* Tapio Investment Company I,et al. v. State Of Washington

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FILED
OCTOBER 27, 2016
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
TAPIO INVESTMENT COMPANY I, a
Washington limited liability company;
MONARCH INVESTMENT; TAPIO
OFFICE IV PARTNERSHIP;
CLONINGER/EUCKER
PARTNERSHIP; PAMELA M.
CLONINGER, an individual, and
CLONINGER & ASSOCIATES, LLC, a
Washington limited liability company,
Appellants,
v.
)
)
)
)
)
)
)
)
)
)
)
)
)
)
THE STATE OF WASHINGTON, by and 	)
through the Department of Transportation, 	)
Respondent.
)
)
No. 33684-1-111
PUBLISHED OPINION
SIDDOWAY, J. -Tapio Investment Company I and its affiliates 1 (collectively
"Tapio") filed an inverse condemnation lawsuit against the State of Washington
1 Monarch Investment, Tapio Office IV Partnership, Cloninger/Bucker
Partnership, Pamela M. Cloninger, and Cloninger Associates, LLC.
 	 	 	 	 	 	 	 	 	 	 	 	 	

No. 33684-1-111
Tapio Investment Company 1 v. State
Department of Transportation for an alleged taking of Tapio's office park during
construction of a major freeway project in Spokane. The approved route for the freeway
includes a portion of the office park, which is situated partially within a planned
interchange. 	Construction of the interchange will be one of the last steps in the decades-
long construction process. The Department will not need Tapio's property for many
years.
The case proceeded to a jury trial on Tapio's theory that while the Department had
not physically or legally interfered with use of its property, Department publicity about
the freeway project and its acquisition of nearby properties hampered Tapio's leasing
activity and diminished the market value of the office park to an extent that had, by 2006,
already effected a constitutional taking. At the close of Tapio's case the trial court
granted the Department's CR 50 motion, ruling that Tapio's evidence was insufficient as
a matter of law to support a claim for relief.
On appeal, Tapio abandons any request that we recognize a new type of inverse
condemnation claim for taking by oppressive preacquisition conduct-one theory that it
advanced in the trial court. It contends, instead, that its evidence was sufficient to
support its claim of inverse condemnation under existing law. Because there has been no
physical invasion ofTapio's land, no regulation restricting Tapio's use of its property,
and the harm it complains of does not otherwise amount to a constitutional taking, we
affirm.
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FACTS AND PROCEDURAL BACKGROUND
What is commonly referred to in Spokane as the future North-South Freeway is a
partially completed, 10.5 mile long, high-speed limited access freeway that will link U.S.
Highways 2 and 395 with Interstate 90 in the city of Spokane. The approved route
traverses a great deal of developed property, requiring that approximately 940 parcels of
land be acquired. Among them is the Tapio Center, which is situated partially within a
planned interchange at Interstate 90.
Tapio Center is a three-acre office park located near the Thor-Freya interchange
on Interstate 90. Nine office buildings and one restaurant are positioned on the perimeter
of the site in what one owner has described as a "circle the wagons" format, with a park-
like setting in the protected interior. Report of Proceedings (RP) at 1012. Common
parking is included in the landscaped center, to which there are presently eight entrances.
The north portion of Tapio Center includes five buildings managed by their majority
owner, the Cloninger family. 	The five buildings in the south portion are primarily owned
by Dixon/Stejer family interests and are managed by John Stejer.
The freeway project's right-of-way plans call for complete removal of three
buildings in the south portion of Tapio Center. Two others will be "clipped." RP at 562.
Southern access to the office park will be eliminated and access and parking to the
northern portion will be affected.
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Construction of the freeway project is proceeding from U.S. Highway 395 on the
north toward Interstate 90 on the south. 	Since Tapio Center is among the southern-most
properties touched by the approved route, the Department will not need to acquire,
physically affect, or regulate use of Tapio's property for many years.
The Department's initial budget request to fund the purchase of all properties
needed for the freeway project was denied by the legislature. 	Instead, the legislature
began providing partial acquisition funding of approximately $16 million each biennium.
Funding for a particular biennium is not appropriated or tied to particular locations and
may be used by the Department to acquire properties anywhere along the project right-of-
way.
The Department's communication about the freeway project with affected persons
has been extensive. Following initial environmental approval of the freeway project in
the late 1990s, the Department had, by the time of the trial below, held over 100 public
meetings to impart information and gather public input. It had communicated with every
identifiable affected property owner, and continued to communicate with them as
construction progressed toward their area.
Before commencing this inverse condemnation action in 2011, Tapio's owners
had complained for years that publicity about the freeway project was worrying their
tenants, hampering leasing activity, and making it difficult to plan for improvements and
long-term maintenance expenditures. Concerns first expressed in writing in 1999 were
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No. 33684-1-111
Tapio Investment Company Iv. State
renewed in writing several times, and in additional meetings and conversations with
Department representatives. The Cloninger family patriarch, Glen Cloninger, asked in
1999 that the Department make an early purchase of the properties in which his family
was invested. In 2002, Mr. Stejer wrote to Timothy Golden, the Department's real estate
manager for the North-South Freeway, asking that the Department "go ahead and initiate
the necessary proceedings," to acquire the needed Tapio property in order to prevent
further economic damage. RP at 401; Ex. 17.
