Court Opinion

ID: 4174121
Source: CourtListenerOpinion
Date Created: 2017-06-02 17:11:26.601973+00
Date Added: 2024-06-11T14:38:55.763504
License: Public Domain

COLORADO COURT OF APPEALS                                          2017COA69

Court of Appeals No. 16CA0861
Douglas County District Court No. 15CV31017
Honorable Paul A. King, Judge

Tallman Gulch Metropolitan District,

Plaintiff-Appellee,

v.

Natureview Development, LLC and Michael Richardson,

Defendants-Appellants.

                              ORDER AFFIRMED

                                  Division V
                         Opinion by JUDGE BOORAS
                       Román and Márquez*, JJ., concur

                           Announced May 18, 2017

Kutak Rock LLP, Reid A. Page, Denver, Colorado, for Plaintiff-Appellee

Senter Goldfarb & Rice, LLC, Eric M. Ziporin, Ryan F. McGrath, Denver,
Colorado; Sherman Howard LLC, Joseph J. Bronesky, Denver, Colorado, for
Defendants-Appellants

*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2016.
¶1    Defendants, Natureview Development, LLC and Michael

 Richardson, appeal the district court’s order holding that the

 Colorado Governmental Immunity Act did not apply to the claims of

 plaintiff, Tallman Gulch Metropolitan District, against Richardson.

 We affirm.

                           I.    Background

¶2    Richardson, owner of Natureview Development (Natureview),

 platted and developed Tallman Gulch, a real estate development in

 Douglas County. In 2006, the Tallman Gulch Metropolitan District

 (the District) was formed to provide public improvements and

 services to its residents and taxpayers. Metropolitan districts may

 impose and collect taxes upon properties within their boundaries to

 collectively pay for their authorized services. Richardson was the

 president of the District’s Board of Directors (Board).

¶3    Upon its formation, the District submitted a service plan to

 Douglas County. The plan included details of the improvements

 and services the District planned to provide and financial

 assumptions regarding expected costs and the expected revenues

 that would fund the costs:

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          the District was to provide (1) street and traffic safety

            improvements; (2) storm sewers; (3) water and sanitation

            distribution; and (4) landscaping and parks and

            recreation;

          the total cost of anticipated improvements was

            approximated at $6,053,350;

          the District was authorized to issue up to $6,000,000 in

            bonded indebtedness; and

          the financial plan forecasted sales of eighty-six lots

            between 2007 and 2013, which would provide revenue

            with which the District could repay the bonds.

¶4    Natureview and Richardson borrowed approximately

 $8,600,000 from Community Banks of Colorado (CBC) to build out

 the public infrastructure in Tallman Gulch. Tallman Gulch, its

 improvements, and any rents received from Tallman Gulch, served

 as collateral for the loan.

¶5    Sales in Tallman Gulch did not meet the expectations set forth

 in the service plan; only four out of the anticipated eighty-six lots

 were sold between 2007 and 2011. In 2009, Natureview completely

 drew down its construction loan but only constructed one-third of

                                    2
 the public infrastructure for the neighborhood. Richardson (as

 president of the District’s Board) sent himself (as manager of

 Natureview) a letter purporting to accept nearly four million dollars

 of improvements on behalf of the District, attaching a “Bill of Sale”

 for landscaping signed by Richardson as manager of Natureview.

¶6    Natureview assigned the construction loan to another

 Richardson-related entity in 2009, which then defaulted on the loan

 in 2010. In 2011, CBC initiated foreclosure proceedings. On May

 2, 2011, the then loan holder filed a motion to authorize the public

 trustee sale of Tallman Gulch. Despite being aware of the

 foreclosure proceedings, on May 23, 2011, Richardson, acting as

 president of the District’s Board, signed off on the issuance of

 $4,214,000 in bonds to Natureview in exchange for the then-

 existing infrastructure improvements in Tallman Gulch. Ten days

 after the bonds were issued, the district court authorized the public

 trustee sale of Tallman Gulch. Tallman Gulch was sold on July 6,

 2011.

¶7    The District alleges that Richardson and Natureview did not

 disclose prior to the issuance of the bonds the financial status, the

 failure to meet sales expectations, the pending foreclosure, and the

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 conflict of interest presented by Richardson’s involvement on both

 sides of the bond transaction. The District asserted the following

 claims against both Richardson and Natureview:

      (1) securities fraud;

      (2) negligent misrepresentation;

      (3) false representation; and

      (4) fraudulent concealment.

 The District claimed breach of fiduciary duty against Richardson,

 and it claimed unjust enrichment against Natureview. Finally, the

 District sought a declaratory judgment reducing the value of the

 bonds and interpreting the bonds.

¶8    Defendants moved to dismiss the District’s claims on various

 grounds. As relevant here, defendants argued that the district

 court lacked subject matter jurisdiction over the claims against

 Richardson under C.R.C.P. 12(b)(1). Defendants asserted the

 claims were based on Richardson’s actions as an officer of the

 District, and were thus barred by the Colorado Governmental

 Immunity Act (CGIA), sections 24-10-101 through -120, C.R.S.

