Sintra, Inc. v. City of Seattle, 62304-0

Citation935 P.2d 555,131 Wn.2d 640
Decision Date16 July 1997
Docket NumberNo. 62304-0,62304-0
CourtUnited States State Supreme Court of Washington
PartiesSINTRA, 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, Respondents/Cross Appellants, v. The CITY OF SEATTLE, a municipal corporation, Holly 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, Appellants/Cross Respondents.
Mark Sidran, Seattle City Attorney, Robert C. Williams, Asst., Seattle, for appellants

Richard B. Sanders, Bellevue, for respondents.

JOHNSON, Justice.

For a second time, we are asked to review a dispute between Sintra, Inc., and the City of Seattle involving the enforcement of Seattle's former Housing Preservation Ordinance (Ordinance). In Sintra, Inc. v. City of Seattle, 119 Wash.2d 1, 829 P.2d 765 (1992) (Sintra I), we held enforcement of the Ordinance violated substantive

due process as unduly oppressive and remanded to the trial court to resolve questions of fact, including whether a regulatory taking had occurred, and, if so, the proper amount of compensation. We also remanded for the trial court to determine whether Sintra was entitled to money damages under 42 U.S.C. § 1983 for the substantive due process violation. The trial court resolved a number of issues on summary judgment, but sent the regulatory takings issue and the § 1983 claim for money damages for the City's conduct after July 15, 1986 to the jury. Following a month long trial, the jury found a taking had occurred for which it awarded Sintra $47,809 compensation. The jury denied Sintra's § 1983 claim for money damages on the basis the City's unconstitutional conduct did not proximately cause any harm to Sintra. The trial court awarded interest on the compensation award in the amount of $60,918.73, having decided not to submit the issue to the jury. The trial court also awarded attorney's fees. Now we are asked, among other things, to determine whether the trial court properly awarded interest on the compensation award and whether Sintra had to prove invidious or irrational conduct on the part of the City as part of a 42 U.S.C. § 1983 action to recover money damages. We hold review of the invidious or irrational conduct requirement is not proper under the law of the case doctrine. Although the trial court correctly found interest was awardable as part of just compensation, the court erred in allowing compound, as opposed to simple, interest. We also find error in the trial court's award of attorney's fees under § 1988. Therefore, we reverse and remand to the trial court to determine the proper amount of interest and attorney's fees in accordance with this opinion. Finding no error with the remaining issues, we affirm the trial court's rulings regarding the punitive damages jury instruction, the City's qualified immunity argument, and Sintra's motion for a new trial
FACTS

The Ordinance was first enacted in 1980 with the stated

purpose of mitigating the loss of low income housing in Seattle and reducing the hardships experienced by displaced tenants. It accomplished this purpose by requiring developers to either replace any low income housing they destroyed or pay a fee into the housing replacement fund. It also required developers to pay tenant relocation fees. In 1983, the Superior Court for King County invalidated the 1980 Ordinance as an invalid tax under RCW 82.02.020. In response, in 1985 the City enacted the Ordinance at issue in this case, which differs only slightly from the original. See San Telmo Assocs. v. City of Seattle, 108 Wash.2d 20, 21-22, 735 P.2d 673 (1987). We invalidated the housing replacement provisions of the Ordinance as an unauthorized tax in San Telmo Assocs., and, in R/L Assocs. v. City of Seattle, 113 Wash.2d 402, 780 P.2d 838 (1989), we invalidated the tenant relocation provisions for the same reason

Before our decisions in San Telmo Assocs. and R/L Assocs., Sintra purchased the Larned Hotel located near downtown Seattle. 1 Sintra agreed to pay $640,000 cash [935 P.2d 559] for the property, which was dilapidated but home to a few low income tenants. Sintra planned to relocate the tenants and convert the building into a bed and breakfast with retail space on the street level. Before making the offer, Mr. Hamack discussed the Ordinance with the sellers, but it was believed the Larned would be exempted from the Ordinance as a hotel.

