Camden County, Georgia v. Lexon Insurance Company
Filing
145
ORDER granting Lexon's 68 Motion to Dismiss the Intervenors' Complaint. Signed by Chief Judge Lisa G. Wood on 9/1/2015. (ca)
R the Wntteb Otatto Otarta Court
for the boutbern Motrict of Ozorgiz
Jgrunftirk Oibioton
CAMDEN COUNTY, GEORGIA,
Plaintiff,
V
.
LEXON INSURANCE COMPANY,
Defendant.
CV 214-20
DOUGLAS PORCELLI, CENTHIA
PORCELLI, STEPHEN AGNONE, ENZO
AGNONE, DAVID B. BISHOP, EVA
BISHOP, RICHARD W. GARRISON,
BERYL K. GARRISON, DANIEL K.
HARSHMAN, JATN FAMILY LIMITED,
RICHARD E. MUMFORD, SALLY
MUMFORD, RICK SWISHER, CINDY
SWISHER, FRANCIS G. O'SUCH,
VALERIE D. O'SUCH, DOUGLAS
WINDSOR, and JOANNE M. WINDSOR,
Intervenors.
BPJS INVESTMENTS, LLC; GEORGE
L. "BOOG" POTTER; MIKE
MARTINEZ; ROBERT STEVEN
WILLIAMS, SR.; and ROBERT
STEVEN WILLIAMS, JR.,
Third-Party Defendants.
Before the Court is Defendant Lexon Insurance Company's
Motion to Dismiss the Intervenors' Complaint (Dkt. no. 68) . The
Intervenors own property in a failed subdivision located within
AO 72A
(Rev. 8/82)
Plaintiff Camden County's boundaries. In overseeing the
subdivision's development, Camden County had required the
developer to post surety bonds to guarantee that necessary
infrastructure could be installed if the developer failed to
complete the project. Initially, Defendant Lexon Insurance
Company provided these bonds. However, after the first developer
went broke, Third-Party Defendants stepped in to develop the
subdivision and proposed that Camden County release the Lexon
bonds for alternative surety. Camden County agreed to the
release. Unfortunately, the Third-Party Defendants were unable
to complete the subdivision, and their surety was inadequate to
cover the costs of the necessary infrastructure.
This case concerns what went wrong with the development
and, particularly, the surety bonds. The various parties are
pointing fingers in all directions. But this Order only concerns
Intervenors' accusation that Camden County's release of the
Lexon bonds and acceptance of alternative security is void as an
ultra vires act. See Dkt. no. 58 ("Compl.") . Defendant Lexon
Insurance Company has moved to dismiss Intervenors' sole count
under Rule 12(b) (6) for failure to state a claim. Dkt. no. 68.
For its part, Camden County agrees with Lexon that Intervenors'
Complaint should be dismissed. Dkt. no. 92. Because Camden
County generally has authority to dispose of its property as it
sees fit and no law specifically proscribes the County from
AO 72A
(Rev. 8/82)
2
I
releasing the surety bonds and accepting alternative security as
it did here, Lexon's Motion to Dismiss (Dkt. no. 68) is GRANTED.
FACTUAL BACKGROUND
The Court draws these facts from the Intervenors' Complaint
and accepts them as true in considering Lexon's Motion to
Dismiss. See Am. United Life Ins. Co. v. Martinez, 480 F.3d
1043, 1057 (11th Cir. 2007)
The Intervenors hail from across the country—none are
Camden County residents. Each of them, though, owns a lot in a
subdivision in Camden County, Georgia, known as Bridge Pointe at
Jekyll Sound. As property owners, Intervenors pay property taxes
to Camden County. Compi. ¶91 1-11.
In 2005, a developer going by the name Bridge Point at
Jekyll Sound, LLC, planned to develop the subdivision and began
accepting lot reservation agreements from prospective lot
purchasers. The then-applicable Camden County development
ordinances required the developer to obtain surety bonds backing
the installation of certain infrastructure in the development.
