2008-01-08 District Court Order and MemorandumJAN-08-2008 TUE 03:23 PM FAX N0, P. 01112
DISTRICT COURT OF MINNESOTA
TENTH JUDICIAL DISTRICT
HONORABLE STEPHEN M. HALSEY
JUDGE OF DISTRICT COURT
DISTRICT COUNTIES:
WRIGHT ANOKA
SHERBURNE CHISAOC
PINE ISANTI
WASHINGTON KANABEC
Date:
CHAMBERS
WRIGHT COUNTY GOVERNMENT CENTER
10 SECOND STREET NW, ROOM 201
BUFFALO, MN 55313.1192
(763) 662-7539
FAX (763) 682-7300
To: C i r, ,-, / U 1 Llh Esq. Fax # La - L-14I
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Re: Court File: C-U - b(n- a4qq • CV — 06 - `I A9 I key V. C
l-U12
Dear Counsel:
Enclosed are courtesy opies of the Order in the above -noted matter. This is not Notice of
Filing of the Order as% has not yet been filed. You will receive a copy from the District Court
Adrninistr for shortly. These copies are not for service upon opposing counsel. Thank you. 2-
6 i
Rtindi Setter, Law Clerk to
Stephen M. Halsey
Judge of District Court
JAN-08-2008 TUE 03:23 PM
FAX N0, P. 02112
STATE OF MINNESOTA
COUNTY OF WRIGHT
Gold Key Development, Inc.,
a Minnesota corporation,
Plaintiff,
V.
City of Albertville,
Defendant/Third Party Plaintiff,
LTA
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
T/C Homes, Inc., a Minnesota corporation,
Plaintiff,
and
Legacy Homes Incorporated,
Intervening Plaintiff,
V.
Gold Key Development, Inc., a Minnesota corporation,
Defendant/Third Party Plaintiff,
v
Hedlund Engineering,
Third Party Defendant,
and
City of Albertville,
Defendant/Third Party Plaintiff,
La
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
DISTRICT COURT
TENTH JUDICIAL DISTRICT
Court File No.: CV-06-2998
FINDINGS OF FACT,
CONCLUSIONS OF LAW, ORDER
FOR SUMMARY JUDGMENT,
AND MEMORANDUM
Court File No.: CV-06-4997
JAN-08-2008 TUE 03:23 PM FAX N0, P. 03/12
This matter came on for hearing before The Honorable Stephen M. Halsey, Judge of
District Court, on November 27, 2007, pursuant to Gold Key Development, Inc.'s ("Gold Key")
motion for summary judgment, at the Wright County Government Center, Buffalo, Minnesota.
Gold Key was represented by Cynthia Matt, Esq. The City of Albertville ("City") was
represented by Jason Kuboushek, Esq. Short Elliot Hendrickson ("SHE") was represented by
John Markert, Esq. Hedlund Engineering ("Hedlund") was represented by Anton Van Der
Merwe. T/C Homes, Inc. ("TC Homes") and Legacy Homes ("Legacy") were represented by
Steven Yoch, Esq. Wright County Court files CV-06-2998 and CV-06-4997 were consolidated
on August 31, 2006.
Gold Key filed a motion for summary judgment to dismiss TC Homes and Legacy's
claims of enforcement of contract and negligence. Based upon all the Court files and records,
and upon affidavits and the arguments of counsel, the Court makes the following:
FINDINGS OF FACT
THE COURT HEREBY FINDS:
1. That Gold Key is the developer of a subdivision located in the City of Albertville and
known as Prairie Run. Gold Key hired Hedlund as their engineer. TC Homes and
Legacy ("The Builders") are builders of some of the homes in Prairie Run. The City's
engineer, at the time in question, was SEH, with which the City had an oral contract
to review plat submissions to ensure compliance with Minnesota Statutes and City
ordinances.
2. That in approximately 2002 or 2003, Gold Key developed a plan for the residential
Portion of Prairie Run. On June 12, 2003, Gold Key submitted to the City Council a
Preliminary plat that included grading and drainage plans drawn up by Hedlund.
