Hole in the Wall Nwa, LLC v. City of Bella Vista

• Decision Date: 02 September 2020
• Docket Number: No. CV-19-882,CV-19-882
• Citation: 609 S.W.3d 8,2020 Ark. App. 373
• Parties: HOLE IN THE WALL NWA, LLC, Appellant v. CITY OF BELLA VISTA, Appellee
• Court: Arkansas Court of Appeals

2020 Ark. App. 373

609 S.W.3d 8

HOLE IN THE WALL NWA, LLC, Appellant

v.CITY OF BELLA VISTA, Appellee

No. CV-19-882

Court of Appeals of Arkansas, DIVISION I.

Opinion Delivered: September 2, 2020

Rehearing Denied October 7, 2020

Wright, Lindsey & Jennings, LLP, by: Ryan Agnew, for appellant.

RMP, LLP, by: Larry McCredy and Tim Hutchinson, Rogers, for appellee.

KENNETH S. HIXSON, Judge

Appellant Hole in the Wall NWA, LLC (HITW), appeals from an order granting appellee's motion to dismiss filed pursuant to Arkansas Rule of Civil Procedure 12(b)(6) (2019). On appeal, HITW contends that the circuit court erred in dismissing its amended complaint because (1) the mayor of the City of Bella Vista was vested with the authority to contract regarding zoning matters, and (2) the thirty-day statute-of-limitations period found in Arkansas Code Annotated section 14-40-503(b) (Repl. 2013) did not bar HITW's challenge to the annexation ordinance. We affirm.

I. Relevant Facts

HITW filed its complaint and amended complaint in April 2019 for injunctive relief, declaratory judgment, and breach of contract against appellee City of Bella Vista (the City). In its amended complaint, HITW alleged the following relevant factual background to this appeal. There existed a parcel of real property commonly referred to as the "Chelsea Road Property" within or near the city limits of the City of Bella Vista (hereinafter referred to as "the Property"). On August 24, 2015, the City unanimously passed Ordinance No. 2015-19 entitled "Annexing Lands Completely Surrounded by Municipal Limits of Bella Vista and the City of Gravette, and for Other Purposes" (the Ordinance), which annexed the Property into the City. The Property was annexed under the R-1 zoning district, which meant that the property was zoned for residential use. It is undisputed that the Ordinance did not contain a specified effective date, nor did the attestation by the municipal clerk contain a date. HITW alleged that the Ordinance was subsequently filed by the City with the Benton County clerk and recorder on October 15, 2018.¹

HITW signed a real-estate contract to purchase the Property on May 24, 2018. The intended use by HITW for the Property was a campground, an RV park, and on-site events. Prior to the purchase, members of HITW communicated with the City regarding HITW's intended commercial use of the Property to determine whether its intended usage would be allowed on the Property. On May 8, 2018, HITW received an email from the City's economic development manager, Travis Stephens, indicating that the property was "definitely not part of the city at this time but it is within the planning jurisdiction." HITW alleged that due to this email assurance from the City's economic development manager, HITW proceeded with the purchase.

After HITW purchased the Property, Mr. Stephens emailed HITW on September 25, 2018, and advised HITW that he "just found out" that the Property was actually annexed into the City through the 2015 Ordinance and suggested that they "meet to discuss your Hole in the Wall property sooner rather than later." On November 29, 2018, Ariane Grazian, on behalf of HITW, and Ryan Agnew, HITW's attorney, met with Mayor Christie and Jason Kelly, the City's staff attorney. HITW alleged Ms. Grazian and Mr. Agnew stated at the meeting that it was "HITW's intention to bring legal action to nullify the annexation due to [the City's] clerical negligence and improper filing." HITW further alleged that as a result of the meeting, Mayor Christie agreed to honor HITW's "pre-existing non-conforming use" within the scope of existing operations in order to avoid court action. The City memorialized this agreement in a letter from City Attorney Kelly to HITW on December 7, 2018. The letter stated the following in relevant part:

It was a pleasure to meet with you, your colleague, and the Mayor concerning Hole-in-the-Wall NWA's property off Chelsea Road in Bella Vista (the "property"). Please allow this letter to memorialize the discussion which took place last week with regard to zoning and annexation issues at the site.

The property was annexed as surrounded land by the City Council of Bella Vista in 2015. The ordinance effecting the annexation also zoned the property as R-1 pursuant to our city zoning ordinance. It was discovered late this year that notice of this annexation by Bella Vista was never filed by city officials with Benton County, thus meaning that no title search would reflect the fact that the property was within the city limits of Bella Vista, nor indicate any information with regarding to zoning.

