Washington Suburban Sanitary Commission v. TKU Associates

Murphy, C. J., delivered the opinion of the Court. We deal here in a single opinion with two separate but related appeals involving a developer’s plan to construct a ⁴ large commercial mall in Montgomery County, Maryland. Primarily at issue in Appeal No. 0 is whether the Circuit Court for Montgomery County (Mathias, J.) was correct in holding that the Washington Suburban Sanitary Commission (the WSSC) improperly denied the developer a sewer hookup permit which it needed to proceed with the planned construction. Primarily at issue in Appeal No. 133 is whether Montgomery County is estopped to bar the developer’s project, notwithstanding an intervening downzoning of the developer’s property to a scale inhibiting implementation of the planned construction, because of an alleged wrongful withholding of the sewer hookup permit caused by illegal acts of the County and other governmental agencies perpetrated prior to enactment of the downzoning 'resolution.

The Circuit Court for Montgomery County (Mathias, J.) held that the County was not estopped to bar the developer’s project. We granted certiorari in both cases after appeals were entered, but before decision by the Court of Special Appeals. Maryland Code (1974), Courts and Judicial Proceedings Article, § 12-201. While the parties draw different inferences and conclusions from the evidence presented in the cases, the basic facts are these: Woodward '& Lothrop, Inc. owns a department store containing approximately 178,000 square feet of shopping floor area located on an eight-acre tract of land at the intersection of Wisconsin and Western Avenues in the Central Business District of Friendship Heights, Maryland.

In mid-1971, it formulated plans with TKU Associates and the Taubman Company, Inc. (hereinafter collectively referred to as Woodies) to replace its store and extensively redevelop the eight-acre site by constructing thereon a commercial mall complex, to be known as Town Center. The complex was to consist of a new and enlarged Woodward & Lothrop department store, a Garfinckel’s department store, various other stores, mall shops, and commercial offices, comprising in all 900,340 square feet of retail and commercial space, with parking facilities — an increase of 722,340 square feet over that contained in the existing store on the site. Woodies planned to construct the ⁵ Town Center in several phases over a five-year period, with its new department store, and other stores and shops to be built on the parking lot adjacent to the existing store, after which its old store would be demolished and other mall shops and commercial facilities erected in its place. The complex was to be connected by tunnel to the rotunda of a planned rapid transit (Metro) station to be built in Friendship Heights by the Washington Metropolitan Area Transit Authority (WMATA).

While the Town Center project was buildable as of right under the then existing C-2 (General commercial) zoning, construction could not begin unless and until Woodies (a) placed on record a plan of subdivision and final record plat approved by the Maryland-National Capital Park and Planning Commission (the Planning Commission), 1 (b) obtained a sewer hookup permit from the Washington Suburban Sanitary Commission, 2 and (c) obtained a building permit from Montgomery County. 3 Beginning in late 1971 and continuing through mid-1972, Woodies expended large sums of money for the preparation of building plans, traffic, market and other studies, and for fees of architects, surveyors, lawyers, and other expenses associated with the project. During this period, Woodies’ representatives attended numerous meetings and conferences with officials of the various governmental agencies whose approval would be needed before the project could be implemented; at these meetings Woodies fully disclosed its building plans by displaying models, sketches, and architectural renderings. On December 22,1971, Woodies filed a preliminary plan of subdivision with the Planning Commission. 4 As a condition precedent to the Planning Commission’s approval of the ⁶ plan, it was required to consider the availability of water and sewerage facilities to the proposed subdivision and make its determination “upon the recommendation” of the WSSC. 5 On January 26, 1972, after the WSSC had reviewed the preliminary subdivision plan, it noted thereon that the plan was “Suitable for water and sewer design, without commitments as to installation.” The Montgomery County Planning Board of the Planning Commission approved the preliminary subdivision plan on February 24, 1972. Consistent with requirements imposed by the County's subdivision regulations, 6 the approval was contingent upon Woodies dedicating designated parcels of its land for public use for future streets, roads, and pedestrian walkways.

On March 29, 1972, the WSSC imposed a sewer moratorium in the Little Falls Drainage Basin tributary to the Blue Plains Treatment Plant, which included the proposed Town Center project; the moratorium order barred sewer service to replacement facilities that would generate sewage flows in excess of those of existing facilities. Prior to granting final approval of Woodies’ proposed subdivision plan, the Planning Commission sought further assurances from the WSSC that sewer service would be available to Woodies’ redevelopment project; the Planning Commission expressed concern that in view of the size of the proposed Town Center, the project could not be implemented without violating the WSSC’s sewer moratorium order. On April 26, 1972, Woodies wrote to the WSSC, requesting that it advise the Planning Commission that sewer service would be available for the Town Center. Woodies supplied the WSSC at that time with detailed information concerning the number of plumbing drainage fixtures proposed for inclusion in the new project.

