Amended May 3, 2017 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

IN THE SUPREME COURT OF IOWA

No. 15–1540

Filed March 10, 2017

Amended May 3, 2017

TUNIS E. DEN HARTOG, SHIRLEY ANN SCHWEERTMAN,

LEONARD G. LYBBERT, MARY ELLEN MOLINARO, WILLIAM JAMES

ROBERT, AND MARK D. FISHER,

Appellants,

vs.

CITY OF WATERLOO, IOWA,

Appellee,

SUNNYSIDE SOUTH ADDITION, LLC,

Intervenor.

Appeal from the Iowa District Court for Black Hawk County,

Andrea J. Dryer, Judge.

Taxpayers challenge the district court’s ruling finding a

municipality was not in contempt of a court order forbidding it from

selling certain property except in compliance with statutory

requirements. AFFIRMED AS MODIFIED.

Dave Nagle, Waterloo, for appellants.

David Zellhoefer, Waterloo City Attorney, and Ivan T. Webber of

Ahlers & Cooney, P.C., Des Moines, for appellee.

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CADY, Chief Justice.

In this case, we must decide if we should hold a municipality in

contempt of a court order that required it to dispose of certain property

only in compliance with Iowa Code section 306.23 (2014). The

municipality promulgated notices that gave a development company

preferential bidding on the property even though it was not a prior or

adjacent landowner, gave that same development company a bid credit

for the improvements it had already made to the property, described the

land as delineated in the plat filed for the contested development, and

used a backdated valuation. Following a hearing, the district court

found the notices did not satisfy the requirements of section 306.23, but

nevertheless held the municipality’s actions did not rise to the level of

contempt. The taxpayers appealed. On appeal, we affirm. We also

address additional arguments presented to, but not ruled on by, the

district court. We conclude the municipality violated the injunction but

agree the record does not establish beyond a reasonable doubt the

municipality acted with the requisite willfulness to establish contempt.

I. Factual Background and Proceedings.

This case is before us for the second time. The factual background

can be summarized from our earlier opinion, as follows:

The State of Iowa acquired property in Black Hawk

County for purposes of constructing a state highway in

1959. The highway had originally been planned as, and

enough land had been acquired for, a four-lane project, but

the highway was eventually constructed with just two lanes.

In 1983, the state transferred control of the highway and

attendant property to the City of Waterloo (the City), in

accordance with the terms of Iowa Code chapter 306,

entitled “Establishment, Alteration, and Vacation of

Highways.” After the transfer, the highway property became

known as San Marnan Drive in Waterloo. The City has

retained jurisdiction and control over the property in the

years since and has maintained it with grading, mowing, and

weed control.

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The City has now indicated its intention to transfer the

property to Sunnyside South Addition, LLC (Sunnyside), as

part of a development agreement. Under the terms of the

agreement, Sunnyside proposes to relocate San Marnan

Drive by reconstructing it approximately eighty feet south of

its current position and intends to retain the property on

which the current San Marnan Drive sits for purposes of

residential construction. The City proposes to transfer the

highway property to Sunnyside according to the agreement

for the sum of $1.00.

Taxpaying residents of Waterloo . . . became aware of

and objected to the proposed transfer in 2011. They filed in

the district court a petition for writ of mandamus and

temporary injunction requesting postponement of the sale on

the ground the City’s proposed transaction failed to comply

with certain appraisal, notice, right-of-first refusal, and

public bid requirements set forth in chapter 306.

Den Hartog v. City of Waterloo, 847 N.W.2d 459, 460–61 (Iowa 2014).

The dispute was submitted to the district court for a resolution.

The fighting issue was whether a statutory preference given to certain

persons when unused right-of-way land is intended to be sold apply not

only to land acquired for highway purposes but never used, but also land

used for highway purposes that were later discontinued. Following a

hearing, the district court held the statutory preference procedures did

not apply to the sale of the right-of-way land in this case and dismissed

the motion to enjoin the sale and the petition for writ of mandamus.

The taxpayers filed an appeal from the district court decision.

