v. Bd. of Cty. Comm'rs

2020 COA 77

• Court: Colorado Court of Appeals
• Decided: May 7, 2020
• Docket: 17CA1971, Lannie
• Status: Published

Opinion

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 7, 2020

2020COA77

No. 17CA1971, Lannie v. Bd. of Cty. Comm’rs — Taxation — Property Tax — Residential Land

A division of the court of appeals answers a question left open

in Mook v. Board of County Commissioners, 2020 CO 12 — whether,

for purposes of classifying vacant property as residential land for

tax classification, the phrase “common ownership” refers to

identical ownership or merely overlapping ownership. The division

concludes that identical ownership is required. COLORADO COURT OF APPEALS 2020COA77

Court of Appeals No. 17CA1971 Board of Assessment Appeals Case Nos. 68965 & 69093

Paul Anthony Lannie and Donna Dean Lannie,

Petitioners-Appellants,

v.

Board of County Commissioners of Eagle County, Colorado; and Board of Equalization of Eagle County, Colorado,

Respondents-Appellees,

and

Board of Assessment Appeals, State of Colorado,

Appellee.

ORDER AFFIRMED IN PART, REVERSED IN PART, AND CASE REMANDED WITH DIRECTIONS

Division II Opinion by JUDGE TOW Dailey and Vogt*, JJ., concur

Announced May 7, 2020

Ryley Carlock & Applewhite, F. Brittin Clayton III, Denver, Colorado, for Petitioners-Appellants

Bryan R. Treu, County Attorney, Christina C. Hooper, Assistant County Attorney, Eagle, Colorado, for Respondents-Appellees

Philip J. Weiser, Attorney General, Emmy A. Langley, Assistant Solicitor General, Katie Allison, 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. 2019. ¶1 In Colorado, residential land is taxed at a significantly lower

rate than vacant land. See Colo. Const. art. X, § 3; § 39-1-104.2,

C.R.S. 2019. This variance in the tax rate has spawned a plethora

of cases in which taxpayers with combinations of residential and

vacant parcels have sought to have the vacant land reclassified as

“residential land,” which requires a showing that (1) the vacant

parcel is contiguous with the residential parcel; (2) the parcels are

under common ownership; and (3) the parcels are used as a unit.

§ 39-1-102(14.4)(a), C.R.S. 2019. Divisions of this court have come

to differing conclusions as to the meaning of each of these criteria.

¶2 In Mook v. Board of County Commissioners, 2020 CO 12, our

supreme court addressed three such cases, each of which involved

a dispute over one of the three requirements: Mook v. Board of

County Commissioners, (Colo. App. No. 17CA0437, May 3, 2018)

(not published pursuant to C.A.R. 35(e)) (contiguity); Kelly v. Board

of County Commissioners, 2018 COA 81M (common ownership); and

Hogan v. Board of County Commissioners, 2018 COA 86 (used as a

unit). The supreme court affirmed the divisions’ judgments in Mook

and Hogan, reversed the division’s judgment in Kelly, and provided

guidance on each of the three criteria. In the wake of Mook, several

1 cases, including this one, were remanded for reconsideration in

light of the court’s decision.

¶3 This case involves two of the three criteria — whether the

parcels were under common ownership and whether they were used

as a unit. To resolve the first issue, we must answer a question left

open in Mook: Does “common ownership” under the tax code

require that identical parties hold record title to each contiguous

parcel? We answer that question “yes.” Because the parcels were

not under common ownership during two of the three tax years at

issue in this case, we affirm the decision of the Board of

Assessment Appeals (BAA) for those two years. We reverse the

decision of the BAA for the third tax year and remand the matter for

consideration of whether the parcels were used as a unit under the

analysis announced in Mook.

I. Background

¶4 Petitioners, Paul Anthony Lannie and his wife Donna Dean

Lannie,1 own two contiguous parcels of land in Eagle County,

Colorado — one with a home on it (the residential parcel) and an

1Because they share the same surname, we will refer to Paul and Donna by their first names. We mean no disrespect in doing so.

2 adjacent one that is undeveloped (the subject parcel). For tax years

2014 and 2015, Paul held title to the subject parcel solely in his

name, while he and Donna held title to the residential parcel as

joint tenants. By the time of the valuation for tax year 2016, Paul

conveyed the subject parcel to himself and Donna as joint tenants.