Sintra ran into trouble almost immediately after buying the Larned. Unable to obtain financing, Sintra renegotiated the terms of the sale, agreeing to pay an additional $30,000 for the property, $120,000 down, and the remainder in a series of balloon payments over the course of three years. Then, in the first part of 1985, Sintra discovered an adult entertainment business had purchased the abutting building and had been issued a permit by the City. Believing this made the bed and breakfast unfeasible, Sintra put

the Larned back on the market and actively solicited development partners. Later, in a claim against the City, Sintra stated the issuance of a permit to the adult entertainment business rendered the Larned "valueless for its intended use and economically unviable for any other use." Clerk's Papers at 11

By August 1985, a developer had expressed some interest in working with Sintra to convert the Larned into a ministorage warehouse, but was unable to finance the project. Unable to obtain financing or find a buyer, Sintra missed the first $30,000 balloon payment due in March 1985. The sellers eventually declared default and accelerated the note, after Sintra failed to make several more payments.

By the time the sellers had accelerated the note, Sintra had determined the only economically viable use of the Larned was as a ministorage. Thus, Sintra applied for a demolition permit from the City in November 1985. Under the Ordinance, the City assessed a $219,840 demolition fee. Sintra immediately applied for administrative relief from the Ordinance. 2 From the time Sintra applied for administrative relief in November 1985 until the City issued the demolition permit in June 1987, Sintra made repeated requests for relief. 3 Despite Sintra's requests, the City initially denied administrative relief, concluding "the proposed mini-warehouse project [was] not feasible regardless of the housing replacement requirement...." Pls.' Ex. 238 at 1.

Several months after the Superior Court invalidated the Ordinance on July 15, 1986 in the case brought by San Telmo Associates, the City granted Sintra partial administrative relief by waiving the Ordinance fee for development of the ministorage, but no other uses. The City stopped enforcing the Ordinance against Sintra entirely when this court affirmed the Superior Court in San Telmo Assocs. The City issued a demolition permit on April 24, 1987, and a master use permit on June 22, 1987. Had Sintra obtained the permit by the summer of 1986, it was confident it would have been able to go ahead with the ministorage project. But, by April 1987, Sintra thought the market opportunity to develop the ministorage had been lost.

In the middle of all of this, in October 1986, the sellers sued Sintra. After accelerating the note, they had reluctantly concluded Sintra could not develop the property because of the Ordinance and other problems. Sintra counterclaimed for rescission of the sales contract, alleging the sellers' agent misrepresented the value and development potential of the Larned. Sintra eventually prevailed on its counterclaim and obtained rescission of the contract and return of its purchase money.

[935 P.2d 560] Based on the City's actions, Sintra sued the City and a number of its employees in 1988. It claimed deprivation of substantive due process, an unconstitutional taking, and interference with business expectancy. The trial court granted summary judgment in favor of the City on Sintra's takings and substantive due process claims. This court reversed. We found the Ordinance violated substantive due process as unduly oppressive. We remanded for the trial court to resolve a number of issues, including whether the City's conduct was invidious or irrational, whether a taking had in fact occurred and, if so, the time period of the taking and appropriate compensation. See Sintra I, 119 Wash.2d at 29, 829 P.2d 765.

On remand, the trial court dealt with most of the claims

against the City employees on summary judgment. 4 The trial court also determined on summary judgment that the City's actions taken after July 15, 1986 were irrational, but left for the jury to determine whether the actions proximately caused the alleged injury. In addition, the trial court found the City (not the employee Defendants) violated Sintra's substantive due process rights by enforcing the Ordinance before July 15, 1986, but denied money damages, finding the City had not acted irrationally as a matter of law in enforcing the Ordinance. The remaining claims, including the issues of § 1983 damages for the City's post-July 15, 1986 conduct and the taking, proceeded to jury trial. The City made a CR 68 offer of judgment for $75,000 plus costs and attorney's fees several months before trial

At trial, Sintra presented several theories of recovery. Sintra argued the City was liable for the income it would have earned from a ministorage during the entire useful life of the ministorage, estimated to be 20 years. In addition, it asked for emotional damages, lost personal income, and lost income from other investments. Sintra's expert, Robert Moss, calculated the income producing potential of the Larned converted to a ministorage as $143,428 per year or...

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