Port Valdez Co., Inc. v. City of Valdez
| Decision Date | 20 May 1974 |
| Docket Number | No. 1996,1996 |
| Citation | 522 P.2d 1147 |
| Parties | PORT VALDEZ COMPANY, INC., a Washington corporation, Appellant, v. CITY OF VALDEZ, Alaska, a municipal corporation, et al., Appellees. |
| Court | Alaska Supreme Court |
John W. Pletcher, III, Merdes, Schaible, Staley & DeLisio, Anchorage, for appellant.
Kenneth P. Jacobus, Hughes, Thorsness, Lowe, Gantz & Clark, Anchorage, for appellee City of Valdez.
David B. Ruskin, Anchorage, for appellee Local Boundary Comm.
Before RABINOWITZ, Chief Justice, CONNOR, BOOCHEVER and FITZGERALD, Justices, and DIMOND, Justice Pro Tem.
The instant action chronicles the latest chapter in the acrimonious relationship between the Port Valdez Company, plaintiff and appellant here, and the City of Valdez, Alaska. 1 At stake is the validity of a bubstantial annexation by the city of land which encompasses a parcel of the company's property. Underlying this more abstract determination is the legality of the tax burden the city seeks to impose upon the company's land.
The earthquake of March 27, 1964 rendered the former site of the City of Valdez unsuitable for human habitation or commercial development; the city was rebuilt on property formerly owned by the company. 2 As the rebuilt community strengthened its foothold on the southcentral coast of Alaska, expansion occurred beyond the boundaries of the land deeded after the earthquake. Simultaneously, the prospect that Valdez would become the terminus for the pipeline from the North Slope oilfields led to predictions of substantial municipal growth. In order to conform the city's boundaries to the existing area of actual services rendered, to extend full municipal services to the adjacent area and to plan for future growth, on November 5, 1969, the City of Valdez petitioned the Local Boundary Commission for an extention to its boundaries to include the entire port area and adjacent territory. The proposed annexation comprised 274 square miles, of which the company owns less than one square mile. After the city filed a supplemental petition, the commission held a public hearing on the proposed annexation, at which the company protested the proposal. The commission approved the annexation at its January 4, 1970 business meeting. The annexation became effective when, after proper presentation, the legislature failed to disapprove the commission's action. 3 A certification of boundaries was duly filed by the commission, noting that the annexation became effective March 8, 1970.
Immediately after the annexation became effective, the company began negotiations with the city concerning the company's tax burden on that portion of its land which had been included in the restructured city. Some temporary compromises were effected, but when no ultimate solution was agreed upon, the company said $18,335 in assessed taxes under protest and filed this action seeking declaratory relief invalidating the annexation and restoration of the taxes paid under protest. The action was filed on December 20, 1971, more than a year and nine months after the effective date of the annexation.
In its suit against the city, the company contended that a step annexation had been effected. 4 It charged that the annexation was void because the Local Boundary Commission failed to promulgate standards for annexations, failed to promulgate standards for step annexations, failed to hold the election required by the step-annexation legislation, failed to create a transition schedule for provision of municipal services to the annexed area and failed to establish prorated tax mill levies proportional to the services provided, as required by the same legislation. The city, the commission and the state in their answers denied the allegation that the Valdez annexation was a step annexation, and challenged the validity of the legal theories underlying the company's complaint. They also asserted immunity under the doctrine of de facto municipal incorporation as an affirmative defense. Later, the affirmative defense of laches was raised without procedural objection from the company.
After cross-motions for summary judgment, the superior court held a hearing at which Owen Meals, president of the Port Valdez Company, and Herbert W. Lehfeldt, city manager of the City of Valdez, testified. Most of the testimony was directed to the issues of de facto corporation immunity and laches. The court granted summary judgment for the city, primarily because he found the annexation immune from attack under the doctrine of de facto municipal incorporation. Findings favorable to the city on the step-annexation and laches issues were also made. This appeal followed.
We must decide whether the annexation suffered from any defect which could cause its invalidity, and, if so, whether the annexation is immune from attack either under the doctrine of de facto municipal incorporation or because the suit is barred by laches.
