             IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Solow RI, Inc. and Phila RI, Inc.,   :
                   Appellants        :
                                     :
             v.                      :
                                     :
Philadelphia Zoning Board of         :
Adjustment; H. Kulp, Inc. and        :       No. 333 C.D. 2019
Blenheim Capital Group, LLC          :       Argued: November 12, 2019


BEFORE:      HONORABLE PATRICIA A. McCULLOUGH, Judge
             HONORABLE ANNE E. COVEY, Judge
             HONORABLE ELLEN CEISLER, Judge

OPINION NOT REPORTED

MEMORANDUM OPINION BY
JUDGE COVEY                                  FILED: December 9, 2019


             Solow RI, Inc. and Phila RI, Inc. (Objectors) petition this Court for
review of the Philadelphia County Common Pleas Court’s (trial court) February 6,
2019 order affirming the Philadelphia Zoning Board of Adjustment’s (ZBA) decision
granting H. Kulp, Inc. and Blenheim Capital Group, LLC’s (collectively, Applicant)
variances.   There are two issues before this Court: (1) whether Objectors have
standing; and (2) whether substantial evidence supports the ZBA’s finding of
unnecessary hardship.


                                         Facts
             Applicant owns an 8.6-acre lot at 3601 Island Avenue (Property). There
is an industrial warehouse on 6 acres of the lot and the remaining 2.6 acres are
undeveloped.      On October 18, 2017, Applicant applied to the Philadelphia
Department of Licenses and Inspections (L&I) for a zoning/use registration permit
for a proposed relocation of lot lines to create two lots, i.e., Lot 1 (6 acres) and Lot 2
(2.6 acres) at the Property, and for construction of a 4-story, 148-unit hotel with an
eat-in restaurant, 151 accessory open-air parking spaces and 4 accessory signs on Lot
2.    L&I determined that the proposed eat-in restaurant and hotel (Visitor
Accommodation) were prohibited in the Property’s I-2 Industrial zoning district, and
that the proposed signs were not permitted because they would be located above the
proposed structure’s second floor windowsill. On November 11, 2017, L&I issued a
notice of refusal. Applicant appealed from the refusal to the ZBA.
              The ZBA held hearings on April 3 and May 16, 2018. At the conclusion
of the May 16, 2018 hearing, the three ZBA members in attendance voted
unanimously to grant the requested variances. Objectors appealed to the trial court.
On February 6, 2019, the trial court affirmed the ZBA’s decision. Objectors appealed
to this Court.1 On March 4, 2019, the trial court directed Objectors to file a Statement
of Errors Complained of on Appeal pursuant to Pennsylvania Rule of Appellate
Procedure 1925(b) (Rule 1925(b) Statement).           On March 22, 2019, Objectors filed
their Rule 1925(b) Statement. On April 25, 2019, the trial court filed its opinion.


                                         Discussion
              Objectors argue that substantial evidence does not support the ZBA’s
finding of unnecessary hardship. Applicant rejoins that Objectors are improperly
using zoning proceedings to foreclose commercial competition.




       1
         Where the parties present no additional evidence, “our review is limited to determining
whether the ZBA committed an abuse of discretion or an error of law.” Soc’y Hill Civic Ass’n v.
Phila. Zoning Bd. of Adjustment, 42 A.3d 1178, 1185 n.2 (Pa. Cmwlth. 2012).


                                               2
                                       Standing
             At the outset, Applicant asserts that Objectors do not have standing to
bring this appeal because their challenge is based entirely on elimination of
commercial competition. Objectors respond that, notwithstanding the fact that they
are business competitors, they have standing because they are abutting property
owners. Objectors cite A.R.E. Lehigh Valley Partners v. Zoning Hearing Board of
Upper Macungie Township, 590 A.2d 842 (Pa. Cmwlth. 1991), to support their
position.
             This Court recognizes that “[w]e cannot allow zoning appeals to be used
as a method to deter free competition.” In re Farmland Indus., Inc., 531 A.2d 79, 84
(Pa. Cmwlth. 1987).    However, presented with the same argument, the A.R.E. Court
explained:

             [The applicant] argues that [the objector] lacks standing
             because it is merely a business competitor. In support of
             [its] position, [the objector] relies upon [Farmland]. . . . In
             that case, we held that a business competitor whose
             property neither abuts nor is in the immediate vicinity of the
             property subject to the zoning board’s action lacks the
             requisite standing. As [the objector’s] property abuts the
             [applicant’s] parcel, Farmland does not support [the
             applicant’s] argument. . . . As an abutting landowner, the
             appellant here has standing.

