Ocean Bay Mart, Inc. v. The City of Rehoboth Beach ( 2021 )

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
OCEAN BAY MART, INC., )
)
Plaintiff, )
v. )
)
THE CITY OF REHOBOTH ) C.A. No. 2019-0467-SG
BEACH, DELAWARE, )
)
Defendant. )
MEMORANDUM OPINION
Date Submitted: September 9, 2021
Date Decided: October 13, 2021
Richard A. Forsten, Pamela J. Scott, and Elizabeth S. Fenton, of SAUL EWING
ARNSTEIN & LEHR LLP, Wilmington, Delaware, Attorneys for Plaintiff Ocean
Bay Mart, Inc.
Max B. Walton and Lisa R. Hatfield, of CONNOLLY GALLAGHER LLP, Newark,
Delaware, Attorneys for Defendant The City of Rehoboth Beach, Delaware.
GLASSCOCK, Vice Chancellor
The Ocean Bay Mart shopping center has been a Rehoboth landmark—
perhaps not the city’s most attractive—for decades. Located on Rehoboth’s
southwestern border—across Route 1 from the unincorporated area locals refer to as
the “Forgotten Mile,” the shopping center is owned by the Plaintiff Ocean Bay Mart,
Inc., itself solely owned by Keith Monigle (together with Ocean Bay Mart, Inc., the
“Plaintiff”). The Plaintiff intends to redevelop the property into 63 residences,
organized as a condominium. In question is whether the Plaintiff developed vested
rights to so redevelop before the Defendant City of Rehoboth Beach (the
“Defendant” or the “City”) enacted a current ordinance which requires that such a
development—with many detached homes—requires a sub-division of the property,
a step the Plaintiff wishes to avoid. The Plaintiff seeks a declaration that its rights
vested prior to the enactment of the new ordinance, or that the City must be equitably
estopped from enforcing the ordinance against it.
The equitable question here is a familiar one. A developer submits a
development plan for governmental review; during the pendency of the review, the
governmental entity amends the law, and the new law renders the development plan
non-compliant. Does the new law apply, or does the developer get the benefit of
review under the law as it formerly existed? Here, the matter has been tried, and the
trial record presents, to my view, a rather close equitable case regarding vested
rights. It is clear that the Plaintiff and its principal expended funds and forwent
1
income in the hopes of development under the old regime. It is also clear that
Mr. Monigle was aware from the earliest planning stages that the City might prefer
to impose a subdivision requirement on him, that he eschewed the chance to put
tentative plans before the City to avoid “poking the beast,” and that he therefore
relied on rather obscure assurances from City officials that he would be able to
proceed without subdivision. The City’s code as it existed then was ambiguous as
to whether subdivision was required; Mr. Monigle was clearly aware by the time the
City’s Building Inspector rejected the Site Plan in 2015 that the City espoused the
view that subdivision was required.1 City officials themselves were unclear and
inconsistent in their interpretation of the code, making statements indicating that the
project could proceed without subdivision. On balance, however, I find the Plaintiff
did not reasonably rely on the prior City ordinances such that his rights became
vested, and that equity requires neither a declaration to the contrary nor the
application of estoppel against the Defendant.
The facts as developed at trial, and my reasoning therefrom, follow.
1
The Board of Adjustment rejected the Building Inspector’s decision, finding the City code
ambiguous. The City thereafter amended the code in an attempt to cure the ambiguity.
2
I. BACKGROUND 2
For several years, Ocean Bay Mart, Inc., solely owned by Mr. Monigle, has
sought to turn certain property in Rehoboth Beach into a condominium featuring 63
units, consisting mostly of detached dwelling houses, a development Mr. Monigle
denominated “Beachwalk.” The property consists of a single large lot of 7.71 acres,
and at all times pertinent has been zoned C-1.3 Lots zoned C-1, according to the
City’s “Table of Use Regulations,” may be developed with single-family detached
dwellings “[p]rovided that no more than one main building may be erected on a
single lot.”4 During preliminary planning stages, associates of the Plaintiff spoke
with various officials from the City of Rehoboth Beach regarding land use planning
and density regulations. After the Plaintiff submitted the Beachwalk Site Plan
application (the “Site Plan” or “Beachwalk”) for approval, the City Building
Inspector for Rehoboth Beach issued a letter indicating that the Site Plan could not
go forward as described, explaining that he viewed the Site Plan outlined as a
2
Where the facts are drawn from exhibits jointly submitted at trial, they are referred to according
to the numbers provided on the parties’ joint exhibit list and with page numbers derived from the
stamp on each JX page (“JX _, at _”).
3
JX 13; JX 17.
4
See Rehoboth Beach Code, Table of Use Regulations, at 1, 3 (2010); see also Rehoboth Beach
Code § 270-10(C) (2015). The C-1 zoning code considers any use permitted in the R-2 District
under Section 270-12(C) a use permitted as a matter of right. See Rehoboth Beach Code § 270-
13(C) (2015). The R-2 zoning code, for its part, considers any use permitted in the R-1 District
under Section 270-11(c) a use permitted as a matter of right. See Rehoboth Beach Code § 270-
12(C) (2015). Finally, the R-1 zoning code incorporates all uses permitted under R-1(S) as a
matter of right. See Rehoboth Beach Code § 270-11(C) (2015). The language at issue is drawn
from the R-1(S) zoning code. Rehoboth Beach Code § 270-10(C) (2015).
3
subdivision, and not a condominium, under the City’s Table of Use Regulations (the
“Rehoboth Code” or the “Table of Use Regulations”). The Plaintiff appealed this
finding to the Board of Adjustment for the Defendant, which determined that the
City’s applicable Table of Use Regulations was ambiguous, and overturned the City
Building Inspector’s decision on that basis. In response, the City Commissioners
promptly changed the applicable law, enacting Ordinance No. 1116-01 and
Ordinance No. 1016-02 (together, the “2016 Ordinances”) presumably in an attempt
to remove the ambiguity. Finally, in 2019, the City Commissioners adopted
Ordinance No. 0519-01, which made the 2016 Ordinances retroactively applicable
to the Site Plan (together with the 2016 Ordinances, the “Ordinance Amendment”).