In written responses to Tapio's correspondence, Department representatives
explained that its public communication about the project was required by federal and
state environmental regulations; that construction would not affect Tapio's property
anytime soon and it did not expect to acquire Tapio's property for years; that when
property was condemned, it would be valued as if there was never any freeway project;
and that the Department's recommendation was that all property owners "maintain or
enhance their properties as they see fit," because the Department "will consider all
improvements and maintenance made to the property during the appraisal prior to
purchase." RP at 819; Ex. 18.
By the end of 2003, the Department had acquired several properties in the area of
Interstate 90, even though construction was still several miles north in the Wandermere
area. The acquisitions included a vacant tavern and a daycare that were purchased due to
owner medical and hardship reasons, as well as two church buildings. The Department
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Tapio Investment Company I. v. State
occasionally purchased residences in response to requests from homeowners that it
purchase their homes, and East Central Neighborhood community leaders eventually
lobbied for a verbal commitment from the Department to acquire residences when
funding became available so families could relocate.
The Department's biennial acquisition budgets could have accommodated a
purchase of the Tapio Center had the Department thought that was the best use of the
funds available. As Mr. Golden would testify at trial, the Department's business practice
is to look at all residential and commercial purchase requests and identify the best use of
the available budget to maximize the number of parcels purchased. 	In the Interstate 90
area, it placed a priority on purchasing residential properties because acquiring single-
family dwellings with yards was more cost effective and provided more total right-of-
way for the amount expended than would acquiring commercial properties. For a time,
the Department was also acquiring and removing structures along Interstate 90 to
accommodate a plan to install noise walls. The plan was later dropped because of
engineering uncertainties and funding issues. 	Commercial properties were purchased on
a case-by-case basis if price, location, or surrounding circumstances presented a good
business reason for deviating from the priority on residential purchases.
The Department purchased increasing numbers of residential properties in the
Interstate 90 area from 2007 to 2011. By the time of trial in 2014, it had acquired about
300 parcels in the area, on both sides of the interstate and up and down blocks east and
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No. 33684-1-111
Tapio Investment Company I. v. State
west of Tapio Center. On many of the properties, structures were demolished and the
land bulldozed for safety and maintenance reasons and to avoid problems with theft and
transients. The Department spends about $100,000 annually for mowing and general
maintenance of the lots that have been cleared.
In March 2010, Mr. Stejer sent another letter to Department officials, again
complaining of publicity about the freeway plan and acquisition, and about the
Department's demolition of neighboring properties. In a response that discussed legal
requirements for notice and public participation and the funding and property acquisition
demands of a large highway project, Regional Administrator Keith Metcalf informed Mr.
Stejer that the Department did not anticipate construction would directly affect Tapio's
property for at least 10 years.
Tapio filed its inverse condemnation action against the Department in November
2011. It contends that a taking ofTapio's property occurred in the fall of 2006 when the
Department consciously started negotiating for the purchase of homes in the Interstate 90
area. After the denial of several dispositive motions, the case proceeded to trial in June
2014.
Tapio called eight witnesses, including four experts. Dewitt Sherwood, a licensed
real estate appraiser, testified to his opinion that as a result of Department publicity and
property acquisitions, the value of the Tapio Center had been diminished by 80 to 90
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Tapio Investment Company I. v. State
percent, with resulting damages of $8,510,000. His opinion assumed a taking in October
2006, the date given him by Tapio's attorneys.
Craig Soehren, a commercial real estate broker, testified that commercial brokers
would be unlikely to bring potential tenants to Tapio in light of the published freeway
plan and that he would not bring potential buyers to the property. He admitted he had no
knowledge that the Department did anything different in pursuit of the North-South
Freeway construction than it had done in other major projects, and agreed that Tapio still
had the right to sell its property. He admitted that the Department's demolition of nearby
homes had improved the look of the neighborhood.
Jeff Johnson, also a real estate broker, testified to his opinion that the
Department's plans and acquisition activity in the vicinity of Tapio Center had affected
its ability to obtain tenants, thereby affecting Tapio's ability to sell the office park. He
acknowledged that Tapio remained legally able to sell or lease the property.
Cajer Neely, a commercial banker, testified that in light of the freeway plans and
property acquisitions in the Interstate 90 area, it was unlikely a commercial bank would
provide a loan to a potential purchaser of Tapio Center if it was secured only by the
office park property.
Tapio also called two Department employees, Mr. Golden and Larry Larson (a
project engineer on the North-South Freeway project) questioning them about the history
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No. 33684-1-III
Tapio Investment Company I. v. State
of the project, Tapio's communications with the Department, and the Department's
property acquisitions in the Interstate 90 area.
