2006-05-26 Verified Complaint
STATE OF MINNESOTA
DISTRICT COURT
COUNTY OF WRIGHT
TENTH JUDICIAL DISTRICT
CASE TYPE: Declaratory Judgment/Breach of Contract
Court File No.
Gold Key Development, Inc.
a Minnesota corporation,
Plaintiff,
vs.
VERIFIED COMPLAINT
City of Albertville,
Defendant.
Plaintiff, for its Complaint herein, states and alleges as follows:
1. Plaintiff Gold Key Development, Inc. (hereinafter "Developer") IS a duly formed
Milmesota corporation, with its principal place of business located in Medina, Minnesota.
2. Defendant City of Albertville (hereinafter "City") is a municipality located in the County
of Wright, State of Minnesota.
3. On or about July 16, 2004, Developer and City entered into a planned unit development
agreement (hereinafter "Development Agreement") for the Prairie Run Subdivision, which was
recorded with the Wright County Recorder as document number 940358. A true and correct
copy of the Development Agreement is attached hereto as Exhibit A.
4. At the time the Development Agreement was entered into, the City's engineer was Short
Elliot Hendrickson, Inc. (hereinafter "SEH").
5. At the time the Development Agreement was entered into and through the present, the
City's attorney was Michael Couri (hereinafter "Couri").
6. At the time the Development Agreement was entered into and through the present,
Developer's engineer was Hedlund Engineering (hereinafter "Hedlund").
7. The Development Agreement was drafted by Couri.
8. On or about June 7, 2004, the City approved the Plat of Prairie Run Subdivision
(hereinafter "the Plat") and accepted it as in compliance with Minnesota Statutes, Section
505.03. A true and correct copy of the Plat is attached hereto as Exhibit B.
9. On December 22, 2004, the Plat was duly recorded in the Office of the Wright County
Recorder as document number 940357.
10. The Property that is the subject of the Development Agreement and of the Plat is legally
described as follows:
Lots 1-15, Block 1, Lots 1-38, Block 2, Outlot A, Prairie Run, Wright County,
Minnesota
11. 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. lfsufficient 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. 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 approved by the Building Inspector or a professional
soils engineer.
Emphasis added.
12. At the time the Development Agreement was entered into, sufficient data on high water
levels was not available.
13. Developer had no obligation to determine the 100-year flood elevations.
14. Developer's engineer had no obligation to determine the 100-year flood elevations.
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15. At the time the Development Agreement was entered into, the elevation of the line of
permanent aquatic vegetation was 947.5 feet.
16. Couri, the City and SEH were aware of and approved the use of the 947.5 feet line of
permanent aquatic vegetation as the estimated high water elevation.
17. Pursuant to Paragraph 13.r. of the Development Agreement, the lowest grade opening
was to have been 949.5 feet.
18. Pursuant to the Grading Plan attached to the Development Agreement as Exhibit D
(hereinafter "the Grading Plan"), the lowest grade openings were going to be 950.5.
19. The lowest grade openings set forth on the Grading Plan all exceeded the 949.5 feet
lowest grade opening required pursuant to Paragraph 13.r. of the Development Agreement.
20. The City and SEH adopted the Grading Plan in approximately August of 2004.
21. Thereafter, sometime in late summer or early fall of 2004, the actual grading of the
Property was done by the City, in accordance with the Grading Plan which it adopted.
22. On or about October 1, 2004, Colleen Allen, from the Wright County Soil and Water
Conservation District, wrote a letter to Todd Udvig of SEH, indicating, among other things, that
their office was concerned about the flooding potential of a portion of the Property when ditch 9
backs up. A true and correct copy of Ms. Allen's 10/1/04 letter is attached hereto as Exhibit C.
23. After receiving Ms. Allen's 10/1/04 letter and reviewing it together, on or about October
14, 2004, Hedlund and SEH jointly revised the Grading Plan (hereinafter "the Revised Grading
Plan"), raising several of the Lots even higher than the 950.5 feet elevation which was in the
original Grading Plan.
