Carver County District Court File No. 10-CV-12-1116
Joseph Gerald Springer, Joseph John Cassioppi, Fredrikson & Byron, P.A., Minneapolis, Minnesota (for respondents)
Katherine Marie Swenson, Greene Espel PLLP, Minneapolis, Minnesota (for appellant)
Considered and decided by Peterson, Presiding Judge; Chutich, Judge; and Smith, Judge.
A party must exhaust administrative remedies before seeking judicial review of a municipal building official's determination relative to the application and interpretation of the state building code.
This appeal is from a district court order that denied appellant city's motion to dismiss for lack of subject-matter jurisdiction respondents' lawsuit challenging the city's building-permit fees. The city argues that (1) because each of respondents' claims addresses the application and interpretation of the state building code, and an administrative process is available to address these matters, the district court erred in ruling that respondents did not need to exhaust administrative remedies before seeking judicial review; and (2) the municipal planning act does not apply to this case. We reverse.
Respondent Centra Homes, LLC, applied to appellant City of Norwood Young America for building permits to build two homes. The city has adopted the Minnesota State Building Code, and its building-permit fee schedule is based on permit valuations. City of Norwood Young America, Minn., Code of Ordinances (NYA) §§ 2000.01-.02, Schedule A (2012). To determine permit valuations, the city uses a valuation table provided by Metro West Inspection Services, Inc., a company that provides inspection services for about 20 municipalities.
Because the city had previously set permit valuations significantly higher than Centra's estimated permit valuations and the actual costs of permit-related work on homes that Centra built, Centra submitted an estimated permit valuation of $110, 000 for the first home, even though it believed that its actual costs would be about $81, 000. For the second home, Centra submitted an estimated permit valuation of $101, 424. Using the Metro West valuation table, the city set a permit valuation of $146, 000 for the first home and $189, 544 for the second home.
Centra asserted to city staff and officials that the city's permit fees violated state law because they were not related to actual costs. When the city declined to reduce its permit fees, Centra contacted the city attorney about whether there were administrative remedies for Centra to pursue before bringing a lawsuit. The city attorney responded that he would review the city ordinances to determine whether they provided for an administrative appeal. More than one month later, the city sent an email to Centra stating that it had reviewed Centra's claims with the Minnesota League of Cities and would "accept payment in escrow for the building permit fees, based on Minn. Stat. § 462.353."
Centra and the city entered into an escrow agreement under Minn. Stat. § 462.353, subd. 4(d) (2012). The agreement permitted Centra to file an appeal to the district court under Minn. Stat. § 462.361 (2012), to challenge the city's permit valuations for the two homes. Centra and respondents Builders Association of the Twin Cities (BATC) and Builders Association of Minnesota (BAM) then began this lawsuit, alleging that the city's building-permit fees are not based on the total value of all construction work for which the permit is issued, as required under Minn. R. 1300.0160, subp. 3 (2011). Centra challenged the permit valuations and permit fees for the two homes, and all three respondents sought a declaratory judgment that the city's use of the Metro West valuation table to determine permit valuations "has resulted in permit valuations that are not reasonably based on the total value of all construction work for which the permits were issued" and the city is required to set permit valuations based on the total value of construction work. Respondents also sought a writ of mandamus and an injunction requiring the city "to set permit valuations reasonably based on the total value of all construction work for which the permits are issued and to refund to Centra all overcharged fees for the [two properties]."
The city moved to dismiss the complaint for lack of subject-matter jurisdiction, arguing that Centra's appeal from the permit valuations was an appeal of a "decision" made by a "building official relative to the application and interpretation of [the building] code" under Minn. R. 1300.0230, subp. 1 (2011). The city asserted that Centra should have challenged the permit valuations by filing an administrative appeal with the state appeals board instead of filing a district court action. The district court denied the city's motion based on its determinations that it had subject-matter jurisdiction over the claims for declaratory, mandamus, and injunctive relief; respondents' claims challenged the city's actions under both the building code and Minnesota statutes, and the court was "not persuaded that these claims are merely challenges to code interpretation/application"; and it would not serve the interests of judicial economy to dismiss the action.
This appeal followed. This court questioned jurisdiction. Respondents argued that this is an improper interlocutory appeal because the city's motion to dismiss was based on the exhaustion of remedies, which is a potential defense that does not involve subject-matter jurisdiction. The city argued that the district court's order denying its motion to dismiss was based on subject-matter jurisdiction, and, therefore, the order is immediately appealable. This court accepted jurisdiction provisionally and referred to the panel deciding the case ...