The Plaintiff argues that he has vested rights in the law as it existed prior to
the Ordinance Amendment, because he had already begun the approval process and
expended funds to further his vision. He further argues that the Defendant is
equitably estopped from requiring submission of the Site Plan as adapted to
contemplate a major subdivision designation. This post-trial Memorandum Opinion
assesses the questions of whether vested rights exist and whether equitable estoppel
applies and concludes that neither does. Applicable facts that guide my decision are
outlined below.
4
A. Factual Background
1. The Condominium Site Plan
Ocean Bay Mart is an existing shopping center in Rehoboth Beach seeking to
reinvent itself as a residential development.5 After evaluating the options available,
the Plaintiff decided to pursue a 63-unit development designated as condominiums,
rather than as a major subdivision. 6 Development as condominiums rather than as a
subdivision would allow the Plaintiff to sidestep some of the more involved
subdivision regulations.7 The Plaintiff then began developing the Site Plan, which
ultimately was designed to include 58 single-family detached units and five single-
family attached units. 8 The Plaintiff contracted with Pennoni Associates Inc.
(“Pennoni”), an engineering firm, in 2012, to assist with the Site Plan. 9
At the time the Plaintiff began work on the Site Plan, the City’s Table of Use
Regulations stated that, in a commercial zoning area,10 single-family detached
dwellings were a permitted use “[p]rovided that no more than one main building
may be erected on a single lot.”11
5
JX 25, at 1–2.
6
JX 25, at 1–2.
7
See Def.’s Opening Br. Supp. Its Mot. Summ. J. 5, Dkt. No. 40 [hereinafter “Def.’s MSJ Br.”].
8
JX 23, at 2.
9
JX 25, at 4.
10
Commercial zoning, C-1, is the applicable zoning designation for Ocean Bay Mart. See City of
Rehoboth Beach’s Post-Trial Br. 5, Dkt. No. 72 [hereinafter “Def.’s Post-Trial Br.”].
11
Rehoboth Beach Code § 270-10(C) (2015).
5
2. Interactions with the City of Rehoboth Beach
Prior to submitting the Site Plan for approval, the Plaintiff in a circuitous
manner sought assurances from City officials through communications with third
parties.12 In 2013, a real estate broker and personal friend of Mr. Monigle’s, Kathy
Newcomb, directed certain questions regarding condominium projects, densities,
and layouts to Terri Sullivan, the then-acting City Building Inspector, to which
Ms. Sullivan responded via email (the “August 26 email”).13 Ms. Newcomb’s
inquiry directly related to another, much smaller project of redevelopment in
Rehoboth Beach. 14 Ms. Sullivan’s response generally indicated that condominium
projects did not require sub-division.15
In June 2014, the Plaintiff’s attorney, Dennis Schrader, spoke with the City
Solicitor, Glenn Mandalas, who confirmed that in general, a condominium plan is
not a subdivision, and only requires site plan approval. 16 Again, the specific
Beachwalk project was not part of this discussion.
12
JX 25, at 3–4.
13
See JX 01, JX 02. It appears that Ms. Sullivan and Ms. Newcomb exchanged at least one
additional set of emails on the topic of Beachwalk. See JX 08. At that time, Ms. Sullivan indicated
that the site plan review would be “the place to clarify whether these changes can occur.” This
recommendation suggests that Ms. Sullivan sought to encourage the Plaintiff to reach out through
formal City channels regarding the intended development, rather than through ad hoc email
exchanges. Id.
14
See JX 01.
15
See JX 02.
16
See JX 22; cf. JX 06 (a contemporaneous email sent by Mr. Schrader to the Plaintiff). There is
no record of the phone conversation between Mr. Schrader and Mr. Mandalas, but in any event,
Mr. Mandalas does not dispute Mr. Schrader’s recollection. See Pl.’s Post Trial Closing Statement
Following Trial 3, Dkt. No. 73 [hereinafter “Pl.’s Post-Trial Br.”].
6
On strength of these two rather opaque communications, the Plaintiff decided
to proceed with the Site Plan. Various communications between the Plaintiff and
his professionals during this time reference avoiding designation as any sort of
subdivision. 17
The Site Plan was submitted in June 2015. 18 A month later, David Mellen,
the Chairman of Rehoboth Beach Planning Commission, reached out to the Plaintiff
to inquire as to why the Plaintiff had not used the voluntary Project Concept Review
process.19 Use of the Project Concept Review would have allowed the Plaintiff to
communicate directly with the Defendant regarding the proposed Site Plan before
committing “substantial time and expense” to the preparation of a formal Site Plan.20
The Plaintiff commented in an email to his associates that the process was one where
“the perspective [sic] applicant lays out his cards and the town then has the
opportunity adjust [sic] the code!” 21
3. The Site Plan Application on Review
From July until November 2015, the City Building Inspector (originally
Ms. Sullivan, and later Damalier J. Molina) and Pennoni traded correspondence
pertaining to a number of flaws in the Site Plan that needed to be addressed before
17
See, e.g., JX 07, at 1–2; JX 04; JX 05.
18
See JX 09.
19
JX 10.
20
See Rehoboth Beach Code § 236-31(A) (2015).
21
JX 10.
7
the City’s Planning Commission could move forward. 22 This correspondence does
not indicate that the Site Plan was improper because subdivision was required. 23 On
November 20, 2015, however, the City Building Inspector provided notice (the
“2015 Letter”) that the proposed Site Plan would need to be carried out as a
subdivision rather than as a condominium.24
The Plaintiff appealed the 2015 Letter to the Board of Adjustment for the
Defendant, arguing that the language of the City’s Table of Use Regulations was
ambiguous.25 The Board of Adjustment agreed and overturned the decision of the
City Building Inspector in May 2016.26
On October 21, 2016, the Planning Commission unanimously voted that the
Site Plan should be assessed as a major subdivision. 27 On the same day, the City
Commissioners voted to adopt Ordinance 1016-02, which requires that the primary
entrance to any one- or two-family dwelling be located within 100 feet of a public
street.28
On November 18, 2016, the City Commissioners adopted Ordinance
No. 1116-06, amending Chapter 270 of the Rehoboth Code to clarify that no more
22
JX 12; JX 13; JX 14; JX 16; JX 17.
