### FILED OCTOBER27, 2016 In the Office ofthe Clerk ofCourt WA State Court ofAppeals, Division III

INTHE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE TAPIO INVESTMENT COMPANY I, a Washington limited liability company; MONARCH INVESTMENT; TAPIO OFFICE IVPARTNERSHIP; CLONINGER/EUCKER PARTNERSHIP; PAMELAM. CLONINGER, an individual, and CLONINGER& ASSOCIATES, LLC, a Washington limited liability company, Appellants,


### v. ) ) ) ) ) ) ) ) ) ) ) ) ) ) THE STATE OF WASHINGTON, by and ) through the Department ofTransportation, ) Respondent. ) ) No. 

### 33684-1-111

PUBLISHED OPINION

SIDDOWAY, 

### J. -TapioInvestment Company I and its affiliates 1 (collectively "Tapio") filed an inverse condemnation lawsuit againstthe State ofWashington

1Monarch Investment, Tapio Office IVPartnership, Cloninger/Bucker Partnership, PamelaM. Cloninger, and CloningerAssociates, LLC.

### No. 33684-1-111 Tapio Investment Company1 v. State 

### Department ofTransportation for an alleged taking ofTapio's office park during construction ofa major freeway project in Spokane. The approved route for the freeway includes aportion ofthe officepark, which is situatedpartially within a planned interchange. Construction ofthe interchange will be one ofthe last steps in the decadeslong constructionprocess. The Department will not need Tapio'sproperty for many years. The case proceeded to ajurytrial on Tapio's theory that while the Department had not physically or legally interfered with use ofits property, Departmentpublicity about the freeway project and its acquisition ofnearby properties hampered Tapio's leasing activity and diminished the market value ofthe office parkto an extentthat had, by 2006, already effected a constitutional taking. Atthe close ofTapio's case the trial court granted the Department's CR 50 motion, ruling that Tapio's evidence was insufficient as
a matter oflaw to support a claim for relief. On appeal, Tapio abandons any requestthat we recognize a new type ofinverse condemnation claim for taking by oppressive preacquisition conduct-onetheory that it advanced in the trial court. 

### It contends, instead, that its evidence was sufficientto support its claim ofinverse condemnation under existing law. Because there has been no physical invasion ofTapio's land, no regulation restricting Tapio's use ofits property, and the harm it complains ofdoes not otherwise amount to a constitutional taking, we affirm. 2No. 33684-1-111 Tapio Investment Company

### I. v. State
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 ofSpokane. The approved route traverses a great deal ofdeveloped property, requiring that approximately 940 parcels of land be acquired. Among them is the Tapio Center, which is situatedpartially 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 onthe perimeter ofthe site in what one ownerhas described as a "circle the wagons" format, with aparklike setting in the protected interior. Report ofProceedings (RP) at 1012. Common parking is included in the landscaped center, to which there are presently eight entrances. The north portion ofTapio Center includes five buildings managed by their majority owner, the Cloninger family. The five buildings in the southportion 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 ofthree buildings in the southportion ofTapio Center. Two others will be "clipped." RP at 562. Southern access to the officeparkwill be eliminated and access and parking to the northern portion will be affected.

3No. 33684-1-111 Tapio Investment CompanyI. v. State
Construction ofthe freeway project is proceeding from U.S. Highway 395 onthe north toward Interstate 90 on the south. Since Tapio Center is among the southern-most properties touched by the approved route, the Department will notneed to acquire, physically affect, orregulate use ofTapio'sproperty for many years. The Department's initial budgetrequestto fund the purchase ofall properties needed for the freeway projectwas denied bythe legislature. Instead, the legislature beganprovidingpartial acquisition funding ofapproximately $16 million eachbiennium. Funding for a particularbiennium is not appropriated ortied to particular locations and may be used by the Departmentto acquire properties anywhere along the projectright-ofway. The Department's communication about the freeway projectwith affectedpersons has been extensive. Following initial environmental approval ofthe freeway project in the late 1990s, the Departmenthad, by the time ofthe trial below, held over 100 public meetings to impart information and gatherpublic input. Ithad communicatedwith every identifiable affectedproperty owner, and continued to communicate with them as construction progressedtoward their area. Before commencingthis inverse condemnation action in 2011, Tapio's owners had complained for years thatpublicity aboutthe freeway projectwas 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 4No. 33684-1-111 

