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Town of Cheswold v. Central Delaware Business Park

Supreme Court of Delaware

June 8, 2018

TOWN OF CHESWOLD, Petitioner Below, Appellant,

          Submitted: April 13, 2018

          Court Below: Superior Court of the State of Delaware C.A. No. K13M-08-016

          Court Below: Court of Chancery of the State of Delaware C.A. No. 1574-JJC

         Upon Appeal from the Superior Court and the Court of Chancery of the State of Delaware (Consolidated): REVERSED and REMANDED.

          Max B. Walton, Esquire (argued), Kyle Evans Gay, Esquire, Connolly Gallagher LLP, Newark, Delaware, for Petitioner Below, Appellant Town of Cheswold.

          Mark F. Dunkle, Esquire, Parkowski, Guerke & Swayze, P.A., Dover, Delaware, for Respondent Below, Appellee Central Delaware Business Park.

          Before STRINE, Chief Justice; VALIHURA, VAUGHN, SEITZ, and TRAYNOR, Justices, constituting the Court en Banc.

          SEITZ, JUSTICE.

         In this appeal, we consider whether stipulated court orders agreed to in 2005 by a property owner and the Town of Cheswold prevent the Town from enacting new ordinances affecting the property. Applying res judicata, the Superior Court found that they did, and entered a judgment prohibiting the Town from enacting any ordinance impairing the property owner's existing development rights.

         We reverse the Superior Court's judgment and hold that the 2005 stipulated orders do not prohibit the Town from enacting future ordinances affecting the property. If the Town eventually adopts a new ordinance, any future litigation over the property owner's vested rights should be resolved by applying the balancing test in In re 244.5 Acres of Land.[1]


         The Central Delaware Business Park owned nineteen lots in a planned industrial park in the Town of Cheswold. Before the Town's adoption of the ordinance causing the controversy later resolved by the stipulated orders, the lots were zoned M-1 Industrial under the Town's 1977 zoning code.[2] In 2005, as part of a comprehensive effort to modernize its zoning code, the Town proposed an amended ordinance changing zoning classifications and permitted and proscribed uses within the new zoning districts. Under the proposed ordinance, the Business Park's property would have been separated into two new zones: I-1 Light Industrial and I-2 Heavy Industrial. According to the Business Park, the new ordinance would "downzone" the entire business park and impair the rights of third parties who installed improvements and buildings in reliance on the 1977 code.[3]

         At a public hearing, the Business Park representatives objected to the 2005 Ordinance, explaining it would "cause an immediate financial hardship" by impairing five pending purchase agreements, affect the existing property owner's present uses, and interfere with the development plan under the 1977 zoning.[4] They proposed an amendment to the 2005 Ordinance, Article 5A, that would allow it to retain the M-1 Industrial zoning under the 1977 zoning code. At the public hearing, the Town agreed to adopt Article 5A, but when the Town published the 2005 Ordinance, Article 5A was not included.

         The Business Park filed suit in Superior Court seeking a writ of mandamus to compel the Town to publish Article 5A, revise the minutes of the public hearing to show that the Town unanimously accepted the Article, and approve the Business Park's pending site plan applications.[5] The Business Park also filed suit in the Court of Chancery seeking, along with other relief, a declaration that the Business Park had vested rights to its M-1 Industrial zoning under the 1977 zoning code.[6] The two cases were consolidated and heard by the Superior Court.[7]

         The parties eventually settled the litigation by filing essentially identical stipulated orders in each court.[8] Under the stipulated orders, the Business Park agreed to drop its claims, and the Town agreed to allow the Business Park to "continue with M-1 Zoning and site plans/building procedures under the 1977 Zoning Code"; to approve all the Business Park's "pending site plan and building permit applications";[9] and to amend the 2005 Ordinance to include Article 5A. Article 5A states:

It is necessary and desirable, as a matter of public policy, to recognize vested property development rights in order to ensure reasonable certainty, stability, and fairness in the land use planning process and in order to stimulate economic growth, secure the reasonable investment-backed expectations of landowners, and foster cooperation between the public and private sectors in the area of land use planning. . . . The [Central Delaware Business Park's plans] satisfy the provisions of this section as vested in development plans . . . .
A vested property right shall be deemed established with respect to any lots, parcels or tract of land created as part of a land development plan approved by the Town of Cheswold under the Zoning Ordinance. . . . A vested property development right, once established as provided in this Article 5A, precludes any zoning or land use action by the Town of Cheswold which would alter, impair, prevent, diminish, impose a moratorium on development, or otherwise delay the development or use of the property subject to Section 16-6, except with the written consent of the owner of such land.[10]

         Eight years later, the Town considered enacting a new ordinance affecting the Business Park's remaining six lots. [11] Unclear about the effect of the earlier stipulated orders and threatened by the Business Park with a contempt proceeding if the Town proceeded with any new ordinance, [12] the Town filed a petition for declaratory judgment in Superior Court to clarify whether the 2005 orders prohibited it from rezoning the Business Park. In the alternative, the Town sought relief from the stipulated orders because the 2005 Ordinance amounted to illegal contract zoning. The Town argued that because the stipulated orders only required the Town to include Article 5A in the adopted ordinance and approve the Business Park's pending applications, the stipulated orders did not bar the Town from passing new ordinances that affected the property.