Hedlund used the line of permanent aquatic vegetation as the estimated high water
level. On June 25, 2003, the City issued a planning report, which stated that the plan
was subject to review and approval by SEH and that the preliminary plan was
generally consistent with city ordinances. The day before the report was issued, a
storm occurred and SEH's analysis determined that the high water level from this
storm was 950.5 feet. The Planning and Zoning Commission approved the
preliminary plat on July 8, 2003 and the City Council approved the preliminary plat on
August 7, 2003. The approval was conditioned on the review and comment of the
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plan by SEH. However, SEH never officially reviewed the preliminary plat for
Prairie Run, nor did SEH prepare a written review of the plat.
3. That in April 2004, Hedlund raised, in part, the elevation of Prairie Run so that the
lowest opening on any of the homes was at 952.5 feet above sea level. This was
two feet above the high water level of 950.5 feet determined from the 2003 flood
event. In June 7, 2004, the City approved the final plat of Prairie Run. SEH did not
review the final plat before City approval.
4. That on or about July 16, 2004, Gold Key and the City entered into a planned unit
development agreement ("Development Agreement') for Prairie Run. Paragraph 13.1
of the Development Agreement states that openings on any structure in Prairie Run
should be at least two feet above the highest known surface water level or ordinary
high water level, or at least one foot above the 100-year flood level. If high water
levels are unknown or there is insufficient data in regards to these levels, then the
line of permanent aquatic vegetation should be substituted for the high water
elevation. Gold Key and Hedlund believed that there was insufficient data regarding
high water levels and used the line of permanent aquatic vegetation. The elevation
of the line of permanent aquatic vegetation ranged from 947.5-948 feet. The City
approved the final plat, which used this line for grading and drainage.
5. That on or about December 30, 2004, TC Homes entered into an option agreement
("the TC Option Agreement') with Gold Key to develop individual lots and build
homes on those lots. Under the terms of the TC Option Agreement, TC Homes
agreed to purchase 17 tots from Gold Key on a specified "take -down" schedule, for a
specified price per lot. Before building, TC Homes had to receive a building permit
from the City. The City would review the individual site plan to ensure that the plan
was in compliance with city ordinances and met the guidelines set forth in the final
plat.
6. That on or about December 27, 2004, Legacy and Gold Key entered into an option
agreement ('the Legacy Option Agreement'), Legacy also agreed to purchase a
specified number of lots from Gold Key, at a specified 'take -down" schedule, and for
a specified price per lot. The TC Option Agreement and the Legacy Option
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Agreement are virtually identical to each in terms of duties and responsibilities of the
parties.
7. That in both the TC Homes Option Agreement and the Legacy Option Agreement
paragraph 13.1 states "Gold Key represents and warrants to [the Builders] as
follows:
13.1.1 There are no notices of or violations of law or municipal ordinances, orders, or
rules noted or issued by any governmental authority having jurisdiction over the
Property which have not been complied with or which will not be complied with by
Gold Key, other than those matters set forth herein being undertaken or assumed by
[Builders].
8. That in both the TC Homes Option Agreement and the Legacy Option Agreement
paragraph 15 states:
[The Builders] shall not, under any circumstances be entitled to a remedy of breach
Of contract against Gold Key. [The Builders] shall possess the right (i) to recover
damages directly related to the costs associated with correcting any nonconforming
condition of any Lot purchased by [The Builders] if, and only if, Gold Key fails to
make any such correction or repurchase the Lot from the Builders within forty-five
(45) days (or such longer time as is reasonably necessary to make such corrections
if seasonal considerations prevent Gold Key from doing so as of the date of the
notice) of receipt of notice that correction is required specifying the nature and scope
of the correction ...
9. That in August or September 2005, there was a heavy rain in the City. There was
standing water in parts of Prairie Run. The City suspended a building permit and
required Gold Key to revise grading and elevation within the subdivision. Gold Key
revised the grading and raised the elevations in the area of the subdivision where
there had been standing water. After the revision, the City re -issued the building
permits of the affected areas of Prairie Run.
10. On November 29, 2005, the City, in a letter to Gold Key, declared Gold Key to be in
default of the Development Agreement. The City based the default on a November
21, 2000, letter to the City from Wright County after a culvert sizing review of County
Ditch #9, which stated that the 100-year flood elevation was 951.5 feet. In February
2006, the City's new engineer, Bolton & Menk, issued a Flood Study for the
watershed area that includes Prairie Run. This study set the 100-year flood
elevation at 950.9 feet above sea level. In April 2006, Bolton & Menk revised the
100-year elevation to 949.9 feet above sea level. The April 2006 revised study
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established a "highest known surface water elevation" as 951.47 feet above sea
level. The homes that have been built at Prairie Run have a lowest opening at 953.5
feet above sea level. Six homes that were already built at the time of the moratorium
have a lowest opening of 952.5 feet above sea level.
