RE: Nehemiah Associates, Inc., Application #1R0672-1-EB, Findings of Fact, Conclusions of Law and Order (June 8, 1995) VERMONT ENVIRONMENTAL BOARD 10 V.S.A. Chapter 151 Re: Nehemiah Associates, Inc. Application #1R0672-1-EB FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER This decision pertains to an appeal of the District #1 Environmental Commission's denial of land use permit application #1R0672-1 (the Application) for a project proposed by Nehemiah Associates, Inc. (the Appellant). The Application is for an Act 250 permit authorizing the subdivision of a 3.38 acre parcel of land into three lots (the Project). As explained below, the Board denies the Application under the doctrine of collateral estoppel. I. BACKGROUND On October 14, 1993, the District Commission denied the Application. On November 5, 1993, the Appellant filed a motion to alter and a motion for reconsideration with the District Commission. On November 15, 1993, the District Commission denied the Appellant's motion to alter and motion for reconsideration. On December 14, 1993, the Appellant filed an appeal with the Environmental Board. On January 19, 1994, Associate General Counsel David L. Grayck convened a prehearing conference in Pittsford, Vermont. On February 16, 1994, Board Chair Elizabeth Courtney issued a Prehearing Conference Report. On February 16, 1994, Chair Courtney designated Board member Art Gibb as acting chair in this appeal. On March 7, 1994, Board member Art Gibb was made chair of the Board by Governor Howard Dean. On March 9, 1994, and on April 15, 1994, the Board issued Memoranda of Decision relative to the preliminary issues of party status and the use of an administrative hearing panel of the Board under Board Rule 41. The Board granted Dorothy Perkins and Rodney Drown party status pursuant to Board Rule 14(A)(3), granted Douglas Baker party status pursuant to Board Rule 14(B)(1)(a), and ordered that an administrative hearing panel of the Board would convene a hearing, notwithstanding that this proceeding would require the consideration of the doctrines of res judicata and collateral estoppel. On August 3, 1994, an administrative hearing panel of the Board consisting of Chair Gibb, and Board members Bill Martinez and Sam Lloyd convened a hearing in this matter pursuant to Board Rule 41 with the following parties participating: Appellant by James P.W. Goss, Esq. Dorothy Perkins by Robert Woolmington, Esq. Rodney Drown by Richard Pearson, Esq. Douglas Baker, pro se After hearing testimony and taking a site visit, the administrative hearing panel recessed the matter. On August 26, 1994, the Appellant, Dorothy Perkins, and Rodney Drown each submitted proposed findings of fact and conclusions of law. The hearing panel deliberated on this matter on October 5, 1994. A proposed decision was sent to the parties on October 19, 1994. The parties were provided an opportunity to submit written objections to the proposed decision and to present oral argument before the full Board. Oral argument was held on December 7, 1994. The Board deliberated concerning this matter on December 7, 1994, and on June 1, 1995. On June 1, 1995, following a review of the proposed decision and the evidence and arguments presented in the case, the Board declared the record complete and adjourned the hearing. This matter is now ready for decision. To the extent any proposed findings of fact and conclusions of law are included below, they are granted; otherwise, they are denied. II. ISSUE Whether the Project is barred by the application of the doctrine of collateral estoppel and, if not, whether, pursuant to 10 V.S.A. Sec. 6086(a)(8), the Project will have an undue adverse effect on the scenic or natural beauty of the area, aesthetics, historic sites or rare and irreplaceable natural areas. III. FINDINGS OF FACT 1. The Appellant is a Vermont corporation formed in 1988. Mr. Robert Zins is the president of the Appellant. 2. In 1989, the Appellant purchased 12 acres of land on the west side of Vermont Route #3 in the Town of Pittsford (the Property). Due to the number of lots that the Appellant had previously subdivided within the jurisdictional area of the District Commission, the Appellant applied for an Act 250 permit for the subdivision of the Property. 3. On December 29, 1989, the District Commission issued Land Use Permit #1R0672 (the 1989 Permit), and supporting Findings of Fact, Conclusions of Law, and Order (the 1989 Findings). The 1989 Permit authorized the Appellant to subdivide the Property into 11 lots: 10 residential lots, numbered Lot #1 through Lot #10, each varying in size between .69 and .8 acres, and a single 3.38 acre lot (the 1989 Project). 