Fedway Marketplace West Llc, Appellant V State Of Wa, Respondent (Majority)

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COURT OF APPEALS II DIVISION 20 i tt SEP 30 IN THE COURT OF APPEALS OF THE STATE. Q ( , DIVISION II W. AM 9: 06 S GTON 1,3Y ti 1- ' No. 44509 -3 - II FEDWAY MARKETPLACE WEST, LLC, a limited liability company, GARLAND & MARKET INVESTORS, LLC, Washington and Washington limited liability company, on behalf of themselves and all others similarly a situated, Appellant, v. PUBLISHED OPINION STATE OF WASHINGTON, Respondent. HUNT, J. landlords of Fedway former state Marketplace West, LLC, and Garland & liquor store Market Investors, LLC, locations ( Landlords), appeal the superior court' s entry of a CR 12( c) judgment on the pleadings and dismissal of Landlords' complaints against the State of Washington for terminating its leases of Landlords' properties the State had used for selling liquor. After Initiative 1183 ( I 1183) privatized the sale of liquor in Washington, the State' s Liquor Control Board terminated its leases with the landlords of state -owned liquor store locations and auctioned the right to sell liquor at these locations to private retailers. Landlords argue that ( 1) the State deliberately misinterpreted I -1183, wrongfully terminated their leases, and illegally gave auction buyers the right to sell liquor within a one mile radius of the Landlords' locations; ( 2) the superior court erred in striking Landlords' extrinsic evidence that the State acted in bad faith in deliberately misinterpreting I -1183 and terminating their leases; ( 3) the State breached the duty of No. 44509 -3 -II good faith and fair dealing in terminating their leases; and (4) the State' s termination of their leases violated the contract clauses' and takings clauses2 of the federal and state constitutions. The State responds that ( 1) its decision to permit auction buyers to sell liquor within a one mile radius was state a claim irrelevant to the lease terminations, for a breach of the duty which faith of good I 1183 and fair required; ( 2) dealing; ( Landlords failed to 3) Landlords' extrinsic evidence was not admissible to interpret an unambiguous contract; and ( 4) the superior court properly dismissed Landlords' constitutional claims because, once the leases terminated, there could be no contract and no taking.. We hold that, because I -1183 triggered the termination provision in the State' s leases with Landlords, Landlords cannot state a claim against the State under their former leases. We affirm the superior court' s dismissal of Landlords' complaints. FACTS I. LEASES Fedway Marketplace West, LLC and Garland & Market Investors, LLC are former lessors of State liquor store locations. In 2007, Garland leased its Spokane premises to the State; in 2010, Fedway leased its Federal Way leases included a termination premises to the State. clause ( " Paragraph 3 "), Each lease was for a 10 -year term. Both which provided that if a newly enacted law prevented either party from complying with the lease,3 then the lease would terminate and both I WASH. CONST. U. S. CONST. I, § 10. art. I, § 23; art. I, § 16; and U.S. CONST. amend. V. 2 WASH. CONST. 3 Both leases included and art The premises shall be occupied by the Washington State Liquor Control Board and used solely for the purposes of selling alcoholic beverages and lottery products. The Board shall and may peaceably and quietly have, hold and enjoy the premises a " use" for these provision purposes." that stated: " CP at 21 -22, 32 ( emphasis added). 2 No. 44509 -3 - II parties would be released from all liability. As the leases required, Landlords made improvements according to the Liquor Control Board' s specifications, and the State paid Landlords rent for using the premises to sell liquor. On November 8, 2011, Washington voters approved Initiative 1183, which privatized the State controlled system of liquor distribution and sale, effective December 8, 2011. I -1183, now codified as RCW 66. 24. 6204, also directed the Liquor Control Board to cease all liquor sales no later than June 1, 2012, and to auction " the right at each state -owned store location of a spirits[ 5] retail licensee to operate a liquor store upon the premises." RCW 66. 24. 