24. The City and SEH were aware of and approved the Revised Grading Plan.
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25. The City then graded the Property pursuant to the higher elevations set forth in the
Revised Grading Plan.
26. In approximately August or September of 2005, the City of Albertville experienced a
significant rain event. No homes on the Property were flooded as a result of this rain event.
However, the City suspended a building permit which it had previously issued on a home that
Developer was building on Lot 7, Block 2, until such time as Developer prepared yet another
revised grading plan. Therefore, on or about October 11, 2005, Hedlund did prepare another
revised grading plan (hereinafter "the Second Revised Grading Plan") and raised the elevations
of Lots 7-13, Block 2, located on the Property. A true and correct copy of the Second Revised
Grading Plan is attached hereto as Exhibit D.
27. On November 29, 2005, Couri wrote a letter to Developer declaring Developer to be in
default of paragraph 13.F. of the Development Agreement. A true and correct copy of Couri' s
11/29/05 letter is attached hereto as Exhibit E.
28. Paragraph 13.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.
29. In his 11/29/05 letter, Couri specifically indicated that "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). . ."
30. Wright County never calculated a 100-year flood elevation for the Property.
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31. Couri's reference in his 11/29/05 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. Specifically, it was taken from a November 20,
2000 letter from Brian Walter to Wayne Fingalson at the Wright County Highway Department.
A true and correct copy of Brian Walter's 11/20/00 letter is attached hereto as Exhibit F.
32. Brian Walter is an engineer for Hancock Concrete Products Company, Inc. Brian Walter
prepared his 11/20/00 letter as part of a culvert replacement study for the culvert on Highway 18,
Wright County. Brian Walter's estimate that the IOO-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, where he indicated:
As you know, I prepared a culvert replacement study for the culvert on County State Aid
Highway 18 . . .One of the requirements for a study of this type is to compare the
hydraulic characteristics of the existing structure with the proposed structure at the
occurrence of the 100-year flood event. The reason for this is to make sure that the
proposed structure (culvert) does not materially increase the risk of flood damage. In
order to make this comparison, it is first necessary to estimate the 100-year flow rate and
flood stage. But 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 accuracy is necessary when determining 100-year flood stages for flood
plain zoning. . . For the above stated reasons, lOO-year flood stages determined for
bridge and culvert replacements should generally not be utilized for flood plain
zoning purposes.
Emphasis Added. A true and correct copy of Brian Walter's 12/29/05 letter is attached hereto as
Exhibit G.
33. Developer and its engineer, Hedlund, were not aware of Brian Walter's 11/20/00 letter
until sometime in November 2005.
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34. Couri and the City were aware that Brian Walter's 951.5 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. In Couri's 11/29/05 Letter, he states:
Albertville Staff has discussed the possibility that Wright County's 100 year flood
elevation may be a very conservative elevation considering it did not include any
storm water ponding or reflect the City's requirement to restrict post-development
run-off rates to 50% of pre-development run-off rates in the County Ditch 9
watershed west of Wright County Highway No. 19. However until a study is
done to determine whether this elevation is correct, the City accepts this elevation
as the correct elevation.
35. Despite this 951.5 feet estimate being inaccurate for flood and zoning purposes, the City
relied on it and utilized it to declare Developer to be in default of the Development Agreement
and to essentially shut down further building on the Property. In his 11/29/05 letter, Couri
further states:
Using the 100-year flood elevation calculated by Wright County, we have
determined there are a number of lots in the Prairie Run development that do not
comply with City ordinances requiring that the lowest opening elevation of a
building be at least 2 feet above the 100-year flood elevation (City Code 11-7-
5G). .. The failure to comply with City Ordinance is a violation of paragraph
13.F. of the Developer's Agreement. . .
36. At the time of the Development Agreement, there were two Zoning Ordinances which
addressed minimum floor elevations. Those two ordinances were Zoning Ordinance section
1000.9, Subd. (d) and Zoning Ordinance Section 5000.4, Subd. (a).
