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United States v. Barron Collie Co.

United States District Court, D. Arizona

June 29, 2016

United States of America, Plaintiff,
v.
Barron Collier Company, Defendant. v.

          ORDER

          PAUL G. ROSENBLATT UNITED STATES DISTRICT JUDGE

         This case involves the largest and one of the most complex interstate land exchanges ever consummated by the United States Department of Interior ("Interior"). It involves the exchange of land located in Florida that was owned by defendant Barron Collier Company ("Collier") for land located in Phoenix that was owned by the United States Government (the "Government"). The Government filed this action after Collier stopped making payments under the agreements through which the land exchange was consummated. The Government seeks specific performance of a contractual provision, imposition of a constructive trust under a theory of unjust enrichment, and recovery of damages based on a claim for waste. The parties have each filed a motion for summary judgment (Doc. 148, 150). Also pending is a Motion for Collier's Fees and Costs Incurred as a Result of Two Additional 30(b)(6) Depositions (Doc. 116), and the Motion for Leave to File Supplemental Authority or Take Judicial Notice of a Pleading in Court of Federal Claims Case (Doc. 184). The Court will grant in part and deny in part the respective parties' motions for summary judgment, will grant in part and deny in part Collier's motion for fees and costs, and will grant the motion for leave to file supplemental authority.[1]

         Background

         In the mid-1980s, Collier and Interior began discussing the sale to the United States of more than 100, 000 acres of wetlands in the Florida Everglades that were owned by Collier. Interior desired to add these wetlands, which were environmentally sensitive, to a national refuge, but lacked sufficient appropriated funds for an outright purchase of the wetlands. The parties explored alternatives and eventually conceived of a land exchange which involved the exchange of the Florida wetlands for property located in Phoenix on which an Indian School, that was scheduled to be closed, was located. Because the Phoenix property was more valuable than the Florida wetlands, the parties entered into an initial Exchange Agreement that required Collier to pay $34.9 million in cash at closing to equalize the exchange.

         The planned land exchange required ratification by Congress before it could be implemented. Collier worked with Congress to gain approval of the exchange and to include in the approving legislation a financing option permitting Collier to pay the $34.9 million over a period of 30 years. Collier also negotiated a side deal with the City of Phoenix (the "City") under which Collier would trade all but 15 acres of the Indian School property it was about to acquire from the United States for development rights to two undeveloped commercial lots in the heart of downtown Phoenix (the "Downtown Lots"). This side deal meant that little of the federal property being transferred to Collier by Interior would remain in Collier's control once the land exchange and the side deal with the City were consummated.

         Congress provided the needed ratification for the land exchange in 1988 by passing the Arizona-Florida Land Exchange Act (the "Act"), Public Law 100-696, 102 Stat. 4577 (November 18, 1988). Under the Act, Collier would exchange 108, 000 acres of land near the Florida Everglades for a portion of the Phoenix Indian School property and make a payment to the United States of $34.9 million. The Act requires the $34.9 million payment to be used for the purpose of establishing two Indian education trust accounts, the "Arizona InterTribal Trust Fund" and the "Navajo Trust Fund" (collectively, the "Trust Accounts"), which would support Indian education following the closure of the Phoenix Indian School. The Act authorizes the Secretary of Interior to accept the $34.9 million from Collier as either (i) a cash payment at closing or (ii) over time with annual interest payments on the $34.9 million at an interest rate of between 8.5% and 9.0% per annum for thirty years, followed by a balloon payment of the principal at the end of the thirty years.

         As required by the Act, Interior consulted with the Intertribal Council of Arizona ("ITCA") about the thirty-year payment option, and the ITCA expressed a preference for a lump sum payment, unless such demand became an obstacle to closing the deal. Interior ultimately offered Collier the thirty-year payment option because Interior believed that the exchange would fall apart unless Collier was given that option. In December 1991, Collier accepted the land exchange offer, as ratified by Congress, subject to reaching a satisfactory payment agreement.

         Over the following year, Collier and Interior continued to negotiate, and finally executed a comprehensive agreement (the "Trust Fund Documents") in December 1992 that implemented the Act and the exchange agreement. The Trust Fund Documents include a Trust Fund Payment Agreement ("TFPA"), a Deed of Trust, and a Promissory Note. Despite execution of the Transfer Agreement in 1992, the transaction did not finally close until four years later, in December 1996. During this four year interim, Collier was not obligated to pay interest or principal. Instead, the Transfer Agreement required Collier to being making annual payments in December 1997.

         A. The Trust Fund Documents

         1. Promissory Note[2]

         The Promissory Note requires Collier to pay annual interest payments of $2, 966, 500, reflecting an interest rate of 8.5%, with the interest payments to be "payable to the United States for deposit by the United States into the Arizona Trust Fund Account and the Navajo Trust Fund Account to be established in accordance" with the Act. The Note also requires that, along with the thirtieth and final annual interest payment, Collier is to pay the $34.9 million principal amount. The Note provides that Collier has no right to prepay any annual interest payment or the principal amount.

         The Note also contains a "No Personal Recourse" provision, stating:

Notwithstanding anything to the contrary contained in this Promissory Note or the Trust Fund Payment Agreement or elsewhere, neither [Collier] nor any affiliate of [Collier] nor any partner of [Collier] (whether individually or as a trustee), nor any legal representative, successor, heir, estate, or assignee of any of them shall have any personal liability for the payment of any sum which may be payable under this Promissory Note or the Annuity, or for the performance or discharge of any obligation of [Collier] under this Promissory Note, the Annuity, or the Agreement. In the enforcement of any of its rights under this Promissory Note, the United States shall solely resort to, and proceed in rem against the Trust Estate and the Annuity.

