The City of Colorado Springs v. Kitty Hawk Development Co., 154 Colo. 535

Mr. Justice Pringle delivered the opinion of the Court. Defendant in error, Kitty Hawk Development Company, hereinafter designated as plaintiff or Kitty Hawk, instituted this action against the plaintiff in error, City of Colorado Springs, hereinafter designated as defendant or City, to recover the sum of $25,378.08 paid by it to the City. It alleged that the payment was made pursuant to

Section 2E (1) of the City’s Subdivision Ordinance, No. 1987, as amended and that the said

section was unconstitutional, specifying numerous grounds therefor. Trial was to the court and at the conclusion thereof the court rendered judgment for plaintiff in the amount claimed, together with interest, and declared said

Section 2E (1) unconstitutional on the grounds, among other things, that it (1) provides for the taking of property without due process of law in violation of

Article II,

Section 25 of the Constitution of the State of Colorado; (2) violates

Article II,

Section 3 of the Constitution of the State of Colorado; (3) usurps a judicial function in that it prohibits the determination of the value of land by judicial process, leaving such valuation to a commission without benefit of appeal; and (4) places an unequal burden of tax upon the plaintiff. From this judgment, the City brings error.

Section 2E (1) of the City’s Subdivision Ordinance reads as follows: “Allocation of Land for Public Spaces. The owner of the land in each subdivision shall allocate and convey eight per cent of the area of the land in his subdivision, exclusive of streets and alleys, for park, playgrounds, schools, recreational or similar public purposes, at such location as designated by the City or at the option of the City, said owner, shall in lieu of such conveyance of land in kind, pay to the City in cash an amount equal to eight per cent of the value of the land.

If the City and the owner fail to agree on the value of said land, such value shall be fixed and established by the Real Estate Appraisal Committee of the Colorado Springs Board of Realtors. The proceeds of said payments shall be deposited in a separate City account and shall be used only for the acquisition of land for parks, playgrounds, schools, recreational or similar public purposes.

The provisions of this ordinance shall be applicable to each area, territory, subdivision or addition which is being, or is hereafter annexed to the City of Colorado Springs to the end that there shall be allocated or paid to the City of Colorado Springs the eight per cent in land or value thereof in dollars as herein provided. To the extent that public uses or areas have been provided in said area or territory annexed to the City, such uses or areas may receive credit at the option of the City to the extent applicable upon the eight per cent allocation of land or equivalent value in dollars thereof.” .

Of utmost importance in resolving the issues raised by this writ of error is a thorough understanding of the circumstances under which the payment of $25,378.08 was made by Kitty Hawk to the City. In 1954, Kitty Hawk was incorporated for the sole and exclusive purpose of acquiring and subdividing a large tract of land contiguous to the City and owned by one Ruby von Rosenberg Menzer. Robert Morrison, president and a major stockholder of the plaintiff, “did practically everything” in regard to the mechanics of development.

Morrison had served in an executive capacity in several other large real estate developments in Colorado and was a seasoned businessman with many years of practical ' experience in the field of real estate and land subdivision. On August 10, 1954, the plaintiff entered into a contract with Menzer for the purchase of her land, the total purchase price being $442,215.00.

The contract called for the payment of $10,000.00 upon execution and further payments in installments to be made in part “* * * upon arrangements being completed with the City of Colorado Springs to furnish utilities for said land, * * (Emphasis supplied.) On August 23, 1954, the contract was amended in pertinent part as follows: “It is understood that purchaser shall use due diligence to have said property legally and properly zoned, the plat to said land approved and arrangements completed for the installation of utilities with the City of Colorado Springs, Colorado, but in the event that said purchaser is unable to obtain said platting, zoning and arrangements for utilities, then this contract shall become null and void and the payment made hereunder as provided in Paragraph 1, Sub-paragraph A, Page 2 shall be returned to purchaser(Emphasis supplied.) On February 18, 1955, the contract was supplemented, said supplement containing the following recitals: “WHEREAS in and by said contract it was contemplated that said lands be platted as a subdivision in El Paso County and that utilities be acquired by agreement with the City of Colorado Springs, and “WHEREAS the said City of Colorado Springs has refused to furnish said utilities unless and until said property is annexed to said City of Colorado Springs, and . “WHEREAS the proper officers of the said City of Colorado Springs have authorized the annexation of said land to said City of Colorado Springs and such annexation is now in the process of being accomplished, and “WHEREAS by reason thereof it is proper and necessary that said agreement be changed, altered and amended in the particulars hereinafter set forth and the parties hereto hereby mutually agree to such changes, alterations and amendments, to-wit: “1.

