Landmark Towers Association, Inc., a Colorado nonprofit corporation, by EWP-GV, LLC, as receiver for 7677 East Berry Avenue Associates, LP, its declarant, Plaintiff-Appellee and Cross-Appellant,
UMB Bank, N.A., Colorado Bondshares, a tax exempt fund; and Marin Metropolitan District, a Colorado special district, Defendants-Appellants and Cross-Appellees.
Arapahoe County District Court No. 11CV1076 Honorable Donald W. Marshall, Judge.
Burg Simpson Eldredge Hersh & Jardine, P.C., Brian K. Matise, Diane Vaksdal Smith, Nelson P. Boyle, Denver, Colorado, for Plaintiff-Appellee and Cross-Appellant
Kutak Rock LLP, Neil L. Arney, Mia K. Della Cava; McNamara Law Firm, P.C., John N. McNamara, Denver, Colorado, for Defendants-Appellants and Cross-Appellees
Sherman & Howard, LLC, Joseph J. Bronesky, Peter J. Whitmore, Denver, Colorado, for Amicus Curiae Colorado Municipal Bond Dealers Association.
Butler Snow LLP, Monica Rosenbluth, Denver, Colorado, for Amicus Curiae Special District Association of Colorado.
J. JONES, JUDGE.
¶ 1 A real estate developer, Everest Marin, L.P. (Everest), created a special district, the Marin Metropolitan District (District), as a vehicle for financing the infrastructure of a to-be-developed residential community known as the European Village. The District issued bonds to finance the development which were to be paid for by property taxes imposed on landowners within the District. A group of condominium owners who did not live in the European Village learned that their properties had been included in the District under suspicious circumstances. The condominium owners received no benefit from the European Village development, and had not been notified of, much less voted in, the elections to create the District and approve the bonds and taxes. Acting through their homeowners association, plaintiff Landmark Towers Association, Inc. (Landmark), they brought two actions; one to invalidate the creation of the District and the other - this case - to invalidate the approval of the bonds and taxes and to recover taxes they had paid to the District.
¶ 2 Following a bench trial, the district court in this case granted Landmark part of the relief it requested, ordering partial refund of taxes paid and enjoining the District from continuing to collect taxes from the Landmark condominium owners.
¶ 3 Defendants, UMB Bank (UMB), Colorado Bondshares (Bondshares), and the District, appeal the district court's rulings in favor of Landmark. Landmark cross-appeals the court's determination that its contest to the bond and tax election under the Taxpayer's Bill of Rights (TABOR) was time barred, and the court's alternative determination that the election complied with TABOR and applicable statutes.
¶ 4 We conclude that Landmark's contest of the bond and tax election is not time barred, and that the election violated TABOR and applicable statutes. We reject defendants' contentions that are not mooted by our determination that the election was invalid, and remand for further proceedings.
¶ 5 The Landmark Towers are two condominium towers in Greenwood Village with retail space. 7677 East Berry Avenue Associates, LP, developed the Landmark Towers. Zachary Davidson was its managing partner. While the Landmark Towers were being developed from 2005 through 2007, about 130 buyers (Landmark buyers) entered into contracts to buy condominiums in the towers, paid $35, 000 to $100, 000 in nonrefundable deposits, and agreed to pay pro-rated taxes for the year at closing. The purchasers were required to close when the condominiums were completed. The purchase contracts did not name any special districts encompassing the Landmark Towers, but did contain a notice that special districts might be created and impose ad valorem property taxes.
¶ 6 Mr. Davidson was also the managing partner of Everest. Everest bought land near the Landmark Towers and intended to develop the site into a residential community called the European Village. To finance the development of the European Village, Mr. Davidson decided to create the District under Title 32, Article 1 of the Colorado Revised Statutes, and to include the Landmark Towers in the district to provide a sufficient tax base.
¶ 7 Mr. Davidson and five other organizers submitted a service plan for the District to Greenwood Village which said that the District would provide public infrastructure improvements to all property within the District. Greenwood Village approved the service plan pursuant to section 32-1-301, C.R.S. 2015.
¶ 8 The service plan provided that the District would give notice of the creation of the special district to individuals under contract to buy Landmark condominiums before conveyance of title. The service plan also provided that the District could issue up to $35, 500, 000 in general obligation bonds bearing an interest rate of as much as 12%, which would be paid over a thirty-year period.
¶ 9 The District's organizers filed a petition for organization with the district court, and the court set a hearing on the petition. At the hearing, the court entered an order directing that an organizational election be held for the District.
¶ 10 The organizers held an organizational election for the District. To become eligible electors under section 32-1-103(5)(a), C.R.S. 2015, each of the six organizers executed option contracts with Everest to purchase undivided 1/20th interests in a ten-foot by ten-foot parcel in the District. The contracts purported to obligate the organizers to pay taxes on the parcels. The organizers held the organizational election on November 6, 2007, and approved the creation of the District. At the same time, the organizers voted to approve the issuance of bonds and to impose ad valorem property taxes to pay the bonds. The district court subsequently entered an order declaring the special district organized.
