Rockstep Willmar, LLC v. County of Kandiyohi

• Decision Date: 11 December 2019
• Docket Number: 34-CV-18-222
• Parties: Rockstep Willmar, LLC, Petitioner, v. County of Kandiyohi, Respondent.
• Court: Tax Court of Minnesota

Rockstep Willmar, LLC, Petitioner,
v.
County of Kandiyohi, Respondent.

No. 34-CV-18-222

Tax Court of Minnesota, Regular Division, Kandiyohi County

December 11, 2019

ORDER DENYING COUNTY'S MOTION FOR SUMMARY JUDGMENT AND BIFURCATING MATTER FOR FURTHER PROCEEDINGS

BRADFORD S. DELAPENA, CRUET JUDGE

This matter was heard by The Honorable Bradford S. Delapena, Chief Judge of the Minnesota Tax Court, on respondent Kandiyohi County's motion for summary judgment.

Paul B. Kilgore and Eric S. Johnson, Fryberger, Buchanan, Smith & Frederick, P.A., represent petitioner Rockstep Willmar, LLC.

Shane D. Baker, Kandiyohi County Attorney, and Marc J Manderscheid and Andrew M. Carlson, Briggs and Morgan, P.A., represent respondent Kandiyohi County.

Respondent Kandiyohi County moves for summary judgment on the ground that tax abatement agreements between petitioner Rockstep Wilmar, LLC, and three local taxing jurisdictions bar Rockstep from filing a property tax petition challenging the January 2, 2017 assessment of the subject property. Rockstep opposes the County's motion arguing, in part, that the abatement agreements do not clearly bar Rockstep's petition. Concluding that the agreements are ambiguous, we deny the County's motion for summary judgment.

The court, having heard and considered the evidence adduced at the hearing and the arguments of counsel, and upon all of the files, records, and proceedings herein, now makes the following:

ORDER

1. Respondent Kandiyohi County's motion for summary judgment is denied.

2. Pursuant to Minnesota Rule of Civil Procedure 42.02, further proceedings in this matter are bifurcated. During Phase I, the parties shall present evidence and argument concerning the meaning of the abatement agreements between petitioner Rockstep Willmar, LLC, and the County of Kandiyohi, the City of Willmar, and Independent School District No. 347. During Phase II, the parties shall present evidence and argument concerning the market value of the subject property as of January 2, 2017.

3. Within 30 days of this order, the parties shall jointly contact the Court Administrator to schedule an evidentiary hearing for Phase I.

IT IS SO ORDERED.

MEMORANDUM

I. BACKGROUND

Rockstep Willmar, LLC, purchased the Kandi Mall, a regional shopping center located in Willmar, Minnesota, in October 2015.^[1] In July 2016, Rockstep submitted a formal application for tax abatements to the County of Kandiyohi, the City of Willmar, and Independent School District No. 347, requesting a combined $1.5 million in abatements from those three jurisdictions.^[2]

On September 6, 2016, the Kandiyohi Board of Commissioners held a public hearing and adopted a resolution approving Rockstep's application for an abatement of county taxes (the "Abatement Resolution").^[3] The City of Willmar and the School District likewise approved Rockstep's application to those taxing jurisdictions.^[4] The combined value of the three approved abatements was approximately $1, 236, 000.^[5]

Although the County Abatement Resolution set forth the critical terms of the abatement, a second document, the Tax Abatement and Business Subsidy Agreement ("Abatement Agreement"), contains the parties' complete, formal agreement.^[6] The Abatement Agreement grants county tax relief in exchange, inter alia, for Rockstep's promise to make $5 million of capital improvements at the Kandi Mall and to create 60 full-time jobs.^[7] Section 3.7 of the Agreement-the one primarily at issue here-provides that Rockstep will not take certain actions with respect to tax assessments for the duration of the Agreement.^[8] The Agreement was signed by a Rockstep official and by the Chair of the Kandiyohi County Board and the County Auditor.^[9] Separate and materially identical agreements were signed by the City of Willmar and the School District.^[10]

On April 26, 2018, Rockstep filed a Real Property Tax Petition under chapter 278 (2018) in Kandiyohi County District Court challenging the Kandi Mall's January 2, 2017 property tax assessment for taxes payable in 2018.^[11] The County subsequently filed a summary judgment motion asserting that Section 3.7 of the abatement agreements contractually bar Rockstep's chapter 278 petition.^[12] In response, Rockstep argues, among other things: (1) that the County's Abatement Agreement is invalid because the County did not properly approve it; (2) that the County is statutorily prohibited from pleading any affirmative defense to a chapter 278 petition; (3) that even if the County were authorized to plead waiver, its failure to do so bars it from now asserting that defense by means of a summary judgment motion; and finally (4) that Section 3.7 does not waive Rockstep's right to file a chapter 278 petition in any event.^[13]II. Summary Judgment Standard

Under Minn. R. Civ. P. 56.01, summary judgment is to be granted "if the movant shows that there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law." A genuine issue of material fact exists "if its resolution will affect the outcome of a case." O'Malley v. UllandBros., 549 N.W.2d 889, 892 (Minn. 1996).

