Naumes, Inc. v. City Of Chelan

Opinion

FILED

December 11,2014

In the Office of the Clerk of Court

WA State Court of Appeals, Division III

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION THREE

NAUMES, INC., an Oregon corporation, ) No. 32191-6-111 ) Appellant, ) ) v. ) ) CITY OF CHELAN, a municipal ) PUBLISHED OPINION corporation, ) ) Respondent. )

BROWN, A.C.J. - In this land use case, developer Naumes, Inc. appeals a second

trial court's decision denying its motion to compel arbitration under a development

agreement between it and the City of Chelan (City) concerning an industrial and

commercial development. In 2003, the City approved a planned development rezone

and general binding site plan (GBSP) for Naumes' property. In 2012, Naumes

submitted a specific binding site plan (SBSP) for a particular lot showing a road plan

deviating from the GBSP. The City rejected what it considered a nonconforming SBSP.

Naumes initially filed an administrative appeal and a first lawsuit to compel arbitration.

The first trial court denied Naumes' arbitration request and deferred to the hearing

examiner, who affirmed the City's determination. This second lawsuit followed.

Naumes contends the second trial court (the same court, Judge Lesley A. Allan) erred No. 32191-6-111 Naumes, Inc. v. City of Chelan

in denying its arbitration request because it argues the parties' development agreement,

in essence, supplants the City's land use ordinance process that would otherwise be

required to modify or alter a GBSP. We disagree with Naumes, and affirm.

FACTS

Naumes is a developer and owner of a 198-acre property located in Chelan

known as the Apple Blossom Center (the Property). In March 2003, the parties entered

into a development agreement. The agreement included an arbitration provision:

16. Review Procedures and Standards for Implementing Decisions. Review and resolution of disputes by the Parties, their successors and assigns, shall be resolved by arbitration as follows: In the event the Parties cannot agree on any matter set out in this Agreement, they shall promptly consult together and attempt to resolve the dispute. In the event they cannot agree upon a resolution of the dispute, the same shall be settled by arbitration pursuant to Chapter 7.04 RCWet. seq. except as herein modified.

Clerk's Papers (CP) at 295. The agreement stated, "Naumes and the City desire that

the future development of the Property be consistent with land use and development

regulations of the City now existing or hereafter adopted." CP at 280. Thus, property

development was required to be consistent with the City's GBSP process. The

development GBSP includes a placement of streets, roads, improvements, utilities,

open spaces, and other features of the completed project. The Chelan City Council

approved the GBSP on April 24, 2003 in ordinance no. 2003-1266.

During the fall of 2012, Naumes entered into a purchase and sale agreement

with a third party buyer for lot 16 of the Property. Naumes submitted a SBSP

No. 32191-6-111 Naumes, Inc. v. City of Chelan

application for lot 16 to facilitate the sale. The SBSP application sought removal of a

portion of Isenhart Road, a deviation from the GBSP. The City rejected the proposed

SBSP because it conflicted with the GBSP. Naumes argued relocating Isenhart Road

merely effected a modification of the GBSP. The City in response reasoned the original

GBSP, including the segment of Isenhart Road, could potentially be modified, but solely

by using the GBSP modification process pursuant to the applicable city regulations

found at Chelan Municipal Code (CMC) § 16.10.070.

In spring 2013, the City and Naumes reached an impasse over the relocation of

Isenhart Road. The dispute was clouded by Washington State's desire to relocate the

intersection of Isenhart Road with a state road and the creation of a realigned, an

extended, and a relocated Isenhart Road. The parties agreed to submit the City's

interpretation of the matter to the City's hearing examiner. The City's ordinances

allowed for Naumes to challenge the City's interpretation in the form of an administrative

appeal. Naumes filed a notice of appeal of the City's interpretation. Naumes asked the

hearing examiner find the entire matter subject to arbitration under the development

agreement. Alternatively, Naumes asked the hearing examiner to find the City erred in

failing to approve the modification of lot 16 through the SBSP application.

