[00:00:01] Speaker 02:
Good morning, your honors, may it please the court, Merida Reed-Feldt on behalf of Appellant City of Los Angeles.

[00:00:07] Speaker 02:
I'd like to reserve three minutes for rebuttal.

[00:00:10] Speaker 02:
Let's watch the clock.

[00:00:12] Speaker 02:
This case involves residential building permits, which on their face- I'm sorry, could you move the microphone a little closer?

[00:00:17] Speaker 02:
It's pretty quiet.

[00:00:32] Speaker 02:
filings.

[00:00:34] Speaker 02:
Venice Lender stopped funding and its workers walked off the job.

[00:00:37] Speaker 02:
Construction was then dormant for two years, after which, on the eve of Lender's foreclosure, Respondent filed for bankruptcy.

[00:00:46] Speaker 02:
At this time, the building permits were almost five years old.

[00:00:50] Speaker 02:
But Dutter hired new staff in bankruptcy and decided to try to revive the permits by suing the city in an adversary proceeding for declaratory relief

[00:01:01] Speaker 02:
that the permits remain valid.

[00:01:04] Speaker 02:
Detter's theory was that it obtained vested rights in the permits, which did not expire.

[00:01:10] Speaker 02:
They argued because the permits are vested, they did not expire.

[00:01:15] Speaker 02:
The bankruptcy court, in an extremely expedited proceeding in which the motion for summary adjudication was filed two and a half weeks after the complaint was served, granted summary adjudication finding Detter maintained vested rights, quote, without time limitations.

[00:01:31] Speaker 02:
The court should reverse for three main reasons.

[00:01:35] Speaker 02:
Number one, vested rights is a state law issue, and the State Supreme Court and Abco v. South Coast Regional Commission held that vested rights are limited in scope to the express terms of the permit.

[00:01:46] Speaker 02:
All subsequent Court of Appeal and Ninth Circuit case law have confirmed this includes a permit's stated expiration date.

[00:02:18] Speaker 02:
What, so their theory is that they obtained vested rights in the permits by, um, and common, is the common law right, which, under which- I know, I know.

[00:02:29] Speaker 02:
Yes.

[00:02:29] Speaker 03:
I'm gonna miss briefs, but so I just don't understand.

[00:02:31] Speaker 03:
Um, I mean, I think you have a legal argument that they're wrong.

[00:02:34] Speaker 03:
Yes.

[00:02:34] Speaker 03:
Because the vested rights don't last past the permit expiration.

[00:02:39] Speaker 03:
Yes.

[00:02:40] Speaker 03:
Um, what is your second one?

[00:02:41] Speaker 02:
The second thing is that our tribal issues affect the ones that they vested at all.

[00:02:45] Speaker 01:
So, vested,

[00:02:53] Speaker 02:
Their theory in their briefs in the trial court and what the bankruptcy court found is that based on this theory of estoppel the city

[00:03:09] Speaker 03:
vested in the second one.

[00:03:10] Speaker 03:
Like I thought there was sort of a separate theory that there's some sort of estoppel based on the city's actions after the permits would have expired.

[00:03:17] Speaker 02:
That is not how they phrased it in the bankruptcy court.

[00:03:20] Speaker 02:
Their argument was that because they had vested in the permits, the city was estopped.

[00:03:27] Speaker 02:
They were entirely leaked.

[00:03:30] Speaker 02:
They did not make an independent estoppel argument.

[00:03:32] Speaker 03:
So I guess I view that then as just the first

[00:03:47] Speaker 01:
Apple if the city lead them on and they relied on it.

[00:03:51] Speaker 01:
But I wasn't sure if they made it on appeal.

[00:03:54] Speaker 01:
Is it your view that they're making this argument on appeal?

[00:03:58] Speaker 02:
Well, they completely link it.

[00:03:59] Speaker 02:
Their argument in their answering brief is because the permits are vested, the city is a stopped.

[00:04:04] Speaker 02:
So it's all the same.