Mr. Stejer and Blake Cloninger testified to the damages each was requesting on
behalf of their owners' interests-collectively, $13.8 million-based on what each
considered a total taking of Tapio Center in 2006. Mr. Stejer conceded the Department
had imposed no rule that kept them from running their operations and that they retained
the right to sell the property.
At the time of trial, an estimated 4 7 to 50 residential properties and 5 commercial
properties (in addition to Tapio Center) remained to be acquired for the proposed
Interstate 90 interchange.
At the close ofTapio's case, the Department moved to dismiss under CR 50(a).
After hearing argument from the parties, the court granted the motion, finding that
Tapio's theory of unwarranted delay or oppressive preacquisition conduct-a theory the
court had allowed to proceed, but that has not yet been recognized by any reported
Washington decision 2
-had not been demonstrated by its evidence.
2 In Orion Corp. v. State, 109 Wn.2d 621, 671-72, 747 P.2d 1062 (1987), our
Supreme Court declined to recognize a distinct inverse condemnation claim for a taking
by oppressive preacquisition conduct. The court explained:
Apparently, California has recognized a cause of action for inverse
condemnation when a "diminution in market value resulted from
'unreasonably delaying eminent domain action following an announcement
of intent to condemn or by other unreasonable conduct prior to
condemnation ... "' Jones v. People ex rel. Dep't ofTransp., 22 Cal. 3d
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No. 33684-1-111
Tapio Investment Company I. v. State
In attempting to persuade the court to change its ruling, Tapio's lawyer reminded
it of Tapio's proposed but as-yet unadmitted exhibit 35-a partial e-mail chain among
Department employees that used the word "blight" in describing a concern about a
property disposition outside of the Interstate 90 area. Tapio had tried to offer the partial
e-mail through Mr. Stejer, but the court sustained an objection and ruled that its relevance
would have to be demonstrated by someone like Mr. Golden, who had personal
knowledge of its subject matter.
Tapio moved to reopen its case to recall Mr. Golden for the purpose of offering the
exhibit. The court denied the motion on the basis that Tapio had rested its case.
Tapio sought direct review by the Washington Supreme Court of the judgment
dismissing its complaint with prejudice. The Supreme Court transferred the appeal to us.
ANALYSIS
At oral argument of the appeal, Tapio's lawyer began by stating Tapio was not
asking us to recognize a new cause of action for oppressive precondemnation conduct, as
the courts of some states have done. 	He stated Tapio's contention that the property rights
144,151,583 P.2d 165,148 Cal. Rptr. 640 (1978) (quotingKloppingv.
Whittier, 8 Cal. 3d 39, 500 P.2d 1345, 104 Cal. Rptr. I (1972)) ....
At this time, we do not choose to recognize this new cause of
action.
The Orion court further commented that even if it had recognized the cause of action, the
evidence in the case before it did not support it.
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No. 33684-1-III
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it asserts and the damages it seeks to recover are available under Washington's existing
condemnation law. 3
We review a trial court's decision on a CR SO(a) motion for judgment as a matter
of law using the same standard as the trial court. Schmidt v. Coogan, 162 Wn.2d 488,
491, 173 P.3d 273 (2007). A motion for judgment as a matter oflaw admits the truth of
the opponent's evidence and all reasonable inferences that can be drawn from it. Queen
City Farms, Inc. v. Cent. Nat'! Ins. Co., 126 Wn.2d 50, 98, 882 P.2d 703 (1994).
"Granting a motion for judgment as a matter of law is appropriate when, viewing the
evidence most favorable to the nonmoving party, the court can say, as a matter oflaw,
there is no substantial evidence or reasonable inference to sustain a verdict for the
nonmoving party." Sing v. John L. Scott, Inc., 134 Wn.2d 24, 29, 948 P.2d 816 (1997). 4
3 The following argument appears at Washington Court of Appeals oral argument,
Tapio Investment Company I, et al v. State, No. 33684-1-III (June 10, 2016) at 40 sec.
through 1 min., 28 sec. (on file with the court):
[T]his case was pied as an inverse condemnation claim. It was not pied as a
separate abuse of the precondemnation conduct claim. That term however, does
apply and identify the cause of the significant precondemnation damage that the
plaintiffs suffered as a direct result of the state's inverse condemnation acts
which specifically targeted the plaintiffs property for taking, acts which are not
permitted under our state constitution.
So we're not asking this court this morning to recognize this as a new
cause of action, as some other states have done. That's because Washington law
applicable to inverse condemnation, condemnation law in general, already
supports the claim that we alleged in our complaint.
4 Tapio emphasizes the trial court's pretrial denials of the Department's CR
12(b)(6) and summary judgment motions and this court's denial of discretionary review
of the CR 12(b)( 6) ruling as illustrating the presence of factual issues requiring a jury
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I. 	Takings law: an overview
The takings clause of the Fifth Amendment of the United States Constitution,
applicable to the States through the Fourteenth Amendment, prohibits the government
from taking private property for public use without just compensation. "The clearest sort
of taking occurs when the government encroaches upon or occupies private land for its
own proposed use," and decisions by the United States Supreme Court establish that
"even a minimal 'permanent physical occupation of real property' requires compensation
under the Clause." Palazzolo v. Rhode Island, 533 U.S. 606, 617, 121 S. Ct. 2448, 150 L.