11. That on August 8, 2007, this Court issued a Summary Judgment Order granting Gold
Key's motion for partial summary judgment, finding that the City had breached the
Development Agreement by wrongfully withholding building permits and certificates
of occupancy. This Court also found that Gold Key had not breached the
Development Agreement as to grading and elevations.
12. That on September 7, 2007, this Court granted Legacy's motion to intervene in this
litigation, but under the condition that Legacy would be bound by the August 7, 2007
summary judgment order. On or about September 13, 2007 Legacy served (but did
not file an original) its Intervention Complaint upon Gold Key, alleging virtually
identical claims against Gold Key as TC Homes had alleged.
13. That on November 27, 2007, at the motion hearing before this Court, Mr. Yoch
conceded that there was no basis for the TC Homes' and Legacy's ne li ence
claims against Gold Key based upon the Court's Summary Judgment Order from
August 7, 2007.
Based upon the foregoing findings of fact, the Court makes the following
CONCLUSIONS OF LAW
THE COURT HEREBY CONCLUDES:
1. That taking the facts in the light most favorable to the non-moving party, TC Homes and
Legacy have not demonstrated a genuine issue of material fact as to their claims of breach of
contract or enforcement of contract against Gold Key.
2. That TC Homes and Legacy's negligence claims against Gold Key must be dismissed as
said parties concede they have no such valid claims.
3. That the attached memorandum is incorporated by reference. That to the extent facts
are stated in said memorandum, they are additional findings of fact.
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P. 07/12
ORDER
IT IS HEREBY ORDERED:
1. That Gold Key's motions for summary judgment against TC Homes and Legacy, and
to dismiss TC Homes and Legacy's claims for enforcement of contract and breach of
contract claims are GRANTED.
2. That Gold Key's motions for summary judgment to dismiss TC Homes and Legacy's
negligence claims are GRANTED.
3. That all other motions are denied.
LET JUDGMENT BE ENTERED ACCORDINGLY.
a
Dated:Qn, 2008
BY THE rOl IRT-
1J
JAN-08-2008 TUE 03:24 PM FAX N0, P. 08112
M2MQRANDUM
Pursuant to Rule 56.03 of the Minnesota Rules of Civil Procedure, a moving party is
entitled to summary judgment on any claim if "the pleadings, depositions, answers to
interrogatories, and admissions on file, together with affidavits, if any, show that there is no
genuine issue as to any material fact and that either party is entitled to a judgment as a matter
of law." Minn.R.Civ.P. 56.03. A material fact, which would affect the issuance of a summary
judgment, is a fact that will affect the result of the case depending upon the resolution of the
questions. Zappa v. Fahey, 245 N.W.2d 258, 260-261 (Minn. 1976). In determining whether
summary judgment is appropriate, the court must view the evidence in the light most favorable
to the party opposing the motion. Grondahl v. Bulluck, 318 N.W.2d 214, 242 (Minn. 1982). The
nonmoving party must demonstrate that there is a genuine issue of material fact. Celotex Corp.
v. Catrett, 477 U.S. 317, 324 (1986). An adverse party may not rest upon the mere averments
or denials of the adverse party's pleading but must present specific facts showing that there is a
genuine issue for trial. Minn.R.Civ.P. 56.05. Summary judgment is a tool to be used sparingly,
and where there is doubt about whether there are genuine issues of material fact to be resolved,
summary judgment should not be used. Donnay v. Boulware, 275 Minn. 37, 45, 144 N.W.2d
711, 716 (1966). Summary judgment should be employed only where it is perfectly clear that no
issue of fact is involved, and that it is not desirable nor necessary to inquire into facts which
might clarify the application of the law. See Id.
Gold Key's Motion for Summary Judgment to dismiss TC Homes' and Legacy's
negligence claims and to dismiss TC Homes' and Legacy's enforcement of contract and
breach of contract claims.
