City of Rapid City v. Estes

#25868-rev & rem-DG

2011 S.D. 75

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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CITY OF RAPID CITY,
a municipal corporation, Plaintiff and Appellant,

DOYLE ESTES, individually,
BIG SKY, LLC and DAKOTA
HEARTLAND, INC., Defendants and Appellees.

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APPEAL FROM THE CIRCUIT COURT OF
THE SEVENTH JUDICIAL CIRCUIT
PENNINGTON COUNTY, SOUTH DAKOTA

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THE HONORABLE WALLY EKLUND
Judge

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JOHN K. NOONEY
AARON T. GALLOWAY of
Nooney, Solay & Van Norman, LLP
Rapid City, South Dakota Attorneys for plaintiff
and appellant.

EDWARD C. CARPENTER
STEPHEN C. HOFFMAN of
Costello, Porter, Hill, Heisterkamp,
Bushnell & Carpenter, LLP
Rapid City, South Dakota Attorneys for defendants
and appellees.

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CONSIDERED ON BRIEFS
ON AUGUST 22, 2011
OPINION FILED 11/16/11
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GILBERTSON, Chief Justice

[¶1.] Rapid City (City) Ordinances require a developer to complete certain

public improvements before the City accepts a final plat. In lieu of completing the

improvements before the City accepts a plat, the City may accept a surety from a

developer. In this case, Doyle Estes; Big Sky, LLC; and Dakota Heartland, Inc.

(collectively “Developers”) provided sureties which the City accepted. The sureties

expired. The City sued Developers, seeking relief to have the required public

improvements completed or repaired to meet the City’s standards. The circuit court

granted summary judgment in favor of Developers. We reverse and remand.

FACTS

[¶2.] Developers were involved in developing the Big Sky subdivision in

Rapid City, South Dakota. Under SDCL 11-6-26, a municipality has extra-

territorial jurisdiction to regulate the subdivision of all land within three miles of

the municipality’s corporate limits.1 Under SDCL 11-6-272 the City adopted

1. SDCL 11-6-26 provides in part:
After the city council of any municipality has adopted a
comprehensive plan that includes at least a major street plan or
has progressed in its comprehensive planning to the stage of
making and adopting a major street plan, and has filed a
certified copy of the major street plan in the office of the register
of deeds of the county in which the municipality is located, no
plat of a subdivision of land lying within the municipality, or of
land within three miles of its corporate limits and not located in
any other municipality, may be filed or recorded unless the plat
has the recommendation of the city planning and zoning
commission and the approval of the city council.

2. SDCL 11-6-27 provides in part: “In exercising the duties granted to it by this
chapter, the planning commission shall recommend and the council shall by
(continued . . .)
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Chapter 16 of Rapid City Municipal Code (RCMC). Chapter 16 establishes

regulations governing the subdivision of land within the City’s jurisdiction.

[¶3.] RCMC 16.16.010 requires subdividers to install or construct certain

public improvements:

A. The subdivider is required to install or construct the
improvements hereinafter described prior to receiving
approval of his or her final plat or prior to having released
bond or other securities which guarantee the required
improvements.
B. All improvements required under these regulations shall be
constructed in accordance with City Specificiations and
under the inspection of the City Engineer or his or her duly
authorized representative.

RCMC 16.16.010. “Improvements” include streets, curbs, gutters, property

markers, sidewalks, street lights, traffic signs, water mains, sanitary sewers, and

storm sewers. RCMC 16.16.020 - .090. The City adopted Standard Specifications

for Public Works Construction (Specifications) that improvements were required to

meet.

[¶4.] The RCMC provided an alternative to prior construction of required

improvements before approval of final plats would be considered. RCMC 16.20.060

provides:

A. No final plat shall be approved by the Common Council or
accepted for record by the Register of Deeds until all the
preceding required improvements listed shall be constructed
in a satisfactory manner and approved by the Director of
Public Works or his or her designee; or in lieu of the prior
construction, the Common Council may accept a security bond

____________________________
(. . . continued)
ordinance adopt regulations governing the subdivision of land within its
jurisdiction as defined in § 11-6-26.”

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in an amount equal to the estimated cost of installation of the
required improvements, whereby the improvements will be
made and utilities installed without cost to the city in the
event of default of the subdivider.3
B. If the final plat is for transfer of title and is so designated,
the Common Council may approve other methods, in lieu of
actual completion or bonds, whereby the city is put in
assured position that all the improvements will be made
before the land is developed. All bonds and other methods of
guarantee shall be approved by the City Attorney.

