Petition for Writ of Certiorari — Beer v. Continental Airlines Inc., 114 S. Ct. 1297 (1994) (No. 93-1154)

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‘ Supreme Court, U.S.

) FILED

993-4-4-5-4-44n-+8 1994

In The

OrejCc pr LC wicisis

Supreme Court of the United’ States

October Term, 1993

In re: CONTINENTAL AIRLINES, INC., et al.,

Debtors.

ae ;

PATRICIA BEER, MANAGER OF REVENUE OF THE

CITY AND COUNTY OF DENVER, COLORADO,

Petitioner,

CONTINENTAL AIRLINES, INC., et al.,*

Respondents.

Petition For A Writ Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

PETITION FOR A WRIT OF CERTIORARI

AtIice J. FiscHer, Esa.

(Counsel of Record)

Assistant City Attorney

City and County of Denver

DanieEL E. Muse, Esa.

City Attorney

Rosert F. StreNnski, Esa.

Assistant City Attorney

Office of the City Attorney

353 City and County Building

Denver, Colorado 80202-5375

Telephone: (303) 640-3611

Facsimile: (303) 640-5609

Attorneys for Petitioner,

Patricia Beer, Manager of Revenue

of the City and County of Denver

* A complete list of Respondents is

January 1994 set forth, infra, at ii.

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 Pee

OR CALL COLLECT (402) 342-2831 \

/ D \

QUESTIONS PRESENTED

1. Whether the Court of Appeals erred in consi##1-

ing the provisions of the Colorado Constitution by sis

finding that curative tax legislation, which was enacted

on August 9, 1991, and mde retroactively effective to

February 1, 1991, in order to clarify a prior tax exemption

ordinance, violated the Colorado Constitution’s prohibi-

tion against the passing of retrospective laws.

2. Whether the Court st Appeals erred in rendering

its decision by its failure to apply legislative intent when

construing a tax exemption ordinance, and by its finding

that legislative intent is not controlling over the plain

meaning and common-usage-of-words, in direct conflict

with the decisions of other courts of appeals, of this

Court, and with decisions of Colorado courts.

LIST OF PARTIES

The Petitioner is: PATRICIA BEER, MANAGER OF

REVENUE OF THE CITY AND COUNTY OF DENVER,

COLORADO.

The Respondents are: CONTINENTAL AIRLINES, INC.;

CONTINENTAL AIRLINES HOLDINGS, INC.; CHELSEA

CATERING CORPORATION; CML HOLDINGS, INC.;

TAC

301

303

306

309

313

315

319

321

325

327

329

331

333

376

402

818

820

CORPORATION;

TAC

302

304

307

312

314

318

320

322

326

328

330

Koy

334

401

811

819

823

CORPORATION;

TAC 833-834 CORPORATION; TAC 835 CORPORATION;

TAC FUEL MANAGEMENT, INC.; TEXAS AIR LEASING

CORPORATION; BRITT AIRWAYS, INC.; ROCKY

MOUNTAIN AIRWAYS, INC.; CONTINENTAL AIR-

LINES HISTORICAL SOCIETY, INC.; CONTINENTAL

AIR MANAGEMENT SERVICES, INC.; CONTINENTAL-

TRUK HOTEL CORPORATION; FRONTIER AIRLINES,

LIST OF PARTIES —- Continued

INC.; NEW YORK AIRLINES, INC.; SYSTEM ONE

HOLDINGS, INC.; SYSTEM ONE TRAVEL RESOURCES,

INC.; SYSTEM ONE DIRECT ACCESS, INC.; MAXPIU

INTERNATIONAL, INC.; AND THOMAS E. ROSS,

UNITED STATES TRUSTEE.

