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Den Hartog v. City of Waterloo

Supreme Court of Iowa

March 10, 2017

TUNIS E. DEN HARTOG, SHIRLEY ANN SCHWEERTMAN, LEONARD G. LYBBERT, MARY ELLEN MOLINARO, WILLIAM JAMES ROBERT, AND MARK D. FISHER, Appellants,
v.
CITY OF WATERLOO, IOWA, Appellee, SUNNYSIDE SOUTH ADDITION, LLC, Intervenor.

         Appeal from the Iowa District Court for Black Hawk County, Andrea J. Dryer, Judge.

         Taxpayers challenge the district court's ruling finding a municipality was not in contempt of a court order forbidding it from selling certain property except in compliance with statutory requirements. AFFIRMED AS MODIFIED.

          Dave Nagle, Waterloo, for appellants.

          David Zellhoefer, Waterloo City Attorney, and Ivan T. Webber of Ahlers & Cooney, P.C., Des Moines, for appellee.

          CADY, CHIEF JUSTICE.

         In this case, we must decide if we should hold a municipality in contempt of a court order that required it to dispose of certain property only in compliance with Iowa Code section 306.23 (2014). The municipality promulgated notices that gave a development company preferential bidding on the property even though it was not a prior or adjacent landowner, gave that same development company a bid credit for the improvements it had already made to the property, described the land as delineated in the plat filed for the contested development, and used a backdated valuation. Following a hearing, the district court found the notices did not satisfy the requirements of section 306.23, but nevertheless held the municipality's actions did not rise to the level of contempt. The taxpayers appealed. On appeal, we affirm. We also address additional arguments presented to, but not ruled on by, the district court. We conclude the municipality violated the injunction but agree the record does not establish beyond a reasonable doubt the municipality acted with the requisite willfulness to establish contempt.

         I. Factual Background and Proceedings.

         This case is before us for the second time. The factual background can be summarized from our earlier opinion, as follows:

The State of Iowa acquired property in Black Hawk County for purposes of constructing a state highway in 1959. The highway had originally been planned as, and enough land had been acquired for, a four-lane project, but the highway was eventually constructed with just two lanes. In 1983, the state transferred control of the highway and attendant property to the City of Waterloo (the City), in accordance with the terms of Iowa Code chapter 306, entitled "Establishment, Alteration, and Vacation of Highways." After the transfer, the highway property became known as San Marnan Drive in Waterloo. The City has retained jurisdiction and control over the property in the years since and has maintained it with grading, mowing, and weed control.

          The City has now indicated its intention to transfer the property to Sunnyside South Addition, LLC (Sunnyside), as part of a development agreement. Under the terms of the agreement, Sunnyside proposes to relocate San Marnan Drive by reconstructing it approximately eighty feet south of its current position and intends to retain the property on which the current San Marnan Drive sits for purposes of residential construction. The City proposes to transfer the highway property to Sunnyside according to the agreement for the sum of $1.00.

Taxpaying residents of Waterloo . . . became aware of and objected to the proposed transfer in 2011. They filed in the district court a petition for writ of mandamus and temporary injunction requesting postponement of the sale on the ground the City's proposed transaction failed to comply with certain appraisal, notice, right-of-first refusal, and public bid requirements set forth in chapter 306.

Den Hartog v. City of Waterloo, 847 N.W.2d 459, 460-61 (Iowa 2014).

         The dispute was submitted to the district court for a resolution. The fighting issue was whether a statutory preference given to certain persons when unused right-of-way land is intended to be sold apply not only to land acquired for highway purposes but never used, but also land used for highway purposes that were later discontinued. Following a hearing, the district court held the statutory preference procedures did not apply to the sale of the right-of-way land in this case and dismissed the motion to enjoin the sale and the petition for writ of mandamus.

         The taxpayers filed an appeal from district court decision. Around the same time, the City entered into a contract to sell the right-of-way land to Sunnyside. It also entered into a development agreement with Sunnyside. Under the agreement, Sunnyside was required to develop the unused right-of-way, which ran next to a country club and golf course, into lots for residential development. The City also gave Sunnyside a special warranty deed to the land. During the pendency of the appeal, the City platted the land for the development, and Sunnyside relocated San Marnan Drive to the south. Sunnyside also graded the land for the housing development and installed curbs, gutters, storm sewers, utilities, and took other action necessary to complete the development site for home construction.

         In June 2014, we reversed the decision of the district court. We held the statutory sales preference did apply to land formerly used for highway purposes. We remanded the case to the district court to enter the requested injunction against the City. On July 7, 2014, the district court entered an order enjoining the City "from selling or transferring the property in this proceeding without first following the procedures prescribed in Iowa Code section 306.23."

         The City subsequently moved to dissolve the injunction. It did not assert the sale of the property to Sunnyside was complete. Instead, it asserted that it desired to sell the land and proposed to do so by first giving notice of the intended sale consistent with the requirements of the preference statute. On February 20, 2015, the district court denied the motion to dissolve the injunction.

         The City then proceeded to give the notices of the intended sale under the preference statute. The taxpayers filed an application to find the City in contempt of court for noncompliance with the statutory requirements of the notices. They also sought a temporary restraining order to prevent any sale.

         On June 4, 2015, the district court held the notices of sale sent by the City failed to comply with the statutory sales preference. However, it found the deficiencies in the notices were not willful and did not amount to contempt. It further found a ...


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