Peekay, Inc. v. City of Lacey, No. 30595-0-II (WA 9/8/2004)

• Decision Date: 08 September 2004
• Docket Number: No. 30595-0-II,30595-0-II
• Court: Washington Supreme Court
• Parties: PEEKAY, INC., a Washington corporation, Appellant, v. CITY OF LACEY, a Washington municipal corporation, Respondent.

Page 1

Unpublished Opinion

PEEKAY, INC., a Washington corporation, Appellant, v. CITY OF LACEY, a Washington municipal corporation, Respondent.

No. 30595-0-II

Court of Appeals of Washington, Division Two.

Filed: September 8, 2004.

Appeal from Superior Court of Thurston County. Docket No: 02-2-01199-1. Judgment or order under review. Date filed: 06/10/2003. Judge signing: Hon. Wm Thomas McPhee.

Counsel for Appellant(s), Jane Anne Ryan Koler, Law Office of Jane Ryan Koler PLLC, 620 Kirkland Way Ste 200, PO Box 908, Kirkland, WA 98083-0908.

Counsel for Respondent(s), Kenneth R. Ahlf, Attorney at Law, 1230 Ruddell Rd SE Ste 201, Lacey, WA 98503-5749.

William Dale Kamerrer, Law Lyman Daniel Kamerrer et al, PO Box 11880, Olympia, WA 98508-1880.

MORGAN, A.C.J.

This case has two distinct parts. In what we will call Part I, Peekay filed a land-use appeal to the superior court. In what we will call Part II, Peekay filed an original action for damages in superior court. The two parts were combined in one complaint.

Facts pertaining to Part I: Peekay, Inc., operates a chain of stores that it calls Lovers Package. It owned certain land on which it wanted to establish a new store. It applied for the necessary business license, which a hearing examiner either granted or recommended be granted. The City Council reversed, asserting that a Lovers Package store would not be appropriate for the neighborhood. Peekay invoked the superior court's appellate jurisdiction by filing a complaint that embodied a LUPA appeal.¹ The superior court affirmed the City Council, and Peekay appealed to this court. While the appeal was pending, Peekay sold the land and abandoned plans for a store at that location. When the City learned of the sale, it moved to dismiss this appeal as moot, and we heard oral argument on the motion as well as on the merits of the appeal.

Facts pertaining to Part II: At the same time as Peekay invoked the superior court's appellate jurisdiction by filing a LUPA appeal, it also invoked the superior court's original jurisdiction by alleging a cause of action for damages. It claimed that the City had unlawfully denied its application for a business license and that the unlawfulness of the denial had caused delay and other damages. When Peekay thereafter tried to amend its damages cause of action, the superior court declined to rule, and Peekay appealed here. At oral argument in this court, the parties disagreed on whether the findings of the hearing examiner or City Council have or will have preclusive effect.²

This history gives rise to four questions. (1) Should we grant or deny the City's motion to dismiss the case as moot, and, if so, to what extent? (2) If Part I is moot, will the findings of the examiner and City Council have preclusive effect and, if not, should they be vacated as surplusage? (3) If Part I is moot, should we rule that the City Council exceeded its authority by making its own findings of fact? (4) If Part II is not moot, did the superior court abuse its discretion when it declined to rule on Peekay's motion to amend its original complaint for damages?

I.

The first question is whether one or both parts of this case are now moot. A case is moot if we can no longer provide effective relief.³

As already seen, Part I of this case is Peekay's appeal from the City's denial of Peekay's application for a business license. We can no longer provide effective relief in that part of the case because Peekay, having sold the land on which it wanted to operate a business, no longer has the ability to operate a business at the location in question. Part I of this case, Peekay's administrative appeal to the superior court, is moot.

As already seen, Part II of this case is Peekay's original complaint for damages caused by the City's allegedly unlawful denial of Peekay's business license application. We can still provide effective relief in that part of the case because, if Peekay's allegations are true, Peekay may have been damaged by delay or other factors while it owned the land. Part II of this case, Peekay's original complaint for damages, is not moot.⁴

II.

At oral argument, Peekay expressed concern that the examiner's and City Council's findings of fact might be given preclusive effect in the other part of this case or in a subsequent case. As those findings became moot before we could review them, they never became unconditionally final and they do not have preclusive effect.⁵ To prevent their future misuse, we vacate them as having become moot before they could be reviewed.

