City of Lafayette v. Town of Erie , 434 P.3d 746 ( 2018 )

The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
June 14, 2018
2018COA87
No. 17CA0595, City of Lafayette v. Town of Erie — Municipal
Law; Eminent Domain — Public Use or Purpose — Necessity —
Bad Faith
A division of the court of appeals considers whether a
municipality may condemn a parcel of land belonging to a statutory
town for the purpose of creating an open space community buffer.
The division also considers whether the municipality’s finding of
necessity and public purpose can be reviewed based on a showing
of bad faith.
Following the supreme court’s decision in Town of Telluride v.
San Miguel Valley Corp., 185 P.3d 161 (Colo. 2008), the division
concludes that a municipality may condemn a statutory town’s
property because an open space community buffer would be a valid
public purpose.
However, the division concludes that (1) the district court’s
finding of bad faith behind the municipality’s decision to condemn
the property was correct; and (2) the municipality’s finding of
necessity can be reviewed. The division holds that the
municipality’s ultimate reason for condemning the property — to
prevent a grocery store and its associated tax revenue from
relocating — is not a valid public purpose.
Accordingly, the division affirms the judgment.
COLORADO COURT OF APPEALS 2018COA87
Court of Appeals No. 17CA0595
Boulder County District Court No. 16CV30791
Honorable Norma A. Sierra, Judge
City of Lafayette, a home rule municipality and a Colorado municipal
corporation,
Plaintiff-Appellant,
v.
Town of Erie Urban Renewal Authority; and Town of Erie, Colorado
Defendants-Appellees.
JUDGMENT AFFIRMED
Division VI
Opinion by JUDGE FOX
Ashby, J., concurs
Furman, J., specially concurs
Announced June 14, 2018
Hamre, Rodriguez, Ostrander & Dingess, P.C., Donald M. Ostrander, Richard
F. Rodriguez, Stephanie Ceccato, Denver, Colorado; Williamson and Hayashi,
LLC, David Williamson, Boulder, Colorado, for Plaintiff-Appellant
Waas Campbell Rivera Johnson & Velasquez LLP, Darrell G. Waas, Mikaela V.
Rivera, Denver, Colorado, for Defendants-Appellees
¶1 This dispute stems from the attempt by the City of Lafayette
(Lafayette) to condemn a parcel of land owned by the Town of Erie
(Erie). Lafayette appeals the district court’s order granting Erie’s
motion to dismiss for lack of jurisdiction. Because the record
supports the district court’s finding that Lafayette had an unlawful
motive for the condemnation, we affirm.
I. Background and Procedural History
¶2 Lafayette, a home rule municipality, and Erie, a statutory
town, were signatories to the East Central Inter-Governmental
Agreement (IGA), a comprehensive plan that sought to maintain
some rural development as community buffers. The agreement
lasted from 1994 to 2014. Lafayette and Erie were also signatories
to the Super IGA — a comprehensive development plan for Boulder
County. Erie and Lafayette withdrew from the Super IGA in July
2013.
¶3 After the two IGAs ended and the land along Highway 287 was
no longer designated for rural preservation, commercial
development by Erie and Lafayette ensued along Highway 287. The
map below shows the relevant corridor of Highway 287. The Tebo
property is part of unincorporated Boulder County. Lafayette
1
annexed Weems, a residential community. The Safeway above Nine
Mile Corner — the property at issue — is in Erie. Beacon Hill,
located below Nine Mile Corner, is residential property within
Lafayette.
2
¶4 Erie formed the Town of Erie Urban Renewal Authority
(TOEURA) in 2011. In 2012, TOEURA purchased the Nelson
property and the Kuhl property — together, they form Nine Mile
Corner. Erie annexed Nine Mile Corner from TOEURA in 2015.1
¶5 In 2013, Erie commissioned a geotechnical investigation of the
property which determined that the property was suitable for
development. Two blight studies commissioned by Erie, in 2012
and 2015, found that Nine Mile Corner was a blighted area. Erie
then began to develop an urban renewal plan for the property. Erie,
TOEURA, and the Nine Mile Developer signed a disposition and
development agreement on March 22, 2016.
