2007-08-08 Summary Judgment OrderAUG-08-2007 WED09:68 AM
FAX NO, P. 02/17
STATE OF MINNESOTA
COUNTY OF WRIGHT
Gold Key Development, Inc.,
a Minnesota corporation,
Plaintiff,
v.
City of Albertville,
Defendant/Third Party Plaintiff,
V.
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
TIC Homes, Inc., a Minnesota corporation,
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,
N
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,
AND MEMORANDUM
Court File No.: CV-06-4997
This matter came on for hearing before The Honorable Stephen M. Halsey, Judge of
District Court, on May 15, 2007, pursuant to Gold Key Development, Inc.'s ("Gold Key") motion
for partial summary judgment, City of Albertville's ("City") motion for summary judgment, and
Short Elliott Hendrickson, Inc.'s ("SEH") motion for summary judgment, at the Wright County
Government Center, Buffalo, Minnesota. Gold Key was represented by Cynthia Matt, Esq. City
AUG-08-2007 WED 09:58 AM FAX NO, P, 03/17
was represented by Jason Kuboushek, Esq. SEH was represented by John Markert, Esq.
Hedlund Engineering ("Hedlund") was represented by Anton Van Der Merwe. T/C Homes, Inc,
("TC Homes") was 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 partial summary judgment based on the alleged breach of
contract and declaratory judgment and estoppel. City of Albertville brought a motion of
summary judgment based on statutory immunity and breach of contract, SEH brought a motion
of summary judgment based on no duty to Plaintiff relative to Gold Key's negligence claim, and
that Gold Key and TC Homes were not third party beneficiaries to the contract between the City
and SEH. 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 is one
of the builders 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 as follows as reflected in the City Council Findings of Fact & Decision
(Deposition Exhibit 67): "Based on the foregoing considerations and applicable
ordinances, the Rezoning from R-1A to PUS and the Preliminary Plat to be known as
'Prairie Run' are approved based on the most current plans and information
F,
AUG-08-2007 WED 09:58 AM FAX N0, P. 04/17
received to date, subject to the following conditions...." The approval was
conditioned on the review and comment of the 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 as follows as
reflected in Plat of the Prairie Run Addition (Deposition Exh. 94): "This plat of Prairie
Run was approved and accepted in compliance with Minnesota Statute Section
505.03 Subdivision 2, by the City Council of the City of Albertville, Minnesota, at a
meeting held this 7'h day of June, 2004." 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. After the final
plat was approved by the City, Gold Key made commitments and borrowed money in
excess of $2,000,000,00. TC Homes entered into option agreements with Gold Key
to develop individual lots and build homes on those lots. 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.
5. 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
.�7
AUG-08-2007 WED 09:58 AM FAX N0, P. 05/17
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.
6. 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
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.
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
Gold Key have not demonstrated a genuine issue of material fact as to their claims of breach of
contract and negligence against SEH.
2. That taking the facts in the light most favorable to the non-moving party, the City has not
demonstrated a genuine issue of material fact as to the City's liability for Gold Key's claims of
breach of contract, estoppel, and for declaratory judgment.
3, That the City breached the Development Agreement between itself and Gold Key,
4. That the City did not owe TC Homes a duty and the City's actions were protected by
statutory immunity and vicarious official immunity.
Cl
AUG-08-2007 WED 09:58 AN FAX NO, P. 06/17
5. That SEH did not owe Gold Key or TO Homes a duty; Gold Key and TO Homes were not
third party beneficiaries to the contract between SEH and the City.
g. That the attached memorandum is incorporated by reference. That to the extent facts
are stated in said memorandum, they are additional findings of fact.
ORDER
IT IS HEREBY ORDERED:
t. That City's motion for summary judgment and motion to dismiss Gold Key's
declaratory judgment claim, motion to dismiss Gold Key's breach of contract claim,
motion to dismiss TO Homes Mandamus claim, and motion to grant the City an
award of attorney's fees are DENIED.
2. That City's motion for summary judgment and motion to dismiss TC Homes
negligence and negligent misrepresentation claims are GRANTED.
