Landmark Development, Inc. v. City of Roy

• Decision Date: 22 July 1999
• Docket Number: No. 65817-0,65817-0
• Citation: 980 P.2d 1234,138 Wn.2d 561
• Parties: LANDMARK DEVELOPMENT, INC., a Washington corporation, Petitioner, v. CITY OF ROY, a municipal corporation; Charles L. Wolf and Jane Doe Wolf, husband and wife; James Rotondo and Jane Doe Rotondo, husband and wife; Joe Derefield and Jane Doe Derefield, husband and wife; Rex Raczykowski and Jane Doe Raczykowski, husband and wife; James Byrd and Jane Doe Byrd, husband and wife; and Patrick Sloppy and Jane Doe Sloppy, husband and wife, Respondents.
• Court: Washington Supreme Court

Page 1234

138 Wn.2d 561

980 P.2d 1234

LANDMARK DEVELOPMENT, INC., a Washington corporation, Petitioner, v. CITY OF ROY, a municipal corporation; Charles L. Wolf and Jane Doe Wolf, husband and wife; James Rotondo and Jane Doe Rotondo, husband and wife; Joe Derefield and Jane Doe Derefield, husband and wife; Rex Raczykowski and Jane Doe Raczykowski, husband and wife; James Byrd and Jane Doe Byrd, husband and wife; and Patrick Sloppy and Jane Doe Sloppy, husband and wife, Respondents.

No. 65817-0.

Supreme Court of Washington En Banc.

Argued May 19, 1998.

Decided July 22, 1999.

Gordon, Thomas, Honeywell, Salvador A. Mungia, II, Margaret Archer, Tacoma, for Petitioner.

Ogden, Ogden & Wallace, Phillip C. Raymond, Kent C. Metey, Seattle, for Respondents.

JOHNSON, J.

This case requires us to decide whether a municipality, in setting and applying water connection charges authorized under RCW 35.92.025, is liable to a developer for damages under RCW 64.40.020(1), RCW 35.92.010, or 42 U.S.C. § 1983 and § 1988. Specifically, we must resolve whether a municipality, in determining its water system users' equitable share of the system's cost via the computation of water charges authorized under RCW 35.92.025, must deduct grants and donations used for improving the water system. We are also asked to decide whether a municipality may charge a different connection fee to two similarly situated developers. The Court of Appeals reversed the trial court's judgment in favor of the property owner. Landmark Dev., Inc. v. City of Roy, No. 19797-9-II, 1997 WL 235500 (Wash.Ct.App. May 9, 1997). We affirm.

FACTS

In early July 1990, Landmark Development, Inc. (Landmark) requested a water availability letter from the city of Roy (Roy), a city of approximately 350 people in Pierce County. In compliance with county platting procedures, Landmark sought tentative assurance from Roy that sufficient water was available for Landmark's proposed 50-unit residential development to be built outside the Roy city limits.

On July 9, 1990, Mark Carpenter, a principal of Landmark, assured the Roy City Council (Council) that Landmark's inquiry, as a preliminary step in the developer's rudimentary plans, was limited to the issue of water availability alone: "[A]t this point, [the Landmark development] is all conjecture and so what I'm just looking for is a letter stating that you do have water that is available to tap on to this and, you know, so that I can go ahead and submit and go from there." Roy City Council Hr'g Tr., July 9, 1990 at 2 (Pl.'s ex. 1, at 2) (hereinafter Transcript). The Council attempted to secure more detailed information about the planned development at this meeting but Carpenter was unable to provide specific facts for the Council to rely on: "I wish I had more stuff, but, you know, until we get it back from the County and they tell us things we can and can't do, its hard to pin it all down." Transcript at 3.

Indeed, at this meeting, Landmark expressly stated that its inquiry was not about what Roy's water might cost the developer.

                Rather, Landmark was solely seeking assurance that Roy's water quantity was sufficient if Landmark's development plans came to fruition.  When Roy Mayor Charles L. Wolf cautioned Landmark that the development project "will be at your expense," Landmark replied:  "Right.  But ... they don't want to know about that.  All they care about is that there is water available."   Transcript at 7. Based on these representations of Landmark's interests, Roy shortly after the meeting issued Landmark a standard water availability letter and certificate of water availability on July 18, 1990.  Landmark signed the certificate on August 22, 1990 and returned it to Roy
                

The one-year water availability letter confirmed enough water was available for the 50 new water connections Landmark might install. In conformity with the understanding that occurred at the July 9, 1990 Council meeting, the letter did not commit Roy to a fixed connection fee. Directly above Carpenter's signature, the letter reads:

I [Landmark] acknowledge that this proposed project may require improvements to the water system which would incur my financial obligation. Prior to final approval for construction of the water system, it is understood that a legal contract between myself and the water utility must be submitted which specifies the terms of water service, operational responsibility, and financial obligation.

