Kelly v. Board of County Commissioners of Summit County , 2018 COA 81 ( 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
May 31, 2018
2018COA81
No. 17CA0431, Kelly v. Bd. of Cty. Comm’rs — Taxation —
Property Tax — Residential Land
In this property tax case, a division of the court of appeals
considers whether the Board of Assessment Appeals erred in
declining to reclassify a parcel of land as residential — rather than
vacant — because the separately titled parcel was not under
“common ownership” with a contiguous residential parcel. The
division concludes that determining ownership under section 39-1-
102(14.4)(a), C.R.S. 2017, requires looking beyond record title and
examining a person’s or an entity’s right to possess, use, and
control the contiguous parcels.
The division also concludes that the Board of Assessment
Appeal abused its discretion when, on its own and without notice, it
rejected the parties’ stipulation that two issues were undisputed.
Accordingly, the division reverses the order and remands for
reclassification.
COLORADO COURT OF APPEALS 2018COA81
Court of Appeals No. 17CA0431
Colorado Board of Assessment Appeals Case No. 68821
Karen L. Kelly, Trustee,
Petitioner-Appellant,
v.
Board of County Commissioners of Summit County, Colorado,
Respondent-Appellee,
and
Board of Assessment Appeals,
Appellee.
ORDER REVERSED AND CASE
REMANDED WITH DIRECTIONS
Division V
Opinion by JUDGE DUNN
Welling and Casebolt*, JJ., concur
Announced May 31, 2018
Ryley Carlock & Applewhite, F. Britton Clayton III, Denver, Colorado, for
Petitioner-Appellant
Jeffrey L. Huntley, County Attorney, Franklin Celico, Assistant County
Attorney, Breckenridge, Colorado, for Respondent-Appellee
Cynthia H. Coffman, Attorney General, Emmy A. Langey, Assistant Solicitor
General, Krista Maher, Assistant Attorney General, Denver, Colorado, for
Appellee
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2017.
¶1 This property tax case involves two adjacent parcels of land in
Summit County, Colorado — one classified as residential and one
as vacant — with a separate trust holding record title to each
parcel. Karen L. Kelly (Ms. Kelly), Trustee of the separate trusts
each holding record title to one parcel, sought reclassification of the
vacant parcel (subject parcel) for property tax purposes. The Board
of Assessment Appeals (BAA) denied her request, concluding that
the two differently titled parcels were not under “common
ownership” within the meaning of section 39-1-102(14.4)(a), C.R.S.
2017, which defines “residential land” for purposes of the property
tax statute.
¶2 Ms. Kelly appeals the BAA’s denial of her reclassification
request. Because we conclude that Ms. Kelly presented sufficient
evidence establishing common ownership of both parcels, we
reverse the BAA’s order and remand with directions for the BAA to
reclassify the subject parcel as residential land for tax years 2014
and 2015.
1
I. Background
¶3 In the 1990s, Ms. Kelly purchased two adjacent parcels of land
in Summit County. She built a home on one parcel (residential
parcel) and left the subject parcel undeveloped.
¶4 Sometime after she purchased the two parcels, Ms. Kelly
placed them in trust. In particular, on counsel’s advice, she put the
residential parcel in the Karen L. Kelly 2011 Irrevocable Trust, a
qualified personal residence trust. And she put the subject parcel
in the Karen L. Kelly 1990 Declaration of Trust, a revocable family
trust. Ms. Kelly was the settlor, trustee, and beneficiary of both
trusts.
¶5 For tax purposes, the Summit County Assessor classified the
residential parcel as residential land. But the Assessor classified
the subject parcel as vacant land, which is taxed at a higher rate.
¶6 In 2016, Ms. Kelly appealed the subject parcel’s classification
to the Summit County Board of County Commissioners (County).
She requested that the subject parcel be reclassified as residential
land under section 39-1-102(14.4)(a) and sought a tax abatement
for the tax years 2014 and 2015. The County denied the petition.
2
¶7 Ms. Kelly then appealed the County’s decision to the BAA,
again requesting to have the subject parcel reclassified as
residential land and seeking the associated tax abatement. At the
evidentiary hearing, Ms. Kelly and the County presented evidence
on the ownership of the parcels.