3. That Gold Key's motion for summary judgment against the City to grant Gold Key's
breach of contract claim and declaratory judgment and estoppel order are
GRANTED IN PART. (A supplemental order granting Gold Key's estoppel motion
will follow.) Damages for the breach of the contract claim have not been determined
and significant issues of material fact exist relative to damages against the City.
4, That Gold Key's motion for summary judgment to grant Gold Key's negligence claim
against SEH and to grant the breach of contract claim against SEH are DENIED.
5. That SEH's motion for summary judgment to dismiss Gold Key's and TO Homes'
negligence claims and to dismiss Gold Key's and TO Homes breach of contract
claims are GRANTED.
6. That all other motions are denied.
LET JUDGMENT BE ENTERED ACCORDINGLY.
5
AUG-08-2007 WED 09:58 AM
FAX N0,
P. 07/17
Dated; S 1 f , 2007
MEMORANDUM
QV YuC nnl [b�.
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 more 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.
I.
SEH's Motion For Summary Judgment to dismiss Gold Key's and TC Homes' negligence
claims and to dismiss Gold Key's and TC Homes' breach of contract claims,
A. SEH only owed a duty to the general public and not a special duty to Gold Key or TC
Homes.
Both Gold Key and TC Homes allege that SEH was negligent when it did not complete
and submit a formal written review of the preliminary or final plats submitted by Gold Key and
t�
AUG-08-2007 WED 09:58 AM FAX NO, P, 08/17
drawn up by Hedlund. The elements of negligence are (1) duty, (2) breach of that duty, (3) the
breach was the proximate cause of the harm to the plaintiff, and (4) damage. Gilbertson v.
Leininger, 599 N.W.2d 127, 130 (Minn, 1999). The existence of a duty is for the court to
determine as a matter of law. Larson v. Larson, 373 N.W.2d 287, 289 (Minn. 1985). If the
defendant lacks a duty to the plaintiff, there can be no negligence. Rasmussen v. Prudential
Ins. Co., 152 N.W.2d 359, 362 (Minn. 1967).
A public duty, is the general duty owed by a government, municipality, or government
agency to the public as a whole, and is not a special duty, which is owed to a specific individual
or class of individuals. Cracraft v. City of St. Louis Park, 279 N.W,2d 801, 804 (Minn, 1979). For
a plaintiff to be able to sue a city for negligence, the plaintiff must show that the defendant
breached a specific duty and not an obligation owed to the general public. to. at 805. "Building
codes, the issuance of building permits, and building inspections... are designed to protect the
public and are not meant to be an insurance policy by which the municipality guarantees that
each building is built in compliance with the building codes and zoning codes." Id. (internal
quotation omitted).
As an engineer, contracted by the City to provide certain review services for the City,
SEH, is like a fire inspector, who performs the inspection to protect the general public. See
Hoffert v. Owatonna Inn Towne Motion, Inc., 199 N.W.2d 158 (Minn. 1972). SEH's duty was to
review plans to see if they complied with the city ordinances and zoning laws. Its duty was to
the general public that new subdivisions were being planned and built within the general
confines of the law. SEH's duty was not to insure that the subdivisions were built in compliance
with the City ordinances,
Occasionally, a municipality or government agency may have assumed a specific duty.
In making this determination, the court looks at four factors: (1) did the municipality have actual
knowledge of the dangerous condition; (2) was there reasonable reliance by persons on the
municipality's representations and conduct; (3) an ordinance or statute that sets forth mandatory
acts for the protection of a particular class of people and not just the general public; and (4) the
municipality must use due care to avoid increasing the risk of harm. Cracraft, 279 N.W.2d at
806-7. SEH did not have actual knowledge of other high water levels that would lead to a
dangerous condition. Reasonable reliance must go further than merely relying on an inspection.
