Sterling Homes Corp. v. Anne Arundel County

DAVIS, Judge. On July 13, 1992, the Office of Planning and Zoning (OPZ) for Anne Arundel County refused to issue Sterling Homes Corporation (appellant) a permit to construct a marina bathhouse and parking lot (Bathhouse Permit) on three waterfront acres contiguous to a planned community called Stoney Beach. The proposed bathhouse and parking lot were to be followed by the completion of a commercial marina on the three acres. Appellant filed an appeal from this decision with the Anne Arundel County Board of Appeals (the Board) on August 10, 1992.

After five days of testimony, the Board refused the permit, holding that OPZ properly denied the Bathhouse Permit and that comprehensive rezoning had occurred before ²¹⁰ appellant was able to obtain a vested right in its proposed use of the site. Appellant appealed this decision of the Board to the Circuit Court for Anne Arundel County. On August 1, 1996, the circuit court (Robert H. Heller, J.) issued a thorough Memorandum Opinion and Order affirming the Board’s decision. Appellant appeals from that judgment, presenting a single question for our review, which we rephrase: Did the circuit court legally err in affirming the decision of the Board to deny appellant’s permit application?

We hold that the circuit court committed no error. FACTS In 1984, appellant, through its engineering firm, applied for approval to subdivide a sixty-acre parcel of waterfront property upon which it would construct the townhome community of Stoney Beach. At the time, fifty-seven acres of the land were zoned R15, a classification that permitted low-density multifamily dwellings. The remaining three acres were zoned MA2, which would allow a light-use commercial marina.

The subdivision application consisted of sixteen plats; fifteen plats covered the R15 area (residential site), and the remaining plat covered the MA2 area (marina site). The preliminary plan showed 461 townhomes on the residential site. Plat sixteen, covering the marina site, contained a notation that it was a “Reserved Parcel—Zoned MA-2.” It contained no details about a marina. It did contain a notation that “Any future construction with this Parcel will be subject to review and approved by the Office of Planning and Zoning.” Likewise, neither a September 1985 traffic analysis report, nor the Chesapeake Bay Critical Area reports prepared by appellant in April 1985, mentioned a commercial marina on the site. 1 ²¹¹ The circuit court made reference, however, to a memorandum sent to OPZ on April 22, 1995, that stated that “a conceptual plan for the marina zone portion of the property [had] been prepared.” The County contended that, at the time of the initial subdivision application, appellant’s plans for plat sixteen were unformed.

Frank Ward, OPZ’s project coordinator when the proposed subdivision was reviewed, testified at the Board hearing that “Reserved Parcel,” in the context of the Anne Arundel County Code, “is a reference given to a property that is not approved for a building parcel in conjunction with a subdivision.” According to Ward, such a notation is given in order that an unplanned parcel included within a subdivision application may have some type of designation, without indicating any future plans for the site. Ward explained, “[W]hen property is submitted for subdivision review, the entire property has to be shown in one form or another. We can’t just leave a piece of the property hanging out there for lack of a better term.” 2 ²¹² David Thaler, an engineer, testified for appellant that the notation “reserved parcel” meant that the marina site was reserved for future MA2 use, which would include a commercial marina. 3 Sterling Leppo, appellant’s president, testified that he understood the notation to mean that the marina site was reserved for a commercial marina use at some future date. Appellant also argues that, at the time of the review of the subdivision plans, Ward knew that appellant planned a commercial marina on plat sixteen.

Ward testified that he told Ken Colbert, an engineer for appellant, to “either show a plan for the marina so we can include it in the subdivision, or set it up as a reserve parcel, which would defer submittal of any development plans on those areas until the developer knows exactly what he’s going to do within that area.” Ward also testified, however, to his recollection that Leppo intended to defer any action on the marina site until “some time in the future.” Appellant’s final subdivision plats were approved by OPZ in November 1985, and recorded. Appellant then began construction of the community, which it maintains was to proceed in four phases. The first phase included the construction of the infrastructure for all portions of the property and the construction of some of the townhomes. The second and third phases included the construction of most of the homes in the middle of the property.

