Case Name: Sintra, Inc., et al., Respondents, v. The City of Seattle, et al., Appellants
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1997-04-17
Citations: 131 Wash. 2d 640
Docket Number: No. 62304-0
Parties: Sintra, Inc., et al., Respondents, v. The City of Seattle, et al., Appellants.
Judges: 
Reporter: Washington Reports
Volume: 131
Pages: 640–705

Head Matter:
[No. 62304-0.
En Banc.]
Argued October 26, 1995.
Decided April 17, 1997.
Sintra, Inc., et al., Respondents, v. The City of Seattle, et al., Appellants.
Mark H. Sidran, City Attorney, and Robert C. Williams, Assistant, for appellants.
Richard B. Sanders, for respondents.

Opinion:
Johnson, J.
For a second time, we are asked to review a dispute between Sintra, Inc., and the City of Seattle involving the enforcement of Seattle's former Housing Preservation Ordinance (Ordinance). In Sintra, Inc. v. City of Seattle, 119 Wn.2d 1, 829 P.2d 765 (1992) (Sintra I), we held enforcement of the Ordinance violated substantive due process as unduly oppressive and remanded to the trial court to resolve questions of fact, including whether a regulatory taking had occurred, and, if so, the proper amount of compensation. We also remanded for the trial court to determine whether Sintra was entitled to money damages under 42 U.S.C. § 1983 for the substantive due process violation. The trial court resolved a number of issues on summary judgment, but sent the regulatory takings issue and the § 1983 claim for money damages for the City's conduct after July 15, 1986 to the jury. Following a month-long trial, the jury found a taking had occurred for which it awarded Sintra $47,809 compensation. The jury denied Sintra's § 1983 claim for money damages on the basis the City's unconstitutional conduct did not proximately cause any harm to Sintra. The trial court awarded interest on the compensation award in the amount of $60,918.73, having decided not to submit the issue to the jury. The trial court also awarded attorney's fees. Now we are asked, among other things, to determine whether the trial court properly awarded interest on the compensation award and whether Sintra had to prove invidious or irrational conduct on the part of the City as part of a 42 U.S.C. § 1983 action to recover money damages. We hold review of the invidious or irrational conduct requirement is not proper under the law of the case doctrine. Although the trial court correctly found interest was awardable as part of just compensation, the court erred in allowing compound, as opposed to simple, interest. We also find error in the trial court's award of attorney's fees under § 1988. Therefore, we reverse and remand to the trial court to determine the proper amount of interest and attorney's fees in accordance with this opinion. Finding no error with the remaining issues, we affirm the trial court's rulings regarding the punitive damages jury instruction, the City's qualified immunity argument, and Sintra's motion for a new trial.
FACTS
The Ordinance was first enacted in 1980 with the stated purpose of mitigating the loss of low income housing in Seattle and reducing the hardships experienced by displaced tenants. It accomplished this purpose by requiring developers to either replace any low income housing they destroyed or pay a fee into the housing replacement fund. It also required developers to pay tenant relocation fees. In 1983, the Superior Court for King County invalidated the 1980 Ordinance as an invalid tax under RCW 82.02.020. In response, in 1985 the City enacted the Ordinance at issue in this case, which differs only slightly from the original. See San Telmo Assocs. v. City of Seattle, 108 Wn.2d 20, 21-22, 735 P.2d 673 (1987). We invalidated the housing replacement provisions of the Ordinance as an unauthorized tax in San Telmo Assocs., and, in R/ L Assocs. v. City of Seattle, 113 Wn.2d 402, 780 P.2d 838 (1989), we invalidated the tenant relocation provisions for the same reason.
Before our decisions in San Telmo Assocs. and Rl L As-socs., Sintra purchased the Larned Hotel located near downtown Seattle. Sintra agreed to pay $640,000 cash for the property, which was dilapidated but home to a few low income tenants. Sintra planned to relocate the tenants and convert the building into a bed and breakfast with retail space on the street level. Before making the offer, Mr. Hamack discussed the Ordinance with the sellers, but it was believed the Larned would be exempted from the Ordinance as a hotel.
Sintra ran into trouble almost immediately after buying the Larned. Unable to obtain financing, Sintra renegotiated the terms of the sale, agreeing to pay an additional $30,000 for the property, $120,000 down, and the remainder in a series of balloon payments over the course of three years. Then, in the first part of 1985, Sintra discovered an adult entertainment business had purchased the abutting building and had been issued a permit by the City. Believing this made the bed and breakfast unfeasible, Sintra put the Larned back on the market and actively solicited development partners. Later, in a claim against the City, Sintra stated the issuance of a permit to the adult entertainment business rendered the Larned "valueless for its intended use and economically unviable for any other use." Clerk's Papers at 11.
By August 1985, a developer had expressed some interest in working with Sintra to convert the Larned into a ministorage warehouse, but was unable to finance the project. Unable to obtain financing ór find a buyer, Sintra missed the first $30,000 balloon payment due in March 1985. The sellers eventually declared default and accelerated the note, after Sintra failed to make several more payments.
By the time the sellers had accelerated the note, Sintra had determined the only economically viable use of the Larned was as a ministorage. Thus, Sintra applied for a demolition permit from the City in November 1985. Under the Ordinance, the City assessed a $219,840 demolition fee. Sintra immediately applied for administrative relief from the Ordinance. From the time Sintra applied for administrative relief in November 1985 until the City issued the demolition permit in June 1987, Sintra made repeated requests for relief. Despite Sintra's requests, the City initially denied administrative relief, concluding "the proposed mini-warehouse project [was] not feasible regardless of the housing replacement requirement . . . ." Pis.' Ex. 238 at 1.
