Town of Monument v. State

         El Paso County District Court No. 17CV30105 Honorable Eric Bentley, Judge.

         Murray Dahl Kuechenmeister & Renaud LLP, Malcolm Murray, Joseph Rivera, Lakewood, Colorado, for Plaintiff-Appellant.

          Cynthia H. Coffman, Attorney General, Ed Hamrick, Senior Assistant Attorney General, Eva La, Assistant Attorney General, Denver, Colorado, for Intervenor-Appellee State of Colorado.

         Hanes & Bartels LLC, Richard W. Hanes, Brenda L. Bartels, Colorado Springs, Colorado, for Intervenors-Appellees Forest View Company and Richard Decker.

         OPINION

         JUDGE J. JONES.

         [¶1] The Town of Monument (the Town) bought a parcel of real property in a residential subdivision, intending to construct a municipal water storage tank on the lot. There was only one problem: a restrictive covenant prohibiting such structures applies to all lots in the subdivision. So the Town filed this case, seeking to use its power of eminent domain to have the court declare its property free of the restrictive covenant. Not so fast, said some of the other owners of lots in the subdivision, who had intervened in the case.^[1] They said because the restrictive covenant benefits all property in the subdivision, the

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Town can't eliminate the restrictive covenant on its lot without paying every property owner in the subdivision an amount compensating each of them for the loss in value to their respective properties. The State Board of Land Commissioners (Land Board), which owns several lots in the subdivision, presented an even greater obstacle to the Town's goal. It asserted that because the restrictive covenant is a compensable interest in the property, and the power of eminent domain can't be used against the State, the Town can't eliminate the restrictive covenant on its lot. The Town fought back, claiming that the restrictive covenant isn't a compensable interest in property in the context of an eminent domain case.

         [¶2] Everyone recognized that the case came down to deciding whether the Colorado Supreme Court's decision in Smith v. Clifton Sanitation District, 134 Colo. 116, 300 P.2d 548 (1956), or the Colorado Court of Appeals' decision in City of Steamboat Springs v. Johnson, 252 P.3d 1142 (Colo.App. 2010), controls. In the former, an eminent domain case, the court held that a restrictive covenant wasn't a compensable property interest. Smith, 134 Colo. at 119-21, 300 P.2d at 549-50. In the latter, also an eminent domain case, the division said that a restrictive covenant was a compensable property interest. Johnson, 252 P.3d at 1146.

         [¶3] The district court agreed with the intervening landowners. It reasoned that Smith, which involved property owners who agreed to a restrictive covenant for the clear purpose of preventing a condemnation, must be limited to its particular facts; this case doesn't involve comparable facts; and Johnson sets forth the better rule. This ruling rendered the Town's condemnation action untenable for several practical reasons, but also because the power of eminent domain can't be exercised against the State. As a result, the parties stipulated to a dismissal of the case with prejudice. The court granted the stipulation. The Town timely appealed from the dismissal, raising only the issue whether Smith controls.

         [¶4] We hold that the holding and underlying reasoning of Smith aren't limited to that case's particular facts. That is, the court announced a rule of law— that a restrictive covenant isn't a compensable property interest in an eminent domain case— and the rule isn't limited to situations where the affected property owners agree to the restrictive covenant in a clear attempt to thwart acquisition of property by a public entity for public use. We therefore reverse and remand the case for further proceedings.

         I. We Have Jurisdiction

         [¶5] Though the Land Board stipulated to the dismissal with prejudice so that the Town could appeal the issue presented, it now argues that because of that dismissal we lack jurisdiction over the appeal.^[2] The Land Board says the order ruling on the Smith issue isn't appealable because it didn't resolve the case on the merits and, relying primarily on Foothills Meadow v. Myers, 832 P.2d 1097 (Colo.App. 1992), the stipulation for dismissal with prejudice means no court has jurisdiction over the case. Both arguments fail.

         [¶6] The order disposing of the Smith issue may or may not have been a final judgment. But regardless, the dismissal with prejudice clearly constituted a final, appealable judgment. Id. at 1098; Dailey v. Montview Acceptance Co.,514 P.2d 76, 78 (Colo.App. 1973) (not published pursuant to C.A.R. 35(f)). And once the court entered it, the legal ruling on which the dismissal was premised became appealable. See BCW Enters., Ltd. v. Indus. Claim Appeals Office,964 P.2d 533, 537 (Colo.App. 1997) ("[A]n interlocutory order becomes reviewable when appealed incident to or in conjunction with an otherwise final order."); see also McBride v. CITGO Petroleum Co.,281 F.3d ...