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2007-04-17 Summary Judgment MemoSTATE OF MLNNESOTA COUNTY OF WRIGHT DISTRICT COURT TENTI I JUDICIAL DISTRICT CASE TYPE: Declaratory Judgment/Breach of Contract Court File No. 86-CV-06-2998 Gold Key Development, Inc., a Minnesota corporation, Plaintiff, yS. City of Albertville, Defendant/Third Party Plaintiff, as. Short Elliott Hendrickson, Inc.. Third Party Defendant. T'C I lorries, Inc., a Minnesota corporation, Plaintiff, Court File No. 86-CV-06-4997 vs. GOLD KEY'S MEMORANDUM OF Gold Key Development, Inc., a Minnesota corporation LAW IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT Defendant/Third Party Plaintiff, vs. Hedlund Engineering, Third Party Defendant, vs, City of Albertville, Defendant/Third Party Plaintiff, vs. Short Elliott Hendrickson, Inc. Third Party Defendant. INTRODUCTION "Impossible" was the word that the City's Zoning Administrator used to describe the City Engineer failing to review the plat of Prairie Run prior to the time the City approved it. (Sutherland Depo at 82). Now the Developer finds itself in the "impossible' position of having a moratorium on development in Prairie Run imposed by the City two and a half years after the Plat of Prairie Run was approved by the City, and after the Developer has spent millions of dollars in reliance upon the approved Plat. This case involves a residential devclopment in Albertville called Prairie Run, which was being developed by Plaintiff Gold Key Development, Inc. The City of Albertville approved the Plat of Prairie Run in June of 2004. Thereafter, Gold Key and various builders proceeded to spend millions of dollars in developing the infrastructure and homes in Prairie Run. Over a year and a half after the Plat of Prairie Run was approved, and after homes were already constructed, the City refused to issue any more building permits or certificates of occupancy for certain lots that the City alleged were all of the sudden in violation of its ordinances regarding elevations, based upon "new-" information that the City discovered regarding the 100-year flood elevation numbers. In reality the "new-" information was information that was in the hands of the City and the City Engineer, Short Elliot Hendrickson, prior to the time the Prairie Run Plat was approved, but neither the City nor the City Engineer shared this information with Gold Key or its engineer, Hedlund Engineering. In May 2006, Gold Key sued the City for breach of the Development Agreement and a declaratory judgment that the City be compelled to issue building permits and certificates of occupancy. Through various claims and cross -claims, and the consolidation with an action brought by one of the builders, there are now five parties to this litigation with various claims against each other. During the discovery process, it has come out that the City Engineer failed to conduct an official review of the grading and drainage plans that were submitted by Gold Key and its eneineer as part of the plat approval process. Eventually, in December 2006, the City declared a moratorium on development in the entire Prairie Run development, even as to those lots that the City concedes do not have anv elevation issues. After sifting through the mountain of paper that has been produced and depositions that have bean taken in this case, the undisputed facts demonstrate that, as a matter of law, 1) Gold Kcy was justified in relying upon the line of permanent aquatic vegetation as the estimated high water level when it prepared its grading and drainage plans, when the use of that line was approved by the City and consistent with the Development Agreement and City ordinances; 2) the Plat of Prairie Run complies with the Development Agreement and, to the extent they are applicable, City Zoning and Subdivision Ordinances, and no homes in Prairie Run are threatened with flooding; 3) SEII was negligent and breached its contractual obligations in failing to review Gold Key's plat submissions and is liable to Gold Key as a result; and 4) the City is estopped from halting development in Prairie Run, based on elevation numbers that the City determined cfier it had already approved the Plat of Prairie Run, when Gold Key and various builders have incurred such extensive obligations and expenses in reliance upon the approved Plat, that it would be highly inequitable and unjust to allow the moratorium. Accordingly, Gold Key is entitled to judgment as a matter of law as to these issues, and the only issue that remains for trial is the issue of damages. DOCUMENTS COMPRISING THE RECORD Verified Complaint of Gold Key Development, Inc. 3 2. City's Answer and Counterclaim to Gold Key's Complaint 3. Gold Key's Reply to City's Counterclaim 4. Complaint of TC Homes ("TC Complaint") 5. City's Answer to Complaint ofTC Homes and Cross Claim against Gold Key 6. Gold Key's Reply to Cross -claim of City 7. Gold Key's Answer to Complaint of TC Homes. Cross -claim and Third Party Complaint Against Hedlund 8. City's Answer to Cross -claim of Gold Key 9. Hedlund's Answer to Third Party Complaint of Gold Key 10. City's Third Party Complaint Against SEH 11. Answer of SEH to City's Third Party Complaint 12. Gold Key's Complaint and Amended Crossclaim Against SHE ("GK Amd. Complaint") 13. SEH's Answer to Gold Key's Amended Crossclaim 14. TC's Complaint and Amended Crossclaim Against SEH I �. Affidavit of Cinch S. Matt; Esq. and exhibits thereto 16. Affidavit of Brian Mundstock and exhibits thereto 17. Affidavit of Dean Johnson and exhibits thereto 18. Affidavit of Kevin Conway ISSUES PRESENTED The issues presented by this motion for summary j udgment are: I) Whether Gold Key was justified in relying upon the line of permanent aquatic vegetation as the estimated high water level. which was approved by the City and consistent with the Development Agreement and City ordinances? �) Whether the Plat of Prairie Run complies with the Development Agreement and; to the extent they are applicable. City Zoning and Subdivision Ordinances? 9 3) Whether SEH was negligent and breached its contractual obligations in failing to review Gold Key's plat submissions, and is liable to Gold Key for the same" 4) Whether the City is estopped from imposing a moratorium on development in Prairie Run; based on "new" elevation numbers that the City determined after it had already approved the Plat of Prairie Run; and after Gold Key and various builders have incurred extensive obligations and expenses in reliance upon the approved Plat; such that it would be highly inequitable and unjust to allow the moratorium? STATEMENT OF UNDISPUTED NIATERIAL FACTS The Parties Plaintiff Gold Key Development, Inc. (hereinafter "Developer' or "Gold Key") is the developer of a subdivision of 52 single family homes and townhomes located in the Defendant City of Albertville (hereinafter "City') and known as Prairie Run.I (GK Amd. Complaint" 1, 3, 101). Dean Johnson is the principal of Gold Key who was primarily involved with the development of Prairie Run. Gold Key's engineer was Third Party Defendant Hedlund Engineering (hereinafter "Hedlund`). (GK Amd. Complaint, 434, 5, 6) One of the builders of the homes in Prairie Run is Plaintiff/Defendant TC Homes Inc. (hereinafter "'TC').' (GK Amd. Complaint 4; 56). At the pertinent times hereto, the City Attorney vas N ichael Couri (hereinafter "Couri'), the City Administrator was Linda Goeb (until January 2004) and then Larry Kruse (from January 2004 through the present), the City Planner was Al Brixius from Northwest Associated Consultants (hereinafter 'NAC" ), the City Zoning Administrator was Jon Sutherland and the The Property that is the subject of the Development Agreement and of the Plat is legally described as follows: Lots 1-15. Block I, Lots 1-38. Block 2. Outlot A. Prairie Run, Wright County. Minnesota The other two builders, 'Majesticand Legacy, are not parties to this litigation. 5 Cites engineer was Third Party. Defendant Short Elliot Hendrickson, Inc. (hereinafter "SEH" ).3 (Carlson Deno at 44-45; Kruse Depo at 9).4 Peter Carlson. a principal with SEH. had served as the Cites Engineer since approximately January 1995. (Carlson Depo at 16-17). In 2005, the City replaced SEH with a new City Engineer; Bolton & Menk, in part due to dissatisfaction that the City had with SEH based upon flooding that was happening in the Albert Villas development.6 (Kruse Depo at I I-13). The Plat of Prairie Run The Concept Plans In late 2002 or early 2003, Gold Key developed a concept plan for the residential portion of Prairie Run.' Throughout the first few months of 2003. Dean Johnson had several meetings with City staff, including Peter Carlson, Linda Goeb, Michael Couri, and Alan Brixius, about the concept plan, during which time the use of the line of permanent aquatic vegetation as the estimated high water level was discussed. (Johnson Depo at 28-30, 38-40, 130 — 133; Hedlund ' SEI-1 was not an employee of the City, but was instead an independent consultant or contractor. (Carlson Depo at 17-I8; Kruse Depo at 15; Ntoberg Depo at 8). ' Throughout this Memorandum, deposition transcripts are referred to by the last name of the deponent The complete deposition transcripts are attached to the Affidavit of Cindi S. Matt. The City had SEH continue working on the Prairie Run development until June 2006. even though Bolton & Menk became the official City Engineer in early 2005. (Moberg Depo at 9-10). 't Albert Villas is a residential development across County Road 18 from. and south westerly of, Prairie Run. Albert Villas is "downstream" of Prairie Run on County Ditch -9, and is alleged to be a contributing factor to the alleged problems that the City claims Prairie Run is now experiencing, in that water from Prairie Run drains into County Ditch -9 and Albert Villas is not able to drain properly, which backs up County Ditch � 9 and causes a back up in the westerly cul-de-sac in Prairie Run, during significant rain events. (Kruse Deno at 53-54). SEH was both the City Engineer and the design engineer for the commercial portion of the Prairie Run Plat. htedlund Engineering was the design engineer for the residential portion of the Prairie Run Plat, which was the only portion that Gold Key was developinl-. In addition, SEH was responsible for preparing the Construction Plan set for the entire Prairie Run development (both commercial and residential) and submitting those for bids. (Carlson Depo at 48-49). 6 86-87). After each meeting, Gold Key made revisions to the concept plans, based upon the input, comments and suggestions from the City and its consultants. (Id.) On February 3. 2003, the Cit} Council directed Gold Key to work with City staff from that point forward and proceed throuuh "the normal avenues", which would include working with the Cit} Planner and the City Engineer. (Carlson Depo at 59-61). Preliminary Plat Submissions Sometime prior to preliminary plat approval a meeting was held in a room located off of council chambers, and it was discussed that the line of permanent aquatic vegetation would be used to establish the heights of building pads. (Johnson Depo at 130-132. 149 - 150). At this saute meeting, which was attended by Dean Johnson, Peter Carlson, Al Brixius, Linda Goeb and Kevin Conway (the realtor who showed the property that would become Prairie Run to Gold Key)_ Peter Carlson stated that the Albert Villas development and the property that would become Prairie Run were in the same watershed. and that no storm water management plan or study existed for the area. (Conway Aff. 2, 3, and 4). On June 12, 2003, Gold Key submitted a zoning request application, requesting rezoning and subdivision approval for the preliminary plat of Prairie Run, along with the necessary documentation for preliminary plat approval, including grading and drainage plans drafted by Hedlund which used the line of permanent aquatic vegetation as the estimated high water level. (iviatt Aff.. Ex. I, Hedlund 86-87). On June 25. 2003, after reviewing the preliminary plat submissions; the City Planner issued a Planning Report, which stated, in pertinent part: Grading and Drainage The Preliminary Plat indicates a storm water retention pond both at the northern portion of the site and at the western most portion of the site. The City Engineer should comment as to any issues with regards to maintenance of these ponds. 