2007-09-07 Judge Mottl's OrderSTATE OF MINNESOTA
COUNTY OF WRIGHT
Gold Key Development, Inc.,
Plaintiff,
VS.
City of Albertville,
Defendant/Third Party Plaintiff,
VS.
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
VC Homes, Inc.,
Plaintiff,
VS.
Gold Key Development, Inc.,
Defendant/Third Party Plaintiff,
VS.
Hedlund Engineering Services, Inc.,
Third Party Defendant,
LIM
City of Albertville,
Defendant/Third Party Plaintiff,
VS.
Short Elliott Hendrickson, Inc.,
Third Party Defendant.
DISTRICT COURT
CIVIL DIVISION
TENTH JUDICIAL DISTRICT
Type: Declaratory Judgment, Contract
Court File No. 86-CV-06-2998
Type: Declaratory Judgment, Contract
Court File No. 86-CV-06-4997
FINDINGS OF FACT,
CONCLUSIONS OF LAW,
AND ORDER
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The above -captioned matter came on for hearing before the Honorable Kathleen Mottl,
Judge of District Court, on June 11, 2007 at the Wright County Government Center in Buffalo,
Minnesota, pursuant to multiple motions. Specifically at issue were: (1) the request of Majestic
Builders and Legacy Homes to intervene and be added as parties to the action; and (2) the City of
Albertville's motion to amend its counterclaim against Gold Key Development, Inc., and to
amend the current scheduling order accordingly to allow for discovery on the new counterclaim.
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The following appearances by counsel for the various parties were entered and noted on
the record at the outset of the hearing:
Cindi S. Matt of Johnson, Larson, Peterson & Matt, P.A., for Gold Key Development,
Defendant and Third -Party Plaintiff,
Jason J. Kuboushek of Iverson Reuvers, LLC, on behalf of the City of Albertville,
Defendant and Third -Party Plaintiff,
Robert W. Kettering of Arthur, Chapman, Kettering, Smetak & Pikala, P.A., on behalf of
Third -Party Defendant Hedlund Engineering Services; and
Stephen E. Yoch of Felhaber, Larson, Fenton & Vogt, P.A., representing Plaintiff T/C
Homes, along with potential intervening plaintiffs Majestic Builders and Legacy Homes.
Neither Short Elliott Hendrickson, Inc. nor its attorney was present, and the Third -Party
Defendant takes no position as to the motions at hand.
Counsel for the parties presented their respective oral arguments, and the record was
closed with both motions taken under advisement at the conclusion of the hearing. On August 7,
2007, Judge Stephen M. Halsey of this Court issued his Findings of Fact, Conclusions of Law,
Order, Memorandum, and Judgment, ruling on the parties' various motions for summary
judgment, argued on May 15, 2007. The Court temporarily reopened the record upon request,
with the attorneys submitting letter briefs summarizing the impact of Judge Halsey's order on the
pending motion to intervene and motion amend the complaint and scheduling order. Majestic
Builders has subsequently notified attorney Yoch that it no longer wishes to participate in the
litigation, and Majestic has withdrawn its request to intervene.
After due consideration of all the files, records, and proceedings herein, the Court, being
fully advised in the premises, now makes the following findings and determinations:
1. Gold Key Development, Inc. ("Gold Key") is a corporation formed and existing under the
laws of the State of Minnesota, with a principal place of business located at 20170 75'h
Avenue North in the City of Corcoran, County of Hennepin, State of Minnesota.
2. The City of Albertville ("the City" or "Albertville") is a municipality located in the
northeastern portion of Wright County, Minnesota, with all the usual statutory powers and
obligations accorded to such municipal entities under the laws of the State of Minnesota.
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3. As implied by its full name, Gold Key is primarily engaged in the business of developing
real estate. During 2002 and 2003, Gold Key devised an initial plan for the residential
portion of Prairie Run, a mixed -use retail and housing development in Albertville.
4. Gold Key hired Hedlund Engineering, Inc. ("Hedlund") to provide planning, engineering,
and surveying services in conjunction with developing the Prairie Run subdivision.
Hedlund is a domestic corporation officed at 2005 Pin Oak Drive in Eagan, Minnesota.
