Stewart Enterprises, Inc. v. City of Oakland (2016) 248 Cal.App.4th 410

By William W. Abbott

A judicial determination that a vested right exists brings to mind one of those folksy truisms I occasionally like to quote: even the blind squirrel finds a nut once in a while. Simply stated, California’s common law rule on vested rights is hostile to land investment and development as rights are not protected until very late in the regulatory process. The Supreme Court invited the California Legislature to craft a different rule, and that invitation introduced development agreements, vesting tentative maps and the locking-in of subdivision standards into California land use practice. Other than those changes, there has been only microscopic adjustments to the common law rule which requires an applicant to acquire a building permit (or equivalent) and undertake substantial good faith expenditures based upon that permit in order to vest rights against regulatory changes since the seminal California Supreme Court decision in Avco Community Developers, Inc. v. South Coast Regional Commission (1976) 17 Cal. 3d 785.

But enough with ancient history. The latest vested rights case involves an applicant (Stewart) who obtains a permit to construct a crematorium. Stewart identified property zoned Commercial Industrial Mix 2, an intensive zoning district. City staff made a determination that a crematorium was an allowable use and granted a zoning clearance. BAAQMD issued an authority to construct in November 2011, and Stewart purchased the property in January 2012. Stewart obtained a building permit in May 2012, and at that time, the City’s code had general provisions [1]recognizing that the issuance of a building permit was a recognized vesting point against later changes in the zoning code. Stewart’s plans created community concerns, and the staff worked on an interim ordinance which then morphed into an urgency ordinance. The public supported the proposed regulatory changes. The City Council adopted the urgency ordinance which had the effect of adding the conditional use permit requirement. The ordinance contained the usual health, safety and welfare findings, and also recognized that applicants with vested rights would be exempt from the ordinance. Following passage of the ordinance, the planning director wrote Stewart advising it that a use permit was required. Stewart appealed the staff determination, and the Planning Commission, following consideration of public input opposed to the appeal, denied the appeal on a 3-2 vote. Stewart then brought suit to invalidate the Planning Commission decision, alleging eleven causes of action. The case went to trial on the administrative mandamus claim, and the trial court granted relief in favor of Stewart based upon the general vesting provisions of the City Code. Eventually, Stewart dismissed the balance of the case.

On appeal, the City argued that the later enactment requiring a conditional use permit trumped the general ordinance provisions which vested permit holders. Not according to the terms of the City’s own ordinance according to both the trial and appellate courts. The City also argued that the later ordinance which added a conditional use permit requirement was not in conflict with the vesting ordinance as it did not prohibit the activity, but simply added an additional discretionary permit requirement. Both the trial and appellate courts rejected this argument concluding the introduction of a discretionary permit requirement effectively prohibited what would have otherwise been permitted, and therefore conflicted with the local ordinance. The City’s final argument was that any impairment of Stewart’s rights were justified to protect the public welfare. The appellate decision discusses both the urgency enactment (the legislative act) and the adjudicatory act (denial of Stewart’s appeal) and refers to the evidence in front of the City in both proceedings. Looking at all of the evidence, but without distinguishing which hearing was the relevant hearing to evaluate the evidentiary support to apply a public welfare exception to the vested rights rule, the appellate court also concurred that the generalized objections presented to and by the City were insufficient to support a public welfare determination sufficient to denial Stewart of its vested rights.

PS.   The Cubs last won the Series in 1908. Perhaps the odds on vested rights in California are a better play.

William W. Abbott is a partner at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

[1] A provision which is found in many local codes.