The Colorado Supreme Court has assumed control over four virtually identical cases at the unusual behest of the state's Court of Appeals, wading into a flood of challenges filed by commercial property owners who want counties to reduce the value of their properties because of the COVID-19 pandemic.
Eleven lawsuits, each spearheaded by the same attorneys, are pending against local assessors with the same legal proposition: The pandemic, and the accompanying governmental orders that restricted business operations in the name of public health, amounted to the type of "unusual conditions" under state law that required a new calculation of property values outside of the normal schedule.
To date, trial judges across the state have issued rulings on both sides of the issue, containing conflicting interpretations of the law. With the cases barreling toward the Court of Appeals, Chief Judge Gilbert M. Román asked the Supreme Court in late October to hear four of the appeals directly, given the sizable amount of money at stake for all parties.
"The fact that dozens of plaintiffs and multiple boards of equalization, from counties across Colorado, await resolution of these issues demonstrates the 'significant public interest,'" Román wrote. "A single ruling from Colorado’s highest court would ensure a fair, final, and expeditious resolution."
Under Colorado law, county assessors value property every two years. On Jan. 1 of odd-numbered years, the assessor assigns a value based on data gathered over an 18-month window leading up to the new cycle.
However, assessors can adjust a property's value "for the years which intervene" if there are "unusual conditions." The law specifically names on-site improvements, vandalism or a change in land use as unusual conditions. Among the other categories are "detrimental acts of nature" and "any new regulations restricting or increasing the use of the land."
Commercial property owners in multiple jurisdictions, led by attorneys Glen F. Gordon of Boulder and James P. Bick Jr. of Missouri, attempted to have their assessors re-value their properties for 2020, arguing the COVID-19 pandemic itself amounted to a detrimental act of nature, and the government's public health orders — including capacity reduction or outright closures — restricted the use of their property.
Local assessors declined the requests, noting that Jan. 1 is the legal reassessment date each year, and any change in conditions after Jan. 1, 2020, could not trigger a revaluation for that tax year. The county boards of equalization, in turn, denied the appeals.
Then the plaintiffs turned to the courts, asking for judges to declare that unusual conditions existed due to the pandemic and that assessors were required to revalue the commercial properties for 2020.
The results were chaotic.
"The COVID-19 pandemic may constitute 'unusual conditions,'" wrote District Court Judge Bruce Langer of Boulder County, permitting a revaluation for 154 property owners.
"Here, while this court acknowledges that COVID has impacted society in a uniquely detrimental manner, it is not persuaded by Plaintiffs’ arguments that COVID is a 'detrimental act of nature,'" countered Broomfield District Court Judge Sean Finn in shooting down another request.
Douglas County does "not have a clear duty to perform the act requested, the revaluation of Petitioners’ properties," added District Court Judge Jeffrey K. Holmes in a case with 67 property owners.
"The Court finds that Colorado law allows unusual conditions occurring after Jan. 1, 2020, to be taken into consideration for the 2020 tax year," indicated Denver District Court Judge Darryl F. Shockley in greenlighting the plaintiffs' lawsuit.
On Oct. 6, the Court of Appeals weighed in on the controversy. A three-judge panel, examining a decision out of Weld County, declined to say whether the pandemic itself was an unusual condition requiring an adjustment of property values. It also refrained from answering whether the public health orders restricted the use of the commercial property.
But the panel did conclude the law permitted the property owners to seek a revaluation after Jan. 1, 2020, for the 2020 tax year.
"Determining whether the pandemic was a detrimental act of nature and the orders were regulations restricting the use of land within the meaning of the unusual conditions statute requires further proceedings," wrote Judge W. Eric Kuhn for the panel, returning the case to Weld County for the assessor to take action.
The Supreme Court has accepted the pending appeals out of Broomfield, Douglas, Jefferson and Larimer counties. Oral arguments are scheduled for January 2023.
In addition to the property tax appeals, the members of the Supreme Court voted to hear two other cases.