23
See JX 16.
24
Transmittal Aff. of Max B. Walton, Esq., Ex. K, Dkt. No. 41 [hereinafter “Walton Aff.”].
25
See JX 19, at 2.
26
See id. at 3–4.
27
See Walton Aff., Ex. B.
28
See id. at Exs. B and D.
8
than one single-family detached dwelling may be constructed on a lot in all zoning
districts. 29
The express language of each of the 2016 Ordinances states that “the City’s
Building and Licensing Department shall thereafter reject any new application” not
in compliance with the ordinance.30 Neither of the 2016 Ordinances provides any
affirmative language “grandfathering in” applications already being processed. 31
In December 2016, the Plaintiff informed the Planning Commission that it had
no intention of filing as a major subdivision and would prefer to proceed with Site
Plan review. 32 In response, the Planning Commission adopted a motion to reject the
Site Plan unless the Plaintiff submitted a subdivision plan by March 14, 2017.33 The
Plaintiff appealed this decision to the City Commissioners, who upheld the Planning
Commission in January 2018.34
The Plaintiff appealed to the Delaware Superior Court in February 2018.35
The Delaware Superior Court reversed the City Commissioners and remanded the
matter to the City, holding that the court could not “now determine whether
29
See id. at Exs. A and C.
30
See id. at Exs. C and D (emphasis added).
31
Id.
32
See id. at Ex. Y.
33
See Pl.’s Opening Br. Supp. Mot. Summ. J., Ex. Q, Dkt. No. 36 [hereinafter “Pl.’s MSJ Br.”].
34
See id. at Ex. R.
35
See Pet. Writ Cert., Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2019 WL 112635 (Del.
Super. Mar. 12, 2019) (C.A. No. S18A-02-001 THG).
9
Ordinance 1116-01 applies to ‘Beach Walk,’ reasoning that this issue should, in the
first instance, be presented to and decided by the appropriate City officials.”36
In May 2019, the City Commissioners adopted Ordinance No. 0519-01, which
expressly requires that any applications that were submitted and pending for major
subdivisions, minor subdivisions, site plan approval, partitioning or any other
division of land as of the time of adoption of the 2016 Ordinances that had not been
finally approved as of April 1, 2019 must comply with all requirements of the 2016
Ordinances prior to obtaining final approval.37 Thus, for the Site Plan to be
approved, the Site Plan must comply with the Ordinance Amendment.
B. Procedural History
The Plaintiff filed a Complaint in this Court on June 18, 2019 containing three
counts: a claim of vested rights, a claim for declaratory judgment permitting the
Plaintiff to proceed with the Site Plan free of the effect of any ordinances adopted
after June 18, 2015, and a claim of equitable estoppel. 38 In September 2019, I denied
a Motion to Intervene by certain third parties for failure to demonstrate a legally
cognizable interest in the application of the 2016 Ordinances to the Plaintiff’s
property. 39 Discovery then proceeded. Both parties moved for summary
36
Ocean Bay Mart, Inc. v. City of Rehoboth Beach, 2019 WL 1126351, at *2 (Del. Super. Mar.
12, 2019).
37
See Walton Aff., Ex. I.
38
Compl. Ocean Bay Mart, Inc. Equitable and Declaratory Relief, Dkt. No. 1.
39
See, e.g., Letter Op. and Order, Dkt. No. 23.
10
judgment.40 I denied each on the basis that the factual issue of good faith reliance
was best resolved through development of a record at trial. 41
I held trial in this matter on July 23, 2021, and counsel for the Plaintiff and
the Defendant submitted post-trial closing statements to me on September 1, 2021.42
I considered the matter fully submitted at that time.
II. THE EVOLUTION OF THE VESTED RIGHTS DOCTRINE IN
DELAWARE
A. The Permit-Plus Test
The history of the vested rights doctrine’s application in Delaware is tangled,
due in part to modifications to the test used to assess a claim of vested rights.43 The
Delaware Supreme Court adopted the “permit-plus” rule in Shellburne, Inc. v.
Roberts, requiring that any claimant both hold a valid building permit issued prior
to a zoning change as well as prove a “substantial change in position, expenditures,
or incurrence of obligations, made lawfully and in good faith under the permit” in
order to perfect vested rights. 44
40
See Pl. Ocean Bay Mart’s Mot. Summ. J., Dkt. No. 36; Def. City of Rehoboth Beach’s Mot.
Summ. J., Dkt. No. 40.
41
See Letter Op., Dkt. No. 56.
42
See Tr. of 7.23.21 Trial, Dkt. No. 66 [hereinafter “Trial Tr.”]; Def.’s Post-Trial Br.; Pl.’s Post-
Trial Br.
43
See Acierno v. Cloutier, 40 F.3d 597, 619–20 (3d Cir. 1994) (“What the above discussion
concerning the district court’s decision and the defendants’ arguments on appeal demonstrates to
us is that the vested rights law of both New Castle County and the State of Delaware at the time
the County Council enacted Ordinance 91-190 was subject to considerable uncertainty and
differing interpretations.”).
44
224 A.2d 250, 281–83 (Del. 1966).
11
The “permit-plus” view prevailed for a number of years; 45 however, the fact-
specific nature of the doctrine eventually led to a modification of the bright-line test.
In New Castle County v. Mitchell, this Court assessed a claim of vested rights,
purportedly under the “permit-plus” rule. 46 The analysis in Mitchell also included,
among other things, three “considerations” the Court looked into when balancing the
equities, each of which pertained to notice or the defendants’ ability to foresee the
change in zoning. 47 This emphasis on notice suggested a shift away from the pure
permit-plus-substantial change position identified in Shellburne.
