Corey v. Dlcd, M119478.

• Decision Date: 31 January 2007
• Docket Number: A129905.,M119478.
• Citation: 210 Or. App. 542,152 P.3d 933
• Parties: Virginia COREY; Bergis Road, LLC; and Bernita Johnston, Petitioners, v. DEPARTMENT OF LAND CONSERVATION AND DEVELOPMENT, Respondent.
• Court: Oregon Court of Appeals

152 P.3d 933

210 Or. App. 542

Virginia COREY; Bergis Road, LLC; and Bernita Johnston, Petitioners, v. DEPARTMENT OF LAND CONSERVATION AND DEVELOPMENT, Respondent.

M119478.

A129905.

Court of Appeals of Oregon.

On Respondent's Motion to Determine Jurisdiction April 10, 2006.

Decided January 31, 2007.

Hardy Myers, Attorney General, Mary H. Williams, Solicitor General, and Denise G. Fjordbeck, Senior Assistant Attorney General, for motion.

Before WOLLHEIM, Presiding Judge, and SCHUMAN and ROSENBLUM, Judges.

SCHUMAN, J.

Petitioners seek judicial review of an order issued by respondent, the Department of Land Conservation and Development (DLCD), opting to waive enforcement of certain land use regulations in lieu of paying compensation under ORS 197.352 (Ballot Measure 37). Petitioners have also sought judicial review in the circuit court. In response, DLCD filed a motion in this court seeking a summary determination of which court has jurisdiction to review the order. We grant the motion and determine that we have jurisdiction.

Petitioners Virginia Corey and Bergis Road, LLC, each own undivided one-third interests in a 23-acre parcel of land located in rural Clackamas County. In January 2005, they filed a claim seeking $4,985,000 in compensation for the asserted reduction in the fair market value of their property caused by land use regulations restricting its use. ORS 197.352(1).¹ DLCD determined that application of those laws to petitioners' property would result in a loss of fair market value and, on that basis, that petitioners had a valid claim under Measure 37. In lieu of paying compensation, DLCD decided to forgo applying certain land use regulations affecting petitioners' use of their property, as permitted by ORS 197.352(8).² The agency also determined, however, that each petitioner's use of the property would remain subject to certain regulations because the statute required waiver only insofar as necessary to allow "the owner to use the property for a use permitted at the time the owner acquired the property." Id. Petitioners do not agree with DLCD's determination of which regulations need to be waived, and they consequently seek judicial review. The question now before us on DLCD's motion is where jurisdiction for judicial review of DLCD's order lies.

That question might be resolved by one of several statutes. One possibility is ORS 183.482, which vests jurisdiction for judicial review of orders in contested cases in this court. Whether that statute applies depends on whether the proceeding before DLCD should have been treated as a contested case³ as defined by ORS 183.310(2)(a):

"`Contested case' means a proceeding before an agency:

"(A) In which the individual legal rights, duties or privileges of specific parties are required by statute or Constitution to be determined only after an agency hearing at which such specific parties are entitled to appear and be heard;

"(B) Where the agency has discretion to suspend or revoke a right or privilege of a person;

"(C) For the suspension, revocation or refusal to renew or issue a license where the licensee or applicant for a license demands such hearing; or

"(D) Where the agency by rule or order provides for hearings substantially of the character required by ORS 183.415, 183.425, 183.450, 183.460 and 183.470."

Subparagraphs (B) and (C) clearly do not apply, because DLCD did not have authority to suspend, revoke, or refuse to renew anything. Subparagraph (D) does not apply, because the procedure that DLCD employed to deal with petitioners' claim bears no resemblance to a hearing as required by the statutes cited in that subparagraph, that is, an Administrative Procedures Act contested case hearing with notice by personal service, live testimony under oath, depositions, cross-examination of witnesses, and a decision based exclusively on the record. Rather, the rules governing DLCD's treatment of Measure 37 claims, OAR 125-145-0030 to 125-145-0100, provide only for written comment and no other procedural formalities. Thus, the only arguably relevant subparagraph is (A), under which a proceeding is a contested case if it is one "[i]n which the individual legal rights, duties or privileges of specific parties are required by statute or Constitution to be determined only after an agency hearing at which such specific parties are entitled to appear and be heard." Further, as no statute requires notice and a hearing, and the Oregon Constitution contains no provision guaranteeing procedural rights in noncriminal cases, the question reduces to this: Does anything in the United States Constitution require DLCD to provide a Measure 37 claimant with notice and a hearing before DLCD decides not to waive certain land use regulations for the benefit of the claimant?