(Promissory Note, ¶ D.)

         Although obligations owed under the Promissory Note, the Annuity, and the Trust Fund Agreement (referred to as "the Agreement") are referenced in this "No Personal Recourse" provision, obligations owed under the Deed of Trust are not.

         2. Trust Fund Payment Agreement[3]

         The TFPA requires Collier to obtain and fund an Annuity Contract "in favor of the United States." (TFPA, art. 5) The Annuity Contract was to permit Collier to make thirty annual payments to the Annuity Company and was required to "be sufficient, on the completion of such annual payments, to pay to the United States a lump sum" of $34.9 million - the principal sum due under the Promissory Note - on the maturity date of the Note, "thirty years from the Closing Date." This Annuity, along with the "Trust Estate (as such term is defined in the Deed of Trust), " secured the Promissory Note.

         The TFPA also contains a "Limitations on Personal Recourse" provision, stating:

Notwithstanding anything to the contrary contained in this Agreement or the Promissory Note or elsewhere, neither [Collier] nor any affiliate of [Collier] nor any partner of [Collier] . . . shall have any personal liability for the payment of any sum which may be payable under the Promissory Note or the Annuity, or for the performance or discharge of any obligation of [Collier] under this Agreement, the Promissory Note, or the Annuity. In the enforcement of any of its rights under this Agreement or the Promissory Note, the United States shall solely resort to, and proceed in rem against the Trust Estate (as defined in the Deed of Trust) and the Annuity.

(TFPA, § 9.5.) Although obligations owed under the Promissory Note, the Annuity, and the Trust Fund Agreement (referred to as "this Agreement") are referenced in this limitations provision, obligations owed under the Deed of Trust are not.

         3. Deed of Trust[4]

         The Deed of Trust defines the "Trust Estate" as the "entire estate, property, right, title, and interest, " in the property Collier acquired through the Land Exchange. The Trust Estate includes all of Collier's "right, title, and interest in and to" the remaining 15 acres of the Indian School property ("Indian School Lot") and, to the extent it constitutes a real property interest, all of Collier's "right, title and interest in and to the Disposition and Development Agreement by and between the City of Phoenix and Barron Collier" in the Downtown Lots.

         The Deed of Trust includes a provision allowing for a "partial reconveyance" to Collier when certain conditions are met. Under § 6.2,

At any time, and from time to time, upon request by [Collier] to [the Government] and upon satisfaction of the condition specified in Section 6.2(b) of this Deed of Trust, the [Government] shall reconvey to [Collier] an Envelope or Envelopes held under the Trust Estate.

(Deed of Trust, § 6.2.)

         An "Envelope" is defined as "that part of the Trust Estate compromising a development envelope as described in a Site Plan for all or part of the Trust Estate." (Id.) A "Release Envelope" is defined as "an Envelope subject to a pending request for reconveyance." (Id.) "Site Plan" in turn is defined as "the site plan or site plans applicable to the real property described in Exhibit A-1 [the Indian School Lot] and Exhibit A-2 [the Downtown Lots] filed by [Collier] with, and approved by, the City." (Id.)

         The conditions that must be met for Collier to be entitled to a reconveyance of an Envelope are set out in § 6.2(b), which provides:

[Collier's] right to require, and the [Government's] obligation to cause, the reconveyance of a Release Envelope shall be subject to the following condition: the fair value of the Unreleased Property less the value of the Release Envelope exceeds one hundred thirty percent (130%) of the Release Level Amount.

(Deed of Trust, § 6.2(b).)[5]

         The Deed of Trust also includes a separate "Maintenance of Collateral Value" provision, located in § 6.3(a), which states:

If, after a reconveyance of an Envelope, the fair value of the remaining Unreleased Property falls below one hundred thirty percent (130%) of the Release Level Amount, Trustor shall add to the Trust Estate United States Government-backed Securities sufficient in value to restore the fair value of the Unreleased Property to one hundred thirty percent (130%) of the Release Level Amount.

(Doc. 151-1 at 109.)

         The Deed of Trust defines "Events of Default" as including the "[f]ailure to pay any monies due hereunder or under the Promissory Note or under other Trust Fund Documents, " or the "[f]ailure to comply with any of the agreements made by or requirements of [Collier] in this Deed of Trust or in any of the other Trust Fund Documents" within thirty days "after written notice by [the Government] of such failure is received or deemed received by" Collier. (Deed of Trust, § 3.1(a), (b).)

         As to remedies upon an occurrence of an Event of Default, the Deed of Trust provides that the Government may, among other remedies, "[c]ommence an action to foreclose the lien of this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants hereof"; "[e]xercise all other rights and remedies provided herein, in any Trust Fund Document or other document or agreement now or hereafter securing or guarantying all or any portion of the Obligations, or by law, including, without limitations, the rights and remedies provided in A.R.S. Section 33-702.B"; and "[e]lect, subject to applicable laws, to receive the Trust Estate pursuant to a Deed in Lieu of Foreclosure." (Deed of Trust, § 3.2.)

         Section 3.6 of the Deed of Trust provides that, upon an Event of Default, the Government is "entitled to enforce payment and performance of any and all of the Obligations and to exercise all rights and powers under the Trust Fund Documents and under the law now or hereafter in effect, notwithstanding some or all of the Obligations may now or hereafter be otherwise secured or guaranteed." (Deed of Trust, § 3.6.) Further, "[n]o remedy herein conferred upon or reserved to [the Government] is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing under the law." (Id.) "Every power or remedy given by any of the Trust Fund Documents or by law to ...


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