4. Condition #9 of the 1989 Permit provides: The permittee shall, by deed covenant to all lots, include the following restriction: By acceptance of this deed, Grantees, their heirs and assigns, hereby acknowledge that on the above described site plan, are retained and made available to third parties for agricultural and related farming purposes. By acceptance of a deed to the parcel herein conveyed, Grantees, for themselves, their heirs and assigns, hereby knowingly, voluntarily and irrevocably waive any cause or causes of action against Grantor or any person utilizing the said retained lands for agricultural purposes, arising out of or pertaining to odors, run-off, or noise associated with any agricultural operation on said retained lands. Furthermore, the permittee or subsequent landowners association shall maintain the 3.38 acre agricultural reserve lands as open, cleared, uncluttered, and unencumbered land. 5. Under Criterion 8 of the 1989 Findings, the District Commission found, in part: 3) The front 3.38 acre referenced below under criterion 9B, will provide a visual buffer for travellers on Route 3, by helping to maintain the rural character of the area. 6. Under Criterion 9(B) of the 1989 Findings, the District Commission found, in part: 2) Of the approximately six acres of prime agricultural soils, the applicant proposes to preserve undeveloped the 3.38 acres closest to Route 3. * * * 4) The applicant has proposed covenants to maintain this 3.38 acres as open land and furthermore, has proposed "right to farm" covenants to protect the farming viability of this parcel in the future. The Commission accepts these as minimizing the reduction of the agricultural potential of these lands. The Commission will require same by condition: The permittee shall, by deed covenant to all lots, include the following restriction: By acceptance of this deed, Grantees, their heirs and assigns, hereby acknowledge that other lands of Grantor, consisting of 3.38 acres immediately adjoining Route 3 as shown on the above described site plan, are retained and made available to third parties for agricultural and related farming purposes. By acceptance of a deed to the parcel herein conveyed, Grantees, for themselves, their heirs and assigns, hereby knowingly, voluntarily and irrevocably waive any cause or causes of action against Grantor or any person utilizing the said retained lands for agricultural purposes, arising out of or pertaining to odors, run-off, or noise associated with any agricultural operation on said retained lands. Furthermore, the permittee or subsequent landowners association shall maintain the 3.38 acre agricultural reserve lands as open, cleared, uncluttered, and unencumbered land. 7. Condition #9 of the 1989 Permit was issued pursuant to the 1989 Findings under Criteria 8 and 9(B). 8. Condition #20 of the 1989 Permit provides: Construction shall not commence until the permittee(s) has read this permit and returned a signed copy of the permit to the Commission. 9. Mr. Zins read the 1989 Permit and signed page four of the 1989 Permit as president of the Appellant. The Appellant did not request a motion to alter of the 1989 Permit before the District Commission, and nor did it appeal the 1989 Permit to the Board. 10. Condition #21 of the 1989 Permit provides: Each prospective purchaser of any lot shall be shown a copy of the approved plot plan, the Subdivision Permit, the Land Use Permit, and the Findings of Fact and Conclusions of Law before any written contract of sale is entered into. 11. The Appellant conveyed Lot #1 of the Property to Ms. Dorothy Perkins. The Appellant showed Ms. Perkins a copy of the 1989 Permit prior to Ms. Perkins' purchase of Lot #1, and provided her with a proposed warranty deed. 12. When the Appellant conveyed Lot #1 to Ms. Perkins, the warranty deed did not include all of the language required by Condition #9 of the 1989 Permit. 13. Ms. Perkins' warranty deed, with regard to compliance with Condition #9 of the 1989 Permit, only provides: The Premises described herein are further conveyed subject to the following permits, covenants and conditions and by acceptance of this deed, Grantee covenants, acknowledges and agrees for herself and her heirs and assigns that the same shall pertain to and run with the premises herein conveyed: * * * 3. The premises described herein are conveyed subject to the terms, conditions and provisions of Land Use Permit No. 1R0672 together with the Findings of Fact and Conclusions of Law therein dated December 29, 1989, to be recorded in the Pittsford Land Records. . . By acceptance of this deed, Grantee acknowledges that she has received and reviewed copies of the Land Use Permit and Subdivision Permit prior to entering into the purchase and sale agreement consummated by this conveyance. 