City of Harwood v. The City of Reiles Acres
2015 ND 33
| N.D. | 2015Background
- Harwood and Reiles Acres (two neighboring municipalities) entered a 1985 written agreement to build and operate the Harwood Lagoon: Harwood 68% interest/capacity and Reiles Acres 32%. Harwood administrated the facility; maintenance and capacity allocated proportionally.
- Lake Shure Properties (later Lake Shure Estates) acquired part of Reiles Acres’ volumetric capacity (resulting in Lake Shure Estates holding ~9.04% of total lagoon capacity).
- The Harwood Lagoon is a three-cell pond system designed for ~500 people and required 180 days of winter storage; by late 1990s–2010 both municipalities outgrew capacity.
- Reiles Acres contracted with Fargo for wastewater treatment in 1998 and ceased using the lagoon; Harwood and Lake Shure Estates later contracted with Fargo (2009–2010) and also stopped using the lagoon.
- In 2011 Harwood and Lake Shure Estates sued Reiles Acres (and others) seeking: declaratory relief about contractual rights and obligations (including discharge by frustration of purpose) and partition of the lagoon property.
- After a bench trial the district court: found the 1985 contract superseded prior agreements; held the contract’s principal purpose was frustrated by both municipalities’ contracting with Fargo and ceasing use of the lagoon, discharged the parties’ obligations, adjudicated ownership interests (68% Harwood, 32% Reiles Acres; Lake Shure Estates rights in the force main), ordered partition by public sale, and confirmed sale proceeds distribution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject-matter & personal jurisdiction to decide declaratory and partition claims | Plaintiffs: district court has authority to construe contracts and order partition under ND law | Reiles Acres: court lacked subject-matter and personal jurisdiction over contract/partition disputes and some parties | Court: district court (general jurisdiction) properly exercised subject-matter jurisdiction under declaratory statutes and partition statutes; Reiles Acres was properly served, so personal jurisdiction existed |
| Application of frustration of purpose to 1985 agreement | Harwood: principal purpose — shared construction/operation of lagoon for municipalities’ customers — was substantially frustrated after both municipalities contracted with Fargo, discharging obligations | Reiles Acres: no breach; declaratory action cannot nullify contract or reform it; Lake Shure Estates not party to 1985 agreement | Court: doctrine applies; principal purpose was frustrated without fault of parties due to growth and contracting with Fargo; obligations discharged; declaratory relief proper (contract may be construed before breach) |
| Whether plaintiffs impermissibly sought reformation/alteration of contract | Plaintiffs sought discharge of obligations (frustration), not reformation | Reiles Acres argued plaintiffs attempted to alter/reform obligations via declaratory judgment | Court: distinguished reformation claims; declaratory judgment and frustration-of-purpose are proper remedies; plaintiffs not required to wait for breach |
| Partition by public sale (standing, procedure, appropriateness) | Plaintiffs: partition and sale appropriate because three-cell facility functions as single unit, cells have no individual value, and sale yields greatest value | Reiles Acres: Lake Shure Estates lacks land ownership/standing; insufficient joinder/service; partition in kind possible; statutory prerequisites not met | Court: partition is a matter of right; court found sale necessary (partition in kind would cause great prejudice); Lake Shure Estates did not obtain partition relief but parties with recorded interests were properly before court; failure to record pendency initially not shown to cause prejudice; sale and distribution affirmed |
Key Cases Cited
- Albrecht v. Metro Area Ambulance, 580 N.W.2d 583 (N.D. 1998) (personal and subject-matter jurisdiction principles for district courts)
- Larson v. Dunn, 474 N.W.2d 34 (N.D. 1991) (distinguishing subject-matter vs. personal jurisdiction and service requirements)
- First W. Bank & Trust v. Wickman, 527 N.W.2d 278 (N.D. 1995) (when a judgment is void for lack of jurisdiction)
- Silbernagel v. Silbernagel, 800 N.W.2d 320 (N.D. 2011) (doctrine of frustration of purpose and its elements)
- WFND, LLC v. Fargo Marc, LLC, 730 N.W.2d 841 (N.D. 2007) (limitations on invoking frustration of purpose and requirement of lack of party fault)
- Tallackson Potato Co. v. MTK Potato Co., 278 N.W.2d 417 (N.D. 1979) (frustration analysis requires the frustrated event be a basic assumption of the contract)
- Schmidt v. Wittinger, 687 N.W.2d 479 (N.D. 2004) (district court jurisdiction to hear partition claims)
- Schnell v. Schnell, 346 N.W.2d 713 (N.D. 1984) (partition guided by equitable principles; wide discretion to do equity)