That sub-paragraph B of paragraph 1 of said original contract as heretofore amended, be amended to read as follows: “ ‘B.

On or before ten (10) days after said property shall be duly and properly annexed to the City of Colorado Springs and shall be zoned substantially in the manner and for the usages and purposes specifically described and set forth on the plat of said land as attached to the original contract and made a part thereof with the exception, however, that the portion of said land set off for usage as a shopping center shall at this time be rezoned for usages as residential property and an agreement has been made with the City of Colorado Springs for the furnishing of utilities to said land, then the Purchaser shall * * ” (Emphasis supplied.) In September, 1954, a plat of the Kitty Hawk Subdivision had been approved by the Planning Commission and the Board of County Commissioners of El Paso County.

On March 8, 1955, the Subdivision was annexed to the City by Ordinance 2204, which provided in pertinent part: “* * * provided, however, that said territory is subject to all ordinances of the City of Colorado Springs, relating to the extension of Utilities, the Subdivision of said territory and any and all other ordinances in any way effecting (sic) said land and territory.” Subsequent to annexation, a plat of the Subdivision was approved by the City and thereafter, on August 12, 1955, the plaintiff paid $25,378.08 to the City.

Before the trial, the parties stipulated that subsequent to the annexation, water and sewer lines and other utilities were installed in the Kitty Hawk Subdivision; that streets have been built and other municipal services, including fire and police services, have been furnished. Houses have been built and sold by various contractors on a substantial portion of the lots within the Subdivision. At the trial, the only witness called by the plaintiff on its case-in-chief was Robert Morrison.

He testified that among the factors he considered in deciding whether a particular subdivision would amount to a profitable investment were the costs of curbs and gutters, sidewalks, water, sewer, gas and electrical services. He testified further that investigations were made as to these costs in relation to the Kitty Hawk Subdivision both before and after signing the contract for the purchase of the land from Menzer. The record discloses that Morrison and his associates did not originally intend to seek annexation of Kitty Hawk Subdivision to the City, but preferred instead to remain in the County of El Paso.

After the County .had approved of the plat of the Subdivision, plaintiff’s representatives were informed by an employee of the City that water and sewer services would not be forthcoming from the City unless and until the Subdivision was annexed, and they were further informed that if the plaintiff chose to annex, it would be required to make payment to the City in a sum equivalent to eight per cent of the appraised value of the Subdivision, this being the percentage expressly stated in

Section 2E (1) of the City’s Subdivision Ordinance set out above. Prior to annexation, Morrison was advised by his attorney that, in his opinion, the City’s position on water was not legally correct and that the same could be obtained without annexation, but that this would entail lengthy and costly litigation. Thereafter, Morrison held several meetings with plaintiff’s Board of Directors, at which the cost of annexation in order to obtain the needed water and sewer services was discussed.

At this point it was estimated that the payment required would be in the neighborhood of $20,000.00 or $25,000.00 and the Board of Directors “gave very serious consideration to just dropping the thing and walking away and leaving it.” Instead, the Board of Directors decided to proceed with the Kitty Hawk Subdivision, with full knowledge of the payment which the plaintiff would be required to make in order to secure annexation to the City and acquire the needed water and sewer ¡Services.

A material factor in this decision was the development of the Air Force Academy near the City, which Morrison and his associates contemplated would substantially add to their profits. This suit to recover the payment of $25,378.08 was instituted on April 14, 1961, almost six years after the payment was made. The record discloses the following: “Q. Mr. Morrison, can you tell us why you waited until 1961 to file suit on this thing? “A. Yes. About two years ago I was in Mr.

Cool’s office and we were discussing other legal matters and hé, asked me at that time, ‘Did you pay a subdivision fee to the City?’ I said yes. ‘What was it,’ he said, and I -said ‘It was about twenty-five thousand dollars. It was eight per cent of their appraisement.’ And he said, ‘Did you know that there was some litigation as to whether that fee was legal or not?’ and I said ‘No.’ And he says ‘There seems to be a little question about that.’ And at that time I asked them, ‘Why don’t you look into it and find out?

