VR Acquisitions v. Wasatch County et al
Filing
67
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER denying 3 MOTION for Preliminary Injunction. Signed by Judge Dale A. Kimball on 1/30/15 (alt)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
VR ACQUISITIONS LLC,
Plaintiff,
v.
WASATCH COUNTY, the JORDANELLE SPECIAL
SERVICE DISTRICT, the JORDANELLE SPECIAL
IMPROVEMENT DISTRICT NO. 2005-2, JAY
PRICE and DAN MATTHEWS,
FINDINGS OF FACT, CONCLUSIONS OF LAW,
AND ORDER
Case No.: 2:15-cv-00018-DAK-EJF
Judge Dale A. Kimball
Defendants.
This matter is before the court on Plaintiff VR Acquisitions LLC’s (“VR Acquisitions”)
Motion for a Preliminary Injunction. An evidentiary hearing on the motion was held on January
29, 2015. At the hearing, Plaintiff VR Acquisitions was represented by Timothy J. McCaffrey and
Robert G. Wing. Defendant Wasatch County was represented by Barton H. Kunz II, and
Defendants Jordanelle Special Service District, Jordanelle Special Improvement District No.
2005-2, Jay Price and Dan Matthews were represented by Mark R. Gaylord, Tyler M. Hawkins,
and Melanie J. Vartabedian. The court has carefully considered the memoranda and other
materials submitted by the parties, along with the sworn testimony of witnesses presented at
the evidentiary hearing. Since taking the matter under advisement, the court has further
considered the law and facts relating to this motion, the testimony of the witnesses presented
at the hearing, and the arguments presented by counsel. Now being fully advised, the court
renders the following Findings of Fact and Conclusions of Law and Order.
FINDINGS OF FACT 1
1.
Jordanelle Special Service District (“JSSD”) is a limited purpose quasi-
governmental entity created by Wasatch County pursuant to Utah law. Utah Code Ann. § 17D1-101, et seq.
2.
The Wasatch County Council (the “Council”) acts as the governing body of JSSD.
Utah Code Ann. § 17D-1-301.
3.
Although the governing body may delegate administrative duties to an
administrative board, only the governing body (Council) has the authority to “levy an
assessment.”
4.
JSSD was established in 1993 to plan for the successful and orderly development
of a water and sewer system to provide public water and sewer services to the Jordanelle Basin
surrounding the shoreline areas of the Jordanelle Reservoir (the “Reservoir”) in Wasatch
County, Utah.
5.
Once the Reservoir filled to capacity in approximately 1995, development
around the basin accelerated.
The court notes that the findings of fact and conclusions of law made by a court in
deciding a preliminary injunction motion are not binding at the trial on the merits. University of
Texas v. Camenisch, 451 U.S. 390 (1981).
1
2
6.
JSSD undertook the task to construct public sewer and water facilities starting
with Phase 1 and Area A located on the Western side of the Reservoir along Hwy 40 adjacent to
Deer Valley.
7.
JSSD used the common tool of assessment bonds as a means to finance the
construction of public infrastructure, which bonds are known to the financial markets as “dirt
bonds” since they are secured solely by assessments levied against participating land owners
based on equivalent residential units (“ERUs”).
8.
The ERUs were determined through a joint master-planning effort with JSSD and
property owners within Phase 1 and Area A.
9.
Sewer and water systems were eventually planned and the main systems were
gradually constructed within Phase 1 and Area A with the cooperation and support of property
owners.
10.
The installation of public infrastructure continued within Area B, which is located
on the Northeast side of the Reservoir.
11.
JSSD’s role in the proper development of the lands within its jurisdiction arises
out of its governmental role to provide adequate capacity rights regarding sewer and water to
accomplish the development needs and desires of its citizens.
12.
The value and desirability of property within these assessment areas will
depend, to a great extent, on the construction of infrastructure to serve the future needs of the
assessment area. Each parcel of property will receive a special benefit by ensuring capacity
rights, rights of service, and use of a modern, efficient and publicly owned and operated sewer
3
system. JSSD’s purpose was to provide water and sewer services to landowners within the
district based on their needs.
13.
JSSD engaged Franson-Noble & Associates, Inc. to prepare a pilot study, which
was completed in March of 2002 and encaptioned, Water Reclamation Facility Impact Fee
Study. Neither JSSD nor its governing body (the Council) had made any decisions regarding the
actual construction of a water reclamation facility at that time. This study does not evidence
the intent of Defendants as related to the ultimately-constructed water reclamation facility
within Area C.