4. By acceptance of this deed, Grantee, her heirs and assigns, hereby acknowledge that other lands of Grantor, consisting of 3.38 acres immediately adjoining Route 3 as shown on the above described survey, are retained by Grantor and made available to third parties for agricultural and related farming purposes. By acceptance of this deed, Grantee, for herself and her heirs and assigns, hereby knowingly, voluntarily and irrevocably waives any cause or causes of action against Grantor, its successors and assigns, or any person utilizing said retained lands for agricultural or farming purposes arising out of or pertaining to odors, run-off, or noise associated with any agricultural or farming operation on said retained lands. 14. The Appellant failed to include in Ms. Perkins' warranty deed the second paragraph contained in Condition #9 of the 1989 Permit, that is, the following language: Furthermore, the permittee or subsequent landowners association shall maintain the 3.38 acre agricultural reserve lands as open, cleared, uncluttered, and unencumbered land. 15. Ms. Perkins, having been shown the 1989 Permit, purchased Lot #1 notwithstanding that the warranty deed she accepted did not include the second paragraph required by Condition #9. 16. As of May 1994, the Appellant has sold nine of the ten residential lots created pursuant to the 1989 Permit. 17. In the eight other closings besides Ms. Perkins', the Appellant showed the 1989 Permit to the prospective purchaser prior to the closing, and provided a proposed warranty deed which omitted the second paragraph of Condition #9. 18. Each of the eight additional closings, like Ms. Perkins', proceeded without any objection by the prospective purchaser, notwithstanding that the warranty deed lacked the second paragraph contained in Condition #9 of the Permit. 19. Although Mr. Zins had read the 1989 Permit, he intentionally omitted the second paragraph from the nine warranty deeds because he believed the 1989 Permit to only require the first paragraph. 20. Mr. Zins' belief was that because the second paragraph is separated from the first paragraph, the insertion of the second paragraph in a deed to a third-party lot owner would make no grammatical sense. 21. In addition, Mr. Zins did not believe that the District Commission had the authority to impose permit conditions which the Appellant did not offer. 22. Mr. Zins believed that the Appellant was only bound by what it had submitted to the District Commission in its letter dated August 4, 1989. In this letter, the Appellant only proposed a "Right to Farm" covenant. 23. The Appellant's August 4, 1989 letter was in response to the District Commission's hearing recess memo of June 27, 1989. The recess memo provided, in part: The District Environmental Commission recessed the hearing for application #1R0672 on June 27, 1989, pending the submittal by the applicant of the following information: 4) "Right to farm" covenants for reserve land (3.38 acre common land); 24. The District Commission accepted the proposed covenant in the Appellant's August 4, 1989 letter and incorporated it into the 1989 Permit as the first paragraph of Condition #9. In addition to the first paragraph, the District Commission added what is now the second paragraph of Condition #9. 25. On November 10, 1992 the Appellant filed the Application for the Project. The 3.38 acres which is the subject of the Application is the same 3.38 acres created pursuant to the 1989 Permit, and is the same 3.38 acres which was set aside under Condition #9 of the 1989 Permit to mitigate impacts which otherwise might result under Criteria 8 and 9(B). 26. As part of the Application, the Appellant has proposed to participate in an agricultural soils mitigation program sponsored by the Vermont Department of Agriculture (the Department). 27. Under the program, Act 250 applicants are allowed to mitigate primary agricultural soils' impacts of their projects by paying a fee to the Department calculated according to the acreage of primary agricultural soils impacted. These fees are then deposited in a fund used to preserve agricultural lands throughout Vermont. 28. The agricultural soils mitigation program did not exist at the time the Appellant applied for and obtained the 1989 Permit. 