June 28, 2017

Colorado Court of Appeals: CGIA Does Not Apply to Claims by Metropolitan District Against Developers

The Colorado Court of Appeals issued its opinion in Tallman Gulch Metropolitan District v. Natureview Development, LLC on Thursday, May 18, 2017.

Colorado Governmental Immunity Act—Public Employee Immunity for Torts.

Richardson owned Natureview Development, LLC (Natureview) and platted and developed Tallman Gulch, a real estate development. In 2006, the Tallman Gulch Metropolitan District (the District) was formed to provide public improvements and services to its residents and taxpayers. Richardson was president of the District’s Board of Directors (Board). Tallman Gulch went into foreclosure, and despite being aware of the foreclosure proceedings, 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, which was sold in 2011.

The District filed various claims against Natureview and Richardson, alleging it suffered an injury when it issued over $4 million in bonds to Natureview and Richardson, despite Tallman Gulch’s foreclosure status. The District argued that Richardson breached his fiduciary duty to the District as a Board member by approving issuance of bonds in a financially reckless manner and in bad faith, failing to disclose and consider the development’s financial and foreclosure status in making the bonds decision. Defendants moved to dismiss on various grounds. As relevant here, defendants argued that the court lacked subject matter jurisdiction over the claims against Richardson under CRCP 12(b)(1), asserting that 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). The court denied the motion to dismiss.

On appeal, defendants argued it was error to conclude the CGIA did not apply to the District’s claims against Richardson. Richardson argued that as a public employee he was immune under the CGIA with regard to the District’s tort claims against him. Here, the District, the public entity that employed Richardson, sued him for his malfeasance while in its employ. The plain language of the statute is unambiguous as to the immunity of the entity or employee when called upon to defend against tort claims, but it is silent as to suits brought by a public entity plaintiff. The CGIA clearly states that its purpose is to limit the liability of public entities in defending against tort claims, and thus to lessen the burden on taxpayers who provide funding for public entities. To prevent the District from recovering its loss by allowing Richardson to claim immunity as a public employee does not effectuate the purposes of the CGIA. The Court of Appeals concluded that the district court correctly concluded that the CGIA did not on its face apply to the District’s claims against Richardson.

The order was affirmed.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Reversal Based on Firm and Definite Conviction that Mistake Had Been Made

The Colorado Court of Appeals issued its opinion in Indian Mountain Corp. v. Indian Mountain Metropolitan District on Thursday, August 11, 2016.

In 1970, Indian Mountain Corporation’s (IMC’s) predecessor in interest purchased land and water rights in Park County with the intent of creating an upscale subdivision within a community of amenities. After residential construction had begun in the Indian Mountain subdivision, SB 72-35 passed, requiring the subdivision to obtain a water-court-approved augmentation plan. The plan required homeowners to drill a well at their own expense, but for many years, IMC maintained and operated the plan at its own expense.

In 1972, the developer spearheaded the creation of the Indian Mountain Parks & Recreation District, which was converted into the Indian Mountain Metropolitan District (IMMD) in 2012 in order to be able to legally purchase and provide water services. IMMD negotiated to purchase the plan from IMC, but was not successful. In 2013, owners of a neighboring ranch approached IMC’s director about purchasing the reservoir, and eventually purchased all of the assets of IMC, including the water plan. IMC’s new owner charged IMMD for its water usage, but IMMD did not pay the invoices.

IMC filed an action in district court, seeking a declaratory injunction that it is the legal owner of the water rights and the plan and IMMD has no right, title, or interest in them. IMMD filed an answer and counterclaim, seeking a declaratory injunction that the Indian Mountain lot owners owned the plan and water rights as beneficiaries of a constructive trust. The district court issued an order in favor of IMMD. IMC filed a post-judgment motion requesting a hearing on the amount of reasonable fees it could charge IMMD for ongoing operation of the plan, which the district court denied.

On appeal, the court of appeals ruled the district court erred in finding that the water rights and augmentation plan were held in a constructive trust. The court based its reversal on a “firm and definite conviction that a mistake ha[d] been made.” Because three experts testified that the lot prices included the cost of the plan, but all advanced different theories that were directly refuted by the documentary evidence in the record, the court found reversal necessary. The court of appeals found that the district court clearly erred in finding that the lot prices included the cost of the plan, and the unjust enrichment analysis failed at the first prong.

The judgment of the district court was reversed.

Colorado Court of Appeals: TABOR Election Illegal Where Landowners Denied Participation in Election

The Colorado Court of Appeals issued its opinion in Landmark Towers Association, Inc. v. UMB Bank, N.A. on Thursday, April 21, 2016.

