Title: Vokoun v. City of Lake Oswego

State: oregon

Issuer: Oregon Supreme Court

Document:

Filed:  October 24, 2002
IN THE SUPREME COURT OF THE STATE OF OREGON

WILLIAM VOKOUN
and PAULA VOKOUN,
		Petitioners on Review,
	v.
CITY OF LAKE OSWEGO,
a municipal corporation,
	Respondent on Review.
(CC 96-11-052; CA A101203; SC S47931)

	En Banc
	On review from the Court of Appeals.*
	Argued and submitted September 12, 2001.
	Mark P. Reeve, Portland, Reeve Kearns PC, argued the cause
and filed the briefs for petitioners on review.  With him on the
briefs was Tracy Pool Reeve.
	Timothy J. Sercombe, Portland, Preston Gates & Ellis LLP,
argued the cause and filed the briefs for respondent on review. 
With him on the briefs was William K. Kabeiseman.
	Mark C. McClanahan, Portland, filed a brief on behalf of
amici curiae George Spada and Marietta Spada.
	Harry Auerbach, Portland, Senior Deputy City Attorney, City
Attorney's Office, filed a brief on behalf of amicus curiae
League of Oregon Cities.
	W. Eugene Hallman, Pendleton, Hallman and Dretke, filed a
brief on behalf of amicus curiae Oregon Trial Lawyers
Association. 
	LEESON, J.
	The decision of the Court of Appeals is reversed, and the
case is remanded to the Court of Appeals for further proceedings.
	*Appeal from Clackamas County Circuit Court, Robert D. Herndon, Judge. 169 Or App 31, 7 P3d 608 (2000).
		LEESON, J.
		Plaintiffs William and Paula Vokoun (plaintiffs)
challenge a decision of the Court of Appeals that reversed a jury
verdict in their favor on their claims for inverse condemnation
and negligence against the City of Lake Oswego (city) after the
trial court denied the city's motion for a directed verdict on
both claims.  Vokoun v. City of Lake Oswego, 169 Or App 31, 7 P3d
608 (2000).  For the reasons that follow, we reverse the decision
of the Court of Appeals and remand the case to that court for
further proceedings.
I.  FACTS