37. 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. When fill is
required to meet this elevation, the fill shall be allowed to stabilize, and
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construction shall not begin until the property has been inspected by the Building
Inspector.
38. 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 mark of public
waters regulated by chapter 4900 (Shoreland Overlay District) of this Chapter,
whichever is greater.
39. At the time of the Development Agreement, and when the grading was done on the
Property, Zoning Ordinance Section 5000.4 did not apply because the 100-year flood elevation
was not known and there were no public waters regulated by chapter 4900 on the Property.
40. At the time of the Development Agreement, and when the grading was done on the
Property, Developer was in compliance with Zoning Ordinance section 1000.9, Subd.(d) because
sufficient data on known high water levels was not available and, therefore, the elevation of the
line of permanent aquatic vegetation - 947.5 feet - must be used as the estimated high water
elevation.
41. In fact, the lowest building openings were designed to be greater than three feet above the
line of permanent aquatic vegetation, which more than meets the two foot requirement in section
1000.9, Subd. (d), and the three foot requirement of section 5000.4, Subd. (a) (if said ordinance
even applied).
42. In any event, neither Zoning Ordinance 1000.9, Subd.(d), nor Zoning Ordinance section
5000.4(A) applied to Developer or the Development Agreement, because paragraph 13.1. of the
Development Agreement specifically addressed the elevation issue and take precedence over
those two ordinances, to the extent they are inconsistent with it.
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43. Pursuant to paragraph 13.1 of the Development Agreement, the lowest grade opening was
to have been 949.5 feet. The lowest grade openings set forth in the Grading Plan, Revised
Grading Plan and Second Revised Grading Plan met this 949.5 feet requirement.
44. Thereafter, pursuant to Couri's Memorandum dated 12/20/05, the City relied upon the
inaccurate 951.5 feet number which was determined by Brian Walters for the purposes of his
culvert replacement study, and indicated that it would shut down development on every Lot on
the Property lower than 954.5 feet and declared that the City would not issue occupancy permits
or new building permits for lots with elevations lower than 954.5 feet. A true and correct copy
of Couri' s 12/20/05 Memorandum is attached hereto as Exhibit H.
45. In Couri's 12/20/05 Memorandum, he acknowledges that the 951.5 feet figure is not
accurate, stating that an engineer for the culvert supplier "calculated a 1 DO-year flood level of
sorts ..." and further that "While this study was not a comprehensive study, it represents the
only information available as to potential flood levels in County Ditch 9 . . . and its method of
calculation appears to be sound given its limited scope. . . City Staff has determined the 951.5
number represents the most accurate estimate of the I DO-year flood level for the Gold Key
portion of the Prairie Run plat." Emphasis added.
46. Based upon this admittedly inaccurate estimate of a 1 DO-year flood level of sorts, which
was calculated for a limited purpose of culvert replacement, the City did temporarily suspend
development in late 2005 and then did eventually shut down development in the Property in
approximately February or March of2006.
47. At the time the City declared Developer to be in default of the Development Agreement
and refused to issue certificates of occupancy and new building permits, the City was aware:
that the 951.5 feet elevation was not the accurate 1 DO-year flood elevation; that the Developer
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and various builders had relied upon the provisions of the Development Agreement which had
previously been approved by the City and had already built homes with their lowest openings at
elevations less than 954.5 feet in reliance thereon; and that the Developer and various builders
had incurred substantial costs in reliance upon the provisions of the Development Agreement.
48. Sometime between December 2005 and February 2006, the City's new engineer, Bolton
Menk, did finally conduct a I DO-year flood study (hereinafter "the Flood Study").
49. Upon information and belief, the Flood Study determined that the 100-year flood
elevation for the Plat was 950.9 feet.
