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

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.

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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.

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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.

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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.

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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

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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.

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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).

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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,

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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.

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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.

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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

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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

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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.

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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.