County of Kauai v. Pacific Standard Life Insurance Co.
Supreme Court of Hawaii, 1982

Facts: Developers Pacific Standard Life Insurance Co. and Graham Beach Partners acquired 60.425 acres (2.6MM Sq.Ft., or 1/10 Sq.Mi.) in Kauai in 1974, when the land was classified as open space and agriculture. In Nov. 1977, the Kauai General Plan was amended to designate the parcel as "resort." The Developers then sought a zoning amendment, with plans to build 3 hotels of 500 rooms each. In Feb. 1979, the County Council amended the zoning code to "resort," but allowing smaller development (One 350 room hotel plus in-lieu payment). In March 1979 a petition drive began to repeal the zoning ordinance. In January 1980 the referendum petition was certified. In February 1980, the County refused to suspend the ordinance and sent the referendum to an election as required by County charter. In April 1980 the County Planning Commission granted the Developers Special Management Area use permit on advice from legal counsel. The petitioners appealed to a lower court but lost. In August 1980 the Developers applied for and were granted building permits for 150 condo units. The petitioners sought an injunction but were denied by the circuit court. On Nov. 3, 1980 the Developers were granted building permit for a 350 room hotel. On Nov. 4, 1980, the referendum passed by nearly 2-1 (10,794 to 5,618), repealing the zoning ordinance.

Procedure: Lower court ruled (as a summary judgment on motion from the Developers) that Developers had acquired vested rights and the initiative could not rezone or stop the development.

Issue: Should the case be decided according to the common law principle of vested rights (of the property owner, unalterable by regulation), or the equitable law principle of estoppel (of a government repudiating a prior assurance)? In the latter analysis, estoppel is justified when developers expend "substantial sums" in "good faith" after having received reliable "assurance" by officials. Were these conditions met? In the former analysis, does the referendum rise to the level of a constitutional taking?

Holding: Lower court reversed.

Rationale: Either analysis leads to a similar result. "Final discretionary action constitutes official assurance for zoning estoppel purposes." In this case, since the referendum petition was certified prior to the completion of the normal permit procedure, assurance could not possibly have been granted until the referendum was voted upon. Furthermore, the developer did not make "substantial expenditures in good faith" for the purposes of estoppel. Estoppel does not protect against speculative business expenditures, including acquiring land and proceeding through the permit process, and expenditures made after the referendum was certified should be considered at risk rather than in good faith. In the vested rights analysis, the referendum is subject to a presumption of validity, unless the rezoning rises to the level of a constitutional "taking" where "the ordinance does not substantially advance legitimate state interests.... or denies an owner economically viable use of his land." In this case, the preservation of agriculture land is considered rational, and the Developers may still develop the land as such (as it was zoned when they acquired it).

Notes: The "final discretionary action" is normally considered to be a building permit, though here it would have been a shoreline management permit. But in multi-stage projects, this can be more complicated.