2008-02-07 LOC Copy
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"Also licensed in Illinois
COURI, MACARTHUR &
RUPPE, P.L.L.P.
Attorneys at Law
705 Central Avenue East
PO Box 369
St. Michael, MN 55376-0369
(763) 497-1930
(763) 497-2599 (FAX)
courimacarthur@earthlinknet
Kristen H. Carr
Kyle R. Hartnett
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Michael C Couri.
Andrew J. MacArthur
Robert T. Ruppe"
""Also licensed in California
February 7, 2008
Mr. Aaron A. Dean
F abyanske Westra Hart & Thomson
800 LaSalle Avenue
Suite 1900
Minneapolis, MN 55402
Re: City of Albertville; Hunters Pass Estates.
Dear Mr. Dean:
I have received your letter of January 31, 2008 and am enclosing a copy of the
letter of credit provided to the City by Hunters Development, LLC and issued by
Contractors Capital Corporation as a requirement of the approval of the Hunters Pass
subdivision. That letter of credit expires on August 12,2008 and is currently held in the
amount of$204,120.
As we discussed on the phone last week and contrary to the assertions set out in
your letter, the City has not approved using the letter of credit to pay your client, S.J.
Louis. While City staff will likely recommend to the City Council that the City draw on
the letter of credit to pay S.J. Louis, that recommendation has not yet gone to the City
Council, nor has the City Council taken any action on this issue. Further, that
recommendation would be subject to the following conditions, which have not yet been
satisfied:
· That your client first obtain a court order determining that the City has the
authority under the Developer's Agreement to draw on the letter of credit for the
benefit ofS.J. Louis. I would want to see that court order be issued in a
proceeding in which Hunters Development, LLC, the City, and Contractors
Capital Corporation are parties.
· That the City's initial draw on the letter of credit not fall below $102,060.00,
which represents 5% of the cost of the municipal improvements, which is the
minimum amount of surety required to be maintained under the developer's
agreement until August 12,2008. In the event that the City's inspection of the
Mr. Aaron A. Dean
February 7, 2008
Page 2
improvements in early August indicates that no further warranty work is required,
the City Council may choose to allow a draw on the letter of credit below the
$102,060.00 amount to pay SJ. Louis before the letter of credit expires.
· That any unpaid City bills owed by Hunters Development, as well as any expenses
incurred by the City in any litigation establishing the City's right to draw on the
letter of credit and in actually drawing on the letter of credit be paid from any
letter of credit draw first, before any amounts are forwarded to S.J. Louis.
· That the City Council determines as a matter of policy that it desires to draw on
the letter of credit to pay S.J. Louis. As noted earlier, this issue has not yet been
brought before the City Council for a decision.
As also noted in our discussion last week, I do not believe that Hunters Development,
LLC has come forward with a formal request to reduce the letter of credit from the
current $204,120.00 amount. Your client's objection to such a request is duly noted and
will be passed on to the City Council should such a reduction request come forward.
In our discussion last week regarding the possibility of your client bringing some
sort of declaratory judgment action seeking an order authorizing the City to draw on the
letter of credit to pay your client, you informed me that your client was also
contemplating bringing an action against the City under Minn. Stat. 574.29, seeking to
make the City directly liable to your client for not obtaining a payment bond as required
by Minn. Stat. 574.26. At the time, I told you that I thought that Section 574.26 did not
apply to developer's agreements where municipalities required the construction of
municipal improvements as a condition of the subdivision, but I could not cite any
authority for that proposition. That authority is Minn. Stat. 462.358, Subd. 2A. That
section provides in part:
The [ subdivision] regulations may permit the municipality to condition its
approval on the construction and installation of sewers, streets, electric, gas,
drainage, and water facilities, and similar utilities and improvements or, in lieu
thereof, on the receipt by the municipality of a cash deposit, certified check,
irrevocable letter of credit, bond, or other financial' security in an amount and with
surety and conditions sufficient to assure the municipality that the utilities and
improvements will be constructed or installed according to the specifications of
the municipality. Sections 471.345 and 574.26 do not apply to improvements
made by a subdivider or a subdivider's contractor.
The improvements constructed by your client were in fact improvements required by the
City as a condition of approval of the Hunters Pass plat, and therefore, do not fall under
the requirements of Minn. Stat. 574.26. Accordingly, your client has no cause of action
against the City under Minn. Stat. 574.29. I would expect that any litigation brought by
Mr. Aaron A. Dean
February 7, 2008
Page 3
your client in relation to the improvements installed in Hunters Pass would not contain a
claim against the City under Minn. Stat. 574.29.
Finally, I suggest that you contact Contractors Capital Corporation to see if they
will agree to the City drawing on the letter of credit and paying your client, thus avoiding
the litigation expenses that the City will incur and will further draw on the letter of credit
and the litigation expenses that Contractors Capital Corporation would also incur. Given
the language in the developer's agreement, I would not be surprised if Contractors
Capital Corporation agreed to your clients request.
Please keep me apprised of your progress in working with the bank. If you
conclude that some sort of declaratory action is necessary, I would appreciate it if you
would provide me with a draft copy ofthe complaint prior to service upon any party.
Please feel free to contact me if you need any additional information.
Enclosure
Sincerely,
nJJ C~.
Michael C. Couri
Couri, MacArthur & Ruppe, P.L.L.P.
Cc: Larry Kruse
Tina Lannes
Adam Nafstad
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