source: Caselaw Access Project

author: Opinion by JUDGE RICHMAN Terry, J., concurring in part and dissenting in part JUDGE TERRY, concurring in part and dissenting in part.

license: Public Domain

text:
    OWNERS INSURANCE COMPANY, a Michigan corporation, Petitioner-Appellant, v. DAKOTA STATION II CONDOMINIUM ASSOCIATION, INC., a Colorado corporation, Respondent-Appellee.
    Court of Appeals No. 16CA0733
    Colorado Court of Appeals, Division VII.
    Announced July 27, 2017
    Levy Wheeler Waters, PC, Karen H. Wheeler, Matthew W. Hall, Englewood, Colorado, for Petitioner-Appellant
    Orten Cavanagh & Holmes, LLC, Jonah G. Hunt, Denver, Colorado, for Respondent-Appellee
   Opinion by JUDGE RICHMAN

¶ 1 Plaintiff, Owners Insurance Company (Owners), appeals the trial court's judgment denying its petition to vacate an appraisal award. We affirm.

I. Background

¶ 2 Owners issued a property damage insurance policy to Dakota Station II Condominium Association, Inc. (Dakota). Wind and hail storms damaged buildings in the residential community owned by Dakota. The parties combined the losses into a single insurance claim but disagreed about the total amount of damages.

¶ 3 The parties then invoked the insurance policy's appraisal provision. Each party selected an appraiser. When the appraisers submitted proposed awards of differing amounts, they nominated a neutral umpire as provided in the insurance policy.

¶ 4 In calculating a final award of approximately $3 million, the umpire adopted four damage estimates from Owners' appraiser, Mark Burns, and two estimates from Dakota's appraiser, Laura Haber. Burns disagreed with the final award and declined to sign the final determination of costs. However, the umpire and Haber agreed and signed the award, and Owners paid Dakota.

¶ 5 Dakota later sued Owners in federal court, Dakota Station II Condo. Ass'n, Inc. v. Auto-Owners Ins. Co. , No. 14-CV-2839-RM-NYW, 2015 WL 6591888 (D. Colo. Oct. 30, 2015) (unpublished opinion), for breach of contract and unreasonable delay in paying insurance benefits. During discovery in the federal suit, Owners learned several facts about Haber that it alleges demonstrate she was not an impartial appraiser as required by statute and by the insurance policy.

¶ 6 Owners then filed a petition to vacate the appraisal award under section 13-22-223, C.R.S. 2016, of the Colorado Uniform Arbitration Act (CUAA). Following a hearing, the trial court denied the petition in an oral ruling on March 11, 2016.

II. Timeliness of Motion to Vacate

¶ 7 Dakota initially contends Owners failed to timely file a "motion" to vacate within ninety-one days of learning of its basis for vacating the award as required by section 13-22-223(2) because Owners' filing was captioned a "petition" rather than a "motion." We disagree. While the CUAA refers to a "motion" to vacate, rather than a "petition," the substance of the pleading, and not its title, governs. Hawkins v. State Comp. Ins. Auth. , 790 P.2d 893, 894 (Colo. App. 1990). We conclude that Owners' petition satisfied the statutory requirement for a timely motion to vacate the award.

III. Appraiser Impartiality Under the CUAA

¶ 8 Owners contends the trial court erred when it did not analyze the insurance policy's appraisal dispute provision, as well as the hiring and conduct of Haber, under the CUAA's standards for a neutral arbitrator in section 13-22-211(2), C.R.S. 2016. We find no error because the policy does not incorporate, and the parties' stipulation was not sufficiently specific to require application of, the CUAA's standards, in particular section 13-22-211(2).

¶ 9 The appraisal provision of the policy states:

If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser . The two appraisers will select an umpire. If they cannot agree, either may request that the selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.

(Emphasis added.)

¶ 10 At the hearing, the parties initially stipulated orally that the CUAA applies to their appraisal dispute. The trial court's order did not state whether it was applying any of the CUAA provisions. The UAA provides the parties with choices to be made regarding whether to have party arbitrators or impartial arbitrators. Because the parties' stipulation here did not specify whether the appraisers were to be treated as arbitrators, and if so, whether they were to be held to the statutory standard for impartial arbitrators, the UAA sections regarding disclosures to be made by impartial arbitrators did not apply. See sections 13-22-211 and 13-22-212, C.R.S. 2016.

¶ 11 Because of these ambiguities, Owners has not established that, even if Dakota's appraiser violated the CUAA, reversal would be required. Also, at least one other court has concluded an identical appraisal provision was not subject to the CUAA. Auto-Owners Ins. Co. v. Summit Park , 129 F.Supp.3d 1150, 1152-55 (D. Colo. 2015) (applying Colorado law).

IV. Appraiser Impartiality Under Insurance Policy

¶ 12 Whether Haber was an "impartial appraiser" under the insurance policy turns on the meaning of that term, which we must construe.

A. Standard of Review

¶ 13 We review the interpretation of contracts de novo.

Fibreglas Fabricators, Inc. v. Kylberg , 799 P.2d 371, 374 (Colo. 1990).

¶ 14 The primary goal of contract interpretation is to give effect to the intent of the parties. Ad Two, Inc. v. City & Cty. of Denver , 9 P.3d 373, 376 (Colo. 2000). We determine the parties' intent by looking to the plain and generally accepted meaning of the contractual language. Copper Mountain, Inc. v. Indus. Sys., Inc. , 208 P.3d 692, 697 (Colo. 2009).

¶ 15 "The meaning and effect of a contract are to be determined from a review of the entire instrument, not merely from isolated clauses or phrases. A contract should be interpreted to harmonize and, if possible, to give effect to all its provisions." First Christian Assembly of God, Montbello v. City & Cty. of Denver , 122 P.3d 1089, 1092 (Colo. App. 2005) (alteration omitted) (citation omitted).

¶ 16 "The overriding rules of contract interpretation require a court to apply the plain meaning of the words used subject to interpretation from the context and circumstances of the transaction." Id. (citations omitted).

¶ 17 Written contracts that are complete and free from ambiguity will be found to express the intention of the parties and will be enforced according to their plain language. Ad Two , 9 P.3d at 376. A contract provision is ambiguous if it is reasonably susceptible of more than one meaning. Cheyenne Mountain Sch. Dist. No. 12 v. Thompson , 861 P.2d 711, 715 (Colo. 1993).

B. Impartiality Under This Policy

¶ 18 The only policy requirement clearly applicable to Haber's conduct is the policy provision providing that in the event the insured and the insurer disagree on the amount of the loss, either may demand an "appraisal" and each "will select a competent and impartial appraiser." The phrase "impartial appraiser" is not further defined in the policy. Thus it was the trial court's task to determine the meaning of the provision and whether Haber met the criteria of an impartial appraiser.

¶ 19 Although the phrase appears in many insurance policies, apparently no Colorado appellate court has construed it. See Auto-Owners Ins. Co. v. Summit Park Townhome Ass'n , No. 14-CV-03417-LTB, 2016 WL 1321507, at *4-7 (D. Colo. Apr. 5, 2016) (unpublished mem. opinion and order).

¶ 20 The trial court determined the appraisers provided for in this policy need not be impartial in the same manner as a judge, umpire, or arbitrator. Rather, they needed to be impartial in the sense that experts at a trial, such as a forensic chemist, need to be: rendering their opinions based on their experiences and not allowing themselves to be influenced by the litigants. We understand this to mean that an impartial appraiser in rendering his or her valuation opinion applies appraisal principles with fairness, good faith, and lack of bias. We conclude this is the correct reading of the policy provision and its intent.

¶ 21 We first note that because the policy does not define "impartial," any ambiguity in the term is construed against Owners, who drafted the policy. Union Ins. Co. v. Houtz , 883 P.2d 1057, 1061 (Colo. 1994) ("Once an ambiguity in the policy language is found, it is construed against the drafter of the document and in favor of the insured.").

¶ 22 We then consider the context in which the term is used. Owners contends the word "impartial" has a common and usual meaning. Citing to Black's Law Dictionary, Owners asserts that "impartial" means "not favoring one side more than another; unbiased and disinterested; unswayed by personal interest." While we agree that an impartial appraiser should be unbiased and unswayed by personal financial interest, like an expert witness at trial, we do not agree that the impartial appraiser called for in this policy may not favor one side more than the other. We reach this conclusion from the context of the policy provision taken as a whole.

¶ 23 The relevant paragraph of the policy goes on to provide that the two appraisers will select an "umpire," and if the two appraisers fail to agree on the amount of loss, they will submit their differences to the umpire. Therefore, this language distinguishes the "impartial" appraisers from the umpire. Under this method, no one appraiser determines the final outcome; rather it is left to the umpire to resolve the differences between the appraisers. The policy plainly contemplates that the appraisers will put forth a value on behalf of the party that selects them. The umpire, who is not selected by either party, makes the final determination.

¶ 24 Thus, the policy does not hold an appraiser to the standard of "not favoring one side more than another," in the sense that a judge or arbitrator (or the umpire under this policy) would be required to be impartial. Rather, we agree with the observation of the Iowa Supreme Court in this regard:

The appraisal procedure involves an adjudication of a dispute between parties; however, the selected participants must act fairly, without bias, and in good faith. The intent of the appraisal procedure is not to provide appraisers who possess the total impartiality that is required in a court of law. The appraisers do not violate their commitment by acting as advocates for their respective selecting parties. However, appraisers should be in a position to act fairly and be free from suspicion or unknown interest.

Cent. Life Ins. Co. v. Aetna Cas. & Sur. Co. , 466 N.W.2d 257, 261 (Iowa 1991). So long as the selected appraiser acts fairly, without bias, and in good faith, he or she meets the policy requirement of an impartial appraiser.

