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<br />Councilmember Dehen pointed out that the judge will have the 30 days or 90 days to consider <br />the declaratory judgment action. He asked what the law is on whether the Master Development <br />Agreement will remain or be extinguished. <br /> <br />Mr. Bray stated the four documents other than the Master Development Agreement include the <br />1 st Amendment to the Master Development Agreement, the Parkland and Trail Agreement, the <br />Parking Maintenance Agreement, and the Option Agreement. They were all expressly consented <br />to by Community National Bank prior to the transfer of mortgage to Minn West Bank. Staff is at <br />this point not aware of what basis Minn West Bank may be claiming that their mortgage would <br />not be subject to those documents. With respect to the Master Development Agreement, the <br />Bank's argument relates to the timing of the recording, of which one factor is the relative <br />knowledge of the parties. The general rule is the document recorded first has priority, but there <br />are exceptions if the person who records first has knowledge of the prior interest. Staff thinks it <br />can be shown that Community National Bank had knowledge of the Master Development <br />Agreement before the recording. Then the question is whether the knowledge of Community <br />National Bank is binding on MinnWest Bank. There is a split of authority throughout the <br />country on that. There are slightly more cases favoring the City's position. The other significant <br />contributing factor is that there is of record the 1 st Amendment to the Development Agreement in <br />which Community National Bank expressly agreed that their interest in the property is subject to <br />the 1 st Amendment to the Master Development Agreement. He believes the Court would be hard <br />pressed to separate the 1 st Amendment from the Development Agreement. <br /> <br />Councilmember Elvig stated it seems to him they have taken on a project, put roads in, and spent <br />millions on the basis of assumptions that there will be parks and amenities, and things that come <br />back to the City. Some of that is not retrievable; there have been defaults and people have to put <br />in their own roads. The action the Bank is suggesting at this point is to break this up and split the <br />parcels out. <br /> <br />Mr. Bray indicated the City does not know what the Bank is proposing at this time. <br /> <br />Councilmember Elvig stated the Bank is challenging the Development Agreement. In his <br />opinion, they take the gloves off. This is someone trying to pick the pocket of the City and make <br />it the City's responsibility for bad business when they have already gone forward with millions <br />in good faith, good earnest, signatures and agreements. That is when he says strategy wise it <br />seems to try to work something out has a whole different impression on this than losing 31 acres <br />of park ground and the City not becoming whole on this again. <br /> <br />Councilmember Dehen commented that the Bank wants to maximize their money out of this and <br />it is in their interest if they can get rid of some parks and sell it to someone else. To him it boils <br />down to the weight of legal authority, and it is fairly easy to bring a declaratory judgment action <br />to find that out. <br /> <br />Mr. Bray advised it is safe to say that the declaratory judgment is an aCtion that will be brought <br />sooner or later. <br /> <br />City Council Work Session / June 5,2007 <br />Page 5 of 12 <br />