7 The submitted grading and drainage plan will be subject to review and approval kv the City Engineer. Staff has some concerns as to the drop in grade along the northern portion of the site. The City Engineer should make comment as to the need for some type of fence or retaining wall. RECOMMENDATION Upon review of the proposed project, it is staffs view that ... the preliminary plat subdividing the site into 52 single family residential lots are generally consistent with . . . the standards of both the Zoning and Subdivision Ordinances. As such, staff recommends approval of both the rezone and the preliminary plat, subject to the conditions listed within this report. (Matt Aff.. Ex. J). Emphasis added. One of the listed conditions was that "The submitted grading and drainage plan will be subject to review and approval by the City Engineer." (Id.). City Attornc; Mike COUri. Peter Carlson of SEH, and the City Administrator were all copied on this Planning Report. (Id.). On the evening of June 24, 2003, the day before the Planning Report was issued, there was a significant rain event in Albertville which produced 8.5 inches of rain in a four hour period.' (Sutherland Depo at 27, Carlson Depo at 64, Matt Aff, Ex K). The City received complaints from at least 56 homeowners whose homes were damaged or flooded during this significant rain event. (Sutherland Depo at 28, 124). Many of the homes that were flooded were in developments that drained into County Ditch 49, which is adjacent to what would become the Prairie Run development. (Sutherland Depo at 28-30). Peter Carlson of SEII was aware of virtually all of these complaints, as .ion Sutherland, the City Zoning Administrator, copied Peter k 100 year storm would produce 5.8 inches of rain in 24 hours, and has a I out of 100 chance of occurrine in any Qiven year. 8.5 inches of rain in 4 hours would be akin to approximately a 5.000 veal storm (a storm which has a .02 percent chance of occurring in any given year). (Mundstock Aff. i 201) 9 Carlson on the inspection notices prepared in response to the complaints and also called Peter Carlson from his cell phone as he was touring the homes affected by the flooding. (Sutherland Depo at 13, 18-20. 32-34, 50-5L 54, 57-58). This was a significant, devastating rain event for Albertville, with news media covering the flooding, a three hour citizen forum about the flooding at a City Council meeting on July 7, 2003, unirilrabitable homes. and a great deal of devastation in the City. (Sutherland Depo at 27. 49-5L 55, 74-78). Mr. Sutherland took photographs of houses affected by the flooding and shared them with `'anyone who was interested" from the City staff, including the City Administrator Larry Kruse and Peter Carlson of SEH. (Sutherland Depo at 15-18, 20-22). I-[owever. no one from the City or SEII bothered to share these photographs, or raise any concerns about the significant flooding and the potential effect on the future Prairie Run development; with Gold Key or Hedlund. (Sutherland Depo at 16.84: Carlson Depo at 144). It is these very photographs, which were available to the City and the City Engineer prior to the time the preliminary plat of Prairie Run was approved, but not shared with Gold Key or Hedlund, which the City eventually used in 2006 to establish the highest known water level, and to declare Gold Ifey in default of the Development Agreement. (Sutherland Depo at 17-18: Schulz Depo at 65-66; Matt Aff. Es L). On July 8, 2003, the Planning and Zoning Commission held a public hearing on the Prairie Run Preliminary Plat. (Sutherland Depo. At 63). Despite commission member Frank Kocon raising a concern about water sitting on the site for about 3+ days. and despite a City Council meeting the night before where the City listened to citizen complaints and held a forum for three hours about the flooding problems, the Commission approved the preliminary plat of Prairie Run without any concerns being raised or brought to the attention of Gold ICey or 9 Hedlund about the grading and drainage plans submitted by Gold Kev. (Sutherland Depo at 63- 66, 77-79). At the August 4, 2003 City Council meeting, the City Council approved the preliminary plat of Prairie Run, and issued Findings of Fact noting that the preliminary- plat is in substantial compliance with the design standards of Albertville Zoning Ordinances. (Carlson Depo at 77- 80: Matt Aff. Ex I). One of the conditions of preliminary plat approval was that it was subject to review and comment by the City Engineer. (Id.) Although City Engineer Peter Carlson was present at the meeting, he made no comments, nor did he raise any concerns about, the grading or drainage plans, despite the fact that he was aware of flooding issues with County Ditch #9. (Carlson Depo at 81-82). Final Plat Submissions In the months following approval of the preliminary plat, Gold Key and Hedlund worked with the City Staff, SEH, and the City Planner. responding to any questions or concerns that were raised about the preliminary plat, and submitting any additional documents that were requested for the final plat approval process. (Johnson Depo 28-30; 33-34; 47-49; Hedlund Depo at 86-8T Kruse Depo at 36;. In November 2003, Hedlund's office contacted SEH to get SEH's comments regarding the requirements for the ponds and what size storm they have to hold on the development, and minimum depth of overflow compared to house pads. (;Matt Aft. Ex. '0) . During this time period, SEH was conducting a flood study of the impact of the June 2003 rain event on the County Ditch 49 watershed. (Carlson Depo at 87-90). Peter Carlson presented his findings regarding the June 2003 rain event at a City Council meeting in September or October 2003, but SEFI did not issue an official report incorporating its findings until June 10 2004. (Id.) SEII's findings regarding the June 2003 rain event established a 100 year flood elevation of 950.5. (Matt Aff. Ex K; Nafstad Depo at 68; Kruse Depo 124-125). SEH and the City did not share the flood study, or information about it, with Gold Key or Hedlund Engineering. (Schulz Depo at 37-39, 70-71; Kruse Depo at 126). In April 2004. Randy Hedlund was called by Jim Schulz of SEH regarding concerns that Jim Schulz had about the grading plans. (Hedlund Depo at 78-81). In response to Jim Schulz' concern about the grading plans, and at his request, Randv Hedlund revised the grading plans to raise the elevation of the building pads on I I lots in Prairie Run.9 (Id.). This is the grading plan that was incorporated into SEH's Construction Plan set that was presented by Peter Carlson at the April 19, 2004 City Council meeting and adopted by the City and sent out for bid on the project. (Carlson Depo at 112-113). This is the grading plan that was ultimately approved by the City and that was Exhibit D to the Development Agreement between the City and Gold Key, and which is now referenced in the letter from the City declaring Gold Key to be in default of the Development Agreement. (Amd. Complaint, Ex C; Matt Aff. Ex L.). On June 2, 2004, the City Planner prepared a Memorandum to CuN Administrator Larry Kruse regarding the Prairie Run Final Plat. (Kruse Depo at 48-50: Matt Aff. Ex N). In the Memorandum, the City Planner states: 9 Lots 8, 9, 14-19, 26-28. Block 2, were all raised per the 4, 19%04 revision on the evading plans. Jim Schulz has testified that he believes he made Randy Hedlund aware of the 951.5 100-year number for the culvert at County Ditch'9 that was'prepared by the culvert installer. Randy Hedlund has testified that Jim Schulz raised a concern about County Ditcn `9 and the June 2003 storm, and that there was a known high water number tied to the 2003 storm. (Hedlund Depo at 101). Jim Schulz has testified that he does not recall the exact conversation and has admitted that he has no reason to dispute what Randy Hedlund says about the conversation. (Schulz Depo at 32-37). in any event, it is undisputed that a conversation about the grading plans did occur in April 2004 between SEH and Hedlund; and as a result of that conversation. Hedlund revised the elevations of the grading plans and those revised plans were then subsequently approved by the City. (Hedlund Depo at 78-81). RECOMMENDATION Based on our review, we find that the Prairie Run final plat is consistent with the approved preliminary plat and has complied with the conditions of the prelirninaty plat approval. Staff recommends approval of the final plat with the following conditions ... (ld.) Emphasis added. Significantly, the preliminary plat condition regarding the grading and drainage plan being subject to review and approval by the Citv Engineer was no longer mentioned and was not a condition being recommended for final plat approval. (Id.; Carlson Depo at 116 — 119; Kruse Depo at 48-50). Peter Carlson of SEH, City Attorney Couri and City Zoning Administrator Sutherland were all copied on this memo. (Matt Aff. Ex. N.). The City Planner's statement that "the Prairie Run final plat is consistent with the approved preliminary plat and has complied with the conditions of preliminary plat approval' meant that the condition of preliminary plat approval that the submitted grading and drainage plan will be subject to review and approval by the City Engineer had now been complied with. (Kruse Depo at 50). At the June 1, 2004 City Council meeting, the City approved the final plat of Prairie Run, and accepted it as in compliance with Minnesota Statute Section 505.03. subd 2.1D (Kruse Depo at 41-42). The City believed the plans were in compliance with all City Ordinances and Subdivision Ordinances. (Kruse Depo at 145-146). Despite recognizing that it would be important for the City Council to know that the City Engineer had not yet reviewed grading and drainage plans prior to final plat approval, and despite recognizing that once a final plat is approved a lot of' people are going to spend a significant amount of money grading and der eloping the property based upon the approved final plat, City Engineer Peter Carlson failed to t' Minn. Stat. §505.03, Subd. 2 sets forth the requirements for plat approval and road review when plat abuts a county road, highway or county state aid hmh�+,ay. 12 stand up at the City Council meeting and let the City Council, Gold Key, or anyone else know that SEII had not yet reviewed the grading and drainage plans. (Carlson Depo at 123-125). At this point, the City thought the grading and drainage plans submitted by Gold Key and Hedlund had been reviewed. (Kruse Depo at 42). At this point, it was reasonable foe Gold Key and Hedlund to assume that the plans they submitted had been reviewed and approved by the City Engineer. (Kruse Depo at 42, 92-93). The City Planner and the City Attorney had, by this point, undertaken their own assessment of the grading and drainage plans submitted by Gold Key and determined that they complied with City ordinances and subdivision ordinances. (Kruse Depo at 43, 77-78). Post Plat Approval Actions Taken In Reliance Upon the Approved Plat O❑ or about July 16, 2004, Gold Key and the City entered into a planned unit development agreement (hereinafter '`Development Agreement"), for the Prairie Run Subdivision. 1 (GK Arad. Complaint, Ex A). Paragraph 13.I of the Development Agreement states as follows: 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.. . Emphasis added. (Id.). At the time the Development Agreement was entered into Gold Key and Hedlund believed that sufficient data on high water levels was not available, so the tine of permanent aquatic vegetation was used to determine the grading elevations. (Hedlund Depo 86- '' The Development Agreement evas recorded with the Wright County Recorder on 1224'04 as document number 940358. (GK Complaint, Ex. A). 