III.

Asserting the public-interest exception to mootness,⁶ Peekay urges us to review issues inherent in its land-use appeal, despite that appeal's mootness. The concurrence urges us to do likewise on the issue of whether the City Council exceeded its authority under state law by entering its own findings of fact. We decline both requests because we lack enough information to rule reliably.

RCW 35A.63.170 allows a city council to use either of two options when describing the powers of a hearing examiner.⁷ The council can vest the examiner with binding fact-finding authority and itself with appellate jurisdiction,⁸ or it can vest the examiner with recommendatory fact-finding authority and itself with original jurisdiction.⁹ The council may use one option in some classes of cases and the other option in other classes of cases.¹⁰

Depending on the type of case, a Lacey hearing examiner and the Lacey City Council may be operating under either option. Lacey Municipal Code (LMC) 2.30.090(A) applies the first option in some cases. LMC 2.30.090(B) applies the second option in other cases. LMC 2.30.140(C) is also instructive, for it requires the examiner to state in his decision that `{t}he decision constitutes a recommendation' or that `{t}he decision will become final in 14 calendar days.'

After examining LMC 2.30.090 and the parties' briefs, we cannot tell whether Peekay's appeal from the denial of an application for a business license falls under LMC 2.30.090(A) or LMC 2.30.090(B). Nor did the hearing examiner follow LMC 2.30.140(C) and state whether he was making a recommendation or a final decision. The concurrence reasons that Peekay asked the City Council to exercise appellate jurisdiction rather than original jurisdiction, and thus that the City Council must have had only appellate jurisdiction but we fail to see how the parties' conduct can determine the authority the Council has by law. Ultimately then, we cannot reliably say that the Council had or did not have fact-finding authority when considering Peekay's application for a business license, and we decline to address that question in this moot context.

IV.

The remaining question is whether the superior court erred by not ruling on Peekay's motion to amend its complaint for damages. The superior court declined to rule because it believed the entire action was moot. Having concluded that Part II is not moot, we conclude that the court's declination was an abuse of its discretion. We also conclude that the court must allow the amendment on remand because `leave shall be freely given when justice so requires'¹¹ and the amendment will relate back to the date of the original complaint.¹²

In summary, Part I of this case, but not Part II, is dismissed as moot. Given that the examiner's and Council's findings and conclusions relate only to Part I, they are hereby vacated as surplusage. Although we decline to address any issues that are moot, we hold that Peekay is entitled to amend its original complaint for damages. The case is remanded to the superior court for that court to exercise its original jurisdiction.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

Van Deren, J.

I concur:

BRIDGEWATER, J. (concurring)

I concur in the result of the majority but view the mootness differently.

Peekay, Inc. appeals the superior court's decision upholding the Lacey City Council's denial of a business license to operate a Lovers Package store in Lacey. Though Peekay has sold the location and no longer has a business license application pending, I would hold that the matter is not totally moot. While the land use issue as to the particular parcel is moot, the land use issue regarding the City's procedural application is not moot. The city council erred in its review as an appellate body because it had no authority under the statute to make its own findings. Further, the damage issue is not moot because the superior court did not allow Peekay to amend its complaint to allege damages under RCW 64.40.020 for arbitrary and capricious actions. I would grant amendment of the complaint and remand as to the cause alleged under RCW 64.40.020.

The city council for the City of Lacey (City) adopted, as part of its zoning code, a regulation dealing with the proper location of adult entertainment facilities in 1996. The city council developed Ordinance No. 1037 after a long series of studies conducted by the City's Planning Commission and review of those studies by the city council.

Chapter 16.67 of the Lacey Municipal Code (LMC) encompasses section 3 of Ordinance 1037. This chapter regulates adult businesses, including adult novelty stores, and limits their locations. It allows adult novelty stores to locate in certain commercial and industrial zones of the City but not in the Woodland Zoning District, which is involved here.

Peekay, Inc. applied for a business license to operate a Lovers Package store on November 29, 2001. The City's ordinances require that all businesses apply for a business license prior to operating within the City. The license application was denied. Peekay appealed, and a hearing examiner took testimony. The hearing examiner made findings and concluded that Peekay's proposed use was appropriate. The director of...