Rick Warner Enterprises filed a notice of claim against Orem City Monday seeking more than $2 million in connection with a failed auto mall development.
It's the second legal action filed in the soured business deal. In April, 12 residents sued Rick Warner Enterprises for failing to follow through on an option to buy their homes, which are located on the site of the proposed auto mall.A notice of claim is the first step required in initiating legal action against a city. After months of preliminary discussions, Rick Warner Enterprises, Orem and the city's Redevelopment Agency agreed in November 1991 to participate in a redevelopment project to build an auto mall on 12 acres located between 1200 South and 1300 South and between Main Street and 150 East. The agreements, signed Nov. 25, 1991, required Rick Warner Enterprises to buy out existing homes at the site.
The agreements also contained an out clause: The agreements were void if the city failed to rezone the property as needed for commercial development.
"Warner was assured that since the proposed use of the property complied with the master plan, and since the very people who signed the agreements would be making the decisions on rezoning, that rezoning was merely a formality," the claim states.
Based on that assurance, an agent for Rick Warner Enterprises notified the homeowners the dealership planned to exercise options on their properties. The deals were to close on or before Jan. 27, 1992.
However, in a special meeting held Dec. 28, 1991, the previous City Council refused to rezone the property despite Planning Commission support for the action, overturning months of its own work.
The current council, which took office in January, also refused to rezone the property in subsequent meetings.
The homeowners' suit contends that Rick Warner Enterprises breached enforceable contracts with them and is obligated to purchase their properties at a total cost of $1.03 million.
Rick Warner Enterprises denies any liability to the homeowners based on the belief that all agreements were voided when the city failed to rezone the project property.
However, the auto dealership maintains it is entitled to be compensated by the city and the redevelopment agency for any amount it is required to pay the residents in the event their suit succeeds. The claim also seeks repayment of all costs and fees Rick Warner Enterprises incurs fighting the homeowners' suit.
In addition, Rick Warner Enterprises wants more than $1 million for lost profits it would have realized from purchasing the property at a discounted price and from dealerships that would have operated at the auto mall.
The City Council met in a closed-door session Tuesday night to discuss the claim.