13 87; Johnson Depo at 38-39). At the time the Dcvclopment Agreement was entered into, the elevation of the line of permanent aquatic vegetation ranged from 947.5 - 948 feet on the westerly side of the Plat to 950 feet on the easterly side of the Plat. (Hedlund Depo at 70-71). The City and its Engineer were aware of the use of the line of permanent aquatic vegetation as the estimated high water elevation because this was discussed at preliminary meetings regarding the concept plans and preliminary plat plans. (Johnson Depo at 38-39; Hedlund Depo at 86-87). The property was then graded and the infrastructure developed based upon the approved, and subsequently revised, grading, drainage and storm sewer plans. (GK Amd. Complaint s21: Sutherland Depo at 86-89). Gold Key incurred expenses of, or entered into binding legal commitments for, in excess of $2,000.000.00. (Johnson Aff., `r2, 3). Further, in reliance upon the approved Plat and approved grading plans, Developer entered into Option Agreements with TC Homes and two other builders. whereby said builders would purchase lots in accordance with a schedule set forth in the various Option Agreements. (GK Amd. Complaint ¶56). TC Homes and the other builders began purchasing lots from Developer in accordance with the terms of the Option Agreements, and they built homes upon many of the lots in accordance w-ith, and reliance upon, the approved grading plans. (TC Complaint 9(10 & 18; Sutherland Depo at 87-89; Johnson Depo at 108-109). In order to build a home on a particular lot, the builder first has to obtain a building permit. Prior to issuing a building permit, the City's Zoning Administrator and the City Engineer (and, sometimes, the City Planner and City Attorney) have to approve the building permit application and ensure that the proposed site plans comply with the approved plat and are in compliance with the City's Zoning Ordinances and Subdivision Ordinances. (Sutherland Depo at 38-47, 85-100; Moberg Depo at 12). Specifically, the City Engineer is looking at the 14 elevations related to the plat approval process, including low floor elevations or lowest opening elevations, and positive overflow elevations of important drainage ways. (Sutherland Depo at 41-45: Mobera Depo at 14). City Zoning Administrator Sutherland explained what the engineer is looking for during this second review process: Q. Okay. And when you said the engineer is looking at elevations of dwellings, the lows floor elevations or low opening elevations. do you know what he is looking for there? A. Yes. Q. What? A. The elevation of those low openings or low floors are based on the engineer's original review of the plat and the developer's engineer's design of the plat. They've decided how these houses should be laid out and where those floors should be, so similar to this patio door in this room, that's an opening into the house; and the engineer would review the elevation at this floor to be sure it wouldn't be flooded by the adjacent water. Q. So the engineer, when he's doing this review, is actually going back and looking at the approved — the plans that had previously been approved as part of the plat. Is that your understanding? A. Yes. (Sutherland Depo at 43-44). The City Attorney and Cite Planner are sometimes brought into this review process. to ensure compliance with the City's Zoning and Subdivision Ordinances. (Sutherland Depo at 92-95). In the case of Prairie Run, the City Engineer, Zoning Administrator, the City Planner, and City Attorney were all part of this process for the initial building permits. Each of these individuals gave their approval, indicating everything was in compliance with the City's Zoning Ordinances and Subdivision Ordinances, and the City issued at least 13 building permits. (Nlatt Aff. Ex. O; Sutherland Depo at 106-110, 114-115). Bob Moberg from SEH reviewed 4 or 5 building permit applications in 2005, compared the lot 15 sur�cys to the approved grading plans and did not notice any deficiencies with the approved grading plan or the elevations of the buildings. (Moberg Depo at 13-14). Yet another review is done by the City Zoning Administrator and the City Engineer prior to issuing a certificate of occupancy, to ensure that the home that was actually built complies with the approved plat and the City's Ordinances. (Sutherland Depo at 38-39, 114-1 15). hi approximately August or September of 2005, the City of Albertville experienced another rain event, which was significantly less serious than the June 2003 flooding. (Sutherland Depo at 123). Although no homes in Prairie Run were flooded as a result of this rain event, the westerly cul-de-sac in Prairie Run was flooded. (Hedlund Depo at 156-159: Nafstad Depo at 48- 49. 107, 116-118). The City Engineer (both SEH and Bolton & Me k) began to do some investigation after this flooding. which eventually led to the discovery of a 11/21/2000 letter from a culvert engineer that set forth a 100 year elevation "of sorts" for the culvert under County Road 18 at County Ditch 7�i9. (Hedlund Depo at 156-159; Nafstad Depo at 16-18; Moberg Depo at 18-21). It was during this investigation that SEH realized it had failed to undertake an initial review of the grading and drainage plans submitted by Gold Key. because Bob Moberg noticed that there was no documentation in the file regarding a review. (Moberg Depo at 53 — 54). However, SEH did not tell anyone that it had failed to review the plans. (N'Ioberg Depo at 27- 38). I lie City suspended a building permit wA hich it had previously issued on a home that Gold Key was building on Lot 7, Block 2, which was on the cul-de-sac which had flooded, until such time as Gold Key prepared a revised grading plan raising the elevation of the building site. (Johnson Depo at 93-94; Hedlund 156-159). The revision was done at the direction of the City's new engineer, Bolton & Menk, based upon the discovery of the 11/21/00 letter from the culvert 16 engineer. (Iledlund Depo at 156-159). Therefore, on October 11, 2005, Hedlund did prepare another revised grading plan and raised the elevations of Lots 7-133, Block 2, located on the Property. (Id.). The City then re -issued the building permit on hot 7. Block 2, indicating it was in compliance with all of the Citys requirements. (Id.; Sutherland Depo at 128-130; Nafstad Depo at 6 3-64). The Citv Declares Developer in Default of the Development Agreement On November 29. 2005, Couri wrote a letter to Gold Key declaring Gold Key to be in default of paragraph 131. of the Development Agreement, stating "it has been discovered that the grading plan for the Prairie Run plat does not account for the 100-year flood elevation (calculated at 951.5 by Wright County) (Matt Aff. Ex S). Paragraph li.F. of the Development Agreement states as follows: Developer represents to the City that Said Plat complies with all City, county, state and federal laws and regulations, including but not limited to: subdivision ordinances, zoning ordinances, and environmental regulations. Developer agrees to obtain all required federal, state and local permits. If the City determines that said Plat does not comply, the City may, at its option, refuse to allow construction or development work in the plat until Developer so complies. Upon the City's demand, the Developer shall cease work until there is compliance. (GK Amd. Complaint 'i 27). Couri and the City were aware that the 95 L5 figure was not accurate, yet they shut down development on the project and declared Developer to be in default, based on what they knew to be an inaccurate number, and even though they had just asked Gold Key and Hedlund to raise several lots based upon this number, and had approved the same. (Kruse Depo at 109-1.101 Hedlund Depo at 156-159). Prior to declaring Gold Key in default, there was a divide among the City Administrator, the City Attorney, Bolton & Menk and SEH as to whether the approved Prairie Run grading plans complied with the City ordinances regarding elevations, as those City ordinances were inconsistent. (i loberg Depo at 29 - 30). 17 After several round table meetings were held to attempt to resolve the differences between the parties, this litigation ensued. (Kruse Depo at 55-57). During these round table meetings, Bob Moberg of SEH was aware that SEH had not in fact reviewed the grading plans that were submitted by Gold Key for plat approval, but no one from SEII shared this information with anyone from the City, Gold Key or Hedlund. (Moberg Depo at 37- 38; Kruse Depo at 104- 105). Wright County never calculated a 100-year flood elevation for the Property. (GK Amd. Complaint 514). Couri's reference in his 11/29%O5 letter to the 951_5 feet 100-year flood elevation allegedly calculated by Wright County is to a figure calculated in 2000 by a concrete company for the limited purpose of culvert replacement at County Ditch 9, which is not sufficient for zoning purposes,12 (Hedlund Depo at 159-160; Kruse Depo at 109-I10). [n any event, the City and the City Engineer did not share this number with Gold Key or Hedlund prior to the time the plat of Prairic Run was approved. despite the fact that SEII had possession of this number as of at least July 1, 2003, and despite the fact that SEH considers this to be a very - Specifically, this number was taken from a November 20, 2000 letter from Brian Walter to Wayne Fingalson at the Wright County Highway Department. (GK Complaint, Ex. F.) Brian Walter is an engineer for Hancock Concrete Products Company, Inc. Brian Walter prepared his 1 Ir20'00 letter as part of a culvert replacement study for the culvert on Highway 18, Wright County. Brian Walter's estimate that the 100-year flood elevation was 951.5 feet was for culvert sizing only and was not meant to be for flood plain zoning purposes. Brian Walter confirmed this in his 12;29'05 letter to Attorney John Brennan (GK Complaint. Ex G), where he indicated: ... it should be pointed out that the purpose of the 100-year flood estimate is to assist in the selection of the proper culvert size, not to establish 100-year flood levels for zoning purposes. The degree of accuracy in determination of the 100-year flood stage for culvert sizing is typically not sufficient for flood plain zoning purposes. .. a much higher degree of accureev is necessary when determining 100-year Flood stages for flood plain zoning ... For the above stated reasons, I00-year flood stages determined for bridge and culvert replacements should generally not be utilized for flood plain zoning purposes. 18 important number that impacts how the plat should be graded properly." (Fled Iund Depo at 93- 94, 156-158, Carlson Depo 74-76: Moberg Depo at 59-62; Schulz Depo at 31). Hedlund was not aware of this number until the Fall of 2005. (Hedlund Depo at 156-160). The 2006 Flood Study by Bolton & Vienk In February 2006, the City's new engineer, Bolton & yilenk, issued a Flood Study of the County Ditch 49 Watershed, which includes Prairie Run, which deternvned that the 100-year elevation was 950.9 feet above sea level. (Nafstad Depo at 17-20: Matt Aff. Ex Q). In April 2006, Bolton & Menk issued an Amendment to its 2006 Flood Study. based on photographs of the June 2003 Flood, which apparently Just became available to it (although the City and SEFI had these photographs in June of 2003 ). (Matt Aff., Ex T). Tlie Amended Bolton & Menk 2006 Flood Studv set the 100 year elevation at 949.9 feet above sea level. (Id.; Nafstad Depo at 68- 69). On December 1, 2006, the City vv-rote a letter to Developer indicating that it had revised its numbers yet again. (Matt Aff. Ex L). It now set the highest !grown water elevation at 951.47 feet above sea level, based upon further analysis of the photographs of the June 2003 flood." (Id.) Based upon this, the City declared Developer in default of paragraph 13.F. of the Development Agreement, alleging that Developer had violated subdivision ordinances A- 600.4(g), A-600.13(c)(1), A-700.6, and zoning ordinances 1000.9(d) and 5000.4(a), as they were SEH was aware of this 951.5 culvert replacement number on July 1. 2003 — 7 days prior to the time that the preliminary plat of Prairie Run was approved by the Planning Commission. (Carlson Depo at 73-78). Jim Schulz of SEH was also aware of this number in April or May of 2004. (Schulz Depo at 28-30, 74-76). `' htterestingly, Jim Schulz, the individual from SEH who designed the commercial portion of Prairie Run, viewed the photocraphs from the 2003 Flood sometime in 2004. but did not use them to detennine a highest known water level, because he did not consider that to be the design standard. (Schulz Depo at 67-68). 19 in effect on June 7, 2004, at the time of plat approval. (Id.). The City listed certain lots that it allc«ed to be in violation of these ordinances, even though the City and the City Engineer had already determined that many of those lots were in compliance with the City's ordinances when it issued building permits for those lots. (Id.; Sutherland Depo at 110-112, 94--104, 115, 130- 132). The City now also informed Gold Key that it would not be issuing building permits for any loss, even those lots that met the ordinance requirements regarding elevations. (Matt Aff. Ex 1, and P). The City also indicated for the first time that it believed the infrastructure in the entire development, including streets and ponds, had to be raised, a fix which would cost millions of dollars. (Id.; Nafstad Depo at 75). The City has taken this position even though it approved the plat and believed that each of these lots that it is now alleging to be in violation of the City Ordinances and Subdivision Ordinances were in compliance with City Ordinances at the time of plat approval. (Kruse Depo at 109, 145-146, 169). SEH's Duty to Review Grading and Drainage Plans As the City Engineer, one of SEH's normal duties was to review the engineering aspects of the preliminary and final plat submissions for all plats in the City of Albertville_ including grading, drainage and storm sewer plans. 