5. Through an oral contract, the City retained Short Elliott Hendrickson ("SEH") to review
plat submissions for the Prairie Run project, to ensure compliance with applicable local,
state, and federal statutes and regulations. SEH is a Minnesota corporation engaged in the
business of providing engineering, architectural, and planning services, with its corporate
office located at 3535 Vadnais Center Drive in St. Paul, Minnesota.
6. Gold Key submitted its preliminary plat to the Albertville City Council for review on June
12, 2003. Hedlund designed the preliminary plat, including grading and drainage plans
that used the line of permanent aquatic vegetation as the estimated high water level.
7. On June 25, 2003, the City issued a planning report stating that while the preliminary plat
was subject to SEH's review and approval, the plat was largely consistent with Albertville
ordinances. Subsequent to issuance of this report, the Planning and Zoning Commission
and the City Council respectively approved the preliminary plat on July 8, 2003 and
August 7, 2003. Approval of the plat was conditioned on review and approval by SEH, but
SEH did not conduct such a review of the preliminary plat.
8. From a major rainfall event occurring on June 24, 2003 (one day prior to issuance of the
City's planning report), SEH determined the high water level in Prairie Run to be 950.5
feet above sea level. In April of 2004, Hedlund raised the grading for portions of Prairie
Run, with the lowest opening for any of the homes being set at an elevation of 952.5 feet.
9. At an Albertville City Council meeting on June 7, 2004, the City approved the final plat
for Prairie Run. Approximately five weeks later, Gold Key and the City entered into a
planned unit development agreement for Prairie Run (the "Development Agreement"),
filed with the Wright County Recorder as Document # A940358.
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10. Paragraph 13.I of the Development Agreement required any structural openings to be a
minimum of two feet above the highest known surface level or ordinary high water level,
or at least one foot above the 100-year flood elevation. In the event that none of these
benchmarks are known or there is insufficient data to ascertain high water levels, the
Development Agreement provides that the line of permanent aquatic vegetation should be
used as a substitute for the ordinary high water level.
11. Following final plat approval and execution of the Development Agreement, Gold Key
commenced site development work at Prairie Run and entered into building and financing
agreements, which included borrowing in excess of $2,000,000 to finance the project.
12. Gold Key entered into option agreements with multiple homebuilders to develop individual
lots and build residences on those lots. The contractors were to obtain building permits
from Albertville prior to construction, and the City would review individual site plans to
ensure the plans were in compliance with applicable ordinances and met the guidelines of
the final plat approved for Prairie Run.
13. T/C Homes, hic. ("TC Homes"), the Plaintiff herein, is one of the builders that entered into
an option agreement with Gold Key to construct homes at Prairie Run. TC Homes is a
domestic corporation based in Dayton, Hennepin County, Minnesota.
14. A heavy rainstorm took place in Albertville during late summer of 2005, causing standing
water in portions of Prairie Run. As a result, the City suspended a building permit for one
lot and required Gold Key to revise grading and elevation for affected portions of the
subdivision. Gold Key complied with the City's directive by raising pad elevations and
modifying grading for remaining unbuilt lots in the development.
15. In a November 29, 2005 letter to Gold Key, the City declared Gold Key to be in default of
the Development Agreement and declared a moratorium on construction in Prairie Run,
based on information that the 100-year flood elevation for the area was 951.5 feet. This
figure was obtained from a document regarding review of culvert sizing for a nearby ditch
(County Ditch 99), authored on or about November 21, 2000.
16. At the time of the moratorium, six houses had already been constructed in Prairie Run
based on the minimum elevation of 952.5 feet for structural openings. All other housing
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site pads were graded to the revised figure of 953.5, as agreed upon after review of the plat
following the street ponding in August or September of 2005.
17. The City hired a new engineering firm, Bolton & Menck, who commissioned two studies
during early 2006 concerning water elevations for the Prairie Run vicinity. The 100-year
flood elevation was determined to be 951.5 feet above sea level in February of 2006, but
was revised to 949.9 feet two months later. The April 2006 revised study also found a
"highest known surface water elevation" of 951.47 feet above sea level.
