ok somebody can come and tell us how you're going to divide up your time your branch or mine on behalf of mojave county and also valley springs wonder i'm under the impression that i have twenty minutes for both of my clients because of the two different appeals and i think that's their understanding to address all three appeals and so we've agreed to split the time fifteen minutes for me on behalf of lex on and the lex on it that he's in mr cunningham would take five minutes it was my intention to spend ten to twelve minutes of my fifteen on the appeal of well we in that particular case we are the appellant counsel and i were talking before hand and it might be logical to have the claims between mojave county and lex on insurance aired and then  counsel and i have agreed that i would take five minutes to address our claims back against the winter obviously we're pleased to take them up in whatever order you guys managed to create and i'm holy mass let's start out please the court we've got three cases let me just read the numbers for the record fifteen dash one seven one six seven fifteen dash one seven two three two sixteen dash one six eight eight seven all of them being argued today thank you i my name is brian sherman and i represent mojave county and valley springs lender alice e my intentions subject of course to your direction instructions is to first address the county's appeal of the district court's decision concerning luck songs liability on the surety breach of contract case there are several fundamental precepts that guy the analysis and these are the building blocks the first is that the general purpose of a surety contract is to guard against loss in the event of the principal debtors default the second is the terms of a bond issued by a paid surety shall be construed most strongly against the surety the third is that the liability of surety s is to be determined by the specific have to read the bond as incorporating the statute in the regulations you do but that doesn't mean you ignore the language in the bond you still start with the language in the bond you still look at the intent of the parties you still look at these other guiding principles but at it in that mix of factors that you consider in order to interpret the bond most certainly you look at the statute and you look at the regulations underlying the statute we do not dispute that so is there a lot still pre condition the the bond the statute or the regulations now well maybe i'm just reading the language of the bond is a very short bond with the third full paragraph it's on page five twenty eight i'm sure you're familiar with the bond so this obligation is to assure the principal completes the subdivision improvements within the time specified well complete is an interesting word complete suggests that it's already been begun but nothing's been begun that's not that's not true your honor what's not true my definition of complete or nothing has been begun no the subdivision was almost fifty percent complete your honor the improvements were so so so your brief you well yes westchester is not binding because it's a florida case and point two of westchester is that the lexan cited a district court decision in that case and we can get into the language in that district court decision but the third point that we made about west chester is that the eleventh circuit then took up the case and the language if you read the opinion of the eleventh circuit and i would make the argument if you read the totality of the opinion in the district court their focus is on the  the commencement of the improvements in other words the construction of the improvements whether that has begun or not and they were looking at completion because at the underlying ordinance also had the word or the bond have the word complete in it and they were they were interpreting that i mean obviously westchester is only going to be persuasive regardless of what the eleventh circuits are or not but i thought you had said that this case was different it was just or in any event because were had commands that's correct it had commenced and and let me be clear we're not running away from westchester i believe that if you if you read both the district court decision and the eleventh circuit opinion that language supports our interpretation of this bond which is there is no lots of precondition the important points in west chester are one the city did not attempt to construct improvements nor did they even solicit bids for the improvements millions of dollars were at stake but there was a one page bond that failed to specify many of the terms that would clarify the party's rights and obligations if you read the district court decision in fact the district court said both sides have made reasonable arguments because of the ambiguity in the bond and then goes on with the analysis if you look at our bond with all due respect it does talk about the need  to to complete the subdivision improvements that is not does not address lot sales that addresses the improvements and that's it and we were well on our way on the improvements in  order to prevail as i understood opposing counsel's brief there has to be some requirement that the at the sale of lots has commands in order for them to be libel correct and and you are saying that there is there is nothing in the language of the ordinance or the the statute but but their argument is well but the purpose of it was clearly intended to merely protect the county from having to pay for improvements on its own once lots started why shouldn't we look for the purposes they're arguing you should look to the purpose there's many purposes the to the statute so let's let's talk about the purpose of the statute and by the way the cases that are cited the language is not always the same in terms of what these cases say about the relationship between the authorizing statute and the bond