14.
After 2002, but before 2005, because of a desire expressed by landowners in the
yet-created Area C to develop their land, it was proposed that JSSD would construct and
provide improvements to the landowners. One of the landowners in that area (which would
become Area C), was Robert Larsen. At the time, Mr. Larsen owned land, designated as Victory
Ranch, in what would later become Area C.
15.
Thereafter, each property owner within the proposed Area C, including Mr.
Larsen, voluntarily and of their own volition determined the number of ERUs they wanted
assigned to their properties. The six property owners that were to be a part of Area C certified
a total of 3,318 ERUs that they planned to develop within the newly-formed improvement
district.
16.
The property owners within the proposed Area C met on multiple occasions with
representatives of JSSD, including Steve Jackson (engineer), Dan Matthews (general manager),
as well as with Jon Bronson of Zions First National Bank, in which they identified the number of
4
ERU’s and the types of infrastructure to be constructed for their benefit. Some property
owners expressed a need for water and sewer infrastructure while others sought only sewer
infrastructure.
17.
JSSD, in consultation with its engineers, moved forward with the design of a
water reclamation facility that would serve the capacity needs of the property owners within
Area C. The engineers designed a water reclamation facility with a design capacity of
approximately 1 million gallons per day based on State of Utah regulatory guidelines which
required JSSD to allocate 340 gallons per day per ERU because there was no historical data.
18.
The design of the water reclamation facility was only capable of serving the
capacity needs of the 3318 ERUs identified by the property owners within Area C.
19.
Based on the interest expressed by the six property owners, JSSD, by and
through its seven member governing body, unanimously voted to notify the public, and in
particular the property owners who would be collateralizing their property to finance the
design and construction of the improvements required to meet the requested 3,318 ERUs
capacity, that JSSD was creating an assessment area (Area C) to construct Improvements for the
benefit of the property owners within Area C.
20.
In compliance with Utah law, the 2005 Notice of Intention was mailed to all
property owners within the proposed assessment area and published in the Wasatch Wave.
See Utah Code Ann. § 17A-3-206 (recodified).
21.
The 2005 Notice of Intention specifically set forth the nature and scope of the
assessment as mandated by, and in compliance with, Utah Code Ann. § 17A-3-205 (recodified).
5
22.
Based on the current record, it is not clear to the court that the 2005 Notice of
Intention was false or misleading, as alleged by Plaintiff.
23.
Based on the current record, it is not clear to the court that, either before or
after the 2005 Notice of Intention, Defendants had the intention to either (1) use the
improvements constructed pursuant to the 2005 Notice of Intention to benefit properties that
would not be levied with special assessments, or (2) engage in any of the bad acts alleged by
Plaintiff in its Complaint.
24.
With the support of all the property owners within Area C, in February 2006, the
seven member Council unanimously passed a resolution creating the improvement district (the
“Creation Resolution”).
25.
No objections were voiced by any of the property owners within the proposed
Area C assessment area. Nor did any property owners within the newly created assessment
area file an action within thirty (30) days after the adoption of the Creation Resolution.
26.
With the adoption of the Creation Resolution, JSSD was obligated to provide and
the property owners had the right to connect up to 3318 residential units to the improvements
constructed for their benefit.
27.
By June 2009, more than ninety-percent of the improvements were completed.
On June 23, 2009, JSSD caused a Notice of Proposed Assessment to be recorded against all the
property owners within Area C. As required by Utah law, copies of the Notice of Proposed
Assessment were mailed to all property owners within Area C, including Mr. Larsen (the prior
owner of Victory Ranch), and published in the Wasatch Wave. Utah Code Ann. § 11-42-402.
6
28.
The Notice of Proposed Assessment notified all property owners affected by the
passage of the assessment that a Board of Equalization had been appointed and that it would
hold hearings on June 30, July 1, and July 2, 2009 to allow any interested party to voice
objections to the proposed assessment. The Board of Equalization met as required and then
made findings and recommendations to the governing body of JSSD.
29.
During the Board of Equalization hearing, two of the six property owners
appeared and requested adjustments to the assessment. A representative of Cummings Land &
Livestock, LLC (“Cummings”) appeared and requested that the Cummings family homestead be
removed from the assessment area so that it would not be pledged as collateral for the
assessments to be levied. JSSD accommodated Cummings and removed the homestead from
the assessment.
30.