¶ 25 Owners challenges this interpretation, citing to Noffsinger v. Thompson , 98 Colo. 154, 156, 54 P.2d 683, 683 (1936) ("An arbitrator, in the discharge of his duties as such, is bound to exercise a high degree of impartiality, without the slightest degree of friendship or favor toward either party.") (citation omitted). But that case involved the impartiality of an arbitrator, without the policy context discussed above.

¶ 26 The dissenting opinion cites to Providence Washington Insurance Co. v. Gulinson , 73 Colo. 282, 283-85, 215 P. 154, 155 (1923), a case where the insurance policy provided for the selection of "two competent but disinterested" appraisers. The partial dissent cites the case for the proposition that "[a]ppraisers are not referees, but their duty of impartiality is the same" as that of a referee. Id. at 285, 215 P. at 155. However, the lack of impartiality in that case arose when one appraiser and the umpire entered the award without notice to the third appraiser, and, for that reason, the court did not approve the award.

V. The Trial Court's Determination as to Haber's Impartiality

¶ 27 The trial court considered the evidence and arguments put forward by Owners that Haber was not impartial. Applying its understanding of the policy requirement of an impartial appraiser, it made findings and reached conclusions on each contention of impartiality. On appeal, Owners contends the trial court erred in making its findings or reached the wrong conclusion. We review each contention in turn, deferring to the trial court's findings of fact but considering de novo its conclusions of law. Loveland Essential Grp., LLC v. Grommon Farms, Inc. , 251 P.3d 1109, 1117 (Colo. App. 2010).

A. Haber's Meeting With Dakota's Board Prior to Appointment

¶ 28 Owners argues that Haber improperly met with the Dakota Board of Directors, and its public adjuster, prior to being chosen as the appraiser. There was no dispute that the meeting took place. But the trial court found it was proper, and that any rule prohibiting a pre-appointment meeting would discourage policyholders from pursuing the appraisal process provided for in the policy. The trial court emphasized that a pre-appointment meeting with an appraiser is prudent because Dakota could not be expected to authorize an expensive appraisal without some basis for believing it had a meritorious claim justifying the expense. Accordingly, the trial court rejected this claim.

¶ 29 We agree. Where an insured is contemplating retaining an appraiser, a pre-appointment meeting with the appraiser does not render the appraiser's final valuation impermissibly impartial.

¶ 30 Although not specifically referenced by the trial court, Haber's trial testimony revealed that at her pre-appointment visit she advised that there was "storm related damage" to the property, and a Dakota representative understood that the roofs needed replacement. But those observations, as the trial court found, were preliminary observations that supported retention of, and incurring the cost of, an appraiser. There was no evidence identified by Owners that Haber formed an opinion of the appraisal amount before retention, or before conducting her appraisal.

¶ 31 To the extent Owners argues that Haber was obligated to disclose this meeting under section 13-22-212, we disagree because, as noted above, the provisions of the CUAA do not apply.

B. Haber's Communication With Adjuster

¶ 32 Owners also argues Haber acted improperly by communicating ex parte with the public adjuster retained by Dakota during her appraisal.

¶ 33 The trial court noted this argument was based on provisions in an Insurance Commissioner's bulletin. But it found that the bulletin did not prohibit communications between Haber and Dakota while Haber performed her appraisal. The bulletin did prohibit such communications after Haber concluded her work and after the final umpire's decision. Therefore, the trial court concluded that Haber did nothing improper by contacting Dakota or its agent, referred to as the public adjuster.

¶ 34 Owners has not demonstrated any clearly erroneous findings by the trial court, and we agree that the trial court's factual conclusion is supported by the record.

C. Haber's Failure to Disclose Policy Coverage Period to Burns

¶ 35 Owners argues Haber had a "heightened duty to disclose" to Burns, Owners' appraiser, that the policy ending November 2012 did not cover damage from an August 2013 hailstorm. Owners claims Burns may have believed he was subject to the Insurance Commissioner's bulletin's restrictions on contacts between an appraiser and the insurance company, and thus would not have known the policy period. The trial court rejected this argument for three reasons.

¶ 36 First, the final appraisal award entered by the umpire indicated the dates of loss as May 24, 2012, and June 12, 2012. Both dates are within the policy period.

¶ 37 Second, Haber had no reason to believe Burns was under a misapprehension about the coverage period, and therefore had no duty to disclose the coverage period even if she had had such a duty in other circumstances.

¶ 38 Third, neither Haber, nor anyone representing Dakota, misled Burns into thinking that Owners was responsible for losses incurred in 2013.

¶ 39 Owners has not demonstrated any clearly erroneous findings by the trial court in this regard, and we agree that the trial court's factual conclusions are supported by the record.

D. Haber's Failure to Disclose Roofer Estimates That Predated June 2012

¶ 40 Owners argues Haber evinced partiality by failing to disclose the roofer estimates and recommendations gathered by Dakota before June 2012. Owners theorized these estimates might reveal the roofs' condition before the events during the policy period. The trial court rejected this argument, finding that Owners made no inquiry into these matters, and Dakota and Haber never misled Owners or failed to correct a misconception held by Owners. The trial court further found that the insurance policy did not create a duty for Dakota to inform Owners about the roof conditions, other than providing access for an investigation. Finally, the trial court concluded Dakota did not have a fiduciary duty to Owners that created a disclosure obligation. Thus, this contention did not demonstrate a lack of impartiality by Haber.

¶ 41 Again, because we cannot say that these factual findings were clearly erroneous, we concur with the conclusions of the trial court. To the extent Owners argues that the CUAA created a disclosure duty, we have already concluded the CUAA does not apply here. We also agree that the law does not place a fiduciary duty on an insured to make disclosures to an insurance company.

E. Haber Included A Claim for Damage to Siding Not Caused by the Hailstorm

¶ 42 Owners argues Haber's lack of impartiality was shown by her collaboration with the public adjuster to include damage to siding not caused by the covered hailstorms (but rather by a later storm) in the insurance claims. The trial court found that while some documentation indicated Dakota did not intend to include such damage, there was also documentation indicating a need to replace the siding due to damage that occurred before the later uncovered storm. And the trial court found the public adjuster noted damage to the siding and that Dakota would have to replace the siding and make roof repairs to conform to code. Therefore, the trial court found that there was no evidence showing a lack of damage to the siding during the covered period, and implicitly no improper conduct by Haber reflecting a lack of impartiality.

¶ 43 Again, because we cannot say that these factual findings were clearly erroneous, we concur with the trial court's conclusions.

F. Haber's Failure to Disclose the Policyholder's Tactical Decision

¶ 44 Owners argues Haber's lack of impartiality was evinced by her failure to disclose Dakota's "tactical decision" to pursue coverage under the Owners policy before deciding whether to bring a new claim against the subsequent carrier.

¶ 45 The trial court made no finding about whether Haber knew of this "tactical decision," nor do we find in Owners' briefs any record citation supporting a conclusion that Haber knew. Nonetheless, the trial court found that pursuing the claim against Owners was a "rational decision" by Dakota, and, in any event, once Dakota made the claim the tactic had "nothing to do with the appraisal process" set forth in the policy. The trial court also found that Haber had no duty to Owners other than to be impartial, and no duty to tell one side what the other side's tactical strategy "consisted of."

¶ 46 On appeal, Owners has not demonstrated, or even argued, that these factual findings are clearly erroneous. Nor has it cited to any law that holds an appraiser has a duty to disclose an insured's strategy to an insurer, even if the appraiser knows of the strategy.

G. Haber's Duty to Disclose That She and the Public Adjuster Were "Partners"

¶ 47 Owners claims Haber and Benglen, Dakota's retained public adjuster, were partners. The trial court concluded Haber was required to disclose such a relationship if it existed. But it found the evidence "clearly demonstrates" that the allegation was not true. Although the public adjuster referred to Haber as "his partner," the trial court found "absolutely no evidence that they were partners or had any business relationship" akin to the ones described in section 13-22-212(1)(b).

¶ 48 On appeal, Owners contends this finding rests on an erroneous application of partnership law, or a misapprehension of the facts. We disagree.

¶ 49 Citing to section 7-64-308, C.R.S. 2016, Owners argues that "holding out" oneself as a partner creates a partnership. But the statute concerns liability to someone who relied on a representation of partnership. That is not the situation here. To the contrary, Owners asserts it did not know of the asserted relationship. Therefore the statute is inapplicable.

¶ 50 Owners argues the relationship between Haber and Benglen amounted to a relationship that should have been disclosed pursuant to section 13-22-212(1)(b). But the trial court considered that provision and found as a factual matter that no such relationship was supported by the evidence. Owners' assertion on appeal does not demonstrate why that factual finding was clearly erroneous.

H. Haber's Retention Contract Evinces Partiality

¶ 51 Dakota retained Haber under a written "appraisal contract." The contract included the following conditions:

• An "initial minimum fee" of $750 for the first five hours of work, and an hourly fee of $150 if the time to settle the claim exceeds five hours.
• Invoices for the work were not to exceed "5% of the total replacement cost value."
• Fees were payable upon entry of the final appraisal award and are "not contingent upon payment of the Award by the carrier."
• The appraiser had a "responsibility to be impartial and also competent to handle the case."

¶ 52 Owners argues this contract evinced a lack of impartiality because it gave Haber a financial incentive to give a higher appraised value to increase her own fees.

¶ 53 The trial court rejected this argument for two reasons. First, it noted that no party suggested that the 5% cap came into play in setting Haber's fees. Five percent of the final appraisal award of $2.997 million is about $150,000. Although the record does not reflect the exact amount of Haber's final fee, the trial court stated it "would have been well under 2% [of the final award] pretty much no matter what the umpire decided."

