In re Lyon

Annotate this Case

In re Lyon (2004-231); 178 Vt. 232; 882 A.2d 1143

2005 VT 63

[Filed 24-Jun-2005]

NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.

2005 VT 63

No. 2004-231

In re William and Ann Lyon Supreme Court

On Appeal from
Water Resources Board

February Term, 2005

John F. Nicholls, Chair

John W. Lyon of Otterman and Allen, P.C., Barre, for Appellants.

David John Mullett of David John Mullett, P.C., Montpelier, for Appellee.

William H. Sorrell, Attorney General, and S. Mark Sciarrotta, Assistant
Attorney General, and Abigail Doolittle, Law Clerk (On the Brief),
Montpelier, for Amicus Curiae State of Vermont.

PRESENT: Reiber, C.J., Dooley, (FN1) Johnson and Skoglund, JJ., and
Allen, C.J. (Ret.), Specially Assigned

¶ 1. SKOGLUND, J. Appellants William and Ann Lyon appeal the
revocation of wastewater permit issued by the Agency of Natural Resources.
The Lyons owned three separate adjacent parcels of land in Northfield,
Vermont: a parcel with a single family house; a small lot that was a
pre-existing lot as defined by the Wastewater System and Potable Water
Supply Rules and therefore exempt from permitting (the pre-existing lot);
and another small lot arguably eligible for the same pre-existing lot
status, though the deed did not contain the pre-existing deferral language
(the deferral lot). To provide a seasonal home for Mr. Lyon's mother, the
Lyons moved a camper/trailer onto the property line straddling the
pre-existing lot and the deferral lot and obtained a wastewater permit from
the Agency of Natural Resources (ANR) to connect the camper/trailer to an
existing municipal sewage line. A neighbor complained and petitioned ANR
to revoke the permit. Following a hearing, the Commissioner of ANR
declared the permit invalid because the Lyons' application did not include
the design and installation certifications necessary to receive a valid
permit. The Lyons appealed the Commissioner's decision to the Water
Resources Board.

¶ 2. The Water Resources Board revoked the wastewater permit issued
to the Lyons by ANR, holding that the Lyons' application did not include
the statutorily required certifications. Given the extraordinary
circumstances of this case, including an acknowledged, systemic failure on
the part of multiple ANR regional offices to require the certifications
when issuing wastewater permits, we hold that the Board erred in rejecting
the Lyons' estoppel argument and that the State is estopped from revoking
the Lyons' wastewater permit. Accordingly, we reverse the Board's decision
revoking the permit and remand to ANR to reinstate the permit. Statutory
and Regulatory Background

¶ 3. First, we summarize the regulatory backdrop against which
this case unfolds. The Vermont Legislature established the Potable Water
Supply and Wastewater System Permit program for the purpose of
"regulat[ing] the construction, replacement, modification, and operation of
potable water supplies and wastewater systems in the state in order to
protect human health and the environment, including potable water supplies,
surface water and groundwater." 10 V.S.A. § 1971(1). ANR may not grant
wastewater permits unless the applicant provides a system design
certification, id. § 1973(d), and, upon completion of the system, the
permit remains valid only if the permitee submits an installation
certification, id. § 1973(e). There is no provision for waiver of the
certifications in the statute.

¶ 4. The permit program delegates authority to ANR to establish
regulations on wastewater system requirements and the issuance of permits.
Pursuant to that authority, in August 2002, ANR promulgated the Wastewater
System and Potable Water Supply Rules, 7 Code of Vermont Rules 12 033 001
(2002) (amended 2005), available at
http://www.anr.state.vt.us/dec/ww/Rules/OS/Final081602/Subchap1-4-081602.pdf
[hereinafter Wastewater Rules]. These rules condition issuance of a permit
on the submission of a proper design certification, id. § l-302(b)(l), and
mandate that the permit shall require submission of an installation
certification once the project is complete, id. § 1-303(c). The Wastewater
Rules contain no waiver provision for design or installation
certifications.