On July 8, 2009, the County Council, as the governing board of JSSD,
unanimously adopted an Assessment Ordinance levying an assessment against all the property
owners within Area C, including the Victory Ranch property.
31.
No objections were filed by any of the affected property owners within Area C or
any other party, including Mr. Larsen, either before or at the July 8, 2009 public hearing when
the Assessment Ordinance was adopted.
32.
The Assessment Ordinance took effect on July 15, 2009.
33.
Neither the prior owner of Victory Ranch (Mr. Larsen), nor any property owners
within Area C filed an action, pursuant to Utah Code Ann. § 11-42-106, within thirty (30) days
after the effective date of the Assessment Ordinance.
7
34.
JSSD, by and through the Board of Equalization and its governing board,
determined that the property owners (identified on the Assessment List) will be directly or
indirectly benefited by the improvements in an amount not less than the assessment and that
no parcel within Area C will bear more than its proportionate share of the costs of such
improvements.
35.
Based on the current record, it is not clear to the court that, either before or
after the effective date of the 2009 Assessment Ordinance, Defendants had any intention to
either (1) use the improvements constructed pursuant to the 2005 Notice of Intention to
benefit properties that would not be levied with special assessments, or (2) engage in any
transactions to personally benefit themselves and/or their family members or cronies as alleged
by Plaintiff in its Complaint.
36.
On or about November 1, 2009, JSSD sent notice to all property owners of record
in the assessment area of their right to elect to either pay the assessment in its entirety or pay
the assessment over twenty years. The Prior Owner of Victory Ranch (Mr. Larsen) unilaterally
elected to pay the assessment over twenty years.
37.
On February 1, 2010, Mr. Larsen made the first assessment payment
($2,088,990.07). On November 10, 2010, however, a Wells Fargo Bank (lender) special purpose
entity, ATC Realty Sixteen, Inc. (“ATC Realty”), obtained title to Victory Ranch via a deed in lieu
of foreclosure from Mr. Larsen. ATC Realty held title to the Victory Ranch property for over two
years, during which time it made the required annual assessment payments on February 1,
2011 and February 1, 2012 without objection.
8
38.
Plaintiff was formed as an entity in February 2012. On May 2, 2012, Plaintiff
purchased the Victory Ranch property.
39.
Plaintiff purchased the Victory Ranch property subject to the Assessment
Ordinance and assessment lien that had been levied against the Victory Ranch property in
2009.
40.
At the time Plaintiff purchased Victory Ranch, the assessment liens created by
the establishment of the improvement district in 2005 and adoption of the Assessment
Ordinance in 2009 were a matter of public record.
41.
Plaintiff conducted due diligence prior to purchasing the Victory Ranch property
for $17 million.
42.
Plaintiff paid the February 2013 annual assessment ($2,042,219.16). A year
later, on January 31, 2014, Plaintiff made a second assessment payment in the amount of
$2,027,939.18. Plaintiff did not file the instant action until just three weeks before its February
1, 2015 assessment payment was due.
43.
Based on the current record, it is not clear to the court that Defendants
attempted to conceal any of their actions related to the 2005 Notice of Intention, the Creation
Resolution, or the Assessment Ordinance, as alleged by Plaintiff in its Complaint.
44.
The documents related to JSSD, including those related the creation of the
assessment area and the adoption of the Assessment Area, are a matter of public record.
45.
Based on the current record, it is not clear to the court that any of the
Defendants, or their agents or representatives (including Jay Price and Dan Matthews)
9
personally benefitted from creation of the assessment area or adoption of the Assessment
Ordinance, as alleged by Plaintiff in its Complaint. Further, it is not clear to the court based on
the current record that any of Defendants’ family members, associates, or friends personally
benefitted from any assessment funds, as alleged by Plaintiff in its Complaint.
46.
Based on the current record, it is not clear to the court that JSSD’s purchase of
the Best Ranch in June of 2006 was anything other than an arms-length transaction approved
by the Administrative Control Board of the JSSD on May 2, 2006 and pursuant to a properly
adopted resolution.
47.
Based on the current record, it is not clear to the court that either JSSD or its
general manager, Mr. Matthews, acted improperly in negotiating and/or consummating the
purchase of the Best Ranch from Fishin’ With Bread, LLC (“Fishin’ With Bread”), as alleged by
Plaintiff in its Complaint.
48.
Based on the current record, it is not clear to the court that either JSSD or its
general manager, Mr. Matthews, used Tom Flinders and/or Fishin’ With Bread as a strawman to
purchase the Best Ranch, as alleged by Plaintiff in its Complaint.