A.R.E., 590 A.2d at 843 (emphasis added); see also Abe Oil Co. v. Zoning Hearing
Bd. of Richmond Twp., 649 A.2d 182, 185 n.3 (Pa. Cmwlth. 1994) (“Even if standing
had been raised below, we would hold that [the objector’s] status is not only as a
business competitor, but as a ‘person affected’ by [applicant’s] application.”).
             Moreover,

             this Court explained that ‘[g]enerally, in order to establish
             standing as an ‘aggrieved person,’ it must be shown that the
             person has a substantial, direct and immediate interest in the
             claim sought to be litigated[;]’ notwithstanding, ‘a property

                                           3
             owner need not establish pecuniary or financial loss if his
             property is located in close proximity to the subject
             property because the zoning decision is presumed to
             have an effect on the property owner’s property.’
             [Laughman v. Zoning Hearing Bd. of Newberry Twp., 964
             A.2d 19, 22 (Pa. Cmwlth. 2009),] (emphasis added). Thus,
             ‘[t]he owner of property that is adjacent to or abuts the
             property at issue is ‘aggrieved’ and has standing to appeal a
             [zoning] board decision.’ Bradley v. Zoning Hearing Bd. of
             Borough of New Milford, 63 A.3d 488, 491 (Pa. Cmwlth.
             2013).

Plaxton v. Zoning Bd. of Adjustment, 213 A.3d 374, 379-80 (Pa. Cmwlth. 2019)
(emphasis added; footnote omitted).       Because Objectors’ status is not only as
business competitors, but also as abutting property owners, they have standing to
appeal.


                               Unnecessary Hardship
             Objectors contend that Applicant’s hardship is attendant to his person,
not the Property.    Further, Objectors assert that Applicant did not present any
evidence that the Property has unique physical conditions but, rather, presented only
an unsuccessful attempt to sell the entire Property. Applicant rejoins that it presented
sufficient evidence of unnecessary hardship. In particular, Applicant claims that it
presented evidence of a lack of marketability for industrial use and a change of
circumstances indicating a transition away from such a use.
             Initially, Section 14-303(e)(.1) of the Philadelphia Zoning Code (Code)
provides, in relevant part:

             The [ZBA] shall grant a variance only if it finds each of the
             following criteria are satisfied:
             (.a) The denial of the variance would result in an
             unnecessary hardship. The applicant shall demonstrate that
             the unnecessary hardship was not created by the applicant
             and that the criteria set forth in [Section] 14-303(8)(e)(.2)

                                           4
            [of the Code] (Use Variances) [], in the case of use
            variances . . . have been satisfied;
            (.b) The variance, whether use or dimensional, if
            authorized will represent the minimum variance that will
            afford relief and will represent the least modification
            possible of the use or dimensional regulation in issue;
            (.c) The grant of the variance will be in harmony with the
            purpose and spirit of this [] Code;
            (.d) The grant of the variance will not substantially
            increase congestion in the public streets, increase the danger
            of fire, or otherwise endanger the public health, safety, or
            general welfare;
            (.e) The variance will not substantially or permanently
            injure the appropriate use of adjacent conforming property
            or impair an adequate supply of light and air to adjacent
            conforming property;
            (.f) The grant of the variance will not adversely affect
            transportation or unduly burden water, sewer, school, park,
            or other public facilities;
            (.g) The grant of the variance will not adversely and
            substantially affect the implementation of any adopted plan
            for the area where the property is located; and
            (.h) The grant of the variance will not create any
            significant environmental damage, pollution, erosion, or
            siltation, and will not significantly increase the danger of
            flooding either during or after construction, and the
            applicant will take measures to minimize environmental
            damage during any construction.

Phila. Code § 14-303(e)(.1). Section 14-303(8)(e)(.2) of the Code specifies:

            To find an unnecessary hardship in the case of a use
            variance, the [ZBA] must make all of the following
            findings:
            (.a) That there are unique physical circumstances or
            conditions (such as irregularity, narrowness, or shallowness
            of lot size or shape, or exceptional topographical or other
            physical conditions) peculiar to the property, and that the

                                          5
            unnecessary hardship is due to such conditions and not to
            circumstances or conditions generally created by the
            provisions of this [] Code in the area or zoning district
            where the property is located;
            (.b) That because of those physical circumstances or
            conditions, there is no possibility that the property can be
            used in strict conformity with the provisions of this [] Code
            and that the authorization of a variance is therefore
            necessary to enable the viable economic use of the property;
            (.c) That the use variance, if authorized, will not alter the
            essential character of the neighborhood or district in which
            the property is located, nor substantially or permanently
            impair the appropriate use or development of adjacent
            property, nor be detrimental to the public welfare; and
            (.d) That the hardship cannot be cured by the grant of a
            dimensional variance.

