Tiffany Family Trust Corp. v. City of Kent

• Decision Date: 08 September 2005
• Docket Number: No. 74526-9.,74526-9.
• Citation: 155 Wn.2d 225,119 P.3d 325
• Court: Washington Supreme Court
• Parties: TIFFANY FAMILY TRUST CORPORATION, Petitioner, v. CITY OF KENT, a municipal corporation, Respondent.

119 P.3d 325

155 Wn.2d 225

TIFFANY FAMILY TRUST CORPORATION, Petitioner, v. CITY OF KENT, a municipal corporation, Respondent.

No. 74526-9.

Supreme Court of Washington, En Banc.

Argued Sept. 28, 2004.

Decided September 8, 2005.

COPYRIGHT MATERIAL OMITTED

Richard Michael Peterson, Stephen Howard Roos, Hillis Clark Martin & Peterson, Seattle, for Tiffany Family Trust Corporation.

P. Stephen DiJulio, Ramsey E. Ramerman, Foster Pepper & Shcefelman, Seattle, Thomas C. Brubaker, City of Kent Legal Department, Kent, for City of Kent.

FAIRHURST, J.

¶ 1 Tiffany Family Trust Corporation asks us to find that a $364,939 local improvement district (LID) assessment was an unconstitutional taking and a violation of due process. Because Tiffany failed to use the mandatory statutory procedure for challenging LID assessments, the city's assessment against Tiffany is conclusively correct and for that reason Tiffany's state and federal constitutional claims are without substance.

I. FACTS

¶ 2 In 1986, Tiffany obtained a conditional use permit from the city of Kent to increase its nonindustrial usage (retail, office, and/or service uses) by 10 percent (from 25 to 35 percent).¹ In order to mitigate some of the environmental impacts which would result from the proposed development, the permit required Tiffany to pay a proportional amount of the related cost of improvements to nearby roads. Tiffany and the city subsequently entered into a mitigation agreement. The agreement estimated that the proportional cost that Tiffany would be responsible for would be $23,800. This amount was estimated based on a per peak hour trip formula.² The parties to the agreement noted however, that the final cost would be based on "actual expenses incurred at the time said improvements" were constructed and, thus, the amount quoted was merely an estimate to be determined in the future. Clerk's Papers (CP) at 69.

¶ 3 Rather than requiring any payment at the time the permit was granted, payment for the improvements was to be made pursuant to the formation of a LID. Local governments are vested with the authority to "defray the cost of local improvements" by specially assessing those nearby properties that are benefited from the improvements. Philip A. Trautman, Assessments in Washington, 40 Wash. L.REV. 100, 100 (1965); see also ch. 35.43 RCW. In the mitigation agreement, Tiffany agreed to participate in and refrain from protesting the formation of the LID. The parties also agreed that Tiffany's property would be "specially benefited and its value increased" by the LID improvements in an amount not less than $23,800 — the same amount for which Tiffany would be responsible due to the impacts of its own development. CP at 69.

¶ 4 In 1998, 12 years after Tiffany and the city entered into the mitigation agreement, the LID in which Tiffany agreed to participate was formed. The city assessed amounts against the properties within the LID by determining their fair market values before and after the special benefit resulting from the LID attached. The appraiser assessed Tiffany's property at $364,939 — over 10 times greater than the original estimate.

¶ 5 The city sent notices to Tiffany regarding the LID assessments via regular mail to the address listed on the county assessor's rolls and in the mitigation agreement. Tiffany maintains that it did not receive any of those notices. After the assessment roll was confirmed by the city in 1999, the city mailed notice to affected properties by certified mail. The notice sent to Tiffany was returned unclaimed.

¶ 6 Tiffany alleges that it learned of the LID assessment only because of an unrelated title search it conducted in April 1999. Tiffany filed suit in King County Superior Court in February 2000, alleging that the assessment was an unconstitutional taking and violated substantive and procedural due process. The complaint included similar claims under 42 U.S.C. § 1983 asserting civil rights violations. Tiffany requested the court to declare the assessment void and require the city to pay just compensation and damages.

¶ 7 The parties filed cross motions for summary judgment. The trial court granted the city's motion and dismissed the suit. It determined that the statutory time period for attacking the assessments had passed, and Tiffany could not get around that bar by collaterally attacking the assessment using the same arguments disguised as constitutional claims that it would use in a direct attack. The court additionally found no jurisdictional defect that would allow for a collateral attack.