		Because the jury found in plaintiffs' favor, we view
the evidence, and all inferences that reasonably may be drawn
from it, in the light most favorable to plaintiffs.  Greist v.
Phillips, 322 Or 281, 285, 906 P2d 789 (1995).  Our inquiry is
whether there was any evidence from which the jury could have
found the facts necessary to support its special verdicts on
plaintiffs' claims for inverse condemnation and negligence.  See
Brown v. J. C. Penney Co., 297 Or 695, 705, 688 P2d 811 (1984) 
(describing standard of review in determining whether trial court
erred in denying motion for directed verdict).  Our review of the
record "is circumscribed by the case actually presented to the
jury through the pleadings, evidence, and jury instructions." 
Northwest Natural Gas Co. v. Chase Gardens, Inc., 333 Or 304,
310, 39 P3d 846 (2002).
		In 1989, plaintiffs purchased a home on the north side
of Rocking Horse Lane in the Red Fox Hills Subdivision in Lake
Oswego.  The subdivision had been developed in the early 1970s on
a hill above Tryon Creek State Park.  Plaintiffs' property slopes
down to the north, into a ravine at the bottom of the hill.  The
ravine runs approximately parallel to the northern border of
plaintiffs' property.  Plaintiffs' house is located on the south
side of their property.
		The city built a storm drain that runs underground from
Rocking Horse Lane north along a drainage easement near the
western border of plaintiffs' property. (1)  An outfall pipe, 12
inches in diameter, located near the northwest corner of
plaintiffs' property, discharges the water into the ravine.  The
water then flows east along a drainage course towards Tryon
Creek.  During periods of heavy rainfall, the outfall pipe
discharges a high volume of water.
		Before the Red Fox Hills Subdivision and storm drain
were built, storm water from approximately one acre of land
drained to the location where the storm drain now exists.  After
the subdivision was built, the outfall pipe discharged runoff
from about seven acres of land into the drainage course, causing
extensive erosion.  By 1986, in the words of a city engineer, the
drainage course "needed some significant attention."  However,
the city has a "complaint driven" repair policy for maintaining
storm drains, and, apparently because no one had complained, the
city did not undertake any repairs at that time.  
		The city also has a five-year plan for determining
which capital improvements projects -- including projects
involving storm drains -- to undertake.  That plan is
incorporated into the city's budget.  The plan addresses projects
that are estimated to cost $25,000 or more.  The city council
decides which proposed projects to include in the capital
improvements plan.  Undertaking a capital improvement project
that is not in the plan and that costs more than $25,000 usually
requires the city council to adopt a supplemental budget.  The
city did not consider whether to place improvement of the storm
drain and drainage course at issue in this case in the capital
improvement plan.  Neither did the city council consider whether
to adopt a supplemental budget to repair the erosion problems
associated with the storm drain.
		Before buying their property in 1989, plaintiffs
discovered a hole approximately eight feet deep around the storm
drain outfall pipe.  The hole appeared to have been caused by erosion from water coming out of the outfall pipe.  Although the
point where the pipe discharged the storm water was beyond the
boundary of the property that plaintiffs were considering buying,
the hole had swallowed the property marker for the northwest
corner of the lot.  Plaintiffs notified the city about the hole,
and, after plaintiffs had purchased the property, the city's
maintenance staff filled the hole with asphalt debris left over
from a street project in another area of the city.  After filling
the hole with pieces of asphalt, the maintenance department did
not inspect the outfall site or the drainage course to determine
whether filling the hole had solved the erosion problem.  Neither
did the city tell plaintiffs that plaintiffs were responsible for
inspecting the area to determine whether filling the hole had
stopped the erosion at the outfall site or along the drainage
course.  In fact, filling the hole did not stop the erosion along
the drainage course.
		On February 8, 1996, following a period of unusually
heavy rain, a landslide occurred on the hillside on which
plaintiffs' property is located.  The landslide continued to grow
