Tallman Gulch Metropolitan District v. Natureview Development, LLC

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

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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

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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.

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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

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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

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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

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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.

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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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