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Court of Appeal ruling on annexation


 

STATE OF MINNESOTA IN COURT OF APPEALS A17-1210

In re the Matter of the Annexation of Certain Real Property to the City of Proctor
From Midway Township

Filed April 9, 2018 Reversed Worke, Judge

St. Louis County District Court
File Nos. 69DU-CV-16-2676, 69DU-CV-16-2679

Lori Swanson, Attorney General, Nathan J. Hartshorn, Assistant Attorney General, St. Paul, Minnesota (for appellant Minnesota Office of Administrative Hearings)

John H. Bray, Maki & Overom, Ltd., Duluth, Minnesota (for appellant City of Proctor) Kenneth D. Butler, Duluth, Minnesota (for respondent Midway Township)

Gunnar B. Johnson, Duluth City Attorney, Nathan N. LaCoursiere, Assistant City Attorney, Duluth, Minnesota (for respondent City of Duluth)

Considered and decided by Worke, Presiding Judge; Peterson, Judge; and Ross, Judge.

SY L L A B U S

A nonparty to an orderly annexation agreement made pursuant to Minn. Stat. § 414.0325 (2016) may annex real property within the designated area by ordinance pursuant to Minn. Stat. § 414.033, subd. 2(3) (2016), if all relevant statutory requirements for annexation by ordinance are satisfied.

OPINION

WORKE, Judge
Appellants argue that the district court erred by vacating the chief administrative

law  judge’s  order  approving  the  City  of  Proctor’s  annexation  by  ordinance. We reverse.

FACTS

In January 2013, respondents City of Duluth and Midway Township entered into an orderly annexation agreement (OA Agreement) and designated certain land in Midway as an Orderly Annexation Area. Midway abuts both Duluth and appellant City of Proctor. The OA Agreement divided the Orderly Annexation Area into three parcels identified as Parcel I, Parcel II, and Parcel III.

Julia Ann (Hovland) Savalas and George Hovland III own approximately 92 acres of real property (the property) located within Parcel II. In May 2014, the owners executed a petition requesting annexation by ordinance to Proctor. In August 2014, Proctor adopted an ordinance to annex the property. Duluth objected to the proposed annexation by ordinance on the grounds that the property is subject to the OA Agreement and was therefore not eligible for annexation by ordinance into Proctor. In October 2014, the chief administrative law judge (chief ALJ) issued an order annexing Parcel I into Duluth. Neither Duluth nor Midway has commenced proceedings to annex Parcel II or Parcel III.

In October 2016, the chief ALJ issued her findings of fact, conclusions of law, and order  approving  Proctor’s  annexation  by  ordinance.    Duluth  and Midway appealed to the district court, which vacated the chief ALJ’s  order  and  determined  that once real property

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is subject to an orderly annexation agreement, that property cannot subsequently be annexed by ordinance. This appeal followed.

ISSUES

Did the district court err by concluding that once parties execute an orderly annexation agreement with respect to a designated area, nonparties cannot subsequently seek to annex real property within the designated area by ordinance?

ANALYSIS

Appellant Office of Administrative Hearings (OAH) and Proctor argue that the district court erred by concluding that Proctor could not annex the property by ordinance because the property was already subject to the OA Agreement between Duluth and Midway.1 This case involves potential conflict between two statutory schemes for the annexation of real property—annexation by agreement and annexation by ordinance. This court reviews questions of statutory interpretation de novo. Hyatt  v.  Anoka  Police  Dep’t, 691 N.W.2d 824, 826 (Minn. 2005).

“The  object  of  all  statutory  interpretation  is  to  ascertain  and  effectuate the intention of  the  Legislature.”    Cocchiarella v. Driggs, 884 N.W.2d 621, 624 (Minn. 2016). First, this court should examine the statutory language to determine whether the law is free from

1 Proctor also argues that the district court correctly determined that it satisfied the statutory requirements for annexation by ordinance. The district court ruled in favor of Proctor, however, and neither Duluth nor Midway appealed this element of the district  court’s   ruling.     “The   function   of   the   court   of   appeals   is   limited   to   identifying   errors   and   then   correcting   them.”     Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). Because no aggrieved party appealed from this determination, this issue is not properly before this court.