1' (Carlson Depo at 12, 18-21, 44-45, 49-50, 69; Kruse Depo at 20-24, 131-132; Sutherland Depo at 60-61, 631 71-73, 81-83.) The City Engineer is expected to review all plat documents, without having to specifically be requested to do so by the City. (Kruse Depo at 21, 86-87; Carlson Depo at 165-166). The City expects that this review by `- This duty to review plat submissions was not part of the written contract between the City and SEH because "it's so interwoven in all of the either discussions with city council or city staff that they wanted the city engineer to review plans'. instead of being part of the formal, written contract, the review of plat submissions was part of an oral contract, done "at the behest of the city council." (Carlson Depo at 169 - 170). 20 the City Engineer is usually done before preliminary plat approval; but in all cases before final plat approval. (Kruse Depo at 27, 36-37). to developer and developer's engineer can also assume that the review by the City Engineer has been done by the time of final plat approval. ([Cruse Depo at 37-401). The purpose of the review by the Cite Engineer is to be sure the submitted plans complied with City Ordinances and Subdivision Ordinances.'t' (Carlson Depo at Peter Carlson described the review process as follows: Q. And as city engineer. do you review and approve the engineering aspects of all the plats for the City of Albertville? A. Yes. Q. And are you doing that because the cit; asked you to do that? A. That was part of the process that was followed. Q. What process? A. The process was when an application was -- development application was prepared and submitted to the city, that plans were distributed to me and others for review. Q. And you were to review those in your capacity as city engineer? A. Yes. Q. What were you looking for when you would review those^. A. I would look for the criteria that the engineer used in the preparation of their plans. I would look to see if they were using the city standard -- standard plates, the street widths. the city criteria. you Know, and pipe sizes that were used for sanitary sewer, looked to verify that they were correct. Q. When you say you were looking for the criteria that the engineer used, are you meaning the engineer for the developer of the plat? A. Correct. Q. And when you would -- would you also look at grading issues related to the plat'. A. Yes. Q. Would you look at drainage issues relating to the plat? A. Yes. Q. Would you look at storm sewer issues related to the plat? A. Yes. Q. And when you're looking at these things, if they don't mesh with city standards, did von alert someone or what would you do? A. 1 would -- I would write -- my process. I would write a review memo with comments of what I felt needed to be corrected and provide that to the design engineer and to the city planner. Q. And the city planner, was that Northwest-- Northwest -- NAC? A. Yes. Q. And would you provide that review memo to the city administrator as %Nell'. A. Yes. Q. And then would you review any changes that were made then by the engineer for the developer? A. Yes. ifootnote continued on next page; 11 18-21. 153, 160, 163; Moberg Depo at 57-58). The City expects the City Engineer to catch any errors that may exist in the plans submitted by a developer and its engineer. (Kruse Depo at 1 12- 113). During his normal review of plat submissions, the City Engineer would issue a review, memorandum in order to make the City and its staff and consultants aveare of anything that the City Engineer felt needed to be corrected because it did not comply with cite standards. (Carlson Deno at M 1 18-1197 130-132, 163: Kruse Depo at 102, 135-136) Peter Carlson admitted that lie was the one from SEH that was supposed to have reviewed the grading and drainage plans submitted for Prairie Run, but that he failed to do so. (Carlson repo at 20-21. 49-50, 68-69, 99-100). He does not know why he failed to do so. (td.) He testified: Q. Did SEH do this, this review process for Prairie Run? A. No. Q. Why not? A. I don't know. Q. So as city engineer for the City of Albertville, shouldn't SEH have reviewed the plans that were submitted for the plat of Prairie Run? A. Yes. Q. if changes were inade based on that review memo that Non would provide, would you subsequently go review whatever the changes were? A. Yes. (Carlson Depo at 18-21)- 22 (Carlson Depo at 20-21). Emphasis added. Bob Moberg, an enaincer at SEH involved with the construction review process, admitted that SEH's failure to review the Grading and drainage plans was a mistake. (Moberg Depo at 54-58). Peter Carlson was aware that the Grading and drainage plans that had been submitted by Gold Key and Hedlund needed to be reviewed and approved by SEH, but he was waiting to conduct his review until after the public hearing on the assessments for the public improvements. (Carlson Depo at 71-72, 79-80. 91-92. 104-107, 111). The public hearing that he was waiting for happened on February 17, 2004. and the City Council passed a resolution approving the assessments on March I. 2004. (Carlson Depo at I11). Therefore, according to City Engineer Peter Carlson, the grading and drainage plans could have, and should have, been reviewed after February 17. 2004. or, at the latest, March 1, 2004. (Carlson Depo at 111-112, 173-175). Peter Carlson took a leave of absence for the month of Iebruary 2004, due to the unexpected death of his son the preceding fall. (Carlson Depo at 142; Schulz Depo at 11). Jim Schulz, a registered Professional Engineer with SEH, was designated to handle SEH's duties with respect to the City of Albertville for the month of February 2004 during Peter Carlson's leave of absence. (Carlson Depo at 142; Schulz Depo at 13-19). Jim Schulz attended the City Council meeting where the public hearing was held on the public improvements. (Id.) Jim Schulz was qualified to review the grading and drainage plans for Prairie Run, but did not do so. (Carlson Depo at 175; Schulz Depo at 17-18). After returning from his leave of absence in March 2004. when the plat was now apparently no longer "premature" and was ready for engineering review, Peter Carlson not only failed to conduct the required engineering review of the Prairie Run plat submissions.. but he failed to let the City Planner, City Attorney, City Council, City staff, Gold Key or Hedlund 23 Engineering or anyone else know that SEH had not yet conducted this review of the Prairie Run plat submissions; despite the fact that Ile was copied on many emails and memos regarding Prairie Run and attended Council Meetings regarding Prairie Run. (Carlson Depo at 112-118, 121-124). N[r. Carlson is not aware of any other plat, in the City of Albertville or anywhere else, that has been approved without the grading and drainage plans submitted by a developer having been reviewed by the City Engineer. (Carlson Depo at 83-84). The Cih's Duty The City has the ultimate say in what elevations a developer and its engineer use for designing a particular development. (Nafstad Depo at 67-68). The City is ultimately responsible for ensuring that the plat that is approved is consistent with its comprehensive plan and complies with its zoning and subdivision ordinances. (Sutherland Depo at 60-62, 168). The City always receives a "review memorandum' from the City Engineer as part of the plat approval process, wherein the City Engineer sets forth his comments and recommendations regarding the engineering aspects of the plat submissions, including the grading and drainage plans. (Carlson Depo at 20, 128-132; Kruse Depo at 30). The City Attorney, City Administrator. Zoning Administrator and City Planner are always copied on these review memorandums. (Id.) Since SEH failed to "officially" review the grading and drainage plans for Prairie Run, it did not prepare a review memorandum. (Carlson Depo at 118-119). Despite receiving review memorandums for virtually every plat in the City of Albertville, none of the City Staff or consultants called attention to the fact that no such review memorandum had been prepared by 24 the Cit}Engineer for the Plat of Prairie Run." These review memorandum are such an integral part of the plat approval process that both Peter Carlson of SEH and Jon Sutherland. the City Zoning Administrator, believe the absence of a review memorandum in the case of Prairie Run should have raised a red flag for the City and the City should have asked for it. (Carlson Depo at 119. 130-132; Sutherland Depo at168). Peter Carlson testified: Q. ... Did Mike Court ever ask You whether SEH had reviewed the grading and drainage plans for the preliminary plat of Prairie Run? A. No. Q. Did Jon Sutherland ever ask you whether SEH had done a review of the Grading and drainage plans of the preliminary plat of Prairie Run? -V No. Q. Did Al Brixius ever ask you if SEH had done a review of the grading and drainage plans of the preliminary plat of Prairie Run? A. No. Q. Did anyone from the city ever ask you if SEH had done a review of the grading and drainage plans of the preliminary plat of Prairie Run? A. No. Q. Did anyone ask you -- any of those individuals or anyone from the city ask you if SEH had reviewed the grading and drainage plans associated with the final plat of Prairie Run? A. No. ' ''here is no requirement in the Citv Ordinances or Subdivision Ordinances that the Developer or the Developer's Engineer secure such a "review memorandum' prior to plat approval, and Gold Key and Hedlund had not previously developed property in Albertville so had no way ofknowing that it was typical for the City Engineer to issue such a memorandum. (Sutherland Depo at 167:: Johnson Depo at 10-1 1: Hedlund Depo at22-23: Carlson Depo at 119- 120). 2i Q. Do you think they should have asked you that? A. Yes. Q. Why? S. The review and documentation of my review is part of the process. Q. Part of the normal process? A. Yes. Q. And so because this memorandum -- a memorandum like Exhibit 84 wasn't provided to those individuals, you think they should have asked you whether you had reviewed the grading and drainage plans.ts A. Yes. (Carlson Depo at 130-132). Emphasis added. Jon Sutherland testified as follows: Q. Okay. And so by the same token, shouldn't the city council have asked for the written review report that you're talking about? I mean, they're going forward and approving the final plat document, preliminary and final plat documents. Shouldn't someone at the city council have said, "Wait a minute. Where is this review memorandum? I don't see that the review has actually been done? A. Yes. (Sutherland Depo at 168). Emphasis added. The Ordinances At the time of the Development Agreement, there were two zoning ordinances and a subdivision ordinance which addressed minimum floor elevations, and which the City now claims Gold Key to be in violation of: Subdivision Ordinance 600.4(g), Zoning Ordinance Section 1000.9, Subd. (d) and Zoning Ordinance Section 5000.4, Subd.(a). There were also two subdivision ordinances which addressed drainage and run off rate control. and which the City `s Exhibit 84 is attached to the Affidavit of Cindi S. Man as Exhibit R. 26 noon claims Gold Key to be in violation of: Zoning Subdivision Ordinance A-700.6. and A- 600.13(c)(I ). 