Opinion
No. 71-139 (Supreme Court No. 24450)
Decided June 8, 1971. Rehearing denied June 29, 1971.
Action to determine whether certain land was exempt from state property tax by virtue of its allegedly being held by city under long-term lease with an option to purchase. From finding property not exempt from tax, city appealed.
Affirmed
1. CONTRACTS — Essential Meaning — Consideration — Entire Instrument. Essential meaning of any contract is to be found from a consideration of the entire instrument in question, not merely from isolated phrases or clauses provided therein.
2. TAXATION — Contract — Lease Provisions — Mere Surplus — Land — Not Under Lease — City — Not Exempt. Considering the entire contract between city and owner of land, the lease provisions therein are found to be mere surplus in the totality of the contract, having no independent existence aside from the option to purchase provisions; accordingly, the "lease" provisions were properly disregarded by the trial court and the land in question, does not qualify for exemption from the property tax rolls of Boulder county as being under long-term lease by the city.
Error to the District Court of Boulder County, Honorable William E. Buck, Judge.
Walter L. Wagenhals, City Attorney, Ronald B. Porter, Assistant, for plaintiff in error.
Stanley F. Johnson, District Attorney, Marsha B. Yeager, Deputy, Richard W. Dana, Assistant, for defendants in error.
This case was transferred to the Court of Appeals pursuant to statute.
The facts were stipulated. Plaintiff in error, the City of Boulder, shall be referred to as the "City," and the defendants in error who are the County Assessor and County Treasurer for Boulder County, shall be referred to as the "County."
Essentially, the issue is whether or not a section of land lying west and south of the City is exempt from property tax. The dispute arose out of the desire of the City to obtain approximately 764 acres of undeveloped land owner by a third party by the name of Wells.
An agreement was entered into by Wells and the City, whereby a portion of this land was purchased by the City, and the balance of the land was divided into seven parcels. Each parcel was made subject to a separate option to purchase. As part of the agreement, the seven parcels were leased to the City for one dollar per year plus real property taxes.
The City maintains its interest in the seven parcels comes under the provisions of C.R.S. 1963, 139-61-1, et seq., which provides a tax exempt status for land held by a long-term lease by municipality, including land under a long-term lease with an option to purchase. The County took the position that in reality the lease portion of the agreement between the City and Wells was a sham, and that the agreement was in fact only an option to purchase land, which meant the land was to remain on the tax rolls.
The trial court agreed with the position taken by the County. The sole issue to be determined on appeal is whether or not this agreement between the City and Wells was a contract to purchase land, or whether in fact it was a long-term lease with an option to purchase, thereby exempting it from the tax rolls under C.R.S. 1963, 139-61-2.
Scrutiny of the agreement leads to the conclusion that the lease portion is unimportant insofar as the totality of the contractual terms are concerned. The contract first defines the land in question, the 764 acres to be acquired by the City. The inherent purpose of the agreement as stated in the contract was for the City to acquire land for its Open-Space Program and for water utility purposes and to allow Wells to avoid condemnation proceedings.
The contract provides for the outright and immediate purchase of a portion of the 764 acres, labeled as "Parcel B." It then provides that in return for $60,000, the balance of the land shall be divided into seven parts, each part subject to an option to purchase for an agreed amount on a given date. An option to purchase is to be exercised by the City every August 1st for seven successive years. If, in any year, the City fails to exercise its option, it loses its right to purchase the remaining parcels and forfeits the $60,000. Other pertinent provisions of the contract provide that Wells may not encumber or burden the property so long as the City retains its option to purchase, nor may Wells assign the contract or sell the balance of the land without the City's consent.
The lease provisions of the contract provide that as long as the City retains its option to purchase any of the parcels, that the land still under option to the City is leased to the City for one dollar per year plus payment of any taxes assessed against the leased property. As the successive options are exercised, the lease terminates as to the parcel acquired by the exercise of the option, and furthermore the lease terminates entirely if the City chooses not to complete the contract by exercising all of its options to purchase.
[1] We concur with the finding made by the trial court that this contract was in fact a contract to purchase land, and not a lease of the property in question. The essential meaning of any contract is to be found from consideration of the entire instrument in question, not merely from isolated phrases or clauses provided therein. American Mining Co. v. Himrod-Kimball Mines Co., 124 Colo. 186, 235 P.2d 804.
[2] Looking to the entire contract, we find that the lease provisions contained therein are mere surplus in the totality of the contract itself. The lease itself is tied in with, and has no independent existence aside from, the option to purchase provisions of the contract. If the City failed to exercise any of its options, the entire contract falls, including the right to lease these premises.
Accordingly, we find that the trial court was correct in disregarding the "lease" provision. This agreement does not qualify the property under contract for exemption from the tax rolls of Boulder County as a long-term lease.
Judgment affirmed.
JUDGE ENOCH and JUDGE DUFFORD concur.