Ed. 2d 592 (2001) (quoting Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S.
419,427, 102 S. Ct. 3164, 73 L. Ed. 2d 868 (1982)).
In 1922, the United States Supreme Court recognized "there will be instances
when government actions do not encroach upon or occupy the property yet still affect and
limit its use to such an extent that a taking occurs." Palazzolo, 533 U.S. at 61 ?'(citing
Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 43 S. Ct. 158, 67 L. Ed. 322 (1922)).
"In Justice Holmes' well-known, if less than self-defining, formulation, 'while property
may be regulated to a certain extent, if a regulation goes too far it will be recognized as a
trial. And the Department contends that the trial court should have granted its motion to
bifurcate and should have decided the issue of whether there was a taking first. 	The
Department did not seek discretionary review of the denial of its motion to bifurcate.
The only decision whose correctness is presented by the appeal, and the only one
that we need to address, is the trial court's decision to grant the CR 50(a) motion.
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Tapio Investment Company I. v. State
taking."' Id. (quoting Mahon, 260 U.S. at 415). 	When a regulation restricts an owner's
use of its property but advances a legitimate state interest, courts balance the public
interest against the economic impact on the landowner using three factors identified in
Penn Central Transportation Co. v. New York City, 438 U.S. 104, 124, 98 S. Ct. 2646, 57
L. Ed. 2d 631 (1978): (1) the regulation's economic impact on the property, (2) the extent
of the regulation's interference with investment-backed expectations, and (3) the
character of the government action. Presbytery of Seattle v. King County, 114 Wn.2d
320, 333, 335-36, 787 P.2d 907 (1990) (footnote omitted).
Article I, section 16 of the Washington Constitution states that "[n]o private
property shall be taken or damaged for public or private use without just compensation
having first been made." At oral argument, Tapio contended that this broader language,
speaking of "damage," means that neither a physical intrusion nor a regulatory taking is
required to trigger a right to compensation under the Washington Constitution. 5 Asked to
5 The following argument appears at Washington Court of Appeals oral argument,
Tapio Investment Company I, et al v. State, No. 33684-1-III (June 10, 2016) at 1 min., 28
sec. through 2 min., 7 sec. (on file with the court):
Our state constitution is rather unique. It's different than the federal
constitution under the Fifth Amendment. "No private property shall be taken
or damaged''-and those are the operative words that are applicable to this
case and the decision that I believe we're asking you to make-"for public or
private use without just compensation." . . . So our state constitution
recognizes that you don't have to have a physical intrusion or a regulatory
taking in order to trigger compensation.
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No. 33684-1-III
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identify any Washington decision that has held that no physical intrusion or regulatory
taking need be shown, however, counsel was unable to identify one.6
Professor Stoebuck has expressed the view that our state constitution-like 25
other state constitutions, beginning with that of Illinois-allowed compensation for
damaging as well as taking private property "to allow compensation in certain cases,
especially certain loss-of-street-access cases, in which most courts had been unwilling to
hold a taking had occurred." WILLIAM B. STOEBUCK, NONTRESPASSORY TAKINGS IN
WASHINGTON§ 1.9, at 9 (1980) (citing, inter alia, Brown v. Seattle, 5 Wash. 35, 31 P.
313, 32 P. 214 (1892)). Tracing the erratic history of judicial construction of the "or
damaging" language in article I, section 16, he concluded, as of the time he was writing,
that any distinction between damaging and taking had been abolished. Id. at 10. Tapio
does not address this history nor any of the Gunwall7 factors in suggesting that we rely on
an independent analysis of Washington's takings provision to find that no physical
invasion or regulation is required for a taking. We decline to do so and rely instead on
6 He cited four cases when questioned, but three involved an alleged physical
invasion and one concluded that in the absence of a physical invasion, there was no
taking. Phillips v. King County, 136 Wn.2d 946, 957, 968 P.2d 871 (1998) (physical
invasion: surface water runoff onto plaintiffs property); Showalter v. City of Cheney, 118
Wn. App. 543,549, 76 P.3d 782 (2003) (physical invasion-removal of a canopy);
Pierce v. Ne. Lake Wash. Sewer Dist., 123 Wn.2d 550, 559, 870 P.2d 305 (1994) (action
was properly dismissed because there was no physical invasion and, lacking an easement,
property owner had no property "right to a view"); Martin v. Port of Seattle, 64 Wn.2d
309, 391 P.2d 540 (1964) (physical invasion-noise from low flying aircraft).
