Isla Verde Intern. v. City of Camas

196 P.3d 719

147 Wn. App. 454

ISLA VERDE INTERNATIONAL HOLDINGS, LTD., a foreign corporation, and Connaught International Holdings, Ltd., a foreign corporation, Respondent, v. CITY OF CAMAS, Washington, a municipal corporation of the State of Washington, Appellant.

No. 36066-7-II.

Court of Appeals of Washington, Division 2.

November 12, 2008.

William Dale Kamerrer, Law Lyman Daniel Kamerrer et al., Olympia, WA, for Appellant.

Le Anne Marie Bremer, Joseph Vance, Miller Nash LLP, Vancouver, WA, for Respondent.

PUBLISHED OPINION

HUNT, J.

¶ 1 Defendant City of Camas (the City) appeals the trial court's grant of summary judgment to developer Isla Verde International Holdings, Ltd. and Connaught International Holdings, Ltd. (Isla Verde) on the liability element of its Land Use Petition Act (LUPA)¹ petition for damages under RCW 64.40.020(1). The City argues that (1) Isla Verde failed to exhaust administrative remedies before filing its LUPA petition in superior court; (2) the trial court erred in ruling the City's conduct—imposition of a 30 percent open-space set-aside condition on Isla Verde's development—was an "unlawful act" for purposes of Chapter 64.40 RCW damages; and (3) the trial court erred in granting summary judgment based on its unsupported ruling that the City knew or reasonably should have known that imposition of the 30 percent open-space set-aside condition was unlawful, which were material issues of fact.

¶ 2 Holding that whether the City knew or reasonably should have known its 30 percent open-space set-aside condition was unlawful are issues of material fact, we reverse summary judgment on the liability issue and remand for trial.

FACTS

I. Plat Application

¶ 3 In 1995, Isla Verde submitted a preliminary plat application to the City of Camas to develop its 13.4-acre property into 51 lots. Isla Verde Int'l Holdings, Inc. v. City of Camas, 146 Wash.2d 740, 746, 49 P.3d 867 (2002). After hearing public comments, the Camas Planning Commission recommended that the City Council approve the development with the following conditions: (1) construction of a secondary access road for emergency vehicles; (2) payment of impact fees for parks, recreational facilities, and open-space under Camas Municipal Code (CMC) § 3.88.070; and (3) compliance with CMC § 18.62.020,² which required every development within a certain class to "retain a minimum of thirty (30%) percent of the site as open space" ("open-space setaside").³ Isla Verde Int'l. Holdings, Inc. v. City of Camas, 99 Wash.App. 127, 130-31, 990 P.2d 429 (1999), aff'd, 146 Wash.2d 740, 49 P.3d 867 (2002), quoting CMC § 18.62.020A.

¶ 4 The City Council considered Isla Verde's application and the Planning Commission's recommendations. Isla Verde, 146 Wash.2d at 748, 49 P.3d 867. Isla Verde objected to all of the Planning Commission's recommended conditions, especially the mandatory 30 percent open-space set-aside. Id. at 749, 49 P.3d 867. Attempting to negotiate a lesser set-aside, Isla Verde volunteered to pay the City money in exchange for the City's reducing the percentage of open-space to be set aside as a condition of plat approval.⁴ Id. These negotiations apparently did not result in an agreement.

¶ 5 In July 1995, the City Council approved Isla Verde's application on condition that Isla Verde (1) build a secondary access road for emergency vehicles in and out of the subdivision, and (2) set aside 30 percent of the subdivision land as open-space, with no opportunities to for Isla Verde "buy down" the full percentage. Id. at 746-50, 49 P.3d 867.

II. Procedure

A. First Appeal

1. Superior court LUPA review

¶ 6 Seeking LUPA review of the City's allegedly unlawful conditions imposed on its proposed subdivision, Isla Verde filed an action for damages under RCW 64.40.020 in Clark County Superior Court. Id. at 750, 49 P.3d 867. The superior court ruled that the secondary access road condition violated both constitutional substantive due process and chapter 64.40 RCW because this condition (1) was impossible to satisfy, unduly burdensome, arbitrary and capricious; and (2) denied every viable use of the property. Id. The superior court also ruled that the mandatory 30 percent open-space set-aside condition was a "taking" in violation of the state constitution, RCW 82.02.020, and chapter 64.40 RCW, because the City had made no specific finding that Isla Verde development impacts necessitated this condition. Id. Accordingly, the superior court struck both subdivision plat approval conditions as unlawful.

¶ 7 The City moved for reconsideration. In support, it submitted a 1991 land use study on which it had based the mandatory 30 percent open-space set-aside requirement. This study, however, showed only the benefits of open-space generally; it did not tie the 30 percent open-space set-aside requirement to any specific impact of Isla Verde's development. Isla Verde, 99 Wash.App. at 133, 990 P.2d 429. Refusing to consider the City's additional evidence as "untimely," the superior court denied the motion for reconsideration. Id. at 132-33, 990 P.2d 429.

