TSB HOLDINGS, L.L.C. and 911 N. GOVERNOR, L.L.C., Plaintiffs-Appellants,
CITY OF IOWA CITY, IOWA, Defendant-Appellee. TSB HOLDINGS, L.L.C. and 911 N. GOVERNOR, L.L.C., Plaintiffs-Appellants/Cross-Appellees,
BOARD OF ADJUSTMENT FOR THE CITY OF IOWA CITY, Defendant-Appellee/Cross-Appellant.
from the Iowa District Court for Johnson County, Chad A.
Kepros (trial) and Mitchell Turner (motion to amend answer
and summary judgment), Judges.
property owner appeals the district court's grant of
summary judgment to the City of Iowa City and the district
court's decision in favor of the Board of Adjustment for
the City of Iowa City, and the Board of Adjustment appeals
the district court's denial of its motion to amend its
answer to add affirmative defenses. AFFIRMED IN PART,
REVERSED IN PART, AND REMANDED.
Charles A. Meardon of Meardon, Sueppel & Downer, P.L.C.,
Iowa City, and James W. Affeldt of Elderkin & Pirnie,
P.L.C., Cedar Rapids, for appellants/cross-appellees.
Elizabeth J. Craig and Sara Greenwood Hektoen, Assistant City
Attorneys, Iowa City, for appellees/cross-appellant.
by Doyle, P.J., McDonald, J., and Blane, S.J. [*]
Holdings L.L.C. and 911 N. Governor, L.L.C. (TSB) appeal the
district court's rulings granting the City of Iowa
City's motion for summary judgment and denying TSB's
rule 1.904(2) motion. TSB also appeals the district
court's decision in a separate case in favor of the Board
of Adjustment for the City of Iowa City (BOA). At issue in
these cases is the City's decision to rezone certain
properties owned by TSB and the BOA's decision to deny
TSB's site plans for those properties based on the
City's rezoning, which TSB contends interfered with its
ability to develop the properties and violated the supreme
court's decision in Kempf v. City of Iowa City,
402 N.W.2d 393, 401 (Iowa 1987).
case against the City, TSB claims the court erred in granting
the City's motion for summary judgment, and in denying
its motion, because the City's rezoning ordinance
violates the district court's 1987 remand order that was
entered following the Kempf decision. TSB also
claims the court erred in concluding in the 1.904(2) ruling
that TSB failed to meet the notice pleading requirements for
its takings claim.
case against the BOA, TSB claims (1) the district court erred
in concluding it is not a successor or assign to the
properties owned by Kempf, (2) the district court erred in
concluding the properties had already been developed through
Kempf's inaction and concluding TSB's plans called
for the further development or redevelopment of the
properties, (3) the district court erred in concluding
TSB's actions violate public policy, and (4) the BOA
acted illegally in not applying the Kempf decision
and remand order to its site plans. In a cross-appeal, the
BOA claims the district court abused its discretion in
denying its motion to amend its answer to add certain
affirmative defenses, specifically the statute of
respect to the litigation against the City, we agree the
district court correctly granted summary judgment to the
City; however, we reverse and remand the district court's
order that dismissed TSB's takings claims based on notice
pleading. With respect to the BOA litigation, we affirm the
district court's decision that the BOA did not act
illegally in failing to apply the Kempf decision and
the remand order to TSB's site plans in light of the
supreme court's recent ruling in Dakota, Minnesota,
& Eastern Railroad v. Iowa District Court
(Dakota Railroad), 898 N.W.2d 127, 138 (Iowa 2017).
In light of this holding, we need not address the BOA's
cross-appeal regarding its motion to amend its answer to add
Background Facts and Proceedings.
properties at issue in this matter have a long and storied
history in our courts. As detailed in the Kempf
decision, the properties, located in Iowa City, were acquired
by Wayne Kempf and others in 1972 in reliance on the
City's 1968 study that proposed the properties be used
for medium to high density housing. 402 N.W.2d at 395-96.
