Wheat Ridge Urban Ren. v. Cornerstone Group

• Decision Date: 03 December 2007
• Docket Number: No. 06SC591.,06SC591.
• Citation: 176 P.3d 737
• Parties: WHEAT RIDGE URBAN RENEWAL AUTHORITY, Petitioner v. The CORNERSTONE GROUP XXII, L.L.C., Respondent.
• Court: Colorado Supreme Court

176 P.3d 737

WHEAT RIDGE URBAN RENEWAL AUTHORITY, Petitioner v. The CORNERSTONE GROUP XXII, L.L.C., Respondent.

No. 06SC591.

Supreme Court of Colorado, En Banc.

December 3, 2007.

Hayes, Phillips Hoffmann & Carberry, P.C., Corey Y. Hoffmann, Denver, Colorado, Light Harrington & Dawes, P.C., Steven J. Dawes, Denver, Colorado, Attorneys for Petitioner.

Messner & Reeves, LLC, Thomas D. Leland, Tanya E. Milligan, Denver, Colorado, Attorneys for Respondent.

The Holt Group, LLC, Meredith A. Kapushion, Denver, Colorado, Pacific Legal Foundation, Timothy Sandefur, Sacramento, California, Attorneys for Amici Curiae Pacific Legal Foundation and Arthur Fast.

Justice COATS delivered the Opinion of the Court.

Wheat Ridge Urban Renewal Authority sought review of the court of appeals' judgment in Cornerstone Group XXII, L.L.C. v. Wheat Ridge Urban Renewal Authority, 151 P.3d 601 (Colo.App.2006). The district court

We granted the Renewal Authority's petition challenging the latter holding. Because the district court rightly determined that it lacked the authority to order the specific performance of a contractual obligation to exercise the core governmental power of eminent domain, and the Renewal Authority could not be estopped from abandoning its petitions in condemnation, under the circumstances of this case, the judgment of the court of appeals is reversed. Because, however, the Renewal Authority's agreement to acquire specific properties, by condemnation if necessary, does not render the contract void, the case is remanded with directions to return it to the district court for consideration of Cornerstone's remaining claims, including its claims for breach of contract.

I.

The Cornerstone Group filed a civil action against the Wheat Ridge Urban Renewal Authority and the City of Wheat Ridge, alleging breach of contract and claims of equitable and promissory estoppel. As relief, it sought indemnification from damage claims by Walgreens, a constructive trust, declaratory and injunctive relief, specific performance of the breached contracts, and damages for the breaches. Cornerstone also filed a motion for preliminary injunction, with regard to which the district court took evidence and made findings of fact and conclusions of law.

The district court found that the Renewal Authority and Cornerstone entered into a "Disposition and Development Agreement" to redevelop five parcels of property in Wheat Ridge. The DDA obligated the Renewal Authority to acquire these parcels at its own expense, by eminent domain if necessary, and sell them to Cornerstone, in order to build a Walgreens store. It further provided for enforcement of the agreement by specific performance, injunction, or any remedy available at law.

After the Renewal Authority failed to obtain the necessary financing, Cornerstone agreed to provide financing on terms memorialized in a separate "Loan Agreement" and "Line of Credit Note." The loan agreement obligated the Renewal Authority to initiate litigation in eminent domain for the immediate possession and acquisition of the parcels if negotiated agreements were not reached by a certain date, and it too provided for its own enforcement by specific performance.

When the Renewal Authority failed to acquire all five properties or begin condemnation proceedings by the loan agreement's deadline, Cornerstone sent notice that the Renewal Authority had defaulted its obligation under the loan agreement. Although the Renewal Authority later filed petitions in condemnation against the four properties it had thus far failed to acquire, the petitions did not salvage the deal. Cornerstone and the Renewal Authority exchanged a series of recriminating letters, and ultimately the Renewal Authority notified Cornerstone that it was terminating the DDA and rescinding its approval of the loan agreement. It subsequently negotiated settlements with two of the landowners to abandon already initiated condemnation proceedings, and it was in the process of negotiating similar settlements with the other two owners.

The district court largely granted the motion for preliminary injunction, ordering the Renewal Authority to retain all assets and funds necessary and incidental to the redevelopment project. With regard to Cornerstone's tenth claim for relief—its demand for specific performance of the contracts—the district court found that the subject properties could not be acquired unless the Renewal Authority exercised its power of eminent domain, but ruled that it lacked the authority to order the Renewal Authority to do so; and in response to Cornerstone's ensuing motion, the court entered final judgment pursuant to C.R.C.P. 54(b), dismissing that claim for relief in its entirety. Both parties appealed the district court's rulings, Cornerstone challenging the dismissal of its claim for specific performance and the Renewal Authority challenging the preliminary injunction.