¶5 The county assessor classified the subject parcel as vacant

land. The Lannies appealed the classification for the 2014 and

2015 tax years to the Board of County Commissioners of Eagle

County and the classification for 2016 to the Board of Equalization

of Eagle County (collectively, the County). After the County upheld

the assessor’s classification, the Lannies appealed to the BAA. The

BAA held a consolidated hearing and thereafter entered two orders

upholding the County’s rulings. The BAA concluded that the

subject parcel was not used as a unit in conjunction with the

improvements on the residential parcel for any of the tax years in

question, and further concluded that, for tax years 2014 and 2015,

the parcels were not under common ownership.

¶6 The Lannies appealed to this court, and a different division

affirmed the BAA’s orders. See Lannie v. Bd. of Cty. Comm’rs, (Colo.

App. No. 17CA1971, Dec. 13, 2018) (not published pursuant to

3 C.A.R. 35(e)) (Lannie I). Specifically, the division agreed with the

BAA that the parcels were not used as a unit. As a result, the

division did not address the issue of common ownership. As noted,

the supreme court vacated that decision and remanded for

reconsideration in light of Mook. Lannie v. Bd. of Assessment

Appeals, (Colo. No. 19SC56, Mar. 16, 2020) (unpublished order).

We thus address both whether the parcels were under common

ownership and whether they were used as a unit.

II. Standard of Review

¶7 In reviewing BAA decisions that classify property for tax

purposes, we defer to the BAA’s factual findings but review its legal

conclusions de novo. See Ziegler v. Park Cty. Bd. of Cty. Comm’rs,

2020 CO 13, ¶ 11. When a statute concerns property tax, we also

owe deference to, but are not bound by, the interpretation of the

statute by the BAA and by the Property Tax Administrator in the

Assessors’ Reference Library (ARL). See Mook, ¶ 47.

¶8 We review the interpretation of a statute de novo, seeking “to

effectuate the intent of the General Assembly by looking to the plain

meaning of the language used, considered within the context of the

statute as a whole.” Id. at ¶ 24 (quoting Bly v. Story, 241 P.3d 529,

4 533 (Colo. 2010)). In so doing, we construe any undefined term “in

accordance with its ordinary or natural meaning.” Id. (quoting

Cowen v. People, 2018 CO 96, ¶ 14). Applying the plain meaning of

the language requires us to “give consistent effect to all parts of a

statute, and construe each provision in harmony with the overall

statutory design.” Larrieu v. Best Buy Stores, L.P., 2013 CO 38,

¶ 12 (citing In re Miranda, 2012 CO 69, ¶ 9).

III. Analysis

A. Common Ownership

1. Applicable Law

¶9 The tax code does not define the term “common ownership.” It

does, however, direct that “[o]wnership of real property shall be

ascertained by the assessor from the records of the county clerk

and recorder . . . .” § 39-5-102(1), C.R.S. 2019. “Thus, according to

the plain language of the tax code, assessors must rely on county

records to determine whether properties are held under ‘common

ownership.’” Mook, ¶ 80.

¶ 10 In Kelly, record title to the residential parcel was held by a

qualified personal residence trust, while record title to the subject

parcel was held by a revocable family trust. Kelly, ¶ 4. The same

5 person (Kelly) was settlor, trustee, and beneficiary of both trusts.

Id. Before the supreme court, Kelly argued that because she held

“overlapping equity ownership and control” of both properties, they

were under common ownership. Mook, ¶ 79. The supreme court

rejected this argument, holding that the record of legal title was

conclusive. Id. at ¶ 86. In doing so, however, the court explicitly

declined to consider the issue of whether overlapping legal title

would suffice, or rather whether identical ownership is required. Id.

at ¶ 86 n.7.

2. Analysis

¶ 11 Here, there are overlapping legal title interests in the parcels

for tax years 2014 and 2015.2 During those tax years, because

Paul Lannie was a record titleholder of both properties — one held

in his name alone and one held jointly with Donna — we turn to the

question left open in Mook.

¶ 12 The BAA urges us to adopt its interpretation of the term,

which is that common ownership requires identical record title

2 There is no dispute that the parcels were under common ownership for tax year 2016. The discussion of common ownership, therefore, is limited to tax years 2014 and 2015.

6 owners. The BAA posits that this interpretation was established in

Sullivan v. Board of Equalization, 971 P.2d 675 (Colo. App. 1998).

But the BAA reads Sullivan too broadly. There, the sole owner of

the subject parcel was the taxpayer, while the taxpayer’s wife was

the sole owner of the residential property. Id. at 676. In other

words, there was no overlapping legal title as there is here.

Furthermore, the taxpayer in Sullivan conceded the lack of common

ownership and, thus, the appellate court did not address that issue.