[00:04:07] Speaker 03:
We're almost helping them by saying there's a second one that has a fact dispute because I don't

[00:04:15] Speaker 01:
I read their briefs that they're on the field.

[00:04:19] Speaker 01:
They were focusing on the two, the half of the permit was issued.

[00:04:23] Speaker 01:
They continued working during that two years.

[00:04:25] Speaker 01:
It was vested.

[00:04:27] Speaker 01:
And then the time expiration date item has no effect at all.

[00:04:41] Speaker 02:
case Pardee-Avco's holding has no meaning because Pardee makes municipal expiration dates invalid.

[00:04:52] Speaker 02:
So Pardee was, was resting specifically on statute.

[00:04:56] Speaker 02:
Exactly.

[00:04:57] Speaker 02:
Exactly.

[00:04:58] Speaker 02:
Pardee was a state statutory exemption interpretation case.

[00:05:01] Speaker 02:
What we're looking at here is the terms of the permits.

[00:05:04] Speaker 00:
What's the significance of the city telling Treetop that the permits were reactivated?

[00:05:14] Speaker 00:
million dollars after being told that the permits were reactivated?

[00:05:20] Speaker 02:
So if we're looking at the facts in the light most favorable to the city, as we must on some re-judication, what happened was that a few months after the debtor began construction, the city issued a stop work order because the plans violated building standards.

[00:05:39] Speaker 02:
Work was stopped for six months, at which point the

[00:05:43] Speaker 02:
They submitted revised plans, and the city lifted the stop work order, reactivating the permits.

[00:05:50] Speaker 02:
And the permits had expired, but it was within the 90-day period when they could apply for an extension.

[00:05:56] Speaker 02:
But they didn't.

[00:05:58] Speaker 02:
But they didn't.

[00:05:59] Speaker 02:
And on appeal, and their theory below was that the reactivation was an extension of 180 days.

[00:06:07] Speaker 02:
And I want to argue that this failed

[00:06:12] Speaker 02:
They're disputed facts and it's founded on debtor's attorney's declaration which contradicted her declaration from two weeks prior.

[00:06:23] Speaker 02:
So debtor's attorney acknowledged the city has this extension policy in the municipal code which requires a permit holder to submit an application with a showing of unusual difficulties if they want to obtain an extension.

[00:06:41] Speaker 00:
Do they, typically for a project of this size, can it be completed in two years?

[00:06:46] Speaker 02:
I just can't imagine it being completed in two years, regardless of... There's really, that's really not an issue in the record.

[00:07:03] Speaker 02:
on an extension, and it's undisputed between the sides that the municipal code provides that to obtain an extension, you have to submit a request, and you have to make a showing of unusual difficulties.

[00:07:15] Speaker 00:
So the idea- I'm just asking you just in practice.

[00:07:17] Speaker 00:
I mean, I just can't imagine- Oh.

[00:07:18] Speaker 00:
If you cut a home, it takes a year to build.

[00:07:20] Speaker 00:
I mean, something of this size seems like it's a pro forma, these extensions, for a project of this size.

[00:07:26] Speaker 02:
I think that whether they could have obtained an extension had they asked for one, especially

[00:07:42] Speaker 02:
construction continued for a few months, and at that point, lenders stopped funding, the workers walked off the job, and their manager, Justin Kunkel, did submit an application for an extension, and the city, even though the permits were expired right then, in the 90-day period, the city said, hey, you have to, Cuevas submitted a declaration saying you have to direct this

[00:08:05] Speaker 02:
But at that point the money stopped.

[00:08:07] Speaker 02:
Nobody was working and they never did.

[00:08:10] Speaker 02:
Had they in fact submitted this extension request when the construction had been ongoing, for that point the law hadn't changed.

[00:08:22] Speaker 02:
It's certainly possible the city would have granted it even though it was late.

[00:08:26] Speaker 02:
It's a very different question than whether or

[00:08:30] Speaker 02:
issued and that construction had been dormant for two years and the law had changed drastically whether the city would then issue an extension request.

[00:08:43] Speaker 02:
So from the Ninth Circuit to the State Court of Appeal, Keys Law has uniformly applied Avco's holding.

