A very interesting public use opinion from the Colorado Court of Appeals. In Carousel Farms Metropolitan District v. Woodcrest Homes, Inc., No. 2017COA149 (Nov. 30, 2017), the court invalidated an attempted taking of Woodcrest's property, concluding that the condemnation was neither for a public purpose, nor necessary for that purpose.
The facts of the case are straightforward, and rather than paraphrase, we'll just quote the opinion:
¶ 1 Appellant, Woodcrest Homes, Inc., owned a .65-acre parcel of land (referred to as Parcel C) outside the Town of Parker. Century Communities, Inc., and its subsidiaries (collectively, the Developer) acquired the parcels to the north and south of Parcel C, with a plan to create a development — Carousel Farms — comprising all three parcels. Under its agreement with the Town, the Developer could not move forward with its development plan until it acquired Woodcrest’s land.
¶ 2 Woodcrest, though, declined to sell Parcel C for the price offered. So the Developer threatened to condemn the property. When Woodcrest did not acquiesce, the Developer created the Carousel Farms Metropolitan District (District), the appellee, which promptly initiated condemnation proceedings and took possession of Parcel C.
Slip op. at 1.
In short, the developer's subdivision plans could be thwarted if the owner of Parcel C refused to sell. Which it did. So the developer created a government entity with the power of eminent domain, staffed it with its own employees, and condemned Parcel C.
In response to the objection of the owner of Parcel C that the taking was neither a public use or purpose and was not necessary, the district claimed that "the property would, upon the Town’s approval of the subdivision, be used for public improvements such as roads and sewers." Slip op. at 16. Thus, the taking was supported by a public purpose. The court rejected the argument:
We do not doubt that the planned improvements would benefit the public or, more accurately, the future residents of the proposed subdivision. The question, though, is not whether the condemned property will eventually be devoted to a public use, but whether the taking itself was for a public purpose.
Slip op. at 16 (emphasis original). So public use, standing alone, was not sufficient, and the condemnor needed to show a public purpose.
The court had other reasons for rejecting the claim that the taking was for a public purpose and was necessary: how could the taking be "necessary to the public health, safety, and welfare of the property owners and residents of the District for the District to construct the Public Improvements," when, "[a]t the time of the resolution, the District had no residents, the only two property owners having sold their property to the Developer"? Slip op. at 9.
Plus, the District was essentially bootstrapping its reasons. At the time of the taking of Parcel C, there was no subdivision. Indeed, the subdivision approval was conditioned on the successful taking. "Thus," the court held, "without Parcel C, there was no likelihood of a subdivision and no necessity for the public improvements that purportedly justified the condemnation in the first place. In other words, the taking of Parcel C was a step removed from any public purpose." Slip op. at 17. The taking justified itself.
The court concluded "the essential purpose of the taking itself was to ensure that the terms and conditions of the Agreement were satisfied so that the Developer could seek final approval of its final plat in the first place." Slip op. at 18. And here's the money quote:
When the primary purpose of a condemnation is to advance private interests, even if there will be an eventual public benefit, the condemnation is not for a public purpose
Slip op. at 18.
Lacking a public purpose, the taking obviously wasn't necessary to further a public purpose, and "the evidence of bad faith is substantial," because the directors of the District were all employees of the developer, and thus concededly adopted the taking and necessity resolutions while operating under a conflict of interest. Slip op. at 19-20.
This evidence establishes that, when the Developer could not obtain Parcel C at the desired price, the District stepped in to assist the Developer and ensure that the development process could proceed. The fact that the Developer threatened to condemn Parcel C when it had no authority to do so, and then created the District (which promptly initiated condemnation proceedings), suggests a kind of alter ego relationship between the District and the Developer, as does the fact that the Developer signed the amendments to the Agreement, but the District did not. In other words, the Developer spoke for the District and the District acted for the Developer.
Slip op. at 21-22.
In sum, "[t]he immediate purpose of the taking was to ensure the Developer’s compliance with the contract, slip op. at 23, and "[w]e conclude that the District failed to demonstrate that its condemnation of Parcel C was for a public purpose and necessary for such a purpose. And, by taking Parcel C, effectively on behalf of the Developer, the District also ran afoul of section 38-1-101(1)(b)(I) — the statue prohibiting a taking for transfer to a private entity for the purpose of economic development." Slip op. at 15-16.
Finally, the court concluded the transfer violated Colorado's "anti-Kelo" statute by transferring private property from one private owner to another.
This case resonates with us, because we represented the property owner in a very similar case, and that similarly ended up making good law, even if the eventual result wasn't righteous. In that case, a private developer and the County entered into a development agreement which committed the developer to acquire private property for what would eventually road dedicated to the public by the developer. See video above. If the developer could not acquire these properties on the market, the development agreement committed the County to exercising its power of eminent domain to take the properties by force.
As in the Colorado case, a property owner did not voluntarily sell, and the County eventually condemned the property (twice, simultaneously!). The County claimed that the fact that the property being taken would likely end up as a publicly-owned road and that the resolution of taking was silent on the private benefit and motivation, meant that the taking was essentially immune from judicial scrutiny. The Hawaii Supreme Court concluded that courts have an obligation to allow a property owner to prove that the stated reasons supporting a taking are pretextual, and cannot simply rely on the government's proffered reasons, even where the use may eventually be public.
Thus, we think the Colorado court's opinion is a welcome addition to ours and others which conclude that the condemnor's actual purpose matters, and not merely its proffered purpose, or even eventual use, and that courts should take seriously their role in evaluating exercises in eminent domain for actual public use and purpose.