On March 10, 2006, the developer provided eight subdivision
bonds to Camden County underwritten by Defendant Lexon. The
surety bonds totaled $16,412,467.50 and insured the complete
development of necessary infrastructure such as the roadway,
curb and gutter, storm sewer, removal of dirt material, lake
excavation and construction, waste water disposal system,
AO 72A
(Rev. 8/82)
3
electrical and telephone conduit, and other improvements. The
bonds identified the Camden County Joint Development Authority
as the Obligee, and provided that the Surety, upon receipt of
notice that the improvements have not been installed or
completed, would complete the improvements or pay the Obligee up
to the amount of the bonds for completion of the improvements.
Id. at ¶91 20-24.
Around May and June of 2006, the developer began selling
lots in the subdivision before completing the infrastructure
improvements. By late 2008, the developer had sold some 398
residential lots in the subdivision, but had only completed a
small part of the infrastructure improvements required by the
development code and backed by the bonds. On October 30, 2008,
the developer went bankrupt and stopped work on the subdivision.
About 286 of the 697 lots remained unsold. Id. 191 26-31.
Intervenors allege that either Emerson Properties, LLC or
Jekyll Sound Development Company, LLC, acquired property in the
development from Bridge Point at Jekyll Sound, LLC's bankrupt
estate for about $3,050,000. The land included 286 lots, a marsh
parcel, and land that would be common areas or amenity locations
in the subdivision. Id. 191 39-40. This land was later
transferred to a new entity, Third-Party Defendant Bridge Point
at Jekyll Sound Investments, LLC. Id. 191 43, 49.
AO 72A
(Rev. 8182)
1
4
Intervenors further allege that, around this time, ThirdParty Defendant Steve Williams Jr. gave a presentation to the
Camden County Board of Commissioners proposing that the board
replace the current surety bonds on the subdivision. Third
Party-Defendant Bridge Point at Jekyll Sound Investments would
procure the new surety bonds. The Board agreed to this plan at a
meeting on January 5, 2010, and Camden County executed a release
in favor of Lexon that same day. However, at another meeting on
February 16, 2010, Third-Party Defendant George "Boog" Potter,
speaking on behalf of Bridge Point at Jekyll Sound LLC, told the
board that the investment company had not been able to obtain
new letters of credit, and proposed that Camden County accept
deeds of trust on 243 lots in the subdivision as substitute
collateral on the infrastructure improvements. The Board
approved this proposal unanimously without discussion or
presentation of any documentation. A few days later, Potter, as
chief manager of Bridge Point at Jekyll Sound Investments,
transferred a security deed on the 243 lots to Camden County.
Id. 191 41-51.
Intervenors believe that there were several deficiencies in
both the procedure and amount of the security deeds. For
instance, Intervenors allege that Camden County never required
or obtained a title examination for the Security Lots or
otherwise determined how many lots Bridge Point at Jekyll Sound
5
actually owned. Nor did it verify any title insurance policy in
connection with the security lots. Id. ¶ 53.
Despite these measures taken to develop the subdivision, no
further development work has occurred since February 19, 2010.
To this day, the gates to the subdivision remain chained and
locked by Camden County and Bridge Point at Jekyll Sound
Investments, preventing the lot owners from entering the
Subdivision. Camden County has not taken any formal action to
collect any amounts payable under the released bonds or to
require Lexon to complete the infrastructure improvements in the
subdivision. Id. 191 58-64.
LEGAL STANDARD
When ruling on a motion to dismiss brought pursuant to Rule
12(b) (6), a district court must accept as true the facts as set
forth in the complaint and draw all reasonable inferences in the
plaintiff's favor. Randall v. Scott, 610 F.3d 701, 705 (11th
Cir. 2010) . Although a complaint need not contain detailed
factual allegations, it must contain sufficient factual material
"to raise a right to relief above the speculative level." Bell
Ati. Corp. v. Twombly, 550 U.S. 544, 555 (2007) . At a minimum, a
complaint should 'contain either direct or inferential
allegations respecting all the material elements necessary to
sustain a recovery under some viable legal theory." Fin. Sec.
Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282-83 (11th
Cir. 2007) (per curiam) (quoting Roe v. Aware Woman Ctr. for
Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001))
DISCUSSION
All parties agree that Intervenors only have standing to
bring this suit if Camden County's release of the Lexon bonds
was ultra vires because Intervenors base their standing on their
taxpayer status. A plaintiff challenging the actions of a local
government based on his standing as a taxpayer must first show
that the government's actions were ultra vires. Newsome v. Cit
of Union Point, 291 S.E.2d 712, 715 (Ga. 1982) . "For the action
to be considered ultra vires, it must appear that the action
taken was beyond the scope of the powers that have been
expressly or impliedly conferred on the municipality." Id. The
Court will thus examine the scope of Camden County's authority
to determine if its release of the Lexon bonds and acceptance of
alternative security were ultra vires acts.
I. An Overview of Camden County's Conferred Powers
Generally, two sources of authority demarcate Camden
County's power to act under these circumstances: Georgia law,
which Lexon and Camden County say grants Camden County the power
to dispose of its property as it sees fit; and Camden County's
Unified Development Code, the zoning ordinance which Intervenors
argue Camden County is bound to follow.
7
County governments have constitutional and statutory grants
of authority to dispose of and manage their property. Under the
Georgia Constitution,
The governing authority of each county shall have
legislative power to adopt clearly reasonable
ordinances, resolutions, or regulations relating to
its property, affairs, and local government for which
no provision has been made by general law and which is
not inconsistent with this Constitution or any local
law applicable thereto.
Ga. Const. art. IX, § 2, ¶ I. And under Georgia statutory law,
"[t]he governing authority of each county has original and
exclusive jurisdiction over the following subject matters: (1)
The directing and controlling of all the property of the county,
according to law, as the governing authority deems expedient;
•" Ga. Code Ann. § 36-5-22.1(a) (1). Camden County, then, has
the general authority to dispose of its property "according to
law," including local law.
That said, Intervenors argue that there are several
portions of the Unified Development Code ("UDC") which bind
Camden County to follow certain procedures or otherwise limits
its general authority under state law in some circumstances. The
general purpose of the UDC
is to promote the health, safety, morals, aesthetics,
convenience, order, prosperity and general welfare of
the community, and is intended: . .
(8) To protect property from blight and depreciation;
[and]
(15) To assure the provisions of the required streets,
drainage, utilities, and other facilities and services
in new land developments to help prevent and reduce
traffic congestion, health and safety hazards.
UDC § 104(a) (8), (15) ("Purpose of the development code.")
(available at Dkt. no. 39-1)
To achieve these goals, UDC section 1231 governs the
"Assurance for maintenance and completion of improvements" for
development projects. See UDC § 1231. The section requires a
maintenance surety before subdivision plat approval. UDC
§ 1231 (a) (1) . The applicant for approval must post a performance
guarantee "at the time of application for final subdivision
approval . . . ." § 1231(b) (1) (a) . An adequate performance
guarantee can be in the form of either a letter of credit from a
bank or other financial institution or a variety of other
guarantees, such as a performance or surety bond, an escrow
account, or a property escrow. § 1231(b) (7). If, after a
developer has posted a performance guarantee and the final
subdivision plat has been approved, the developer fails to
complete the required improvements in a timely manner, "the
Board of Commissioners may thereupon declare the guarantee to be
in default and require that all the improvements be installed
regardless of the extent of the construction of said
improvements at the time the guarantee is declared in default."
§ 1231(b) (5). On the other hand, when the improvements have been
completed and approved by the County for conformity to the UDC
and are free of any liens or encumbrances, "the performance
guarantee shall be released by the Public Works Director and
returned to the applicant." § 1231(b) (6).
Thus, while Camden County may have general authority to
dispose of its property as it sees fit, the next question in the
ultra vires analysis becomes whether these UDC provisions
limited the authority for Camden County to release the bonds in
this case.
II. The Board's Release of the Lexon Bonds Was Not Ultra
Vires
The Intervenors argue that, despite the general grant of
authority Camden County has to dispose of its property under
Georgia law, the UDC is nevertheless a local law that binds the
County's official actions. Specifically, Intervenors claim that
the Board of Commissioner's release of the Lexon bonds and
acceptance of (allegedly inadequate) alternative security either
violates the letter of the UDC or, at least, results in an
absurd result in light of the UDC's aspirations.
a. No Provision of the TJDC Proscribes the Board from
Releasing Surety Bonds Before Infrastructure
Improvements are Complete
For an action to be considered ultra vires,
"it must appear
that the action was beyond the scope of the powers that have
been expressly or impliediLy conferred on the municipality."