[00:08:55] Speaker 02:
South Lake Tahoe applied AVCO's rule and reasoning to reject the developer's claim to a vested right and a permit that had issued many years prior.

[00:09:06] Speaker 02:
The Ninth Circuit held that, according to AVCO, a developer should not be able to stop the government when the project temporally exceeds the scope of that approved.

[00:09:16] Speaker 02:
And in Lakeview, there was just a understanding

[00:09:23] Speaker 02:
Here we have actually a stated expiration date on the face of the permit.

[00:09:29] Speaker 02:
Lakeview explained that the vested rights doctrine balances a tension between the public interest in lower construction costs that result from providing developers with some certainty about their investments with the public interest in regulating land use.

[00:09:45] Speaker 03:
So if we agree with you that

[00:09:53] Speaker 03:
Let me say it again.

[00:09:54] Speaker 03:
If we agree with you that the rights vested only for the length of the permit, do we need to remand for the bankruptcy court to figure out what the length of the permit was, given the possibility that it was somehow extended, or do we get to find that it only lasted two years, like you'd like us to say?

[00:10:09] Speaker 03:
What do you want us to do about when the permit expired?

[00:10:13] Speaker 02:
I think that there were

[00:10:20] Speaker 02:
remand to the court to determine, remand the declaratory relief to the court.

[00:10:31] Speaker 02:
Or in the alternative, the court could find that.

[00:10:37] Speaker 03:
Let me ask you again.

[00:10:37] Speaker 03:
Would you like us to hold that the permits have already expired?

[00:10:41] Speaker 03:
Or do we not have the power to do that?

[00:10:43] Speaker 03:
We need the bankruptcy court to do that.

[00:10:53] Speaker 03:
Let me think on that.

[00:10:54] Speaker 03:
Because I think your argument is the vested rights only last the length of the permit.

[00:10:58] Speaker 03:
And you've argued that the permits expired in March 2020, but I don't think there's a finding of that by the Bankruptcy Court because they had thought this other thing.

[00:11:05] Speaker 03:
Exactly.

[00:11:06] Speaker 03:
So I don't know what you want us to do.

[00:11:09] Speaker 02:
I think you should reverse the summary adjudication and remand for the case to proceed.

[00:11:14] Speaker 02:
For further proceedings.

[00:11:15] Speaker 02:
For further proceedings, basis with the opinion.

[00:11:18] Speaker 03:
Including a new determination of

[00:11:24] Speaker 02:
I think if their only theory is that vested rights continue past the expiration date, this court can certainly find that the permit's expired because the AVCO and all the courts have determined that expiration dates must be enforced.

[00:11:49] Speaker 02:
But there is a second ground for moving to summary adjudication.

[00:11:56] Speaker 02:
I think it's a matter of law, a stated expiration date must be enforced.

[00:12:04] Speaker 02:
So now I agree with the court that you can find that the permits have been

[00:12:34] Speaker 04:
Taking this case so quickly at our request as I think the court knows from the briefing Getting a quick resolution of this case is essential in this bankruptcy case to ensure the maximum value of the bankruptcy estate which in turn ensures maximum value to creditors with that in mind

[00:12:59] Speaker 04:
The bankruptcy court explicitly punted on most of the issues that the city is arguing on appeal, namely whether the permits expired under the terms of the Los Angeles Municipal Code, which is a two-year period.

[00:13:14] Speaker 04:
I don't quite understand the distinction that the city draws in their briefs between what was on the face of the permit and what's in the Municipal Code because, of course, the scope of the temporal length of the permit is determined by the Municipal Code itself.

[00:13:32] Speaker 04:
on the face of the permits and under the municipal code, no, it's not more than two years.

[00:13:36] Speaker 04:
The issue is, did, the only issue that's on appeal, the only issue that the bankruptcy court resolved was whether under AVCO and Pardee, the permits vested, that's AVCO.

[00:13:49] Speaker 04:
And if they did vest, what is the scope of that vested right?

[00:13:52] Speaker 04:
That's Pardee.

