A major fact correction on rehearing led the Second Appellate District to reverse its earlier ruling in Bowman v. California Coastal Commission (2nd Dist., Div. 6, 10/23/14, B243015 (on rehearing).  The court has now held that collateral estoppel does not prevent a landowner from letting a permit expire and then challenging imposition of the same conditions on a later replacement permit.  This conclusion replaces the original holding that reliance on an unchallenged permit estops the property owner from seeking changed conditions when applying for a revised permit.  Nevertheless, in a complete victory for the owner, the court has also found that the original condition should not have been imposed in the first place because it was an illegal taking under Nollan v. California Coastal Commission (1987) 483 U.S. 825.

On rehearing, the court found the owner of a house and barn obtained over-the-counter permits from San Luis Obispo County for repair work exempt from coastal permit requirements.  A month later, he applied for a coastal development permit (CDP) to allow new construction.  At the County’s request, he stopped the exempt work until issuance of the CDP, which occurred two years later.  The CDP was conditioned on dedication of a public access easement along nearly a mile of shoreline owned by the same owner, but located more than a mile from the house.  The owner had died in the meantime, and his successors did not appeal the dedication condition.

Nearly a year later, the family trust applied for another CDP, covering some of the same work proposed in the original CDP, but including additional construction.  The trust objected to re-imposition of the dedication condition on the replacement permit, and the County agreed.  Two environmental groups and two coastal commissioners appealed the second CDP to the Coastal Commission, which decided that the original easement condition was permanent and binding under the policy favoring public access to coastal resources.  The Commission argued an owner should not be allowed to walk away from an approved permit, in the hope of obtaining better terms in the future.

The difference in facts between the initial and final opinions, although relatively minor, turned out to be legally controlling.  In its original opinion, the court found that the owner had performed work authorized after-the-fact by the first CDP.  In other words, although all of the work was performed before issuance of the permit, the owner relied on the CDP to demonstrate its legality.  Under these circumstances, the owner’s failure to challenge the original dedication condition collaterally estopped him from challenging the same condition attached to a later replacement permit.  Although described in terms of collateral estoppel, the court effectively held that work in reliance on the permit constituted binding acceptance of the condition.

On rehearing, the court found the owner had not performed any work in reliance on the CDP; the completed work consisted entirely of repairs authorized by the over-the-counter County permits.  When the first CDP expired without being used, therefore, its conditions terminated as well.  The County was free to remove any conditions or, we assume, to add new requirements pursuant to statutory changes.  In this case, the County acknowledged that the original dedication condition was illegal, and removed the coastal access condition from the replacement permit.

The court acknowledged the reach of collateral estoppel to preclude challenges to administrative decisions that were or could have been litigated in a prior proceeding.  However, barring a property owner from objecting to imposition of an illegal condition on a new permit simply because it had once been accepted in connection with an expired permit struck the court as unjust and unfair.  Applying equitable considerations to these facts, the court rejected an interpretation of collateral estoppel that subverts the fair application of the Coastal Act.

The second, and equally important, holding is that the easement dedication requirement violates existing law.  “The easement requirement amounted to an unconstitutional taking.  We agree with appellants that under Nollan andDolan, the easement lacks an “essential nexus” between the exaction and the construction.”  Going further, the court concluded “[t]here is no rational nexus, no less rough proportionality, between the work on a private residence a mile from the coast and a lateral public access easement.”  In the court’s opinion, the fact that the condition was illegal when imposed virtually mandated rejection of collateral estoppel.

California courts have held for more than 20 years that applicants cannot accept the benefits of a permit without challenging its burdens, even if those burdens are later determined to be illegal.  Under Bowman, this rule is now refined to hold that applicants who let a permit expire and therefore do notaccept its benefits can object later to re-imposition of an illegal condition.  This is an important ruling.  Nevertheless, prudent landowners are still advised to challenge potentially illegal conditions at the time they are imposed, rather than letting entitlements expire in the hope of more favorable treatment later.