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'Unclean hands' follow Mason City developer: Ongoing California suit cites same unethical action

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MASON CITY — The developer slated to build a hotel as part of Mason City’s downtown redevelopment project will go before a judge in March for his lawsuit against a city in California where he had another development agreement.

Philip Chodur, president of G8 Development of San Diego, is currently suing the city of Vista, California, alleging breach of contract over project in that city that never came to fruition.

Vista is a city of 93,000 in San Diego County, California.

In August, the Iowa Economic Development Authority, or IEDA, approved two contingencies for the city’s project: an extension for G8 Development to show full proof of financing for its hotel, an important aspect of the overall project, or Mason City’s written notice of Chodur’s default.

On Sept. 7, the city provided written and electronic notice of default to G8 Development for its development agreement, giving Chodur 45 days to show full proof of financing for the hotel. Prior to a Monday deadline to respond, Choder's attorney sent Mason City a letter demanding it "rescind the Notice of Default."

The local threat of a lawsuit is similar to the dispute in California.

G8 Development sued the Community Development Commission of Vista and the City of Vista in September 2015, claiming breach of contract over a development agreement reached in 2008.

In the agreement, G8 was tasked to build 81 condominiums, 27,000 square feet of commercial/retail space and 4,000 square feet of office space in one complex.

The city canceled the deal in 2014 because of what it considered a lack of progress after six years. Chodur filed a claim with the city for $3 million in 2015 which the city rejected. He then filed the suit for breach of contract.

Mason City

Cerro Gordo County records show Chodur owns 19 properties in Mason City, many of them downtown.

Chodur first presented the idea of a downtown hotel to the Mason City Council in June 2013.

When he failed to meet several construction deadlines to build next to City Hall, the city found him in default and the deal fell through. At the time, city officials said Chodur could not get financing.

That delay led the city to work with another developer, Gatehouse Capital. Local opponents forced a referendum on the overall project in November 2017, but voters overwhelming approved the plan.

In July 2017, G8 filed a lawsuit against the City of Mason City and the Chamber of Commerce Foundation. In a response to the lawsuit, the Chamber said Chodur acted unethically or had acted in bad faith – in the court filing, he had "unclean hands."

But after changes in the downtown plan halted contract negotiations between Gatehouse and Mason City, the city was forced to open the project for bid. G8 submitted a bid the Mason City Council found more favorable and accepted.

As a condition of the new agreement, G8 dropped its lawsuit against the city and the chamber.

G8 Development was selected to build a hotel in the Southbridge Mall parking lot, which would connect via skywalk to The Music Man Square, which would be remodeled into a conference center. 

City officials have been waiting for adequate proof of financing since.

Vista, California

In the California dispute, G8 claims Vista officials delayed the project and imposed new design requirements, therefore breaching the development agreement. According to the lawsuit, G8 claims the city wanted to be rid of the developer once the property increased in value and after improvements were made.

The breach of contract centers on a proposed parking structure and a change in the city’s parking ordinance. He also accuses officials of knowingly deceiving G8 during the transfer of the development agreement from the economic development group to the city.

“Every avenue and remedy to keep the horse in the barn was rendered valueless by the CITY and the CDC and each of them when they failed to notify G8 until after the barn door was opened and the horse was long gone,” the lawsuit said.

Chodur's initial complaint sought at least $225,000 each from the the city and the community development commission. The lawsuit has undergone several amendments.

In addition to legal fees and interest on any award, Chodur's latest legal request asks for at least $10.1 million from both the City of Vista and the Community Development Commission.

The commission and the city responded separately to the suit in August 2018, denying every allegation and claiming G8 was in breach of contract.

“Plaintiff’s injuries and damages, if any, have been aggravated as a result of Plaintiff’s failure to exercise reasonable diligence in caring for those injuries and minimizing those damages,” the commission said.

Both the city and the commission said G8 is barred by the doctrine of unclean hands – the defense that argues a plaintiff is acting unethically or has acted in bad faith, and the same defense used by the Mason City Chamber before Chodur dropped that lawsuit.

Through the doctrine, the plaintiff is not entitled to a remedy since it acted unethically.

A hearing is scheduled for March 1, 2019, and the judge can decide to terminate the case before it can go to trial.

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Contact Courtney at 641-421-0534 or on Twitter @CourtneyFiorini.

 

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