¶ 54 Second, the trial court found that the contract terms did not show bias as a matter of law, nor did they show Haber had an interest in the litigation. The trial court found that the purpose of the 5% fee cap was to benefit Dakota; it provided protection for the "person paying the appraiser." And the provision required both parties' initials to invoke the provision. The court noted the 5% provision was not initialed by the parties, so "it is not an issue in the case."

¶ 55 We agree with the trial court that in the circumstances of this case, the 5% cap does not demonstrate a lack of impartiality on the part of the appraiser. Had the appraiser's fees exceeded 5% of the amount of the final appraisal, we might consider whether the appraisal was inflated to increase the recoverable fees. But in this case, we see no basis for concluding that Haber's impartiality was compromised by this 5% fee cap when 5% of the final appraisal was far in excess of the actual billed fees and the contract provision was not invoked.

¶ 56 We acknowledge that two Colorado federal cases reach a different conclusion as to whether appraisal fee contracts containing percentage fee caps render the appraiser not impartial. But the facts of those cases are different, or not fully discernable.

¶ 57 In Auto-Owners Insurance Co. v. Summit Park , 2016 WL 1321507, at *4-7, Judge Babcock concluded the insured's appraiser was not impartial. The appraiser's contract, like Haber's, capped his fee at 5% of the replacement cost value of the final claims if an umpire was involved. But unlike in this case, Judge Babcock found a lack of impartiality for numerous reasons, and not just due to the percentage fee provision. Id. at *5-6.

¶ 58 We have already rejected the other arguments made by Owners, and we decline to reach the same conclusion as Judge Babcock.

¶ 59 Judge Babcock relied on Judge Brooke Jackson's decision in Colorado Hospitality Services Inc. v. Owners Insurance Co. , No. 14-CV-001859-RBJ, 2015 WL 4245821 (D. Colo. July 14, 2015) (unpublished order). There, an appraiser was deemed not impartial solely based on the contract which, like Haber's, had a fee cap of 5% of the replacement cost value of the final claims if an umpire was involved. Judge Jackson gave only a brief analysis, reading the contract to state that "the higher his appraisal amount, the higher the cap on his fee."

¶ 60 But in applying his rationale, Judge Jackson did not discuss or explain how the actual final appraisal in that case would have raised the actual fee paid to the appraiser. Rather, he looked at a different set of hypothetical replacement values, substantially different from the actual values arrived at by the umpire in the actual case, and, based on those values, stated that if the fee might be materially affected by the opinion, the appraiser could not be considered to be impartial. Id. at *2-3.

¶ 61 We disagree with the analysis in these two federal cases because Haber's fee in this case could not be, and was not, affected by the 5% cap. Had the umpire made the final award based entirely on Burns' appraisal, it would have exceeded $2.3 million. Thus, this was never a case like the hypothetical used by Judge Jackson where the final appraisal amount was only $50,000 leading to potential application of the 5% fee cap.

¶ 62 Nor was this a case like Shree Hari Hotels, LLC v. Society Insurance , No. 1:11-CV-01324-JMS, 2013 WL 4777212 (S.D. Ind. Sept. 5, 2013) (unpublished opinion), where the court found the insured's appraiser lacked impartiality based on a 10% fee cap because the cap would have come into play had the umpire adopted the insurance company's appraisal value ($90,000) versus the insured's appraisers value ($1,358,000). Id. at *2. Under those circumstances, the court found it was "not believable that [the insured's appraiser] did not have an incentive to make 10% of his appraisal figure meet or exceed the fee his hourly rate would have ... yielded." Id.

¶ 63 But those circumstances are not present here. Thus, we decline to conclude that the percentage fee cap in Haber's contract rendered her work not impartial.

I. Haber's Testimony About Being an "Advocate"

¶ 64 Owners argues Haber's testimony shows she was not impartial. In response to questioning from Owners' counsel as to whether "it's appropriate to be an advocate for an insured when you're acting as an appraiser," Haber replied, "I think it's natural. I think you're an advocate for Auto Owners." Owners argues on appeal that Haber's testimony demonstrates that she was not an impartial appraiser as required by the insurance policy.

¶ 65 The trial court did not explicitly reference this testimony in its final order. We therefore have no findings by the trial court as to the meaning of Haber's answer that she "thinks it's natural."

¶ 66 The question was not posed in connection with the policy's impartiality language. There was no clarification about what Haber understood was meant by "advocate," in this context, although she compared it to the lawyer's role as advocate for a client. And Haber's answer could be read as describing a general situation of a hired appraiser, not necessarily tied to the impartiality requirement of the insurance policy.

¶ 67 We conclude Haber's answer to this one question does not demonstrate that she lacked the impartiality required by the policy. As noted above, the policy did not require the independence required of a judge, arbitrator, or umpire. Both of the appraisers in this case had pre-existing relationships with their retaining party. The respective parties provided, in part, the appraisal information relied on, thereby necessitating contact with those parties. Both appraisers knew an umpire would review their appraisals and select what the umpire found to be the more accurate appraisal. Under these circumstances, it is understandable that Haber may have viewed herself as an "advocate," but that does not mean that her appraisal was biased, dishonest, or purposely inaccurate. As stated by the Iowa Supreme Court, "appraisers do not violate their commitment by acting as advocates for their respective selecting parties. However, appraisers should be in a position to act fairly and be free from suspicion or unknown interest." Cent. Life Ins. Co. , 466 N.W.2d at 261.

¶ 68 We agree with this description of the appraisal process and the requirements placed upon the impartial appraiser. That one answer given by Haber does not show that she was acting with bias, in bad faith, or dishonesty in formulating her appraisal.

J. No Subjective Evidence of Bias or Lack of Impartiality

¶ 69 While Owners offers objective factors that could demonstrate a lack of impartiality, it points to no action, decision, or analytical choice made by Haber in rendering her appraisal report that shows a subjective lack of impartiality. It identifies no appraisal assumption made by Haber that should have been assumed differently but for the fact that it was the product of bias. And, while Haber's final appraisal was about $3,000,000, we cannot disregard the fact that even Owners appraiser presented a value in excess of $2,300,000. Thus, unlike the enormous gaps between the two appraisals in Shree Hari Hotels, LLC , or other similar cases, the appraisal by Haber is not palpably biased or lacking impartiality.

VI. Conclusion

¶ 70 For these reasons, we affirm the trial court's judgment denying Owners' motion to vacate the appraisal award.

Vogt , J., concurs

Terry, J., concurring in part and dissenting in part

JUDGE TERRY, concurring in part and dissenting in part.

¶ 71 I concur in Parts II and III of the majority's opinion. But because I conclude that the trial court's order did not hold the insured's appraiser to the standard of impartiality provided for in the insurance policy, I respectfully dissent from the remainder of the majority's opinion.

¶ 72 The trial court's order seems to have been influenced by a perceived imbalance in the power of the insurer as compared with the insured, and by the insurer's ability to hire the same appraiser for numerous claims-an ability not shared by the insured. While those matters may be troubling, the issue in this case is confined to whether the insured's appraiser was impartial, and I have limited my analysis accordingly. I note, however, that the majority's ruling permitting appraisers to be somewhat less than truly impartial may ultimately harm insureds by giving justification to insurers to hire appraisers who are not truly impartial.

¶ 73 I review the contract de novo, and my primary goal is to give effect to the intent of the parties. Ad Two, Inc. v. City & Cty. of Denver , 9 P.3d 373, 376 (Colo. 2000) ; Fibreglas Fabricators, Inc. v. Kylberg , 799 P.2d 371, 374 (Colo. 1990). That intent is determined by looking to the plain and generally accepted meaning of the contract language. Copper Mountain, Inc. v. Indus. Sys., Inc. , 208 P.3d 692, 697 (Colo. 2009). Individual phrases and clauses are not viewed in isolation, but instead the contract is interpreted in its entirety so as to give effect to all provisions so that none will be rendered meaningless. Id.

¶ 74 If the contract is complete and free from ambiguity, it will be found to express the intention of the parties and will be enforced according to its plain language.

Ad Two , 9 P.3d at 376. A contract provision is ambiguous if it is reasonably susceptible of more than one meaning. Cheyenne Mountain Sch. Dist. No. 12 v. Thompson , 861 P.2d 711, 715 (Colo. 1993).

¶ 75 The appraisal provision of the insurance contract, fully excerpted in the majority opinion, required each party to select a "competent and impartial appraiser."

¶ 76 The phrase "impartial appraiser" is not defined in the contract. As a result, I must look to the plain and generally accepted meaning of the term "impartial." The term is defined as "[n]ot favoring one side more than another; unbiased and disinterested; unswayed by personal interest." Black's Law Dictionary 869 (10th ed. 2014) (emphasis added). Given this definition, I find no ambiguity in the contractual phrase. To be impartial as required by the contract, an appraiser may not favor one side more than the other.

¶ 77 Nothing in the contract contemplates that an appraiser may advocate for the party who selects him or her. To conclude otherwise would be to read the term "impartial" completely out of the contract, which we may not do. See Copper Mountain , 208 P.3d at 697.

¶ 78 My interpretation of the appraisal provision is supported by Providence Washington Insurance Co. v. Gulinson , 73 Colo. 282, 283-85, 215 P. 154, 154-55 (1923), in which the supreme court reviewed a similar appraisal dispute provision that called for "disinterested appraisers." As the majority recognizes, in Providence , the nature of the disputed conduct was dissimilar to that of the present case, instead involving an appraiser and an umpire who made an award without giving proper notice to the other appraiser. Id. at 285, 215 P. at 155.