Certificate of Water Availability (Pl.'s ex. 4, at 2).

Also, at the July 9, 1990 Council meeting, Landmark assured Roy that Landmark's on-site water connections would be "more than up and running" in six months. Transcript at 6. Roy's city attorney confirmed this understanding of Landmark's building schedule, reiterating, "we anticipate that the contract will be completed sometime in the fall...." Transcript at 7. However, it was in fact nearly two years later, on May 13, 1992, when Landmark finally managed to purchase the proposed 30 acres of property outside Roy. Since the property purchase date occurred nearly two years after Roy's original one-year water availability letter had been issued to Landmark, that letter had expired by the time Landmark actually bought the property. On February 26, 1993, two and one half years after Landmark first made its water availability inquiries to the Council, Roy renewed the original one-year water availability letter to Landmark.

During this time, another developer, New Concept Homes, Inc. (New Concept), requested a water availability letter from Roy for a planned 83-unit residential development also located outside of Roy. Roy issued a one-year water availability letter to New Concept on October 19, 1992; that letter was identical to the one issued to Landmark.

In 1986, Roy had constructed a 260,000-gallon standpipe and two 500-gpm wells. That expansion of the city's water supply cost $177,669 and the expansion of the city's water storage capacity cost $269,923. The total cost of the 1986 construction was $447,592. A part of the cost was funded by a federal grant. Roy borrowed $70,000 to pay those expansion costs not borne by the federal monies.

Both the Landmark and New Concept developments would be utilizing Roy's water system as it existed after the 1986 expansion project. The new developments would add an additional 133 service connections to Roy's existing draws. Roy would also need to provide required fire flows to the proposed development plats.

At the time Roy sent the 1992 water availability letters to Landmark and New Concept, Roy's water connection fee was set at $350 under Roy City Ordinance 351. In July 1993, New Concept finished installing its water system at its development site and was ready to connect to Roy's water system.

After Roy was informed by New Concept in June that its development units would be ready in less than one month to connect to the municipal water system, Roy issued a connection fee invoice to the developer. This bill, dated June 15, 1993, charged New Concept $350 per connection, the city fee then in effect. New Concept paid this invoice on October 21, 1993.

Meanwhile, by June 1993, Landmark was still one and one half years away from commencing installation of the water system at After New Concept was connected to the Roy water system and had received its invoice, Roy learned that a project report was required by the state Department of Health as a supplement to Roy's 1982 comprehensive water system plan and engineering report. On July 9, 1993, nearly one month after issuing its water connection rate invoice to New Concept, Roy contracted with a professional engineering firm, Gray & Osborne, to prepare the mandatory project report. Gray & Osborne's report was to "evaluate[ ] the proposed developments' impacts on the City water system using hydraulic modeling." Gray & Osborne Report at 1-1 (Pl.'s ex. 33) (hereinafter Report).

its development site. Landmark had not moved beyond the initial stage in the negotiation process - Roy's water availability letter. That letter, as noted above, contained no language guaranteeing Landmark a specific water connection fee.

Gray & Osborne recommended, inter alia, "that the City consider increasing their installation and connection charges outside the City limits to provide a source of funding for capital improvements which will be necessary to meet the requirements of the expanded service area." Report at 1-3.

Specifically, Gray & Osborne advised Roy increase its $350-per-unit connection fee to $920. Gray & Osborne had taken the total cost of Roy's 1986 expansion ($447,592) into account when calculating its recommended connection fee increase: "The connection charge for the City of Roy was determined using the 1986 construction cost of the 260,000-gallon standpipe and two 500-gpm wells, and dividing these costs by the number of equivalent residential units (ERUs) each facility has the capability of serving." Report at app. F.

Roy followed Gray & Osborne's recommendation and adopted Roy City Ordinance 448 at its October 11, 1993 Council meeting, raising the water connection fee to $920 per connection. At a September 21, 1993 Council meeting, a month before Ordinance 448 was passed, Landmark tendered a check to Roy for $17,500 which would have paid in full Landmark's planned connections at Roy's old water connection fee rate. However, at the time Landmark tendered the check, the developer had not begun design or construction of its water system and could not estimate when it might do so. In fact, Landmark was over one month away from even submitting its water system plans to Roy. Roy, therefore, rejected Landmark's check. Although initially cautious at this meeting, Roy's city attorney later conducted legal research and advised Roy to charge Landmark the new connection fee.

Landmark brought suit in December 1993, alleging Roy was charging it an unreasonable water connection fee. Landmark specifically...