The evolution continued in Wilmington Materials, Inc. v. Town of
Middletown. 48 The Court applied the “permit-plus” test to a claim of vested rights,
but also indicated that it believed conduct of town officials induced substantial
reliance (rather than merely a change in position, expenditures or incurrence of
obligations). 49 Additionally, Wilmington Materials discussed the town’s motivation
for adopting the amendment at issue, questioning whether the changes were a valid
45
See, e.g., Raley v. Stango, 1988 WL 81162 (Del. Ch. Jul. 28, 1988); New Castle Cty. v. Mitchell,
1981 WL 15144 (Del. Ch. Nov. 25, 1981); Wilmington Materials, Inc. v. Town of Middletown,
1988 WL 135507 (Del. Ch. Dec. 16, 1988); E. Shore Envtl., Inc. v. Kent Cty. Dep’t of Planning,
2002 WL 244960, at *3 n.4 (Del. Ch. Feb. 1, 2002); Miller v. Bd. of Adjustment, 521 A.2d 642(Del. Super. 1986).
46
Mitchell, 1981 WL 15144.
47
Id. at *6 (“. . . (4) defendants had no knowledge or reason to know of the proposed zoning
change, (5) there was no reason for defendants to suspect that the [permits] would not be
granted . . . (7) there was no testimony of any substantial change . . . which would have put
defendants on notice . . . .”).
48
Wilmington Materials, 1988 WL 135507.
49
Id. at *8 (“Clearly the Town, acting through its officials, engaged in conduct that it knew or
should have known would (and, in fact, did) induce substantial reliance by WMI.”).
12
exercise of “police power” or whether the changes were targeted to prevent an
otherwise lawful use of the land. 50 Thus, the universe of applicable fact
considerations when faced with a vested rights claim in equity expanded.
B. The Multi-Factor Good Faith Reliance Test
The Delaware Supreme Court brought clarity to the vested rights doctrine in
the 2002 case In re 244.5 Acres of Land, in which the Court stated that it did not
“read Shellburne as promulgating a ‘permit plus’ standard which controls the issue
of good faith reliance in all situations, such as are present here, where the permitting
process is complex and multi-leveled.”51 Instead, the Court put forth a new test,
which weighs “‘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 . . . .’” 52 “In the final analysis, good faith reliance on
existing standards is the test.” 53 Under this test, the issuance or non-issuance of a
permit (as here) is a consideration, but is not case-dispositive.54
50
Id. at *9.
51
808 A.2d 753, 757 (Del. 2002).
52
Id. at 757–58 (quoting Urban Farms, Inc. v. Borough of Franklin Lanes, 431 A.2d 163,172 (N.J.
1981)).
53
Id. at 758.
54
Id.
13
In 2006, the defendants in Salem Church (Delaware) Associates v. New Castle
County proposed adding a new element to the mix: timeliness. 55 The Salem Church
Court applied In re 244.5 Acres, assessing the public interest to be served by the
ordinance amendment and the private interest of the plaintiff (as evidenced by
expenditures and statements by county officials), finding that, on a motion to
dismiss, the plaintiff’s vested rights claim did not fail as a matter of law. 56 The
defendants asserted that the plaintiff’s claim must fail due to delay. 57 In considering
this argument, the Court of Chancery stated that delay could defeat a vested rights
claim, relying on language from In re 244.5 Acres; however, this statement is dicta,
as the Court determined that a more fact-intensive inquiry would be necessary to
determine whether delay defeated any vested rights from attaching.58
In re Kent County Adequate Public Facilities Ordinances Litigation followed
In re 244.5 Acres and ultimately denied vested rights to the claimant. 59 To reach
this conclusion, the Court of Chancery assessed the following: the developer’s
progress in obtaining essential approvals; costs incurred; 60 the public interest
55
2006 WL 2873745 (Del. Ch. Oct. 6, 2006).
56
Id. at *11.
57
Id.
58
Id. at *12; see, e.g., In re MFW S’holders Litig., 67 A.3d 496, 521 (Del. Ch. 2013) (discussing
judicial statements on issues that are not outcome-determinative as dicta).
59
2009 WL 445386 (Del. Ch. Feb. 11, 2009), rev’d sub nom. on other grounds, Chase Alexa, LLC
v. Kent Cty. Levy Court, 992 A.2d 1148 (Del. 2010).
60
Although not expressly stated, the In re Kent County court appears to have considered obtaining
approvals and expenditures as evidence of “nature, extent and degree of the developer’s reliance
on the state of the ordinance under which he has proceeded.” In re 244.5 Acres, 808 2.Ad at 757–
14
advanced by the ordinance amendment; and good faith reliance. 61 The good faith
reliance analysis included both consideration of notice to the claimants as well as
statements made by government officials.62 Here, the good faith reliance analysis
appears to have been carried out as its own separate prong, rather than as an
overarching principle applied to the factors to be weighed.
C. Town of Cheswold
Town of Cheswold v. Central Delaware Business Park is the latest word in
Delaware vested rights jurisprudence, but again, expounds on the existing test via
dicta.63 Town of Cheswold addressed the question of whether prior stipulated orders
in litigation proceedings prohibited a town from rezoning property; the Court
concluded that the town was permitted to carry out rezoning. 64 In closing, the
Delaware Supreme Court reiterated the In re 244.5 Acres balancing test should be
applied if the business park raised a vested rights claim, but the Court’s description
expands the precedent to include delay as a third, formal factor:
The court should consider, among other factors it sees as important,
“the nature, extent and degree of the public interest to be served by
the ordinance amendment,” “the nature, extent and degree of the
developer’s reliance on the state of the ordinance under which he
has proceeded”—i.e., the developer’s “good faith reliance on
58; see In re Kent Cty., 2009 WL 445386 at *3 (discussing the consideration of expenditures and
building permits in In re 244.5 Acres).
61
In re Kent Cty., 2009 WL 445386 at *3–8.
