Kempf v. City of Iowa City

• Citation: 402 N.W.2d 393
• Decision Date: 18 March 1987
• Docket Number: No. 85-1876,85-1876
• Parties: Wayne KEMPF, Kenneth L. Albrecht, Governor-Dodge Street Rentals, and Earl Yoder Construction Co., Appellees, v. CITY OF IOWA CITY, Iowa, Appellant.
• Court: United States State Supreme Court of Iowa

Page 393

402 N.W.2d 393

Wayne KEMPF, Kenneth L. Albrecht, Governor-Dodge Street Rentals, and Earl Yoder Construction Co., Appellees, v. CITY OF IOWA CITY, Iowa, Appellant.

No. 85-1876.

Supreme Court of Iowa.

March 18, 1987.

Rehearing Denied April 9, 1987.

Richard J. Boyle, Asst. City Atty., Iowa City, for appellant.

Ronald W. Wendt, Cedar Rapids, for appellees.

Considered by REYNOLDSON, C.J., and HARRIS, WOLLE, LAVORATO, and NEUMAN, JJ.

REYNOLDSON, Chief Justice.

The unusual circumstances of this case require us to mark the obscure line that sometimes protects a landowner's right to hold and utilize property against a city's power to change zoning regulations. Except when it is necessary to distinguish them, we refer to plaintiffs Wayne Kempf, Kenneth L. Albrecht, Governor-Dodge Street Rentals, and Earl Yoder Construction Co. collectively as Kempf.

Kempf purchased a four-acre tract in Iowa City, zoned for office buildings and high density, multi-family residential housing. Relying on a city study concluding such uses should be expanded in the area, Kempf substantially improved the tract and constructed an office building and the first of five apartment structures. The city then rezoned the remaining area so that the planned improvement could not be completed. Kempf brought action challenging the rezoning. Trial court, sitting in equity, invalidated the ordinance as applied to the Kempf property, and restored the former zoning. The city has appealed that decision. We affirm in part, reverse in part, and remand to the district court.

This case was tried in equity and decided under equitable principles. Thus we treat the proceeding as equitable in nature and our review is de novo. See Iowa R.App.P. 4; see also Stone v. City of Wilton, 331 N.W.2d 398, 401 (Iowa 1983); Incorporated City of Denison v. Clabaugh, 306 N.W.2d 748, 751 (Iowa 1981). We give weight to trial court's fact-findings but we are not bound by them. Iowa R.App.P. 14(f)(7).

In our de novo review we find the following facts, which essentially are those found by the trial court. At the outset the property involved in this controversy comprised seven unimproved platted lots or parts of lots, zoned R3B, lying between North Dodge Street and North Governor Street in the near north side of Iowa City. In all, the property was approximately four acres in size. We find these lots probably were assigned a R3B intense zoning designation because their rugged and wooded terrain significantly increased the cost of development, making it economically unfeasible to develop them for less intense, relatively low income producing uses like single-family or duplex residential housing.

In about 1962 a comprehensive plan established for the near north side determined this was an area of deteriorating houses and the area should become more dense in population.

In January 1968 the city finalized and published "The North Side Study," the introduction to which proclaimed it included "statements which establish a 'policy framework' to guide development decisions, both public and private." The stated "basic purpose [of the report was] to formulate a body of policy to guide the development of the northern sector of the community," and it was specifically pointed out that "[m]any persons, particularly those directly involved in development, will appreciate knowing in advance where the City stands with regard to various development proposals."

With respect to the area of deteriorating housing and the vacant lots involved in this controversy, the study stated:

A "transition area" is proposed between North Governor Street and Dodge Street [to] be established by rezoning this area to R3 (except for the area that is now zoned R3B ). This could provide an orderly transition from the older established residential areas to the newer areas and would promote the desirability of this area for gradual redevelopment.

(Emphasis added.)

Further,

Medium to high density housing is proposed for the older established area between North Governor and North Dodge Street[s]....

The use of planned area developments by developers will be encouraged. This is possible because of the present single ownership of large tracts of land in the study area.

Finally, the report proposed the medium-high density land use in the area be increased from 38 acres to 226 acres. An accompanying map disclosed the proposed land use of the subject property would be for medium to high density housing.

