Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc.
Carousel Farms Metro. Dist. v. Woodcrest Homes, Inc.
Opinion
¶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 *405 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.
,
¶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
,
¶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.
,
¶17 We conclude that takings present mixed questions of law and fact, with public use determinations reviewed de novo.
¶18 As a general proposition, findings of fact should be reviewed for clear error, and legal conclusions should be reviewed de novo.
See
E-470
,
¶19 Second, institutional competence. For example, appellate tribunals don't (and, indeed, can't) make findings of fact.
See
Valdez
,
¶20 What does this mean for condemnation proceedings? For starters, when it comes to appellate review of public use determinations, the chaff has already been discarded. The facts have been "found" and the record set by the trial court. And while the debate over the standard of review here demonstrates that the distinction between law and fact isn't always a bright one, fact questions "usually call[ ] for proof" and legal questions "usually call[ ] for argument." Clarence Morris,
Law and Fact
,
¶21 The Supreme Court has also stated that cases that "require courts to expound on the law" are best suited toward de novo review.
See
U.S. Bank Nat. Ass'n ex rel. CWCapital Asset Mgmt. LLC v. Village at Lakeridge, LLC
, --- U.S. ----,
¶22 Therefore, takings cases present mixed issues of law and fact, and a trial court's public use determination should be reviewed de novo. Any cases from this court or the court of appeals holding otherwise are overruled. 5
B. The Taking Essentially Created a Public Benefit
¶23 We now analyze whether the taking satisfied the public use requirement of our state constitution and statutes. Because the taking's purpose was essentially to benefit the public, we reverse the division's judgment.
¶24 The Colorado Constitution requires that, when the government takes private land, it must pay just compensation and the land must be put to a public use.
See
Colo. Const. art. II, § 15. The General Assembly has confirmed the importance of this prohibition by further enacting these requirements into statutory law.
See
§ 38-1-101(1)(a), C.R.S. (2018) ("Notwithstanding any other provision of law, in order to protect property rights, without the consent of the owner of the property, private property shall not be taken or damaged by the state or any political subdivision for a public or private use without just compensation."). Additionally, even if a taking is found to satisfy the public use requirement, the land taken must also be necessary to the intended public use.
See
Mortensen v. Mortensen
,
¶25 The term "public use" is inherently amorphous. As noted above, we long ago observed that there is "no precise line" and the meaning of public use is flexible, having a "degree of elasticity capable of meeting new conditions and improvements, and the ever-increasing needs of society."
Tanner
,
¶26 These guidelines, however, only assist a court in assessing whether the taking is "essentially for public benefit."
*409
Tanner
,
¶27 Here, the taking is essentially for public benefit. Parcel C will be used for public rights of way, storm drainage, and sewer improvements. It is difficult to argue that those functions don't essentially benefit the public. It is true that Century will also benefit from the taking, but, as we already explained, that doesn't somehow change the essential benefit from public to private. If a utility company can condemn a large strip of land to supply power to a private, for-profit corporation because residents might use the power line in the future, then the District may condemn Parcel C for planned improvements that will benefit the community.
See
Shaklee
,
¶28 Significantly, Parcel C was always going to be used for those improvements-even under Woodcrest's original plan-because Parcel C is encumbered by easements and utilities and is best suited for those purposes. While review of potentially improper takings can often be problematic because courts don't know ex ante whether the land will be used as claimed, here we know from the start how the District will utilize Parcel C.
See
Ilya Somin,
Overcoming Poletown
,
¶29 The division reasoned that the eventual dedication of the land to a public purpose is insufficient because the "taking itself" wasn't for a public purpose. Carousel Farms , ¶ 35. That is, the first benefit to be received (even if a minor one) is satisfying the contractual obligations between the District and Parker, which isn't a public benefit in any sense. Id. at ¶¶ 35-37. Thus, the argument goes, because that first benefit itself isn't public, the entire taking doesn't pass constitutional muster. Id.
¶30 This analysis fails for two reasons. First, the test is, and has been since 1906, whether the taking is "essentially for public benefit."
See
Tanner
,
¶31 Second, it relies on flawed precedent on takings and public benefit. The division cites another division's opinion in
American Family Mutual
for the proposition that the taking itself must be for a public purpose, and, in turn,
American Family Mutual
cites
Trinity Broadcasting
for the same notion.
See
Carousel Farms
, ¶ 35 (citing
Am. Family Mut. Ins. Co. v. Am. Nat'l Prop. and Cas. Co.
