Supreme Court Resolves Condemnation Dispute

A developer argued that a rival’s taking didn’t serve a public use

A dispute between two rival developers grew to a fight over takings law that had to be resolved by the Supreme Court. 

The dispute centers around the question of whether a metropolitan district can condemn property under takings statute without the public benefitting at the time of the taking. In answering the question, the Supreme Court reviewed de novo the trial court’s public use determination. Ultimately, the court found the taking did serve a public use. 

The facts of the case date to 2006. “A subdivision development contemplated by Woodcrest Homes seems to have been yet another casualty of the 2007–2008 financial crisis,” wrote Justice William Hood in a majority opinion for the Colorado Supreme Court. Prior to the economic recession, Woodcrest was planning a new development adjacent to the town of Parker but only ended up able to secure one parcel between two larger parcels necessary for completion of the project. A rival, Century Communities, sought to condemn the parcel and finish the development itself with Woodcrest’s plans.

Century acquired the two adjacent parcels in 2012, and in 2013 offered to purchase Woodcrest’s parcel. Woodcrest refused, and Century proceeded with its plans to finish the development by attempting to condemn Woodcrest’s parcel. Parker agreed to annex Woodcrest’s development and approve the development if Century owned all three parcels.

In order to obtain Woodcrest’s parcel, Century created a metropolitan district, Carousel Farms, which allowed it to condemn property through eminent domain, which it did after Woodcrest once again rejected an offer to sell its parcel.

Woodcrest sued the metropolitan district, saying the condemnation was only for a private use.

A district court sided with Carousel Farms, but the Court of Appeals disagreed, concluding that the taking was not for a public use and was done in bad faith.

In the February oral arguments in the case, Carrie Bernstein of Denver firm Alderman Bernstein, arguing for the developer, said state law allows for “incidental private benefits” to come about from a condemnation and if there is a private benefit, that doesn’t defeat the public use determination.

David Schlachter of Greenwood Village firm Dymond Reagor argued to the court that there was no public use at the time of the taking and that it was done solely to satisfy an agreement between the developer and Parker.

Jeffrey Redfern of the Institute for Justice, an amicus curiae for Woodcrest, also argued that it’s hard to determine whether a taking satisfies the public use test when a developer has sole control of a metropolitan district. He argued that Colorado was unique in allowing private developers to create metro districts and use it to condemn property.

The Colorado Supreme Court ultimately agreed with Carousel Farms, finding that the taking was for a public use. 

In getting to that conclusion, Hood discussed why it was necessary for the court to review the public use determinations of the lower courts de novo: while it’s typical for trial courts make findings of fact and appellate courts pronounce law, and appellate tribunals can’t make findings of fact. 

“What does this mean for condemnation proceedings? For starters, when it comes to appellate review of public use determinations, the chaff has already been discarded,” Hood wrote. “While the debate over the standard of review here demonstrates that the distinction between law and fact isn’t always a bright one, fact questions ‘usually call for proof’ and legal questions ‘usually call for argument.’”

The Court wrote that public use determinations should be reviewed de novo. In doing that review, the court found that the condemnation served a public use in that the parcel will be used for public rights of way, storm drainage and sewer improvements. “It is difficult to argue that those functions don’t essentially benefit the public,” the Supreme Court wrote. “And of course, private parties may benefit, perhaps significantly.”

“I think the court seemingly elected to discount or not significantly consider the uniqueness of the facts and the factual basis on which this particular Metro district was formed and what powers it gives,” Schlachter told Law Week. “Our biggest concern coming out of this opinion is it gives an open door to developers to abuse the special district statute.”

Bernstein did not respond to comment by press time.

Schlachter said it was too early to say whether there might be a constitutional challenge to the U.S. Supreme Court, but he said he read the Colorado Supreme Court’s opinion to invite the legislative branch to tighten up exemptions concerning public takings for private benefit. 

— Tony Flesor, [email protected]

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