City and County of Denver v. Block 173 Associates

• Decision Date: 09 July 1991
• Citation: 814 P.2d 824
• Docket Number: 90SC382
• Parties: The CITY AND COUNTY OF DENVER; the City Council of the City and County of Denver, by its council members (not as individuals, but as members of the City Council), T.J. Hackworth, M.L. Sandos, Stephanie A. Foote, Paul L. Swalm, John J. Silchia, Nieves Perez McIntire, Hiawatha Davis, Jr., Salvadore Carpio, Cathy Donohue, William R. Roberts, Robert L. Crider, Cathy Reynolds, William A. Scheitler, the Denver Urban Renewal Authority; Federico Pena, as Mayor of the City and County of Denver; Thomas P. Briggs, Manager of Revenue of the City and County of Denver and Ex Officio Treasurer and Assessor of the City and County of Denver; Felicia Muftic, City Clerk of the City and County of Denver; BCE Development Properties, Inc.; and Freida Marin, Public Trustee, Petitioners, v. BLOCK 173 ASSOCIATES, a Colorado general partnership, Donald Oberndorf; Leo Stern; Harry Paul Wertheimer; Carol Brodie, Administrator for the Edith O. Wertheimer Trust; and Dottie Hammell, Respondents.
• Court: Colorado Supreme Court

Page 824

814 P.2d 824

The CITY AND COUNTY OF DENVER; the City Council of the City and County of Denver, by its council members (not as individuals, but as members of the City Council), T.J Hackworth, M.L. Sandos, Stephanie A. Foote, Paul L. SwalmJohn J. Silchia, Nieves Perez McIntire, Hiawatha Davis, Jr.Salvadore Carpio, Cathy Donohue, William R. Roberts, Robert L. Crider, Cathy Reynolds, William A. Scheitler, the Denver Urban Renewal Authority; Federico Pena, as Mayor of the City and County of Denver; Thomas P. Briggs, Manager of Revenue of the City and County of Denver and Ex Officio Treasurer and Assessor of the City and County of DenverFelicia Muftic, City Clerk of the City and County of Denver; BCE Development Properties, Inc.; and Freida Marin, PublicTrustee, Petitioners, v.BLOCK 173 ASSOCIATES, a Colorado general partnership, Donald Oberndorf; Leo Stern; Harry Paul Wertheimer; Carol Brodie, Administrator for the Edith O. Wertheimer Trust; and Dottie Hammell, Respondents.

No. 90SC382.

Supreme Court of Colorado, En Banc.

July 9, 1991.

Opperman & Associates, P.C., Marlin D. Opperman, William M. Schell, Linda A. Surbaugh, Denver, for Denver Urban Renewal Authority.

Davis, Graham & Stubbs, Dale R. Harris, David R. Hammond, Lisa S. Kahn, Denver, for petitioner BCE Development Properties.

Patricia L. Wells, City Atty., Robert M. Kelly, Donald E. Wilson, Karen A. Aviles, Asst. City Attys., Denver, for petitioners the City and County of Denver; the City Council of the City and County of Denver, by its council members (not as individuals, but as members of the City Council), T.J. Hackworth, M.L. Sandos, Stephanie A. Foote, Paul L. Swalm, John J. Silchia, Nieves Perez McIntire, Hiawatha Davis, Jr., Salvadore Carpio, Cathy Donohue, William R. Roberts, Robert L. Crider, Cathy Reynolds, William A. Scheitler; Federico Pena, as Mayor of the City and County of Denver; Thomas P. Briggs, Manager of Revenue of the City and County of Denver and Ex Officio Treasurer and Assessor of the City and County of Denver; Felicia Muftic, City Clerk of the City and County of Denver; and Freida Marin, Public Trustee.

Baker & Hostetler, James A. Clark, Bruce D. Pringle, Joan B. Burleson, Denver, for respondentBlock 173 Associates.

Justice ERICKSONdelivered the Opinion of the Court.

We granted certiorari to review the opinion of the Colorado Court of Appeals, Block 173 Associates v. City & County of Denver, 797 P.2d 771(Colo.App.1990).The issue is whether res judicata or collateral estoppel operates to bar the trial of the plaintiff's, Block 173 Associates(landowner), claims in state court.The landowner's state claims contested an urban renewal plan adopted by the defendants, which included the condemnation of the landowner's property in downtown Denver, Colorado.A companion case, alleging the same underlying facts, was filed by the landowner in federal district court.The federal district court resolved the issues by granting the defendants' motion for summary judgment.Oberndorf v. City & County of Denver, 696 F.Supp. 552(D.Colo.1988).That decision was appealed and affirmed by the Tenth Circuit, 900 F.2d 1434(10th Cir.1990), and certiorari was denied by the United States Supreme Court.Block 173 Assoc. v. City & County of Denver, 498 U.S. 845, 111 S.Ct. 129, 112 L.Ed.2d 97(1990).

The Denver District Court, on the basis of the federal decisions in Oberndorf, granted the defendants' motion for summary judgment in the companion state cases.The Colorado Court of Appeals partially reversed the district court's determination that res judicata and collateral estoppel barred the landowner's state claims, and held that two of the landowner's state claims were not barred by virtue of the federal district court summary judgment.We affirm the court of appeals.