Subsequent to the annexation in 2015, but prior to the City's recording of the ordinance with Benton County in 2018, Hole-in-the-Wall NWA began use of the property as an overnight campground, small entertainment venue. Such use is not permitted as of right in the current R-1 zoning. However, due to the use beginning prior to public notice of the annexation being recorded with Benton County, and in order to resolve any potential legal dispute with regard to the City's annexation and zoning action, the City has agreed that your use of the property at its current intensity would be permitted as a pre-existing, non-conforming use pursuant to our zoning ordinance.

It was further understood during our meeting that any expansion or further construction on the property by Hole-in-the-Wall NWA would require the site to be brought into an appropriate zone for the proposed activity. In short, existing use at the site can continue without violation of the City's zoning ordinance.

The City wishes you success in your effort, and we hope the City's planned second-phase expansion of our trail system will fit nicely into your future plans. Should you need to discuss this matter further, please do not hesitate to contact me.

Three months after the City's letter of December 7, 2018, the City changed its position and reversed course. The City hired attorney Tim Hutchinson. Attorney Hutchinson wrote a letter to HITW dated March 22, 2019, wherein he stated that the City was rescinding its agreement due to HITW's misrepresentations. The letter additionally stated that the City intended to enforce the Bella Vista Code as it pertained to the property, including the zoning restrictions. HITW filed the present litigation and specifically requested from the circuit court the following relief in its amended complaint:

[HITW] requests that the Court immediately schedule a hearing and at said hearing, (1) temporarily enjoin Bella Vista from zoning code enforcement against HITW; (2) enter declaratory judgment that the Agreement between the parties is valid and enforceable; (3) adjudicate the breach of contract claim and prayer for damages or set the matter for bench trial; (4) award costs, fees, and other relief as the Court may deem appropriate; (5) In the alternative, enter declaratory judgment that Bella Vista Ordinance 2015-19 is void ab initio.

Thereafter, the City filed a motion to dismiss the amended complaint and a brief in support pursuant to Arkansas Rule of Civil Procedure 12(b)(6). In summary, the City argued that the alleged contract—the December 7, 2018, letter from City Attorney Kelly—was neither valid on its face nor enforceable as it was not approved by the Bella Vista Planning Commission or the Bella Vista Board of Zoning Adjustment. The City explained that the alleged contract was signed only by Mr. Kelly and that even the amended complaint alleged that the contract memorialized an agreement that took place between Mayor Christie, Mr. Kelly, Ms. Grazian, and Mr. Agnew. The City argued that because Mayor Christie and Mr. Kelly lacked the legal authority to grant conditional-use permits or variances, any agreement, to the extent there was one, was invalid and unenforceable. Additionally, the City argued that HITW's alternative count to declare the Ordinance void ab initio must be dismissed because HITW lost its ability to challenge the Ordinance when it failed to file an action within the time frame provided by Arkansas Code Annotated section 14-40-503(b). Therefore, it argued that HITW's amended complaint should be dismissed pursuant to Rule 12(b)(6) because even if the alleged facts were true, there was no basis for recovery against the City.

HITW filed a brief in opposition to the City's motion to dismiss. HITW stated that it did not contest the Board of Zoning Adjustment's authority to grant variances or the Planning Commission's authority to grant conditional uses as provided under the Code of Ordinances, City of Bella Vista, Arkansas (the City Code). It cites section 109-33 of the City Code and explains that the Mayor is vested with certain "enforcement" authority. It argued that it had a "preexisting non-conforming use recognized" under the City Code and that "Article V is silent on a prerequisite procedure to recognize a non-conforming use." Therefore, HITW argued that it was "fitting" that Mayor Christie and Mr. Kelly made the determination and requested that the circuit court hold that in the absence of a designated official vested with the power to determine established preexisting use, Mayor Christie's and Mr. Kelly's decision should not be held ultra vires. Regarding the City's contention that its alternative count to declare the Ordinance void ab initio must be dismissed, HITW disagreed. HITW argued that any challenge to the Ordinance was not limited by Arkansas Code Annotated section 14-40-503(b) because the City waited three years to record the ordinance with the Benton County clerk. Moreover, it argued that even if section 14-40-503(b) was applicable, any statute of limitations should be tolled until after it received notice that the City was breaching its agreement.

The City filed a reply to HITW's response to the motion to dismiss. In the City's reply, it argued that HITW's response failed to directly address the arguments made in the motion to dismiss and instead argued new...