¶ 5. On the other hand, the Rules provide that "[f]or projects that
present a negligible potential for adverse environmental impact, the
Secretary may waive submission of any of the specific information required
in subsections (c) (l) through (7) of this section as he or she deems
appropriate." Id. § l-302(c)(8). Subsections l-302(c)(1)-(7) set forth
specific application materials, including a plot plan, design flow, soil
data, site plans, and other construction details, but make no mention of
design or installation certifications. In other words, neither the waiver
language of § 1-302(c)(8), nor the language of § 1-302(c)(1)-(7) to which
it refers, covers design and installation certifications or allows ANR to
waive them. Indeed, the Secretary cannot issue a permit "unless the
Secretary receives the designer certification required to be submitted with
the permit application under section 1-302(b)(l) of these Rules." Id. §
l-302(e).

¶ 6. Once an applicant has submitted a complete permit
application, the Secretary has authority to deny the permit or grant it
with specific conditions. Id. § l-302(e). After a permit is granted, ANR
may revoke it "either in response to a petition or on [its] own motion."
Id. § l-306(a). An applicant or any person directly affected by a
permitted project may petition ANR for review and reconsideration. Id. §
1-304(a). The bases for revocation include a violation of a permit
condition as well as a "violation or failure to comply with the provisions
of these Rules or authorizing statutes." Id. § 1-306(b)(4). Additionally,
a "person aggrieved by a final act or decision, other than an enforcement
decision, of the Secretary under these Rules may appeal to the Vermont
Water Resources Board in accordance with 10 V.S.A. section 1977." Id. §
l-305(a).

Factual and Procedural Background

¶ 7. In November 2002, the Lyons received a letter from the Barre
Regional Office of ANR discussing a possible subdivision violation arising
from the location of the camper/trailer. The Regional Engineer, Donald
Wernecke, offered three options the Lyons could take to avoid a violation:
(1) merge the two lots on which the camper/trailer was located; (2) obtain
a Wastewater System and Potable Water Supply Permit for the camper/trailer;
or (3) relocate the camper/trailer.

¶ 8. The Lyons chose to pursue two of the three options. First, in
December 2002, the Lyons applied for a wastewater permit for the project.
Though the application lacked both a design certification and an
installation certification, ANR issued the permit on February 6, 2003.
Second, two days after receiving the permit, the Lyons executed a quitclaim
deed merging the two lots.

¶ 9. After the wastewater system had been installed, an adjoining
property owner, Robert Tucker, filed a petition with ANR to revoke the
permit. On August 12, 2003, in response to Tucker's petition, the
Commissioner declared the Lyons' wastewater permit invalid because it was
issued without design and installation certifications, in violation of
sections l-302(b) and l-303(c) of the Wastewater Rules. Also on August 12,
2003, the Commissioner issued a "Procedure for issuance of voluntary
estoppel Letters for projects with permits, that are substantially
completed, but which do not have valid installation certifications,"
acknowledging that permits were issued between June 14, 2002 and August 18,
2003 without submission of a plan prepared by a designer and that, lacking
a plan, no installation certification was included in the applications.
Jeffrey Wennberg, Commissioner, Department of Environmental Conservation,
Estoppel Statement (Aug. 12, 2003) [hereinafter Estoppel Statement].
Therefore, the Commissioner stated, ANR would not institute enforcement
actions for wastewater permits that lacked design and installation
certifications because permit recipients had "reasonably relied on the
expectation that the permit was issued in compliance with the [Wastewater
Rules]." Id.

¶ 10. The Lyons appealed to the Board for de novo review of the
Commissioner's decision invalidating their permit pursuant to 10 V.S.A. §
1977. Both Tucker and the Lyons moved for summary disposition, and ANR
moved to dismiss.

¶ 11. On April 21, 2004, the Board granted summary judgment to
Tucker, and revoked the Lyons' permit. It ruled that "ANR had no authority
to waive the certification requirements" of 10 V.S.A. § 1973(d), (e) and
sections l-302(b)(l) and l-303(c) of the Wastewater Rules. Further, the
Board ruled that "[b]oth the statute and ANR's rules expressly prohibit ANR
from issuing a permit in the first place unless the permit application
includes a design certification." The Board also rejected the Lyons'
estoppel argument, finding it unsupported by the facts.

