posted by Gary Taylor

GEISLER V. CITY OF CEDAR FALLS (link to case here)
769 NW2d 162 (Iowa Supreme Court, July 10, 2009)

In this case, the Iowa Supreme Court validates use of moratoria as planning tool and expounds on Iowa’s vested rights doctrine, but remands to district court the landowner’s claim of bad faith actions by the city.

In 2004, Michael Geisler purchased land located in an Overlay District of Cedar Falls, Iowa to develop an eight-unit apartment complex. In May 2005, he submitted a site plan to the Cedar Falls planning and zoning commission. Apparently at the time an amendment to the Overlay District that would have prohibited the project was “under discussion.” At the commission’s May 18, 2005, meeting, the Cedar Falls city planner stated that the site plan met all the basic ordinance requirements; however, because there was substantial resident opposition to the proposed development voiced at the meeting, the commission voted to recommend denial of Geisler’s site plan.

At the Cedar Falls city council meeting held May 23, 2005, the council considered Geisler’s site plan. Several citizens residing in the Overlay District expressed concerns about the plan, including the increase in traffic it would generate and the detrimental effect to single-family homes in the area. The council denied the site plan because it was “inconsistent with the character of the neighborhood due to architectural design … [and was] not of comparable scale and character in relation to adjoining properties.” At the same meeting, a motion also passed to discuss a temporary moratorium to study the issue of multi-family unit construction in the Overlay District. At the next city council meeting on June 13, 2005 the council passed a resolution imposing a moratorium on all development or construction of multi-family housing in the Overlay District. On that same day Geisler submitted a revised site plan that could not be processed in time to be discussed at the meeting. On June 22, 2005 Geisler filed a petition for writ of certiorari in the district court alleging the city acted illegally by denying his site plan and subsequently passing the moratorium. On July 11, 2005 a city official refused to process the revised site plan in light of the moratorium, effectively denying the project. On December 12, 2005 the city council passed an amendment to the Overlay District that prohibited multi-family housing. Geisler did not resubmit the site plan after the enactment of the ordinance.

Moratoria. The city first asserted that the district court did not have jurisdiction to hear the case because a writ of certiorari can only be used to challenge judicial and quasi-judicial actions, and the council’s adoption of the moratorium was a legislative function. The Iowa Supreme Court agreed, stating that in enacting the moratorium, “the city was performing a traditional legislative function.” In doing so, the court gave implicit approval to the use of moratoria by Iowa cities, an issue not previously addressed by the court. It observed that “a moratorium aids a governing body in performing the legislative task of municipal planning….They aid in bridging the gap between planning and its implementation into legal measures. They may be used to preserve the status quo while study of the area and its needs is completed [thus serving] a significant public purpose.”

Vested rights. The discussions of vested rights and bad faith came about in the court’s attempt to address a matter of procedure known as the “pending ordinance rule.” Under this rule, a court is supposed to decide a case “based on the zoning law as it exists at the time of the court’s decision.” The pending ordinance rule thus requires the court to apply the zoning ordinance as amended on December 12, 2005, since both courts’ (district and supreme court) decisions were made subsequent to the city council’s adoption of those amendments.

According to the court, the theory of vested rights acts as one exception to the pending ordinance rule. In a 1998 case, Quality Refrigerated Services v. Spencer, the Iowa Supreme Court determined that a developer acquires a vested right to proceed under the old ordinance if (1) s/he makes substantial expenditures toward the development prior to the zoning change, and (2) those expenditures were made lawfully. In the present case, the court essentially states that only expenditures made pursuant to a validly-issued building permit can be considered “lawful.” Since no building permit had been issued at the point when Cedar Falls rezoned Geisler’s property, he had not acquired a vested right to proceed.

The second exception to the pending ordinance rule is if the local government acted in bad faith. To establish bad faith in the context of a zoning decision, Geisler would need to show that Cedar Falls (1) illegally denied the application, and (2) did so with an improper purpose. The Supreme Court laid out markers for determining both illegality and improper purpose. Citing the 1999 Iowa Supreme Court case U.S. Cellular v. Board of Adjustment, the Court observed that the denial, without any legal justification, of an application that clearly meets all the requirements of the then-existing ordinance is illegal. Then, after providing examples from the Second and Sixth Federal Circuits, and state cases from New Jersey and Wisconsin, the Court “discerned that an improper purpose exists when a zoning authority adopts a new zoning regulation designed to frustrate a particular applicants plans for development.” It went even further in a footnote, saying that “unlike the [examples cited in these other cases] where bad faith was found when the governing body sought to change the rules in response to a particular request, the result may be different where a zoning change is already being contemplated before the particular request is made.” The Court found that the district court failed to consider the issue of bad faith and remanded the case back to the district court to determine whether the city acted illegally and with an improper purpose.