29. In connection with its Application, the Appellant has committed to pay the required program fee necessary to mitigate the loss of any primary agricultural soils located on the 3.38 acres. 30. Based upon the Appellant's participation in this program, the District Commission made an affirmative finding under Criterion 9(B) with respect to the Application. 31. The Appellant's participation in the agricultural soils mitigation program has no bearing upon the aesthetic effects which the District Commission determined would be mitigated by the retention of the 3.38 acres as a visual buffer, and as a means for maintaining the rural character of the area. 32. The lots proposed by the Application adjoin Route 3. The area surrounding the 3.38 acres is characterized by residential development of comparable density and type to that proposed in the Project. 33. For example, immediately to the north of the Project is an unrelated 8-lot subdivision, and there has been additional residential development immediately to the west and south. If the Project were constructed, the three houses to be built thereon would be surrounded by at least 23 other single-family residences. 34. Residential construction and subdivision has occurred in the area surrounding the 1989 Project since the District Commission issued the 1989 Permit. 35. The Pittsford Town Plan identifies the area within which the Project is located as a location for residential growth in Pittsford. The Town Plan provides that approved uses in this area include high density residential uses. IV. CONCLUSIONS OF LAW Collateral estoppel is a doctrine which is intended to eliminate repetitive litigation, and give repose to litigants. Applying collateral estoppel prevents a party from relitigating those issues necessarily and essentially determined in a prior action. Berisha v. Hardy, 144 Vt. 136, 138 (1984). Although collateral estoppel does not apply to administrative proceedings as an inflexible rule of law, the principles of collateral estoppel generally apply in Act 250 proceedings. See In re Application of Carrier, 155 Vt. 152, 157 (1990). The Board has applied collateral estoppel in previous cases. See, e.g., Re: Cabot Creamery Cooperative, Inc., #5W0870-13-EB, Memorandum of Decision (Dec. 23, 1992). A. Elements of Collateral Estoppel In Cabot Creamery, the Board applied the elements of collateral estoppel as enunciated by the Vermont Supreme Court in Trepanier v. Getting Organized, Inc., 155 Vt. 259, 265 (1990). Those elements, and our decision regarding their applicability to the present case, are as follows: 1. Collateral estoppel must be asserted against one who was a party or in privity with a party in the earlier action. The Appellant applied for and was issued the 1989 Permit. The Appellant now has filed its Application to amend to the 1989 Permit. Therefore, the first element is met. 2. The issue was resolved by a final judgment on the merits. The District Commission issued the 1989 Permit and the 1989 Findings. Condition #9 was made part of the 1989 Permit pursuant to the District Commission's decisions under Criteria 8 and 9(B). The condition was not appealed. Thus, there was a final judgment on the merits of whether the Appellant should be required to set aside the 3.38 acres for reasons related to both aesthetics and preservation of primary agricultural soils. The second element is met. 3. The issue is the same as raised in a later action. The 1989 Permit authorized the creation of 10 residential lots and a single 3.38 acre lot. The District Commission made affirmative findings under Criteria 8 and 9(B) based upon its understanding of what purposes would be served by the 3.38 acre parcel. In 1989, with regard to Criterion 8, the District Commission concluded that "the front 3.38 acre referenced below under criterion 9B, will provide a visual buffer for travellers on Route 3, by helping to maintain the rural character of the area." (Emphasis added.) In 1989, under Criterion 9(B), the District Commission concluded that the front 3.38 acres would be subjected to a dual purpose deed covenant: one, the 3.38 acres would be "retained and made available to third parties for agricultural and related farming purposes," and two, "the permittee or subsequent landowners association shall maintain the 3.38 acre agricultural reserve lands as open, cleared, uncluttered, and unencumbered land." Thus, we conclude that the District Commission's affirmative finding under Criterion 8 relied upon the dual-purpose covenant which was set forth in the context of its Criterion 9(B) discussion, and which was made part of the 1989 Permit as Condition #9 pursuant to both Criterion 8 and