Colorado Auto Auction Services Corp. v. City of Commerce City

• Decision Date: 29 October 1990
• Docket Number: Nos. 89SA343,89SA450,s. 89SA343
• Citation: 800 P.2d 998
• Parties: COLORADO AUTO AUCTION SERVICES CORP., a Delaware corporation, d/b/a Colorado Auto Auction, Inc., Plaintiff-Appellant/Cross-Appellee, v. The CITY OF COMMERCE CITY, Defendant-Appellee/Cross-Appellant.
• Court: Colorado Supreme Court

Page 998

800 P.2d 998

COLORADO AUTO AUCTION SERVICES CORP., a Delaware corporation, d/b/a Colorado Auto Auction, Inc. Plaintiff-Appellant/Cross-Appellee, v. The CITY OF COMMERCE CITY, Defendant-Appellee/Cross-Appellant.

Nos. 89SA343, 89SA450.

Supreme Court of Colorado En Banc.

Oct. 29, 1990.

As Modified on Denial of Rehearing Nov. 19, 1990.

Springer and Steinberg, P.C., Jeffrey A. Springer, Denver, for plaintiff-appellant/cross-appellee.

Gehler & Merrigan, Thomas E. Merrigan, Commerce City, Greengard Senter Goldfarb & Rice, Steven J. Dawes, Edward L. Serr, Denver, for defendant-appellee/cross-appellant.

Justice QUINN delivered the Opinion of the Court.

The issues in this appeal arise out of a judgment entered by the Adams County District Court in a declaratory and injunctive action filed by Colorado Auto Auction, Inc., a taxpayer, against the City of Commerce City. The district court upheld the validity of a Commerce City ordinance imposing a ten dollar tax on transfers of motor vehicles at auctions conducted within the city and invalidated the city council's declaration that the ordinance was an emergency measure. ¹ We affirm that part of the judgment upholding the validity of the taxing ordinance and reverse that part of the judgment invalidating the declaration of emergency.

I.

The City of Commerce City is a home rule municipality. On July 11, 1988, the City Council of Commerce City enacted Ordinance 846, entitled "Transfer Tax on Motor Vehicles Sold at Public Auction," with an effective date of August 15, 1988. The ordinance imposed a ten dollar tax on "each transfer of a motor vehicle sold at auction" in the city. Commerce City Ord. No. 846 § 20-214 (1988). Colorado Auto Auction, which was the only taxpayer affected by the ordinance, operates a weekly wholesale auction in Commerce City. The auctions are not public auctions and are open only to motor vehicle dealers. Approximately 450 to 550 dealers from twenty or more states and Mexico attend the auctions. Colorado Auto Auction generates revenue by charging each dealer in attendance a flat fee of $30 and the seller of each vehicle a graduated commission of $55 or more based upon the sale price of the vehicle. Approximately 600 vehicles are sold weekly at the auction, and of that number about 200 are sold to out-of-state dealers.

The auction is conducted by placing individual cars on the auction block. Once the bidding reaches a minimum level, the vehicle is then sold to the highest bidder. The actual transfer of possession occurs within ten days after the auction upon the seller's presentation of a clear title and the purchaser's payment of the bid price.

On September 7, 1988, Colorado Auto Auction filed a declaratory and injunctive action in the Adams County District Court, requesting that the court declare the ordinance invalid and to enjoin its enforcement on several grounds, including, as pertinent here: that the ordinance applies only to public auctions and hence is inapplicable to its private auctions; that the ordinance violates section 39-26-113(5)(a), 16B C.R.S. (1982), which exempts from all sales taxes "[t]he sale of a new or used automobile to a purchaser who is a nonresident of Colorado and who purchases such automobile for use outside this state"; and that the ordinance violates due process of law and equal protection of the laws under both the United States and Colorado Constitutions. U.S. Const. amend. XIV; Colo.Const. art. II, § 25. Shortly after the enactment of Ordinance 846, Colorado Auto Auction, with the consent of Commerce City, began paying approximately $25,000 per month into a tax escrow account pending the final resolution of the validity of the ordinance.

