Sintra, Inc. v. City of Seattle

• Decision Date: 14 May 1992
• Docket Number: No. 57029-9,57029-9
• Citation: 119 Wn.2d 1,829 P.2d 765
• Parties: SINTRA, INC., an Oregon corporation qualified and doing business in Washington, Keith H. Hamack and Patty L. Hamack, husband and wife and their marital community; Arthur M. Stanley and Susan S. Stanley, husband and wife, and their marital community, Appellants, v. The CITY OF SEATTLE, a municipal corporation, Holley Miller and John Gayman, her husband, Ovid Thompson, a single person, David Moseley and Jane Doe Moseley, his wife, Beatrice Ryan and John Doe Ryan, her husband, Respondents.
• Court: Washington Supreme Court

Page 1

119 Wn.2d 1

829 P.2d 765

SINTRA, INC., an Oregon corporation qualified and doing

business in Washington, Keith H. Hamack and Patty L. Hamack,

husband and wife and their marital community; Arthur M.

Stanley and Susan S. Stanley, husband and wife, and their

marital community, Appellants, v. The CITY OF SEATTLE, a municipal corporation, Holley Miller and John Gayman, her husband, Ovid Thompson, a single

person, David Moseley and Jane Doe Moseley, his wife,

Beatrice Ryan and John Doe Ryan, her husband, Respondents.

No. 57029-9.

Supreme Court of Washington,

En Banc.

May 14, 1992.

Reconsideration Denied June 17, 1992.

Richard B. Sanders, Bellevue, for appellants.

Mark H. Sidran, City Atty., Miriam Reed, Asst. City Atty., Seattle, for respondents.

Ronald J. Zumbrun, Edward J. Connor, Jr., John M. Groen, Sacramento, Cal., Ben J. Gantt, Jr., Seattle, amicus curiae for appellants on behalf of Pacific Legal Foundation.

DURHAM, Justice.

In this land use action, we are asked to decide for the first time the impact of federal civil rights actions on our takings jurisprudence. Increasingly, this court is called upon to resolve disputes concerning land use regulation, and the trend is likely to continue. A body of cogent, workable rules upon which regulators and landowners alike can rely is essential to the task.

In 1989, this court affirmed a holding of contempt against the City of Seattle for enforcement of the Housing Preservation Ordinance (HPO) after it had been ruled invalid by the Superior Court. R/L Assocs., Inc. v. Seattle, 113 Wash.2d 402, 411, 780 P.2d 838 (1989). Once again, we are asked to review the actions of the City in a similar situation. Plaintiffs, Sintra, Inc., and its shareholders, Keith and Patty Hamack and Arthur and Susan Stanley (Sintra), appeal an order dismissing on summary judgment all of their claims against Seattle and four of its employees. Sintra claims that the City violated Sintra's federal rights to substantive due process and just compensation for a taking of its property, and that it is entitled to damages under 42 U.S.C. § 1983. We reverse the summary judgment in favor of the City and remand for further proceedings.

In September 1984, Sintra purchased the Larned Hotel on Westlake Avenue near downtown Seattle. The building was in an advanced state of disrepair and was almost vacant. The previous owners were unable to find new tenants for the building, despite their repeated attempts.

Sintra intended to renovate the building, and put retail shops on the ground floor and a bed and breakfast on the upper two floors. The building was purchased for $670,000--$120,000 down and an installment note payable over 3 years. The terms of the financing were not favorable, but Sintra was unable to obtain alternative financing. After relocating the few remaining tenants, Sintra learned that an adult entertainment business might be moving into the adjacent building, and it became apprehensive about the possibilities for developing a bed and breakfast.

When the adult entertainment establishment opened its doors in July 1985, Sintra tried to sell the building. Sintra hired real estate broker Wade Cole, but his attempts were unsuccessful. Sintra and Cole also searched diligently for someone to develop low income housing at the building. In the meantime, Sintra defaulted on its installment note, and ceased making payments.

Eventually, Sintra concluded that the only profitable use to be made of the building was to convert it to a ministorage warehouse. On October 29, 1985, Sintra applied to the City for a master use permit for that purpose. Sintra was informed that a housing demolition fee of $219,840 would be required under the HPO for the change of use. ¹ Seattle Municipal Code (SMC) 22.210.

Sintra applied for a variance from the HPO fee on November 6, 1985. On November 12, 1985, the sellers accelerated the note. The parties dispute the ensuing course of events. The City claims that Sintra failed to provide requested information until August 1986. Sintra, however, claims that despite repeated requests, the City failed to make any recommendation concerning relief until September 1986. The record supports Sintra's allegations of a continuing course of requests to the City to hasten the process. Many letters were directed to the Department of Community Development (DCD). At every turn, Sintra informed the City of its financial hardship and its desire to resolve the situation. Moreover, a memo from a city employee to David Moseley of DCD written in January 1986 indicates that a ministorage warehouse would be acceptable. Nevertheless, no recommendation was given. In a meeting with Sintra and its lawyers in March 1986, when Moseley was questioned about his reasons for delaying action, he responded: "What are you going to do, sue us?"