14 (Platt Aff. Ex L). �9 The copies of the zoning ordinances and subdivision ordinances in effect in 2004 which the City has provided as part of this litigation are difficult to decipher, as they have writing on them, portions are crossed out, and they are not clearly identifiable by section. For the purposes of this summary judgment motion only. and without waiving any legal arguments Gold Key may have based upon the copies of the ordinance provided by the City, Gold Key concedes the Ordinances and Subdivision Ordinances are as follows: Subdivision Ordinance 600.4(g) states: (g) Drainage Courses. Lots abutting a drainage course, wetland, pending area, drainage way, channel. or stream shall have additional depth and width, as required under the provisions of the City Zoning Ordinance to assure building sites that are not subject to flooding. Lots abutting a lake, pond, stream. Fatercourse or wetland shall contain adequate lot area which is capable of accommodating a structure with its lowest opening (window or door) no less than two (2) feet above the highest known water level or no less than two (2) feet above the t00-year flood level. In determining- the high water levels. Section 1000.9(d) of the City Zoning Ordinance shall be followed. Zoning Ordinance section 1000.9, Subd. (d), states: No structure, except docks and retaining walls, shall be placed at an elevation such that the lowest floor, including basement floor, is less than two feet (21) above the highest known surface water level or ordinary high water level. or less than one foot (I-) above the 100-year flood level. if determined, of any adjacent lake, pond, stream, watercourse or wetland. If sufficient data on ietow❑ high water levels is not available, the elevation of the line of permanent aquatic vegetation shall be used as the estimated high water elevation. When fill is required to meet this elevation, the fill shall be allowed to stabilize, and construction shall not begin until the property has been inspected by the Building Inspector. Zoning Ordinance Section 5000.4, Subd. (a) states: The following standards apply to all lands within and, or abutting a wetland: A. The lowest ground floor elevation shall be three (3) feet above the 100-year flood elevation or four (4) feet above the ordinary high water marl: of public waters regulated by chapter 4900 (Shore land Overlay District) of this Chapter, whichever is greater. "Zoning Ordinance A-700.6 states: Drainage. At[ surface and underground drainage systems shall be installed to adequately remove all natural drainage that accumulates on the developed property. All such systems shall provide a permanent solution for the removal of drainage water. All property west ofCSAH 19 that drains to Count} Ditch r9 shall not drain or discharge more than one-half (1!2) of the pre -development rate of runoff. Subdivision Ordinance A-600.13(c) (1) states: (c) Permanent Storm Water Pollution Controls. (I ) fhe applicant shall install or construct, or pay the City fees for all storm water management facilities necessary to manage increased runoff, so that the two year, ten year. and 100 year storm peak discharge rates exiting before the proposed development shall not be increased.. . 27 Damages Gold Key has suffered, and will continue to suffer, significant damages as a result of the City's breach of the Development Agreement, which vv-ill need to be determined at the trial of this matter. (GK Amd. Complaint 1�57 & 5& TC Complaint" 33 & 34; Johnson Aff. 1-1 3 and 4). LEGAL ARGUMENT L STANDARD OF REVIEW Summary judgment is proper when no genuine issues of material fact exist and one party is entitled to judgment as a matter of law. Minn. R. CiN-. P. 56.03. A "material fact" is one that would affect the outcome of the case, depending on its resolution. O',Lfalley v. LZland Bros., 549 NAV,2d 889, 892 (Minn. 1996). A genuine issue of material fact `must be established by 'substantial evidence— .Lfurphy v. Country House, Inc., 307 Minn. 344, 351, 240 N.W.2d 507, 512 (1976) (citations omitted). The present case is ripe for partial summary judgment in favor of Gold Key for the reasons set forth herein. The only factual issues which remain for trial as to Gold Key are the amount of damages that it has suffered as a result of the actions and inactions of the Citv and SEH. H. GOLD KEY WAS JUSTIFIED IN RELYING UPON THE LINE OF PERMANENT AQUATIC VEGETATION AS THE ESTIMATED HIGH WATER LEVEL, WHICH WAS APPROVED BY THE CITY AND CONSISTENT WITH THE DEVELOPMENT AGREEMENT AND CITY ORDINANCES. In residential developments, the developer gets direction from the appropriate local uovernmental authority ("LGU") as to what benchmarks to use to establish minimum structure elevations. (Mundstock Aff. �6). In the City of Albertville, "ultimately the developer has to do what the City says'. (Nafstad Depo at 69). Typically the LGU vwill tell the developer "hat the 100-year Mood levels pertinent to the particular development are, or, if a comprehensive 28 hydrological study has not been conducted of the surrounding watershed, the LGLI wilt tell the developer what to use as the estimated high water level. (MUndstock Aff 1i6) The LGU has a duty to provide the developer or developer's engineer with information that is relevant to developing a plat. (Vlundstock Aff 121) The City of Albertville recognizes this duty and does provide developers with any relevant information that it has about a particular property that is being developed. (Carlson Depo at 144; Kruse Depo at 51-53). To the extent that the LGU or its engineer possess any analysis, reports or studies that indicate high water levels that potentially impact a proposed development, and do not give this information to the developer, it wrould be a serious mistake on behalf of the LGU and its engineers. (Nlundstock Aff. !21). In this case, City Engineer Peter Carlson represented to Gold Key and its realtor Kevin Conway, very early on in the development process, that there was no 100-year flood Level knovyn, as there was no comprehensive storm water management plan or study for the area encompassing Prairie Run. (Conway Aff.; Johnson Depo. At 130-132. 149-150). The City or its engineer did not provide Gold Key or Hedlund information about highest known surface water levels or the 100-year flood levels, nor was information about the 100-year flood levels available to the developer or its engineer.''0 So the City (in both the Development Agreement and in its '9 The developer and its engineer did not have a duty to determine the 100-%ear flood elevations for the entire 2300 acre watershed encompassing the 33.7 acre Prairie Run development. A watershed describes an area of land that drains down slope to the lowest point. (Matt Aff., Ex P B&M0009), Prairie Run is approximately 33.7 acres. The watershcd that encompasses Prairie Run is known as the County Ditch =9 watershed and is approximately 2,321 acres. (1d). The Local Governing Unit ("LGU") has the obligation to determine the 100-year flood elevations of a particular watershed. (Mundstock Aff ,' 7). 1f individual property owners, or developers, set area or regional 100- year flood levels, it would lead to a serious problem of piecemeal establishment of flood levels. (Id. at !i 8). Further, it is logical to have a city perform an analysis of the entire watershed, rather than an individual property owner, because the properties impacted in the entire watershed are oftentimes beyond the property contained in the individual developments themselves. (Kruse Depo at 80). In this case, the LGU for the County Ditch r9 watershed encompassing the Prairie Run Development is the City of Albertville. Albertville became the LGU on December 17, 2002, pursuant to a resolution established by the Wright County Board of Commissioners. which resolution was (footnote continued on next page) 29 ordinances) directed Gold Key and Hedlund to use the line of permanent aquatic vegetation as the estimated high water level. (Hedlund Depo at 86-87, 1 I3-115, 16T Vlundstock Aff. ¶ 9, 10; Carlson Depo at 144-146; Kruse Depo at 173). During meetings between Gold Key and the City and City Engineer prior to preliminary plat approval, the line of permanent aquatic vegetation was discussed and the Citv stag and consultants were aware that this was the benchmark being used to establish elevations. (Johnson Depo at 130-132, 149-150). Paragraph 13.I of the Development Agreement states as follows: 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... Emphasis added. (GK Amd. Complaint, Ex. A). The pertinent ordinance, Zoning Ordinance section 1000.9. Subd. (d), states: No structure, except docks and retaining walls, shall be placed at an elevation such that the lowest floor, including basement floor, is less than two feet (2') above the highest known surface water level or ordinary high water level. or less than one (1) foot above the 100-year flood level, if determined, of any adjacent lake, pond, stream, watercourse or wetland. If sufficient data on known high water levels is not available, the elevation of the line of permanent aquatic vegetation shall be used as the estimated high water elevation.. . Emphasis added, passed pursuant to the Ditch r 9 Agreement sinned by the Citv of Albertville and the City of St. Michael on September 3, 2002. (Matt Aff., Ex P at B&Nt0030-0035: Matt Aff. Ex T). As the L.GU, the City of Albertville, and not Gold Key or it engineer, had the obligation to determine the 100-year flood elevation for the watershed encompassing the Prairie Run subdivision. (ivtundstock Aff. ')SI 7 and 3). 30 In 2003, Gold Key submitted to the City information for preliminary plat approval which used the line of permanent aquatic vegetation as the estimated high water level. On June 25, 2003, Alan Brixius, the City Planner, reviewed the information submitted by Gold Kev requesting preliminary plat approval for the Prairie Run Plat and stated that "The submitted ,grading and drainage plan will be subject to review and approval by the City Engineer." At the August 4, 2003 City Council Meeting, the City Council approved the preliminary plat for Prairie Run, with no comments from the City Engineer about the grading or drainage. Thereafter, Gold Key submitted additional documentation to the Citv Planner. in conjunction with Gold Kev's request for final plat approval for the Prairie Run plat, including a grading plan which again used the line of permanent aquatic vegetation as the estimated high water level. The grading plan indicates that that high water level ("HWL") ranges from 947.5 - 948 on the westerly side of the Plat to 950 on the easterly side of the Plat. The City Planner reviewed the information submitted by Gold Key requesting final plat approval and he recommended approval of the Final Plat of Prairie Run, indicating that "[we] find that the Prairie Run final plat is consistent with the approved preliminary plat and has complied with the conditions of the preliminary plat approval." At the June 7, 2004 City Council meeting, the Citv approved the Final Plat of Prairie Run, and accepted it as in compliance with Minnesota Statutes, Section 505.03, with no comments from the City Engineer about grading or drainage issues. Using the line of permanent aquatic vegetation as the estimated high water elevation is in accordance with accepted practice and standards in residential developments, and Gold Key was justified in using the same when directed to do so by the City in the Development Agreement and Ordinances. (Mrmdstock Aff. 49, 10 and 11). Given the City's complete silence regarding 31 Cold Keys use of the line of permanent aquatic vegetation to estimate the high water elevations for the Prairie Run development, and given the fact that the Development Agreement and the relevant ordinance specifically allow use of this method to estimate the high water level, Gold Kcy was entitled to use it and to rely upon it in the absence of instructions from the City to the contrary. (Mundstock Aff. 4110, 11). This is particularly true when the City, its staff and its engineer attended meetings in the concept phase of the project where is was specifically discussed that the line of permanent aquatic vegetation was being used and the City then eventually approved the grading plans which used the tine of permanent aquatic vegetation. (Johnson Depo at 38-39). Therefore, as a matter of law. Gold Key is entitled to summary judgment in its favor on the issue of whether it was justified in relying upon the line of permanent aquatic vegetation as the estimated high water level. wwhen that line was approved by the City and consistent with both the Development Agreement and the Ordinances. III. GOLD KEY COMPLIED WITH THE DEVELOPMENT AGREEMENT AND CITY ORDINANCES WHEN IT DEVELOPED THE PROPERTY CONSISTENT WITH THE PLAT AND GRADING PLANS THAT WERE APPROVED BY THE CITY. There is no dispute that the Prairie Run infrastructure — the ponds, streets and lots - was constructed consistent with the approved plans submitted by Gold Key.21 (Nafstad Depo at 87- 90). The City claims that Gold Key is in default of paragraph 13.F. of the Development Agreement, in that Developer had allegedly violated subdivision ordinances A-600.4(g), A- 600.li(c)(I), A-700.6, and zoning ordinances 1000.9(d) and 5000.4(a), as they were in effect on June 7, 2004. at the time of plat approval, based upon numbers that the City came up with in While the City is now saying that a different number should be, or should have been, used to determine elevations, there is no dispute that Prairie Run was constructed as set forth on the plans that were approved. 