### Tapio Investment CompanyIv. 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 ofthe 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 orderto 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'sproperty anytime soon and it did not expect to acquire Tapio'sproperty for years; that when property was condemned, it would be valued as ifthere was never any freeway project; and that the Department'srecommendation 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 priorto purchase." RP at 819; Ex. 18. By the end of2003, 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 

### 5No. 33684-1-111 Tapio Investment CompanyI. 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 Departmentto acquire residences when funding became available so families could relocate. The Department's biennial acquisition budgets could have accommodated a purchase ofthe Tapio Centerhad the Department thought that was the best use ofthe 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 bestuse of the available budget to maximize the number ofparcels purchased. Inthe Interstate 90 area, it placed a priority onpurchasing residential properties because acquiring singlefamily dwellings with yards was more cost effective andprovided more total right-ofway for the amount expended than would acquiring commercial properties. For a time, the Departmentwas also acquiring and removing structures along Interstate 90 to accommodate a plan to install noise walls. Theplan was later dropped because of engineering uncertainties and funding issues. Commercial properties were purchased on
a case-by-case basis ifprice, location, or surrounding circumstancespresented a good business reason for deviating from the priority on residential purchases. The Departmentpurchased increasing numbers ofresidential properties in the Interstate 90 area from 2007 to 2011. By the time oftrial in 2014, it had acquired about 300 parcels in the area, on both sides ofthe interstate and up and down blocks east and 6No. 33684-1-111 Tapio Investment Company

### I. v. State

west ofTapio Center. On many ofthe properties, structures were demolished and the land bulldozed for safety and maintenance reasons andto avoid problems withtheft and transients. The Department spends about $100,000 annually for mowing and general maintenance ofthe lots thathave been cleared. In March 2010, Mr. Stejer sent another letterto Department officials, again complaining ofpublicity aboutthe freeway plan and acquisition, and aboutthe Department's demolition ofneighboringproperties. In a response that discussed legal requirements for notice andpublic participation andthe funding andproperty acquisition demands ofa large highway project, Regional Administrator Keith Metcalfinformed Mr. Stejerthatthe Department did not anticipate construction would directly affect Tapio's property for at least 10 years. Tapio filed its inverse condemnation action againstthe Department in November 2011. It contends that a taking ofTapio's property occurred in the fall of2006 when the Department consciously started negotiating for the purchase ofhomes in the Interstate 90
area. Afterthe denial ofseveral dispositive motions, the case proceededtotrial 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 ofDepartmentpublicity and property acquisitions, the value ofthe Tapio Centerhad been diminished by 80 to 90

7No. 33684-1-III Tapio Investment CompanyI. 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 wouldbe unlikely to bringpotential tenants to Tapio in light ofthe published freeway plan and that he would not bringpotential buyers to the property. He admitted he had no knowledge that the Department did anything different in pursuit ofthe North-South Freeway constructionthan it had done in othermajorprojects, and agreed that Tapio still had the right to sell its property. He admitted that the Department's demolition ofnearby homes had improved the look ofthe neighborhood. JeffJohnson, also a real estate broker, testified to his opinion that the Department's plans and acquisition activity in the vicinity ofTapio Centerhad 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. CajerNeely, a commercial banker, testified that in light ofthe freeway plans and property acquisitions in the Interstate 90 area, it was unlikely a commercial bank would provide a loan to a potential purchaser ofTapio Center ifit was secured only by the office parkproperty. 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

8

### No. 33684-1-III Tapio Investment Company

### I. v. State
ofthe project, Tapio's communications with the Department, and the Department's property acquisitions in the Interstate 90 area. Mr. 

