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City of Old Town v. Dimoulas et al.
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MAINE SUPREME JUDICIAL COURT					                              Reporter of Decisions
Decision:	2002 ME 133
Docket:	   Pen-01-146
Argued: 	   April 4, 2002
Decided:	August 9, 2002


                                                 CITY OF OLD TOWN 


                                         ANTONIOS DIMOULAS et al.


	[¶1]  Antonios and Claudia Dimoulas appeal from several judgments
entered in the Superior Court (Penobscot County).  The Dimoulases appeal from a
summary judgment (Marden, J.) entered in favor of the City of Old Town in the
Dimoulases' counterclaim to recover damages for defamation; a judgment
(Marsano, J.) entered following a jury trial declaring that a zoning ordinance
adopted by referendum is inconsistent with the City's Comprehensive Plan and
constitutes illegal spot zoning; and a judgment as a matter of law (Marsano, J.) in
favor of the City in the Dimoulases' counterclaim brought pursuant to 42 U.S.C.
§ 1983 alleging that the City violated their civil rights by failing to act in a timely
manner in their attempt to renew their victualer's license.  The City cross-appeals
from that part of the judgment following the jury verdict (Marsano, J.) that the
City is collaterally estopped from denying a license to the Dimoulases because of
the Planning Board's prior approval of a site plan.  We vacate the judgment
declaring the ordinance invalid, but affirm the judgments on the section 1983 and
defamation claims.  We do not reach the collateral estoppel question. 

	[¶2]  The City's Comprehensive Plan was adopted by the City Council in
April of 1995.   Regarding the Stillwater area, where the parcel of land at the
center of this dispute is located, the Plan provides, in pertinent part:

Commercial activity in what is now downtown Old Town began
around 1832 to serve the workers, sawmill operators, and river
drivers who congregated in this area. Downtown is still an important
local commercial center, although Stillwater Avenue had superseded
downtown as the principal commercial area. . . . The Stillwater area
grew up around the ledges in Stillwater. Although Stillwater village
is not a commercial center, it remains a desirable residential

Old Town, Me., Comprehensive Plan 9-1 (April, 1995).

	[¶3]  Later, in a section entitled "Commercial and Industrial Trends," the
Plan describes the development of commercial activity in the Stillwater area in
more detail:

While the downtown area still contains the largest
concentration of businesses, other commercial areas have emerged in
recent decades. There is now a great deal of commercial activity
along Stillwater Avenue. Commercial growth in recent years has
been guided by the City's zoning ordinance, which places the
downtown in the C-1 (Commercial Business) zone, portions of
Stillwater Avenue in the C-3 (Highway Commercial) and C-4
(Shopping Center) zones, and a small portion of Treat-Webster Island
in the C-3 Zone. There are a number of home occupations located
throughout the community, as well as neighborhood grocery stores.

Id. at 9-4.

	[¶4]  The City Charter allows ordinances to be adopted by referendum.  It
provides that "[a]n ordinance adopted by a vote of the people shall not be repealed
or amended except by a vote of the people, unless such ordinance shall otherwise
expressly provide."

	[¶5]  Section 111.4 of the City Zoning Ordinances defines the
Commercial-Business C-1 zone as follows:

The C-1 zone is established to accommodate those retail, service and
office uses which are of city-wide significance. Within this area of
concentrated activity and intensive development is the central
business district, offices of professional and nonprofessional persons
offering a variety of specialized services, and important public
facilities. New construction and any alteration of existing building or
land use should be consistent with the objective to develop and
maintain the central business district.

Old Town, Me., Zoning Ordinance § 111.4 (January 23, 1984).

	[¶6]  Subsection (b) of that same section lists permitted uses for land zoned
C-1.  Almost any normal business activity is permitted in the C-1 zone. 

	[¶7]  The Dimoulases had been operating a small store on Stillwater Avenue
for several years.  In addition to groceries and other sundries, the store had a
delicatessen and bakery.  Although the store property was zoned as residential, the
store did not violate the zoning ordinance because the ordinance allowed
neighborhood grocery stores in residential areas.  In 1995, the Dimoulases decided
to set up tables and chairs where customers could eat deli and bakery items.  The
Code Enforcement Officer determined that these proposed changes would not be
consistent with the definition of neighborhood grocery store.  The Dimoulases
appealed this determination to the Zoning Board of Appeals (the Board), where
they argued that the tables and chairs did not bring the store outside the definition
of neighborhood grocery store because a neighborhood grocery store was defined
as a business primarily for the purpose of selling food for consumption
off-premises.  The Dimoulases reasoned that providing a location for on-premises
consumption of food was a secondary purpose because the area with the tables and
chairs took up only about ten percent of the floor space of the store.  The Board
agreed, and reversed the determination of the Code Enforcement Officer.

