SK Finance SA v. La Plata County, Bd. of County Com'rs

Decision Date01 October 1997
Docket NumberNo. 96-1291,96-1291
Citation126 F.3d 1272
Parties28 Envtl. L. Rep. 20,131, 97 CJ C.A.R. 2139 SK FINANCE SA, Plaintiff-Appellant, v. LA PLATA COUNTY, BOARD OF COUNTY COMMISSIONERS, Defendant-Appellee.
CourtU.S. Court of Appeals — Tenth Circuit

Alvin M. Cohen, Roos, Cohen & Long, P.C., Denver, CO, for appellant.

Michael A. Goldman, McLachlan & Goldman, LLC, Durango, CO, for appellee.

Before EBEL, HENRY, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

SK Finance, the owner of several lots in the Durango Estates Subdivision (Subdivision) in LaPlata County, Colorado, appeals from a district court order dismissing as premature SK Finance's federal and state takings claims and state-law vested rights claim arising from LaPlata County's denial of a request to build a sewage treatment facility to serve a portion of the Subdivision. We affirm.

I.

In 1970 and 1971, Colorado Land Management, Inc., submitted plats for the Subdivision to LaPlata County. The planning commission approved the plats and the plats were subsequently recorded. A note on the plats signed by Robert Balliger, director of the San Juan Health Unit, reads: "Subject to approved community water and sewer systems, as per agreement dated June 17, 1970." Appellant's append. at 100. The agreement referenced in the note cannot be found, but apparently it required some kind of community sewer system as opposed to individual septic tanks. At the time the plats were approved, the Colorado Department of Health (CDH) was the only governing entity that had adopted sewage treatment regulations. Balliger testified the note on the plats required that water and sewage systems serving the Subdivision be approved by the CDH.

Since approval of the plats, successive owners of the Subdivision have constructed many on-site improvements, including roads, water lines, and sewer lines, and have incurred engineering and legal fees. Several lots in the Subdivision have been sold. All of the improvements were allegedly done in reliance on the approved plats for the Subdivision.

In 1982, the developer of the Subdivision attempted to develop approved water and sewer service for the Subdivision, submitting an application for approval of an aerated sewer lagoon system to the CDH. The CDH denied the application. The CDH indicated to the developer that it would not approve an on-site sewage treatment system unless the developer was unable to contract for sewage treatment from the City of Durango (City). The developer made such a request in 1986, but the request was set aside with the developer's concurrence pending creation of a land use plan. LaPlata County developed the Junction Creek Area Land Use Plan (Plan) in 1986, primarily to provide sewer service to the Subdivision. The Plan recognized that development of a mechanical sewage treatment system would be "a poor practice because of the high potential for failure and problems associated with organization and management by small special districts or homeowner groups." Id. at 279. The Plan recommended that the Subdivision secure sewer and water service through a special district that would contract with the City for sewage treatment through an extension of the City's sewer utility system. The Plan found the Subdivision's 1986 application unacceptable because it required the City to administer and operate the sewer extensions and engage in activities outside its jurisdiction. Thus, the Plan called for a "metro" district that would contract with the City to tie into its sewer system.

The City entered into an intergovernmental agreement with LaPlata County in 1987 to extend sewer service to the Subdivision through contracts with appropriate legal entities with the capacity to operate the system within the area. The agreement lapsed before the developer of the Subdivision formed any legal entity to enter into any agreement with the City for sewer service. Nevertheless, the City remains willing to negotiate to provide sewer service to the Subdivision if a legal entity is created that is capable of managing and maintaining the system as provided by the Plan. The principal problem with connecting to the City's sewer facilities appears to be that the City requires ductile iron pipe while the Subdivision was improved with PVC pipe.

In 1990, the Durango Estates Property Owners Association (DEPOA) submitted a proposal to connect with the City's sewer service. The proposal varied in significant ways from the provisions of the Plan, requiring the City to own, administer, and maintain the sewer main. In rejecting the proposal, the City found the financial projections were insufficiently complete and that a contract with the Subdivision was "premature." DEPOA's engineer testified that the City did give DEPOA guidance on what it could do to satisfy the City's concerns and stated, "if you'd've followed that road map, [DEPOA would have] ended up in a project that could've been built," albeit expensively. Id. at 180-81. However, DEPOA never pursued the process far enough to determine what the cost would be.