Around the same time, the City entered into a contract to sell the right-

of-way land to Sunnyside. It also entered into a development agreement

with Sunnyside. Under the agreement, Sunnyside was required to

develop the unused right-of-way, which ran next to a country club and

golf course, into lots for residential development. The City also gave

Sunnyside a special warranty deed to the land. During the pendency of

the appeal, the City platted the land for the development, and Sunnyside

relocated San Marnan Drive to the south. Sunnyside also graded the

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land for the housing development and installed curbs, gutters, storm

sewers, utilities, and took other action necessary to complete the

development site for home construction.

In June 2014, we reversed the decision of the district court. We

held the statutory sales preference did apply to land formerly used for

highway purposes. We remanded the case to the district court to enter

the requested injunction against the City. On July 7, 2014, the district

court entered an order enjoining the City “from selling or transferring the

property in this proceeding without first following the procedures

prescribed in Iowa Code section 306.23.”

The City subsequently moved to dissolve the injunction. It did not

assert the sale of the property to Sunnyside was complete. Instead, it

asserted that it desired to sell the land and proposed to do so by first

giving notice of the intended sale consistent with the requirements of the

preference statute. On February 20, 2015, the district court denied the

motion to dissolve the injunction.

The City then proceeded to give the notices of the intended sale

under the preference statute. The taxpayers filed an application to find

the City in contempt of court for noncompliance with the statutory

requirements of the notices. They also sought a temporary restraining

order to prevent any sale.

On June 4, 2015, the district court held the notices of sale sent by

the City failed to comply with the statutory sales preference. However, it

found the deficiencies in the notices were not willful and did not amount

to contempt. It further found a restraining order was unnecessary

because the prior injunction remained in effect.

The taxpayers appealed. On appeal, they claim the notices sent by

the City failed to comply with the governing statute in four ways and that

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the noncompliance constituted a willful and wanton disregard for the

injunction entered on July 7, 2014. The taxpayers also claim the district

court erred in failing to address each claim of noncompliance. The City

argued no contempt could occur without a final sale. It also argued that

any noncompliance with Iowa Code section 306.23 was not

contemptuous.

II. Standard of Review.

Despite the vast procedural background of this case, the

fundamental question now presented is whether the district court erred

in failing to find the City in contempt of court for sending notices that did

not comply with Iowa Code section 306.23. We permit the direct appeal

of a dismissal of an application for contempt. State v. Lipcamon, 483

N.W.2d 605, 606 (Iowa 1992).

Our cases impose a special standard of review of the facts in

contempt cases. If it is claimed that a ruling is not

supported by substantial evidence, “we examine the

evidence, not de novo, but to assure ourselves that proper

proof supports the judgment.” “The exact extent to which we

may go in deciding questions of fact from the record is

vaguely defined; it lies in a shadow land, a ‘twilight zone,’

whose boundaries do not admit of definite charting.” The

finding of contempt must be established by proof beyond a

reasonable doubt.

Id. (first quoting Palmer Coll. of Chiropractic v. Iowa Dist. Ct., 412 N.W.2d

617, 619 (Iowa 1987); then quoting Watson v. Charlton, 243 Iowa 80, 92,

50 N.W.2d 605, 612 (1951)); see also Patterson v. Keleher, 365 N.W.2d

22, 24 (Iowa 1985) (“Our review is not de novo; while we give much

weight to the trial court’s findings of fact, we are not bound by them.”).

Since proof beyond a reasonable doubt must be established

for a finding of contempt, substantial evidence to support

such a finding is “such evidence as could convince a rational

trier of fact that the alleged contemnor is guilty of contempt

beyond a reasonable doubt.”

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Reis v. Iowa Dist. Ct., 787 N.W.2d 61, 66 (Iowa 2010) (quoting In re

Marriage of Jacobo, 526 N.W.2d 859, 866 (Iowa 1995)). “We review the

district court’s conclusions of law for errors at law.” Id.; see also

Lipcamon, 483 N.W.2d at 606–07 (“We are not bound by the trial court’s

conclusions of law and may inquire into whether it applied erroneous

rules of law that materially affected its decision.”). “We are authorized

. . . to find contempt ‘notwithstanding the fact that the district judge

found that a contempt had not been committed.’ ” Orkin Exterminating

Co. v. Burnett, 160 N.W.2d 427, 430–31 (Iowa 1968) (quoting Lake v.

