Tunis E. Den Hartog, Shirley Ann Schweertman, Leonard G. Lybbert, Mary Ellen Molinaro, William James Robert, and Mark D. Fisher v. City of Waterloo, Iowa, 2017 Iowa Sup. LEXIS 23

Background

In 1959 Iowa acquired land for a highway; control transferred to the City of Waterloo in 1983. The City later planned to transfer an unused portion of San Marnan Drive to developer Sunnyside South Addition, LLC (Sunnyside) as part of a development agreement.
Taxpayers sued in 2011 seeking to enjoin the transfer, arguing the City must follow Iowa Code § 306.23, which gives a sale preference to (1) the present owner of adjacent land from which the tract was acquired and (2) the person who owned the land when acquired.
The district court initially rejected the taxpayers; the Iowa Supreme Court reversed in 2014, holding § 306.23 applies to land formerly used for highway purposes and remanding for an injunction requiring statutory procedures before any sale.
The City issued notices intended to comply with § 306.23 while the injunction remained in effect; the notices allegedly (a) listed Sunnyside as a preferential adjacent owner, (b) offered Sunnyside a bid credit for improvements, (c) described the property by newly recorded plat descriptions, and (d) used a valuation that predated Sunnyside’s improvements.
The district court found the notices failed to comply with § 306.23 but concluded the City’s noncompliance was not willful contempt. The taxpayers appealed; the Supreme Court affirmed, held the notices violated the injunction/statute but that contempt beyond a reasonable doubt was not proven.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Sunnyside could be treated as a "present owner of adjacent land" entitled to notice under § 306.23	Sunnyside was improperly included as an adjacent-owner preferential buyer	City did not assert Sunnyside was such an owner on appeal; any prior sale to Sunnyside does not make it the original adjacent owner	Court: Sunnyside should not have been treated as an adjacent-owner preferential buyer; notices to Sunnyside were improper
Whether Sunnyside could receive a bid credit for improvements	Credit improperly favored Sunnyside and subverted statutory preference	City treated improvements as relevant to its prior contractual relationship	Court: Record does not support treating Sunnyside as a preferential bidder, so bid-credit issue need not be resolved now
Whether describing the property by the platted descriptions recorded during the appeal satisfied the notice requirement	Taxpayers argued plats altered the property description and could mislead preferential buyers	City argued plat descriptions reasonably identify the land and notify interested owners	Court: Plat descriptions are generally sufficient; the descriptions here were adequate to notify entitled persons
Proper timing/value basis for the fair market value stated in the statutory notice	Value must reflect present fair market value, including improvements made before notice	City used a backdated valuation (pre-improvements)	Court: Fair market value in the notice must reflect value at or near the time notice is given and include improvements made prior to notice; the City’s backdated valuation was defective

Key Cases Cited

Den Hartog v. City of Waterloo, 847 N.W.2d 459 (Iowa 2014) (held § 306.23 preference applies to land formerly used for highway purposes)
Reis v. Iowa Dist. Ct., 787 N.W.2d 61 (Iowa 2010) (contempt must be shown beyond a reasonable doubt; standard for substantial evidence in contempt cases)
Ary v. Iowa Dist. Ct., 735 N.W.2d 621 (Iowa 2007) (burden-shifting in contempt: plaintiff must prove duty and willful failure; then defendant may show lack of willfulness)
Amro v. Iowa Dist. Ct., 429 N.W.2d 135 (Iowa 1988) (definition of willful disobedience for contempt)
City of Dubuque v. Iowa Dist. Ct., 725 N.W.2d 449 (Iowa 2006) (contempt requires willful disobedience of court order)
Palmer Coll. of Chiropractic v. Iowa Dist. Ct., 412 N.W.2d 617 (Iowa 1987) (standard for reviewing evidence in contempt proceedings)