	[¶8]  In regard to the issuance of licenses, the ordinances provide, in
pertinent part:

When any applicant or premises is found, based upon the appropriate
inspections by the city or the department of human services (division
of health engineering), not in compliance with the requirements of
the department of human services or city regulation, the city may
refuse issuance of the license.

Old Town, Me., Zoning Ordinance § 10-22(a) (January 16, 1984).

	[¶9]  The Dimoulases obtained a victualer's license on November 12, 1997. 
This license was revoked after the Code Enforcement Officer inspected the
premises and determined that the Dimoulases were using more than ten percent of
the floor space for the on-premises consumption of products purchased at the
store and were consequently not in compliance with the zoning ordinances.{1}

	[¶10]  In appealing this determination, the Dimoulases asked the Planning
Board to rezone their property from Residential R-1 to Commercial C-1.{2}  The
Board took evidence and considered this proposed change at a hearing on May 22,
1998.  At the end of the hearing, the Board found that rezoning the property to
C-1 would be inconsistent with the Comprehensive Plan and would constitute
illegal spot zoning.  It consequently refused to rezone the property.

	[¶11]  In response to this denial, the Dimoulases arranged to have a
referendum presented to the voters in the next election that would change the
classification of the lot on which the store was located from R-1 to Commercial
C-1.  In a special election on June 9, 1998, the question presented to the voters
was whether to:

Amend the Official Zoning Map of the City of Old Town, Maine by
changing 827 Stillwater Avenue, Map 15, Lot 7 on the City of Old
Town tax maps, from R-1 to Commercial C-1.

	[¶12]  The Planning Board had held a public hearing on the proposed
amendment on May 22, 1998.  The Board unanimously recommended that the
voters not adopt the proposed ordinance, but the voters approved the amendment. 
Immediately after the election, the Dimoulases appealed the City Clerk's May 27,
1998 denial of a victualer's license on the ground that the City Clerk's
determination was rendered "moot" by the referendum.  The City Council did not
hold a hearing or issue a ruling on this appeal.

	[¶13]  On June 24, 1998, the City, its Code Enforcement Officer, and two
neighbors of the Dimoulases filed a complaint in the Superior Court against the
Dimoulases seeking a declaratory judgment that the amendment adopted by
referendum was void because it failed to comply with the Comprehensive Plan
and constituted illegal spot zoning, and that the restaurant was located on a parcel
of land zoned R1-S.{3}  The Dimoulases counterclaimed seeking damages for
(1) violations of their civil rights, pursuant to 42 U.S.C. § 1983, arising out of the
refusal of the City to issue the victualer's license, and (2) defamation arising from
derogatory comments made by the City Manager about the Dimoulases.  

	[¶14]  On June 29, 1998, the Dimoulases applied for a site plan review
pursuant to the City's Zoning Ordinances.  The site plan review was required in
order for the Dimoulases to obtain a victualer's license.  The site plan was
approved on September 14, 1998, and the Dimoulases received a victualer's
license in October. 

	[¶15]  Meanwhile, the Superior Court entered a summary judgment in favor
of the City in the Dimoulases' defamation counterclaim, on the ground that the
City is immune under the Maine Tort Claims Act.  The court denied summary
judgment on the other claims.  A jury trial was held on the remaining issues.{4} 
The jury found that (1) the amendment to the ordinance adopted by referendum
was invalid because it was inconsistent with the Comprehensive Plan, (2) the
amendment constituted illegal spot zoning, (3) the property is located in an R1-S
district and consequently is not zoned for use as a restaurant, (4) the Dimoulases
were nevertheless entitled to continue operating the Market Cafe as a restaurant
because the approval of the site plan was res judicata and the City was estopped
from claiming that the Dimoulases could not operate a restaurant, and (5) the City
had violated the Dimoulases civil rights, and the Dimoulases were damaged in the
amount of $2500.  The parties renewed motions for judgments as a matter of law
on the claims.

	[¶16]  The Superior Court upheld the jury's determinations on the question
involving the Comprehensive Plan and spot zoning, as well as the determination
that the Dimoulases could continue to operate their enterprise as a restaurant.  The
court vacated the jury's verdict in favor of the Dimoulases on their section 1983
claim, and entered judgment for the City, concluding that the Dimoulases did not
have a property interest in a victualer's license as a matter of law, and that the
evidence on damages was insufficient.  The Dimoulases appealed the judgments
against them, and the City cross-appealed that part of the judgment that the
Dimoulases were entitled to continue to operate the restaurant. 


