Vested Permit Rights

Stewart Enterprises, Inc and SE Combined Services of California, Inc. set out to build a crematorium in East Oakland following acquisition of the required building permit. The crematorium property rested in a commercial zone and qualified for the permit obtained.  However, following an oppositional public outcry based on potential health risks and impacts from emitting pollutants as well as East Oakland’s existing high rates of asthma, the issue of having a crematorium became a significant topic for review. The City backpedaled, heard its constituent’s arguments, and further reviewed public policy and laws; then rescinded its then current ordinance, in which Stewart’s building permit was issued, to resolve public conflict and concern.

The Oakland City Council passed an emergency ordinance requiring a conditional use permit (CUP) to operate a new crematorium; thereby affecting Stewart’s building plans for the crematoria.  Stewart objected to the conditions placed on the permit that it had previously legally attained. The City argued that it was necessary to enforce a CUP forged from the emergency ordinance prohibiting the new crematorium, and that the CUP transcended any right the previous permit-vesting ordinance may have indicated. Stewart initially appealed the case to the Oakland Planning Commission where the Commission denied the appeal. Unsatisfied with that result, Stewart took its case to civil court.

At the time Stewart acquired the building permit, the existing building permit law OMC section 17.102.040(A) deemed any subsisting permit “‘issued beforehand, … neither the original adoption of the zoning regulations nor the adoption of any subsequent rezoning or other amendment thereto shall prohibit the construction, other development or change, or use authorized by said permit.’” The two main questions for the court were:

The trial court ruled that Stewart indeed had a vested right in the building permit based on the preexisting local ordinance, and the emergency ordinance infringed on its right and was not sufficiently necessary to the public welfare to justify an impairment of that right. The trial court further held that by imposing conditions on the building permit, the property owner is prohibited from executing the building process until the conditions are satisfied; this is unlikely to occur considering he will need the City’s discretionary approval.

The City appealed the decision to the appellate court.  The appellate court upheld the ruling of the trial court, finding that that the original ordinance provided Stewart a “vested right to have [its] building permit application reviewed and considered in light of the regulations existing on the date of the application” (p. 8). Under the vested rights doctrine, a vested right is obtained when the party ‘has performed substantial work and incurred substantial liabilities in good faith reliance upon a permit issued by the government …;” that of which Stewart had already invested nearly two million dollars for the project. The court further noted that the City is misdirected in its position to impose a CUP requirement by invalidating preexisting legislation, and the determination of vested rights is derived from the timing of the permits rather than the effects of the enactments at the time. The appellate court also rejected the City’s reasoning behind the emergency ordinance because it prohibited the construction of the crematorium rather than placing a halt on building upon further review.