18. This litigation was commenced during the summer of 2006 in Court File # 86-CV-06-
2998, with Gold Key alleging, inter alia, claims of negligence and breach of contract
against Albertville and SEH, and the City asserting breach of contract claims against Gold
Key. TC Homes subsequently filed claims against Gold Key and Albertville in a separate
action (File # 86-CV-06-4997); the City and Gold Key asserted various third party claims,
with Hedlund and SEH brought in as third party defendants. The files were consolidated
for hearing by court order on August 31, 2006.
19. During the course of proceedings, Gold Key and TC Homes moved for partial summary
judgment against the City and SEH, with the latter two parties moving for full summary
judgment on all claims against them, and in favor of the City's contractual claims.
20. After hearing on the summary judgment motions, Judge Stephen Halsey issued his
Findings of Fact, Conclusions of Law, Order, Memorandum, and Judgment (hereinafter
"Order for Partial Summary Judgment"), which ruled as follows, in relevant part:
• The City's motion to dismiss TC Homes' negligence and negligent misrepresentation
claims was granted
• The City's motions to dismiss Gold Key's declaratory judgment and breach of
contract claims, along with TC Homes' mandamus claim, were all denied
• Gold Key's motion for summary judgment in favor of its claims against SEH was
denied
• Gold Key's motion for summary judgment in favor of its against the City was granted
in part, finding that the City breached the Development Agreement, with damages
remaining to be determined
• SEH's motions to dismiss the negligence and breach of contract claims by both Gold
Key and TC Homes was granted
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21. In addition to the Order for Partial Summary Judgment, Judge Halsey issued a
supplemental order granting Gold Key's motion for estoppel, thereby prohibiting the City
from enforcing its building moratorium for Prairie Run and requiring issuance of building
permits and certificates upon proper application.
22. The City now seeks to amend its counterclaims to assert an additional breach of contract
claim against Gold Key, based on violation of Minnesota Pollution Control Agency
(MPCA) regulations and permits. However, the Court finds that such a claim is virtually
identical to the City's claims against Gold Key that were already dismissed by Judge
Halsey in his Order for Partial Summary Judgment. The issue of Gold Key's contractual
liability has been decided, and there is no need to allow Albertville to assert new claims.
23. With regard to Legacy Homes' motion to intervene, the Court concludes that no substantial
prejudice would be caused upon any party if Legacy is allowed to participate in the
litigation, even at this late stage. Legacy has agreed to be bound by Judge Halsey's Order
for Partial Summary Judgment to the same extent as TC Homes, and will be asserting the
exact same claims as TC Homes. Additional discovery time and expense created by
Legacy Homes' intervention will be negligible.
24. Conversely, permitting Legacy Homes to intervene in the current action will promote
judicial efficiency and avoid extended re -litigation of the same issues involved here.
25. This matter is scheduled for a three day jury trial, to commence on December 17, 2007.
The previous scheduling order specified a discovery deadline of June 15, 2007, with all
motions to be filed by August 1, 2007. Judge Michelle Larkin recently signed new
scheduling orders for trial, which do not impact these dates above.
Based on the above findings and determinations, the Court now makes the following:
41 '7
1. The City's motion to amend its counterclaims against Gold Key is DENIED in its entirety.
2. Legacy's motion to intervene is GRANTED, and Legacy may be added as a party to this
action upon filing of a valid complaint.
Page 6 of 7
3. Legacy is bound by Judge Halsey's Partial Summary Judgment as if it were in the same
position as TC Homes, and may only file claims similar in form to TC Homes' complaint
against Gold Key in this matter.
4. Discovery is extended for 45 days from the date of this order, with regard to Legacy's
claims against Gold Key and any resulting cross -claims and counterclaims.
5. Any cross -claims or counterclaims to be asserted as a result of Legacy's claims against
Gold Key must be served and filed within 30 days of this order, and must be substantially
similar in scope and form to existing counterclaims and cross -claims.
6. Trial will remain as scheduled for December 17, 2007, and the scheduling orders signed by
Judge Larkin will remain in full force and effect, with the exception of the additional time
granted for third party claims and discovery described above.
7. All other motions and requests of the parties not specifically addressed herein are denied.
Dated this 714-4� day of September, 2007 By the Court:
j4 &
Kathleen A. Mottl,
Judge of District Court
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