III. Validity Of The Abatement Agreement

Counties are political subdivisions of the State of Minnesota, and must exercise their delegated powers in accordance with law:

The powers of the county as a body politic and corporate shall only be exercised by the county board or in pursuance of a resolution adopted by the county board. Deeds and other written instruments made by the county shall be executed in its name by the chair of the county board and by the clerk of the board

Minn. Stat. § 373.02 (2018). Counties are authorized to abate property taxes: "The governing body of a political subdivision may grant a current or prospective abatement, by contract or otherwise, of the taxes imposed by the political subdivision on a parcel of property ...." under specified circumstances, and based on specified findings. Minn. Stat. §469.1813, subd. 1 (2018). A county (or other political subdivision) may approve an abatement only after holding a properly noticed public hearing, id., subd. 5, and "adopting an abatement resolution, specifying the terms of the abatement," id., subd. 2(a). Rockstep argues that the Abatement Agreement was improperly executed and is therefore invalid and unenforceable.^[14] We disagree.

On September 6, 2016, the Kandiyohi County Board adopted County Resolution No. 2016-43, titled "Resolution Approving Property Tax Abatements for the Kandi Mall Rehabilitation Project." ^[15] The body of the Abatement Resolution contains three major sections. Part one sets forth certain recitals; part two makes certain findings necessary to authorize the abatement; and part three specifies the "Terms of Abatement." Part three begins: "The Abatement is hereby approved. The terms of the abatement are as follows[.]" The Resolution then sets forth seven substantive provisions in paragraphs labeled 3(a) to 3(g). Paragraph 3(h) then provides: "All terms will be subject to final approval of the Development Agreement between the taxing jurisdictions and the Company." ^[16]

The parties subsequently drafted the "Tax Abatement and Business Subsidy Agreement by and between County of Kandiyohi, Minnesota and Rockstep Willmar LLC." ^[17] In late January or early February 2017, a representative from Rockstep executed the Abatement Agreement on the company's behalf, and the Kandiyohi County Board Chair and County Auditor (and Board Clerk) executed the Agreement on behalf of the County.^[18] See Minn. Stat. § 384.09 (2018) ("The county auditor by virtue of office shall be clerk of the county board ....").

Citing Section 3(h) of the Abatement Resolution, Rockstep argues that "the County Resolution itself states that further action by the County Board would be required to approve the Abatement Agreement. But, the County never adopted a separate resolution approving the Abatement Agreement or authorizing a County official to execute the Agreement on the County Board's behalf." ^[19] We conclude, however, that execution of the Agreement by the Board's chair and clerk was sufficient to finally approve the Abatement Agreement.

Section 3(h) of the Abatement Resolution states that the terms set forth therein are "subject to final approval of the Development Agreement between the taxing jurisdictions and the Company." ^[20] The precise question, then, is how the pertinent taxing jurisdiction-the County-was required to furnish its "final approval."

By means of Resolution No. 2016-43, the County exercised its power to grant Rockstep an abatement of property tax.^[21] In accordance with Minnesota law, the Resolution "specif[ied] the terms of the abatement." Minn. Stat. § 469.1813, subd. 2(a). It also provided that those terms were "subject to final approval of the Development Agreement." Section 373.02 provides that a county may act "i» pursuance of a resolution adopted by the county board" and that "[d]eeds and other written instruments made by the county shall be executed in its name by the chair of the county board and by the clerk of the board." (Emphasis added).

In this context, the transitive verb "execute" means: "To make (a legal document) valid by signing; to bring (a legal document) into its final, legally enforceable form...." Execute, Black's Law Dictionary 689 (10th ed. 2014). We conclude that, "in pursuance of the Abatement Resolution, the County Board's chair and clerk executed the Abatement Agreement, thereby indicating the County Board's "final approval" of that Agreement, and rendering it valid and legally enforceable. Indeed, the Abatement Agreement expressly states that it "has been duly approved by the County Board of the County and the execution and delivery of this Agreement has been authorized by such County Board." ^[22] See also R. E. Short Co. v. City of Minneapolis, 269 N.W.2d...