Congregation Etz Chaim v. City of Los Angeles

371 F.3d 1122, 2004 U.S. App. LEXIS 11772, 2004 WL 1336646

• Court: Court of Appeals for the Ninth Circuit
• Decided: June 16, 2004
• Docket: 02-56487
• Status: Published

Opinions

Opinion by Judge RAWLINSON; Dissent by Judge ALDISERT.

RAWLINSON, Circuit Judge:

The controlling question in this case is whether Appellant the City of Los Angeles (the City) may revoke a building permit issued to Appellee Congregation Etz Chaim (the Congregation) authorizing renovations to a home owned by the Congregation and used as a place of worship. Because we agree with the district court that Congregation was entitled to rely on issuance of the building permit by the City, we AFFIRM the district court’s order lifting the stop-work order issued by the City.

I.

BACKGROUND

There is a long history of litigation between the City and the Congregation. The Congregation’s initial claim against the City, filed in federal court in 1997, alleged that the City’s building permit requirements- violated the Congregation’s constitutional rights to the free exercise of religion, freedom of speech, freedom of association, freedom of assembly, and equal protection; and violated the Fair Housing Act. Eventually, most of the Congregation’s claims were dismissed, but a claim against the City under the Religious Land Use and Institutionalized Persons Act of 2000, 42 U.S.C. § 2000cc, remained. Before the district court ruled on the merits of this claim, the parties entered into a settlement agreement (the Agreement), which resulted in dismissal of the Congregation’s remaining claim. The district court retained jurisdiction over the matter for the purpose of issuing any future orders necessary to modify or terminate the Agreement.

After the Agreement was signed and the Congregation’s action was dismissed, the Congregation submitted its renovation plans to the City’s Department of Building and Safety. The plans clearly and explicitly described expansion of the existing home from 3,400 square feet to 8,150 square feet. The Building Department spent approximately three months reviewing the renovation plans in conjunction with the Agreement. As part of this process, the Building Department demanded ' numerous changes to the plans, with which the Congregation complied. An attorney in the City Attorney’s office who represented the Building Department also reviewed the plans and the Agreement. After this review, the Building Department issued a building and grading permit to 'the Congregation, and the Congregation promptly began work as specified in the plans.

Approximately one week later, apparently in response to complaints from neighbors, the City issued a stop-work-order, giving notice that it intended to.revoke the Congregation’s building permit. The City described the permit as having been issued “in error or in violation of other provisions of the code and condition [sic] are such that the action should not have been allowed.” In response, the Congregation filed a motion seeking enforcement of the Agreement and lifting of the stop-work order. The City countered with its motion to enforce the Agreement and the stop-work order. The district court granted the Congregation’s motion, and denied the City’s. This timely appeal followed.

II.

DISCUSSION

A. Standard of Review

We review a district court’s interpretation of- a settlement agreement de novo. See Botefur v. City of Eagle Point, 7 F.3d 152, 156 (9th Cir.1993). Where the district court oversaw the extensive litigation giving rise to the settlement agreement and approved the agreement, we review the district court’s interpretation of the agreement with due respect for the district court’s superior perspective. Cfi Labor/Cmty. Strategy Ctr. v. Los Angeles County Metro. Transp. Auth., 263 F.3d 1041, 1048 (9th Cir.2001) (“We must give deference to the district court’s interpretation based on the court’s extensive oversight of the [consent] decree from the commencement of the litigation to the current appeal.”) (citation and internal quotation marks omitted).

B. Estoppel Ruling Against the City

The district court essentially ruled that the City was estopped from revoking the building permit it had previously issued to the Congregation pursuant to the Agreement. The district court expressly noted that the City’s objection to the size of the building under construction “would have made a fine issue for the court, with excellent arguments on.both sides, and with [the] result not predictable, except for the fact that City approved the plans and issued the building permit with full knowledge of the terms of the settlement agreement.” (emphasis added). The district court presumed that it would have had jurisdiction to resolve the size dispute if the dispute had arisen prior to issuance of the building permit and the incurrence of substantial expenditures by the Congregation in reliance upon issuance of the building permit. However, the district court concluded that once the building permit had issued and the Congregation had substantially relied upon its issuance by commencing construction, the Congregation acquired a vested right under California law that could not be revoked by the City. The district court ruled that the City’s issuance of the building permit represented its approval of the building project, size and all. - According to the district court, the appropriate time for the City “to take issue with the size of the remodeling was during the extensive and meticulous review, including review of the agreement, which preceded the issuance of the permit and the expensive reliance on it by Congregation.”

The use of equitable estoppel to resolve land use issues is well-developed in California law. “The principle of estoppel ... prohibits a governmental entity from exercising its regulatory power to prohibit a proposed land use when a developer incurs substantial expense in reasonable and good faith reliance on some governmental act or omission so that it would be highly inequitable to deprive the developer of the right to complete the development as proposed.” Toigo v. Town of Ross, 70 Cal.App.4th 309, 321, 82 Cal.Rptr.2d 649 (Cal.Ct.App.1998) (citation omitted). A developer’s right to develop property pursuant to its proposed plans vests when: (1) a valid building permit issues and (2) the developer performs substantial work and incurs substantial liabilities in good faith reliance on the permit. See id. (citations omitted).

The facts of this case provide particularly strong support for the Congregation’s estoppel argument. It is unrefuted that the Congregation performed substantial work and incurred substantial liabilities in rebanee on the permit. The record reflects that prior to revocation of the permit, the Congregation paid in excess of $21,000 in permit fees and over $15,000 for demolition pursuant to the renovation plans approved by the City.