10
Newsome, 291 S.E.2d at 715. The challenged action "must be
beyond the power or authority of the municipality . . . to
perform under any circumstances." Id. at 714. County
commissioners are vested by law with broad discretion in
handling county affairs, "and the reviewing power of a judge of
the superior court should be exercised with caution, and no
interference had unless it is clear and manifest that the county
authorities are abusing the discretion vested in them by law."
Price v. Fulton Cnty. Comm'n, 318 S.E.2d 153, 155 (Ga. Ct. App.
1984) (quoting Lovett v. Bussell, 249 S.E.2d 86, 86 (Ga. 1978)).
In interpreting the relevant laws, "the literal meaning of
the words of a statute must be followed unless the result is an
absurdity, contradiction, or such an inconvenience that it is
clear that the legislature must have intended something else."
Colonial Life Ins. Co. v. Heveder, 618 S.E.2d 39, 41 (Ga. Ct.
App. 2005) (quoting Mansfield v. Pannell, 404 S.E.2d 104, 105
(Ga. 1991) ) . That said, the court must still effectuate the
intent of the legislature and give "each part of the statute
meaning and avoid constructions that make some language mere
surplusage." Id.
None of the UDC provisions briefed by Intervenors, by their
terms, prohibit Camden County's Board of Commissioners from
releasing a performance surety and accepting alternative
security after a final plat has been approved. Intervenors argue
11
that section 1231(b) (6), which states that the Public Works
Director "shall" release a performance guarantee upon completion
of the improvements, suggests that a performance guarantee may
only be released upon the completion of the improvements. But
this is not the plain meaning of section 1231(b) (6) . Section
1231(b) (6) only applies to the Public Works Director, and does
not apply to the Board of Commissioners. See § 1231(b) (6) (after
completion of the improvements, "the performance guarantee shall
be released by the Public Works Director and returned to the
applicant."). Furthermore, section 1231(b) (6) does not state
that completion of the improvements is the exclusive condition
precedent to releasing the bonds—completion is simply a
condition which binds the Public Works Director to release the
bonds. Thus, while completion of the improvements requires the
Public Works Director to release the bonds, it does not follow
that the Board of Commissioners cannot release the bonds unless
and until the improvements are complete. Section 1231(b) (5)
further supports this conclusion: if the developer fails to
complete the improvements in a timely manner, "the Board of
Commissioners may thereupon declare the guarantee to be in
default . . . ." § 1231(b) (5) . Section 1231, then, does not bind
the Board of Commissioners to any course of conduct under any
circumstances.
12
Additionally, the UDC's failure to bind the Board of
Commissioners to a particular course of action in section 1231
does not appear to be an unintentional omission, as the Board is
bound by non-discretionary language in other UDC provisions. For
example, section 1229(h) (5) governs the certification of public
improvements as a requirement for final plat approval, and
states:
Upon certification by the Public Works Direct and the
Fire Marshal that the public and community
improvements depicted on the as-built surveys are in
conformance with the specifications of this
Development Code and are in good repair, the Board of
Commissioners shall release the maintenance bond and
accept the public improvements into perpetual
maintenance.
UDC § 1229(h) (5) (emphasis added) . When public and community
improvements are certified, the Board of Commissioners "shall"
release the bond insuring those improvements. Here, the UDC
explicitly requires the Board of Commissioners to act in a
certain way under certain circumstances. A failure to do so
would be an ultra vires act. And the fact that the UDC drafters
knew how to bind the Board of Commissioners in some
circumstances suggests that the failure to bind the Board under
other circumstances was an intentional omission.