According to appellant, the marina was to be completed during the last phase, when there would be sufficient financing and built-in demand from already occupied homes to complete it and the last 128 residences. At the time of final plat approval, appellant did not pay the fees required for commercial development and did not obtain a sewer and water allocation for the marina site. ²¹³ The OPZ refused to issue construction permits until appellant obtained all of the necessary public works agreements. Allegedly delayed by litigation over the ownership of the main access road to the property—ownership that appellee denied—appellant waited at least a year before obtaining a declaratory judgment in the circuit court that appellee owned the road. That judgment was issued in December 1986.

In November 1986, Anne Arundel County began the process of rezoning the entire county. In March 1987, the County released a map indicating the proposed zoning changes, including the proposed rezoning of appellant’s property from R15/MA2 to R5, a less dense usage residential classification that, the Board and the circuit court stated, would support a community-owned marina (by special exception), but not a commercial marina. Appellant’s counsel objected to the proposed rezoning in April and December 1988, and January 1989, to no avail. The Council passed the zoning ordinance on July 19, 1989, and gave final approval on July 28.

The rezoning went into effect on September 11,1989. On March 20, 1987, two and one-half years before the rezoning went into effect, OPZ issued a grading and construction permit for appellant’s property. The permit covered the entire sixty-acre property, including the marina portion, and allowed appellant to construct bulkheads and revetments along the shoreline to support the grading work. The circuit court accepted, arguendo, that appellant completed the following work before the effective date of the rezoning: construction of 1,600 lineal feet of bulkhead and 360 feet of waterfront revetment on the residential site, construction of sediment control devices and 120 feet of revetment on the marina site, completion of seventy-eight townhomes on the residential site, and road improvements and a sewer pumping station to service the development.

In 1988, appellant also repaired existing pilings at the marina site, replaced deckboards and ²¹⁴ stringers, and began leasing boating slips to the public. 4 Appellant also began marketing the development as a town-home community with a commercial marina. As part of this effort, appellant displayed a large drawing of the future marina in its sales office. On April 14, 1989, appellant applied for a permit for additional grading on the marina site; on July 14, 1989, it applied for a building permit to build a bathhouse and a parking lot on the site (the Bathhouse Permit), the denial of which is the subject of this appeal. On July 28, the day the rezoning received final approval from the County Council, OPZ sent appellant a memorandum noting the legal impact of the zoning change, informing appellant that it could complete its residential development under the old R15 zoning, but that the marina site would be covered by the new zoning unless appellant obtained a permit and began substantial construction by the effective date of the rezoning.

Appellant argues that, at the time of the July 28 memorandum, it believed that it had applied for all the necessary permits. Appellant also maintains that, until the OPZ proposed the eventual downzoning, the County never indicated that any permits other than the Bathhouse Permit and the additional grading permit were needed to complete construction of the commercial marina. Appellee’s position before the Board and the circuit court was informed by A.A.C.C. art. 28, §§ 5-110 and 5-111. These sections list the uses permitted as permitted uses and as special exception uses, respectively, in areas designated as MA2-Commercial Marina District.

Neither bathhouses nor parking lots are listed as permitted principal uses in these sections. Article 28, § 10-106(d), governing accessory structures, states that an accessory structure may not be built without a principal structure. Thus, according to appellee, OPZ could not have issued the Bath ²¹⁵ house Permit alone; appellant first would have had to obtain a permit for a use permitted under § &-110, such as piers. On August 2, 1989, OPZ wrote to appellant that the marina site was not a legally subdivided lot and that appellant would have to go through the subdivision process in order to develop the site.

Appellant assails this claim as an unfounded delaying tactic, deliberately calculated to prevent appellant from vesting its rights under the MA2 classification for the marina site before the rezoning took effect. Appellant claims that appellee admitted at the Board hearing that the lot had been legally subdivided all along. Nevertheless, appellant maintains that, in the time remaining before the rezoning took effect, it attempted to create a new administrative plat that would satisfy OPZ’s requirements for a legally subdivided lot. It failed.

After the rezoning went into effect, appellant continued its efforts to construct the commercial marina while waiting for approval of the Bathhouse Permit. Appellant obtained various State and federal permits, completed and sold more townhomes, and made more Improvements to the property. On July 13, 1992, three years after appellant applied, OPZ formally denied the Bathhouse Permit. Appellant appealed that decision to the Board.

