Carousel Farms Metropolitan District v. Woodcrest Homes, Inc.

          Certiorari to the Colorado Court of Appeals Court of Appeals Case No. 15CA1956

          Attorneys for Petitioner: Alderman Bernstein LLC Jody Harper Alderman Carrie S. Bernstein Amanda E. Bradley Steven M. Nagy Denver, Colorado

          Attorneys for Respondent: Dymond Reagor, PLLC David D. Schlachter Greenwood Village, Colorado Attorneys for Amicus Curiae Institute for Justice: Diana Simpson Jeffrey Redfern Arlington, Virginia

          OPINION

          HOOD JUSTICE

         ¶1 A subdivision development contemplated by Woodcrest Homes seems to have been yet another casualty of the 2007-2008 financial crisis. Before the economic downturn, Woodcrest was poised to construct the new development adjacent to the town of Parker. But with the economy in dire straits, Woodcrest secured only a small parcel-known as Parcel C-stuck between two larger parcels that were necessary for completion of the project. Now, over a decade after the failed development, a special metropolitan district controlled by a competitor, Century Communities, seeks to condemn Parcel C and finish what Woodcrest started.

         ¶2 But Woodcrest objects. It claims that the entire condemnation proceeding is really a sham designed to benefit Century. Woodcrest maintains that the condemnation violates both the public use protections of the Colorado Constitution and the statutory prohibition on economic development takings. According to Woodcrest, the purpose of the taking, at the time it occurred, was to satisfy contractual obligations between Century and Parker. Because the public would not be the beneficiary at the time of the taking, Woodcrest contends that this condemnation violates the Colorado Constitution. Moreover, it argues, the taking effectively transfers the condemned land to Century, which violates section 38-1-101(1)(b)(I), C.R.S. (2018), the state's anti-economic development takings statute.

         ¶3 We disagree. The centerpiece of our jurisprudence on takings and public use is that the taking must, at its core, benefit the public. The condemnation of Parcel C will do just that, with the intended construction of various utilities, public rights of way, and sidewalks. There is nothing in the Colorado Constitution that prohibits private parties from incidentally benefiting from any particular condemnation. Additionally, Colorado's prohibition on economic development takings has no bearing on the condemnation at issue here: The plain language of section 38-1-101(1)(b)(I) prevents public entities from transferring condemned land to private entities. But there was no transfer, and the only entity involved was a public one, the special district.

         ¶4 Before reaching any of those issues, however, the parties ask us to clarify whether clear error or de novo review applies to a trial court's public use determination. Because public use is ultimately a legal question, we review it de novo, while deferring to the trial court on underlying historical facts.

         ¶5 Therefore, we hold as follows. First, takings questions present mixed issues of law and fact, with public use being a question of law that is reviewed de novo. Second, takings that essentially benefit the public will survive constitutional scrutiny, even if, at the time of the taking, there is an incidental private benefit. As a result, the taking here is valid. Third, the plain language of section 38-1-101(1)(b) only limits the transfer of condemned land to a private entity and, because there was no transfer and no private entity involved here, that section is inapplicable.

         I. Facts and Procedural History

         ¶6 In 2006, the respondent, Woodcrest Homes, began the process of securing three parcels to build a new development that would be annexed into the town of Parker. Woodcrest purchased Parcel C, a small parcel around twenty feet wide that totaled about 0.65 acres, sandwiched between two approximately twenty-acre parcels known as Parcels A and B. This sliver of land offered Woodcrest an opportunity to plan utilities for its development, as Parcel C already contained a sewer line, a water line easement, and a natural drainage system with culverts. Although Woodcrest was under contract to purchase Parcels A and B, the "weak housing market" left Woodcrest unable to move ahead.

         ¶7 Fast forward to 2012, when Century acquired Parcels A and B. In 2013, Century offered to purchase Parcel C from Woodcrest, tendering nearly $45, 000. Woodcrest rebuffed the offer, remarking that it subsidized, at great cost, Century's ability to complete the development, given that Century intended to use Woodcrest's plans for the development. Undeterred, Century told Woodcrest that it would continue to pursue development and that, if Woodcrest didn't accept some offer, Century would condemn Parcel C with the "Town Council's support."^[1] Then, using nearly identical plans to Woodcrest's-which included using an already encumbered Parcel C for sewage, roads, and other public improvements-Century approached Parker. Century asked for the same deal that Woodcrest had in 2006, and Parker agreed that it would annex the development and approve the development's plat, if Century owned all three parcels.