Wolfe, 108 Iowa 184, 186, 78 N.W. 811, 811 (1899)).

III. Contempt of Court.

“Illegal resistance to any order” of the court is a contemptuous act.

Iowa Code § 665.2(3). However, “[r]esistance to or violation of an order

cannot be considered contempt of court unless it is willful.” Reis, 787

N.W.2d at 68. Thus, “[c]ontempt actions are adjudicated to determine

whether the alleged contemner acted in willful disobedience of a court

order beyond a reasonable doubt.” City of Dubuque v. Iowa Dist. Ct., 725

N.W.2d 449, 452 (Iowa 2006).

The party alleging contempt bears the initial burden of proving “a

duty to obey a court order” and a “willful[] fail[ure] to perform that duty.”

Ary v. Iowa Dist. Ct., 735 N.W.2d 621, 624 (Iowa 2007). If the party

makes this showing, “the burden shifts to the alleged contemner to

produce evidence suggesting the violation was not willful.” Id.

Disobedience is willful when it is

conduct that is intentional and deliberate with a bad or evil

purpose, or wanton and in disregard of the rights of others,

or contrary to a known duty, or unauthorized, coupled with

an unconcern whether the contemner had the right or not.

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Reis, 787 N.W.2d at 68 (quoting Amro v. Iowa Dist. Ct., 429 N.W.2d 135,

140 (Iowa 1988)). However, “[a] failure to follow a court order is not

willful if a contemner shows the order was indefinite or that the

contemner was unable to comply with the order.” Ary, 735 N.W.2d at

624. The interpretation of an order’s language is a question of law. See

Zimmermann v. Iowa Dist. Ct., 480 N.W.2d 70, 74 (Iowa 1992).

In construing [an] injunction, effect should be given to every

word, if possible, to give the injunction as a whole a

consistent and reasonable meaning. Effect should also “be

given to that which is clearly implied as well as that which is

expressed.”

Bear v. Iowa Dist. Ct., 540 N.W.2d 439, 441 (Iowa 1995) (citation omitted)

(quoting In re Marriage of Lawson, 409 N.W.2d 181, 182 (Iowa 1987)).

Our review is of “the spirit as well as the letter of the injunction to

determine if its intent has been honestly and fairly obeyed.” Id. (quoting

Burnett, 160 N.W.2d at 431); see also Matlock v. Weets, 531 N.W.2d 118,

124 (Iowa 1995).

A. Court Order. The district court order prohibits the City “from

selling or transferring the property . . . without first following the

procedures prescribed in Iowa Code Section 306.23.” The City asserts

the order only prohibits the City from completing a sale in violation of the

statute, not from attempting to sell the property in violation of the

statute. However, the phrase “from selling or transferring” is written in

the present tense. Thus, the statutory requirements are part of the

process that must be performed in “selling or transferring” the land.

Accordingly, the injunction encompasses efforts to sell the land in

compliance with the statute, not merely the completed sale. We proceed

to consider the statutory requirements that must be followed by the City

in selling the land.

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B. Statutory Requirements. Under Iowa law, the governmental

agency in control of land that is an unused right-of-way may sell it for

cash. 1 Iowa Code § 306.22. We have held this statute applies both to

land acquired for highway purposes, but never used, and to land

acquired and used for highway purposes that are discontinued.

Den Hartog, 847 N.W.2d at 465–66. The law, however, gives a sales

preference to two classes of persons. It gives a preference to the person

who is 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.” Iowa Code § 306.23(1). It also gives a preference to

the person who owned the land at the time it was acquired. Id. The

agency must give these persons an opportunity to purchase the land

before proceeding with the sale. Id. § 306.23(2).

