Western Mills, Inc. v. Housing Authority of City of Salem

• Decision Date: 15 May 1978
• Citation: 34 Or.App. 401,578 P.2d 817
• Parties: WESTERN MILLS, INC., a Washington Corporation, and Balboa Enterprises, Inc., a Washington Corporation, dba Western-Balboa, Appellants, v. HOUSING AUTHORITY OF the CITY OF SALEM, Oregon, Respondent.
• Court: Oregon Court of Appeals

Page 817

578 P.2d 817

34 Or.App. 401

WESTERN MILLS, INC., a Washington Corporation, and Balboa Enterprises, Inc., a Washington Corporation, dba Western-Balboa, Appellants, v. HOUSING AUTHORITY OF the CITY OF SALEM, Oregon, Respondent.

Court of Appeals of Oregon.

Argued and Submitted Feb. 27, 1978.

Decided May 15, 1978.

John Spencer Stewart, Portland, argued the cause for appellants. With him on the briefs were David R. Trachtenberg and Kobin & Meyer, Portland.

David J. DeMartino, Asst. City Atty., Salem, argued the cause for respondent. With him on the brief was William J. Juza, City Atty., Salem.

Before SCHWAB, C. J., and THORNTON and TANZER, JJ.

TANZER, Judge.

Plaintiff brought this breach of contract action against the Housing Authority of the City of Salem to recover expenditures it made in preparation for the construction of a low-income housing project which was to be purchased by defendant upon completion. The project was never built. Plaintiff complied with all the pre-construction requirements of the contract except one: It failed to obtain a required conditional use permit because the city council rejected plaintiff's application after a public hearing. Plaintiff did not seek review of the city council's action. Instead, it seeks to hold defendant accountable for the costs incurred in reliance on defendant's representations that it planned to proceed with the project.

The equitable basis of plaintiff's complaint arises from the fact that defendant housing authority, which encouraged plaintiff to proceed with the housing project, is composed of the same individuals as the city council which denied the conditional use permit after a public hearing. Nevertheless, the city council and the housing authority are distinct entities with different functions even though their membership is identical. ORS 456.095(1)(b) provides that "any act of the governing body acting as a housing authority shall be, and shall be considered, the act of the housing authority only and not of the governing body."

Citation to ORS 456.095(1) should be the short answer, but plaintiff's legal theory is more convoluted: plaintiff argues that its contract with the housing authority required the housing authority to enforce for plaintiff's benefit the provisions of a cooperation agreement between the housing authority and the city council, and that the cooperation agreement required the city council to approve the conditional use permit. The housing authority denies the existence of a contract and raises several affirmative defenses.

We assume for purposes of discussion that the housing authority was contractually bound to assist plaintiff in bringing the project to a successful completion. The issue then is whether the housing authority could have compelled the city council to issue the conditional use permit.

The source of the city council's allegedly ministerial duty to issue the conditional use permit is a provision in the cooperation agreement that "in so far as the Municipality may lawfully do so," the city council would make such changes in the zoning of the site as were reasonable and necessary for the development of the housing project. Plaintiff contends that this provision obligated the city to grant a conditional use permit ¹ for any housing project approved by the housing authority and that the housing authority could and should have compelled the city to issue the permit as a ministerial task.

Housing projects such as the one plaintiff sought to construct are " subject to the planning, zoning, sanitary and building laws, ordinances and regulations applicable to the locality in which the housing project is situated." ORS 456.150(1). In this case, city ordinances required plaintiff to obtain a conditional use permit before the proposed development could proceed.

The decision to grant or deny a conditional use permit is a quasi-judicial decision. Rockway v. Stefani, 23 Or.App. 639, 642, 543 P.2d 1089 (1975) rev. den. (1976). Such decisions are to be made on the record after a hearing before an impartial tribunal. Fasano v. Washington Co. Comm., 264 Or. 574, 588, 507 P.2d 23 (1973). These requirements defeat plaintiff's contention that the Salem city council had lawfully bound itself before the hearing to approve plaintiff's application: The city has no authority to pre-judge the merits of the proposed conditional use. ²

Because the cooperation agreement did not vitiate the city council's duty to consider the proposed conditional use on its merits after a quasi-judicial hearing, neither plaintiff nor the housing authority could have compelled issuance of the desired permit by invoking the cooperation agreement. This conclusion is dispositive; therefore, it is unnecessary to consider the other asserted deficiencies in plaintiff's theory of recovery.

Affirmed.

THORNTON, Judge, dissenting.

The central issue presented is this: Did defendant breach its contract with plaintiffs by refusing to enforce the provisions of the Cooperation Agreement between the defendant-Housing Authority and the City of Salem, and were plaintiffs entitled to recover damages against defendant on account of such breach?

Contrary to the majority it is my conclusion, based on an examination of the cases cited below, that (1) defendant breached its contract with plaintiffs by refusing to enforce the provisions of the Cooperation Agreement for plaintiffs' benefit, (2) the city council had no authority to refuse to approve the conditional use permit and (3) plaintiffs were entitled to recover damages against defendant for breach of contract.

The leading case in point is State ex rel. v. City of Great Falls et al., 110 Mont. 318, 100 P.2d 915 (1940). Subsequently Great Falls was cited and relied upon by the Supreme Court of California in reaching a similar conclusion in Housing Authority v. City of L. A., 38 Cal.2d 853, 243 P.2d 515 (1952), also a mandamus case.

The most recent case in point is Cuyahoga Metropolitan Housing Auth. v. Harmody, 474 F.2d 1102 (6th Cir. 1973), involving the Housing Authority of the City of Cleveland, Ohio. The United States Court of Appeals, in affirming the District Court, fully approved of the reasoning of City of L. A.

In all of the above cases the city councils tried to repudiate their previous legal commitments to low-rent housing projects. In each case the court held that it could not. In the interests of brevity, only Great Falls will be discussed.

In Great Falls, as in the case...