Town of Monument v. State

• Decision Date: 04 October 2018
• Docket Number: Court of Appeals No. 17CA1663
• Citation: 467 P.3d 1126
• Parties: TOWN OF MONUMENT, a statutory municipality of the State of Colorado, Plaintiff-Appellant, v. STATE of Colorado, BY AND THROUGH the STATE BOARD OF LAND COMMISSIONERS; Forest View Company; and Raymond Decker, Intervenors-Appellees.
• Court: Colorado Court of Appeals

467 P.3d 1126

TOWN OF MONUMENT, a statutory municipality of the State of Colorado, Plaintiff-Appellant,

v.STATE of Colorado, BY AND THROUGH the STATE BOARD OF LAND COMMISSIONERS; Forest View Company; and Raymond Decker, Intervenors-Appellees.

Court of Appeals No. 17CA1663

Colorado Court of Appeals, Division VII.

Announced October 4, 2018

Murray Dahl Kuechenmeister & Renaud LLP, Malcolm Murray, Joseph Rivera, Lakewood, Colorado, for Plaintiff-Appellant

Cynthia H. Coffman, Attorney General, Ed Hamrick, Senior Assistant Attorney General, Eva La, Assistant Attorney General, Denver, Colorado, for Intervenor-Appellee State of Colorado

Hanes & Bartels LLC, Richard W. Hanes, Brenda L. Bartels, Colorado Springs, Colorado, for Intervenors-Appellees Forest View Company and Richard Decker

Opinion by JUDGE J. JONES

¶ 1 The Town of Monument (the Town) bought a parcel of real property in a residential subdivision, intending to construct a municipal water storage tank on the lot. There was only one problem: a restrictive covenant prohibiting such structures applies to all lots in the subdivision. So the Town filed this case, seeking to use its power of eminent domain to have the court declare its property free of the restrictive covenant. Not so fast, said some of the other owners of lots in the subdivision, who had intervened in the case.¹ They said because the restrictive covenant benefits all property in the subdivision, the Town can't eliminate the restrictive covenant on its lot without paying every property owner in the subdivision an amount compensating each of them for the loss in value to their respective properties. The State Board of Land Commissioners (Land Board), which owns several lots in the subdivision, presented an even greater obstacle to the Town's goal. It asserted that because the restrictive covenant is a compensable interest in the property, and the power of eminent domain can't be used against the State, the Town can't eliminate the restrictive covenant on its lot. The Town fought back, claiming that the restrictive covenant isn't a compensable interest in property in the context of an eminent domain case.

¶ 2 Everyone recognized that the case came down to deciding whether the Colorado Supreme Court's decision in Smith v. Clifton Sanitation District , 134 Colo. 116, 300 P.2d 548 (1956), or the Colorado Court of Appeals’ decision in City of Steamboat Springs v. Johnson , 252 P.3d 1142 (Colo. App. 2010), controls. In the former, an eminent domain case, the court held that a restrictive covenant wasn't a compensable property interest. Smith , 134 Colo. at 119-21, 300 P.2d at 549-50. In the latter, also an eminent domain case, the division said that a restrictive covenant was a compensable property interest. Johnson , 252 P.3d at 1146.

¶ 3 The district court agreed with the intervening landowners. It reasoned that Smith , which involved property owners who agreed to a restrictive covenant for the clear purpose of preventing a condemnation, must be limited to its particular facts; this case doesn't involve comparable facts; and Johnson sets forth the better rule. This ruling rendered the Town's condemnation action untenable for several practical reasons, but also because the power of eminent domain can't be exercised against the State. As a result, the parties stipulated to a dismissal of the case with prejudice. The court granted the stipulation. The Town timely appealed from the dismissal, raising only the issue whether Smith controls.

¶ 4 We hold that the holding and underlying reasoning of Smith aren't limited to that case's particular facts. That is, the court announced a rule of law—that a restrictive covenant isn't a compensable property interest in an eminent domain case—and the rule isn't limited to situations where the affected property owners agree to the restrictive covenant in a clear attempt to thwart acquisition of property by a public entity for public use. We therefore reverse and remand the case for further proceedings.

I. We Have Jurisdiction

¶ 5 Though the Land Board stipulated to the dismissal with prejudice so that the Town could appeal the issue presented, it now argues that because of that dismissal we lack jurisdiction over the appeal.² The Land Board says the order ruling on the Smith issue isn't appealable because it didn't resolve the case on the merits and, relying primarily on Foothills Meadow v. Myers , 832 P.2d 1097 (Colo. App. 1992), the stipulation for dismissal with prejudice means no court has jurisdiction over the case. Both arguments fail.