The statutory sales preference makes it possible for land taken for

highway purposes to be returned to the particular tract of land or to the

particular owner from which it was acquired. Thus, the “present owner

of adjacent land from which” the unused tract or unused part of a tract

controlled by the agency “was originally purchased or condemned” refers

to present owners of land that lies adjacent to the unused right-of-way

because the right-of-way was acquired from that land. The “person who

owned the land” at the time it was acquired would also be the “present

1It appears only the Iowa Department of Transportation (DOT) may sell the land

on an installment contract. Section 306.22(2) authorizes “[t]he department” to

“contract for the sale of any tract of land.” The statute is clear that “[t]he department”

refers to the DOT. See Iowa Code § 306.2(3). Any “agency,” on the other hand, may sell

the land for cash. See id. § 306.22(1). An “agency” is “any governmental body which

exercises jurisdiction over any road.” Id. § 306.2(1). “When the legislature has defined

words in a statute—that is, when the legislature has opted to ‘act as its own

lexicographer’—those definitions bind us.” In re J.C., 857 N.W.2d 495, 500 (Iowa 2014)

(quoting State v. Fischer, 785 N.W.2d 697, 702 (Iowa 2010)).

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owner of adjacent land” if the person who owned the land at the time it

was acquired still owned the tract of land from which the right-of-way

was acquired. See Op. Iowa Att’y Gen. No. 97–11–1 (Nov. 4, 1997), 1997

WL 816849, at *2 (finding the Act required the DOT to offer a last

previous owner the opportunity to buy back just that particular piece of

land it acquired from that owner); see also Office of Right of Way, Iowa

Dep’t of Transp., Property Management Manual 29 (March 2016) (defining

“adjacent owner” for purposes of Iowa Code section 306.23).

The purpose of this statute is consistent with the purpose of Iowa

Code section 6B.56, which created a right of first refusal for condemnees

and was enacted at the same time section 306.23 was amended to add

the original-owner preference. See 1997 Iowa Acts ch. 149, §§ 1, 2

(codified at Iowa Code § 6B.56 and § 306.23 (1999)). The original

statutory preference for adjacent landowners was enacted in 1934. See

1934 Iowa Acts ch. 8, § 2 (codified at Iowa Code § 4755-f2 (1935)). The

statute prefers restoration of unused rights-of-way to either the original

tract or original owner from which it was acquired before selling it to

another person. See Iowa Code § 306.23(1)–(2) (2014).

The sales preference operates by requiring the agency to send

notice of the agency’s intent to sell the land to the two classes of persons

entitled to preference. See Iowa Code § 306.23(1). The notice must

identify the name and address of any other person to whom the notice

was sent and state “the fair market value of the land based on an

appraisal by an independent appraiser.” Id.

The notice gives the two classes of persons an opportunity “to be

heard and to make offers within sixty days” of the time the notice is given

for the tract, parcel, or piece of land to be sold. Id. § 306.23(2). An offer

that equals or exceeds the amount of any other offer received and equals

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or exceeds the fair market value is given preference by the agency. Id. If

the agency receives no offers within the sixty-day period or if the offers

do not equal or exceed the fair market value of the land, the agency is

permitted to proceed with its intended sale for cash.

C. Compliance with the Statutory Requirements. The

taxpayers claim the notices sent by the City were deficient in four ways.

The district court did not expressly rule on each of these alleged failings.

However, the taxpayers preserved error for our review by filing a motion

to amend or enlarge. See Meier v. Senecaut, 641 N.W.2d 532, 537 (Iowa

2002).

First, the taxpayers claim the notices were deficient because,

among others entitled to notice, the City included Sunnyside as a

preferential buyer within the “present owner of adjacent land” category.

Without this status, Sunnyside does not qualify for notice since it was

clearly not an owner of the right-of-way at the time it was acquired. See

Iowa Code § 306.23(1) (noting the only two ownership interests entitled

to notice). However, the City makes no claim on appeal that Sunnyside

is a present owner of land adjacent to the right-of-way from which the

right-of-way was acquired. Any claim of ownership by Sunnyside derived

from a sale of the right-of-way land from the City did not make

Sunnyside the present owner of land adjacent to the right-of-way. Thus,

the City should not have sent notices to Sunnyside.

