Ocean Bay Mart, Inc. v. The City of Rehoboth Beach Delaware ( 2022 )

IN THE SUPREME COURT OF THE STATE OF DELAWARE
OCEAN BAY MART, INC., §
§ No. 28, 2022
Plaintiff-Below, §
Appellant, § Court Below: Court of Chancery
§ of the State of Delaware
v. §
§ C.A. No. 2019-0467
THE CITY OF REHOBOTH BEACH §
DELAWARE, §
§
Defendant-Below, §
Appellee. §
Submitted: July 20, 2022
Decided: September 30, 2022
Before SEITZ, Chief Justice; VAUGHN and MONTGOMERY-REEVES,
Justices.
Upon appeal from the Chancery Court. AFFIRMED.
Richard A. Forsten, Esquire (argued), Pamela J. Scott, Esquire, Aubrey J. Morin,
Esquire, SAUL EWING ARNSTEIN & LEHR LLP, Wilmington, Delaware, for
Plaintiff-Bellow, Appellant Ocean Bay Mart, Inc.
Max B. Walton, Esquire (argued), Lisa R. Hatfield, Esquire, CONNOLLY
GALLAGHER LLP, Newark, Delaware, Defendant-Below, Appellee the City of
Rehoboth Beach Delaware.
Robert J. Valihura, Jr., Esquire, MORTON, VALIHURA, & ZERBATO, LLC,
Greenville, Delaware, Amicus Curiae for The Committee of 100.
Paul E. Bilodeau, Esquire, LOSCO & MARCONI, P.A., Wilmington, Delaware,
Amicus Curiae for The Delaware Chapter of the American Planning Association &
The Delaware League of Governments.
VAUGHN, Justice:
2
The Plaintiff-Appellant, Ocean Bay Mart, Inc. (“Ocean Bay”), owns a 7.71-
acre parcel of real property located in the City of Rehoboth Beach (“the City”). In
June 2015, Ocean Bay submitted a Site Plan to the City proposing to develop the
property into 63 residential condominium units. Fifty-eight of the residential units
would be detached, single-family dwellings. The other five would be single-family
attached units. The common elements would include a clubhouse, a pool, and
private streets, referred to as drives. Under the plan, the 7.71 acres would remain a
single, undivided parcel. The development would be known as “Beach Walk.”
The submission of the Site Plan set into motion a chain of events over whether
Beach Walk could be approved as a single, undivided parcel or whether the project
had to be subdivided into individual lots corresponding to the residential units. The
events included a decision by the City’s Building Inspector that the project could not
be approved as a single, undivided parcel; a decision by the City’s Board of
Adjustment overruling the Building Inspector’s decision; a decision by the City’s
Planning Commission, rendered after the Board of Adjustment’s decision, that the
Site Plan could not be considered unless it was resubmitted as a major subdivision
application; a decision by the City Commissioners upholding the Planning
Commission; an appeal of the Commissioners’ decision to the Superior Court, which
reversed the Commissioners; and the City’s adoption of three amendments to its
zoning code. Two of the amendments were enacted in 2016. The third was enacted
3
in 2019. The Superior Court’s decision reversing the City Commissioners also
remanded the matter to the City for a determination as to how one of the 2016
amendments applied to Beach Walk, an issue not considered by the Commissioners
when they upheld the Planning Commission. However, the 2019 amendment,
adopted after the Superior Court remand, settled the issue by making it clear that
Beach Walk was subject to the 2016 amendments and had to comply with the City’s
major subdivision regulations.
Ocean Bay then filed this action in the Court of Chancery, alleging that it had
a vested right to have its Site Plan approved substantially in the form submitted
without going through major subdivision approval and that the City was equitably
estopped from enforcing the zoning code amendments against Beach Walk. After a
trial, the Court of Chancery ruled that Ocean Bay did not have a vested right to
develop Beach Walk as laid out on the Site Plan and the City was not equitably
estopped from enforcing its new zoning amendments. Ocean Bay appealed, and for
the reasons that follow, we affirm.
FACTS AND PROCEDURAL HISTORY
Ocean Bay’s property is the site of the Ocean Bay Mart Shopping Center. It
is situated on the eastern side of Route 1 in the City of Rehoboth. Since its heyday
in the mid-70s and 80s, the Center has seen increased competition as newer, more
modern shopping centers and restaurants north of the Center on Route 1 have been
4
constructed, drawing business away from Ocean Bay Mart and diminishing the
Center’s appeal. In 2009, Keith Monigle, Ocean Bay’s sole owner, began
investigating residential options for redevelopment of the property while waiting for
longer term leases to wind down. By 2012, Mr. Monigle decided to redevelop the
property as residential condominiums. He was interested in organizing the
development as a condominium in hopes of avoiding the City’s subdivision approval
process, which is more arduous and expensive than a site plan approval for
condominiums.
In particular, Mr. Monigle was impressed with a condominium project located
in the City known as the “Cottages at Philadelphia Place.” This project is on
property just under one acre in size and consists of eight separate buildings, each a
single condominium residence, on one parcel, with the area between the buildings
designated as common area and maintained by the condominium association. In
2012, Mr. Monigle retained the engineering firm Pennoni Associates, Inc. to create
the condominium Site Plan for Beach Walk.
