Allen v. City and County of Honolulu

Decision Date03 November 1977
Docket NumberNo. 5957,5957
PartiesRobert ALLEN and Grace Gunn, Plaintiffs-Appellees, v. CITY AND COUNTY OF HONOLULU, Defendant-Appellant.
CourtHawaii Supreme Court

Syllabus by the Court

1. When the city is equitably estopped from enforcing the terms of a new ordinance the proper remedy is to permit construction to continue, not an award for damages for development costs.

Samuel P. King, Jr., Deputy Corp. Counsel, Honolulu (George T. Aoki and Edmund L. Lee, Jr., Deputy Corp. Counsels, Honolulu, on the briefs), for defendant-appellant.

Robert M. Ehrhorn, Jr., Honolulu (Okumura & Takushi, Honolulu, of counsel), for plaintiffs-appellees.

Before RICHARDSON, C. J., and KOBAYASHI, OGATA, MENOR and KIDWELL, JJ.

KOBAYASHI, Justice.

The City and County of Honolulu (hereinafter the City) brings this appeal from a judgment of the trial court granting money damages to Grace Gunn and Robert Allen (hereinafter appellees). The trial court ruled that the City, by rezoning appellees' property, was liable for costs incurred by the appellees in reliance on the zoning applicable to the property when they purchased it.

For reasons stated hereinafter, we reverse.

ISSUE

The central issue presented by this appeal is whether the trial court erred in granting damages for the development costs incurred by appellees.

FACTS

Appellees, a real estate agent and a developer, sought land suitable for residential development. They purchased the oceanfront property which is the subject of this appeal only after inquiring about its zoning and discussing development alternatives with an architect, Jo Paul Rognstad. On November 8, 1972, the appellees purchased the property identified by Tax Map Key Nos. 6-8-11-46 and 47 situated at Kamananui, Waialua, Oahu, Hawaii, for $207,400.00. At the time of the purchase, and since the adoption of the Comprehensive Zoning Code in 1969, the property was zoned A-3. This classification allows, among other things, construction not exceeding a height of 350 feet.

On or about November 10, 1972, appellees retained the professional services of Rognstad and he commenced architectural, engineering and other work necessary to obtain a building permit from the City for an eleven-story condominium structure. On March 20, 1973 Rognstad submitted appellees' On March 6, 1973, ". . . in response to political pressure from certain residents in Waialua to prevent highrise construction in the area", 1 Bill No. 46, Draft 1, entitled "An Ordinance to Rezone a Portion of A-3 Apartment District Nos. R-8 and R-19 situated at Mokuleia, Waialua, Oahu, Hawaii, to A-2 Apartment District No. R-6", was introduced to the City Council. Appellees learned of the proposal to amend the zoning in a newspaper article on or about March 3, 1973, and appellee Allen later testified in opposition to the proposal at the public hearing held concerning Bill 46.

permit application to the City's Building Department.

By May 14, 1973, several government agencies had initialed their approval on the permit application, but on May 15, 1973, the zoning amendment took effect as Ordinance 4145. Thereafter the permit application and construction plans were withdrawn by the appellees. The permit was neither granted nor denied by the Building Department.

Appellees claimed they had spent $77,017.26 in nonrecoverable expenses on account of the downzoning and sought damages in that amount at trial. The trial court found, as stated in its Finding of Fact No. 12, that:

12. Prior to the effective date of Ordinance 4145, the Plaintiffs in reliance on the A-3 zoning then in effect and on the reasonable probability that a building permit would be issued, substantially changed their position and incurred certain nonrecoverable costs for the development of their property in the amount of $67,950.26 for which they were and are liable.

The trial court stated in its Conclusions of Law:

1. Plaintiffs had the right to rely on the zoning requirements existing prior to the effective date of Ordinance 4145.

2. The City is liable for the costs incurred by the Plaintiffs in reliance on the then existing A-3 zoning and on the reasonable probability of the issuance of a building permit.

3. The mere introduction of Bill 46 on March 6, 1973 does not constitute notice to the Plaintiffs that the zoning would be changed.

OPINION

Appellees base their claim for damages on two distinct legal theories, vested right and equitable estoppel. Though theoretically distinct, courts across the country seem to reach the same results when applying these defenses to identical factual situations. As stated in Heeter, "Zoning Estoppel: Application of the Principles of Equitable Estoppel and Vested Rights to Zoning Disputes", 1971 Urban L.Ann. 63 at 64-65:

. . . The defense of estoppel is derived from equity, but the defense of vested rights reflects principles of common and constitutional law. Similarly their elements are different. Estoppel focuses on whether it would be inequitable to allow the government to repudiate its prior conduct; vested rights upon whether the owner acquired real property rights which cannot be taken away by governmental regulation. Nevertheless, the courts seem to reach the same results when applying these defenses to identical factual situations. (Footnotes omitted.)

The California Supreme Court spoke in terms of vested rights when it denied a developer a writ of mandamus to compel the California Coastal Zone Commission to grant an exemption to its permit requirements. Avco Community Developers, Inc. v. South Coast Regional Commission, 17 Cal.3d 785, 132 Cal.Rptr. 386, 553 P.2d 546 (1976), cert. den. 429 U.S. 1083, 97 S.Ct. 1089, 51 L.Ed.2d 529 (1977). But in Hollywood Beach Hotel Co. v. City of Hollywood, 329 So.2d 10 (Fla.1976), the Florida Supreme Court held that the City was equitably estopped from rezoning petitioner's property in order to halt multi-family residential development. But, as in California, the Illinois Appellate Court, Second District, held that the developers did not acquire a vested right in the former zoning classification which would entitle them to a writ of mandamus to compel the removal of a stop work order. First National Bank & Trust Co. v. City of Rockford, 47 Ill.App.3d 131, 5 Ill.Dec. 509, 361 N.E.2d 832 (1977).

The only Hawaii Supreme Court case dealing with this issue spoke in terms of estoppel. Denning v. County of Maui, 52 Haw. 653, 485 P.2d 1048 (1971). The Court, at 52 Haw. 658-59, 485 P.2d 1051, set the standard for applying the doctrine of equitable estoppel in zoning disputes, wherein this court stated:

The "rule of law" laid down by the trial court was, in summary:

If Denning expended substantial sums for the preparation of plans and documents in good faith reliance upon law prior to Ordinance 641 and which expenditures were incurred upon the reasonable probability of a building permit being issued then Denning must be allowed the right to proceed.

We further stated at 52 Haw. 658-59, 485 P.2d 1051:

In order to avoid unnecessary appellate proceedings and for the proper guidance of the trial court, we are of the opinion that for Denning to be allowed the right to proceed in constructing the planned structure the facts must show that Denning had been given assurances of some form by appellants that Denning's proposed construction met zoning requirements. And that Denning had a right to rely on such assurances thereby equitably estopping appellants from enforcing the terms of Ordinance No. 641.

Mere good faith expectancy that a permit will issue does not create in a property owner a right to continue proposed construction.

But we need not decide here whether the City should be estoppel from enforcing the terms of Ordinance 4145. Denning, supra, does not deal at all with the issue of payment of damages by the government for the development costs of the petitioners, but speaks only in terms of the right to proceed with construction. In each of the cases cited by the parties in their briefs and in each case found by this court where a developer has been held to have a vested right to a building permit, or the government held to be equitably...

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