¶6 Erie hired a consultant to examine the property and identify
potential tenants, including King Soopers. King Soopers had a
location in Lafayette, but it had developed a larger store prototype.
In early 2016, Lafayette became aware that King Soopers might
relocate to open a larger store. In February 2016, Lafayette
1 Lafayette argued in the supplemental briefing requested by this
court that the property still belongs to TOEURA, a statutory body.
However, the record (and the parties’ previous briefing) indicates
that Erie annexed the property as of 2015 so the property is
currently within the boundaries of Erie, a statutory town.
3
engaged in discussions to keep King Soopers (and its corresponding
tax revenue) in Lafayette. Lafayette offered King Soopers a potential
development site north of the Walmart on the west side of Highway
287.
¶7 In May 2016, Lafayette’s city council passed an ordinance
declaring, “[a]cquisition of [part of Nine Mile Corner] is necessary for
the public purpose of open space and benefits associated with open
space, as well as preservation of Lafayette’s local and unique
character, and buffering of Lafayette from development activities in
neighboring communities.” Lafayette determined it would condemn
twenty-two acres of the southern portion of Nine Mile Corner to
create an open space community buffer and leave the remaining
twenty-three acres of Nine Mile Corner for Erie.
4
2
¶8 After attempting to purchase the property,3 Lafayette filed its
petition in condemnation and motion for immediate possession in
July 2016. Erie responded by filing a motion to dismiss arguing
that Lafayette’s condemnation lacked a proper public purpose,
thereby depriving the court of jurisdiction. After a two-day
2 The Nine Mile Corner property: the blue/shaded area reflects the
twenty-two acres Lafayette sought to condemn, and the white area
reflects the twenty-three acres left for Erie.
3 The record is sparse regarding Lafayette’s purchase efforts. Erie’s
answer brief asserts that Lafayette never attempted to negotiate the
size of the condemnation parcel, but does not assert that Lafayette
never attempted a purchase. Lafayette contends it tried to
purchase the property before starting condemnation proceedings,
but denies it was obligated to negotiate the size of the
condemnation parcel.
5
evidentiary hearing, the district court granted Erie’s motion to
dismiss, thus preventing Lafayette from condemning the property.
¶9 Lafayette appeals, arguing that its condemnation had a proper
public purpose and that no bad faith motivated its condemnation
decision. Although we agree that condemnation to create an open
space community buffer could be a proper public purpose, the
record here supports the district court’s findings that Lafayette’s
condemnation decision fails because it was motivated by bad faith.
Thus, we affirm the district court’s judgment.
II. Standard of Review
¶ 10 The parties dispute the applicable standard of review. In
examining the public purpose for a condemnation, we examine
whether the stated public purpose is supported by the record. City
& Cty. of Denver v. Block 173 Assocs., 814 P.2d 824, 828-29 (Colo.
1991). Allegations of bad faith are also reviewed by reference to the
record. Id.; see also Glenelk Ass’n, Inc. v. Lewis, 260 P.3d 1117,
1120 (Colo. 2011) (in a private condemnation action, the district
court’s findings of facts are reviewed under the clearly erroneous
standard); Denver W. Metro. Dist. v. Geudner, 786 P.2d 434, 436
6
(Colo. App. 1986) (recognizing that even if there is an incidental
public benefit, a court may still find bad faith).4
III. Open Space Buffer as Public Purpose
¶ 11 First, we consider whether a municipality may condemn
property belonging to a statutory town for an open space buffer
under article XX of the Colorado Constitution. As a general matter,
Town of Telluride v. San Miguel Valley Corp., 185 P.3d 161 (Colo.
2008), concluded that open space buffers can serve a valid public
purpose.