Id. For this reason, while we generally afford deference to statutory

interpretation by the agency charged with administering the

statute, see Mook, ¶ 47, because the BAA misapplied the holding in

Sullivan, we do not defer to its construction in this context. See El

Paso Cty. Bd. of Equalization v. Craddock, 850 P.2d 702, 704-05

(Colo. 1993) (“Courts, of course, must interpret the law and are not

bound by an agency decision that misapplies or misconstrues the

law.”).

¶ 13 Nevertheless, for the following reasons, we conclude that the

statute requires identical ownership.

¶ 14 First, as noted, the supreme court observed that section 39-5-

102(1) requires the assessor to rely on county records. Mook, ¶ 80.

7 When doing so, the supreme court discussed its earlier decision in

Hinsdale County Board of Equalization v. HDH Partnership, 2019 CO

22. Mook, ¶¶ 80-84. In Hinsdale, the supreme court invoked the

same statutory language when it held that “assessors must value

and tax separate parcels of real property and assess taxes on the

parcel owner as determined by the county’s real property records.”

Hinsdale, ¶ 22. The court further noted that “Colorado’s tax

statutes reflect the legislature’s intent to levy property tax on the

record fee owner of real property.” Id.

¶ 15 The court in Mook reiterated that “the party holding record title

to the property is the fee owner responsible for property taxes.”

Mook, ¶ 81 (quoting Hinsdale, ¶ 25). The court then rejected Kelly’s

argument that assessors could look to record title to determine

ownership for purposes of tax liability, while taking a different

approach to determine ownership for purposes of tax classification.

Id. at ¶¶ 82-83. Noting that nothing in the statute suggested such

differing approaches to determining ownership, the court stated,

“[t]herefore, we won’t require assessors to use different standards

when classifying property and assessing taxes.” Id. at ¶ 83.

8 ¶ 16 Reading Hinsdale and Mook in conjunction with each other

leads to one conclusion: in the tax code, owner and taxpayer are

synonymous. Thus, having a common ownership means the

taxpayer for each parcel must be the same. For this to be the case,

the fee owners must be identical.

¶ 17 Second, we note that interpreting the phrase “common

ownership” to merely require overlapping ownership would lead to

absurd results. See Ziegler, ¶ 19. We acknowledge that, here, it is

the subject parcel that is solely held by one person who is also a

joint titleholder of the residential parcel; therefore, Paul’s assertion

that he is the common owner of both parcels is reasonable. Query,

however, what if the reverse were true? What if Paul solely owned

the residential parcel while he and Donna jointly owned the vacant

property? The overlap of ownership would be of the same nature

and degree, but the result (if treated as common ownership under

the tax code) would be that Donna would be entitled to pay the

residential tax rate on her property despite not owning a residence.

To put a finer point on it, what if Paul co-owned the vacant property

as one of a hundred co-owners, but only a one percent share of the

9 property? Would the other ninety-nine co-owners share the benefit

of Paul’s beneficial tax rate?

¶ 18 In our view, either scenario would be an absurd result, and

one we cannot conclude would be consistent with the legislature’s

intent. And, if “common ownership” is read to encompass mere

overlapping interest, there is no textual basis establishing any limit

on how large or small the overlap must be. Nor could we remedy

this omission under the guise of construing the statute by imposing

some limit such as “substantially overlapping.” See Trujillo v. Colo.

Div. of Ins., 2014 CO 17, ¶ 12 (“We do not add words to a statute.”).

¶ 19 Finally, we note that the phrase “common ownership” is not

foreign to real property law. Take, for example, the situation in

which a parcel is burdened by a prescriptive easement. Under the

doctrine of merger, if the two estates come “under common

ownership,” the easement is extinguished. Salazar v. Terry, 911

P.2d 1086, 1090-91 (Colo. 1996). However, for merger to occur,

there can be no other ownership interests in either estate. Brush

Creek Airport, L.L.C. v. Avion Park, L.L.C., 57 P.3d 738, 747-48

(Colo. App. 2002) (citing Restatement (Third) of Property: Servitudes

§ 7.5 cmt. d (Am. Law Inst. 2000)). In Westpac Aspen Investments,

10 LLC v. Residences at Little Nell Development, LLC, 284 P.3d 131

(Colo. App. 2011), one party was the sole owner of the servient

estate and held title to the dominant estate in joint tenancy with

someone else. Id. at 136. A division of this court held that,

because the two lots were not owned in “completely identical

manner,” their co-ownership was insufficient to extinguish the

easement. Id. at 136-37.