The property is zoned C-1, that is, Commercial-1. The City’s Table of Use
Regulations provides that single-family detached dwellings and single-family
attached units are permitted in a C-1 district. When Beach Walk was being planned,
however, construction of single-family detached dwellings was subject to a footnote
in the Table of Use Regulations that provided that “no more than one main building
5
may be erected on a single lot.”1 This one-main-building footnote did not apply to
single-family attached dwellings, two-family dwellings or single-family
semidetached dwellings, which are also permitted in the C-1 zone. It applied only
to single-family detached dwellings.
In 2013, Mr. Monigle had Ocean Bay’s realtor, Kathy Newcomb, reach out to
City officials and inquire about the zoning laws and regulations relating to
condominiums. She set up a meeting in August 2013 with the City’s Building
Inspector, Terri Sullivan. Ms. Newcomb attended the meeting with another realtor,
Rob Burton, who had a parcel similar to Ocean Bay’s for sale and had zoning
questions regarding that property. Ms. Newcomb asked specific questions related
to the property Mr. Burton was interested in and general zoning questions that related
to Ocean Bay’s property. Neither Ms. Newcomb nor Mr. Burton identified Ocean
Bay’s property or mentioned it by name. She also asked questions related to a
property “for sale by owner on Scarborough Avenue Extended,”2 which was a
28,000 square foot lot with similar zoning where the owner wanted to build five
dwellings. After the meeting, Ms. Newcomb confirmed their discussion in a letter
to Inspector Sullivan. A response by Inspector Sullivan via email expressly
mentions only R-2 and C-3 districts and states that having one parcel with five homes
1
Rehoboth Beach C. § 270, Attachment 1 - Table of Use Regulations, at 1:3 n.1 (2010).
2
App. to Opening Br. at A099.
6
was allowable. The Vice-Chancellor found that the email generally indicated that
condominium projects did not require subdivision.
In June 2014, Mr. Monigle also had an attorney for Ocean Bay reach out to
the City about zoning laws and regulations relating to condominiums. The attorney
called and spoke with the City’s Solicitor on June 27. In an affidavit, the attorney
stated that he asked the City Solicitor “if a residential condominium project had to
go through a full ‘subdivision’ review process, or whether a condominium plan only
needed a ‘site plan’ review.”3 The City Solicitor told him that a proposed
condominium plan “would only need to go through a ‘site plan’ review.”4
Between 2012 and 2015, Mr. Monigle and Pennoni worked to develop the
concepts and layout that would become the Site Plan for Beach Walk. Avoiding a
plan that would be considered a subdivision remained a concern. In one email, for
example, dated July 7, 2014, Mr. Monigle explained that some of the parking areas
within Beach Walk were planned to be available to several residents and visitors and
that “[t]his may be something we have to do in order [to] avoid subdivision at the
Rehoboth level.”5 In another email, he indicated that one of his goals was “[t]o avoid
becoming any sort of subdivision.”6
3
Id. at A101.
4
Id.
5
Id. at B003 (emphasis in original).
6
Id. at B004.
7
As mentioned above, the Site Plan was submitted on June 15, 2015. Prior to
submitting a land-use plan, applicants can take advantage of the City’s optional
Project Concept Review—the purpose of which is to present the general goals of the
project to the Planning Commission and receive feedback in the form of “nonbinding
written comments and suggestions.”7 Ocean Bay elected not to use this process. On
July 2, 2015, less than a month after Ocean Bay’s Site Plan was submitted, the
Chairman of the Rehoboth Beach Planning Commission called Mr. Monigle and
asked why Ocean Bay Mart had not used the Project Concept Review process. Mr.
Monigle then emailed Pennoni about the phone call and his decision to forgo the
Project Concept Review and described the process as one “where the perspective
[sic] applicant lays out his cards and the town then has the opportunity [to] adjust
the code!”8
On July 29, 2015, a little over a month after the Site Plan was submitted,
Building Inspector Sullivan issued a comment letter identifying flaws in the plan.
Soon after, Damalier Molina became the new Building Inspector. On September 23,
2015, he issued an additional comment letter regarding the Site Plan, which again
identified several flaws. Neither letter called into question the submission of Beach
Walk as a single parcel or mentioned any need that Beach Walk undergo subdivision
7
Rehoboth Beach C. § 236-31 C.
8App. to Answering Br. at B006.
8
approval.
At two City Planning Commission meetings in the months following Ocean
Bay’s submission of its Site Plan, the Chairman of the City’s Planning Commission
made comments indicating that Beach Walk was not a subdivision. On September
11, 2015, the Chairman mentioned that the Site Plan would be before the
Commission soon and stated that “this is not a subdivision . . . [b]ecause you’re not
subdividing the property.”9 At a November 13, 2015 Planning Commission meeting,
the Chairman stated again that Beach Walk “is not [a] subdivision. It is a condo.”10
On November 20, 2015, however, Inspector Molina issued a comment letter
to Ocean Bay stating, apparently for the first time, that the Site Plan was not
compliant with the City Code because the 58 single-family detached dwellings
violated the no-more-than one-main-building on a single lot requirement contained
in footnote 1 to the Table of Use Regulations. In other words, Inspector Molina
provided notice to the effect that the proposed Site Plan would need to be carried out
as a subdivision rather than as a condominium. The letter also explained that,
accordingly, the Site Plan would not be included on the agenda for the Commission’s
next public hearing. It informed Ocean Bay of its right to appeal the building
inspector’s determination to the City’s Board of Adjustment. Mr. Monigle was
9
App. to Opening Br. at A035.
