by Gary Taylor

Tunis E. Den Hartog, et al. v. City of Waterloo
(Iowa Supreme Court, May 30, 2014)

The state of Iowa transferred control of a state highway – now known as San Marnan Drive – and its right-of-way to the city of Waterloo in 1983. The city has maintained it by grading and mowing since that time. The city recently reached agreement to transfer the property to Sunnyside South Addition, LLC, for one dollar. Sunnyside proposes to relocate San Marnan Drive in order to place residential development where the road is currently located. Some Waterloo taxpayers filed suit, claiming that the transaction failed to comply with the notice and sale provisions of Chapter 306 of the Iowa Code, which governs the establishment, alteration, and vacation of roads. The city responded that the procedures of Chapter 306 cited by the taxpayers (specifically, section 306.23) only apply to property acquired for roadway purposes that was never used as a roadway.

Iowa Code 306.23 provides in part:

1. The agency in control of a tract, parcel, or piece of land, or part thereof, which is unused right-of-way shall send by certified mail to the last known address of the present owner of adjacent land from which the tract, parcel, piece of land, or part thereof, was originally purchased or condemned for highway purposes, and to the person who owned the land at the time it was purchased or condemned for highway purposes, notice of the agency’s intent to sell the land, the name and address of any other person to whom a notice was sent, and the fair market value of the real property based upon an appraisal by an independent appraiser.
2.  The notice shall give an opportunity to the present owner of adjacent property and to the person who owned the land at the time it was purchased or condemned for highway purposes to be heard and make offers within sixty days of the date the notice is mailed for the tract, parcel, or piece of land to be sold.  An offer which equals or exceeds in amount any other offer received and which equals or exceeds the fair market value of the property shall be given preference by the agency in control of the land. If no offers are received within sixty days or if no offer equals or exceeds the fair market value of the land, the agency shall transfer the land for a public purpose or proceed with the sale of the property.

The parties dispute the meaning of “unused right-of-way.” The city argued that it refers only to land never in use for roadway or related purposes – the implication being that section 306.23 does not apply in this case. The taxpayers argue that the phrase should be read to include any land which the city has determined will no longer be needed or used for roadway purposes. This could include land currently in use for roadway purposes, so long as the city has determined that the land will not be used as such in the future. Under this reading section 306.23 applies and the property should have first been offered to adjacent landowners for purchase at or above fair market value.

In siding with the taxpayers, the Iowa Supreme Court cited several “linguistic and structural cues…the statutory purpose, and the legislative history [of chapter 306].” Noting that the owner of land abutting a highway may suffer special damage because of its vacation, the hearing procedures in chapter 306 protect their unique property interests. The Court looked to several provisions in the chapter that suggest a broad reading of the term “unused”; i.e., to apply to land that will not be used for roadway purposes going forward, regardless of whether it may have been used for such purposes previously.

The Supreme Court remanded for entry of an order prohibiting the city from the sale or transfer of the property to Sunnyside without first following the requirements of section 306.23.