Here's a very important decision eminent domain decision we've been waiting to drop.
As the caption might indicate, the Colorado Court of Appeals' opinion in City of Lafayette v. Town of Erie, No. 17CA0595 (June 14, 2018), isn't your usual "condemnor vs private property owner" case. The question was whether one municipality -- a home rule city -- could take land from a neighboring statutory city. Framed that way, the issue seemed like one more to warm the cockles of municipal law junkies than takings mavens.
But no, this one should be read by every condemnation lawyer. Because it details a subject we've been thinking about a lot lately: how to ferret out an improper motive in a taking in which the condemnor's stated purpose appears to be public. Read on.
As noted above, this dispute was between two Colorado municipalities. Essentially a border dispute where the towns were merging together in the exurbs along the corridor of Highway 287. The Lafayette side of the corridor had plenty of development: a big Walmart, fast food restaurants, an auto repair shop, and a King Soopers supermarket, along with a residential development.
Erie wanted to get in on the development of the Highway 287 corridor. It formed an urban renewal authority, and purchased two vacant parcels (together, now called Nine Mile Corner). A few years later, Erie annexed Nine Mile from the renewal agency.
Turns out (surprise, surprise, surprise!) that the Nine Mile parcel was blighted. Time for urban renewal and development! And just who might the new tenant of the saved-from-blight property be? King Soopers, the same supermarket with an outlet just down Highway 287 in Lafayette. King Soopers wanted to ... sooper size ... as it was, in the court's words, developing "a larger store prototype." Erie's Nine Mile property looked mighty good.
Lafayette, it seems, wanted to keep its King Soopers ("and its corresponding tax revenue," as the court put it). If you want the parcel next to the Walmart, let us know, KS. Apparently, no deal.
Things moved fast. Just a couple of months after Lafayette found out about King Soopers maybe moving next door to the Nine Mile parcel in Erie, the Lafayette city council approved the taking of the land:
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.
Now hold on, Erie said, Nine Mile is in our town, not Lafayette's, and it can't grab land we own (that's our AO).
When Lafayette's offer to buy the land was refused, it filed an eminent domain lawsuit. Erie objected, arguing the condemnation lacked a public purpose. After a two day hearing, the trial court agreed, this purpose of this taking was to stop Erie from developing the parcel:
The articulated need of acquiring open space for the purpose of creating a community buffer between Lafayette and Erie is inconsistent with Lafayette’s actions in development the Hwy. 287 corridor. Instead, Lafayette’s actions are more closely aligned with a previously articulated goal to ensure that Erie does engage in commercial development on Nine Mile Corner.The court of appeals affirmed. The court sideskipped the muni law issue of whether property owned by a statutory city can be taken by a home rule city. Apparently both cities assumed Lafayette could reach outside its borders and take, as long as it had the right reasons. The court noted that a Colorado home rule municipality can, generally speaking, take land outside of its borders, even property already devoted to public use, as long as the the taking is for a public purpose.
But the court focused on Lafayette's actual motive for the taking, concluding that the taking was motivated by Lafayette's desire to keep King Sooper from opening a larger store prototype just over the border in Erie. And interestingly, the court also found that Lafayette's stated necessity was pretextual. (Yes, necessity.)
The court concluded Lafayette had an improper motive "to interfere with Erie's proposed commercial development." Slip op. at 15. No deal, even where the advanced public purpose (buffer zone) is, on its face, a public use:
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.
Slip op. at 15 (citing R.I. Econ. Dev. Corp. v. Parking Co., L.P., 892 A.2d 87 (R.I. 2006)).
Interestingly, the court looked at the factual record (not just the stated reasons for the taking), and tested whether Lafayette's claim that it needed a buffer zone would not be satisfied by means other than taking Nine Mile Corner. For example, "Lafayette presented no evidence showing why the setback incorporated in Erie's development plans would be insufficient to serve as a community buffer."). Slip op. at 17-18.
The taking was pretextual. The court concluded:
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.
Slip op. at 18.
Here are your takeaway points:
- Courts don't have to just accept whatever the condemnor says its reasons are for the taking. Slip op. at 13-14 ("Lafayette's argument hinges on its belief that because the Lafayette city council determine this condemnation was necessary, the district court cannot look behind that determination to see if it was motivated by bad faith. This is incorrect.").
- If there's an allegation of bad faith (improper motive), the court gets to take a hard look. Slip op. at 12 ("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.").
- Some public benefit resulting from the taking won't necessarily save it. Slip op. at 12. Motive, not the percent of public benefit, is what counts here.
- The way to see whether the stated public purpose is indeed public, the court looks to the record. Slip op. at 14 (citing City & Cty. of Denver v. Block 173 Assocs., 814 P.2d 824, 828-29 (Colo. 1991)).
- Similarly, a condemnor's statement of the necessity of the taking is subject to review for bad faith/improper motive. Slip op. at 13. But only bad faith. Without an allegation of improper motive, a court cannot reweigh the need for the taking. Id. ("Thus, if bad faith is at issue, courts may look behind an entity's stated condemnation purpose and finding of necessity.").
- The trial court did the right thing to test Erie's claim on bad faith by conducting a hearing to consider the evidence. Slip op. at 14.
- When the condemnation isn't sui generis, but there's a factual record of stuff that happened before the condemnor decided to take, the reviewing court should dive into that record. Drafting a neutral resolution of taking isn't going to insulate the condemnor from this sort of review. Slip op. at 15-16.
- When the trial court makes these type of factual findings about the condemnor's motive, the appellate court will defer. Slip op. at 15.
To us, the Colorado Court of Appeals got it right. Motive, not stated reason, is what matters. The fact that a taking motivated by stinky reasons might also have some public benefit, or that there were good motives mixed in with the bad, isn't enough. It doesn't matter, for example, that a taking may be for a public road, if the taking was motivated by other, nonpublic reasons.
One final note: you often hear about what we call "spite takings." So-and-so is a bad guy, so let's take his property. These have always stuck us as silly proposals, subject to invalidation for the reasons the Colorado court articulated.
Sidebar: the opinion includes the color map and the property image, above. We wish more courts did this.
City of Lafayette v. Town of Erie, No. 17 CA0595 (Colo. App. June 14, 2018)