7 State v. Gunwall, 106 Wn.2d 54, 720 P .2d 808 ( 1986).
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No. 33684-1-111
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existing case law. Cf Guimont v. Clarke, 121 Wn.2d 586, 854 P.2d 1 (1993) (refusing to
address the plaintiffs' contentions that the Washington Constitution provides greater
protection from government takings of property where they did not brief the Gunwall
factors).
A property owner may bring an inverse condemnation claim to "' recover the
value of property which has been appropriated in fact, but with no formal exercise of the
power of eminent domain.'" 	Fitzpatrick v. Okanogan County, 169 Wn.2d 598,605,238
P.3d 1129 (2010) (quoting Dickgieser v. State, 153 Wn.2d 530, 534-35, 105 P.3d 26
(2005)). To maintain an action for inverse condemnation, a plaintiff must show "(l) a
taking or damaging (2) of private property (3) for public use (4) without just
compensation being paid (5) by a governmental entity that has not instituted formal
proceedings." Dickgieser, 153 Wn.2d at 535.
A cause of action for inverse condemnation accrues when the landowner sustains
any measurable loss of market value as a result of interference, physical or regulatory,
with the use and enjoyment of its property. Highline Sch. Dist. No. 401 v. Port of Seattle,
87 Wn.2d 6, 548 P.2d 1085 (1976). But a loss of market value alone-even a loss of
value attributable to government action-is not itself evidence that the government has
interfered in a way that amounts to a constitutional taking. Pierce v. Ne. Lake Wash.
Sewer Dist., 123 Wn.2d 550, 562, 870 P.2d 305 (1994).
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Legal acts that do not interfere, physically or by regulating use of private property,
are not takings, and neither the Washington nor federal constitutions have been held to
require compensation for depreciation in market value caused by such legal acts. Id. at
562 & n.55 (citing Aubol v. Tacoma, 167 Wash. 442,446, 9 P.2d 780 (1932)); Danforth
v. United States, 308 U.S. 271,286, 60 S. Ct. 231, 84 L. Ed. 240 (1939) ("The mere
enactment of legislation which authorizes condemnation of property cannot be a
taking."); Andrus v. Allard, 444 U.S. 51, 66, 100 S. Ct. 318, 62 L. Ed. 2d 210 (1979)
("[A] reduction in the value of property is not necessarily equated with a taking" and
"loss of future profits-unaccompanied by any physical property restriction-provides a
slender reed upon which to rest a takings claim."); Kirby v. Forest Indus., Inc. v. United
States, 467 U.S. 1, 15, 104 S. Ct. 2187, 81 L. Ed. 2d 1 (1984) ("[l]mpairment ofthe
market value of real property incident to otherwise legitimate governmental action
ordinarily does not result in a taking.").
II. 	Tapio presented no substantial evidence of a taking
At issue is whether, by the close of Tapio's case, there was substantial evidence or
reasonable inference that would sustain a verdict that the Department had committed a
taking of Tapio's property under the federal or state constitution, thereby requiring
payment of compensation.
Messrs. Stejer and Cloninger conceded no governmental rule had been imposed on
Tapio that had impeded its operations or otherwise prevented it from improving or
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No. 33684-1-111
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maintaining the property. 	Tapio's experts and Mr. Stejer acknowledged that Tapio still
had the legal right to lease or sell the property. Tapio nonetheless argues that it did suffer
damage from "regulatory conduct" in the form of a limited access order entered in 2005
and, alternatively, that neither physical invasion nor regulation is required for a taking.
A. The 2005 Final Limited Access Order does not
regulate Tapio's use of its property
Tapio contends that a Final Limited Access Order entered by the Department in
2005 (and the public notice and planning processes leading up to that order) is
tantamount to an administrative regulation, justifying a regulatory takings analysis under
the Penn Central factors. 	If entitled to Penn Central balancing, it claims to have
demonstrated economic impact, interference, and a character of government action
entitling it to relief.
The final limited access design for the freeway project was approved by the
Department in 2005. Approval resulted in findings and an order related to the proposed
right of way and access control plans. 8 But the undisputed evidence was that the plan had
not yet been filed with the Spokane County Auditor. As a matter of state law, it had not
yet restricted property owners in any way. Because of "the uncertainties of federal aid
and the state level of funding of proposed construction or improvement of state
8 The parties generally refer to this as the 2005 Limited Access Order. Although
referred to by trial witnesses and in various exhibits, th~ document itself is not included
in the record.
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No. 33684-1-III
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highways," the Department's plans for highway improvements "shall be deemed tentative
until filed with the county auditor as authorized in RCW 47.28.025 or until the
department commences action to condemn or otherwise acquire the right-of-way for the
highway improvements." RCW 47.28.026(2). Unless and until the Department causes a
plan of a proposed new highway or limited access facility to be recorded with the county
auditor, nothing contained in highway construction provisions dealing with building and
improvement prohibitions (RCW 47.28.025 or 47.28.026) "may be deemed to restrict or
restrain in any manner the improvement, development, or other use by owners or
occupiers of lands, buildings, or improvements within the limits of any proposed new or
limited access highway or any proposed relocated or widened highway." Id.