Although the City continually acknowledged that the Larned was entirely unsuitable for housing, it insisted that the HPO fee must be paid. In addition, the City required Sintra to show that any endeavor would be profitable if the HPO were not in effect.

In the meantime, events occurring on a different front became relevant. In July 1986, King County Superior Court found that the provisions of the HPO were an invalid tax unauthorized by statute. A permanent injunction was issued prohibiting the City from enforcing the HPO against another developer, San Telmo Associates. Although the decision was appealed, the City did not seek a stay of the injunction.

Finally, in September 1986, Moseley recommended that Sintra be granted conditional relief. Instead of simply waiving the HPO requirements, the conditional relief proposed by DCD would allow a variance for a ministorage warehouse, but would require full payment of the $219,840 fee if the use of the property were later changed. Sintra appealed, seeking a complete waiver of the fee. Defendant Holly Miller, Director of the City's Department of Construction and Land Use, adopted the recommendation given by Moseley in October 1986. Among the reasons given in a concurrent memo, a city employee noted that granting complete administrative relief would "establish an undesirable precedent". The memo also recognized that the City's law department recommended granting the variance and full relief from the fee.

Sintra appealed further to a hearing examiner, who reversed Miller's action and remanded. The examiner concluded that the conditional relief was not allowed under the SMC, but that Sintra should still be granted some form of partial relief so that it could use its property. Sintra did not appeal from this decision, which apparently was never carried out.

In April 1987, this court affirmed the trial court's order invalidating the housing replacement provisions of the HPO. San Telmo Assocs. v. Seattle, 108 Wash.2d 20, 25, 735 P.2d 673 (1987). We held that those requirements amounted to an unauthorized tax, as opposed to a regulation on development. San Telmo at 24, 735 P.2d 673. We reasoned that shifting the social cost of development from the public at large to individual developers was a tax to "accomplish desired public benefits which cost money ...". San Telmo at 24, 735 P.2d 673 (quoting Hillis Homes, Inc. v. Snohomish Cy., 97 Wash.2d 804, 809, 650 P.2d 193 (1982)). Such a tax can only be levied when authorized by the Legislature; it is not a valid exercise of a city's police power. Moreover, under RCW 82.02.020, cities are expressly prohibited from taxing development. We also noted, in dicta, that the high fees involved could constitute a taking under the Washington Constitution. San Telmo, 108 Wash.2d at 25, 735 P.2d 673.

On June 22, 1987, the City finally issued a change of use license and a master use permit to Sintra. But by then, Sintra claims, it was too late. The market opportunity was gone, and the building was in an advanced state of disrepair.

This court again considered the HPO in 1989, and struck down the tenant relocation provisions. R/L Assocs., Inc. v. Seattle, 113 Wash.2d 402, 409, 780 P.2d 838 (1989). There, we held that RCW 82.02.020 also prohibited the imposition of the costs associated with tenant relocation, since those requirements constituted an indirect charge on development. R/L Assocs. at 409, 780 P.2d 838. We declined to reach the issue of whether a taking had occurred, R/L Assocs. at 410, 780 P.2d 838, and also refused to consider the substantive due process claim because plaintiff had failed to plead it properly and had not argued it to the trial court. R/L Assocs. at 412, 780 P.2d 838.

In addition, this court found that the City's continued enforcement of the tenant assistance provisions after they had been ruled invalid by the Superior Court was contempt of court. R/L Assocs. at 411, 780 P.2d 838. In response to the City's claim that the injunction applied only to R/L, we noted:

[T]he City's argument would lead to the absurd conclusion that it is free to enforce the provisions of a facially invalid ordinance against the citizens of Seattle until and unless each aggrieved party brings its own action challenging the ordinance....

....

The City's decision to continue to enforce the HPO was deliberate. Two days after issuance of the injunction in this case, the City issued a news release that the city attorney had advised the Department of Construction and Land Use to continue to enforce the tenant relocation requirements. The release stated that the City had been enjoined from enforcing this provision in one case. The courts need not tolerate this intentional violation of a valid judgment that prohibited the City from enforcing those provisions.

R/L Assocs. at 411, 780 P.2d 838.

Sintra filed this action in October 1988. It claimed damages under 42 U.S.C. § 1983 for deprivation of its substantive due process rights and an unconstitutional taking. In addition, Sintra raised claims of inverse condemnation and wrongful interference with business expectancy. It also requested...