there are cases cited by both sides that stand for the proposition that the court should read into the bond any omitted terms of the authorizing statute now that's different than saying that you should change the terms of the bond based on a purpose of the statute so keep that in mind but let's look at the authorizing statute that's a r s eleven a twenty one c and in that section the relevant language says the regulations shall require the posting of performance bonds for assurances or such other security as may be appropriate and necessary to ensure the installation of required street sewer electric and water utilities drainage flood control and improvements meeting a stablished minimum standards of design and construction i'm emphasizing this last part first no no mention of lot sales but there is a reference to meeting is that list minimum standards of design and construction if you go to the regulations which are part of our a den if you go to section five point one d of the underlying regulations there that's in our denim starting on page seventy eight there are about five pages in those regulations that define what minimum required improvements are so what this statute means and what all these cases are talking about is that in this context the bond does not define what the minimum required standards are but the regulations do and in order to follow the law the case law that talks about reading the statute with the bomb and you could in a hypothetical argue that these minimum required standards that are set forth in the regulations are part of the bond because you have the connection you have the bond you have the case law that says you read the bond based on the authorizing statute you have the authorizing statute that says that any insurance bond must meet these minimum standards and then you have the regulations that effect set forth the minimum standards i get all that is a understand the sort of the fear that leads us to this point at the outset the county was not basically recounting a narrative in the brief and i want you to tell me whether it's true or not the county is then pressured by the lender to bring a lawsuit if you bring a lawsuit we're going to sue the county then bring suit against the surety that well that's that is lexicons characterization of the facts that's not ok if that is true the there there was an earlier recommendation that was going to be made to the board of supervisors not to pursue the subdivision which would then allow for pursuit of the bond they were so valley springs land which was the the lender on the deal stepped up and agreed to take over the subdivision so now all of a sudden the county had a dance partner that they didn't have before to complete the subdivision and keep in mind was there no threat everybody against county there the the lender wrote a demand letter to the county stating the lenders position that the county had an obligation to go after the surety bond was there  though your honor the letter is part of the lines your honor i'm not trying to be quiet i don't have the letter memorized the letter is part of the record i don't remember what frankly whether there was a threat of litigation or not i would i proceeds have been assigned to the lender so that's the answer while i understand your question your honor the think i understand your the the money has the county has committed to use the proceeds to complete the subdivision so if valley springs lender hires some this is my point of valley springs lender it's a lender it's not a contractor either valley springs lender if if this subdivision moves forward what hire subcontractors are contractors that money eventually would get into the hands of the contractors not valley springs lender that's the only that's my only has it taishan with your characterization or the substance of them was it lives in the review may we characterize it was sounds like it's roughly that's the story right and that's an important factor that the county does have a dance partner to finish the subdivision which the county and this really expressed an interest in have and in in doing and i understand we've addressed in the brief i want to dress we don't deny that one of the purposes of a of this bond in any surety bond for subdivision improvements is to protect future homeowners but the fallacy in lex on's argument is that they elevate that purpose over all the other ones that are cited in all the other cases and says that in order to obtain this purpose we should ignore all the other purposes and in fact we may we make construe the bond in a subdivisions they want to move forward on the court that this report was impressed by the thought that if everything stopped now the county would have no expenses because the county would they have the obligation to  implement improvements for people who are living there and so therefore i think it characterized it as there's no amaj is to the county but isn't that the case at the county's standing right now  have any financial responsibilities with respect to the development no your honor i mean right now there there are there is a a there is a plat of land that is sitting empty but that doesn't mean that the county doesn't have responsibilities associated with it so there are some but more to your point your honor and this goes to the damages the case law that talks about damages in the context of a surety ship case make it very so i agree with the way that you characterize district courts analysis i think that analysis was wrong what obligation has the lender now undertaken with respect to the development is  it green to go forward with the development irrespective of whether or not you and your lawsuit the keep the present yes under the development there is that there is a contractual agreement between the lender and the county called the development agreement in  which the lender has agreed to undertake the improvements and