Court Opinion

ID: 4253411
Source: CourtListenerOpinion
Date Created: 2018-03-09 21:10:00.019755+00
Date Added: 2024-06-11T14:44:13.394601
License: Public Domain

The summaries of the Colorado Court of Appeals published opinions
  constitute no part of the opinion of the division but have been prepared by
  the division for the convenience of the reader. The summaries may not be
    cited or relied upon as they are not the official language of the division.
  Any discrepancy between the language in the summary and in the opinion
           should be resolved in favor of the language in the opinion.

                                                                  SUMMARY
                                                               March 8, 2018

                                2018COA31

No. 16CA1869, Marriage of Humphrey — Civil Procedure —
Receivers — Professions and Occupations — Colorado Medical
Marijuana Code — Colorado Retail Marijuana Code — Licensing

     A division of the court of appeals decides, as a matter of first

impression, whether a district court’s power to appoint a receiver

trumps Colorado’s marijuana licensing laws. Here, the appointed

receiver was not licensed to operate marijuana businesses as

required by the Colorado Retail Marijuana Code and the Colorado

Medical Marijuana Code.

     The division holds that courts may only appoint receivers for

marijuana businesses who are licensed under Colorado marijuana

licensing laws.

     Accordingly, the division reverses the district court’s order and

remands the case with directions.
COLORADO COURT OF APPEALS                                         2018COA31

Court of Appeals No. 16CA1869
City and County of Denver District Court No. 16DR30252
Honorable Lael Montgomery, Judge

In re the Marriage of

Kelsey M. Yates,

Petitioner-Appellee,

and

Kiri A. Humphrey,

Respondent,

and Concerning Sterling Consulting Corporation, Receiver,

Appellee,

v.

Michael S. Hartman, in his official capacity as the Executive Director of the
Colorado Department of Revenue and State Licensing Authority for the
Marijuana Enforcement Division,

Intervenor-Appellant.

                        ORDER REVERSED AND CASE
                        REMANDED WITH DIRECTIONS

                                 Division VII
                         Opinion by JUDGE BERGER
                        Bernard and Freyre, JJ., concur

                           Announced March 8, 2018

Griffiths Law PC, Carolyn Witkus, Jon Eric Stuebner, Lone Tree, Colorado, for
Petitioner-Appellee
Fairfield and Woods PC, John M. Tanner, Denver, Colorado, for Appellee

Cynthia H. Coffman, Attorney General, Claudia Brett Goldin, First Assistant
Attorney General, J. Alan Call, Senior Assistant Attorney General, Denver,
Colorado, for Intervenor-Appellant
¶1    The question before us is whether a court may appoint a

 receiver for a marijuana business if that receiver does not possess

 the licenses required by Colorado’s marijuana licensing laws. We

 hold that, although courts have the equitable power to appoint

 receivers, they must make such appointments in compliance with

 the marijuana licensing laws enacted by the General Assembly.

¶2    Because the district court erroneously concluded that its

 power to appoint a receiver trumped the marijuana licensing laws,

 we reverse the receivership order.

            I.     Relevant Facts and Procedural History

¶3    Petitioner-Appellee Kelsey M. Yates (Wife) filed a petition to

 dissolve her marriage to respondent-appellee Kiri A. Humphrey.

 She requested the appointment of a receiver over marital property,

 which included the “Frosted Leaf” group of businesses (the

 marijuana businesses). The marijuana businesses included a

 number of licensed medical and recreational marijuana entities.

¶4    The court granted Wife’s request for a receiver and appointed

 appellee Sterling Consulting Corporation (Receiver). The Receiver’s

 principal is Richard Block. The receivership order authorized the

 Receiver to “take immediate control of the [businesses] and operate

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 the [businesses] on the Court’s behalf in custodia legis.” The

 Receiver had the “powers and duties” to “manage, operate,

 maintain, repair, and otherwise control the [businesses] as

 necessary to preserve [them].”