Id. at 807. The reliance must be "based on specific actions or representations which cause the
persons to forego other alternatives of protecting themselves." Id. The record does not
definitely reflect that Gold Key, Hedlund, or TC Homes relied on any specific action or
representation by SEH so as to forego any other alternative to engineering the drainage and
7
AUG-08-2007 WED 09:59 AM FAX NO, P, 09/17
grading of Prairie Run. There was no ordinance or statute that mandated that the City engineer
perform specific acts to protect a certain class of persons. The applicable ordinances here
involve requiring buildings to have openings at certain heights and grading and drainage in
newly developed areas. These ordinances are for the benefit of the entire city and its populace
and do not protect a specific class of people. Finally, SEH did not increase the risk of harm to
Gold Key or TC Homes.
As there was no specific duty owed by SEH to either Gold Key or TC Homes, SEH's
motion to dismiss their claims of negligence against SEH must be granted.
B. Gold Key and TC Homes were not third party beneficiaries to the contract between
SEH and the City, and therefore, neither party can raise a breach of contract claim.
Contracts normally only bind the parties who enter into the contract. A third party
generally does not have any rights under the contract. Wurm v. John Deere Leasing Co., 405
N.W.2d 484, 486 (Minn. App. 1987). However, a third party can recover under a breach of
contract, if it can show it was an intended beneficiary under the duty -owed or intent -to -benefit
test. Cretex Companies, Inc. v. Construction Leaders, Inc. 342 N.W.2d 135, 139 (Minn. 1934),
All parties agree that Gold Key and TC Homes were not parties to the contract between the City
and SEH.
1. Intent to Benefit test
The intent to benefit test determines if "the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the promised perrormance." Mears Park Holding
Corp. v. MorselDiesel, Inc., 427 N.W.2d 281, 285 (Minn, App. 1988) internal quotation omittec.
The contract language is evaluated in light of all the surrounding circumstances, Buchman
Plumbing Co. v. Regents of the University of Minnesota, 215 N.W.2d 479, 483 (Minn. 1974),
The intent to benefit test is generally met when the third party is referenced in the contract or the
intent of the contract is to benefit a third party. 614 Co. v, Mpls. Comm'ty Dev. Agency, 547
N.W.2d 400, 410 (Minn. App. 1996) (referencing third party in the contract indicated intent to
benefit); Chard Realty, Inc. v. City of Shakopee, 392 N.W.2d 716, 720 (Minn. App. 1986)
(intending contract to benefit third party).
The contract entered into by SEH and the City does not reference either Gold Key or TC
Homes or any other third party. When the City and SEH entered into the contract, the specific
development of Prairie Run was not contemplated. Further, the language of the contract does
not indicate that SEH would perform duties to benefit anyone other than the City. SEH's duties
under the contract were to perform engineering tasks for the City, including reviewing
preliminary and final plats before City approval. Lastly, the contract specifically states in
0
AUG-08-2007 WED 09:59 AM FAX N0,
P. 10/17
paragraph 5.6.2 that there are no third parties to the contract and that the contract is only to
benefit the City and SEH. The specific language of the contract denies third -party beneficiaries.
The circumstances surrounding the entering of the contract between SEH and the City do not
show that Gold Key or TO Homes were intended beneficiaries of the contract. This clearly
indicates that Gold Key and TO Homes were not third parties to the contract under the "intent to
benefit" test, and, therefore, neither Gold Key nor TO Homes has a cause of action against SEH
for breach of contract.
2. Duty owed Test
promisor's performance discharges a duty that the
The duty owed test requires that the
promisee owed to a third party. Cretex Companies., 342 N.W.2d at 138. In this instance, the
promisor is SEH, the promisee is the City, and Gold Key and TO Homes would be the third
parties. Here, SEH promised the City that it would review plats before preliminary or final
approval by the City. This did not discharge any duty that the City may have owed
o Gold under the
or TO Homes. Therefore, Gold Key and TO Homes were not third party
duty owed test and, therefore, the breach of contract claim must be dismissed.
li.
Gold Key's Motion for Partial Summary Judgment against the City and SEH.
