Church of the Divine Earth v. City of Tacoma

• Decision Date: 19 September 2019
• Docket Number: No. 96613-3,96613-3
• Citation: 194 Wash.2d 132,449 P.3d 269
• Court: Washington Supreme Court
• Parties: The CHURCH OF the DIVINE EARTH, Petitioner, v. CITY OF TACOMA, Respondent.

194 Wash.2d 132

449 P.3d 269

The CHURCH OF the DIVINE EARTH, Petitioner,

v.CITY OF TACOMA, Respondent.

No. 96613-3

Supreme Court of Washington.

Argued June 13, 2019

Filed September 19, 2019

Richard B. Sanders, Carolyn A. Lake, Goodstein Law Group, 501 S. G Street, Tacoma, WA 98405-4715, for Petitioner.

Margaret A. Elofson, City of Tacoma, 747 Market Street, # 1120, Tacoma, WA 98402-3726, for Respondent.

Hannah Sarah Sells Marcley, Attorney at Law, Jackson Wilder Maynard, Jr., Building Industry Association of Washington, 111 21st Avenue SW, Olympia, WA 98501-2809, for Amicus Curiae (Building Industry Association of Washington).

Brian Trevor Hodges, Pacific Legal Foundation, 255 S. King Street, Suite 800, Seattle, WA 98134, for Amicus Curiae (Pacific Legal Foundation).

JOHNSON, J.

¶1 This case concerns whether the city of Tacoma (City) can be held liable for damages for imposing an unlawful condition on a building permit. In an appeal brought under the Land Use Petition Act (LUPA), chapter 36.70C RCW, the superior court ruled that the City acted unlawfully when it placed a condition on the Church of the Divine Earth’s (Church) building permit, requiring an uncompensated-for dedication of land for right-of-way improvements. However, the court denied the Church’s action for damages under RCW 64.40.020, and the Court of Appeals affirmed. We reverse and remand for a new trial.

FACTS

¶2 On September 20, 2013, the Church submitted an application to the City to build a parsonage on property it owned. A single-family residence had previously been located on the property, but it had been demolished in 2012. City staff reviewed the permit application and placed a number of conditions on it, including, at issue here, a requirement that the Church dedicate a 30-foot-wide strip of land for right-of-way improvements to a street abutting the property. While the existing street was generally 60 feet wide in other areas, it was 30 feet wide next to the Church’s property. This lack of uniformity had existed for around 100 years.

¶3 The Church challenged the permit conditions, and the City eventually removed most of them but kept the requirement for a dedication. The Church appealed the decision to the City’s hearing examiner, and the hearing examiner granted summary judgment in favor of the City.

¶4 The Church filed a timely appeal under LUPA, in which it challenged the hearing examiner’s decision and also sought damages under RCW 64.40.020. In addressing the propriety of the dedication, the court confined its review to the administrative record that had been before the hearing examiner and acknowledged that, in that record, the stated purpose by the City for imposing the dedication requirement was to create a uniform street. The court held that this reason was insufficient to justify the requirement and reversed the hearing examiner, invalidating the condition.

¶5 The case then proceeded to trial on the issue of damages. The court issued an order prohibiting the City from entering evidence to show the dedication was imposed for any reason other than uniformity. However, during trial, City officials testified that the dedication was intended to address a variety of issues, including to alleviate impacts to traffic, visibility, parking, and pedestrian safety, as well as to bring the street into compliance with city codes and industry best practices. The trial court apparently considered the evidence and found that the City imposed the dedication to address increased vehicular and pedestrian traffic and related safety impacts, and to ensure adequate visibility. It then concluded (a) "[t]he City reasonably believed that the development conditions it attached to the permit had a nexus to the project and were proportional" and (b) the City "did not know and should not have reasonably known that its requirement for a dedication of right of way would be considered violative of Nollan / Dolan^{[1 ]}." Clerk’s Papers (CP) at 2408. The court denied the Church’s request for damages, and the Church appealed.

¶6 The Court of Appeals affirmed the trial court, holding that "[b]ecause the City reasonably believed that it satisfied the requirements of Nollan / Dolan , it did not know and should not have known that its action was unlawful." Church of Divine Earth v. City of Tacoma, 5 Wash. App. 2d 471, 494, 426 P.3d 268 (2018). The Court of Appeals also awarded attorney fees to the City. The Church petitioned this court, and we granted limited review.² Church of Divine Earth v. City of Tacoma, 192 Wash.2d 1022, 435 P.3d 285 (2019).