The court of appeals affirmed the district court's preliminary injunction but reversed its judgment dismissing Cornerstone's tenth claim for relief. With one member of the panel dissenting, the court rejected the Renewal Authority's assertion that contractual agreements to exercise the uniquely governmental power of eminent domain are necessarily void, instead apparently considering their enforceability dependent upon the extent to which eminent domain proceedings had already progressed and the equities of the individual case. The court of appeals ultimately remanded for reconsideration of Cornerstone's claim for specific performance, ordering the district court to determine, under the circumstances of this case, whether the Renewal Authority should be estopped from abandoning its condemnation petitions and whether Cornerstone, in fact, has a vested right to specific performance of the Renewal Authority's promise to condemn.

The Renewal Authority petitioned this court for a writ of certiorari, solely to review the court of appeals' holding with regard to specific performance.

II.

Specific performance is an equitable remedy for breach of contract. Setchell v. Dellacroce, 169 Colo. 212, 216, 454 P.2d 804, 806 (1969). As a theory of recovery, breach of contract is separate and distinct from both the quasi-contractual claim of promissory estoppel and the defensive doctrine of estoppel in pais, or equitable estoppel, all three of which were separately pled by Cornerstone. Only Cornerstone's request for specific performance was considered and rejected by the district court, and only the court's ruling dismissing Cornerstone's tenth claim for relief was certified as a final judgment for purposes of immediate appeal.

It appears that the appellate court equated any theory requiring condemnation of the subject properties with specific performance of the contract or at least that the question of specific performance could not be fully resolved without consideration of Cornerstone's estoppel claim. It therefore immediately moved to the question whether the Renewal Authority could be estopped from abandoning its earlier-initiated condemnation proceedings. Determining that under certain circumstances it could, the appellate court, without ever directly addressing the district court's authority to order the specific performance of a contractual obligation to exercise the power of eminent domain, reversed the district court's order of dismissal and remanded for consideration of the relative equities involved in evaluating a claim of estoppel. In light of the appellate court's directions on remand, and its implication that Cornerstone's claim of specific performance could not be fully resolved without simultaneous resolution of its assertions of estoppel, the applicability of estoppel principles is necessarily before this court.

Promissory estoppel is an offensive theory of recovery, or cause of action, providing a remedy for those who rely to their detriment, under certain circumstances, on promises, despite the absence of any mutual agreement by the parties on all the essential terms of a contract. Vigoda v. Denver Urban Renewal Auth., 646 P.2d 900, 905 (Colo. 1982). Recovery on a theory of promissory estoppel is incompatible with the existence of an enforceable contract. Scott Co. of Cal. v. MK-Ferguson Co., 832 P.2d 1000, 1003 (Colo. App.1992). By contrast, the doctrine of equitable estoppel is not a cause of action at all, but rather a defensive doctrine, which may be invoked "to bar a party from raising a defense or objection it otherwise would have, or from instituting an action which it is entitled to institute." Jablon v. United States, 657 F.2d 1064, 1068 (9th Cir.1981); see also Piz v. Housing Auth. of the City & County of Denver, 132 Colo. 457, 463, 289 P.2d 905, 908-909 (1955) ("The doctrine of equitable estoppel has been invoked to cut off rights or privilege conferred by statute . . . .").

In the course of distinguishing it from the quasi-contractual action of promissory estoppel, we have at times loosely referred to equitable estoppel as a tort action, but it is more precisely characterized as an equitable doctrine that suggests a tort-related theory in that it attempts to allocate loss resulting from the misrepresentation of facts to the most culpable party and to ameliorate an innocent party's losses. Compare Bd. of County Comm'rs v. DeLozier, 917 P.2d 714, 716 (Colo.1996) (IA] claim for equitable estoppel lies in tort, whereas a claim of promissory estoppel lies in contract."), with Berg v. State Bd. of Agric., 919 P.2d 254, 259 (Colo. 1996) ("Equitable estoppel, because it is based on the misrepresentation of facts, is fundamentally a tort theory."). But whatever its theoretical relation to tort law, equitable estoppel is not a cause of action.

In Piz, this court, in express reliance on the California case of Times-Mirror Co. v. Superior Court, 3 Cal.2d 309, 44 P.2d 547 (1935), applied the doctrine of estoppel in pais, or equitable estoppel, to bar a...