62
Id. at *5–8.
63
Town of Cheswold v. Cent. Del. Bus. Park, 188 A.3d 810 (Del. 2018).
64
See generally id.15
existing standards,”—and “the effect of the pace of the development
effort” because “delay may defeat a vested rights claim.” 65
The Delaware Supreme Court also, in a footnote, identified additional factors that
might be assessed:
Other factors a court may consider include: the ordinance’s effects
on public health and welfare—including safety, education,
transportation, medical services, utilities, and environmental
concerns; whether the developer incurred major expense or made
material progress toward obtaining approval before the ordinance’s
enactment; any actions or statements made by municipality officials
that the developer reasonably and substantially relied on; and
whether the developer was on notice or had reason to anticipate the
ordinance’s enactment prior to incurring expenses on the project. 66
While these factors are consistent with the factual scenarios explored in the caselaw
above, this is the first formal recognition of these fact patterns as express factors to
be considered.
In the final analysis, I conclude, where a municipal ordinance has changed
while a property-use application is pending, the law simply requires an equitable
balancing. The primary focus is the reason the ordinance has been amended,
balanced against the reasonable reliance costs to the property owner. Without
fetishizing the factors referred to in the case law as a “test,” the various factors laid
65
Id. at 821–22 (first quoting In re 244.5 Acres, 808 A.2d at 757–58; then quoting Salem Church,
2006 WL 2873745, at *12).
66
Town of Cheswold, 188 A.3d at 822 n.62 (first citing In re Kent Cty., 2009 WL 445386, at *4;
then citing Salem Church, 2006 WL 2873745, at *10; then citing Lynch v. City of Rehoboth Beach,
2005 WL 1074341, at *2 (Del. Ch. Apr. 21, 2005); and then citing 4 Rathkopf’s The Law of Zoning
and Planning § 70:26 (4th ed. 2018)).
16
out above, culminating in Town of Cheswold, identify matters helpful to that
balancing analysis.
III. ANALYSIS
In order to determine whether the Plaintiff has obtained vested rights in his
condominium plans, I apply the two-part test from In re 244.5 Acres, which inquires
as to (1) the nature, extent, and degree of the public interest to be served by the
ordinance amendment and (2) the nature, extent, and degree of the developer’s
reliance on the state of the ordinance under which he has proceeded, and assesses
the developer’s good faith reliance on existing standards as the final analysis. 67 In
conducting this analysis, I consider certain of the factors the Delaware Supreme
Court identified as applicable to the balancing analysis in Town of Cheswold, to the
extent I find them applicable.68 I note that the record does not demonstrate delay on
the part of the Plaintiff such that a vested rights claim, otherwise viable, would be
defeated.
After addressing vested rights, I also briefly address the Plaintiff’s claim of
equitable estoppel.
67
In re 244.5 Acres, 808 A.2d, at 757–58.
68
Town of Cheswold, 188 A.3d at 822 n.62 (first citing In re Kent Cty., 2009 WL 445386, at *4;
then citing Salem Church, 2006 WL 2873745, at *10; then citing Lynch, 2005 WL 1074341, at *2;
and then citing 4 Rathkopf’s The Law of Zoning and Planning § 70:26 (4th ed. 2018)).
17
A. The Plaintiff has not secured vested rights.
As this Court has noted previously, there is no bright line test or objective
formula for determining whether vested rights have attached.69 Thus, the question
is not merely whether more factors militate for the Plaintiff over the Defendant;
rather, I must conduct an equitable balancing under the record before me. 70
1. Public Interest in the Ordinance Amendment
The first prong of the In re 244.5 Acres test directs me to inquire into the
public interest behind enacting the Ordinance Amendment.71
There are two 2016 Ordinances.72 The first, Ordinance 1016-02, requires that
the primary entrance to any one- or two-family dwelling be located within 100 feet
of a public street. 73 The notice adopting Ordinance 1016-02 discusses the State of
Delaware’s Fire Prevention Regulations and their identified standards for access to
all types of buildings, including residential buildings, and indicates that this
ordinance is the best way to ensure emergency services can adequately access all
residential dwelling units. 74
69
See In re Kent Cty., 2009 WL 445386, at *4.
70
See, e.g., id. at *8 (discussing the “required balancing” and “greater emphasis” to be placed upon
certain factors in assessing good faith reliance).
71
In re 244.5 Acres, 808 A.2d at 757.
72
The 2019 Ordinance clarifies that the 2016 Ordinances apply to Beachwalk. I need not decide
whether those Ordinances, as enacted, so applied, since I find no reasonable reliance on the pre-
2016 Code by the Plaintiff, in any event.
73
See Walton Aff., at Ex. D.
74
See id.18
Ordinance 1116-01 adds a new section to the Rehoboth Code to prevent more
than one single-family detached dwelling from being constructed upon any
commercially zoned lot.75 Ordinance 1116-01 specifically states that its intent is “to
affirm the Building Official’s interpretation of the referenced code provision” (that
is, that erection of multiple detached homes on a single lot requires sub-division)
and to remove any uncertainty in the Code’s application.76
The public interest behind Ordinance 1116-01 is an administrative interest in
clarity in the Rehoboth Code. A further interest, I presume, is strengthening the
City’s control over use of property in the C-1 zone, including regarding residential
density.77 The public interest driving Ordinance 1016-02 is more compelling. It
requires proximity to public streets to provide access for fire and emergency
vehicles, and is thus predicated on public health and safety. Both of the 2016
Ordinances represent an exercise of the City’s police powers, in the public interest.78
Therefore, I find that this factor weighs in favor of the Defendant.
2. Developer’s Reliance on the Prior Ordinance
The 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.
75
See id. at Ex. C.
76
See id.77
It appears that if the Ocean Bay Mart property is subdivided, fewer detached homes will be
permitted than called for in the Site Plan. See JX 19.
78
See Wilmington Materials, Inc., 1988 WL 135507.
