Winsted-Lester Prairie Journal, February 9, 1998

SJ&F vs. city lawsuit waits appeals court ruling

BY MAGGIE SCHUETTE-VOSS

WINSTED - After consideration in McLeod County District Court, a lawsuit by SJ&F Enterprises against the City of Winsted is going on to the Minnesota Court of Appeals.

Several complaints in the suit were dismissed by Judge Thomas McCarthy while others were allowed to stand.

SJ&F Enterprises of Winsted filed suit against present and former Winsted City Council members, the mayor, city attorney, and city clerk.

At the center of the lawsuit is whether SJ&F's property on Baker Avenue is in the city limits and is therefore subject to city ordinances. SJ&F maintains it is not; the city says it is.

Another issue put forth by SJ&F - whether actions by the council placed the company at a disadvantage while it negotiated a property purchase agreement - was dismissed by the court.

 

SJ&F's allegations

In the suit, SJ&F claims fraud and intentional misrepresentation, negligent misrepresentation, negligence, and tortuous interference with prospective contractual relations.

The suit against present council members Gary Lenz and Bonnie Quast, former council members Milo Kubasch and Tom Wiemiller , and Mayor Don Guggemos was dismissed by McCarthy.

Suit against the City of Winsted, City Clerk Betty Zachmann, and City Attorney Fran Eggert were not dismissed, and this decision has been taken to the appellate court by the city's and Eggert's attorneys.

Written arguments by the city's and Eggert's attorneys were expected to be filed this week. SJ&F's attorney has 30 days to respond with his written arguments.

The city and Zachmann are represented by George Hoff and Paula Callies, attorneys with Hoff, Barry & Kuderer, PA of Eden Prairie.

Eggert is represented by David Alsop of Gislason, Dosland, Hunter, & Malecki, PLLP of Minnetonka.

SJ&F is represented by James Sandler of Wagner, Falconer, & Judd, LTD of Minneapolis.

If the lawsuit against Zachmann and Eggert are not dismissed by the appellate court, the case will be sent back to McLeod County District Court for summary judgment or trial. The court can issue a summary judgement if both parties agree on the facts of the case.

Court's findings of fact

According to the court's findings of fact, filed Dec. 10, 1997, when SJ&F purchased property at 211 Baker Ave. in 1984, where the SJ&F company is now located, it was believed by all parties that the property was within the city limits.

In 1991, SJ&F purchased adjoining property to the south from Reuben Roos.

Planned expansion by the company included a building which would partially be located on the Baker property and partially on the property purchased from Roos. In order for SJ&F to be granted a building permit, the city required the property the Roos property to be annexed into the city.

In August 1991, a sketch prepared by Meyer-Rohlin, Inc., land surveyors for SJ&F showed the Baker property in the city limits and the Roos property outside. All parties agreed to the annexation, which was done on March 4, 1992.

In May 1992, Zachmann received information from Rieke, Carrol, Muller and Associates, the city's engineers, that there was a possible 50-foot wide strip running through the Baker property that had not been annexed into the city. The land had been a railroad right-of-way.

In summer 1993, Zachmann received a map from the Minnesota Department of Transportation showing the entire Baker property had never been annexed into the city, and Eggert was told about this.

On Sept. 29, 1993, SJ&F purchased property at the corner of Highway 261 and Baker Avenue from Niro-Sterner. Prior to the purchase, SJ&F was aware the city was considering an ordinance that would require businesses to screen outdoor storage and materials.

SJ&F claimed council members Lenz and Quast, along with Floyd Sneer, the city's economic development director, said there would be no problem with the use of the Niro property. The city claims a representative of SJ&F discussed the proposed storage ordinance with them.

When the storage/screening ordinance was adopted by the city, SJ&F claims it made the Niro property unusable and limited its use of the Baker property.

Several variances regarding both the Niro and Baker properties were granted to SJ&F, but according to SJ&F, were more restrictive than it requested.

During the problems with SJ&F and the screening ordinance, the city continued to investigate the possible problems with its boundaries and the discrepancies between the city's map and the Mn/DOT maps.

Eggert requested a copy of the Mn/DOT map on April 28, 1994, and requested Leroy Grewe, the city's engineer, to review the map.

It was Grewe's opinion that according to the Mn/DOT map, there was more land not annexed than originally thought and his description was the Baker property.

Sandler, SJ&F's attorney, told the Journal Mn/DOT uses maps to keep track of city limits in relation to roads it maintains.

Annexations are reported to the Secretary of State's office, which in turn provides the information to Mn/DOT, Sandler said.