TABLE OF CONTENTS

Page

CIR EUIOOD PUUMEUE ED 60 vec civcnsenevvedecsesen i

Ce ee EEE or ecicracévtstesecseseetsseunseee ii

CFF EE: TEE voce shh ees eeuadevetanveasonanees 2

pe ee err errr errr rs er 2

CONSTITUTIONAL PROVISIONS AND ORDI-

POP CR EE OWEN OMe nce nds nstecekésecougueeeess 2

SEAR EE. GE BOGE oh ng bob ev kaekberenes ¥ea0es 4

STATEMENT OF STANDARD OF REVIEW......... 11

REASONS FOR GRANTING THE PETITION ....... 11

I. THE COURT OF APPEALS MISCONSTRUED

THE COLORADO CONSTITUTION .......... 11

Il. THE COURT OF APPEALS SUPPORTED ITS

DECISION BY AN ERRONEOUS USE OF THE

RULES OF STATUTORY CONSTRUCTION IN

DIRECT CONFLICT WITH THE DECISIONS

OF THIS COURT AND THE COLORADO

CPE as sues vie hawt anedceees eo aa eee ences 21

CRUE sv edcredeenacécdeasawersauebistueaas 30

TABLE OF AUTHORITIES

Page

Court CAsEs:

American Respiratory Care Servs. v. Manager of Reve-

nue, 835 P.2d 623 (Colo. App. 1992).........+-- 24, 25

Andrus v. Shell. Oil Co, 446 U.S. 657 (1980) ........-- 30

Atlantic Coast Line Railroad Company v. Phillips, 332

is Se" Fo) a oerrererr rrr reer rr errr ieee 21, 22

Bermite Powder Company v. Franchise Tax Board, 109

Cal.App.2d 524, 242 P.2d 9 (1952)....-.--.-+.+e+e: 20

Blue River Defense Comm. v. Town of Silverthorne, 33

Colo. App. 10, 516 P.2d 452 (1973)......---++++-. 15

BQP Industries v. State Bd. of Equalization, 694 P.2d

337 (Colo. App. 1984) .......------2eeeeees 20, 21, 30

City of Aurora, Colorado v. Bechtel Corp., 599 F.2d

362 (10th Cie. 1979).......cccccercrceccenccsees 17, 27

City of Leadville v. Rood, 198 Colo. 328, 600 P.2d 62

Lg, REE Per er ory er Perr ree rir ie oe 12

City of Los Angeles v. Rancho Holmes, Inc., 40 Cal.2d

764, 256 P.2d 305 (1953) ...... eee ec c cece ecceceees 20

City of New Orleans v. Dukes, 427 U.S. 297 (1976) .... 11

East Ohio Gas Co. v. Limbach, 26 Ohio St.3d 63, 498

NB.2d 453 (1906). 2 occ cccccccrececsevererccvesese 4

Estate of Kennett v. State, 115 N.H. 50, 333 A.2d 452

COU sina sUdcaretecsceckvavivareaesaesyyeteueres 18

Hanson v. Town of Flower Mound, 539 S.W.2d 178

(Tex.Civ.App. 1976)..........eeee cece eee eee eneees 18

Helvering v. U.S. Trust Company, 111 F.2d 576 (2d

Cir. 1940), cert. denied, 45 U.S. 678 (1940) ......... 13

TABLE OF AUTHORITIES — Continued

Page

In re Channel Home Centers, Inc., 989 F.2d 682, 24

ee DO Ge A, SED gov cutacdessccetaees 23

In re Colorado Mercantile Co., 299 F.Supp. 55

SR SDS vg 6 cans 44 ans yale ke ae eee res 19

In re Continental Airlines, Inc., 138 B.R. 430

SUED odd l cava ca de ese tu ae eee 2, 3 aa

In re Continental Airlines, Inc., 23 Bankr.Ct.D. 1499,

149 B.R. 76 (D.Del. 1993)

ere 2, 8, 9, 10, 14, 15, 16, 21, 23, 27, 28, 29, 30

In re Sierra Steel Corporation, 88 B.R. 314 (D.C.

ee Pert ee ere bag Ey pore 11

International Business Machines v. State Board, 26

Ce Pees Cer Wal: 2 UNO kvawesscbedewcerteres 20

Kane v. Town of Estes Park, 786 P.2d 412 (Colo.