¶ 12. The Lyons then appealed under 10 V.S.A § 1977(b), which
allows an aggrieved party to appeal adverse decisions by the Water
Resources Board to the Supreme Court. The Lyons argue that: (1) the design
certification is waivable and the Board's interpretation of the governing
statute creates a rule conflict; (2) the revocation is a retroactive
application of law that violates vested rights of the Lyons; and (3) the
State is estopped from revoking the permit. Appellee Tucker and the State
of Vermont, as amicus curiae, request that the Court affirm the Board's
decision.

¶ 13. As a preliminary matter, we reject the Lyons' first two
arguments. First, as explained above, the authorizing statute and the
applicable Wastewater Rules explicitly require both design and installation
certifications. There is no authority allowing ANR to waive these
requirements. As noted above, section 1-302(c)(8) of the Wastewater Rules
authorizes ANR to waive only certain enumerated application materials, not
including the certifications. Thus, there is no rule conflict, and the
Lyons' first argument is without merit.

¶ 14. Second, the revocation of the Lyons' permit was not a
retroactive application of law violating a vested right of the Lyons. The
permit was revoked pursuant to valid regulations already in effect at the
time they applied for their permit. Accordingly, the Lyons' second
argument is also without merit. Thus, the single issue remaining on appeal
is whether the Lyons have met their burden to estop the State. For the
reasons set out below, we hold that the State is estopped from revoking the
Lyons' permit, and we reverse the Board's decision revoking the permit.

II.

¶ 15. We review the Board's denial of the Lyons' estoppel argument
to determine "whether the Board acted arbitrarily, unreasonably, or
contrary to law." In re Town of Sherburne, 154 Vt. 596, 604, 581 A.2d 274,
279 (1990). In doing so, "we must decide whether the decision makes sense
to a reasonable person," id. at 605, 581 A.2d at 279, while recognizing
that "the board has wide discretion in making its findings and conclusions
as long as they are not inconsistent with legislative and agency policy,"
Town of Groton v. Agency of Natural Res., 172 Vt. 578, 579, 772 A.2d 1103,
1105 (2001) (mem.). However, an administrative board's conclusions of law
are not so protected, and it is for this Court to determine whether, as a
matter of law, its findings of fact fairly and reasonably support the
conclusions of law. In re McGrath, 138 Vt. 77, 82, 411 A.2d 1362, 1365
(1980). Because the applicability of judicially-created doctrines, such as
equitable estoppel, is a question of law outside of the Board's special
expertise, see In re Tariff Filing of Cent. Vt. Pub. Serv. Corp., 172 Vt.
14, 19-20, 769 A.2d 668, 673 (2001) (stating that applicability of
collateral estoppel was question of law outside special expertise of Public
Service Board), we review de novo the Board's decision on equitable
estoppel, see Thompson v. Dewey's South Royalton, Inc., 169 Vt. 274, 276,
733 A.2d 65, 67 (1999) (noting that appellate review of questions of law is
nondeferential and plenary).

¶ 16. "The doctrine of equitable estoppel precludes a party from
asserting rights which otherwise may have existed as against another party
who has in good faith changed his position in reliance upon earlier
representations." My Sister's Place v. City of Burlington, 139 Vt. 602,
609, 433 A.2d 275, 279 (1981). As we noted in My Sister's Place, "[t]he
doctrine of estoppel is based upon the grounds of public policy, fair
dealing, good faith, and justice, and its purpose is to forbid one to speak
against his own act, representations or commitments to the injury of one to
whom they were directed and who reasonably relied thereon." Id.
(quotations omitted). We have further recognized that although "[e]stoppel
is not a defense that should be readily available against the state, . . .
neither is it a defense that should never be available." In re McDonald's
Corp., 146 Vt. 380, 383, 505 A.2d 1202, 1203 (1985) (quotations omitted).
Thus, "[w]hile the doctrine of estoppel must be applied with great caution
when the government is the involved party, nevertheless when a government
agent acts within his authority, the government can be estopped by his
actions." My Sister's Place, 139 Vt. at 609, 433 A.2d at 279 (citations
omitted).