Kempf started developing the site to construct five apartment
buildings and a commercial office building, and invested a
total of $114, 500 in the land purchase price and preliminary
site development. Id. After Kempf began construction
on a twenty-nine-unit apartment building, several neighboring
property owners objected, and the City revoked the previously
issued building permit. Id. at 396-97. Litigation
ensued, which forced the City to reissue permits for the
apartment building, and the construction on that building was
completed in 1977. Id. at 397. The City imposed a
moratorium on further development on the properties and also
rezoned the properties in 1978 to prevent further apartment
building development. Id. at 398. The litigation
between the parties culminated in the supreme court's
ruling in 1987, which held:
The record discloses admissible testimony the downzoning of
the tract in question would not contribute to public health,
safety, or welfare. The open invitation the city extended in
"The North Side Study" to proceed with such
developments carries with it the plain conclusion there would
be no adverse impact on city streets or utilities, nor does
the city argue otherwise. The large investment Kempf made in
filling, grading, and bringing in utilities for the whole
tract in reliance on the zoning and the city's study
would provide substantial support for application of the
vested rights principle.
Under this record, however, we are not required to develop
that analysis because a more limited test controls our
determination. The overwhelming evidence discloses the lots
in the remaining 2.12 acres of the Kempf tract cannot be
improved with any development that would be economically
feasible. For this reason we find that application of the
downzoning ordinance to the lots in the 2.12 acres would be
The relevant principle is found in McQuillin: Where it
appears that under existing zoning restrictions property must
remain for an unpredictable future period unimproved,
unproductive, and a source of expense to the owners from
heavy taxes, the zoning ordinance is unreasonable as to such
property. 8 McQuillin, Municipal Corporations §
25.45, at 122 [(3d ed. 1982)]. Undergirding this rule is the
concept that in these situations there is, in effect, an
unconstitutional taking. Although a property owner does not
necessarily have a remedy if the police regulation merely
deprives the owner of the most beneficial use of his or her
property, frustration of investment-backed expectations may
amount to a taking. . . .
We agree with the trial court that application of the June
28, 1978 zoning ordinance to Kempf's underdeveloped lots
and portions of lots would be unreasonable and therefore
invalid. We are left with the question of the present and
future status of these lots and portions of lots. . . . .
. . . [W]e hold that [the zoning ordinances at issue] may
apply to the Kempf property, provided, however, that Kempf
shall be permitted to proceed with the development of
apartment buildings, as shown by the record in this case, to
the extent that such buildings conform to the ordinances in
effect prior to the 1978 rezoning . . . . The city shall be
enjoined from prohibiting this use of the property by Kempf.
Further development or redevelopment of the property beyond
that contemplated by Kempf as shown by this record and noted
in this opinion, whether carried out by Kempf or future
owners, will be subject to the amended ordinances above
Id. at 400-01 (citations omitted).
matter was remanded to the district court "for a
disposition in conformance with this opinion."
Id. at 401. On remand, the district court issued a
supplementary order that outlined the legal description of
the 2.12-acre undeveloped portion of Kempf's land and
The owner or owners of said properties, and their successors
and assigns, shall be permitted to develop those properties
with multiple dwellings (apartments) in accordance with the
provisions applicable to the R3B zone in effect on May 30,
1978, prior to the rezoning of said real estate which was
finalized on June 28, 1978.
. . . The City is and shall be enjoined from interfering with
development of those properties as herein provided.
Once a use has been developed or established on any of the
above-described properties, further development or
redevelopment of that property shall be subject to the zoning
ordinances in effect at the time such further development or
redevelopment is undertaken.
language used in the remand order was approved by the
attorneys for the parties and the City has never challenged
the remand, Kempf applied for and received a building permit
to construct a twelve-unit apartment building in 1988-89. In
addition, in 1990, Kempf granted the local energy company an
electrical easement across a portion of the undeveloped land
to provide utilities to the new apartment building. No other
development occurred on the properties.
2005, the company associated with Kempf and his partners sold
a portion of the 2.12 acres of the land at issue in
Kempf and the land occupied by the two existing
apartment buildings to Main Street Partners for $2.4 million.
Then in 2009, the properties were sold to TSB for $3.4
million. Tracy Barkalow, owner of TSB, testified he acquired
the properties for the existing apartments and to add more
apartments per the Kempf order as the sellers
provided him a copy of the Kempf rulings and a 1988
site plan created by Kempf that detailed more apartment
buildings on the land. In addition, Barkalow testified his
appraiser communicated with the City before the purchase and
confirmed the pre-1978 zoning would apply to the properties
to construct additional apartments on land under the
2011, the City received and denied a request from a developer
to rezone the portion of the land occupied by the commercial
building and a small portion of the 2.12 acres at issue in
Kempf, and the City then reexamined the zoning of
all the properties in question. City staff recommended
rezoning the properties to prevent high density residential
development. In March 2012, the portion of the land occupied
by the commercial building was sold by the company associated
with Kempf and his partners to 911 North Governor L.L.C. for
January 2013, TSB submitted its first site plan to develop
the properties with apartment buildings. That plan was routed
to the various City building departments and evaluated under
the Kempf ruling. However, the plan was ultimately
rejected on January 17, 2013.