Dis wena be 6 Ondn oN 0 Cedaedet caetnee ena venwcn 24, 25

Landtech Corp. v. State Mutual Life Ass'n. Co., 605

Be Be ee rr a> Me 25

Lewis v. Grinker, 965 F.2d 1206 (2d Cir. 1992)........ 23

Longbottom v. State Bd. of Comm. Colleges and Occu-

pational Ed., __ P.2d __, No. 92CA0410 (Colo.

App. May 20, 1993), petition for cert. filed, No.

Ney COU Gy WES 0:5 0 vos save vsbucseiscevacan 27

Lynch v. Overholser, 369 U.S. 705 (1962).......-...... 28

Martin v. Board of Assessment Appeals, 707 P.2d 348

Py: SE pi oks i nincsesdedeenbiexapnecchs 13, 17, 18

Murray v. Board of Commissioners of Montrose

County, 28 Colo. 427, 65 P. 26 (1901)........... 13, 19

Oklahoma Tax Commission v. Standolind Pipe Line

Co., 113 F.2d 853 (10th Cir. 1940), cert. denied,

PEE WOU EE REOUEE 6 ods Cecestdescecedeaseiueeus 19, 20

vil

TABLE OF AUTHORITIES - Continued

Page

People v. eatin 182 Colo. 21, 510 P.2d 430 (1973) .... 23

People v. Waterman's Estate, 108 Colo. 263, 116 P.2d

SOG CIOGA) . ccc cccce cscs ceceuvsceseveesenceses 13, 19

People ex rel. Clyde v. Gilchrist, 262 U.S. 94 (1923) .... 13

People ex rel. Dunbar v. Trinidad State Jr. Col., 184

Colo. 305, 520 P.2d 736 (1974) .....-.----eeee. 23, 26

Roberts v. Gunter, 251 Ga. 276, 304 S.E.2d 369

COO og 6 dobcdebowdiwbece denpetededseneuaeiensets 18

Security Life and Accident Co. v. Heckers, 177 Colo.

455, 495 P.2d 225 (1972) .....--- cc eee eee eeeeeeres 26

Security Life and Accident Co. v. Temple, 177 Colo.

14, 492 P.2d 63 (1972) ........cceccceecececercccees 3

Sharon Steel Corp. v. National Gas Distrib. Corp., 872

F.2d 36 (Gd Cie. 1969). 0.00 ce cccccccecvcssesereees 11

Smith v. Putnam, 250 F.Supp. 1017 (D.Colo. 1965) 12, 19

Society for the Propagation of the Gospel v. Wheeler,

22 F.Cas. 756 (C.C.N.H. 1814).........--0 seer eee: 13

State of Colorado v. Fisch’s Estate, 153 Colo. 525, 387

P.2d 282 (Colo. 1963) .........---++-e: 19, 21, 22, 26

Triad Painting Co. v. Blair, 812 P.2d 638 (Colo. 1991) 24, 25

Truck Drivers Local 807 v. Carey Transportation Inc.,

816 F.2d 82 (2d Cir. 1987) .......---e eee e eee ees 11

United States v. Alvarez-Sanchez, 975 F.2d 1396 (9th

CE FE ikon cu ce kads powecen cévncesaawasecesgeveus 23

United States v. American Trucking Ass'n, 310 U.S.

BSE (IGG. ow cnc ccc cvtvedcccesssseecucesse veces 22, 26

Viii

TABLE OF AUTHORITIES - Continued

Page

United States v. Everett, 700 F.2d 900 (3d Cir. 1983) .... 27

United States v. Ron Pair Enterprises, 489 U.S. 235 ,

GE se cdrdwesésctvbevedsecouvivenvvesepestaes bev ee

Van Sickle v. Boyes, 797 P.2d 1267 (Colo. 1990)....... 13

Walgreen Company v. Charnes, 859 P.2d 235 (Colo.