Criterion 9(B). Now, the Appellant seeks to develop the same 3.38 acres which, by deed covenant, were to be kept as "open, cleared, uncluttered, and unencumbered land." Thus, the issue in this appeal is whether the 3.38 acres must remain as "open, cleared, uncluttered, and unencumbered land" for aesthetic reasons under Criterion 8. In issuing the 1989 Permit and in denying the Application, the District Commission decided that the 3.38 acres must remain open for aesthetic reasons. Accordingly, the issue in this proceeding is the same as that which was decided in 1989 and, therefore, the third element is met. While we applaud the Appellant's participation in the Department's primary agricultural soils mitigation program, such participation only eliminates the need for retaining the 3.38 acres for purposes of Criterion 9(B), and not Criterion 8. 4. There was a full and fair opportunity to litigate the issue in the earlier action. The burden of proof on this element of collateral estoppel is on the Appellant. Trepanier, supra, 155 Vt. at 266. We are not persuaded that the Appellant did not have a full and fair opportunity to litigate whether Condition #9 was necessary for the District Commission to make an affirmative finding under Criterion 8. The Appellant participated before the District Commission and was represented by counsel. Even if Mr. Zins did not understand that the District Commission had the authority to impose a permit condition not offered by the Appellant, he read the 1989 Permit, accepted and signed it, and did not appeal it to the Board within 30 days under 10 V.S.A. Sec. 6089(a). Even short of an appeal to the Board, the Appellant could have sought a motion to alter before the District Commission under Board Rule 31(A). While we have found that the Appellant only offered the first paragraph of Condition #9, we also have found that the District Commission stated under Criterion 9(B) that "[t]he [Appellant] has proposed covenants to maintain this 3.38 acres as open land and furthermore, has proposed "right to farm" covenants to protect the farming viability of this parcel in the future." (Emphasis added.) We conclude that the District Commission understood the Appellant to have proposed covenants for two purposes: one, to maintain the 3.38 acres as open land, and two, to protect the farming viability of the 3.38 acres. This discrepancy between what the Appellant believes it proposed and what the District Commission decided that the Appellant proposed could have been addressed and decided by a motion to alter. Even if the Appellant failed to perceive the discrepancy noted above, its understanding of the second paragraph of Condition #9 as a grammatical error could also have been the basis for a motion to alter. Even if we were to assume that the insertion of the second paragraph into a warranty deed would constitute a grammatical error, and we conclude that it would not, the second paragraph should not have been regarded as irrelevant verbiage with no relevancy at all. In summary, we conclude that the Appellant had a full and fair opportunity to litigate the issue of Criterion 8 in the 1989 proceeding, as well as ample reasons to suspect that a discrepancy existed between what it understood and what the District Commission decided with regard to the future status of the 3.38 acres. Therefore, the fourth element is met. 5. Applying collateral estoppel in the subsequent action must be fair. The burden of proof under this element of collateral estoppel is also on the Appellant. Id. When the Appellant signed the 1989 Permit and constructed the 1989 Project without appeal to the Board, it represented to the District Commission by its conduct that it would comply with the 1989 Permit. In fact, the Appellant has not complied with the 1989 Permit since the second paragraph of Condition #9 is lacking from the nine warranty deeds by which the Appellant has conveyed lots in the 1989 Project. The fact that the nine lot owners did not object to the absence of the second paragraph at their respective closings does not alter the fact that the Appellant has not complied with Condition #9. We are not persuaded that applying collateral estoppel in this proceeding would be unfair and, therefore, the fifth element is met. In summary, we conclude that the elements of collateral estoppel are met in this case. However, since collateral estoppel does not apply to administrative proceedings as an inflexible rule of law, we have the discretion not to apply this doctrine because of policy or practical considerations. B. Policy and Practical Considerations In Cabot