As a matter oflaw, the Final Limited Access Order did not regulate Tapio's use of
its property.
B. "Government action" falling short of regulation does not trigger
application of Penn Central balancing
Tapio nonetheless argues that
[i]t is the implementation of this Final Limited Access Order that has
resulted in the damages to Tapio. For example, the acquisition and
construction in the immediate neighborhood [i]s provided for by those
plans. 	[The Department] went beyond ''planning" when it adopted through
the regulatory process the Final Limited Access plan and began acting in
accordance with it.
Br. of Appellant at 38-39.
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No. 33684-1-111
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Tapio represents that "[ n ]umerous other jurisdictions" have affirmed that the focus
of the inquiry in analyzing whether a Penn Central taking has occurred is not on
regulation but on the "government's action itself," but it identifies only one decision-
Mekuria v. Washington Metropolitan Area Transit, 975 F. Supp. 1 (D.D.C. 1997)-that
suggests that Penn Central should be read broadly as applying to any government action,
not just regulatory or legislative action. Br. of Appellant at 39-41.
In Mekuria, business owners in a Washington D.C. neighborhood brought an
inverse condemnation suit against the local transit authority for the alleged taking of their
property in constructing a rail station. According to the complaint, obstructions from the
project cut off street access to the businesses and greatly hindered pedestrian access,
resulting in loss of delivery services and customers. Two of the businesses closed and the
others suffered revenue decreases of 70 to 90 percent. The construction caused physical
damage to the properties including cracked walls, ceilings and floors, and flooding from
sewer water flowing from the construction site. The construction also hindered police
patrol, resulting in robberies and vandalism. Mekuria, 975 F. Supp. at 2-3. The plaintiffs
alleged the transit authority's actions deprived them of reasonable access, denied them all
viable economically beneficial or productive use of the properties, and thereby interfered
with their investment-backed expectations. Id. at 3.
The transit authority argued that Penn Central did not apply because there was no
regulatory or legislative governmental action. The court disagreed:
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The simple answer to this argument is that Penn Central can not be read so
narrowly. For example, the Court explicitly refers to the possibility of
compensable takings occurring as a result of a government's "public
action" or "public program", neither of which necessarily require regulatory
or legislative action. See Penn Central, 438 U.S. at 124, 98 S. Ct. at 2659.
Similarly, First English [Evangelical Lutheran Church of Glendale v.
County of Los Angeles, 482 U.S. 304, 306-07, 107 S. Ct. 2378, 96 L. Ed. 2d
250 (1987)] refers to "government action" which may constitute a taking.
See First English, 482 U.S. at 314, 107 S. Ct. at 2385. Moreover, it makes
no sense to limit Penn Central to apply merely to statutes and regulations,
such as land use regulations, when there are myriad ways in which
government action can seriously impact individual owners' use of their
property.
Id. at 6.
The district court's analysis is flawed and unpersuasive. Both Penn Central and
First English involved takings challenges to actual government regulations: Penn Central
to a municipal law restricting development of historic landmarks, see Penn Central, 438
U.S. at 116, and First English to a flood protection ordinance, First English, 482 U.S. at
306-07. Between them, the cases speak of "public action," "public programs," or
"government action," but each of those terms encompass regulation and actions taken
pursuant to regulation, leaving no reason to believe that the Court was, in dicta, speaking
of something other than regulation. Neither Penn Central nor First English discusses at
all whether a Penn Central regulatory takings analysis applies to cases not involving a
regulation, let alone holds that the analysis would apply in such a case.
Mekuria is a legal anomaly in its willingness to entertain a Penn Central
regulatory taking claim where there was no regulation. 	The businesses harmed by the
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No. 33684-1-111
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transit authority's construction in Mekuria failed to plead a physical taking, which is what
they had actually suffered. Because of that shortcoming in the pleading, the district court
concluded that to find a taking, it had to find a regulatory taking. Mekuria, 975 F. Supp.
at 5. Perhaps the court's analysis is problematic because it was results-oriented.
Following Mekuria, the United States Supreme Court has overruled the district
court's approach, holding that a "longstanding distinction between acquisitions of
property for public use ... and regulations prohibiting private uses ... makes it
inappropriate to treat cases involving physical takings as controlling precedents for the
evaluation of a claim that there has been a 'regulatory taking,' and vice versa." Tahoe-
Sierra Pres. Council v. Tahoe Reg'! Plan. Agency, 535 U.S. 302, 323, 122 S. Ct. 1465,
152 L. Ed. 2d 517 (2002) (footnote omitted). The Supreme Court also observed that in.
determining whether government action affecting property is an unconstitutional
deprivation of ownership rights, "a court must interpret the word 'taken[,]'" and
identified only two senses in which property is "taken":
When the government condemns or physically appropriates the property,
the fact of a taking is typically obvious and undisputed. 	When, however,
the owner contends a taking has occurred because a law or regulation
imposes restrictions so severe that they are tantamount to a condemnation
or appropriation, the predicate of a taking is not self-evident, and the
analysis is more complex.