A. Negligence claim
Both Legacy and TC Homes alleged in their complaints that Gold Key was negligent in
selling lots to Legacy and TC Homes that did not conform to the City's grading and elevation
ordinances. However, at the November 27, 2007, motion hearing they agreed to dismiss these
claims.
B. Gold Key did not provide Legacy and TC Homes with non -conforming lots, and
therefore, there is no claim for enforcement of contract.
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The Builders seek damages for correcting a "nonconforming condition" of the lots that
they purchased from Gold Key. Under the terms of paragraph 15 of the TC Homes Option
Agreement and the Legacy Option, the Builders must show that there was a nonconforming
condition on the lots, that they gave appropriate notice to Gold Key, and that Gold Key either
failed to correct the nonconforming condition or failed to repurchase the lots. The approval of
final plats is relied on by developers and builders. See Minn. Stat. § 462.358, subd. 3b. The
City and Gold Key entered into a development agreement in July 2004, one month after the City
approved the final plat of Prairie Run. The purpose of contract interpretation is to determine the
intent of the parties and to enforce that intent. Tavertine Corp. v. Lexington-Silverwood, 683
N.W.2d 267, 271 (Minn. 2004). "Mhe intent of the parties is determined from the plain
language of the [written] instrument." Id. A contract will not be rewritten, modified, or limited,
when the language of the contract is clear and unambiguous. Id. The intent of the parties in
paragraph 13 of the Builders' Option Agreements is clear and unambiguous. The language
'.which will not be complied with" is clearly written in the passive voice and referring to prior
notices of or violations of law that at the time of signing, the Option Agreement Gold Key was
aware of but had no future intention of complying with.
However, even if the language is not clear and unambiguous, under contract
interpretation, the language does not refer to future violations of the law. Interpretation of a
contract is a question of law. Collins v. Minn. Sch. of Bus., Inc., 636 N.W.2d 816, 818
(Minn.App.2001). When interpreting contracts, certain principles apply: (1) language must be
given its plain and ordinary meaning; (2) a contract term must be read in the context of the
entire contract so as not to lead to a "harsh and absurd result'; and (3) a contract should be
interpreted to give meaning to all its provisions. Brookfield Trade Ctr., Inc. v. County of
Ramsey, 584 N.W.2d 390. 394 (Minn.1998). In paragraph 13.1.3 of the Option Agreements, it
states, "The Property will, as of the Ready Date, be free and clear of all liens...." It is clear
from this language that the parties knew how to draft an active future commitment. The
language of 13.1.3 does not refer back to another obligation, but instead looks forward and
states in the active voice what Gold Key's obligations are at a future date (i.e., the Ready Date).
This language is different than grammar of paragraph 13.1.1. In order to give meaning to all
provisions, and as the parties clearly knew how to draft a future commitment, the language of
13.1.1 does not create a future and on -going obligation of Gold Key to know of some unknown
future alleged violations of law or municipal ordinances and correct them before they occur.
Even if the language of 13.1.1 does create an obligation to correct future alleged
unknown violations of law and municipal ordinances, since Gold Key brought suit against the
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City, that they attempted to correct any alleged nonconforming lots, which "correction" occurred
when this Court issued the August 2007 Summary Judgment Order and Estoppel Order, finding
the City in breach of the Development Agreement by means of the moratorium that the City had
imposed upon Prairie Run.
1. The expectation of Cold Key and the Builders at time of contract was that final plat
approval and signing of the development agreement meant they could develop the
Prairie Run per the approved plat and development agreement.
The approval of final plats is relied on by developers and builders. See Minn. $tat. §
462.358, subd. 3b. The City cannot expect Gold Key and the Builders to wait years for the City
to investigate the proper grading of a development. Additionally, from the language of the
paragraph 9 of the Option Agreements, Gold Key was obligated to "obtain full and complete site
plan and plat approval from the City of Albertville...." Neither Gold Key nor the Builders had
the expectation that the City would stop development of Prairie Run after giving affirmative final
plat approval of Prairie Run, after the development agreement between the City and Gold Key
had been signed, and a year after the Option Agreements were signed by TC Homes and
Legacy.
2. City breached the Development Agreement with Gold Key
As stated in the prior Order from August 7, 2007, the City and Gold Key entered into a
development agreement in July 2004, one month after the City approved the final plat of Prairie
Run. The purpose of contract interpretation is to determine the intent of the parties and to
enforce that intent. Tavertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn.