If it is illegal, I didn’t want to pay it.’ I just took it for granted — unless I wanted to go into litigation on that water deal. But that would have taken a long time. Q. So I take it you were satisfied with your arrangement and deal with the City until it was mentioned by Mr. Cool? A. I wasn’t satisfied but I had to do it. Q. You had made an agreement and you were satisfied with it, is that right? A.

I wasn’t satisfied, but I had made an agreement and I had to sell the ground — and I had to have the utilities.” In our view, it is not necessary under the circumstances of this case to determine the constitutionality of

Section 2E (1) of the City’s Subdivision Ordinance, since the plaintiff is precluded by other matters appearing in the record from recovering that which it sought. We have consistently held that when a controversy can be decided upon other grounds, we will make no inquiry concerning the constitutionality of a statute. See State ex rel. Cruse v. American Can Co., 117 Colo. 312, 186 P. (2d) 779. The testimony of Robert Morrison himself and the documentary evidence establishes beyond question that:

(1) The plaintiff was in need of water and sewer services from the City, but preferred not to annex to the City;

(2) Plaintiff could obtain City water and sewer services only in the event of annexation of the Kitty Hawk Subdivision to the City;

(3) The City conditioned annexation upon payment by the plaintiff to the City of an amount equal to eight per cent of the appraised valuation of the Subdivision;

(4) The plaintiff agreed to annex to the City and to máke the payment required by the City so that it might receive water and sewer services;

(5) Water and sewer services were supplied plaintiff upon annexation and the payment of $25,378.08. It is now well established in this state that a city is under no obligation to sell or furnish water or sewer services to anyone outside its corporate limits, but, if it elects to do so, it acts in a proprietary capacity, and the relationship entered into between a city as a supplier and such users is purely contractual. City of Engletoood v. City and County of Denver, 123 Colo. 290, 229 P. (2d) 667; City of Colorado Springs v. P.U.C., 126 Colo. 265, 248 P. (2d) 311; Lee v.

City of Colorado Springs, 136 Colo. 248, 315 P. (2d) 822 (cert. denied) 355 U.S. 955, 2 L.Ed. (2d) 531, 78 S. Ct. 541. Pertinent here is a quotation from the City of Fort Collins v. Park View Pipe Line, 139 Colo. 119, 336 P. (2d) 716 where this Court approved the following language from City of Phoenix v.

Kasun, 54 Ariz. 470, 97 P. (2d) 210: “After a careful consideration of all the authorities we are of the opinion that the controlling factors in the present case are that the City was under no obligation, as- a matter of law, to furnish any service to the plaintiff; that the relationship between them was purely contractual in its nature, and that such being the case, the reasonableness or unreasonableness of the rates fixed by the contract are not subject to review by the court.

The only right which it has under the circumstances is to determine whether the City is complying with the terms of its contract, * * No governmental power was bargained for here, nor was any constitutional right surrendered, for plaintiff had no constitutional or statutory right to receive water and sewer services from the defendant. Nor is it material that the consideration which the City required in- return for furnishing such water and sewer services was annexation and the payment of an amount equal to that required by

Section 2E (1) after the plaintiff' was annexed. Though

Section 2E (1) was used by-the parties as the method of computing the amount demanded by the City for water and sewer services and for determining the time of payment, such fact does not affect the validity of the contract. Both parties knew approximately what the figure would be before plaintiff agreed to annex.

Morrison discussed it with plaintiffs Board of Directors and after much discussion they agreed to proceed on the terms outlined by the City because, as Morrison testified, “it was smart,” [it was] “a good business venture.” Much is made in the plaintiff’s brief of “business compulsion.” In the instant case the implications of that doctrine are not applicable. The only “compulsion” — legal or otherwise — serving to motivate Morrison and his associates was the desire to make a profit on the Kitty Hawk Subdivision. In order to do this, water and sewer services were essential.

The City was under ,no obligation to furnish these services for property without the City’s corporate limits. The plaintiff wanted water and sewer services; the City required annexation and a sum of money equal to eight per cent of the appraised value of the property. Each got what it bargained for. Morrison’s own testimony is that up to the time this decision was made Kitty Hawk was under no legal obligation to purchase the property or to proceed with its subdivision plans. In such circumstances, the equities clearly do not lie with the plaintiff.