### Stejer and Blake Cloningertestified to the damages each was requesting on behalfoftheir owners' interests-collectively, $13.8 million-based on what each considered a total taking ofTapio Center in 2006. Mr. Stejer concededthe 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 oftrial, 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. Atthe close ofTapio's case, the Department moved to dismiss under CR 50(a). Afterhearing argument from the parties, the court granted the motion, finding that Tapio's theory ofunwarranted delay or oppressive preacquisition conduct-atheory the court had allowed to proceed, but that has not yet beenrecognized by any reported Washington decision2

### -hadnot 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, Californiahas recognized a cause ofaction for inverse condemnation when a "diminution in market value resulted from 'unreasonably delaying eminent domain action following an announcement ofintent to condemn or by otherunreasonable conductpriorto condemnation
..."' Jones v. People ex rel. Dep'tofTransp., 22 Cal. 3d 9No. 33684-1-111 Tapio Investment CompanyI. v. State
In attempting to persuade the courtto change its ruling, Tapio's lawyerreminded it ofTapio'sproposed but as-yet unadmitted exhibit 35-apartial e-mail chain among Department employees that used the word "blight" in describing a concern about a property disposition outside ofthe Interstate 90 area. Tapio hadtried to offerthe partial e-mail through Mr. Stejer, butthe court sustained an objection and ruled that its relevance would have to be demonstrated by someone like Mr. Golden, whohadpersonal knowledge ofits subject matter. Tapio moved to reopen its case to recall Mr. Golden for the purpose ofoffering the exhibit. The court denied the motion onthe basis that Tapio had rested its case. Tapio sought direct review by the Washington Supreme Court ofthejudgment dismissing its complaintwithprejudice. The Supreme Courttransferred the appeal to us. ANALYSIS At oral argument ofthe appeal, Tapio's lawyerbegan by stating Tapio was not asking us to recognize a new cause ofaction for oppressiveprecondemnation conduct, as the courts ofsome 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))
.... Atthis time, we do not choose to recognize this new cause of action. The Orion court further commentedthat even ifit hadrecognized the cause ofaction, the evidence in the case before it did notsupport it. 10No. 33684-1-III Tapio Investment Company

### I. v. State
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 forjudgment as a matter oflaw using the same standard as the trial court. Schmidt v. Coogan, 162 Wn.2d 488, 491, 173 P.3d 273 (2007). A motion forjudgment 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 forjudgment as a matter oflaw is appropriate when, viewing the evidence most favorable to the nonmovingparty, the court can say, as a matter oflaw, there is no substantial evidence orreasonable 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 ofAppeals oral argument, Tapio Investment Company

### I, etalv. State, No. 33684-1-III (June 10, 2016) at 40 sec. through 1min., 28 sec. (on file with the court): [T]his case was pied as an inverse condemnation claim. It was notpied as a separate abuse ofthe precondemnation conduct claim. Thatterm however, does apply and identify the cause ofthe significant precondemnation damage that the plaintiffs suffered as a direct result ofthe state's inverse condemnation acts which specifically targeted the plaintiffsproperty 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 ofaction, 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 ofthe Department's CR 12(b)(6) and summaryjudgmentmotions and this court's denial ofdiscretionary review ofthe CR 12(b)(6) ruling as illustrating the presence offactual issues requiring ajury 11No. 33684-1-111 Tapio Investment Company I. v. State
I. Takings law: an overview The takings clause ofthe Fifth Amendment ofthe United States Constitution, applicable to the States through the Fourteenth Amendment, prohibits the government from taking private property for public use withoutjustcompensation. "The clearest sort oftaking occurs whenthe 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 'permanentphysical occupation ofreal property' requires compensation underthe Clause." Palazzolo v. RhodeIsland, 533 U.S. 606, 617, 121 S. Ct. 2448, 150 L. Ed. 2d 592 (2001) (quotingLoretto v. Teleprompter Manhattan CATVCorp., 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 extentthat 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)). "InJustice Holmes' well-known, ifless than self-defining, formulation, 'whileproperty may be regulated to a certain extent, ifa regulation goes too far it will be recognized as a
trial. And the Department contends that the trial court shouldhave granted its motion to bifurcate and should have decided the issue ofwhether there was a taking first. The Department did not seek discretionary review ofthe denial ofits motion to bifurcate. The only decision whose correctness is presentedby the appeal, and the only one that we need to address, is the trial court's decision to grantthe CR 50(a) motion.
12

### No. 33684-1-III Tapio Investment Company

### I. v. State taking."' Id. (quoting Mahon, 260 U.S. at 415). When a regulation restricts an owner's
use ofits 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 ofthe regulation's interference with investment-backed expectations, and (3) the character ofthe 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 ofthe Washington Constitution states that "[n]oprivate property shall be taken or damaged for public or private use withoutjustcompensation 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 ofAppeals oral argument, Tapio Investment Company