Several months after the Superior Court invalidated the Ordinance on July 15, 1986 in the case brought by San Telmo Associates, the City granted Sintra partial administrative relief by waiving the Ordinance fee for development of the ministorage, but no other uses. The City stopped enforcing the Ordinance against Sintra entirely when this court affirmed the Superior Court in San Telmo Assocs. The City issued a demolition permit on April 24, 1987, and a master use permit on June 22, 1987. Had Sin-tra obtained the permit by the summer of 1986, it was confident it would have been able to go ahead with the ministorage project. But, by April 1987, Sintra thought the market opportunity to develop the ministorage had been lost.
In the middle of all of this, in October 1986, the sellers sued Sintra. After accelerating the note, they had reluctantly concluded Sintra could not develop the property because of the Ordinance and other problems. Sintra counterclaimed for rescission of the sales contract, alleging the sellers' agent misrepresented the value and development potential of the Larned. Sintra eventually prevailed on its counterclaim and obtained rescission of the contract and return of its purchase money.
Based on the City's actions, Sintra sued the City and a number of its employees in 1988. It claimed deprivation of substantive due process, an unconstitutional taking, and interference with business expectancy. The trial court granted summary judgment in favor of the City on Sin-tra's takings and substantive due process claims. This court reversed. We found the Ordinance violated substantive due process as unduly oppressive. We remanded for the trial court to resolve a number of issues, including whether the City's conduct was invidious or irrational, whether a taking had in fact occurred and, if so, the time period of the taking and appropriate compensation. See Sintra I, 119 Wn.2d at 29.
On remand, the trial court dealt with most of the claims against the City employees on summary judgment. The trial court also determined on summary judgment that the City's actions taken after July 15,1986 were irrational, but left for the jury to determine whether the actions proximately caused the alleged injury. In addition, the trial court found the City (not the employee Defendants) violated Sintra's substantive due process rights by enforcing the Ordinance before July 15, 1986, but denied money damages, finding the City had not acted irrationally as a matter of law in enforcing the Ordinance. The remaining claims, including the issues of § 1983 damages for the City's post-July 15,1986 conduct and the taking, proceeded to jury trial. The City made a CR 68 offer of judgment for $75,000 plus costs and attorney's fees several months before trial.
At trial, Sintra presented several theories of recovery. Sintra argued the City was liable for the income it would have earned from a ministorage during the entire useful life of the ministorage, estimated to be 20 years. In addition, it asked for emotional damages, lost personal income, and lost income from other investments. Sintra's expert, Robert Moss, calculated the income producing potential of the Larned converted to a ministorage as $143,428 per year or $11,952 per month, assuming a 90 percent occupancy rate. Assuming the taking lasted 20 months, he testified Sintra lost $239,047 in net operating income during this time plus several hundred thousand dollars of lost income during the useful life of the project. In total, Moss estimated Sintra's loss, including emotional and other damages, at more than $2 million. In answers to interrogatories, Sintra originally claimed losses of over $100 million.
One of the City's experts, University of Washington Professor Richard Zerbe, testified enforcement of the Ordinance caused Sintra no economic loss. He based his opinion on the fact Sintra knew of the Ordinance when it purchased the Larned. He also testified the project was "doomed" from the start because Sintra paid too much for the Larned. Vern Kelling, a commercial real estate appraiser, testified for the City that the highest and best use for the Larned property during the 1984-1989 period was low income housing. William Partin, CPA, another witness for the City, criticized Moss's methodology and opined Sintra suffered no lost profits because of the Ordinance.
In accordance with its rulings on summary judgment, the trial court instructed the jury that its consideration of the § 1983 claim was limited to determining whether the City's conduct after July 15, 1986 proximately caused Sin-tra damages. As to the taking, the trial court instructed the jury that if a temporary taking had been proven, Sin-tra was entitled to the leasehold value of the property for the period during which the Ordinance was wrongfully enforced against it. Further, the trial court instructed the jury that it could award punitive damages on the § 1983 claim.
Sintra proposed a jury instruction on interest that stated a property owner is entitled to interest sufficient to ensure that he or she is placed in as good a position pecuniarily as he or she would have occupied had the payment coincided with the taking. The trial court did not give the proposed instruction and reserved this issue for post-trial consideration. Neither party excepted to the trial court's decision not to submit the interest issue to the jury.
The jury returned a special verdict in which it found enforcement of the Ordinance after July 15, 1986 did not cause injury to Sintra. Thus, it awarded Sintra only nominal damages on the § 1983 claim. The jury did not award punitive damages. As to the takings claim, the jury found a taking had occurred and awarded Sintra compensation of $47,809, but did not specify the time period of the taking. Finally, the jury found the City did not wrongfully interfere with a business expectancy.
Following the verdict, Sintra moved for a new trial or an order correcting the verdict, arguing the taking award was inadequate in light of the evidence. Sintra also submitted memoranda on prejudgment interest and attorney's fees. It claimed $362,024 in prejudgment interest.
The trial court denied Sintra's new trial motion on July 22, 1994. As to the takings award, the trial court stated: 'T am fully satisfied that it would invade the province of the jury for the court... to set aside the jury's verdict as the amount of just compensation . . . ." Oral Ruling (July 22, 1994) at 4.