¶5    It is undisputed that when the court entered the receivership

 order, neither Mr. Block nor his employees held the licenses

 required by section 12-43.3-103(2)(e), C.R.S. 2017, of the Colorado

 Medical Marijuana Code, and section 12-43.4-104, C.R.S. 2017, of

 the Colorado Retail Marijuana Code, to own, operate, manage,

 control, or work in a licensed marijuana business.

¶6    After it learned of the receivership order, appellant, the

 Executive Director of the Colorado Department of Revenue, officially

 acting as the State Licensing Authority (SLA), moved to intervene

 under C.R.C.P. 24. The SLA moved to modify the receivership order

 by removing Sterling Consulting Corporation as the Receiver, at

 least until Block and his employees obtained the requisite licenses.1

 After a hearing, the court granted the SLA’s motion to intervene,

 1 The SLA offered to expedite the licensing application process for
 the Receiver and its employees.

                                   2
 but denied the motion to modify the receivership order.2 The SLA

 now appeals that order.3

                            II.   Analysis

¶7    We begin by distinguishing what is at issue in this case from

 what is not. The SLA does not challenge the district court’s

 authority to appoint receivers for marijuana businesses. Instead,

 the SLA only challenges the court’s authority to appoint receivers

 who are not licensed to operate marijuana businesses.4

                 A.    Equitable Powers of the Court

¶8    Courts of equity have inherent power to appoint receivers.

 Johnson v. El Paso Cattle Co., 725 P.2d 1180, 1182-83 (Colo. App.

 1986). This power is codified by C.R.C.P. 66. Consequently, “[t]he

 2 After the hearing, two of the Receiver’s employees, but not Richard
 Block, obtained occupational licenses under Colorado’s marijuana
 licensing laws.
 3 We have appellate jurisdiction to hear this case under C.A.R.

 1(a)(4), which provides that an order appointing a receiver is
 appealable.
 4 At oral argument, for the first time, the SLA argued that

 paragraph sixteen of the receivership order, which states that any
 actions brought against the marijuana businesses or the Receiver
 are stayed “absent express permission” of the appointing court was
 beyond the authority of the district court. We do not address this
 argument because it was asserted for the first time at oral
 argument. McGihon v. Cave, 2016 COA 78, ¶ 10 n.1.

                                   3
 appointment of a receiver is governed by general equitable

 principles.” Premier Farm Credit, PCA v. W-Cattle, LLC, 155 P.3d

 504, 519 (Colo. App. 2006).

¶9    But, “[c]ourts of equity can no more disregard statutory and

 constitutional requirements and provisions than can courts of law.”

 Immigration & Naturalization Serv. v. Pangilinan, 486 U.S. 875, 883

 (1988) (quoting Hedges v. Dixon Cty., 150 U.S. 182, 192 (1893)); see

 also Armstrong v. Driscoll Constr. Co., 107 Colo. 218, 222, 110 P.2d

 651, 653 (1941). “The courts of a jurisdiction cannot authorize

 violations of that jurisdiction’s laws, unless pursuant to the

 command of a higher law. It is a fundamental tenet of a

 separation-of-powers doctrine that a court’s enforcement powers

 are restricted by the dictates of the legislature.” LaShawn A. v.

 Barry, 144 F.3d 847, 853 (D.C. Cir. 1998); see also Baker v. David

 Alan Dorfman, P.L.L.C., 232 F.3d 121, 122 (2d Cir. 2000). The

 Receiver has not cited, and we have not found, any authority

 supporting the proposition that when a district court appoints a

 receiver the court can disregard marijuana licensing laws enacted

 by the General Assembly.

                                   4
                 B.   Colorado Marijuana Licensing Laws

¶ 10   “The General Assembly may prohibit practice of a profession or

  operation of a facility in the absence of a statutorily-prescribed

  license or permit.” Kourlis v. Dist. Court, 930 P.2d 1329, 1333

  (Colo. 1997). The General Assembly exercised this authority when

  it prohibited the operation of both medical and recreational

  marijuana businesses unless the businesses’ owners and employees

  hold the licenses prescribed by statute. § 12-43.3-103(2)(e); § 12-

  43.4-104(4).

