Embassy Real Estate v. Mayor's Agent

• Decision Date: 20 March 2008
• Docket Number: No. 06-AA-1083.,06-AA-1083.
• Citation: 944 A.2d 1036
• Parties: EMBASSY REAL ESTATE HOLDINGS, LLC, Petitioner, v. DISTRICT OF COLUMBIA MAYOR'S AGENT FOR HISTORIC PRESERVATION, Respondent, and Committee of 100 on the Federal City, Intervenor.
• Court: D.C. Court of Appeals

944 A.2d 1036

EMBASSY REAL ESTATE HOLDINGS, LLC, Petitioner, v. DISTRICT OF COLUMBIA MAYOR'S AGENT FOR HISTORIC PRESERVATION, Respondent, and Committee of 100 on the Federal City, Intervenor.

No. 06-AA-1083.

District of Columbia Court of Appeals.

Argued March 27, 2007.

Decided March 20, 2008.

Whayne. S. Quin, with whom Paul J. Kiernan, Mary Carolyn Brown, Washington,

DC, and Kkyrus L. Truman, were on the brief, for petitioner.

Holly M. Johnson, Assistant Attorney General, with whom Linda Singer, Acting Attorney General at the time the brief was filed, Todd S. Kim, Solicitor General, and Edward E. Schwab, Deputy Solicitor General at the time the brief was filed, were on the brief, for respondent.

Andrea C. Ferster, Washington, DC, for intervenor.

M. Jesse Carlson and Richard W. Boone Jr., Washington, DC, were on the brief for amicus curiae, The D.C. Preservation League.

Before RUIZ and RE ID, Associate Judges, and KERN, Senior Judge.

RUIZ, Associate Judge:

This case arises out of a plan to convert, by partially demolishing and adding new construction to, the former Italian Embassy ("the property"), which is owned by petitioner, Embassy Real Estate Holdings, LLC, into condominium residences. After petitioner's construction team had applied for pre-construction and construction permits, the Historic Preservation Office ("HPO") applied to designate the property an historic landmark under the Historic Landmark and Historic Protection Act of 1978 ("the Act"). See D.C.Code § 6-1101 et seq. (2001). The Department of Consumer and Regulatory Affairs ("DCRA") issued some of the requested permits before the Historic Preservation Review Board ("HPRB") completed its review of the designation application, which ultimately resulted in designation of the property as an historic landmark. As a result, the HPRB determined, the construction permits had been issued in error by DCRA, because the development that petitioner proposed for the property was inconsistent with the purposes of the Act. Petitioner appealed to the Mayor's Agent for Historic Preservation ("Mayor's Agent"), who affirmed HPRB's determination that issuance of the permits was inconsistent with the property's designation as an historic landmark.

Before this court, petitioner challenges the decision of the Mayor's Agent on various grounds: that the permit applications are not subject to review under the Act because they were filed before the landmark designation, and, therefore, HPRB and the' Mayor's Agent acted without jurisdiction; that the doctrines of estoppel and laches preclude application of the Act to the permit applications; that, even assuming that the Act applies, the Mayor's Agent acted arbitrarily and without substantial evidence in determining that the permits did not meet the Act's requirement that they be "necessary in the public interest;" and that the Mayor's Agent applied the wrong standard and ignored undisputed evidence in determining that denial of the permits did not constitute "unreasonable economic hardship" amounting to an unconstitutional taking. We disagree with petitioner's contentions and affirm the decision of the Mayor's Agent as consistent with applicable legal principles and supported by substantial evidence of record.

I. BACKGROUND

The property is a free-standing urban mansion, located at 2700 16th Street and 1651 Fuller Street, N.W., which consists of a main building containing the former Italian ambassador's residence, a chancery wing, and a courtyard. It is designed in Italian Renaissance Revival Style and "is a primary and integral component of the boulevard of distinguished buildings that line 16th Street on Meridian Hill." The buildings and grounds are described in the HPRB's landmark designation:

The three-story hip-roofed main block contains the original ambassador's residence, with one-story flat-roofed wings enclosing three sides of an open-air courtyard at the rear. The fourth side of the court is formed by the side of the original chancery wing, originally a long two-story hip-roofed block with its short end facing onto Fuller Street. A circa 1930s addition extends the original chancery in a similar two-story configuration along Fuller Street, creating an Shaped footprint overall. The embassy is faced in limestone with a terra cotta tile roof and sculptural embellishment concentrated at window and door surrounds; the simpler chancery is stucco with limestone trim and tile roofs.