A. Condemnation Law
¶ 12 Home rule municipalities may “condemn property for any
lawful, public, local, and municipal purpose.” Id. at 164 (discussing
Colo. Const. art. XX); see also Kelo v. City of New London, 545 U.S.
469, 478 (2005) (recognizing that a governmental entity may not
take property “under the mere pretext of a public purpose”).5 It is
4 The parties agreed in their briefing that there is not a specific
definition of “bad faith” in the case law; rather it is a fact specific
inquiry into whether a condemning entities’ proffered motives for a
condemnation are legitimate.
5 Decisions before and after the 2005 decision in Kelo v. City of New
London, 545 U.S. 469, 478 (2005), have examined the motives of
condemning authorities when considering whether a taking was
7
true “the powers of a home rule or statutory municipality to acquire
by condemnation property outside of its territorial boundaries
[must] be limited to the narrowest extent permitted by article XX of
the state constitution,” § 38-1-101(4)(a)(II), C.R.S. 2017, but our
supreme court has stated more than once that the powers
enumerated in article XX are illustrative not exclusive, see Telluride,
pretextual. See Fideicomiso De La Tierra Del Caño Martin Peña v.
Fortuño, 604 F.3d 7, 23 n.13 (1st Cir. 2010) (noting that the court
was not foreclosing a later as-applied challenge to a condemnation
as a “mere pretext of a public purpose” (quoting Kelo, 545 U.S. at
478)); Franco v. Nat’l Capitol Revitalization Corp., 930 A.2d 160, 171
(D.C. Cir. 2007) (acknowledging the potential for a claim that an
alleged “public purpose is a pretext” to a condemnation (quoting
Kelo, 545 U.S. at 478)); Cty. of Hawaii v. C & J Coupe Family Ltd.
P’ship, 198 P.3d 615, 647-49 (Haw. 2010) (noting that courts must
consider evidence of an illegitimate purpose and determine whether
the rationale was “a mere pretext for its actual purpose to bestow a
private benefit”); Middletown Twp. v. Lands of Josef Seegar Stone,
939 A.2d 331, 337-38 (Pa. 2007) (“In considering whether a primary
public purpose was properly invoked, this [c]ourt has looked for the
‘real or fundamental purpose’ behind a taking[,]” meaning that “the
government is not free to give mere lip service to its authorized
purpose or to act precipitously and offer retroactive justification.”)
(citation omitted); see also Cottonwood Christian Ctr. v. Cypress
Redevelopment Agency, 218 F. Supp. 2d 1203, 1229 (C.D. Cal.
2002) (“Courts must look beyond the government’s purported public
use to determine whether that is the genuine reason or if it is
merely pretext.”); 99 Cents Only Stores v. Lancaster Redevelopment
Agency, 237 F. Supp. 2d 1123, 1129 (C.D. Cal. 2001) (“No judicial
deference is required . . . where the ostensible public use is
demonstrably pretextual.”).
8
185 P.3d at 166; Town of Glendale v. City & Cty. of Denver, 137
Colo. 188, 194, 322 P.2d 1053, 1056 (1958) (allowing Denver to
condemn property belonging to Glendale for the construction of
sewer lines because “[a]lthough sewers are not expressly mentioned
in the Constitution, the powers enumerated therein are by way of
illustration and not of limitation”).
¶ 13 In a condemnation action, “the burden of proof is on the
condemning entity to demonstrate, by a preponderance of the
evidence, that the taking of private property is for a public use[.]”
§ 38-1-101(2)(b).
¶ 14 In Telluride, our supreme court concluded that “article XX
grants home rule municipalities the power to condemn property,
within or outside of territorial limits, for any lawful, public, local,
and municipal purpose[,]” because “the list of purposes in section 1
[of article XX] is not comprehensive.” 185 P.3d at 166. But,
Telluride did not adopt a uniform rule for what constitutes a lawful
public purpose “because of the difficulty of capturing the
permissible range of local and municipal projects with a static
9
test.”6 Id. at 167. On the facts before it, the Telluride court
concluded that open space and parks were a valid public purpose
for which a municipality could condemn extraterritorially. Id. at
167-68.
