City of Iowa City v. Hagen Electronics, Inc., 94-1427

• Decision Date: 20 March 1996
• Docket Number: No. 94-1427,94-1427
• Parties: CITY OF IOWA CITY, Iowa, and Iowa City Airport Commission, Appellants, v. HAGEN ELECTRONICS, INC., Appellee. HAGEN ELECTRONICS, INC., Clarence Hagen, and Kenneth Hagen, Appellees, v. The CITY OF IOWA CITY, Iowa, and Johnson County, Iowa, Appellants.
• Court: Iowa Supreme Court

Page 530

545 N.W.2d 530

CITY OF IOWA CITY, Iowa, and Iowa City Airport Commission, Appellants, v. HAGEN ELECTRONICS, INC., Appellee.

HAGEN ELECTRONICS, INC., Clarence Hagen, and Kenneth Hagen, Appellees, v. The CITY OF IOWA CITY, Iowa, and Johnson County, Iowa, Appellants.

No. 94-1427.

Supreme Court of Iowa.

March 20, 1996.

Rehearing Denied April 17, 1996.

David E. Brown of Hayek, Hayek, Brown & Engh, L.L.P., Iowa City, for appellants City of Iowa City, Iowa, and Iowa City Airport Commission.

J. Patrick White, County Attorney, for appellant Johnson County.

William L. Meardon of Meardon, Sueppel, Downer & Hayes, Iowa City, for appellees.

Considered by MCGIVERIN, C.J., and HARRIS, LAVORATO, NEUMAN, and ANDREASEN, JJ.

NEUMAN, Justice.

This is an appeal from a judgment entered for the landowner in an inverse condemnation action. Although the appeal raises multiple questions, our decision turns, ultimately, on the landowner's failure to exhaust administrative remedies. We, therefore, reverse.

I. Factual Background.

In 1972, plaintiffs Hagen Electronics, Clarence Hagen, and Kenneth Hagen (hereinafter "Hagen") purchased a tract of unimproved land southwest of Iowa City in Johnson County, Iowa. The tract of approximately 1.47 acres adjoined Highway 1 and the Iowa City Municipal Airport. At the time Hagen purchased the property no airport zoning ordinance existed, but the property was (and still is) subject to federal regulations governing airports. The property remained undeveloped until 1985.

After years of study and planning, the city adopted a new airport master plan in 1982. The plan substituted runway 6-24 for 17-35 as the airport's primary runway. The plan also called for a 1000' extension of runway 6-24, thereby altering the approach slope to 34:1. ¹ Hagen's property lies within the approach of runway 6-24.

The airport improvement project culminated in the adoption of a joint city-county airport ordinance in November 1984. The ordinance imposed use and height limitations on surrounding properties. Penetration of the new approach slope was prohibited. Under a 1990 amendment to the ordinance (adopted to reflect the fact that runway 6-24 was only extended by 355', not the proposed 1000') the maximum clearance above the Hagen property was approximately twelve feet.

The airport ordinance also established procedures for surrounding property owners to apply for building approval. Essentially, the ordinance required developers to notify the Federal Aviation Administration (FAA) by filing a federal form 7460-1 (notice of proposed construction). Under the ordinance, however, developers were not required to notify the FAA if the proposed structure would be "shielded by existing structures of a permanent or substantial character or by natural terrain or topographic features of equal or greater height...." Determinations on the question of "shielding" were left to local building officials. Developers proposing unshielded projects were required to obtain special exceptions or variances. The ordinance created an airport board of adjustment to hear such applications. To a large extent, the ordinance incorporated restrictions already contained in FAA regulations applicable to property surrounding the airport.

In 1985, Hagen contacted the Johnson County zoning administrator about developing his property. Advised that he would need airport approval, Hagen then discussed his development plans with airport manager Manfred Zahr. Zahr evidently told Hagen that the utility lines and power poles between Hagen's property and the runway did not constitute shielding. Hagen nevertheless applied for a building permit to operate a mobile home and satellite dish sales business. Zahr then advised the zoning administrator that (1) Hagen's proposed development penetrated the approach slope to runway 6-24 and (2) the FAA would not consider the utility lines and poles shielding.

Later, after Hagen advised Zahr that the proposed structure would only be seventeen feet high or less, Zahr again wrote to the zoning administrator, this time concluding that (1) the proposed development did not penetrate the approach slope but (2) Hagen still needed to file a 7460-1 notice with the FAA. Based on this advice, the county issued Hagen a building permit. Hagen also submitted a 7460-1 notice to the FAA. He immediately began to sell mobile homes and satellite dishes from his property.