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all ambiguity. Id. “A   statute   is   ambiguous   only   if   it   is   susceptible to more than one reasonable  interpretation.”    500, LLC v. City of Minneapolis, 837 N.W.2d 287, 290 (Minn. 2013). To determine whether a statute is ambiguous, this court should interpret the statute “as  a  whole  so  as  to  harmonize  and  give  effect  to  all  its  parts.”    328 Barry Ave., LLC v. Nolan Props. Grp., LLC, 871 N.W.2d 745, 749 (Minn. 2015) (quotation omitted). When the  language  of  a  statute  is  unambiguous,  this  court  applies  the  statute’s  plain  language  and   will  not  “explore  its  spirit  or  purpose.”    Cocchiarella, 884 N.W.2d at 624.

If this court concludes that a statute is ambiguous, then we may consider the factors set forth in Minn. Stat. § 645.16 (2016) to determine legislative intent. Christianson v. Henke, 831 N.W.2d 532, 537 (Minn. 2013). These factors include:

(1) the occasion and necessity for the law; (2) the circumstances under which it was enacted; (3) the mischief to be remedied; (4) the object to be attained; (5) the former law, if any, including other laws upon the same or similar subjects; (6) the consequences of a particular interpretation; (7) the contemporaneous legislative history; and (8) legislative and administrative interpretations of the statute.

Minn. Stat. § 645.16.
Under the annexation-by-agreement statute, one or more townships or

municipalities may, through an agreement, designate a certain area as appropriate for annexation.    Minn.  Stat.  §  414.0325,  subd.  1(a).    The  statute  defines  a  “designated  area”  as   “any  area  which  the  signatories  to  a  joint  resolution  for  orderly  annexation  have  identified   as being appropriate for annexation . . . pursuant to the negotiated terms and conditions set forth  in  the  joint  resolution.”    Id., subd. 1(b). The joint resolution—or agreement—confers jurisdiction on the chief ALJ over annexation in the designated area. Id., subd. 1(c). Once

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an  agreement  is  in  place,  “an  annexation  of  any  part  of  the  designated  area  may  be  initiated   by: (1) submitting to the chief [ALJ] a resolution of any signatory to the joint resolution; or   (2)   the   chief   [ALJ].”     Id., subd. 1(e). Subdivision 6 of the annexation-by-agreement statute also states:

An orderly annexation agreement is a binding contract upon all parties to the agreement and is enforceable in the district court in the county in which the unincorporated property in question is located. The provisions of an orderly annexation agreement are not preempted by any provision of this chapter unless the agreement specifically provides so. If an orderly annexation agreement provides the exclusive procedures by which the unincorporated property identified in the agreement may be annexed to the municipality, the municipality shall not annex that property by any other procedure.

Id., subd. 6.
Under the annexation-by-ordinance statute, a municipal council may by ordinance

declare land annexed to the municipality if

the land abuts the municipality and the area to be annexed is 120 acres or less, and the area to be annexed is not presently served by public wastewater facilities or public wastewater facilities are not otherwise available, and the municipality receives a petition for annexation from all the property owners of the land. Except as provided for by an orderly annexation agreement, this clause may not be used to annex any property contiguous to any property either simultaneously proposed to be or previously annexed under this clause within the preceding 12 months if the property is or has been owned at any point during that period by the same owners and annexation would cumulatively exceed 120 acres.

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Minn. Stat. § 414.033, subd. 2(3).2

Ambiguity

OAH and Proctor argue that the annexation-by-agreement statute is ambiguous as to whether an annexation agreement trumps an attempt to annex by ordinance. They assert that (1) subdivision 1(e) does not preclude a municipality from annexing part of a designated area   by   ordinance   and   (2)   the   “preemption”   clause   in   subdivision   6   is   ambiguous as to whether a valid annexation agreement is binding on nonparties.

