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Chelsea Investment Group LLC v. City of Chelsea

April 27, 2010


Washtenaw Circuit Court LC No. 06-000164-CK.

Per curiam.



In this contract action, defendants, city of Chelsea and Michael Steklac, and plaintiff, Chelsea Investment Group, LLC, cross appeal the trial court's order entering judgment in defendants' favor after a bench trial. We affirm in part and vacate in part.


In 2000, plaintiff acquired 157 acres of undeveloped real property by land contract. The property was located in Chelsea, Michigan, and plaintiff agreed to pay $5,000,000 for the property. Plaintiff paid $500,000 at closing, leaving $4,500,000 to be paid in equal semi-annual installments over the next five years.*fn1 Plaintiff also agreed to pay the property taxes.

After entering into the land contract, plaintiff filed a petition with the city of Chelsea to rezone the property as a planned unit development (PUD). Plaintiff also filed a petition for site plan approval for the purpose of developing single-family units. The city's planning commission issued two resolutions that made findings and recommendations as to plaintiff's petitions. Ultimately, the planning commission recommended that defendant approve the rezoning request and the proposed development as long as plaintiff met all the provisions in the resolutions. Accordingly, in November 2001, the property was rezoned. Further discussions ensued concerning the site plan and, in April 2002, plaintiff proposed a detailed plan for the construction of a development called "Heritage Point," which would contain 352 single-family condominiums.


In April 2003, the city approved this site plan and plaintiff and the city entered into a PUD Agreement, which was recorded in the register of deeds. The PUD Agreement granted plaintiff site plan approval for all 352 residences and required the development of Heritage Point to be carried out in five separate phases, each phase of which contemplated the development of a certain number of lots. Under the agreement, each phase was subject to plaintiff obtaining site plan approval for the project from the city. In particular, no zoning or building permits could be issued in a phase until "the public water mains, public sanitary sewers, and all appurtenances necessary to support that phase have been installed," approved, and accepted by defendant.

The PUD Agreement was divided into several parts: recitals, statements of mutual agreement, plaintiff's obligations under Part A, and the city's obligations under Part B. The recitals provided an account of what had occurred over the last several years with regard to the subject property. The statements of agreement indicated that the "[PUD] zoning designation shall consist of the findings and recommendations of the [city] Planning Commission adopted on November 21, 2001 . . . ." In other words, the PUD Agreement incorporated a November 2001 resolution of the city's planning commission. The resolution stated, in relevant part:

b. Sanitary sewer -- The existing sanitary sewer is adequate to handle the proposed development. However, the [waste water treatment plant] must be expanded and 10 acres of additional land is needed for that expansion.

c. Water -- Existing water mains cannot provide volumes or pressure needed for the proposed 352 houses.

Part A of the PUD Agreement provided conditions under which plaintiff would develop the property and set forth plaintiff's contractual obligations. Plaintiff, for instance, was required to donate 10 acres of land to defendant for the expansion of the city's waste water treatment plant (WWTP) and to convey a conservation easement of approximately 30 acres. Further, Part A of the agreement indicated that it was defendant's duty to expand the existing water capacity. Paragraph 4 of the PUD Agreement stated:

The [city] is in the process of extending the existing 12" water main down Elm Street . . . which 12" Water Main Work will be completed by the [city], at the [city's] expense, in sufficient time so as not to interfere with or delay [plaintiff's] development of the Property. In Consideration of the donation/conveyance of the WWTP property . . . the [city] agrees that neither the Developer . . . nor any of the owners of lots/units in the Development will ever be required to install (or pay to install) any offsite improvements with regard to the provision of water to the Development and, if there is ever a need to increase the water capacity to the Development, the [city] will be responsible for installing any and all offsite improvements related to increasing the water capacity to the Development without contribution of any kind from the Developer . . . or any owners of lots/units in the Development . . . .

Part B of the PUD Agreement contained further obligations of the city. It stated, in full:

The [city] agrees to do the following in a timely manner so as not to delay any approvals or the issuance of any permits or certificates of occupancy in the Development:

1. Approve PUD zoning for the Property, based on the Area/Site Plan.

2. Extend the 12" water main in Elm Street, at the [city's] expense, to the west line of the Property by Elm Street and Taylor Lane.

3. Mill and apply a 2" overlay to, at the [city's] expense, the remaining segment of Taylor Lane, between Dexter Chelsea Road and the South line of the Property, in accordance with [city] standards and specifications so as not to delay or interfere with the Development.

4. Construct and perform those requisite tasks, at the [city's] expense, as outlined above, in connection with the installation of any offsite utilities.

5. Accept street and public utilities as public facilities upon inspection, testing, submission of as-built drawings, and approval by the [city] Engineer.

6. To obtain any offsite easements in connection with any requisite improvements to Dexter/Chelsea Road as provided above. (Emphasis added.)


In May 2004, plaintiff entered into a purchase agreement with Pulte Land Company (Pulte) for the construction of the residential units. Under the purchase agreement, Pulte agreed to purchase the home sites from plaintiff for $23,000 per lot. Pulte was to purchase the lots and construct the homes in three phases, which roughly corresponded with the five phases in the PUD Agreement. More specifically, Pulte phase one was the purchase of 76 lots which encompassed all of PUD Agreement phase I; Pulte phase two was the purchase of 167 lots encompassing PUD Agreement phases II and III; and, Pulte phase three was the purchase of 109 lots encompassing PUD Agreement phases IV and V.

Importantly, Pulte's purchase of the sites was conditioned upon plaintiff's securing governmental approval for each phase. The purchase agreement also required Pulte to pay a $250,000 deposit, which would be fully refundable if plaintiff failed to obtain the necessary government approvals within certain time limits. For example, once Pulte closed on Pulte phase one, plaintiff had a year from that date to obtain ...

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