The City argues that revocation of the permit is proper because the estoppel doctrine cannot immunize the Congregation from compliance with current law as reflected in the Agreement. However, we agree with the district court that the City’s argument is significantly weakened by the fact that the size of the building was clearly delineated in the building plans that were reviewed at length and approved by the City. The issuance of a valid building permit by the City was essentially a representation that the Congregation’s plans were in accordance with the terms of the Agreement. See Hock Investment Co. v. City and County of San Francisco, 215 Cal.App.3d 438, 445, 263 Cal.Rptr. 665 (Cal.Ct.App.1989) (characterizing a building permit as an implied promise “that the proposed use will not be prohibited by ... the regulation in question”).

The City does not and cannot allege that the Congregation engaged in fraud or acted in bad faith in presenting its proposed plans to the City for approval. In fact, the City conceded at oral argument that the Congregation submitted both the building permit application and a copy of the Agreement to the Building Department and to the deputy city attorney who advised the Building Department. The City simply cannot dispute that it had ample opportunity to review both the plans and the Agreement before- granting the building permit. In view of these- facts, we would be hard pressed to find error in the district court’s decision to lift the stop-work order.

C. Interpretation of the Settlement Agreement

.The City’s second argument in support of the stop-work order is that the Congregation failed to comply with the Agreement when the Congregation submitted its permit application to the City. Although the Congregation submitted the application to the Building Department and to the deputy city attorney who advised the Building Department, the City maintains that the Agreement required submission of the application to a specific individual in the Planning Department, Daniel Green.¹

To resolve this issue, we must consider two provisions of the Agreement, Paragraph VI and Paragraph XI.

Paragraph VI of the Agreement is entitled “Use of 303 South Highland Avenue” and specifically addresses the building permit application process, requiring the submission of “any required plan and permit application to the City ...” (emphasis added).

Paragraph XI of the Agreement is entitled “Form of Notice,” and provides in relevant part: “Any notice, tender, delivery or other communication pursuant to this Settlement Agreement ... shall be deemed to be properly given if delivered, mailed or sent ... If to the City: Daniel Green, Planning Department ...” (emphasis added).

The City contends that Paragraph XI required submission of the permit application to Daniel Green, and the Congregation’s failure to comply with Paragraph XI voided issuance of the building permit.

The district court rejected the City’s argument, ruling that the Congregation’s building permit application “was not a notice, tender, delivery, or other communication[.]” Rather, the permit application was a “plan or permit application separately referred to in paragraph VI(A) [and] required to be submitted to the City,” rather than to a specific individual. The district court also pointed out the unlikelihood that the City construed Paragraph XI to encompass the permit application given the City’s failure to follow Paragraph XI itself when processing the permit application. Finally, it would have been an easy matter for the City to require compliance with Paragraph XI prior to issuing the building permit, as it did with numerous other issues that were addressed during the application process. This is especially true in light of the fact that the Agreement was submitted with the permit application and a deputy city attorney participated in the review of the application, having been provided with his own copy of the Agreement.

We agree with the district court that in these circumstances, the buck stops with the City. Because the Notice provision did not encompass the permit application, we conclude that the Congregation complied with the terms of the Agreement. The permit application was presented and processed in accordance with Paragraph VI of the Agreement, which specifically concerned renovations to the property.

There is little indication in the language of the Agreement or in the actions of the parties to support the City’s proposition that the notice provision was intended to apply to submission of the building permit application. “[Cjourts must give a reasonable and commonsense interpretation of a contract consistent with the parties’ apparent intent.” People ex rel. Lockyer v. R.J. Reynolds Tobacco Co., 107 Cal.App.4th 516, 526, 132 Cal.Rptr.2d 151 (Cal.Ct.App.2003) (internal quotation marks omitted). A commonsense interpretation of the Agreement indicates that the Congregation was not required to submit its building permit application to Mr. Green. The building permit application is referenced elsewhere in the Agreement, where the Congregation agrees to “take all necessary actions to restore the property to [residential] use, including submitting any required plan and permit application to the City within ninety (90) days of sign- ■ ing this Settlement Agreement.” The City more or less concedes that the Congregation .complied with this requirement by “submitt[ing] building plans to the City’s building officials in order to obtain a building permit as required by state law.” It would have made little sense to require the Congregation to submit its plans to Mr. Green, when it is undisputed that he had no authority to approve the plans or to grant a permit. The district court, judge, who oversaw the litigation and settlement of this case, and who was presumptively familiar with the processes and procedures of the municipality in which he sits, committed no error in rejecting the City’s argument that the Congregation’s purported failure to comply with Paragraph XI justified imposition of the stop-work order.

III.

CONCLUSION

The district court did not err when it applied equitable estoppel principles and lifted the City’s stop-work order. The Congregation’s permit application was reviewed and approved by the City and the subsequent renovations were undertaken in reliance upon the issuance of a valid building permit. A commonsense interpretation of the Agreement coupled with an examination of the parties’ behavior reflects that the parties did not intend that the Congregation’s building permit application be submitted to the individual listed in the notice provision of the Agreement.

AFFIRMED.

1 . The dissent advances an argument that was not made by any of the parties to this case— that the settlement agreement "was tantamount to a deemed-approved conditional use [permit.]" See Dissent at 1130-31. This position is nowhere supported in the record, the briefs, or the oral argument on behalf of the parties. In short, the dissent seeks to bind the parties to an agreement that not even they contend was made, hence use of the term "tantamount.” We elect in the majority opinion to address the settlement agreement that was actually agreed upon by the parties and approved by the court.