,
¶32 In
Trinity Broadcasting
, we held that water damage that occurred because of accidental leaking from town-owned water towers wasn't a taking.
¶33 That still leaves us with the question of whether the taking was necessary for the intended public use.
See
Mortensen
,
¶34 The division, however, held that the District acted in bad faith because it was run by Century employees, who condemned the property to meet the District's contractual obligations, and only did so once negotiations with Woodcrest failed. Carousel Farms , ¶¶ 43-44. But Century and the District always sought to build public improvements and have the development annexed into Parker, and we already rejected the notion that the District and Parker's desire to fulfill their contractual obligations predominated over the essential public purpose of the taking. Moreover, developer employees frequently comprise the sole managers of special districts in their early stages. 9 Therefore, *411 neither of these two facts sufficiently demonstrates the District's bad faith.
¶35 The division's fundamental concern seems to be with the order of the condemnation: The District was only formed after Century failed in negotiations with Woodcrest. True, but there isn't an order-of-formation or order-of-negotiation requirement in the Colorado Constitution or the special district statutes. Holding that there is would involve inserting such a requirement into the statute. And that is not for us to do.
See
State v. Medved
,
¶36 Moreover, eminent domain was partly designed to overcome the "holdout" problem that occurred here.
See
Thomas W. Merrill,
The Economics of Public Use
,
¶37 The division's and Woodcrest's reliance on
Geudner
is also unavailing.
Carousel Farms
, ¶ 45. There, one family operated a special district, and all the land within the district was owned by the family or corporations controlled by the family.
Denver W. Metro. Dist. v. Geudner
,
¶38 In sum, so long as the essential benefit of a taking is public, the taking passes constitutional muster. That was the case here.
C. Private Entities, Transfers, and Takings
¶39 After briefly addressing the standard of review, we proceed to interpret section 38-1-101(1)(b)(I). We conclude that the statute doesn't apply to the taking here, as there wasn't a transfer from a public entity to a private one.
1. Standard of Review and Principles of Interpretation
¶40 Issues of statutory construction, like the issue before us, are questions of law that we review de novo.
See
Doubleday v. People
,
*412 2. No Transfer, No Private Entity
¶41 Section 38-1-101(1)(b)(I) unambiguously applies only to transfers of property to private entities. The section states, in part: "For purposes of satisfying the requirements of this section, 'public use' shall not include the taking of private property for transfer to a private entity for the purpose of economic development or enhancement of tax revenue." § 38-1-101(1)(b)(I) (emphases added).
¶42 First, this section only covers "transfer[s]."
¶43 But let's assume it somehow did. The property still needs to be conveyed to a private entity. See § 38-1-101(1)(b)(I) (" '[P]ublic use' shall not include the taking of private property for transfer to a private entity ...." (emphasis added)). The only entity involved, however, was a public one-the metropolitan district. Metropolitan districts are special districts that offer many of the same services as towns, such as safety, transportation, street improvement, and fire protection. See § 32-1-103(10), C.R.S. (2018). And, of course, they also have the power of eminent domain. See § 32-1-1004(4), C.R.S. (2018). Therefore, the District functions as a public entity, not a private one. See Public entity , Black's Law Dictionary (10th ed. 2014) (defining "public entity" as a "governmental entity, such as a state government or one of its political subdivisions"). So, even if there somehow was a transfer, it wouldn't have been to a private entity. In other words, the statute wasn't designed to limit a public entity from taking a property and keeping it.
3. Kelo Doesn't Dictate a Different Result
¶44 Both the division below and Woodcrest argue that allowing the District to do what it did here would be to permit Century to accomplish indirectly what it couldn't do directly. For them,
Kelo v. City New London
and Colorado's anti-
Kelo
statute prevent the District from finishing the developer's project.
See
§ 38-1-101(1)(b)(I) ;
Kelo v. City of New London
,
¶45 First, as we just explained, the anti-
Kelo
statute, section 38-1-101(1)(b)(I), doesn't apply when a public entity takes a property and keeps it for itself. The division implies that, through a "manipulation of circumstances," Century violated the spirit of Colorado's anti-
Kelo
statute.
Carousel Farms
, ¶ 52. But, the spirit of a statute doesn't displace its plain language.
Cf.
Doubleday
, ¶ 19,
¶46 Second,
Kelo
doesn't change any of this. In
Kelo
, the city of New London sought to condemn a wide swath of land and transfer it to a private company for economic development.
