City Of Okoboji, Iowa Vs. Okoboji Barz, Inc. D/b/a O'farrell Sisters And Leo Parks, Jr. ( 2008 )


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  •                  IN THE SUPREME COURT OF IOWA
    
                              No. 131 / 06-0269
    
                             Filed March 14, 2008
    
    
    CITY OF OKOBOJI, IOWA,
    
          Appellee,
    
    vs.
    
    OKOBOJI BARZ, INC. d/b/a O'FARRELL SISTERS
    and LEO PARKS, JR.,
    
          Appellants.
    
    
          On review from the Iowa Court of Appeals.
    
    
    
          Appeal from the Iowa District Court for Dickinson County, David A.
    
    Lester, Judge.
    
    
    
          City of Okoboji seeks further review of court of appeals decision
    
    reversing district court’s grant of declaratory and injunctive relief
    
    regarding a nonconforming restaurant.      DECISION OF COURT OF
    
    APPEALS VACATED; DISTRICT COURT JUDGMENT REVERSED;
    
    CASE REMANDED.
    
    
    
          Phil C. Redenbaugh of Phil Redenbaugh, P.C., Storm Lake, for
    
    appellants.
    
    
    
          Michael J. Chozen of Chozen & Saunders, Spirit Lake, for appellee.
                                         2
    
    CADY, Justice.
    
           In this appeal, we must decide whether a city ordinance prohibits
    
    the sale and service of alcoholic beverages in conjunction with the
    
    operation of a restaurant as a nonconforming use. We conclude the sale
    
    and service of alcoholic beverages would not alone violate the ordinance.
    
    We vacate the decision of the court of appeals, reverse the judgment of
    
    the district court, and remand.
    
           I. Background Facts and Proceedings.
    
           Edna Mae, Arlene, and Fern O’Farrell opened a small, family-
    
    oriented restaurant in the City of Okoboji in 1958 called “O’Farrell
    
    Sisters.”    The three sisters successfully operated O’Farrell Sisters for
    
    decades, and other family members later continued the restaurant
    
    operation.    The restaurant maintained its quaint appearance over the
    
    years and was particularly recognized for its pancake breakfast.
    
    O’Farrell Sisters remains a popular dining landmark in the great lakes
    
    area today under the same name.
    
           The restaurant is located on Lakeshore Drive in a small building
    
    situated on a triangular-shaped lot.       It overlooks Smith’s Bay on
    
    West Lake Okoboji. The restaurant building occupies a large portion of
    
    the lot.     The dining area of the restaurant is 740 square feet and
    
    accommodates table seating for approximately fifty patrons.           The
    
    restaurant also has an eight-foot counter with five stools. A fish-shaped
    
    “O’Farrell Sisters” sign is located on the roof of the building. The word
    
    “beer” is inscribed on the sign.      When the restaurant first opened,
    
    alcoholic beverages were sold to patrons. As in the past, the restaurant
    
    serves breakfast, lunch, and dinner and remains open until 10 or 11
    
    p.m.
                                         3
    
          In 1972, the City of Okoboji adopted a comprehensive zoning
    
    ordinance.    The O’Farrell Sisters property was rezoned for commercial
    
    use at the time, although much of the property in the area, especially to
    
    the south and west of the restaurant, was used for residential housing.
    
    In 1978, the area was rezoned into a single-family residential district.
    
    This classification limited use of property in the district to single-family
    
    homes and duplexes.      The O’Farrell Sisters Restaurant continued to
    
    operate on the property as a preexisting, nonconforming use.
    
          The rezoning in 1978 was prompted by the death of Edna Mae
    
    O’Farrell, the last of the three sisters involved in the operation of the
    
    restaurant.   The city was concerned at the time that the restaurant
    
    would be sold and converted into a bar.           It changed the zoning
    
    classification to preserve the integrity of the area and to reflect its
    
    predominant use.
    
          In 1994, the restaurant operators allowed the liquor license for the
    
    restaurant to expire. Alcoholic beverages have not been sold and served
    
    on the premises since that time.
    