19
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.”79
A close reading of a recent Delaware vested rights case, In re Kent County,
illuminates the proper way to evaluate this factor. 80 In that case, a developer had
purchased land to construct a residential community, engaging engineers, pursuing
preliminary land use approvals with the government, and incurring material
expenses. 81 Approximately six months into this planning process, the developer
discovered that the applicable ordinance permitting the development might be
amended. 82 Despite this, the developer continued to pursue its project; during this
time, certain government officials made statements indicating that the developer’s
project, along with others in the application “pipeline,” would be grandfathered.83
After the adoption of the new ordinance, the project was in fact not grandfathered,
and the developer asserted a claim of vested rights, which the Kent County Court
denied.84 In making this determination, the Court applied the In re 244.5 Acres test,
79
In re 244.5 Acres, 808 A.2d at 758.
80
See generally In re Kent Cty., 2009 WL 445386.
81
Id. at *1.
82
Id.
83
Id.
84
Id. at *7–8.
20
evaluating good faith reliance by the developer by questioning first whether there
was in fact reliance and then whether such reliance was reasonable.85
A number of circumstances must be considered to determine whether the
Plaintiff reasonably relied on existing Rehoboth Code standards in 2015.
a. The Plaintiff’s Knowledge of the Rehoboth Code
The Plaintiff purports to have relied on the Rehoboth Code as it existed at the
time it submitted its Site Plan, together with statements made by City officials. 86 It
cites, however, to no section of the Rehoboth Code explicitly permitting a
condominium development in contradiction to the permitted uses of property
otherwise provided in the Rehoboth Code. Unlike more typical vested rights cases,
this is not situation where the law ante clearly permitted a use, later prohibited by
new legislation. Here, the applicable provision is the Defendant’s Table of Use
Regulations as of 2015, and the underlying sections of the Rehoboth Code providing
“uses of right” for zone C-1, which state that single-family detached dwellings were
a permitted use of a commercially zoned lot “[p]rovided that no more than one main
building may be erected on a single lot.”87 This language does not support the view
85
Id. at *5–8 (“[The developer] identifies four discrete events which, in its view, demonstrate both
its reliance on the pre-APFO standards of subdivision regulation and the reasonableness of that
reliance.”).
86
“[A]t the time Ocean Bay Mart filed its Site Plan, it had not only read the City Code, but it had
confirmed with the City Building Inspector and the City Solicitor that its reading of the Code was
correct.” Pl.’s Post-Trial Br. 3.
87
Rehoboth Beach Code § 270-10(C) (2015).
21
that no subdivision was required. Mr. Monigle testified at trial that he had never
read this language prior to 2015, and thus had no reason to rely on any particular
interpretation of the Code at the time the Site Plan was submitted, outside of the
statements of City personnel. 88
b. Research into the Rehoboth Code by the Plaintiff’s
Associates
The Plaintiff, who did not have experience in real estate development, and
who faced a sizable investment in redeveloping the Ocean Bay Mart property, turned
to others to assist.89 Among these were Mr. Schrader, the Plaintiff’s attorney, and
Ms. Newcomb, a friend who is also a real estate broker. 90 As outlined above, both
Mr. Schrader and Ms. Newcomb engaged in conversations with City officials
regarding Beachwalk.
Mr. Schrader confirmed with the City Solicitor that a condominium is not a
subdivision, and is assessed under different standards for purposes of Planning
Commission review.91 This general confirmation was surely of interest and
encouragement to the Plaintiff, but it is insufficient, in my view, to provide a basis
for reasonable reliance that the Site Plan, in particular, would constitute a
88
See Trial Tr., 39–44.
89
See, e.g., id. at 54:20–22 (discussing hiring Mr. Schrader); id. at 11 (discussing the help of
Ms. Newcomb, the realtor, who appears to have assisted as a personal friend of Mr. Monigle’s).
90
Id.
91
See JX 22.
22
condominium rather than a subdivision. 92 The Plaintiff notes that other
condominium developments had been permitted in the City apparently without
requiring a subdivision even where the condominium developments led to a higher
density than that proposed by the Beachwalk Site Plan. 93 The Plaintiff did not offer
evidence regarding the state of the Rehoboth Code when these condominiums were
developed, however, nor explain why deviation from the “one main building” per
lot standard was permitted. 94
Likewise, Ms. Newcomb’s discussion with the then-acting City Building
Inspector, Ms. Sullivan, and Ms. Sullivan’s August 26 email in response, support
the Plaintiff’s position that it understood no subdivision would be required. Neither
discussion nor email referenced the Beachwalk project at all, however, and the
project they did concern was of a different scale and planning zone.95 Like the
conversation between Plaintiff’s counsel and the City Solicitor, the August 26 email
can be rightfully seen as encouraging to Plaintiff’s hopes to avoid subdivision, but
does not in itself justify a finding of reasonable reliance. This is particularly so in
92
In the course of researching and planning the Beachwalk redevelopment, one of the Plaintiff’s
own attorneys, Michael Smith, indicated that he believed Beachwalk would require the submission
of a subdivision plan. See JX 03. In conjunction with the Plaintiff’s admitted lack of knowledge
of the Rehoboth Code, this belief by one of its agents weakens any reliance value that the Plaintiff
attributed to Mr. Schrader’s conversation with the City Solicitor. Mr. Monigle testified at trial that
Mr. Smith later changed his mind regarding whether a subdivision would be required, but did not
proffer further evidence on this point. See Trial Tr. 51:21–22.
93
Pl.’s Post-Trial Br., 4 n.5.
94
Def.’s Post-Trial Br., 5 n.6.
95
JX 02.
