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STATE OF MINNESOTA IN SUPREME COURT A06-2305

Court of Appeals

Dietzen, J.

The Big Lake Association, Appellant, vs. Saint Louis County Planning Commission, et al., Respondents, Big Lake Properties, LLC, John A. Swenson, Sheryl L. Swenson, and George P. Nall, Respondents. Filed: February 26, 2009 Office of Appellate Courts

________________________ James P. Peters, Karna M. Peters, Peters & Peters, PLC, Glenwood, Minnesota, for appellant. Melanie S. Ford, St. Louis County Attorney, Thomas G. Stanley, Assistant County Attorney, Duluth, Minnesota, for respondent Saint Louis County Planning Commission, et al. Joseph J. Mihalek, Fryberger, Buchanan, Smith & Frederick, P.A., Duluth, Minnesota, for respondents Big Lake Properties, LLC, John A. Swenson, Sheryl L. Swenson and George P. Nall. ________________________

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SYLLABUS Based on separation of powers principles, we will not consider an issue that was not properly raised before a local zoning authority. The court reviews the record to determine whether the issue was fairly raised for consideration before the zoning authority. Affirmed. OPINION DIETZEN, Justice. This appeal concerns the decision of the Saint Louis County Planning Commission to grant a conditional use permit (CUP) to Big Lake Properties, LLC, to convert an existing resort into a common interest community and to add 11 new cabins to the resort. By writ of certiorari, The Big Lake Association sought review of the decision. Among other issues, the Association argued that the Planning Commission erroneously approved the CUP as a commercial planned unit development when the proposal should have been considered as a residential planned unit development. The court of appeals affirmed the decision of the Planning Commission, concluding that the approval of the CUP was not arbitrary and capricious, and that the issue concerning the classification of the resort conversion was waived. We granted review on the waiver issue. We affirm. Appellant Big Lake Association (Association) was organized to advance and promote the interests of property owners on Big Lake. Its principal purpose is to preserve the natural condition of Big Lake. Big Lake is immediately adjacent to and is a

designated access lake for the Boundary Waters Canoe Area Wilderness. Big Lake is 2

classified by the Minnesota Department of Natural Resources as a recreational development lake. Motorized watercraft are permitted on the lake. Respondents George P. Nall, John A. Swenson, and Sheryl L. Swenson own respondent Big Lake Properties, which in 2005 acquired an existing resort, Big Lake Wilderness Lodge Resort. The resort is located on Big Lake and encompasses 23 acres. The resort currently consists of 13 rental cabins that range in size from 282 to 684 square feet. There also is a 3,418 square foot lodge, as well as other storage buildings and sheds. Saint Louis County regulates the subject property. The resort is located in an area zoned as "shoreland mixed use," which allows planned unit developments as a conditional use. The County has delegated the responsibility for approving conditional use permits to respondent Saint Louis County Planning Commission. In September 2006 Big Lake Properties submitted a proposal to increase the number of cabin units from 13 to 24 and to convert the resort into a commercial common interest community. In response to a question on the application form, Big Lake

Properties indicated that the existing business type is "Resort/Campground/B&B" and the proposed business type is "Residential Seasonal." The proposal stated that the longrange plans for the property are "[t]o sell existing cabins (units) to private individuals with the purpose of continued rental in a resort setting." Along with the application form, Big Lake Properties included a concept statement, rules for the homeowners' association, and a draft declaration of covenants. Under these documents, ownership of the cabins would be private, while the infrastructure and open space would be maintained by an association. The owners of the cabins would receive time at the resort and rental income 3

from the cabins in exchange for their investment. All owners would be required to participate in the rental program. The Saint Louis County Planning Department reviewed the proposal and prepared a staff report for the Planning Commission. The report described the nature of the proposal as "a commercial planned unit development consisting of a total of 24 units." The report stated that the proposal "represents an expansion and continuation" of the historic use of the property as a commercial resort "with a change in the type of ownership and operation." Analyzing the proposal under the criteria for a commercial planned unit development, the Planning Department concluded that the proposal to add 11 new units to the resort did not violate the density standards of the ordinance. The Planning Department also concluded that the proposal met the other criteria of the ordinance and recommended approval of the conditional use permit, subject to a number of conditions. The Planning Commission conducted a public hearing on the proposal. Notice of the hearing was published and sent to affected property owners. The notice stated: The Planning Commission will consider a commercial planned unit development consisting of a total of 24 units. Thirteen of the units are existing, and 11 are new construction. Ownership of the units would be private, while the infrastructure and open space would be maintained by association. The property would continue to operate as a resort. At the hearing, Planning Department staff described the property, the proposed development, and the staff recommendation. The Planning Commission received written comments from 21 people and heard testimony from 10 people, including representatives from Big Lake Properties and owners of property on Big Lake. Those opposing the 4

proposal raised concerns that included an old remediated environmental problem on the site and the density of the proposal, which increased the number of cabin units from 13 to 24. In addition, one neighboring property owner questioned whether the owners of the resort "are actually on Big Lake to run a resort or turn a quick profit on the sale of lakeshore lots." A representative from Big Lake Properties denied they were

"developers"; rather he described them as "resorters who have figured out a way to survive." Following the hearing, the Planning Commission voted unanimously to

approve the conditional use permit, subject to 14 conditions. By writ of certiorari, the Association appealed the Planning Commission's decision to the court of appeals, raising a number of issues, including the proper classification of the proposal. The court of appeals affirmed the decision to grant the conditional use permit, concluding that the requirements of the ordinance had been met and the decision was not unreasonable or arbitrary and capricious. Big Lake Ass'n v. Saint Louis County, No. A06-2305, 2008 WL 663813 (Minn. App. Mar. 11, 2008). The court of appeals also concluded that the Association had waived the argument that the Planning Commission acted arbitrarily in allowing the proposal to proceed as a commercial, rather than residential, planned unit development, concluding that the issue was not raised before the Planning Commission, and the Planning Commission had no opportunity to address it. Id. at *6. I. The Association argues that the County should have treated the Big Lake Properties proposal as a residential, rather than commercial, planned unit development. 5

Claiming that the proposal does not meet the density requirements for a residential planned unit development, the Association contends that the approval of the conditional use permit was arbitrary and capricious. The County and Big Lake Properties contend that this argument was waived because it was not raised before the Planning Commission. A county may designate by ordinance certain types of developments, including planned unit developments, as conditional uses under zoning regulations. Minn. Stat.

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