50. Sometime after September 2005, the City amended its Zoning Ordinances 1000.9, Subd.
(d) and 5000.4 A (hereinafter "Amended Ordinances"). Those Amended Ordinances now state:
Zoning Ordinance section 1000.9, Subd. (d):
No structure, except docs and retaining walls, shall be placed at an elevation such
that the lowest building opening is less than two feet (2') above the highest known
surface water level or ordinary high water level, or emergency overflow elevation,
whichever is greater, if determined, of any adjacent pond or watercourse. 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. 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 official.
Zoning Ordinance Section 5000.4, Subd. (a) states:
The following standards apply to all lands within and/or abutting a wetland:
A. The lowest floor elevation shall be three feet (3') above the 1 DO-year flood
elevation or three feet (3') above the ordinary high water mark of public waters
regulated by chapter 4900, "Shoreland Overlay District", of this ordinance,
whichever is greater.
51. Couri, in his 12/20/05 memo, 'states that the Amended Ordinances will take effect as to
Developer on June 7, 2006, pursuant to Minn. Stat. S462.358, Subd. 3c, which is two years
following final approval of the Plat.
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52. Said Amended Ordinances are not applicable to Developer or the Development
Agreement, pursuant to Minn. Stat. 462.358, Subd. 3c because substantial physical activity and
investment has been incurred by the Developer in reasonable reliance upon the approved Plat and
Developer will suffer substantial financial damages as a consequence of a requirement to submit
a new application or otherwise comply with the Amended Ordinances.
53. The City is in default of the Development Agreement in that it has essentially shut down
development by refusing to issue certificates of occupancy or building permits for Lots with
elevations less than 953.9 feet.
54. It would be unjust, inequitable and unreasonable for Developer to have to raise any Lots
or raise any houses upon Lots, based upon what is now a known 1 DO-year elevation, when such
information was unknown at the time of the Development Agreement and when the grading was
done pursuant to the approved Grading Plan, Revised Grading Plan and Second Revised Grading
Plan, and when Developer and various builders have incurred significant expenses in reliance
upon the information in existence, and approved by the City and SEH, at the time of the
Development Agreement and actual grading.
55. Upon information and belief, despite the City determining that the 1 DO-year elevation is
950.9, which under its Amended Ordinances would require the lowest floor elevation to be 953.9
feet, the City has begun issuing building permits for lots with the lowest floor elevation being
953.5 feet.
56. In approximately December 2004, Developer entered into agreements with T/C Homes
and Legacy Homes Incorporated for those builders to have the exclusive option to purchase and
build upon certain Lots on the Property, pursuant to the terms and schedule set forth specifically
in said agreements.
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57. Based upon the City's breach of the Development Agreement and refusal to issue
certificates of occupancy and building permits for certain Lots which do not have elevations
above 953.5, Developer will be unable to fulfill the terms of its agreements with TIC Homes and
Legacy (as to certain Lots), as it will not be able to convey buildable lots to said Builders. The
City's breach of the Development Agreement and refusal to issue building permits and
certificates of occupancy, as set forth above, has allegedly caused TIC Homes in excess of
$162,000 of damages, which amount TIC Homes alleges continues to increase daily as a result of
holding costs. TIC Homes has put Developer on notice that it intends to hold Developer
responsible for those alleged damages. To the extent that Developer is liable to TIC Homes for
its alleged damages, Developer will be damaged and will be entitled to be indemnified for such
damage as a result of the City's breach of the Development Agreement.
58. In addition to the damages set forth in the preceding paragraph, Developer has suffered
significant and substantial damages as a result of the City's breach of the Development
Agreement, and will continue to suffer damages, including, but not limited to: interest accruing
on the Developer's loan against the Property (which loan would have been paid off, but for the
City's actions in shutting down development on the Property); Developer has had to pay property
taxes and monthly costs for the Assessments against Lots (which would have been taken down
by various Builders had the City not shut down development on the Property); attorneys fees and
costs incurred as a result of the City's unreasonable and arbitrary actions; Developer has lost
business opportunities andlor incurred significant expenses in order to preserve business
opportunities that Developer had commitments for with the intent of using the cash that
Developer should have had from the sales of the Lots, but which Developer has not received as a
result of the City shutting down development on the Property.