(Emphasis added.)

[¶5.] After improvements are completed, the City’s Specifications address

project acceptance:

Final acceptance of the project by the Owner [City] will be
documented by the issuance of an acceptance letter, which is
issued according to the following criteria:
1) Construction has been substantially completed and the
facilities can be put to their intended use.
2) All testing has been completed, and the required results have
been met.
The date of the acceptance letter documents the start of the
two-year warranty period, during which the Contractor shall be
notified in writing of any defects in the project and shall correct
the defects at his expense . . . .

3. This provision appears to be included under the authority of SDCL 11-6-29:
Subdivision regulations may provide that, in lieu of the
completion of such work and installations previous to the final
approval of a plat, the council may accept a bond, in an amount
and with surety and conditions satisfactory to it, providing for
and securing to the municipality the actual construction and
installation of such improvements and utilities within a period
specified by the council and expressed in the bond; and the
municipality is hereby granted the power to enforce such bonds
by all appropriate legal and equitable remedies.

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RCMC Specifications, § 7.65 (emphasis added). This section was revised in June

2006 to clarify that the “contractor/subdivider/developer” is responsible for

improvement repairs.4

[¶6.] Developers applied for approval of 15 subdivision plats. All of the

subdivision improvements were either completed or surety was posted to guarantee

completion of the improvements. Each plat was approved by the City between 1998

and 2005.

[¶7.] The City conducted final inspections of the required public

improvements for some of the properties. After the inspections the City provided a

“punch list” identifying deficiencies.5 The areas marked as deficient needed to be

corrected before the City would formally accept ownership and maintenance of the

public improvements. No follow-up inspections were completed. The remaining

properties identified in this suit have never undergone a final inspection.

[¶8.] The sureties expired. Developers claim to have spent $5,160,000.00 in

payments to independent contractors and engineers to install public improvements

in the subivisions and paid $77,400.00 to the City for inspections of these

improvements. The City has never formally accepted ownership or maintenance

responsibility for any of the public improvements on the properties. No “acceptance

4. Developers emphasize that RCMC Chapter 16 was revised in June 2006.
Developers argue that until 2006, the City did not have a formal process to
ensure public improvements were improved and accepted. We confine our
analysis to the ordinances as written at the time approval for the plats was
sought and sureties were posted.

5. Developers point out that this punch list related to an earlier phase of the
subdivision development and was not a “final” inspection.

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letter” was sent to Developers as indicated in Specifications § 7.65. Developers

contend that they informed the sub-contractors of the deficiencies but repair efforts

either failed or were not undertaken.

[¶9.] The City filed suit in 2008. The City claims there are major

deficiencies in the properties. The City alleges that Developers failed to satisfy

their obligations on numerous plats to build or correct public improvements. The

City seeks injunctive relief to require Developers to complete certain improvement

obligations and repair any deficiencies, subject to a final inspection by the City.

Alternatively, the City requests the court order Developers “to specifically perform

their obligations under the City’s subdivision ordinances.” Developers filed for

summary judgment, asserting that when the sureties expired, they were no longer

liable for the improvements under RCMC 16.20.060. The circuit court granted

summary judgment in favor of Developers. On appeal, we address whether the

circuit court erred in granting summary judgment in favor of Developers.6

6. Developers argue that the City did not formally accept the improvements and
therefore lacks ownership of them. Developers assert that this deprives the
court of subject matter jurisdiction because “[i]f the facts are indeed as City
contends, and no ‘acceptance’ of these improvements has ever occurred, then
where is City’s standing to bring this action?” “Subject matter jurisdiction is
the power of a court to act such that without subject matter jurisdiction any
resulting judgment or order is void.” Cable v. Union Cnty. Bd. of Cnty.
Comm’rs, 2009 S.D. 59, ¶ 20, 769 N.W.2d 817, 825 (quoting City of Sioux
Falls v. Missouri Basin Mun. Power Agency, 2004 S.D. 14, ¶ 10, 675 N.W.2d
739, 742). “Subject matter jurisdiction is conferred solely by constitutional or
statutory provisions.” Id. (quoting In re Application of Koch Exploration Co.,
387 N.W.2d 530, 536 (S.D. 1986)). Black’s Law Dictionary defines subject
matter jurisdiction as “jurisdiction over the nature of the case and the type of
relief sought; the extent to which a court can rule on the conduct of persons or
the status of things.” Black’s Law Dictionary 870 (8th ed. 2004). Conversely,
(continued . . .)
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STANDARD OF REVIEW

[¶10.] The standard of review for a grant or denial of a motion for summary

judgment is settled.