620( 4)( c). To implement I -1183, the State auctioned the rights to sell liquor at its 167 state -run liquor store Each of the 128 successful bidders received the exclusive right to apply for a locations. license to sell liquor at the store on which the bid had been The State advised each bid placed. winner ( 1) to secure a lease with the store' s landlord; and ( 2) if unable to secure such a lease, to consider ( a) location re- selling the right to sell mile radius of within a one - liquor at that location the existing location." or ( b) requesting " Clerk' s Papers ( CP) an alternative at 8. Before terminating its leases, the State sent its liquor store lessors, including Landlords, letters notifying them of the upcoming lease terminations. The State terminated its Fedway lease effective May 4 LAws 5 "` of 2012, ch. 2, § 102. Spirits' means any beverage which contains alcohol obtained by distillation, except flavored malt beverages, but 66. 04. 010( 41). including wines four exceeding twenty - percent of alcohol by volume." RCW No. 44509 -3 - II 31, 2012, and its Garland lease effective July 31, 2012.6 II. PROCEDURE Landlords brought a class action against the State, alleging that it had ( 1) anticipatorily repudiated and faith and fair breached their liquor store lease contracts; ( 2) violated an implied covenant of good dealing; ( 3) violated the state and federal contract clauses' by engaging in legislative action that impaired the State' s contractual obligations; and ( 4) violated the state and federal takings clauses8 by taking private property for public use without just compensation. The State moved for judgment on the pleadings under CR 12( c). Landlords opposed the State' s motion with extensive exhibits purporting to show that ( 1) the State knew one mile its decision to permit bid winners to sell liquor in alternative locations within a radius of the existing location could Landlords' leverage in renegotiating lease require bid winners violate I -1183 and would significantly erode agreements to accept assignment of the State' s with bid winners; ( existing leases; ( 2) the State did not 3) in February 2012, the State made a commitment to pay for unamortized improvements that Landlords had made to meet the Liquor Control Board' s specifications; and ( 4) the State Department of Revenue failed to perform its duty under RCW 66. 24. 620 to develop rules and procedures "` to address claims that 6 After the State terminated its lease, Fedway entered into a 12 -month lease with the bid winner for its Federal Way location at a rent that was $ 3, 832 less per month than the State had been paying. later, Fedway' s new tenant defaulted and ceased operating. The bid winner for Garland' s Spokane store location did not enter into a lease with Garland; Garland found no tenant Two months to lease its store space and received no rental income. WASH. CONST. 8 art. I, § 23, WASH. CONST. art. I, § and U. S. CONST. art I, § 10, respectively. 16, and U.S. CONST. amend. V, respectively. 4 No. 44509 -3 -II I -1183] unconstitutionally impairs any contract. "' CP at 116 ( citation omitted). The superior court granted the State' s motion to strike Landlords' exhibits, reasoning that it could not consider such extrinsic evidence to " interpret" unambiguous contract terms. Verbatim Report of Proceedings ( VRP) at 32. The superior court also ( 1) ruled that because I -1183 had forced the State to terminate its liquor store leases, the State did not improperly terminate its leases or breach a duty of good faith and fair dealing; ( 2) granted the State' s motion for judgment on the pleadings; and ( 3) dismissed Landlords' complaint with prejudice. Landlords appeal. ANALYSIS I. ANTICIPATORY REPUDIATION AND BREACH OF CONTRACT Landlords appeal the superior court' s dismissal of their complaint when it granted the State' s CR 12( c) motion for judgment on the pleadings. They argue that the hypothetical facts in their complaint and the additional evidence they submitted stated a justiciable claim that the State deliberately misinterpreted I -1183 and that the State breached its lease obligations and anticipatorily repudiated its leases. The State responds that it fully complied with the leases and that lease provision Paragraph 3 gave the State the right to terminate the leases when the voters' initiative took away the State' s previously exclusive right to sell liquor, thus preventing the State from carrying out the lease terms. We agree with the State. A. Standard of Review We review de novo CR 12( c) dismissal rulings. P.E. Sys., LLC v. CPI Corp., 176 Wn.2d 198, 203, 289 P. 3d 638 ( 2012). We examine the pleadings " to determine whether the claimant can prove any set of facts, consistent with the complaint, that would entitle the claimant to relief." 