¶8 After the hearing, the BAA affirmed the County’s classification
of the subject parcel as vacant land, determining that the subject
parcel and residential parcel were owned by two separate trusts and
“[e]ach trust [was] a separate and distinct legal entity.” It thus
concluded that the parcels were not commonly owned and therefore
the subject parcel did not qualify as residential land under section
39-1-102(14.4)(a).
II. Residential Land
¶9 Ms. Kelly contends that the BAA erred in concluding that the
subject parcel was not residential land. More precisely, she argues
that the BAA “misconstrued the ‘common ownership’ element of
section” 39-1-102(14.4)(a). We agree.
A. Standard of Review and Applicable Law
¶ 10 The determination of the appropriate land classification for
property tax purposes is a mixed question of law and fact. Home
3
Depot USA, Inc. v. Pueblo Cty. Bd. of Comm’rs, 50 P.3d 916, 920
(Colo. App. 2002). While we consider the BAA’s determination to
the extent it’s consistent with the relevant statutory provisions, the
interpretation of the tax statutes is a question of law that we review
de novo. Boulder Cty. Bd. of Comm’rs v. HealthSouth Corp., 246
P.3d 948, 951 (Colo. 2011).
¶ 11 In construing a statute, we look to the plain and ordinary
language of the statute to give effect to the legislature’s intent.
Young v. Brighton Sch. Dist. 27J, 2014 CO 32, ¶ 11. And we read
words and phrases in context and construe them according to their
common meaning and usage. Morris v. Goodwin, 185 P.3d 777, 779
(Colo. 2008). As well, we read and consider the statute as a whole,
construing it to give consistent, harmonious, and sensible effect to
all its parts. Oakwood Holdings, LLC v. Mortgage Invs. Enters. LLC,
2018 CO 12, ¶ 12. Only if the statute is ambiguous do we look to
other statutory interpretation aids. HealthSouth, 246 P.3d at 951.
B. Ownership
¶ 12 “Residential land” is defined as “a parcel or contiguous parcels
of land under common ownership upon which residential
improvements are located and that is used as a unit in conjunction
4
with the residential improvements located thereon.” § 39-1-
102(14.4)(a); Fifield v. Pitkin Cty. Bd. of Comm’rs, 2012 COA 197,
¶ 9. The statute doesn’t define “common ownership.” And though
the Property Tax Administrator is charged with enforcing the
statute, § 24-1-125(2)(b), C.R.S. 2017, the Administrator, too, has
not defined “common ownership,” or offered guidance to assessors
on determining whether two parcels are “under common
ownership.”
¶ 13 Lacking statutory or agency guidance, the BAA and the
County interpret “common ownership” to mean the same record
titleholder. As support, they lean heavily on Sullivan v. Board of
Equalization, 971 P.2d 675 (Colo. App. 1998), arguing that the
Sullivan division interpreted “common ownership” in subsection
102(14.4)(a) to mean that contiguous parcels must be “titled in the
same name” to be residential land. But the parties in Sullivan
agreed that different people owned the parcels at issue. Id. at 676
(“[T]axpayer states that he is not asserting that . . . the vacant
parcel [is] residential under the common ownership provisions.”).
The division therefore didn’t interpret “common ownership,” and it
didn’t conclude that “common ownership” under subsection
5
102(14.4)(a) required contiguous parcels to be titled in the same
name. Id. (declining to address this aspect of residential
classification).
¶ 14 Without any legislative or other guidance, we consider the
plain meaning of “ownership” as well as how courts have
interpreted it in other contexts. Ybarra v. Greenberg & Sada, P.C.,
2016 COA 116, ¶ 10 (cert. granted Feb. 27, 2017) (looking to
dictionary definitions and Colorado and federal cases for
interpretive guidance). And while the BAA and the County use the
phrase “common ownership,” we focus specifically on “ownership”
because if Ms. Kelly is the owner of the residential and subject
parcels, no commonality issue exists. That is, to the extent the BAA
and the County suggest that “common” means the “same” owner,
the result here doesn’t change since we conclude Ms. Kelly owns
both parcels.1
¶ 15 “Ownership” is defined as “[t]he bundle of rights allowing one
to use, manage, and enjoy property, including the right to convey it
to others.” Black’s Law Dictionary 1280 (10th ed. 2014); see also
1 Because commonality is not at issue here, we take no position on
the BAA’s and the County’s suggestion that “common” means the
“same.”
