Brotman v. East Lake Creek Ranch, LLP, 99SC713.

Citation31 P.3d 886
Decision Date10 September 2001
Docket NumberNo. 99SC713.,99SC713.
PartiesRobert BROTMAN, State Board of Land Commissioners, and State of Colorado, Petitioners/Cross-Respondents, v. EAST LAKE CREEK RANCH, L.L.P., a Colorado limited liability Partnership, Respondent/Cross-Petitioner.
CourtSupreme Court of Colorado

Duncan, Ostrander & Dingess, P.C., Donald M. Ostrander, James Birch, Denver, CO, Attorneys for Petitioner/Cross-Respondent Robert Brotman.

Ken Salazar, Attorney General, D. Edgar Hamrick, Assistant Attorney General, Natural Resources and Environment Section, Denver, CO, Attorneys for Petitioners/Cross-Respondents State Board of Land Commissioners and State of Colorado.

Dunn & Abpalnalp, P.C., John W. Dunn, Vail, CO, Fairfield and Woods, P.C., Robert S. Slosky, Gregory C. Smith, Denver, CO, Attorneys for Respondent/Cross-Petitioner East Lake Creek Ranch L.L.P., a Colorado limited liability partnership.

Justice BENDER delivered the Opinion of the Court.

In this appeal, we hold that because the Colorado Enabling Act imposes a trust on the state of Colorado to manage the school lands given to Colorado for the benefit of Colorado's public schools, and not for the benefit of taxpayers at large, the East Lake Creek Ranch does not have standing to enjoin a Land Board transaction as a trust beneficiary, as a taxpayer, or as an adjacent land owner.

The Ranch sued to enjoin the operation of an agreement between the Petitioners State Board of Land Commissioners (Land Board or Board) and Robert Brotman in which Brotman would gain title to school land managed by the Land Board. The trial court found that the Ranch had derivative taxpayer standing and granted a preliminary injunction. The court of appeals determined that the Ranch had direct taxpayer standing and standing as a trust beneficiary and affirmed. We reverse.

I. FACTS AND PROCEEDINGS BELOW

To provide background for our discussion of this case, we review the history of state enabling acts generally and the Colorado Enabling Act in particular.

In Andrus v. Utah, 446 U.S. 500, 520-24, 100 S.Ct. 1803, 64 L.Ed.2d 458 (1980) (Powell, J. dissenting), Justice Powell summarized the history of congressional grants in state enabling acts of land for school use. Each of the 13 States forming the Union had sovereign authority over the lands within its borders. This land provided those states with a tax base for the support of education and other governmental functions. Id. at 522, 100 S.Ct. 1803. On the other hand, in 1802, settlers in what is now Ohio, sought statehood within a portion of the Northwest Territory and encountered a different situation: large portions of the proposed state belonged to the federal government. Id. Thus, unless the federal government waived its immunity from taxation, the new state would not have an adequate tax base. In order to place Ohio on an equal footing with the original states, Congress enacted a compromise that "set a pattern followed in the admission of virtually every other state." Id. "As consideration for each new State's pledge not to tax federal lands, Congress granted the State a fixed proportion of the lands within its borders for the support of public education." Id. at 523, 100 S.Ct. 1803. To ensure that each new state would receive a random cross-section of public land, the federal government granted certain numbered "sections" of land within each "township."1 Id.

In Colorado's case, Congress provided in the 1875 Colorado Enabling Act2 that, should the inhabitants of the Territory of Colorado pass a state constitution and form a state, the federal government would grant, among other things, two sections in each township to the new state "for the support of the common schools." 18 Stat. 474 (1875); Enabling Act § 7, 1 C.R.S. (2000) at 27. The Enabling Act allowed the state to sell these lands, but only at a public sale and for no less than $2.50 per acre, and mandated that the proceeds from such sales be put in a permanent school fund, the interest from which the state must spend in support of the common schools. Enabling Act § 14, 1 C.R.S. at 28.

In 1876, Colorado's leaders convened a constitutional convention and approved our constitution. The Colorado constitution established a State Board of Land Commissioners to manage the lands granted to the new state in the Enabling Act. Colo. Const. art. IX, §§ 9, 10.

