RRI Realty Corp. v. Incorporated Village of Southampton, s. 152

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Writing for the CourtJON O. NEWMAN; GARTH
Citation870 F.2d 911
PartiesRRI REALTY CORP., Plaintiff-Appellee-Cross-Appellant, v. The INCORPORATED VILLAGE OF SOUTHAMPTON, Roy L. Wines, Jr., Mayor, Orson D. Munn, Jr., Paul Parash, Charles F. Schreier, Jr., and Richard L. Fowler, Constituting the Board of Trustees of the Village of Southampton, Sherburne Brown, Courtland Smith, Victor Finalborgo, John Winters and Morley A. Quatroche, Constituting the Board of Architectural Review of the Village of Southampton, and Eugene R. Romano, the Building Inspector of the Village of Southampton, Defendants-Appellants-Cross-Appellees, William Matrick, Jr., Carlos Nadal, Jacob Buchheit, Elise Korman and Marvin Dozier, Constituting the Zoning Board of Appeals of the Village of Southampton, Defendants. Docket 88-7441, 88-7443, 88-7445, 88-7447 and 88-7485.
Docket Number153,Nos. 152,329 and 290,154,s. 152
Decision Date29 March 1989

Edward Brodsky, New York City (Sarah S. Gold, Lawrence P. Gottesman, Spengler, Carlson, Gubar, Brodsky & Frischling, New York City, on the brief), for defendant-appellant-cross-appellee Village of Southampton.

Therese Neilsen, Uniondale, N.Y. (Lois H. Kleinberg, J.M. Furey & R.J. Furey, Hempstead, N.Y., on the brief), for defendants-appellants-cross-appellees Members of Bd. of Architectural Review.

Evan H. Krinick, Uniondale, N.Y. (Frank L. Amoroso, Richard C. Mooney, Rivkin, Radler, Dunne & Bayh, Uniondale, N.Y., on the brief), for defendants-appellants-cross-appellees Members of Bd. of Trustees.

John H. McLoone, Jr., Williston Park, N.Y. (J. Maloney, Murphy, McLoone, Nelson, Dobise & McGrane, Williston Park, N.Y., on the brief), for defendant-appellant-cross-appellee Romano.

Glenn S. Goldstein, New York City (Ellen G. Margolis, Summit Rovins & Feldesman, New York City, on the brief), for plaintiff-appellee-cross-appellant.

(Peter Tufo, Anita Fisher Barrett, Barry M. Schreibman, Brown & Wood, New York City, submitted an amicus curiae brief for Assn. of Towns of the State of N.Y., N.Y. State Conference of Mayors & Other Municipal Officers.)

Before FEINBERG, NEWMAN and GARTH, * Circuit Judges.

JON O. NEWMAN, Circuit Judge:

This appeal concerns primarily the issue of whether an applicant for a building permit, subsequently ordered to be issued by a state court, had a sufficiently clear entitlement to the permit to constitute a property interest protected by the Due Process Clause. The issue arises on an appeal by the Village of Southampton, New York, and various Village officials, from a judgment of the District Court for the Eastern District of New York (Charles P. Sifton, Judge), after a jury trial, awarding RRI Realty Corp. ("RRI") $2.7 million in damages and attorney's fees pursuant to 42 U.S.C. Secs. 1983, 1988 (1982). RRI claimed that the Village officials, acting in their official capacity, had wrongfully denied RRI's application for a building permit, thereby depriving RRI of its property without due process of law. RRI cross-appeals to challenge the pretrial ruling of the District Court denying RRI's motion to amend its complaint to assert a claim for punitive damages against the Village officials in their individual capacities.

We conclude that the record was insufficient to support a finding of such a clear entitlement to the permit as to establish a property interest protected by the Fourteenth Amendment. Accordingly, we reverse the judgment of the District Court, dismiss the cross-appeal, and remand with directions to enter judgment for the defendants.


In 1979, RRI purchased a 63-room mansion and surrounding oceanfront property in the Village of Southampton. After planning extensive renovations for the mansion, RRI held discussions with the Village Building Inspector, Eugene Romano, regarding procedures for acquiring the requisite building permit. Although the plans were somewhat inchoate, it was clear that several features of the proposed design exceeded height restrictions in the local zoning code. Romano issued a limited building permit to RRI, covering only minor structural renovations; he advised RRI not to apply for successive building permits as plans changed but to make one omnibus building permit application when its plans became final. RRI also applied for, and received, a height variance from the Zoning Board of Appeals ("ZBA") in anticipation of future construction.