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59. In reliance on the specific terms of the Development Agreement and the City's approval
of the Plat, the Grading Plan, the Revised Grading Plan and the Second Revised Grading Plan,
and upon the ordinances in effect at the time of the Development Agreement, Developer has
incurred significant expenses in developing the Property and in entering into option agreements
with various builders, consistent with said approved documents.
60. It would be unjust to require Developer to comply with the Amended Ordinances which
were not in effect at the time of the Development Agreement and approval of the Plat, and with
the 100-year elevations that the City has now determined after it approved the Development
Agreement and the Plat based on the permanent line of aquatic vegetation.
Count 1 - Declaratory Jud2ment
61. Plaintiff hereby realleges and incorporates by reference paragraphs 1 - 60 herein.
62. Declaring the City to be in breach of the Development Agreement and adjudging that
Developer is entitled to damages against City in an amount to be determined at trial.
63. Declaring that Development Agreement is not subject to the Amended Ordinances.
64. Ordering the City to issue certificates of occupancy and building permits for the
remaining Lots on the Property in accordance with the provisions of the Development
Agreement and the Ordinances that were in effect at the time of the Development Agreement,
and with the Grading Plan, Revised Grading Plan and Second Revised Grading Plan which were
all approved by the City.
Count 2 - Breach of Contract
65. Plaintiff hereby realleges and incorporates by reference paragraphs I - 64 herein.
66. The Development Agreement between Developer and the City is an enforceable contract.
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67. The City has breached the Development Agreement by unreasonably and wrongfully
declaring Developer to be in default of the Development Agreement as set forth specifically
herein and by failing and refusing to issue certificates of occupancy and building permits for
Lots on the Property because of alleged deficiencies in the elevations, as specifically set forth
herein.
68. As a result of the City's breach of the Development Agreement, Developer has suffered
significant damages and will continue to suffer significant damages.
WHEREFORE, the Plaintiff demands the judgment of the Court as follows:
1. Declaring the City to be in breach of the Development Agreement and adjudging
that Developer is entitled to damages against City in an amount to be determined
at trial;
2. Declaring that Development Agreement IS not subject to the Amended
Ordinances;
3. Ordering the City to issue certificates of occupancy and building permits for the
remaining Lots on the Property in accordance with the provisions of the
Development Agreement and the Ordinances that were in effect at the time of the
Development Agreement;
4. Adjudging that Developer IS entitled to a judgment against the City for
Developer's attorneys fees, costs and disbursements incurred in this action;
5. For such other relief as the Court deems just and equitable.
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JOHNSON, LARSON, PETERSON & MATT, P.A.
Dated S jy ( o;6U;
/-
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rt: _~fv~--
Cindi S. Matt;tD. # 269359
Attorney for Plaintiff
908 Commercial Drive
Buffalo, MN 55313
(763) 682-4550
ACKNOWLEDGEMENT
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.
~ /.' f l~ L
L--b~U ~ l ;,. // ,~... /'( -_..
Cindi S. Matt
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VERIFICA nON
STATE OF MINNESOTA)
) ss.
COUNTY OF ,WRIGHT )
I, Dean Johnson, Secretary for Gold Key Development, Inc., being first duly sworn, upon
oath, swear that I am the Plaintiff in the above-entitled proceeding, that I have read the foregoing
Complaint, know its contents, and that it is true and correct, except as to the allegations made
upon information and belief, and as to them I believe them to be true.
Gold Key Development, Inc.
J)~ ~ ~\ \l-fvv.
.
Dean Johnson, Secretary
Subscribed and sworn to before
thi~day of , 2006.
?
Notary Public
DIANE PROElL
NOTARY PUBLIC - MINNESOTA
MY COMMISSION EXPIRES 1-31-09
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