-----Original Message----- From: Randolph, Patrick Sent: Monday, December 05, 2005 5:31 PM To: Randolph, Patrick Subject: DD 11/8/05 Zoning estoppel permits calculated "end run?" Daily Development for Tuesday, November 8, 2005 by: Patrick A. Randolph, Jr. Elmer F. Pierson Professor of Law UMKC School of Law Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu ZONING AND LAND USE; ESTOPPEL: City will be estopped from reneging on building permit after applicant has invested substantially in project, even when permit issued erroneously and in violation of settlement agreement that applicant previously had entered into with City. Congregation Etz Chaim v. City of Los Angeles, 371 F. 3d 1122 (9th Cir. 2004) The Congregation owned property in a residential neighborhood that had used as a location for its religious practices, in violation of local zoning ordinances, for 18 months. Other residents of the neighborhood objected. There was litigation in state and federal court, including a claim under the Religious Land Use and Institutionalized Persons Act. On the eve of the hearing on this Act, the parties reached a settlement agreement by which the Congregation agreed to "the single family character of the property shall be restored and maintained, including the residential character and architecture" the action was dismissed, with the Federal District Court retaining jurisdiction over the carrying out of the dispute. The Agreement obviously contemplated that new permit applications might be made by the Congregation in "restoring" the property, and required submission of plans for approval within 90 days. It provided expressly that the "any notice, tender or delivery or oth! er com munication pursuant to the Settlement Agreement" would be submitted by the Congregation was to a specified individual in the City's large planning department who lots of experience on this dispute and the neighborhood. This person was vested with responsibility by the City to monitor compliance with the Agreement. Instead, the Congregation ignored the specified individual and submitted building plans to other persons in the City building department and obtained a building permit. The plans called for expansion of the existing home from 3145 square feet to 8150 square feet, an expansion guaranteed to infuriate the neighbors and, in the view of the City, wholly inconsistent with the Agreement. It did submit a copy of the Agreement along with the plans, and negotiated for three months both with the building department and a City Attorney lawyer who also had a copy of the Agreement, paying over $20,000 in permit fees. Upon receiving the permit, the Congregation immediately commenced with its "remodelling." The first step consisted of utterly demolishing the existing house, leaving only two exterior walls standing. The neighbors immediately ran to Mr. Green, who apparently learned for the first time of the "end run." He concluded that the Agreement did not contemplate a massive expansion of the size of the house as a "restoration." When the City tried to stop work and suspend the permit, the Congregation returned to Court and got an injunction against the City action based upon estoppel. The Ninth Circuit Court of Appeals, upheld the estoppel claim by a split decision, including a clear and sensible dissent. The court held that California had a well established doctrine of estoppel, and that this was a relatively clear case, as there had been extensive negotiation with the City, which had then issued a permit, resulting in reliance by the Congregation that now appeared to be irreparable. It noted that whether the Congregations activities in fact were inconsistent with the Agreement was a "nice question," but not one that it needed to consider, as the City was estopped from raising it. Of course, the City responded that the Congregation had violated the Agreement by failing to notify Mr. Green, and that it therefore had "unclean hands" and should not benefit from the estoppel. The Court responded that the submission of plans in connection with a permit application was not clearly a "notice, tender, delivery or other communication . . . ." as contemplated by the agreement to be addressed to Mr. Green. Comment 1: Give us a break!!! As the dissent points out, this isn't even a close case. The Agreement specifically contemplated that there would be construction and that the plans would be submitted to the City, so how could the subsequent permit application not be a "communication" under the Agreement? The parties had selected Mr. Green, out of over 47,000 employees of the City, to receive this communication. To anyone looking on from the outside, there does seem to be some bad faith going on. Comment 2: On the other hand, there had to be some very bad lawyering going on as well, since the lawyer for the City Attorney's office who had a copy of this Agreement also did not communicate with Mr. Green. Perhaps the lawyer believed that Green had received notice from the Congregation, but verification of this fact was only a phone call away. Is it possible that the Congregation selected people in the Planning Office who might have been favorably disposed towards its case? The Editor has no inside information on this point, but is struggling to understand how a case of this evident notoriety within the Planning Department sat there for three months without Mr. Green's notice, especilly when the Agreement contemplated the submission of new plans within 90 days to restore the property. Comment 3: Don't try this at home, kids. Zoning estoppel may be common in California, as asserted by the court, but in fact there is a long tradition in most jurisdictions of protecting the body public from carelessness by its own employees, and other jurisdictions might have had no problem in letting the City dodge this bullet. Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA. Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues. ABOUT DIRT: DIRT is an internet discussion group for serious real estate professionals. 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