¶ 8 Tiffany petitioned this court for direct review. This court deferred its decision to accept or deny review pending the outcome in Benchmark Land Co. v. City of Battle Ground, 146 Wash.2d 685, 49 P.3d 860 (2002). After Benchmark Land Co. was decided, Tiffany was transferred to the Court of Appeals.

¶ 9 The Court of Appeals affirmed the trial court order dismissing Tiffany's suit holding that Tiffany was procedurally barred from raising its claims. The court noted that even a claim that an assessment exceeds special benefits cannot be brought collaterally if the statutory procedures were not utilized (and as long as those procedures satisfy due process requirements). Tiffany Family Trust Corp. v. City of Kent, 119 Wash.App. 262, 274, 77 P.3d 354 (2003). We granted Tiffany's petition for discretionary review. Tiffany Family Trust Corp. v. City of Kent, noted at 151 Wash.2d 1018, 91 P.3d 94 (2004).

II. ANALYSIS

¶ 10 This court reviews a grant or denial of summary judgment de novo. Green v. A.P.C., 136 Wash.2d 87, 94, 960 P.2d 912 (1998). Summary judgment is appropriate when "there is no genuine issue as to any material fact" and "the moving party is entitled to judgment as a matter of law." CR 56(c). A party opposing summary judgment may not rely on "mere allegations or denials" set forth in the pleadings, but rather "must set forth specific facts showing that there is a genuine issue for trial." CR 56(e).

A. What is the nature of the amount the city imposed against Tiffany?

¶ 11 As an initial matter, we must determine whether the amount that the city assessed against Tiffany was a mitigation fee or a LID assessment. This is necessary because Tiffany alleges that the amount was an unconstitutional taking and a violation of substantive due process. To make such an allegation, Tiffany must show that the amount was in excess of, or bore no relationship to, the legitimate purpose for which it was purported to be assessed. Because mitigation fees and LID assessments have different underlying purposes, we must decide the nature of the assessment before we can determine its constitutionality. Tiffany argues that the amount should have been a mitigation fee but in any event it claims the takings and due process provisions were violated. The city maintains that the amount is and always has been a LID assessment.

1. LID assessments

¶ 12 Under RCW 35.43.040, municipal corporations are vested with the authority to make local improvements and to require properties specially benefited by those improvements to help cover the costs through LID assessments. Cities need not obtain the permission of benefited property owners in order to make such improvements and assessments. They must, however, provide adequate notice to affected properties so that owners may challenge the amount, existence, or character of the assessments before they become final. RCW 35.43.125,.150.

¶ 13 LID assessments must be based on the special benefits that properties acquire as a result of improvements to the area. RCW 35.44.010. Special benefits are determined by comparing the fair market values of each property before and after the improvements are made. Bellevue Assocs. v. City of Bellevue, 108 Wash.2d 671, 675, 741 P.2d 993 (1987). Once it is determined that a property is specially benefited, any LID assessment must be logically related to, and cannot exceed, the special benefit amount. RCW 35.44.010; RCW 35.51.030(2). This can be done by the zone and termini method outlined in chapter 35.44 RCW, the alternative method based on classification in RCW 35.51.030, or any other method "which may be deemed to more fairly reflect the special benefits to the properties being assessed." RCW 35.44.047. In 1993, however, this court discredited the "trip generation" formula for determining the amount of LID assessments because the formula had no relationship to the special benefits that properties incurred from LIDs. Bellevue Plaza, Inc. v. City of Bellevue, 121 Wash.2d 397, 418, 851 P.2d 662 (1993).

2. State Environmental Policy Act mitigation conditions

¶ 14 Mitigation fees, on the other hand, are subject to very different standards. An environmental impact mitigation fee is initially provided for under the State Environmental Policy Act (SEPA), chapter 43.21C RCW. SEPA allows local governments to condition development "to mitigate specific adverse environmental impacts" that would result from the proposed development. RCW 43.21C.060. Thus, in exchange for the adverse impacts that the proposed development is anticipated to have on the surrounding area, the developer agrees to either act in some manner or pay for a portion of nearby improvements intended to address those impacts. An impact fee may also be imposed under RCW 82.02.050; however, a government may not charge for the same impact under both RCW 43.21C.060 and RCW 82.02.050.

¶ 15 Mitigation conditions must be reasonable and capable of mitigating "specific environmental impacts." RCW 43.21C.060. One accepted formula for determining the amount of a mitigation fee is based on the increased peak hour trips a given development will generate in the relevant area. Bellevue Plaza, 121 Wash.2d at 416, 851 P.2d 662.

¶ 16 Thus, while mitigation conditions are imposed to remedy the burdens developers impose on others, LID assessments require landowners to pay for the benefits they receive from...