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TSB Holdings, L.L.C. v. Board of Adjustment for City of Iowa City

Supreme Court of Iowa

June 1, 2018

TSB HOLDINGS, L.L.C. and 911 N. GOVERNOR, L.L.C., Appellants,
v.
BOARD OF ADJUSTMENT FOR THE CITY OF IOWA CITY, Appellee. TSB HOLDINGS, L.L.C. and 911 N. GOVERNOR, L.L.C., Appellants,
v.
CITY OF IOWA CITY, IOWA, Appellee.

         On review from the Iowa Court of Appeals.

          Appeals from the Iowa District Court for Johnson County, Mitchell E. Turner and Chad Kepros, Judges.

         Developers seek further review of a court of appeals decision affirming the district court's orders denying them relief in certiorari proceedings against a municipality.

          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.

          Elizabeth J. Craig and Sara Greenwood Hektoen, Assistant City Attorneys, Iowa City, for appellee.

          MANSFIELD, Justice.

         Relying on a 1987 court order, developers sought the right to build apartments on certain adjoining properties they owned in Iowa City. After the City denied their site plans, the developers brought separate actions against the City and its Board of Adjustment. The district court ruled against the developers in both actions. The developers appealed. The court of appeals affirmed both judgments on the ground that enforcement of the 1987 order was barred by Iowa Code section 614.1(6) (2013), which provides that actions "founded on a judgment of a court of record" may only be brought within twenty years after the cause of action accrues. See Iowa Code § 614.1, .1(6). The developers asked for further review, which we granted.

         On further review, we find the Board of Adjustment should have permitted the developers to proceed in accordance with the 1987 decree. We conclude the statute of limitations does not bar enforcement of the decree. We further conclude the developers are entitled to enforce the decree as "successors and assigns." Additionally, we reject the Board of Adjustment's argument that the decree had expired by its terms because "a use [had] been developed or established" on the properties. Therefore, we vacate the decisions of the court of appeals, reverse the district court judgment in favor of the Board of Adjustment, and remand with directions to enter judgment in favor of the developers in that proceeding.

         I. Background Facts and Proceedings.

         A. The Kempf Decision and the Resulting Remand Order.

         The properties at issue are six numbered, adjoining lots in Iowa City.[1] Lots 49-51 on the west front on North Dodge Street. Lots 8-10 on the east front on North Governor Street.

         These properties were the subject of our decision in Kempf v. City of Iowa City, 402 N.W.2d 393');">402 N.W.2d 393 (Iowa 1987). Wayne Kempf and his partners[2]bought a four-acre tract in the near north side of Iowa City. Id. at 395-96. At the time of Kempf's purchase, the City had zoned the properties as R3B, a classification that permits office buildings and high density, multifamily residential housing. Id. at 395.

         Kempf planned to build one office building and five apartment buildings on the lots, and invested $114, 500 to purchase the whole tract and develop it for construction. Id. at 395-96. Kempf had completed construction of the office building on lots 8 and 9. See id. at 396. This building is located at 911 North Governor Street. Kempf then began construction of a twenty-nine unit apartment building on a part of lot 50. See id. This building is located at 902 North Dodge Street. Following vigorous neighborhood protests against the construction of the apartment building, the City revoked Kempf's building permit. Id. at 396-97.

         Kempf commenced litigation. Id. at 397. The district court ordered the City to reissue the building permit and enjoined the City from preventing further construction. Id. After the completion of the apartment building in 1977, the City imposed a moratorium on all construction with the exception of single-family and duplex development. Id. In 1978, the City rezoned Kempf's tract and other tracts in the area. Id.

         Kempf filed an amended petition, arguing the City's rezoning was arbitrary, capricious, and discriminatory, and the rezoning was an unconstitutional taking. Id. at 398. Litigation between the parties culminated in our Kempf decision.

         First, we held the application of the rezoning to the lots and portions of lots in the remaining 2.12 acres of the tract would be unreasonable. Id. at 400-01. We reasoned overwhelming evidence showed it would be economically unfeasible because "the cash flow income would not retire the debt[, ]" "lending agencies [would not] be willing to loan for such purposes in these circumstances[, ]" and "there would be no market for single-family or duplex residences on the remaining Kempf tract." Id. at 398, 400.

         Second, we considered the present and future status of the remaining lots. Id. at 401. We held

ordinances numbered 78-2901 through 78-2906 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 [C]ity 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 designated.

Id.

         We remanded the case to the district court to enter a ruling consistent with our opinion. Id.