The Board reviewed the permits for mass grading, bulk-heading, and revetment completed under the grading permit that was issued, and found that these actions did not operate to advise the neighborhood as to the intended use of the MA2 tract as a commercial marina. Thus, appellant’s rights under that use did not vest before the effective date of the rezoning. In addition, the Board denied the Bathhouse Permit as an improper application for an accessory use permit in the MA2 zone, made before appellant had obtained permits for a pier and boatslips. The circuit court affirmed the Board’s application of existing Maryland law, finding that substantial evidence existed to support the Board’s finding that appellant’s rights to develop the marina site had not vested before the rezoning.

The court ²¹⁶ also declined to adopt as Maryland law the New York decision of Schoonmaker Homes-John Steinberg, Inc. v. Village of Maybrook, 178 A.D.2d 722 , 576 N.Y.S.2d 954 (1991), which stated that development rights to a parcel may vest if that parcel is part of a common scheme of development. Addressing appellant’s argument that the Board failed to consider whether the County should be estopped from denying the permits, the court concluded that the evidence was insufficient to support a zoning estoppel claim. DISCUSSION Standard of Review The decisions of an administrative agency will be affirmed on appeal if they are supported by substantial evidence and are not arbitrary, capricious, or unreasonable. Supervisor of Assessments v. Peter & John Radio Fellowship, Inc., 274 Md. 353, 355 , 335 A.2d 93 (1975).

The definition of “substantial evidence” was discussed in Board of County Comm’rs v. Oak Hill Farms, Inc., 232 Md. 274 , 192 A.2d 761 (1963), in which the Court of Appeals stated that substantial evidence [has] been held to mean more than a scintilla and ... such evidence “as a reasonable mind might accept as adequate to support a conclusion ... and enough to justify, if the trial were to a jury, a refusal to direct a verdict____” Id. at 280 , 192 A.2d 761 (quoted source omitted). In addition, a zoning authority must properly construe the controlling law. Umerley v. People’s Counsel, 108 Md.App. 497, 503 , 672 A.2d 173 , cert. denied, 342 Md. 584 , 678 A.2d 1049 (1996). Our review is confined to whether 1) the agency recognized and applied the correct principles of law governing the case, 2) the agency’s factual findings are supported by substantial evidence, and 3) the agency applied the law to the facts reasonably.

Evans v. Shore Communs., 112 Md.App. 284, 299 , 685 A.2d 454 (1996). In our consideration of the last stage of analysis, we accord great deference to the agency and ask merely whether a reasoning mind could rea ²¹⁷ sonably have reached the conclusion reached by the agency. Id. Because we should not substitute our own judgment for the expertise of the agency from which the appeal is taken, see O’Donnell v. Bassler, 289 Md. 501, 509 , 425 A.2d 1003 (1981), we may not uphold an agency’s decision “unless it is sustainable on the agency’s findings and for the reasons stated by the agency.” United Steelworkers of America, Local 2610 v. Bethlehem Steel Corp., 298 Md. 665, 679 , 472 A.2d 62 (1984).

Finally, our analysis is informed by the following passage written by the Court of Appeals in Pemberton v. Montgomery County, 275 Md. 363, 367-68 , 340 A.2d 240 (1975), as it reviewed a Board of Appeals determination that a permit was granted for a project, that substantial construction had begun under that permit, and that the construction was begun in good faith: Since these three questions, which are either clearly factual or at least mixed questions of law and fact, have been answered at the administrative level prior to this matter reaching the courts, our function, as was also true of the circuit court, is not to substitute our assessment of the facts for those of the Board as they relate to these issues, but merely to evaluate whether the evidence before the Board was “fairly debatable” such that a reasoning mind could reasonably have reached the same result as did the administrative agency upon a fair consideration of the factual picture painted by the entire record before that body. A Appellant rests its argument entirely on the law of vested rights and does not challenge the Board’s conclusion that the Bathhouse Permit, as an accessory use, could not have issued before a permit for a permitted use. We therefore do not review this finding by the Board, but confine our discussion to an analysis of whether appellant obtained vested rights to a commercial marina. Md. Rule 8-504(a).