It stated that by utilizing water saving devices, and by eliminating “high water users” such as restaurants and beauty salons from the project until after the sewer moratorium had been terminated, the amount of sewage flow generated by Town Center would be less than ⁷ that generated by the existing facility. On May 3, 1972, the WSSC advised the Planning Commission by letter that sewers abutted Woodies’ property and that service could be provided. WSSC based its confirmation “on information” which Woodies had furnished to it that “no additional sewage flows will be generated by the proposed buildings since the existing building is to be removed.” By another letter dated May 24, 1972, the WSSC advised the Planning Commission that while no construction plans for the proposed development had been submitted to it for review and approval, the information furnished by Woodies “based upon standard methods of determining design sewage flows from plumbing fixtures, indicates that from a sewer design standpoint no greater flows would be expected from the proposed plumbing fixtures than from the fixtures contained in the existing store.” WSSC advised the Planning Commission that the statement contained in its letter of May 3 that sewerage service could be provided to the project was based solely upon its understanding with Woodies “that the proposed development will not generate additional sewage . . . [and that] it will be incumbent upon the developer to insure that the design of the buildings . . . will . . . ensure that no additional sewage flows will be generated.” In its May 24th letter, the WSSC stated that “this element of the design will be monitored by the Commission’s Plumbing Division at such time as final construction plans are submitted for review and approval in accordance with an application for plumbing permits.” Deeming itself bound by the recommendation of the WSSC with respect to the availability of sewer service, the Planning Commission approved Woodies’ final record plat. The required land dedications having been made by Woodies as part of the subdivision process, the property was recorded as one lot in the county land records on June 22, 1972.

As of that time, Woodies had expended approximately $1,500,000 on the project. In addition, the land which it had dedicated for public use, amounting to approximately 41,000 square feet, was valued in excess of $800,000. Woodies applied to the County for a building permit for ⁸ Town Center in September of 1972. It could not, however, obtain the permit until it first obtained a sewer hookup permit from the WSSC.

It applied for that permit on October 25, 1972. It anticipated early approval of its application and was prepared to begin construction within 90 days after receiving a building permit from the County. As these events were transpiring, the future commercial development of the Friendship Heights Central Business District (CBD) and surrounding area was under intensive study. On June 22, 1971 — at approximately the same time as Woodies was initially formulating its Town Center project — the Montgomery County Council had enacted a resolution creating a Citizens Advisory Committee to study zoning in central business districts throughout the county.

Shortly thereafter, the Planning Commission appointed an Advisory Committee to assist it in preparing a detailed development plan for the Friendship Heights CBD, such a plan having been recommended by the 1970 Master Plan for the Bethesda-Chevy Chase planning area (the B-CC Master Plan), of which Friendship Heights was a part; that plan recognized that then existing commercial zones were unsatisfactory for the adequate development of CBD zones and recommended adoption of new commercial zones. As a result of the activities of these committees, and of Planning Commission studies conducted during 1972, a “Preliminary Sector Plan for the Central Business District of Friendship Heights” was completed in December of 1972. It recommended a reduction in the boundaries of the CBD, the adoption of three new and more restrictive zoning classifications to replace all others within the CBD, and a substantial reduction in the amount and intensity of development within the CBD. It recommended that Woodies’ property be rezoned from C-2 to CBD-2, a classification which would have permitted the Town Center to be constructed in accordance with Woodies’ then existing building plans.

Aware that curtailment of future commercial development within the Friendship Heights area was under active study by the Planning Commission, Woodies pressed ⁹ the WSSC throughout late 1972 for approval of its sewer permit application. By this time, however, considerable concern had been and was being expressed by citizens and individual members of the Planning Commission and County Council that the Town Center, being so much larger than the existing Woodward & Lothrop store, would if constructed generate greater sewage flows than were permissible under the sewer moratorium order. Council and Planning Commission members were publicly critical of the WSSC’s performance, expressing the view that the WSSC was not acting upon reliable or accurate information in calculating sewage flows in connection with its subdivision plan recommendations and its approval of sewer hookup permits. Members of the staff of the WSSC who were responsible for passing upon the issuance of sewer hookup permits viewed this criticism as an effort to dissuade the WSSC from issuing a permit for the Town Center project.

