The Wisconsin Court of Appeals held that the adult entertainment provided at a tavern for twelve days before the effective date of an ordinance amendment prohibiting that use in that zoning district did not constitute a nonconforming use.
In early 2005, a tavern business called Kitt’s Korner was operating in the Town of Cross Plains, Dane County. Bow-Wow Entertainment, LLC, owned and operated an adult entertainment tavern in North Bristol, Dane County. As a result of the opening of this establishment, Dane County officials became aware that Dane County ordinances did not contain any provisions regulating adult entertainment and they began to consider proposals to address this. On January 31, 2005, a County Board committee voted to approve an amendment addressing adult entertainment. The proposed amendment was scheduled for action by the County Board on February 18, 2005.
On February 11, 2005, Bow-Wow purchased all of Kitt’s stock. A managing member of Bow-Wow, testified that at the time he began negotiations for the purchase of Kitt’s Korner, he was aware an amendment requiring a zoning change for an adult entertainment tavern was going to be adopted sometime in early 2005. On the night of February 11, Kitt’s began presenting nude dancers. A manager of Bow Wow acknowledged that he started on this date in order to attempt to beat the ordinance amendment and to be “grandfathered” in under the existing ordinance. Kitt’s then offered adult entertainment every night from 5:00 p.m. until 2:00 a.m.
On February 19, 2005, the County Board adopted an adult use amendment to the Dane County Zoning Ordinance. The amendment became effective on February 23. However, on February 21, 2005, Kitt’s obtained a building permit and thereafter began remodeling the events area to add balconies, private viewing cubicles, a stage with poles, dressing rooms, lighting, and other improvements. The Town revoked Kitt’s liquor license and a dispute arose over the lawfulness of the adult entertainment.
Kitt’s Korner looked to Wis. Stat. § 59.69(10)(a) and argued it had vested rights as an established nonconforming use under Wisconsin law. Wis. Stat. § 59.69(10)(a) states that zoning ordinances “may not prohibit the continuance of the lawful use of any building, premises, structure, or fixture for any trade or industry for which such building, premises, structure, or fixture is used at the time that the [zoning] ordinances take effect.” The Town argued the adult entertainment offered by Kitt’s was not a legal nonconforming use. The Wisconsin Court of Appeals agreed with the Town. The Court’s decision addressed two issues. The first was: What, if anything, in addition to a use actually occurring on the effective date of the ordinance amendment, is required to constitute a vested interest for purposes of protection as a nonconforming use under Wis. Stat. § 59.69(10)(a)? The Court concluded that, “in order for a use to be protected as a nonconforming use, the business owner must have a vested interest in the continuance of that use, meaning that, were the continuance of the use to be prohibited, substantial rights would be adversely affected. In the context of § 59.69(10)(a)–relating to trade and industry–this will ordinarily mean that there has been a substantial investment in the use or that there will be a substantial financial loss if the use is discontinued.” (Emphasis Added.)
The Court next noted that to determine whether Kitt’s Korner’s had established substantial rights (had made a substantial investment or would suffer a substantial financial loss) depended on resolution of a second issue. The second issue was: What is the effect of the owners’ knowledge of the pending ordinance amendment before they began to make expenditures and incur liabilities to establish the new adult entertainment use?
The Court concluded that, in order to acquire a vested interest in a use for protection as a legal nonconforming use under Wis. Stat. § 59.69(10)(a), “the business owner must reasonably rely on the then-existing ordinance when making expenditures and incurring liabilities. In the circumstances of this case, we conclude that, because the owners knew of the pending ordinance amendment before they made expenditures and incurred liabilities to establish the use, they did not reasonably rely on the then-existing ordinance.” (Emphasis added.) In other words, because of Bow Wow’s knowledge of the proposed ordinance change, the Court of Appeals viewed the proposed ordinance as the “then-existing” ordnance and the last minute efforts by Kitt’s to frustrate the County’s pending ordinance change would not work to establish a nonconforming use.
Town of Cross Plains v. Kitts “Field of Dreams” Korner, 2009 WL 3030209 (Wis. App. 9/24/2009)
The opinion may be accessed at: http://www.wisbar.org/res/capp/2009/2008ap000546.htm
This abstract appears in the September 30th Caselaw Update of the Wisconsin Chapter of the American Planning Association, Prepared by Prof. Brian Ohm. See, http://www.wisconsinplanners.org/law/WAPA_September_09_case_law_update.pdf