          In 2004, Leo Parks purchased the restaurant.        Parks owns and
    
    operates a corporation called Okoboji Barz, Inc. He continued to operate
    
    the restaurant in the same manner as in the past, but promptly applied
    
    to the city for a class “C” liquor license. Parks wanted to resume the sale
    
    and service of alcoholic beverages to patrons, but claimed he had no
    
    intention of transforming the restaurant into a bar or tavern. The city
    
    denied the application. It determined the sale and service of alcoholic
    
    beverages at the restaurant would violate the zoning ordinance. Parks
    
    appealed the ruling to the Iowa Department of Commerce, Alcoholic
    
    Beverages Division.
                                          4
    
          At the same time, the city feared Parks would ultimately transform
    
    the restaurant into a bar or tavern if he was successful in his appeal.
    
    Consequently, it filed a petition in district court for a temporary and
    
    permanent injunction to prohibit Parks from “operating a bar or tavern”
    
    on the premises. The city and Parks later additionally sought declaratory
    
    relief. The city asked the district court to declare Parks could not operate
    
    a bar on the restaurant premises.         Parks asked the district court to
    
    declare that the sale and service of alcoholic beverages at the restaurant
    
    under a class “C” liquor license would not violate the city ordinance. The
    
    administrative law judge who heard the appeal from the city’s decision to
    
    deny the liquor license determined Parks would be entitled to a liquor
    
    license if he succeeded in his declaratory relief action in district court.
    
          At the hearing before the district court, Parks introduced evidence
    
    that other restaurants in the area that serve dinner commonly serve
    
    alcoholic beverages pursuant to a license. The city did not contest this
    
    evidence and did not introduce evidence that the sale and service of
    
    alcoholic beverages by the restaurant would adversely impact the
    
    surrounding neighborhood. Instead, the city claimed the sale of alcoholic
    
    beverages was not permitted as a matter of law under the ordinance.
    
          The district court denied the injunction.      It found Parks had no
    
    intent to sell alcoholic beverages without a class “C” liquor license.
    
    Consequently, the district court determined no irreparable harm would
    
    result if the injunction was not issued.        However, the district court
    
    declared Parks was “no longer authorized to operate a bar selling
    
    alcoholic beverages to the public” on the premises because the sale of
    
    alcoholic   beverages    would    constitute   a   separate    and    distinct
    
    nonconforming use and an expansion of an existing nonconforming use.
                                         5
    
    The district court also rejected the claim by Parks that the zoning
    
    ordinance constituted impermissible spot zoning.
    
          Parks appeals and raises three claims. First, he claims the district
    
    court erred by concluding the sale of alcoholic beverages pursuant to a
    
    class “C” permit would constitute a distinct nonconforming use of the
    
    property. Second, Parks claims the trial court erred in concluding the
    
    sale and service of alcoholic beverages would be an unlawful expansion
    
    of a nonconforming use. Finally, Parks claims the trial court erred in
    
    concluding the 1978 rezoning scheme did not constitute impermissible
    
    spot zoning.
    
          We transferred the case to the court of appeals. It remanded the
    
    case to the district court to enter an order for the city to issue a liquor
    
    license for the restaurant. It held the sale of alcoholic beverages at the
    
    restaurant would not constitute a nonconforming use or an expansion of
    
    the existing nonconforming use.       The city sought, and we granted,
    
    further review.
    
          II. Standard of Review.
    
          This case was tried in equity.     As such, our review is de novo.
    
    Passehl Estate v. Passehl, 
    712 N.W.2d 408
    , 414 (Iowa 2006); Iowa R.
    
    App. P. 6.4 (2003). “Under this review, we give weight to the fact findings
    
    of the district court, especially as to the credibility of witnesses, but we
    
    are not bound by them.” City of Okoboji v. Okoboji Barz, Inc., 
    717 N.W.2d 310
    , 313 (Iowa 2006).
    
