Camino Props., LLC v. Doe
| Decision Date | 23 March 2016 |
| Docket Number | Case No. 2:13-cv-02262-APG-CWH |
| Parties | CAMINO PROPERTIES, LLC, a foreign limited liability company, Plaintiff, v. INSURANCE COMPANY OF THE WEST, a California company, DOE INDIVIDUALS 1 through 100, inclusive; ROE ENTITIES 1 through 100, inclusive, BOE BONDING COMPANIES 1 through 100, inclusive, Defendants. |
| Court | U.S. District Court — District of Nevada |
The trial of this matter was conducted on March 7, 8, 14, 15, and 16, 2016 without a jury. Pursuant to Fed. R. Civ. P. 52(a), I set forth my findings of fact and conclusions of law.
1. The original owner/developer of the Camino Al Norte Townhomes project ("Project") was Camino Al Norte Properties, LLC ("Original Developer").
2. The Project is located within the City of North Las Vegas ("CNLV"). CNLV required the Original Developer to enter into a Subdivision Offsite Improvements Agreement ("Offsite Improvement Agreement") as a condition for approval of the Project. [Ex 502]
3. As a further condition for approval of the Project and in accordance with the Offsite Improvement Agreement, the Original Developer was required to post a performance bond in the amount of $733,541.80.
4. On or about December 12, 2005 Insurance Company of the West ("ICW") issued City of North Las Vegas Department of Public Works Development of Offsite Improvements Performance Bond no. 2169554 ("Performance Bond") in the amount of $733,541.80. [Exs 501, 502] The Original Developer is named as the principal on the Performance Bond and CNLV is named as the obligee on the Performance Bond.
5. The Performance Bond secures the Original Developer's obligations under the Offsite Improvement Agreement.
6. The Performance Bond provides that if the Original Developer defaults, ICW may assure and complete or procure completion of the obligations of the Original Developer, and ICW will be subrogated and entitled to all rights and properties of the Original Developer arising out of the Offsite Improvement Agreement. [Ex 501 ¶7]
7. The Offsite Improvement Agreement provides that in the event the Original Developer fails to complete the improvements within the applicable period, CNLV has the option to complete the improvements at the expense of the Original Developer or ICW. [Ex 502, p. 2 ¶] Should that happen, the Performance Bond shall be used for the payment of the cost of completion of the improvements. [Ex 502, p. 3 ¶]
8. ICW obtained as security for the Performance Bond an indemnity from the Original Developer and a Set Aside Letter ("SAL") from the Original Developer's lender (Community Bank of Nevada) in the amount of $733,541.00.
9. The Original Developer of the Project failed to complete the bonded work and eventually went bankrupt. Community Bank was ultimately taken over by the Federal Deposit Insurance Corporation.
10. As a consequence of the Original Developer's failure to complete the Project, CNLV made a claim against the Performance Bond. [Ex 504]
11. ICW and CNLV eventually agreed to a scope of work to be completed by ICW, which was memorialized in a punch list dated January 5, 2010. [Ex 514] 12. ICW hired Roel Consulting as its consultant, which retained Western States Companies as the completion contractor to complete the work on the punchlist. [Ex 511] The work performed by Western States included both offsite and onsite work. [Ex 513]
13. On July 8, 2010, a CNLV employee wrote on the punchlist "Field Items Complete." [Ex 516] However, not all work on the punchlist was completed. For instance, no as-built drawings were submitted to and approved by CNLV. Even if it had been completed, the punchlist did not contain all of the work needed to satisfy full completion of the work in the Offsite Improvement Agreement.
14. Subsequently, ICW requested that CNLV reduce or release the Performance Bond. CNLV estimated the costs to complete the remaining work under the Offsite Improvement Agreement to be $586,058.20. [Ex 24]
15. On August 16, 2010, ICW adjuster David Lee Styers was told by CNLV representative Dale Daffern that ICW would have to complete onsite work in order to have the Performance Bond Released. [Styers depo at 29:8-14; deposition exhibit 83; Ex 517]
16. ICW and CNLV never reached an agreement on the reduction or release of the Performance Bond.
17. Section of 10 the Offsite Improvement Agreement provides that "[a]ny application for release of the surety upon the completion of the improvements by the Developer shall not be granted unless accompanied by a written certificate from the Director [of Public Works] stating that all requirements have been completed in accordance with the terms of the [Offsite Improvement] Agreement." [Ex 502]
18. ICW did not obtain a "written certificate" from CNLV's Director of Public Works stating that all requirements had been completed in accordance with the terms of the Offsite Improvement Agreement.