49.
Based on the current record, it is not clear to the court that either Dan Matthews
or anyone else associated with JSSD received any kickbacks or personal benefits as a result of
the transaction with Fishin’ With Bread, as alleged by Plaintiff in its Complaint.
50.
Based on the current record, it is not clear to the court that either Dan Matthews
or anyone else associated with JSSD had knowledge of the purchase price paid by Fishin’ With
10
Bread to the original sellers of the Best Ranch until after the transaction was closed, which
knowledge came several years after the closing.
51.
Based on the current record, it is not clear to the court that the Water and
Wastewater Development and Service Agreement by and between Twin Creeks Special Service
District (“TCSSD”) and Red Ledges Land Development, Inc., (“Red Ledges”) dated October 18,
2012, was anything other than an arms-length transaction.
52.
Based on the current record, it is not clear to the court that JSSD’s willingness to
provide water and sewer service to TCSSD and Red Ledges was not reasonable and sound public
policy.
CONCLUSIONS OF LAW
1.
Under Utah law, JSSD (and like entities) can assess property owners only an
amount that is “fair and equitable according to the benefit of the benefitted property from the
improvement.” Utah Code Ann. § 11-42-409(5)(a).
2.
The amount of the assessments for improvements in a special improvement
district shall not exceed the sum of certain costs and expenses laid out by Utah law. Utah Code
Ann. § 17A-3-213.
3.
A property owner who is assessed an assessment does not acquire ownership in
the public infrastructure constructed by the special service district. Rather, a developer of
property acquires only the capacity right to connect to the public improvements constructed by
the special improvement district based on the number of ERUs contemplated by a particular
11
development. In other words, they bargain for and are assessed based on the capacity (i.e., the
number of ERUs that will be connected to the public improvements).
4.
This Court has personal jurisdiction over each of the defendants in this matter.
Wasatch County, the Jordanelle Special Service District and the Jordanelle Special Improvement
District No. 2005-2 are political subdivisions of the State of Utah. Jay Price and Dan Matthews
are Utah residents. Moreover, each of the defendants were properly served.
5.
This Court has subject matter jurisdiction over each of the claims alleged in
Plaintiff’s Complaint. Subject matter jurisdiction is proper in this Court under 28 U.S. C. §1331.
Claims brought under 42 U.S.C. §1983 present federal questions.
6.
Plaintiff Victory Ranch has standing under Article III of the United States
Constitution. Purchasers of land have standing to challenge unreasonable limitations on its use
and value. Palazzolo v. Rhode Island, 533 U.S. 606, 627 (2001). As the current owner of the
assessed land Plaintiff asserts its own rights, not the rights of the prior owner. Commonwealth
Prop. Advocates v. Mortgage Elec. Registration Sys., 680 F.3d 1194, 1201 (10th Cir. 2011)
(unpublished) (“Plaintiff’s decision to purchase the encumbered property in no way deprived it
of the right to challenge an allegedly unauthorized foreclosure” and “[b]ecause Plaintiff is the
current owner of the real property, a foreclosure would injure Plaintiff directly. Therefore,
Plaintiff also has prudential standing, and we may proceed to the merits.”) Plaintiff alleges the
assessment against the property is unconstitutional. When considering whether a plaintiff has
standing, a court “must accept as true all material allegations of the complaint, and must
construe the complaint in favor of the complaining party.” Warth v. Seldin, 422 U.S. 490, 501
12
(1975). If Plaintiff’s allegations are true, Defendants have violated Plaintiff’s constitutional
rights, and the claims belong to Plaintiff. In addition, if the allegations of the Complaint are
true, Plaintiff has suffered injury in fact. Plaintiff alleges it is injured because it must either pay
an unconstitutional annual assessment or subject its property to foreclosure. According to the
allegations of the Complaint, this injury is traceable directly to Defendants’ actions. Defendants
argue that there is a lack of causation because Plaintiff did not exist at the time many of the
actions complained of occurred. But under Palazzolo, purchasers of land have standing to
challenge governmental actions that unreasonably limit the value of their property.
7.
This suit is not barred by principles of comity. Principles of comity counsel
federal courts to resist engagement in state tax matters. Levin v. Commerce Energy, Inc. 560
U.S. 413, 421 (2010). Because the assessments in this case are not taxes, however, the doctrine
of comity does not bar Plaintiff’s claims.
8.
The tax injunction act does not deprive this Court of jurisdiction. The tax
injunction act applies only to the collection of taxes, not fees or other assessments.
