Suit over housing development appealed again

  • Article by: JIM ANDERSON , Star Tribune
  • Updated: May 18, 2013 - 12:26 PM

A seven-year legal battle over a housing development has reached the Court of Appeals for a second time.

All around the vacant field, with its out-of-place cul-de-sac, are bustling signs of a rebounding housing market: the pop of hammers, chirps of backing trucks and skeletons of freshly minted homes taking shape.

Houses may yet be built there. But the long legal wrangle over the vacant land winds on.

By Woodbury standards, the Oak View 4th Addition was to be a fairly modest housing tract: 15 lots on 7 acres tucked among larger developments in a new and attractive part of the city, just to the southwest of Eagle Valley Golf Course off Lake Road.

But it has been one of its most contentious.

For the second time in a complex seven-year legal feud between the city of Woodbury and the development company, Walker Properties of Woodbury II, the case is scheduled to be argued before the Minnesota Court of Appeals on June 6.

At issue is nearly $1 million the city claims it is owed for assessments and other fees for improvements like building streets, curbs and gutters it constructed in anticipation of the development, which was approved in 2005 before the housing market collapsed.

Walker, meanwhile, asserts that amount is inflated, was determined unfairly and that it never should have been charged those costs in the first place.

The city and Walker entered into a commonly used developer’s agreement under which the firm agreed to make some improvements at its own expense and let the city make most of the others, then recover those costs later through fees and by levying assessments on the property.

Under the deal, Walker agreed to the city’s terms, the assessment amounts and how it determined those costs. The deal also required Walker to post two letters of credit that the city could tap if Walker were to default on the agreement.

The deal went sour very quickly, and Walker sued in 2006.

Walker wanted to construct its own improvements, with plans approved by the city, using its own contractors, said Jon Erik Kingstad, who represents the company. Walker, he said, should have been able to petition the city to do that.

“Walker Properties did this all under protest,” he said. “They have these rules, these unwritten policies that are not written down or put in the form of an ordinance — they’re just policies they’ve adopted, and they apply them differently whether you’re a large developer or a small developer, which Walker is.”

But Walker reneged on its deal and is now trying to evade a court order compelling it to pay the city what it is owed, said Pete Regnier, who is handling the case for Woodbury. “Walker Properties did not pay those fees and assessments as required by the contract,” he said.

Because the city contended Walker had defaulted on the deal, it sought to recover the money set aside in the letters of credit issued by Construction Mortgage Investors Co. When the city told CMIC it was drawing the money, Walker went to Washington County District Court in 2009 and got an injunction to prevent it.

The city appealed, seeking to get the injunction lifted, and sought an “injunction bond” of nearly $1 million. Such a bond was to guarantee that Walker would cover payment to the city for its losses if its injunction was later ruled to be improper, Regnier said. Kingstad said the bond amount is far more than what the city is entitled to.

In the 2010 Court of Appeals ruling, the panel of three judges sent the case back to District Court, saying the legal issues of the injunction and the bond needed to be re-examined and argued again.

In this upcoming round, the city is arguing to have the lawsuit thrown out and for Walker to post its injunction bond as Washington County District Judge Tad Jude ordered, Regnier said.

Washington County, meanwhile, has launched a “quiet- title” action to clear ownership claims on the property so that it can be sold and developed. “That’s a whole other issue,” Kingstad said.

The land was forfeited to the state over unpaid property taxes. Under the process, the land was put up for auction. There were no bidders, said Jennifer Wagenius, of the county’s property records and taxpayer services division.

The land, valued at just more than $1 million, would next be put on the market once there is a clear title, with proceeds going to the city, county and school district.

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