¶ 17. The party seeking equitable estoppel against the government
must establish all four of its traditional elements: (1) the party to be
estopped must know the facts; (2) the party being estopped must intend that
his conduct shall be acted upon; (3) the party asserting estoppel must be
ignorant of the true facts; and (4) the party asserting the estoppel must
rely on the conduct of the party to be estopped to his detriment. Wesco,
Inc. v. City of Montpelier, 169 Vt. 520, 524, 739 A.2d 1241, 1244-45
(1999). Additionally, the party seeking to estop the government must
demonstrate that "the injustice that would ensue from a failure to find an
estoppel sufficiently outweighs any effect upon public interest or policy
that would result from estopping the government in a particular case." In
re Letourneau, 168 Vt. 539, 547, 726 A.2d 31, 37 (1998) (quotations
omitted).

¶ 18. The Board found that the Lyons failed to meet the first and
fourth elements of estoppel and did not prove the requisite extraordinary
circumstances that would justify estopping the State. Specifically, the
Board found that: (1) "ANR's Regional Engineer plainly did not know the
facts;" (2) "[a] permit applicant cannot reasonably rely on an agency
employee's interpretation of the law, which is often disputed by third
parties;" and (3) "this is not one of those rare cases" that would justify
estoppel against a government body.

¶ 19. We hold that the Lyons proved the required elements of
estoppel and met their burden for estopping the government. Regarding the
first element, we conclude that, as a matter of law, the Regional Engineer
knew the relevant facts. The Regional Engineer was acting within the scope
of his authority when he offered guidance to the Lyons and when he granted
their permit. The Lyons consulted with the Regional Engineer on steps they
should take to gain the permit, and communicated their intentions clearly.
Thus, the Regional Engineer was fully aware of the facts regarding the
Lyons' application. Moreover, because he is a duly authorized agent of the
government whose responsibilities include properly advising the public
regarding the issuance of wastewater permits, he was reasonably charged
with knowing the laws governing his duties. Thus, the Lyons satisfied the
first element of equitable estoppel.

¶ 20. The Lyons also satisfied the second element because the
Regional Engineer intended that the Lyons would rely upon his conduct. He
informed the Lyons of specific steps they should take to receive a permit.
Furthermore, the permit application process is designed to award permits to
satisfactorily submitted applications. The Regional Engineer is central to
this process as both advisor and the person with authority to issue the
permits on behalf of the agency. As such, in performing his duties, the
Regional Engineer fully intended for the Lyons to act on his advice in
order to receive a permit, which they did.

¶ 21. As for the third element, the Lyons were ignorant of the true
facts. Indeed, they had no reasonable way of knowing that several of the
regional offices of the Wastewater Management Division of the Department of
Environmental Conservation were violating the law by issuing permits
without the required certifications. See Estoppel Statement at 1
(acknowledging issuance of permits by "some" regional offices without
design or installation certifications). While as a general rule the Lyons'
ignorance of the law would not excuse failure to comply with its
requirements, this is an exceptional circumstance. We will not require
permit applicants to know the law better than the government agency charged
with administering it, particularly where, as here, the agency acknowledges
that permit recipients like the Lyons "reasonably relied on the expectation
that the permit was issued in compliance with the [law]." Id. Further,
multiple ANR regional offices incorrectly applied the law for over one
year, according to the agency's own Commissioner. In such an extraordinary
circumstance, it would be manifestly unfair to charge permit applicants
with the responsibility of correctly interpreting and enforcing the
applicable legal provisions in the face of advice to the contrary from the
responsible government agency.