ISSUE

¶7 1. Whether the City knew or should reasonably have known its requirement for a dedication of land was unlawful.

ANALYSIS

¶8 We should first settle what this case is not about. This is not a case challenging the constitutionality of a land use decision; the propriety of the permit condition was already resolved by the lower court and is not before us on appeal. And because the superior court invalidated the permit condition, this is not a claim for just compensation for a taking. Instead, what we have before us is a claim for damages under RCW 64.40.020 for an attempted exaction of land through an unlawful permit condition.

¶9 RCW 64.40.020(1) allows a property owner who files an application for a permit to bring an action for damages

to obtain relief from acts of an agency which are arbitrary, capricious, unlawful, or exceed lawful authority, or relief from a failure to act within time limits established by law: PROVIDED, That the action is unlawful or in excess of lawful authority only if the final decision of the agency was made with knowledge of its unlawfulness or that it was in excess of lawful authority, or it should reasonably have been known to have been unlawful or in excess of lawful authority.

This statute does overlap to some degree with LUPA insofar as, to obtain damages under RCW 64.40.020, the land use decision must, necessarily, be invalid. But not every successful LUPA appeal will justify damages, as is expressly acknowledged in RCW 36.70C.130(2) (stating that "[a] grant of relief by itself may not be deemed to establish liability for monetary damages"). To establish liability for such damages under RCW 64.40.020, a plaintiff must meet a higher burden than is required in LUPA, establishing actual or constructive knowledge, or that the government entity acted in an arbitrary or capricious manner.

¶10 Our review here is limited to the question of whether the Church may obtain damages for the City’s unlawful action. As the statute indicates, the City incurs liability for an unlawful action "only if the final decision of the agency was made with knowledge of its unlawfulness ... or it should reasonably have been known to have been unlawful." RCW 64.40.020(1) (emphasis added). The City argued, and the trial court held, that the final decision was that of the hearing examiner. Therefore, the issue in this case is whether the City knew or should reasonably have known the hearing examiner’s decision to allow the permit condition was unlawful. The trial court appears to have based its findings of fact and conclusions of law on arguably improper, irrelevant evidence, and the Court of Appeals, in turn, applied the wrong standard in its review.

¶11 Whether the City should reasonably have known the final decision was unlawful is an issue involving related questions of both law and fact. Isla Verde Int’l Holdings, Ltd. v. City of Camas, 147 Wash. App. 454, 467, 196 P.3d 719 (2008). It requires an examination of the law, which the City is presumed to have known, see, e.g., State ex rel. Dungan v. Superior Court, 46 Wash.2d 219, 222, 279 P.2d 918 (1955), and the material facts underlying the final decision. The statute creates an objective standard, asking whether a reasonable person looking at the facts utilized in the final decision would be expected to know the decision violated established law. See, e.g. , In re Forfeiture of One 1970 Chevrolet Chevelle, 166 Wash.2d 834, 841, 215 P.3d 166 (2009) (holding that while "actual knowledge" is a subjective standard, having "reason to know" is an objective standard); Cloud v. Summers, 98 Wash. App. 724, 731, 991 P.2d 1169 (1999) (recognizing the objective nature of whether a plaintiff should have known of an injury).

¶12 A permit condition for an uncompensated dedication of land is unlawful where it fails to fulfill the requirements laid out in two formative cases on unconstitutional conditions, Nollan v. California Coastal Commission, 483 U.S. 825, 107 S. Ct. 3141, 97 L. Ed. 2d 677 (1987), and Dolan v. City of Tigard, 512 U.S. 374, 114 S. Ct. 2309, 129 L. Ed. 2d 304 (1994). Taken together, the Nollan and Dolan cases create a framework for analyzing the constitutionality of a permit condition involving an uncompensated land dedication. First, the government must show the development will create or exacerbate an identified public problem. Second, the government must show the proposed condition will tend to solve or alleviate the public problem. Finally, the government must show that the condition is roughly proportional to the development’s anticipated impact. In fulfilling these requirements, the government must, to some degree, quantify its findings, and cannot rely on speculation regarding the impacts or mitigation of them.

¶13 The City provided little documentation to the hearing examiner to justify its requirement for a dedication.

The record contained minutes from a September 25, 2013 review panel where the Church’s permit was discussed, and a declaration from the director of planning and development services, Peter Huffman. The review panel minutes state that the Church was being required to dedicate the land "to provide consistent right-of-way widths" along the street, and 30 feet was being required "to stay consistent and provide adequate street and sidewalk area." CP at 598. Huffman’s declaration summarized the City’s reason for the dedication as "It is important to the...