A. Gold Key's Motion for partial Summary Judgment against SEH.
Gold Key's Motion for summary judgment on the issue of negligence by SEH and breach
of contract by SEH is denied as stated above regarding SEH's motions.
S. The City breached the Development Agreement when It refused to issue certificates of
occupancy and building permits for Prairie Run.
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 [whttenj 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 states:
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 I
e
at body or wetland. If sufficient data on high water levar flood els level
tilny adjacent
ls snoavvaable, the
w
0
AUG-08-2007 WED 09:59 AN FAX NO, P. 11/17
elevation of the line of permanent aquatic vegetation shall be used as the estimated high
water elevation.
Additionally, the Development Agreement requires in paragraph 10 that the developer (here,
Gold Key) comply with all federal, state, county, or city drainage requirements. The city
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 was preparing and developing 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 are 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 cannot come forward with new numbers to base grading of a
33 acre development nearly two years after it approved the final plat.
The approval of final plats is relied on by developers and builders. See Minn. Stat. §
462,358, subd, 3b. The City cannot expect a developer to wait years for the City to investigate
the proper grading of a development. Further, the homes that have already been built are more
than one foot above the latest 100-year flood figures and are greater than two feet above the
high water level of 950.5 feet above sea level. This is not a complete breach of the
Development Agreement and only affects 11 homes in Prairie Run. Hedlund and Gold Key
have revised the pads for the other homes to be graded at 953.5 feet above sea level.
10
AUG-08-2007 WED 09:59 AN FAX NO, P. 12/17
The alleged drainage breaches by Gold Key are not supported by facts brought forth by
the City. The City relies on a quote from Hedlund that allegedly admits to the breach. The City
does not provide any other specific facts showing that there is a genuine issue for trial. See
Minn.R.Civ.P. 56.05. Gold Key has provided a affidavit of an expert, Brian Mundstock, stating
that the drainage as engineered exceeded the requirements of the City and that any 100-year
flood level was to be determined by the City and not the individual developer. Therefore, Gold
Key has shown that there is no breach as to drainage, and the City has merely relied on
averments and has not shown that there is a genuine issue of material fact for trial on the issue
of drainage. Therefore, Gold Key's motion for summary judgment on the issue of breach of
contract is granted. Conversely, the City's motion for summary judgment to dismiss Gold Key's
breach of contract claim is denied.
C. The City is estopped from issuing a moratorium on building permits and certificates of
occupancy for Prairie Run.
A moratorium is a valid exercise of a city's police powers. Semler Construction, Inc. v.
City of Hanover, 667 N.W.2d 457, 465 (Minn. App. 2003) review denied (Oct. 29, 2003).
However, equitable estoppel can be applied to a moratorium if the plaintiff can demonstrate that
it relied in good faith on the language or conduct of the defendant, whose language or conduct
induced such reliance, and the plaintiff was injured or prejudiced by this reliance. Id. at 466,
When equitable estoppel is applied to governmental actions, the plaintiff must show that the
government acted wrongfully. Id. This requires an affirmative act by the government and not
merely inadvertent or mistaken conduct. Id. The equities of the parties must be weighed, and if
justice requires, the government will be estopped, but only after weighing against the public
interest that would be frustrated. Ridgewood Development Co. v. State, 294 N,W.2d 288, 291
(Minn.1980).
Gold Key relied in good faith on the City's approval of the final plat in June of 2004, In
reliance on this approval, Gold Key spent or dedicated over $2,000,000,00 for the development
of Prairie Run, Gold Key proceeded to dedicate and spend funds to build roads, culverts,
drains, and homes on this site. The City also issued certificates of occupancy for some of the
homes built in Prairie Run. It is only after two years of development that the City affirmatively
acted by refusing to issue certificates of occupancy, building permits, and it placed a moratorium
on homes that had already received certificates of occupancy. The City also affirmatively
approved the final plat and affirmatively approved some certificates of occupancy. Only in 2006,
after two years of development did the City decide that Gold Key was in breach of the
Development Agreement. Further, the equities of the parties dictate that, after relying on the
AUG-08-2007 WED 09:59 AM FAX N0, P
final plat approval and the extensive expenditures of GI old Key, the equities lie with Gold Key.