Second, the taxpayers claim the notices did not comply with the

statute because they gave Sunnyside a bid credit. We need not address

this claim because the record in this case does not support a finding that

Sunnyside qualified as a preferential bidder under the statute.

Third, the taxpayers claim the notices were deficient because right-

of-way properties intended to be sold by the City were described in the

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notices by using the platted descriptions recorded during the pendency

of the first appeal. The preference statute does not specifically require

the selling agency to describe the land intended to be sold, but a

description would be implicit in the requirement to give notice of the sale.

A description would be sufficient if it reasonably notified those entitled to

notice of the land intended to be sold. Normally, land that has been

platted provides a reasonable description. See City of Clinton v. Owners

of Prop. Situated Within Certain Described Boundaries, 191 N.W.2d 671,

674–75 (Iowa 1971) (noting a description may be sufficient if it

reasonably identifies the land). Thus, the descriptions here were

sufficient.

Finally, the taxpayers claim the notices were deficient because the

City identified the fair market value of the right-of-way land in the

notices prior to the time the land was improved by Sunnyside. Again,

the statute does not specifically identify the time for the valuation to take

place. However, the statutory-notice process implies the fair market

value would be the value at or near the time the notice of impending sale

is given. Accordingly, the fair market value in this case would include

the value of the improvements made to the land by Sunnyside prior to

the notices. See Den Hartog, 847 N.W.2d at 465 (noting one of the

“purposes underlying the chapter 306 framework” is to protect the City

and its taxpayers by attaining the best price for the land). Thus, the

notices must state the present fair market value of the land to be sold.

Any preferential offer would need to equal or exceed the fair market value

of the land as improved by Sunnyside. If no such offers are received, the

City may then proceed to confirm its prior sale to Sunnyside.

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D. Willful Violations. The final question is the City’s culpability.

To reiterate, we ask whether the City acted with willful disobedience. See

Reis, 787 N.W.2d at 68. Disobedience is willful when it is

conduct that is intentional and deliberate with a bad or evil

purpose, or wanton and in disregard of the rights of others,

or contrary to a known duty, or unauthorized, coupled with

an unconcern whether the contemner had the right or not.

Id. (quoting Amro, 429 N.W.2d at 140).

The taxpayers rely on testimony establishing the City’s actions

were far out of the norm for the typical disposal of right-of-way. They

point to the obvious nature of some of the violations and assert that is

sufficient evidence of the requisite mental state. The City attributed any

failings to the complicated circumstances. The district court found the

taxpayers failed to prove willful disobedience beyond a reasonable doubt.

In responding to this appeal, the City expands on its earlier arguments,

arguing there is a lack of evidence of intent and that even if its acts were

contemptuous, it should be given the opportunity to purge itself of

contempt.

We agree with the district court. Based on this record, the

taxpayers have not met their high burden of proving the City acted

contemptuously beyond a reasonable doubt. While some aspects of the

notices are particularly troubling, we recognize the limited interpretive

guidance available on this seldom-cited statute. However, now that we

have ruled on each of the faults of the notices identified by the taxpayers,

we expect future notices will be in compliance with Iowa Code section

306.23.

It cannot go unnoticed that the sale of the right-of-way land and

compliance with the statutory preference has been complicated by the

prior sale of the land to Sunnyside and the subsequent development of

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the land by Sunnyside into residential lots during the pendency of the

first appeal. Yet, the sole issue presented in this appeal involves the

actions of the City in attempting to comply with the statute under these

complex circumstances. Under the course of litigation pursued in this

case, any such issues of Sunnyside’s legal or equitable rights in the land

would not likely be ripe until such time as a prior or adjacent owner

utilized its sale preference established under the statute. See Taft v.

Iowa Dist. Ct., 879 N.W.2d 634, 638 (Iowa 2016) (noting we generally do

not resolve hypothetical controversies).

IV. Conclusion.

We conclude substantial evidence supports the finding of the

district court that the City has not acted contemptuously in failing to

comply with the preference requirements of Iowa Code section 306.23 at

this point in the proceedings. We affirm the decision of the district court

with the additional guidance laid out above.

AFFIRMED AS MODIFIED.

All justices concur except Zager, J., who takes no part.