         In response, the Business Park argued that the stipulated orders incorporated the substance of Article 5A, which recognized the Business Park's vested rights to the 1977 zoning classification. Thus, according to the Business Park, the Town was prohibited from enacting any new ordinances affecting the Business Park's vested property rights. The Business Park also argued that the stipulated orders did not amount to illegal contract zoning because they were not a contract. Rather, it argued that a vested right existed in a validly approved zoning ordinance and did not illegally contract away the Town's power.[13]

         The Superior Court, on its own initiative, raised res judicata as a possible bar to the Town's request for relief, and eventually concluded that the Town's claims were "dispensed with by res judicata" and the law of the case doctrine because the Business Park "acquired vested rights pursuant to the settlement agreement entered as stipulated judgments in 2005."[14] According to the court, the Business Park's "vested rights remain perpetually vested."[15] Thus, the court held the Town could not enact legislation changing the zoning for the Business Park's lots.[16] The court entered a judgment declaring that the Business Park's rights were "vested as provided in the 2005 Stipulated Orders" and "the Town is prohibited from enacting any ordinance that would impair" its vested rights.[17]


         Three issues are raised on appeal-the first one by this Court, and the other two by the Town. First, does the dispute present a justiciable controversy; second, did the Superior Court properly hold that the Town's declaratory judgment claims were barred by res judicata; and finally, does the Business Park have perpetual vested rights to its existing zoning classification, such that the Town cannot enact any new ordinance affecting the property.

         A. Justiciability

         Although the justiciability issue was raised at oral argument in the Superior Court, the court passed over the issue because "neither party dispute[d] that there is an actual controversy."[18] On appeal, we raised the issue once again to ensure that the issues involved present an actual controversy that is ripe for review.[19]

         The Town sought relief from the stipulated orders through the Declaratory Judgment Act.[20] The Act is used "to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations."[21] Not all disputes, however, are appropriate for judicial review when parties request it. Under the Act, there must be an actual controversy between the parties, meaning:

(1) It must be a controversy involving the rights or other legal relations of the party seeking de[c]laratory relief; (2) it must be a controversy in which the claim of right or other legal interest is asserted against one who has an interest in contesting the claim; (3) the controversy must be between parties whose interests are real and adverse; (4) the issue involved in the controversy must be ripe for judicial determination.[22]

         The first three elements are met in this case-the controversy involves the Business Park's legal rights in its zoning classification; the Town has an interest in contesting the Business Park's rights because it intends to rezone the property; and the interests are real and adverse. It is only the last factor that made us pause- whether the controversy is "ripe for judicial determination."[23] Our concern arose because the Town has not yet adopted a new ordinance that would affect the Business Park's property rights. We find, however, the case is sufficiently ripe to decide whether res judicata prevented the Town from adopting ordinances affecting the Business Park property. But, as will be discussed later, the status of the Business Park's rights under any new ordinance is not ripe for judicial review and will have to await legislative action by the Town.

         A case is ripe for judicial review when the dispute has matured to the point where the plaintiff has suffered or will imminently suffer an injury.[24] Using a "common sense assessment" of the facts, a court should hear a dispute when "litigation sooner or later appears to be unavoidable and where the material facts are static."[25] If facts are still unknown or changing, however, the court should be reluctant to weigh into the controversy, for fear it might be offering only advice and a premature binding decision.[26]

         Ordinarily, the Town would have enacted the new ordinance, and the parties would have litigated the vested rights issues when the Town applied the new ordinance to the Business Park. But, the Business Park took that option away when it threatened to petition the Superior Court to hold the Town in contempt if the Town adopted the new ordinance. Instead of risking contempt, the Town acted reasonably by bringing a declaratory judgment action to determine the effect of the stipulated orders. At least as far as the res judicata question is concerned, the facts are static, as evidenced by the parties' cross-motions for summary judgment, and the dispute has matured to the stage where judicial relief involving the stipulated orders can be provided in concrete form.[27] Thus, this aspect of the dispute is ripe for judicial review.


         Res Judicata

         The Superior Court reasoned that the stipulated orders resolved for all time the Business Park's vested rights to the 1977 M-1 Industrial zoning classification and, applying res judicata, held that the Town could not re-litigate the issue through its declaratory judgment action. Res judicata, however, was not the proper legal framework to resolve the Town's claims.

         In its petition for a declaratory judgment, the Town argued that, under its interpretation, the orders did not "preclude legislative discretion to enact ordinances, rules, and regulations relating to zoning, site plan, or building permit procedures for the M-1 Industrial zoned lands in the Central Delaware Business Park."[28] According to the Town, the stipulated orders only required the Town to adopt the 2005 Ordinance with Article 5A included and to process the Business Park's pending applications under the 1977 Ordinance. The Business Park took the opposite position and argued that the stipulated orders incorporated Article 5A and established for all time the Business Park's rights to be subject only to the 1977 M-1 Industrial zoning.

         Thus, the Superior Court was confronted with an interpretive dispute and not a res judicata question. Under res judicata, the claims asserted in the earlier action must be the same as those asserted in the present action.[29] That is not the case here. The Town is not attempting to re-litigate the 2005 claims by re-asserting the same claims in the present action. Instead, the Town brought a declaratory judgment to determine the scope of the 2005 stipulated orders-a claim ...

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