Preliminary Injunction
The right to injunctive relief is an extraordinary remedy. A plaintiff is eligible for a
preliminary injunction only if it establishes the following four factors: (1) a substantial likelihood
of success on the merits of the case; (2) irreparable injury to the movant if the preliminary
injunction is denied; (3) the threatened injury to the movant outweighs the injury to the other
party under the preliminary injunction; and (4) the injunction is not adverse to the public
13
interest. RoDa Drilling Co. v. Siegal, 552 F.3d 1203, 1208 (10th Cir. 2009); Salt Lake Tribune
Publishing Co., LLC v. AT&T Corp., 320 F.3d 1081, 1099 (10th Cir. 2003).
9.
The right to relief in a preliminary injunction must be “clear and unequivocal
because a preliminary injunction is an extraordinary remedy.” AT&T Corp., 320 F.3d at 1081.
10.
If a preliminary injunction alters the status quo, then a plaintiff “bears a
heightened burden and must make a strong showing both with regard to the likelihood of
success on the merits and with regard to the balance of harms.” GM Corp. v. Urban Gorilla, LLC,
500 F.3d 1222, 1226 (10th Cir. 2007). The party seeking the preliminary injunction must show
that the preliminary injunction factors “weigh heavily and compellingly in its favor.” SCFC ILC,
Inc. v. Visa USA, Inc., 936 F.2d 1096, 1097 (10th Cir. 1991). “The status quo is defined by the
reality of the existing status and relationships between the parties, regardless of whether the
existing status and relationships may ultimately be found to be in accord or not in accord with
the parties’ legal rights.” Utah Gospel Mission v. Salt Lake City Corp., 316 F.Supp.2d 1201, 1220
(D. Utah 2004) (quoting Visa, 936 F.2d at 100).
11.
Here, Plaintiff’s request for preliminary injunctive relief is subject to the
heightened burden because Plaintiff is seeking to alter the status quo. The status quo is
Plaintiff continuing to make its assessment payments. Plaintiff is not currently in default of its
assessment obligations. Plaintiff has failed to overcome its heightened burden on any of the
elements of a preliminary injunction. On this basis alone, Plaintiff’s request for preliminary
injunction is denied.
14
12.
Even if Plaintiff were not subject to a heightened burden, it has not satisfied the
standard burden for a preliminary injunction. Moreover, even if Plaintiff were subject a more
relaxed burden, Plaintiff has not satisfied such a burden.
13.
Plaintiff has not shown that there is a substantial likelihood that it will succeed
on the merits.
14.
Plaintiff will not be irreparably harmed if this Court does not enjoin the
Defendants.
a. “Irreparable harm, as the name suggests, is harm that cannot be undone, such as
by an award of compensatory damages or otherwise.” Salt Lake Tribune Pub.
Co., LLC v. AT & T Corp., 320 F.3d 1081, 1005–06 (10th Cir. 2003). “Mere
threatened, speculative harm, without more, does not amount to irreparable
injury for purposes of justifying preliminary injunctive relief.” Chemical Weapons
v. U.S. Dept. of Army, 935 F.Supp. 1206, 1215 (D. Utah 1996). A plaintiff must
show that irreparable injury is “certain, great, actual; not theoretical.” Schrier v.
Univ. of Colo., 427 F.3d 1253, 1267 (10th Cir. 2005). Plaintiff will not suffer
irreparable harm here. Even assuming that Plaintiff elects not to make the
assessment payment, JSSD cannot, as explained in Defendants’ memorandum,
foreclose on the property for at least 150 days after Plaintiff’s default.
15.
Plaintiff has not demonstrated that the balance of harm weighs in its favor.
Based on the current record, JSSD will be significantly harmed if it is now enjoined.
15
16.
Plaintiff has not demonstrated that issuing an injunction here would be in the
public interest. Plaintiff must show, “clearly and unequivocally, that it would not be adverse to
the public’s interest to grant the injunction.” Utah Gospel, 316 F.Supp.2d at 1223.
17.
Plaintiff has failed to meet any of the four preliminary injunction requirements
and, accordingly, the Court concludes Plaintiff is not entitled to a preliminary injunction.
ORDER
Based on the foregoing findings and conclusions, Plaintiff’s motion for a preliminary
injunction [Docket No. 3] is DENIED.
DATED this 30th day of January, 2015.
BY THE COURT:
________________________________________
Honorable Dale A. Kimball
United States District Court Judge
16
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?