¶ 79 However, regardless of the factual differences between Providence and the present case, the supreme court laid out a general duty of impartiality for appraisers by stating that during the dispute process, "[a]ppraisers are not referees, but their duty of impartiality is the same" as that of a referee. Id. ; cf. Noffsinger v. Thompson , 98 Colo. 154, 156, 54 P.2d 683, 683 (1936) ("An arbitrator, in the discharge of his duties as such, is bound to exercise a high degree of impartiality, without the slightest degree of friendship or favor toward either party.") (citation omitted). I believe that the supreme court's standard of appraiser impartiality arising from a substantially similar appraisal dispute provision in Providence is applicable here and consequently binds us.

¶ 80 I disagree with the majority's assertion that "[t]he [contract] plainly contemplates that the appraisers will put forth a value consistent with the position of the party that selects them." Nowhere in the contract is that stated or implied, and the word "impartial" cannot be reconciled with such a view. On the contrary, the contract term "competent and impartial appraiser" contemplates that the appraiser will make the appraisal using standards of professionalism, and will not rely on the selecting party's desired value.

¶ 81 I conclude that the trial court erred in applying a lesser standard of impartiality than what is required under the contract and under Colorado law. And while the court evaluated the propriety of certain actions taken by the insured's appraiser, it never made specific findings as to whether she was in fact impartial.

¶ 82 I would consequently reverse and remand for the trial court to make additional factual findings as to whether the insured's appraiser was impartial under the impartiality standard described in Providence . If she lacked the requisite impartiality, the damages award should be vacated.

      In its notice of appeal, filed April 29, 2016, Owners stated the trial court did not enter a proposed written order. However, the appellate record contains a written order dated July 6, 2016, signed by a different judge than the judge who tried the case in March. The written order is substantially the same as the transcribed oral order. Because the appellate briefs refer primarily to the transcribed oral ruling, this opinion relies on the oral order entered on March 11, 2016.

      In Summit Park , Judge Lewis Babcock directed the appraisal process to go forward and set the following guideline for an impartial appraiser: "[a]n individual who has a known, direct, and material interest in the outcome of the appraisal proceeding or a known, existing, and substantial relationship with a party may not serve as an appraiser." Auto-Owners Ins. Co. v. Summit Park Townhome Ass'n , No. 14-CV-03417-LTB, 2016 WL 1321507, at *1 (D. Colo. Apr. 5, 2016) (unpublished mem. Opinion and order). Owners, despite being a party to that case, does not argue that this "guideline" applies to Haber.
      We also note that the Division of Insurance Bulletin B.5-26 specifies that a "fair and competent" appraiser is one who is "not a party to the insurance contract," has "no financial interest in the outcome of the appraisal," is "not a current employee of the insurer or policyholder," and is "not a family member or an individual with whom the insured has a personal relationship that could reasonably suggest bias." Colo. Dep't of Regulatory Agencies, Div. of Ins., Bulletin No. B-5.26, Requirements Related to Disputed Claims Subject to Appraisal, at 2 (re-issued Oct. 26, 2015), https://perma.cc/3JC4-37HG. Bulletin B.5-26 further instructs that an appraiser "may not have a direct material interest in the amounts determined by the appraisal process." Id. Owners does not argue for application of this provision's standards.

      As noted by Judge Babcock in Summit Park , appraisers are not like arbitrators because they do not resolve pending disputes or determine ultimate liability. Auto-Owners Ins. Co. v. Summit Park , 129 F.Supp.3d 1150, 1154 (D. Colo. 2015).

      This contract was prepared by Benglen, and signed by Dakota's representative and Benglen. Regardless, the parties agree that Haber operated pursuant to this contract.

      Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5 (3), and § 24-51-1105, C.R.S. 2016.


author: Opinion by JUDGE DUNN

text:
    Francisco "Frank" RUYBALID IV, Plaintiff-Appellant, v. BOARD OF COUNTY COMMISSIONERS OF the COUNTY OF LAS ANIMAS COUNTY, Colorado; Anthony Abeyta, member of the Las Animas Board of County Commissioners; Gary D. Hill, member of the Las Animas Board of County Commissioners; Mack Louden, member of the Las Animas Board of County Commissioners; Board of County Commissioners of the County of Huerfano County, Colorado; Gerald Cisneros, member of the Huerfano Board of County Commissioners; Ray Garcia, member of the Huerfano Board of County Commissioners; and Max Vezanni, member of the Huerfano Board of County Commissioners, Defendants-Appellees.
    Court of Appeals No. 16CA1473
    Colorado Court of Appeals, Division V.
    Announced August 24, 2017
    Kamm & McConnell, L.L.C., Steven L. McConnell, Raton, New Mexico, for Plaintiff-Appellant
    Newnam Land LLP, Mary D. Newnam, Wimberley, Texas, for Defendants-Appellees Board of County Commissioners of the County of Las Animas County, Anthony Abeyta, Gary D. Hill, and Mack Louden
    Garrett Sheldon, Walsenburg, Colorado, for Defendants-Appellees Board of County Commissioners of the County of Huerfano County, Gerald Cisneros, Ray Garcia, and Max Vezanni
   Opinion by JUDGE DUNN

¶ 1 Francisco "Frank" Ruybalid IV admitted to serial violations of the Colorado Rules of Professional Conduct during his tenure as District Attorney for the Third Judicial District, located in Las Animas and Huerfano Counties. Believing that the Counties should be on the hook for the fees and costs he incurred to defend himself in the disciplinary proceeding, he sued them. Seeing no legal claim, the district court dismissed the complaint. Urging us to undo that ruling, Mr. Ruybalid professes to have statutory and equitable rights to attorney fees and costs. Because he doesn't, we affirm.

I. Background

¶ 2 In 2000, the citizens of the Third Judicial District elected Mr. Ruybalid District Attorney. During his term, the Office of Attorney Regulation Counsel filed disciplinary charges against him.

¶ 3 After the Counties refused to assume Mr. Ruybalid's defense, he hired counsel to represent him in the disciplinary action. Mr. Ruybalid eventually entered into a stipulation, admitting to a pattern of discovery violations and several instances of failing to supervise and train his subordinates. He acknowledged that his discovery violations-and those of his subordinates-resulted in sanctions and suppression of key evidence in over a dozen criminal cases. He also agreed that, as a direct result of these violations, the prosecution dismissed the majority of those cases. And he stipulated that he "did not diligently represent the People" and "engaged in conduct prejudicial to the administration of justice" in violation of the Colorado Rules of Professional Conduct.

¶ 4 The Presiding Disciplinary Judge approved the "conditional admission of misconduct and suspended [Mr. Ruybalid] for six months, all stayed upon the successful completion of a twenty-three-month" probation period. People v. Ruybalid , Nos. 13PDJ065, 14PDJ064, 2010 WL 11020220, at *1 (Colo. O.P.D.J. Jan. 28, 2010).

¶ 5 After resolving the disciplinary action, Mr. Ruybalid filed a complaint for declaratory relief against the Counties, seeking reimbursement for his attorney fees and other costs incurred in the disciplinary proceeding. He specifically asked the court to declare that "the [C]ounties were required to indemnify and defend [him] against the claims asserted in the [d]isciplinary [a]ction" and that he "is allowed to collect ... all of his reasonable and necessary attorney[ ] fees, expert witness fees, expenses, practice monitor fees and costs" incurred in that action.

¶ 6 The Counties moved to dismiss the complaint for failure to state a claim, arguing Mr. Ruybalid had no right to attorney fees and costs. Mr. Ruybalid countered that he had a statutory entitlement to attorney fees and costs and, in addition, he had stated an equitable claim for such fees and costs. The district court concluded that Mr. Ruybalid had stated neither a statutory nor an equitable claim for attorney fees and costs, and it dismissed the complaint.

II. Section 20-1-303

¶ 7 Mr. Ruybalid's primary contention is that he is statutorily entitled to attorney fees and costs under section 20-1-303, C.R.S. 2016, and the district court erred in concluding otherwise. The issue for us then is whether that statute requires the Counties to reimburse Mr. Ruybalid for such fees and costs. We conclude it does not.

¶ 8 That parties generally bear their own costs of litigation absent a statute, court rule, or private contract permitting those costs to be shifted is well settled. See, e.g. , Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res. , 532 U.S. 598, 602-03, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) ; Bernhard v. Farmers Ins. Exch. , 915 P.2d 1285, 1287 (Colo. 1996). And while this so-called American Rule is more often considered in the context of whether a prevailing party may recover fees and costs from an opposing party, it reflects the broader and long-held presumption that parties pay their own legal fees and costs, "win or lose." Baker Botts L.L.P. v. ASARCO LLC , 576 U.S. ----, ----, 135 S.Ct. 2158, 2164, 192 L.Ed.2d 208 (2015) (quoting Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) ); Fogerty v. Fantasy, Inc. , 510 U.S. 517, 533, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) ("[I]t is the general rule in this country that unless Congress provides otherwise, parties are to bear their own attorney's fees.").

¶ 9 We will not conclude that a statute alters the American Rule and shifts attorney fees and costs to another absent "explicit statutory authority." Buckhannon , 532 U.S. at 602, 121 S.Ct. 1835 (quoting Key Tronic Corp. v. United States , 511 U.S. 809, 819, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994) ); see also City of Wheat Ridge v. Cerveny , 913 P.2d 1110, 1114 (Colo. 1996) (Courts do not construe a fee-shifting provision as mandatory unless its directive is specific and clear.). And such explicit statutory authority tends to plainly "authorize the award of 'a reasonable attorney's fee,' 'fees,' or 'litigation costs,' and usually refer[s] to a 'prevailing party' in the context of an adversarial 'action.' "

Baker Botts , 576 U.S. at ----, 135 S.Ct. at 2164 (citing specific statutory examples). Following this lead, we will not infer an exception to the general rule that parties pay their own attorney fees and costs from statutory provisions "that do not explicitly address attorney fees." Allstate Ins. Co. v. Huizar , 52 P.3d 816, 821 (Colo. 2002) ; see also § 13-16-122(1)(h), C.R.S. 2016 (Attorney fees are recoverable as costs only "when authorized by statute or court rule.").

