City of Okoboji v. Okoboji Barz, Inc.

• Citation: 746 N.W.2d 56
• Decision Date: 14 March 2008
• Docket Number: No. 06-0269.,06-0269.
• Parties: CITY OF OKOBOJI, Iowa, Appellee, v. OKOBOJI BARZ, INC. d/b/a O'Farrell Sisters and Leo Parks, Jr., Appellants.
• Court: United States State Supreme Court of Iowa

746 N.W.2d 56

CITY OF OKOBOJI, Iowa, Appellee, v. OKOBOJI BARZ, INC. d/b/a O'Farrell Sisters and Leo Parks, Jr., Appellants.

No. 06-0269.

Supreme Court of Iowa.

March 14, 2008.

Phil C. Redenbaugh of Phil Redenbaugh, P.C., Storm Lake, for appellants.

Michael J. Chozen of Chozen & Saunders, Spirit Lake, for appellee.

CADY, Justice.

In this appeal, we must decide whether a city ordinance prohibits the sale and service of alcoholic beverages in conjunction with the operation of a restaurant as a nonconforming use. We conclude the sale and service of alcoholic beverages would not alone violate the ordinance. We vacate the decision of the court of appeals, reverse the judgment of the district court, and remand.

I. Background Facts and Proceedings.

Edna Mae, Arlene, and Fern O'Farrell opened a small, family-oriented restaurant in the City of Okoboji in 1958 called "O'Farrell Sisters." The three sisters successfully operated O'Farrell Sisters for decades, and other family members later continued the restaurant operation. The restaurant maintained its quaint appearance over the years and was particularly recognized for its pancake breakfast. O'Farrell Sisters remains a popular dining landmark in the great lakes area today under the same name.

The restaurant is located on Lakeshore Drive in a small building situated on a triangular-shaped lot. It overlooks Smith's Bay on West Lake Okoboji. The restaurant building occupies a large portion of the lot. The dining area of the restaurant is 740 square feet and accommodates table seating for approximately fifty patrons. The restaurant also has an eight-foot counter with five stools. A fish-shaped "O'Farrell Sisters" sign is located on the roof of the building. The word "beer" is inscribed on the sign. When the restaurant first opened, alcoholic beverages were sold to patrons. As in the past, the restaurant serves breakfast, lunch, and dinner and remains open until 10 or 11 p.m.

In 1972, the City of Okoboji adopted a comprehensive zoning ordinance. The O'Farrell Sisters property was rezoned for commercial use at the time, although much of the property in the area, especially to the south and west of the restaurant, was used for residential housing. In 1978, the area was rezoned into a single-family residential district. This classification limited use of property in the district to single-family homes and duplexes. The O'Farrell Sisters Restaurant continued to operate on the property as a preexisting, nonconforming use.

The rezoning in 1978 was prompted by the death of Edna Mae O'Farrell, the last of the three sisters involved in the operation of the restaurant. The city was concerned at the time that the restaurant would be sold and converted into a bar. It changed the zoning classification to preserve the integrity of the area and to reflect its predominant use.

In 1994, the restaurant operators allowed the liquor license for the restaurant to expire. Alcoholic beverages have not been sold and served on the premises since that time.

In 2004, Leo Parks purchased the restaurant. Parks owns and operates a corporation called Okoboji Barz, Inc. He continued to operate the restaurant in the same manner as in the past, but promptly applied to the city for a class "C" liquor license. Parks wanted to resume the sale and service of alcoholic beverages to patrons, but claimed he had no intention of transforming the restaurant into a bar or tavern. The city denied the application. It determined the sale and service of alcoholic beverages at the restaurant would violate the zoning ordinance. Parks appealed the ruling to the Iowa Department of Commerce, Alcoholic Beverages Division.

At the same time, the city feared Parks would ultimately transform the restaurant into a bar or tavern if he was successful in his appeal. Consequently, it filed a petition in district court for a temporary and permanent injunction to prohibit Parks from "operating a bar or tavern" on the premises. The city and Parks later additionally sought declaratory relief. The city asked the district court to declare Parks could not operate a bar on the restaurant premises. Parks asked the district court to declare that the sale and service of alcoholic beverages at the restaurant under a class "C" liquor license would not violate the city ordinance. The administrative law judge who heard the appeal from the city's decision to deny the liquor license determined Parks would be entitled to a liquor license if he succeeded in his declaratory relief action in district court.