'Rule of Martin'
In a 1976 decision, the Supreme Court articulated the "Rule of Martin," named for one of the litigants, a director of social services in Montrose County. The rule provided that unless the law specifically grants the right to do so, a "subordinate state agency" cannot ask a court to review an action by a "superior state agency." The subordinate agency, in that instance, meant a board of county commissioners.
More than four decades later, Weld County found itself dissatisfied with new state rules governing emissions from oil and gas operations. The county, which is home to the largest quantity of oil and gas production of any Colorado jurisdiction, worried the new regulation would potentially shut down up to one-third of well operations. It filed suit against the Colorado Air Quality Control Commission and related agencies, alleging procedural deficiencies in the rulemaking.
A Denver judge dismissed Weld County's complaint, finding, among other things, the Rule of Martin barred the challenge from a subordinate against a superior state agency.
In reviewing Weld County's appeal, a three-judge panel of the Court of Appeals noted that case law has found counties to actually be subdivisions of the state government, "existing only for the convenient administration of the state." And under state statute, wrote Judge Terry Fox for the panel, counties are subordinate to the air quality commission.
Even though the law enables "any person" affected by a governmental action to seek judicial review, she elaborated that such language did not indicate the legislature had granted a subordinate county the right to sue the superior air quality commission.
"Where a statute has left unspecified who can seek judicial review, no Colorado case has recognized, for purposes of Martin, an express right of a subordinate agency to do so," Fox wrote in February of this year.
Weld County, in turn, argued to the Supreme Court that the appellate panel's ruling made little sense, given the interests that counties have in the state's rulemaking process.
"Weld County is certainly not part of, nor an agent of, the State Air Quality Control Commission," the county's lawyers contended. They added that hurdles exist to challenging the Rule of Martin, but "Weld County is a rare litigant that has persevered this far."
The Supreme Court agreed to look at the appellate panel's finding that the Rule of Martin prohibits Weld County from suing the air quality commission. The justices also consented to tackle an additional issue: whether to "review and clarify" the 46-year-old Rule of Martin itself.
The city of Aspen managed the development of an affordable housing project consisting of single family homes, townhomes and condominiums. The city created a homeowner association for the project, known as Burlingame Ranch II, and turned control of the community over to the HOA in 2017, three years after construction ended.
However, shortly before the transfer, the property manager learned of a problem with some wooden components. At the time, Aspen demanded the contractors fix the problem. But once the homeowners took over the association, they started pursuing claims against the city itself.
The HOA attempted to bring the city into arbitration by claiming it breached its warranty. Aspen, in turn, asked a trial court to find the Colorado Governmental Immunity Act barred the association's claims against it. A judge in Pitkin County agreed, finding the HOA was fundamentally alleging Aspen violated its duty to "build without negligence," which is the type of liability from which the CGIA shields government entities.
But in March, the Court of Appeals reinstated the lawsuit. The HOA argued the harms from the faulty construction stemmed from a contractual relationship, the appellate panel noted. Under a legal doctrine known as the "economic loss rule," certain claims can be litigated only through contractual terms, and not under other liability theories like negligence. If Burlingame Ranch II's HOA had viable contract claims against the city, the types of liability barred by the governmental immunity law would be irrelevant.
Fox, who also authored the opinion in the HOA's appeal, wrote that the trial court "could not conclude that all of the Association’s claims involving construction defects are barred by the CGIA, since the underlying facts are essential to those legal determinations."
Aspen then turned to the Supreme Court, arguing the appellate panel's decision was bound to "contradict and undermine" the governmental immunity law. The city insisted the allegations against it amounted solely to negligent construction, and permitting HOAs to circumvent the CGIA under the economic loss rule could adversely affect its pursuit of affordable housing projects.
"Aspen attempted to provide an essential function and service to its community by facilitating affordable residential housing. If construction defect contract claims can circumvent the CGIA, this would expose Aspen to liability and costs, hurting the taxpaying public," its lawyers wrote.
The Supreme Court agreed to review the appellate panel's reasoning and conclusions.