¶ 6 The order disposing of the Smith issue may or may not have been a final judgment. But regardless, the dismissal with prejudice clearly constituted a final, appealable judgment. Id. at 1098 ; Dailey v. Montview Acceptance Co. , 514 P.2d 76, 78 (Colo. App. 1973) (not published pursuant to C.A.R. 35(f) ). And once the court entered it, the legal ruling on which the dismissal was premised became appealable. See BCW Enters., Ltd. v. Indus. Claim Appeals Office , 964 P.2d 533, 537 (Colo. App. 1997) ("[A]n interlocutory order becomes reviewable when appealed incident to or in conjunction with an otherwise final order."); see also McBride v. CITGO Petroleum Co. , 281 F.3d 1099, 1104 (10th Cir. 2002) (notice of appeal designating the final judgment is sufficient to support review of all earlier orders that merge into the final judgment).³

¶ 7 Further, the court's order determining that the restrictive covenant is a compensable property interest, in effect, completely resolved the parties’ rights. See Brody v. Bock , 897 P.2d 769, 777 (Colo. 1995) (an order on a question of law was a final, appealable order, notwithstanding that the court purported to dismiss the plaintiff's claim without prejudice, because it completely determined the parties’ rights with respect to that claim); In re Custody of Nugent , 955 P.2d 584, 587 (Colo. App. 1997) (orders entered before court's order of dismissal completely resolved the parties’ rights as to the issue raised on appeal). That's because the Town can't acquire property owned by the State via eminent domain, Town of Parker v. Colo. Div. of Parks & Outdoor Recreation , 860 P.2d 584, 586-89 (Colo. App. 1993), and the Land Board owns several lots benefitted by the restrictive covenant. So there's no way for the Town to eliminate the restrictive covenant on its lot in this proceeding, at least if the district court's ruling stands.⁴

¶ 8 But what about Foothills Meadow , on which the Land Board so heavily relies? The short answer is that the Land Board misreads the case. It doesn't hold that once a district court dismisses a case with prejudice pursuant to the parties’ stipulation the case is over for all purposes, and the dismissal, or the underlying ruling prompting it, can't be appealed. Rather, it holds, as does the case it cites, Columbia Sav. & Loan Ass'n v. Dist. Court , 186 Colo. 212, 217, 526 P.2d 661, 664 (1974), that once a district court dismisses a case with prejudice, that court loses jurisdiction over the case, Foothills Meadow , 832 P.2d at 1097-98 (after the district court dismissed case with prejudice, a party to that case couldn't later seek a declaratory judgment in that case against a new party because "neither the action nor the parties remain[ed] within the jurisdiction of the court").⁵ So Foothills Meadow doesn't apply to the Town's appeal.

¶ 9 In sum, we conclude that we have jurisdiction over the Town's appeal.

II. The Rule Announced in Smith Controls

¶ 10 The facts in Smith are, as appellees point out, somewhat unusual, in at least one sense. A sanitation district sought to obtain property on which it would build a "sanitary disposal system." 134 Colo. at 118, 300 P.2d at 548. That, of course, wasn't unusual. What was unusual was that after negotiations to buy the property broke down, the owner of the property and owners of many surrounding properties entered into a restrictive covenant barring the use of their properties for certain purposes, including as sanitary disposal systems. Their obvious goal was to try to prevent the sanitation district from obtaining the property for its desired purpose through eminent domain. Id. at 117-18, 300 P.2d at 548-49.

¶ 11 Undeterred, the sanitation district filed a condemnation petition anyway, naming only the owner of the subject property as a party. The district court refused to allow the other property owners to intervene, and they appealed. The supreme court phrased the question before it as follows:

We are called upon to determine whether the intervenors by the execution and recording of these restrictive covenants should be made parties respondent in the condemnation case and permitted to recover damages because of the taking of the [subject property] for the uses of the District.

Id. at 119, 300 P.2d at 549.

¶ 12 In holding that the restrictive covenant couldn't be enforced against the district, the court announced the following rule:

We think it is fundamental that where a company, corporation or agency of the state is vested with the right of eminent domain and has acquired property thr[ough] eminent domain proceedings and is using the property for public purposes, no claim for damages arises by virtue of such a covenant as in the instant case, in favor of the owners of other property on account of such use by the condemner.... Parties may not by contract between themselves restrict the exercise of the power of eminent domain.

Id. at 120-21, 300 P.2d at 550.

¶ 13 Taken at face value, this rule would seem to control this case—meaning the restrictive covenant doesn't give the other lot owners a compensable property interest in this eminent domain proceeding. But the district court concluded otherwise, saying that the rule announced in Smith is "dicta" that applies "only in the unusual factual context of that case." In so concluding, the court gave several reasons, some of which appellees adopt on appeal. Those reasons are: (1) the holding in S...