At the hearing before the district court, Parks introduced evidence that other restaurants in the area that serve dinner commonly serve alcoholic beverages pursuant to a license. The city did not contest this evidence and did not introduce evidence that the sale and service of alcoholic beverages by the restaurant would adversely impact the surrounding neighborhood. Instead, the city claimed the sale of alcoholic beverages was not permitted as a matter of law under the ordinance.

The district court denied the injunction. It found Parks had no intent to sell alcoholic beverages without a class "C" liquor license. Consequently, the district court determined no irreparable harm would result if the injunction was not issued. However, the district court declared Parks was "no longer authorized to operate a bar selling alcoholic beverages to the public", on the premises because the sale of alcoholic beverages would constitute a separate and distinct nonconforming use and an expansion of an existing nonconforming use. The district court also rejected the claim by Parks that the zoning ordinance constituted impermissible spot zoning.

Parks appeals and raises three claims. First, he claims the district court erred by concluding the sale of alcoholic beverages pursuant to a class "C" permit would constitute a distinct nonconforming use of the property. Second, Parks claims the trial court erred in concluding the sale and service of alcoholic beverages would be an unlawful expansion of a nonconforming use. Finally, Parks claims the trial court erred in concluding the 1978 rezoning scheme did not constitute impermissible spot zoning.

We transferred the case to the court of appeals. It remanded the case to the district court to enter an order for the city to issue a liquor license for the restaurant. It held the sale of alcoholic beverages at the restaurant would not constitute a nonconforming use or an expansion of the existing nonconforming use. The city sought, and we granted, further review.

II. Standard of Review.

This case was tried in equity. As such, our review is de novo. Passehl Estate v. Passehl, 712 N.W.2d 408, 414 (Iowa 2006); Iowa R.App. P. 6.4 (2003). "Under this review, we give weight to the fact findings of the district court, especially as to the credibility of witnesses, but we are not bound by them." City of Okoboji v. Okoboji Barz, Inc., 717 N.W.2d 310, 313 (Iowa 2006).

III. Issues Presented.

The district court declared Parks was not "authorized to operate a bar selling alcoholic beverages to the public" on the premises. In doing so, the district court denied Parks' request for a declaration that the issuance of a liquor license for the restaurant was not prohibited under the zoning ordinance. On appeal, Parks challenges the prohibition against the issuance of a liquor license. Parks acknowledges he does not desire to change the restaurant into a tavern or nightclub, but only wants to sell and serve alcoholic beverages to the restaurant patrons. Thus, the fundamental issue we face is whether this restaurant will retain its status as a legal, nonconforming use if alcoholic beverages are sold and served to patrons,¹

IV. Nonconforming Use.

A nonconforming use of property is one that lawfully existed prior to the time a zoning ordinance was enacted or changed, and continues after the enactment of the ordinance even though the use fails to comply with the restrictions of the ordinance. Perkins v. Madison County, 613 N.W.2d 264, 270 (Iowa 2000). The prior use Of the property essentially establishes a vested right to continue the use after the ordinance takes effect. See Quality Refrigerated Servs. v. City of Spencer, 586 N.W.2d 202, 206 (Iowa 1998). The nonconforming use is permitted to continue until legally abandoned. Iowa Coal Mining Co. v. Monroe County, 555 N.W.2d 418, 430 (Iowa 1996). However, the nonconforming use cannot be enlarged or extended. Stan Moore Motors, Inc. v. Polk County Bd. of Adjustment, 209 N.W.2d 50, 52 (Iowa 1973). This limiting principle is carved into the city ordinance at issue in this case. The ordinance expresses an intent "to permit ... nonconformities to continue until they are removed, but not to encourage their survival," and provides "that nonconformities shall not be enlarged upon, expanded or extended, nor be used as grounds for adding other structures or uses prohibited elsewhere in the same district." Okoboji Zoning Ordinance art. IV, § 3. Nevertheless, the body of law governing nonconforming uses of property recognizes "[l]andowners are given some latitude ... and may change the original nonconforming use `if the changes are not substantial and do not impact adversely on the neighborhood.'" Perkins, 613 N.W.2d at 270 (citing City of Jewell Junction, v. Cunningham, 439 N.W.2d 183, 186 (Iowa 1989)).

In this case, the city does not rely on any particular facts and circumstances associated with the sale and service of alcoholic beverages by the restaurant to support its claim that Parks would substantially expand the nonconforming use of his property as a restaurant by serving alcoholic beverages to patrons. Instead, it asserts the underlying sale of alcoholic beverages, under the ordinance, is a separate and distinct use of the property from the current use of the property as a restaurant. As a result, the city maintains, as the district court found, that expanding the nonconforming...