The company first contends that the commission failed to hold an election and follow other procedures mandated by the step-annexation provisions of the statute regulating local boundary changes. 5 However, the company has never made clear why the Valdez annexation ought to be considered a step annexation. The Alaska Constitution, art. X § 12 6 established two methods by which local boundaries might be changed: (1) by direct action of the Local Boundary Commission subject to legislative disapproval, 7 and (2) by establishment by the commission of procedures for the adjustment of boundaries by local action. The legislature implemented art. X § 12 in 1959 by enacting AS 44.19.260. Only the simple, direct annexation by the commission was authorized at that time.
The step-annexation provisions were added to AS 44.19.260 in 1964. 8 As an alternative to immediate annexation, these provisions allow for gradual assimilation of contiguous areas into incorporated cities where direct annexation would be premature or impractical. Ordinarily, a step annexation will be commenced by a municipality's petition specifically requesting that alternative, 9 although presumably the commission could require the municipality to annex by the step method. In the instant case the company has adduced no evidence that either the city or the commission contemplated a step annexation. The original petition requested a direct annexation and the certification of boundaries (a document similar to a judgment accompanied by findings of fact, which formally estblishes the new boundaries) contains not a single fact, conclusion or order suggesting that a step annexation was contemplated. Since the city did not request and the commission did not certify a step annexation, the requirements for step annexation are not applicable.
The company has argued that because service areas with differing municipal services and tax rates were established after the annexation, the annexation must be considered to have been effected by the step method. We find the selection of annexation method made by the commission and approved by the legislature to be controlling. The company's argument amounts to an assertion that the differing municipal services and tax rates demand the choice of the step method. We find no such fetters imposed upon the commission's discretion. The policy decision as to the mode of annexation is an exercise of lawfully vested administrative discretion which we will review only to determine if administrative, legislative or constitutional mandates were disobeyed or if the action constituted an abuse of discretion. 10 The company has adduced no facts from which we can conclude that the approval of direct annexation for the Valdez expansion constituted an abuse of discretion. The company relies upon the statement of the city that one of the purposes of the annexation was the extension of services into unincorporated territory. This argument misses the point that all annexations will have the purpose and effect, in part, of extending city services. The post-annexation creation of differently served and treated areas does not impugn the reasonableness of the annexation. 11 Nor can the company point to any constitutional, statutory or administrative provision which requires that an annexation of territory like that absorbed by the City of Valdez be accomplished by the step method.
We therefore hold that the Valdez annexation was undertaken by the direct method rather than the step method. 12 It follows that the company's contentions regarding the necessity of an election, schedule of services and tax mill levies as mandated by the step-annexation provisions are without merit.
The proceedings before the commission respecting the Valdez annexation-petition, public hearing and formal approval-all took place in late 1969 and early 1970. The appellees admit that the commission had not, at that time, adopted standards for changing local boundary lines as required by AS 44.19.260. 13 In United States Smelting, Refining & Mining Co. v. Local Boundary Commission, 14 we held that the failure of the commission to adopt such standards before public hearings into an annexation are held, and before it submitted proposals to the legislature, made the annexation voidable upon timely attack. We found the failure to promulgate legislatively-mandated standards before the Nome hearings to be so unreasonable as to undermine the validity of the annexation.
The commission acted on the Valdez annexation almost a year after its Nome hearings. The continued failure to have promulgated standards makes the Valdez annexation a fortiori voidable and prima facie illegal. 15 Therefore, the present annexation is null and void unless validated by some overriding doctrine.
The doctrine of de facto municipal incorporation was developed by American courts in the nineteenth century. Its purpose was to...
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...with the provisions; and (4) an assumption in good faith of municipal powers over the annexed territory. Port Valdez Company, Inc. v. City of Valdez, 522 P.2d 1147 (Alaska 1974); Ash Realty Corporation v. City of Milwaukee, 25 Wis.2d 169, 130 N.W.2d 260 (1964); see also Peterson v. Bountifu......