However, the trial court added $60,918.73 of interest to the judgment. It awarded 12 percent interest on the compensation award compounded annually. The trial court also awarded $196,381.87 in attorney's fees and costs of $35,584.20.
The City appealed to the Court of Appeals, Division One, challenging the interest and attorney's fees. Sintra cross-appealed directly to this court, challenging the trial court's dismissal of its claim for damages arising from the enforcement of the Ordinance before July 15, 1986. Sintra also sought review of the jury's failure to award punitive damages and the trial court's denial of Sintra's motion for a new trial on the taking award. Pursuant to RAP 5.3(g), we treated both appeals as filed in this court.
DAMAGES UNDER 42 U.S.C. § 1983
In Sintra, Inc. v. City of Seattle, 119 Wn.2d 1, 829 P.2d 765 (1992) (Sintra I), we found the Ordinance violated substantive due process as unduly oppressive and remanded "for a determination of whether the City's conduct was irrational or invidious." Sintra I, 119 Wn.2d at 29. We explained that when money damages are sought as a remedy under 42 U.S.C. § 1983, as opposed to a judgment invalidating the Ordinance, the conduct that violates substantive due process must be invidious or irrational. See Sintra I, 119 Wn.2d at 23 (citing R/L Assocs. v. City of Seattle, 113 Wn.2d 402, 412, 780 P.2d 838 (1989)).
Following this decision, the trial court found as a matter of law the City's conduct before July 15, 1986 was not irrational. Thus, the trial court ruled Sintra could not recover money damages for any harm caused by the City's conduct before July 15, 1986. In this appeal, we are asked to revisit our decision in Sintra I and hold that § 1983 provides a damages remedy for substantive due process violations regardless of whether the act violating substantive due process is invidious or irrational. Resp'ts Br. at 15. Our decision in Sintra I constitutes the law of the case. RAP 2.5(c)(2) allows an appellate court to "review the propriety of an earlier decision of the appellate court in the same case and, where justice would best be served, decide the case on the basis of the appellate court's opinion of the law at the time of the later review." We have interpreted this rule to allow review of a previous decision when the decision is erroneous and when justice would best be served by review. See First Small Bus. Inv. Co. v. Intercapital Corp., 108 Wn.2d 324, 332-33, 738 P.2d 263 (1987). We hold that Sintra has not established our prior decision was erroneous or shown sufficient prejudice to overcome the law of the case doctrine.
Section 1983 was designed to afford plaintiffs a cause of action for constitutional violations on the part of local government bodies and other state officials, and is essentially a constitutional tort. See Rogin v. Bensalem Township, 616 F.2d 680, 686-87 (3d Cir. 1980). Because this is a federal cause of action, we are bound by the federal interpretation of § 1983. While numerous state and federal cases address substantive due process in the context of land use permitting decisions, few reported cases address the arbitrary and capricious substantive due process standard in relation to money damages under § 1983.
In Sheerr v. Township of Evesham, 184 N.J. Super. 11, 445 A.2d 46 (Law Div. 1982), the New Jersey Supreme Court discussed the availability of damages under § 1983 for deprivation of substantive due process as a result of excessive regulation. The court found Fourteenth Amendment substantive due process suits for zoning violations could be maintained under § 1983, but it expressed the need for some limiting principle.
This question, in a zoning context, is very troublesome. . . . A right to collect damages under the Civil Rights Act for an unreasonable and unfavorable regulation, regardless of the amount of loss, would have vast economic consequences for every governmental body exercising regulatory powers. Its stifling effect upon innovative land use planning is obvious. . . .
. . . Some balancing of public and private interests must take place when remedies for invalid zoning legislation are addressed; if private remedies impose too heavy a burden upon the public, everyone loses. Some restriction of remedies is necessary.
Damages are not the only remedy provided by the Civil Rights Act; injunctive relief and declaratory judgments are available. . . . Nevertheless, damages may be the proper remedy in a given case, subject to limiting criteria.
Sheerr, 445 A.2d at 71 (citations omitted). Because the court determined a regulatory taking had occurred under the Fifth Amendment, it did not reach the issue of the appropriate limiting criteria for Fourteenth Amendment claims.
Sheerr recognizes that 42 U.S.C. § 1983 provides injunc-tive, declaratory, or damages remedies. Section 1983 states: the person "shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress." (Emphasis added.) Damages have been rejected as an appropriate form of relief in some § 1983 actions. See, e.g., Jacobson v. Tahoe Reg'l Planning Agency, 474 F. Supp. 901, 903 (D. Nev. 1979).
Our prior land use decisions addressing money damages clearly support the application of limiting criteria. See, e.g., Presbytery of Seattle v. King County, 114 Wn.2d 320, 332, 787 P.2d 907 (1990), and Orion Corp. v. State, 109 Wn.2d 621, 649, 747 P.2d 1062 (1987), where we recognized strict financial liability would intimidate legislative bodies from making difficult, but necessary, choices. In Presbytery, we stated the remedy for a land use regulation that violates substantive due process is invalidation: "[n]o compensation (which properly belongs with a "taking" analysis) is warranted in the face of a due process violation." Presbytery, 114 Wn.2d at 332.
In Sintra I, we recognized in some limited circumstances money damages are available and established the limiting criteria as invidious or irrational conduct. Sintra I, 119 Wn.2d at 23. In doing so, we recognized, as we must, this standard originates in federal arbitrary and capricious substantive due process cases. We will not reexamine the propriety of this limiting criteria in this case in view of the fact Sintra would not have been entitled to money damages under § 1983 for the City's conduct before July 15, 1986 even assuming the City's conduct was invidious or irrational because of the jury's finding regarding proximate cause.
