Tallman Gulch Metropolitan District v. Natureview Development, LLC

COLORADO COURT OF APPEALS 2017COA69
Court of Appeals No. 16CA0861
Douglas County District Court No. 15CV31017
Honorable Paul A. King, Judge
Tallman Gulch Metropolitan District,
Plaintiff-Appellee,
v.
Natureview Development, LLC and Michael Richardson,
Defendants-Appellants.
ORDER AFFIRMED
Division V
Opinion by JUDGE BOORAS
Román and Márquez*, JJ., concur
Announced May 18, 2017
Kutak Rock LLP, Reid A. Page, Denver, Colorado, for Plaintiff-Appellee
Senter Goldfarb & Rice, LLC, Eric M. Ziporin, Ryan F. McGrath, Denver,
Colorado; Sherman Howard LLC, Joseph J. Bronesky, Denver, Colorado, for
Defendants-Appellants
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2016.
¶1 Defendants, Natureview Development, LLC and Michael
Richardson, appeal the district court’s order holding that the
Colorado Governmental Immunity Act did not apply to the claims of
plaintiff, Tallman Gulch Metropolitan District, against Richardson.
We affirm.
I. Background
¶2 Richardson, owner of Natureview Development (Natureview),
platted and developed Tallman Gulch, a real estate development in
Douglas County. In 2006, the Tallman Gulch Metropolitan District
(the District) was formed to provide public improvements and
services to its residents and taxpayers. Metropolitan districts may
impose and collect taxes upon properties within their boundaries to
collectively pay for their authorized services. Richardson was the
president of the District’s Board of Directors (Board).
¶3 Upon its formation, the District submitted a service plan to
Douglas County. The plan included details of the improvements
and services the District planned to provide and financial
assumptions regarding expected costs and the expected revenues
that would fund the costs:
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 the District was to provide (1) street and traffic safety
improvements; (2) storm sewers; (3) water and sanitation
distribution; and (4) landscaping and parks and
recreation;
 the total cost of anticipated improvements was
approximated at $6,053,350;
 the District was authorized to issue up to $6,000,000 in
bonded indebtedness; and
 the financial plan forecasted sales of eighty-six lots
between 2007 and 2013, which would provide revenue
with which the District could repay the bonds.
¶4 Natureview and Richardson borrowed approximately
$8,600,000 from Community Banks of Colorado (CBC) to build out
the public infrastructure in Tallman Gulch. Tallman Gulch, its
improvements, and any rents received from Tallman Gulch, served
as collateral for the loan.
¶5 Sales in Tallman Gulch did not meet the expectations set forth
in the service plan; only four out of the anticipated eighty-six lots
were sold between 2007 and 2011. In 2009, Natureview completely
drew down its construction loan but only constructed one-third of
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the public infrastructure for the neighborhood. Richardson (as
president of the District’s Board) sent himself (as manager of
Natureview) a letter purporting to accept nearly four million dollars
of improvements on behalf of the District, attaching a “Bill of Sale”
for landscaping signed by Richardson as manager of Natureview.
¶6 Natureview assigned the construction loan to another
Richardson-related entity in 2009, which then defaulted on the loan
in 2010. In 2011, CBC initiated foreclosure proceedings. On May
2, 2011, the then loan holder filed a motion to authorize the public
trustee sale of Tallman Gulch. Despite being aware of the
foreclosure proceedings, on May 23, 2011, Richardson, acting as
president of the District’s Board, signed off on the issuance of
$4,214,000 in bonds to Natureview in exchange for the then-
existing infrastructure improvements in Tallman Gulch. Ten days
after the bonds were issued, the district court authorized the public
trustee sale of Tallman Gulch. Tallman Gulch was sold on July 6,
2011.
¶7 The District alleges that Richardson and Natureview did not
disclose prior to the issuance of the bonds the financial status, the
failure to meet sales expectations, the pending foreclosure, and the
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conflict of interest presented by Richardson’s involvement on both
sides of the bond transaction. The District asserted the following
claims against both Richardson and Natureview:
(1) securities fraud;
(2) negligent misrepresentation;
(3) false representation; and
(4) fraudulent concealment.
The District claimed breach of fiduciary duty against Richardson,
and it claimed unjust enrichment against Natureview. Finally, the
District sought a declaratory judgment reducing the value of the
bonds and interpreting the bonds.
¶8 Defendants moved to dismiss the District’s claims on various
grounds. As relevant here, defendants argued that the district
court lacked subject matter jurisdiction over the claims against
Richardson under C.R.C.P. 12(b)(1). Defendants asserted the
claims were based on Richardson’s actions as an officer of the
District, and were thus barred by the Colorado Governmental
Immunity Act (CGIA), sections 24-10-101 through -120, C.R.S.
