Rapid City Council fails to acknowledge surety bond timeframe

A circuit judge ruled on December 21 that a developer is not responsible for fixing roads related to a project he had worked on, citing that the city opted to accept a surety bond in advance rather than wait to formally approve the project upon completion. Unfortunately for the city, the Rapid City Council failed to maintain the bond and instead allowed the bond to expire before claiming any problems with the developer Doyle Estes’ work.

The city filed the suit against Estes in 2008 after flaws began appearing in work he had previously done in the Big Sky subdivision. The major problem is the settling that has since occurred in the roads, and officials estimate that the necessary repairs will cost about $1 million.

The judge didn’t find Estes to be responsible for resulting problems since he had posted the required surety bond. Furthermore, when the final improvement was completed in 2005 there was no stipulation in city ordinances or state statute that requires developers to guarantee such improvements.

Later that day the Raid City Council unanimously voted to file an appeal to the judge’s decision to the Iowa state Supreme Court. The appeal will be made sometime within the next month.

What happened here

Essentially, the Rapid City Council consciously chose not to inspect the improvements after completion, but instead accept a surety bond to guarantee the Estes’ work for a period of time. Because the city allowed the bond to expire before submitting any complaints about the work, the developer really has no legal obligation to repair the work or pay compensation. Furthermore, at the time there was no other legal regulation in existence requiring him to guarantee his work. While a guarantee of his work may ethically entitle the city to due compensation, legally the developer has no obligation to the city.

If the city had extended the duration of the bond or submitted its official complaints before the bond expired, the issue would be entirely different. The Iowa state Supreme Court will have to rule whether or not Estes should compensate the city for the problems, or if the outcome should be in line circuit judge’s ruling: he is legally off the hook for the problems.

About the Author

Chris Birk
Chris Birk is a former newspaper and magazine writer who now works for a pair of Inc. 500 companies. He’s also a principal and the chief content creator for Surety Bonds.com, and a part-time college professor at a private Midwestern university.