Here, the trial court ruled on summary judgment that the City's conduct after July 15, 1986 was irrational, but its conduct before July 15, 1986 was not. As a result, the only issue related to the § 1983 claim that went to the jury was whether the City's conduct after July 15, 1986 proximately caused harm to Sintra.
The record fully supports the jury's view that the City's conduct after July 15, 1986 did not proximately cause Sin-tra any harm. By Sintra's own admission, the event that rendered the Larned "valueless for its intended use and economically unviable for any other use" occurred in 1985 when Western Amusement purchased the abutting property. In addition, the jury could have found Sintra's inability to attract developers or obtain financing before it applied for a demolition permit was the substantial factor preventing it from deriving income from the Larned. This finding by the jury as to damages after July 15, 1986 resolves any claim for damages for the City's conduct before July 15, 1986 because the same evidence and conduct is present both before and after July 15, 1986. Under these circumstances, Sintra was not prejudiced because it would not have recovered even had the City's conduct before July 15, 1986 been invidious or irrational. Absent prejudice, we will not reexamine this issue. See RAP 2.5(c).
INTEREST AS AN ELEMENT OF JUST COMPENSATION
When private property is taken for public use, our state and federal constitutions require the payment of just compensation. See Wash. Const, art. I, § 16 (amend. 9); U.S. Const, amend. V. Just compensation requires that the property owner be put in the same position monetarily as he or she would have occupied had the property not been taken. It consists of the full equivalent of the value of the property paid contemporaneously with the taking. See Almota Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470, 473-74, 93 S. Ct. 791, 35 L. Ed. 2d 1 (1973); Lange v. State, 86 Wn.2d 585, 589, 547 P.2d 282 (1976); State v. Lacey, 84 Wn.2d 33, 36-37, 524 P.2d 1351 (1974).
In a conventional eminent domain proceeding, property is not taken or damaged until just compensation is paid. But in an inverse condemnation or quick-take action under RCW 8.04.090, property is taken before just compensation is paid. In these cases, we have held that interest is necessary to compensate the property owner for the loss of the use of the monetary value of the taking or damage from the time of the taking until just compensation is paid. See Smithrock Quarry, Inc. v. State, 60 Wn.2d 387, 391, 374 P.2d 168 (1962); see also In re City of Anacortes, 81 Wn.2d 166, 500 P.2d 546 (1972); Consolidated Diking Improvement Dist. 3 v. Davis, 36 Wn. App. 125, 672 P.2d 414 (1983); State v. Hallauer, 28 Wn. App. 453, 624 P.2d 736 (1981). We assume a person who received the money value of his or her property as of the date of the taking has a beneficial use available for these funds. See Hansen v. Rothaus, 107 Wn.2d 468, 473, 730 P.2d 662 (1986). Interest in this context is not an award of prejudgment interest on a liquidated sum in the traditional sense, but is a measure of the rate of return on the property owner's money had there been no delay in payment. See United States v. Blankinship, 543 F.2d 1272, 1275 (9th Cir. 1976); State Rds. Comm'n v. G.L. Cornell Co., 85 Md. App. 765, 584 A.2d 1331, 1337 (1991). The Legislature codified these principles in the quick-take provisions of RCW 8.04.090, making the State liable for interest on the difference between what it pays into the court registry and the amount to which the owner is entitled. See RCW 8.04.092.
These rules apply with equal force in temporary regulatory takings cases because a temporary regulatory taking is no different in kind from a permanent taking, in that compensation is required for the same reason it is required when the State takes property through conventional eminent domain or quick-take proceedings. See First English Evangelical Lutheran Church v. County of Los Angeles, 482 U.S. 304, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987); see also In re City of Seattle, 81 Wn.2d 652, 659, 504 P.2d 292 (1972) (requiring interest for period of temporary taking even when the City later abandons its eminent domain proceeding). Because the property owner in a temporary regulatory taking loses the use of the monetary value of the property from the time of the taking until payment is made, interest is usually necessary to place the property owner in the same position he or she would have occupied had the taking not occurred.
RCW 8.28.040, providing for interest in all eminent domain proceedings, appears on its face to apply only to postjudgment interest awards. We have, however, modified this interest rule to apply when interest must commence at an earlier date by virtue of earlier possession. See In re City of Anacortes, 81 Wn.2d at 169. We hold RCW 8.28.040 also applies in regulatory takings actions and should guide the trial court's award of interest unless a party proves by presenting evidence that the statute does not afford just compensation.
The City correctly points out that municipalities are generally immune from prejudgment interest. See Fosbre v. State, 76 Wn.2d 255, 456 P.2d 335 (1969). Here, however, the interest awarded is not prejudgment interest. The interest awarded is part of the damages and is required as part of just compensation. Therefore, we dispense with the City's immunity argument.
The amount of compensation necessary to satisfy the constitutional mandate is a matter for judicial determination. See Lange, 86 Wn.2d at 589; RCW 8.04.092; RCW 8.04.110. This should be determined by a jury "unless a jury be waived, as in other civil cases in courts of record, in the manner prescribed by law." Const, art. I, § 16 (amend. 9); see Chelan County v. Navarre, 38 Wash. 684, 80 P. 845 (1905) (act or omission which would amount to waiver of a jury in an ordinary civil action would amount to waiver in a condemnation proceeding); RCW 8.12.090.