in the following months.  The landslide caused a four-foot drop
in the land approximately nine feet from plaintiffs' house and a
20-foot drop approximately 19 feet from the house.  The landslide
damaged a deck on the house and a dog run, and both had to be
removed.  The landslide also destroyed many trees.  If plaintiffs
had not taken remedial action, the land would have continued to
slide, eventually destroying the house. 
		In November 1996, plaintiffs filed this action against
the city for inverse condemnation and negligence. (2)  In their
claim for inverse condemnation, plaintiffs alleged that the city
had "taken" their property for a public use by constructing a
storm drain pipe and outfall pipe in a manner that destabilized
the soils on and adjacent to plaintiffs' property, causing a
landslide.  As relates to issues on appeal regarding plaintiffs'
negligence claim, plaintiffs alleged, among other things, that
the city was negligent by failing properly to inspect the outfall
and drainage course to discover the erosion that was occurring
and to take reasonable steps to prevent a catastrophic landslide. 
		As noted, in its answer, the city admitted that it
built the storm drain in question.  The city contended that
plaintiffs had failed to state facts sufficient to constitute a
claim and that the city was immune from liability for plaintiffs'
negligence claim under ORS 30.265(3)(c). (3)
		At trial, plaintiffs presented evidence that the water
that the storm drain diverted into the drainage course eroded
more than nine tons of soil per acre each year.  Before the
development of the Red Fox Hills Subdivision and construction of
the storm drain, there had not been a drainage course running
from the outfall site to Tryon Creek.   One of plaintiffs' experts
testified that the speed of the water coming out of the outfall
pipe likely caused the extensive erosion that occurred along the
drainage course.  Another expert testified that the erosion had
been occurring for about 25 years before the landslide, or about
since the time that the storm drain and outfall pipe were
installed, and that the primary cause of the landslide was the
erosion in the drainage course that had removed the soil at the
toe of the slope that supported the hillside on which plaintiffs'
property is located. According to that expert, the city should
have been aware of the potential for further erosion in the
drainage course when it filled the hole at the outfall site in
1989.  Finally, plaintiffs presented evidence that the city could
have prevented the landslide if it had "backfilled" the length of
the drainage course with compacted soil or had constructed an
enclosed pipe to carry water from the outfall pipe east along the
drainage course to Tryon Creek.  Either of those repairs would
have cost more than $25,000.
		At the close of plaintiffs' case, the city moved for a
directed verdict on plaintiffs' inverse condemnation and
negligence claims.  The city argued that, as a matter of law, the
damage to plaintiffs' property from the landslide was not a
taking.  The city also argued that, as a matter of law under ORS
30.265, discretionary immunity barred plaintiffs' negligence
claim.  The trial court denied both motions, and the jury
thereafter returned special verdicts for plaintiffs on both
claims. (4) 
		The city appealed, raising multiple assignments of
error.  The Court of Appeals reversed, addressing only the city's
contention that the trial court erred in denying the city's
motion for a directed verdict on plaintiffs' inverse condemnation
and negligence claims.  See Vokoun, 169 Or App at 33 (those two
assignments "dispositive").  The Court of Appeals viewed
plaintiffs' inverse condemnation claim as being predicated on the
city's negligence.  See Vokoun, 169 Or App at 40 ("In this case,
plaintiffs expressly predicate their claims on the City's
negligence.").  Relying primarily on Patterson v. Horsefly
Irrigation Dist., 157 Or 1, 69 P2d 282, 70 P2d 33 (1937), the
Court of Appeals held that, as a matter of law, negligent
interference with property rights does not support a claim for
inverse condemnation.  Vokoun, 169 Or App at 37-38.  The Court of
Appeals also held that, as a matter of law, the city had made
discretionary policy decisions that entitled it to discretionary
immunity under ORS 30.265.  Id. at 42-43.  We allowed plaintiffs'
petition for review.  We begin our analysis with the inverse
condemnation claim.  
II.  INVERSE CONDEMNATION

