Dove Valley Business Park Associates, Ltd. v. Board of County Commissioners of Arapahoe County

Decision Date15 September 1997
Docket NumberNo. 96SC101,96SC101
Citation945 P.2d 395
Parties97 CJ C.A.R. 1931 DOVE VALLEY BUSINESS PARK ASSOCIATES, LTD., a Colorado limited partnership; Abacus Group Realty Holding Company II, a Delaware corporation, as successor by merger to Diversified Land Holdings, Inc., a Delaware corporation; Havana Street, Ltd., a Colorado limited partnership; Gullwing Acres Limited Liability Co., a Wyoming limited liability company; and Colorado National Bank, a federally chartered bank, as successor by merger to Bank Western, federal savings bank, Petitioners, v. The BOARD OF COUNTY COMMISSIONERS OF ARAPAHOE COUNTY, COLORADO; and Adrian B. "Bernie" Ciazza, Treasurer, Arapahoe County, Colorado, Respondents.
CourtColorado Supreme Court

The Law Offices of Bennett S. Aisenberg, P.C., Bennett S. Aisenberg, H. Paul Himes, Jr., Barry J. Goldstein, Denver, for Petitioners.

Kathryn L. Schroeder, County Attorney, Arapahoe County, Richard F. Mutzebaugh, Assistant County Attorney, for Respondents.

Wilcox & Ogden, P.C., Ralph Ogden, Denver, for Amici Curiae, The Colorado Union of Taxpayers and The Colorado Trial Lawyers Association.

Justice BENDER delivered the Opinion of the Court.

In this property tax case, the respondents, the Arapahoe County Board of Commissioners (the county) and the Treasurer of Arapahoe County (the treasurer), refused to return the redemption interest paid by the petitioners (the taxpayers) on that portion of the taxpayers' real property taxes which was determined to be excessive and was refunded as a result of later protest and abatement proceedings. The taxpayers sued, claiming that the county and the treasurer violated the takings clauses of the United States and Colorado Constitutions and were unjustly enriched. The district court dismissed the taxpayers' complaint for failure to state a claim upon which relief can be granted. The court of appeals affirmed in Dove Valley Business Park Associates v. Board of County Commissioners, 923 P.2d 242 (Colo.App.1995), holding that any taking that occurred was constitutionally permissible and that the county had not been unjustly enriched. The taxpayers petitioned this court for certiorari review of the decision of the court of appeals. 1

We hold that redemption interest is a statutorily imposed penalty, an additional charge, which must be calculated based on the amount of taxes paid by the purchaser of a tax lien rather than on the amount of taxes determined to have been actually owed at a later protest or abatement proceeding. § 39-12-103, 11 C.R.S. (1997). Redemption interest is a penalty exacted from the taxpayer for the privilege of redemption because the taxpayer failed to pay property taxes before the property was sold at a tax lien sale. Id. Because the taxpayer has no reasonable expectation based on state law of being exempt from this penalty, we hold that no taking occurs when the county charges redemption interest as required by statute. We further hold that the county was not unjustly enriched by the taxpayers' payment of this penalty because the taxpayers conveyed no benefit to the county. We affirm the court of appeals, but differ in our reasoning.

I.

The taxpayers each own parcels of commercial real property located in Arapahoe County. 2 For the tax years 1989, 1990, and/or 1991, the Arapahoe County Assessor overvalued these parcels by as much as 48% above their actual value. The taxpayers failed to pay their taxes for the years in which their properties were overvalued, and the treasurer conducted a tax sale at which third party bidders purchased tax liens on some of these properties. Properties of the taxpayers on which no bids were submitted at the sale were removed from the county tax rolls.

The taxpayers then redeemed much of their property by paying the amount of the erroneous tax assessment, delinquent interest 3 on the erroneous assessment, redemption interest on the erroneous assessment, and the costs of the sale. Delinquent interest is interest that accrues when the taxpayer fails to pay property taxes by the statutory due date. § 39-10-104.5, 11 C.R.S. (1997).

One of the taxpayers, Havana Street, Ltd., filed a protest upon receiving the notice of valuation from the assessor. The other taxpayers waited until after the tax lien sale and then petitioned for abatement and refund. The protest and the petitions for abatement were denied by the assessor and the assessor's denial was affirmed on appeal to the Arapahoe County Board of Equalization (BOE). Further appeal to the State Board of Assessment Appeals (BAA) resulted in a substantial lowering of the assessed values of all the taxpayers' properties and an order to the treasurer to abate the taxes.