The Land Board currently manages approximately three million surface acres and four million mineral acres in the state, direct income from which generated more than $22 million for schools in fiscal year 1999-2000. Colorado Land Board 2000 Annual Report, available at http://trustlands.state.co.us/2000AnnualReport/colorado_land_board_2000_annual_.htm. In addition, interest from the permanent school fund generated approximately $20 million.3 Id. Our constitution requires that the income generated from the Land Board's management of school lands and the permanent school fund be distinct from and in addition to revenue appropriated for public education. See Colo. Const. art IX, § 3. Thus, the $42 million generated by the school lands in fiscal year 1999-2000 is distinct from and in addition to the approximately $5 billion in revenue appropriated for public education that same year.4

The property at issue in this case (the parcel) is one of the one square mile (640 acre) sections in one of the 36-section townships,5 given by the federal government to the state of Colorado through the 1875 Enabling Act for the support of the common schools. Respondent/Cross-Petitioner East Lake Creek Ranch (Ranch) owns an interest in property that partially adjoins the western boundary of the parcel. The parcel is bounded on the other sides by federal forest lands and by the Arrowhead ski area. Surrounded on all sides by land owned by others and lacking access to the state's general road system, the parcel is "landlocked." From 1974 to 1994, the Land Board leased the parcel for grazing purposes to the Ranch, through its principals, for an average annual rental of $0.65 per acre (approximately $416 per year for the entire parcel). The Land Board did not renew the lease in 1994 but instead sought a more productive use of the property.

In 1996, the Land Board entered into an "Agreement to Exchange Real Property" (agreement) with Petitioner/Cross-Respondent Robert Brotman (Brotman). The agreement essentially provided that the Land Board would deposit a patent conveying the parcel, and Brotman would deposit $1.84 million into an escrow account and the escrow agent would use the escrow funds deposited by Brotman to purchase "replacement" properties as directed by the Land Board.

After Brotman and the Board had signed the agreement but before the transaction was completed, the Ranch sued to prevent the agreement's operation. The Ranch alleged, among other things, that the transaction was not an "exchange" but rather a "sale" and as such violated constitutionally mandated sale procedures. See Colo. Const. art. IX, § 9 (providing land board has the duty to provide for the sale or other disposition of school lands "under such regulations as may be prescribed by law"); § 36-1-124, 15 C.R.S. (1990) (setting forth procedures for school land sales).

Brotman and the Board filed motions to dismiss on the issue of standing. The trial court denied these motions. The trial court rejected the Ranch's argument that it had individual standing as an adjacent landowner because if the transaction were completed, Brotman would have the right to "un-lock" the landlocked parcel by condemning a right-of-way through the Ranch's property. See Colo. Const. art II, § 14; § 38-1-102(3), 10 C.R.S. (2000). Since the Ranch's land was only one of several adjacent properties through which Brotman could condemn a right of way and because he had not yet done so, the trial court reasoned that "any injury to the [Ranch] as a result of the Agreement is fluctuating and uncertain at best," and thus the Ranch had not established that there was an "existing legal controversy that can be effectively resolved and not a mere possibility of a future legal dispute."

Although the trial court rejected the Ranch's argument that it had individual standing as an adjacent land owner, the trial court concluded that the Ranch nonetheless had derivative standing as a taxpayer under McCroskey v. Gustafson, 638 P.2d 51 (Colo. 1981) to bring suit on behalf of the Land Board. In McCroskey, we adopted a test established by the court of appeals for deciding standing in a suit brought by a citizen-taxpayer on behalf of a municipality. Id. at 56. The trial court concluded that the Ranch met the requirements of that test and therefore allowed the Ranch to proceed in the case.

After hearing the Ranch's motion for preliminary injunction, the trial court concluded that the transaction between Brotman and the Land Board was not an exchange but rather the "functional equivalent of a sale" and as such violated the mandated procedures for selling school lands. The trial court therefore enjoined Brotman and the Board from completing the transaction.

Brotman and the Board appealed, contending, among other things, that the trial court erred in holding that the Ranch had derivative taxpayer standing under McCroskey. The Ranch cross-appealed, asserting that it did have such standing and that, furthermore, it was error for the trial court to conclude that it did not also have individual standing as an adjacent landowner. The court of appeals declined to extend derivative taxpayer standing under McCroskey to the facts of this case. East Lake Creek Ranch v. Brotman, 998 P.2d 46, 48 (Colo.App.1999). Instead, the court of appeals held that the Ranch had direct taxpayer standing under Dodge v. Department of Social Services, 198 Colo. 379, 600 P.2d 70 (1979). East Lake Creek Ranch, 998 P.2d at 49.

The question in Dodge was "[u]nder what circumstances, if any, does the taxpayer/citizen have standing to challenge an...

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