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City of Sacramento v. Beazer Homes Holdings Corp

March 11, 2011

CITY OF SACRAMENTO, PLAINTIFF,
v.
BEAZER HOMES HOLDINGS CORP., DEFENDANT AND APPELLANT, ALLEGHANY PROPERTIES LLC, DEFENDANT AND RESPONDENT.



(Super. Ct. No. 34-2009-00037027-CU)

The opinion of the court was delivered by: Nicholson ,j.

City of Sacramento v. Beazer Homes Holding Corp.CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

This is a dispute between two developers concerning the funds available from a drainage fee account held by the City of Sacramento (the City) to reimburse developers for construction of drainage facilities. One of the developers, Alleghany Properties LLC (Alleghany), claims entitlement to all funds currently in the account, while the other developer, Beazer Homes Holdings Corporation (Beazer), asserts that some of the funds should be distributed to Alleghany and the rest to Beazer. In light of the dispute, the City interpleaded the funds, naming Alleghany and Beazer as defendants, and the trial court granted Alleghany's motion for summary judgment. Contrary to the trial court's order granting summary judgment, we conclude that the record does not support distribution of all funds to Alleghany as a matter of law. Therefore, summary judgment was improper.

BACKGROUND

The Development

Before 1998, the City designated a mostly undeveloped area of North Natomas as "Shed 6" or "Basin 6" for the purpose of drainage facilities. In anticipation of developing Shed 6, Alleghany and Beazer bought land there. Before development of the land and subsequent sales, Alleghany owned more than 70 percent of the land in Shed 6. Part of Alleghany's development of the land included drainage facilities, specifically for its land and also for the common benefit of other eventual developers. Alleghany built the drainage facilities in two phases, "Basin 6A" and "Basin 6B," and completed the work by sometime in 2004, expending $10.6 million on the drainage facilities.*fn1

After Alleghany had completed its work on the drainage facilities in Shed 6, Beazer began its work. It expended $2 million on construction of drainage facilities and also paid to the City a drainage fee of $2.4 million. Beazer's total expenditure on drainage was $4.4 million.

Based on the amount of land owned in Shed 6 and the uses to which the land is to be put, Alleghany is responsible for 72.5671 percent (rounded to 73 percent) of the cost of common drainage facilities, and Beazer is responsible for 18.3036 percent (rounded to 18 percent), while other landowners are responsible for the rest.

The Agreements

Alleghany and Beazer each entered into several contracts with the City with respect to the Shed 6 development. Those contracts, which were identical for Alleghany and Beazer in all ways relevant to this proceeding, included the North Natomas Finance Plan (Finance Plan), the North Natomas Development Agreement (Development Agreement), and several Agreements for the Construction of Drainage Improvements (drainage agreements).

The Development Agreement committed each developer "to funding its appropriate share of the cost of Infrastructure and other facilities which are the subject of the North Natomas Finance Plan . . . ." On the same subject of funding a fair share of common or regional facilities, the Development Agreement continued: "The North Natomas Finance Plan establishes a method for financing of required Infrastructure and public facilities . . . , so that the land within the North Natomas Finance Plan Area pays for its share of the cost of such Infrastructure and facilities."

The Development Agreement also provided for reimbursement to any developer paying more than its fair share of the facilities benefitting the entire basin. It stated: "In any case where CITY requires or permits [the developer] to plan, design, construct, or fund the planning, design or construction of improvements required for development by the North Natomas Finance Plan, in excess of or beyond those required for development of [the developer's property], . . . CITY shall utilize its best efforts to require that all other Persons benefitted by the improvements shall reimburse (through fee districts, agreements, conditions of approval, or otherwise) [the developer] for such Person's proportionate share of such costs as determined in accordance with the North Natomas Finance Plan, or by CITY." And later: "Reimbursement shall be limited to that amount which exceeds [the developer's] appropriate share of the cost, determined in accordance with principles established in the North Natomas Finance Plan, and any associated documents or studies."

Contribution by developers in Shed 6 toward the common drainage facilities was to be either by (1) expending funds in the construction of the common drainage facilities or (2) paying to the City a drainage fee. The drainage agreements stated: "Drainage Fees that are paid to the City by other landowners . . . shall be maintained by the City in a separate account (the 'Drainage Fee Account') . . . ." Concerning the timing of the reimbursement, the drainage agreements stated: "Upon full completion of the Drainage Facilities and acceptance thereof by the City, the City will pay [the developer] the amount then available in the Drainage Fee Account for reimbursement up to, but not in excess of, the approved and properly proportioned Reimbursement Amount for the Drainage Facilities. Thereafter, on a quarterly basis, commencing on the first of the calendar month following completion of the Drainage Facilities and continuing on the ...


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