¶ 11 In 2008, the District sold $30, 485, 000 in general obligation bonds bearing an interest rate of 7.75% to Bondshares. The bonds had a twenty-year maturity date. UMB held the bond proceeds for the benefit of the District.
¶ 12 The District was authorized to withdraw funds from UMB by submitting requests for payment showing the allocation of that money to the public infrastructure in the European Village. Per the service plan, the bond funds were to be used only for public infrastructure work. In 2008, the District withdrew $8, 000, 000, the full amount available for initial withdrawal. Because Mr. Davidson was the managing partner of both Everest and the District, he had unsupervised access to the bond funds. Mr. Davidson misused a large portion of the funds.
¶ 13 In 2011, the Landmark buyers discovered facts indicating that the District had been formed through alleged misrepresentations to Greenwood Village and fraud on the district court. Landmark intervened in the case the District's organizers had opened to seek approval of the special district, and moved pursuant to C.R.C.P. 60(b)(2), (3), and (5) to set aside the district court's order approving the District. Landmark asserted fraud on the court, lack of jurisdiction to approve the special district, and invalidity of the order due to lack of due process.
¶ 14 The district court ruled that it was precluded from setting aside the order by section 32-1-305(7), C.R.S. 2015, which bars a challenge to an order declaring a special district organized. A division of this court affirmed. Marin Metro. Dist. v. Landmark Towers Ass'n, Inc., 2014 COA 40, ¶ 30 (Marin I).
¶ 15 Landmark brought this action to recover taxes Landmark buyers had paid to the District and to enjoin the future levying of taxes pursuant to TABOR. Landmark asserted that TABOR and related statutes had been violated in several ways: (1) the bond and tax election had been illegally conducted because (a) the organizers' option contracts were a sham and (b) the Landmark buyers had not been allowed to participate in the election; (2) the District had improperly disbursed bond funds for the benefit of Mr. Davidson; (3) the District set the property tax levy for debt service at a mill levy level higher than that allowed by the service plan or otherwise allowed by law; and (4) the District had made the bonds subject to a net effective interest rate higher than the limit set in the service plan. Landmark also asserted that (5) taxing the Landmark buyers violated their constitutional right to due process because the improvements funded by the bonds provided no benefit to Landmark property.
¶ 16 The district court ruled in Landmark's favor on contentions (2), (3), and (5); ordered the District to refund Landmark buyers the portion of the misused bond funds that the Landmark buyers had paid; ordered the District to refund Landmark buyers the property taxes collected in excess of the mill levy limit set in the service plan; and enjoined the District from levying further illegal taxes on Landmark. The court ruled in the District's favor on contentions (1) and (4).
¶ 17 The district court subsequently held a TABOR refund hearing and approved the District's proposed refund plan. At the refund hearing, Landmark brought two additional claims against the District, Bondshares, and UMB, which the district court denied. The district court later denied Bondshares' and UMB's motion for an award of costs as the prevailing parties on Landmark's additional claims.
¶ 18 On appeal, defendants contend that we should reverse the district court's orders for the following reasons: (1) Landmark's challenge to the bond and tax election is untimely under section 11-57-212, C.R.S. 2015; (2) the district court erred in entering an injunction based on a finding of a due process violation because the court erroneously applied special assessment law to the District's ad valorem property tax; (3) the District's property tax mill levy does not exceed that allowed by TABOR and applicable statutes; (4) the misuse of the bond funds did not violate TABOR because TABOR does not apply to bond proceeds; (5) the court's injunction violates the Uniform Taxation Clause; and (6) the FDIC (which now owns the European Village property) is an indispensable party and should have been joined. Bondshares and UMB also contend that (7) they were the prevailing parties on two of Landmark's claims and thus should have been awarded costs.
¶ 19 Landmark cross-appeals the district court's order on liability, contending that the TABOR election was illegal and thus the bonds and taxes approved in the election are void.
¶ 20 We agree with Landmark. We address and reject defendants' first and sixth contentions and Bondshares' and UMB's contention regarding costs. Because of our disposition of Landmark's cross-appeal, we need not address defendants' second, third, fourth, and fifth contentions.
II. Defendants' Appeal
A. Timeliness of Landmark's Challenge
¶ 21 Defendants contend that all of Landmark's challenges to the validity of the taxes are barred by the thirty day time limit in section 11-57-212. We conclude that defendants waived this issue.
1. Standard of Review
¶ 22 Defendants' contention presents issues of statutory construction. We review such issues de novo. Beren v. Beren, 2015 CO 29, ¶ 11.
¶ 23 Section 11-57-212 ...