A meeting was arranged on February 13,1973 between the Planning Commission and the WSSC to discuss a wide range of topics of mutual concern, including the need for better communications and closer liaison between the two agencies. The agenda included discussion of the availability of sewer service to accommodate new developments, and specifically encompassed the proposed Town Center project. At the meeting, sewage flow monitoring by WSSC was discussed. Planning Commission officials expressed concern over the scale of Woodies’ proposed development and the need for a careful determination of the merits of its sewer permit application.

It was discovered at the meeting that the WSSC had never read the sewage meter at the Woodward & Lothrop store and therefore had no exact information with respect to the outflow of sewage from the existing facility. As a result of this meeting, the agencies devised a format to assure that more reliable information would be assembled at the subdivision processing stage relative to sewer availability. Concern had also been expressed that the Town Center project constituted too intensive a redevelopment project within the Friendship Heights CBD and should not be ¹⁰ permitted. At a public hearing held on February 7, 1973 before the Montgomery County Planning Board on the Preliminary Sector Plan for the Friendship Heights CBD, it had been suggested by a representative of the Citizens Coordinating Committee of Friendship Heights that if the entire area were promptly downzoned to limit future commercial development, and if the WSSC failed to act on Woodies’ sewer permit application, Woodies could not obtain the requisite building permit needed to begin construction and could not obtain “vested rights” prior to the time that its property was downzoned.

On February 15, 1973, WSSC officials met with representatives of Woodies to discuss the sewer permit application, Woodies having been unsuccessful in its repeated efforts to arrange an earlier meeting. WSSC officials expressed a need for additional sewage flow information before they could act on the application. On March 1, 1973, Woodies submitted a study of the metered sewage flow from a comparable project in Milwaukee which demonstrated that the Town Center, as it was designed to operate in view of constraints imposed by the moratorium order, would not increase the sewage flow from the site. Not satisfied, WSSC requested that further studies be made of existing shopping centers in the Metropolitan Washington area.

Woodies submitted studies of three such shopping centers on March 27,1973, which indicated that, with the use of water saving devices, the sewage flow from Town Center would not be greater than that generated by its existing facility. Once again, the WSSC asked for additional information that would take into account factors not previously considered. Woodies complied, submitting its final study on June 21, 1973; this study superseded all previous studies and again showed that no greater sewage flows would be involved. During the period from February to June of 1973, WSSC officials received numerous communications from citizens and individual members of the Council and Planning Commission expressing a desire that the WSSC not issue a sewer permit for the project.

In June of 1973, a new Director ¹¹ of Project Planning for the WSSC was appointed and given responsibility to evaluate the merits of Woodies’ application. He developed reservations with respect to the validity of the sewage flow information supplied by Woodies; he also voiced concern that a 16-inch water main was needed to service the project, the installation of which would require an amendment to the Council’s- 10-year water and sewerage capital improvement plan and, presumably, further delay implementation of the proposed complex. The Planning Board by this time was preparing a Final Draft Sector Plan for the Friendship Heights CBD. It had studied the record amassed at the public hearings held in February and March of 1973 on the Preliminary Sector Plan, at which considerable criticism had been directed at the proposed intensity of the Town Center project in view of existing traffic and environmental constraints upon development within the CBD.

The Planning Board decided in June of 1973 to recommend that Woodies’ property not be zoned CBD-2, as originally recommended in the Preliminary Sector Plan, but rather CBD-1 — a less intensive zoning classification which, if enacted, would so reduce the permissible scale of development of Woodies’ property that the Town Center could not be built. It was explained that the project, as originally proposed by Woodies, had been included in the Preliminary Sector Plan with a CBD-2 zoning classification only because of the prior approval of Woodies’ subdivision plat and the belief that the WSSC would approve its sewer permit application. Because of the delay in acting on its application, Woodies demanded a hearing before the WSSC. It was, however, unsuccessful in having one firmly scheduled until August 29, 1973.

That hearing was cancelled by WSSC on August 22, 1973; a letter signed by its Secretary on that date advised Woodies that a new sewer moratorium order had been issued on August 16, 1973 by the Secretary of the State Department of Health and Mental Hygiene. As a consequence, the letter stated that the scheduled hearing would “serve no useful purpose” and that “it has been ¹² determined that the requested service cannot be provided at this time.” Woodies viewed the Secretary’s letter as the equivalent of a denial of its sewer permit application. On October 15,1973, it .sued the WSSC in ,the Circuit Court for Montgomery County, in equity, there being no statutory right to appeal from the action taken by the agency. Woodies alleged that it was entitled to a sewer permit prior to the passage of the Secretary’s sewer moratorium order of August 16, 1973 but that, in any event, the order did not preclude granting a permit since no greater sewage flows would be generated by the Town Center project than were presently permissible.

