City of Broken Arrow v. World

• Decision Date: 11 April 2011
• Docket Number: No. 104,015.,104,015.
• Parties: CITY OF BROKEN ARROW, Oklahoma, a Municipal Corporation, Plaintiff/Appellee,v.BASS PRO OUTDOOR WORLD, L.L.C.; Phil Roland; Roland Investments, Ltd.; Stone Wood Hills BP, L.L.C.; and Bank of America, N.A., Defendants/Appellees,andState of Oklahoma, ex rel. Karen Franklin, a resident taxpayer of the City of Broken Arrow, State of Oklahoma, Intervenor Defendant, Counterclaimant, and Cross–Petitioner/Appellant,v.Bass Pro Outdoor World, L.L.C.; Phil Roland; Roland Investments, Ltd.; Stone Wood Hills BP, L.L.C.; Bank of America, N.A., and City of Broken Arrow, Oklahoma, a municipal corporation, Third–Party Defendants/Appellees.
• Court: Oklahoma Supreme Court

250 P.3d 305

2011 OK 1

CITY OF BROKEN ARROW, Oklahoma, a Municipal Corporation, Plaintiff/Appellee,

v.BASS PRO OUTDOOR WORLD, L.L.C.; Phil Roland; Roland Investments, Ltd.; Stone Wood Hills BP, L.L.C.; and Bank of America, N.A., Defendants/Appellees,andState of Oklahoma, ex rel. Karen Franklin, a resident taxpayer of the City of Broken Arrow, State of Oklahoma, Intervenor Defendant, Counterclaimant, and Cross–Petitioner/Appellant,

v.Bass Pro Outdoor World, L.L.C.; Phil Roland; Roland Investments, Ltd.; Stone Wood Hills BP, L.L.C.; Bank of America, N.A., and City of Broken Arrow, Oklahoma, a municipal corporation, Third–Party Defendants/Appellees.

No. 104,015.

Supreme Court of Oklahoma.

Jan. 18, 2011.As Corrected Jan. 19, 2011.Rehearing Denied April 11, 2011.

ON CERTIORARI TO THE OKLAHOMA COURT OF CIVIL APPEALS, DIVISION NO. 1¶ 0 Taxpayer filed a qui tam demand challenging a development project of the City of Broken Arrow. The City responded to the qui tam demand by filing a declaratory judgment petition in the District Court for Tulsa County. The City filed a motion for summary judgment and then the taxpayer sought to intervene. The Hon. David L. Peterson, District Judge, denied taxpayer's motion to intervene and granted the City's motion for summary judgment. Taxpayer appealed and the order denying leave to intervene was affirmed by the Oklahoma Court of Civil Appeals. In the Oklahoma Supreme Court taxpayer filed a petition for writ of certiorari to the appellate court. The petition for certiorari was granted. We hold that a qui tam taxpayer seeking to intervene in public body's declaratory judgment proceeding must show that the public body has not fairly presented or will not fairly present the controverted facts or law material to the substantive issues to the trial court for adjudication.CERTIORARI PREVIOUSLY GRANTED; OPINION OF THE COURT OF CIVIL APPEALS VACATED; ORDER OF THE DISTRICT COURT AFFIRMEDTerry Guy Shipley, Norman, OK, and Larry R. Steidley, Jr., Claremore, OK, for Appellant.Beth Anne Wilkening and R. Haydon Downie, Broken Arrow, OK, for City of Broken Arrow.Bob L. Latham, Jr., Lance Freije, Laura E. Samuelson, and Allison L. Thompson of Latham, Wagner, Steele & Lehman, P.C., Tulsa, OK, for Appellee Bass Pro Outdoor World, L.L.C. Joe E. Edwards of Day, Edwards, Propester & Christensen, P.C., Oklahoma City, OK, for Appellee Bank of America, N.A.Lawrence D. Taylor, Tulsa, OK for Appellees Phil Roland, Roland Investments, Stone Wood Hills BP, L.L.C.EDMONDSON, J.

¶ 1 This case involves an attempt by a qui tam taxpayer to intervene in a declaratory judgment action which was brought by officials in response to the qui tam demand and notice. The taxpayer challenged the City's expenditure of funds for an economic development project which involved construction and location of a sporting goods store, Bass Pro, in the City of Broken Arrow. The construction had been completed and Bass Pro operating the business for approximately ten months at the time of the hearing in the trial court on Taxpayer's motion to intervene and City's motion for summary judgment. We hold that the record on appeal shows that the City adequately presented Franklin's (or Taxpayer's) claims in the declaratory judgment proceeding and we affirm the order denying the motion to intervene.

¶ 2 In 2004, Stone Wood Hills BP, L.L.C. (Stone Wood) entered into a lease agreement with Bass Pro Outdoor World, L.L.C. (Bass Pro) for rental of a building to be constructed on approximately 19.15 acres in the city of Broken Arrow, Tulsa County, Oklahoma. Stone Wood and Bank of America, N.A. (Bank of America) agreed to a Construction and Term Loan Agreement for non-recourse financing in the amount of 20.3 million dollars. Then the City of Broken Arrow approved Resolution No. 379 which authorized the acceptance of an assignment of the lease from Stone Wood, an assumption of the indebtedness created by the loan agreement, and acceptance of the real property on which the Bass Pro store would be located.