The doctrine of vested rights is predicated on the legal theory that an owner who obtains a lawful permit, commences ²¹⁸ to build in good faith, and completes substantial construction on the property, wins the right to complete the construction unaffected by a subsequent, change in the zoning regulations. Prince George’s County v. Equitable Trust Co., 44 Md.App. 272, 278 , 408 A.2d 737 (1979). In Richmond Corp. v. Board of County Comm’rs, 254 Md. 244, 255 A.2d 398 (1969), the Court of Appeals explained: In Maryland it is established that in order to obtain a “vested right” in the existing zoning use which will be constitutionally protected against a subsequent change in the zoning ordinance prohibiting or limiting that use, the owner must (1) obtain a permit or occupancy certificate where required by the applicable ordinance and (2) must proceed under that permit or certificate to exercise it on the land involved so that the neighborhood may be advised that the land is being devoted to that use. Id. at 255-56 , 255 A.2d 398 .

This principle was restated in Rockville Fuel & Feed Co. v. Gaithersburg, 266 Md. 117 , 291 A.2d 672 (1972), as follows: Such a “vested right” could only result when a lawful permit was obtained and the owner, in good faith, has proceeded with such construction under it as will advise the public that the owner has made a substantial beginning to construct the building and commit the use of the land to the permission granted. Id. at 127 , 291 A.2d 672 ; Sykesville v. West Shore, 110 Md.App. 300, 315 , 677 A.2d 102 (1996). We examine the Board’s application of both prongs of the Rockville Fuel test to the facts of appellant’s case. I It is undisputed that appellant never obtained a permit for the construction of a commercial marina.

Appellant also did not obtain a permit for the construction of additional piers and boatslips. The permits that appellant requested in 1989, the second marina grading permit and the Bathhouse Permit, were not granted. Nevertheless, appellant relies upon the ²¹⁹ opinion of the Court of Appeals in Pemberton to argue that the initial grading permit issued on March 20, 1987 (grading permit) is sufficient to satisfy the first part of Maryland’s vesting test. 5 That permit allowed appellant to construct initial grading of the entire sixty-acre property, and to construct revetments and bulkheading along the shoreline in both the R15 area and the MA2 area. In Pemberton , the Court, explained that the requirement of a valid permit should not be so narrowly construed as to require that a permit be issued for the final structure per se.

In that case, the petitioner had applied for a special exception to construct a gasoline filling station. The county granted the special exception on the condition that the petitioner comply with Montgomery County Code § lll--S2(c) (1955), which specified that permission to erect a building would be valid for one year, “during which time a building permit for such erection ... must be obtained and the erection ... started.” Pemberton, 275 Md. at 366 , 340 A.2d 240 . On the last day of the twelve-month time period, the petitioner obtained a permit for the construction of a retaining wall, the first step in building the filling station. Id. at 367 , 340 A.2d 240 .

In upholding the Board’s decision that the retaining wall permit was a “building permit for such erection,” the Court reasoned that “a building permit” does not necessarily translate into a permit only for a building as such. Indeed, if a “building permit” for a swimming pool project, for instance, were required, the needed permit could be for the pool itself and not necessarily for a bathhouse building being erected nearby. And so, in this case, a “building permit” allowing commencement of a service station project can be a permit for the construction of a portion of that project such as the foundation or retaining wall and it is therefore not limited, as the appellant insists, to a permit for the erection of a ²²⁰ building; a gasoline station is, after all, probably more vitally comprised of the pumps and the underground storage tanks. Furthermore, in the Board’s view, “the retaining wall was an indispensable part of the support of the gasoline station building made necessary because the site slopes sharply to the rear of the lot,” and, therefore, the retaining wall permit was part and parcel of the permit for budding the station, it being inextricably connected to that erection.

Id. at 368-69 , 340 A.2d 240 . Ultimately, the Court deferred to the expertise of the Board, quoting from the Board’s opinion: “Since every budding must begin with a foundation, common sense indicates that obtaining a permit to begin where one must begin, ie., with a foundation, is sufficient to satisfy the requirements of Section 111-32. The applicant [ (Exxon) ] would have had to start construction with the foundation regardless of the kind of budding permit first obtained. A foundation permit is a budding permit, since it is sufficient to adow the start of construction under the provisions of the code and under the practices of the office of Budding Inspector and the construction industry.” This finding by the Board, as to the existence of a construction permit within the requisite twelve-month period, is based upon a foundation of evidence which is at least “fairly debatable,” and, therefore, we cannot disturb it.