6
Restatement (First) of Property § 10 (Am. Law Inst. 1936) (As used
in the Restatement, “[t]he word ‘owner,’ . . . means the person who
has one or more interests.”).
¶ 16 Consistent with this definition, courts, too, have long
recognized that ownership goes beyond bare record title and instead
focuses on who has the power to possess, use, enjoy, and profit
from the property. See, e.g., Bd. of Cty. Comm’rs v. Vail Assocs.,
Inc., 19 P.3d 1263, 1278-79 (Colo. 2001) (outlining “significant
incidents of ownership of interests in tax-exempt property”); Aspen
Springs Metro. Dist. v. Keno, 2015 COA 97, ¶¶ 9-11 (noting that the
statutory powers of special districts to “acquire, dispose of, and
encumber real and personal property” implies ownership of that
property (quoting § 32-1-1001(1)(f), C.R.S. 2017)). Use and
possession in fact are so central to ownership that continuous,
open, and exclusive possession and use of property may be
sufficient to strip a record titleholder of ownership. See § 38-41-
101(1), C.R.S. 2017; Beaver Creek Ranch, L.P. v. Gordman Leverich
Ltd. Liab. Ltd. P’ship, 226 P.3d 1155, 1160 (Colo. App. 2009)
(discussing requirements to adversely possess property).
7
¶ 17 In property tax cases in particular, courts often look beyond
record title to determine ownership. See, e.g., Frank Lyon Co. v.
United States, 435 U.S. 561, 572-73 (1978) (recognizing the Court’s
repeated refusals to allow formal legal title “to shift the incidence of
taxation attributable to ownership of property where the transferor
continues to retain significant control over the property”); Mesa
Verde Co. v. Bd. of Cty. Comm’rs, 178 Colo. 49, 54, 495 P.2d 229,
232 (1972) (looking beyond “form and labels in order to ascertain
real ownership interest involved” when a state tax is assessed
against federal property); Gunnison Cty. v. Bd. of Assessment
Appeals, 693 P.2d 400, 404 (Colo. App. 1984) (noting that record
title does not determine ownership; rather, “[t]he question of
ownership for tax purposes must be decided on the basis of ‘real
ownership’ rather than ‘forms and labels’”); Planning Bd. of Norwell
v. Serena, 550 N.E.2d 1390, 1391 (Mass. 1990) (concluding that
two lots controlled by the same owner but with different record title
held by separate entities were commonly owned for zoning
purposes).
¶ 18 Applying these principles, a division of this court recently
considered whether individuals who held bare record title to
8
property, but enjoyed few of the recognized rights associated with
ownership, were the owners of the property for taxation purposes.
HDH P’ship v. Hinsdale Cty. Bd. of Equalization, 2017 COA 134
(cert. granted Apr. 9, 2018). There, applying the substance over
form doctrine, the division concluded that the individual record
titleholders had little right to control the property. Id. at ¶¶ 25-26.
Rather, “the traditional benefits of real property ownership,
including the rights to exclude . . . , to erect or remove
improvements, to control the river and its waters, and to profit from
the land” were enjoyed by a different entity. Id. at ¶ 26. The HDH
Partnership division therefore concluded that, “while the
[individuals] h[e]ld bare legal title to the parcels, the [entity was] the
true owner.” Id.
¶ 19 It may be that in many — perhaps most — cases the record
titleholder is also the one who enjoys the right to possess, use, and
control the property. But we can’t conclude the General Assembly
intended to limit the meaning of “ownership,” as the term is used in
subsection 102(14.4)(a), to record titleholders. After all, had the
General Assembly intended to restrict ownership in such a way, it
could have done so by simply defining residential land as “a parcel
9
or contiguous parcels of land, titled in the same name, upon which
residential improvements are located and that is used as a unit in
conjunction with the residential improvements located thereon.”