¶47 The plain language of section 38-1-101(1)(b)(I) only limits the transfer of condemned land to a private entity. Because there was no transfer and no private entity involved here, that section is inapplicable.
III. Conclusion
¶48 The Colorado Constitution requires that condemnation benefit the public, but it doesn't prohibit a private party from also benefiting. When a condemnation's benefits are essentially public, as they are here, there is no constitutional violation. We reach this conclusion through de novo review because, regardless of our previous inconsistencies, public use determinations are best suited toward such review. And although Colorado has a prohibition on economic development takings, that prohibition isn't implicated here because the only entity involved is a public one, which kept the condemned property for itself.
¶49 We therefore 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.
¶50 Accordingly, we reverse the division's judgment and remand for further proceedings consistent with this opinion.
As it turns out, Parker doesn't typically exercise its eminent domain power and had little intention of using it here.
It's unclear whether the trial court adopted the proposed findings of fact and conclusions of law verbatim or nearly verbatim, and the parties disagree on this fact. But this disagreement ultimately doesn't matter, as there is no more heightened scrutiny than de novo review, which we hold is the appropriate standard of review for public use determinations.
We granted certiorari to review the following issues:
1. [REFRAMED] Whether the court of appeals should review for clear error a trial court's determination that a condemning authority sufficiently demonstrated that a taking is for public use.
2. [REFRAMED] Whether the court of appeals erred in concluding a metropolitan district failed to prove condemnation of a parcel was for public use and necessary, where the subdivision that would principally benefit from the condemnation did not exist at the time of the taking and development of the subdivision was conditioned on the district's acquisition of the parcel.
3. [REFRAMED] Whether the court of appeals erred in concluding that a metropolitan district's condemnation of a parcel violated section 38-1-101(1)(b), C.R.S. (2017), when the condemned parcel would be dedicated to the public and would not be transferred to a private entity.
While
Glenelk
and
Fowler
are not prototypical eminent domain cases-they are private condemnation and inverse condemnation cases, respectively-the standards and rules for both types of cases are the same as eminent domain cases like the one before us, other than a few particularities not relevant here.
See
Glenelk
,
It's unclear whether the division below applied a de novo or clear error standard to its review. It implies that the standard of review is de novo when it cites to
Glenelk
.
Carousel Farms
, ¶ 32 (citing
Glenelk
,
Colorado doesn't adhere to a strict definition of public "use."
See, e.g.
,
Rabinoff v. Dist. Court
,
Permitting some private benefit by public taking may strike some as unusual. But Colorado is no stranger to this method of encouraging development. Our constitution and statutes contemplate wholly private takings for numerous non-public projects, like drains, mining, and milling. See Colo. Const. art. II, § 14 ; § 38-1-201, C.R.S. (2018) ("[T]he power of eminent domain allows ... individual property owners and corporations to condemn property ... when condemnation is necessary ... to allow beneficial use of private property."); § 38-2-104, C.R.S. (2018) (enabling "the owner of any coal or other mineral lands, not contiguous to any railroad in this state" to "exercise the right of eminent domain and condemn [property]" for the purpose of connecting mineral lands to a railroad).
This, of course, isn't to say that there's no time limitation whatsoever. It's unlikely that a taking where the public doesn't benefit for a significant amount of time would essentially benefit the public. But, an incidental private benefit that results from fulfilling antecedent contractual obligations doesn't implicate this longer time scale.
The process of developer-initiated special district formation is by no means peculiar to the District here or Colorado as a state. The Colorado Department of Local Affairs informs as follows: "Metropolitan districts, since they can offer multiple services, are often established by developers to finance, through the issuance of municipal bonds, the infrastructure necessary to support a new subdivision." Special District Assistance,
Special Districts: A Brief Review for Prospective Homeowners
3 (Colo. Dep't Loc. Aff.), https://drive.google.com/file/d/0B0m67XbcqVYRbVJYVGFmLURqeU0/view[https://perma.cc/VGT3-N6DW]. And across the United States, special districts spend nearly $175 billion and have almost $300 billion in debt. Nadav Shoked,
Quasi-Cities
,
Reference
- Full Case Name
- CAROUSEL FARMS METROPOLITAN DISTRICT, a Quasi-Municipal Corporation and Political Subdivision of the State of Colorado, Petitioner, v. WOODCREST HOMES, INC., a Colorado Corporation, Respondent.
- Cited By
- 369 cases
- Status
- Published