HomeMy WebLinkAbout20101195.tiff Jeffrey T. Hare, CPA CISA CIA
16504 Badminton Rd N
Platteville, CO 80651
May 27, 2010
Board of County Commissioners
Ms. Barbara Kirkmeyer
Mr. Sean Conway
Mr. Bill Garcia
Mr. David Long
Mr. Douglas Rademacher
Weld County Board of County Commissioners
915 Tenth Street
P. O. Box 758
Greeley CO 80632
Re: Metropolitan Districts
Dear Esteemed Commissioners,
As you may be aware by now, I was recently elected to the Beebe Draw Farms Metro District #1 board
and am acting as the board President. I am writing this letter as a citizen, not in regards to my role on
the board.
I wanted to bring to your attention a recent court case that may have an impact on your oversight
related to Metro Districts in Weld County. See the attached opinion from Court of Appeals No.
09CA0425 Jefferson County District Court Nos. 88CV482, 04CV126 & 04CV375.
In this case, the judge ruled "The principal dispute involves whether a service plan providing that Plains
"will" build specified recreational facilities obligates Plains to build those facilities. We hold that it does,
unless Plains can demonstrate that plan compliance is no longer "practicable. Our holding is based on
the mandatory language in the plan itself and on a statutory provision stating that special district
facilities and services "shall conform so far as practicable to the approved service plan." § 32-1-207(1),
C.R.S. 2009. We further hold that a special district's violation of its service plan can be remedied under
section 32-1-207(3)(a), C.R.S. 2009."
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COLORADO COURT OF APPEALS Mar 182010
8:00AM
Court of Appeals No. 09CA0425
Jefferson County District Court Nos. 88CV482, 04CV126 86 04CV375
Honorable Tamara S. Russell, Judge
Plains Metropolitan District, a quasi-municipal corporation and political
subdivision of the State of Colorado,
Plaintiff-Appellee,
v.
Ken-Caryl Ranch Metropolitan District, a quasi-municipal corporation and
political subdivision of the State of Colorado,
Defendant-Appellant,
and
Jan Rousselot; Ruth Sunderberg; and Patricia Lynch,
Intervenors-Appellants.
JUDGMENT REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division IV
Opinion by JUDGE CONNELLY
Webb and Terry, JJ., concur
Announced March 18, 2010
Ryley Carlock 86 Applewhite, John L. Watson, Olivia D. Lucas, Denver,
Colorado, for Plaintiff-Appellee
Shearer & Call, P.C., Richard L. Shearer, J. Alan Call, Denver, Colorado, for
Defendant-Appellant and Intervenors-Appellants
Mary G. Zuchegno, Denver, Colorado, for Amicus Curiae Special District
Association of Colorado
This dispute, regarding the duty to construct neighborhood
recreational facilities, involves adjoining metropolitan districts in
Jefferson County, Colorado. The claims now before us were filed by
Ken-Caryl Ranch Metropolitan District (KC) and three of its
taxpayers against Plains Metropolitan District (Plains). After a
bench trial, the trial court entered judgment for Plains.
The principal dispute involves whether a service plan providing
that Plains "will" build specified recreational facilities obligates
Plains to build those facilities. We hold that it does, unless Plains
can demonstrate that plan compliance is no longer "practicable."
Our holding is based on the mandatory language in the plan
itself and on a statutory provision stating that special district
facilities and services "shall conform so far as practicable to the
approved service plan." § 32-1-207(1), C.R.S. 2009. We further
hold that a special district's violation of its service plan can be
remedied under section 32-1-207(3)(a), C.R.S. 2009. We finally
hold that, even though KC's claims might otherwise have been
untimely, KC's right to assert them as compulsory counterclaims
was revived by section 13-80-109, C.R.S. 2009. We accordingly
reverse the judgment for Plains and remand for further proceedings.
1
I. Background
All property owners within the KC and Plains districts must
belong to the Ken-Caryl Ranch Master Association (Association).
The Association could have used homeowners' dues to build
facilities and perform services for the community. But funding
those activities through special district taxes, rather than
association dues, provided tax benefits to property owners.