¶ 20 For these reasons, we conclude that, for purposes of the tax

code, “common ownership” requires that the taxpayer(s) for the two

properties must be the same, and thus the parcels must have

identical record titleholders. Because the two parcels were not

under common ownership for tax years 2014 and 2015, we affirm

the BAA’s decision denying reclassification for those years.

B. Used as a Unit

¶ 21 Because the parcels were under common ownership in tax

year 2016, we turn to whether the parcels were used as a unit

during that year.

¶ 22 Like the term “common ownership,” the term “used as a unit”

is not defined in the tax code. However, the code requires the

11 Property Tax Administrator to produce manuals, procedures, and

instructions to aid assessors in their valuation and assessment of

property taxes. § 39-2-109(1)(e), C.R.S. 2019. The product of this

requirement is the ARL, which assessors are required to follow.

Huddleston v. Grand Cty. Bd. of Equalization, 913 P.2d 15, 17-18

(Colo. 1996).

¶ 23 In Hogan, the taxpayers’ vacant lot next to their residential

parcel contained an unpaved driveway, and the taxpayers used the

parcel to walk their dog, park vehicles, and secure scenic views with

a privacy buffer. Hogan, ¶¶ 2, 28. The assessor concluded that

none of these uses satisfied the “used as a unit” requirement, in

part because they were not active uses of the property and because

the vacant parcel did not contain any residential improvements,

and the BAA agreed with the assessor. Mook, ¶ 46.

¶ 24 In affirming the division’s reversal of the BAA, the supreme

court rejected the BAA’s interpretation of “used as a unit,” and

provided “additional direction.” Id. at ¶ 63. To satisfy the “used as

a unit” requirement, “a landowner must use multiple parcels of land

together as a collective unit of residential property.” Id. at ¶ 77.

Contrary to what had been held in some earlier cases, (1) there is

12 no requirement that the vacant parcel itself contain a residential

improvement, id. at ¶¶ 59-62; (2) the primary purpose of the vacant

parcel should be for the support, enjoyment, or other non-

commercial activity of the occupant of the residence, id. at ¶ 72; (3)

the “used as a unit” requirement is the same for multi-parcel cases

as it is in the context of reclassifying a single parcel of land, id. at

¶¶ 68, 73-74; (4) in applying the third ARL guideline (would the

vacant parcel likely be conveyed with the residential parcel as a

unit?), the focus is to be on how the owner presently uses the land,

not on the owner’s potential future plans for use of the property, id.

at ¶¶ 53-55; and (5) while the vacant parcel must be used as an

integral part of the residence, its uses need not be “necessary” or

“essential,” and passive as well as active uses may satisfy the

requirement, id. at ¶¶ 50-52, 56-57.

¶ 25 Paul testified at the hearing that he and Donna bought the

residential parcel as a vacation home, used it mainly during the ski

season, and planned to retire there. Shortly thereafter, he bought

the subject parcel to protect his views of the Gore Range and to add

a flat yard space where his grandchildren could play. The family

13 enjoyed walking on the subject parcel and viewing wildlife there.

The subject parcel was kept in its natural condition until 2017,

when the Lannies sodded the flat area.

¶ 26 The county’s appraiser testified that she had seen no evidence

of walking, children playing, or trampled grass on the four

occasions when she visited the subject parcel. She did not consider

activities such as walking and wildlife viewing to meet the statutory

requirement that the parcel be used as a unit with the residence on

the adjoining parcel. The appraiser also opined that, given the

topography, any structure on the subject parcel would likely be

built on the lower portion of the lot and thus would not affect views

of the Gore Range from the Lannies’ residence.

¶ 27 Crediting the appraiser’s testimony over Paul’s, and citing

other maps and photographs in the record, the BAA found that the

Lannies had not shown that the subject parcel was used as a unit

in conjunction with the residential improvements on the residential

parcel. Although its orders indicate that the BAA was basing its

ruling on the persuasiveness of the various witnesses’ testimony, it

is not clear that the BAA was assessing that testimony under the

standards announced in Mook. Similarly, in affirming that ruling in

14 Lannie I, we included language — e.g., that multi-parcel cases

should be treated differently from single-parcel cases — that is

inconsistent with Mook. In these circumstances, we conclude that

the BAA should reconsider the “used as a unit” issue under the

Mook standards set forth above. In reconsidering the issue, the

BAA may in its discretion order such additional testimony or

briefing as it deems necessary.

IV. Conclusion

¶ 28 The BAA’s order denying reclassification for the 2014 and

2015 tax years is affirmed. The order denying reclassification for

the 2016 tax year is reversed, and the case is remanded to the BAA

for reconsideration in accordance with this opinion.

JUDGE DAILEY and JUDGE VOGT concur.