          III. Issues Presented.
    
          The district court declared Parks was not “authorized to operate a
    
    bar selling alcoholic beverages to the public” on the premises. In doing
    
    so, the district court denied Parks’ request for a declaration that the
    
    issuance of a liquor license for the restaurant was not prohibited under
                                                6
    
    the zoning ordinance.          On appeal, Parks challenges the prohibition
    
    against the issuance of a liquor license. Parks acknowledges he does not
    
    desire to change the restaurant into a tavern or nightclub, but only
    
    wants to sell and serve alcoholic beverages to the restaurant patrons.
    
    Thus, the fundamental issue we face is whether this restaurant will
    
    retain its status as a legal, nonconforming use if alcoholic beverages are
    
    sold and served to patrons.1
    
              IV. Nonconforming Use.
    
              A nonconforming use of property is one that lawfully existed prior
    
    to the time a zoning ordinance was enacted or changed, and continues
    
    after the enactment of the ordinance even though the use fails to comply
    
    with the restrictions of the ordinance. Perkins v. Madison County, 
    613 N.W.2d 264
    , 270 (Iowa 2000). The prior use of the property essentially
    
    establishes a vested right to continue the use after the ordinance takes
    
    effect.     See Quality Refrigeration Servs. v. City of Spencer, 
    586 N.W.2d 202
    , 206 (Iowa 1998). The nonconforming use is permitted to continue
    
    until legally abandoned.         Iowa Coal Mining Co. v. Monroe County, 
    555 N.W.2d 418
    , 430 (Iowa 1996). However, the nonconforming use cannot
    
    be enlarged or extended. Stan Moore Motors, Inc. v. Polk County Bd. of
    
    Adjustments, 
    209 N.W.2d 50
    , 52 (Iowa 1973). This limiting principle is
    
    carved into the city ordinance at issue in this case.                  The ordinance
    
    expresses an intent “to permit . . . nonconformities to continue until they
    
    
              1Theparties correctly agree the restaurant is a legal nonconforming use. The
    city’s zoning ordinance explicitly provides: “The lawful use of a building existing at the
    time of the enactment of this Ordinance may be continued even though such use may
    not conform with the regulations of this Ordinance for the district in which it is
    located.” Okoboji Zoning Ordinance art. IV, § 2. The ordinance defines nonconformities
    as “lots, structures, buildings and uses which were lawful before this ordinance was
    effective or amended, but which would be prohibited, regulated or restricted under the
    provisions of this Ordinance or future amendment,” and allows “nonconformities to
    continue until they are removed.” Okoboji Zoning Ordinance art. IV, § 3.
                                        7
    
    are removed, but not to encourage their survival,” and provides “that
    
    nonconformities shall not be enlarged upon, expanded or extended, nor
    
    be used as grounds for adding other structures or uses prohibited
    
    elsewhere in the same district.” Okoboji Zoning Ordinance art. IV, § 3.
    
    Nevertheless, the body of law governing nonconforming uses of property
    
    recognizes “[l]andowners are given some latitude . . . and may change the
    
    original nonconforming use ‘if the changes are not substantial and do not
    
    impact adversely on the neighborhood.’ ”     Perkins, 613 N.W.2d at 270
    
    (citing City of Jewell Junction v. Cunningham, 
    439 N.W.2d 183
    , 186 (Iowa
    
    1986)).
    
          In this case, the city does not rely on any particular facts and
    
    circumstances associated with the sale and service of alcoholic beverages
    
    by the restaurant to support its claim that Parks would substantially
    
    expand the nonconforming use of his property as a restaurant by serving
    
    alcoholic beverages to patrons. Instead, it asserts the underlying sale of
    
    alcoholic beverages, under the ordinance, is a separate and distinct use
    
    of the property from the current use of the property as a restaurant. As
    
    a result, the city maintains, as the district court found, that expanding
    
    the nonconforming use of the property as a restaurant to also include a
    
    separate and distinct use not permitted in the zoning district would
    
    constitute an illegal expansion or addition of the nonconforming use as a
    
    matter of law. Additionally, the city asserts, as the district court found,
    
    the prior separate and distinct nonconforming use of the property to sell
    
    and consume beer was abandoned in 1994 and cannot, as a matter of
    
    law, be resumed under the ordinance.
    
