Fowler Trust v. City of Boulder

• Decision Date: 29 January 2001
• Docket Number: No. 99SC304.,99SC304.
• Citation: 17 P.3d 797
• Parties: The FOWLER IRREVOCABLE TRUST 1992-1, Petitioner, v. The CITY OF BOULDER, a Colorado municipal corporation, Respondent.
• Court: Colorado Supreme Court

17 P.3d 797

The FOWLER IRREVOCABLE TRUST 1992-1, Petitioner, v. The CITY OF BOULDER, a Colorado municipal corporation, Respondent.

No. 99SC304.

Supreme Court of Colorado, En Banc.

January 29, 2001.

Rehearing Denied February 20, 2001.

Caplan & Earnest, LLC, Alexander Halpern, J. Marcus Painter, Boulder, CO, Attorneys for Petitioner.

Opperman & Associates, P.C., Marlin D. Opperman, William M. Schell, Douglass S. Widlund, Denver, CO, Joseph N. deRaismes, III, Boulder City Attorney, Jerry P. Gordon, Boulder, CO, Attorneys for Respondent.

Justice HOBBS delivered the Opinion of the Court.

We granted certiorari in this inverse condemnation action to review the court of appeals' decision in Fowler Irrevocable Trust 1992-1 v. City of Boulder, 992 P.2d 1188 (Colo.App.1999). The court of appeals reversed a jury's just compensation award of $123,000 against the City of Boulder (Boulder) for its temporary taking of 3.09 acres of private property and $41,000 for the cost of restoring the property to its pre-taking condition.¹ We uphold the jury award of $41,000 in restoration costs and require a new trial regarding the property's fair rental value during the period of Boulder's temporary taking.

I.

During a twenty-six month period from June 1993 to September 1995, Boulder occupied 3.09 acres of vacant, grass-covered land owned by the Fowler Irrevocable Trust 1992-1 (Trust Property). Without obtaining a construction easement, Boulder used the Trust Property as a staging area for construction of the Phase II Goose Creek Channel Improvement Project (Project). The Project, extending from Foothills Parkway to just west of 30th Street, involved construction of a flood control channel, relocation of sewer lines and other existing utilities, and installation of drainage structures, rock walls, and box culverts to contain the one-hundred-year floodplain. The one-hundred-year floodplain covered the entire Trust Property; the high-hazard area of the floodplain encompassed approximately seventy percent of the Trust Property.² Boulder's land use regulations prohibited development within the high-hazard area and severely restricted uses in the rest of the floodplain area of the Trust Property. Once completed, the Project would remove the Trust Property and other properties in the Project area from the one-hundred-year floodplain and, consequently, trigger lifting of the building restrictions Boulder's land use regulations had placed on development in the floodplain.

In pursuing the Project, Boulder hired a number of contractors (Contractors). Under its agreements with the Contractors, Boulder had the responsibility to obtain necessary easements from landowners for construction of the Project. Accordingly, it commenced negotiations with the Trust Property owner (Trust); these negotiations were unsuccessful. Instead of instituting an eminent domain action, Boulder—with actual knowledge of the Contractors' activities—allowed the Contractors to use Trust Property for a construction staging area.³ After twenty-six months of occupation, the Contractors left the surface of the Trust Property scarred with wheel tracks and piled with rocks, rubbish, and other waste material.

The Trust brought this inverse condemnation action against Boulder in November of 1994, while one of the Contractors still occupied the Trust Property. The Trust based its claims on Article II, section 15 of the Colorado Constitution and sections 38-1-101 to 122, 10 C.R.S. (2000). Pursuant to section 38-1-101, the trial court bifurcated the issues of liability and damages. In the bench trial, the trial court found Boulder liable for the permanent taking of 347 square feet of Trust Property for a sewer easement (Parcel A)⁴ and the temporary taking of 3.09 acres of Trust Property for a construction staging area (Parcel B). The trial court found the temporary taking of Parcel B occurred for a period of twenty-six months between June 1993 and July 1995. The trial court submitted the valuation and compensation issues for determination by a jury of six freeholders.

