Seven Hills, LLC v. Chelan Cnty.

• Decision Date: 23 September 2021
• Docket Number: No. 98730-1,98730-1
• Citation: 495 P.3d 778
• Parties: SEVEN HILLS, LLC, a Washington limited liability company; and Water Works Properties, LLC, a Washington limited liability company, Petitioners, v. CHELAN COUNTY, a municipal corporation, Respondent.
• Court: Washington Supreme Court

495 P.3d 778

SEVEN HILLS, LLC, a Washington limited liability company; and Water Works Properties, LLC, a Washington limited liability company, Petitioners,

v.CHELAN COUNTY, a municipal corporation, Respondent.

No. 98730-1

Supreme Court of Washington.

Filed: September 23, 2021

Taudd Alexander Hume, James McPhee, Deanna Marie Willman, Witherspoon Brajcich McPhee, PLLC, 601 W. Main Ave. Ste. 714, Spokane, WA, for Petitioners.

Kenneth W. Harper, Menke Jackson Beyer, LLP, 807 N. 39th Ave., Yakima, WA, Susan E. Hinkle, Chelan County Prosecutor's Office, P.o. Box 2596, Wenatchee, WA, for Respondent.

MADSEN, J.

¶1 In 2014, Seven Hills LLC began developing a cannabis¹ production and processing business in Chelan County, Washington. After Seven Hills procured the relevant permits and began building on its property, Chelan County (County) passed Resolution 2015-94, which placed a moratorium on siting new cannabis-related businesses. While the moratorium was in place, Seven Hills received the necessary state licenses and began operating its cannabis production and processing business. Shortly thereafter, the County passed Resolution 2016-14, which changed the relevant ordinances resulting in the barring of new cannabis-related businesses. Seven Hills received a notice and order to abate zoning from the County Department of Community Development. The order contained four allegations: that Seven Hills had (1) produced and processed cannabis in violation of Resolution 2016-14, (2) constructed and operated unpermitted structures, (3) operated unpermitted propane tanks, and (4) created a public nuisance. A hearing examiner found Seven Hills committed all four violations; the trial court and the Court of Appeals affirmed.

¶2 We hold that the County's resolution declaring a moratorium on siting new cannabis production and processing activities did not amend or replace existing zoning ordinances, and that Seven Hills established a nonconforming use prior to adoption of Resolution 2016-14. We hold that Resolution 2016-14 did amend the County's ordinances defining agricultural use, but did not retroactively extinguish vested rights. Accordingly, we reverse the Court of Appeals, in part, and remand for further proceedings.

BACKGROUND

¶3 On November 6, 2012, Washington voters passed Initiative 502 (I-502), which decriminalized adult nonmedical use, possession, and production of cannabis. LAWS OF 2013, ch. 3. I-502 also established licensure for cannabis businesses through the Washington State Liquor and Cannabis Board (Board) to produce, process, and sell cannabis for recreational use. Former RCW 69.50.325 -.369 (2013).

¶4 The Board promulgated and implemented rules related to cannabis operations. Former ch. 314-55 WAC (2013). In October 2013, the Board established the application requirements to be a licensed cannabis producer and processor. Former WAC 314-55-015 to - 050, - 079, - 081. The Board then determined the maximum number of cannabis businesses per county, and prospective business owners applied for licensure through a lottery. Former WAC 314-55-081(1). Once the Board received an application for a producer, processor, or retailer license, the Board was required to give notice of the application to the local jurisdiction. Former RCW 69.50.331(7)(a). That jurisdiction had 20 days to approve or object to a cannabis business receiving a license. Former RCW 69.50.331(7)(b). If an objection was raised, the Board was required to give "substantial weight" to the local jurisdiction's objections if "based upon chronic illegal activity associated with the applicant's operations of the premises proposed to be licensed or the applicant's operation of any other licensed premises, or the conduct of the applicant's patrons inside or outside the licensed premises." Former RCW 69.50.331(9).

¶5 In addition, applicants for producer licenses were required to describe their plans for product transportation, growing operations, and protocols and procedures for testing cannabis. Former WAC 314-55-020(9). Similarly, processor applicants were obligated to report their plans for product transportation, processing operations, testing procedures and protocols, and packaging and labeling. Id .

