Golden Run Estates, LLC v. Town of Erie

• Decision Date: 06 October 2016
• Docket Number: Court of Appeals No. 15CA1135.
• Citation: 401 P.3d 87
• Parties: GOLDEN RUN ESTATES, LLC, a Colorado limited liability company; and Aaron Harber, Plaintiffs-Appellees, v. TOWN OF ERIE, Defendant-Appellant.
• Court: Colorado Court of Appeals

401 P.3d 87

GOLDEN RUN ESTATES, LLC, a Colorado limited liability company; and Aaron Harber, Plaintiffs-Appellees,

v.TOWN OF ERIE, Defendant-Appellant.

Court of Appeals No. 15CA1135.

Colorado Court of Appeals, Div. I.

Announced October 6, 2016

Rehearing Denied December 1, 2016

RJB Lawyer, LLC, Robert J. Bruce, Denver, Colorado, for Plaintiffs-Appellees

Nathan Dumm & Mayer, P.C., J. Andrew Nathan, Marni Nathan Kloster, Nicholas C. Poppe, Denver, Colorado, for Defendant-Appellant

Opinion by JUDGE TAUBMAN

¶ 1 This case arises out of defendant, Town of Erie, annexing a 320-acre property located in unincorporated Boulder County that plaintiff Aaron Harber owned. Harber envisioned his company, plaintiff Golden Run Estates, LLC, developing the property into a sustainable, mixed-use community for 40,000 residents over 25 to 50 years. After the parties entered into a pre-annexation agreement, Golden Run and Harber (the plaintiffs) sued Erie because further negotiations did not result in an annexation agreement. They brought four claims: two contract claims, one claim for declaratory relief, and one claim for a judicial disconnection decree.

¶ 2 After trial, the court concluded that it had subject matter jurisdiction over the plaintiffs' contract claims and entered judgment on the jury's award of damages of over $350,000. The trial court also ordered judicial disconnection under section 31-12-702, C.R.S. 2016. The only claims before us are Erie's appeal of the jury award on the plaintiffs' two contract claims.¹ Because we conclude that the trial court did not have subject matter jurisdiction over either contract claim, we vacate that part of the judgment, vacate the jury's award of damages, and remand the case with directions to grant Erie's motion for directed verdict and for a determination of the amount of attorney fees incurred by Erie for this appeal.

I. Background

¶ 3 In 2013, Harber discussed with Erie his plan to develop the property. The parties ultimately agreed to pursue annexation of the property into Erie. Erie proposed the parties enter into a pre-annexation agreement, as the first step of a three-part annexation process. An annexation agreement and a detailed development plan would follow the pre-annexation agreement.

¶ 4 In April 2013, Erie and the plaintiffs entered into a pre-annexation agreement, which defined the roles of the plaintiffs and Erie until the parties could enter into a more formal annexation agreement. The parties anticipated they would reach an annexation agreement by August 1, 2013, but did not do so.

¶ 5 The pre-annexation agreement set forth remedies for both parties in the event of a breach. While Erie retained "all remedies at law and equity," the plaintiffs negotiated for two remedies contained in sections 4A and 4B of the pre-annexation agreement. As relevant here, section 4A reads:

At any time on or after August 1, 2013, in the event the Golden Run Annexation agreement proposed by [the plaintiffs], as it may be mutually amended by the parties hereto, is not approved by [Erie] at the same time as [Erie] approves the annexation of the Property, then, in that event, at [the plaintiffs'] sole option, [the plaintiffs ] may retroactively withdraw the Annexation Petition without penalty or further obligation by written notice delivered to [Erie] and the Property shall not be annexed by [Erie], regardless of annexation approval or any other actions taken by [Erie].

(Emphasis added.)²

¶ 6 In October 2013, Erie's Board of Trustees adopted Ordinance 30-2013, which annexed Golden Run into Erie. The ordinance became effective on November 15, 2013.

¶ 7 In January 2014, the plaintiffs submitted a draft annexation agreement for the Board of Trustees' meeting. In the draft agreement, Harber proposed that he alone would select the number of units in Golden Run. However, a trustee proposed amending the annexation agreement to allow Erie to approve the number of units that Harber had selected. The plaintiffs did not want Erie to have any "veto power" over the scale of Golden Run and thus rejected the proposed agreement.

¶ 8 On February 24, 2014, 101 days after the annexation became effective, the plaintiffs requested "retroactive nullification" of the annexation of Golden Run. However, the next day, they withdrew their request, and the parties continued to negotiate, but without reaching agreement. Nonetheless, the plaintiffs agreed to move forward with Erie's initial zoning plan, given Erie's assurances that all the plaintiffs' "rights to disconnect" would remain intact.

