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Carousel Farms Metropolitan District v. Woodcrest Homes, Inc.

Court of Appeals of Colorado, Second Division

November 30, 2017

Carousel Farms Metropolitan District, a quasi-municipal corporation and political subdivision of the State of Colorado, Petitioner-Appellee,
Woodcrest Homes, Inc., a Colorado corporation, Respondent-Appellant.

         Douglas County District Court No. 15CV30013 Honorable Richard B. Caschette, Judge.

          Alderman Bernstein, LLC, Jody Harper Alderman, Carrie S. Bernstein, Amy E. Arlander, Denver, Colorado, for Petitioner-Appellee

          Dymond Reagor, PLLC, David D. Schlachter, Portland, Oregon, for Respondent-Appellant Ann A. Terry, Denver, Colorado, for Amicus Curiae Special District Association of Colorado


          HARRIS JUDGE.

         ¶ 1 Appellant, Woodcrest Homes, Inc., owned a .65-acre parcel of land (referred to as Parcel C) outside the Town of Parker. Century Communities, Inc., and its subsidiaries (collectively, the Developer) acquired the parcels to the north and south of Parcel C, with a plan to create a development - Carousel Farms - comprising all three parcels. Under its agreement with the Town, the Developer could not move forward with its development plan until it acquired Woodcrest's land.

         ¶ 2 Woodcrest, though, declined to sell Parcel C for the price offered. So the Developer threatened to condemn the property. When Woodcrest did not acquiesce, the Developer created the Carousel Farms Metropolitan District (District), the appellee, which promptly initiated condemnation proceedings and took possession of Parcel C.

         ¶ 3 The District defends the condemnation of Woodcrest's property as a lawful exercise of its power of eminent domain on the theory that Parcel C will ultimately be used for a public purpose. In accordance with the Developer's proposed development plan, the infrastructure for the Carousel Farms subdivision, including public improvements such as roads and sewers, will be located on Parcel C.

         ¶ 4 We conclude that the District cannot meet its burden by showing that, under the Developer's plan, once approved, the taking will result in the property's eventual use for public purposes. Rather, the taking itself must be necessary to serve a public purpose.

         ¶ 5 Here, the taking was carried out by the District, acting as a sort of alter ego of the Developer, to ensure that the Developer met its contractual obligations to the Town. True, once those obligations are satisfied and the development plan can proceed, the District intends to put the property to a public use. But this amounts to a classic case of the tail wagging the dog - the District condemned property to advance the private development process, the completion of which would then require the construction of infrastructure, which qualifies as a public purpose necessitating the condemnation of Parcel C. We do not agree that this scenario passes constitutional or statutory muster, and therefore we reverse.

         I. Background

         A. Woodcrest Begins the Development Process and Buys Parcel C

         ¶ 6 Carousel Farms comprises two twenty-acre parcels (Parcel A and B) and the .65-acre strip of land sandwiched between them (Parcel C), located in unincorporated Douglas County.

         ¶ 7 Woodcrest initially intended to develop Carousel Farms. As a prerequisite to development, the three parcels had to be annexed into the Town, rezoned as planned development, and approved as a subdivision - an extensive process that entailed the preparation and approval of a sketch plan, a preliminary plan, and a final plat. As the Town explains in its municipal code, "[e]ach step is a distinct process involving the submittal of an application, an application fee, required plans and reports, referrals of the proposal to other agencies and public hearings/meetings." Parker Mun. Code 13.07.040(a)(2).

         ¶ 8 To meet those obligations, Woodcrest bought Parcel C and entered into contracts to buy Parcels A and B. It executed an annexation agreement and successfully progressed through the sketch plan and preliminary plan phases of the subdivision process. The final plat prepared by Woodcrest's engineering firm was never approved, however, because Woodcrest did not ultimately acquire Parcels A and B. After six months without further progress, Woodcrest's development plans were deemed abandoned.

         B. The Developer Takes Over Development of Carousel Farms

         ¶ 9 About five years later, in 2012, the Developer stepped in. At the immediate possession hearing, the Developer testified that it essentially picked up where Woodcrest had left off: the engineering firm had retained all the development plans so the Developer was "able to pick those plans up." It contracted to buy Parcels A and B and began the subdivision process, making some adjustments to Woodcrest's plans along the way.

         ¶ 10 In January 2014, the Town entered into a new annexation agreement (the Agreement) with the then-current owners of Parcels A and B. Under the terms of the Agreement, the Town would not annex Parcels A and B, nor would it approve any plats for Carousel Farms, unless the Developer owned all three parcels, including Parcel C. This latter condition was contained in the following provision:

2. Consolidation of Ownership of the Property and the Strip Parcel. The Town has no obligation to approve (including the setting of any public hearings) any plats for the Property until all of the following conditions are satisfied: a. [The Developer] or its assign is the owner of the Property [Parcels A and B] and the real property described in Exhibit C [Parcel C] . . . (the "Strip Parcel").
b. The Strip Parcel [Parcel C] is zoned PD-Planned Development . . . .
c. The Strip Parcel [Parcel C] is made subject to this Agreement by an amendment hereto.

(Formatting omitted.)

         ¶ 11 In the meantime, the Developer made overtures to Woodcrest to acquire Parcel C. In January 2013, it offered to buy the parcel for approximately $45, 000. But Woodcrest declined that offer, noting that it had essentially subsidized the Developer's entitlement process because the Developer had used Woodcrest's development plans and because the owners of Parcels A and B had retained Woodcrest's earnest money, presumably reducing the Developer's purchase price of those parcels. Woodcrest told the Developer that its offer "must increase substantially."

         ¶ 12 The Developer did not make another offer. Instead, two weeks later, it sent Woodcrest a notice that it intended "to move forward with annexation into the Town of Parker." If Woodcrest did not accept the offer "expeditiously, " condemnation proceedings would be initiated "with Town Council's support." The Developer did not explain the basis for its authority to condemn Woodcrest's property, and Woodcrest assumed that it was the Town that might move to condemn Parcel C.

         ¶ 13 In fact, though, the Town never considered condemning Woodcrest's property. At the possession hearing, the Town's representative testified that the Town did not even want to "talk about" the possibility of taking Parcel C because the Town "d[oesn't] do condemnation." Rather, as the Town's representative explained, the Town preferred that "the two property owners, " meaning the Developer and Woodcrest, "work it out by themselves."

         ¶ 14 But the Developer made no further attempts to "work it out" with Woodcrest. Instead, it simply moved forward with its development plans. It closed on Parcels A and B and, in the fall of 2014, the former owners assigned their rights and obligations under the Agreement to the Developer.

         ¶ 15 On September 2, 2014, the Town held a public hearing on the Carousel Farms sketch and preliminary plan. The Town's planning department conditioned approval of the plan on the Developer acquiring and rezoning Parcel C and including it within the Agreement. According to the planning department representative, only with the addition of Parcel C would the Developer's sketch and preliminary plan satisfy the density requirements under the Parker 2035 Master Plan. The Town approved the plan on the condition that "[t]he Woodcrest Parcel shall be acquired, rezoned to Carousel Farms PD and made a part of the Carousel Farms Annexation Agreement."

         C. The Developer Forms the District and the District Condemns Parcel C

         ¶ 16 During the fall of 2014, the Developer also created the District, a new metropolitan district that would serve Carousel Farms. According to the District's service plan, the District's primary purpose was to finance the construction of public improvements authorized to be ...

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