After the complaint was filed, the City Council of Commerce City on November 7, 1988, enacted Ordinance 858 to amend Ordinance 846. Ordinance 858, which was enacted as an emergency measure, contained the following declaration of legislative intent:

The City Council finds, determines and declares that after considering the businesses and occupations in the City and the relation of such businesses and occupations to the municipal welfare as well as the relation thereof to the expenditures required by the City, and proper, just and equitable distribution of the tax burden within the City in all matters proper to be considered in relation thereto, the excise tax imposed on the transfer of motor vehicles sold at auction in the City, with exemptions thereto, is reasonable, proper, uniform and nondiscriminatory and that any person, as herein defined, who engages in the conduct of an auction business in the City that involves the transfer of ownership of motor vehicles, or is authorized to conduct an auction business in the City which involves the transfer of ownership of motor vehicles, is the taxpayer liable for payment of such excise tax to the City in accord with the terms and provisions of this Article and further that, in the sole discretion of the taxpayer, the excise tax, or any portion thereof, imposed pursuant to this Article may be passed on to the transferee of any such motor vehicle transferred at auction of the taxpayer in the City and collected from the transferee by the taxpayer as reimbursement to the taxpayer.

Commerce City Ord. No. 858 § 20-211 (1988). The amending ordinance eliminated the word "public" from the title of the ordinance, described the tax imposed as an "excise" tax, and added the following definitions of the words "person" and "taxpayer" to § 20-213:

(4) Person shall mean and include an individual, a business entity, firm, sole proprietorship, and corporation.

(5) Taxpayer shall mean any person engaged in the conduct of an auction business in the City which involves the transfer of ownership of motor vehicles, or is authorized to conduct an auction business within the City which involves the transfer of ownership of motor vehicles.

In addition, Ordinance 858 changed the language in Ordinance 846 that imposed a "tax in the amount of $10.00 for each transfer of a motor vehicle sold at auction in the City" to the following: "an excise tax in the amount of $10.00 for each transfer of ownership of a motor vehicle at auction in the City." Commerce City Ord. No. 858 § 20-214 (1988). ² The original version of Ordinance 846 exempted from the tax "[a]ny auction sale of a motor vehicle to a purchaser who is required under the laws of the State of Colorado to register such motor vehicle as a retail purchaser responsible for payment of a sales tax on such purchase." Commerce City Ord. No. 846 § 20-217(2) (1988). This provision was not amended and remained in full force and effect upon adoption of Ordinance 858.

Ordinance 858 contained an emergency clause which was enacted pursuant to the following provision of the Commerce City Charter:

An ordinance which is declared therein to be an emergency ordinance and which is immediately necessary for the preservation of the public peace, health, safety or welfare may be enacted at the regular or special meeting at which it is introduced by seven (7) affirmative votes without any requirement of prior posting or publication and without any requirement of a second reading and passage. Such emergency ordinances, after passage, shall take effect immediately, but shall, for informational purposes, be posted and published as required in Section 5.6 for ordinances after final passage.

Commerce City Charter ch. V, § 5.4 (1970). The emergency measure in Ordinance 858 was approved by eight members of the city council and stated as follows:

This City Council hereby finds and declares that an emergency exists and that passage of this Ordinance is immediately necessary in order to implement the amendments to said Ordinance No. 846 of the City of Commerce City as are set forth herein for the preservation of the public peace, health, safety and welfare.

Commerce City Ord. No. 858 § 3 (1988). After the adoption of Ordinance 858, Colorado Auto Auction amended its complaint to include the same claims it had directed against Ordinance 846 in its original complaint and added the additional claim that Ordinance 858 was not validly enacted as an emergency measure. ³ Commerce City, in its answer to the amended complaint, alleged that Ordinances 846 and 858 imposed an excise tax, not a sales tax, that the ordinances were enacted pursuant to applicable law, and that the ordinances conformed to constitutional requirements.

The case was tried to the court on April 28, 1989. At the conclusion of the evidence, the district court initially determined that the provisions of Ordinance 846 as originally enacted were vague and hence inapplicable to Colorado Auto Auction, but that Ordinance 846, as amended by Ordinance No. 858, did apply to Colorado Auto Auction, and then ruled as follows: that Ordinance 846 as amended by Ordinance 858 imposed an excise tax, rather than a sales tax, and that the enactment of the excise tax did not violate state statutory law; that the imposition of the tax on each "transfer of ownership of a motor vehicle at auction" was not unconstitutionally vague so as to violate due process of law; that Ordinance 846 as amended by Ordinance 858 did not violate equal protection of the laws; and, finally, that there was no evidence establishing an emergency and, consequently, the emergency clause of Ordinance 858 was an invalid exercise of the city's authority.

Colorado Auto Action appealed from that part of the judgment upholding the validity of the taxing ordinance, and Commerce City appealed from that part of the judgment invalidating the emergency clause. ⁴ Colorado Auto Auction claims that Ordinance 846 as amended by Ordinance 858 (hereinafter collectively referred to as the tax ordinance) is invalid for three reasons: (1) the tax ordinance was enacted in violation of section 39-26-113(5)(a), which exempts from all sales taxes any sale of a motor vehicle to a nonresident purchaser for use outside the...