Jill Schramm/MDN An expanse of open space behind a group of townhomes reflects the stalled development by 16th Crossing in southeast Minot, west of 55th Street. The number of homes built was fewer than provided for in a development agreement with the City of Minot, resulting in a lawsuit.

A judge has granted partial summary judgment to a property developer sued by the City of Minot over an alleged contract breach.

The city sued 16th Crossing in 2018 for failure to develop townhomes as promised in a development agreement following the 2011 flood.

North Central District Judge Richard Hagar dismissed most of the damages sought by the city in granting the partial summary judgment on Jan. 26. The city claimed $5.9 million in damages based on its investment into infrastructure for the project in southeast Minot. However, 16th Crossing argued the $5 million invested by the city using Community Development Block Grant-Disaster Recovery dollars from the Department of Housing and Urban Development shouldn’t be included.

“HUD has never requested the return of those funds and likely never will, as the development accomplished many of the original HUD goals and further development at the property will likely accomplish more,” the developer stated in court records.

The city countered that its agreement with 16th Crossing wasn’t contingent upon whether HUD requested funds be returned. The agreement stated all funds given by the city for public infrastructure will be returned to the city if the contract isn’t met. The city also argued it has an obligation to HUD to ensure money is spent in accordance with the agreement.

Hagar determined the $5 million is not a loss to the city that can be claimed as damages.

“Minot expended those funds to develop infrastructure as it chose in its own discretion for its own benefit. The infrastructure was completed and is in place to the benefit of Minot,” he wrote. “With Minot retaining the infrastructure developed, as paid for with the $5 million grant, a requirement to return the $5 million to Minot would result in an impermissible windfall to Minot. Minot has presented no basis for showing actual damages in regard to the $5 million other than it is the amount of grant money Minot spent.”

A bench trial that had been scheduled to begin Tuesday has been postponed. The parties plan to schedule a meeting to discuss options for next steps, according to information submitted by City Attorney Kelly Hendershot to the city council.

In the lawsuit, the city claims it spent $951,194 of its own funds on public infrastructure for the development.

The city had entered a development agreement in 2013 with 16th Crossing, led by Nathan Smith. In exchange for help with infrastructure, 16th Crossing agreed to construct 178 townhomes, with a minimum of 51% of townhomes offered at prices affordable to low- and moderate-income buyers. The agreement also called for 16th Crossing to provide 350 manufactured homes, with at least 51% leased to low- to moderate-income households.

The city terminated the agreement in December 2017 and sued for breach of contract in May 2018. In court filings, 16th Crossing alleges the city’s delays in installing infrastructure, followed by economic changes when the oil boom ended, led to its inability to provide the promised housing units.

“Having delayed the project until demand for low-income housing had effectively evaporated, the City instituted that 16th Crossing proceed to build low-income townhomes that the City knew could not possibly be sold and would not be occupied. The result of the City’s conduct was to destroy 16th Crossings’s development opportunity and then sue 16th Crossing,” it stated in court filings.

The city responded 16th Crossing was responsible for the engineering and pace of the infrastructure construction, other than the $5 million provided by the city. The city’s court filing stated only 46 of the 178 townhomes were built despite more than two years of opportunity after infrastructure completion to comply.