		Article I, section 18, of the Oregon Constitution
provides, in part, that "[p]rivate property shall not be taken
for public use * * * without just compensation[.]"  Private
property is "taken" for public use or benefit through the
exercise of the power of eminent domain.  GTE Northwest, Inc. v.
Public Utility Commission, 321 Or 458, 466, 900 P2d 425 (1995).
See Dept. of Trans. v. Lundberg, 312 Or 568, 571 n 1, 825 P2d 641
(1992) (describing eminent domain as "the power inherent in a
sovereign state of taking or of authorizing the taking of any
property within its jurisdiction for a public use or benefit"). 
A governmental unit with eminent domain authority can exercise
its power of eminent domain by instituting condemnation
proceedings.  Id.  An action against the government to recover
the value of private property that the government has taken
without first filing condemnation proceedings is referred to as
an action for "inverse condemnation."  See Suess Builders v. City
of Beaverton, 294 Or 254, 258 n 3, 656 P2d 306 (1982) (claim for
inverse condemnation is shorthand description of process through
which landowner recovers just compensation for governmental
taking of property even though government did not institute
condemnation proceedings). 
		To establish a taking by inverse condemnation, the
plaintiff is not required to show that the governmental defendant
deprived the plaintiff of all use and enjoyment of the property
at issue.  See Morrison v. Clackamas County, 141 Or 564, 568, 18
P2d 814 (1933) (any destruction, restriction, or interruption of
common and necessary use and enjoyment of property constitutes
taking).  A "substantial interference" with the use and enjoyment
of property is sufficient.  Hawkins v. City of La Grande, 315 Or
57, 68-69, 843 P2d 400 (1992).  
		Before this court, plaintiffs first argue that the
Court of Appeals erred in holding that negligent governmental
interference with property rights will not support a claim for
inverse condemnation.  They contend that, under this court's
decisions in Morrison and Tomasek v. Oregon Highway Com'n, 196 Or
120, 248 P2d 703 (1952), a public body is liable in inverse
condemnation for the consequences of a public use, "regardless of
whether the consequences are themselves expected or intended,
regardless of 'fault.'"  In the alternative, plaintiffs contend
that the Court of Appeals erred in analyzing their claim for
inverse condemnation as being predicated on the city's
negligence.  According to plaintiffs, they based their inverse
condemnation claim on the city's acts, not on the city's
omissions regarding maintenance of the drainage course and repair
of erosion along the drainage course. 
		The city responds that this court's cases, including
Morrison and Tomasek, establish that a "purposive act" is an
element of an inverse condemnation claim and that "there is no
allegation or proof in this case that the city designed or
constructed the subdivision stormwater drainage system."  Rather,
"[t]he only action of the City related to the subdivision
drainage system was its presumed acceptance of the system in the
plat dedication."  The city's alleged failure to maintain the
drainage course and repair the erosion along the course, the city
continues, is not the type of "purposive act" that this court's
cases have held is required to state a claim for inverse
condemnation.  The city does not comment on whether its admission
that it built the storm drain would satisfy what it views as the
"purposive act" requirement.  In addition, the city argues that
plaintiffs failed to establish a taking in this case because the
damage that the landslide caused to their to property did not
amount to a substantial interference with their use and enjoyment
of the property.
		We begin with plaintiffs' first argument, namely, that
the Court of Appeals erred in holding that a takings claim cannot
be based on interference with property rights that is "merely a
consequence of negligent government conduct."  Vokoun, 169 Or App
at 37.  Plaintiffs are mistaken.  This court long has held that a
claim for inverse condemnation requires a showing that the
governmental acts alleged to constitute a taking of private
property were done with the intent to take the property for a
public use.  See Gearin v. Marion County, 110 Or 390, 402, 223 P 
929 (1924) (distinguishing eminent domain from tort, in part, by
whether governmental acts done with intent to take private
property for public use).  Patterson, on which the Court of
Appeals relied, explained by analogy the difference between
negligence and inverse condemnation, and it cited Gearin for the
proposition that governmental negligence will not support a claim
for inverse condemnation.  Patterson, 157 Or at 17-19. 
Plaintiffs apparently believe that Morrison and Tomasek
eliminated the requirement that a claim for inverse condemnation
requires a showing that the governmental defendant intended to
take private property for a public use.  We disagree.
		In Morrison, the plaintiff alleged that the defendant
county had built a jetty in the Sandy River that closed the
southerly portion of the river channel, thereby forcing the
entire flow of the stream to the northerly bank.  141 Or at 566. 
The next spring, when the river reached its annual high water
stage, the entire flow of the river was diverted over the
plaintiff's land, destroying it.  Id. at 566-67.  In discussing
the law of inverse condemnation, this court stated:
		"In an action of this character it is no defense
that there was no specific intention on the part of
defendant to appropriate plaintiff's property, but the
defendant must be held to have intended to do those
things which are the natural and ordinary consequences
of [its] act."  
Id. at 569 (emphasis added).  By alleging that the county
intended to construct the jetty in a manner that necessarily
caused the flooding that destroyed the plaintiff's property, the
plaintiff had stated a claim for inverse condemnation.  Id. 
Morrison thus stands for the proposition that the fact-finder may
infer the intent-to-take element of a claim for inverse
condemnation from the natural and ordinary consequences of the
government's act.  Accord Levene v. City of Salem, 191 Or 182,
196-97, 229 P2d 255 (1951) (municipal act resulting in "a direct
and continuous trespass upon real property, as by diverting the
flow of a stream from its natural course onto the property, or by
flooding the property through a drain or sewer so constructed
that such flooding is a necessary result of the construction," is