Construction began in early 1981. By the spring of 1983, renovation had proceeded far enough to permit RRI to complete the final design plans for the residence. Under local law, RRI had to submit these plans to the Village's Architectural Review Board ("ARB") for approval before the Building Inspector could issue a permit. See Southampton, N.Y., Code Sec. 116.32 (1984) (hereinafter "Code"). The ARB approved RRI's final overall design in May 1983. The Building Inspector then instructed RRI to submit an application to his office for a comprehensive building permit. Romano also told RRI to apply to the ZBA for another variance--this one covering the portion of the proposed structure that would exceed the height limitations of the previous variance.

With RRI's application pending before the ZBA, RRI and the Building Inspector devised a plan to divide the building permit application into three stages. Stage one represented the structural work covered by the initial building permit already issued by Romano. Stage two--the permit for which is the subject of this litigation--represented the balance of the construction that was in conformity with the zoning law and the initial variance. Stage three included that part of the structure for which a new height variance was required.

RRI submitted an application to the Building Inspector for a stage-two building permit in February 1984 along with final plans, which covered the entire project but were marked to indicate the three stages of construction. In early April, RRI, apparently at the Building Inspector's request, submitted a new set of plans that did not include any stage-three alterations. These altered plans showed a house missing most of its roof, parts of one side, and an entire new wing. On April 11, the Building Inspector referred these revised plans and the permit application to the ARB for its final consideration. Apparently, under the Code, the ARB had to approve these more detailed designs even though it had approved plans for the overall project in 1983.

In early May 1984, the Building Inspector notified RRI, as he had throughout the spring, that a permit was about to be issued. However, no permit was forthcoming. The ARB decided to take no action on the building permit application. No one informed RRI of this decision. At about this time, the RRI project became a target of community rumor and a controversial matter in Village politics. Prominent Southampton residents attacked the project for attracting undesirable elements and promoting improper behavior. Reacting to this pressure, the Acting Mayor, a member of the Village Board of Trustees, ordered the Building Inspector to issue a stop-work order on May 17 because RRI lacked a building permit for all of the post-stage-one construction. The ZBA also denied RRI's application for its stage-three variance.

On June 1, 1984, RRI commenced an Article 78 proceeding in New York Supreme Court, Suffolk County, against the Building Inspector and the ARB to compel issuance of a stage-two building permit and to cancel the stop-work order. The court granted summary judgment for RRI, finding that the ARB had refused to approve the stage-two permit because of its awareness that the stage-three permit would violate the existing zoning regulations and that this was an impermissible consideration for the ARB, whose role is limited by section 116-33 of the Village Code to matters of aesthetic judgment. RRI Realty Corp. v. Romano, No. 84-10639 (N.Y.Sup.Ct. Apr. 3, 1986) (unreported). The state court then found that by the time RRI had commenced the Article 78 proceeding, the ARB was in violation of the Code provision requiring the ARB, if it does not approve a permit application, to hold a public hearing within thirty days of its receipt of the application. Code, supra, Sec. 116.32.E. Since the thirty-day period had expired, RRI was deemed entitled to the stage-two permit as a matter of law. RRI Realty Corp. v. Romano, supra. The court ordered issuance of a permit for what was "concededly legal work." Id.

RRI received its building permit in August 1986 and commenced this action for damages caused by the delay in the issuance of the stage-two permit and for attorney's fees and costs. The jury found in favor of RRI, awarding it $1.9 million in damages. The judgment also includes $762,970.36 for attorney's fees and costs.


The gravamen of the complaint is that RRI had a property interest in the stage-two permit, that Village officials arbitrarily and capriciously deprived RRI of its property interest in this permit, and that this violation of substantive due process was an official Village policy for which the municipality is liable for damages under section 1983. See Monell v. Department of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978); see also City of St. Louis v. Praprotnik, 485 U.S. 112, 108 S.Ct. 915, 99 L.Ed.2d 107 (1988). In the view we take of the case, it becomes necessary to consider only the threshold issue of whether the evidence sufficed to create a jury issue as to whether RRI had a property interest in the stage-two permit.

I. Development of the Legal Standard

Federal courts have followed a somewhat uneven course in explicating the rationale for and the extent to which the substantive component of the Due Process Clause of the Fourteenth Amendment protects landowners in disputes with local agencies empowered to limit the permissible uses of their property. Though appellate courts frequently invoke Justice Marshall's observation that the role of the...

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