### I, etalv. State, No. 33684-1-III (June 10, 2016) at 1min., 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 FifthAmendment. "Noprivate 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-"forpublic or private use withoutjustcompensation."
. . . So our state constitution recognizes that you don'thave to have a physical intrusion or aregulatory taking in order to trigger compensation.
13No. 33684-1-III Tapio Investment Company

### I. v. State identify any Washington decision that has held that no physical intrusion orregulatory taking need be shown, however, counsel was unable to identify one. 6 Professor Stoebuck has expressed the view that our state constitution-like25 other state constitutions, beginning with that ofIllinois-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 ofthe "or damaging" language in article I, section 16, he concluded, as ofthe 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 ofthe Gunwall7 factors in suggesting that we rely on
an independent analysis ofWashington's takings provisionto find that no physical invasion orregulation is required for a taking. We decline to do so and rely instead on

6 He cited four cases when questioned, butthree involved an alleged physical invasion and one concludedthat in the absence ofa physical invasion, there was no taking. Phillips v. King County, 136 Wn.2d 946, 957, 968 P.2d 871 (1998) (physical invasion: surface water runoffonto plaintiffsproperty); Showalter v. City of Cheney, 118 Wn. App. 543,549, 76 P.3d 782 (2003) (physical invasion-removal ofa canopy); Pierce v. Ne. Lake Wash. SewerDist., 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 ownerhad no property "rightto a view"); Martin v. Port of Seattle, 64 Wn.2d 309, 391 P.2d 540 (1964) (physical invasion-noise from low flying aircraft). 7State v. Gunwall, 106 Wn.2d 54, 720 P.2d 808 (1986). 14No. 33684-1-111 

### Tapio Investment Company

### I. v. State existing case law. 

### CfGuimont v. Clarke, 121 Wn.2d 586, 854 P.2d 1 (1993) (refusingto address the plaintiffs' contentions that the Washington Constitutionprovides greater protection from government takings ofproperty where they did notbriefthe 

### Gunwall factors). A property owner may bring an inverse condemnation claim to "'recover the value ofproperty which has been appropriated in fact, butwith no formal exercise ofthe power ofeminent 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 plaintiffmust show "(l) a taking or damaging (2) ofprivateproperty (3) for public use (4) withoutjust compensation beingpaid (5) by a governmental entity that has not instituted formal proceedings." 

### Dickgieser, 153 Wn.2d at 535. A cause ofaction for inverse condemnation accrues when the landowner sustains any measurable loss ofmarketvalue as a result ofinterference, physical orregulatory, with the use and enjoyment ofits property. 

### Highline Sch. Dist. No. 401 v. Port of Seattle, 87 Wn.2d 6, 548 P.2d 1085 (1976). But a loss ofmarketvalue alone-even a loss of value attributable to government action-is not itselfevidence that the governmenthas interfered in a waythat amounts to a constitutional taking. 

### Pierce v. Ne. Lake Wash. SewerDist., 123 Wn.2d 550, 562, 870 P.2d 305 (1994).

15No. 33684-1-111 Tapio Investment CompanyI. v. State Legal acts that do not interfere, physically orby regulating use ofprivate property,
are not takings, and neitherthe 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 (citingAubolv. Tacoma, 167 Wash. 442,446, 9 P.2d 780 (1932)); Danforth

v. UnitedStates, 308 U.S. 271,286, 60 S. Ct. 231, 84 L. Ed. 240 (1939) ("The mere enactment oflegislation which authorizes condemnation ofproperty cannotbe 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 ofproperty is not necessarily equated with a taking" and "loss offuture profits-unaccompaniedby any physical property restriction-provides a slender reed upon whichto rest a takings claim."); Kirby v. ForestIndus., Inc. v. United States, 467 U.S. 1, 15, 104 S. Ct. 2187, 81 L. Ed. 2d 1 (1984) ("[l]mpairment ofthe marketvalue ofreal property incident to otherwise legitimate governmental action ordinarily does notresult in a taking."). II. Tapiopresentedno substantial evidence of a taking At issue is whether, by the close ofTapio's case, there was substantial evidence or reasonable inference that would sustain a verdict that the Department had committed a taking ofTapio'sproperty under the federal or state constitution, thereby requiring payment ofcompensation. 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 16