23
light of the Rehoboth Code language allowing no more than one detached residence
“main building” on a single lot; Beachwalk, as conceived in the Site Plan, called for
more than sixty such homes. Again, Mr. Monigle had not read the Code, but he is
charged with knowledge of it for purpose of determining reasonable reliance. 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. 96 The August 26 email might have been
of some preliminary reliance value to the Plaintiff, but in 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. Indeed, as discussed below,
the new City Building Inspector, upon review of the actual Site Plan, opined in
November 2015 that Beachwalk required a subdivision under existing law.
c. The Plaintiff’s Later Arguments That the Rehoboth Code Is
Ambiguous
The Plaintiff promptly appealed the City Building Inspector’s adverse
ruling—that subdivision was required under the Code and its Table of Use
Regulations—to the City Board of Adjustment. The nature of the appeal I find
pertinent to the reasonable reliance analysis. The City Building Inspector had
rejected the Site Plan on the ground that it provided for “more than” one main
96
See JX 11.
24
building on the Plaintiff’s lot—in fact, there were dozens—and thus was inconsistent
with the Code, absent subdivision.97 In the appeal, the Plaintiff’s attorney argued
that the Table of Use Regulations was ambiguous, and could be read to support
condominium development without subdivision. 98 That argument was successful,
and the Board of Adjustment overturned the City Building Inspector’s determination
on grounds of ambiguity.99
I note that zoning restrictions limit full use of real property, in derogation of
the common law, and that as a result ambiguity is resolved in favor of the property
owner.100 The Plaintiff argued successfully before the Board of Adjustment that the
Table of Use Regulations was ambiguous, and thus established that the Site Plan was
in compliance with the then-ordinances, once the ambiguity was resolved in its
favor. The issue here, however, is quite different. Having made the ambiguity
argument, the Plaintiff was on notice that the City may have intended the more
restrictive interpretation, and thus might clarify the law to accomplish that intent (as,
in fact, it did). In other words, the Plaintiff is in the uncomfortable position of asking
this Court to find that it reasonably relied on the fixed nature of an ordinance that it
97
See Walton Aff., Ex. K.
98
See JX 20, at 27:5–20.
99
See generally JX 20.
100
See Carl M. Freeman Assocs., Inc. v. Green, 447 A.2d 1179, 1182 (Del. 1982) (citation omitted)
(“Because zoning ordinances are in derogation of common law property rights, [there must be]
strict compliance with the [legislated] procedures.”); Dewey Beach Enters., Inc. v. Bd. of
Adjustment, 1 A.3d 305, 310 (Del. 2010).
25
has acknowledged was ambiguous, and which it knew the City construed as
requiring subdivision.
The Board of Adjustment appeal was important for another reason. It
commenced a season of litigation in which the City made clear its intention that
subdivision would be required for the Plaintiff’s redevelopment. 101
d. Statements Made by Municipal Officers
The Plaintiff puts forth as further support for his position a number of
statements made by municipal officers indicating that the Ordinance Amendment
would not apply to the Site Plan.
First, the Plaintiff points to a local newspaper story that included comments
from the City Mayor indicating that the 2016 Ordinances would not apply to the
Beachwalk project. 102 Additionally, the Plaintiff refers to certain comments made
during a public workshop for the 2016 Ordinances, wherein one of the City
Commissioners and the Mayor engaged in commentary as to whether the 2016
Ordinances would apply to Beachwalk, ultimately suggesting that because the Site
Plan application was already before the City Building Inspector that the 2016
101
For instance, the City has at various times relied, unsuccessfully, on a State statute, the
Delaware Uniform Common Interest Ownership Act, to argue that detached houses as part of a
condominium development constitute separate parcels of real estate. See 25 Del. C. § 81-105(b)(1)
(2009).
102
Pl.’s MSJ Br., Ex. X, at 2 (“[Mayor] Cooper said the proposed changes will not apply to the
Beach Walk project because it would be considered grandfathered.”).
26
Ordinances would not apply.103 The City Solicitor at the same workshop indicated
that the 2016 Ordinances were to be prospective in nature. 104
In a further City Commissioners’ meeting on September 16, 2016, the City
Solicitor made a number of related statements while discussing whether the 2016
Ordinances would apply to Beachwalk, explaining that Beachwalk could proceed on
theories of vested rights or equitable estoppel to attempt to avoid the effect of the
2016 Ordinances.105 He stated that, while he had not yet considered whether either
doctrine could apply in full, “because [the Plaintiff is] already in the pipeline, this
ordinance would probably not be applicable to them. Again, I haven’t done the full
analysis.”106 The City Solicitor went on to say that he didn’t “think [the 2016
Ordinances did] anything to the [Beachwalk] application that’s pending, unless
there’s a reason to hold that application.” 107
Despite these statements, in May 2019 the Defendant adopted an ordinance
that directly applied the 2016 Ordinances to any pending applications, including
Beachwalk. 108
103
See Pl.’s MSJ Br., Ex. Y.
104
I note that the evidence supporting these statements is excerpted in nature, meaning that I am
without the benefit of context to review these statements. See id.
105
See generally Walton Aff., Ex. T.
106
See id. at 44:22–23.
107
Id. at 45:22–23.
108
See id. at Ex. I.
27
In these circumstances, could the Plaintiff reasonably rely upon these
municipal officers’ statements to perfect a claim of vested rights? I find that it could
not. In In re Kent County, the Court of Chancery indicated that a statement by the
President of the Levy Court could not bind “his fellow members,” as he is but a
single member. 109 This Court indicated that “[the Plaintiff], understandably, may
have taken heart from the President’s comments; substantial reliance was not,
however, justified.” 110 Similarly, a single Commissioner’s statements at a public
workshop cannot bind the City’s Board of Commissioners in its entirety, nor can the
commentary of the Mayor or the City Solicitor. Additionally, the City Solicitor was
careful to qualify his statements at the September 2016 workshop, noting that he had
not performed the full analysis to conclude as to whether the 2016 Ordinances would
have retroactive effect. 111 It would therefore not be reasonable for the Plaintiff to
substantially rely upon these statements. Statements of the Mayor, reproduced in a
city newspaper, likewise cannot bind the City’s Board of Commissioners and are not
a suitable basis for substantial reliance.
e. The Plaintiff’s Election to Forego Project Concept Review
The Plaintiff chose not to participate in the Project Concept Review process
offered by the Defendant, which would have afforded an opportunity to discuss and
109
In re Kent Cty., 2009 WL 445386.
