2010-11-10 CC Packet - Laserfiche WebLink

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MEMORANDUM TO: Mayor and City Council FROM: Kurt B. Glaser, City Attorney DATE: November 3, 2010 RE: Recommending Settlement of Litigation Centerville v. Royal Oaks Realty, Special Assessment Summary: I am recommending the Council approve settlement of City litigation against Royal Oaks Realty. The City achieved its litigation goals and has been financially made-whole. To date, Royal Oaks paid its debt to the City (plus interest and penalty) and paid the City's litigation costs. Action: If settlement is desired, the Council must approve a resolution authorizing the Mayor to execute documents dismissing the lawsuit against Royal Oaks and satisfying liens held by the City against two parcels owned by Royal Oaks. Details: Royal Oaks asked the City to build public improvements (i.e., road, water, sewer) to serve its three commercial lots and specially assess the cost of the improvements against those lots. The City entered into a binding contract whereby Royal Oaks agreed to repay this debt plus interest in monthly payments over a ten -year period. The contract also called for Royal Oaks to provide a letter of credit to secure the debt. When payments began Royal Oaks immediately sold one lot and paid one-third of the special assessment associated with that lot. Thereafter it failed to make any monthly payments for the two remaining lots. The City moved to take its letter of credit only to discovery that the letter had been canceled without notice to the City. The City then brought suit for breach of contract. During October 2010, Royal Oaks found a buyer for the two remaining lots. However, that sale was blocked due to the City's liens and lawsuit against those parcels. In exchange for lifting the liens and dismissing the lawsuit, Royals Oaks agreed to fully pay its debt to the City and reimburse the City's litigation costs. Repayment of its debt included the principal amount of 575,379.33 plus interest and penalty. The City's litigation costs were $5,814.50 and included attorney fees, court costs, and staff time. In anticipation of the Council's approval (and to facilitate its pending sale), Royal Oaks actually paid the City in-full and our bank confirmed that its checks were fully funded. All goals of litigation against Royal Oaks have been met: 1.) The City was financially made whole. Continued litigation will not result in further financial benefit to the City. And, 2.) The City fulfilled its mandate to protect taxpayer-financed public improvements by requiring repayment by a private Developer - and did so in this case at no additional cost to the public, NO