### No. 33684-1-111 Tapio Investment Company l v. State maintaining the property. Tapio's experts and Mr. Stejer acknowledged that Tapio still hadthe legal right to lease or sell the property. Tapio nonetheless argues that it did suffer damage from "regulatory conduct" in the form ofa limited access order entered in 2005 and, alternatively, that neitherphysical invasion norregulation is required for a taking. A. The 2005 Final Limited Access Order does not regulate Tapio's use ofits property Tapio contends that a Final Limited Access Order entered by the Department in 2005 (and thepublic 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. Ifentitled to Penn Centralbalancing, it claims to have demonstrated economic impact, interference, and a character ofgovernment action entitling it to relief. The final limited access design for the freeway projectwas approved by the Department in 2005. Approval resulted in findings and an orderrelated to the proposed right ofway and access control plans. 8 Butthe undisputed evidence was that the planhad not yetbeen filed with the Spokane County Auditor. As a matter ofstate law, it had not yet restricted property owners in any way. Because of"the uncertainties offederal aid and the state level offunding ofproposed construction or improvement ofstate

8 The parties generally refer to this as the 2005 Limited Access Order. Although referred to bytrial witnesses and in various exhibits, th~ document itselfis not included in the record. 

### 17No. 33684-1-III Tapio Investment CompanyI. v. State highways," the Department'splans 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." RCW47.28.026(2). Unless and until the Department causes a plan ofa proposed new highway or limited access facility to be recorded with the county auditor, nothing contained in highway constructionprovisions dealing with building and improvementprohibitions (RCW 47.28.025 or 47.28.026) "may be deemed to restrict or restrain in any manner the improvement, development, or otheruse by owners or occupiers oflands, buildings, or improvements within the limits ofany proposed new or limited access highway or any proposed relocated orwidened highway." Id. As a matter oflaw, the Final Limited Access Order did notregulate Tapio's use of its property. B. "Government action" falling short ofregulation does not trigger application ofPenn Centralbalancing Tapio nonetheless argues that [i]t is the implementation ofthis Final LimitedAccess Orderthat 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. ofAppellant at 38-39.

18No. 33684-1-111 Tapio Investment Company

### I. v. State Tapio represents that "[ n]umerous otherjurisdictions"have affirmed that the focus ofthe inquiry in analyzing whether aPenn Centraltaking has occurred is not on regulation but on the "government's action itself," but it identifies only one decisionMekuria v. Washington MetropolitanArea Transit, 975 F. Supp. 1 (D.D.C. 1997)-that suggests thatPenn Central should be readbroadly as applying to any government action, notjustregulatory or legislative action. Br. ofAppellant at 39-41. InMekuria, business owners in a Washington D.C. neighborhoodbrought an inverse condemnation suit against the local transit authority for the alleged taking oftheir property in constructing a rail station. According to the complaint, obstructions from the project cut offstreet access to the businesses and greatly hinderedpedestrian access, resulting in loss ofdelivery services and customers. Two ofthe businesses closed and the others suffered revenue decreases of70 to 90 percent. The construction causedphysical damage to the properties including cracked walls, ceilings and floors, and flooding from
sewer water flowing from the construction site. The construction also hinderedpolice patrol, resulting in robberies and vandalism. Mekuria, 975 F. Supp. at 2-3. The plaintiffs alleged the transit authority's actions deprived them ofreasonable access, denied them all viable economically beneficial orproductive use ofthe properties, and thereby interfered with their investment-backed expectations. Id. at 3. The transit authority argued thatPenn Central did not apply because there was no regulatory or legislative governmental action. The court disagreed: 19No. 33684-1-III Tapio Investment Company