¶ 10 We review de novo whether a statute mandates an award of attorney fees and costs. Castro v. Lintz , 2014 COA 91, ¶ 11, 338 P.3d 1063.

¶ 11 Section 20-1-303 states that a district attorney "shall be allowed to collect and receive from each of the counties in his district the expenses necessarily incurred in the discharge of his official duties for the benefit of such county." This section says nothing about attorney fees, fees, or litigation costs. See Baker Botts , 576 U.S. at ----, 135 S.Ct. at 2164. Nor does it reference litigation, any type of action or proceeding, or prevailing parties. See id. That is, nothing in section 20-1-303 even hints at a legislative intent to include attorney fees or litigation costs incurred in a disciplinary proceeding as "expenses necessarily incurred" in discharging a district attorney's official duties. Because nothing in the statute explicitly authorizes awarding Mr. Ruybalid his attorney fees and costs, we cannot agree that the use of the term "expenses"-untethered as it is from a legal proceeding or reasonable attorney fees-creates an exception to the long-established presumption that parties to a legal proceeding pay their own way.

¶ 12 It is indeed rare for courts to sweep attorney fees into statutory language that uses phrases other than "attorney fees." See, e.g. , Leadville Water Co. v. Parkville Water Dist. , 164 Colo. 362, 365, 436 P.2d 659, 660 (1967) (declining to interpret "just compensation" in eminent domain provision of Colorado Constitution to include attorney fees in absence of statute expressly so providing); In re Marriage of Wright , 841 P.2d 358, 361 (Colo. App. 1992) ( "[T]he term 'costs' normally does not include attorney fees."); Lanes v. O'Brien , 746 P.2d 1366, 1374 (Colo. App. 1987) (Attorney fees were not authorized in statute allowing for reimbursement "for 'any costs' incurred" in an administrative proceeding; the legislature later specifically added "attorney fees" to the language of the statute at issue, Ch. 251, sec. 1 § 24-50.5-104(2), 1997 Colo. Sess. Laws 1418.); see also State ex rel. Bryant v. McLeod , 318 Ark. 781, 888 S.W.2d 639, 642 (1994) ("The terms 'costs' or 'expenses' when used in a statute do not ordinarily include attorneys' fees."); Merlino v. Delaware Cty. , 556 Pa. 422, 728 A.2d 949, 951 (1999) (Use of the word "expense" in a statute was "insufficient to constitute a basis for the award of attorneys' fees.").

¶ 13 For these reasons, we cannot agree with Mr. Ruybalid that the Counties' statutory obligation to pay for "expenses necessarily incurred" in discharging a district attorney's official duties creates an exception to the American Rule.

¶ 14 Consider also that had the General Assembly intended to permit district attorneys to recover attorney fees and costs incurred in a legal proceeding, disciplinary or otherwise, it would have said so. After all, it has plainly provided that public officials may recover reasonable attorney fees and costs incurred in defending against certain tort claims. § 24-10-110(1.5), C.R.S. 2016. And it has explicitly and plainly authorized the recovery of attorney fees in various other statutes. See § 5-6-114(3), C.R.S. 2016 (allowing Consumer Credit Code administrator to seek reimbursement of attorney fees when the administrator is the prevailing party); § 13-17-102(2), C.R.S. 2016 (authorizing attorney fees against a party when a showing is made that the party brought or defended a civil action that "lacked substantial justification" in whole or in part); § 13-17-201, C.R.S. 2016 (mandating award of attorney fees when a trial court dismisses a tort action under C.R.C.P. 12 ); § 18-4-405, C.R.S. 2016 (allowing awards of attorney fees in civil theft actions); § 24-4-106(8), C.R.S. 2016 (requiring attorney fees awards for frivolous proceedings that contest a rulemaking agency's jurisdiction or authority). These statutes share a clear intent to deviate from the American Rule-an intent that is not expressed in, or even suggested by, section 20-1-303.

¶ 15 All that said, we are left to address Colorado Counties Casualty & Property Pool v. Board of County Commissioners , 51 P.3d 1100 (Colo. App. 2002). That case seems to interpret section 20-1-303, and both sides point to language in the opinion that they argue supports their respective positions.

¶ 16 In Colorado Counties , a former employee sued a district attorney for wrongful termination. Id. at 1101. Three of the four counties in which the judicial district sat paid the district attorney's defense fees and costs. Id. The counties that paid then sought reimbursement from the county that did not (Prowers County) under section 20-1-303 and perhaps the Colorado Governmental Immunity Act (CGIA), § 24-10-110(1.5). Colorado Counties , 51 P.3d at 1101. The trial court entered judgment against Prowers County and ordered that it indemnify the other counties for its share of defense costs and settlement expenses. Id. at 1101-02. On appeal, a division of this court concluded that the attorney fees and costs were necessarily incurred because it "is foreseeable that the district attorney would have employees and, consequently, that such employees might sue for wrongful termination." Id. at 1102.

¶ 17 To the extent Colorado Counties can be read to authorize payment of attorney fees and costs under section 20-1-303, for three reasons, we don't agree. See City of Steamboat Springs v. Johnson , 252 P.3d 1142, 1147 (Colo. App. 2010) ("We are not bound to follow a prior division's ruling."). First, it is not apparent (and the opinion does not say) how the counties had standing to assert a claim under section 20-1-303. See § 20-1-303 (referring solely to the district attorney's ability to collect and receive certain expenses). So whether the trial court or this court had jurisdiction to consider the counties' claim is questionable. Second, Colorado Counties addressed neither the American Rule nor the lack of any explicit language in section 20-1-303 authorizing attorney fees. Third, with no explanation or analysis, Colorado Counties fused the standard for obtaining attorney fees under the CGIA (which expressly allows for attorney fees) into section 20-1-303 (which says nothing about attorney fees). We see no analytical basis to import the CGIA into section 20-1-303 and are left unconvinced that the General Assembly so intended. Because we do not agree with Colorado Counties , we need not determine whether it helps or hurts Mr. Ruybalid.

¶ 18 Perhaps anticipating problems with the statutory language, Mr. Ruybalid pursues a second path, arguing that he should be reimbursed for attorney fees and costs incurred in defending a disciplinary proceeding as a matter of public policy. He argues that without reimbursement, "the office of the District Attorney cannot be maintained nor exist." This is so, he continues, because it is foreseeable that prosecutors will be grieved, and without reimbursement, qualified candidates will be deterred from serving the public for fear of being required to either consent to discipline or "face personal financial ruin." The Counties retort that it is not in the public's interest to force taxpayers to pay the attorney fees of an admitted ethics violator. Whatever the merits of these competing arguments, matters of public policy are better addressed by the General Assembly, not us. See Samuel J. Stoorman & Assocs., P.C. v. Dixon , 2017 CO 42, ¶ 11, 394 P.3d 691 ; Huizar , 52 P.3d at 821. Should the General Assembly conclude that policy considerations favor requiring counties to reimburse district attorneys for defending disciplinary charges, and, if so, under what conditions, it will so legislate. Stoorman , ¶ 11 ("The General Assembly sets public policy, and express statutory language is the main vehicle it uses.").

¶ 19 Finally, each party invites us to consider selected out-of-state opinions for guidance. But these cases are based either on that state's common law, see Lomelo v. City of Sunrise , 423 So.2d 974, 976 (Fla. Dist. Ct. App. 1982), or on dissimilar statutes, see Spatola v. Town of New Milford , 44 Conn. L. Rptr. 242, 2007 WL 3038100, at *1 n.1 (Conn. Super. Ct. Sept. 26, 2007) (unpublished opinion); Triplett v. Town of Oxford , 439 Mass. 720, 791 N.E.2d 310, 313 (2003) ; Sanders v. State , 166 Wash.2d 164, 207 P.3d 1245, 1247 (2009). Out-of-state authority is therefore unhelpful here.

¶ 20 Leaving aside the fact that the statute doesn't exempt Mr. Ruybalid from bearing his own attorney fees and costs, we also observe that he failed to allege any facts that the expenses incurred in defending the disciplinary proceeding were "for the benefit of" the Counties. § 20-1-303. While we accept all factual allegations in the complaint as true, we do not do the same with conclusory allegations or legal conclusions. Warne v. Hall , 2016 CO 50, ¶ 9, 373 P.3d 588 ; Fry v. Lee , 2013 COA 100, ¶ 17, 408 P.3d 843. This means that, to survive a motion to dismiss, a complaint must allege more than conclusions. Warne , ¶ 9 ; see also Ashcroft v. Iqbal , 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (Mere legal conclusions cannot survive a motion to dismiss.).

¶ 21 The complaint here did not. It simply parroted the statutory language, alleging in a conclusory fashion that the expenses Mr. Ruybalid incurred in the disciplinary proceeding were "for the benefit of" the Counties. Simply asserting a legal conclusion-bereft of any supporting factual allegations-does not state a plausible claim for relief. Warne , ¶ 9.

¶ 22 In sum, we agree with the district court that Mr. Ruybalid failed to state a claim that the Counties were required to reimburse him for the attorney fees and costs incurred to defend his disciplinary proceeding under section 20-1-303.

