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Lawyers Steven S. Weil and Mary W. Filson presented their findings for an hour and fielded audience questions for an hour.
Related:

• Who's who in the development story

• Timeline and links to related stories

• What your neighbors think

• Five-year archive of development coverage

Legal opinion upholds development documents and RMA board actions

Corrected Monday, September 5, 2005
Full story published Monday, September 5, 2005
Brief story published Thursday, September 1, 2005

Lawyers for the Rancho Murieta Association told an overflow crowd at the RMA Thursday evening that the Letter Agreement and the Mutual Benefit Agreement are valid documents that previous boards had the authority to negotiate. Further, they said the county cannot require new development to annex.

RMA President Paul Gumbinger called the opinion, which the RMA paid for, comprehensive and well-researched.

"I think it is a completely unbiased view," he said Friday. "They were not looking to substantiate or deny any of the things. They were just looking for facts. … I hope we can move on now and really tackle other issues that have to do with the development itself."

In an hour-long presentation, Steven S. Weil and Mary W. Filson of Berding & Weil LLP addressed four questions the RMA board posed in May at the request of the Rancho Murieta Development Concerned Citizens Committee, development opponents who want to nullify the MBA and require North developers to annex.

Instead, the legal opinion contradicted RMDCCC claims and was completely supportive of the RMA board's handling of those issues over the last decade.

Filson and Weil said past RMA boards operated from a weak legal position, yet acted aggressively in negotiating the terms of the MBA.

Some members of the RMDCCC spoke at the meeting and promised the fight would continue before the county board of supervisors and possibly in court. In a letter to RanchoMurieta.com, RMDCCC member Candy Chand wrote that Filson and Weil work for the RMA board, and their opinion was an effort to protect the RMA board.

In brief, the four questions posed to the lawyers asked the following:

  • Can the county require North development to annex into the RMA? The lawyers said no.
  • Are the Letter Agreement and MBA valid? The lawyers said yes.
  • The MBA, which wasn't approved by the membership, allows new development access to the community's parks. Did that action cause the RMA membership harm or lessen the association's value? Did it violate any laws? The lawyers said prior agreements allowed new development access to the parks, and RMA board actions were only in response to that reality. No laws or rules were violated.
  • The MBA was negotiated in executive session, and the RMA's attorney was also working for the developers. Did the RMA violate any law? Was there a conflict of interest? The lawyers said the RMA board did not act improperly in keeping contractual and legal matters in executive session. There was no violation of the law concerning the potential for conflict of interest on the part of legal counsel. The parties involved signed a waiver, and the RMA retained independent legal counsel when the concern was raised.

The presentation offered a chronological journey through the issues, starting with the first planning documents for the community and tracking the origins of the Letter Agreement and the MBA.

The law firm was hired by the RMA a year ago and was not involved in negotiating either agreement. One RMA director has characterized the firm as aggressively anti-developer.

Weil said the lawyers' approach was "not pro-development, it was not anti-development, it wasn't pro or con anything. …" Berding & Weil's area of expertise is representing homeowner associations, he said.

Filson said she reviewed "thousands of pages of documents, probably a two-foot stack," to reach the conclusions she presented at the meeting. Her research included county planning documents, subdivision maps for the community, the governing documents, hundreds of pages of correspondence, numerous agreements the RMA made with various entities, and news stories and community letters at RanchoMurieta.com.

Filson handled most of the presentation, using 60 slides to list key points, and she and Weil both answered audience questions.

The following are Filson's comments, from her presentation and audience answers, arranged by topic.

Annexation

  • There are no state laws that require the developers to annex to the RMA, and there is no requirement for annexation in the county planned development ordinance for Rancho Murieta. The county wants to avoid litigation, and, without a legal requirement for annexation, a developer would probably sue the county to fight an effort to force annexation.
  • The original and amended planned development ordinances were consistent with the existence of multiple associations. "The overwhelming evidence is that annexation is only permissive, it is not required." Also, the original CC&Rs make it "abundantly clear" that annexation is optional for the developer.
    In hundreds of pages of documents, there were many opportunities for the county to say a single homeowner association was contemplated, and there is no such mention.
  • The county lacks the power to force annexation. Annexation requires either approval by the board or, more likely, approval by the members. The county forcing the issue is "highly unlikely" because the county's objectives aren't necessarily in line with the desires of the pro-annexation members of the community.
  • The county is likely to conclude that most of the annexation advocates' goals -- community unity, RMA architectural control and exclusive RMA use of parks and amenities -- are addressed in the MBA.
  • The RMA board could approve annexation provided the new development conforms to RMA's CC&Rs. But it's "highly likely" there would be changes in the CC&Rs due to developer and county concerns about the type of housing to be built and the passage of time since the adoption of Murieta's present CC&Rs. So the vote would have to go to the membership, and the county probably would feel 60 percent approval there is unlikely.