10
Id.9
unaware of the footnote and it had also apparently gone unnoticed by his
representatives, and, initially, by former Building Inspector Sullivan and Building
Inspector Molina himself until he noticed it prior to writing his November 20, 2015
letter.
Ocean Bay appealed to the Board of Adjustment. At the hearing before the
board on May 23, 2016, Ocean Bay’s attorney argued that the language in the
footnote in the Table of Use Regulations was ambiguous. The City Solicitor argued
that the Table of Use Regulations was “clear and unambiguous with regard to one
main building per lot.”11 The Board of Adjustment agreed with Ocean Bay’s
argument that the footnote was ambiguous, granted the appeal and reversed the
decision of the Building Inspector. The minutes of the meeting record the Board’s
decision as follows:
Mr. [C.H.] made a motion, seconded by [Ms. M.K.], to
grant the appeal to reverse the decision of the Building
Inspector.
[The Chairman] clarified that the motion is to overturn the
decision of the building inspector and therefore to support
the appeal.
[C.H.] – for. He did not want to get too involved with the
emotions that have been expressed across the board in the
letters and otherwise. There is no question that the
language of the Code is ambiguous and confusing. [T.E]
– for, for the same reasons as his colleagues. [M.K] – for.
She regretted that there is some ambiguity here that the
11
Id. at A158.
10
Board is trying to deal with. This is a justified appeal of
this case. [D.P] – for. To say that only one unit can be
built on seven acres is ridiculous. Motion carried
unanimously.12
After the Board of Adjustment rendered its decision, the Planning
Commission addressed Beach Walk at its regular meeting held on August 12, 2016.
The Commission passed a motion “that the Planning Commission request [Ocean
Bay] and any other interested parties to submit to the Planning Commission . . . a
legal memo . . . addressing (1) whether [Beach Walk] constitutes a subdivision under
the City ordinance, and (2) whether the Planning Commission is bound by the Board
of Adjustment’s decision[.]”13
In September 2016, the City Commissioners began considering ordinances
that would resolve the apparent ambiguity created by footnote one in the Table of
Use Regulations. Ordinances 1016-02 and 1116-01 were passed in October and
November 2016, respectively. Ordinance 1016-02 amended Section 270-46.1.1 of
the City Code to require that a building used as a one or two-family dwelling have
its primary entrance within 100 feet of a public street. The public interest to be
served as recited in that ordinance was effective access to dwelling units by
emergency services. Ordinance 1116-01 amended Chapter 270 to delete footnote
one in the Table of Use Regulations and add a new section that states: “Within all
12
Id. at A159-60.
13
Id at A165.
11
districts, where permitted, no more than one single-family detached dwelling with
its customary non-habitable accessory buildings may occupy or be constructed upon
any lot.”14 The public interest to be served as recited for that ordinance was the
desire by the Mayor and Commissioners to affirm the Building Inspector’s
interpretation of footnote one to the Table of Use Regulations and “to remove any
uncertainty in its application.”15 These ordinances, if applied to Beach Walk, would
require that it go through major subdivision approval. Both ordinances contained a
provision stating that they were subject to the pending ordinance doctrine and that
the Building Inspector should “reject any new application that is inconsistent with
the amendments to Chapter 270 provided in the Ordinance until such time as the
Mayor and Commissioners take action on the Ordinance.”16 Thus, while any new
land-use application that did not comply with the 2016 ordinances was to be rejected
while action on the proposed ordinances was pending, the ordinances did not
expressly address their retroactive effect on the pending Beach Walk Site Plan.
While the 2016 Ordinances were under consideration, several City officials
indicated that they would not apply to Beach Walk. A local newspaper reported on
September 6, 2016, that the City’s Mayor commented that “the proposed changes
[would] not apply to the Beach Walk project because it would be considered
14
Id. at A174.
15
App. to Opening Br. at A173.
16
Id. at A172, A174.
12
grandfathered.”17 At a September 7, 2016 public workshop concerning possible
amendments to the Code, a Commissioner and the City Solicitor also made
statements inferring that the 2016 Ordinances would not apply to the Beach Walk
application.
On October 21, 2016, the Planning Commission met and discussed the legal
memos that it had requested at its August 12 meeting. Persons who had filed memos
were given an opportunity for additional comment. The Commission then voted
unanimously “that it would treat the Beach Walk Application . . . as a major
subdivision.”18 The Commission then tabled its decision to give Ocean Bay an
opportunity to respond to its decision.
At a Planning Commission meeting held on December 9, 2016, Mr. Monigle
advised the Commission that “he has no intention at this time to file for a major
subdivision” and that “[h]e would like to proceed with site plan review.”19 At a
meeting held on January 13, 2017, the Commission passed a motion giving Ocean
Bay 60 days to file a major subdivision application or request additional time to do
so. Failure to do so would result in the decision of the Commission not to consider
the Site Plan as submitted being deemed final.