 2016.

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¶9        The district court denied defendants’ motion to dismiss the

  District’s claims. Specifically, the district court concluded that the

  CGIA did not apply to the claims of the District, itself a public

  entity, against Richardson, but even if the CGIA applied to this type

  of litigation, Richardson’s actions underlying the District’s claims

  were outside the scope of his employment with the District, and the

  CGIA would not apply to those claims. Defendants now appeal.

  See § 24-10-108, C.R.S. 2016 (the district court’s decision on

  sovereign immunity is a final judgment subject to interlocutory

  appeal).

                                II.   Analysis

¶ 10      Defendants contend that the district court erred when it

  concluded that the CGIA did not apply to the District’s claims

  against Richardson. We agree with the district court that the CGIA

  does not apply here.

     A.    Standard of Review and Principles of Statutory Construction

¶ 11      “Determining whether there is immunity under the CGIA is a

  question of subject matter jurisdiction to be decided pursuant to

  C.R.C.P. 12(b)(1). We review a district court’s interpretation of the

  CGIA de novo.” Denver Health & Hosp. Auth. v. City of Arvada ex

                                      5
  rel. Arvada Police Dep’t, 2016 COA 12, ¶ 38 (citation omitted) (cert.

  granted Sept. 12, 2016); see also Munoz v. Am. Family Mut. Ins. Co.,

  2017 COA 25, ¶ 7 (we review issues of statutory construction de

  novo). In interpreting a statute, our primary objective is to

  ascertain and effectuate the intent of the General Assembly.

  Specialty Rests. Corp. v. Nelson, 231 P.3d 393, 397 (Colo. 2010);

  Munoz, ¶ 8. “If the statutory language is clear, we interpret the

  statute according to its plain and ordinary meaning.” Specialty

  Rests. Corp., 231 P.3d at 397. We read words and phrases in

  context and construe them according to their common usages.

  Jefferson Cty. Bd. of Equalization v. Gerganoff, 241 P.3d 932, 935

  (Colo. 2010).

¶ 12   “We also interpret a statute in a way that best effectuates the

  purpose of the legislative scheme.” Perfect Place v. Semler, 2016
COA 152M, ¶ 20. “When a court construes a statute, it should read

  and consider the statute as a whole and interpret it in a manner

  giving consistent, harmonious, and sensible effect to all of its

  parts.” Gagne v. Gagne, 2014 COA 127, ¶ 26. “In doing so, a court

  should not interpret the statute so as to render any part of it either

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  meaningless or absurd.” Id. If a statute is unambiguous, we look

  no further. Id. at ¶ 27.

               B.   Colorado Governmental Immunity Act

¶ 13   “Before 1971, public entities enjoyed common-law sovereign

  immunity from suit and were liable for compensatory damages for

  injuries in tort only when constitutional or statutory provisions

  operated to waive the government’s immunity.” City of Colorado

  Springs v. Conners, 993 P.2d 1167, 1171 (Colo. 2000). In 1971, the

  supreme court decided three cases that abrogated Colorado’s

  common law of governmental immunity. See Springer v. City & Cty.

  of Denver, 13 P.3d 794, 798 (Colo. 2000). The supreme court noted

  that, in reaching these decisions, it wished to leave the decision of

  whether to restore governmental immunity in whole or in part to the

  General Assembly. Evans v. Bd. of Cty. Comm’rs, 174 Colo. 97,

  105, 482 P.2d 968, 972 (1971), superseded by statute, Colorado

  Governmental Immunity Act, Ch. 323, sec. 1, §§ 130-11-1 to -17,

  1971 Colo. Sess. Laws 1204-11.

¶ 14   In 1971, the legislature adopted the CGIA, providing sovereign

  immunity for public entities in tort actions (or actions that could lie

  in tort), absent one of the enumerated exceptions. 1971 Colo. Sess.

                                     7
  Laws at 1204-11; Conners, 993 P.2d at 1171-72. The legislature

  described the doctrine of sovereign immunity “whereunder the state

  and its political subdivisions are often immune from suit for injury

  suffered by private persons” as sometimes inequitable. § 24-10-

  102, C.R.S. 2016. It later declared that a central purpose of the

  CGIA is to limit the potential liability of public entities for

  compensatory money damages in tort, because “unlimited liability

  could disrupt or make prohibitively expensive the provision of . . .

  essential public services and functions.” Ch. 166, sec. 1, § 24-10-

  102, 1986 Colo. Sess. Laws 873. “This form of liability places a

  burden upon taxpayers, who ultimately face the ‘fiscal burdens of

  unlimited liability’ incurred by the state in tort suits.” Conners, 993
P.2d at 1172 (quoting § 24-10-102).

