In Masloka v. Public Utility District No. 1, No. 101241-1 (Aug. 3, 2023), the Washington Supreme Court held that a takings claim did not automatically transfer to a new property owner when the property was sold.
Your first reaction might be like ours, "what about Palazzolo!?" Didn't that case say that transfer of property after an alleged taking does not wipe out the transferee's right to assert a takings claim:
Were we to accept the State's rule, the postenactment transfer of title would absolve the State of its obligation to defend any action restricting land use, no matter how extreme or unreasonable. A State would be allowed, in effect, to put an expiration date on the Takings Clause. This ought not to be the rule. Future generations, too, have a right to challenge unreasonable limitations on the use and value of land.
Palazzolo, 533 U.S. at 607.
So what gives, Washington Supreme Court?
After reading the court's opinion, and upon further reflection (always a good thing), the story becomes a bit clearer: the Washington court did not conclude that the takings claim disappeared by virtue of the transfer of the property to the new owner, but considered only how a court should determine whether a takings claim was transferred.
And one other big point: this case involved an allegation of a physical taking, not a regulatory taking as in Palazzolo. We'll see how that makes a different shortly.
Back when the first owner owned the land, the utility district maintained a nearby dam and its operation occasionally caused flooding on the land. The Maslonkas then purchased the property. "The previous owners informed the Maslonkas that the land occasionally flooded." Slip op. at 2. The flooding did not stop.
Next:
In 2016, the Maslonkas sued the PUD, alleging its operation of the dam entitled them to damages based on inverse condemnation, trespass, nuisance, and negligence.The trial court found the subsequent purchaser rule barred the inverse condemnation claim, and that the PUD established a prescriptive easement barring the trespass and nuisance claims. The Court of Appeals reversed, holding that the PUD could not benefit from the subsequent purchaser rule because it failed to prove its conduct constituted a taking prior to the Maslonkas’ purchase. The Court of Appeals also the PUD’s alternative argument that the Maslonkas could not bring their tort claims alongside their inverse condemnation claim.
Slip op. at 2.
The issue was whether the court should presume the takings claim transferred along with the land (and thus the district had the burden to prove it didn't), or whether this was an element of the Maslonkas' claim. As the court put it, "in other words, whether the ["subsequent purchaser"] rule is a doctrine of standing or an affirmative defense." Slip op. at 2.
The court came down on the side of standing. It framed the issue as whether the Maslonkas have the ability to assert the rights of the former owners. In other words, the takings claims belong to the former owners: "[a]lthough our case law does not expressly characterize the subsequent purchaser rule as one of standing, it limits who may sue for inverse condemnation by prohibiting a subsequent purchaser from asserting the legal rights of the owner at the time of the alleged taking." Slip op. at 13.
This conclusion, although not supported in the opinion, is supported by Palazzolo, which noted:
In a direct condemnation action, or when a State has physically invaded the property without filing suit, the fact and extent of the taking are known. In such an instance, it is a general rule of the law of eminent domain that any award goes to the owner at the time of the taking, and that the right to compensation is not passed to a subsequent purchaser. See Danforth v. United States, 308 U. S. 271, 284 (1939); 2 Sackman, Eminent Domain, at § 5.01[5][d][i] ("It is well settled that when there is a taking of property by eminent domain in compliance with the law, it is the owner of the property at the time of the taking who is entitled to compensation").
Palazzolo, 533 U.S. at 628.
The Washington court didn't presume that the claim transferred upon sale, but noted that it could be transferred: "the right does not pass to a subsequent purchaser unless expressly conveyed." Slip op. at 1 (emphasis added). It wasn't here, so the court analyzed whether the Maslonkas established a new taking -- one that took place after their purchase. Sorry, no:
The Maslonkas produced no evidence that the dam’s operations changed after 1993 to increase flooding; any increase cannot be, on this record, attributed to the PUD. Without evidence of a new taking, the Maslonkas’ inverse condemnation claim cannot survive summary judgment.
Slip op. at 16.
Although the court's holding that it cannot be presumed that a takings claim transferred upon sale to new owners does not help the property owners here, we take solace that the opinion tells our transactional colleagues how to avoid this problem down the road. We'll leave it to them to come up with some reuseable language that can be used to convey everything the seller owns (including takings claims).
And breathe a sigh of relief that the court did not depart from the Palazzolo rule or, worse yet, adopt the goofy theory that the purchase price must have been a reflection of the decline in value of the land attributable to the taking.
Maslonka v. Pub. Util. Dist. No 1 of Pend Oreille Cnty., No. 101241-1 (Wash. Aug. 3, 2023) (en banc)
