Marriage of Humphrey — Civil Procedure , 2018 COA 31 ( 2018 )

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.
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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.
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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
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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.
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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.
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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
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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.
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¶ 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.
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