5 No. 44509 -3 - II Parrilla v. King County, 138 Wn. App. 427, 431, 157 P. 3d 879 ( 2007). On a CR 12( c) motion, the court presumes that the allegations asserted in the complaint are true. Tenore v. AT & Wireless T Servs., 136 Wn.2d 322, 330, 962 P. 2d 104 ( 1998). B. Unambiguous Lease Termination Provision Here, both leases included identical termination provisions, which provided, in part: I] n the event that the enactment of any law or the decision of any court of competent jurisdiction shall prevent either party hereto from complying with or carrying out the terms of then this Lease shall terminate and the this Lease ... parties hereto shall be released from any and all liability for any damage or loss which may result from such inability to comply therewith. CP at 22, 33 ( emphasis added). Codifying I- 1183, RCW 66. 24. 620 expressly provided, in. part: "[ The Liquor Control Board] must effect orderly closure of all state liquor stores no later than June 1, 2012, and must thereafter refrain from purchase, sale, or distribution of liquor." RCW 66. 24. 620( 2). This new law plainly prohibited the State from selling alcohol and, thus, prevented the State from complying with or carrying 9 out " the " use " 10 provision of its leases with Landlords. Regardless of whether the State permitted bid winners to choose alternate liquor store locations, or instead required bid winners to use the Landlords' original store locations bid upon, 11 the State could not 9CPat22, 33. I° CP at 21 -22, 32. 11 See Landlords' argument that the State understood that I -1183 did not expressly permit the Liquor Control Board to expand potential liquor sale locations to within a one -mile radius of the former state liquor stores and, thus, deliberately misinterpreted the initiative in implementing a Relocation Policy" that conflicted with the law. Br. of Appellant at 24. 6 No. 44509 - - II 3 continue leasing Landlords' properties for the leases' contractual purpose of providing locations for the State to sell liquor. 12 We hold that ( 1) I -1183 and its RCW 66. 24. 620 codification triggered the lease termination provisions; ( 2) under the leases' plain language, enactment of this new law made it impossible for the State to continue selling liquor at Landlords' premises; and ( 3) therefore, the State did not anticipatorily repudiate or breach its leases with Landlords. C. Striking Landlords' Extrinsic Evidence Landlords State had also argue deliberately that in striking their misinterpreted extrinsic evidence offered to show that the I- 1183 the superior court erred because such evidence is admissible even when the court believes that contract terms are unambiguous. The State responds that none of Landlords' extrinsic evidence was relevant to prove the meaning of any specific term in the leases. We agree with the State and hold that the superior court properly excluded the evidence. 12 Landlords argue that the State could have assigned its rights to sell liquor under the leases because neither I -1183 nor the leases precluded the State' s assigning its lease obligations to the bid winners, thereby avoiding lease to Landlords " and rights. CP at assigns," 21, 31. terminations. This argument fails: Although the leases refer there is no corresponding lease provision granting the State assignment Moreover, at the time the parties entered into these leases, the law gave the State the exclusive right to import and to sell liquor and, thus, there was no possibility that the State could assign this exclusive right to Former WAC 314 -36 -020 ( 2011); former RCW another. See Colorado Structures, Inc. v. Ins. Co. of the West, 161 Wn.2d 577, 66. 16. 010, . 040 ( 2011). 