Plains was created as a special district within the Ken-Caryl
community by a 1986 court order. The order approved a 1985
service plan that previously had been reviewed and approved by
Jefferson County authorities.
The 1985 service plan provided that "[t]he recreational
facilities to be designed and constructed by [Plains] will include a
swim and tennis facility and a ball field park" consisting of three
fields. These facilities were to be operated, maintained, and
ultimately owned by the Association. The service plan called for the
facilities to be included in the first construction phase in 1986, but
also contained a "flexibility" provision allowing Plains to "postpone"
construction "if necessitated by a slowdown of development as
caused by economic or other factors."
2
KC, in turn, was created as a special district by a 1988 court
order. It too was located within the Ken-Caryl community, but its
boundaries did not overlap with the Plains district. Excluding the
properties located in Plains from the new KC district benefited the
Plains property owners by allowing them to avoid being taxed for
services that KC would provide to the entire Ken-Caryl community.
By 1996, Plains still had not built the recreational facilities. In
January 2002, Plains indicated that it would dissolve as a district
in 2004 (when the existing bond debt was due to be paid off),
without building the recreational facilities. Litigation ensued.
KC asserted the claims now at issue, involving the recreational
facilities, as counterclaims to Plains' lawsuit against KC. Plains'
lawsuit had challenged KC's expansion of its district boundaries to
include property within Plains. Plains' lawsuit was later settled,
with the districts agreeing to maintain their prior boundaries.
The case proceeded to a bench trial on KC's counterclaims,
which were joined in by three KC taxpayers. The court ruled for
Plains by reasoning that the service plan was simply a "permissive"
"guide" - one providing "authority to act but not requiring [Plains] to
do so." It ruled, alternatively, that the claims were time barred.
3
II. Discussion
A. Merits
The trial court's ruling that Plains had no judicially
enforceable obligation to construct the facilities rested on an
interpretation of both this specific service plan and the law
governing special districts. Our review of both points is de novo.
See Wolf Ranch, LLC v. City of Colorado Springs, 220 P.3d 559, 563
(Colo. 2009) (statutory interpretation is de novo); Denver Found. v.
Wells Fargo Bank, 163 P.3d 1116, 1122 (Colo. 2007); Montoya v.
Connolly's Towing, Inc., 216 P.3d 98, 102 (Colo. App. 2008).
1. The Mandatory Language of Plains' Service Plan
The language in the 1985 service plan regarding the building
of recreational facilities is not phrased in merely permissive terms.
The plan provides that "[t]he recreational facilities to be designed
and constructed by [Plains] will include a swim and tennis facility
and a ball field park," that they "will include a swim pool, 2 tennis
courts and a restroom and mechanical building," and that the "ball
field park will consist of 3 combination softball/soccer field[s]."
(Emphases added.)
4
Statutory provisions that an entity "will" do something
typically are construed, like those using the term "shall," as
mandatory. See, e.g., Hewitt v. Helms, 459 U.S. 460, 471 (1983)
(statute and regulations went "beyond simple procedural guidelines"
by using "language of an unmistakably mandatory character,
requiring that certain [prison] procedures `shall,' 'will,' or `must' be
employed"), abrogated in part by Sandin v. Conner, 515 U.S. 472
(1995); In re Airadigm Communications, Inc., 519 F.3d 640, 656 (7th
Cir. 2008) (describing "shall" and "will" as "mandatory terms");
Britell v. United States, 372 F.3d 1370, 1378 (Fed. Cir. 2004)
("mandatory language" such as "will pay' and `shall pay' creates the
necessary `money-mandate"' to waive sovereign immunity).
Likewise, contractual provisions that a party "will" do
something usually create mandatory obligations. See, e.g.,
McDonnell Douglas Corp. v. Islamic Republic of Iran, 758 F.2d 341,
346-47 (8th Cir. 1985); Terra International, Inc. v. Mississippi
Chemical Corp., 922 F. Supp. 1334, 1373-74 (N.D. Iowa 1996),
aff'd, 119 F.3d 688 (8th Cir. 1997). In contrast, "use of the term
'may' is indicative of a grant of discretion or choice among
alternatives." People v. Triantos, 55 P.3d 131, 134 (Colo. 2002).