2. Court of Appeals

¶ 8 The City appealed. We affirmed the superior court's ruling that the mandatory 30 percent open-space set-aside condition on Isla Verde's subdivision was unlawful. We held that the 30 percent open-space set-aside violated the Takings Clause of the Fifth Amendment to the federal Constitution.⁵ Isla Verde, 99 Wash.App. at 137-38, 990 P.2d 429.

3. Supreme Court

¶ 9 The Washington Supreme Court granted the City's petition for review. Isla Verde Int'l Holdings, Inc. v. City of Camas, 141 Wash.2d 1011, 10 P.3d 1071 (2000). The City argued that the conditions it had imposed on Isla Verde's development were valid. Isla Verde, 146 Wash.2d at 745, 49 P.3d 867. With respect to the set-aside open-space condition, our Supreme Court disagreed.

¶ 10 The Supreme Court, however, did not address the constitutionality of the condition or the City's ordinance.⁶ Instead, the court focused on the condition's illegality under RCW 82.02.020. Emphasizing that the City had failed to show it had made an individualized determination to justify the mandatory 30 percent open-space set-aside condition, the Supreme Court held that the condition was an unlawful "in kind indirect `tax, fee, or charge' on new development" under RCW 82.02.020.⁷ Isla Verde, 146 Wash.2d at 759, 49 P.3d 867. The court reasoned that (1) "[a]side from the ordinance requiring a flat 30 percent set aside for every proposed subdivision, there [was] nothing in the record explaining why 30 percent was chosen as the amount of open-space"; and (2) the lack of a correlation between the 30 percent open-space set-aside and impacts of Isla Verde's development rendered the condition unlawful under RCW 82.02.020. Id. at 763, 49 P.3d 867.

¶ 11 Although invalidating the 30 percent open-space set-aside condition, the court upheld the secondary access-road condition, Id. at 769, 49 P.3d 867, and remanded the case for further proceedings. Id. at 771, 49 P.3d 867.

B. Remand to Superior Court; Isla Verde's Claim for Damages

¶ 12 On remand, Isla Verde moved for partial summary judgment against the City on the issue of liability under chapter 64.40 RCW. Isla Verde argued that the City knew or reasonably should have known that Washington law requires a municipality to conduct an individualized analysis before imposing a blanket condition, such as the mandatory 30 percent open-space set-aside at issue here.

¶ 13 The City cross-moved for summary judgment, arguing that Isla Verde could not prevail at trial as a matter of law because Isla Verde had failed (1) to challenge the open-space set-aside as unlawful under RCW 64.40 on appeal; (2) to present evidence that the City knew or reasonably should have known its 30 percent open-space set-aside condition was unlawful; and (3) to present evidence of cognizable damages.

¶ 14 Agreeing, in part, with Isla Verde, the superior court concluded:

[I]t is clear that the [c]ourts have consistently found that the action of the City in imposing the condition of 30 [percent] open-space on this development was not valid. Specifically, applying this condition without a showing of need in this specific application violated RCW 82.02.020.

Clerk's Papers (CP) at 388 (emphasis added). The superior court further noted that once the validity of the City's mandatory set-aside ordinance was challenged,

[T]he City had the option of withdrawing the condition or appealing the Superior Court's decision. The City elected to appeal not only the Superior Court but also that of the Court of Appeals. Clearly, at this juncture, the City should have known that the ordinance as applied was invalid. The wealth of reported case law in existence at this time supports this conclusion. Thus I find that the City's actions in defending the ordinance after the issue was raised, invokes the ramifications of RCW 64.40.

....

I must allow petitioner the opportunity to prove any damages pursuant to the statute.

CP at 389-90.

¶ 15 Finding no genuine issue of material fact about whether the City knew or should have known that its blanket 30 percent open-space set-aside condition was unlawful, the superior court (1) denied the City's motion for summary judgment, (2) granted Isla Verde's motion for summary judgment on the knowledge/liability element of its claim, and (3) set the case for trial at which Isla Verde would prove what damages, if any, the City owed under chapter 64.40 RCW.

C. Interlocutory Appeal

¶ 16 The City petitioned our court for discretionary review, which we granted on the limited issues of whether, as a matter of law, the City acted "unlawfully" and knew or reasonably should have known that its action was unlawful.⁸ Thus, there has not yet been a trial on damages.

ANALYSIS

¶ 17 Isla Verde filed a LUPA action against the City for damages under RCW 64.40.020. Isla Verde asserted that the City knew or reasonably should have known that...