In June 2013, before the hearing examiner filed his decision, Naumes sued for

declaratory judgment and breach of contract in superior court and asked for an order to

compel arbitration. The trial court denied the motion to compel arbitration, finding, "The

city code was not subject to the development agreement, and it would be improper for

the Court to send the city code to arbitration to be interpreted to determine the proper

course of action under the city code." CP at 245. The court determined the

administrative appeal should go forward. The hearing examiner found the CMC did not

authorize modification of a GBSP through a SBSP. The sole mechanism available to

Naumes to eliminate the Isenhart Road segment would be the same process in the

code for approval of the original general binding site plan.

In August 2013, Naumes again sued the City relating to the Property, partly

asking to arbitrate the GBSP modification issue. The August 2013 lawsuit raised

several claims raised in the June 2013 lawsuit with the addition of theories based on the

Land Use Petition Act (LUPA), chapter 36.70C RCW, promissory estoppel, and breach

of oral covenant. Naumes requested that the entire dispute be referred to arbitration or,

in the alternative, the court accept review of the hearing examiner's decision under

LUPA.

The City argued the claims were "barred by the doctrines of collateral estoppel

and/or res judicata." CP at 201. The City opposed the arbitration motion. The City

argued the arbitrability issue had been conclusively settled, but it did not dispute

Naumes was entitled to judicial review of the hearing examiner's decision under LUPA.

The court denied the motion to compel arbitration. The court found judicial review of the

hearing examiner's decision was available through LUPA as the exclusive means of

appeal. The court was not persuaded the binding site plan dispute fell within the scope

of the development agreement because questions of municipal code interpretation were

not themselves a matter addressed in the development agreement. The court granted

the City's motion to bifurcate Naumes' LUPA claim from its causes of action seeking

damages. Naumes appealed.

ANALYSIS

The issue is whether the trial court erred in denying Naumes' motion to compel

arbitration. Naumes contends the parties were bound by the arbitration provision in

their development agreement. The City responds that its code process controls.

Our review is de novo for a trial court's decision to deny a motion to compel

arbitration. Zuverv. Airtouch Comm'cns, Inc., 153 Wn.2d 293,302,103 P.3d 753

(2004). The party opposing arbitration bears the burden of showing the arbitration

clause is inapplicable or unenforceable. Otis Hous. Ass'n, Inc. v. Ha, 165 Wn.2d 582,

587,201 P.3d 309 (2009). , The City initially argues this appeal is moot because Naumes did not appeal the I first order denying Naumes' motion to compel. The City's premise theorizes the trial

court denied the second motion to compel based on res judicata and collateral estoppel

principles1; therefore, the sole viable matter to appeal is the first order and the time to

appeal that order has expired under RAP 5.2(a). Sut, the court's second order denying

the motion to compel does not specify the court's basis for denial was res judicata

and/or collateral estoppel; rather, the court states the motion is denied. Moreover, our

1 Naumes argues these issues are raised for the first time on appeal. See App. Reply Sr. at 8. The City's answer to Naumes' second complaint, however, clearly sets I forth these affirmative defenses.

5 No. 32191-6-111 Naumes, Inc. v. City of Chelan

record does not contain the motion hearing's report of proceedings to ascertain the

court's basis for the second denial. Given the general wording of the trial court's order

and our preference to settle controversies on their merits, we conclude the issue of

whether the trial court erred when denying Naumes' motion to compel is not moot.

Griggs v. Averbeck Realty, Inc., 92 Wn.2d 576,581,599 P.2d 1289 (1979). Thus, we

proceed to the merits.

Washington has a strong public policy favoring arbitration. Heights at Issaquah

Ridge Owners Ass'n v. Burion Landscape Grp., Inc., 148 Wn. App. 400, 405, 200 P.3d

254 (2009). Therefore, we "must indulge every presumption in favor of arbitration,

whether the problem at hand is the construction of the contract language itself or an

allegation of waiver, delay, or a like defense to arbitrability." Verbeek Props., LLC v.