But where the General Assembly did not restrict “ownership” to
record titleholder, it is not for us to judicially do so. Scroggins v.
Unigard Ins. Co., 869 P.2d 202, 205 (Colo. 1994); Krol v. CF & I
Steel, 2013 COA 32, ¶ 28 n.6.
¶ 20 This interpretation is also consistent with the statute as a
whole. See Ybarra, ¶ 8 (reading the statutory scheme as a whole to
give it “consistent, harmonious, and sensible effect”). If the General
Assembly intended that record title conclusively establishes
ownership, it would have made such records conclusive evidence of
ownership rather than providing taxpayers an avenue to challenge
record title. § 39-5-102(1), C.R.S. 2017 (providing that assessors
determine real property ownership through the clerk and recorder,
but a person claiming interest in the property “may file a schedule
with the assessor specifying such interest”); § 39-5-122(2), C.R.S.
2017 (providing a process for taxpayers to challenge assessment);
see also HDH P’ship, ¶ 16 (concluding that record title creates a
rebuttable presumption, but is not conclusive evidence of
10
ownership). Under the BAA’s and the County’s interpretation, these
provisions would be rendered meaningless. See Burton v. Colo.
Access, 2018 CO 11, ¶ 23 (noting we avoid interpreting statutes in a
way that renders other provisions superfluous); Soto v. Progressive
Mountain Ins. Co., 181 P.3d 297, 300 (Colo. App. 2007) (same).
¶ 21 Nor do we share the concern that this interpretation places an
unreasonable burden on assessors, as the County and the BAA
argue. No one disputes, of course, that assessors are allowed in the
first instance to determine the ownership of two contiguous parcels
from the county clerk and recorder’s records. § 39-5-102(1). If
unchallenged, the record title establishes ownership. But, as
pointed out, record title simply provides some evidence of
ownership. Id. Such evidence is rebuttable, not conclusive. See
§ 39-5-122(2); HDH P’ship, ¶ 16. So, if, as here, a taxpayer seeks to
reclassify a parcel, the burden is not on the assessor to justify the
initial classification or prove ownership. Instead, the burden shifts
to the taxpayer to show that the ownership presumption accorded
to the record titleholder is not correct. See Gyurman v. Weld Cty.
Bd. of Equalization, 851 P.2d 307, 310 (Colo. App. 1993) (noting
that the taxpayer has the burden of proof to rebut the presumption
11
that the county assessor’s classification is correct); see also Krueger
v. Ary, 205 P.3d 1150, 1154 (Colo. 2009) (stating that rebuttable
presumptions shift “the burden [of] going forward to the party
against whom it is raised”). If the taxpayer cannot rebut the
presumption, then the record title establishes ownership.
¶ 22 We thus conclude that ownership of contiguous parcels for
purposes of subsection 102(14.4)(a) depends upon a person’s or an
entity’s right to possess, use, and control the contiguous parcels.
See HDH P’ship, ¶ 22.
C. The Residential and Subject Parcels
¶ 23 We turn then to the evidence presented at the BAA hearing
regarding ownership of the parcels.
¶ 24 Mr. Taylor Dix testified as an expert in trust and estate
planning.2 He stated that a trust is created by a settlor (or grantor).
The settlor, through a trust instrument, names a trustee to manage
the property on behalf of the named beneficiaries “for whom the
property is held.” He explained that trusts split up title to property,
2 Ms. Kelly offered Mr. Dix as an expert in “trust and estate
planning.” In that capacity, he testified, in part, about the effect of
the trust instruments. No one objected to Mr. Dix’s testimony at
the hearing or on appeal, so we do not consider the propriety of his
testimony. See In re Marriage of Tozer, 2017 COA 151, ¶ 7 n.1.