¶ 22. Finally, the Lyons have relied on the government to their
detriment. The Lyons relied on the specific guidance offered by the
Regional Engineer, subsequently received a permit without having followed
the steps required by law, and installed the permitted wastewater system.
As a result, the Lyons have suffered the costs of defending their permit
before the Board, and they presumably will have to repeat the permitting
process at greater time and expense if the Board's revocation is upheld.
Furthermore, the Lyons' title to the affected lots will be clouded until a
new permit is successfully obtained. Moreover, these costs borne by the
Lyons need not be balanced with any actual injury to any party; neither
Tucker nor the State alleges any adverse impact resulting from the
wastewater system as installed. Therefore, the Lyons alone have suffered
detrimental consequences due to their reliance on the responsible agency,
satisfying the fourth element of estoppel.

¶ 23. Having met the traditional requirements of estoppel, the
Lyons also have carried the additional burden of showing that "the
injustice that would ensue from a failure to find an estoppel sufficiently
outweighs any effect upon public interest or policy that would result from
estopping the government." In re Letourneau, 168 Vt. at 547, 726 A.2d at
37 (quotations omitted). In prior cases, we have declined to estop the
government where an isolated agency employee's actions resulted in some
form of reliance by a single party. Here, by contrast, an unknown number
of permit applicants, including the Lyons, received permits without
supplying the required design and installation certifications.
Additionally, multiple ANR regional offices issued wastewater permits
without requiring applicants to submit the certifications. Furthermore,
remarkably-and admirably-the agency admitted its own error: on the same day
ANR invalidated the Lyons' permit, the Commissioner issued the Estoppel
Statement, recognizing that

some of the regional offices . . . issued . . . [p]ermits for
projects with existing wastewater systems . . . without requiring
submission of a plan prepared by a designer. Because there was no
plan, the requirement for a design certification was waived, and
therefore, the requirement for an installation certification was
not included as a permit condition.

Estoppel Statement at 1. The Commissioner went on to acknowledge that
"[i]n these situations, the recipient of the permit has reasonably relied
on the expectation that the permit was issued in compliance with the Rules"
and to declare that the Commissioner would "voluntarily estop [himself]
from asserting the existence of a permit violation in these cases." Id.
If we decline to estop the government under these circumstances, it would
be difficult to assert that equitable estoppel against the government
remains a viable doctrine in Vermont.

¶ 24. The exceptional circumstances present here are analogous to,
if not more striking than, those in My Sister's Place v. City of
Burlington, 139 Vt. 602, 433 A.2d 275 (1981). In that case, agents of a
nonprofit corporation sought to open a women's center and restaurant in the
City of Burlington. The agents met with a city deputy fire warden to
discuss renovations necessary to bring the premises into compliance with
the city's fire code. They informed the fire warden of the nonprofit's
plans for the restaurant, and he gave them a list of specific improvements
necessary to comply with the code. However, upon a second inspection,
after the nonprofit had completed the renovations, the fire warden informed
the agents that they could not open the restaurant because they were not in
compliance with the code, and attributed his erroneous guidance to his
unfamiliarity with certain provisions of the fire code.

¶ 25. Noting that the fire warden was "a duly authorized agent of
the City charged with a duty of enforcing the [code]," we concluded that
"[c]oncomitant with this duty is the charge of knowing the law and properly
advising the public." Id. at 608, 433 A.2d at 279. Thus, we estopped the
city from denying liability for the nonprofit's losses. Id. at 609-10, 433 A.2d at 280.

¶ 26. Similarly, the Lyons were misinformed by-and reasonably relied
upon-a duly authorized agent of the government acting within his authority.
And, as ANR recognized, the agency provided similar advice to permit
applicants at multiple regional offices over an extended time period.
Therefore, the Lyons' reliance on the Regional Engineer in this case is
precisely the kind of rare circumstance that justifies estopping the State,
because the injustice of allowing the revocation of their permit easily
outweighs any effect on the public interest.