¶ 3 Pursuant to a Sales Tax Pledge Agreement, the City acknowledged that the City is to pay Bank of America, when due, all debt service as defined in the loan agreement and pledges revenues from a municipal sales tax levied by City Ordinance No. 432. The Sales Tax Pledge Agreement states that the City cannot become obligated beyond its fiscal year and that the pledge of revenues and covenants are on a year-to-year basis renewed for an additional year on July 1st of each year.

¶ 4 Approximately two years after the City of Broken Arrow publicly approved the project, the City Clerk for the City of Broken Arrow received a “Demand” from taxpayers requesting that the City prosecute an action to recover certain property and rescind certain contractual obligations. The Demand alleged that the actions of the City were in violation of the Oklahoma Constitution, Open Meeting Act (25 O.S. §§ 301–314), Competitive Bidding Act (61 O.S. §§ 101–138), anti-fraud statutes, and that they also constitute common law fraud.

¶ 5 Constitutionally, Taxpayer argued that the City's assumption of the promissory note in the amount of $20,300,000.00 and certain contractual obligations violated Article 10 § 35. They argued that the automatic renewal of the City's annual appropriations of sales tax violated Art. 10 § 26. Taxpayer also argued that using sales tax proceeds for the purpose of economic development violated Article 10 § 19.

¶ 6 The City filed a petition for declaratory judgment in the District Court for Tulsa County. The City's petition stated that all transactions at issue relating to Resolution No. 379 were performed in compliance with the Oklahoma Open Meeting Act and the Competitive Bidding Act. The City asserted that none of its acts violated 15 O.S. §§ 58–59, or were fraudulent conveyances, or amounted to common law fraud. The City pled that Art. 10 § 35 was not applicable to the transactions, that approval of the electorate was not necessary, and “nor was it required that the debt be publicly bid.” Similarly, the City pled that Art. 10 § 26 did not apply because the pledge of tax revenues was on a year-to-year basis. The City pled that economic development was a proper function of a municipality and Art. 10 § 19 was not applicable. The City requested a declaratory judgment that the assumption of the agreement, Sales Tax Pledge Agreement, Special Warranty Deed, and assignment and assumption of lease were all lawful. The City then requested, “In the event any of the subject transactions are found to be unlawful or fraudulent as contemplated by the provisions of 62 O.S. § 372 or § 373, the City prays that the Court will award all such reasonable relief as the City may be entitled.” Twenty-nine days later the City filed an amended petition for declaratory judgment, and the following day filed a motion for summary judgment requesting a judgment that the City's actions were lawful.

¶ 7 Prior to the scheduled date to hear the City's motion for summary judgment, Taxpayer sought to intervene in the declaratory judgment action. She alleged that although she had requested the City to bring an action to recover money and property, the City was seeking to have the transactions at issue confirmed and validated by the District Court. She alleged that the City could not be expected to diligently prosecute an action to recover the property. She also alleged that her intervention was necessary to challenge the allegations made by the City.

¶ 8 The City objected to the intervention. It argued that it had requested a judgment to confirm the validity of the transactions as well as alternative relief in that “the City pled that if the transactions were found to be unlawful or unconstitutional, that the Court would award all such relief as it might be entitled to.” The City argued that Taxpayer's allegations had no basis in fact or were not material to the transactions at issue, and that its transactions did not violate the Oklahoma Constitution. The City also relied upon 62 O.S.2001 § 374 ¹ and claimed that Taxpayer's Demand was untimely. The City's objection states that “The above-identified responses clearly resolve every question of fact and law presented by taxpayer in her proposed Answer, Counter–Claim and Cross–Petition.” O.R. at 749. The City referenced its motion for summary judgment and the arguments made therein.

¶ 9 The motion for summary judgment argued that no question of fact existed and that the City was entitled to a judgment adjudicating the transactions as lawful and “[f]or all other relief as this Court deems just and equitable.” O.R. at 86. The City stated that Taxpayer's Demand and Amended Demand alleged that the City Council had been “ ‘duped’ ... into authorizing the assumption of the contractual lease obligations to Bass Pro and the construction financing debt to Bank of America.” The City stated that Taxpayer alleged that the transactions had violated the Open Meeting Act, the Competitive Bidding Act, Anti–Fraud statutes, and the Oklahoma Constitution. The City concluded that “[a]lthough all of the allegations set forth in the ‘Demands' are entirely without merit, in light of the significant risk of harm to the City and public interest by allowing the allegations to remain unchallenged, the City is seeking the Court's assistance in confirming the validity of the transactions challenged by the taxpayers.” O.R. at 62–63.

¶ 10 The trial court denied Taxpayer's motion to intervene and granted the City's motion for summary judgment. Taxpayer filed a motion for new trial which was also denied. She appealed and the order of the trial court was affirmed by the Court of Civil Appeals. The appellate court concluded that Taxpayer's claims were set forth in the City's amended petition as set forth in the qui tam demand letter attached as an exhibit to the City's petition. Taxpayer sought and was granted certiorari to the appellate court. We also...