Ocean Bay appealed the Commission’s decision to the City Commissioners.
17
Id. at A168.
18
Id. at A176
19
Id. at A038.
13
At a hearing before the Commissioners, the Planning Commission argued that the
Delaware Uniform Common Interest Ownership Act (“DUCIOA”) provides that
each unit in a condominium “constitutes, for all purposes, a separate parcel of real
estate.”20 From this, the Commission argued, it follows that Beach Walk created
multiple separate parcels of real estate and fell within the City code’s definition of a
subdivision, which is the “division of a parcel of land into two or more lots.”21
The Commissioners agreed with the Planning Commission’s argument that
under the DUCIOA, the Beach Walk plan created multiple separate lots which
required subdivision approval. They analyzed the Board of Adjustment’s decision
as follows:
The Board of Adjustment’s decision does not bar a
determination that the Board Walk project is subject to
subdivision review. The Board merely concluded that
more than one main building is permitted on a single lot at
the subject site. It did not speak to whether the application
to create “multiple parcels of real estate” pursuant to
DUCIOA triggered subdivision review. The features of
the proposed development trigger subdivision review, not
its form of ownership.22
The Commissioners upheld the Planning Commission by a vote of 4-2.
Ocean Bay then filed a petition for a writ of certiorari in the Superior Court in
20
Id. at A182 (quoting 25 Del. C. § 81-105(b)(1) (emphasis added)).
21
App. to Opening Br. at A182. The division of a parcel of land into five or more lots constitutes
a major subdivision.
22
Id. at A187.
14
which it sought review of the City Commissioners’ decision. In a September 19,
2018 ruling, the court reversed the City Commissioners, holding that they “made an
error of law when they concluded that [DUCIOA] makes ‘Beach Walk’ subject to
the City’s subdivision requirements.”23 The court refused to address an argument
made by the City that Ordinance 1116.01 applied to Beach Walk and remanded the
case back to the City, reasoning that the City Commissioners had not addressed the
ordinance in their decision, and the “issue should, in the first instance, be presented
to and decided by the appropriate City officials.”24
After receiving the Superior Court’s decision, the City adopted the third
Ordinance relevant to this appeal, Ordinance 0519-01, on May 17, 2019. The
Ordinance reads:
[A]ny application submitted for a major subdivision,
minor subdivision, site plan approval, partitioning or other
division of land pending at the time of adoption [of]
Ordinances 1016-02 and 1116-01 and which are not
finally approved as of April 1, 2019 shall comply with all
requirements of Ordinances 1016-02 and 1116-01 prior to
obtaining final approval and recordation.25
This eliminated any doubt that Beach Walk would require approval as a major
subdivision and brought proceedings in the City to an end.
Ocean Bay responded by filing this lawsuit in the Court of Chancery. The
23
Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2019 WL 1126351, at *6 (Del. Super. Mar.
12, 2019).
24
Id. at *1, *6.
25
App. to Opening Br. at A189-90.
15
complaint contained three counts. The first alleged that Ocean Bay had developed
a vested right to develop Beach Walk as a condominium Site Plan because it had
begun the approval process before the 2016 and 2019 ordinances were enacted and
had spent considerable funds in support of its efforts. The second requested a
declaratory judgment permitting Ocean Bay to proceed with its Site Plan free of the
effect of any ordinances adopted after June 18, 2015. The third alleged that the City
was equitably estopped from requiring it to go through the major subdivision
process.
The Vice-Chancellor analyzed Ocean Bay’s vested rights argument by
applying the balancing test approved by this Court in In re 244.5 Acres of Land and
Town of Cheswold v. Central Delaware Business Park.26 In In Re 244.5 Acres, this
Court explained that:
the test should involve “a weighing of such factors as the
nature, extent and degree of the public interest to be served
by the ordinance amendment on the one hand and, on the
other hand, the nature, extent and degree of the
developer’s reliance on the state of the ordinance under
which he has proceeded ….”27
“In the final analysis, good faith reliance on existing standards is the test.”28 In Town
of Cheswold, this Court added that ‘the effect of the pace of the development effort’
26
See Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2021 WL 4771246 (Del. Ch. Oct. 13,
2021).
27
808 A.2d 753, 757-58 (Del. 2002) (quoting Urban Farms, Inc. v. Borough of Franklin Lakes,
431 A.2d 163, 172 (N.J. Super. Ct. App. Div. 1981)).
28
In re 244.5 Acres, 808 A.2d at 758.
16
is another factor to be considered, “because ‘delay may defeat a vested rights
claim.’”29 In a footnote, the Court also set forth some specific factors a court may
consider in applying the test set forth in In re 244.5 Acres.30
The Vice-Chancellor described the test set forth in these cases as an “equitable
balancing. The primary focus,” he reasoned, “is the reason the ordinance has been
amended, balanced against the reasonable reliance costs to the property owner.”31
After applying the balancing test set forth in In re 244.5 Acres and Town of
Cheswold, the Vice-Chancellor concluded that the 2016 Ordinances represented an
“exercise of the City’s police powers, in the public interest[,]”32 and “the Plaintiff
did not reasonably rely on the prior City ordinances such that his rights became
vested.”33 The Vice-Chancellor also rejected Ocean Bay’s equitable estoppel
argument.34
The Vice-Chancellor found that Ocean Bay had “expended a substantial sum
of money pursuing this development, hoping to proceed without subdivision.”35
STANDARD OF REVIEW
“We will not overturn the Court of Chancery’s factual findings unless they
29
188 A.3d 810, 822 (Del. 2018) (quoting Salem Church (Del.) Assocs. v. New Castle Cnty., 2006
WL 2873745, at *11 (Del. Ch. Oct. 6, 2006)).