III. Promissory Estoppel

¶ 23 Mr. Ruybalid's contention that the district court erroneously dismissed his promissory estoppel claim fares no better.

¶ 24 Promissory estoppel provides relief to those without an enforceable contract who were harmed because they relied on another's promise. G & A Land, LLC v. City of Brighton , 233 P.3d 701, 703 (Colo. App. 2010). To assert a claim for promissory estoppel, a plaintiff must allege facts showing a promise by the defendant, action or forbearance by the plaintiff induced by the promise, and injustice that can be avoided only by enforcing the promise. Id.

¶ 25 Mr. Ruybalid, however, did not allege facts showing that the Counties promised him anything. More to the point, he did not allege the Counties promised to reimburse him for attorney fees and costs incurred in defending a disciplinary proceeding. Rather than alleging that the Counties directly promised to reimburse Mr. Ruybalid, the promissory estoppel claim appears to be based on three statutes. But Mr. Ruybalid points to no authority-nor are we aware of any-that allows a plaintiff to maintain a promissory estoppel claim against a local government based on a statute enacted by the state legislature. And even if it is conceivable to do so, the Counties did not draft or enact the statutes. See Denver Milk Producers v. Int'l Bhd. of Teamsters, Chauffeurs, Warehousemen & Helpers' Union , 116 Colo. 389, 414, 183 P.2d 529, 541 (1947) ("[T]he legislature has plenary power to legislate...."). So the identified statutes do not reflect any "promise" by the Counties.

¶ 26 That is not to say a plaintiff may not maintain a promissory estoppel claim against a board of county commissioners. See Bd. of Cty. Comm'rs v. DeLozier , 917 P.2d 714 (Colo. 1996). But such a claim must be based upon a clear and unambiguous promise the board made to the plaintiff. Id. (allowing promissory estoppel claim against a board where the plaintiff alleged the board breached its employment promise to her).

¶ 27 Given the allegations in the complaint, we agree with the district court that Mr. Ruybalid did not allege facts showing the Counties unambiguously promised to reimburse him for attorney fees and costs he incurred in defending the disciplinary proceeding. The district court therefore correctly concluded that Mr. Ruybalid failed to state a promissory estoppel claim.

IV. Other Challenges to the Court's Dismissal

¶ 28 Mr. Ruybalid also contends that the district court erred by (1) making factual findings that the disciplinary action did not benefit the Counties; (2) stating that, to be entitled to indemnification under section 20-1-303, Mr. Ruybalid "needed to have stated a plausible claim" under the CGIA; and (3) determining Mr. Ruybalid was required to successfully defend the disciplinary proceeding before the Counties were obligated to pay. We need not delve into these specific contentions, however, because they all assume that Mr. Ruybalid is entitled to attorney fees under section 20-1-303. Because he is not, even if he is correct that the court erred in any of these respects, it does not alter the fact that Mr. Ruybalid is not entitled to reimbursement of his attorney fees and costs.

V. Conclusion

¶ 29 The judgment is affirmed.

JUDGE HAWTHORNE and JUDGE NAVARRO concur.

      Mr. Ruybalid named as defendants the respective Boards of County Commissioners, along with each individual commissioner.

      The opinion shifts between discussing the CGIA, § 24-10-110(1.5), C.R.S. 2016, and section 20-1-303, C.R.S. 2016, but it does not specifically identify what claims the counties asserted in their complaint.

      Nothing in the opinion suggests that the counties brought a derivative claim.

      For instance, the General Assembly could condition reimbursement on whether a district attorney successfully defends against the disciplinary charges or on whether the disciplinary charges are without factual or legal basis.

      Specifically, the complaint identified section 20-1-302, C.R.S. 2016 (requiring counties, in proportion to their populations, to provide "necessary expenses of maintaining an office for the transaction of official business"); section 20-1-303 (requiring a county to pay "expenses necessarily incurred in the discharge of ... official duties for the benefit of such county"); and section 24-10-110 (authorizing indemnification of public officials for defending certain tort claims).


author: Opinion by JUDGE HARRIS

text:
    CAROUSEL FARMS METROPOLITAN DISTRICT, a quasi-municipal corporation and political subdivision of the State of Colorado, Petitioner-Appellee, v. WOODCREST HOMES, INC., a Colorado corporation, Respondent-Appellant.
    Court of Appeals No. 15CA1956
    Colorado Court of Appeals, Division II.
    Announced November 30, 2017
    Alderman Bernstein, LLC, Jody Harper Alderman, Carrie S. Bernstein, Amy E. Arlander, Denver, Colorado, for Petitioner-Appellee
    Dymond Reagor, PLLC, David D. Schlachter, Portland, Oregon, for Respondent-Appellant
    Ann A. Terry, Denver, Colorado, for Amicus Curiae Special District Association of Colorado
   Opinion by JUDGE HARRIS

¶ 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.

¶ 3 The District defends the condemnation of Woodcrest's property as a lawful exercise of its power of eminent domain on the theory that Parcel C will ultimately be used for a public purpose. In accordance with the Developer's proposed development plan, the infrastructure for the Carousel Farms subdivision, including public improvements such as roads and sewers, will be located on Parcel C.

¶ 4 We conclude that the District cannot meet its burden by showing that, under the Developer's plan, once approved, the taking will result in the property's eventual use for public purposes. Rather, the taking itself must be necessary to serve a public purpose.

¶ 5 Here, the taking was carried out by the District, acting as a sort of alter ego of the Developer, to ensure that the Developer met its contractual obligations to the Town. True, once those obligations are satisfied and the development plan can proceed, the District intends to put the property to a public use. But this amounts to a classic case of the tail wagging the dog-the District condemned property to advance the private development process, the completion of which would then require the construction of infrastructure, which qualifies as a public purpose necessitating the condemnation of Parcel C. We do not agree that this scenario passes constitutional or statutory muster, and therefore we reverse.

I. Background

A. Woodcrest Begins the Development Process and Buys Parcel C

¶ 6 Carousel Farms comprises two twenty-acre parcels (Parcel A and B) and the .65-acre strip of land sandwiched between them (Parcel C), located in unincorporated Douglas County.

¶ 7 Woodcrest initially intended to develop Carousel Farms. As a prerequisite to development, the three parcels had to be annexed into the Town, rezoned as planned development, and approved as a subdivision-an extensive process that entailed the preparation and approval of a sketch plan, a preliminary plan, and a final plat. As the Town explains in its municipal code, "[e]ach step is a distinct process involving the submittal of an application, an application fee, required plans and reports, referrals of the proposal to other agencies and public hearings/meetings." Parker Mun. Code 13.07.040(a)(2).

¶ 8 To meet those obligations, Woodcrest bought Parcel C and entered into contracts to buy Parcels A and B. It executed an annexation agreement and successfully progressed through the sketch plan and preliminary plan phases of the subdivision process. The final plat prepared by Woodcrest's engineering firm was never approved, however, because Woodcrest did not ultimately acquire Parcels A and B. After six months without further progress, Woodcrest's development plans were deemed abandoned.

B. The Developer Takes Over Development of Carousel Farms

¶ 9 About five years later, in 2012, the Developer stepped in. At the immediate possession hearing, the Developer testified that it essentially picked up where Woodcrest had left off: the engineering firm had retained all the development plans so the Developer was "able to pick those plans up." It contracted to buy Parcels A and B and began the subdivision process, making some adjustments to Woodcrest's plans along the way.

¶ 10 In January 2014, the Town entered into a new annexation agreement (the Agreement) with the then-current owners of Parcels A and B. Under the terms of the Agreement, the Town would not annex Parcels A and B, nor would it approve any plats for Carousel Farms, unless the Developer owned all three parcels, including Parcel C. This latter condition was contained in the following provision:

2. Consolidation of Ownership of the Property and the Strip Parcel. The Town has no obligation to approve (including the setting of any public hearings) any plats for the Property until all of the following conditions are satisfied:
a. [The Developer] or its assign is the owner of the Property [Parcels A and B] and the real property described in Exhibit C [Parcel C] ... (the "Strip Parcel").
b. The Strip Parcel [Parcel C] is zoned PD-Planned Development....
c. The Strip Parcel [Parcel C] is made subject to this Agreement by an amendment hereto.

(Formatting omitted.)

¶ 11 In the meantime, the Developer made overtures to Woodcrest to acquire Parcel C. In January 2013, it offered to buy the parcel for approximately $45,000. But Woodcrest declined that offer, noting that it had essentially subsidized the Developer's entitlement process because the Developer had used Woodcrest's development plans and because the owners of Parcels A and B had retained Woodcrest's earnest money, presumably reducing the Developer's purchase price of those parcels. Woodcrest told the Developer that its offer "must increase substantially."

¶ 12 The Developer did not make another offer. Instead, two weeks later, it sent Woodcrest a notice that it intended "to move forward with annexation into the Town of Parker." If Woodcrest did not accept the offer "expeditiously," condemnation proceedings would be initiated "with Town Council's support." The Developer did not explain the basis for its authority to condemn Woodcrest's property, and Woodcrest assumed that it was the Town that might move to condemn Parcel C.

¶ 13 In fact, though, the Town never considered condemning Woodcrest's property. At the possession hearing, the Town's representative testified that the Town did not even want to "talk about" the possibility of taking Parcel C because the Town "d[oesn't] do condemnation." Rather, as the Town's representative explained, the Town preferred that "the two property owners," meaning the Developer and Woodcrest, "work it out by themselves."

¶ 14 But the Developer made no further attempts to "work it out" with Woodcrest. Instead, it simply moved forward with its development plans. It closed on Parcels A and B and, in the fall of 2014, the former owners assigned their rights and obligations under the Agreement to the Developer.