588, 167 P. 3d 1125 ( 2007) ( courts construe contracts as a whole to effectuate all of the contract' s provisions, so as not to render words superfluous); see also Dep' t ofEcology v. Tiger Oil Corp., 720, 762, 271 P. 3d 331 ( 2012) ( We " 166 Wn. App. contract provisions " and avoid interpretations ` avoid ` a strained or leading Pemco Ins. Co., 108 Wn.2d 338, 341, 738 P. 2d 251 ( 1987)). 7 forced to absurd results. ") ( construction ' of quoting Eurick v. No. 44509 -341 1. We review conjunction with a de novo trial all Standard of review court summary judgment dismissal Virginia Ltd. P' ship, 158 Wn. App. motion, the including evidentiary court " may consider review rulings, citing Folsom v. Burger King,. denied, 171 Wn.2d 1014 ( 2011). hypothetical facts made in See Cornish Coll. of the Arts v. 1000 order. 203, 215, 242 P. 3d 1 ( 2010) ( 135 Wn.2d 658, 663, 958 P. 2d 301 ( 1998)), 12( c) rulings, not included in the record." On a CR Tenore, 136 Wn.2d at 330. When reviewing judgments on the pleadings under CR 12( c), Washington follows the assent objective manifestation to definite terms is normally test for contracts." ... fact for the fact finder. ... a question of Mutual But a question of fact may be determined as a matter of law if reasonable minds could not differ. P.E. Sys., 176 Wn.2d Xerox Corp., at 207 ( internal citations omitted) ( quoting Keystone Land & Dev. Co. v. 13 152 Wn.2d 171, 177, 94 P. 3d 945 ( 2004)). To interpret a contract, we must determine the parties' intent, for which we apply the context rule. "' 943 ( 2012) ( Roats v. Blakely Island Maint. Comm' n, Inc., 169 Wn. App. 263, 274, 279 P. 3d quoting Shafer v. Bd. of Trs. of Sandy Hook Yacht Club Estates, 76 Wn. App. 267, 275, 883 P. 2d 1387 ( 1994)). This context rule allows a court, when "` viewing the contract as a whole, to consider extrinsic evidence, such as the circumstances leading to the execution of the contract, the subsequent conduct of the parties and the reasonableness of the parties' respective 13 See also Spradlin Rock Prods., Inc. v. Pub. Util. Dist. No. 1 ofGrays Harbor County., 164 Wn. App. 641, 654 -55, 266 P. 3d 229 ( 2011) ( "[ S] ummary judgment on an issue of contract interpretation is proper where ` the parties' written contract, viewed in light of the parties' other objective manifestations, has only one reasonable meaning.") ( Fixtures, Inc., 87 Wn. App. 1, 9, 937 P. 2d 1143 ( 1997)). 8 quoting Hall v. Custom Craft No. 44509 -3 -II interpretations. "' Roats, 169 Wn. applies " even when But our limited "` to the disputed consideration App. at provision of " 274 ( quoting Shafer, 76 Wn. is unambiguous." at 275). This rule Id.14 circumstances surrounding App. and other extrinsic evidence" is determin[ ing] the meaning of specific words and terms used' and not to ` show an intention independent of the instrument' or to ` vary, contradict or modify the written word.'" Hearst Commc' ns, Inc. Hollis Seattle Times Co., 154 Wn.2d 493, 503, 115 P. 3d 262 ( 2005) ( quoting v. Garwall, Inc., 137 Wn.2d 683, 695, 974 P. 2d 836 ( 1999)). v. See also ER 402 ( "Evidence which is not relevant is not admissible. "). 2. Extrinsic evidence irrelevant Here, the superior court could admit Landlords' extrinsic evidence only if it would help the court "` to Wn.2d at determine the meaning of specific words and 503 ( quoting Hollis, 137 Wn.2d at terms used ' in the leases. Hearst, 154 696). Landlords argue that, in addition to the context for the parties' understanding of I- 1183' s requirements, the evidence showed ( 1) the State " had been discussing and making contingency plans for privatization for five years before I -1183 was 14 The Washington Supreme Court first adopted the "` context rule ' in Berg v. Hudesman: The Berg Court] recognized that intent of the contracting parties cannot be interpreted without examining the context surrounding an instrument' s execution. If relevant for determining mutual intent, extrinsic evidence may include ( 1) the subject matter and objective of the making of the contract, ( 3) the contract, ( 2) all the circumstances surrounding the subsequent acts and conduct of the parties, and 4) the reasonableness of respective interpretations urged by the parties. Seattle Times Co., 154 Wn. 2d 493, 502, 115 P. 3d 262 ( 2005) ( citing Hudesman, 115 Wn.2d 657, 667, 801 P. 2d 222 ( 