In reviewing a grant or a denial of summary judgment under
SDCL 15–6–56(c), we determine whether the moving party has
demonstrated the absence of any genuine issue of material fact
and showed entitlement to judgment on the merits as a matter
of law. In considering a trial court’s grant or denial of summary
judgment, this Court will affirm only if all legal questions have
been decided correctly.

Muhlbauer v. Estate of Olson, 2011 S.D. 42, ¶ 7, 801 N.W.2d 446, 448 (quoting

Bertelsen v. Allstate Ins. Co., 2011 S.D. 13, ¶ 5, 796 N.W.2d 685, 692-93). “All

reasonable inferences drawn from the facts must be viewed in favor of the non-

____________________________
(. . . continued)
standing is “a party’s right to make a legal claim or seek judicial enforcement
of a duty or right.” Black’s Law Dictionary 1442 (8th ed. 2004). In order to
establish standing, a litigant must show: (1) an injury in fact that is (a)
concrete and particularized and (b) actual or imminent; (2) a causal
connection between the plaintiff’s injury and the conduct of which the
plaintiff complains; and (3) the likelihood that the injury will be redressed by
a favorable decision. Cable, 2009 S.D. 59, ¶ 21, 769 N.W.2d at 825-26;
Benson v. State, 2006 S.D. 8, ¶ 22, 710 N.W.2d 131, 141. See also Lujan v.
Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 2136, 119 L. Ed.
2d 351 (1992). Determining lack of standing or lack of subject matter
jurisdiction are separate arguments that require separate analyses. It is
possible for a court to have subject matter jurisdiction, but a party could lack
standing. In this case, although Developers attempt to cloak their issue as
one of subject matter jurisdiction, the content of the arguments goes to
standing. We conclude that the City has standing because after
improvements are accepted, the City assumes ownership, maintenance, and
operation of them. The City therefore would suffer financial injury if the
Developers fail to construct the improvements to meet the design standards
as required by law. Furthermore, the issue of standing was not raised below.
“When an issue was not raised at the trial court level, we will not ordinarily
address it on appeal.” State v. Sorensen, 2004 S.D. 108, ¶ 5 n.2, 688 N.W.2d
193, 196 n.2.

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moving party.” Benson Living Trust v. Physicians Office Bldg. Inc., 2011 S.D. 30, ¶

9, 800 N.W.2d 340, 342-43.

ANALYSIS

[¶11.] The circuit court granted Developers’ motion for summary judgment

after Developers argued that, under RCMC 16.20.060, the expiration of the sureties

released them from their obligations to complete the public improvements. The

City argues that the circuit court erred because when reading all the ordinances

together, the expiration of the sureties did not relieve Developers of their obligation

to construct the improvements according to the City’s Specifications.7

[¶12.] This is a case of statutory and ordinance construction.

The purpose of statutory construction is to discover the true
intention of the law, which is to be ascertained primarily from
the language expressed in the statute. The intent of a statute is
determined from what the Legislature said, rather than what
the courts think it should have said, and the court must confine
itself to the language used. Words and phrases in a statute
must be given their plain meaning and effect.

State ex rel. Dep’t of Transp. v. Clark, 2011 S.D. 20, ¶ 5, 798 N.W.2d 160, 162. In

this case we have several statutes and municipal ordinances governing the

acceptance of public improvements. “To determine legislative intent, this Court will

take other statutes on the same subject matter into consideration and read the

statutes together, or in pari materia.” Onnen v. Sioux Falls Indep. Sch. Dist. No.

49-5, 2011 S.D. 45, ¶ 16, 801 N.W.2d 752, 756 (citing Loesch v. City of Huron, 2006

S.D. 93, ¶ 8, 723 N.W.2d 694, 697). “Statutes are construed to be in pari materia

7. The City does not argue that there are any genuine issues of material fact.

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when they relate to the same person or thing, to the same class of person or things,

or have the same purpose or object.” Goetz v. State, 2001 S.D. 138, ¶ 26, 636

N.W.2d 675, 683.