¶ 11   Moreover, the Colorado Constitution provides as follows:

             In the interest of the health and public safety
             of our citizenry, the people of the state of
             Colorado further find and declare that
             marijuana should be regulated in a manner
             similar to alcohol so that:

             ...

             Legitimate, taxpaying business people, and not
             criminal actors, will conduct sales of
             marijuana.

  Colo. Const. art. XVIII, § 16(1)(b)(IV). Both the Colorado Retail and

  Medical Marijuana Codes similarly state that the licensing of the

  marijuana industry, as a part of those codes, “shall be deemed an

  exercise of the police powers of the state for the protection of the

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  economic and social welfare and the health, peace, and morals of

  the people of this state.” § 12-43.3-102(1), C.R.S. 2017; § 12-43.4-

  102(1), C.R.S. 2017. Thus, both the people of Colorado and the

  General Assembly have expressed that the regulation of persons

  engaged in marijuana businesses is an important state interest.

¶ 12   In 2010, the General Assembly enacted the Colorado Medical

  Marijuana Code, sections 12-43.3-101 to -1102, C.R.S. 2017, which

  sets forth “the exclusive means by which manufacture, sale,

  distribution, and dispensing of medical marijuana may occur in the

  state of Colorado,” § 12-43.3-103(2)(e). The code requires not only

  licenses for medical marijuana businesses themselves, but also

  “[o]ccupational licenses” for “owners, managers, operators,

  employees, contractors, and other support staff employed by,

  working in, or having access to restricted areas of the licensed

  premises, as defined by the state licensing authority.” § 12-43.3-

  401(1)(d), C.R.S. 2017; see also Dep’t of Rev. Rule M 204.5(B)(3), 1

  Code Colo. Regs. 212-1. “It is unlawful for a person to exercise any

  of the privileges granted under a license other than the license that

  the person holds or for a licensee to allow any other person to

                                    6
  exercise the privileges granted under the licensee’s license.” § 12-

  43.3-310(8)(a), C.R.S. 2017.

¶ 13   Two years later, the General Assembly enacted the Colorado

  Retail Marijuana Code, which requires similar business and

  occupational licenses for the retail marijuana industry. See § 12-

  43.4-312(2), C.R.S. 2017; see also Dep’t of Rev. Rule R 204.5(B)(3),

  1 Code Colo. Regs. 212-2. The Colorado Retail Marijuana Code also

  makes it unlawful “for a person to exercise any of the privileges

  granted under a license other than the license that the person holds

  or for a licensee to allow any other person to exercise the privileges

  granted under the licensee’s license.” § 12-43.4-309(7)(a), C.R.S.

  2017.

¶ 14   Thus, under both the Colorado Medical Marijuana Code and

  the Colorado Retail Marijuana Code, no person may operate a

  marijuana establishment without the required licenses. See § 12-

  43.3-313(3), C.R.S. 2017; § 12-43.4-312(2). To operate a marijuana

  establishment without these licenses is a criminal offense. § 12-

  43.3-901(2), C.R.S. 2017; § 12-43.4-901(2)(a), C.R.S. 2017.

                                     7
  C.    The District Court Erroneously Appointed Sterling Consulting
                          Corporation as a Receiver