### I. v. State
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 ofa government's "public action" or "publicprogram", neither ofwhich necessarily require regulatory or legislative action. See Penn Central, 438 U.S. at 124, 98 S. Ct. at 2659. Similarly, FirstEnglish [EvangelicalLutheran Church of Glendale v. County of LosAngeles, 482 U.S. 304, 306-07, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987)] refers to "government action" whichmay constitute a taking. See FirstEnglish, 482 U.S. at 314, 107 S. Ct. at 2385. Moreover, it makes no sense to limitPenn 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 oftheir property. Id. at 6. The district court's analysis is flawed and unpersuasive. BothPenn Central and FirstEnglish involved takings challenges to actual governmentregulations: Penn Central to a municipal law restricting development ofhistoric landmarks, see Penn Central, 438 U.S. at 116, and First English to a flood protection ordinance, FirstEnglish, 482 U.S. at 306-07. Betweenthem, the cases speak of"public action," "public programs," or "government action," but each ofthose terms encompass regulation and actions taken pursuant to regulation, leaving no reason to believe that the Court was, in dicta, speaking ofsomething otherthan regulation. NeitherPenn Central norFirstEnglish discusses at all whether aPenn Centralregulatory 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 aPenn Central regulatory taking claim where there was no regulation. The businesses harmed by the 20No. 33684-1-111 Tapio Investment Company

### I. v. State
transit authority's construction in Mekuria failed to plead a physical taking, which is what they had actually suffered. Because ofthat shortcoming in the pleading, the district court concludedthatto 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 prohibitingprivate uses ...makes it inappropriate to treat cases involvingphysical takings as controlling precedents for the evaluation ofa claim that there has been a 'regulatory taking,' and vice versa." TahoeSierraPres. Councilv. 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 ofownership rights, "a court must interpret the word 'taken[,]'" and identified only two senses in which property is "taken": When the government condemns orphysicallyappropriates the property, the fact ofa 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 ofa taking is not self-evident, and the analysis is more complex. Id. at 322, n.17 (emphasis added).

21No. 33684-1-111 Tapio Investment CompanyI. v. State Any number ofbusinesses in the vicinity ofthe 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 notphysically touched their property or legally restricted its use. It is well settled that such harm is not compensable in an inverse condemnationproceeding. 9 Andjustbecause aportion ofTapio'sproperty is expectedto 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 ofuse 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 damagedprivate 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 adjacentproperty); Rains v. Dep'tof Fisheries, 89 Wn.2d 740,575 P.2d 1057 (1978) (State's denial of permitto rechannel creekbed that later overflowed and damaged plaintiffsproperty was not a taking);Ackerman v. Port of Seattle, 55 Wn.2d 400, 348 P.2d 664 (1960), overruled on othergrounds byHighline 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 thatpreexisted plaintiffsproperty ownership); Pruittv. 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 ofadjacent 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 ofproperty value, the extent ofwhich presented a factual issue); LincolnLoan Co. v. State, 274 Or. 49, 51,545 P.2d 105, 107 (1976) (complaint alleged thatthe dismantling ofdwellings in the surrounding properties created noise, dust and confusion) and cfHall v. State, 355 Or. 503,516,326 P.3d 1165 (2014) ("[N]othing in LincolnLoan suggests that, in the absence ofaphysical occupation or invasion ofaproperty right, a government action that causes only a reduction in the value ofproperty qualifies as a taking."). 22No. 33684-1-III Tapio Investment Company

### I. v. State respect. See Campbell v. UnitedStates, 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 ofhis property but not for the diminution ofthe value ofhis remaining property attributable to government's acquisition ofneighboring property and construction oflarge industrial plant); Cent. PugetSoundReg'! TransitAuth. v. Heirs &Devisees of Eastey, 135 Wn. App. 446, 458, 144 P.3d 322 (2006) (damage to Easteyproperty caused by a pockettrack
on nearby land does not flow from the taking ofa narrow strip ofEastey land, but from Transit's legal use ofother land, and the damage to Eastey was no differentthan the damage (ifany) to the rest ofthe neighborhood). 10 This settled takings law also advances public interests, as recognized in a Texas decision cited by the Department: Construction ofpublic-works projects would be severely impeded ifthe government could incur inverse-condemnation liability merely by announcing plans to condemnproperty in the future. Such a rule would encourage the governmentto maintain the secrecy ofproposedprojects as long as possible, hindering public debate and increasing waste and inefficiency
.... After announcing a project, the government would be underpressure to acquire the needed property as quickly as possible to \ . avoid or minimize liability. This likewise would limitpublic input, and

10 It is well settled that whenproperty 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 whichthe 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 ifthe freeway projecthad never occurred. 23No. 33684-1-111 Tapio Investment Company

### I. v. State
forestall any meaningful review ofthe project's environmental consequences. The government also would be reluctant topublicly suggest alternative locations, for fear that it might incur inverse condemnation liability to multiple landowners arising out ofa singleproposedproject.
...