Sintra proposed instruction number 66A, which would have submitted the amount of interest to the jury. It stated:
An owner whose property was taken, damaged or interfered with by the government is also entitled to interest on the damage award sufficient to insure that he is placed in as good a position pecuniarily as he would have occupied if the payment had coincided with the appropriation[ ]
Clerk's Papers at 209. The trial court did not give the jury either of Sintra's proposed instructions on interest, instead reserving the issue for post-trial The City did not except to the trial court's failure to submit the issue to the jury.
After trial, Sintra argued that 12 percent was appropriate, and submitted different calculations based on simple and compound interest, and differing time periods. The City argued it was immune from prejudgment interest, and, contrary to its position on appeal, also submitted motions and briefs on the amount of interest the trial court should award.
The trial court awarded $60,918.73 based on 12 percent compounded interest, stating:
In order to fully and fairly compensate one whose property has been taken by the government, I believe that interest on the compensation award should run from the date of the taking.
Given the uncertainty as to the basis for the calculation made by the jury and the actual period of the taking that they found, I believe that the most reasonable approach is to say that the taking in this case ended upon issuance of the demolition permit in April of 1987; therefore, interest should accrue at the statutory rate from the date of April of 1987 through today. I do believe it is appropriate to have that interest compounded, again in order to achieve full and fair compensation of the claimants.
Oral Ruling (July 22, 1994) at 5.
While the trial judge in this case did not give Sintra's proposed instruction on interest, we are satisfied no reversible error occurred when the trial court awarded interest post-trial. All of the issues triable to the jury were initially submitted to the jury pursuant to Sintra's CR 38 demand. Neither party objected to or excepted to the trial court's action in reserving the interest issue for post-trial. By not objecting or excepting and submitting argument post-trial, both parties agreed to the trial court's manner of handling this issue. In this appeal, the City now argues the trial judge could not award interest without invading the province of the jury. The City's argument comes too late. It cannot now complain of the trial court's decision when it failed to object at the time the trial court decided to handle this issue post-trial. See Nania v. Pacific N.W. Bell Tel. Co., 60 Wn. App. 706, 806 P.2d 787 (1991) (invited error doctrine). Moreover, there was no reversible error because the jury instructions in this case effectively excluded consideration of the time value of money. The jury was instructed to award compen sation on the basis of the leasehold value of the property during the time the Ordinance was enforced. During deliberations the jury asked the trial judge, "[d]oes leasehold value represent gross income or net income after expenses?" He responded "[[leasehold value means the market rental rate for the building during such period as you find a taking to have occurred." Clerk's Papers at 283. While there was trial testimony concerning interest, the jury instructions and conduct of the parties indicate that the jury did not take into account the time value of the delay in payment. Under these particular circumstances, no reversible error occurred. Generally, however, all elements of just compensation should be decided by the same jury unless both parties properly waive jury trial on the interest, and the trial court instructs the jury not to consider the time value of money in its award of compensation.
In awarding compound versus simple interest, however, the trial court erred. Courts, in awarding just compensation, must be guided by equitable principles and the measure of such compensation will vary with the facts. See Lange, 86 Wn.2d at 590. However, the court, in determining the award of interest as part of the award of just compensation, is guided by RCW 8.28.040. The statute applies to eminent domain proceedings and specifically incorporates the interest rate of RCW 19.52.020, which is 12 percent per annum. Because the statute does not specifically provide for the compounding of interest, only simple interest is allowed. See Caruso v. Local Union No. 690, 50 Wn. App. 688, 690-91, 749 P.2d 1304 (1988); Goodwin v. Northwestern Mut. Life Ins. Co., 196 Wash. 391, 83 P.2d 231 (1938). If a party proves by presenting evidence that statutory simple interest does not afford just compensation, the trial court has discretion to award compound interest. Absent such proof, however, a property owner in a temporary regulatory takings case is entitled only to simple interest under RCW 8.28.040 as part of just compensation. In this case, where no evidence was offered from which the trial court could base an award of compound interest, we hold the trial court is guided by and should follow RCW 8.28.040 in calculating interest. We reverse and remand for the trial court to determine the proper interest award in accordance with this opinion.
JURY INSTRUCTION ON PUNITIVE DAMAGES
Sintra argues the trial court improperly instructed the jury on punitive damages by not setting out the factors in Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991), in the jury instruction, and erred by excluding evidence it offered to support an award of punitive damages. Because municipalities are immune from punitive damages under 42 U.S.C. § 1983, City of Newport v. Fact Concerts, Inc., 453 U.S. 247, 101 S. Ct. 2748, 69 L. Ed. 2d 616 (1981), the only issue is whether the trial court erred with respect to the individual Defendants (Holly Miller and Ovid Thompson) for their post-July 15, 1986 conduct. Assuming, without deciding, punitive damages are recoverable absent actual damages, we find no error regarding the punitive damages instruction. See Mattison v. Dallas Carrier Corp., 947 F.2d 95, 100 (4th Cir. 1991) (cannot recover punitive damages in the absence of actual damages).
Here, the trial court instructed the jury that it could award punitive damages on the § 1983 claim "only if you find [by a preponderance of the evidence] that the conduct of an individual defendant was malicious or taken in reckless disregard of plaintiffs' rights." Clerk's Papers at 278. It also instructed the jury that "[p]unitive damages, if any, should be in an amount sufficient to fulfill their purposes of punishing reprehensible conduct and deterring the defendants and others from similar conduct." Clerk's Papers at 278.