¶ 9 In July 2014, an Erie police officer responded to Golden Run after the police department received a series of complaints about its condition. Upon arrival, the police officer observed several municipal code violations from the property's edge, but a "tenant" refused his entry onto the property. Nevertheless, the tenant informed the officer that his mobile home lacked running water and that he was forced to urinate and defecate outside. The officer contacted Boulder County Adult Protective Services for the elderly, at-risk tenant and obtained a search warrant to view the remainder of the property.

¶ 10 The search revealed that four tenants were living in dwellings unfit for human habitation. The structures on the property were in various states of decay and concerns existed over numerous deficiencies in the electrical systems exposed to outside elements. An Erie building official ordered the tenants to vacate all dwellings on the property. The plaintiffs believed that their requests for disconnection or "retroactive nullification" of Golden Run's annexation ensured that they were "under no further obligation" to Erie and thus were upset by the police action.

¶ 11 On July 30, 2014, the plaintiffs requested that the Board of Trustees consider their proposed disconnection ordinance. Erie's Town Administrator informed the plaintiffs that they did not have a right to disconnect the property. The plaintiffs objected because disconnection was "guaranteed by the pre-annexation agreement."

¶ 12 On August 15, 2014, the plaintiffs "(1) withdr[ew] our Annexation Petition, (2) withdr[ew] our Zoning Application, and (3) request[ed] to immediately disconnect (i.e. de-annex) from the Town of Erie." They also notified Erie of its alleged breach of the pre-annexation agreement.

¶ 13 When Erie failed to remedy its alleged breach within the thirty-day grace period provided in the pre-annexation agreement, the plaintiffs initiated this lawsuit. They asserted four claims: (1) breach of contract for Erie "not processing the de-annexation of the Properties"; (2) breach of the implied covenant of good faith and fair dealing for Erie exercising its discretion in a commercially unreasonable fashion and without regard to the intent of the parties when the pre-annexation agreement was executed; (3) declaratory relief to "de-annex" or "disconnect" the properties from Erie; and (4) an alternative claim for a judicial decree disconnecting the properties from Erie.

¶ 14 After the plaintiffs rested their case, Erie moved for a directed verdict on several grounds. It asserted that the trial court lacked subject matter jurisdiction over the breach of contract claims because the Municipal Annexation Act of 1965 (the Act), §§ 31-12-101 to - 123, C.R.S. 2016, precluded the relief the plaintiffs sought. Erie also moved for a directed verdict on damages, arguing that the plaintiffs' attempts to value Golden Run without any expert testimony were speculative as a matter of law. Erie also moved for a directed verdict on the bad faith claim.

¶ 15 As relevant here, the court concluded that it had subject matter jurisdiction over the plaintiffs' contract claims and denied Erie's motion for directed verdict. The court entered judgment in the plaintiffs' favor, totaling $362,500 in damages: $305,000 on their breach of contract claim and $57,500 on their claim for breach of the implied covenant of good faith and fair dealing.

¶ 16 Erie raises four contentions on appeal: (1) the trial court erred under the Act in concluding that it had subject matter jurisdiction over the plaintiffs' contract claims and in upholding the breach of contract verdict; (2) the court erred in upholding the jury's award of damages for a breach of the implied covenant of good faith and fair dealing despite provisions of the Act that prohibit such an award; (3) the court erred in allowing the jury to consider the plaintiffs' damages for Golden Run's lost opportunity costs in light of the insufficient evidence presented at trial; and (4) the court abused its discretion in permitting the plaintiffs' property manager to testify because he was not qualified as an expert.

¶ 17 We agree with Erie that the trial court did not have subject matter jurisdiction over the plaintiffs' contract claims. Therefore, we need not address their contentions relating to the sufficiency of the evidence concerning lost opportunity costs or the property manager's testimony.

II. Subject Matter Jurisdiction

¶ 18 Erie contends that the trial court lacked subject matter jurisdiction over the plaintiffs' contract claims because they did not bring their claims within the jurisdictional sixty-day limitation period under section 31-12-116(2)(a)(I), C.R.S. 2016. On the other hand, the plaintiffs respond that their contract claims were not controlled by the Act and that section 31-12-116 is inapplicable. We agree with Erie.

A. Standard of Review

¶ 19 We review de novo a court's subject matter jurisdiction. Tulips Invs., LLC v. State ex rel. Suthers , 2015 CO 1, ¶ 11, 340 P.3d 1126, 1131. Interpretation of the Act is a question of law, which we also review de novo. Bd. of Cty. Comm'rs v. City of Aurora , 62 P.3d 1049, 1052 (Colo. App. 2002). Last, we review de novo the interpretation of contract terms. Edge Telecom, Inc. v. Sterling Bank , 143 P.3d 1155, 1159 (Colo. App. 2006).

B. Principles of Statutory Interpretation

¶ 20 "Our review is controlled by the...