Cornerstone v. Wheat Ridge Renewal Auth.

• Decision Date: 10 August 2006
• Docket Number: No. 05CA0279.,05CA0279.
• Citation: 151 P.3d 601
• Parties: CORNERSTONE GROUP XXII, L.L.C., Plaintiff-Appellant and Cross-Appellee, v. WHEAT RIDGE URBAN RENEWAL AUTHORITY, Defendant-Appellee and Cross-Appellant.
• Court: Colorado Court of Appeals

151 P.3d 601

CORNERSTONE GROUP XXII, L.L.C., Plaintiff-Appellant and Cross-Appellee, v. WHEAT RIDGE URBAN RENEWAL AUTHORITY, Defendant-Appellee and Cross-Appellant.

No. 05CA0279.

Colorado Court of Appeals, Div. V.

August 10, 2006.

Hale Friesen, LLP, Allan L. Hale, John G. Lubitz, Robert T. Hoban, Thomas D. Leland, Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee.

Light, Harrington & Dawes, P.C., Steven J. Dawes, Denver, Colorado; Hayes, Phillips, Hoffmann & Carberry, P.C., Corey Y. Hoffmann, Denver, Colorado, for Defendant-Appellee and Cross-Appellant.

Opinion by Judge WEBB.

In this breach of contract action concerning condemnation and development of private property, plaintiff, Cornerstone Group XXII, L.L.C., appeals the trial court's judgment dismissing its specific performance claim against defendant, Wheat Ridge Urban Renewal Authority (the Authority). The Authority cross-appeals the trial court's preliminary injunction requiring it to preserve certain assets to satisfy a potential damage award in favor of Cornerstone. We affirm the preliminary injunction, reverse the dismissal, and remand for further proceedings.

I. Factual Background

In June 2001, after determining that the southwest corner of 38th and Sheridan (the property) was "blighted" and thus subject to redevelopment, the Authority contacted Cornerstone, a commercial developer whose primary client was Walgreens, about building a Walgreens drugstore on the property. Cornerstone submitted to the Authority an initial, and later a formal, proposal to acquire the property and build the drugstore. Cornerstone also provided the Authority with Walgreens' written commitment to the project.

In May 2003, Cornerstone and the Authority entered into a Disposition and Development Agreement (DDA). Under the terms of this agreement, the Authority was to acquire through purchase or, if necessary, condemnation proceedings, title to five parcels that made up the property, and then sell these parcels to Cornerstone for $1.4 million; before closing, Cornerstone was to provide the Authority with evidence of an irrevocable commitment from Walgreens to operate the drugstore under a twenty-five-year lease; and after closing, Cornerstone was to develop the property by building the drugstore.

In the fall of 2003, after the Authority was unable to secure land acquisition financing, it entered into a Loan Agreement (LA) with Cornerstone. Under the LA, the Authority pledged $1,025,000 of its own funds ($800,000 of which would be raised in taxes over a four-year period), while Cornerstone committed to provide a $1.9-2.2 million line of credit for the Authority's use in acquiring the five parcels that made up the property, again through purchase or condemnation proceedings.

Both the DDA and the LA provided specific performance as a remedy for breach.

Using its own funds, the Authority purchased one of the five parcels (the Ames parcel). In June 2004, the Authority filed petitions in condemnation on the remaining four parcels.

A dispute arose after the Authority advised Cornerstone that it needed funding under the LA for the condemnation proceedings. Cornerstone was reluctant to disburse any funds without a deed to or security in the parcels being condemned. But the Authority did not submit a request for funding under the LA. Instead, it terminated the DDA in late September 2004, abandoned the condemnation proceedings, indicated it was going to sell the Ames parcel, and began settling with the owners of the remaining four parcels, using funds it had pledged under the LA.

In November 2004, Cornerstone filed this action seeking, as relevant here, injunctive relief, specific performance, and damages based on breach of contract, equitable estoppel, and promissory estoppel.

II. Preliminary Injunction Proceeding

Cornerstone moved for a preliminary injunction. At the hearing, the Authority asserted that it had terminated the DDA and the LA when Cornerstone defaulted on its obligations by neither confirming the availability of financing for the Authority's use in the condemnation proceedings to acquire immediate possession of the four parcels nor providing evidence of an irrevocable commitment to the project from Walgreens. However, the trial court described these two grounds as most likely mere excuses to avoid the Authority's obligations to Cornerstone because, for whatever reason, the Authority had "changed its mind about wanting a Walgreens store or perhaps anything else at the site."