Instructions are sufficient if they permit a party to argue his or her theory of the case, are not misleading, and, when read as a whole, properly inform the jury on the applicable law. See Douglas v. Freeman, 117 Wn.2d 242, 256-57, 814 P.2d 1160 (1991). A "jury may award punitive damages under section 1983 either when a defendant's conduct was driven by evil motive or intent, or when it involved a reckless or callous indifference to the constitutional rights of others." Davis v. Mason County, 927 F.2d 1473, 1485 (9th Cir. 1991) (citing Smith v. Wade, 461 U.S. 30, 56, 103 S. Ct. 1625, 75 L. Ed. 2d 632 (1983)). Haslip did not say that the jury must be instructed on certain factors; rather it said instructions on punitive damages should be fashioned to describe the proper purposes of punitive damages, so that the jury understands punitive damages are not to compensate the plaintiff, but to punish the defendant and to deter the defendant and others from such conduct in the future. See Morgan v. Woessner, 997 F.2d 1244, 1256 (9th Cir. 1993).
In this case, the trial court's instructions focused upon the discretionary nature of the award, the need to punish the Defendant, and the need to deter repetition of such conduct. The instructions adequately allowed each party to argue its theory of the case. See Morgan, 997 F.2d at 1256. As such, there was no error.
Similarly, we find no evidentiary errors. A trial court has broad discretion in ruling on evidentiary matters and will not be overturned absent manifest abuse of discretion. See Industrial Indem. Co. v. Kallevig, 114 Wn.2d 907, 926, 792 P.2d 520, 7 A.L.R.5th 1014 (1990). Sintra cites trial testimony related to this issue but fails to present authority and argument. Absent argument and authority, review is not proper. See In re F.D. Processing, Inc., 119 Wn.2d 452, 455, 832 P.2d 1303 (1992).
ATTORNEY'S FEES
The trial court found Sintra achieved full success on the State takings claim and partial success on the § 1983 claim, and awarded Sintra $196,381.87 in attorney's fees under RCW 8.25.075 and 42 U.S.C. § 1988. The City challenges the award of attorney's fees on three grounds. First, it argues the final judgment did not exceed the offer of judgment by 10 percent absent the prejudgment interest such that Sintra could not recover attorney's fees pursuant to RCW 8.25.075(3) or under 42 U.S.C. § 1988. Second, the City argues Sintra is not entitled to attorney's fees on the § 1983 claim because Sintra recovered only $3 in nominal damages on the § 1983 claim. Finally, the City challenges the hourly fee award to Sintra's lead attorney and the award of attorney's fees to Mr. Hamack. We award interest as part of the required just compensation and find error only in the trial court's award of compound, as opposed to simple, in(terest. The final judgment, including the award of simple interest, exceeds the City's offer of judgment and the RCW 8.25.075 limit. Thus, we only discuss the City's second and third arguments.
The City argues Sintra is not entitled to attorney's fees on the § 1983 claim incurred after the offer of judgment because it recovered only $3 in nominal damages on the § 1983 claim. We agree. Under 42 U.S.C. § 1988(b), the court may award a prevailing party reasonable attorney's fees as part of the costs. The actual issue on review is whether the trial court abused its discretion in awarding the fees. See Progressive Animal Welfare Soc'y v. University of Wash., 114 Wn.2d 677, 688-89, 790 P.2d 604 (1990). The trial court abuses its discretion when the exercise of its discretion is manifestly unreasonable or based on untenable grounds or reasons. See Progressive, 114 Wn.2d at 688-89.
To qualify for attorney's fees under § 1988, a plaintiff must be a "prevailing party." "[A] plaintiff 'prevails' when actual relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff." Farrar v. Hobby, 506 U.S. 103, 111-12, 113 S. Ct. 566, 121 L. Ed. 2d 494 (1992). A plaintiff winning nominal damages is a prevailing party under § 1988. See Farrar, 506 U.S. at 112. Because Sintra won $3 of nominal damages on its § 1983 claim, it is a prevailing party for purposes of a § 1988 attorney's fee award.
However, a prevailing party is not always entitled to attorney's fees. The Supreme Court has stated: "In some circumstances, even a plaintiff who formally 'prevails' under § 1988 should receive no attorney's fees at all. A plaintiff who seeks compensatory damages but receives no more than nominal damages is often such a prevailing party." Farrar, 506 U.S. at 115. In Farrar, the petitioner sought damages of $17 million, and was awarded only $1 in nominal damages. The Court concluded:
As we have held, a nominal damages award does render a plaintiff a prevailing party by allowing him to vindicate his "absolute" right to procedural due process through enforcement of a judgment against the defendant. In a civil rights suit for damages, however, the awarding of nominal damages also highlights the plaintiff's failure to prove actual, compen-sable injury. Whatever the constitutional basis for substantive liability, damages awarded in a § 1983 action "must always be designed 'to compensate injuries caused by the [constitutional] deprivation' ". When a plaintiff recovers only nominal damages because of his failure to prove an essential element of his claim for monetary relief, the only reasonable fee is usually no fee at all.
Farrar, 506 U.S. at 115 (alteration in original) (citations and italics omitted). The Farrar Court found error in the district court's award of attorney's fees and reversed the award. See Farrar, 506 U.S. at 116.