5
The mandatory obligation to build the recreational facilities is
confirmed by the service plan's "flexibility" clause allowing Plains to
"postpone construction of improvements if necessitated by a
slowdown in development as caused by economic or other factors."
Absent an obligation to construct the facilities, Plains would not
need authority to "postpone construction." Accepting Plains'
contention would render this flexibility provision meaningless and
thereby contravene normal rules of construction. See Copper
Mountain, Inc. v. Industrial Systems, Inc., 208 P.3d 692, 697 (Colo.
2009) (courts "harmonize" and "give effect to all provisions so that
none will be rendered meaningless") (internal quotations omitted).
Plains implicitly recognized the mandatory nature of its plan
when it tried to amend the language from "will" to "may" in 2005.
But Plains indisputably did not follow the procedures for "material
modifications of the service plan," § 32-1-207(2), C.R.S. 2009. The
trial court, while criticizing Plains' "disingenuous" action, deemed
the amendments immaterial because "will" meant the same as
"may" in this context. For reasons set forth above, however, "will" is
different than "may" in the 1985 service plan. Accordingly, Plains'
attempted 2005 amendments were material - and legally invalid.
6
2. The Enforceability of Mandatory Service Plans
The question, therefore, is whether courts can compel special
districts to comply with mandatory terms of their service plans. We
hold such plans are enforceable under the Special District Act.
The General Assembly has provided that "the facilities,
services, and financial arrangements of the special district shall
conform so far as practicable to the approved service plan." § 32-1-
207(1). This statutory language, like the 1985 service plan, uses
mandatory language ("shall conform"). The extent of required
conformance is prescribed as "so far as practicable." Thus, unless
for some reason it is not practicable to do so, special districts must
conform to their service plans.
Section 32-1-207(3)(a) empowers a court - acting sua sponte
or upon motion of the county or municipal board or "any interested
party" - to enjoin a district's material departure from the plan.
Plains has not argued that the recreational facilities were only an
immaterial part of the plan. Accordingly, injunctive relief is
expressly authorized by statute. And where the material departure
from a service plan involves inexcusable inaction, such relief may
take the form of a mandatory injunction. See C.R.C.P. 65(f).
7
The parties disagree whether it remained "practicable" for
Plains to build the facilities. Because the trial court made no
finding on this issue, we agree with Plains' alternative suggestion
that the case should be remanded to the trial court to decide this
issue in the first instance. The trial court, after hearing any further
evidence on this point that it may deem necessary, should issue
findings and conclusions as to the practicability of Plains' building
the recreational facilities provided for in the 1985 service plan.
B. Procedural Issues
1. Pleading of the Counterclaims
The counterclaims unmistakably alleged that Plains was not
complying with its "duty" under the 1985 service plan to build the
recreational facilities, and they unmistakably sought a court order
compelling Plains to build the facilities. The counterclaims
pertaining to the 1985 plan, however, did not specifically allege a
statutory cause of action or cite provisions governing "compliance"
with and judicial "enforcement" of service plans, § 32-1-207(1) &
(3)(a). Rather, in seeking to enforce Plains' 1985 service plan, the
counterclaims relied on contract and promissory estoppel theories.
8
Plains is correct that the Special District Act - not common
law contract doctrines - controls the extent to which special
districts must comply with, and courts can enforce, service plans.
The Act's specific provisions requiring conformance "so far as
practicable" to service plans, § 32-1-207(1), may not be trumped by
resorting to more general common law theories. Likewise, section
32-1-207(3)'s procedures control over more general theories of
enforcement. Cf. Silver Eagle Services, Inc. v. Public Utilities
Comm'n, 768 P.2d 208, 212-14 (Colo. 1989) (public utilities statute
provides "exclusive method" for challenging PUC decisions).
We disagree with Plains, however, that the counterclaimants
forfeited their right to enforce the 1985 service plan by using
incorrect labels. Plains cannot show any prejudice from the
incorrect labeling. To the contrary, Plains' trial court pleadings
show it always understood the thrust of the counterclaims. Its
pleadings reflected an understanding that "[a]t bottom," the
counterclaims were under section 32-1-207. See, e.g., Plains'
7/ 18/08 Trial Br., at 4-5. And, beginning with their own trial brief
(KC-Taxpayer 7/23/08 Trial Br., at 23-24), and then throughout
trial, counterclaimants explicitly addressed the statute.