30
See Town of Cheswold, 188 A.3d at 822 n.62.
31
Ocean Bay Mart, 2021 WL 4771246, at *7.
32
Id. at *8.
33
Id. at *1.
34
Id. at *12-13.
35
Id. at *12.
17
are clearly erroneous.”36 “Factual findings are not clearly erroneous ‘if they are
sufficiently supported by the record and are the product of an orderly and logical
deductive process.’”37 Whether an equitable remedy was applied or not applied
using the correct standards is a question of law that we review de novo, but in the
application of the correct legal standard to the facts of the case before us, our review
is for abuse of discretion.38 To the extent that Ocean Bay challenges the Court of
Chancery’s legal conclusions or raises questions of statutory interpretation, we
review both questions of law and statutory interpretation de novo.39
DISCUSSION
Ocean Bay raises three claims on appeal. Its first claim is that the Court of
Chancery erred because (1) Ocean Bay relied in good faith on the City’s past
application of its code and representations from City officials that Beach Walk did
not require approval as a subdivision; (2) when the Board of Adjustment ruled in
favor of Ocean Bay, its rights were vested and protected against subsequent actions
by the City; and (3) since ambiguous provisions are interpreted in favor of a
landowner, the owner can reasonably rely upon ambiguous land use regulations.
36
Bäcker v. Palisades Growth Capital II, L.P., 246 A.3d 81, 94 (Del. 2021) (quoting Klaassen v.
Allegro Dev. Corp., 106 A.3d 1035, 1043 (Del. 2014)).
37
Id. at 94–95 (quoting Biolase, Inc. v. Oracle P’rs, 97 A.3d 1029, 1035 (Del. 2014)).
38
Id. at 95 (citing Siga Techs., Inc. v. PharmAthene, Inc., 67 A.3d 330, 341 (Del. 2013)).
39
Clark v. Clark, 47 A.3d 513, 517 (Del. 2012).
18
Ocean Bay’s second claim is that the Court of Chancery erred because the
2016 ordinances did not apply retroactively to its pending Site Plan and it was
entitled to rely upon the language in the ordinances stating that the Building
Inspector was not to accept any new applications which were inconsistent with the
proposed new ordinances until such time as the Mayor and Commissioners act upon
them.
Ocean Bay’s third claim is that the Court of Chancery erred in not finding that
the City was equitably estopped from applying the 2016 ordinances to Beach Walk.
Preliminarily, Ocean Bay, with the support of the Committee of 10040 as
amicus curiae, contends that the test for finding a vested right in a land use
development should not be “equitable balancing,” a phrase used by the Vice-
Chancellor in applying the test set forth in In re 244.5 Acres and Town of Cheswold.41
The test, they contend, should be “good faith reliance on existing standards.” 42 All
ordinances, they contend,
are, presumably, enacted in the public interest, and, in
particular, a local government determined to stop an
unpopular project, can always put forth some seemingly
compelling reasons unrelated to a particular project that
40
The Committee of 100 is a non-partisan, non-profit association of Delaware business leaders
that works to promote responsible economic development and address issues that affect
Delaware’s economic health.
41
See Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2021 WL 4771246, at *7 (Del. Ch. Oct.
13, 2021).
42
Opening Br. At 24; Committee of 100’s Br. At 12.
19
justifies the additional regulation or change (and which, it
just so happens, also acts to block the unpopular project).43
The City argues in response that “[t]here is no bright line or objective formula for
determining whether vested rights attached – rather the Court must engage in
equitable balancing – and that is precisely the analysis that the [Court of Chancery]
undertook.”44
The finding of a vested right to complete a land use project is meant to protect
a property owner against an amendment to a zoning law that renders a project
nonconforming where the property owner reasonably and in good faith relies upon
existing law at the time the project is initiated and spends substantial sums or incurs
significant obligations on the project.45 We reaffirm that the proper test to be applied
in determining whether a property owner has established a vested right is the
balancing test set forth by this Court in In re 244.5 Acres. In applying that test, the
evaluation of the “nature, extent, and degree of the public interest to be served”46 by
the zoning amendment may take into account as a factor, in addition to other factors
such as those set forth in Town of Cheswold,47 evidence that an amendment is
43
Committee of 100’s Br. at 4.
44
Answering Br. at 25.
45
Edward H. Ziegler et al., 4 Rathkopf’s The Law of Zoning and Planning §70:20 (4th ed. 2018).
46
In re 244.5 Acres of Land, 808 A.2d 753, 757 (Del. 2002).
47
See Town of Cheswold v. Central Delaware Business Park, 188 A.3d 810, 821-822, n.62 (Del.
2018).
20
motivated by vocal opposition to a project rather than strong public interest
concerns.