[¶13.] RCMC 16.16.010(B) states that: “All improvements required under

these regulations shall be constructed in accordance with City Specificiations and

under the inspection of the City Engineer or his or her duly authorized

representative.” (Emphasis added.) Specifications § 7.65 clearly states that “[f]inal

acceptance of the project by the Owner [City] will be documented by the issuance of

an acceptance letter . . . .”8 It is undisputed that the City never issued any final

acceptance letters as referenced in the Specifications. The provision of RCMC

16.20.060 allowing a surety to be posted in lieu of prior construction does not

override the requirement of RCMC 16.16.010(B) that improvements be constructed

according to the Specifications. Nor does RCMC 16.20.060 indicate that posting a

surety eliminates the requirement of Specifications § 7.65 that a final acceptance

letter must be issued. When all the ordianances are read together, the intent is

clear that regardless of how or when plat approval is obtained, the improvements

must be built according to the Specifications and accepted by the City.

[¶14.] We must also take into consideration Specifications § 7.55, which

provides that: “The Engineer, upon completion of the contract work, shall satisfy

himself by examination and test that the work has been finally and fully completed

8. Developers argue that Specifications § 7.65 only applies to “Contractors” and
Developers are not contractors. In this case, from a plain reading of the
ordinance, Developers are contractors who engaged sub-contractors to
complete various improvements.

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in accordance with the Specifications and Contract, and report such completion to

the Owner.” The engineer cannot examine and test the work if the developer never

completes the improvements. If we were to agree with Developers’ argument, then

any time a surety is posted a developer can do nothing and hope that the city will

let the surety expire. This clearly goes against Specifications § 7.55, which requires

that the Engineer must be satisfied that the work has been completed correctly

before the City can formally accept the improvements by letter.

[¶15.] Under the ordinances and specifications, Developers remain liable

until the City accepts the improvements by a final acceptance letter. The sureties

made it possible for Developers to obtain plat approval from the City Council

without first constructing the improvements. But it does not relieve Developers

from constructing the improvements as required by the Specifications. Neither do

the sureties release Developers from this obligation until they receive a final

acceptance letter. Obtaining plat approval and receiving a final acceptance of the

required improvements are distinct, separate actions.

[¶16.] Because it does not appear that all legal questions were correctly

decided, we reverse and remand.

[¶17.] WILBUR, Justice, and MYREN, Circuit Court Judge, concur.

[¶18.] HOFFMAN, Circuit Court Judge, concurs with a writing.

[¶19.] PORTRA, Circuit Court Judge, dissents.

[¶20.] MYREN, PORTRA and HOFFMAN, Circuit Court Judges, sitting for

KONENKAMP, ZINTER, and SEVERSON, Justices, disqualified.

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HOFFMAN, Circuit Court Judge (concurring).

[¶21.] I concur in the majority decision. I write separately to address the

standing issue.

[¶22.] In my view the City does have standing within the strictures of Lujan

v. Defenders of Wildlife, 504 U.S. 555, 112 S. Ct. 2130, 119 L. Ed. 2d. 351 (1992),

and Benson v. State, 2006 S.D. 8, 710 N.W.2d 131, by virtue of its having accepted

the surety bonds in lieu of actual completion of the contemplated improvements

under RCMC 16.20.060 and SDCL 11-6-29. Acceptance of the surety bond is “in lieu

of the completion of such work and installations previous to the final approval of

[the] plat[.]” SDCL 11-6-29. According to the express language of the ordinance,

acceptance of a surety bond by the City, for purposes of effectuating plat acceptance,

is the functional equivalent of satisfactory construction of the improvements by the

Developer and the subsequent approval of the same by the Director of Public Works.

RCMC 16.20.060. Accordingly, once a plat is approved under this alternative

procedure, it may be recorded and the City then assumes responsibility for the

infrastructure developed within the public areas identified therein.

[¶23.] According to South Dakota law, once the plat is approved, it may be

recorded with the register of deeds. SDCL 11-3-6, 11-6-26, 11-6-34. Once that

occurs, ownership and maintenance responsibility for the public areas within the

subdivision passes to the City. SDCL 11-3-12. See also Herrmann v. Bd. of

Comm’rs of City of Aberdeen, 285 N.W.2d 855, 856 (S.D. 1979); Haley v. City of

Rapid City, 269 N.W.2d 398, 400 (S.D. 1978). Only upon that contingency may the

Developer actually sell the subdivided lots. SDCL 11-6-35. The various

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developments at issue in this case were approved between 1998 and 2005. Had

development and subdivision not occurred, the plats could have been vacated and

the public rights returned to Developers. See SDCL 11-3-16. That is not what

occurred in this case. Rather, the infrastructure is substantially completed in the

developments, but the City seeks remediation from the Developers for certain

quality control issues that have not passed final inspection by the City Engineer.