Real Estate—Special District—Property Taxes—Time Bar—Waiver—Bill of Costs—Prevailing Party—Taxpayer’s Bill of Rights—Notice.

A real estate developer created a special district, the Marin Metropolitan District, as a vehicle for financing the infrastructure of a to-be-developed residential community, the European Village. The District issued bonds to finance the development, which were to be paid for by property taxes imposed on landowners within the District. A group of condominium owners who did not live in European Village learned that their properties had been included in the District under suspicious circumstances. The condominium owners received no benefit from the European Village development, and they had not been notified of and did not vote in the elections to create the District and approve the bonds and taxes. Acting through their homeowners association, plaintiff Landmark Towers Association, Inc., they brought two actions, one to invalidate the creation of the District and the other—this case—to invalidate the approval of the bonds and taxes and to recover taxes they had paid to the District. Following a bench trial, the district court granted Landmark part of the relief it requested, ordering partial refund of taxes paid and enjoining the District from continuing to collect taxes from the Landmark condominium owners.

On appeal, defendants, UMB Bank, Colorado Bondshares, and the District, contended that all of Landmark’s challenges to the validity of the taxes are barred by the 30-day time limit in C.R.S. § 11-57-212. However, defendants waived this issue by not raising it at trial.

Bondshares and UMB contended that the district court erred in denying their bill of costs because they prevailed on Landmark’s fraudulent transfer and unjust enrichment claims against them. While no specific claims were asserted against Bondshares and UMB at trial, they were aligned with the District’s position and had not prevailed in the overall context of the litigation. The district court did not abuse its discretion in denying this claim.

Landmark contended that the district court erred in ruling that the District’s Taxpayer’s Bill of Rights (TABOR) election was valid. The court of appeals determined that the organizers who voted in the election were not eligible electors because the organizers’ contracts for options to purchase parcels were sham agreements. Therefore, the organizers illegally participated in the District’s TABOR election and their votes are void. It follows that the TABOR election was invalid. The court also held that those under contract to purchase units in the Landmark Towers were eligible electors in the TABOR election who did not receive constitutionally required notice. Therefore, the district court erred; the TABOR election itself was illegal and the District’s taxes to pay the bonds were illegally levied. The District must refund all taxes paid illegally with simple interest and the Landmark buyers are entitled to an order enjoining the District from levying any further taxes without proper voter approval.

The judgment was affirmed in part and reversed in part, and the case was remanded.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Clear Language of Statute Precludes Appellate Review of Special District’s Creation

The Colorado Court of Appeals issued its opinion in Marin Metropolitan District v. Landmark Towers Association, Inc. on Thursday, March 27, 2014.

Special Metropolitan District—CRS § 32-1-305(7).

In 2007, a developer and five affiliated individuals (organizers) commenced proceedings under CRS §§32-1-101 to -1807 to form a special metropolitan district within the boundaries of Greenwood Village. The organizers filed a service plan with the municipality, and the city council approved it.

On September 5, 2007, a petition for organization was filed with the Arapahoe County District Court pursuant to CRS §32-1-301 and a hearing was set for October 4, 2007. Notice was published in the local newspaper and the clerk of the court issued a notice of the hearing. At the hearing, the district court entered an order directing an organizational election be held on November 6, 2007. The election was held, and on December 6, 2007, the district court entered findings and an order and decree creating the special district. The order included within the special district the Landmark Towers Association (Landmark) condominium properties, which were under construction. Approximately 130 people were under contract to purchase, but no sales had been completed.

Landmark alleged it was not until several years after the Marin Metropolitan District (District) was formed that the owners discovered facts indicating that the District had been organized through alleged misrepresentations and an asserted fraud on the court. In 2012, Landmark intervened and moved pursuant to CRCP 60(b)(2), (3), and (5) to set aside the December 2007 order for alleged fraud on the court, a lack of subject matter jurisdiction to approve the special district, and invalidity of the order due to lack of due process. The court held a three-day evidentiary hearing and issued an order on December 17, 2012 dismissing Landmark’s motion pursuant to CRS §32-1-305(7).

On appeal, the Court of Appeals reviewed the pertinent provisions of the statutory scheme for creating a special district. Landmark argued that regardless of CRS §32-1-305(7), a court has inherent power to vacate a void judgment notwithstanding a statutory time bar; has jurisdiction to set aside a previously entered order based on fraud on the court; and has a duty to provide constitutional due process, providing jurisdiction to set aside an order that is void for lack of notice and an opportunity to be heard. The Court disagreed.