110
Id.111
See Walton Aff., Ex. T, 44:22–23, 45:22–23.
28
design the Site Plan in close contact with the City.112 Project Concept Review is
voluntary, not mandatory,113 and the Plaintiff was not required to participate. Had
the Plaintiff done so, and had the City agreed to the Site Plan under the process, that
would support the Plaintiffs reasonable reliance argument. 114 Conversely, since the
Plaintiff chose not to undertake Project Concept Review, this cannot bolster its
reliance argument. In fact, the Plaintiff’s reason for eschewing review is telling;
Mr. Monigle wished to avoid bringing attention to the subdivision issue out of fear
that the City might amend its law in a way adverse to his interest.115 The Plaintiff
wrote in a 2015 email that he had received an inquiry as to why Ocean Bay Mart
hadn’t taken advantage of the Project Concept Review, and described his wish to
avoid a process which might cause the City to “adjust the [Rehoboth] Code!”116 This
may (or may not) reflect prudence, but is incompatible with reasonable reliance on
the pre-2016 Code.
***
112
See Pl.’s MSJ Br., Ex. H (“[Y]ou decided to waive your rights to a Planning Commission
concept review as permitted under city code Section 236-31 Project concept review. This would
have been an opportunity to review the potential development before committing substantial time
and expense in the preparation of the site plan . . . .”).
113
See id. (referring to the Plaintiff’s “right[]” to engage with the project concept review process).
114
In re Kent Cty., 2009 WL 445386, at *4 (mentioning concept plan approval as part of the
developer’s progress along the “regulatory pathway”).
115
See supra notes 19–21 and accompanying text.
116
See JX 10.
29
In sum, I cannot find that the Plaintiff reasonably relied upon the language of
the Rehoboth Code as it existed in 2015. It is true that the Plaintiff here has hired
engineers and consultants117 and has expended a substantial sum of money pursuing
this development, hoping to proceed without subdivision. Prior to the 2016
Ordinances, the Plaintiff avers it had invested over $576,000 in costs, expenses, and
lost rent in pursuing Beachwalk. 118 Of course, this does not demonstrate a loss to
the Plaintiff of that amount. Assuming that the Plaintiff goes forward with a
subdivision, the record is barren of what amount of the sums already expended will
be applicable to the project. Nonetheless, the Plaintiff has made a significant and
material investment here. Because I find that Mr. Monigle cannot reasonably have
relied on the continued applicability of the ambiguous language of the Rehoboth
Code to his project, the out-of-pocket costs and forgone rent hold little equitable
suasion.
The Plaintiff’s lack of knowledge regarding the Rehoboth Code and later
arguments that the Rehoboth Code itself is ambiguous regarding its project preclude
me from finding that the Plaintiff’s reliance was reasonable. The fact that the
Plaintiff’s associates engaged in nonspecific research with various city officials and
117
See supra note 9 and accompanying text.
118
See Pl.’s Post-Trial Br., at 15 n.12. With respect to lost rent, Mr. Monigle testified that he lost
tenants as a result of his decision to offer only short-term leases, to facilitate redevelopment. See
Trial Tr., 27:3–24, 28:1–13.
30
that certain municipal officers made nonbinding statements indicating that no
subdivision would be required, or that the 2016 Ordinances would not apply, I find
insufficient in equity to support a finding of vested rights. The record reflects that
the Plaintiff was well aware, by the time of the City Building Inspector’s decision in
November 2015, that the City understood the Rehoboth Code to require subdivision.
Having successfully argued that the Rehoboth Code was ambiguous in appeal of that
decision, it was aware of the potential that the City would look to eliminate that
ambiguity. 119 As early as July 7, 2015, Mr. Monigle had written in an email that he
had received an inquiry as to why Ocean Bay Mart had not taken advantage of the
optional Project Concept Review, and described the process as giving the City the
chance to “adjust the [Rehoboth] Code!”120 Acknowledgement that the City might
have a motive to change the Rehoboth Code constitutes reason to anticipate the 2016
Ordinances and their eventual application to Beachwalk.
Under all these circumstances, the Plaintiff’s reliance on the legal status
quo was not reasonable, and equity will not impose relief under the doctrine of vested
rights.
119
See Trial Tr., 39–44.
120
See JX 10.
31
B. The Defendant is not equitably estopped from requiring a major
subdivision plan.
The doctrine of equitable estoppel can be used to prevent a municipal
government from exercising its zoning powers where “‘a landowner [is] induced to
expend substantial sums in reasonable, good faith reliance upon governmental
assurances (or equivalent conduct) that the landowner’s intended use of the property
is permitted under the zoning code.’”121
Equitable estoppel and vested rights doctrines are “theoretically distinct,” but
generally “reach the same results in similar factual situations.”122 So it is here. As
delineated above, the Plaintiff has not made a showing of reasonable, good faith
reliance upon governmental assurances, as it was not reasonable for the Plaintiff to
rely upon the Mayor’s and the Commissioners’ informal statements as to whether
Beachwalk would be grandfathered and thus exempt from the application of the 2016
Ordinances. By contrast, the Plaintiff should have been (and was) on notice that the
City might seek to change the Table of Regulations via the Ordinance Amendment—
even if the applicable law in 2015 did include an ambiguity he might exploit.123
121
See DiSabatino v. New Castle Cty., 781 A.2d 698, 702 (Del. Ch. 2000) (quoting Wilmington
Materials, 1988 WL 135507 at *5).
122
Miller v. Bd. of Adjustment, 521 A.2d 642, 645 (Del. Super. 1986).
123
See, e.g., supra notes 19–21 and accompanying text.
32
IV. CONCLUSION
The Plaintiff has not secured vested rights, and the Defendant is not equitably
estopped from requiring a major subdivision plan. Therefore the 2016 Ordinances
shall apply to Ocean Bay Mart, Inc. in full. The parties should submit a form of
order consistent with this Memorandum Opinion.
33