. . .The necessary review time between public announcement and acquisition ofproperty for a particularproject will depend on many factors unique to theproject, including the projected cost, the number offeasible alternatives, the potential environmental impact, and the extent offederal involvement.
... Ifthe government were subjectto liability for "unreasonable" delay
... officials would be pressuredto expedite property acquisition to avoid immediate liability to a particular landowner, regardless ofthe long-term social costs. Public policy dictates that the government be free to make this type ofplanning decision in the public interest, withoutthreat ofcivil liability to a particular landowner. Westgate, Ltd. v. State, 843 S.W.2d 448, 453-54 (Tex. 1992) (citations omitted); see Br. ofResp. at 34-35. The Department's "actions" have nottriggered application ofPenn Central balancing. Ill. The trial courtdidnoterr 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 "takingby oppressive preacquisition conduct" claim at oral argument, however, we address the assignment oferror. Tapio offered exhibit 35 during Mr. Stejer's re-direct testimony. The exhibit contained one day's worth ofan e-mail exchange among Department employees in

24

### No. 33684-1-111 Tapio Investment Company

### I. v. State September and October of2006. The subject matter was whetherthe Department, as landlord, shouldhave reduced the rent ofa commercial building onMarket Street in orderto have continued occupancy until project construction reachedthat area. Tapio contends that a passage inthe e-mail demonstrates Department officials knewthat acquiring and demolishingproperties 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 whetherto acquire the Tapio Center: it involved a differentproperty 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 withoutproperfoundation as to relevance. The trial court sustained the objection, ruling itwas notyet apparent that exhibit 

### 35 proved anything andthat Mr. Stejerwas notthe appropriate person to testify about its contents. The court said ifthe exhibitwas to come in at all, it would have to be through

11 The allegedly relevantpassage states: We were figuring about 5 years before constructionwas slated for this area. So, in another 3 years we will have purchased more ofthe surroundingproperties, creating an even more blighted or depressed commercial area along Market Street. We will also be 3 years closerto construction, which makes it an evenriskier venture for any otherpotential tenant if[ourlessee] is gone. Ex. 

### 35. 25No. 33684-1-111 Tapio Investment Company

### I. v. State

someone like Mr. Golden, who was a party to the e-mail exchange. When testimony resumed, Tapio's lawyer elicited Mr. Stejer's testimony thathe had selected October 2006 as the taking date because the Departmentwas "underthe full knowledge that when they skip ahead and acquire property out ofsequence from where they are actually doing construction
...that their acquisition would create blight, and
...thatblightwould reduce rents, increase vacancies, and ultimately affectthe fair marketvalue." RP at 914- 15. It offered the exhibit again following that testimony, and the court again sustained the Department's objection. Tapio did not attemptto offerthe exhibitthrough 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 hadbeen authenticated through notice in accordance with ER 904. But authenticity was not at issue. The trial court declined to admitthe exhibit because, as argued bythe Department, Tapio did not

26No. 33684-1-111 Tapio Investment Company

### I. v. State
establish that Mr. Stejerhad personal knowledge ofthe e-mail's contents sufficientto establish its relevance. The proponent ofevidence 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 sufficientto support a finding that [he] has personal knowledge of the matter." ER602. The trial court did not abuse its discretion in denying admission through Mr. Stejer. He might ormight not have been right about what amounted to his speculation thatthe e-mail reflected knowledge that applied to Tapio's situation. The court reasonably required Tapio to call a witness who couldprovide 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 oferror is that the trial court erred by denying its motion to reopen, in orderto call Mr. Golden and reoffer exhibit 35. Reopening a cause for additional evidence rests within the discretion ofthe 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

27

### No. 33684-1-111 Tapio Investment Company

### I. v. State
re-call Mr. Golden for thatpurpose despite having the opportunity to do so. That is not
an abuse ofdiscretion. Affirmed. 

# ?J~tv~,~ Siddoway, J. WE CONCUR:

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