¶ 15   The CGIA establishes sovereign immunity for public entities.

  Further, it extends to public employees in limited circumstances in

  tort actions:

             It is the intent of this article to cover all
             actions which lie in tort or could lie in tort
             . . . . No public entity shall be liable for such
             actions except as provided in this article, and
             no public employee shall be liable for injuries
             arising out of an act or omission occurring
             during the performance of his or her duties

                                      8
             and within the scope of his or her employment,
             unless such act or omission was willful and
             wanton . . . .

  § 24-10-105(1), C.R.S. 2016; see also § 24-10-106(1), C.R.S. 2016.

¶ 16   Because the CGIA derogates the common law, we construe its

  grants of immunity strictly. See, e.g., Burnett v. State Dep’t of Nat.

  Res., 2015 CO 19, ¶ 11.

                              C.    Analysis

¶ 17   Richardson was a public employee for the purpose of the

  CGIA, as an officer of a public entity, the District. First Nat’l Bank

  of Durango v. Lyons, 2015 COA 19, ¶ 9; see § 24-10-103(4)(a), (5),

  C.R.S. 2016. He argues that as a public employee he was immune

  under the CGIA with regard to the District’s tort claims against him.

  We disagree.

¶ 18   In the present litigation, the District, the public entity that

  employed Richardson, sued him for his malfeasance while in its

  employ.

¶ 19   The plain language of sections 24-10-105 and -106 is

  unambiguous in its contemplation of the immunity of the public

  entity, or public employee as an extension of the entity, when called

  upon to defend against tort claims raised. However, these sections

                                     9
  of the statute are silent as to the application of the CGIA to suits

  brought by a public entity plaintiff, and thus the scope of the

  statute is ambiguous. See People v. Paloma, 272 P.3d 1106, 1112

  (Colo. App. 2011) (where a statute is silent on and does not appear

  to contemplate the issue presented, the silence renders it

  ambiguous as to scope).

¶ 20   Construing the CGIA as a whole, and interpreting it in a

  manner that gives consistent, harmonious, and sensible effect to all

  of its parts, we look to the statement of policy contained within

  section 24-10-102. The legislature describes sovereign immunity as

  a concept that arises when a public entity is being sued for “injury

  suffered by private persons.” § 24-10-102 (emphasis added). In

  this case, however, injury was suffered by a public entity.

¶ 21   In our view, where a public entity, as plaintiff, asserts injuries

  caused by one of its employees, it would frustrate the purpose of

  the CGIA to permit the employee to shield himself or herself with

  the sovereign immunity meant to protect a public entity, and a

  public employee only when acting as an extension of the entity. The

  statute clearly states that the purpose of the CGIA is to limit the

  liability of public entities in defending against tort claims, and thus

                                    10
  to lessen the burden on taxpayers who provide funding for public

  entities.

¶ 22   In the present case, the District is alleging that it suffered an

  injury when it issued over four million dollars in bonds to

  Natureview and Richardson despite Tallman Gulch’s foreclosure

  status. Specifically, the District argues that Richardson breached

  his fiduciary duty to the District as a member of the Board when he

  approved the issuance of the bonds in a financially reckless manner

  and in bad faith, favoring his own interests over those of the

  District. Richardson failed to disclose and consider the

  development’s financial and foreclosure status in making the bonds

  decision.1 To prevent the District from recovering this loss by

  1 While the District makes numerous claims pertaining to
  misrepresentations allegedly made by Richardson, we agree with
  the district court’s conclusion that, other than the breach of
  fiduciary duty claim discussed here, the alleged misrepresentations
  were made by Richardson while acting in his capacity as a private
  developer for Natureview, not as a public employee. For example,
  the representations Richardson made to the Board in seeking
  approval of the bond issuance and his failure to correct
  Natureview’s previous statements within the service plan regarding
  the development’s failure to meet sales expectations, which underlie
  the District’s claims for securities fraud, negligent
  misrepresentation, false representation, and fraudulent
  concealment, were made in his role as the developer.

                                    11
  allowing Richardson to claim immunity as a public employee does

  not effectuate the purpose of the CGIA. Thus, construing the plain

  language of the CGIA, and acknowledging that we construe its

  grants of immunity strictly, we conclude the district court correctly

  concluded that the CGIA did not, on its face, apply to the District’s

  claims against Richardson.

¶ 23   This conclusion is limited to the assertion of CGIA immunity

  under the facts presented here, and we do not speak to other

  circumstances under which a public entity, as plaintiff, may sue its

  own employees for their conduct, or may sue another public entity.

  Because this is an issue for the legislature, we express no opinion

  regarding the scope of the CGIA in civil lawsuits containing

  circumstances not presented here.

¶ 24   In view of our disposition, we do not address defendants’

  remaining contentions.

                            III.   Conclusion

¶ 25   The order is affirmed.

       JUDGE ROMÁN and JUDGE MÁRQUEZ concur.

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