CRS §32-1-305(7) is clear and unambiguous that once an order establishing a special district is entered, it “shall be deemed final, and no appeal or other remedy shall lie therefrom.” There is one exception for an action in the nature of quo warranto commenced by the attorney general within thirty days after entry of the organizational order. Finally, the subsection mandates that the organization of the district “shall not be directly or collaterally questioned in any suit, action, or proceeding except as expressly authorized in this subsection (7).” This jurisdictional issue was dispositive. Accordingly, the order was affirmed.

Summary and full case available here.

Colorado Court of Appeals: Special District Had Authority to Enter Into Loan Agreements and Pledge District’s Assets as Collateral

The Colorado Court of Appeals issued its opinion in Todd Creek Village Metropolitan District v. Valley Bank & Trust Co. on Thursday, November 21, 2013.

Municipal District—Colo. Const. art. XI, § 6(1)—Collateral—Service Plan—General Obligation Debt.

Defendant Valley Bank & Trust Company (bank) appealed the judgment entered in favor of plaintiff Todd Creek Village Metropolitan District (special district). The judgment was reversed.

The bank contended that the district court erred in concluding that the loans made to the special district and the security agreements that it signed were invalid because they were not submitted to the voters in accordance with the Colorado Constitution. It was undisputed that (1) the board of the special district adopted a measure approving the debt; (2) the ballot issue specified the purposes of the debt; and (3) the voters approved the ballot issue. Therefore, the district court erred in reaching this conclusion.

The bank also contended that the district court erred in ruling that the loan to the special district was invalid based on the special district’s service plan. The service plan, however, did not prohibit the issuance of the general obligation debt, and the loan issued by the bank did not dramatically expand or change the special district’s service authority. Therefore, the loans to the special district did not violate the plan, and the special district had the statutory authority and voter approval to enter into the loans. Accordingly, the district court erred in invalidating the loan.

Summary and full case available here.

Colorado Court of Appeals: C.R.S. § 32-1-1001(1) Does Not Grant Special District the Right to Assign its Right to Receive Revenue

The Colorado Court of Appeals issued its opinion in SDI, Inc. v. Pivotal Parker Commercial, LLC on Thursday, October 11. 2012.

Breach of Contract—Assignment—CRS § 32-1-1001(1).

In this dispute over the terms of several contracts, defendant Pivotal Parker Commercial, LLC (Pivotal) appealed the trial court’s entry of judgment following a bench trial in favor of plaintiff SDI, Inc. (SDI). The judgment was reversed and the case was remanded.

In 1984, the Town of Parker annexed a parcel of undeveloped land known as Stroh Ranch. Cherry Creek South Metropolitan District No. 1 (District) thereafter incurred an obligation to one of the original developers of the Stroh Ranch (later called Stroh Ranch Development, LLC, or SRD) for $11,130,000. SRD later assigned the right to receive development fee revenue to SDI by a purchase and sale agreement (Seventh Amendment). SDI entered into a real estate purchase and sale contract with Pivotal (SDI–Pivotal Contract) for “Filing Nos. 14 and 15.” SDI later sought a declaratory judgment and damages for unpaid development fees pursuant to the Seventh Amendment and the SDI–Pivotal Contract. Following a bench trial, the trial court entered judgment in favor of SDI.

On appeal, Pivotal contended that the trial court erred when it determined that the District validly assigned its right to receive development fee revenue to SDI, and that SDI was entitled to collect, and charge interest on, that amount. The trial court erred in concluding it must look to common law to fill in the statutory silence in CRS § 32-1-1001(1), which defines a special district’s common powers. The statute does not give the District the power to assign its right to receive revenue to a private party. The District’s assignment to SDI in paragraph 6 of the Seventh Amendment, therefore, went beyond the District’s statutory and constitutional powers. Consequently, paragraph 6 of the Seventh Amendment is void, and the trial court erred when it determined that the District validly assigned its right to receive development fee revenue to SDI, and that SDI was entitled to collect, and charge interest on, that amount. The trial court further erred when it declared that SDI has a perpetual lien on Filing Nos. 14 and 15.

Pivotal also argued that the trial court erred when it concluded that Pivotal breached its contract with SDI. Neither the SDI–Pivotal Contract, the E&T Contract, nor the E&T Contract Assignment provided that Pivotal must transfer a portion of the purchase price of the E&T Contract to SDI as development fees. Therefore, Pivotal did not breach the contract.

Summary and full case available here.