2016.
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¶9 The district court denied defendants’ motion to dismiss the
District’s claims. Specifically, the district court concluded that the
CGIA did not apply to the claims of the District, itself a public
entity, against Richardson, but even if the CGIA applied to this type
of litigation, Richardson’s actions underlying the District’s claims
were outside the scope of his employment with the District, and the
CGIA would not apply to those claims. Defendants now appeal.
See § 24-10-108, C.R.S. 2016 (the district court’s decision on
sovereign immunity is a final judgment subject to interlocutory
appeal).
II. Analysis
¶ 10 Defendants contend that the district court erred when it
concluded that the CGIA did not apply to the District’s claims
against Richardson. We agree with the district court that the CGIA
does not apply here.
A. Standard of Review and Principles of Statutory Construction
¶ 11 “Determining whether there is immunity under the CGIA is a
question of subject matter jurisdiction to be decided pursuant to
C.R.C.P. 12(b)(1). We review a district court’s interpretation of the
CGIA de novo.” Denver Health & Hosp. Auth. v. City of Arvada ex
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rel. Arvada Police Dep’t, 2016 COA 12, ¶ 38 (citation omitted) (cert.
granted Sept. 12, 2016); see also Munoz v. Am. Family Mut. Ins. Co.,
2017 COA 25, ¶ 7 (we review issues of statutory construction de
novo). In interpreting a statute, our primary objective is to
ascertain and effectuate the intent of the General Assembly.
Specialty Rests. Corp. v. Nelson, 231 P.3d 393, 397 (Colo. 2010);
Munoz, ¶ 8. “If the statutory language is clear, we interpret the
statute according to its plain and ordinary meaning.” Specialty
Rests. Corp., 231 P.3d at 397. We read words and phrases in
context and construe them according to their common usages.
Jefferson Cty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935
(Colo. 2010).
¶ 12 “We also interpret a statute in a way that best effectuates the
purpose of the legislative scheme.” Perfect Place v. Semler, 2016
COA 152M, ¶ 20. “When a court construes a statute, it should read
and consider the statute as a whole and interpret it in a manner
giving consistent, harmonious, and sensible effect to all of its
parts.” Gagne v. Gagne, 2014 COA 127, ¶ 26. “In doing so, a court
should not interpret the statute so as to render any part of it either
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meaningless or absurd.” Id. If a statute is unambiguous, we look
no further. Id. at ¶ 27.
B. Colorado Governmental Immunity Act
¶ 13 “Before 1971, public entities enjoyed common-law sovereign
immunity from suit and were liable for compensatory damages for
injuries in tort only when constitutional or statutory provisions
operated to waive the government’s immunity.” City of Colorado
Springs v. Conners, 993 P.2d 1167, 1171 (Colo. 2000). In 1971, the
supreme court decided three cases that abrogated Colorado’s
common law of governmental immunity. See Springer v. City & Cty.
of Denver, 13 P.3d 794, 798 (Colo. 2000). The supreme court noted
that, in reaching these decisions, it wished to leave the decision of
whether to restore governmental immunity in whole or in part to the
General Assembly. Evans v. Bd. of Cty. Comm’rs, 174 Colo. 97,
105, 482 P.2d 968, 972 (1971), superseded by statute, Colorado
Governmental Immunity Act, Ch. 323, sec. 1, §§ 130-11-1 to -17,
1971 Colo. Sess. Laws 1204-11.
¶ 14 In 1971, the legislature adopted the CGIA, providing sovereign
immunity for public entities in tort actions (or actions that could lie
in tort), absent one of the enumerated exceptions. 1971 Colo. Sess.
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Laws at 1204-11; Conners, 993 P.2d at 1171-72. The legislature
described the doctrine of sovereign immunity “whereunder the state
and its political subdivisions are often immune from suit for injury
suffered by private persons” as sometimes inequitable. § 24-10-
102, C.R.S. 2016. It later declared that a central purpose of the
CGIA is to limit the potential liability of public entities for
compensatory money damages in tort, because “unlimited liability
could disrupt or make prohibitively expensive the provision of . . .
essential public services and functions.” Ch. 166, sec. 1, § 24-10-
102, 1986 Colo. Sess. Laws 873. “This form of liability places a
burden upon taxpayers, who ultimately face the ‘fiscal burdens of
unlimited liability’ incurred by the state in tort suits.” Conners, 993
P.2d at 1172 (quoting § 24-10-102).
¶ 15 The CGIA establishes sovereign immunity for public entities.
