045 provides:

"No owner of a facility where flammable liquids are dispensed at retail shall allow the general public to use or manipulate any pump, hose, pipe or other device used at the facility to dispense flammable liquids into a fuel tank of a motor vehicle or container."

Under the rules, the sale of gasoline to the "general public" constitutes retail sale. However, by defining cardlock facilities as "non-retail," the rules exempt cardlock dealer sales from the statutory requirement that an attendant must dispense gasoline sold at retail. Plaintiffs argue, and the trial court agreed, that under the statutes in effect when this case arose, cardlock dealers dispense gasoline "at retail" and are subject to the ban on self-service dispensing. ²

Defendants first argue that the trial court lacked jurisdiction, because plaintiffs' claim is solely a challenge to the validity of administrative rules and, therefore, must be brought by petition to this court under ORS 183.400(1). Plaintiffs counter that their main objective was a determination of their rights under and the meaning of the two statutes, which they assert were properly before the court in a declaratory judgment action under ORS 28.010. They argue that the State Fire Marshal's selective enforcement actions violated the statute and the administrative rules. They also argue that the injunctive relief that they seek is not available in an ORS 183.400 rule challenge and that, therefore, the trial court can determine the validity of the rules in the course of deciding the entire dispute. See Hay v. Dept. of Transportation, 301 Or. 129, 719 P.2d 860 (1986).

ORS 183.400 provides, in part:

"(1) The validity of any rule may be determined upon a petition by any person to the Court of Appeals in the manner provided for review of orders in contested cases. * * *

"(2) The validity of any applicable rule may also be determined by a court, upon review of an order in any manner provided by law or pursuant to ORS 183.480 or upon enforcement of such rule or order in the manner provided by law."

In Oregon Bankers Assn. v. Bureau of Labor and Ind., 102 Or.App. 539, 544, 796 P.2d 366 (1990), we held that a rule challenge under ORS 183.400(1) is confined to an adjudication of "the validity of an administrative rule as it is written." (Emphasis in original.) Hay v. Dept. of Transportation, supra, holds that our jurisdiction to consider a rule challenge under ORS 183.400(1) is not exclusive and that a circuit court may hear a rule challenge "when a party places a rule's validity at issue in a separate civil action." 301 Or. at 138, 719 P.2d 860.

Plaintiffs' claim is not solely a facial challenge to the validity of rules. They alleged that the Fire Marshal was responsible for enforcement of the statutory prohibitions on self-service and coin-operated dispensing of Class 1 flammable liquids at retail. ORS 480.330; ORS 480.340. They claimed that her encouragement of "cardlock" dispensers violated those statutes, deprived plaintiffs of due process and equal protection under the Fourteenth Amendment and 42 USC § 1983, restrained trade and commerce in violation of ORS 646.705 et seq., interfered with prospective economic advantage and caused a loss of goodwill and defamation to plaintiffs' businesses, names and trades. They alleged that her conduct had caused and would cause irreparable harm to plaintiffs and other "non-cardlock" gasoline dealers. They sought a declaration of their rights under ORS 480.330 and ORS 480.340 and a permanent injunction requiring the Fire Marshal to enforce the statutory prohibitions on self-service dispensing of gasoline at retail against all retail dealers, including cardlock dealers. Defendants do not contend that plaintiffs made their allegations or sought injunctive relief and attorney fees in bad faith or solely to circumvent this court's jurisdiction under ORS 183.400(1).

Hay quoted, with approval, a law review article, Safriet, Judicial Review of Government Action: Procedural Quandaries and a Plea for Legislative Reform, 15 Envtl.L. 217, 239 (1985), that pointed out the impracticality of compelling a party seeking a rule's invalidation and other relief, such as an injunction, to litigate exclusively in the Court of Appeals. The court in Hay relied on that reasoning in rejecting the state agency's contention that litigation in the circuit court over trespass and nuisance issues had to cease because the litigation also concerned the validity of a rule. Defendants argue that plaintiffs did not seek damages in circuit court, but the Supreme Court has not required that. The complaint meets Hay's requirement of a "separate civil action" that seeks relief, such as injunctive relief, that is broader in scope than the invalidation of a rule on its face. The court did not err in assuming jurisdiction of this proceeding. ORS 183.400(2).

Defendants assert that plaintiffs' claims are moot because, after judgment was entered, the legislature enacted statutory amendments to ORS 480.310 and ORS 480.345 that authorized cardlock dealers to permit nonretail customers to dispense gasoline under certain conditions "[n]otwithstanding ORS 480.330 and ORS 480.340." Or.Laws 1991, ch. 863, §§ 48-57. However, defendants dispute plaintiffs' claim to prevailing-party attorney fees in the action. Plaintiffs' cross-appeal asserts that the court erred in denying attorney fees, and defendants contend that the denial of fees was correct. We cannot resolve the attorney fee dispute without addressing the correctness of the court's judgment. Pacific N.W. Dev. Corp. v. Holloway, 274 Or. 367, 371, 546 P.2d 1063 (1976). The appeal is not moot.

Defendants assign error to the trial court's rejection of their laches defense. The state did not plead that defense, and the trial court was not required to consider it sua sponte. Metrofueling argues that it made substantial capital investments for over a decade, in reliance on a 1966 Attorney General's opinion and the Fire Marshal's operations under that opinion. 32 Op Atty Gen 419, 421 (1966). However, laches requires proof that the delay in filing suit caused the defendant "substantial prejudice * * * to the extent that it would be inequitable to afford the relief sought." Stephan v. Equitable S & L Ass'n., 268 Or. 544, 569, 522 P.2d 478 (1974). If the Fire Marshal's enforcement plan is unlawful, Metrofueling does not gain an equitable right to continue operation under that plan because the responsible state official fails to enforce the law until judicially compelled to do so.

Defendants assign error to the trial court's interpretation of ORS 480.330 and ORS 480.340, particularly the phrase "at retail," and the court's rejection of the State Fire Marshal's interpretation of that phrase in her rules. ORS 174.020 provides, in part: "In the construction of a statute...