1990)). But later, in Hearst, the Supreme Hearst Commc' Berg v. Court ( 1) ns, Inc. v. cautioned that its Berg holding may have been " misunderstood as it implicates the and ( 2) expressly " acknowledge[ d] that Washington admission of parol and extrinsic evidence "; continues to follow the objective manifestation theory 9 of contracts." Hearst, 154 Wn.2d at 503. No. 44509 -3 - II adopted," yet the State had " made no provision for privatization in the leases" 15; ( 2) after I -1183 was adopted, the State acknowledged in internal agency documents that introducing a Relocation Policy "' be interpreted could as violating the intent of I- 1183' 16; and ( 3) the State considered but rejected the idea of assigning leases to bid winners, which Landlords contend would not have prevent[ ed] "' at the State 44 ( quoting CP at from "' complying 22, 33). with or carrying out "' the lease terms. Br. of Appellant Landlords' reasoning fails. Neither the State' s potential privatization contingency plan nor its intent in implementing a Relocation Policy is relevant to the meaning of any lease terms; nor are the State' s interpretations of I -1183 or its alleged assignment rights under the leases relevant to understanding any lease terms. Because the and terms used ' 154 Wn.2d at extrinsic evidence at issue did not "` determine the meaning of specific words in the leases, it was not relevant for the superior court' s consideration. Hearst, 503 ( quoting Hollis, 137 Wn.2d at 696). We hold, therefore, that the superior court properly granted the State' s motion to strike this extrinsic evidence. II. DUTY OF GOOD FAITH AND FAIR DEALING Landlords further argue that, even if the State could terminate their leases based on I- 1183' s asset disposal requirements, the manner in which the State accomplished these lease terminations breached its duty of good faith and fair dealing. The State responds that a party breaches the duty of good faith and fair dealing only when performing a specific contract term; thus, the State did not breach such duty when it had fully performed under the leases until the point that the new law triggered the leases' termination provision. We agree with the State. is Br. of Appellant at 40. 16 Br. of Appellant at 41 ( quoting CP at 361). 10 No. 44509 -3 -II The duty of good faith and fair dealing " does not inject substantive terms into the contract; it requires only that the parties perform in good faith the obligations imposed by their rather, ` agreement ' and "' arises only in Chevrolet, Inc., 179 Wn. Badgett v. App. connection with the ... underlying ' contract. GMAC v. Everett 126, 149 -50, 317 P. 3d 1074 ( 2014) ( emphasis added) ( quoting Sec. State Bank, 116 Wn.2d 563, 569, 807 P. 2d 356 ( 1991)), petition for review filed, 2 No. 90366 - ( Wash. June 12, 2014). Having already held that the State did not breach its leases, we further hold that it did not breach its duty of good faith and fair dealing when I -1183 provided the State with no alternative but to cease liquor sales, to terminate its leases with Landlords, and to auction to private parties the right to sell liquor at the Landlords' locations. 17 See RCW 66. 24. 620( 2). III. CONSTITUTIONAL CLAIMS Last, Landlords argue that the superior court committed legal error in dismissing their contracts clause and takings clause claims. They contend that ( 1) I -1183 did not require the State to terminate its leases; and ( 2) thus, the State' s lease terminations " impaired" its contracts with. Landlords, which constituted an unconstitutional taking of private property without just compensation. Br. of Appellant at 8. The State responds that it neither impaired a contract nor took private property without just compensation because the leases terminated by their own terms when enactment of the new law rendered the State unable to perform: By operation of law the State could no longer sell liquor on the Landlords' properties, or anywhere else; and, consequently, 17 Again, as we have already remarked, termination of the leases was the State' s only option because the lease terms ( 1) expressly provided that the Landlords' properties could be used only to sell alcoholic beverages and lottery products, and ( 2) did not provide for the Liquor Control Board to assign the leases. 