This North Side Study was made available for potential developers. Kempf did consult and rely on the study, as well as the R3B zoning, when he paid $65,000 for the property in May 1972 for high density residential development purposes.

In the year of purchase Kempf commenced extensive site development. He removed all trees and brush after determining there were no good trees on the premises. Storm sewerage, which had crossed the property in an open ditch, was replaced with a city-inspected storm sewer, including an eighteen-foot-deep catch basin to direct water into the system. Kempf also filled and graded the area, which had a twenty-foot fall and a deep ravine varying from ten to eighteen feet in depth. Water, sanitary sewer, and electricity were brought to the project. In all, Kempf invested a total of approximately $114,500 in land purchase price and preliminary site improvements.

The contemplated apartment construction was temporarily delayed when Kempf successfully bid on a lease to Johnson County of a social services building to be constructed on three of the small lots. This was a permitted R3B zone use. The city granted a building permit. The improvement was commenced in the fall of 1973 and completed in the spring of 1974. In 1985 the social services building had an assessed valuation of $308,738. At the time of this construction water, electricity, sewer, and a storm sewer were extended to proposed locations for various apartment buildings to be constructed under the overall plan.

In 1974 Iowa City issued the "R3A Area Study." This study included the center of the city, but also extended to and encompassed Kempf's property. Although the publication expressed a concern that there were "insufficient controls over multiple housing in residential districts," Kempf's lots were designated as zoned R3B on maps showing both present and proposed zoning, and were not designated on another map purporting to show "special problem areas."

December 1976, as a second development phase of the property, Kempf contracted with Earl Yoder Construction Co. (Yoder) to build a twenty-nine unit apartment building on part of one of the larger lots. Yoder applied for and obtained a building permit on December 13, 1976, and the work commenced.

Several property owners in the neighborhood, including an ex-mayor of the city, commenced vigorous protests. Because the city attorney owned property "in close proximity" to the Kempf lots, he designated assistant city attorney Angela Ryan to cope with the legal aspects of the controversy. ¹ Several of the city staff persons, including Ryan, took the position Kempf had failed to comply with the Large-Scale Residential Development ordinance (LSRD) because the total tract was more than two acres. ² The two staff persons most directly involved in granting city building permits, Bowers and Siders, disagreed.

January 19, 1977, Ryan drafted and forwarded a letter to Kempf asserting the applicability of LSRD to the project and requesting that construction be stopped voluntarily until the city decided on its course of action.

January 20, 1977, Kempf's then attorney by letter replied that construction would be halted on the condition such action would have no bearing on any future damage claim. At that point Yoder had $41,110.40 of his own money in foundation, footings, materials, and other expenses. In an obvious move to moot the legal controversy, Kempf, in an arm's-length transaction on February 4, 1977, sold the portion of the lot upon which the building was being constructed to Yoder, with the agreement the latter would take the risk it might not be completed.

February 9, 1977, the city officially revoked Kempf's building permit. Two days later, Yoder notified the city of its intention to resume construction.

February 14, 1977, this action was commenced, seeking declaratory and injunctive relief as well as damages. February 15, 1977, Yoder applied for a building permit; its request was denied the next day.

March 3, 1977, the district court, Judge August F. Honsell, Jr., presiding, found there was an actual investment of more than $79,000 in labor and materials installed and on hand for the building, and additional contract commitments in excess of $126,000. The court ordered that a writ of temporary injunction be issued, restraining the city from preventing further construction on the twenty-nine unit apartment building.

March 17, 1977, the matter of a permanent injunction came on for hearing, Judge Honsell again presiding.

The court found that the property had been improved in the first year after purchase as above indicated, and that on April 18, 1974, the city had issued a certificate of occupancy on the social services building constructed on a portion of the tract. Trial court further found that in the latter part of 1976 Kempf contacted Bowers of the city's building department and showed him a survey of the entire tract "indicating that it was the partnership's desire to erect a 29-unit apartment building on a subdivided portion thereof which would be less than two acres in size." Later in the day Bowers "orally communicated to ... Kempf that the [apartment] building could be erected on a subdivided portion of the land."

The court found the contract was entered into with Yoder, which company incurred the interim expenses above mentioned. This subsequent sale to Yoder "was an arm's-length transaction made upon the advice of independent counsel representing the...