          The nonconforming use of property “must be a continuation of the
    
    same use and not some other kind of use.” 8A Eugene McQuillin, The
    
    Law of Municipal Corporations § 25.206, at 138 (3d ed. rev. vol. 2003).
                                        8
    
    On the other hand, a nonconforming use is a legal use of property, and
    
    accessory uses allowed under an ordinance are generally permitted in
    
    conjunction with the continued operation of a nonconforming use.
    
    Okoboji Barz, Inc., 717 N.W.2d at 315.
    
          The city does not address the sale and service of alcoholic
    
    beverages as an accessory use under the ordinance.          Instead, the city
    
    only maintains the sale and service of alcoholic beverages is a separate
    
    and distinct use of property under the ordinance, which was abandoned
    
    as a nonconforming use after the ordinance was enacted so that the
    
    proposed resumption of the use would constitute a prohibited expansion
    
    of the nonconforming use of the property as a restaurant.
    
          We begin our examination of this claim by considering the city’s
    
    premise that the zoning ordinance treats the sale and service of alcoholic
    
    beverages as a separate and distinct use of property.         The ordinance
    
    contains a comprehensive list of defined terms.      See Okoboji Zoning
    
    Ordinance art. II. Only three defined terms mention the sale and service
    
    of alcoholic beverages. See id. The ordinance defines a “cocktail lounge,
    
    cabaret” as a business where a variety of activities take place, including
    
    the sale of alcoholic beverages for consumption.      Id.     The ordinance
    
    defines a “nightclub” as an establishment engaged in entertainment and
    
    other activities, including the service for on-premises consumption of
    
    alcoholic beverages. Id. Lastly, the ordinance defines a “tavern” as an
    
    establishment primarily engaged in serving alcoholic beverages for on-
    
    premises consumption, with the option of serving food. Id. On the other
    
    hand, the ordinance defines a restaurant as a place “where meals . . . are
    
    prepared,” without any reference to the sale and service of alcoholic
    
    beverages. Id. The city asserts this approach of limiting the sale and
    
    service of alcoholic beverages to only three specific uses of property,
                                           9
    
    while excluding the sale and service of alcoholic beverages from the
    
    definition of a restaurant, expresses a clear intent for the sale and service
    
    of alcoholic beverages to be a separate and distinct use of property from
    
    the use of property as a restaurant.
    
          We agree with the city that the sale and service of alcoholic
    
    beverages is a specific permitted activity in the operation of three types of
    
    businesses.   We also agree with the city that the sale and service of
    
    alcoholic beverages is not a specific permitted activity in the use of
    
    property as a restaurant. Yet, the interpretation by the city essentially
    
    ignores the doctrine of accessory uses of property.
    
          Accessory-use provisions are a common component to municipal
    
    ordinance schemes because it is next to impossible for a zoning
    
    ordinance to express “ ‘every possible lawful use’ ” of property. Hannigan
    
    v. City of Concord, 
    738 A.2d 1262
    , 1266 (N.H. 1999) (quoting Town of
    
    Salem v. Durrett, 
    480 A.2d 9
    , 10 (1984)). Thus, the doctrine of accessory
    
    uses contemplates property may be used in ways not expressly permitted
    
    under the ordinance. Id.
    
          The City of Okoboji ordinance specifically recognizes accessory
    
    uses of property and buildings and defines an accessory use as
    
          a use or structure subordinate to the principal use of a
          building on the lot and serving a purpose customarily
          incidental to the use of the principal building or an
          accessory lakeshore storage building.
    
    Okoboji Zoning Ordinance art. II.          If an accessory use under the
    
    ordinance is limited to uses not specifically included in the definition of
    
    other uses, then the general definition of “accessory use” would largely
    
    be rendered superfluous.        Hannigan, 738 A.2d at 1266–67.            In
    
    interpreting ordinances, we are obligated to consider the ordinance as a
    
    whole and give all parts of it meaning. Kordick Plumbing & Heating Co. v.
                                          10
    
    Sarcone, 
    190 N.W.2d 115
    , 117 (Iowa 1971).               Moreover, such an
    
    interpretation conflicts with the purpose and policy of accessory uses
    
    built into the ordinance.
    