It appears to us in this case, however, that the decisive factor in the Vice-
Chancellor’s decision was his finding that Ocean Bay did not reasonably rely upon
the City’s zoning law as it existed prior to passage of the 2016 amendments. 48 In
reaching this conclusion, the Vice-Chancellor stated that
[t]he real gravamen of the issue here is the extent of the
Plaintiff’s reliance on existing law, and the reasonableness
of that reliance under the circumstances. Assessing the
nature, extent, and degree of the developer’s reliance on
the prior ordinance is critical to resolving the question of
whether vested rights exist, as the In re 244.5 Acres Court
identified when it stated that good faith reliance on the
existing standards was the “final analysis.”49
The balancing test articulated in In re 244.5 Acres and Town of Cheswold v.
Central Delaware Business Park was the correct law to apply, and we find that the
Court of Chancery identified that law correctly. Since the Court of Chancery applied
the correct law, we review the Vice-Chancellor’s application of the law to the facts
for abuse of discretion.50 We now return to Ocean Bay’s first claim.
In its first claim of error, Ocean Bay Mart argues that the Chancery Court
erred when it found that it did not reasonably rely on past condominium projects or
48
See Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2021 WL 4771246, at *1, *13 (Del. Ch.
Oct. 13, 2021).
49
Id. at *8 (quoting In re 2.44 Acres, 808 A.2d at 758).
50
See Bäcker v. Palisades Growth Capital II, L.P., 246 A.3d 81, 95 (Del. 2021) (citing Siga Techs.,
Inc. v. PharmAthene, Inc., 67 A.3d 330, 341 (Del. 2013)).
21
representations made by City officials before the Site Plan was filed. It contends
that it engaged in a lengthy project leading up to submitting its Site Plan, including
reviewing the Code and other projects and speaking with City officials−specifically
Inspector Sullivan and the City Solicitor. Ocean Bay asserts that there is no question
it was acting in good faith when it “(i) reviewed other condominium projects in the
City that featured exactly what Ocean Bay proposed, and (ii) specifically asked the
Building Inspector about the Footnote and was told, in writing, that it did not apply
to condominium projects.”51
Before addressing this argument specifically, however, we think it must be
said that when the Beach Walk Site Plan was submitted, a substantial question
existed, although apparently unperceived at that time, as to whether the Plan
complied with the City’s existing law. The Table of Use Regulations provided that
single-family dwellings were permitted in a C-1 district, but subject to the
requirement that no more than one main building could be erected on a single lot.
The Site Plan could easily and reasonably have been viewed as creating 58 “main
building” single-family residences on a single lot in violation of the “no more than
one main building” requirement.52 This view of the one-main-building provision is
precisely the view that Building Inspector Molina arrived at before submitting the
51
Opening Br. at 26.
52
Rehoboth Beach C. § 270, Attachment 1 - Table of Use Regulations, at 1:3 n.1 (2010).
22
Plan to the Planning Commission. As the Vice-Chancellor correctly observed,
“[u]nlike more typical vested rights cases, this is not a situation where the law ante
clearly permitted a use, later prohibited by new legislation.”53 Although Ocean Bay
was unaware of the one-main-building provision, it is charged with knowledge of it
for determining reasonable reliance.54
Ocean Bay contends that the one-main-building provision did not create a
complication for the Beach Walk Site Plan because Ocean Bay relied in good faith
on the City’s past application of its code and representations from City officials that
Beach Walk did not require approval as a subdivision. However, Ms. Newcomb’s
conversation with Ms. Sullivan and Ms. Sullivan’s subsequent “written
interpretation”55 never mentioned Beach Walk or Ocean Bay Mart. While Ms.
Newcomb’s colleague asked specific questions related to his property, Ms.
Newcomb, the record would suggest, merely asked general questions about the
zoning laws applicable to R-2 and C-3 districts, as well as questions about the
Scarborough Avenue property. Ocean Bay contends that Ms. Newcomb asked Ms.
Sullivan about the one-main-building footnote and how it relates to condominiums.
However, the record does not support that contention. The correspondence with
Building Inspector Sullivan does not mention the Table of Use Regulations or the
53
Ocean Bay Mart, 2021 4771246, at *9.
54
Tucker v. Crawford, 315 A.2d 737 (Del. Super. 1974).
55
Opening Br. at 26 (emphasis omitted).
23
one-main-building per lot requirement. Ms. Newcomb testified that they only
discussed the Table of Use Regulations “as it relates to the subordinate nature of the
structures.”56
The Vice-Chancellor considered the discussion and correspondence between
Ms. Newcomb and Building Inspector Sullivan and came to the following
conclusion:
Ms. Sullivan’s email was not an official, or even an
unofficial, approval of Beachwalk itself; in fact, Sullivan
never purported to approve the Site Plan, although she also
did not suggest that it required subdivision. The August
26 email might have been of some preliminary reliance
value to the Plaintiff, but in the context of the further
Beachwalk-specific review to come, the Plaintiff could not
reasonably rely on the August 26 email as a full and final
statement of the law.57
As the Vice-Chancellor also observed, “[t]his is particularly so in light of the
Rehoboth Code language allowing no more than one detached residence ‘main
building’ on a single lot.”58 We find no abuse of discretion in the Vice-Chancellor’s
conclusion that Ocean Bay could not reasonably rely on this vague and indirect
interaction with Building Inspector Sullivan as a full and final statement of the law.