32 2006. (Matt Aff, Ex, I,). The numbers that the City uses to determine these alleged violations are a 100-year flood elevation of 949.9 feet above sea level and a highest known water elevation of 951.47 feet above sea level, which were both determined in 2006 and communicated to Gold Key on December 1, 2006, two and a half years after the Plat of Prairie Run was approved. (Id). A. Gold Key Has Not Violated Zoning Ordinance 1000.9(d) or Subdivision Ordinance A-600.4(g), and Has Complied With the Development Agreement Regarding Lot Elevations. Zoning Ordinance 1000.9(d) and Subdivision Ordinance A-600.4(g) deal with lot elevations. They are set forth in footnote 19. Paragraph 13. F. of the Development Agreement, the paragraph the City alleges that Gold Key is in default of, provides: Developer represents to the City that Said Plat complies with all Citv, county, state and federal laws and regulations, including. but not limited to: subdiv ision ordinances, zoning ordinances, and environmental regulations. Developer agrees to obtain all required federal, state and local permits If the City determines that said Plat does not comply, the City may, at its option, refuse to allow construction or development work in the plat until Developer so complies. Upon the City's demand, the Developer shall cease work until there is compliance. By virtue of this general paragraph, the City argues that Gold Key is responsible for complying with the ordinances and subdivision ordinances specifically set forth in the City's default letter. Absent any contrary indication, the laws in existence at the time that a contract is executed are presumed to be incorporated into the contract. 1letropolitan Sports facilities Comm'n V. General Mills., 460 N. W.2d 625 (Minn. Ct. App. 1990). aff d, 470 N. W.2d 118 (Minn. 1991). Specific language in a contract governs over general language in the contract. Burgi v. Eckes, 354 N.M. 2d 514 (Minn. Ct. App. 1984). In this case, the specific ordinances regarding the elevations of structures are not incorporated into the Development Agreement because paragraph U.I. of the Development 33 Agreement has a specific provision regarding the elevation of structures on the property. Therefore, under the afore -mentioned legal principles, the specific terms of paragraph 13.I. control over Zoning Ordinance 1000.9(d) and Subdivision Ordinance A-600.4(g), and, as a matter of law. Gold Key cannot be in default of the Development Agreement for violation of Zoning Ordinance 1000.9(d) and Subdivision Ordinance A-600.4(g).. Gold Key has complied with paragraph 13.1. of the Development Agreement regarding lot elevations. Paragraph 13.1. of the Development Agreement states as follows: 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... Emphasis added. As set forth in the preceding section of this memorandum. Gold Key was Justified in using the line of permanent aquatic vegetation as the estimated high water elevation.'`' At the time the Development Agreement was entered into, the elevation of the line of permanent aquatic vegetation was 947.5. Based upon this approved number, and pursuant to Paragraph 131 of the Development Agreement, the lowest grade opening was to have been two -- Undoubtedly the City will argue that the language of paragraph 13.F., "if the City determines that Said Plat does not comply, the City may. at its option, refuse to allow construction or development work in the plat until Developer so complies", imposes upon the Developer a continuing obligation to be in compliance with the laws, based on new information that is discovered. This defies logic - a developer cannot be held to a moving target when it invests an enornnous annount of time and resources into developing a subdivision. If one follows the anticipated argument of the City. what would happen if the infrastructure of Prairie Run is WILL up and raised a foot and then, a year from noNn. a more significant rain event occurs which creates an even higher highest known water level? under the City's logic. it would then have Developer tear up the roads and raise the infrastructure and homes again. When would it stop? This is discussed more completely in the final section of this Memorandum. 34 feet above the line of permanent aquatic vegetation, which would put it at 949.5 feet.' The tow est made openings set forth in the approved grading plan dated 5/14'04 met this requirement because all 52 lots were at least 950.E feet, which actually exceeds the requirement that the elevations be two feet above the high water level. (Mundstock Aff.'14.). Even if the zoning ordinances regarding elevation apply, rather than the specific terms of paragraph 13.I. of the Development Agreement, Gold Key is in compliance, since those ordinances also allow the use of the line of permanent aquatic vegetation to be used, and since the elevations of the lowest floor should then be two feet above that number. Since Gold ICey has complied with paragraph 13.1. of the Development Agreement, as well as City zoning ordinances regarding elevations, there is no violation of Zoning Ordinance t000.9(d) and Subdivision Ordinance A-600.4(g), as alleged by the City in its 12I1/06 default letter. B. Gold Key has not violated Zoning Ordinance -5000.4(a) Zoning ordinance 5000.4(a) does not apply to Prairie Run because it is not in a Shoreland Overlay District. (Nafstad Depo at 130). Therefore. there is no violation of this ordinance, as alleged by the City in its 12/1/06 default letter. C. Gold Key has not violated Subdivision Ordinances A-600.13(c)(1) or A-700.6 Subdivision Ordinances A-600.13(c)(1) and A-700.6 deal with drainage and runoff requirements. They are set forth in footnote 19. Runoff rates essentially refer to hovv quickly z; In this case, the Development Agreement and Zoning Ordinance § 1000.9, SUM. (d), specifically allow use of the line of permanent aquatic vegetation to estimate the "high water elevation" for the Prairie Run development. The '`high water elevation" is the functional equivalent of the `ordinary high water level" but is to be distinguished from the 'highest (mown surface water level', each of which are distinct terms of art used in the Development Agreement and derived font the ordinance. The high water elevation or ordinary high water level for the Prairie Run development was based upon the line of permanent aquatic vegetation, and the grading plans relative to the preliminary and final plat reflected this. (Mundstock: Aff¶ 9) 35 water passes through the property and gets to the drainage ditch. Typical with a development, the percent of impervious surface (such as paved roads, homes, and landscaped yards) is increased, which means that more water is not going into the ground. and is running off at a faster rate. Therefore, the ponds in a development need to be designed and sized to hold runoff as required by City ordinances. As set forth in detail in paragraphs 16-19 of the Affidavit of Brian Mundstock, and the supporting exhibit, the drainage calculations for the Prairie Run development as of 5/14/04, or as constructed, do not violate the aforementioned City Subdivision Ordinances in any respect. There is no violation of the requirement that the post -development 100 year storm peals discharge run-off rate should not exceed the predevetopment 100 year storm peak discharge run- off rate [A-600.13 (c)]_ (Mundstock Aff. 116). There is no violation of the requirement that the post development discharge run-off rate should not exceed more than one-half of the pre - development discharge run-off rate [A-700.6)]. (Mundstock Aff. R17). Nor is there a violation of the requirement that the surface and underground drainage systems for the development should be designed to provide a permanent solution for the adequate removal of all natural drainage that accumulates on the property [A-700.6]. (Mundstock Aff. 118). The drainage system for Prairie Run was property designed to provide a permanent solution for the adequate removal of all natural drainage that accumulates on the property. The water capture, storage, and discharge system as designed, including all storage pond capabilities aggregated for this purpose, provided a post development discharge run-off rate that did not exceed more than one-half of the pre -development discharge run-off rate, and provided a post -development 100 year storm peak discharge run-off rate that did not exceed the predevelopment 100 year storm peak discharge run-off rate [A-600.13 (c)(t) and A-700.6]. (Mundstock Aff. �116-19). )6 Gold Key has complied with the Development Agreement, City Ordinances and Subdivision Ordinances when it developed Prairie Run consistent with the approved Plat and grading plans. Prairie Rim in no way violates the City's Ordinances and Subdivision Ordinances. There are no lots that do not meet the required elevations, no drainage or runoff issues. and no homes or home sites in Prairie Run that have flooded, or would flood in a 100 year event.' (Nafstad Depo at 48-50). At a minimum, the lowest building openings were designed to be greater than three feet above the line of permanent aquatic vegctation, which more than meets paragraphs 131. and 13.I. of the Development Agreement. Accordingly, Gold Key is entitled to summary judgment in its favor, and against the City on the City's claim of breach of development agreement, on the issue of whether it complied with the Development Agreement (and pertinent ordinances) in developing Prairie Run. IV. SEH WAS NEGLIGENT AND BREACHED ITS CONTRACTUAL DUTIES IN FAILING TO REVIEW THE PRAIRIE RUN PLAT SUBNIISSIONS, AND IS THEREORE LIABLE TO GOLD KEY As the City Engineer, one of SEH's normal duties was to review the engineering aspects of the preliminary and final plat submissions for all plats in the City of Albertville, including grading, drainage and storm sewer plans. (Carlson Deno at 12, 18-21 44-45, 49-50, 69: Kruse Depo at 20-24, 131-132, Sutherland Depo at 60-61, 63, 71-73, 81-83). The City Engineer is expected to review all plat documents, without having to be specifically requested to do so by the ,y The City is likely pointing to Gold Key because there is a hooding problem. A problem that has an expensive fix, in excess of a million dollars, as identified in the Flood Mitigation Report prepared by Bolton & Menk. However, that problem is not with Prairie Run. That problem is with Albert Villas, the development downstream of Prairie Run on County Ditch `9. 'the City's current en.ginner, Adam Nafstad of Bolton & Menk testified extensively about the probleins with Albert Villas being designed incorrectly from the get -go and as a result backing up County Ditch =9. (Nafstad Depo at 21-24). "The problem the City has is that the developer of Albert Villas. Edina Development Company. has filed bankruptcy (see Wright County Court File No. C9-05-2481). 37 City. (Kruse Depo at 21, 86-87: Carlson Depo at 165-166). The City expects that this review by the Cit} Engineer is usually done before preliminary plat approval, but in all cases before final plat approval. (Kruse Depo at 27, 36-37). A developer and developer's engineer can also assume tl^at the review by the City Engineer has been done by the time of final plat approval. (Kruse Depo at 37-40). The purpose of the review by the City Engineer is to be sure the submitted plans complied with Cite Ordinances and Subdivision Ordinances. (Carlson Depo at 18-21. 153, 160, 163). The City expects the City Engineer to catch any errors that may= exist in the plans submitted by a developer and its engineer. (Kruse Depo at 112-1 1 3). During his normal review of plat submissions, the City Engineer would issue a review memorandum in order to make the Citv staff and consultants aware of anything that the Citv Engineer felt needed to be corrected because it did not comply with city standards. (Carlson Depo at 20. 