App. 1992), cert. denied (Sept. 27, 1993) ......... 4, 23

Washington Waste Systems, Inc. v. Clark County, 115

FORE. Ae 75, THO Cae DOW CUPPED ce ccvccccccesivnss 20

Welch v. Henry, 305 U.S. 134 (1938)........... 16, 17, 19

CONSTITUTIONS, STATUTES, ORDINANCES, AND REGULATIONS:

Colorado Constitution

le I rs ac etdevsdubeewas 3, 9, 12

ee ee ID ood vewau Venu tee onsen 3, 9, 12

Colorado State Statutes

§§ 39-22-508.2(2)(a) (1991 Supp.), 39-22-508.3(4)

UE pret foe lea eer ee a) 3

§§ 40-1-102(3) (1993), 40-1-103(1)(a) (1993)............ 3

Denver Ordinances

Ordinance No. 74, Series of 1991.................. 5, 28

Ordinance No. 75, Series of 1991.......... 2, 3, 5, 6, 29

Ordinance No. 568, Series of 1991.................... 6

TABLE OF AUTHORITIES - Continued

Page

Denver Revised Municipal Code

@ S. Serrrrerr rr rere, \ |

| Brrererer irre eee 4

76) ee 3

G SOO7(17) 2. ccc ccc cccccnccvsevcccccccecccvcsessesen 3

Georgia Constitution

Article I, § 1, Par. VID .....-----eeeeeeeee eee eteees 18

New Hampshire Constitution

Pt. 1, Article 23.0... ccc ccc ccscccnrccccevercccssvers 18

Texas Constitution

Article 1, § 16.........ccccccrccccrscerereerceerceees 18

United States Code

11 U.S.C. § 503 (1978 ed.) ....--- eee reece reer rere 5

11 U.S.C. § 505 (1978 ed.) ...--- cece cece ere reer eee: 5

28 U.S.C. § 1254(1) (1940 ed.)..----- cece ere eee eees 2

U.S. Treasury Regulations

§ 1.103-8(e)(2) (1992)... .-- rere cree reece teen eens 28

MiscELLANEOUS:

Black’s Law Dictionary, 5th Ed......-----+++eeeeeeeee: fo

Webster’s Third New International Dictionary (1976) .... 27

In The

Supreme Court of the United States

October Term, 1993

In re: CONTINENTAL AIRLINES, INC., et al.,

Debtors.

PATRICIA BEER, MANAGER OF REVENUE OF THE

CITY AND COUNTY OF DENVER, COLORADO,

Petitioner,

CONTINENTAL AIRLINES, INC., et al.,

Respondents.

Petition For A Writ Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

PETITION FOR A WRIT OF CERTIORARI

The Manager of Revenue for the City and County of

Denver, Colorado (hereafter “Denver”), by and through

the undersigned counsel, petitions for a writ of certiorari

to review the judgment of the United States Court of

Appeals for the Third Circuit (“court of appeals”) in this

case.

OPINIONS BELOW

The opinion of the court of appeals (App. Al-A24) is

unreported. The opinion of the United States District

Court for the District of Delaware (“district court”) is

reported at In re Continental Airlines, Inc,, 23 Bankr. Ct. D.

1499, 149 B.R. 76 (D.De’ 1993) (App. C1-C34), and the

opinion of the United States Bankruptcy Court for the

District of Delaware (“bankruptcy court”) is reported at

In re Continental Airlines, Inc., 138 B.R. 430 (Bkrtcy.D.Del.

1992) (App. D1-D20), rev'd, 23 Bankr. Ct. D. 1499, 149 B.R.

76 (D.Del. 1993) (App. C1-C34).

JURISDICTION

The judgment of the court of appeals was entered on

September 20, 1993, and petition for panel rehearing was

denied on October 21, 1993 (App. A1-A24; B1-B3). The

court of appeals stayed the issuance of the mandate on

November 17, 1993 (App. B4). The jurisdiction of this

Court is invoked under 28 U.S.C. Section 1254(1) (1940

ed.).