Under section 414.0325, subdivision 1(c), an annexation agreement confers the chief ALJ with jurisdiction over annexations in designated areas. Subdivision 1(e) provides  two  possible  mechanisms  by  which  “an  annexation  of  any  part  of  the  designated   area may be  initiated.”    Minn.  Stat.  §  414.0325, subd. 1(e) (emphasis added). Under Minn. Stat. § 645.44,  subd.  15  (2016),  “may”  is  defined  as  “permissive.”    Conversely,  “shall”   denotes that  something  is  “mandatory.”    Id., subd. 16 (2016). As the chief ALJ noted, the statute’s  use  of  “may”  suggests that there may be other ways to initiate annexation of designated property besides the two processes laid out in subdivision 1(e). To read subdivision   1(e)   otherwise   would   require   this   court   to   add   the   word   “only”   to   that   subdivision. This court cannot add words to a statute that the legislature did not include. Genin v. 1996 Mercury Marquis, 622 N.W.2d 114, 119 (Minn. 2001). We conclude that

2 We cite the most recent version of Minn. Stat. § 414.033 because it has not been amended in relevant part. See  Interstate  Power  Co.  v.  Nobles  Cty.  Bd.  Of  Comm’rs, 617 N.W.2d 566, 575 (Minn. 2000) (stating that, generally, “appellate  courts  apply  the  law  as  it  exists   at  the  time  they  rule  on  a  case”).    For  the  same  reason,  we  also  cite  the  current  versions  of   other statutes cited in this opinion.

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section 414.0325, subdivision 1(e), does not preclude other methods of annexation within a designated area beyond the two methods listed in that subdivision.

OAH and Proctor also argue that the district court erroneously read the “preemption”   clause   as   barring   nonparties   from   initiating   annexation   by   ordinance   in   a   designated area. The second sentence of subdivision  6  states  that  “[t]he provisions of an orderly annexation agreement are not preempted by any provision of this chapter unless the agreement specifically provides so.”     Minn.   Stat.   §   414.0325,   subd.   6.     OAH   acknowledges that one could reasonably read this sentence to mean that the terms of an annexation agreement supersede an attempt to annex by ordinance. However, to determine whether  a  statute  is  ambiguous,  this  court  interprets  the  statute  “as  a  whole  so as to harmonize and give effect to all its parts.”    328 Barry Ave., LLC, 871 N.W.2d at 749 (quotation omitted).

The  first  sentence  of  subdivision  6  states  that  “[a]n  orderly  annexation  agreement  is   a binding contract upon all parties to the agreement . . . .”    Minn.  Stat.  §  414.0325,  subd.   6 (emphasis  added).    The  third  sentence  of  subdivision  6  states,  “If an orderly annexation agreement provides the exclusive procedures by which the unincorporated property identified in the agreement may be annexed to the municipality, the municipality shall not annex that property by any other procedure.”    Id. (emphasis added). Both the first and third sentences of subdivision 6 suggest that the purpose of that subdivision is to ensure that parties to annexation agreements are bound by them and cannot attempt to annex land by alternative means unless the agreement provides otherwise. The second sentence is silent as to whether its preemption mandate applies only to parties to an annexation agreement or

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if nonparties are bound as well. Because this court must look to the statute as a whole to determine ambiguity, rather than a single sentence in isolation, we conclude that subdivision 6 is ambiguous as to whether an annexation agreement is binding only upon parties to that agreement or whether the agreement restricts the rights of nonparties as well. Therefore, we must use other tools to determine legislative intent.

Under section 414.01, subdivision 1a(5)   (2016),   “joint   resolutions   for   orderly   annexation  .  .  .  should  be  encouraged.”    However,  that  does  not  necessarily  imply  that  these   agreements are binding upon nonparties. Encouraging orderly annexation agreements is equally consistent with OAH and Proctor’s   reading   of   the   annexation-by-agreement statute—once parties have entered into an agreement, they cannot circumvent the agreement by pursuing annexation by alternative means.