As the Supreme Court explained: "Where recovery of private damages is the purpose of . . . civil rights litigation, a district court, in fixing fees, is obligated to give primary consideration to the amount of damages awarded as compared to the amount sought." Farrar, 506 U.S. at 114 (quoting Riverside v. Rivera, 477 U.S. 561, 585, 106 S. Ct. 2686, 91 L. Ed. 2d 466 (1986) (Powell, J., concurring)). Here, Sintra recovered only $3 in nominal damages after seeking millions. The trial court, however, awarded $196,381.87 in attorney's fees. Clerk's Papers at 771. Although the trial court stated in its Oral Rulings of July 22, 1994 that the central issue to be addressed in its consideration of an award of attorney's fees under § 1988 was the degree of success obtained by Plaintiffs, the court did not consider this a primary factor in its findings when entering an award. Rather, the court considered other factors, such as the difficulty of the case, the undesirability of the case, and the level of skill necessary to pursue the case properly, and found these factors to be in favor of the Plaintiffs. The court then calculated a fee based on Plaintiffs' success and merely adjusted that fee award downward to compensate for a lack of success on the intentional interference claim and the damages portions of the § 1983 claim. This was error. Recovery of private damages was the primary purpose of Sintra's § 1983 action. Under Farrar, when awarding attorney's fees under § 1988, the trial court should have given primary consideration to the amount of damages Sintra sought as compared to the $3 nominal damages it was awarded. The trial court did not do so. Further, in segregating the claims presented in this case, the court stated that 60 percent of the case concerned § 1983 claims, but included within that percentage the State claim under RCW 64.40. Clerk's Papers at 770.
The trial court abused its discretion. We rule, under Farrar, Sintra is not entitled to an attorney's fee award for its § 1983 claim. Sintra may, however, recover attorney's fees under RCW 8.25.075 for its State takings claim. We reverse the award of attorney's fees under § 1988 and remand for proper determination of attorney's fees for the portion of this case that constituted the State takings claim.
The City also challenges the trial court's determination of Plaintiffs' attorney's hourly fees. A trial court has broad discretion in determining the amount of attorney's fees to be awarded, so long as that award is reasonable and based on tenable grounds. See Progressive, 114 Wn.2d at 688-89. The reasonableness of an award of attorney's fees is reviewed under the abuse of discretion standard. See Progressive, 114 Wn.2d at 688; see also Iqbal v. Golf Course Superintendents Ass'n, 900 F.2d 227, 228 (10th Cir. 1990) (abuse of discretion standard applies in civil rights actions). Here, the hourly fee award to Sintra's lead attorney was reasonable in light of the evidence submitted and based on tenable grounds. In addition, Mr. Hamack was entitled to attorney's fees. See Leen v. De-mopolis, 62 Wn. App. 473, 815 P.2d 269 (1991).
QUALIFIED IMMUNITY
Sintra argues the trial court erred by dismissing its claims against the City's employees on summary judgment on the basis of qualified immunity for the employee's conduct before July 15, 1986.
In Sintra I, this court remanded for the trial court to determine as a matter of law whether the individual Defendants were entitled to qualified immunity because they acted in an objectively reasonable way. See Sintra I, 119 Wn.2d at 26. Under § 1983, "[glovernment officials performing discretionary functions are shielded from all liability for civil damages if their 'conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.' " Sintra I, 119 Wn.2d at 25 (quoting Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S. Ct. 2727, 73 L. Ed. 2d 396 (1982)).
Earlier in this opinion we held we would not reexamine the propriety of the invidious or irrational limiting criteria in view of the fact Sintra would not have been entitled to relief under § 1983 for the City's conduct before July 15, 1986, even assuming the City's unconstitutional conduct was invidious or irrational because of lack of proximate cause. Here too, even if the trial court erred with regard to the individual Defendants, the error was harmless because the jury implicitly held the conduct of the City before July 15, 1986 did not cause Sintra any harm.
MOTION FOR A NEW TRIAL
Finally, Sintra argues the trial court erred by denying its post-trial motion to correct the verdict for a total principal compensation of $239,047 plus interest. Sintra argues that it is undisputed the taking began on the date of its change of use permit application (October 1985) and ended not before April 1987, when the City issued the change of use permit, that is, stopped enforcing the Ordinance. Reasoning the jury adopted Mr. Moss's $11,952 estimated monthly income as the leasehold rate, Sintra concludes the jury miscalculated the compensation award, and its error can be corrected by a simple mathematical calculation.
When exact computation is possible, the court may correct the verdict instead of granting a new trial in an action "upon a contract, or for the injury or detention of property." CR 59(a)(6). Although, Sintra accurately describes the testimony of Mr. Moss, the trial court had no means of determining exactly how the jury determined the amount of computation or whether the jury equated Mr. Moss's income calculations with the leasehold value of the property. Under these circumstances, the trial court properly found it could not correct the verdict without invading the province of the jury.
ATTORNEY'S FEES ON APPEAL
Under RAP 18.1 Sintra is entitled to an award of reasonable attorney's fees in this court. Claims are separated and attorney's fees segregated between successful and unsuccessful claims that allow for the award of fees. See Kastanis v. Educational Employees Credit Union, 122 Wn.2d 483, 501-02, 859 P.2d 26, 865 P.2d 507 (1993). Sintra has prevailed on its takings claim and has also prevailed on its attorney's fee award on the takings claim. We award attorney's fees for the successful portion of Sintra's claims on appeal in an amount to be determined by the Commissioner.
CONCLUSION
We hold review of the invidious or irrational standard is not proper under the law of the case doctrine. We reverse the trial court's awards of interest and attorney's fees and remand for new determinations in accordance with, this opinion. We affirm the trial court's rulings regarding the punitive damages jury instructions, the City's qualified immunity argument, and Sintra's motion for a new trial.