CONSTITUTIONAL PROVISIONS AND

ORDINANCES INVOLVED

The relevant portions of Denver Ordinance, No. 75,

Series of 1991, as originally enacted on February 1, 1991,

and as amended by curative Denver Ordinance No. 568,

which was enacted on August 9, 1991, and made retroac-

tively effective to February 1, 1991, are set forth in the

~~ Appendix, F1-F3; G1-G5 (codified in Denver Revised

Municipal Code (“Den. Rev. Mun. C.”) Sections 53-97(16)

and (17)).! The provisions of Article I, Section 11, and

Article XV, Section 12, of the Colorado Constitution read

as follows:

No ex post facto law, nor law impairing the

obligation of contracts, OF retrospective in its

operation, or making any irrevocable grant of

special privileges, franchises or immunities,

shall be passed by the general assembly. [Colo.

Const., Art. II, § 11.]}

The general assembly shall pass no law for the

benefit of a railroad or other corporation, or any

individual or association of individuals, retro-

spective in its operation. . . . (Colo. Const., Art.

XV, § 12.]

Denver has complete autonomy in enactment of

purely local excise taxes, to the exclusion of state laws;

thus, no Colorado statutes are involved in this matter.

Security Life and Accident Co. v. Temple, 177 Colo. 14, 492

P.2d 63, 64 (1972).?

| The language in the August Exemption was also enacted

prospectively through the enactment of Denver Ordinance No.

571, Series of 1991 (App. H1-H4).

2 The bankruptcy court, in interpreting Denver Ordinance

No. 75, relied, in part, on a state statute that is expressly not

applicable to airlines (App. D13), citing Colo. Rev. Stat.

§ 39-22-508.2(2)(a) (1991 Supp.). Section 39-22-508.3(4), Colo.

Rev. Stat., provides that the Act is not available to public util-

ities: “No credit shall be allowed under this section for the

establishment or expansion of a public utility, as such term is

defined in section 40-1-103, C.R.S. 1973.” Section 40-1-103(1)(a),

Colo. Rev. Stat., states “The term public utility .- . includes

every common carrier...”, and Section 40-1-102(3), Colo. Rev.

Stat., defines “common carrier” as meaning “every person

STATEMENT OF FACTS

1. This case involves the tax liability of Continental

Airlines, Inc. (“Continental”) for Denver use tax incurred

during the period from May 1, 1991 to August 8, 1991.

The Denver use tax is an excise tax levied on the exer-

cise of the privilege of using, storing, distributing, or con-

suming tangible personal property in Denver by an

individual or entity (App. I1). Den. Rev. Mun. C. § 53-92(a).

The tax is not imposed on purchases of personal property, as

such, but on the privilege of use after a retail sale. The price

of purchases made in, or brought into, Denver is merely the

usual base for measuring the tax on the exercise of the

privilege. Walgreen Co. v. Charnes, 859 P.2d 235, 241

(Colo.App. 1992), cert. denied (Sept. 27, 1993); (citing Den.

Rev. Mun. C. § 53-92(a))(App. I1); see also East Ohio Gas Co.

v. Limbach, 26 Ohio St.3d 63, 498 N.E.2d 453, 456 (1986).

Continental operates a commercial airline at Sta-

pleton International Airport (“Stapleton Airport”) located

in the City and County of Denver in leased facilities that

consist of ticket counters and office space utilized in the

main terminal, space in terminal concourses, and leased

buildings used for airplane maintenance and storage.

(App. A4). On December 3, 1990, Continental filed its

petition in the bankruptcy court under Chapter 11 of the

Bankruptcy Code. After its bankruptcy filing, Continental

directly or indirectly affording a means of transportation

... Within this state by railroad, motor vehicle, aircraft, or other

vehicle . . . for compensation. .. .

”

continued normal airline-related business and opera-

tional activities at Stapleton Airport, and continued to

incur Denver taxes.