19. ICW did not make a timely claim or demand on the FDIC to enforce the SAL that Community Bank put up as security for the Performance Bond. [Ex 124] On July 27, 2011, ICW closed its file on the Project without seeking recovery. [Id.] 20. As a result of the Original Developer's bankruptcy and the failure of its lender, the FDIC obtained and foreclosed upon the lender's Deed of Trust lien against the Project.
21. Plaintiff Camino Properties, LLC ("Camino") acquired the Project by way of the foreclosure sale. Prior to the purchase, representatives of Camino negotiated with representatives of CNLV about who would complete and pay for the work covered by the Offsite Improvement Agreement. Camino felt it could not profitably develop the Project if it had to absorb the cost of completing that work. Although no written agreement was put in place at that time, Camino believed CNLV would make demand on ICW to complete the work or surrender the bond amount to pay for the work to be completed.
22. In January and March 2011, Camino sent at least three emails to CNLV requesting that it make demand on ICW for completion of the work or payment of the bond amount. [Exs 518, 519, 520] CNLV did not make that demand.
23. On April 7, 2011, CNLV wrote to Camino that it would not make demand on ICW to complete the work because the remaining work was "private improvements." [Ex 521] This represented a change in CNLV's policy, due in part to its poor economic condition at the time and its desire not become liable for construction and maintenance of improvements on private property. [Ex 526]
24. Camino decided to complete the Project according to the plans of the Original Developer, in order to avoid the expensive and time-consuming requirement of going through the permitting process. In addition, it was imperative for Camino to begin its work before July 1, 2011, when new building codes would go into effect. The new building codes likely would have delayed completion of the Project, significantly increased the cost, and jeopardized Camino's loan commitment.
25. Camino did not enter into an offsite improvement agreement with CNLV nor did it assume the obligations of ICW the Original Developer under the Offsite Improvement Agreement for the Project.
26. On June 16, 2011, Camino and CNLV entered into a letter agreement which allowed Camino to complete construction of the on-site elements of the existing 36 units and 24 foundations without requiring a new bond. [Ex 523] The letter agreement also obligated CNLV to issue the necessary building permits on or before June 30, 2011. [Id.] The agreement did not obligate Camino to complete the work under the Offsite Improvement Agreement, and the parties left for later resolution who would complete and pay for that work. [Ex 528 at 3, ¶]
27. On April 12, 2012, Camino and CNLV entered into a second letter agreement in which CNLV agreed not to require a bond for the completion of construction for the remaining 86 units of the Project. [Ex 527] This agreement likewise did not obligate Camino to complete the work under the Offsite Improvement Agreement, and the parties again left for later resolution who would complete and pay for that work. [Ex 528 at 3, ¶]
28. Camino and CNLV continued negotiating over completion of and payment for the work under the Offsite Improvement Agreement. On approximately October 23, 2012, Camino's counsel (Stephanie Allen) sent to CNLV a draft assignment of CNLV's rights under the Performance Bond. [Ex 528 at 3, ¶] Ms. Allen testified that she believed CNLV had agreed to assign the Performance Bond to Camino and she would not have drafted that document unless an agreement had been reached between CNLV and Camino.
29. On or about December 7, 2012, CNLV requested that Camino provide a video of the sewer system installed by the Original Developer at the Project, to verify that the sewer system was built in accordance with the Offsite Improvement Agreement and all applicable codes and regulations.
30. The video revealed potential defects in installation, so CNLV directed Camino to clean the sewer and "re-video the entire sanitary system (both built and un-built areas) so that an accurate assessment can be made regarding minimum repairs to be required to bring the sanitary sewer system to an adequate level of service." [Ex 26, 531] 31. The video of the sewer system and approval of the system was a requirement for IC W's completion of the Offsite Improvement Agreement and release of its obligations under the performance bond.
32. Camino videoed and tested the sewer as directed by CNLV. That revealed that the sewer installed by the Original Developer was defectively constructed and the flows were not in compliance with the plans, specifications, and CNLV building codes and regulations.
33. On February 22, 2013, ICW's adjuster David Lee Styers again spoke with CNLV representative Dale Daffern in an attempt to reduce or release the Performance Bond. [Ex 124] CNLV refused to release the bond unless ICW put up security in the amount of $2,500 per lot. ICW...
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