When CEQA Violations Are An Afterthought: Fourth District Upholds Trial Court’s Independent Judgment Determination That City Of Anaheim Is Equitably Estopped To Unilaterally Modify Resort Hotel CUP Conditions

by Miller Starr Regalia

CEQA and land use law in California go together like a hand in a glove. Due to CEQA’s broad scope and exacting substantive and procedural requirements, it is relatively easy to plead a cause of action for CEQA violations in most instances where land use approvals or entitlements for a development project are challenged. CEQA claims thus play a prominent, and often leading, role as petitioners’ litigation “weapon of choice” in most such land use disputes.

Such is not invariably the case, however, and other of California’s land use related laws and principles also have teeth. For example, if an enactment or approval is in conflict with a fundamental, mandatory, and specific general plan policy, such inconsistency can effectively “kill” the project approval with no litigation assist needed from CEQA claims. (E.g., Families Unafraid to Uphold Rural El Dorado County v. El Dorado County Bd. of Sup’rs (1998) 62 Cal.App.4th 1332, 1336.)

And likewise, as illustrated by a recently published Fourth District decision, a lead agency’s attempt to modify an existing project approval in contravention of vested rights is also sufficient to invalidate that action where the elements of equitable estoppel against a governmental entity are satisfied. (See, HPT IHG-2 Properties Trust v. City of Anaheim (4th Dist., Div. 3, 2015) 243 Cal.App.4th 188 (“HPT Properties”).)

Published decisions recognizing the existence of common law vested rights or equitable estoppel against the government are something of a land use “unicorn” – such claims are only very rarely upheld and most case law emphasizes the “daunting” challenge facing the developer plaintiff attempting to prove them. (See, e.g., Toigo v. Town of Ross (1998) 70 Cal.App.4th 309,321.)  Which makes it all the more interesting and significant when the rare precedent upholding such claims is handed down.

HPT Properties involved a 1999 conditional use permit (CUP 4153) issued by the City of Anaheim (City) authorizing development of two hotels (Project) on HPT’s property near Disneyland in City’s Resort Specific Plan Area. City strongly encouraged the Project to proceed in order to stimulate Resort Area development. However, it was concurrently planning to build the Gene Autry Way Overpass (Overpass), which potentially posed a substantial impediment to the Project since it required a take of HPT’s property that would ultimately (with required Resort Area landscaping and setbacks factored in) cause a loss of 44 rooms and 142 of the 350-plus required parking spaces. The parties negotiated conditions to the CUP including a Parking Plan that required the City, in addition to paying for the land to be taken, to acquire and construct a parking structure on an adjacent parcel in compliance with Resort Area standards to make up the parking deficit. In reliance on this agreement and the CUP conditions incorporating it, the HPT plaintiffs built and began operating the hotels at a development cost of $40 million, which not only stimulated overall Resort Area development but also provided City with $2 million in annual revenues from the operations.

A decade later when City later filed an eminent domain action to take the portion of HPT’s property needed for the overpass, however, it reneged on the parking deal embodied in the CUP. In 2011, just after the parties participated in a mediation in the condemnation action, the City staff approved an “administrative amendment” to CUP 4153 attempting to substitute surface parking that did not comply with Resort Area setback and landscaping standards in place of the parking structure it had promised to build at its expense. When HPT learned of and objected to this administrative amendment of the CUP on various grounds, the City rescinded it as beyond staff’s authority. Just two years later, however, the City applied for and approved CUP 5573 to eliminate the parking structure and construct a surface “parking lot with reduced setbacks and landscaping less than what the Resort Development Standards required.” The City’s resolution stated this action was in City’s “best interest” and the “best way to feasibly mitigate the loss of parking on the [Property], to be assembled with the Hotel Site for hotel parking.”

The trial court granted the HPT plaintiffs’ petition for writ of mandate, ruling that the City was equitably estopped from adopting CUP 5573, and the Court of Appeal affirmed. Key takeaways from the Court of Appeal’s opinion include:

  • In determining whether the elements of equitable estoppel were met in HPT’s Code of Civil Procedure § 1094.5 administrative mandamus action challenging City’s CUP 5573 decision, the trial court properly reviewed the evidence before it under an “independent judgment” standard. Such a standard of review applied at trial instead on the ordinarily applicable “substantial evidence” standard because a “fundamental vested right” was involved.
  • HPT’s rights under the original CUP 4153 implicated a “fundamental vested right” for purposes of determining the standard of review because they were “preexisting rights” that were “legitimately acquired” and “of sufficient significance to preclude [their] extinction or abridgement by a body lacking judicial power.” (Citations and internal quotations omitted.)
  • While a “fundamental vested right” for purposes of triggering the independent judgment standard of review thus “is not synonymous with… the ‘vested rights’ doctrine relating to land use and development[,]” it is nonetheless true that “[l]and use cases that apply the independent judgment standard of review ‘typically involve[] classic vested rights’.” (Citing McCarthy v. California Tahoe Regional Planning Agency (1982) 129 Cal.App.3d 222, 229-230, and Goat Hill Tavern v. City of Costa Mesa (1992) 6 Cal.App.4th 1519, 1527.)
  • “Where a CUP has been issued and the landowner has relied on it to its detriment, the landowner has a vested right.” (Citing Malibu Mountains Recreation, Inc. v. County of Los Angeles (1998) 67 Cal.App.4th 359, 367.) “Once a use permit has been properly issued, the power of a municipality to revoke it is limited…. Where a permit has been properly obtained and in reliance thereon the permittee has incurred material expense, he acquires a vested property right to the protection of which he is entitled.”  (Quoting Goat Hill Tavern, supra, 6 Cal.App.4th at 1530, internal quotations omitted.)
  • While the trial court thus appropriately employed the independent judgment standard of review to the evidence before it, the Court of Appeal “use[d] the substantial evidence test to review the factual bases of the trial court’s decision, not those of the administrative hearing officer.” (Citing MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 218.) Under this familiar deferential test, the Court of appeal reviews the evidence in the light most favorable to the trial court’s findings, resolving all reasonable doubts in their favor, and sustaining them if any substantial evidence – contradicted or uncontradicted – supports them.
  • The doctrine of equitable estoppel requires four elements: “(1) the party to be estopped must be apprised of the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the party asserting the estoppel had a right to believe it was so intended; (3) the other party must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his injury.” (Citing City of Long Beach v. Mansell (1970) 3 Cal.3d 462, 489.)
  • “[I]n actions against government entities, in addition to finding sufficient evidence to satisfy the ordinary equitable estoppel factors, the court must also weigh ‘policy concerns to determine whether the avoidance of injustice in the particular case justifies any adverse impact on public policy or the public interest’.” (Quoting Schafer v. City of Los Angeles (2015) 217 Cal.App.4th 1250, 1263.) The reason for requiring this so-called “fifth element” in the land use context is to limit estoppel to only “the most extraordinary case where the injustice is great and the precedent set by the estoppel is narrow.”  (Citing id., at 1262-1263.)

Applying the above standards and principles, the Court of Appeal soundly rejected all of the City’s arguments, and upheld the trial court’s factual findings, agreeing that those facts established this was an “extraordinary” case in which the application of estoppel was needed to prevent a grave injustice to the plaintiffs, and which would not set a precedent adversely affecting public policy. While it is unknown from the court’s opinion whether there were flaws in the City’s environmental analyses of traffic, parking, noise, land use consistency, or aesthetics in connection with its approval of CUP 5573, it ultimately did not matter. Who needs a CEQA claim to defeat a lead agency’s adverse unilateral project modification when they’ve got a unicorn?

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Miller Starr Regalia

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