9
Under modern rules of pleading, courts look to the "essence of
a claim regardless of how it is denominated." Bainbridge, Inc. v.
Travelers Casualty Co., 159 P.3d 748, 755 (Colo. App. 2006); see
also Hutchinson v. Hutchinson, 149 Colo. 38, 41, 367 P.2d 594, 596
(1961) ("The substance of the claim rather than the appellation
applied to the pleading by the litigant is what controls."); Sheffield
Services Co. v. Trowbridge, 211 P.3d 714, 718 (Colo. App. 2009)
("the claim's substance rather than [its] appellation ... controls").
The supreme court applied this principle to allow restitution even
though the "counterclaim [] did not label the[] cause of action as
one based upon a theory of unjust enrichment, nor did [it]
specifically seek restitution." Martinez v. Continental Enterprises,
730 P.2d 308, 318 n. 13 (Colo. 1986); see also Trowbridge, 211 P.3d
at 718-19 (corporate veil pierced even though complaint did not
expressly seek relief on that theory).
Here, though the counterclaims were incorrectly labeled, the
substance of the requested relief was clear and consistent with the
statute. Precluding relief based on a misnomer in the cause of
action "would improperly elevate form over substance." Trans
Shuttle, Inc. v. Public Utilities Comm'n, 58 P.3d 47, 48 (Colo. 2002).
10
2. Statute of Limitations
Plains finally contends that the challenges to its failure to
build the facilities are time barred. The trial court ruled that KC
and the taxpayers knew or should have known by the 1990s that
Plains would not build the facilities, such that their 2004 challenge
to Plains' inaction was untimely. We need not address the
correctness of this ruling because we conclude in any event that KC
properly raised its challenges as counterclaims filed pursuant to the
counterclaim revival statute, § 13-80-109.
The timeliness of KC's challenges under the counterclaim
revival statute raises two subsidiary issues: (a) whether the statute
applied to KC's claims; and, if so, (b) whether those claims stayed
revived once Plains' lawsuit was dismissed. We review these issues
of statutory construction de novo. Wolf Ranch, 220 P.3d at 563.
a. Revival of Counterclaims
KC relies on section 13-80-109's second sentence, which
states: "A counterclaim or setoff arising out of the transaction or
occurrence which is the subject matter of the opposing party's claim
shall be commenced within one year after service of the complaint
by the opposing party and not thereafter." The evident "purpose" of
11
this statute "is to allow a party against whom a claim has initially
been asserted to plead a stale claim" as a counterclaim in certain
circumstances. Duell v. United Bank, 892 P.2d 336, 340-41 (Colo.
App. 1994), followed by Atlantic Richfield Co. v. Farm Credit Bank,
226 F.3d 1138, 1168-69 (10th Cir. 2000).
The statutory language - requiring that the counterclaim
"aris[e] out of the transaction or occurrence which is the subject
matter of the opposing party's claim," § 13-80-109 - tracks the
"compulsory counterclaim" rule, C.R.C.P. 13(a). Accordingly, revival
turns on whether the counterclaim was a compulsory one. Skyland
Metropolitan Dist. v. Mountain West Enterprise, LLC, 184 P.3d 106,
123-24 (Colo. App. 2007). We make that determination de novo.
Allen v. Martin, 203 P.3d 546, 555 (Colo. App. 2008).
A counterclaim is compulsory if it is "logically related" to the
subject matter of the opposing party's claim. Visual Factor, Inc. v.
Sinclair, 166 Colo. 22, 26, 441 P.2d 643, 645 (1968); Dinosaur Park
Investments, L.L.C. v. Tello, 192 P.3d 513, 517 (Colo. App. 2008).
