City of Olympia v. Palzer

• Decision Date: 05 February 1986
• Docket Number: No. 7475-3-II,7475-3-II
• Citation: 713 P.2d 1125,42 Wn.App. 751
• Parties: CITY OF OLYMPIA, a municipal corporation, Respondent, v. Chris PALZER and Cathy Palzer, husband and wife; Olympic Properties, Ltd., a limited partnership; Bertil A. Granberg and Jane Granberg, as general partners of Olympic Properties, Ltd., Appellants, and Thurston County, a political subdivision of the State of Washington and Harris G. Hunter, in his capacity as Thurston County Treasurer, Defendants, and Evergreen Park Homeowners Association, Respondent.
• Court: Washington Court of Appeals

Page 751

42 Wn.App. 751

713 P.2d 1125

CITY OF OLYMPIA, a municipal corporation, Respondent, v. Chris PALZER and Cathy Palzer, husband and wife; Olympic Properties, Ltd., a limited partnership; Bertil A. Granberg and Jane Granberg, as general partners of Olympic Properties, Ltd., Appellants and Thurston County, a political subdivision of the State of Washington and Harris G. Hunter, in his capacity as Thurston County Treasurer, Defendants and Evergreen Park Homeowners Association, Respondent.

No. 7475-3-II.

Court of Appeals of Washington Division 2.

Feb. 5, 1986.

Chris Palzer, Federal Way, pro se.

Bertil A. Granberg, Seattle, pro se.

Mark O. Erickson, City Atty., Olympia, for respondent.

WORSWICK, Chief Judge.

We are asked to decide: (1) whether property sold at a tax sale passes to the buyer free of restraints on ownership imposed by a city ordinance; and (2) whether such a tax sale invalidates use restrictions on the land imposed both by a city ordinance and by restrictive covenants. We hold invalid those portions of the ordinance purporting to restrict ownership and to impose use restrictions in perpetuity. We hold valid the use restrictions imposed by the restrictive covenants.

In 1969, Evergreen Park Homeowners Association, a land developer, established a planned unit development in Olympia by filing a plat and otherwise complying with the City's general ordinances on the subject. The plat contained restrictive covenants which, among other things, reserved tracts A through D as greenbelt open space.

Several years later, Evergreen Park asked the City to rezone the PUD to allow a shopping center. The City obliged by enacting Ordinance No. 3776. It contained the following provision:

[Tracts A through D are to] be maintained in perpetuity as natural landscaped open area, owned by a property owners' association, municipal or state body, or by present property owners .... ¹

(Italics ours.)

Evergreen Park failed to pay the 1976 property taxes on Tracts A and D. The Thurston County treasurer foreclosed on the tracts, and in 1982 put them up for sale at public auction. Chris and Cathy Palzer were high bidders. The City asserted that Ordinance 3776 prohibited the treasurer from selling the tracts to anyone not qualified to be owner as defined in the ordinance. The treasurer disagreed, and completed the sale to the Palzers.

The Palzers later sold the tracts to a limited partnership, Olympic Properties, Ltd. The City then sued the Palzers and Olympic in Thurston County Superior Court, seeking rescission of both the tax sale and the Palzers' sale to Olympic. The Evergreen Park Homeowners Association intervened on the side of the City.

Both sides moved for summary judgment. The trial court upheld the tax sale to the Palzers, holding that city ordinances could not restrict county tax sales. ² The court went on, however, to rescind the Palzers' sale to Olympic, holding that Ordinance 3776 bound everyone except the county treasurer, and that the use restrictions in both the ordinance and the covenants continued to apply. The Palzers and Olympic appeal.

We agree with their first contention, that the restrictions on ownership imposed by the ordinance were invalidated by the tax sale. RCW 84.64 creates a comprehensive scheme under state law for foreclosing and selling property on which taxes are delinquent. RCW 84.64.080 gives the county treasurer explicit authority to sell such property at public auction, and requires him to sell to the highest bidder. Because the high bidders here, the Palzers, were not within the class of owners permitted by the ordinance, the ordinance conflicted with state law. Its ownership restrictions are void. State v. Seattle, 94 Wash.2d 162, 615 P.2d 461 (1980). The trial court thus correctly held that the sale to the Palzers was valid.

It erred, however, in holding that the resale was invalid. This holding ignored a further conflict between the ordinance and state law.

A tax sale under RCW 84.64 creates a new title, free and clear of all encumbrances. Brown v. Olmsted, 49 Wash.2d 210, 299 P.2d 564 (1956); Clippinger v. Birge, 14 Wash.App. 976, 547 P.2d 871 (1976). There is only one exception: easements recorded before the property taxes become past due. RCW 84.64.460. This exception simply does not apply here. ³ Again, the ordinance must yield in the face of this irreconcilable conflict with state law.

We disagree, however, with the contention by the Palzers and Olympic that the use restrictions in the restrictive covenants were extinguished by the tax sale. They survived and are valid and enforceable. ⁴

This issue is one of first impression in Washington, and neither side has supplied us with any helpful authority. Our research has disclosed only two cases, both of which hold that restrictive covenants constitute easements that are not cut off by a tax foreclosure sale. Hendley v. Overstreet, 253 Ga. 136, 318 S.E.2d 54 (1984); Halpin v. Poushter, 59 N.Y.S.2d 338 (Sup.Ct.1945). We now so hold. This result is consistent with common sense and sound policy. It is...