2. On August 20, 1991, Denver filed in the bank-

ruptcy court its motion for payment of administrative

expenses pursuant to 11 U.S.C. § 503 (1978 ed.) for delin-

quent use taxes owed by Continental for May and June of

1991. Denver thereafter filed its first amended motion for

payment of administrative expenses On October 4, 1991,

to include delinquent use taxes for the remaining period

of July 1, 1991, to August 8, 1991. The motion for payment

and amended motion for payment are the basis for fed-

eral jurisdiction in the court of first instance. 11 U.S.C.

§ 503, 11 U.S.C. § 505 (1978 ed.). Denver's first amended

motion for payment was denied by the bankruptcy court.

In Re Continental Airlines, Inc., supra, 138 B.R. 430, 435-37

(App. D19).

3. Earlier, on February 1, 1991, the Denver City

Council (“City Council”) had enacted a new exemption

from Denver's use tax by Ordinance No. 75, Series of

1991 (hereafter the “February Exemption” or “Ordinance

No. 75”) (App. F1-F3)- The City Council concurrently

enacted a parallel occupational privilege tax exemption

by Ordinance No. 74 (App. E1-E2)-

4. Continental continued to pay its Denver use tax

liabilities on its purchases for three full months after the

enactment of the February Exemption, from February 1,

1991, until April 30, 1991 (App. A18). In oral argument

before the district court, Continental was unable to

explain why it continued to pay the use tax after the

enactment of the February Exemption (App. K1-K2).

Denver discovered the cessation in Continental’s pay-

ment of use taxes for the month of May, 1991 on June 20,

1991, when Continental filed its use tax return. At that

time, Continental did not report certain use taxes, claim-

ing to be exempt from payment under the provisions of

the February Exemption (App. A18).

On August 9, 1991, City Council enacted (effective as

of February 1, 1991) Ordinance No. 568, Series of 1991

(hereafter the “August Exemption” or “Ordinance No.

568”), retroactively repealing and clarifying the exemp-

tion formerly provided in Ordinance No. 75 (App. G1-

G5). Continental concedes it is not exempt from taxation

under the August Exemption prospectively from August

9, 1991.

5. The court of appeals held that Continental quali-

fied for the February Exemption, but found that Conti-

nental was not entitled to a refund or credit of Denver use

taxes paid from February 1, 1991 to April 30, 1991, due to

Continental’s procedural errors in applying for a refund

(App. A23-A24). The refund and credit issue that was

before the court of appeals is not a subject of this appeal.

Therefore, the relevant time period in our case is May 1,

1991 (the date Continental ceased paying Denver use

taxes), to August 8, 1991 (the day prior to the enactment

date of the August Exemption).

6. The February Exemption, under which Continen-

tal claims its use tax exemption, exempts from use taxes

sales of tangible personal property that are made to a

transportation utility (such as an airline, busline, or rail-

road) so long as the personal property is used, stored,

consumed, or distributed by the transportation utility at

the utility’s facility (1) located in a Denver enterprise

zone; (2) containing one million square feet of useable

floor space; and (3) serving as headquarters or a regular

place of reporting for duty for at least 2,000 employees of

the transportation utility in the third year of operations

and continually thereafter. Also, the transportation utility

must comply with the last paragraph of the February

Exemption which reads:

This exemption may be applicable to the first

and second years of operation at the facility

provided that the utility establishes a reserve account

for the tax for its return to the city at the end of

the third year of operations should less than two

thousand (2,000) employees be employed at the

facility in said third year.

(App. F2; Emphasis added.)°

The court of appeals found that Continental satisfied

the requirements of the February Exemption and that the

retroactive and curative August Exemption would violate

the retrospective restrictions of the Colorado Constitution

(App. A23-A24). The court of appeals also construed the

reserve account requirement, above, of the February

Exemption, and found that the reserve account provisions

did not apply to Continental, but applied only to new

facilities (App. A14).

3 Continental admits: (a) that it did not have a single build-

ing in Denver that met the requirements of the February Exemp-

tion; (b) that it did not establish a reserve account for Denver

taxes; and (c) that its multiple buildings at Stapleton were

erected and in existence prior to the enactment of the February

Exemption (App. C32; J1-J2).