2004). "[T]he intent of the parties is determined from the plain language of the [written]
instrument." Id. A contract will not be rewritten, modified, or limited, when the language of the
contract is clear and unambiguous. Id.
Paragraph 13 (1) of the Development Agreement stated:
Developer shall not place any structure at an elevation such that the lowest grade
opening is less than two feet above the highest known surface water level or ordinary
high water level or less than one foot above the 100-year flood level of any adjacent
water body or wetland. If sufficient data on high water levels is not available, the
elevation of the line of permanent aquatic vegetation shall be used as the estimated high
water elevation.
Additionally, the Development Agreement required in paragraph 10 that the developer (here,
Gold Key) comply with all federal, state, county, or city drainage requirements. The city
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ordinance in effect at the time the parties entered into the Development Agreement, Zoning
Ordinance § 1000.9, subd. (d) mirrors Paragraph 13 (1) of the Development Agreement. The
laws in effect at the time a contract was entered are presumed to be part of the contract.
Metropolitan Sports Facilities Commission v. General Mills, Inc., 460 N.W.2d 625, 629 (Minn.
App. 1990).
When Hedlund prepared and developed the plat proposal, the line of permanent
vegetation, i.e., 947.5 feet above sea level, was used. The City and SEH were aware of
Hedlund's use of this number, as that was the number used in both the preliminary plat and the
final plat, which were both approved by the City. Gold Key and Hedlund were unaware of any
data relating to 100-year flood elevation or highest known surface water level or ordinary high
water level. In April of 2004, Hedlund became aware of a high water level of 950.5 feet above
sea level. All as -built homes (homes built before the City stopped issuing building permits and
occupancy certificates) now have a lowest grade opening of 952.5 feet above sea level. In June
2004, the City approved the final plat which had the homes graded at 952.5 feet above sea
level. In October 2005, the City stated that the 100-year flood elevation was 951.5 feet above
sea level. As of February 2006, the City and its new engineer came forward with a 950.9 feet
above sea level for the 100-year flood elevation. In April 2006, this number was revised to
949.9 feet above sea level and the highest known surface water elevation of 951.47 feet above
sea level. All unbuilt lots in Prairie Run are graded to 953.5 feet above sea level. The homes
built by TC Homes based on the designs by Hedlund and Gold Key were two feet above the
then known high water level of 950.5 feet and are one foot above the October 2005 100-year
flood elevation of 951.5 feet. The City came forward with new numbers to base grading of a 33
acre development nearly two years after it approved the final plat.
Impossibility is when events unforeseen at time of contracting produce an excessive
hardship upon one of the parties which was not reasonable contemplated or expected at time of
execution of contract. G.W. Powers v. Siats, 70 N.W.2d 344, 348 (Minn. 1955). An unforeseen
exercise of governmental authority rendering performance of contractual obligation impossible
will excuse promisor's obligation. Automatic Alarm Corp. v. Ellis, 99 N.W. 2d 54, 56 (Minn.
1959). The City's actions of denying further building permits and certificates of occupancy
made any performance by Gold Key impossible and excuses whatever obligations that they had
at the time to the Builders. There is no evidence that once the City was found in breach of the
development agreement that Gold Key did not want to continue to provide the Builders lots on a
revised "take -down" schedule. Therefore, Gold Key's motion for summary judgment to dismiss
the Builder's enforcement of contract claim is granted.
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C. The Option Agreements signed by Legacy and TC Homes prohibit a breach of contract
claim against Gold Key.
Parties to a contract are free to limit remedies for non-performance. Raymond v.
Mackenzie, 19 N.W.2d 423, 424 (Minn. 1945). Paragraph 15 of the Builders' Option
Agreements clearly states "[The Builders] shall not under any circumstances, be entitled to a
remedy of breach of contract against Gold Key." It is unclear from the Builders' Complaints
whether they meant to allege a breach of contract claim, when that claim is clearly prohibited by
the Option Agreements. The Builders are bound by the language of the Option Agreement that
they signed. If the Builders had wanted the breach of contract remedy, they should not have
eliminated it as a remedy. However, if they did mean to allege such a claim, it must be
dismissed as it clearly prohibited by the terms of the Option Agreements. Therefore, Gold Key's
motion for summary judgment to dismiss any breach of contract claim of the Builders is granted.
AUTIEW1
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