Dolliver, Smith, Guy, Madsen, and Alexander, JJ., concur.
Sintra's shareholders are Plaintiffs Keith and Patty Hamack and Arthur and Susan Stanley.
he Ordinance provided, in part: "The Director may provide full or partial relief from the housing replacement requirement, if the owner establishes with clear and convincing proof that:
"1. The literal interpretation and strict application of the housing replacement requirement of this Ordinance would prevent the owner from making profitable use of the property. 'Profitable use of the property' shall not be the highest, best, or expectant use of the property but any use which may lawfully and reasonably develop the property . . . ." Seattle City Ordinance 112342, § 13.
In a typical letter to the City, Sintra wrote: "[W]e are financially drained and are incurring an additional debt of over $6,000.00 per month. Our position is extremely precarious and each additional day of delay is an additional missed remaining opportunity to avoid financial disaster for our two families." Pis.' Ex. 227.
The trial court dismissed all claims against the individual Defendants for actions taken prior to July 15,1986 on the basis of qualified immunity. It granted summary judgment in favor of Sintra and against Defendants Holly Miller and Ovid Thompson for violation of 42 U.S.C. § 1983 after July 15, 1986.
Specifically, Sintra argued the jury had underestimated the period of the taking: "Correcting the verdict to the beginning and end of the taking is nothing more than a mathematical calculation. . . .
"The jury accepted Moss's testimony as Sintra's recovery for the highest and best use as $11,952 per month. . . . For the entire period this yields compensation of $239,047." Clerk's Papers at 295.
Sintra has not assigned error to the trial court's ruling that the City did not act irrationally as a matter of law before July 15, 1986.
Sintra I cited R/L Assocs. and Silverman v. Barry, 845 F.2d 1072 (D.C. Cir. 1988). See Sintra 1,119 Wn.2d at 23. R/L Assocs. relied on Harding v. County of Door, 870 F.2d 430 (7th Cir. 1989), and Coniston Corp. v. Hoffman Estates, 844 F.2d 461 (7th Cir. 1988). See R/L Assocs., 113 Wn.2d at 412. At issue in these federal cases was whether local government decisions to withhold building permits were arbitrary and capricious such that plaintiifs were deprived of substantive due process.
Clerk's Papers at 11.
Under this procedure, the State takes immediate possession of the owner's property with estimated just compensation placed in the court registry until actual compensation is ascertained by a jury. See RCW 8.04.090, .092.
Sintra also offered an instruction telling the jury to award 12 percent interest.
The colloquy went as follows:
"[Sintra] My instruction No. 67 related to interest on a prejudgment interest particularly on takings. I understand that the Court is going to add premium interest on the takings award.
"MS. WAGNER [the City]: Your Honor, that's not correct. We haven't made any decision on that.
"THE COURT: The Court has indicated that it would be addressed as a post-trial matter.
"MS. WAGNER: But the question as to whether it may he added would be dependent on other matters.
"THE COURT: It will be fully addressed at a post-trial matter if appropriate.
"MR. SANDERfS] [Sintra]: In any event, there are two ways to do this; either the Court could do it or the jury could do it. But, we have a right to interest one way or another, and I want to make sure that my position is clear on that.
"THE COURT: Yes, it is." Report of Proceedings, vol. 14 at 2376-77.
Althougli there was no waiver under CR 38 or CR 39, the special verdict form read in conjunction with the jury instructions omitted interest, which would allow the judge to decide the issue under CR 49(a).
Here, Sintra presented different calculations of interest to the trial court, both simple and compound, based on the leasehold value of the land from the date of the taking. No evidence was offered that would go to prove the fact that simple interest at 12 percent per annum would not afford Sintra just compensation.
Iiaslip was a due process challenge to punitive damages. The Court looked at the following factors in determining whether the award comported with due process: (a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that actually has occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the "financial position" of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation. See Haslip, 499 U.S. at 21-22.
The City made a CR 68 "offer of judgment" dated May 27, 1993 for $75,000 "plus plaintiffs' costs and attorney's fees" for the period prior to the offer. Clerk's Papers at 304.
A prevailing party in a § 1983 action may recover attorney's fees as part of costs under 42 U.S.C. § 1988. But if the defendant makes an offer of judgment and the plaintiff does not obtain a judgment more favorable than the offer, the defendant is not liable for attorney's fees incurred after the settlement offer. See Marek v. Chesny, 473 U.S. 1, 105 S. Ct. 3012, 87 L. Ed. 2d 1 (1985). Fed. R. Civ. P. 68 and CR 68 are identical as far as this issue is concerned. See Hodge v. Development Servs., 65 Wn. App. 576, 579, 828 P.2d 1175 (1992).
The trial court properly determined that April 1987 through July 22, 1994 is the time period for which interest as part of just compensation is required.
We note that even with the required change from compound to simple interest, the final judgment exceeds the City's offer of $75,000 by more than 10 percent, qualifying Sintra for attorney's fees under ROW 8.25.075. ($47,809 x 12%) x (approximately) 7 years = $40,159.56. $47,809 + $40,159.56 *= $87,968.56. The City's offer plus 10 percent is $82,500.)
In Sintra I, we termed this case a "strictly economic case." Sintra I, 119 Wn.2d at 22.
The court also stated the takings claim comprised 35 percent of the case and the intentional interference with a business expectancy claim represented the remaining five percent. Clerk's Papers at 770.