[00:14:03] Speaker 03:
argument and think that the vested right only lasts the length of the permit and the permit is two years, then you lose totally.

[00:14:09] Speaker 04:
I think that's right, but that's not what party says.

[00:14:27] Speaker 04:
instance in 1972 by the city, then that permit vested.

[00:14:32] Speaker ?:
That was never on dispute.

[00:14:34] Speaker 04:
The entire analysis in Part E depends and involves whether the developer had a vested right arising from that original

[00:14:56] Speaker 01:
in the terms of the statute, which didn't include the municipal code.

[00:15:04] Speaker 01:
How do you think, and that has a statutory construction case, how do you think it applies to this case

[00:15:26] Speaker 04:
the original Coastal Act was passed and the question was do you get an exemption from that Coastal Act in 1972 because you have a vested right.

[00:15:37] Speaker 04:
So right there we know that the permit originally issued in 1972 was vested because they got that exemption.

[00:15:44] Speaker ?:
Then the permit lapsed and in the meantime the

[00:15:53] Speaker 04:
Commission says no relying on their new 1976 regulation and despite the fact that the original 1972 permit had lapsed under its own terms the court nonetheless held that the developer had a vested right and was allowed to complete construction.

[00:16:11] Speaker 03:
The reason it was because of the language of the statute that only listed certain ways that a vested right could change and we don't have a statute that has such an exclusionary list here.

[00:16:28] Speaker 04:
ultimately say now I guess what else I I think three four and five is what's doing the work here and in the ways that matter the most and I think the Bankruptcy Court essentially said it the right way when she when she confronted this issue at the summary adjudication hearing which is AFCO establishes how you get the vested right party governs the scope of that vested right and Now that the right is vested and I'm paraphrasing the Bankruptcy Court a little bit here

[00:17:00] Speaker 03:
where the regulation is interpreting the statute.

[00:17:02] Speaker 03:
So I think Section 3 is just saying, let's look at the statute, not the regulation, essentially.

[00:17:06] Speaker 03:
So that's that one.

[00:17:07] Speaker 04:
Well, I think Section 3 says, and I'm quoting here, the right possessed by the developer was in the nature of a property right.

[00:17:14] Speaker 04:
Such a right is rooted in the Constitution.

[00:17:16] Speaker 04:
The developer's failure to exercise that vested right to its fullest extent before the enactment of the 1976 Coastal Act does not affect its vested character.

[00:17:26] Speaker 04:
So I think that language says exactly, I think that's the language that helps us here.

[00:17:32] Speaker 03:
But it goes on in context to say the holding of section three is if the legislature is without authority to retroactively deprive the party of a vested right, then the state commission by regulation can't do it either.

[00:17:42] Speaker 03:
And so it's looking at what the statute is saying, right, about how the vested right ends.

[00:17:47] Speaker 04:
It's looking at whether the vested right gave rise to a statutory exemption.

[00:17:52] Speaker ?:
And the holding was no, it doesn't, or sorry, the holding

[00:18:04] Speaker 04:
vested and once you've incurred substantial liabilities.

[00:18:06] Speaker 03:
The length of the vesting.

[00:18:09] Speaker 03:
So, I mean, don't we have APCO saying the length of the vesting is the length of the permit?

[00:18:15] Speaker 03:
Now in this party case there was a special vesting statute that had different rules about when you can get rid of vesting, but the default in California, as I understand it, is the vesting only lasts as long as the permit.

[00:18:27] Speaker 04:
It depends on what type of vesting you're talking about.

[00:18:29] Speaker 04:
There are different types of vesting under California law, and for that I can point you to two different

[00:18:43] Speaker 04:
law, and I would point you to chapter 21.

[00:18:46] Speaker 04:
I would also point you to the Davidson case that's cited in the brief that makes this distinction.

[00:18:50] Speaker 04:
AFCO vesting is common law constitutional vesting, and I will be the first to admit that many of these California cases use those terms in sort of a fast and loose manner, but there is a distinction.