light of the new rezoning proposal for the properties, the
City put a moratorium into effect on January 22, 2013, to
prevent the approval of any site plan. Undeterred, TSB
submitted additional site plans in January, which included
all properties and provided for the construction of three
additional apartment buildings and demolition of the current
commercial office building. The City denied the site plans as
not complying with the proposed new zoning designation
without an evaluation of the application of the
City exercised its statutory authority to engage in municipal
zoning. As relevant here, in November 2012, the
City amended its comprehensive zoning plan. On March 19,
2013, the City adopted an ordinance to bring the properties
at issue "into compliance with the City's
Comprehensive Plan." Iowa City, Iowa, Ordinance No.
13-4518 (2013). The ordinance rezoned the properties at issue
from mutli-family (R3B) and commercial office (CO-1) to
high-density single family residential (RS-12) and
medium-density multi-family residential (RM-20). The
ordinance, in relevant part, provides as follows:
Whereas, the City of Iowa City has initiated a rezoning of
property located of 906 North Dodge Street from Multi-family
(R3B) to High-Density Single-Family Residential (RS-12);
property located at 911 North Governor Street from Commercial
Office (CO-1) to High-Density Single-Family Residential
(RS-12); property located at 902 and 906 North Dodge Street
from Multi-family (R3B) to Medium-Density Multi-Family
Residential (RM-20) in order to bring the properties into
compliance with the City's Comprehensive Plan; and
Whereas, City plans and policies, including the Comprehensive
and Strategic Plan, have changed considerably in the last 40
years, with the current Comprehensive Plan and Historic
Preservation Plan containing policies to encourage
preservation of the single family character of the City's
older single family neighborhoods and policies that serve to
stabilize these neighborhoods by encouraging a healthier
balance of rental and owner-occupied housing rather than
redevelopment for housing that serves primarily short-term
Whereas, the Central District Plan indicates that R3B zoning
is obsolete and the properties with this designation should
be rezoned to a valid zoning designation;
. . . .
Whereas, the Comprehensive Plan policies in place during the
1960s that led to the R3B zoning on Dodge Street encouraged
demolition and redevelopment of older neighborhoods at higher
Whereas, the City's Zoning Code no longer includes the
R3B zoning designation due to its inconsistency with the
City's current comprehensive planning goals and polices;
. . . .
. . . . NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF
THE CITY OF IOWA CITY, IOWA:
SECTION I APPROVAL. Property described below is hereby
reclassified . . . .
Id. The effect of the ordinance on TSB was to allow
the existing buildings to remain but prevent any further
apartment building construction on the land.
filed two separate challenges in response to the City
rezoning the properties. In February 2013, prior to the
passage of the ordinance, TSB filed a declaratory judgment
action seeking prospective relief. This was docketed as No.
EQCV075292. In Count I of its action, TSB requested
a declaratory decree adjudging the Defendant may not alter
the zoning of the property, and that if the Defendant does
so, that the altered regulation is, to the extent it applies
to the property, unconstitutional and void; that the Court
enter a temporary injunction restraining Defendant from
altering the zoning of the property until a hearing has been
held; for such other relief as the Court deems just and
equitable; and the costs of this action.
II of the petition sought a temporary injunction restraining
the City from "altering the zoning of the
property." In April 2013, TSB timely filed a petition
for writ of certiorari challenging the rezoning ordinance.
The petition was docketed as No. CVCV075457. It alleged:
The change in the zoning classification was improper,
unreasonable, arbitrary and capricious, illegal, contrary to
prior rulings of the Supreme Court of Iowa and of the Johnson
County District Court, and would result in an
unconstitutional taking of Plaintiff's property.
(Emphasis added.) In the prayer for relief, TSB requested a
writ be issued and that the Defendant's "rezoning of
the property be annulled and declared void." The
district court consolidated the cases.
City denied the petitions, and both parties filed motions for
summary judgment. The motions came on for a hearing on March
20, 2015, and the court issued its ruling on June 3, 2015.
The ruling granted the City's motion on all claims pled
by TSB and denied TSB's summary judgment motion. TSB
filed a rule 1.904(2) motion seeking clarification as to
whether the district court's decision also dismissed its
takings claim against the City. The City resisted the