We see no reason, legal or moral, why the plaintiff should have all of the benefits of its bargain by which it obtained the water and sewer services it needed in order to carry out its plans, and yet receive back from the City a portion of the consideration which it gave in order to obtain these services, which the City was under no constitutional or statutory obligation to furnish. We find nothing in the general law of this state or in the Constitution prohibiting the imposition of conditions by a municipality upon one seeking annexation.

A municipality is under no legal obligation in the first instance to annex contiguous territory, and may reject a petition for annexation for no reason at all. It follows then that if the municipality elects to accept such territory solely as a matter of its discretion, it may impose such conditions by way of agreement as it sees fit. If the party seeking annexation does not wish to annex under the conditions imposed, he is free to withdraw his petition to annex and remain without the city.

Annexation can take place only when the minds of the city and the owners of the land contiguous to the city agree that the property shall be annexed and upon the terms upon which such annexation can be accomplished. In Schlarb v. North Suburban Sanitation District, 144 Colo. 590, 357 P. (2d) 647, the plaintiff brought an action to recover a sum of money paid to the defendant district as a condition of having his property annexed to the district.

Judgment was rendered for the defendant and in affirming the judgment this Court employed the following language which we think fully applicable to the instant case: “* * * Such corporation has no obligation or duty to furnish service to owners of land outside the district. The relationship between plaintiff and defendant was purely contractual. Such being the case the reasonableness of the conditions or terms of inclusion within the area so as to reap the benefits of the sanitation services is not subject to review by the courts.

The courts may only determine whether the district complied with the terms of the contract. City of Englewood v. City and County of Denver, 123 Colo. 290, 229 P. (2d) 667; City of Ft. Collins v. Park View Pipe Line, 139 Colo. 119, 336 P. (2d) 716.” (Emphasis supplied.) .The plaintiff relies heavily on an excerpt from Frost v. Railroad Commission of the State of California, 271 U.S. 583, 70 L.Ed. 1101, 46 S. Ct. 605, in support of its position that the City could not impose conditions upon annexation even though the City had the right to withhold annexation if it wished to do so.

In our view,, the language from Frost relied upon by the plaintiff is' not pertinent to the questions presented here, when we view that language in its context and in the light of the fact situation in that case, and, indeed, in the light of a case decided just six years later by the Supreme Court of the United States, Stephenson v. Binford, 287 U.S. 251, 77 L.Ed. 288, 53 S. Ct. 181.

In Frost, the California Supreme Court had itself determined that an amendment to its public carrier law required private carriers already in existence and operating upon the highways of California to change their operation to public carrier service if they wished • to continue in business. This the Supreme Court of the United States held California had no power to do, and in that context the language upon which the plaintiff relies was written.

In Stephenson, supra, through an opinion written by the same justice who wrote Frost, the Court held that it was perfectly proper for a state to require a private carrier' who had been in' business prior to the enactment of a private carrier statute ■ to obtain a permit and be regulated if it wished to continue its business as a condition of using the highways of the State of Texas. The Court pointed out that its decision in Frost rested solely on California’s

interpretation that the new law required a private carrier -to become a public carrier if it wished to continue in business. Plaintiff asserts that the agreement between it and the City was ultra vires. Assuming, arguendo, that this is so, this is no help to the plaintiff since it- is estopped to assert such fact, having received and retained the benefits conferred thereunder, and the contract being fully executed on the part of all parties. See Stewart v. Board of Com’rs of Phillips County, 80 Colo. 232, 250 Pac. 562; Bainbrich v. Boies, 113 Colo. 458, 158 P. (2d) 736; Aberdeen Bldg. Corp. v.

Rickfords, 123 Colo. 484, 232 P. (2d) 183; Mayor of the City of New York v. Sonneborn, 113 N.Y. 423, 21 N.E. 121; 10 Mc-Quillen Municipal Corporations,. 3d Ed., Sec. 29.133, p. 509; Anno. 122 A.L.R. 1370. The judgment is reversed and the cause remanded with instructions to dismiss the complaint. Mr. Justice Moore dissents. Mr. Chief Justice McWilliams and Mr. Justice Sutton not participating.