The New Hampshire Supreme Court reversed the decision of the superior court and held that the petitioners were not required to exhaust administrative remedies before bringing their equitable estoppel claim in court.
Daryl and Mary Dembiec obtained a permit from the Town of Holderness to build a single-family home on their property, which, at the time, consisted only of a two-story boathouse equipped with living quarters. When the home was substantially completed, the compliance officer informed the Dembiecs that he would not issue a certificate of compliance because the boathouse contained a dwelling unit, and the zoning ordinance allowed only one dwelling per lot. The compliance officer informed them that they would either need to remove the plumbing from the boathouse or obtain a variance.
The Dembiecs applied to the ZBA for an equitable waiver, which was originally granted and then denied on rehearing. The Dembiecs also applied for a variance, which was denied. At the same time, they filed suit in superior court, seeking a declaration that the Town was estopped from enforcing the one dwelling-unit per lot zoning restriction because the Town had previously issued a building permit. The Town moved to dismiss on the grounds that the Dembiecs had not raised this argument below and had failed to exhaust their administrative remedies. The superior court dismissed.
The Dembiecs appealed the NH Supreme Court. The Court stated that the rule regarding exhaustion of administrative remedies was flexible and does not prohibit judicial relief in two circumstances. First, a petitioner does not need to exhaust administrative remedies and may bring a declaratory judgment action to challenge the decisions of municipal officers and boards when the action raises a question that is peculiarly suited to judicial rather than administrative treatment and no other adequate remedy is available. Such a situation often occurs where the constitutionality or validity of an ordinance is in question. Second, where further appeal would be useless—including where the administrative board does not have the authority to resolve the issues presented—exhaustion of administrative remedies is not necessary.
The Court held that exhaustion of administrative remedies was not required because the ZBA did not have the authority to take the requested action and, therefore, further administrative action was useless. A ZBA’s authority is conferred by statute, which gives a ZBA authority to hear appeals from administrative decisions and to grant variances, special exceptions, and equitable waivers where particular statutory prerequisites are met. However, the statute does not give a ZBA general equitable jurisdiction. Therefore, the Holderness ZBA did not have the authority to adjudicate an equitable estoppel claim. Furthermore, this was not a question of construction, interpretation, or application of the zoning ordinance or of the compliance officer’s refusal to issue the certificate of compliance: there was no dispute that the ordinance prohibited more than one dwelling unit on a lot. Instead, the Dembiecs claimed that even though the compliance officer correctly interpreted the zoning ordinance, it was inequitable for him to decline to issue a certificate of compliance because the Dembiecs reasonably relied upon the building permit issued by the Town. Therefore, their claim was an entirely new claim for relief and one which the ZBA was not empowered to hear. Consequently, the case was sent back to the superior court.