Id. at 322, n.17 (emphasis added).
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Any number of businesses in the vicinity of the North-South Freeway project may
have suffered reduced property value and lost income due to governmental acquisition
and construction "actions" over the last 13 years that have not physically touched their
property or legally restricted its use. It is well settled that such harm is not compensable
in an inverse condemnation proceeding.9 And just because a portion ofTapio's property
is expected to be taken in the future does not make it different from its neighbors in this
9 Other Washington decisions cited in Tapio's briefing as supporting recovery are
not helpful because they either involve an actual invasion and impairment of use or
access or were held not to be takings. See Dickgieser v. State, 153 Wn.2d at 533 (logging
activities on adjacent land caused flooding that damaged private property); Union
Elevator & Warehouse Co. v. State, 96 Wn. App. 288, 980 P.2d 799 (1999) (question of
fact whether State's activities physically hindered access to plaintiffs adjacent property);
Rains v. Dep't of Fisheries, 89 Wn.2d 740,575 P.2d 1057 (1978) (State's denial of
permit to rechannel creek bed that later overflowed and damaged plaintiffs property was
not a taking); Ackerman v. Port of Seattle, 55 Wn.2d 400, 348 P.2d 664 (1960), overruled
on other grounds by Highline Sch. Dist., 87 Wn.2d 6 (1976) (noise interference caused by
increased airplane overflights near airport); Boitano v. Snohomish County, 11 Wn.2d 664,
672-77, 120 P.2d 1490 (1941) (county's excavation activities resulted in water damage to
plaintiffs neighboring property); Tom v. State, 164 Wn. App. 609, 614, 267 P.3d 361
(2011) (no taking attributable to noise from a neighboring prison firing range that pre-
existed plaintiffs property ownership); Pruitt v. Douglas County, 116 Wn. App. 547,
559-60, 66 P.3d 1111 (2003) (inverse condemnation claim arose when county channeled
water that flooded and destroyed market value of adjacent landowners' properties);
Highline Sch. Dist., 87 Wn.2d at 8, 15-16 (inverse condemnation claim arose when
changes in airport operations led to marked increase in aircraft noise interference with
adjacent land, including school classrooms, which would result in measurable diminution
of property value, the extent of which presented a factual issue); Lincoln Loan Co. v.
State, 274 Or. 49, 51,545 P.2d 105, 107 (1976) (complaint alleged that the dismantling
of dwellings in the surrounding properties created noise, dust and confusion) and cf Hall
v. State, 355 Or. 503,516,326 P.3d 1165 (2014) ("[N]othing in Lincoln Loan suggests
that, in the absence of a physical occupation or invasion of a property right, a government
action that causes only a reduction in the value of property qualifies as a taking.").
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respect. See Campbell v. United States, 266 U.S. 368, 45 S. Ct. 115, 69 L. Ed. 328
( 1924) (landowner was entitled to be compensated for a taking of 1. 81 acres of his
property but not for the diminution of the value of his remaining property attributable to
government's acquisition of neighboring property and construction oflarge industrial
plant); Cent. Puget Sound Reg'! Transit Auth. v. Heirs & Devisees of Eastey, 135 Wn.
App. 446, 458, 144 P.3d 322 (2006) (damage to Eastey property caused by a pocket track
on nearby land does not flow from the taking of a narrow strip of Eastey land, but from
Transit's legal use of other land, and the damage to Eastey was no different than the
damage (if any) to the rest of the neighborhood). 10
This settled takings law also advances public interests, as recognized in a Texas
decision cited by the Department:
Construction of public-works projects would be severely impeded if the
government could incur inverse-condemnation liability merely by
announcing plans to condemn property in the future. 	Such a rule would
encourage the government to maintain the secrecy of proposed projects as
long as possible, hindering public debate and increasing waste and
inefficiency .... After announcing a project, the government would be
under pressure to acquire the needed property as quickly as possible to	\ 	.
avoid or minimize liability. This likewise would limit public input, and
10 It is well settled that when property is condemned for a project such as this, fair
compensation for the property that is actually condemned and acquired by the State
should disregard depreciation that is attributable to the project for which the eminent
domain proceeding is instituted. Lange v. State, 86 Wn.2d 585, 591, 547 P.2d 282
(1976). That is the basis for the Department's repeated assurances to Tapio that when its
property is ultimately condemned, it will be valued as if the freeway project had never
occurred.
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No. 33684-1-111
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forestall any meaningful review of the project's environmental
consequences. The government also would be reluctant to publicly suggest
alternative locations, for fear that it might incur inverse condemnation
liability to multiple landowners arising out of a single proposed project. ...
. . . The necessary review time between public announcement and
acquisition of property for a particular project will depend on many factors
unique to the project, including the projected cost, the number of feasible
alternatives, the potential environmental impact, and the extent of federal
involvement. ... If the government were subject to liability for
"unreasonable" delay ... officials would be pressured to expedite property
acquisition to avoid immediate liability to a particular landowner,
regardless of the long-term social costs. Public policy dictates that the
government be free to make this type of planning decision in the public
interest, without threat of civil liability to a particular landowner.
