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March 22, 2013
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DarkHorse suit set to go to trial next month

An ongoing lawsuit between DarkHorse Golf Club LLC and the DarkHorse homeowners association is set to go to trial April 23, although the homeowners’ attorney succeeded earlier this month in an argument that the plaintiff could not allege fraudulent inducement as a cause of action.

Both sides have filed motions to exclude certain types of evidence in the upcoming trial; a hearing on those motions is set for April 12.

A complaint for damages was filed in June 2011 in Nevada County Superior Court by DarkHorse Golf Club LLC, asking for compensation because it shouldered more than $580,000 in sewage treatment services for three years.

The complaint names the DarkHorse owners association and more than 70 property owners as defendants.

First billed as the “Street of Dreams,” the luxury development next to Lake of the Pines went into foreclosure in 2007 when developer Ed Fralick defaulted on the property. Funding for unfinished electrical hook-ups and wastewater treatment dried up.

Owens Financial Group foreclosed on the development’s golf course and on 75 residential lots in 2007 and then discovered the waste treatment plant for the development had not been completed. Waste was being partially treated at DarkHorse, then hauled to Lake of the Pines and dumped into its system.

From 2007 to 2010, Owens Financial paid for a certified operator to oversee the treatment plant, as well as plant maintenance costs and to truck the partially treated sewage to Lake of the Pines.

In 2010, Nevada County applied bond money from DarkHorse’s developer to a planned $22 million upgrade to the Lake of the Pines plant, finishing new underground pipes to the facility.

Andrew Harris, attorney for DarkHorse Golf Club LLC, filed suit against the homeowners in 2011, alleging that when the corporation took over the sewage collection and treatment in 2007, the defendants agreed to pay for their share of the costs for the operation of the DarkHorse sewer system.

According to the complaint, the total cost for the three years was more than $585,000 with the homeowners’ share calculated at a little more than $407,000.

An amended complaint alleges the defendants met with the corporation in 2008, and a financial agreement to share costs was discussed at that time.

A draft of the agreement was sent to homeowners, and the complaint alleges the defendants knew the corporation had an expectation they would pay their proportionate share of the costs during the time period between June 2008 and October 2010.

But David Alkire, the Nevada City attorney retained by a number of the DarkHorse property owners, said DarkHorse Golf Club does not have the legal right to recover any of those costs.

Alkire had filed a motion for summary judgment, which is a judgment entered by the court for one party and against another party without a trial.

Nevada County Superior Court Judge Sean Dowling ruled last week that there was no evidence the developer was acting as a public utility but simply was providing a temporary service to a small number of lots.

Because the corporation was not a public utility, Dowling ruled he could not dispose of the first two causes of action in the complaint.

Dowling did find, however, that the plaintiff could not point to any facts that would support a conclusion that it was inducted to provide sewer services.

According to Dowling’s ruling, more is required than just silence or a rejection of a proposal; there must be an affirmative act by the defendants in order to show fraudulent inducement.

Trial evidence motions to be heard

Both attorneys recently filed motions seeking to exclude irrelevant evidence in the trial, which has been limited to four days by Dowling.

Alkire filed a motion Friday seeking to bar any evidence relating to claims for reimbursement dating back to before June 16, 2009; that motion is based on an argument that there is a two-year statute of limitations from the filing of the original complaint in June 2011.

Harris had filed a motion Wednesday that seeks to exclude any evidence relating to any alleged failure by the corporation or Owens Financial Group to discover the true status of the sewer system prior to the foreclosure in 2007.

Owens made two loans to Fralick in 2004 at a time when there were no houses on the property, Harris said.

Therefore, there was no way it would have known of the problem when it foreclosed three years later.

According to Harris’ motion, any proposed defense that Owens knew about the state of the sewer system in 2007 “relies entirely on speculation” and would require a “massive effort to connect the dots.”

“Moreover, what difference would it make?” Harris said. “It’s a simple case, really. We provided an interim service, and they won’t pay for it.”

The motions are set to be heard at a pre-trial conference at 11 a.m. April 12.

To contact Staff Writer Liz Kellar, email or call 530-477-4229.

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The Union Updated Mar 26, 2013 12:59PM Published Mar 22, 2013 08:40PM Copyright 2013 The Union. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.