Opinion ID: 1246543
Heading Depth: 1
Heading Rank: 3

Heading: de facto incorporation

Text: The doctrine of de facto municipal incorporation was developed by American courts in the nineteenth century. Its purpose was to insulate nascent local governments from devastating disincorporations resulting from private attacks based upon minor procedural errors which were common to the formation of such governments by laymen. [16] One early commentator well summarized the principle: Briefly stated, the doctrine is that where there is authority in law for a municipal corporation, the organization of the people of a given territory as such a corporation under color of delegated authority, followed by a user in good faith of the governmental powers incidental thereto, will be recognized by the law as a municipal corporation de facto, wherever through the failure to comply with the constitutional or statutory requirements the corporation cannot be said to exist de jure. [17] Where the doctrine of de facto incorporation applies, private parties may not successfully bring a suit challenging the legality of corporate existence. [18] Disincorporation of a municipality substantially disrupts the life and livelihood of anyone associated with the municipality. Among the deleterious consequences of a disincorporation are the diselection of public officials, invalidation of corporate actions (possibly creating individual liability on the part of public officials or unjustly depriving employees, contractors and other creditors of claims against the corporate body), and voiding of actions taken under the police, taxation and eminent domain powers. Not all these consequences necessarily flow from a disannexation as distinguished from a total disincorporation. The governmental entity retains its charter, at least with respect to its boundaries prior to the annexation. Nevertheless, substantial disruption similar to the results of disincorporation may occur. We therefore conclude that an annexation is a corporate reorganization of sufficient dignity so that an attack upon it challenges the corporate essence in a manner justifying the application of the doctrine of de facto municipal incorporation. We presaged our application of the doctrine of de facto incorporation to such cases when we said, in a footnote in the Nome case: Existing cities with Local Boundary Commission created boundaries remain unaffected by our holding in this case under the de facto municipality doctrine. [19] the Nome case inferentially held the doctrine of de facto municipal incorporation inapplicable because the Nome annexation was challenged within two months of its effective date, and there was no evidence that the city had exercised any municipal powers in the annexed area. [20] In our Nome decision, we cited a recent case decided by the Supreme Court of Connecticut holding that a merger of two municipalities was immune from private attack under the doctrine of de facto municipal incorporation. [21] Courts of other states have held that annexations are subject to the doctrine. [22] We hold that the doctrine of de facto municipal incorporation applies to annexations and proceed to apply the doctrine to the facts of the Valdez annexation. Adapting the most generally accepted definition of the doctrine to annexations, the following four elements must be present in order for a prima facie voidable annexation to escape challenge: (1) a constitutional or statutory provision under which the annexation might lawfully have been accomplished; (2) an attempted compliance in good faith with the provision(s); (3) a colorable compliance with the provision(s); and (4) an assumption in good faith of municipal powers over the annexed territory. [23] AS 44.19.260 [24] and procedural regulations promulgated by the commission [25] clearly provide a framework under which an annexation such as that proposed by the City of Valdez could lawfully be effected. The company cannot seriously dispute that the city attempted in good faith to comply with the statute since the city followed the only statutory procedure then available for annexation, and the record is devoid of any evidence of bad faith. The vital elements in testing the Valdez annexation are whether the city colorably complied with the statutes, and whether it sufficiently assumed corporate powers over the annexed territory (again, there is no dispute that whatever power the city exercised, it did so in good faith). Courts have often interpreted the colorable compliance requirement to mean that a defect, in order to render an incorporation or annexation void, must be material, as opposed to technical. [26] The unique Alaska annexation procedures present problems different from those encountered by other courts in determining whether a defect is material or not. Courts in other jurisdictions ordinarily must review only the actions of the municipality in assessing the validity of the annexation; annexations effected through Local Boundary Commission procedures receive a full administrative hearing, followed by legislative review, before they are subjected to judicial scrutiny. The complex social, political and economic judgments leading to the decision as to whether an annexation is wise fall more properly within administrative and legislative competence; ordinarily those decisions will be overturned only when they involve an abuse of discretion. [27] The more common challenge to Local Boundary Commission action, that made here by the company, attacks the procedures by which the substantive decisions were made. Where the other elements of the de facto incorporation doctrine exist, a procedural challenge following both administrative and legislative review should succeed only where it is clear that the defective procedures prevented the opponents of annexation from fully and fairly presenting their case to the reviewing bodies. The proper test to determine whether a procedural defect is so material that it vitiates colorable compliance with the applicable statute and thereby strips the annexation of de facto municipality protection parallels the test of plain error in civil cases: whether the error is so substantial as to result in injustice. [28] In this instance the injustice, if any, would be caused by preventing the full and fair expression of opposing viewpoints. The errors alleged by the company must be tested according to this standard. The company has not alleged that any material argument against the annexation was suppressed or overlooked at the public hearing because of the commission's failure to promulgate standards. We see three purposes underlying the statutory requirement of annexation standards. First, such standards expose the basic decision-making processes of the commission to public view and thus subject commission action to broad corrective legislation. [29] Second, the standards guide local governments in making annexation decisions and in preparing proposals for the commission. Frustration of these purposes cannot harm the opponent of annexation. Third, annexation standards objectify the criteria of decision-making and delineate the battleground for a public hearing, [30] but we cannot perceive how the absence of such delineation in any manner prevented full and fair expression of the company's position at the hearing on the Valdez annexation. The failure to promulgate standards for annexations was not an error so substantial as to result in injustice. Having already held that the company failed to prove that the Valdez annexation was a step annexation, we need not question further whether the failure to promulgate standards for step annexations worked an injustice upon the company. [31] Based on the undisputed facts, the superior court granted summary judgment, holding that the city had exercised sufficient municipal powers in the annexed area so that the doctrine of de facto incorporation was satisfied. At the time of the hearing on the motion for summary judgment, one elected city councilman and several appointed commissioners and committee members lived in the annexed area; city schools served the children in the annexed area; the city had expended $90,000 (some of which was donated) for a comprehensive development plan for the newly annexed territory; the city provided police and fire protection to the annexed area; the city provided ambulance service for the annexed area; refuse collection and animal control services were extended; and the city library services were open to residents of the annexed area. The company disputes none of these facts, except to say that some services were initiated before the annexation or after the commencement of the litigation. [32] We hold that the trial court did not err in finding that the City of Valdez exercised sufficient municipal powers under the annexation order in the annexed area to satisfy the doctrine of de facto incorporation. We conclude that the commission's failure to promulgate standards, the only error we find at the administrative level of these proceedings, renders the annexation voidable; timely attack before the city had exercised its municipal powers under the annexation order would have led to the same result as Nome  disannexation. [33] However, the doctrine of de facto municipal incorporation insulates from collateral attack annexations not impeccably effected where the annexation is attempted under a proper statute, a good faith effort is made to comply with the statute, the statute is colorably complied with, and the municipality has exercised its powers in good faith within the annexed territory. The first two elements of this test are incontestible here, and we hold that the decision of the superior court that the other two are satisfied was not in error under the facts of this case. The company's attack upon the Valdez annexation therefore must fail, and the judgment of the superior court must be affirmed. [34] Affirmed. ERWIN, J., not participating.