Westgate, Ltd. v. State, 843 S.W.2d 448, 453-54 (Tex. 1992) (citations omitted); see Br.
of Resp. at 34-35.
The Department's "actions" have not triggered application of Penn Central
balancing.
Ill. 	The trial court did not err in refusing to admit exhibit 35 or in denying
Tapio 's motion to reopen its case
Given the basis on which we affirm the trial court, its refusal to admit exhibit 3 5
initially, or by allowing Tapio to reopen its case, does not appear to matter. Because this
was not addressed when Tapio abandoned its "taking by oppressive preacquisition
conduct" claim at oral argument, however, we address the assignment of error.
Tapio offered exhibit 35 during Mr. Stejer's re-direct testimony. The exhibit
contained one day's worth of an e-mail exchange among Department employees in
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No. 33684-1-111
Tapio Investment Company I. v. State
September and October of 2006. The subject matter was whether the Department, as
landlord, should have reduced the rent of a commercial building on Market Street in
order to have continued occupancy until project construction reached that area. Tapio
contends that a passage in the e-mail demonstrates Department officials knew that
acquiring and demolishing properties in a phase not funded for construction would leave
the properties that were not acquired in a more blighted and depressed neighborhood. 11 It
argues that such knowledge was relevant to its claims.
The Department objected and argued that the e-mail was not relevant because it
described a different decision than it faced in deciding whether to acquire the Tapio
Center: it involved a different property several miles north, was written five years before
Tapio filed suit, and the one-day excerpt from the exchange was incomplete, out of
context, and should not be admitted without proper foundation as to relevance.
The trial court sustained the objection, ruling it was not yet apparent that exhibit
35 proved anything and that Mr. Stejer was not the appropriate person to testify about its
contents. The court said if the exhibit was to come in at all, it would have to be through
11 The allegedly relevant passage states:
We were figuring about 5 years before construction was slated for
this area. 	So, in another 3 years we will have purchased more of the
surrounding properties, creating an even more blighted or depressed
commercial area along Market Street. We will also be 3 years closer to
construction, which makes it an even riskier venture for any other potential
tenant if [our lessee] is gone.
Ex. 35.
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No. 33684-1-111
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someone like Mr. Golden, who was a party to the e-mail exchange. 	When testimony
resumed, Tapio's lawyer elicited Mr. Stejer's testimony that he had selected October
2006 as the taking date because the Department was "under the full knowledge that when
they skip ahead and acquire property out of sequence from where they are actually doing
construction ... that their acquisition would create blight, and ... that blight would
reduce rents, increase vacancies, and ultimately affect the fair market value." RP at 914-
15. It offered the exhibit again following that testimony, and the court again sustained
the Department's objection. Tapio did not attempt to offer the exhibit through any other
witness before resting its case.
A trial court's decision to exclude evidence will be reversed only where it has
abused its discretion. Kappleman v. Lutz, 167 Wn.2d 1, 6,217 P.3d 286 (2009). A trial
court abuses its discretion when its decision is based on untenable grounds or untenable
reasons. Id.
On appeal, Tapio treats the trial court as sustaining an objection to a lack of
authentication, which it contends was error because exhibit 3 5 had been authenticated
through notice in accordance with ER 904. But authenticity was not at issue. The trial
court declined to admit the exhibit because, as argued by the Department, Tapio did not
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No. 33684-1-111
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establish that Mr. Stejer had personal knowledge of the e-mail's contents sufficient to
establish its relevance.
The proponent of evidence has the burden to establish necessary foundation for the
evidence to be relevant and admissible. See State v. Smith, 87 Wn. App. 345, 348, 941
P.2d 725, 726 (1997). The general rule is "[a] witness may not testify to a matter unless
evidence is introduced sufficient to support a finding that [he] has personal knowledge of
the matter." ER 602.
The trial court did not abuse its discretion in denying admission through Mr.
Stejer. He might or might not have been right about what amounted to his speculation
that the e-mail reflected knowledge that applied to Tapio's situation. 	The court
reasonably required Tapio to call a witness who could provide context, so that an
informed decision could be made as to whether the e-mail exchange reflected knowledge
that was relevant.
Tapio's final assignment of error is that the trial court erred by denying its motion
to reopen, in order to call Mr. Golden and reoffer exhibit 35. Reopening a cause for
additional evidence rests within the discretion of the court. 	Tsubota v. Gunkel, 58 Wn.2d
586,591,364 P.2d 549 (1961). The court denied the motion because Tapio had been told
what the court would require as a reasonable basis for admitting the exhibit and did not
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No. 33684-1-111
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re-call Mr. Golden for that purpose despite having the opportunity to do so. That is not
an abuse of discretion.
Affirmed.
?J~tv~,~Siddoway, J.
WE CONCUR:
28