Further, it extends to public employees in limited circumstances in
tort actions:
It is the intent of this article to cover all
actions which lie in tort or could lie in tort
. . . . No public entity shall be liable for such
actions except as provided in this article, and
no public employee shall be liable for injuries
arising out of an act or omission occurring
during the performance of his or her duties
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and within the scope of his or her employment,
unless such act or omission was willful and
wanton . . . .
§ 24-10-105(1), C.R.S. 2016; see also § 24-10-106(1), C.R.S. 2016.
¶ 16 Because the CGIA derogates the common law, we construe its
grants of immunity strictly. See, e.g., Burnett v. State Dep’t of Nat.
Res., 2015 CO 19, ¶ 11.
C. Analysis
¶ 17 Richardson was a public employee for the purpose of the
CGIA, as an officer of a public entity, the District. First Nat’l Bank
of Durango v. Lyons, 2015 COA 19, ¶ 9; see § 24-10-103(4)(a), (5),
C.R.S. 2016. He argues that as a public employee he was immune
under the CGIA with regard to the District’s tort claims against him.
We disagree.
¶ 18 In the present litigation, the District, the public entity that
employed Richardson, sued him for his malfeasance while in its
employ.
¶ 19 The plain language of sections 24-10-105 and -106 is
unambiguous in its contemplation of the immunity of the public
entity, or public employee as an extension of the entity, when called
upon to defend against tort claims raised. However, these sections
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of the statute are silent as to the application of the CGIA to suits
brought by a public entity plaintiff, and thus the scope of the
statute is ambiguous. See People v. Paloma, 272 P.3d 1106, 1112
(Colo. App. 2011) (where a statute is silent on and does not appear
to contemplate the issue presented, the silence renders it
ambiguous as to scope).
¶ 20 Construing the CGIA as a whole, and interpreting it in a
manner that gives consistent, harmonious, and sensible effect to all
of its parts, we look to the statement of policy contained within
section 24-10-102. The legislature describes sovereign immunity as
a concept that arises when a public entity is being sued for “injury
suffered by private persons.” § 24-10-102 (emphasis added). In
this case, however, injury was suffered by a public entity.
¶ 21 In our view, where a public entity, as plaintiff, asserts injuries
caused by one of its employees, it would frustrate the purpose of
the CGIA to permit the employee to shield himself or herself with
the sovereign immunity meant to protect a public entity, and a
public employee only when acting as an extension of the entity. The
statute clearly states that the purpose of the CGIA is to limit the
liability of public entities in defending against tort claims, and thus
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to lessen the burden on taxpayers who provide funding for public
entities.
¶ 22 In the present case, the District is alleging that it suffered an
injury when it issued over four million dollars in bonds to
Natureview and Richardson despite Tallman Gulch’s foreclosure
status. Specifically, the District argues that Richardson breached
his fiduciary duty to the District as a member of the Board when he
approved the issuance of the bonds in a financially reckless manner
and in bad faith, favoring his own interests over those of the
District. Richardson failed to disclose and consider the
development’s financial and foreclosure status in making the bonds
decision.1 To prevent the District from recovering this loss by
1 While the District makes numerous claims pertaining to
misrepresentations allegedly made by Richardson, we agree with
the district court’s conclusion that, other than the breach of
fiduciary duty claim discussed here, the alleged misrepresentations
were made by Richardson while acting in his capacity as a private
developer for Natureview, not as a public employee. For example,
the representations Richardson made to the Board in seeking
approval of the bond issuance and his failure to correct
Natureview’s previous statements within the service plan regarding
the development’s failure to meet sales expectations, which underlie
the District’s claims for securities fraud, negligent
misrepresentation, false representation, and fraudulent
concealment, were made in his role as the developer.
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allowing Richardson to claim immunity as a public employee does
not effectuate the purpose of the CGIA. Thus, construing the plain
language of the CGIA, and acknowledging that we construe its
grants of immunity strictly, we conclude the district court correctly
concluded that the CGIA did not, on its face, apply to the District’s
claims against Richardson.
¶ 23 This conclusion is limited to the assertion of CGIA immunity
under the facts presented here, and we do not speak to other
circumstances under which a public entity, as plaintiff, may sue its
own employees for their conduct, or may sue another public entity.
Because this is an issue for the legislature, we express no opinion
regarding the scope of the CGIA in civil lawsuits containing
circumstances not presented here.
¶ 24 In view of our disposition, we do not address defendants’
remaining contentions.
III. Conclusion
¶ 25 The order is affirmed.
JUDGE ROMÁN and JUDGE MÁRQUEZ concur.
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