Similarly, it was not an abuse of discretion to find that Ocean Bay did not
reasonably rely on the conversation between Ocean Bay’s attorney and the City
56
App. to Opening Br. at A304.
57
Ocean Bay Mart, 2021 WL 4771246, at *10.
58
Id.24
Solicitor. In that conversation, the attorney confirmed with the Solicitor that a
condominium is not a subdivision and that a condominium is assessed under
different standards for purposes of Planning Commission review. We find no abuse
of discretion in the Vice-Chancellor’s finding that this brief conversation, although
“of interest and encouragement” to Ocean Bay, was insufficient to create reasonable
reliance that Beach Walk, with 58 single-family dwellings, could proceed as a
condominium rather than a subdivision.59
As for Ocean Bay’s reliance on other condominium projects, the Vice-
Chancellor found that Ocean Bay did not offer evidence regarding the facts and
circumstances regarding the approvals of these other projects. 60 A generalized
knowledge that other projects have been approved will not give rise to vested rights.
There is no abuse of discretion in the Vice-Chancellor’s determination that the
approval of other projects does not support Ocean Bay’s claim.
Ocean Bay’s second argument in support of its first claim is that when the
Board of Adjustment ruled in favor of Ocean Bay, any question about the Site Plan’s
compliance with the City’s code was settled in its favor and its vested right to
proceed with its Site Plan was clearly established. However, while the Board of
Adjustment’s decision gave Ocean Bay a short-lived victory, the Planning
59
Id. at *3, 9.
60
Id.
25
Commission and the City Commissioners began taking steps to adopt the Building
Inspector’s interpretation of the one-main-building provision. Less than three
months after the Board of Adjustment’s decision, in August 2016, the Planning
Commission openly solicited views from interested parties as to whether it was
bound by the Board of Adjustment’s decision. A month later, in September 2016,
the City Commissioners began their consideration of ordinances that would “affirm
the Building Official’s interpretation of the . . . [one-main-building per lot] code
provision and to remove any uncertainty in its application.”61 These actions should
not have come as any surprise to Ocean Bay. There is no indication in the record
that Ocean Bay took any significant development steps in reliance on the Board’s
decision during the four-month period after the Board’s decision. Once the Planning
Commission began openly questioning whether it was bound by the Board’s
decision and the City Commissioners began to consider new ordinances consistent
with the Building Inspector’s view, Ocean Bay was in no position to reasonably rely
on the Board’ decision.
Ocean Bay’s third argument in support of it first claim is that since ambiguous
provisions are interpreted in favor of a landowner, the owner can reasonably rely
upon ambiguous land use regulations. Ocean Bay claims that under the Vice-
Chancellor’s ruling, “if a Code provision is ambiguous, the government need simply
61
App. to Opening Br. at A173.
26
amend the Code provision, and the property owner will be bound by that change,”62
regardless of any reasonable reliance on the ambiguous provision before it was
amended. Ocean Bay and the Committee of 100 also argue that this will incentivize
local governments to create ambiguity in their zoning laws and regulations, thereby
preventing any good faith reliance on the laws and regulations and effectively
destroying the vested rights doctrine.
We are unpersuaded by this argument. The principle that an ambiguity in a
statute will be resolved in favor of the property owner is a rule of statutory
construction. There is no evidence that Ocean Bay relied upon this rule of statutory
construction when it formulated its Beach Walk plan. Alleged ambiguity in the one-
main-building footnote was first raised by Ocean Bay when it made its arguments to
the Board of Adjustment. In addition, a property owner who relies upon an
ambiguous zoning provision does so at the property owner’s peril. Where
uncertainty exists regarding the meaning and application of a zoning provision, no
reliance on the provision can be considered reasonable until after the uncertainty is
resolved.
Ocean Bay’s second claim is that the 2016 ordinances did not apply
retroactively to its pending Site Plan and it was entitled to rely upon language in
Section 2 of Ordinance 1016-2 and Section 3 of Ordinance 1116-01 that indicated
62
Opening Br. at 29.
27
that the Building Inspector was not to accept any new applications which were
inconsistent with the proposed new ordinances until such time as the Mayor and
Commissioners acted upon them. Ocean Bay asserts that “new applications would
be rejected, meaning, of course, that pending applications were unaffected.”63 It
contends that it was not until the City further amended its Code in 2019, which
clearly made the ordinances applicable to pending applications, that Ocean Bay’s
good faith reliance could have ended.
We find that the plain language of the 2016 Ordinances is unambiguous and
they applied to pending applications, including the Beach Walk Site Plan. The
default rule is that ordinance amendments apply to pending applications for building
permits.64 While the City was free to specify that pending applications would be
exempt from the new ordinances, it did not do so. The ordinances provided that no
new applications that did not conform to the ordinances would be accepted, but they
did not provide that they would not apply to pending applications, if the ordinances
were enacted. Nothing in the 2016 Ordinances indicates that they would apply only
63
Opening Br. at 31 (emphasis in original).
64
See Kejand, Inc. v. Bd. of Adjustment of Town of Dewey Beach, 1993 WL 189536, at *2 (Del.