UDC section 1231 does not bind the Board of Commissioners
or limit its general authority to dispose of its property. And
even if section 1231 did bind the Board of Commissioners, all of
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section 1231's provisions address pre-approval procedures and
requirements. The Board's release of the Lexon bonds and
acceptance of alternative security after final plat approval,
then, is not proscribed under section 1231.
b. Allowing the Board of Commissioners to Release a Bond
After Plat Approval but Before the Improvements Are
Made Does Not Lead to an Absurd Result
Intervenors argue that if the Board's actions do not
clearly violate specific UDC provisions, then the release of the
Lexon bonds at least contravenes the purpose and spirit of the
UDC and leads to an absurd result. As discussed above, the
purpose of the UDC is to "promote the health, safety, morals,
aesthetics, convenience, order, prosperity and general welfare
of the community," as well as to "promote the orderly and
beneficial development and expansion of the County." UDC
§ 104 (a) . Intervenors claim that section 1231 promotes these
purposes by ensuring that the necessary infrastructure for a
development is either in place before plat approval or, as was
done here, an adequate performance bond is posted pre-approval
to ensure that the infrastructure is completed after the plat is
approved. However, if the Board were permitted to release the
performance bonds after plat approval and without verifying that
either (a) the infrastructure was complete or (b) an adequate
substitute bond has been posted, such an approach would create
"'an absurdity where the Board requires the stated amount of
14
surety or security today, but tomorrow, after final plat
approval, the Board can ignore the security requirements
completely, leaving the intended beneficiaries of the UDC,
including the Intervenors,
unprotected." Dkt. no. 79, p. 4.
In Georgia,
It is a cardinal rule of statutory construction that
the literal meaning of the statute prevails unless
such a construction would produce unreasonable or
absurd consequences not contemplated by the
legislature. Moreover, in construing language in any
one part of a statute, a court should consider the
entire scheme of the statute and attempt to gather the
legislative intent form the statute as a whole.
Advanced Automation, Inc. v. Fitzgerald, 718 S.E.2d 607, 610
(Ga. Ct. App. 2011) (quoting Ga. Soc. of Ambulatory Surgery
Centers v. Ga. Dept. of Cmty. Health, 710 S.E.2d 183, 187 (Ga.
Ct. App. 2011)) . "When a statute is plain and susceptible of but
one natural and reasonable construction, a court must simply
follow the literal language of the statute, unless doing so
would lead to absurd or wholly impracticable consequences."
Lockhart v. 3d. of Regents of Univ. Sys. of Ga., 730 S.E.2d 475,
479 (Ga. Ct. App. 2012) (quoting Fulton Cnty. Bd. of Tax
Assessors v. Greenfield Inv. Group, LLC, 721 S.E.2d 128, 130
(Ga. Ct. App. 2011)).
Here, the fact that the subdivision remains shuttered
several years after the Board of Commissioners agreed to release
the Lexon bonds suggests that the Board of Commissioner's
15
decision in that particular circumstance did not fulfill the
UDC's goals to "protect property from blight and depreciation"
and "assure the provisions of the required streets, drainage,
utilities, and other facilities and services" in the new
development. See UDC § 104 (a) (8), (15) . However, a bad
consequence resulting from the Board's discretion in one
instance does not require a finding that the Board's discretion
is, in and of itself, "absurd" in all similar situations. The
literal meaning of UDC section 1231 is that a developer must
guarantee the infrastructure improvements when applying for a
final plat application, and the Public Works Director is
required to release that guarantee once the improvements are
complete. It is not an absurd result under the UDC for the
Board—who is not otherwise bound by UDC section 1231—to retain
its authority to dispose of the guarantee after the final plat
has been approved. Retaining that authority, in fact, may help
the Board address a developer's bankruptcy by giving it the
option to either enforce the guarantee or, instead, allow a new
developer to complete the project, backed by a new performance
guarantee. Exercising that option may have been imprudent in
this case, but the option itself is not an "absurd" result under
the UDC requiring this Court to ignore section 1231's plain
meaning.
II
CONCLUSION
The UDC, by its terms, does not curtail the County's
constitutional and statutory right to dispose of its own
property as it sees fit. Neither does the County's exercise of
that authority by releasing performance bonds after a
development's final plat approval amount to an "absurd result"
under the UDC. As such, the Board of Commissioner's act of
releasing the Lexon bonds in this case was not ultra vires, and
Intervenors do not have standing to bring their case. Lexon's
Motion to Dismiss the Intervenors' Complaint (Dkt. no. 68) is
SO ORDERED,
this 1ST day of September, 2015.
LISA GODBEY W OD, CHIEF JUDGE
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
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