         On remand, the district court issued an order that described the undeveloped 2.12 acres of the Kempf tract, specifically lots 10, 49, a part of 50, and 51. The court further provided,

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.

         All parties, including the City, approved this language prior to the court entering its decree.[3]

         After entry of the remand order, Kempf constructed a twelve-unit apartment building on a part of lot 50. This building is located at 906 North Dodge Street. Kempf also granted the local energy company an electrical easement across parts of lots 49 and 50 to provide utilities to the new apartment building.[4] Other than the twelve-unit apartment building and the electrical easement, Kempf did not further develop the properties.

         B. Events Leading Up to the Current Litigation.

         Over time, Kempf and his partners divested themselves of the properties. In 2005, AB Investments, L.L.C., a Kempf-related entity, sold lots 49-51 to Main Street Partners. Later that year, Main Street Partners conveyed the lots to Iowa-Illinois Square, L.L.C., a company owned by the Clark family. In 2009, Iowa-Illinois Square, L.L.C. sold the lots to TSB for $3.4 million. Thus, TSB has acquired lots 49-51, although it did not acquire them directly from Kempf.

         In addition to the land itself, TSB now owns the twenty-nine unit apartment building situated on lot 50 whose address is 902 North Dodge Street and the twelve-unit apartment building situated on lot 50 whose address is 906 North Dodge Street.

         In 2012, AB Investments, L.L.C. sold lots 8-10 to 911 North Governor, L.L.C. The sale included the office building that Kempf had built on lots 8 and 9 in the early 1970s. TSB has since acquired 911 North Governor, L.L.C.[5] Therefore, through series of transactions, TSB now owns or controls the lots that are the subject of the Kempf litigation and the remand order.

         In November 2012, the City amended its comprehensive zoning plan to designate properties in the area, including the properties at issue in this case, as single family and duplex residential properties. On March 19, 2013, the City rezoned the properties to comply with the comprehensive zoning plan by passing ordinance 13-4518. This ordinance provides in relevant part,

WHEREAS, the City of Iowa City has initiated a rezoning of property located at 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 residents; and

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 densities; and
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; . . . .

         Iowa City, Iowa, City Code § 13-4518 (2013). The ordinance went into effect on March 28.

         On January 10 of that same year, before ordinance 13-4518 had been published, TSB submitted a site plan to obtain the City's approval for development on 902 and 906 North Dodge Street. Julie Tallman, the City's regulation specialist, evaluated the site plan under the Kempf remand order and noted various deficiencies with it.

         On January 22, the City announced the rezoning and imposed a moratorium to prevent the approval of any site plan in light of the anticipated rezoning. Nevertheless, on January 31, TSB submitted a revised site plan that proposed developing lots 9, 10, 49, 51, and a portion of lot 50, and demolishing the existing parking area on lots 9, 10, 49, and a portion of lot 50.

         Kempf had not developed lots 10, 49, and 51, and they had no buildings on them at the time TSB submitted this site plan. Kempf had developed only a very small portion of lot 50, with substantially all of lot 50 remaining vacant at the time TSB submitted its site plan.

         On February 7, without evaluating the implications of the Kempf remand order on the site plan, Tallman denied the site plan on the ground that multifamily dwellings (apartment buildings) did not comply with the existing commercial office (CO-1) zone or the proposed high-density single-family residential (RS-12) rezone.

         On April 18, TSB submitted a new site plan, which proposed construction of apartment buildings on lots 10, 49, and 51 only. Tallman denied this plan on April 29, viewing it as materially identical to the January 31 site plan. The City also noted the March 28 effective date of ordinance 13-4518 did not alter the situation because the moratorium had been in effect at the time of the January 31 site plan, and the moratorium mandated compliance with the proposed rezoning.

         C. Action Against the City.

         In February 2013, after ordinance 13- 4518 had been proposed but before it had been adopted, TSB filed a petition for declaratory relief and temporary injunction against the City. In count I, TSB requested "a declaratory decree adjudging the [City] may not alter the zoning of the propert[ies], and that if the [City] does so, that the altered regulation is, to the extent it applies to the propert[ies], unconstitutional and void." In count II, TSB sought a temporary injunction that would restrain the City from rezoning the properties until a hearing.

         In April, following the approval of ordinance 13-4518, TSB also filed a petition for writ of certiorari against the City directly challenging the legality of ordinance 13-4518. Specifically, TSB alleged

[t]he change i[n] 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 ...

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