Phila. Code § 14-303(e)(.2). The Pennsylvania Supreme Court has explained:

            [I]n the context of use variances, ‘unnecessary hardship is
            established by evidence that: (1) the physical features of the
            property are such that it cannot be used for a permitted
            purpose; or (2) the property can be conformed for a
            permitted use only at a prohibitive expense; or (3) the
            property has no value for any purpose permitted by the
            zoning ordinance.’ Hertzberg v. Zoning [Bd.] of Adjustment
            of the City of Pittsburgh, . . . 721 A.2d 43, 47 ([Pa.] 1998)[.]
            This Court has repeatedly made clear that in establishing
            hardship, an applicant for a variance is not required to show
            that the property at issue is valueless without the variance or
            that the property cannot be used for any permitted purpose.
            On several occasions, we have reversed the Commonwealth
            Court when it had relied on such a standard for unnecessary
            hardship in reversing the grant of a variance. Showing that
            the property at issue is ‘valueless’ unless the requested
            variance is granted ‘is but one way to reach a finding of
            unnecessary hardship; it is not the only factor nor the
            conclusive factor in resolving a variance request.’
            Hertzberg, [721 A.2d] at 48. Rather, ‘multiple factors are
            to be taken into account’ when assessing whether
            unnecessary hardship has been established. Id.

                                           6
Furthermore, we have never required a property owner
seeking a variance to present direct evidence as to the value
of the property as zoned. In addition, although evidence of
a property owner’s inability to sell may be probative, id.,
we have concluded that it is ‘unreasonable to force a
property owner to try to sell his property as a prerequisite to
receiving a variance.’ Allegheny [W. Civic Council, Inc. v.
Zoning Bd. of Adjustment of the City of Pittsburgh, 689
A.2d 225,] 228 [(Pa. 1997)].
Although a property owner is not required to show that
his or her property is valueless unless a variance is
granted, ‘[m]ere economic hardship will not of itself
justify a grant of a variance.’ Wilson v. Plumstead [Twp.]
Zoning Hearing [Bd.], . . . 936 A.2d 1061, 1069 ([Pa.]
2007) (citation omitted). In Valley View [Civic Association
v. Zoning Board of Adjustment, 462 A.2d 637,] 640 [(Pa.
1983)], we explained that ‘mere evidence that the zoned use
is less financially rewarding than the proposed use is
insufficient to justify a variance.’ Particularly where a
variance is sought in order to make a change from an
existing use consistent with the zoning code to an
inconsistent use, ‘the mere fact that the property would
increase in value if a variance were granted, is not of itself a
sufficient basis’ upon which to find unnecessary hardship.
O’Neill v. Phila[.] Zoning [Bd.] of Adjustment, . . . 120 A.2d
901, 904 ([Pa.] 1956); see also Wilson, [936 A.2d] at 1070
(‘A variance will not be granted because a zoning
ordinance deprives the landowner of the most lucrative
and profitable uses.’) (internal quotation marks and
citation omitted).
However, a zoning board’s discretion is ‘not so
circumscribed as to require a property owner to reconstruct
a building to a conforming use regardless of the financial
burden that would be incident thereto. Especially is this
true where the change sought is from one non[-]conforming
use to another more desirable non[-]conforming use that
will not adversely affect but better the neighborhood.’
O’Neill, [120 A.2d] at 904; see also Halberstadt v. Borough
of Nazareth, . . . 687 A.2d 371, 373 ([Pa.] 1997) (in a case
in which a variance was granted for a massive, legally non-
conforming, one-story building erected in 1914, stating that
‘[p]roperty owners are not required to reconstruct a building
to a conforming use regardless of the financial burden.’).

                               7
            Thus, economic factors are relevant, albeit not
            determinative, in a variance assessment.

Marshall v. City of Phila., 97 A.3d 323, 329-31 (Pa. 2014) (emphasis added; citations
omitted).
            The Marshall Court reversed this Court and upheld the ZBA’s decision
which found a hardship based on the following:

            The ZBA concluded that the [applicant] had established the
            ‘overwhelming support’ of the surrounding community for
            the housing project. In addition, the [applicant] had
            demonstrated the ‘unique nature’ of the property, one aspect
            of which was its legally non-conforming character. The
            building currently was vacant, in need of repair and
            providing no benefit to the community. The variances
            sought for parking, traffic, trash, and aesthetics ‘would not
            adversely impact the health, safety and welfare of the
            surrounding community,’ and in fact, the proposed use
            would be less burdensome on the community than the
            previous use as a school or other uses permitted as of right.
            The conditions that formed the basis for the requested
            variances were not the result of the [applicant’s] actions,
            but rather were unique to the property and related to its
            legally non-conforming character.