In 2001, Bruce Bradley purchased' the property, planning to either sell it for continued use as an embassy or develop it as a residential property. He sought the advice of an architectural design team, Shalom Baranes and Patrick Burkhart. Mr. Baranes advised that, although the property was not in an historic district or designated as an historic landmark, it was "clearly eligible for designation," and that, "should anyone file a designation application, it was our opinion that application would succeed."

To address this possibility, Mr. Baranes presented Mr. Bradley with two options. Under one option, Mr. Bradley would apply for the designation landmark and "then subject the whole property to the normal HPRB review," a course that would definitively establish whether the property would be designated an historic landmark and its development subject to review and, possibly, restrictions under the Act. The other option — which Mr. Baranes told Mr. Bradley would involve "some risk" — consisted of negotiating a private agreement with members of the preservation community most likely to file an application to designate the property as historic. Under such an agreement, the property owner typically offers certain concessions in the development plan in exchange for a promise not to file for historic designation of the property. Mr. Baranes explained that this option would be successful in "a situation where there was no other interested party in proceeding with a designation."¹

Mr. Bradley's design team members testified that they first met with State [i.e., D.C.] Historic Preservation Officer² David Maloney to discuss the project in the fall of 2001. At the time, the plan for the property was to construct high-end condominium units in rooftop additions to the existing buildings. Mr. Maloney testified that, although he could not recall this meeting or design plan, the discussion might have been "tacked onto" an October 2001 meeting regarding a different project.

According to Mr. Baranes, Mr. Maloney told the design team that the HPO had "no intent at the time" to file an application to designate the property as an historic landmark, but the team did not ask for an "absolute assurance that [the HPO] would never file a designation application;" Mr Burkhart testified that he left this meeting with the understanding that, although Mr. Maloney did not intend to file a landmark application on behalf of the HPO, some community groups might do so, and that they should contact these groups. While Mr. Maloney agreed that he likely told the design team to contact community organizations, he testified that he was "100 percent certain" that he had not suggested that they enter into private agreements with these groups in an effort to bypass formal HPRB review under the Act.

In the economic aftermath of September 11, 2001, plans to renovate the property were put on hold. In the spring of 2004, Mr. Bradley brought new investors into the project and created the petitioner, Embassy Real Estate Holdings, LLC. In August 2004, the design team met again with Mr. Maloney of the HPO, to discuss a different plan to renovate the property. This time, Mr. Maloney raised concerns about the negative impact that the new design, which included a ninety-foot tower, would have on existing views and the courtyard, as well as the significant demolition required for its construction. Mr. Burkhart testified that, notwithstanding these concerns, he left that meeting as well with the understanding that the "HPO had no plans to designate the building."

Petitioner had no further contact with the HPO regarding the project. On January 24, 2006, petitioner entered into an agreement with the D.C. Preservation League ("DCPL"), a private group dedicated to preserving and enhancing historic properties in the District of Columbia, in which certain changes were made to the design of the proposed renovation, and petitioner agreed to preserve some of the historic interior features of the property the latter being matters beyond the protection of the Act. In exchange, DCPL agreed not to file for a landmark designation.³ Petitioner's negotiations also resulted in an April 26, 2006 resolution by the Advisory Neighborhood Commission IC ("ANC IC") supporting the project.

On January 26, 2005, petitioner applied for a permit to subdivide the property for sale as seventy-nine condominium units. The permit was issued, with the approval of the HPRB, on July 26, 2005. On September 14, 2005, petitioner filed applications with the D.C. Department of Regulatory and Consumer Affairs ("DCRA") for permits to prepare the site for construction (including construction staging, excavation, sheeting, and shoring), to alter and renovate the existing buildings, and to build new structures.⁴ The permit for construction staging and sidewalk usage was issued on December 12, 2005. The HPO filed an application for historic landmark designation on January 6, 2006& mdash; after the permit for construction staging and sidewalk usage was issued, but while the permits for excavation, sheeting, shoring, alteration/renovation and new construction were still pending. After the application for landmark designation was filed, the DCRA was notified immediately and petitioner was notified a few days later. Despite having been given notice of the landmark application in early January, the DCRA issued permits for excavation, sheeting and shoring on February 1 and for new construction on February 8, 2006. At a hearing...