The trial court ruled that the measure of the just compensation award for Parcel B would be the fair rental value of the Trust Property during the twenty-six month period, plus restoration costs. However, its evidentiary rulings and instructions regarding the fair rental value award allowed the jury, despite Boulder's objections, to consider valuation evidence based solely on the assumption that no floodplain/high-hazard restrictions applied to the Trust Property during the temporary takings period. For purposes of valuation, the Trust's witnesses utilized sales of commercial properties located outside of the one-hundred-year floodplain, calculated an average square-foot market price of those properties, and assumed (1) that Parcel B of the Trust Property was commercially developable during the temporary takings period, and (2) that a fair rental price would afford a ten percent return on the market value of Parcel B for commercial use.⁵ In contrast, Boulder's valuation evidence considered rentals of industrial-zoned property located in a floodplain, such as the Trust Property.

In instructing the jury regarding its compensation award, the trial court intermingled the instructions for permanent and temporary takings. Jury instruction number eight stated:

You are to determine the value of the property actually taken, and, after having determined such value, you are to state that value in your verdict.

The value you are to determine for the property actually taken is the reasonable market value for the property on April 22, 1997. "Reasonable market value" means the fair, actual, cash market value of the property. With respect to Parcel A (347 square feet), it is the price the property could have been sold for on the open market under the usual and ordinary circumstances, that is, under those circumstances where the owner was willing to sell and the purchaser was willing to buy, but neither was under an obligation to do so. With respect to Parcel B (3.09 acres or 134,600 square feet), reasonable market value is the price the property could have been leased for on the open market under the usual and ordinary circumstances where the owner is willing to lease and the purchaser is willing to lease, but neither was under an obligation to do so. In addition, with respect to Parcel B, you must also determine the cost to return the property to its condition prior to the taking.

In determining the market value of the property actually taken, you are not to take into account any increase or decrease in value caused by the public improvement. However, you may take into account the probability that the property will be rezoned upward and the resulting impact on the present market value.

Jury instruction number nine stated:

In determining the market value of the property actually taken, you should consider the use, conditions and surroundings of the property as of the date(s) of valuation.

In addition, you should consider the most advantageous use or uses to which the property might reasonably and lawfully be put in the future by persons of ordinary prudence and judgment. Such evidence may be considered, however, only insofar as it assists you in determining the reasonable market value of the property as of the date(s) of valuation. It may not be considered for the purposes of allowing any speculative damages or values.

Jury instruction number nine did not clearly specify whether it applied to only Parcel A (permanent taking), Parcel B (temporary taking), or to both parcels.

Based on the evidence presented and the instructions given, the jury awarded just compensation to the Trust as follows: $1,200 for the permanent taking of Parcel A, $123,000 for the temporary taking of Parcel B, and $41,000 to restore Parcel B to its pre-taking condition for a total of $165,200. The trial court also awarded costs and attorney's fees to the Trust.

Boulder appealed the trial court's rulings, the jury compensation awards, and the trial court's attorney's fee award. The Trust cross-appealed the denial of pre-judgment interest and attorney's fees, pursuant to section 38-1-122. In its decision, the court of appeals affirmed the trial court's liability decision, but reversed the compensation and attorney's fee awards and denied the Trust's cross-appeal. See Fowler, 992 P.2d at 1201. We review only the compensation award issues involving Parcel B.

While the court of appeals concluded that Boulder temporarily took Parcel B for twenty-six months, see id. at 1194, it disagreed with the trial court's admission of expert valuation testimony. The court of appeals ruled that "evidence that Parcel B might be removed from the floodplain sometime in the future is irrelevant for any purpose." See id. at 1195-96 (emphasis in original). Its reasoning rested on the differences between temporary and permanent takings. As to the restoration award, the court of appeals determined that the difference in a property's value before and after physical damage occurred to it is the standard for awarding just compensation, absent specific factors outlined in the Restatement (Second) of Torts Section 929 (1979). See id. at 1197. The court of appeals then remanded the case to the trial court to determine whether any of the factors described in Section 929 of the Restatement (Second) of Torts existed in the case. See id. at 1198.

In this appeal, the Trust asserts that the court of appeals improperly prohibited evidence of future changes in land use in temporary takings cases. Clearly, completion of the Project would benefit the Trust Property in the future, but the issue is whether the Trust could have effectuated removal of the Trust property from the one-hundred-year floodplain during the temporary takings period for purposes of determining fair rental value. Boulder argues that the trial court should not have permitted the jury, in awarding fair rental...