Daily Development for Thursday, September 22, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

ZONING AND PLANNING; ESTOPPEL: Construction in violation of a zoning classification is unlawful, even when construction is authorized by a building permit issued voluntarily by the appropriate authorities. Failure to request a stay pending appeal of a court ordered building permit does not estop a city from enforcing its zoning regulations (including potentially razing the building).

Lake Bluff Housing Partners v. City of South Milwaukee, 588 N.W.2d 45 (Wis. App. 1998).

Developer planned to build a multifamily housing development. Before building permits were issued, the land on which the project was to be built was rezoned to single family use in order to prohibit the proposed multifamily housing. The developer sued, arguing that it had vested rights in the prior zoning classification. The trial court agreed, and issued a writ of mandamus directing the city's building inspector to issue permits necessary for the project's construction. The permits were issued, and construction proceeded.

 On appeal, the Wisconsin Supreme Court held that the developer did not have vested rights in the original zoning classification "because it never submitted an application for a building permit conforming to the zoning and building code requirements in effect at the time of the application," and directed that the trial court "quash the writ."

By the time the Wisconsin Supreme Court's decision was issued, the developer had finished building its project. Fearing that the city would try to have the development razed, the developer brought a declaratory judgment action seeking an order that the city was "equitably estopped from revoking the building permits issued to the developer," and enjoining the city from "issuing raze orders" for the project. The trial court granted the developer its requested relief.

The court of appeals held that Wisconsin law is settled that "a building permit grants no right to an unlawful use." In addition, it held that the city's issuance of the permits did not waive its obligation to enforce its zoning regulations, which were promulgated by the city under the authority granted to it by Wis. Stat. 62.23. Section 62.23(8) specifically recognizes that structures that do not comply with local zoning regulations are subject to being razed.

Further the court held that, those who build in violation of lawful zoning regulations have no refuge from the requirements of Wis. Stat 62.23(8) merely because construction is completed before lawfulness of the regulations is determined. It noted that a contrary rule would encourage construction in violation of zoning codes the builder could keep the fruits of its unlawful construction merely by tying the matter up in litigation while it sped completion of its project.

The fact that the city did not seek a stay of the original order pending appeal did not alter the Court of Appeals' analysis. It rejected the developer's related estoppel argument on two grounds. First, equitable estoppel in land use cases does not apply against the government unless the government is seeking to negate or modify the landowner's vested rights. As noted, the city's rezoning did not negate or modify any of the developer's vested rights. Moreover, erroneous governmental action or inaction does not prevent ultimate redress of the community's rights. Second, unless circumstances are altered irretrievably (such as where a building is razed pursuant to an order under Wis. Stat 66.05), a party changing its position in reliance on a trial court order or judgment, will have to undo the change if the judgment or order is reversed on appeal, even if a stay pending appeal is not sought.

Comment: Estoppel should be based upon circumstances making the ordinary legal result inequitable. Typically this is because someone has relied on action or inaction of the party to be estopped. That was not the case here. The developer knew that the city was appealing the ruling.  Why didn't the city have the ruling stayed on appeal? Presumably because it didn't want to post an appeal bond (assuming that such a requirement would apply to a Wisconsin city).  This is not a reason for the developer to assume that the city is not continuing to oppose the construction.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 16, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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