11 No. 44509 -3 -II there was no longer a contract to impair. Again, we agree with the State and we affirm the superior court' s dismissal of Landlords' constitutional claims. A. Contracts Clause Claims Both state and federal constitutions prohibit legislatures from enacting laws that impair existing contractual obligations. WASH. CONST. art. I, § 23; U.S. CONST. art I, § 10. " It is fundamental' that this prohibition against impairing contracts reaches any form of legislative action, including direct action by the people through the 159 Wn.2d 16, 27 -28, 148 P. 3d 1002 ( 2006) ( quoting P. 2d 447 ( 1973)). 151 Wn. impairment App. process." Pierce County v. State, Ruano v. Spellman, 81 Wn.2d 820, 825, 505 In determining whether legislation unconstitutionally impairs an existing contractual obligation, our substantial initiative threshold inquiry of a contractual is "` whether the state law has, in fact, operated as a relationship. ' 954, 965, 214 P. 3d 954 ( 2009) ( Wn.2d 625, 653, 854 P. 2d 23 ( 1993)), Optimer Int' l., Inc. v. RP Bellevue, LLC, quoting Margola Assocs. v. City of Seattle, 121 aff'd, 170 Wn.2d 768, 246 P. 3d 785 ( 2011). An `impairment is substantial if the complaining party relied on the supplanted part of the contract, and contracting parties are generally deemed to have relied on existing state law pertaining to interpretation Margola, 121 Wn.2d new conditions or v. Dep' t of Soc. & against contract exactness. ' P. 2d at 653). lessens its and Optimer, 151 Wn. enforcement. ' A "`contract App. 965 -66 ( quoting is impaired by a statute which alters its terms, imposes Optimer, 151 Wn. App. at 966 ( quoting Caritas Servs., Inc. value. ' Health Servs., 123 Wn.2d 391, 404, 869 P. 2d 28 ( 1994)). impairment "` is at not an absolute one, ' and we do not But this prohibition read it "' with literal Optimer, 151 Wn. App. at 965 ( quoting Tyrpak v. Daniels, 124 Wn.2d 146, 151, 874 1374 ( 1994)). Moreover, " legislation does not unconstitutionally impair contractual 12 No. 44509 -3 -II obligations where the legislation constitutes an exercise of the police power in advancing a legitimate public purpose." Heublein, Inc., Optimer, 151 Wn. App. at 966 ( citing Birkenwald Distrib. Co. v. 55 Wn. App. 1, 9, 776 P. 2d 721 ( 1989)). Here, both parties were sophisticated, understood the lease terms, and acknowledged by the leases' express termination provision that a change in the law might prevent compliance with the contracts or terminate the leases. 18 By including Paragraph 3 as their remedy for lease termination, the parties anticipated that a change in the law could prevent either party from complying with or carrying out "19 the lease terms, and they " intended the prescribed remedy as the sole remedy for the condition." 642, 399 P. 2d 74 ( 1965); 1992). United Glass Workers ' Local No. 188 v. Seitz, 65 Wn.2d 640, Rainier Nat' l Bank v. Wells, 65 Wn. App. 893, 899, 829 P. 2d 1168 Thus, in exercising this lease termination provision ( after the law was passed prohibiting the State from continuing to sell liquor), the State did not impair the contracts because the parties' rights and expectations remained the same as before the new law was passed. The superior court correctly ruled that the " leases ceased to exist once [ the] termination 18 Neither party disputes the validity of Paragraph 3' s lease termination provision. 19CPat22, 33. 13 No. 44509 -3 -II provision was triggered." VRP at 44. We hold that the superior court properly dismissed Landlords' contracts clause claims. B. Takings Clause Claims The takings clause of the Fifth Amendment to the United States Constitution protects individuals against uncompensated takings of private property by both the federal and state governments. U. S. CONST. similarly provides, " amend. V. Article I, section 16 of the Washington Constitution No private property shall be taken or damaged for public or private use without just compensation having been first made." In addressing Landlords' takings challenges to the State' s implementation of I -1183, we begin with two threshold questions: First, whether the regulation destroys or derogates any fundamental attribute of property ownership, including the right to possess, to exclude others, to dispose of