¶ 15   The district court thought that its authority to appoint a

  receiver was not subject to the statutory licensing requirements and

  therefore gave the Receiver the “powers and duties” to “manage,

  operate, maintain, repair, and otherwise control the [businesses] as

  necessary to preserve [them],” even though the Receiver did not

  have the licenses required by either the Colorado Medical Marijuana

  Code or the Colorado Retail Marijuana Code.5 The court reasoned

  that its power to appoint a receiver trumped the laws requiring

  persons operating marijuana businesses to be licensed. Because

  the court’s power to appoint receivers for marijuana businesses is

  not in conflict with the licensing laws, we reject this argument. As

  well, “it is not an appropriate function of the court to act as a

  licensing agency,” Kourlis, 930 P.2d at 1337, and undertake the

  5 Wife argues that the receivership order does not give control of the
  businesses to the Receiver because the businesses remain in the
  possession of the court. We disagree because this misperceives the
  actual relationship between the court and the Receiver. The
  receivership order grants plenary authority to the Receiver to
  operate the marijuana businesses. The suggestion that the
  Receiver must ask the court for approval before making every
  decision regarding the operation of the marijuana businesses is
  unsupported.

                                     8
  agency’s role in determining who may operate marijuana

  businesses.

¶ 16   Wife argues that receivers are exempt from holding the

  statutorily prescribed licenses to operate marijuana businesses

  because receivers are “governmental organizations” and not

  “persons” under either the Colorado Medical Marijuana Code or the

  Colorado Retail Marijuana Code. We disagree. A receiver “is an

  officer of [the] court, appointed by the court, directed by the court,

  and paid by the court from the funds in the court. He is in no

  sense an agent or employee or officer of the United States.”

  Cromelin v. United States, 177 F.2d 275, 277 (5th Cir.

  1949), superseded by statute on other grounds as stated in Bell v.

  Thornburg, 743 F.3d 84, (5th Cir. 2014).

¶ 17   Further, contrary to the arguments made by both Wife and the

  Receiver, requiring courts to appoint receivers who comply with

  Colorado’s marijuana licensing laws does not impermissibly limit

  courts’ equitable powers and prohibit them from appointing

  receivers to operate marijuana businesses. This requirement

                                     9
  merely obligates courts, like everyone else, to comply with the law

  in appointing such receivers.6

¶ 18   Wife and the Receiver also make numerous policy arguments

  against requiring courts to appoint receivers who comply with

  Colorado’s marijuana licensing laws. We do not address these

  arguments because the language of the Colorado Medical Marijuana

  Code and the Colorado Retail Marijuana Code unambiguously

  requires a person operating a marijuana business to be licensed.

  See §§ 12-43.3-313(3); 12-43.4-312(2).7 “When a statute is

  unambiguous, public policy considerations beyond the statute’s

  plain language have no place in its interpretation.” Samuel J.

  Stoorman & Assocs., P.C. v. Dixon, 2017 CO 42, ¶ 11.

  6 Neither Wife nor the Receiver contends that it is impossible to find
  receivers who are licensed under the marijuana licensing laws. The
  SLA represents to us that district courts have appointed licensed
  receivers for other marijuana businesses. At oral argument, the
  Receiver acknowledged that it does not base its arguments for
  affirmance on a claim that it is impossible to appoint receivers that
  have the appropriate licenses for marijuana businesses.
  7 We acknowledge that the Colorado Liquor Code provides for

  temporary licenses when receivers are appointed. § 12-47-303(5),
  C.R.S. 2017. No such provision appears in either the Medical or
  Retail Marijuana Code. Nevertheless, we reject the parties’ reliance
  on this provision (or its absence) because it does not affect the
  district court’s obligation to follow the law when appointing
  receivers for marijuana businesses.

                                    10
¶ 19   Thus, we hold that the district court may only appoint a

  receiver who complies with Colorado’s marijuana licensing laws.

                          III.    Conclusion

¶ 20   The district court’s order appointing the Receiver is reversed,

  and the court is instructed to vacate the order and terminate the

  appointment of the existing Receiver, unless, as of the date of the

  issuance of the mandate of this court, the Receiver has obtained the

  necessary licenses. The district court, in the exercise of its

  discretion, may appoint a substitute receiver who complies with the

  licensing requirements of the Colorado Medical Marijuana and

  Retail Marijuana Codes.

       JUDGE BERNARD and JUDGE FREYRE concur.

                                    11