	[¶17]  Any municipal zoning ordinance must "be pursuant to and consistent
with a comprehensive plan adopted by the municipal legislative body."  30-A
M.R.S.A. § 4352(2) (1996).  A "comprehensive plan" is "a document or
interrelated documents containing the elements established under section 4326,
subsections 1 to 4 ['local growth management program'], including the strategies
for an implementation program which are consistent with the goals and guidelines
established under subchapter II ['GROWTH MANAGEMENT PROGRAM']."  Id.
§ 4301(3).

	[¶18]  Although the question of whether the ordinance is consistent with the
Comprehensive Plan is a question of law, the burden is on the City, as the party
challenging the ordinance, to "prov[e] that the challenged amendment[ ] [is]
inconsistent with the . . . comprehensive plan."  Vella v. Town of Camden, 677
A.2d 1051, 1053 (Me. 1996).  In enacting the ordinance, the voters of Old Town
determined that the proposed ordinance was in harmony with the Comprehensive
Plan.  We discern no error in that determination.

	[¶19]  Although the City identifies several sections of the Comprehensive
Plan that it contends the ordinance violates, these provisions do not prohibit
commercial development in the Stillwater area.  The City argues that the absence
of a statement affirmatively allowing commercial development in the Stillwater
area should be interpreted to mean that no commercial development is permitted. 
We disagree.  The absence of language expressly allowing commercial
development in the Stillwater area does not necessarily mean that no development
is allowed, and some commercial development in that area is not inconsistent with
the Comprehensive Plan.

	[¶20]  The City also contends that the ordinance adopted by the voters was
illegal "spot zoning."  The term "spot zoning" refers to any zoning ordinance that
is designed to specifically benefit a particular parcel of land.  Vella, 677 A.2d at
1053.  "Spot zoning" is not itself a pejorative term, and the mere fact that an
ordinance benefits a particular piece of land will not render it illegal.  Id.  Illegal
spot zoning is the "process of singling out a small parcel of land for a use
classification totally different from that of the surrounding area, for the benefit of
the owner of such property and to the detriment of other owners." Id. at 1053-54
(quoting Rodgers v. Village of Tarrytown, 96 N.E.2d 731, 734 (N.Y. 1951)).  In
order to constitute illegal spot zoning, the ordinance "(1) must pertain to a single
parcel or a limited area—ordinarily for the benefit of a particular property owner
or specially interested party—and (2) must be inconsistent with the city's
comprehensive plan, or if there is none, with the character and zoning of the
surrounding area, or the purposes of zoning regulation, i.e., the public health,
safety, and general welfare."  Citizens Ass'n of Georgetown, Inc. v. District of
Columbia Zoning Comm'n, 402 A.2d 36, 39-40 (D.C. 1979) (followed by Vella,
677 A.2d at 1053).

	[¶21]  Because the City has failed to establish that this ordinance is
inconsistent with the Comprehensive Plan, the ordinance does not constitute illegal
spot zoning.{5}  Accordingly, we vacate the judgment entered on the jury verdict
that the ordinance is inconsistent with the Comprehensive Plan and is illegal spot
zoning, and do not address the City's challenge to the jury's determination that it
was estopped from prohibiting the Dimoulases from operating the restaurant.{6}


	[¶22]  The Dimoulases also challenge the Superior Court's decision to set
aside the jury verdict finding that their civil rights had been violated and awarding
them $2500 in damages.  The jury's findings of fact are entitled to deference, and
we review the record to determine whether there was sufficient evidence to
support the jury's verdict.  Marquis v. Farm Family Mut. Ins. Co., 628 A.2d 644,
648 (Me. 1993).

	[¶23]  In order to establish a claim under 42 U.S.C. § 1983, the plaintiff
must establish "(i) that the conduct complained of has been committed under color
of state law, and (ii) that this conduct worked a denial of rights secured by the
Constitution or laws of the United States."  Chongris v. Board of Appeals of the
Town of Andover, 811 F.2d 36, 40 (1st Cir. 1987).  If the plaintiff is able to
establish the deprivation of an interest protected by the due process clause of the
Fourteenth Amendment, we must decide what process is "due" and whether it was
provided.  Id.

