Northgate Vill. Dev., LC v. Orem City

• Decision Date: 17 April 2014
• Docket Number: No. 20120817–CA.,20120817–CA.
• Citation: 325 P.3d 123,758 Utah Adv. Rep. 20
• Court: Utah Court of Appeals
• Parties: NORTHGATE VILLAGE DEVELOPMENT, LC, Plaintiff and Appellant, v. OREM CITY, Defendant and Appellee.

325 P.3d 123

758 Utah Adv. Rep. 20

NORTHGATE VILLAGE DEVELOPMENT, LC, Plaintiff and Appellant,

v.OREM CITY, Defendant and Appellee.

No. 20120817–CA.

Court of Appeals of Utah.

April 17, 2014.

J. Craig Smith and Kathryn J. Steffey, for Appellant.

Jody K. Burnett and George A. Hunt, for Appellee.

Judge J. FREDERIC VOROS JR. authored this Opinion, in which Judges STEPHEN L. ROTH and JOHN A. PEARCE concurred.

Opinion

VOROS, Judge:

¶ 1 Orem City sold a parcel of land to Northgate Village Development. Northgate spent nearly three million dollars excavating material buried on the property. Northgate sued the City, claiming that the City failed to perform its contractual cleanup responsibilities. The district court granted summary judgment in the City's favor and limited Northgate's recovery to a single claim, valued at $1,965. Northgate appeals. We affirm in part, reverse in part, and remand.

BACKGROUND ¹

¶ 2 For years the City operated a public works facility on City-owned property located at 900 West in Orem. The City mined sand from the property for use in public works projects and filled the resulting holes “with fill material left over from various Public Works operations.” Though “[m]ost of the fill material consisted of dirt and rock,” later excavation unearthed a trove of urban detritus:

car bumpers, bicycle tires, water heaters, washing machines, car engines, car parts, asphalt, galvanized pipes, asbestos containing transit pipe, trees, bushes, medical waste products, brick, mason blocks, concrete, toilets, electrical panels, refrigerators, silverware, 50–gallon drums, conduit, general garbage, storm drains, ABS pipe, barbed wire, field fence, cedar fence posts, railroad ties, plywood, carpet, transformers, mercury-containing ballasts, gas cables, truck mud flaps, plastic sheeting, car doors, pallets, rebar, pop bottles, sewer pipe, metal T posts, fire hydrants, water [vials], ductile iron, copper[ ] parts and valves, brass parts, fiberglass insulation, twine, rubber traffic cones, concrete manhole sections, metal rings, and lids for manholes, valve boxes, bags of leaves and metal sheeting for roofs.

The Land Sale Contract

¶ 3 When the City decided to relocate the public works facility, it sold the Public Works Parcel on 900 West to Northgate. The City and Northgate signed a “Real Property Exchange and Sale Agreement” in March 2004 and an amended agreement in May 2004. The May 2004 Land Sale Contract divided the purchase and exchange of property into two phases: Closing 1 and Closing 2. At Closing 1, the City and Northgate would exchange two parcels of equal value and the City would purchase two additional pieces of Northgate property. At Closing 2, Northgate would purchase two pieces of the City's property, including the Public Works Parcel.

¶ 4 Section 3.2.1 of the Land Sale Contract describes environmental audits conducted on the properties. Section 3.2.1.1 allowed Northgate to rescind the contract if it found the results of the environmental audit of the City's properties unacceptable. The City agreed to provide Northgate with a copy of an “Environmental Site Assessment” and “a list of environmental concerns/conditions with the estimated cost of resolving each of the concerns (‘the Environmental Clean–Up List’).” Section 3.2.1.1 adds, “A copy of the Environmental Clean–Up List is attached hereto ... and incorporated herein by reference.”

¶ 5 Section 4.3 of the Land Sale Contract describes the parties' post-Closing 2 responsibilities, which would “survive Closing 2 and the conveyance of the deeds.” Section 4.3.2, titled “Demolition and Clean-up of Northgate Lease Property,” required the City to perform certain work on the Public Works Parcel before it turned the property over to Northgate. The City agreed “to complete any environmental clean-up responsibilities specified in the written action plan for the City Public Works Parcel.”

¶ 6 The Land Sale Contract also contains a provision discussing Section 108 loans, which are federally financed loans offered to qualified redevelopment projects. The provision describes Northgate's intent “to apply for Section 108 loan money and [other redevelopment] grant money” through Orem's Economic Development Commission. But the provision also states, “The City cannot make any representations to Northgate as to whether Northgate will receive these funds.”