is it contingent upon your success in this lawsuit i don't believe there are then how is the county been damaged that is to say you've got a substitute developer who's going to do the development that was previously promised and it's going to happen whether or not you win this lawsuit where's the damage to the county your honor the the the dam again these cases are very clear in this regard that there is an expectation damage  that it will have a complete development and no cost to it and it sounds like that's about what you're going to get assuming the lenders are capable developers well your honor let's let's play this out let's let's say that valley springs lender does not move forward with the improvements the county have got back is has been damaged well and you got a lawsuit against them so you have a breach of contract at that point with the lender and you know what you're saying is and you also have a breach of contract with lex on because you did have a contract with lex and that they would they would pay for that so so why would we hold these two reaches of contract differently i agree i think there are there the the initial contractual relationship can't be ignored just because a substitute developer has come in and read to take over the project in fact at my break there's a case directly on point and that's on this issue and it says that that just because the the municipality has found a substitute developer doesn't mean that the underlying i'm sure he is relieved of its obligations i see that i have about two and a half minutes left so i'll reserve th i certainly didn't see it in the language of the bond in the statute or in the ordinance it's not in the bonds not in the statute the ordinances do talk about the only time and sunder section one point seven d i believe that the county is required to make a claim upon the bond is if lots  been sold right but that doesn't make it a precondition to lex on its obligation on the bond it does not but arizona law is clear that the bond should be construed in connection with the statute and the case law constrain that statute  arizona law is clear that the purpose of the statute in this case is to make sure that no citizens are stuck with a piece of property in the county in the city whatever the municipality may be without the required improvements that they need to live in that property and secondarily that the county or the municipality does not incur any expenses they have to provide the i saw general purpose language but i didn't see anything in the cases as suggesting that a precondition to the  obligation was a lot there is nothing that i saw that was specific it was just sort of generalized purpose language so is that what you're relying on yes the general purpose i was there is no case i'm aware of that says there is an implied precondition but if you look at what the purpose of the statute is the purpose would not be served here by awarding any of the funds under the bond to mojave county and we're talking about mojave county here as the court noted we're really talking about valley springs lender because  intention of bringing a claim on the sponsor the best case to say that we read the policy concerns or the purpose into the bond i would i would there's a couple cases i would say norton the first federal savings that's one twenty eight arizona one seventy but no that's the case it says where a bond is given under the authority of the statute it must be given the effect which in reason must have been intended by the statute and so we can talk about what what's really intended by the assurances that are required in the statute in mojave county in the land regulations which you have the county has two options for obtaining assurances that the that the improvements will be completed one is a performance upon the submission performance much as we have in this case and the other one is a property escrow trust agreement now two things one as a release of submission performance upon i don't disagree with the idea that a pond should be construed against a surety in most cases and specifically in those cases where the surety has actually drafted an issue of the bond the bond issue in this case is not a i don't think that the rest we obviously disagree on the interpretation of the language with respect to completed and with respect to the word required like sun's position is there are no required improvements in the southern vision right now because there are no  look at the two different forms of assurances subdivision bond and a probably escrow trust agreement and incidentally the property escrow trust agreement is the form of assurance that valley springs lender has provided as the new developer on the project and what probably escrow trust agreement is it's an agreement whereby all of the property in the development is put into trust and none of that property is released out of trust until the county is satisfied that all of the improvements are completed so under that form difference the county has no guarantee and no expectation th ever get the improvements completed after why is that relevant because that's what exxon entered into right while that's not entered into with respect to valley springs estates the original developer it is with respect to the subsequent developer i think it's relevant to go to what the county's intent was that but that's not but like sun didn't enter into that sort of agreement i mean like sun just as if if the original developer defaults will pay for the improvements that's correct but i think it's relevant to trust again for the county so we talk about what the county's expectation is about expectation damages the county's expectation here the benefit of this bargain under the bond was not that if there was a default it would get paid is that if there was a default the county would not have to incur any of its own funds to construct improvements and there's