Before a governmental entity applies pre-existing legislative or quasi-legislative standards in such a way as to deprive a person (or small group of persons) of an interest in property, the Due Process Clause of the Fourteenth Amendment requires the government to provide notice and a meaningful opportunity to be heard. Bi-Metallic Investment Company v. State Board of Equalization, 239 U.S. 441, 445, 36 S.Ct. 141, 60 L.Ed. 372 (1915); Londoner v. Denver, 210 U.S. 373, 386, 28 S.Ct. 708, 52 L.Ed. 1103 (1908). DLCD is a governmental entity; Measure 37 is a pre-existing legislative standard; petitioners are a small group of people. The question whether they were entitled to notice and a hearing, then, reduces to whether or not DLCD purported to deprive them of a property interest.

Petitioners' interest in this case is not property in the traditional sense; DLCD is not attempting to deprive them of their actual real estate. Rather, what is at stake for petitioners here is their interest in a waiver of regulations that will result in an expansion of permissible uses of their land. That fact, however, does not necessarily mean that petitioners have no property interest. In a number of cases beginning with Goldberg v. Kelly, 397 U.S. 254, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970), the United States Supreme Court expanded the definition of constitutionally protected property interests beyond tangible real estate and objects. The "new property" includes certain governmental benefits to which an individual has a legitimate claim of entitlement. As the Court explained in Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972):

"Property interests * * * are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law— rules or understandings that secure certain benefits and that support claims of entitlement to those benefits. Thus, the welfare recipients in [Goldberg v. Kelly] had a claim of entitlement to welfare payments that was grounded in the statute defining eligibility for them."

Thus, at least since 1972, to determine whether a particular interest amounts to constitutionally protected property, we look to state law and ask whether that law entitles certain persons to specific benefits. We have no difficulty concluding that Measure 37 creates, in some real property owners, a claim of entitlement either to compensation or to the waiver of restrictive regulations.

However, that does not end our inquiry. Goldberg, Roth, and other United States Supreme Court cases dealing with procedural due process left unanswered for many years the question whether persons (such as petitioners here) initially applying for a benefit, as opposed to persons who have already qualified for a benefit, have a claim of entitlement to that benefit. Some language in Roth suggests that applicants for benefits, as well as possessors of them, have an entitlement: "The recipients [in Goldberg] had not yet shown that they were, in fact, within the statutory terms of eligibility. But we held that they had a right to a hearing at which they might attempt to do so." Roth, 408 U.S. at 577, 92 S.Ct. 2701. A number of scholars argued that the law created an entitlement to a benefit whenever the law spelled out nondiscretionary criteria, the attainment of which qualified an applicant to receive the benefit, even when the person seeking the benefit was an applicant and not an established possessor.⁴ Many cases from the state and lower federal courts reached the same conclusion.⁵ But the Supreme Court never espoused that theory and, in fact, it later repudiated its dictum from Roth and rejected the theory outright.

That occurred in American Mfrs. Mut. Ins. Co. v. Sullivan, 526 U.S. 40, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999) (Sullivan). Applicants for workers' compensation benefits challenged the constitutional adequacy of procedures used by the state to determine the validity of their claims. The Court held that the applicants did not have a constitutionally protected interest in the benefits:

"In [both Goldberg and Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976)], an individual's entitlement to benefits had been established, and the question presented was whether predeprivation notice and a hearing were required before the individual's interest in continued payment of benefits could be terminated.

"Respondents' property interest in this case, however, is fundamentally different. * * * [F]or an employee's property interest in the payment of medical benefits to attach under state law, the employee must clear two hurdles: First, he must prove that an employer is liable for a workrelated injury, and second, he must establish that the particular medical treatment at issue is reasonable and necessary. Only then does the employee's interest parallel that of the beneficiary of welfare assistance in Goldberg and the recipient of disability benefits in Mathews.

"Respondents obviously have not cleared both of these hurdles. While they indeed have established their initial eligibility for medical treatment, the...