DEPOA did not submit a revised proposal providing the information that the City needed, but instead in 1991 it elected to attempt to build and operate an on-site sewage treatment plant, which would serve less than one quarter of the platted lots. LaPlata County and its planning commission recommended to the CDH that the application be approved. The CDH approved the proposal, but stated: "This review does not relieve the owner from compliance with all city or county regulations prior to construction nor from the responsibility for proper engineering, construction, and operation of the facility." Id. at 45.

LaPlata County required a Class II land use permit before the treatment plant could be constructed. The planning commission evaluated the application for a permit and recommended its denial. In part, the evaluation considered the fact that even if the permit was granted, other problems with the Subdivision would prevent it from being viable; thus, the fiscal viability of the plant became an issue and the planning commission found it lacked adequate information for consideration of that issue. LaPlata County rejected the application. DEPOA appealed the decision to state district court, and the decision was affirmed. The court found there was evidence to support the conclusion that DEPOA lacked the economic stability to make its plan work effectively and that the proposed plant could endanger local waterways. DEPOA met with the planning commission concerning a replat of the Subdivision, but no replat or variance application has been submitted.

SK Finance took title to 196 of the 420 lots in the Subdivision in lieu of foreclosure and initiated this action against LaPlata County in March 1995. SK Finance asserted jurisdiction in federal court based on a Fifth Amendment takings claim and diversity of citizenship. SK Finance pursued a state-law claim for impairment of vested rights, an inverse condemnation claim under the United States Constitution, and an inverse condemnation claim under the Colorado Constitution. LaPlata County filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) on the grounds that the claims were not ripe for judicial review, and also filed a motion for summary judgment. The assigned magistrate judge recommended that the motion to dismiss be granted, and the district court dismissed the action.

II.

SK Finance contends the district court erred in concluding its claims were not ripe. We conduct a de novo review of the decision to dismiss for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1). Walden v. Bartlett, 840 F.2d 771, 772-73 (10th Cir.1988). When, as here, a party attacks the factual basis for subject matter jurisdiction, the court may not presume the truthfulness of the factual allegations in the complaint, but may consider evidence to resolve disputed jurisdictional facts. Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995). Reference to evidence outside the pleadings does not convert the motion to dismiss into a motion for summary judgment in such circumstances. Id.

A. Federal and state-law takings claims

We first consider whether SK Finance's claim under the takings clause of the Fifth Amendment of the United States Constitution is ripe.

The issue whether a claim is ripe for review bears on the court's subject matter jurisdiction under Article III of the Constitution. Accordingly, a ripeness challenge, like most other challenges to a court's subject matter jurisdiction, is treated as a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1). Ripeness is a question of law, which we examine de novo.

Bateman v. City of West Bountiful, 89 F.3d 704, 706 (10th Cir.1996) (internal citations omitted). "Before a federal court can properly determine whether the state has violated the Fifth Amendment [takings clause], the aggrieved property owner must show first that the state deprived him of his property, and second, that the state refused to compensate him for his loss." Miller v. Campbell County, 945 F.2d 348, 352 (10th Cir.1991). Because the Fifth Amendment only prohibits takings without just compensation, a federal constitutional claim is not ripe until compensation is denied under state procedures, if adequate state procedures exist. Bateman, 89 F.3d at 708; see, e.g., National Advertising Co. v. City & County of Denver, 912 F.2d 405, 413-14 (10th Cir.1990). An inverse condemnation cause of action arising under a state's constitution is such a procedure that must be utilized before a federal takings claim can mature. See Bateman, 89 F.3d at 708-09.

As the State of Colorado has provided a procedure for obtaining compensation for inverse condemnation, see Colo.Rev.Stat. § 38-1-101 et seq., and SK Finance has not availed itself of that procedure, SK Finance's federal takings claim is not ripe. SK Finance conceded at oral argument of this appeal that its federal...

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