12
giving “the trustee . . . the legal title to the property,” and the
beneficiary “equitable or beneficial title to the property.” He added
that a beneficiary is therefore “the party who has the right to the
use and the enjoyment and the possession of the trust property.”3
¶ 25 He also testified that, under the trust instruments, Ms. Kelly
was the beneficiary, trustee, and settlor of both trusts. This
unchallenged expert testimony established that Ms. Kelly held legal
title to the contiguous residential and subject parcels as trustee
and, as the beneficiary of each trust, was also the equitable owner
of the parcels. Given this, Ms. Kelly had the right to use, enjoy,
possess, and control the adjacent parcels. See Helene S. Shapo,
George Gleason Bogert, George Taylor Bogert & Amy Morris Hess,
The Law of Trusts and Trustees § 182, Westlaw (database updated
June 2017) (“[T]he beneficiary of a trust will normally take an
equitable estate having rights and incidents similar to one owning a
corresponding legal estate.”); see also Pandy v. Indep. Bank, 2016
CO 49, ¶ 16 (noting the settlor of a revocable trust (in this case Ms.
3 Mr. Dix also explained why lack of guidance in the Internal
Revenue Service regulations leads people to place parcels with a
residence in qualified personal resident trusts, but not place a
contiguous undeveloped parcel in one.
13
Kelly) “retains the functional equivalent of ownership of the trust
assets” (quoting 3 Austin Wakeman Scott, William Franklin
Fratcher & Mark L. Ascher, Scott & Ascher on Trusts § 15.4.2, at
960 (5th ed. 2007))); Restatement (Third) of Trusts § 2 cmt. d (Am.
Law Inst. 2018) (defining “owner” for the purposes of the
Restatement as “a person by whom one or more interests are held
for the person’s own benefit”).
¶ 26 For her part, Ms. Kelly testified that she purchased the parcels
in the 1990s and placed them in the two trusts for tax and estate
planning purposes on the advice of counsel. She confirmed that
placing the parcels in separate trusts did not have “any practical
effect on [her] family’s use or control of the parcels.” So the
evidence showed that Ms. Kelly possessed, controlled, and
continued to use the parcels before and after they were placed in
trust. HDH P’ship, ¶ 22 (right to control the property is essential to
owning property).
¶ 27 The County then presented the Summit County Assessor, who
testified that she denied reclassifying the subject parcel “because of
the names [on the trusts] being different.” Given the difference in
record title, she “did not inspect the property” and “did not
14
investigate” any further. The County presented no other evidence
and nothing to dispute that Ms. Kelly used, possessed, and
controlled the residential and subject parcels, or that she held legal
title and was the equitable owner of the parcels.
¶ 28 While the BAA declined to credit the evidence regarding Ms.
Kelly’s use, possession, and control of the subject and residential
parcels, the undisputed evidence showed that Ms. Kelly, as the
trustee and beneficiary of both parcels, enjoyed the “traditional
benefits of real property ownership.” Id. at ¶ 26. After all, in the
field of taxation, the substance and realities matter, rather than the
formalities of written documents. Frank Lyon Co., 435 U.S. at 572-
73; City of Golden v. Aramark Educ. Servs., LLC, 2013 COA 45,
¶ 31; cf. White v. Fitzpatrick, 193 F.2d 398, 401-02 (2d Cir. 1951)
(concluding that, while the taxpayer transferred legal title to his
wife, he retained “administrative control” of the property and thus
was the “actual enjoyer and owner of the property” for federal tax
deduction purposes).
¶ 29 Because Ms. Kelly rebutted the ownership presumption and
presented evidence showing she was the owner of the residential
15
and subject parcels, the BAA erred in denying the request to
reclassify the subject parcel.
III. Contiguity and Use as a Unit
¶ 30 Beyond common ownership, to fall within the definition of
residential land, the residential parcel and the subject parcel must
also be “contiguous” and “used as a unit.” § 39-1-102(14.4)(a).
¶ 31 Before the BAA hearing, the parties filed a signed “stipulation
regarding issues to be tried,” agreeing, as relevant here, that “in this
case,”
 “The ‘contiguous parcels’ element [was] stipulated to be
satisfied and no trial of this element [was] necessary.”
 “The ‘used as a unit’ element [was] stipulated to be satisfied
and no trial of this element [was] necessary.”
¶ 32 At the BAA hearing, the parties again explained that only the
common ownership issue was disputed. And the BAA chair
confirmed which “two issues . . . were already settled.” The BAA did
not raise concerns about the stipulation or ask the parties to
present evidence on whether the subject parcel was “contiguous” or
“used as a unit” with the residential parcel.