Further, the public interest weighs in favor of completinig the 33 acre development rather than
allowing Prairie Run to remain only partially developed I Justice requires the Court to estop the
City. This action was wrongful and improper. The Estoppel motion is granted.
D. Gold Key has vested rights in the development of Prairie Run.
The vested rights doctrine applies when the state attempts to control private
i
development through zoning and building permits. Ridgewood, 294 N.W.2d at 294. The central
question is "whether a developer has progressed sufficiently with his construction to acquire a
vested right to complete it." Id. The developer has to have done more than merely possess a
building permit, incurred some expense, and began more than preliminary efforts for
construction, e.g., excavation. Id. Gold Key has expended over $2,000,000.00 in developing
Prairie Run. More than mere excavation has occurredJI Gold Key and its subcontractors have
built roads, ponds, drainage ditches, and homes on the property. Additionally, Gold Key has
more than a building permit. Gold Key received final plat approval for the development of
Prairie Run. Under the Minnesota Statutes, developer, should be able to rely on final plat
approval in order to develop a property. Minn. Stat. § 462.358, subd. 3b.
IIh i
The City Is immune from TC Homes' negligence and negligent misrepresentation actions.
TO Homes alleges that the City was negligent because it had a duty to TC Homes to
give accurate information regarding the land and drainage issues that were to be developed as
Prairie Run. The elements of negligence are (1) duty, (2) breach of that duty, (3) the breach
was the proximate cause of the harm to the plaintiff, and (4) damage. Gilbertson v. Leininger,
599 N.W.2d 127, 130 (Minn. 1999). The. existence of a duty is for the court to determine as a
matter of law. Larson v. Larson, 373 N.W,2d 287, 2891(Minn. 1985), If the defendant lacks a
duty to the plaintiff, there can be no negligence. Rasmussen v, Prudential Ins, Co., 152 N.W.2d
359, 362 (Minn. 1967). Similarly, in a negligent misrepresentation claim, the entity that has
misrepresented a fact, must owe a duty of care to the entity to whom they are providing the
I
information. Safeco Ins. Co. v. Dain Bosworth, Inc. 531 N,W,2d 867, 870 (Minn. App. 1995). A
city is only liable for misrepresentation. of fact and not of law. Mohler v. City of Saint Louis Park,
643 N.W.2d 623, 637 (Minn. App. 2002) review deniedi(Jul. 16, 2002). Further, if the city did
misrepresent a fact, it would only be liable if the public has no other access to the fact, except
through government employees. Id.
13/17
12
AUG-08-2007 WED 10,00 AM FAX NO, P, 14/17
As with TC Homes' action against SEH, the City must owe more than just a public duty
to TC Homes. See Cracraft, 279 N.W.2d at 803-4, There must have been a specific duty owed
by the City to TC Homes. See id. As with SEH, the City's approval of the final plat is for the
benefit of the public as a whole and does not insure the compliance to city zoning regulations.
See Hoffert, 199 N.W.2d at 160, Unlike in Crilbed v, Billman, 371 N.W.2d 542, 546 (Minn.
1985), the City did not require Gold Key or TC Homes to build Prairie Run in a specific manner,
instead the City merely required that the final plat meet the general zoning ordinances.