Id. at 327-28 (emphasis added; record citations omitted).
            Similarly, in Liberties Lofts LLC v. Zoning Board of Adjustment, 182
A.3d 513 (Pa. Cmwlth. 2018), this Court affirmed a trial court’s order upholding a
ZBA’s hardship determination. The Liberties Court explained:

            [T]he ZBA’s finding of unnecessary hardship is based on its
            supported determinations that the subject property, which
            is currently improved with a mostly vacant, dilapidated
            warehouse, is valueless as zoned or could only be
            converted to a permitted use at a prohibitive expense.
            This constitutes unnecessary hardship.           Marshall.
            Additionally, the ZBA relied on the fact that the area
            surrounding the subject property ha[d] transitioned from
            industrial to residential use. No error is apparent in that
            regard.


                                          8
Liberties, 182 A.3d at 534-35 (emphasis added; record citations omitted).
            Here, the ZBA concluded:

            The Property is surrounded by similar and/or compatible
            uses (including six other hotels) and efforts to market it
            failed to produce any offers from parties interested in
            developing it for a permitted industrial use.
            The [ZBA] concludes that these circumstances are
            sufficient to establish the hardship required for grant of a
            variance.

ZBA Dec. at 7 ¶¶ 10-11.
            This Court is mindful that “[i]t is the function of the [ZBA] to determine
whether the evidence satisfies the criteria for granting a variance[,]” and that “[a]n
appellate court errs when it substitutes its judgment on the merits for that of [the
ZBA].” Marshall, 97 A.3d at 331. However, “[t]he burden on an applicant seeking a
variance is a heavy one, and the reasons for granting the variance must be substantial,
serious and compelling.” Liberties, 182 A.3d at 530. Neither ZBA in Marshall, nor
in Liberties, based its hardship conclusion solely on the combination of the property’s
lack of marketability and the change in the surrounding neighborhood.          In one
instance, “[t]he building [] was vacant, in need of repair and provid[ed] no benefit to
the community[,]” Marshall, 97 A.3d at 327, and the other, the subject property was
“a mostly vacant, dilapidated warehouse, [was] valueless as zoned or could only be
converted to a permitted use at a prohibitive expense[.]” Liberties, 182 A.3d at 534.
            In the instant case, Lot 1 contains a viable 84,000-square-foot industrial
building currently housing a car rental operation, as well as one long-term tenant and
one short-term tenant. See Reproduced Record (R.R.) at 24a. The fact that Applicant
tried unsuccessfully to sell the entire 8.6-acre Property to no avail, see R.R. at 24a-
25a, does not establish an unnecessary hardship. Notwithstanding that subdividing
the Property into two lots and constructing the Visitor Accommodation would be

                                          9
lucrative to Applicant, “a variance will not be granted because a zoning ordinance
deprives the landowner of the most lucrative and profitable uses.”         Marshall, 97
A.3d at 330 (quoting Wilson, 936 A.2d at 1070). “Although a property owner is not
required to show that his or her property is valueless unless a variance is granted,
‘[m]ere economic hardship will not of itself justify a grant of a variance.’” Marshall,
97 A.3d at 330 (quoting Wilson, 936 A.2d at 1069). Because “economic factors are
relevant, albeit not determinative, in a variance assessment[,]” this Court is
constrained to hold that substantial evidence does not support the ZBA’s conclusion
that Applicant met its burden of proving an unnecessary hardship. Marshall, 97 A.3d
at 331.


                                     Conclusion
            For all of the above reasons, the trial court’s order is reversed.


                                       ___________________________
                                       ANNE E. COVEY, Judge




                                          10
             IN THE COMMONWEALTH COURT OF PENNSYLVANIA

Solow RI, Inc. and Phila RI, Inc.,   :
                   Appellants        :
                                     :
             v.                      :
                                     :
Philadelphia Zoning Board of         :
Adjustment; H. Kulp, Inc. and        :    No. 333 C.D. 2019
Blenheim Capital Group, LLC          :


                                     ORDER

             AND NOW, this 9th day of December, 2019, the Philadelphia County
Common Pleas Court’s February 6, 2019 order is reversed.


                                     ___________________________
                                     ANNE E. COVEY, Judge