             Accordingly, we reject the conclusion of the district court that the
    
    sale and service of alcoholic beverages in conjunction with the operation
    
    of a nonconforming use of property as a restaurant constitutes an
    
    expansion of the nonconforming use as a matter of law. Likewise, we
    
    reject the conclusion of the district court that the sale and service of
    
    alcoholic beverages was a nonconforming use of the property that was
    
    abandoned after the enactment of the ordinance.           The principal and
    
    primary use of this property since 1958 has been as a restaurant, and
    
    the restaurant is a nonconforming use that is permitted to continue
    
    today.     Thus, the fighting question is whether the sale and service of
    
    alcoholic beverages is permissible as an accessory use under the
    
    ordinance to the nonconforming use of the property as a restaurant. See
    
    McQuillin § 125.125, at 421–22 (“The question what constitutes auxiliary
    
    and incidental uses has particular significance relevant to authorized
    
    primary nonconforming uses, since in an important sense they measure
    
    the extent of rights in such uses.”). Parks argues that the proposed sale
    
    and service of alcoholic beverages is substantially the same use of the
    
    property as a restaurant.
    
             Unless an ordinance specifies the types of accessory uses, a
    
    particular use will be accessory when it is customary and incidental to
    
    the principal use of the property. Simmons v. Zoning Bd. of Appeals, 
    798 N.E.2d 1025
    , 1028 (Mass. App. Ct. 2003). The ordinance in this case
    
    reflects this standard.      A use is customary so as to qualify as an
    
    accessory use when it is often found in conjunction with the principal
    
    use. Stochel v. Planning Bd., 
    792 A.2d 572
    , 578 (N.J. Super. Ct. Law Div.
                                         11
    
    2000); see also City of Emmetsburg v. Mullen, 
    129 N.W.2d 677
    , 678 (Iowa
    
    1964) (noting proof of the manner in which other buildings in the district
    
    are utilized is useful in “determining just what construction or
    
    interpretation the city officials, and in fact city residents, place upon the
    
    provisions of the ordinance relative to accessory uses”). In other words,
    
    the question is whether the accessory use is so common that the
    
    ordinance could not have intended to prevent its use.            Whaley v.
    
    Dorchester County Zoning Bd. of Appeals, 
    524 S.E.2d 404
    , 410 (S.C.
    
    1999).
    
          Parks produced ample evidence in this case that restaurants in the
    
    great lakes region customarily serve alcoholic beverages to dining
    
    patrons.    The city did not dispute this evidence.          Based on the
    
    undisputed evidence, we conclude the City of Okoboji ordinance does not
    
    preclude the sale and service of alcoholic beverages as an accessory use
    
    to the principal use of property as a restaurant.            Thus, the only
    
    remaining question is whether the sale and service of alcoholic beverages
    
    would nevertheless constitute an expansion of a nonconforming use.
    
          This legal issue has been addressed by a number of other
    
    jurisdictions. Indeed, a number of courts have held the addition of the
    
    sale of alcohol is an unlawful extension of a nonconforming restaurant as
    
    a matter of law. See Fulford v. Bd. of Zoning & Adjustment, 
    54 So. 2d 580
    , 582 (Ala. 1951) (holding “the sale of beer in connection with the
    
    operation of a restaurant on said premises was and is an unlawful and
    
    unauthorized extension of the non-conforming restaurant business”
    
    under the city’s zoning ordinance); Town Council v. State Bd. of
    
    Equalization, 
    296 P.2d 909
    , 912 (Cal. Dist. Ct. App. 1956) (declaring
    
    addition of liquor sales to nonconforming restaurant already selling beer
    
    “ ‘would   be   an   extension    and     enlargement   of   their   existing
                                           12
    
    nonconforming use of the property and would create a use of the
    
    property prohibited by the zoning ordinance’ ” (quoting Salerni v. Scheuy,
    
    
    102 A.2d 528
    , 531 (Conn. 1954))); Hooper v. Del. Alcoholic Beverage
    
    Control Comm’n, 
    409 A.2d 1046
    , 1050 (Del. 1979) (“Introducing the sale
    
    of alcoholic beverages into [a residential] district would, in our judgment,
    
    be an unlawful extension of a nonconforming restaurant business.”).
    