118-119, 130-1321 163; Kruse Depo at 102, 135-136).2' Peter Carlson admitted that he was the one from SEH that was supposed to have reviewed the grading and drainage plans submitted for Prairie Run, but that he failed to do so. (Carlson Depo at 20-21, 49-50, 68-69, 99-100). He does not know why he failed to do so. (Id.) He testified: Q. Did SEH do this, this review process for Prairie Run.' A. No. Q. Why not? A. I don't know. See also Mundstock Aff. ¶12 for a swnmary of the normal and expected duties of a City Engineer. 38 Q. So as city engineer for the Citv of Albertville, shouldn't SEH have reviewed the plans that were submitted for the plat of Prairie Run? A. Yes. Emphasis Added. (Carlson Depo at 20-21). Peter Carlson was aware that the grading and drainage plans that had been submitted by Gold Key and Hedlund needed to be reviewed and approved by SEH, but lie was waiting to conduct his review until after the public hearing on the assessments for the public improvements. (Carlson Depo at 71-72, 79-80, 91-92, 104-107, 111). The public hearing that he was waiting for happened on February 17, 2004, and the City Council passed a resolution approving the assessments on March 1, 2004. (Carlson Depo at 111). Therefore, according to City Engineer Peter Carlson, the grading and drainage plans could have, and should have, been reviewed after February 17, 2004, or, at the latest, March 1, 2004. (Carlson Depo at i I I-112, 173-175). Peter Carlson took a leave of absence for the month of February 2004. due to the death of his son the preceding fall. (Carlson Depo at 142). Jim Schutz, a registered Professional Engineer with SEH, filled in for Peter Carlson during the month of February 2004, attending the City Council meeting where the public hearing was held on the public improvements assessment. (Carlson Depo at 142; Schulz Depo at 14-19) Jim Schulz was qualified to review the grading and drainage plans for Prairie Run. (Carlson Depo at 175). After returning from his leave of absence in Nlarch 2004, Peter Carlson failed to conduct the required engineering review of the Prairie Run plat submissions, even though they were no longer `'premature". He also failed to let the City Planner, City Attorney, City Council, City staff, Gold Key or Hedlund know that SEH had not vet conducted this review of the Prairie Run plat submissions, despite the fact that he was copied on many entails and memos regarding 39 Prairie Run and attended Council Meetings regarding Prairie Run. (Carlson Depo at 112 — I I8, 121-124). Minnesota Courts recognize that a third party may be an intended beneficiary- of a contract between a municipality and an engineer. See Sota Foods. Inc. v. Larson -Peterson & Associcues, Inc., 497 N.W.2d 276 (Minn. Ct. App. 1993) (material facts in dispute prevented resolution of discretionary immunity issue as to both city and engineers in action brought by plaintiff against city and engineers for negligence and breach of contract, as third party beneficiary, in design of sewage treatment facility that lacked capacit} to handle discharges form plaintiffs plant). In this case, SEH understood that others, including Gold Key, Hedlund and builders, would be relying on its review of the plat submissions in proceeding with grading and development of the property. (Carlson Depo at 125). Therefore, SEH's duty was not only to the City, but to Gold Key and Hedlund, who were intended beneficiaries of the contractual obligation of SEH to properly review the plat submissions. The failure by SEH, as City Engineer; to review the engineering aspects of the Prairie Run plat submissions is a breach of the duty of care and professional standards in the industry. (Mundstocic Aff. C12). By Peter Carlson's own admission, SEH had a duty to review the Prairie Run Plat submissions, but SEH failed to do so. There are no genuine issues of material fact as to whether SEH was negligent in failing to review the engineering aspects of the Prairie Run plat submissions. Similarly, there are no genuine issues of material fact as to whether SEH breached its contractual obligations to the City in failing to review the engineering aspects of the Prairie Rum plat submissions. Because Gold Key was an intended beneficiary of SEH's proper review of the Prairie Run plat submissions, and because SEH clearly breached its duty by failing to review the Prairie Run plat submissions. SEH is liable to Gold Key. Accordingly, Gold Key is entitled to summary 40 judgment on its negligence and breach of contract claims against SEII, with the only issue remaining for trial being the amount of Gold Key's damages. V. THE CITY CANNOT DECLARE GOLD KEY IN DEFAULT OF THE DEVELOPMENT AGREEMENT, AND PLACE A MORATORIUM ON DEVELOPMENT IN PRAIRIE RUN, AFTER GOLD KEY AND BUILDERS HAVE SUBSTANTIALLY RELIED UPON THE CITY'S APPROVAL OF THE PLAT The City approved the Plat and grading plans for Prairie Run based upon the line of permanent aquatic vegetation as the estimated high water level, which was not only reasonable, but in compliance with both the Development Agreement and City Ordinances, as set forth previously in this memorandum. In reliance upon the City's approval, Gold Key and various builders spent millions of dollars in developing the infrastructure of Plat of Prairie Run, and building homes in Prairie Run. The City initially declared Gold Key in default and refused to issue building permits and certificates of occupation as to certain lots that it claimed to have elevations that did not comply with City Ordinances. Eventually, for reasons that the City has vet to articulate or make hilly clear, the City declared a moratorium on any development in Prairie Run, even as to those lots which do not have any elevation issues, according to the City. The City now claims that Gold Key is responsible for raising the infrastructure in Prairie Run — a -'fix,, which would cost multiple millions of dollars. (Nafstad Depo at 75). As set forth in previous sections of this memorandum, there is no violation of the Development Agreement or City Ordinances by Gold Key, either with regard to the elevations of the lots, drainage or the runoff rate of the Plat. Therefore, the Cite must be estopped from continuing with its moratorium. Even if the grading levels do not now comply with the Development Agreement or Ordinances (which Gold Key does not concede), based upon the new information that the City 41 has no\w'`discovered", Gold Key is entitled to relief from the moratorium and requirements of the Ordinances and Development Agreement based upon the logic of Minn. Stat. §462.355, Subd. 4, the "reasonable reliance" doctrine created by ,firm. Stat. §462.358, subd. 3e (1998) and the prohibition against retrospective application of laws, or vested rights doctrine.26 A. The Court Should Estop the City from Imposing its Moratorium on Development in Prairie Run, based upon the logic of Minn. Stale §462.355 Subd. 4. Minn. Stat. §462.355, Subd. 4, provides that no moratorium may impede a subdivision that has been given preliminary plat approval prior to the effective date of the interim moratorium ordinance. The plat approval process in gencral, and the significance of preliminary plat approval specifically (which triggers significant activity by developers and cities), was discussed in detail in Semler v. City of Hanover, 667 N.W.2d 457 (Minn. Ct. App. 2003). The SOMle(' Court quoted from the amicus curiae Builders Association of the Tcvin Cities' explanation of the importance of the preliminary plat: The significance of receiving preliminary plat approval in the real estate development cannot be overstated. The term "preliminary" approval is misleading because preliminary plat approval established the nature, design and scope of a development project and triggers significant activity by both developers and cities. upon receiving preliminary plat approval, development agreements are signed, grading and infrastructure installation begins, and property marking may begin. Those activities are undertaken with the expectation that the entire area encompassed by the preliminary plat will be final platted and developed over time and in accordance with guidelines established in preliminary plat. 't Based upon the new highest known elevation that the City determined in 2006, 951.47 feet above sea level. and the new 100 year elevation that the City determined in 2006, 949.9 feet above sea level, any violation of City Ordinances would be de minimis. Specifically, in relation to the new highest known elevation determined in 2006 of 951.47,, requiring structures to be a minimum of 953.47 feet above sea level. there is no unbuilt lot where the lowest proposed opening is less than 953.5 feet above sea level, and not one of the six as -built homes has a low opening that is less than 952.52 (range between 0.4 and 09 feet below 953.47). (j,tundstock Aff. ° 24). In relation to the new 949.9 feet above sea level 100 year level that the City determined in 2006, there is no as built low opening elevations or unbuilt low opening elevations where the lowest proposed opening is less than 952.5 feet above sea level. (Mundstock Aff. c125). 42 Semler at 462. The Semler Court noted that, pursuant to Minn. Star. 462.355, sudb. 4, a city may not apply a moratorium to development on projects that have aleady received preliminary plat approval. Following the logic of Semler and Nlirm. Star. §462.355; SUM. 4, if an interim moratorium on development is not allowed for a subdivision that has received prehinmary plat approval, then clearly it would follow that a moratorium on development would not be allowed for a subdivision that has been givenfir¢a1 plat approval; since by that time a developer would have undertaken even more significant activities and obligations in reliance upon the approved plat. Since Prairie Run has received final plat approval from the City, the moratorium on development that the City is attempting to impose is invalid and should not be allowed. B. The Court Should Estop the City From Imposing its' Moratorium on Development in Prairie Run, Based Upon the Reasonable Reliance Doctrine The reasonable reliance doctrine is set forth in Minn. Stat. §462.358, subd.3c and case law. That statute states: Subd. 3c. Effect of subdivision approval. For one year following preliminary approval and for two years following final approval, unless the subdivider and the municipality agree otherwise, no amendment to a comprehensive plan or official control shall apply to or affect the use, development density. lot size, lot layout, or dedication or platting required or permitted by the approved application. Thereafter, pursuant to its regulations, the municipality may extend the period by agreement with the subdivider and subject to all applicable performance conditions and requirements, or it may require submission of a new application unless substantial physical activity and investment has occurred in reasonable reliance on the approved application and the subdivider will suffer substantial financial damage as a consequence of a requirement to submit a new application. In correction with a subdivision involving planned and staged development, a municipality may by resolution or agreement grant the rights referred to herein for such periods of time longer than two years which it determines to be reasonable and appropriate 43 Emphasis added. The spirit of the language of this reasonable reliance doctrine is that a developer who has substantially completed a project should be entitled to rely upon the ordinances and information in existence when the project was approved. The statute provides for protection against new municipal requirements that prevent a developer from completing a project as it was originally approved, if substantial physical activity and investment has occurred in reasonable reliance upon the approved action. Under this reasonable reliance doctrine. a party may seek estoppel from the Court. Equitable estoppel is the doctrine b-y which a party is precluded by its act or conduct from asserting a right which it otherwise would have had against someone who has justifiably relied upon the conduct of the first party. See Semler v. Cit}gfHanoi-er, 667 N.W.2d 457 (Minn. Ct. App. 2003) (city equitably estopped from claiming its preliminary plat approval expired or that its moratorium applied to final plat application where developer committed substantial resources to project in reliance on city's assurances that preliminary plat approval would remain valid for extended period); Save Lantern Bay v. Cass Counry Planning Commission. 