Parks

  • The MBA and Letter Agreement did not "give away" the community's parks. "The Letter Agreement preserved the right of RMA to receive the parks parcels from the developers."
  • Access to the community's parks and recreation facilities by non-RMA members living in the planned development in return for payment was recognized in the Park Agreements and in the original CC&Rs.
  • Before the update of the master plan in 1984, there is no mention of community parks. Before then, the only recreation land under the original ordinance was land along the river, which has since been transferred to the county.
    In the 1984 plan, there is no discussion of a homeowner association playing any role in maintaining the parks. It called for the local recreation authority, with the Elk Grove Unified School District and the county planning department, to make decisions about parks.
    The 1984 plan gave the CSD control of the community's parks, consistent with its powers as a special district.
  • Through discussions within the community, CSD developed a plan that became the parks master plan in 1988.
  • In 1990 and 1991, the Park Development Agreement left the CSD in charge of parks, but it delegated certain authority to the RMA and developers. It called for developers to contribute park sites to RMA and to pay for neighborhood park facilities. And RMA and developers agreed to both contribute to a fund for park facilities. There were three parts to the agreement which were separately signed by Murieta South developers, North developers, and the PTF. The CSD and RMA signed all three agreements.
  • A failed 1991 effort for a three-party land exchange was motivated by concern that the general public would be able to use Rancho Murieta parks if they were under the control of the CSD, a government agency.

Executive session

  • The board had the right to negotiate in executive sessions since litigation or possible litigation was involved and a contract with a third party was being formed. As a development agreement, the Mutual Benefit Agreement was a contract with third parties and it was also the resolution of litigation as the final settlement under the Letter Agreement.
  • Not publicly disclosing the Letter Agreement -- an interim legal settlement -- was not unusual. To make public such a measure would be "highly unusual."

Validity of MBA and Letter Agreement

  • In 1996, the RMA board began considering a settlement of a lawsuit against the PTF for back dues owed by then-developer Jack Anderson, who had defaulted on the property loan in 1993, triggering a foreclosure action on the part of PTF. The RMA wanted about $600,000 in unpaid dues.
  • In 1996, the Letter Agreement emerged as a settlement option for the lawsuit. It was clear the PTF was not interested in paying cash, so the RMA began to consider accepting land. In the RMA's judgment, its lawsuit was not that strong, and it was risking nearly as much in expense as it hoped to recover from the PTF. The Park Development Agreements were at risk as well; they would have been wiped out in the foreclosure lawsuit.
  • The Letter Agreement offered the following: It affirmed the Park Development Agreements; it called for the PTF to transfer park sites to the RMA at the conclusion of the foreclosure; it called for PTF to convey an industrial piece of land to CSD; it called for CSD to convey land along Stonehouse Road to the RMA. PTF signed the agreement in 1997.
  • In 2000, the Rancho North developers -- Robert J. Cassano and Gerry N. Kamilos -- began to meet with the RMA about plans to develop Murieta North.
  • Also in 2000, the PTF's foreclosure lawsuit was concluded and the park sites could have been conveyed to the RMA under the terms of the Letter Agreement. However, the RMA was reluctant to conclude the Letter Agreement without a development agreement, which eventually was renamed the Mutual Benefit Agreement. In December 2002, the board decided to use the MBA as the final settlement of the Letter Agreement.

MBA issues

  • "I think it's accurate to say that the MBA was in negotiation for almost 15 years. The ultimate function of the MBA, or one of them, is to preserve the Park Development Agreements. And that started with the Park Development Agreements in 1991, the Letter Agreement in 1997 preserved the Park Agreements, and the MBA as final settlement …"
  • In spite of a weak legal position on the key issue of access, the RMA was able to negotiate terms with the PTF and Rancho North Properties and avoid litigation.
    "The county agreed that developers had access over the streets within RMA even if they didn't annex to RMA." The developers' access rights are also based on language in recorded maps that extend easement rights to various entities, including landowners within the entire planned development area. Even so, the RMA took the very aggressive -- if not legally strong -- position that PTF's easement rights had been wiped out in their own foreclosure or that they were personal rights that couldn't be transferred.
    The RMA understood the weakness of its position and knew that if it went to court and lost, there would be no mechanism for collecting contributions for road maintenance "other than an ongoing series of litigations with the developers."
    The MBA called for the formation of a master association for all of the North properties and the payment of a contribution to the RMA that's essentially the same as the dues RMA members pay. This contribution is triggered sooner than if the property were annexed to the RMA. Other access-related terms are a road-mitigation fee paid during construction and liability for road damage.
  • In 2002, the draft MBA was released to RMA members; in October, independent legal counsel was engaged for final negotiations and drafting; and in November there was a town hall meeting. In 2003, the RMA board approved using the MBA as settlement of its 1996 lawsuit. The suit was dismissed in June, and the MBA was signed and recorded in September 2003.