"taking").
		Tomasek is consistent with Morrison.  In that case, the
Highway Department constructed a grade, roadbed, and bridge in a
manner that closed off most of a flood plain.  Tomasek, 196 Or at
138-39.  Closing off the flood plain, combined with excavating
rock from the river bed, substantially increased the velocity of
the current in the main river and changed its course and channel
from its original location to a place over and across the
plaintiff's land.  Id.  Relying on Morrison, this court held that
the Highway Department had taken the plaintiff's land for a
public use without first condemning the land.  Id. at 148-50. 
See also Hawkins, 315 Or 57 (holding intentional release of
sewage-laden water onto private property to prevent overflow at
sewage treatment plant, killing livestock and crops, supported
claim for taking personal property by inverse condemnation). 
		Thus, neither Morrison nor Tomasek eliminated the
requirement that a claim for inverse condemnation requires a
showing that the governmental defendant intended to take private
property for a public use.  A fact-finder may infer the intent to
take from the governmental defendant's action if, as this court
stated in Morrison, the natural and ordinary consequence of that
action was the substantial interference with property rights. 
The Court of Appeals did not err for the first reason that
plaintiffs have asserted. 
		We turn to plaintiffs' argument that the Court of
Appeals erred nonetheless because it mischaracterized plaintiffs'
inverse condemnation claim as being predicated on the city's
negligent maintenance of the outfall pipe.  We agree. 
Plaintiffs' complaint states that their claim for inverse
condemnation was based on the city's construction of the storm
drain pipe and outfall in a manner that created a drainage course
where one had not been previously, and caused accelerated erosion
along that course, thereby destabilizing the soils on and
adjacent to plaintiffs' property.  Accordingly, the question is
whether plaintiffs presented evidence from which a jury could
find that the natural and ordinary consequence of the city's
construction of the storm drain was to destabilize plaintiffs'
property, causing the landslide.  As we have explained, an
appellate court will not reverse the trial court's denial of a
motion for a directed verdict if there is any evidence in the
record from which the jury could find the facts necessary to
establish the elements of the claim.  See Brown, 297 Or at 705
(stating standard of review of denial of motion for directed
verdict).
		As noted, in this case, the city built the storm drain. 
The city does not dispute that water from that storm drain caused
erosion in the drainage channel.  The parties presented
conflicting evidence about what caused the landslide. 
Plaintiffs' evidence showed that the hillside on which
plaintiffs' property is located was stable before the storm drain
was built there had not been a drainage course in the ravine
beneath plaintiffs' property before the storm drain was built;
the storm-drain channeled water consistent with the way that the
drain had been designed and built 25 years earlier; and water
from the drain, without any intervening causes, had created the
drainage course and caused the erosion that undermined the
hillside, causing the landslide.
		That the jury heard conflicting evidence on virtually
every issue regarding plaintiffs' claim for inverse condemnation
is of no moment in our review of whether the trial court erred in
denying the city's motion for a directed verdict on that claim. 
The city built the storm drain, and it is undisputed that a storm
drain is a public work, serving a public purpose.  Before the
storm drain was built, there was no natural drainage course in
the ravine.  The storm drain collected more than five times the
amount of water that naturally flowed through the area where the
landslide occurred.  The outfall pipe dispersed that water with
such force that the water carved a drainage course along the
ravine.  The water was directed at, and caused, unnatural erosion
along the drainage course, undermining the toe of the slope that
supported the hillside on which plaintiffs' property is located. 
One reasonable inference from the foregoing evidence is that the
landslide was the natural and ordinary (even inevitable)
consequence of the city's construction of the storm drain in that
manner.  It follows that there is evidence in the record to
support the jury's verdict.
		Nonetheless, the city argues, there is no evidence in
the record to support plaintiffs' claim that the landslide caused
substantial interference with their property rights.  See
Hawkins, 315 Or at 68-69 (test for whether damage to property
rises to the level of a taking is whether there has been
"substantial interference" with use and enjoyment of property). 
Rather, the city contends, the landslide did not functionally
impair the use of plaintiffs' property.  That argument is without
merit.  As we have explained, plaintiffs presented evidence that
the landslide caused such a significant drop in plaintiffs' land
within a few feet of their home that a deck on the house and a
dog run had to be removed.  Without remedial action, the house
would have collapsed.  On that evidence, the jury could find that
plaintiffs had suffered a substantial interference with their
property rights.  The trial court did not err in denying the
city's motion for a directed verdict on plaintiffs' inverse
condemnation claim. 
		Our decision on plaintiffs' inverse condemnation claim
does not address all the assignments of error that the city
raised on appeal regarding that claim or the relationship of that
claim to plaintiffs' negligence claim.  See Vokoun, 169 Or App at
33 (noting that Court of Appeals did not address all assignments
of error).  Accordingly, the case must be remanded to the Court
of Appeals to address those other assignments of error. 
Moreover, at the Court of Appeals, the city argued that the trial
court erred in a number of respects regarding plaintiffs'
negligence claim.  The Court of Appeals did not reach those
arguments because it held, as a matter of law, that the city was
immune from liability under ORS 30.265(3).  See id. at 43 (so
holding).  Whether the Court of Appeals also must address the
city's remaining assignments of error regarding plaintiffs'
negligence claim depends, in part, on whether the Court of
Appeals erred in its holding on discretionary immunity.  We turn
to that issue.
III.  DISCRETIONARY IMMUNITY