16
¶ 33 Nearly two months after the close of evidence, the BAA issued
its written order. In it, aside from finding the parcels were not
under common ownership, the BAA determined that it was “not
bound by the parties’ stipulation and [found] that insufficient
information was presented to the [BAA] to determine whether the
remaining two elements of the statute were satisfied.”
¶ 34 Ms. Kelly contends that the BAA abused its discretion when,
on its own, it rejected the parties’ stipulation. We agree.
¶ 35 A court should give effect to a stipulation, unless a party
timely requests to be relieved from it and shows “sound reason in
law or equity for avoiding or repudiating a stipulation.” Lake
Meredith Reservoir Co. v. Amity Mut. Irrigation Co., 698 P.2d 1340,
1346 (Colo. 1985); see also Gasteazoro v. Catholic Health Initiatives
Colo., 2014 COA 134, ¶ 37. A court may also disregard a
stipulation when it has “a legitimate and important concern about
giving effect to that agreement.” Lake Meredith Reservoir, 698 P.2d
at 1346. Such a decision is within the court’s discretion. Id. We
will not disturb the court’s decision absent an abuse of that
discretion. Id. A court abuses its discretion when its decision is
manifestly arbitrary, unreasonable, or unfair. Gasteazoro, ¶ 36.
17
¶ 36 The County did not ask the BAA to reject the stipulation. And
at the evidentiary hearing both parties presented evidence only on
the disputed ownership issue. At no point during the hearing did
the BAA alert the parties that it had any concern about “giving
effect to” their stipulation. Lake Meredith Reservoir, 698 P.2d at
1346.
¶ 37 Though the BAA faulted Ms. Kelly for presenting insufficient
evidence on the stipulated issues, Ms. Kelly had no notice that
months after the hearing the BAA would reject the stipulation.
Under these circumstances, we conclude that the BAA’s decision to
reject the signed stipulation when it did, without notice to the
parties, was manifestly unfair. Cf. Snyder v. Colo. Podiatry Bd., 100
P.3d 496, 501 (Colo. App. 2004) (noting that the “essence of due
process is fair procedure,” which includes “providing adequate
notice of opposing claims [and] a reasonable opportunity to defend
against those claims”).
¶ 38 Finally, the BAA (not the County) requests a remand for an
evidentiary hearing to determine if the parcels are “contiguous” and
“used as a unit” — the two elements the parties agreed were
undisputed. The BAA, however, is not a party to the stipulation.
18
See Bd. of Adjustment v. Kuehn, 132 Colo. 348, 354, 290 P.2d 1114,
1116-17 (1955) (noting that the BAA was not a party to the
proceeding, but was only tasked with deciding the question
presented to it). Rather, it is the adjudicative body charged with
review of abatement requests. See § 39-2-125(1)(f), C.R.S. 2017
(BAA hears appeals on claims for abatement); § 39-2-127(6), C.R.S.
2017 (BAA issues written decisions for each appeal heard).
¶ 39 Aside from the fact that the County — the actual party to the
stipulation — does not request a remand, the County voluntarily
entered the stipulation, agreeing that the parcels were “contiguous”
and “used as a unit.” Given these facts, it is hard to see how the
County would not be estopped from presenting evidence on issues it
admitted were undisputed. See Maloney v. Brassfield, 251 P.3d
1097, 1108 (Colo. App. 2010) (noting that stipulations are a form of
judicial admission, which are binding on the party who makes
them).
¶ 40 In sum, we conclude in this instance that the BAA abused its
discretion in rejecting the parties’ stipulation.
19
IV. Conclusion and Remand
¶ 41 While a remand for a new hearing is sometimes the
appropriate remedy for misclassifications, Hepp v. Boulder Cty.
Assessor, 113 P.3d 1268, 1272 (Colo. App. 2005), Ms. Kelly’s
undisputed right to use, possess, and control the residential and
subject parcels under the trust instruments leads us to the legal
conclusion that the parcels were under common ownership for tax
years 2014 and 2015. We thus reverse the BAA’s order and remand
with directions for the BAA to reclassify the subject parcel as
residential land.
JUDGE WELLING and JUDGE CASEBOLT concur.
20