¶6 In 2013, the County adopted Resolution 2013-73, which imposed a moratorium on locating and permitting cannabis-related facilities and uses within the county pursuant to I-502. Thereafter, the County enacted another resolution, adopting the findings and conclusions of law establishing the moratorium and extending it until January 14, 2014. Chelan County Resolution 2013-88. On January 14, 2014, the County passed a third resolution, Resolution 2014-5, that terminated the interim land use controls previously established in Resolutions 2013-73 and 2013-88, and left the decision of siting and licensing cannabis operations to the Board.

¶7 Resolution 2014-5 stated:

Section 2: Applications for permits or licenses to grow, process, dispense and/or sell marijuana/cannabis will not be accepted by employees of Chelan County and are only properly submitted to the Washington State Liquor Control Board as [cannabis] licensing is a state program and not a county program.

....

Section 3. The Community Development Department is not required to draft or implement new licensing, zoning, comprehensive plans, or mapping. Current Comprehensive Plan and zoning regulations will continue to be enforced . The State of Washington shall conduct the licensing and regulation of [cannabis] growing, processing and dispensing facilities.

(Emphasis added.) Consequently, cannabis growing and processing activities in Chelan County fell within the rural industrial zone designation, which included agricultural uses.

¶8 There are two petitioners in this case.² The first, Water Works Properties LLC, owned land in the county. Clerk's Papers (CP) at 2. Water Works Properties leased the land to the second petitioner, Seven Hills. The property is in a rural industrial zone and, at the time, was situated in unincorporated Chelan County. CP at 650.

¶9 In May 2014, Seven Hills submitted the state-required operating plan to the Board in order to establish a cannabis business. The plan included sections on security, traceability, qualifications and a training plan for employees, destruction of waste product, quality assurance protocols, and a description of the operation and premises (in which the purpose for a fence for the property was included). Seven Hills was incorporated as a cannabis business on August 27, 2014.

¶10 In December 2014, Seven Hills e-mailed the County to confirm any additional county-specific cannabis regulations to satisfy the State's licensing requirements. The County responded that no additional county requirements existed and that the County treated cannabis as an agricultural business. On February 5, 2015, Seven Hills exchanged several e-mails with the County regarding the construction of temporary greenhouses that "will last us until after the first harvest." CP at 611-13. The County's plans examiner provided the definition of a temporary greenhouse structure, stating a " ‘[t]emporary growing structure’ means a structure that has the sides and roof covered with polyethylene, polyvinyl or [a] similar flexible temporary synthetic material (used for the commercial production of horticultural plants)." CP at 612; see also former WAC 51-50-007 (2013) ; Chelan County Code (CCC) 3.04.100(18) ("[s]hade cloth structures constructed for nursery or agricultural purposes" were exempted from both a building permit and a certificate of occupancy). The CCC also noted that a temporary structure meeting this definition was exempt from the building code requirements and that no permit was required. CCC 3.04.100. Seven Hills also signed and notarized a commercial lease with Water Works on February 11, 2015, with the lease expressly stating that the property would be used by Seven Hills for the purpose of cannabis production and processing.

¶11 Seven Hills applied for and received a commercial eight-foot chain link fence permit on May 27, 2015. Seven Hills passed the final fence inspection on August 21, 2015, which the State required for cannabis operations. On September 29, 2015, the County adopted Resolution 2015-94, imposing a moratorium on the siting of licensed cannabis recreational sales, production, and processing, and on the implementation of the cannabis patient protection act and cannabis market reform following Second Engrossed Second Substitute House Bill 2136 (enacted in Laws of 2015, 2d Spec. Sess., ch. 4; relating to comprehensive cannabis market reforms and taxation) and Second Substitute Senate Bill 5052 (enacted in Laws of 2015, ch. 70; establishing the cannabis patient protection act). The County then adopted Resolution 2015-102 on November 16, 2015, which continued the moratorium until March 27, 2016.

¶12 Shortly after adoption of Resolution 2015-102, Seven Hills was granted a permit to install five 1,000 gallon propane tanks. Final inspection of the propane tanks and a certificate of occupancy were required. On December 2, 2015, the County inspected the tanks, found problems, and issued a correction notice. As far as the record shows, no further inspections were requested or conducted, and no certificate of occupancy was issued for the installation of the propane tanks. The permit provided, "Every permit issued shall become invalid unless the work on the site authorized by such permit is commenced within 180 days after its issuance, or if the work authorized on the site by such permit is suspended or abandoned for a period of 180 days after the time the work is commenced." CP at 500, ¶ 6. Additionally, the permit required "[n]o building or structure [was to be] used or occupied, and no change in the existing occupancy classification of a building or structure or portion thereof shall be made until the building official has issued a certificate of occupancy except for permits listed in Section...