Posted by: Patricia Salkin | December 6, 2014

AZ Appeals Court Holds County, Not Successive Owner, Has Authority to Decide Whether to Call Subdivision Performance Bond

Empire Residential Construction (Empire) applied to the Coconino County Planning and Zoning Commission to develop a residential community for single-family homes. The Board unanimously approved Empire’s application and both parties agreed on a $4 million performance bond for the development, but Empire declared bankruptcy and abandoned the development midway through the project. Bellemont 276m L.L.C. (Bellemont) then purchased a unit under the impression that the performance bond would pay for the development, but the County passed a resolution to deny payment through bonds due to the fear of potential litigation costs. The County ultimately rejected Bellemont’s application for a building permit and Bellemont as well as several parties filed suit against the County alleging that their interests were harmed by the County’s refusal to issue bonds. Appellees sought declaration from the court that the County’s duty to call the bonds was a mandatory ministerial act and the court granted Appellees’ application, ordering the County to issue the bonds. The County then filed a notice of appeal.

In deciding whether Coconino County, Coconino County Board of Supervisors (Board) and the Coconino County Community Development Department have the discretion to call performance bonds posted by a developer to ensure completion of subdivision improvements, the Court of Appeals of Arizona found that Appellees lacked standing to request the bonds or to make a claim directly against the surety. The statutory language was interpreted by the Court of Appeals to plainly ensure that the amount of the bond posted by a developer was sufficient to cover the cost of necessary subdivision improvements. The court said that the legislative intent of A.R.S. § 11-821(C) was to require developers, such as the new owner, to pay for the cost of subdivision improvements and the County determined that calling the bonds did not serve this interest. The court held that under A.R.S. § 11-821(C) and Coconino County Subdivision Ordinance No. 82–3, the County had discretion to decide not to call performance bonds posted by an owner/developer to ensure completion of subdivision improvements. The Court of Appeals reversed the trial court and remanded the matter for further proceedings consistent with its opinion. An appeal to the Arizona Supreme Court is in process.

Ponderosa Fire District v Coconino County, 235 Ariz. 597 (AZ App. 8/28/2014)

The opinion can be accessed at:

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