683 N.W.2d 862 (Minn. Ct. App. 2004) (grant of equitable estoppel improper when developer failed to establish that the rights that it has ostensibly acquired in a plat would be destroyed by the proposed government action); Ridgetivood Development Company v. State; 294 N.W.2d 288 (Minn. 1980) (developer failed to establish that preparatory expenses were incurred in reliance of statute or that actual expenses were irrevocably lost, or that governments conduct was wrongful as required to equitably estop state from applying amendment to developer's project), Sullivan v. Credit River Toy-.nship, 217 N.W.2d 502 (Minn. 1974) (where landowner had expended in excess of $10.000 in reliance upon board's approval of site as sanitary landfill, town board was estopped from rescinding approval). 44 The Supreme Court of Minnesota set forth the test for whether equitable estoppel may apply in (and use cases in the case of Ridgewood Development Company v. State of Minnesota, 294 N.W.2d 288 (Minn. 1980). The Ridgewood Court held that a local govermnent exercising its zoning powers will be estopped when a property owner, (1) relying in good faith (2) upon some act or omission of the government, ("3) has made such a substantial change in position or incurred such extensive obligations and expenses that it would be highly inequitable and unjust to destroy the rights which he ostensibly had acquired. Ridgewood 294 N.W.2d at 292. The Riclgexood Court went on to say, "stated somewhat differently, before plaintiff can be said to have made a significant investment deserving of judicial protection in a land use case, lie must demonstrate expenditures that are unique to the proposed project and would not be otherwise [sable." Id. The government must have em aged in wrongful conduct, which requires an affirmative act, rather than inadvertent or mistaken conduct. In re. Wesding Llfg. (nc. 442 N. W.2d 328, 332 (Minn. Ct. App. 1989), revieit denied (Minn. Aug. 25, 1989). [n Semler, the Court of Appeals determined that equitable estoppel applied, and the City of Hanover was estopped from claiming that its preliminary plat approval for subdivision expired after one year or that its subsequently enacted moratorium applied to final plat application, where the city itself had requested that the project be developed over several years and the developer had agreed to phased development so long as preliminary plat approval would remain valid for eight years, and developer had committed substantial resources to the project in reliance upon the City's assurance. Semler 667 N.W.2d at 466. The City's imposition of a moratorium on development in Prairie Run, based upon the application of "newly discovered" highest known water elevations, is essentially tantamount to the City attempting to impose a new ordinance to an approved plat. Estoppel is appropriate. The 45 City Council approved the Plat of Prairie Run based upon the permanent line of aquatic vegetation as the estimated high water level. The City affirmatively approved the Plat of Prairie Run. It was not approved through mistaken conduct or inadvertence, as would be the case if the City just overlooked the plat submissions and the% vwere automatically deemed approved pursuant to Minn. Star. § 462.358, subd.3b, by virtue of the City's inaction. The Plat of Prairie Run was approved after a process that lasted at least 18 months (from the initial concept plan in early 2003 through final plat approval in June 2003) and during which time the City's "development team" met to discuss the project frequently and during which time many emails, memos, reports, plans and other documents were exchanged among the members of the development team and with Gold Key and Hedlund. The City Administrator admitted that it was reasonable for Gold Key- and Hedlund to assume that the plans they submitted had been reviewed and approved by the City Engineer. (Kruse Depo at 42, 92-93). The City Planner and the City Attorney had undertaken their own assessment of the grading and drainage plans submitted by Gold Key and determined that they complied with City ordinances and subdivision ordinances. (Kruse Depo at 43, 77-78). Not only did the City take affirmative action when it initially approved the plat of Prairie Run, but the City and the City Engineer engaged in a second and third review of the approved plans when it issued building permits and certificates of occupancy. Clearly Gold Key was relying in good faith upon affirmative action taken by the City of Albertville. it is undisputed that Gold Key and the various builders have committed substantial resources in reliance upon the City's approval of the Plat of Prairie Run. The entire development's infrastructure — roads, sewers, ponds — have been developed. Gold Key has committed millions of dollars to the development of Prairie Run. (Johnson Aff. 'i2, 3 and 4). 46 Homes have been constructed on Prairie Run by various builders. The physical and financial obligations that have been incurred are extensive and cannot be used for anything else. (Johnson Aff. 12). They storm sewer system, roads, and ponds are in place for this particular residential development, in accordance with the plans that were approved by the City. The City is not allowing any type of development to occur in Prairie Run, so it is not like Gold Key can simply use the property for something else. It is hard to imagine the resources that have been committed by Gold Key and the builders to be any more substantial than that which they have already incurred. It would be highly unjust and inequitable for the City to nmy be allowed to halt development, ",lien Gold Key and the builders have acted in substantial reliance upon the approved plans. This is clearly a case where estoppel is appropriate. Based upon the reasoning of the reasonable reliance doctrine and the afore -mentioned cases, the Court should estop the City from imposing a moratorium on development in Prairie Run and the Court should grant summarc judgment in favor of Gold Key for the City's breach of the development agreement in imposing the moratorium. C. The Court Should Estop the City From Imposing Its' IVloratorium on Development in Prairie Run Based Upon the Vested Rights Doctrine Another analogous line of cases involve the "vested rights doctrine", or the prohibition against retrospective application of laws. The prohibition against retrospective application of laws would prohibit the City from applying new ordinances to a previous transaction if it would impair vested property rights, create new obligations or duties or attach a new disability to a transaction. See 11urray v. Cisar, 594 N.W.2d 918 (Minn. Ct. App. 1999). The vested rights doctrine is typically used as an alternative way of resolving land -use controversies between a 47 developer and a government entity. Concept Properties, LLP v. Cily of_1linnetrista, 694 N.W.2d 804 (Minn. Ct. App. 2005). review denied, citing Ridgewood Dev. Co. u. State, 294 N.W.2d 288, 294 ('Minn. 1980). Minnesota Courts have used the vested rights doctrine to determine whether to allow a party to complete a project that was started prior to a change in zoning. In determining whether sufficient rights have vested which would preclude application of a new law, courts look to the facts of the case to determine whether substantial actions, extensive obligations, or extensive expenses have been taken or incurred in reliance on the prior law. The dispositive issue is the extent to which physical aspects of the project, or binding commitments for the same, have gone forward. li%ernza(ger v. Conzorant Township Bd, 716 F.2d 1211, 1215 (8`1 Cir. 1983). In other words. courts look at whether a developer has made sufficient progress with its project or created such binding commitments as to acquire a vested right to complete the project. Concept Properties. 694 N.W.2d at 819. The general rule is that a right becomes vested when it has "arisen upon a contract. or transaction in the nature of a contract. authorized by statute and liabilities under that right have been so far determined that nothing remains to be done by the party asserting it." Ridgewood Dev. Co., 294 N.W. 2d at 294. A mere expectation, desire. or intention to develop a property in a particular way is not sufficient to create a vested right. [Vermager v. Comorant Township Bd. 716 F.2d 1211. 1215 (8"' Cie 1983). In order to acquire a vested right, a developer must have progressed significantly with physical aspects of the project or made a binding commitment to develop the property. Id. See Hawkinson v. County of Itasca, 231 N.W.2d 279 (Minn. 1975) (landowner who was Using Lakeshore property for commercial purposes at time it was zoned residential was entitled to complete building. but could not enlarge original ground floor dimensions); Ridgewood Dev. Co. 294 N.W.2d 288 (neither municipalities 48 prelimincay approval of a project, nor a determination that a development plan would be consistent with applicable land -use regulations will create a vested right). Here, again, what the City is doing with its moratorium in applying "new-" numbers to the ordinances that were in effect at the time of plat apprm al, is tantamount to the City attempting to impose a new ordinance upon an approved plat. Gold Key clearly has a vested right which would preclude the City from declaring its moratorium on building in the Prairie Run development. The City approved the final Plat of Prairie Run in 2004. The City and Gold Key entered into a contract — the July 16, 2004 Planned Unit Development Agreement, based upon that approved Plat of Prairie Run. Gold Key entered into option agreements with three builders in reliance upon the approved Plat of Prairie Run. The option agreements require Gold Key to conve;- buildable lots to the builders, which is impeded by the City's current moratorium. The property was developed — storm sewers, ponds and roads built, and the lots graded, in reliance upon the approved Plat of Prairie Run. Houses were built upon many of the lots in reliance upon the approved Plat of Prairie Run. A significant and substantial amount of money, or commitments for the same, (in excess of 52,000,000.00) has been spent by Gold Key. (Johnson Aff. !I2. 3, 4). All of these actions by Gold Key, and by the City, clearly create a vested right and this Court should recognize that vested right and estop the City from continuing with its moratorium on development in Prairie Run. CONCLUSION Gold Key has been put in the impossible situation of having to deal with the financial repercussions of a moratorium imposed by the City through no fault of Gold Keys. Gold Key's engineer designed Prairie Run in compliance with the Development Agreement and the Citys Ordinances and Subdivision Ordinances, based upon the information that was known to Gold 49 Key and Hedlund and available at the time. The City must be estopped from declaring a moratorium on development in Prairie Run, based on its discovery of "new" information, when SEH negligently failed to review the Prairie Run plat submissions, when the City itself approved the Plat of Prairie Run after an extensive 18 month process, and when Gold Key and others have incurred such extensive obligations and expenses that it would be highly inequitable and unjust to allow the moratorium. The City Administrator, Larry Kruse, recognized the unfairness of the situation to Gold Key during his deposition: Q. I am asking if it seems fair to you that the city is declaring the developer to be in default for ordinances that were in effect at the time of the plat .. but using numbers two ,years later in 2006 as a basis for that default. Does that seem fair to you? ... A. ... it doesn't seem fair. (Kruse Depo at 143). The unfairness of the City's moratorium on development in Prairie Run must come to an end. For the reasons set forth in this Memorandum, and based upon the documents submitted herewith, Gold Key respectfully requests that the Court grant its Motion for Partial Summary Judgment, reserving the issue of Gold Key's damages for trial. JOFINSON, LARSON, PETERSON & MATT, P.A. Dated: By; �ti(�t�ii (��� �4t�u_ Cindi S. Matt. I.D. # 269359 Attorney for Gold Key Development, Inc. 908 Commercial Drive Buffalo, M\ 553li (763) 682-4550 50 ACK\ONVL,EDGEMENT The undersigned hereby acknowledges that costs. disbursements. and reasonable attorney and witness fees may be awarded pursuant to Minn. Stat. 549.211. Subd. 2. to the party against whom the allegations in this pleading are asserted. Cinch S. Matt �1