About a month later Zahr reconsidered his calculations and realized a mistake had been made. The correct calculation reduced the clearance of the Hagen property from seventeen feet to only eight and one-half feet. Zahr then sent the zoning administrator a third memo, advising him to revoke Hagen's permit. Zahr anticipated that the FAA would object to Hagen's development because it penetrated the approach slope. As predicted, Hagen received such a letter from the FAA in mid-July 1985. Hagen, however, never contacted the FAA to question or appeal its objection to his proposal.

Thereafter the zoning administrator revoked Hagen's building permit. The notice informed Hagen that the permit had been originally issued on the basis of incorrect information. Hagen was directed to remove the mobile homes and satellite dishes from his property by November 15, 1985. The notice also informed Hagen of his right to appeal the decision to the airport board of adjustment. Hagen neither appealed the decision nor sought a variance. Instead he continued to use his property to sell mobile homes and satellite dishes.

II. Procedural Background.

On February 26, 1986, the city petitioned the court to enjoin Hagen from using his property in violation of the airport ordinance. Hagen answered and counterclaimed, alleging that the airport zoning ordinance amounted to a taking of his property without just compensation as well as a violation of his civil rights entitling him to relief under 42 U.S.C. § 1983. The city replied, denying Hagen's allegations and arguing that Hagen had failed to exhaust his administrative remedies. Hagen thereafter amended his answer to include an inverse condemnation claim. In an amended reply, the city reasserted its argument that Hagen's claim was not ripe for review because he had failed to exhaust his administrative remedies. The case was continued pending this court's decision in Fitzgarrald v. City of Iowa City, 492 N.W.2d 659 (Iowa 1992), cert. denied, 508 U.S. 911, 113 S.Ct. 2343, 124 L.Ed.2d 253 (1993). ²

Two years later, Hagen sued both the city and county alleging the airport ordinance constituted both a "taking" of his property without just compensation and a violation of his civil rights. He sought a declaratory judgment, attorney fees under 42 U.S.C. § 1988, and an injunction prohibiting enforcement of the ordinance against him. Hagen also claimed that the height restrictions imposed by the ordinance constituted a regulatory taking for which he was entitled to just compensation. He asked for a writ of mandamus directing the city and county to institute eminent domain proceedings for the condemnation of his property.

The city responded to Hagen's new lawsuit by dismissing its former injunction action without prejudice. The record reveals that the dismissal was based, at least in part, on the airport manager's revised opinion that the utility poles and lines surrounding Hagen's property did provide sufficient "shielding" to permit a structure like Hagen's to exist under the zoning ordinance. This belief stemmed from a field survey and further discussion with FAA officials. The city so advised Hagen and further informed him of his right to reapply for a building permit. Hagen never did so. The city meanwhile answered Hagen's new lawsuit, denying any "taking" or violation of Hagen's civil rights. Once again the city asserted its claim that Hagen had failed to exhaust his administrative remedies.

For its part, the county acted on Hagen's failure to pursue administrative relief by moving to dismiss the suit. The motion was denied and no appeal was taken from the ruling. The two cases were then consolidated for trial. ³ Pursuant to Hagen's motion, the parties agreed to bifurcate the issues for trial, litigating the takings and civil rights claims under the zoning ordinances and reserving the question of damages for a later date. Thus the record before us reflects the court's consideration of the following issues: (1) whether Hagen's claims were ripe for review, (2) whether the 1984 and 1990 airport ordinances constituted a "taking" of Hagen's property, and (3) whether the city's actions violated Hagen's civil rights under 42 U.S.C. § 1983.

On the exhaustion issue, the court ruled that the county's failure to appeal the denial of its motion to dismiss rendered the court's decision the "law of the case." Alternatively the court held that Hagen was not required to exhaust his administrative remedies because to do so would have been futile.

On the "takings" claim, the court concluded that the airport ordinances deprived Hagen of all economically beneficial use of his land. Finally, the court held that the city's actions regarding the shielding question were arbitrary and capricious, thereby depriving Hagen of substantive due process. This appeal by the city and county followed.

III. Standard of Review.

An action to compel condemnation by way of mandamus is triable in equity. Fitzgarrald, 492 N.W.2d at 663. Our review on appeal is de novo. Id. Constitutional issues tried at law are also reviewed de novo. Iowa Coal Mining Co. v. Monroe County, 494 N.W.2d 664, 668 (Iowa), cert. denied, 508 U.S. 940, 113 S.Ct. 2415, 124 L.Ed.2d 638 (1993).

IV. Analysis.

A. Law of the Case. Because the county did not appeal the earlier trial court decision overruling the county's motion to dismiss on exhaustion grounds, the district court believed the ruling became the "law of the case," binding on both defendants. Hagen now concedes error in the court's analysis. A...