The first speaker after the presentation was Ted Hart of the RMDCCC, one of those who initially asked the board to get the legal opinion.

"What's missing out of this is the human and moral factor," Hart said of the opinion, adding that the board's actions, which are challenged in the questions to the lawyers, didn't represent "the wishes and desires of 95 percent of the community." He asked how the board could be "stripped of its authority" to make decisions about matters like the MBA.

Filson responded that, while members have the power to elect representatives who share their views, "the law has long recognized that allowing change in the board to rescind contracts that have previously been agreed to would cause chaos."

She said in her view, it was rational of the RMA board to enter into a negotiated settlement of the access issue since the board knew that its legal position was weak. "Our conclusion is that all of these agreements were properly entered into," she said.

Weil explained the extent of the board's power.

"The basic rule is the board makes all decisions" except those involving large capital improvements, CC&R amendments, and the selection and removal of directors, he said. If members want more power, they can achieve it by recalling the board and by adopting amendments that limit the power of the board to enter into agreements.

After a resident suggested that failing to make the Letter Agreement public until years after it was negotiated could indicate "a moral issue," Filson replied, "It is highly unusual for interim settlement agreements like that to be published." Weil said it's not possible to negotiate effectively when "the other guy knows exactly which deal points are important and which are not."

Although the attorneys had only previously shared the opinion with the RMA board in executive session Aug. 18, RMDCCC member Candy Chand remarked when she took the microphone, "I knew what you were going to say before you got here. … I heard it from three people a week and a half ago."

Chand received a smattering of applause when she said, "It's just coming across very loud and clear to me that the board has this ultimate, god-like authority to do what they want but they don't have this god-like ability to get us the heck out of the mess they got us into."

She predicted environmental and other concerns could cause the county Board of Supervisors to supersede the MBA to limit development. She said the group has been lobbying the five-member board and "I think we have three, possibly four votes."

[Correction: An earlier version of this story said Chand predicted the county would prevent development.]

She said the RMDCCC is concentrating on environmental and infrastructure issues in hopes of making the development untenable from a bottom-line perspective. "There comes a point where (the developers) have to walk for a decade," she said.

Chand said homeowners may decide to sue former board members as individuals. She said the RMDCCC previously resisted advice it had received about recalling boards before the vote on the MBA occurred.

She said the custom-home requirement was the only reason the developers don't want to annex to the RMA.

She indicated that the MBA has hindered the RMDCCC's efforts, saying county and state representatives have told them, "if we didn't have (the MBA) in our way, we would have much more of a level of enforcement."

Responding to comments that the MBA limits what the association can do -- and even say -- about development plans, Weil read from the Consent to Development section: "Rancho Murieta Association supports and endorses development of the Rancho North property in a manner that is consistent with Exhibit H."

Exhibit H lists the number of units planned for each subdivision and caps the total at 1,141, fewer than half the number that could be built under the 1984 master plan that's now in effect.

"There is room in that for the board to bring to other agencies concerns that the board has on some of the issues affecting Rancho North," said Weil.

The MBA provision did not stop the RMA from submitting comments to the county recently on the draft environmental impact report for the first two projects in the proposed development.

RMDCCC member Terris Hanson said the group had received legal opinions that differ from the one presented by the RMA lawyers. He said he believes the MBA could be invalidated in a court action, and he found it "appalling" that the RMA legal opinion supports the MBA.

Hanson asked how the lawyers had arrived at the conclusion a 60-percent membership vote of approval would be required for annexation.

Filson said the board could approve annexation only if a new development's CC&Rs were identical to Murieta's present CC&Rs. But it seems likely that the county and a developer would come up with some different requirements, she said, which would call for different CC&Rs. If that were to happen, a membership vote would be required.

"We were not assuming that the terms of annexation would be what the association wanted, but what the county could extract from the developer," Weil said. "We assumed that the developer would require more control over Rancho North than the members would be willing to consent to."

What went unsaid was that county-fostered annexation seems unlikely to concentrate on limiting development to custom homes. The county's planned development ordinance for Rancho Murieta has references to a variety of housing – townhouses, cottage lots, single-family homes on conventional lots, mobile homes and apartments – and, further, the county is now implementing an affordable-housing policy that requires flexibility in housing types.

Under the probable scenario, 60 percent approval by RMA members seems unlikely, Filson said.

The developer plans to build single-family production homes.

Hanson said he believes the county would support conditioning annexation and require the developer to abide by RMA architectural standards for the North.