With respect to the Authority's first assertion, the court found that the Authority had never invoked the process for obtaining funds under the LA; that the Authority likely could have acquired two of the remaining four parcels by agreement and without the necessity of any money being put up front; that Cornerstone was not, in any event, in need of immediate possession of the property; that Cornerstone had the financial ability and the desire to proceed with the project; and that, if "the Authority had truly wished to go forward with the project ... it would have been easy for these two parties to get it done."

With respect to the Authority's second assertion, the court found that "Walgreens was committed to the project, and that there was no legitimate reason for the Authority to doubt it." The Authority had accepted the initial written commitment from Walgreens, and when the Authority first indicated that this was a problem, Cornerstone responded by providing the Authority with the first and last pages of a seventy-five-year lease signed by Walgreens. Thus, the court found it "more likely that the Authority ... settled upon this issue as an event of default after it had decided for other reasons to pull the plug on the deal."

The court discerned a reasonable probability that Cornerstone would succeed on the merits of its breach of contract claim. The court noted, however, that to complete the project Walgreens needed all five parcels and that, most likely, two of those parcels could be obtained only through condemnation proceedings. Observing that "there is simply no authority supporting the notion that a court can order [the Authority] to resume condemnation cases and complete a project of this nature," the court concluded that it could not order specific performance.

The court preliminarily enjoined the Authority from failing to collect the funds it was required to raise under the LA, from disbursing any of those funds, and from selling at less than market value (and disbursing the funds from the sale of) the Ames parcel.

The court certified its ruling that Cornerstone could not obtain specific performance under the agreements as a final judgment appropriate for appeal under C.R.C.P. 54(b). Cornerstone appeals that ruling. The Authority cross-appeals the preliminary injunction under C.A.R. 1(a)(3).

III. Specific Performance

Cornerstone contends the trial court made two errors in determining that specific performance was not an available remedy for the Authority's alleged breach of the DDA and LA: first, the court concluded, as a matter of law, that the Authority could not be required to condemn the parcels needed for the Walgreens project; and second, in any event, the court entered final judgment on the specific performance remedy without allowing Cornerstone the opportunity to discover evidence showing that the Authority might be able to acquire the parcels without using its condemnation power. Because we agree with Cornerstone's first contention, we need not address its second contention.

Specific performance is an equitable remedy, Clark v. Scena, 83 P.3d 1191 (Colo.App.2003), not a matter of right. Emery v. Medal Bldg. Corp., 164 Colo. 515, 436 P.2d 661 (1968). Whether it should be granted ordinarily depends on the equities of the case. Schreck v. T & C Sanderson Farms, Inc., 37 P.3d 510 (Colo.App.2001).

But here, the trial court determined that contract provisions requiring the Authority to exercise its eminent domain power are unenforceable. Because this is a legal conclusion, we review it de novo. See Turnbaugh v. Chapman, 68 P.3d 570 (Colo.App. 2003).

A. Statutory Delegation of the Power to Condemn

We reject Cornerstone's assertion that the contract provisions at issue are enforceable because they are expressly authorized under Colorado's Urban Renewal Law (URL), §§ 31-25-101 to 31-25-115, C.R.S. 2005.

Cornerstone relies on three provisions: (1) § 31-25-105(1)(b), C.R.S.2005, which authorizes an urban renewal authority "to make and execute any and all contracts and other instruments which it may deem necessary or convenient to the exercise of its [urban renewal] powers under this part 1"; (2) § 31-25-105(1)(e), C.R.S.2005, which authorizes such an authority "to acquire any property by purchase, lease, option, gift, grant, bequest, devise, or otherwise to acquire any interest in property by condemnation ... in the manner provided by the laws of this state for the exercise of the power of eminent domain by any other public body"; and (3) § 31-25-105.5, C.R.S.2005, which recognizes that property may be acquired through eminent domain proceedings for subsequent transfer to and redevelopment by a private party.

Contrary to Cornerstone's assertion, we perceive in these provisions no clear indication of an urban renewal authority's power to place in the hands of a private party the decision to condemn. The URL mentions many conventional matters that urban renewal authorities could effectuate only through contracts with private parties. But no provision suggests that urban renewal authorities may, through contract, delegate to private parties the governmental prerogative of taking property by eminent domain.

Neither § 31-25-105.5 nor § 31-25-105(1)(e) suggests this. The text makes clear that the overriding purpose of § 31-25-105.5 is to restrict eminent domain when used to acquire private property for transfer to another private party. And § 31-25-105(1)(...