¶ 15 On September 2, 2014, the Town held a public hearing on the Carousel Farms sketch and preliminary plan. The Town's planning department conditioned approval of the plan on the Developer acquiring and rezoning Parcel C and including it within the Agreement. According to the planning department representative, only with the addition of Parcel C would the Developer's sketch and preliminary plan satisfy the density requirements under the Parker 2035 Master Plan. The Town approved the plan on the condition that "[t]he Woodcrest Parcel shall be acquired, rezoned to Carousel Farms PD and made a part of the Carousel Farms Annexation Agreement."

C. The Developer Forms the District and the District Condemns Parcel C

¶ 16 During the fall of 2014, the Developer also created the District, a new metropolitan district that would serve Carousel Farms. According to the District's service plan, the District's primary purpose was to finance the construction of public improvements authorized to be constructed as part of an "Approved Development Plan," such as a final plat.

¶ 17 At the time the District was created, the Agreement still required "[c]onsolidation of [o]wnership of the Property [Parcels A and B] and the Strip Parcel [Parcel C]" as a condition precedent to approval of the Carousel Farms final plat. More specifically, the Town was not obligated to set a hearing on the Developer's plat until "[the Developer] or its assign, [was] the owner of the ... 'Strip Parcel.' "

¶ 18 On December 10, 2014, the District, acting through its Board of Directors, who were all employees or principals of the Developer, issued to Woodcrest a "Notice of Intent to Acquire" Parcel C. The notice explained that the District was "proceeding with the construction of certain street and related improvements" for "the Carousel Farms development, which improvements are required by the Town of Parker (the 'Project')." Due to "the immediate need for this Project," the notice continued, "the District must obtain [Parcel C] promptly." The District warned that if Woodcrest rejected the offer, the District would "initiate eminent domain proceedings to acquire [Parcel C], so that it can proceed with the Project."

¶ 19 The District then approved a "Resolution of Necessity," stating that "in order to construct and install the Public Improvements for the property within and served by the District, it is necessary for the District to acquire" Parcel C. As part of the resolution, the District's Board of Directors found that

it is 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 and it is necessary for the public health, safety and welfare of the property owners and residents of the District to exercise its power of eminent domain to acquire the Property....

At the time of the resolution, the District had no residents, the only two property owners having sold their property to the Developer.

¶ 20 When Woodcrest declined the offer, the District filed a petition in condemnation and request for immediate possession of Parcel C. The District's petition asserted that "there is a public need and necessity to acquire [Parcel C] ... for the construction of certain street and related improvements ... for the Carousel Farms Development...."

¶ 21 An immediate possession hearing was scheduled for March 19, 2015. The Developer's final plat had not yet been approved, but the Developer was now poised to satisfy the requirement that Parcel C be acquired and annexed into the Town as part of the proposed subdivision. But under the Agreement, the Developer-not the District-had to acquire Parcel C.

¶ 22 So, three days before the hearing, on March 16, 2015, the Developer and the Town executed an amendment to the Agreement. The amendment (though still ostensibly requiring "consolidation of ownership" of Parcels A, B, and C) made the District's ownership of Parcel C the new prerequisite to approval of a final plat. The District was not a party to the amendment; the Developer agreed to the new term.

D. The District Court's Ruling and Woodcrest's Appeal

¶ 23 At the immediate possession hearing, Woodcrest argued that the Developer was using the District to accomplish indirectly what the Developer had been unable to do directly: acquire Parcel C and thereby satisfy its obligation under the Agreement, clearing the way for the Town's approval of the Carousel Farms subdivision. The purpose of the taking, Woodcrest contended, was therefore primarily private, not public. Woodcrest urged the district court to disregard the District's statement of necessity, based on the District's bad faith in pursuing condemnation on behalf of the Developer.

¶ 24 The district court rejected Woodcrest's challenges to the condemnation petition and granted the District's request to take immediate possession of Parcel C. In arriving at that decision, the court adopted the District's proposed findings of fact and conclusions of law verbatim. It determined that condemnation of Parcel C was for a public purpose and that Woodcrest's allegations of bad faith were vague and conclusory.

¶ 25 On appeal, Woodcrest reasserts its argument that the District's condemnation of Parcel C was not necessary to advance a public purpose but instead was initiated in bad faith, for the purpose of facilitating the Developer's compliance with the Agreement.

II. Legal Principles and Standard of Review

¶ 26 Under the state constitution, a governmental entity may not invoke the power of eminent domain unless it has eminent domain power, intends to use the property taken for a proper public purpose, and pays the owner just compensation for the property after giving the owner due process of law. Colo. Const. art. II, § 15. The power of condemnation has been restrained by constitutional limitations for the protection of individual property rights, and it lies dormant in the state until the General Assembly speaks. Town of Parker v. Colo. Div. of Parks & Outdoor Recreation , 860 P.2d 584, 586 (Colo. App. 1993). Thus, the authority to condemn must be conferred expressly by statute or necessarily implied from the rights, powers, and duties conferred by the General Assembly. Id. Narrow construction is the rule in determining the scope of an entity's condemnation power. Id.

¶ 27 The District is a metropolitan district, created pursuant to the Special District Act, sections 32-1-101 to - 1807, C.R.S. 2017. Under section 32-1-1004(4), C.R.S. 2017, the District may exercise the power of eminent domain.

¶ 28 Still, any taking of private property by a governmental entity must be for a public purpose. § 38-1-101(2)(b), C.R.S. 2017; see also Thompson v. Consol. Gas Utils. Corp. , 300 U.S. 55, 80, 57 S.Ct. 364, 81 L.Ed. 510 (1937) (implicit in the Fifth Amendment is a requirement that a governmental taking must be for a public, not private, purpose). There is no precise definition of public purpose; it must be determined on a case-by-case basis. Bd. of Cty. Comm'rs v. Kobobel , 176 P.3d 860, 863 (Colo. App. 2007). The relevant inquiry is whether the purpose of the condemnation is "for the public benefit." State Dep't of Highways v. Denver & Rio Grande W. R.R. Co. , 757 P.2d 181, 183 (Colo. App. 1988), aff'd , 789 P.2d 1088 (Colo. 1990).

¶ 29 The fact that private interests may benefit from the condemnation does not defeat a public purpose, so long as the "essential purpose" of the taking is to obtain a public benefit. Kobobel , 176 P.3d at 863. "Public purpose," however, does not include the taking of private property for transfer to a private entity for the purpose of economic development. § 38-1-101(1)(b)(I).

¶ 30 Whether a contemplated use is a public use is an issue for judicial determination. Silver Dollar Metro. Dist. v. Goltra , 66 P.3d 170, 174 (Colo. App. 2002). Thus, on review, "the court's role is to determine whether the essential purpose of the condemnation is to obtain a public benefit." Id. The burden of proof is on the condemning entity to establish, by a preponderance of the evidence, that the taking of private property is for a public use. § 38-1-101(2)(b).

¶ 31 The condemning entity must also establish the "necessity" of the taking-that is, that condemnation of the particular property at issue is necessary to advance the intended public purpose. Town of Silverthorne v. Lutz , 2016 COA 17, ¶ 34, 370 P.3d 368. The issues of necessity and public purpose are "closely related and, to some extent, interconnected." Denver W. Metro. Dist. v. Geudner , 786 P.2d 434, 436 (Colo. App. 1989) (quoting Thornton Dev. Auth. v. Upah , 640 F.Supp. 1071, 1076 (D. Colo. 1986) ). Ordinarily, once the condemning entity has established that the taking is for a public purpose, we will not second-guess its decision that a particular piece of property must be condemned to achieve that purpose. Absent a showing of bad faith, we will assume that the entity has selected the property necessary to carry out the purpose of the condemnation. Colo. State Bd. of Land Comm'rs v. Dist. Court , 163 Colo. 338, 342, 430 P.2d 617, 619 (1967). But if, for example, the primary purpose underlying a condemnation decision is to advance private interests, the existence of an incidental public benefit does not prevent a court from finding bad faith and invalidating a condemning entity's determination that condemnation of a particular piece of property is necessary. Geudner , 786 P.2d at 436.

¶ 32 In condemnation proceedings, we ordinarily review the district court's findings of fact for clear error and its legal conclusions de novo. Glenelk Ass'n v. Lewis , 260 P.3d 1117, 1120 (Colo. 2011). However, where, as here, the district court adopts the prevailing party's proposed findings of fact and conclusions of law verbatim, the findings are subject to "heightened scrutiny." Trask v. Nozisko , 134 P.3d 544, 549 (Colo. App. 2006). And, even under the clearly erroneous standard of review, we can reverse the district court's factual findings when, although there may be some evidence to support them, we are nonetheless left, after a review of the entire record, with the definite and firm conviction that a mistake has been made. See In re Estate of Schlagel , 89 P.3d 419, 422 (Colo. App. 2003).

III. The District's Condemnation of Parcel C

¶ 33 We 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 statute prohibiting a taking for transfer to a private entity for the purpose of economic development.

A. Public Purpose

¶ 34 The District insists that the condemnation of Parcel C was for a public purpose because the property would, upon the Town's approval of the subdivision, be used for public improvements such as roads and sewers.

¶ 35 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. See Am. Family Mut. Ins. Co. v. Am. Nat'l Prop. & Cas. Co. , 2015 COA 135, ¶ 30, 370 P.3d 319 ("[T]he Colorado Constitution requires that the taking itself be accomplished for a public purpose.").

¶ 36 At the time of the condemnation, there was no subdivision. We acknowledge that a condemning entity is not required to obtain permits and approvals as a condition precedent to moving forward with a condemnation, Goltra , 66 P.3d at 173, but the point in the development process at which the condemnation occurs is relevant to the issue of public purpose, id. And here, it is not just that the subdivision had not been approved at the time of the condemnation; it is that there could be no subdivision unless Parcel C was somehow acquired. Thus, 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. "A condemnation action to support a public benefit that may never be initiated is premature." Kobobel , 176 P.3d at 865.

