The zoning was set up to block mobile homes. The circular logic behind their ruling was stupid, though. I wonder what the ruling would have been if you had poured a foundation and it was site-built the correct distance from the property line.
We are going through the opposite problem. The owner is trying to get their zoning changed to put apartments in the middle of a residential community, replacing a golf course clubhouse. Of course, they have a billion dollars to throw at it.