¶ 15 Section 1 of article XX also provides, “[a municipality] shall
have the power, within or without its territorial limits, to . . .
condemn . . . in whole or in part, and everything required therefore,
for the use of said city and county and the inhabitants
thereof[.]” Colo. Const. art. XX, § 1; cf. City of Aurora v. Commerce
Grp. Corp., 694 P.2d 382, 385 (Colo. App. 1984) (“[T]here is a
presumption against implication of authority for eminent domain
not expressly granted[.]”). Thus, a municipality would not
6 In Town of Telluride v. San Miguel Valley Corp., 185 P.3d 161
(Colo. 2008), the court did not analyze the Public Service Co. of
Colorado v. Shaklee, 784 P.2d 314 (Colo. 1989), factors. It is
unclear if the court’s failure to reference Shaklee is meaningful.
But here, the district court referenced and considered the Shaklee
factors: (1) the physical condition of the property; (2) the
community’s needs; (3) the character of the benefit the project
would confer on the community; and (4) the necessity of the
improvement for the development of state resources. Shaklee, 784
P.2d at 318. Because Telluride, 185 P.3d at 164-68, suggests that
extensive discussion of these factors may not be necessary, the
district court’s discussion was sufficient. In any event, we can
affirm the district court on any ground supported by the record.
Taylor v. Taylor, 2016 COA 100, ¶ 31.
10
necessarily be prohibited from exercising its legitimate
condemnation authority to take land owned by a neighboring
statutory town, if a valid public purpose exists.7 See City of
Thornton v. Farmers Reservoir & Irrigation Co., 194 Colo. 526, 537,
575 P.2d 382, 391 (1978) (“[Beth Medrosh Hagodol v. City of Aurora,
126 Colo. 267, 248 P.2d 732 (1952),] recognizes that Colo. Const.
[a]rt. XX grants to home rule municipalities ample power to acquire
by condemnation property already devoted to a public use.”); Town
of Glendale, 137 Colo. at 195, 322 P.2d at 1057. But see Town of
Parker v. Colo. Div. of Parks & Outdoor Recreation, 860 P.2d 584,
586 (Colo. App. 1993) (“The right to take property already dedicated
to a public use for another public use exists in some cases, but
such rights must be by specific grant of authority.”); see also CAW
Equities, L.L.C. v. City of Greenwood Village, 2018 COA 42M, ¶¶ 27-
28.
7After Telluride, a bill to limit the ability of a home rule
municipality to acquire real property outside its territorial
boundaries via condemnation was introduced to the General
Assembly. H.B. 09-1258, 67th Gen. Assemb., 1st Sess. (Feb. 3,
2009). However, the bill did not pass.
11
B. Bad Faith in the Condemnation Context
¶ 16 Lafayette argues that (1) there was no bad faith or fraud
behind its decision to condemn the property and (2) its finding of
necessity cannot be disturbed. We disagree with both contentions.
¶ 17 Courts may review condemnation actions to determine if “the
essential purpose of the condemnation is to obtain a public benefit.”
Geudner, 786 P.2d at 436. Even if a condemnation decision is
motivated in part by a public benefit, “the existence of an incidental
public benefit does not prevent a court from finding ‘bad faith’ and
invalidating a condemning authority’s determination that a
particular acquisition is necessary.” Id. Bad faith factors into the
lawful public purpose analysis. Without judicial review of
condemnation actions, there would be no end to one entity
subverting another entity’s condemnation action by initiating one of
its own. See Schroeder Invs., L.C. v. Edwards, 301 P.3d 994, 999
(Utah 2013) (“[O]ne of the primary policies underlying the ‘more
necessary public use’ provision is the avoidance of serial takings.”)
(citation omitted); Lake Cty. Parks & Recreation Bd. v. Ind.-Am.
