By Eric Christianson

TSB Holdings, LLC v. City of Iowa City
(Iowa Supreme Court, June 1, 2018)

In the 1980s Wayne Kempf and his partners purchased six parcels on the north side of Iowa City. Their plan was to build an office building and five apartment buildings on the four-acre tract. After the completion of the office building, they began construction of an apartment building. Following neighborhood protests, the city revoked the building permit and then downzoned the area to single family residential. This lead to a number court fights culminating with a 1987 order by the Iowa Supreme Court, which read in part:

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.

Kempf completed one apartment building but did not develop the other properties. Over time Kempf and his partners sold the properties to various other parties. Eventually TSB Holdings purchased all of the properties subject to that order. In January of 2013 TSB Holdings submitted a site plan to the City of Iowa City showing the development of new apartment buildings based on the 1987 court order. The City denied this plan, stating that it did not comply with current zoning.

On April 18, TSB submitted a new site plan, which proposed construction of apartment buildings on only the three lots which had not been developed subsequent to the 1987 Kempf order. The city also denied this plan, viewing it as materially identical to the January 31 site plan. The Iowa City Board of Adjustment also failed to issue a variance to KSB.

TSB claimed that this was a violation of the 1987 court order and appealed the city’s decisions. A district court found in the City’s favor, concluding in part that TSB was not a successor to Kempf and that the order was no longer applicable. TSP appealed to the Iowa Supreme Court.

Among other issues the court examined three questions that were determinative of the case.

1. Is TSB Holdings a successor of Kempf?
2. Is the original 1987 court order unenforceable because of the stature of limitations?
3. Has a use already been established on the properties?

Is TSB Holdings a successor of Kempf?

The district court had found that TSB was not a successor because TSB did not buy the lots directly from Kempf and the lots were sold piecemeal and not as a single package.  The Supreme Court found that in this case those points were irrelevant. The decision ran with the parcels regardless of ownership changes in the meantime.

Statue of limitations/repose

Among the most significant elements of this ruling is the question of whether court orders such as the one issued in Kempf are subject to a time limit. In a recent decision, Dakota, Minnesota & Eastern Railroad v. Iowa District Court, the Iowa Supreme Court interpreted Iowa Code 614.1(6) to say that that court orders are subject to a 20 year statute of repose. Therefore, an action to enforce a judgment more than 20 years after it was entered was untimely.

In this case, TSB argued that 614.1(6) was a statute of limitations rather than a statute of repose. A statute of limitations limits how long after an event causing some harm, the “cause of action,” one can bring a suit. A statute of repose on the other hand would prevent the bringing of a suit if that harm, occurs after a defined time period. The difference is somewhat technical, but here is determinative of the outcome. Does Iowa law say (1) that the court order itself expires after a 20-year period, or (2) does a plaintiff have 20 years to file suit after that court order is violated? Did the clock start ticking in 1987 when this order was issued or in 2013 when Iowa City rejected TSB’s site plan?

The Iowa Supreme Court overruled its own interpretation from Dakota and held that the limitations period in  614.1(6) runs from the date when the “cause of action” occurs. Court orders do not themselves “expire” after 20 years. In this case the “cause of action” occurred in 2013, when the City enforced its current zoning ordinance despite the 1987 court order. Therefore, the case is timely.

Has a use been established?

Another question relevant to this decision concerns which of the lots had been developed and are now subject to the current ordinance. The evidence showed that Lots 10, 49, and 51, had no buildings on them at the time TSB submitted this site plan. Iowa City argued that because of electrical easements and other work that had occurred on at least some of those parcels, they have already been “developed” and the order is moot. They further argued that developing Lots 10, 49, and 51 would require work to be done on the other lots which were clearly already developed and are now subject to current law.

The court was unconvinced that anything less than the construction of a building would be considered development on the affected lots. Further the court ruled that any development that would have to take place on the lots which already have buildings on them would be unaffected by the order. That potential development is therefore outside the scope of this ruling.

 

The Supreme Court overruled the district court’ rulings and held:

1. KSB is a successor to Kempf and benefits from the order.
2. The statute of limitations does not prevent the enforcement of the 1987 Kempf decision.
3. A use had not been established on all of the parcels subject to the decree.

While this decision does clarify some matters of law, the future of this development is not yet settled.