[¶24.] As the majority points out, Developers are not relieved of their

obligations to bring the improvements into compliance with the City’s Construction

Specifications merely because the sureties that facilitated acceptance and recording

of the plats have now expired. Rather, the Developers continue to be legally bound,

pursuant to RCMC 16.16.010(B), to finish the job and build the infrastructure

according to the Specifications. If, as the City now asserts, the Developers have

defaulted in their obligations, and, were it the case that the Developers could not be

held to account for the same, then the City ultimately would be obligated to bring

the infrastructure within the public areas into compliance with the plats because

the City owns them. 64 C.J.S. Municipal Corporations § 1790 (2011); Haley, 269

N.W.2d 398.

[¶25.] The City has not issued an acceptance letter pursuant to the

Construction Specifications documenting the start of the Developers’ warranty

period for improvements, due to its perception that the infrastructure is incomplete.

However, the City’s failure to issue an acceptance letter is of no consequence to the

determination of the standing issue. As a matter of law, the City accepted the plats

when it accepted the sureties in lieu of actual project completion, and title to the

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public areas vested in the City when the plats were recorded. This is the only

cogent reconciliation of the applicable statutes and ordinances, when given their

plain meaning. State ex rel. Dep’t. Transp. v. Clark, 2011 S.D. 20, ¶ 5, 798 N.W.2d

160, 162.

[¶26.] The City’s final “acceptance letter,” is merely an expression of the

City’s recognition that the Developers’ work has met the Construction

Specifications, and, as such, is a red herring vis-à-vis the standing issue. The City’s

withholding of the acceptance letter does not override the clear terms of the

legislation and ordinances setting forth that acceptance of a surety bond constitutes

final approval of the corresponding plat, which, when recorded, incorporates the

infrastructure within that platted area into the City’s maintenance domain, as a

matter of law. Accordingly, the City’s remedy for alleged inadequate adherence by

the Developers to the Construction Specifications in this context is to bring suit

against the Developers, which is precisely what has occurred in this case. The City

is indeed the real party in interest pursuant to SDCL 15-6-17(a) in this action, and

has the concomitant standing to enforce via litigation the Developers’ obligations to

bring the public improvements at issue in this case into compliance with the

applicable specifications.

PORTRA, Circuit Court Judge (dissenting).

[¶27.] I respectfully dissent. I find that the City does not have standing.

First, the issue of standing has not been waived. This Court has previously held

that a plaintiff must establish standing as an aggrieved person such that a court

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has subject matter jurisdiction. Cable v. Union Board of Cnty. Comm’rs, 2009 S.D.

59, ¶ 21, 769 N.W.2d 817, 825 (citations omitted). Further, “[i]t is the rule in this

state that jurisdiction must affirmatively appear from the record and this [C]ourt is

required sua sponte to take note of jurisdictional deficiencies, whether presented by

the parties or not.” Elliott v. Board of Cnty. Comm’rs of Lake Cnty., 2005 S.D. 92, ¶

17, 703 N.W.2d 361, 368 (citations omitted). Therefore, the issue cannot have been

waived.

[¶28.] Considering the merits of the issue, the majority asserts that the City

has standing “because after improvements are accepted, the City assumes

ownership, maintenance and operation of them.” However, the City has not

accepted the improvements and therefore standing is based on a contingency. In

order for the City to have standing, it must have suffered an injury in fact that is a)

concrete and particularized and b) actual or imminent, not conjectural or

hypothetical. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S. Ct. 2130,

2136 (1992). The speculated injury in this case may not happen.

[¶29.] The City’s simple remedy is to refuse to accept the improvements until

they are in compliance with the City’s ordinances. If that never happens, the City

can refuse to issue building permits within the subdivisions and abate any nuisance

caused by the failed subdivisions, if necessary. So at this time, the City has

suffered no injury and they have more than adequate remedies at law to protect

themselves in the future. This lawsuit by the City is premature. Therefore, I would

affirm the trial court on other grounds because the City does not have standing.

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