The county refunded the erroneously levied taxes, but refused to pay any refund interest for having held the taxpayers' money in error. Refund interest is interest paid to the taxpayer on the amount of the refunded payment. § 39-10-114(1)(b), 11 C.R.S. (1997). In addition, the county refused to return to the taxpayers the delinquent interest and the redemption interest that the taxpayers paid on the portion of the tax assessment determined to be excessive. The taxpayers sued the county and the treasurer, arguing that the county's refusal to pay these amounts constituted a violation of the statutory scheme, an unconstitutional taking, and unjust enrichment.

The taxpayers moved for summary judgment, and the county and the treasurer responded by moving to dismiss for failure to state a claim upon which relief can be granted. After a hearing, the district court issued a declaratory judgment that the taxpayers were not statutorily entitled to refund interest, nor were they entitled to a reimbursement of the delinquent interest and the redemption interest paid on the abated portion of the taxes. The district court held that the statutory scheme was neither unconstitutional nor inequitable, and that the taxpayers failed to present any evidence in support of their claims. The district court dismissed the taxpayers' claims for failure to state a claim.

The taxpayers appealed. The court of appeals agreed with the taxpayers that the county was required to pay refund interest 4 and to reimburse the taxpayers for delinquent interest paid on the abated portion of the taxes. See Dove Valley, 923 P.2d at 245, 248. However, the court of appeals agreed with the district court that the county was not required by statute to reimburse the taxpayers for redemption interest paid on the abated portion of the taxes. See id.

Having determined that the county was statutorily entitled to retain the redemption interest paid on the erroneously levied taxes, the court of appeals turned to the question of whether this statutory procedure constituted an unconstitutional taking. See id. The court stated that the abatement award was a judgment, and therefore a property interest which cannot be taken by the government without following due process of law requirements or payment of just compensation. See id. at 249. The court assumed for purposes of its analysis that the charging of redemption interest on the erroneously assessed taxes diminishes the effect of the judgment and therefore constitutes a governmental appropriation of the award. See id. The court of appeals reasoned, however, that this taking was permissible because it was rationally related to the important and legitimate governmental interest in the regular receipt of public revenue. See id.

The court of appeals also held that the county had not been unjustly enriched by retaining the redemption interest paid by the taxpayers on the erroneous assessment. See id. at 250. The court of appeals noted that when a third party purchases the tax lien, the county receives no benefit because redemption interest accrues to the buyer rather than to the county. See id. at 251. The court of appeals acknowledged that the taxpayer does pay redemption interest to the county when no investor can be found to purchase the tax lien. See id. The court reasoned that any benefit to the county under these circumstances was not inequitable because the county did not act in bad faith. See id.

The court of appeals remanded with instructions for the district court to order the county to pay refund interest and to reimburse the taxpayers for the delinquent interest paid on the erroneously levied taxes. See id. The taxpayers petitioned this court for certiorari review on the issue of whether the county effected an unconstitutional taking or was unjustly enriched by refusing to reimburse the taxpayers for redemption interest paid on the erroneously levied taxes. We affirm the holding of the court of appeals that the county's refusal to return a portion of the redemption interest in this case was constitutional and did not constitute unjust enrichment, but we employ different reasoning.

II.

Each year, the assessor for each county values the real property within the county for tax purposes and notifies property owners of the valuation of their property. See generally § 39-1-103(5)(a), 11 C.R.S. (1997). Property owners who believe that their land has been overvalued may file an immediate protest with the assessor, who conducts a hearing and issues a decision. See §§ 39-5-121 to -122, 11 C.R.S. (1997). The statutory scheme provides for subsequent review by the BOE, see § 39-8-106, 11 C.R.S. (1997), by the BAA, see § 39-8-108, 11 C.R.S. (1997), and by state appellate courts, see id. If the taxpayer prevails, the treasurer reduces the tax to reflect the proper assessment.

Although statutory deadlines ensure that this procedure occurs as expediently as possible, the legislative scheme contemplates that in some cases the tax will become due before the resolution of the protest. See § 39-8-109, 11 C.R.S. (1997); Gates Rubber Co. v. State Bd. of Equalization, 770 P.2d 1189, 1193 (Colo.1989); Board of Assessment Appeals v. Benbrook, 735...

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