no dispute here that they don't they have not yet incurred any expenses to construct improvements and they never will have to occur and doesn't know that and never will that we've been to toward the end of the earlier argument we went through what i'll call on that occasion possibilities and one of the arguments is that the county has mitigated its expectation damages by contracting with the lenders now the new developer so that everything will be rebuilt will have  still be sold and so on but what happens if that doesn't go through well and in the current situation that's on not a successful but that's a possible mediation but at this point it's only a contractual obligation as we all know contracts are not always fulfilled sure one of two things going to happen while valley springs lenora still on the clock with respect to its development agreeing with the county no lots can be sold until the improvements are completed so there's no citizens at risk of going to count it's not a risk of incurring an expense secondarily the county right and i believe the development agreement with alice springs lender expressly continues their right to revoke the planet any time the only way the counties are going to have exposure is if it allows a developer to  original developer was different that's why there was a bond put up because the developer under the under the original agreement valley springs estates they were allowed to go out and start selling lots of mediately because they had the benefit of the bond to protect the county so liability under the bond would go towards whatever the county's expense would be you know that's a complicated provision that's nowhere anywhere it's nowhere in the bond or anywhere else i can see it's not but i think when you look at what the purpose of the statute is alive in a twenty one c when you look at what arizona cases the supreme court has done is actually very good about contracts i mean they say we give effect to the language of the contracts and here they say we give effect to the language of the contract a statute ordinance i've never seen an arizona case saying we give effect to things that are floating in the air that people might have intended somehow i never see in arizona casing that yeah i mean the reality is in this circumstance we've got some pretty clear having homes with no proven its or b having to have money come out of the general fund to complete improvements because a developer has not been able to let me ask it this way let's just let's assume that the lender has now the developer  are you saying the county has suffered no harm as relates to the bond yes well what's happened in the real world is that we've got these sort of structural improvements that are  halfway done that's for another was we've got land there's all kind of crap that was previously assumed undeveloped land now we've got land i've not seen a picture of it but i assume we've got to know we've got some trenches we know it's it's not land the people would sort of happily ride their horse or cross anymore is that not harm to the county it's not harm to the county in fact it was it's the big one has lots of developments fail for a variety of reasons i public developments private  developments not all of them have a subdivision bond socio with it so that the counties in situations all the time where you have a development that will fail and you'll be left with unsightly or or difficult conditions on the property but that's what i'm saying isn't the only conditions that i'm kind of imagining because i've not seen a picture but let's assume that the land is no longer in sort of a nice and nice desert with some i don't know some cacti and so on it's now land that's got trenches and piles of dirt and so on that strikes me as that's not a very nice thing to have happen so that strikes me as if it's county on land that's a bad thing for the county or if it's not even county on land it's a harm to the county and its citizens because you had a land that looked kind of nice and now it's a mass and it will possibly go forward into a completed development so what i'm after is not what happens if the current lender completes the development and if that happens because it's not contingent of months excess of this lawsuit the counties are harmless but what i'm saying is what happens if the current lender rechoose leaving the land in its current state there strikes me as possible and i'm with county well while that may be possible possible harm there is no current actual harm the county testified that there are no unsightly or dangerous conditions on the property that you believe to cause any harm but there's an alternative remedy here are for that perspective exaggeration valley springs lender foreclosed not quite the property it's the same remedy that any county city or state would have when one of its citizens has property that's an unsightly condition they turned the to the to the owner of the property in this case the lender and say you need to clean up the property that you won't they bought the property as is it a foreclosure sale if it has dangerous conditions or if it's unsightly that's the responsibility of the land owner to take care of it to the extent th county cares now the county has not and there's no evidence in the record that the county ever suggested at all that it had instructed talismans lender to take care of any conditions on the property the county has been content over the last three years to let the property sit in its current condition and again the condition of the property is not the responsibility of lex under the bond the condition of the property is the responsibility of the property owner which is valley springs lender i want to quickly go back to an earlier question about how to understand your argument that the purpose of the statute should be read in the context of the language of the bond the statute in the ordinances