In applying the Cracraft factors for a specific duty, it is clear that the City does not owe
TC Homes or Gold Key a duty. (See prior discussion regarding SEH's negligence)
A, No Actual knowledge of a Dangerous Condition
The City must have knowledge of a dangerous condition in order for a special duty to be
created. See Cracraft, 279 N.W.2d at 806. The City must have actual knowledge of the
dangerous condition, and not merely constructive knowledge. See Hage v. Stade, 304 N.W.2d
283, 288 (Minn. 1981). TC Homes, Gold Key, and Hedlund have alleged that the City in 2004
had photographs of a recent flood event and other letters that would indicate a high water level
different than the line of permanent vegetation used in the Prairie Run plan. The City did not
have a Flood Plain Report as to the high water levels or the 100-year flood levels until April
2006. Unlike in Pettingerv. Village of Winnebago, 58 N,W,2d 325, 329 (Minn. 1953), where the
court held that a municipality had actual or constructive knowledge "sufficiently long to enable it
to remedy a condition...," the pictures were taken of the flood event days before approval of the
plat. This was not sufficiently long enough to show actual or constructive knowledge on the part
of the City. In 2004, when the City approved the final plat for Prairie Run, there is no evidence
that the City had actual knowledge that the use of the line of permanent water vegetation as the
ordinary high water level in the engineering plan for Prairie Run would lead to a dangerous
condition for the development.
B. No reasonable reliance on the part of TC Homes for representations made by the City.
TC Homes must have reasonably relied on the City's representations and conduct. See
Cracraft, 279 N.W.2d at 806-7, The reliance must be "based on specific actions or
representations which cause the persons to forego other alternatives of protecting themselves.
Id. at 807. However, TC Homes did not deal directly with the City. Instead, it contracted with
Gold Key to build homes in Prairie Run. Any representations the City may have made in
regards to approving the final plat of Prairie Run that TC Homes may have relied upon in
signing the contract are nothing more than the general representations the City makes in plat
13
AUG-08-2007 WED 10:00 AM FAX N0, P, 15/17
approval. These representations have already been shown to only be part of the City's general
obligations to the public and do not form the basis for a specific duty to be owed to TC Homes.
C. No special duty is formed by an applicable ordinance, statute, or regulation.
A special duty may be created when an ordinance or statute sets forth mandatory acts
for the benefit of a specific class of persons and not the public as a whole. Cracraft, 279
N.W.2d at 807. The applicable ordinances in this instance involve zoning, drainage, and flood
plains, These are created to provide order in the development of cities and municipalities.
Further, flood plain and grading ordinances are designed to not only protect flooding in homes
built directly on the flood plain, but also all homes, buildings, and businesses in the city that
could also be flooded if poor grading were allowed. These statutes and ordinances do not
protect a specific class of persons, Instead they protect the entire City. Therefore, no special
duty is created by statute or ordinance.
D. The City did not increase the risk of harm to TC Homes.
The final factor to determine whether the City has a special duty to TC Homes is whether
the City increased the risk of harm to TC Homes. See Cracraft, 279 N.W.2d at 807. An
inspection undertook by the city that does not detect a dangerous condition, does not by itself
increase the risk of harm. In re Norwest Bank Fire Cases 410 N.W.2d 875, 879 (Minn. App.
1987) (holding that a fire inspection that did not reveal fire danger did not increase risk of harm).
This is especially true when the dangerous condition was present both before and after the
inspection took place. Id. The alleged withholding of photographs of the 2004 flood and the
approval of the preliminary and final plats of Prairie Run, like a fire inspection, did not create a
risk that was not already present at Prairie Run, The City did not increase any risk to TC
Homes. Therefore, as none of the four Cracraft have been met, the City does not owe a duty to
TC Homes.
E. Even if the City had a specific duty to TC Homes, the City is immune from suit.
A city is "subject to liability for its torts and those of its officers, employees and agents
acting within the scope of their employment or duties whether arising out of a governmental or
proprietary function." Minn. Stat. § 466.02, However, a city is not liable for a "claim based upon
the performance or the failure to exercise or perform a discretionary function or duty, whether or
not the discretion is abused." Minn. Stat § 466.03, subd. 6. This exception only applies to city
decisions or conduct based on policy, involving social, political, or economic considerations,
otherwise known as planning level decisions. Nusbaum v. Blue Earth County, 422 N.W.2d 713,
722 (Minn. 1988). However, the protection does not extend to professional or scientific
judgments made by a city. Id. Nor does the protection extend to operational level decisions,
i -1
AUG-08-2007 WED 10:00 AM FAX N0, P. 16/17
i.e., decisions that merely put a predetermined plan into effect. Masonick v. J.P. Homes, 494
N.W.2d 910, 912 (Minn. App. 1993). Under Minnesota law, the granting of building permits is a
discretionary action. Mohler v. City of Saint Louis Park, 643 N.W.2d 623, 639 (Minn. App. 2002)
review denied (Jul. 16, 2002), Issuing certificates of occupancy is also a discretionary function.