property, or to make some economically viable landowner claims less than a " physical invasion" use or of a " the total property. If the taking" and if a fundamental attribute of ownership is not otherwise implicated, we proceed to the second question. That question is whether the challenged regulation safeguards the public interest in health, safety, the environment, or the fiscal integrity of an area or whether the regulation " seeks less to prevent a harm than to impose on those regulated the requirement of providing an affirmative public benefit." Edmonds Shopping Ctr. Assocs. v. City ofEdmonds, 117 Wn. App. 344, 362, 71 P. 3d 233 ( 2003) footnotes and citations omitted) ( quoting Guimont v. Clarke, 121 Wn.2d 586, 603, 854 P.2d 1 14 No. 44509 -3 -II 20 1993)). Landlords argue that an agency regulation, such as the Liquor Control Board' s adopting Policy, " may constitute a taking ` if it goes beyond preventing a public harm [ to] the Relocation actually in enhance ... a publicly owned right in property.'" original) ( internal quotation marks omitted) ( 1, 14, 829 P. 2d 765 ( 1992)). Br. of Appellant at 48 ( some alterations quoting Sintra, Inc., v. City ofSeattle, 119 Wn.2d Landlords further argue that, by implementing the Relocation Policy, the [ Liquor Control Board] enhanced public ownership of the liquor rights the [ Board] was selling by public auction have been by diminishing permitted compensation." to pursue the property rights of state store their remedies: proper landlords. [ Landlords] should either invalidation of I -1183 or just Bt. of Appellant at 48. These arguments fail. Returning to the two threshold questions set out in Edmonds Shopping Ctr., 117 Wn. App. at 362, we first note that Landlords do not allege any State action that destroyed or diminished any fundamental attribute of property ownership. On the contrary, the record shows that Landlords retained these fundamental property rights attributes: the rights to possess and to dispose of their properties, to exclude others, and to make some economically viable use of their properties. Guimont, 121 Wn.2d at 595. We next address the second threshold question whether the 20 We engage in additional analysis only if, in answering these two threshold questions, we determine either that the regulation ( 1) infringes on a fundamental attribute of ownership; or ( 2) goes beyond safeguarding the public interest in health, safety, the environment or the fiscal integrity of an area and instead imposes on those being regulated the requirement of providing an affirmative public benefit. Guimont, 121 Wn.2d at 603; Edmonds Shopping Ctr. Assocs., 117 Wn. App. at Such 362. additional analysis would require us legitimate to answer two more questions: " First, interest "; and second, using a balancing test, whether " the state interest in the regulation is outweighed by its adverse economic impact to the whether the regulation advances a landowner ... , character of the state the extent the regulation interferes with investment backed expectations, and the government action." Edmonds Shopping Guimont, 121 Wn.2d at 604). 15 Ctr., 117 Wn. App. at 362 -63 ( citing No. 44509 -3 - II challenged action seeks less to prevent a public harm than to provide an affirmative benefit to the public agency. Edmonds Shopping Ctr., 117 Wn. App. at 362. Although the exclusivity of the right to sell liquor, which the State auctioned to private bidders, may increase the value of this right, the legislature' s purpose for such exclusivity is to prevent proliferation of private liquor stores. public This purpose lies at the heart of the State' s police power and is directed at preventing a harm. See Edmonds Shopping 897, 901, 894 P. 2d 1359 ( 1995). Ctr., 117 Wn. App. at 362; State v. Audley, 77 Wn. App. Answering these Edmonds Shopping Ctr threshold inquiries in the affirmative, we hold that the State' s actions did not constitute a taking; thus, further analysis is not required. We hold that the State did not commit an unconstitutional taking by exercising the lease termination provision when enactment of the new law prohibiting the State from selling liquor rendered it unable to perform under the leases. We affirm. Hunt, J. 16

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