He challenged the lawyers on their finding that the owners of property not annexed to the RMA could use the parks. Filson replied that she had reviewed the first CC&Rs and the restated ones.

"There is specific language in the original CC&Rs that authorizes development of land without it being annexed and entitles the residents and owners of that land to use facilities within RMA in exchange for a reasonable payment," she said. "In the first restated CC&Rs and the second restated CC&Rs there is the specific language that authorizes the board to enter into agreements with the Community Services District. And the agreement that the board entered into with the Community Services District resulted in RMA being entitled to own the parks that were subject to the other terms of the Park Development Agreements. … Under the Park Development Agreements, the term Rancho Murieta means all of the land that is subject to the PD ordinance."

Hart and other members of the audience objected to so much seeming to hinge on the parks and the Park Development Agreements in the lawyers' evaluation of the Letter Agreement and the MBA.

"It's not about the parks," Hart said. "It's about the investment this membership has in homes and property. …" The audience applauded his comments.

The full cost of the legal opinion isn't known yet, said RMA General Manager Kathryn Henricksen. Gumbinger said one thing's certain -- "It's a lot of money." The board will receive a 32-page written report, Gumbinger said, and he expects that a summary will be shared with the membership.

Who's who

Here are the major players and issues in the long-running development story:

Pension Trust Fund of the Operating Engineers Local 3 (PTF): This pension fund for a union of heavy-equipment operators began the development of Rancho Murieta in the 1960s. It still owns most of the remaining undeveloped land, and the golf courses. (The Country Club operates under a long-term lease with the PTF.) McMorgan & Company of San Francisco, a multi-billion-dollar investment management company, directs the PTF's investment.

Murieta Holdings: Robert J. Cassano and Gerry N. Kamilos, acting as development agents for the Pension Trust Fund. They've offered plans to develop the rest of Murieta North.

Mutual Benefit Agreement (MBA): Another name for the development agreement for the final build-out of Murieta North. The RMA board negotiated this agreement for 2 1/2 years before it was made public in 2002.

Letter Agreement: A 1997 RMA legal settlement to address debts in the financial collapse of developer Jack Anderson. The tentative agreement was not made fully public until 2002. In 2003, the RMA board adopted the MBA as the final settlement of the Letter Agreement.

Rancho Murieta Development Concerned Citizens Committee: Citizens group that sprung up in response to the development proposals. The group has gone to the community with petitions twice and become a political force.

Timeline and stories

Here is a timeline with links to coverage related to the legal opinion:

1990-91: The Parks Committee is created, with representation from the Rancho Murieta Association, developers and the Community Services District. Developers pay into a parks fund (with smaller contributions from the RMA), and the money is spent according to a master parks plan. See 2001 story and master plan chart here.

May 1997: The RMA board agrees to a preliminary settlement of a lawsuit it brought against the PTF for unpaid dues resulting from the financial collapse of developer Jack Anderson. Under the terms of the tentative settlement, the RMA gets title to community parks properties and preserves the Park Development Agreements. Unannexed development is allowed to use community parks if they pay into the parks fund. The full text of the agreement will not be made public for more than five years. See the agreement here.

March 2000: The RMA board begins meeting with developer Robert J. Cassano (joined later by partner Gerry N. Kamilos) about the possibility of developing the remainder of Rancho Murieta. The board keeps the talks in executive session and won't publicly identify the developers, even after their identities become an open secret in the community. The PTF is not involved in the initial negotiations as Cassano plans to purchase the property from the PTF. When that doesn't happen, Cassano and Kamilos agree to carry out the development plan as agents for the PTF.

November 2000: After six months of private negotiations with the RMA, but still lacking a final agreement on development, Cassano and Kamilos unveil their development plans before a standing-room-only crowd at the Country Club. Their plans call for fewer homes than allowed by the county's master plan, to be built over the next decade. See story here.

November 2000: The RMA and developers release an outline of a development agreement. See outline here.

October 2002: After 2 1/2 years of negotiation, the RMA releases a 60-page draft of the development agreement, now called the Mutual Benefit Agreement. See story and full text here.

December 2002: The RMA releases the Letter Agreement, the 1997 tentative settlement that still isn't finalized, and says it's the reason the board worked hard to reach the Mutual Benefit Agreement. Board President Mike Schieberl says if the board doesn't sign the MBA, it will have to settle for the lesser terms of the Letter Agreement. Opponents of the MBA meet privately with three RMA board members and say they've got a petition with 1,200 or 1,300 signatures of residents who oppose the MBA. See story here.

January 2003: RMA board votes to use Mutual Benefit Agreement as the final settlement of the Letter Agreement. See story here.

A five-year archive of development coverage is available here

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