Masonick, 494 N.W.2d at 913. By determining that building ordinances, the issuance of
certificates of occupancy, and building Inspections are discretionary functions of municipalities,
the municipalities are encouraged to continue those activities for the protection of the public
without becoming insurers of the construction of those buildings. See id.; see also, Hoffert, 199
N.W.2d 158. Likewise, the decisions that the City made in regards to approving the final plat of
Prairie Run, issuing building permits and certificates of occupancy, and later, denying building
permits and certificates of occupancy, were discretionary and immune from suit. Unllike the
decisions made by the city in Sota Foods, Inc, v. Larson -Peterson & Assoc., Inc., 497 N,W.2d
276 (Minn. App. 1993), where the city of Park Rapids made scientific and professional
judgments when building a waste water treatment facility, the decisions the City and allegations
in this suit do not go to how the City is designing drainage from the watershed. Instead, the
City is deciding how to apply its building and zoning ordinances to Prairie Run. These are
discretionary decisions and not scientific decisions and are therefore are protected by statutory
immunity.
Additionally, the City is protected by vicarious official immunity. Official immunity
protects a public official who by law must exercise judgment or discretion from tort claims,
unless the public official acted willfully or maliciously. Wiederholt v. City of Minneapolis, 581
N.W.2d 312, 315 (Minn. 1998). Official immunity applies when the public official's actions are
discretionary, but does not apply when the actions are ministerial. Id. A discretionary action
involves individual professional judgment and factors in the specific nature of the event. Id. A
ministerial action does not involve any discretion and it is "absolute, certain, and imperative,
involving merely execution of a specific duty arising from fixed and designated facts." Id.
(quotations omitted). Vicarious official immunity protects a city from a tort claim based on the
actions of an employee. Id. at 316. Vicarious official immunity is applied in order to prevent
public officials from second-guessing their actions in fear of their public employer being liable for
the public officials' actions and decisions. Anderson v. Anoka Hennepin Independent School
Dist. 11, 678 N.W.2d 651, 664 (Minn. 2004). Further, vicarious official immunity applies
irrespective of whether the public official or employee is named in the suit. Wiederholt, 581
N.W.2d at 316-17. In approving the final plat, issuing (and not issuing) building permits and
certificates of occupancy, the City and its employees were not merely executing a specific duty
15
AUG-08-2007 WED 10:00 AM FAX NO, P. 17/17
that was fixed and absolute. The decisions were based on judgments and the facts of the
Prairie Run development. Therefore, the City has vicarious official immunity.
IV.
City's Motion to dismiss TC Homes Mandamus Petition is denied.
The City argues that TC Homes did not correctly petition for a Writ of Mandamus.
Minnesota Statutes § 586.08 states;
No pleading or written allegation, other than the writ, answer, and demurrer, shall be
allowed. They shall be construed and amended, and the issues tried, and further
proceedings had, in the same manner as in a civil action.
Minnesota Rules of Civil Procedure allow a party to file inconsistent claims based on legal or
equitable grounds or both. Minn. R. Civ. P. 8.05. Additionally, a party may both pursue a writ of
mandamus and a tort claim in the interests of judicial efficiency and economy. Nolan and Nolan
V. city of Eagan, 673 N.W.2d 487, 494-95 (Minn. App. 2003) review denied (Mar. 16, 2004).
Procedurally, TC Homes may bring both a petition for mandamus and tort and contract claims.
Therefore, the City's motion to dismiss the petition for a Writ of Mandamus is denied.
V.
Attorney's fees and damages will not be awarded under this order.
The questions of an award of attorneys' fees and damages are questions of fact that will
be reserved for trial.
S.M.H.
16