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The Church of Divine Earth v. City of Tacoma

Supreme Court of Washington, En Banc

September 19, 2019

THE CHURCH OF THE DIVINE EARTH, Petitioner,
v.
CITY OF TACOMA, Respondent.

          JOHNSON, J.

         This case concerns whether the city of Tacoma (City) can be held liable for damages for imposing an unlawful condition on a building permit. In an appeal brought under the Land Use Petition Act (LUPA), chapter 36.7OC RCW, the superior court ruled that the City acted unlawfully when it placed a condition on the Church of the Divine Earth's (Church) building permit, requiring an uncompensated-for dedication of land for right-of-way improvements. However, the court denied the Church's action for damages under RCW 64.40.020, and the Court of Appeals affirmed. We reverse and remand for a new trial.

          FACTS

         On September 20, 2013, the Church submitted an application to the City to build a parsonage on property it owned. A single-family residence had previously been located on the property, but it had been demolished in 2012. City staff reviewed the permit application and placed a number of conditions on it, including, at issue here, a requirement that the Church dedicate a 3 0-foot-wide strip of land for right-of-way improvements to a street abutting the property. While the existing street was generally 60 feet wide in other areas, it was 30 feet wide next to the Church's property. This lack of uniformity had existed for around 100 years.

         The Church challenged the permit conditions, and the City eventually removed most of them but kept the requirement for a dedication. The Church appealed the decision to the City's hearing examiner, and the hearing examiner granted summary judgment in favor of the City.

         The Church filed a timely appeal under LUPA, in which it challenged the hearing examiner's decision and also sought damages under RCW 64.40.020. In addressing the propriety of the dedication, the court confined its review to the administrative record that had been before the hearing examiner and acknowledged that, in that record, the stated purpose by the City for imposing the dedication requirement was to create a uniform street. The court held that this reason was insufficient to justify the requirement and reversed the hearing examiner, invalidating the condition.

         The case then proceeded to trial on the issue of damages. The court issued an order prohibiting the City from entering evidence to show the dedication was imposed for any reason other than uniformity. However, during trial, City officials testified that the dedication was intended to address a variety of issues, including to alleviate impacts to traffic, visibility, parking, and pedestrian safety, as well as to bring the street into compliance with city codes and industry best practices. The trial court apparently considered the evidence and found that the City imposed the dedication to address increased vehicular and pedestrian traffic and related safety impacts, and to ensure adequate visibility. It then concluded (a) "[t]he City reasonably believed that the development conditions it attached to the permit had a nexus to the project and were proportional" and (b) the City "did not know and should not have reasonably known that its requirement for a dedication of right of way would be considered violative of Nollan/Dolan[1]" Clerk's Papers (CP) at 2408. The court denied the Church's request for damages, and the Church appealed.

         The Court of Appeals affirmed the trial court, holding that "[b]ecause the City reasonably believed that it satisfied the requirements of NollanlDolan, it did not know and should not have known that its action was unlawful." Church of Divine Earth v. City of Tacoma, 5 Wn.App. 2d 471, 494, 426 P.3d 268 (2018). The Court of Appeals also awarded attorney fees to the City. The Church petitioned this court, and we granted limited review.[2] Church of Divine Earth v. City of Tacoma, 192 Wn.2d 1022, 435 P.3d 285 (2019).

         ISSUE

         1. Whether the City knew or should reasonably have known its requirement for a dedication of land was unlawful.

         ANALYSIS

         We should first settle what this case is not about. This is not a case challenging the constitutionality of a land use decision; the propriety of the permit condition was already resolved by the lower court and is not before us on appeal. And because the superior court invalidated the permit condition, this is not a claim for just compensation for a taking. Instead, what we have before us is a claim for damages under RCW 64.40.020 for an attempted exaction of land through an unlawful permit condition.

         RCW 64.40.020(1) allows a property owner who files an application for a permit to bring an action for damages

to obtain relief from acts of an agency which are arbitrary, capricious, unlawful, or exceed lawful authority, or relief from a failure to act within time limits established by law: PROVIDED, That the action is unlawful or in excess of lawful authority only if the final decision of the agency was made with knowledge of its unlawfulness or that it was in excess of lawful authority, or it should reasonably have been known to have been unlawful or in excess of lawful authority.

         This statute does overlap to some degree with LUPA insofar as, to obtain damages under RCW 64.40.020, the land use decision must, necessarily, be invalid. But not every successful LUPA appeal will justify damages, as is expressly acknowledged in RCW 36.7OC. 130(2) (stating that "[a] grant of relief by itself may not be deemed to establish liability for monetary damages"). To establish liability for such damages under RCW 64.40.020, a plaintiff must meet a higher burden than is required in LUPA, establishing actual or constructive knowledge, or that the government entity acted in an arbitrary or capricious manner.

         Our review here is limited to the question of whether the Church may obtain damages for the City's unlawful action. As the statute indicates, the City incurs liability for an unlawful action "only if the final decision of the agency was made with knowledge of its unlawfulness ... or it should reasonably have been known to have been unlawful." RCW 64.40.020(1) (emphasis added). The City argued, and the trial court held, that the final decision was that of the hearing examiner. Therefore, the issue in this case is whether the City knew or should reasonably have known the hearing examiner's decision to allow the permit condition was unlawful. The trial court appears to ...


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