		Discretionary immunity protects governmental defendants
from liability for certain types of decisions, namely, those that
require supervisors or policy makers to assess costs and
benefits, and to make a choice among competing goals and
priorities.  McBride v. Magnuson, 282 Or 433, 437, 578 P2d 1259
(1978).  The doctrine of discretionary immunity does not immunize
a decision not to exercise care at all, if action of some kind is
required.  See Garrison v. Deschutes County, 334 Or 264, 274, 48
P3d 807 (2002) (so stating).  To qualify for discretionary
immunity under ORS 30.265(3)(c), the city must show that it made
a decision "involving the making of policy" as opposed to a
"routine decision[] made by employees in the course of their day-to-day activities[.]"  See Mosley v. Portland School Dist. No.
1J, 315 Or 85, 89, 843 P2d 415 (1992) (stating test for
discretionary immunity).  The burden is on the governmental
defendant to establish its immunity.  Stevenson v. State of
Oregon, 290 Or 3, 15, 619 P2d 247 (1980). 
		As noted, in this case, the city moved for a directed
verdict on plaintiffs' negligence claim on the ground that the
city's failure to inspect and maintain the outfall and drainage
course was subject to discretionary immunity under ORS
30.265(3)(c).  The trial court denied the city's motion and
submitted plaintiffs' negligence claim to the jury, (5) which found
the city liable.  In reversing the trial court, the Court of
Appeals held that the city's choice about which capital
improvement projects exceeding $25,000 to undertake, which did
not include inspection, maintenance, or repair of the drainage
outfall at issue in this case, was "precisely the sort of
discretionary policy decision that is subject to ORS 30.265(3)." 
Vokoun, 169 Or App at 42-43.
		On review, plaintiffs contend that the Court of Appeals
decision erroneously creates a presumption of immunity whenever a
local government adopts a budget that fails to address that
government's duty to inspect and maintain public facilities. In
this case, plaintiffs contend, the city presented no evidence
that policy makers had considered the risks to plaintiffs'
property from erosion and alternative means for mitigating it. 
Therefore, they assert, the city failed to establish its
immunity.   The city responds that, although plaintiffs couched
their specification of negligence in terms of the city's failure
to inspect and maintain the drainage course, the underlying issue
is the city's failure to acquire the drainage course from the
state and improve it either by constructing a closed pipe along
the length of the course or filling it with compacted soil.  As
to the decision not to acquire and improve the drainage course,
the city argues, it is immune from liability under the doctrine
of discretionary immunity, because the city's governing body made
policy decisions reflected in the capital improvements plan that
did not include acquiring and improving the drainage course at
issue in this case. (6)  For the reasons that follow, we conclude
that, on the facts of this case, the Court of Appeals erred in
holding that the city had established its immunity to plaintiffs'
negligence claim.
		As we have explained, the city has a complaint-driven
policy regarding inspection and repair of storm drains. 
Plaintiffs complained about the hole at the outfall site in 1989. 
Maintenance employees responded to the complaint by going to the
area to assess what should be done.  They discovered that water
from the outfall pipe was causing unnatural erosion along the
drainage course in addition to the large hole that plaintiffs had
identified.  Maintenance employees decided to repair the erosion
by filling the hole with asphalt debris.  The decision how to
respond to the erosion problem about which plaintiffs had
complained was a routine decision made by employees in the course
of their day-to-day activities.  Such decisions do not qualify
for discretionary immunity.  See Mosley, 315 Or at 89 (describing
decisions made by employees in course of day-to-day activities as
not qualifying for discretionary immunity).  Even assuming that
city employees subsequently had inspected their repair,
discovered that filling the hole with asphalt debris had not
solved the erosion problem, and that adequate repairs would have
cost more than $25,000, the capital improvements plan would not
necessarily have barred the city from making the necessary 
repairs.  That is so because, as we explained earlier in this
opinion, city policy permitted the city council to adopt a
supplemental budget to pay for repairs costing more than $25,000. 
The city presented no evidence that the city council considered
whether to adopt a supplemental budget to repair the erosion that
the outfall pipe at issue in this case had caused.  On this
record, we conclude that the fact that the city had adopted a
capital improvements plan that did not include purchasing and
improving the drainage course does not establish the city's
immunity from plaintiffs' negligence claim. (7)  The trial court did
not err in denying the city's motion for a directed verdict on
that claim, and the Court of Appeals erred in holding otherwise. 
On remand, the Court of Appeals must address the city's other
assignments of error regarding plaintiffs' negligence claim.  See
Vokoun, 169 Or App at 33 (declining to address other assignments
of error because holding on discretionary immunity dispositive).
		The decision of the Court of Appeals is reversed, and
the case is remanded to the Court of Appeals for further
proceedings.