	[¶24]  Even if we assume that the Dimoulases' right to a victualer's license
constituted a property interest sufficient to trigger the protections of the due
process clause, and that the damage evidence presented by the Dimoulases was
sufficient, we are unpersuaded that the Dimoulases were denied adequate process. 
Applicants to an administrative entity are entitled, at a minimum, to notice and the
opportunity to be heard before an adverse determination is made against them. 
See Gorham v. Town of Cape Elizabeth, 625 A.2d 898, 902 (Me. 1993) (applicant
to an administrative board is entitled to a fair and unbiased hearing).  In this case,
the City Council did not address the Dimoulases' appeal from the denial of their
request for a victualer's license.  The City did bring a declaratory judgment
action, however, to determine the validity of the recently enacted amendment to
the ordinance that rezoned the land to allow the Dimoulases to operate the
restaurant.  For purposes of a due process analysis, the legal issues surrounding the
amendment to the ordinance, and the right of the Dimoulases to operate the
restaurant were resolved in court proceedings.  The court proceedings gave the
Dimoulases notice and an opportunity to be heard on the issue of their right to
operate their restaurant, and there was no denial of due process.


	[¶25]  The Dimoulases also challenge the summary judgment granted to the
City in their defamation counterclaim based on comments made by the City
Manager at a meeting of the City Council.  The Dimoulases concede that the City
would normally be immune from liability under the Maine Tort Claims Act,
14 M.R.S.A. § 8101-8118 (1980 & Supp. 2001), for the comments of the City
Manager in this context, but argue that liability has been waived pursuant to
14 M.R.S.A. § 8116 (Supp. 2001), which provides that a governmental entity
waives its immunity to the extent it obtains insurance that provides coverage in
areas where the entity would normally enjoy immunity.  Here the City has a
policy issued by the Maine Municipal Association Property & Casualty Pool.  The
policy, however, limited coverage to "those areas for which governmental
immunity has been expressly waived" pursuant to specified provisions, and also
provided that "[l]iability coverage shall not be deemed a waiver of any immunities
or limitation of damages available under the Maine Tort Claims Act, or other
Maine statutory law, judicial precedent or common law."  In Doucette v. City of
Lewiston, 1997 ME 157, ¶¶ 8-10, 697 A.2d 1292, 1294, we concluded that this
disclaimer is sufficient to avoid a waiver of immunity pursuant to section 8116. 
Accordingly, summary judgment was properly entered in favor of the City on the
Dimoulases' defamation claim.

	The entry is:

Judgment affirmed in part, and vacated in part and
remanded to the Superior Court.


Attorney for the plaintiff:

Mark V. Franco, Esq.      (orally)
Thompson & Bowie
3 Canal Plaza
Portland, Maine 04112

For the defendants:

Antonios Dimoulas
Claudia Dimoulas
P.O. Box 252
Stillwater, Maine 04489

Charles E. Gilbert, Esq.     (orally)
Gilbert & Greif
82 Columbia St. 
P.O. Box 2339 
Bangor, Maine 04402

FOOTNOTES******************************** {1} . Apparently, the Code Enforcement Officer made this determination in September of 1997, which was before the license issued. The license was subsequently revoked due to this determination sometime after it was issued. {2} . The Dimoulases also took several other actions in response to the revocation of the license. First, they applied for a variance, but were refused. They also brought an action in the Superior Court and procured a stay of the revocation of the license. The City and the Dimoulases subsequently disagreed about whether the stay required the City to renew the license once it expired. Ultimately, the City refused to renew the license when it expired in May of 1998. {3} . This refers to the fact that the area where the property is located is a "shore overlay zone." It is possible to have commercial zones within the shore overlay zone. {4} . Because they involve questions of law, it is not clear why the issues involving the Comprehensive Plan and spot zoning were determined by a jury. {5} . The requirement that a zoning ordinance be consistent with a comprehensive plan is a statutory requirement. 30-A M.R.S.A. § 4352(2) (1996). The doctrine of illegal spot zoning, as articulated in Vella, is a common law rule developed to ensure that municipal zoning bodies do not act in a manner that is arbitrary, irrational, or unfair. See generally Delogu, Maine Land Use Control Law §§ 6.01-.07 (1997). Since consistency with a comprehensive plan is sufficient to satisfy the common law requirement that neither the ordinance itself nor the procedures employed to enact it were arbitrary or fundamentally unfair, the spot zoning doctrine, as a practical matter, is reserved for municipalities that have not enacted a valid comprehensive plan. Now that the Legislature has required all municipalities to adopt a comprehensive plan to govern their zoning rules, it is likely that the common law spot zoning principles—while still valid—will be less significant. {6} . We are unpersuaded by the City's argument that the referendum failed to fully change the zoning ordinance because the area was also within an R1-S overlay zone. The overlay zone refers to the fact that this land is close to a shore, and land in this overlay zone can be either residential or commercial.