Posted by: Patricia Salkin | November 16, 2011

Oregon Supreme Court Examines Vested Rights and Holds Bad Faith Cannot be Considered in Measure 49 Calculation

The appellant Gordon Cook obtained a Measure 37 waiver to divide his 38.8-acre property into 10 parcels and to develop dwellings on nine of them.  After receiving preliminary subdivision approval from the county, Cook began developing his property including clearing, excavating, and grading.  The day before Measure 49 became effective, Cook obtained final subdivision plat approval, recorded and was ready to begin constructing homes.  At the time Measure 49 was referred to the voters, Cook spent $120,494.06 in development expenses.  By the time it was effective, Cook had spent a total of $155,160.53.  Originally, Cook planned to develop only “finished lots” at a total cost of $204,660.53 meaning that he would have expended 76% of the total development cost.  Cook estimated that the cost of completing the proposed subdivision would be $871,158.54 meaning that at the time of Measure 49 enactment, Cook would have expended nearly 18% of the total project costs.  Although the Friends of Yamhill County disputed the overall project costs, the county and circuit court concluded that the Holmes factors were satisfied and Cook had established a vested right to complete construction.

Contrary to the Court of Appeals decision, the Oregon Supreme Court found that none of the Holmes factors were redundant.  For example with regard to the good faith factor, the Court of Appeals erred in concluding that a provision in Measure 49 asking whether the claimant had a common law vested right “on the effective date of this 2007 Act” permits an inference that all expenditures made before that date were made in good faith.  The Oregon Supreme Court concluded that the more appropriate and complete interpretation is that this phrase serves merely to identify the cutoff date for calculating expenditures and expenditures made in bad faith before this date cannot be considered.

The Supreme Court agreed with the Court of Appeals that the county erred by failing to decide the ratio between the costs that Cook had incurred and the projected costs by failing to determine the cost of building homes.  The county must make this determination keeping in mind Cook’s state of mind as it relates to the good faith factor – originally intending to sell the lots for luxury homes as compared to Cook’s modified plan explained during the legal proceedings to site manufactured homes.  The court instructed that the county must evaluate what would constitute a “substantial expenditure” given the ultimate cost suggesting that the 6.6% expenditure that was sufficient in the Holmes case may not be the appropriate yardstick in every case.  Short of stating the lack of a bright line rule, the court gave no further guidance.

Finally, the Supreme Court found that the county erred in concluding that the zoning scheme in 1970 did not preclude the use rather than focusing on whether the applicable zoning permitted the use.  The case was remanded back to the circuit court for further proceedings.

Friends of Yamhill County, Inc. v. Board of Commissioners of Yamhill County, __ Or. __ (OR 10/20/2011). 

The opinion can be accessed at:  http://www.publications.ojd.state.or.us/S058915.pdf

The summary was prepared by Carrie Richter and Jennifer Bragar of Garvey, Shubert and Barer in Portland, Oregon.  For more information about the firm’s land use team see: http://northwestlandlawforum.com/


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