1. 	On appeal and on review before this court, the city has
maintained that it did not build the storm drain; rather, the
city asserts that the developer of the Red Fox Hills Subdivision
built the drain and later dedicated it to the city.  However, in
its answer, the city admitted that it built the storm drain.  See
Yates v. Large, 284 Or 217, 223, 585 P2d 697 (1978) (holding
admission of fact in pleadings is judicial admission and normally
conclusive on party making it).  

2. 	Plaintiffs' complaint also alleged other claims that
are not at issue here.  

3. 	ORS 30.265 provides, in part:
		"(3) Every public body and its officers, employees
and agents acting within the scope of their employment
or duties * * * are immune from liability for:
		"* * * * *
		"(c) Any claim based upon the performance of or
the failure to exercise or perform a discretionary
function or duty, whether or not the discretion is
abused."

4. 	The jury awarded plaintiffs $138,410 on their inverse
condemnation claim.  The jury awarded each of the plaintiffs
$69,205 for property damage, $80,750 for economic damage, and
$12,000 for noneconomic damage on plaintiffs' negligence claim. 
The trial court struck the property damage award as duplicative
of the inverse condemnation award and then entered judgment for
plaintiffs on the balance, $323,910, plus attorney fees of
$30,224.  Because of the posture in which this case appears
before this court, we do not address whether, as a matter of law,
plaintiffs may recover both on their claim for inverse
condemnation and on their claim for negligence. 

5. 	The trial court instructed the jury as follows:
		"In evaluating Plaintiffs' negligence claim, you
may consider only the City's acts or omissions in
inspecting or maintaining the drain channel.  If
Plaintiffs have proven by a preponderance of the
evidence that the landslide was caused by acts or
omissions in the maintenance or inspection of the drain
channel, then you may find for Plaintiffs."  
(Emphasis added.)

6. 	Regarding plaintiffs' allegation that the city was
negligent in failing to inspect and maintain the outfall and
drainage course, the city contends that it had no such duty
because the drainage course is on state, not city, property.  
That argument relates to whether the city was negligent at all,
not whether it made policy choices that establish its
discretionary immunity.

7. 	We need not decide whether, assuming the city council
had considered and then decided not to approve a supplemental
budget for correcting the erosion in the drainage course, such a
policy judgment would qualify for discretionary immunity.