         ¶8 Century then created a metropolitan district called Carousel Farms (the District). This quasi-municipal structure empowered the District to raise revenue through municipal bonds and, more importantly, condemn property through eminent domain. The District was run solely by Century employees and officers. The District made a final offer to Woodcrest, which Woodcrest rejected. Then, the District sought to condemn Parcel C. But, before it could do so, the District needed to amend the agreement with Parker so that it was the District's possession of Parcel C, not Century's, that was the prerequisite for plat approval and annexation. Parker obliged, and the District initiated condemnation proceedings.

         ¶9 At the immediate possession hearing in district court, Woodcrest argued that the District was acting as a puppet for Century. To Woodcrest, the District was a mere façade designed to empower Century to acquire Parcel C and complete the development, making the taking not for a public use but for a private one. The district court disagreed, holding that the taking was indeed for public use. The court subsequently adopted the District's proposed findings of fact and conclusions of law, verbatim or almost verbatim.

         ¶10 A division of the court of appeals disagreed and reversed. First, it concluded that, in condemnation proceedings, the district court's findings of fact were reviewed for clear error and its legal conclusions reviewed de novo. Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc., 2017 COA 149, ¶ 32, P.3d . However, it reasoned that the district court's findings were subject to heightened scrutiny because the district court adopted the prevailing party's proposed findings of fact and conclusions of law verbatim.^[2] Id.

         ¶11 Second, the division held that the taking was not for public use, as the taking "itself" was to satisfy the District's contractual obligations, which were, under any metric, not a public use. Id. at ¶¶ 36-38. The eventual dedication for utilities and roads was a "step removed" and couldn't save the taking from infirmity. Id. at ¶ 37.

         ¶12 Third, the division concluded that the taking was not necessary to accomplish a public use, as there was no public use even in play. Id. at ¶ 41. Moreover, the division reasoned that, because the District was composed of Century employees only, formed after Century couldn't privately acquire Parcel C, and only initiated to meet contractual obligations, the taking was done in bad faith. Id. at ¶¶ 43-44.

         ¶13 Finally, the division held that the taking also violated section 38-1-101(1)(b)(I), which prohibits takings that transfer property to private entities for the purpose of economic development. Id. at ¶ 48. To the division, the taking effectively transferred the land to the developer, violating the spirit of section 38-1-101(1)(b)(I) and the rule that the "law may not be used to permit one to accomplish indirectly what he may not achieve directly." Id. at ¶ 52 (quoting Salle v. Howe, 793 P.2d 628, 631 (Colo.App. 1990)).

         ¶14 The District petitioned this court for review and we granted certiorari.^[3]

         II. Analysis

         ¶15 We begin by addressing the appropriate standard for appellate review of takings questions. While Colorado caselaw has been somewhat muddled on this subject, we conclude that takings questions present mixed issues of law and fact. We therefore defer to a trial court's factual determinations, but we review de novo the legal determination of whether something is for a public use. Next, we analyze the District's taking and determine that, because the taking was essentially for public benefit, it meets the public use requirements of the state constitution and the relevant statutes. Finally, we examine section 38-1-101(1)(b)(I). Because (1) the plain language of the statute only covers transfers from public entities to private entities and (2) the District is a public entity that never initiated any sort of transfer, this statutory provision doesn't apply.

         A. Public Use and the Standard of Review

         ¶16 Our takings cases have sown confusion as to the appropriate standard to review a trial court's public use determination. Sometimes, we have intimated that the standard is clear error-essentially holding that public use is a fact question left to the trial court. See, e.g., City & Cty. of Denver v. Block 173 Assocs., 814 P.2d 824, 828-29 (Colo. 1991) ("In examining the stated public purpose for a condemnation, we look to whether the stated public purpose is supported by the record. If so, our inquiry ends."); Pub. Serv. Co. of Colo. v. Shaklee, 784 P.2d 314, 318 (Colo. 1989) ("[A]lthough conflicting evidence was presented at trial, the evidence supports the trial court's conclusion that the condemnation was for a public use . . . ."). Other times, we have stated that the inquiry involves a mixed question of law and fact. See, e.g., Glenelk Ass'n, Inc. v. Lewis, 260 P.3d 1117, 1120 (Colo. 2011) (citing Fowler Irrevocable Tr. 1992-1 v. City of Boulder, 17 P.3d 797, 802 (Colo. 2001)) (stating that the court of appeals defers to findings of fact "unless they are . . . clearly erroneous" but ...