[00:19:02] Speaker 04:
And in AFCO, in, sorry, so

[00:19:12] Speaker 04:
just stands for the basic proposition that that that it form it sets out the test right and the remedy for it remedies probably overstating it a bit but how the government is prevented from infringing on that right so that's Avco I mean first to admit Avco is not factually analogous to our case here there was no fact

[00:19:39] Speaker 04:
deals with whether or not you can lose that right due merely to the passage of time.

[00:19:46] Speaker 04:
And I will say one other thing about the way that this case was litigated in the bankruptcy court.

[00:19:54] Speaker 04:
The city never disputed.

[00:20:20] Speaker 00:
the bankruptcy court did.

[00:20:21] Speaker 00:
So you started off your argument saying the bankruptcy court didn't determine certain factual issues, such as whether the permit was renewed.

[00:20:29] Speaker 00:
That's right.

[00:20:30] Speaker 00:
And then later, in response to Judge Freeland's question, you said your case lies involved with Par D. That's right.

[00:20:35] Speaker 00:
So is it, if we disagree with you on Par D and say there's no vested right here,

[00:20:48] Speaker 00:
investments you made, that there's no estoppel.

[00:20:52] Speaker 00:
I mean, that's the one thing I had trouble figuring out.

[00:20:55] Speaker 00:
I said, are you just arguing purely an invested rights theory of all the investment you made pre-March 2020?

[00:21:00] Speaker 00:
I think that's one argument.

[00:21:02] Speaker 00:
Second, and they seem to make another one, is maybe the estoppel argument of the city renewed the permit effectively, and we continue to rely on that and invested money.

[00:21:13] Speaker 00:
And even the bankruptcy court seemed to kind

[00:21:17] Speaker 04:
just trying to figure out what what we're confronted sure I think that the and this you see this all over the cases is that the vested rights doctrine under common law and under Avco is itself based on principles of equitable estoppel not promissory estoppel by the way which is what I believe

[00:21:44] Speaker 04:
bankruptcy court briefing as well.

[00:21:46] Speaker 04:
So the way that I think the cases describe it and I think the way that we litigated it is that AFCO tells you how you get the right vesting substantial funds, substantial work,

[00:22:01] Speaker 04:
and safety.

[00:22:02] Speaker 04:
Part D tells you about the scope of that right and whether it can survive the uh the formal expiration of a permit deadline.

[00:22:10] Speaker 03:
Then the question is how does the government how is the government prevented from uh are you waiving any argument that there's an estoppel argument for any investments you made based on no absolutely not no no hold on because red brief 55 your brief at 55 says it's immaterial whether we reasonably believe the permits were not

[00:22:30] Speaker 03:
actions after March 2020.

[00:22:33] Speaker 03:
If you don't need to rely on the city's actions after 2020 for whether the permits hadn't expired, I don't understand how you can have a separate estoppel argument.

[00:22:42] Speaker 03:
I think what Judge Lee is asking about is a separate estoppel argument based, I think you're calling it promissory estoppel, based on actions the city took after March 2020.

[00:22:50] Speaker 04:
No, our position is everything here is equitable estoppel, not promissory.

[00:22:54] Speaker 03:
Okay.

[00:23:03] Speaker 03:
March 2020, we have a right to keep going.

[00:23:06] Speaker 03:
That argument, I don't think you can maintain after you wrote in your brief that it's immaterial, whether you reasonably believe that the permits were extended by the same actions after March 2020.

[00:23:20] Speaker 04:
That was the, I mean, that section of the brief, if I was, if we were unclear in the briefing about that, I apologize, but the, that section of the brief dealt with a separate section of the Avco

[00:23:38] Speaker 04:
a stop from deeming them expired due to the fact that they invested before March of 2020.

[00:23:42] Speaker 03:
It's back to your vesting argument.

[00:23:43] Speaker 03:
So we're back to you need party and your argument about party or else you lose, right?

[00:23:48] Speaker 03:
There's not a separate argument separate from vesting and party.

[00:23:51] Speaker 04:
I certainly think, so first of all, I'd say the court can affirm for any reason it chooses to raise.