This case arises out of the City of Denver's attempt to promote in the construction and development of a three-block retail complex in downtown Denver known as Centerstone.Block 173 Associates and Donald Oberndorf owned, either alone or as tenants-in-common with BCE Development Properties, Inc.(BCED), three blocks in downtown Denver proposed for Centerstone, which were included within a fifteen-block area that the Denver City Council determined to be blighted for purposes of urban renewal.The defendants were the City of Denver, the Denver City Council, the mayor of Denver, the Denver Urban Renewal Authority (DURA), Denver's manager of revenue, the Denver city clerk, BCED, and the public trustee for the City of Denver.¹

In 1983, Denver and the Denver Partnership, Inc., a civic and downtown business nonprofit organization, formed the Sixteenth Street Retail Development Task Force to assist in forming a public and private partnership to develop a multi-block retail project on the Sixteenth Street Mall.Although multiple bids were solicited, only BCED showed both the interest and capacity to proceed with the project.BCED proposed the three-block Centerstone project, to be built in part on blocks 173 and 196, which were not blighted.The municipal defendants and BCED concluded Centerstone was only economically viable if public funding was available.BCED proposed tax increment financing, a form of public funding that allows for the sale of municipal bonds to raise money for public improvements pursuant to the Colorado Urban Renewal Law, sections 31-25-101 to -115, 12B C.R.S. (1986 & 1989 Supp.).It is undisputed that BCED would benefit from the financing made available by the city and the development of the Centerstone project.In 1984, the city began to take steps to adopt an urban renewal plan.

Section 31-25-107(1) provides that no urban renewal project shall be undertaken unless the appropriate authority, in this case the Denver City Council, finds that the area is blighted or a slum.In early 1985, the city council funded a DURA study of a fifteen-block area, including the three blocks proposed for Centerstone, to determine whether that area was blighted, and employed HOH Associates, Inc., a consulting, economic analysis, and landscape architectural firm, as the expert to conduct the "blight survey."In March 1986, HOH Associates submitted a written report to DURA.In the opinion of HOH Associates, as set forth in the report, the "Downtown Study Area ... is a Blighted Area in accordance with the criteria established in Section 31-25-103(2) of the Colorado Revised Statutes."²HOH Associates was also of the opinion, however, that the three blocks specifically targeted for Centerstone were not blighted within the meaning of the statute.Based on the HOH Associates' study, DURA developed an urban renewal plan that included Centerstone, and which, under the Urban Renewal Law, included the right of condemnation.§ 31-25-105(e).

On May 27, 1986, the city council considered the proposed urban renewal plan at a public hearing.The landowner appeared at the meeting and opposed the plan, disputing that the area was blighted.At the conclusion of the meeting, the council voted 9-2 to adopt the plan for the entire fifteen-block area.In August 1987, DURA solicited proposals from prospective developers for redevelopment of all or part of the fifteen-block urban renewal area.BCED submitted the only proposal for Centerstone.BCED's proposal was accepted and the Centerstone project was to be Phase I of the urban renewal plan.The landowner subsequently filed actions contesting the redevelopment plan in both state and federal court.

The federal complaint included allegations that the plan violated federal antitrust laws, the federal Constitution, and the landowner's civil rights in violation of 42 U.S.C. § 1983.The state complaint set forth virtually identical allegations of facts.The state action included C.R.C.P. 106 claims alleging that the defendants exceeded their jurisdiction under color of quasi-judicial authority.The landowner also sought damages and an injunction, claiming the urban renewal plan was a sham.The landowner claimed that the city council had acted in excess of its authority under the Urban Renewal Law, and the defendants had conspired to take property for private purposes.The landowner also asserted various state and federal constitutional claims.³

After the defendants obtained summary judgment in federal court, an identical motion for summary judgment was made in the state court proceeding.The Denver District Court found that all of the issues were resolved by the federal court and granted summary judgment for the defendants.The Colorado Court of Appeals affirmed with the exception of what it termed the "bad faith" claims, and held that those claims were not affected by the federal decision.797 P.2d at 773-74.The court of appeals preserved the sixth and eighth state claims for relief to permit the landowner to provide proof that there was a genuine issue of material fact regarding the claims of fraud and bad faith.The court of appeals opinion foreclosed the granting of summary judgment on the basis of res judicata and collateral estoppel, and casts the burden of establishing a genuine issue of bad faith or fraud on the landowner.

I

The requirement that the city council make a finding that the area in question is blighted or a slum is a prerequisite to adoption of an urban renewal plan.§ 31-25-107(1).For purposes of judicial review, that statutory requirement is the equivalent of "necessity" in other condemnation cases.⁴Cf.§ 31-25-104(1)(b), 12B C.R.S.(1986)(In order to establish an urban renewal authority, the governing body must find that "one or more slum or blighted areas exist in the municipality, and [find] that the acquisition, ... [and] development ... of such area is necessary in the interest of the public health, safety, morals, or welfare of the residents of the municipality....").

In examining the stated public purpose for a condemnation, we look to whether the stated public purpose is supported by the...