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2010-11-10 CC Packet
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2010-11-10 CC Packet
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MEMORANDUM <br />TO: Mayor and City Council <br />FROM: Kurt B. Glaser, City Attorney <br />DATE: November 3, 2010 <br />RE: Recommending Settlement of Litigation <br />Centerville v. Royal Oaks Realty, Special Assessment <br />Summary: <br />I am recommending the Council approve settlement of City litigation against Royal Oaks <br />Realty. The City achieved its litigation goals and has been financially made-whole. To date, <br />Royal Oaks paid its debt to the City (plus interest and penalty) and paid the City's litigation <br />costs. <br />Action: <br />If settlement is desired, the Council must approve a resolution authorizing the Mayor to <br />execute documents dismissing the lawsuit against Royal Oaks and satisfying liens held by the <br />City against two parcels owned by Royal Oaks. <br />Details: <br />Royal Oaks asked the City to build public improvements (i.e., road, water, sewer) to serve <br />its three commercial lots and specially assess the cost of the improvements against those lots. <br />The City entered into a binding contract whereby Royal Oaks agreed to repay this debt plus <br />interest in monthly payments over a ten -year period. The contract also called for Royal Oaks to <br />provide a letter of credit to secure the debt. When payments began Royal Oaks immediately sold <br />one lot and paid one-third of the special assessment associated with that lot. Thereafter it failed <br />to make any monthly payments for the two remaining lots. The City moved to take its letter of <br />credit only to discovery that the letter had been canceled without notice to the City. The City then <br />brought suit for breach of contract. <br />During October 2010, Royal Oaks found a buyer for the two remaining lots. However, <br />that sale was blocked due to the City's liens and lawsuit against those parcels. In exchange for <br />lifting the liens and dismissing the lawsuit, Royals Oaks agreed to fully pay its debt to the City <br />and reimburse the City's litigation costs. Repayment of its debt included the principal amount of <br />575,379.33 plus interest and penalty. The City's litigation costs were $5,814.50 and included <br />attorney fees, court costs, and staff time. In anticipation of the Council's approval (and to <br />facilitate its pending sale), Royal Oaks actually paid the City in-full and our bank confirmed that <br />its checks were fully funded. <br />All goals of litigation against Royal Oaks have been met: 1.) The City was financially <br />made whole. Continued litigation will not result in further financial benefit to the City. And, 2.) <br />The City fulfilled its mandate to protect taxpayer-financed public improvements by requiring <br />repayment by a private Developer - and did so in this case at no additional cost to the public, <br />NO <br />
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