¶ 7 Finally, the Land Sale Contract contains a provision addressing default and cure. It requires the nondefaulting party to provide notice and allow ninety days for the defaulting party to cure the default. The nondefaulting party “may pursue any remedies available to it” only after the ninety-day window has closed.

Excavation and Redevelopment

¶ 8 Northgate and the City proceeded with Closing 1 and Closing 2. After Northgate took control of the Public Works Parcel, it began excavating the buried debris. Each time Northgate uncovered “another major strike” of material contained in the Environmental Site Assessment, it contacted the Orem City Manager's office. Northgate representatives met with the City Manager several times at the excavation site. At one meeting, Northgate asked the City Manager how the City planned to address its concerns about the buried debris. The City Manager responded, “We probably have responsibility here. If you will ... send me an invoice and some kind of verification of what you have done, ... we'll see what we can do about it.”

¶ 9 In January 2007, Northgate sent the City a letter detailing “a major problem with debris ... found during excavation of the site.” The letter contained contractor reports, a cost breakdown, a list of excavated materials, and photographs of the excavation. The letter also described Northgate's discovery of unexpected fill material:

You asked us to provide you with costs to date and an estimate for future costs to clean up the site. As you know, we understood from soil reports provided by the city, there was an area midway in the site, that had asphalt and concrete as fill. Instead, we found to date, over 100,000 cubic yards of garbage, vehicles, appliances, organic matter, and other debris that can only be characterized as landfill.... Our costs for clean up to date approach $2,000,000 and we believe the balance of the site will cost an additional $500,000–$700,000 to clean up the site.

As per our agreement we expect the city to reimburse us the cost of clean up. We are not in a position to absorb those costs as a part of the project.

¶ 10 Northgate applied for federal redevelopment loans and grants to help cover the cost of rehabilitating the Public Works Parcel. Orem's Economic Development Commission reviews and recommends redevelopment-fund applicants, but because the federal redevelopment funds go directly to municipalities, the City ultimately determines how to distribute the federal redevelopment funds it receives.

¶ 11 Orem's Economic Development Commission recommended Northgate's application to the City. In September 2008 a City representative sent an email to a representative at the Department of Housing and Urban Development explaining the City had decided not to offer Northgate Section 108 loans but that Northgate may still be a good candidate for Brownfields Economic Development Initiative (BEDI) funding, a type of redevelopment grant:

Originally, Northgate wanted both Section 108 and BEDI funding. The city decided that we could not expend more Section 108 money, and with the amount that we have spent, we would only be eligible to receive $220,000 in BEDI funds. The Northgate project has had extensive clean-up work on the site, and it will create many [low- to moderate-income] jobs, so we feel confident it is a great project to receive BEDI funding.

However, BEDI funds must be used in conjunction with Section 108 funding, so the City's decision not to expend Section 108 funds on Northgate also prevented the City from receiving BEDI funds.

The District Court Proceedings

¶ 12 Northgate brought five claims against the City: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing with respect to the environmental clean-up, (3) unjust enrichment, (4) equitable restitution, and (5) breach of the implied covenant of good faith and fair dealing with respect to the redevelopment funds. The City asked the district court to dismiss Northgate's third, fourth, and fifth claims. The district court deemed Northgate's fifth claim viable but dismissed Northgate's unjust-enrichment and restitution claims. The court concluded, “Because of the unique facts claimed here, Causes Three and Four should be dismissed without prejudice. It is not outside of theoretical contention that discovery potentially could support such remedies, but it is difficult to envision.”

¶ 13 Northgate moved for partial summary judgment on its breach-of-contract claim. The City moved for summary judgment on all three remaining claims. The district court granted summary judgment for the City, “subject only to payment by the City of unpaid costs, if any, incurred by Northgate for removing and disposing of buried transformers.”

ISSUES AND STANDARDS OF REVIEW

¶ 14 Northgate appeals both of the district court's summary judgment determinations. First, Northgate contends that the district court erred in denying its motion and granting the City's motion for summary judgment on Northgate's breach-of-contract claim. Second, Northgate contends that the district court erred in granting the City's summary judgment motion on the issue of the implied covenant of good faith and fair dealing with respect to redevelopment funds. We review a district court's summary judgment for correctness, giving no deference to the district court's ruling. Bahr v. Imus, 2011 UT 19, ¶ 15, 250 P.3d 56.

¶ 15 Northgate also contends that the district court erred by dismissing its equitable claims. We review the district court's dismissal of Northgate's equitable claims for correctness,...