Id. at 369 , 340 A.2d 240 . Contrary to appellant’s contention, Pemberton does not compel the conclusion that the Board’s determination that appedant faded to satisfy the first prong of the Rockville Fuel test was not “fairly debatable.” Pemberton cannot, of course, stand for the principle that any work performed under any type of permit wdl qualify as a permit for any subsequent construction performed on the same property. In fact, the Court’s rationale in that case turned upon the permit at issue being for the construction of a retaining wall that was “inextricably connected” to the gasoline station budding because “a ²²¹ gasoline station is, after all, probably more vitally comprised of the pumps and the underground storage tanks,” the construction of which required a retaining wall at one end of the property. Pemberton, 275 Md. at 868-69 , 340 A.2d 240 .

The need for a demonstrated, inextricable connection between the permit granted and the ultimate erection, in order for the permit to be deemed to meet the first requirement for the vesting of rights, rests, in our opinion, upon more than merely an objective extrapolation of the steps from permit to project completion. At its fundamental level, the grant of a permit for any part of an erection, at least when that part is as preliminary in nature as grading and revetments, presupposes that the zoning authority is aware of the nature of the ultimate erection, or end-unit. A permit is, after all, a grant of permission by the zoning authority; it would be profoundly illogical to conclude that, although actual permission must be granted to begin to erect a structure, the permission granted extends automatically to the construction of the end-unit even in cases when the evidence does not establish that the zoning authority contemplated the erection of the end-unit in its initial grant of permission. If this were the case, then any permit for any kind of construction, regardless of the existence of actual or constructive knowledge on the part of the zoning authority of the nature of the end-unit, would satisfy the first prong of the vesting test.

Such a result would vitiate the need for permission in the first place. Moreover, the twin requirements for vesting—a valid permit and actual, recognizable construction—though separate requirements, cannot be divorced from each other entirely. The law in Maryland on vesting is particularly stringent as to the latter requirement—for property rights to vest, any construction under the permit must be recognizable to a reasonable member of the general public as the construction of the end-unit, not merely to a reasonable building inspector. Prince George’s County v. Sunrise Dev.

Ltd. Partnership, 330 Md. 297, 314 , 623 A.2d 1296 (1993). Part of the rationale for such a high threshold is certainty that the public can recognize that a new zoning law is not being violated. Id. ²²² In addition, the work must have been commenced “with the intention and purpose then formed to continue the work until the completion of the building.” Stewart Petroleum Co. v. Board of County Comm’rs, 276 Md. 435, 444 , 347 A.2d 854 (1975) (quoting Rupp v. Earl H. Cline & Sons, Inc., 230 Md. 573, 578 , 188 A.2d 146 (1963)). To impose these high hurdles of substantial commencement and good faith intent to complete the project (measured at the time of commencement), only to impose a very low hurdle for satisfaction of the first requirement of obtaining a permit, would be inconsistent, especially considering the complementary purposes of the two prongs of the Rockville Fuel test—obtaining official permission for construction and then ensuring that the public will be aware of this permission (by virtue of substantial construction at the time of the downzoning).

When a zoning authority issues a permit with no knowledge of the nature of the end-unit, the premise for the second prong collapses. Put another way, we may state the rule as the Court of Appeals did in Rockville Fuel, 266 Md. at 127 , 291 A.2d 672 , when it said that a vested right only resulted when the owner “has proceeded with such construction under [the permit] as will advise the public that the owner has made a substantial beginning to construct the building and commit the use of the land to the permission granted.” Id. (emphasis added). This statement by the Court makes it clear that the “permission” contemplated by the vesting test is permission to construct the end-unit, and that the second prong requires that the owner make a “substantial beginning” in this direction.

Seen in this light, Pemberton stands for the proposition that such permission to construct the end-unit may be implied by a permit to construct an erection that is integral to the end-unit. As noted supra, the Court in Pemberton simply was not confronted, as we are, with the question of whether the zoning authority was actually aware of the nature of the proposed end-unit. It follows