GreenCo Envtl., Inc., 159 Wn. App. 82, 87,246 P.3d 205 (2010).

Naumes seeks modification of the GBSP by means of a SBSP and seeks an

arbitrator's approval of that process. Cities are authorized to adopt by ordinance

procedures for the division of land by binding site plan. RCW 58.17.035. A binding site

plan is an alternative to the procedures otherwise required for subdivision approval. Id.

The City adopted procedures consistent with RCW 58.17.035 by ordinances

codified at Title 16 CMC. Under the CMC, binding site plans are to be processed in

accordance with ch. 16.24 CMC (previously codified at ch. 16.10 CMC). CMC §

16.24.060 relates to the SBSP procedure. It states, "Application for approval of a

specific binding site plan as to part or all of the land covered by the general

binding site plan shall be filed with the administrator at such time as the property

owner(s) intends to sell or lease a portion of property approved in a general binding site

plan." CMC § 16.24.060(A). But, "The process of review and approval of a specific

binding site plan shall not be used to modify the provisions of the approved general

binding site plan." Id. Moreover, 'The specific binding site plan shall be reviewed for

compliance with the conditions of the general binding site plan." CMC § 16.24.060(B).

Thus, the process for approving a SBSP entails solely an administrative determination

of consistency with the conditions of the GBSP. This decision is made by the City's

administrative official. Id.

A GBSP may be modified solely in accordance with the original GBSP

application process. CMC § 16.24.080. GBSPs may be approved solely after a public

notice of application, a public comment opportunity, a public hearing before the hearing

examiner, and a final decision by the hearing examiner. See CMC § 16.24.010 (general

binding site plan approval is 'Type IVA project permit"); CMC § 19.18.010 (Type IVA

project permits require public notice of application, public comment period, and public

hearing before the hearing examiner). Plainly, under the CMC an administrator is

authorized to administratively approve a SBSP so long as it conforms to the existing.

overarching GBSP. Thus, contrary to Naumes' arguments, a code administrator cannot

approve a SBSP that would itself effect a modification or alteration of the GBSP.

Here, the parties' agreement states, "In the event the Parties cannot agree on

any matter set out in this Agreement, they shall promptly consult together and attempt

to resolve the dispute. In the event they cannot agree upon a resolution of the dispute,

the same shall be settled by arbitration." CP at 295. While Isenhart Road relates to the

development, the adjustment to its placement involves a modification to or an alteration

of the GBSP. Notably, the parties' development agreement states, "Naumes and the

City desire that the future development of the Property be consistent with land use and

development regulations of the City now existing or hereafter adopted." CP at 280.

Arbitration cannot substitute for the public participation required by the CMC for GBSP

modifications.

Moreover. a decision on an application to modify an approved binding site plan is

subject to judicial appeal. CMC § 19.18.010. A LUPA action "shall be the exclusive

means of judicial review of land use decisions." RCW 36.70C.030(1). By establishing a

uniform, expedited appeal process and uniform criteria for review, LUPA promotes

"consistent, predictable, and timely judicial review." RCW § 36.70C.010. LUPA, not

arbitration, is the proper recourse in this matter.

The City asks us to "remand to the trial court for entry of an order dismissing,

with prejudice, the non-LUPA claims." Resp't Br. at 39. This request would be outside

Naumes' notice of appeal and would be considered affirmative relief. A notice of cross

appeal is required if the respondent "'seeks affirmative relief as distinguished from the

urging of additional grounds for affirmance.'" Robinson v. Khan, 89 Wn. App. 418.420,

948 P.2d 1347 (1998) (quoting Phillips Bldg. Co. v. An., 81 Wn. App. 696, 700 n.3, 915

P.2d 1146 (1996)). Because the City failed to file a notice of cross review and because

it is now requesting affirmative relief, we decline remand on this matter.

Affirmed.

Brown, A.C.J. WE CONCUR:

K:orsmo, J. 7 Lawrence-Berrey, J.