Creamery, the Board identified two sets of policy considerations: finality and flexibility. In addition, the Board identified certain factual circumstances which it considered as being relevant to its balancing of the competing policies. Cabot Creamery at 11. We will apply the balancing test adopted by the Board in Cabot Creamery in this case. i. Flexibility. There may be times when an Act 250 permit condition should be modified because a condition contained in the decision may no longer be the most cost-effective or best way to meet the goal of mitigating impacts. Cabot Creamery at 10. Where a change has occurred, collateral estoppel should not be applied as an inflexible rule of law. However, such changes which justify the deletion of a permit condition may consist only of (a) changes in factual or regulatory circumstances beyond the control of a permittee; (b) changes in the construction or operation of the permittee's project, not reasonably foreseeable at the time the permit was issued; or (c) changes in technology. In addition, the permittee that seeks to avoid compliance with a permit condition by means of a permit amendment must prove to the Board that the permit amendment application is a direct outgrowth of the above-referenced changes. Cabot Creamery at 11. With regard to Criterion 8, we conclude that there has been a change in the factual circumstances beyond the control of the Appellant. Residential construction and subdivision activity has occurred in the area surrounding the 1989 Project since the District Commission issued the 1989 Permit. Further, we conclude that since the context of the area surrounding the 1989 Project continues to change from a rural agricultural area to a residential area, the Application is a direct outgrowth of changes in factual circumstances beyond the control of the Appellant. ii. Finality. In contrast to the policy of flexibility is the policy of finality. There is significant value in finality to Act 250 decisions so that all parties have some assurance that decisions will not be relitigated, and so that parties may rely on representations that applicants make concerning proposals to mitigate environmental and public health impacts. Cabot Creamery at 10. The district commissions also rely on these representations in rendering their decisions. In those cases where a permit is issued, very often the applicant's representations are the basis for permit conditions. The purpose of permit conditions is to alleviate adverse effects that would otherwise be caused by the project. Those adverse effects would require a conclusion that a project does not comply with the criterion at issue unless the condition is followed. If conditions to mitigate impacts can simply be ignored and not complied with, and instead relitigated at a future date, the protection of the public and the environment from the impacts those conditions are designed to remedy is less likely to occur. In such a circumstance, the Act 250 decision-making process will become less one of making decisions which are adhered to, and more one of picking the time and composition of Act 250 tribunal most favorable to one's interest. Cabot Creamery at 11. We disagree with the Appellant's contention that it was only required to comply with the first paragraph of Condition #9, that is, the "Right to Farm" covenant. Condition #9 requires that both the first and second paragraph be made a part of each lot owner's deed. With regard to Criterion 8, we conclude that the Application, if granted an Act 250 permit, would eliminate the remedial effects which would have been conferred had the Appellant fully complied with Condition #9. iii. Balancing of competing policies. We conclude that until such time as the Appellant has fully complied with Condition #9, the policy of finality outweighs the policy of flexibility. Therefore, we conclude that the doctrine of collateral estoppel is applicable and order that the Application be denied. Accordingly, we do not reach the issue of whether the Project complies with Criterion 8. V. ORDER The Application is denied because it is barred by the doctrine of collateral estoppel. Jurisdiction is returned to the District #1 Environmental Commission. Dated at Montpelier, Vermont, this 8th day of June, 1995. VERMONT ENVIRONMENTAL BOARD ____________________________ Arthur Gibb, Acting Chair* Samuel Lloyd William Martinez Dr. Robert Page John M. Farmer Steve E. Wright *On February 1, 1995, John T. Ewing became Chair of the Board. Arthur Gibb has continued as Acting Chair on this case at Mr. Ewing's request. c:\decision\1ro672-1.dec (d5)