Water Co., 812 N.E.2d 1118, 1123 (Ind. Ct. App. 2004) (“[A]bsent
12
the prior public use doctrine, property could be condemned back
and forth indefinitely.”).
¶ 18 In Telluride, however, the court noted that the trial court
found that Telluride’s condemnation was not motivated by bad
faith. Town of Telluride, 185 P.3d at 169 n.7. Thus, on review, the
court “accept[ed] as fact that Telluride sought the condemnation
pursuant to [a] constitutionally valid purpose.” Id.
¶ 19 Further, “[t]he issues of necessity and public purpose are
‘closely related and, to some extent, interconnected.’” Geudner, 786
P.2d at 436 (quoting Thornton Dev. Auth. v. Upah, 640 F. Supp.
1071, 1076 (D. Colo. 1986)). “While the existence of a public
purpose is always subject to judicial review, the necessity of an
acquisition of a specific parcel of property may only be reviewed by
a court upon a showing of bad faith.” Id. Thus, if bad faith is at
issue, courts may look behind an entity’s stated condemnation
purpose and finding of necessity.
C. Analysis of the Legality of the Asserted Purpose
¶ 20 Lafayette’s argument hinges on its belief that because the
Lafayette city council determined this condemnation was necessary,
the district court cannot look behind that determination to see if it
13
was motivated by bad faith. This is incorrect. It is true that “[a]
determination of necessity . . . is not reviewable absent a showing of
bad faith or fraud.” Block 173 Assocs., 814 P.2d at 829. But here,
Erie’s motion to dismiss alleged that Lafayette’s condemnation was
motivated by bad faith and was not for a lawful public purpose.
¶ 21 To rebut Lafayette’s claim that the taking was for a public
purpose, § 38-1-101(2)(b), Erie presented evidence of Lafayette’s
alleged bad faith during the two-day evidentiary hearing. Because
Erie sufficiently showed that Lafayette’s decision could have been
motivated by bad faith, the district court appropriately reviewed
Lafayette’s finding of necessity. See Block 173 Assocs., 814 P.2d at
828-29 (“In examining the stated public purpose for a
condemnation, we look to whether the stated public purpose is
supported by the record.”).
¶ 22 Pheasant Ridge Associates Ltd. Partnership v. Town of
Burlington, 506 N.E.2d 1152, 1154 (Mass. 1987), presented a
similar question on “the lawfulness of the town’s taking in light of
the plaintiffs’ assertion that the taking was made in bad faith[.]”
The court stated that “[b]ad faith in the use of the power of eminent
domain . . . includes the use of the power of eminent domain solely
14
for a reason that is not proper, although the stated public purpose
or purposes for the taking are plainly valid ones.” Id. at 1156. That
is precisely the situation here. The stated public purpose of an
open space buffer is valid, but blocking Erie’s planned development
— planning that predated Lafayette’s condemnation petition — is
not lawful. See, e.g., R.I. Econ. Dev. Corp. v. Parking Co., L.P., 892
A.2d 87, 104 (R.I. 2006) (concluding that condemnation of a
temporary easement was inappropriate where it was motivated by a
desire for increased revenue and was not undertaken for a
legitimate public purpose). Because the district court’s
determination — that Lafayette’s primary interest in the property
was to interfere with Erie’s proposed commercial development —
enjoys record support, we defer to those factual findings. See
Glenelk Ass’n, 260 P.3d at 1120; Bd. of Cty. Comm’rs v. Kobobel,
176 P.3d 860, 866 (Colo. App. 2007) (finding no valid public
purpose for challenged condemnation of land used as a public road
to a private cemetery).