In 2002, the Minnesota House of Representatives Local Government and Metropolitan Affairs Committee discussed the bill that added the preemption language in section 414.0325, subdivision 6   (2004).     The   bill’s   author,   Representative   Howes,   described   it   as   follows:   “What   this   bill   does   is   an   agreement   between   the   city   and   the township,  it  basically  makes  it  a  binding  contract  and  both  parties  have  to  adhere  to  that.” Hearing on H.F. No. 1620 Before H. Comm. on  Local  Gov’t  &  Metro.  Affairs  (Feb.  20,   2002). Representative Howes then introduced Kent Sulem from the Minnesota Association of Townships, who described the bill as follows:

[I]t is just clarifying that when [orderly annexation] agreements are entered into between a city and a township . . . that   agreement   will   be   binding,   that   there   won’t   be   any   loopholes that either side can use, that the two parties . . . will honor their word as entered into in that orderly agreement.

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Id. Sulem   also   stated   that   the   added   language   of   subdivision   6   “just   simply   clarifies   a   problem that has arisen because of some old case law that exists.” He then explained that he   believed   the   added   language   was   necessary   because   “there   is   case   law   involving   the   City of La Crescent versus the City of -- the Township of La Crescent versus the City of La Crescent that found that despite the existence of an orderly annexation agreement, the property  subject  to  that  agreement  could  be  annexed  via  other  means.”    Id.

In LaCrescent Twp. v. City of LaCrescent, the Township of LaCrescent and the City of LaCrescent entered into an orderly annexation agreement with respect to certain township property. 515 N.W.2d 608, 609 (Minn. App. 1994). Later, the owners of land located within an area governed by the agreement and the city petitioned for annexation of land by ordinance. Id. This court addressed the conflict between the annexation-by- agreement and annexation-by-ordinance statutes, determining that now-repealed subdivision 2a of section  414.0325  “d[id] not require annexation by ordinance to comply with the terms of a previously existing annexation agreement.”    Id. at 610. This court ultimately   held   that   the   City   of   LaCrescent’s   annexation   by   ordinance   was   valid   even   though it did not comply with the prior annexation agreement to which it was a party. Id. at 611.

Reading the legislative committee testimony together with LaCrescent, we discern that the legislative intent behind section 414.0325, subdivision 6, was to prevent parties to an annexation agreement from later reneging on that agreement and annexing by ordinance land that was subject to the agreement. LaCrescent does not address attempts to annex by

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ordinance by nonparties to an annexation agreement, and the legislative history indicates that the legislature was concerned with ensuring that parties to annexation agreements could not later attempt to circumvent those agreements.

Furthermore,  Duluth  and  Midway’s  reading  of  subdivision  6  would  lead  to  absurd   results. See Am. Fam. Ins. Grp. v. Schroedl, 616 N.W.2d 273, 278 (Minn. 2000) (stating that  “courts  should  construe  a  statute  to  avoid  absurd  results  and  unjust  consequences.”).     Under  Duluth  and  Midway’s  interpretation,  parties to an orderly annexation agreement could, by inserting language to that effect, avoid the jurisdictional limits of section 414.0325, subdivision 1, the public notice requirements of section 414.0325, subdivision 1b, or the right to appeal to the district court set out in section 414.07, subdivision 2 (2016). If  this  had  been  the  legislature’s  intent  in  including  the  preemption  language  in  subdivision   6, it would have spoken far more clearly.

Applying the canons of statutory construction, we conclude that section 414.0325, subdivision 6, does not preclude a nonparty to an orderly annexation agreement from seeking to annex real property within the designated area by ordinance.

DECISION

Because section 414.0325 does not preclude nonparties to orderly annexation agreements from annexing land within designated areas by ordinance, we conclude that the district  court  erred  by  vacating  the  chief  ALJ’s  order  for  annexation.

Reversed.

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