Logical relationship "is a broad, flexible, and practical standard,
which prevents the filing of a multiplicity of actions and encourages
the resolution of all disputes arising out of a common factual matrix
12
in a single lawsuit." Allen, 203 P.3d at 556 (internal quotations
omitted). A counterclaim may be compulsory where the factual and
legal issues in both it and the complaint are "offshoots" of the same
controversy. Skyland, 184 P.3d at 124.
We conclude there was a logical relationship between Plains'
complaint and KC's counterclaim, such that the latter was a
compulsory one that triggered the revival statute. Plains' complaint
asserted that KC violated the Special District Act by expanding its
service district to include property already in Plains' district. That
Act prevents a district from organizing within the boundaries of"an
existing special district providing the same service," unless various
approvals are received. § 32-1-107(2) & (3)(b), C.R.S. 2009
(emphasis added). And it states that "[n]othing ... shall prevent a
special district providing different services from organizing wholly or
partly within an existing special district." § 32-1-107(2).
The merits of Plains' now-settled complaint and KC's possible
defenses thereto are not before us; it suffices to note that the
services being provided (or not provided) by Plains and KC were at
least potentially relevant to resolving the complaint. Accordingly,
KC's counterclaim seeking to compel Plains to perform services was
13
logically related to Plains' complaint regarding the districts'
boundaries: the counterclaim arose out of the same transaction or
occurrence as the complaint so as to trigger the revival statute.
b. Continuing Viability of Revived Counterclaims
Plains contends that because the statute "is meant to operate
defensively," KC's counterclaims once again became time barred
when the complaint was dismissed. We cannot agree; nothing in
the statute makes revival evanescent.
The statute is not limited to "defensive" operation. That
contention might have more force if only setoffs were revived. But
the statute revives "counterclaim[s]" as well. While a counterclaim
"includes both setoff and recoupment," it "is broader than either in
that it includes other claims and may be used as a basis for
affirmative relief." Shump v. Balka, 574 F.2d 1341, 1346 (10th Cir.
1978); see also Nelson u. Meyer, 66 Colo. 164, 165-67, 180 P. 86,
87-88 (1919) (recognizing that counterclaim may seek greater
recovery against plaintiff than plaintiff sought in complaint).
Plains' reliance on Duell and Atlantic Richfield is misplaced.
The holdings in those cases were that no counterclaim triggered the
statute: in Duell, because the claim was first asserted in a
14
complaint (and re-pled as a counterclaim to a counterclaim), 892
P.2d at 340-41; and in Atlantic Richfield, because the claims were
asserted by intervenors, 226 F.3d at 1168-69. The Circuit's
references to "defensive" counterclaims, id., were to the parties
asserting the claims and not to the specific relief being sought.
Having rejected Plains' premise, we also reject its conclusion.
We hold that once a compulsory counterclaim is revived, it does not
morph back into a time-barred claim once the complaint goes away.
Our holding is consistent with case law under an Illinois
counterclaim revival statute holding that once revived, otherwise
stale counterclaims stay revived even if the complaint that triggered
revival is later dismissed. See, e.g., Barragan v. Casco Design Corp.,
837 N.E.2d 16, 24 (Ill. 2005); Ogg v. City of Springfield, 458 N.E.2d
1331, 1337 (Ill. App. Ct. 1984), cited with approval on a more
general point in Duell, 892 P.2d at 341. It is inconsistent with the
Duell concurrence that viability of an otherwise stale counterclaim
is "contingent upon [the plaintiffs] claims being actively pursued."
892 P.2d at 343 (Tursi, J., specially concurring). But the Duell
majority did not adopt that conclusion, and the concurrence offered
no authority or reasoning in support of it.
15
C. Appellate Attorney Fees
Plains finally contends that certain arguments made by KC
and the taxpayers in this appeal lacked substantial justification,
such that Plains should be awarded appellate attorney fees under
section 13-17-102, C.R.S. 2009. We deny this request. None of the
appellate arguments in this case was frivolous, and our reversal of
the judgment demonstrates that the appeal was justified.
III. Conclusion
The judgment in favor of Plains is reversed. The case is
remanded to the trial court to determine whether it is now
practicable for Plains to build some or all of the recreational
facilities in question.
JUDGE WEBB and JUDGE TERRY concur.
16
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