    Those courts rely on the idea that the sale of alcoholic beverages changes
    
    the nature and character of a restaurant as a matter of law.
    
          On     the   other   hand,   a   number   of   courts   have   allowed
    
    nonconforming restaurants or hotels to add the sale of alcoholic
    
    beverages.    See Redfern v. Creppel, 
    455 So. 2d 1356
    , 1361 (La. 1984)
    
    (allowing nonconforming restaurant to sell alcoholic beverages); Gauthier
    
    v. Village of Larchmont, 
    291 N.Y.S.2d 584
    , 587 (N.Y. App. Div. 1968)
    
    (allowing nonconforming hotel to sell alcoholic beverages); Appeal of
    
    Sawdey, 
    85 A.2d 28
    , 31 (Pa. 1951) (same). These cases hold the sale of
    
    alcoholic beverages to be an accessory use. See Redfern, 455 So. 2d at
    
    1361 (“[T]he sale of alcoholic beverages is properly an accessory use to
    
    the restaurant operation”); Gauthier, 291 N.Y.S.2d at 587 (“Clearly, the
    
    service of liquor refreshment is inseparable from a modern hotel and as a
    
    matter of law a bar therein is an accessory use.”); Sawdey, 85 A.2d at 31
    
    (“[T]he accommodation of the service of liquor refreshment is usually
    
    regarded to be largely inseparable from a modern hotel.”).
    
          These cases largely reflect that the different outcomes are driven by
    
    the particular facts and circumstances. Under some circumstances, the
    
    sale of alcoholic beverages by a restaurant can create different
    
    conditions, and the restaurant can take on different characteristics. Yet,
    
    under other circumstances, the sale of alcoholic beverages incidental to
                                        13
    
    the service of meals may not alter the existing operation of the restaurant
    
    or characteristic of the area.
    
          While the evidence in this case shows area restaurants customarily
    
    service alcoholic beverages with meals, this evidence only helps establish
    
    that the sale of alcoholic beverages can be an accessory use. Yet, we are
    
    not required in this case to decide if the particular manner that Parks
    
    ultimately operates his restaurant if issued a liquor license will
    
    constitute an expansion of the restaurant. We only declare that the city
    
    ordinance does not prohibit a restaurant from serving alcoholic
    
    beverages as an accessory use, and the sale and service of alcoholic
    
    beverages does not, by itself, constitute an unlawful expansion of this
    
    nonconforming restaurant.
    
          We conclude the district court erred in granting the requested
    
    declaratory relief. The district court also erred in failing to grant Parks’
    
    request for a declaration that the city ordinance does not prohibit the
    
    issuance of a license to sell and serve alcoholic beverages at O’Farrell
    
    Sisters in conjunction with the operation of the restaurant. However, we
    
    only hold that the sale and service of alcoholic beverages to restaurant
    
    patrons is not prohibited under the ordinance as a matter of law and
    
    that it does not constitute an expansion of a nonconforming use of the
    
    property as a restaurant as a matter of law.        Thus, the declaration
    
    sought by Parks is limited to this specific holding.       We express no
    
    opinion whether Parks is automatically entitled to a liquor license or
    
    whether the manner he may ultimately operate the restaurant upon
    
    issuance of any liquor license would not violate the ordinance as an
    
    expansion of a nonconforming use.
                                       14
    
          V. Conclusion.
    
          We reverse the judgment of the district court and remand the case
    
    for entry of a declaratory judgment in accordance with this opinion.
    
          DECISION OF COURT OF APPEALS VACATED; DISTRICT
    
    COURT JUDGMENT REVERSED; AND CASE REMANDED.