[00:23:56] Speaker 04:
The court can do that.

[00:23:58] Speaker 04:
I want to say this about the way it was litigated below and the focus on appeal.

[00:24:18] Speaker 04:
After that, by the end of December of 2023, I believe, that the state or at that point there had been a bankruptcy, they didn't dispute the $25 million was in total spent at that point.

[00:24:33] Speaker 04:
So much of the analysis in the bankruptcy court did deal with facts that post dated March of 2020.

[00:24:39] Speaker 04:
We felt we had to do that in part because what Avco says is that

[00:24:47] Speaker 03:
therefore your estoppel is through abandonment which is what the city obviously pressed on their okay so we could tell you're still saying we have the vested right and it wasn't abandoned but it's all based on the idea of vesting and party not some separate reliance totally apart from that based on the city's later actions we did make that argument in the bankruptcy court certainly we didn't what

[00:25:26] Speaker 04:
of the brief was about good faith reliance and not about estoppel, which is a separate element under Avco vesting.

[00:25:35] Speaker 04:
Before the 2020?

[00:25:37] Speaker 03:
I mean, why?

[00:26:02] Speaker 04:
Um, the way that we envision the case in part is that the, um, the, the, the stopple continues unless you abandon.

[00:26:10] Speaker 04:
So once the, once the vested right kicks in, the city is then a stop from deeming the permits expired unless you abandon.

[00:26:17] Speaker 04:
And so, yes.

[00:26:30] Speaker 04:
stops, is stopped from infringing on those rights comes through a stopple.

[00:26:37] Speaker 04:
You know, if AVCO's test involved good faith reliance on valid issue permits, I don't think you can get vesting in the first instance post, post March 2020 here because there wouldn't have been valid permits anymore.

[00:26:50] Speaker 03:
The other thing... Yeah, can I ask you about that?

[00:26:52] Speaker 03:
Do you concede that the permits expired in March 2020?

[00:26:57] Speaker 04:
The, by their own terms,

[00:27:03] Speaker 04:
I'm not ready to concede.

[00:27:07] Speaker 04:
Again, the bankruptcy court found that none of that's before the court.

[00:27:12] Speaker 04:
That's the first thing I'll say.

[00:27:14] Speaker 04:
Because the bankruptcy court found that we had a vested right to complete the construction as described in the original permits.

[00:27:20] Speaker 03:
If we disagree with that, though, and think that your vested right only lasted the length of the permit, is there any argument that the permit lasted past March 2020?

[00:27:28] Speaker 04:
Sure.

[00:27:29] Speaker 04:
The fact that it appeared continuously is active on the city's own website until October of 2023.

[00:27:33] Speaker 04:
The fact that the city continued to send out inspectors to validate that the permits, as the bankruptcy court found, these are not actions that the city would take if they did not themselves understand the permits to be active throughout that time.

[00:27:50] Speaker 04:
So yes, it's our belief that the permits certainly were active during that time.

[00:27:58] Speaker 04:
the adversary proceeding.

[00:28:00] Speaker 04:
Another thing I'd like to note about all this is that the city's arguments that they were, and this is- You're over time, so please- I apologize, Your Honors.

[00:28:11] Speaker 04:
The last thing I'll say is that the city was informed via a letter that we intended to pursue a vested rights theory as early as, I believe, early November of 2023.

[00:28:36] Speaker 04:
re-judgment motion that they had no idea what was in it, that's simply belied by the record.

[00:28:44] Speaker 02:
AFCO stands for more than the basic test for busting.

[00:28:53] Speaker 02:
AFCO warns that to freeze zoning laws would seriously impair the government's right to control land use policy.

[00:29:01] Speaker 02:
As stated and restated in the Ninth Circuit Case Lake View,

[00:29:07] Speaker 02:
to argue that it had a right to develop vested is vested forever is the very evil that the AVCO court said it wouldn't tolerate.

[00:29:17] Speaker 02:
So I think both the AVCO holding that vested rights are limited to the express terms of the permit and the reasoning that you would seriously impair a government right to control land use applies here.