¶ 23 Although TOEURA submitted its land use application in
October 2016 (after Lafayette passed its condemnation ordinance),
Erie had begun sufficient work to develop the site including hiring a
15
developer, identifying potential tenants, and signing a development
agreement. As in Pheasant Ridge, Lafayette filed its action to
condemn the property only after Erie’s development plans began to
take shape. See 506 N.E.2d at 1157 (“The matter of taking the
subject site came forward only when the plaintiffs’ proposal became
known.”). “Although not controlling, the absence of any prior town
interest in the site or its neighborhood is instructive on the matter
of good faith.” Id. At the evidentiary hearing, Lafayette’s city
administrator tried to explain that Lafayette’s failure to include the
property on previous open space and trail priority (PROST) lists
from 2008 to 2016 did not reflect a lack of interest in the property.
He suggested that the PROST lists reflected properties Lafayette
believed Boulder County would financially partner with Lafayette to
acquire, but that Lafayette had always been interested in the
subject property. The district court judge heard all arguments and
evidence and reasonably concluded that Erie’s explanation — that
Lafayette had no interest in the property until it learned of Erie’s
proposed development — was more credible.
¶ 24 Erie also presented evidence that without the southern
twenty-two acres, the value of the property was severely diminished
16
and developing the remaining portion could be foreclosed. The
district court was within its discretion to consider the respective
economic impacts on Erie and Lafayette of losing the property and
King Soopers as a tenant, see Kelo, 545 U.S. at 490 (concluding
that a taking in furtherance of an economic development plan
constitutes a public use), and to determine Lafayette invoked its
condemnation power improperly — especially because Lafayette was
unable to explain how it determined that the condemned
twenty-two acres were necessary, see Piedmont Triad Reg’l Water
Auth. v. Sumner Hills Inc., 543 S.E.2d 844, 847 (N.C. 2001) (stating
that the condemning entity must explain what portion of the
condemned property is actually for the asserted public purpose and
what portion of the land is “in excess of the public purpose” to
prevent “the condemner from taking the entire tract of land by
[asserting] that the property is needed for a public
purpose without defining that segment of the land actually
necessary”). Here, Lafayette engaged in extensive commercial
development along Highway 287 but ignored Nine Mile Corner —
until King Soopers threatened relocation. Finally, Lafayette
presented no evidence showing why the setback incorporated in
17
Erie’s development plans would be insufficient to serve as a
community buffer.
¶ 25 Because Erie, as the property owner, met its burden of
showing bad faith, see Goltra, 66 P.3d at 174, the district court
properly examined Lafayette’s finding of necessity to determine,
with record support, that the taking to establish an open space
community buffer was pretextual and was not a lawful public
purpose. See Glenelk Ass’n, 260 P.3d at 1120. The court also
indicated that Lafayette’s public officials were highly motivated to
keep King Soopers — and the corresponding tax revenue — within
Lafayette. Accordingly, the record amply supports the district
court’s findings. See id.
IV. Attorney Fees and Costs
¶ 26 Because the district court has not issued an order on Erie’s
motion for attorney fees, we do not review the issue. See Weston v.
T & T, LLC, 271 P.3d 552, 561 (Colo. App. 2011) (“The trial court
must make sufficient findings, so that, when they are considered
together with the record, the reviewing court can conduct a
meaningful review.”).
18
V. Conclusion
¶ 27 Because Erie sufficiently showed that Lafayette’s
condemnation decision was made in bad faith and was thus not for
a lawful public purpose, we affirm the district court’s judgment.
JUDGE ASHBY concurs.
JUDGE FURMAN specially concurs.
19
JUDGE FURMAN, specially concurring.
¶ 28 I agree with my colleagues that Erie sufficiently showed that
Lafayette’s condemnation decision was made in bad faith and was
thus not for a lawful public purpose. That was the focus of the
litigation in the district court. I write separately to point out what I
consider to be a more important question that we need not answer:
Whether the Colorado Constitution, or some other authority,
authorizes one home rule municipality to exercise its eminent
domain power over public land owned by a statutory town. The
parties in the district court appear to have assumed that such
authority exists; so the focus of the litigation was over whether
Lafayette had a proper public purpose in acquiring the land. My
agreement with the division is on this narrow basis.
20