Super. Mar. 19, 1993) (“Delaware courts follow the majority rule that a subsequently enacted or
amended ordinance altering a permitted use to a prohibited or conditional use is valid against a
person who submits an application for a permit or acquires a permit prior to enactment or
amendment of the ordinance.”); Edward H. Ziegler et al., 4 Rathkopf’s The Law of Zoning and
Planning § 70:27 (4th ed. 2022) (“In the ordinary case in which a developer’s plans are frustrated
by an amendment of the ordinance, . . . all prospective developers whose rights under an existing
ordinance have not as yet become vested . . . are bound by the amended provisions.”).
28
to new applications once they were adopted. Both ordinances assert that they will
“take effect immediately upon [their] adoption by the Commissioners of the City of
Rehoboth Beach.”65 The language of Ordinance 1116-02 includes that “[n]o
building used in whole or part as a dwelling shall be constructed unless it complies
with the following street access requirement.”66 Ordnance 1116-01 states, “Within
all districts, where permitted, no more than one single-family detached dwelling with
its customary non-habitable accessory buildings may occupy or be constructed upon
any lot.”67 None of this language places any limitation on their application and the
language is not ambiguous: the Ordinances neither explicitly state nor imply that
pending applications are exempt.
Ocean Bay’s argument that the ordinances limited the scope of the provisions
to only new applications is misplaced. The ordinances merely codified the pending
ordinance doctrine, which prohibits landowners from obtaining building permits if
the proposed construction would violate any provision of a pending ordinance.68 The
Section 2 and Section 3 provisions applied only when the ordinances were pending
and not once the Commissioners took action on them.69 Sections 2 and 3 were
65
App. to Opening Br. at A172, 74.
66
Id. at 171.
67
Id. at 174.
68
Covington v. Bd. of Adjustment of City of Rehoboth Beach, 2016 WL 7242581, at *5 (Del. Super.
Dec. 14, 2016).
69
App. to Opening Br. at A174 (providing that the any new application that is inconsistent with
the amendments will be rejected “until such time as the Mayor and Commissioners take action on
the Ordinance.”).
29
therefore inapplicable following the adoption of the ordinances and had no bearing
on the scope of the Ordinances.70
Ocean Bay’s third claim is that the Court of Chancery erred in not finding
that the City was equitably estopped from applying the 2016 ordinances to Beach
Walk. Because one of the elements of equitable estoppel is good faith reliance,
Ocean Bay repeats many of the same arguments that it made in connection with its
first claim, that is, that it had a vested right to develop Beach Walk as a condominium
on a single, undivided parcel.
In general, equitable estoppel is available “when a party by his conduct
intentionally or unintentionally leads another, in reliance upon that conduct, to
change position to his detriment.”71
To establish estoppel it must be shown that the party
claiming estoppel lacked knowledge or the means of
obtaining knowledge of the truth of the facts in question;
relied on the conduct of the party against whom estoppel
is claimed; and suffered a prejudicial change of position as
a result of his reliance.72
70
The 2019 Ordinance was passed to “conclusively confirm: and “to remove any doubt” that the
2016 ordinances applied to pending applications submitted before their adoption. A189.
Comments made by the Mayor, one Commissioner and the City Solicitor indicating that the 2016
ordinances would not apply to Beachwalk are not binding upon a majority of the Commissioners.
In re Kent County Adequate Public Facilities Ordinances Litigation, 2009 WL 445386 (Del. Ch.
Feb. 11,2009, rev’d on other grounds, Chase Alexa, LLC v. Kent Cnty. Levy Ct., 991 A.2d 1148(Del. 2010).
71
Wilson v. American Ins. Co., 209 A.2d 902, 903–04 (Del. 1965).
72
Williams Cos., Inc. v. Energy Transfer Equity, L.P., 159 A.3d 264, 275 (Del. 2017) (quoting
Waggoner v. Laster, 581 A.2d 1127, 1136 (Del. 1990)).
30
The Superior Court has recognized, and we agree, that “[t]he doctrines of
equitable estoppel and vested rights, although theoretically distinct, are often applied
interchangeably by courts throughout the country to reach the same results in similar
factual situations.”73
As discussed in detail above, Ocean Bay has not made a showing of
reasonable, good faith reliance on statements made by government officials and past
condominium projects. In addition, Ocean Bay could not reasonably rely on the
Board of Adjustment’s decision that the one-main-building footnote was ambiguous
in Ocean Bay’s favor because shortly thereafter, and before Ocean Bay had taken
any development steps in reliance on that position, the Planning Commission began
openly questioning whether it was bound by the decision of the Board of
Adjustment, and, shortly after that, the City began taking steps to amend its
ordinances to resolve the perceived ambiguity in favor of the position taken by
Building Inspector Molina. Ocean Bay Mart could not rely on the text of the 2016
Ordinances because those ordinances did not include any language that exempted
the Site Plan. The Vice-Chancellor did not abuse his discretion in finding that the
City was not equitably estopped from applying the 2016 ordinances to Ocean Bay’s
property.
73
Miller v. Bd. of Adjustment of Town of Dewey Beach, 521 A.2d 642, 645 (Del. Super. 1986).
31
CONCLUSION
For the foregoing reasons, the judgment of the Court of Chancery is
AFFIRMED.
32