and the case that you cited perhaps this is parsing words talks about what was intended by the statute and it seems as though the statute in the intent of the statute is to secure bar and it doesn't seem like intent and purpose are the same are the same words equally substitutable as though the purpose this broader purpose about citizens not having access of necessarily necessary improvements that that purpose doesn't seem to be the intent of the the development in the property escrow trust agreement context the county will never have to incur any expense because no loss can be sold until the improvements are done the subdivision bond is different lots can be sold before the improvements are gone but the bottom provides the funds from please the court my name is whitney cutting him with a law from the us we want consent diesel in flagstaff arizona i'm here today on behalf of my clients all j c development was the developer valley springs of state which was the company owning the subdivision and we today because mr crawley my client a retiree isn't the one who actually might end up having to pick up the check to ending on what occurs but the bond is not the only contract at issue mr crowley also having schulman's firm negotiated to release mr crawley from any claims having to do with that construction loan or anything directly or indirectly related to that loan or the lawsuit that had been brought in exchange the lender took the proverbial bird in the hand in the form of two hundred fifty thousand dollars paid by mr crawley again to buy his piece it was to copy m phrase a business deal and what we have sought in the underlying litigation is that it be enforced because what's happened is that the lender has tried to do an end run to do indirectly what it is contractually prohibited from doing so you if they count he prevails against likes then lex on can enforce its guarantee agreement with mr crowley is my understanding that correctly i think what you've expressed is correct but i think that there is even more but well not necessarily but what the litter wants to do with regard to paragraph ten which is the cooperation clause as well as paragraph five which is the release clause is paint with a very broad brush and disregard the details paragraph ten which is the cooperation cost says that mr crowley will cooperate only if it means no cost or minimal cost to him and now that he's the one that everyone's pointing the guns out in terms of who's ultimately going to pay that's clearly not true but he knew he had that there was a guarantee side and then here is what happened the lender coerced in course it is the correct term because the mojave county officials testified at deposition that they felt threatened by the litigation the lender coerced mojave county enter into going into this december tw twelve development agreement it then funded the litigation by muhammad county against lex on and of course lex on brought mr crowley in as a third party defend it so ultimately mr crowley is left having to cut the check to l indemnity which is turned over to the county and the county has contractually obliged itself to turn the money over to the to the wonder and so what happens is the lender collects mr crawley's money indirectly knowing that it can't do it directly and paragraph five of the settlement agreement prohibits them from doing that this is a straight up breach of contract it's also a breach of the duty of good faith and fair dealing because the lender is acting to deprive mr crawley of the very benefit for which he paid a substantial sum of money in order to buy his peace if we were to sustain the district court if your client have any dog in the fight at that point yes your honor and of course procedurally were in front of you not on the merits but procedurally because our claims were rendered moot we here's what i would say my question is are they really moot if we rule based in the district court yet they might be but the district court didn't determine prevailing party and didn't make awards of attorneys fees based on what the district court ultimately does  in other words if in our opinion the districts are properly assigns liability in this case to the lender and puts the lender on the hook for the various litigation costs and yes this claim would be moot but the court declined to do that at least ye and i and i believe is waiting for this courtroom on the other substantive matters the issue then of course is that to the extent that locks on is not made whole by the winder in the underlying litigation it can still turn to my clients to seek further who's your client we have two clients your honor we have mojave county and valley springs wonder and who's paying the bills valley springs wonder just want to make sure that the county really looks to me like a  i understand is in the name of the county but is not sound as though this is being brought for the benefit of the county it is being brought for the benefit of the county and the lender those are not but it doesn't matter if you just sued if you win and don't go to the county the proceeds would not go to the county regardless because it would go to whoever is is making the improvements whoever is building the subdivision the money is never going to go into the counties pocket if the county was in the business of constructing subdivisions government entity that is interested in in a subdivision improvement or or other development that it has it has gone through the regulatory process of approving it sounds as though the development is going to go forward given the contract with the lenders whether or not you well yes that's certainly the party's expectations and that brings me back your honor you had raised this before and i said i thought that there was a case directly on point and it's the town of polk poughkeepsie case that we cited in our breeze and in that case there the facts are