¶ 37 In other words, the taking of Parcel C was a step removed from any public purpose. A similar scenario arose in American Family Mutual Insurance Co. In that case, the state forest service initiated a prescribed burn on state property that spread unintentionally to surrounding land, resulting in significant property damage. Am. Family Mut. Ins. Co. , ¶ 2. The insurers of the property argued that the forest service had effectuated a taking of the property because the fire, at its inception, was for a public purpose. Id. at ¶¶ 29, 31. The division rejected that argument, reasoning that although the initial act of setting the fire served a public purpose, the resulting damage (or "taking") was a step removed from the original public purpose, and the initial public purpose could not support the later unintentional taking. Id. at ¶ 32.

¶ 38 Here, 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 approval of its final plat in the first place. Only then was approval of the subdivision even possible, and the likelihood of the need for public improvements substantial enough to justify the condemnation. See Pub. Serv. Co. of Colo. v. Shaklee , 784 P.2d 314, 317 n.3 (Colo. 1989) (Although obtaining a permit is not required before the entity can condemn property, "the likelihood that such a [permit] will be issued ... may be relevant to the trial court's determination of public use."). The later planned public use for Parcel C "does not transfer to and supply the 'public purpose' for th[e] [District's] taking." Am. Family Mut. Ins. Co. , ¶ 32.

¶ 39 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. See Geudner , 786 P.2d at 436.

B. Necessity and Bad Faith

¶ 40 That brings us to the closely related issue of necessity. In its briefing on appeal, the District says we must accept its assertion of necessity, no questions asked, because it issued a "Resolution of Necessity" stating that acquisition of Parcel C was necessary for construction of the public improvements and because Woodcrest failed to show (or even allege) any bad faith on the part of the District. We disagree.

¶ 41 First, having determined that the essential purpose of the condemnation was to advance the Developer's interests, we cannot simultaneously determine that the acquisition of Parcel C was necessary to accomplish a public purpose.

¶ 42 Second, the evidence of bad faith is substantial. We recognize, as the District has pointed out, that in the early stages, special district boards are generally made up of the developer's representatives. But the representatives, when serving in their capacities as board members, may not take actions based on their own self-interests as the developer. See Geudner , 786 P.2d at 436-37. At oral argument, counsel for the District conceded that the District's directors, all employees of the Developer, operated under a conflict of interest in pursuing condemnation of Parcel C. Under these circumstances, we must carefully scrutinize the District's decision to take Parcel C to ensure that it was not tainted by "bad faith." Id. at 436.

¶ 43 In our view, the evidence demonstrates that it was:

• From January 24, 2014, when it was executed, until March 16, 2015, a few days before the possession hearing, the Agreement required the Developer to acquire Parcel C, as part of a condition of "consolidated ownership" of Parcels A, B, and C.
• The Developer knew that it could not obtain approval for its final plat without acquiring Parcel C.
• When Woodcrest balked at the Developer's initial offer, the Developer did not negotiate further; instead, it threatened condemnation though it had no authority, on its own, to take Parcel C.
• In November 2014, the District was formally created. Two weeks later, the District sent Woodcrest a notice of intent to acquire Parcel C. At the time the District initiated condemnation proceedings, the Developer-not the District-was required to own Parcel C.
• On March 16, 2015, the Developer and the Town executed an amendment to the Agreement, stating that "[The District] is the owner of ... [Parcel C] (the "Strip Parcel"), to be dedicated for public use and ownership...." The District did not sign the agreement; the vice president of the Developer signed on behalf of the Developer, confirming that the District was entering into the Agreement on behalf of the Developer.
• On August 17, 2015, the Developer and the Town executed a second amendment to the Agreement, requiring both the District and Developer to submit an amended final plat to the Town showing the dedication of Parcel C for public improvements. The District did not sign this agreement either.

¶ 44 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.

¶ 45 These circumstances are similar to those presented in Geudner . In that case, the property within the metropolitan district was owned by members of one family, or entities controlled by the family, and members of the family sat on the district's board of directors. 786 P.2d at 435. A family entity entered into a contract for the sale of a parcel of land within the district. As a condition of the purchase, the seller required the entity to relocate a ditch on the property. Id. The family entity offered to buy property from a neighboring parcel so it could relocate the ditch there, but the owner refused. The district then instituted condemnation proceedings. Id. at 436. The trial court dismissed the petition, finding that the proceedings were initiated in bad faith. On appeal, the district argued that once it was established that relocating the ditch would yield a public benefit, the trial court was precluded from reviewing the necessity of moving the ditch to the neighbor's property. Id. A division of this court affirmed the dismissal, concluding that, while the relocation of the ditch might have provided an incidental public benefit, the essential purpose of the condemnation was to assist the family entity in completing the transaction. Id. at 436-37.

¶ 46 The District says this case is unlike Geudner because the essential purpose here is not to advance the interests of the Developer but to provide improvements to the residents of the proposed subdivision, which will benefit the public "first and foremost." But that conclusory distinction fails, for the reasons we have already explained.

¶ 47 The immediate purpose of the taking was to ensure the Developer's compliance with the contract. The District has not pointed us to a single case in any jurisdiction, and we have not uncovered one through our own research, where a court has approved a governmental entity's condemnation of private property to facilitate a private party's compliance with a contract. The government may not "take property under the mere pretext of a public purpose, when its actual purpose [is] to bestow a private benefit." Kelo v. City of New London , 545 U.S. 469, 478, 125 S.Ct. 2655, 162 L.Ed.2d 439 (2005).

C. The Prohibition on a Taking for Transfer to a Private Entity

¶ 48 In our view, the District's condemnation of Parcel C, undertaken on behalf of the Developer, also runs afoul of section 38-1-101(1)(b). That provision provides:

(b)(I) 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. Private property may otherwise be taken solely for the purpose of furthering a public use.
(II) By enacting subparagraph (I) of this paragraph (b), the general assembly does not intend to create a new procedural mechanism to bring about the condemnation of private property. By enacting subparagraph (I) of this paragraph (b), the general assembly intends to limit only as provided in subparagraph (I) of this paragraph (b), and not expand, the definition of "public use."

Subsection 101(1)(b) was added to the general eminent domain statute in 2006, in response to the Supreme Court's decision in Kelo . See Michael R. McCormick, Kelo Confined-Colorado Safeguards Against Condemnation for Public-Private Transportation Projects , 37 Colo. Law. 39 (Mar. 2008) ; see also Ch. 349, sec. 1, § 38-1-101(1)(b), 2006 Colo. Sess. Laws 1749-50.

¶ 49 In Kelo , the Supreme Court held that the City of New London could, consistent with the Fifth Amendment, condemn private property for the purpose of transferring it to a private nonprofit entity established to assist the city with a redevelopment project, even though there was no showing by the city that the property was blighted. 545 U.S. at 479, 125 S.Ct. 2655. Colorado, like many other states, enacted legislation in the wake of Kelo to preclude the government from taking property and transferring it to a private entity.

¶ 50 We view the District's taking as a circumvention of our anti- Kelo statute. The Agreement, as well as the Town's municipal code, required the Developer to acquire at its own cost all of the parcels for the proposed subdivision. Then, under the Agreement and the municipal code, the Developer had to make certain improvements and dedicate certain property to the Town. See Parker Mun. Code 13.07.010.

¶ 51 Woodcrest's refusal to sell prevented the Developer from meeting those obligations. The Developer, though, had no power to condemn Parcel C. Nor, consistent with section 38-1-101(1)(b), could the District condemn the property and transfer it to the Developer for installation of improvements and dedication to the Town. So, instead, the District, acting as a mere conduit for the Developer, executed an amendment to the Agreement that allowed the District to acquire Parcel C and then, bypassing the Developer, simply dedicated the property directly to the Town.

¶ 52 Thus, through a manipulation of the circumstances surrounding the condemnation proceeding, the District has skirted the prohibition against a governmental entity's taking of private property for transfer to a private entity for economic development purposes. Such action violates the principle that "the law may not be used to permit one to accomplish indirectly what he may not achieve directly." Salle v. Howe , 793 P.2d 628, 631 (Colo. App. 1990).

¶ 53 The District's circumvention of the statute reinforces our view that the condemnation proceedings were undertaken in bad faith.

¶ 54 Because we conclude that the District's condemnation of Parcel C failed to comply with constitutional and statutory requirements, we must reverse the district court's judgment of possession.

IV. Expert Witness Fees

¶ 55 After the court entered its preliminary order of possession, the case proceeded to a valuation hearing to determine just compensation. Woodcrest challenges the district court's denial of its request for reimbursement of certain expert witness fees incurred in connection with the valuation hearing.

¶ 56 In light of our disposition reversing the judgment of possession, we vacate the court's order on Woodcrest's bill of costs and remand for reconsideration in accordance with section 38-1-122(1), C.R.S. 2017 (providing that a district court must award costs and attorney fees upon a finding that petitioner is not entitled to acquire real property).

V. Conclusion

¶ 57 The judgment of possession is reversed. The order on Woodcrest's bill of costs is vacated. The case is remanded to the district court for further proceedings consistent with this opinion.

Dailey and Plank , JJ. concur

      Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5 (3), and § 24-51-1105, C.R.S. 2017.

      The record does not appear to include evidence of the date that Developer acquired parcels A and B. However, Woodcrest represented in its briefing that the Developer closed on the sale of the parcels between September 12 and 15, 2014, and the District did not dispute that representation.