¶ 27. This result in no way undermines Vermont's wastewater
permitting system, which the Court recognizes was designed "to protect
human health and the environment." 10 V.S.A. § 1971(1). As conceded at
oral argument, no party has shown any injury to property or the
environment. Furthermore, were such an injury to a public or private
interest discovered, the injured party would be able to seek a remedy just
as if the existing wastewater system in question had received a valid
permit and subsequently malfunctioned. Wastewater Rules § 1-304.
Additionally, the Wastewater Rules would continue to govern any changes
made to the system in the future that would require a new permit. Id. §
1-402(a). Thus, the Wastewater Rules violations here are merely technical,
and any future adverse effects can be adequately addressed.

¶ 28. This case is distinguishable from those cited by appellee
Tucker and the State, in which we declined to estop the government. For
example, in In re Letourneau, we did not estop the Town of Derby from
enforcing setback requirements against a homeowner who had not fully
informed the zoning administrator of his renovation plan, and thus had not
met the first element of estoppel. 168 Vt. at 548, 726 A.2d at 38; see
also In re Barlow, 160 Vt. 513, 523-24, 631 A.2d 853, 859-60 (1993)
(declining to estop Environmental Board decision requiring Act 250 permit
where party's evidence of gravel mine's historical use was insufficient to
fully inform the Board of the true facts, and thus failed to meet the first
element of estoppel). In contrast, the Lyons made the permitting authority
fully aware of their plans and received direct guidance from the Regional
Engineer as to how they should proceed. The information they provided and
the steps they took to follow the Regional Engineer's guidance must have
been viewed satisfactorily because the Lyons received a permit from ANR.

¶ 29. Likewise, in Wesco, Inc. v. City of Montpelier, 169 Vt. 520,
739 A.2d 1241 (1999), this Court declined to estop the City from requiring
a developer to obtain a conditional use permit while renovating its
property. Because the city zoning administrator had not made any decision
on the merits of the developer's application, but rather had referred it to
the City's planning commission for further review, we held that "[a]ny
reliance by Wesco on the zoning administrator's conduct was misplaced and
premature." Id. at 524, 739 A.2d at 1245. In contrast, here the Regional
Engineer, as the Commissioner's duly authorized agent, was responsible for
final approval of the Lyons' permit application, and their reliance on both
his guidance and the presumptive validity of the approved permit was
reasonable. Indeed, the Commissioner said as much in the Estoppel
Statement.

¶ 30. Finally, in In re McDonald's Corp., 146 Vt. 380, 505 A.2d 1202
(1985), we declined to estop the Environmental Board from requiring a
restaurant to obtain an Act 250 permit where an Environmental Coordinator
involved with the restaurant's application opined that the project would
not require a permit. We held that the Environmental Coordinator's opinion
was only advisory in nature, and that the information he gave McDonald's
was beyond the scope of his authority. Id. at 384-85, 505 A.2d at 1204-05.
The facts of McDonald's contrast with the present case, where the Regional
Engineer who advised the Lyons was acting within the scope of his authority
both when he gave specific guidance to the Lyons, and when he subsequently
granted their permit. Moreover, by granting their permit, his conduct went
well beyond offering an advisory opinion.

¶ 31. We have repeatedly noted that the "doctrine of equitable
estoppel is 'based upon the grounds of public policy, fair dealing, good
faith, and justice.' " Wesco, Inc. v. City of Montpelier, 169 Vt. at 523,
739 A.2d at 1244 (quoting Fisher v. Poole, 142 Vt. 162, 168, 453 A.2d 408,
411 (1982)). Those ends can be served here only by estopping the State
from revoking the Lyons' permit, given that the Lyons reasonably relied on
the Regional Engineer's advice and conduct associated with the issuance of
the permit, and that the Commissioner recognized as much in the Estoppel
Statement. Accordingly, we reverse the Board's decision rejecting the
Lyons' estoppel argument and remand this matter to ANR to reinstate the
permit.

Reversed and remanded to ANR. ANR shall reinstate Wastewater System
and Potable Water Supply Permit # WW-5-2079.

FOR THE COURT:

_______________________________________
Associate Justice

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Footnotes

FN1. Justice Dooley sat for oral argument but did not participate in this
decision.

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