very similar to president president that i hate it when you don't like it but you know i think i don't hate it in that case the town was able to reach an agreement with the bank whereby the bank agreed to make arrangements to complete the project pursuant to the site plan at it expense and consideration for the town's promise to seek recovery on the bonds and turned over any monies received to the bank sound familiar this is just in the bank's arrangements for the completion of the project relieved republic which was the surety in that instance of its contractual obligations to the town which is still subject to the claim of the bank is rejected by this court so there is a case directly on point we're talking about harm and and frankly i think that that  is being used as shorthand for contractual damages and they're not the same in this case and we've cited them in our brief we have established expectation damages on behalf of the county they have those expectation damages on if you win the money go somewhere else if you lose there's no money coming out of the counties of the county is fully mitigated well if the county decided if the county did not have a lender to step up to agree to pursue the subdivision and the county just wanted to go after the bond which it would still have the right to do you could make that same argument in saying that they haven't been harmed yet but that's the idea of the next that that's the these are of the loss i did look at the development agreement at my break and they are can commit it under the terms of the contract to pursue the development regardless of the success of the county's appeal my argument again based on poughkeepsie and the other cases that we cited in our brief says that that doesn't matter and in fact if you took that position you would actually be discouraging the county and others who are beneficiaries of a bond from pursuing any efforts to mitigate their developer on the hook is that correct i think theoretically i think that that's a part that was a possibility that might have been made more attractive to getting a new developer in there but it turns out that a developer is willing to come in without making that a contingency development contract well but you have to keep in mind that the county again is not in the business of building subdivisions so there it was it was a mutually beneficial business deal for both the lender and the county because it's  subdivision the county wanted and it was a subdivision the lender which already had money sunk into it was willing to pursue but i'm trying to figure out what was the deal the lender made with the county the lender made a deal that will pursue the development irrespective of the recovery in th yes yes i don't know i have a few more comments i don't know if there's a few more see if they're interesting ok i do want to address west chester because i feel like the  position we're almost needing to prove a negative the only reason we're here today is because lex on have come up with this idea that there's a lot sal pre condition and they're basing that on westchester and if you actually read west chester closely there is no lot still pre condition it's a fabrication in the district court the district court in numerate five different arguments made by westchester one two three four five not one of those arguments that is made is that there was no lots were sold it wasn't even an argument that was made by either party in the district court decision the closeness the closest argument is that the development was not constructed or even commenced that's a distinguishing path in the eleven more clear though you eleventh circuit begins with i quote we conclude that the bonds impose no obligation on the surety to pay the city to complete the agreed upon infrastructure improvements because no construction of the pertinent improvements commenced the eleventh circuit ends the opinion with the exact same language on top of that when it describes the district court holding the eleventh circuit said the sureties obligation is quote subject to an implied condition that payment for the improvements is required only if the construction commences our contention is that there is no lots condition that has been recognized by any corps in any jurisdiction in the united states let alone in arizona thank you it's not if that's correct it's not moot because the obligations of the nematodes under the general agreement of indemnity are independent and even if we win this appeal and we also get an award of every single one of our fees and costs from valley springs lender there's no guarantee you will ever collect that money from with how much money we're talking about you may be going after mr kelly for you know i don't know because that will be the amount of attorney's fees and costs incurred in both the district court action and in this appeal as well as expert fees so you get all your attorney's fees a little getting this forty eight which is specific provisions as to civil actions brought by the state the county or any cities so if you are being available so you get all your attorney's fees out of them few radically we could get an award for all the fees out of that but i maintain that just because we get an award from them doesn't mean we're not also entitled to an award against the intended ers and contrary to what the district court suggested there would be any double recovery if we got an award against the lender and the same award against the undone tours if you were one of them pays a dollar that's a dollar that would offset the the amount that's owed by the other already between the two and you go after mr crowley first or do you have to go after them i don't think there's any friday we have independent judgment on the general agreement of indemnity on one hand on a contract basis and on statutory basis against the lender we're going to sue in those fees are warded