Woodies sought a decree compelling WSSC to issue the sewer permit, or in the alternative, to hold a hearing on its application and render a decision. The sewer permit case was not scheduled for trial until the summer of 1974. In the interim, the Final Draft Sector Plan for the Friendship Heights CBD was adopted with modifications by the Council on May 28, 1974. The more restrictive CBD zoning classifications having earlier been enacted by the Council, 7 the Adopted Sector Plan was implemented by Council Resolution 7-1849 enacted on July 16, 1974, granting a sectional map amendment 8 comprehensively rezoning the CBD in its entirety, including Woodies’ property which was downzoned to a CBD-1 classification, thus inhibiting construction of the Town Center.

Woodies entered an appeal from the Council’s resolution. The trial of the sewer permit case, in which the State Department of Health and Mental Hygiene intervened as a party defendant, was concluded on September 23, 1974. Judge Mathias held that the WSSC’s refusal to act on Woodies’ application was tantamount to a final decision denying the application. He found as a fact from the evidence that the WSSC had never prepared a report on ¹³ Woodies’ application prior to denying it; that the Secretary’s moratorium order did not bar the WSSC from issuing permits for sewer hookups where there would be no increase of hydraulic or organic flow; that the WSSC misconstrued the Secretary’s order “to deny the plaintiffs a hearing and to withhold approval of their application”; and that “the conduct of WSSC throughout its dealings with . .. [Woodies was] devious and lacking in good faith.” Judge Mathias found as a fact from the conflicting expert evidence before him that the proposed complex would not generate a higher flow than was generated by Woodies’ existing facility.

He concluded: “In reaching our decision in this case, we note WSSC is charged by law with the duty of acting upon applications for approval of sewer and water hookups. In performing this duty, however, WSSC is not required to hold hearings, although customarily it does; nor is it required to make findings. Its decisions, however, like those of any administrative agency, must be supported by some evidence. To reach a decision without some evidence in support thereof is to act arbitrarily and capriciously. “Plaintiffs have adduced convincing evidence to show a dereliction of duty on the part of WSSC’s staff.

It had the plain duty to evaluate plaintiffs’ application, and if necessary to assemble relative data of its own for presentation to the Commission so that the Commission might make an informed judgment. The staff did neither. The statement in WSSC’s letter of August 10, 1973, that ‘The Engineering Department has completed its study and report thereon is being readied for Commission consideration’ was shown by the evidence to be untrue. The statement in WSSC’s letter of August 22, 1973, attributing cancellation of the scheduled hearing to the Department of Health & Mental Hygiene’s moratorium of August 16, was also untrue.” ¹⁴ In view of the Council’s earlier resolution which downzoned Woodies’ property, Judge Mathias specified in his decree dated December 18, 1974 that the Town Center project could not be undertaken unless Woodies’ former zoning classification was restored or “equivalent events” occurred, namely: “(1) the property being made subject to any other zoning classification lawfully permitting construction thereof; or (2) establishment (in a separate judicial proceeding or by administrative action) that said construction may proceed, notwithstanding any supervening zoning change, whether by reason of dedications of property and/or other reliance on the pre-existing zoning classification; by reason of improper governmental delays in granting plumbing and sewer" authorizations which prevented issuance of a building permit for such construction; or for any other reason.” Woodies thereafter filed a declaratory judgment action naming Montgomery County, the County Council, and the Planning Commission as defendants; it sought a declaration that its development rights under the previously existing C-2 zoning were not affected by the Council’s downzoning resolution of July 16, 1974.

It alleged, in substance, that the defendants had led it to believe that it would be permitted to build the Town Center project; that in reliance thereon Woodies made cash payments and incurred liabilities in excess of $1,500,000, yielded title to land valued at $800,000, and paid $45,000 to WMATA in connection with work on the Metro station; but that the defendants conspired to prevent the development plan by causing the WSSC to delay action on its sewer permit application, without regard to its merits, in order to impede issuance of a building permit until such time as its property could be downzoned. The action recited that the defendants’ unlawful actions were “for the sole purpose of placating, for political and other invalid motives, a highly vocal and politically-powerful group of county ¹⁵ residents” and that in furtherance of the scheme, the defendants did subject the property to arbitrary zoning changes. Woodies asserted that by reason of land