The court document states Zachmann presented a joint resolution for orderly annexation to SJ&F on Dec. 27, 1994. This is the order signed when both parties agreed to an annexation.

The order included the former railroad right-of-way, and this was first time SJ&F became aware some of its property had not been annexed into the city. It was at this time SJ&F discovered the proposed annexation included the entire Baker property.

SJ&F wrote a letter questioning the annexation. Eggert's responded that Zachmann was continuing to research its possibility.

Later, on April 12, 1995, Eggert told SJ&F the Baker property was in the city limits and referred to numerous maps showing the the same.

Because SJ&F felt the screening ordinance made the Niro property unusable for its business, it began negotiations with Roos to purchase more property.

On Jan. 30, 1995 the planning commission, which can only advise the council, approved a variance extending by 30 days the time the company had to remove its material from the Niro property. This was on the condition SJ&F produce a purchase agreement in 30 days. SJ&F claims it understood this to mean any purchase agreement.

The city claims SJ&F needed to produce a purchase agreement specifically for the Roos property, and that prior to Jan. 30, 1995, SJ&F indicated it had a purchase agreement for the Roos property that only needed to be put in writing.

SJ&F did produce the purchase agreement on March 7, 1995, but claimed it put the company at a disadvantage when negotiating for the property.

Suit was filed by SJ&F against the city on July 26, 1996. The action initially included federal claims and was moved to federal court.

Two other claims by SJ&F, one alleging civil rights violations and another alleging unconstitutional taking, were dismissed by the court and by the plaintiff, respectively.

 

The court's ruling

On SJ&F's claim of fraud and intentional misrepresentation, that claim against Quast, Lenz, Kubasch, Wiemiller, and Guggemos was dismissed by the court.

The court stated that SJ&F had not demonstrated those parties knew the Baker property was not in the city limits. (Whether or not the property is in the city limits still must be decided by the court.)

Those claims do stand against Zachmann and Eggert.

The court stated that although Zachmann and Eggert maintain the Baker property is within the city limits, SJ&F has submitted evidence that could support its claim that Eggert and Zachmann knew or had reason to believe the Baker property was not in city limits, but continued to represent that it was.

The defendants argue that the Baker property is within the city limits and SJ&F suffered no damages.

They also stated SJ&F would have been subject to McLeod County's screening ordinance if it were not subject to Winsted's, and that the county's requirements are just as rigorous as the city's.

If the county and city ordinances would have affected SJ&F equally is a question that must be decided by the court.

SJ&F also alleges fraudulent misrepresentation concerning the Niro property. This charge against all defendants was dismissed by the court because the ordinance had not been passed and there is no action the court can take under Minnesota law.

On the claim of negligent misrepresentation, this charge against the past and present council member and the mayor was dismissed on the grounds SJ&F did not have adequate proof. McCarthy let the claim stand against Zachmann and Eggert.

McCarthy also ruled the city could be held vicariously liable for the acts of Zachmann and Eggert, and did not dismiss the claim.

Under Minnesota law, negligent misrepresentation occurs when "the misrepresenter has not discovered or communicated certain information that the ordinary person in his or her position would."

The alleged misrepresentation was that the Baker property was within the city limits. McCarthy let the claim against Zachmann stand because it involves a question of fact: whether a particular piece of property was in the city limits.

Eggert raised two defenses against this charge: official immunity and that SJ&F was not his client, therefore he is not liable for any negligent misrepresentations made to SJ&F. Both were rejected by McCarthy.

On the first defense, McCarthy ruled that Eggert, in this case, acted as a municipal officer; therefore immunity does not apply.

McCarthy said because Eggert's actions were those of a municipal officer, he cannot claim freedom from liability to a third party, as a private attorney could.

Again, McCarthy ruled the city could be held vicariously liable for the acts of Eggert and Zachmann.

On the claim of negligence against Lenz, Quast, Guggemos, Wiemiller, and Kubasch was dismiised.

McCarthy said SJ&F did not present evidence against these parties, and if such evidence did exist, they were protected by official immunity.

This clain against Zachmann and Eggert was not dismissed. McCarthy ruled that Zachmann's and Eggert's actions were ministerial and not discretionary, and they are not protected by official immunity.

The claim of alleged tortuous interference with prospective contractual relations was dismissed outright.

SJ&F had claimed the city interfered with its negotiations to purchase property from Reuben Roos. The court stated that SJ&F did not show evidence of interference by the council, clerk, or city attorney.

 

 

 


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