The district court, on the other hand, held that Conti-

nental did not have a facility which would qualify for the

February Exemption. In Re Continental Airlines, Inc., 149

B.R., at 88; App. C29. The district court also found that

Continental’s failure to establish a reserve account for

Denver use taxes also caused the February Exemption to

not be applicable to Continental. 149 B.R., at 90; App. C33.

7. The preamble of the August Exemption states in

part:

WHEREAS, it was at the time of the introduc-

tion, passage, and enactment of Ordinance No.

75, Series of 1991, and is presently the intention

of the Council that only a) uses of machinery,

tools, and equipment in the operation of an

equipment maintenance facility at a single indus-

try building meeting the square footage and employ-

ment requirements and b) uses of building and

construction materials for use in the construc-

tion of a maintenance facility for a single indus-

trial building containing such minimum floor

space and employing such number of employees

be exempted from the use tax in conjunction

with the construction and use of a new, enclosed

structure; and

WHEREAS, the Council, by enacting this bill

into law expresses and reaffirms its understand-

ing that no facility, building, or enclosed structure

or group of such facilities, buildings, or enclosed

structures currently, as of the date of this enactment,

and at all times prior thereto meets the eligibility

criteria established for the exemptions granted

by Ordinance No. 75, Series of 1991, or by this

ordinance, but that said Ordinance No. 75 was,

and this ordinance is, intended to encourage a

transportation utility to construct and operate

such a maintenance facility in the City and

County of Denver;... .

App. G2; emphasis added.

Denver has always contended that the clear intent of

City Council in enacting the February Exemption was to

provide an exemption only as a tax incentive to encour-

age the construction of a new transportation utility build-

ing with the attendant creation of new jobs in the Denver

area.

The district court held in its review of the bankruptcy

court’s record that the legislative history, the August

Exemption, and the reserve-account language in the Feb-

ruary Exemption all dictate that the clear intent of the

City Council in enacting the February Exemption was to

attract a new transportation utility to Denver or to have a

current utility expand into a new facility, consisting of a

single structure. 149 B.R., at 88-90; App. C27-C29; C33.

8. Continental acknowledged before both the dis-

trict court and the bankruptcy court that it did not qual-

ify for the use tax exemption under the amended, clarify-

ing provisions of the August Exemption. Continental,

however, contended that it qualified for exemption under

the provisions of the February Exemption and that the

retroactive application of the August Exemption violated

the Colorado Constitutional prohibition against the pas-

sage of retrospective laws. Colo. Const., Art. II, § 11, and

Colo. Const. Art. XV, § 12; 149 B.R., at 79, 83; App. C6-C7;

C17. Denver contended that Continental did not meet the

exemption requirements of the February Exemption and

that the August Exemption was valid retroactive law.

9. On appeal, the district court reversed the bank-

ruptcy court, and held that Continental failed to qualify

for the use tax exemption under the February Exemption

and that Denver’s first amended motion for payment

should be granted. The district court listed the following

reasons: (1) the use of the term “facility” in the February

Exemption is ambiguous, and the clear intent of the City

Council was to induce new or current transportation

utilities to construct a new facility consisting of a sub-

stantial, single structure for Denver’s economic growth;

(2) “facility” must be construed in context and in accor-

dance with clear legislative intent (new, substantial, sin-

gle structure); (3) Continental could not include

subleased space in calculating whether it met the square

footage requirement of the February Exemption; and (4)

Continental failed to comply with the applicable require-

ment in the February Exemption that it must pay the use

taxes into a reserve account for a three-year period. 149

B.R., at 87-90; App. C24; C27; C29; C33.

The district court did not address the retroactive

application of the August Exemption, but did look to the

preamble of the August Exemption to confirm the legisla-

tive intent behind the February Exemption. Id., at 88;

App. C29.

The court of appeals disagreed with the district court

and found that Continental met the requirements of the

February Exemption, ignoring the legislative intent of

City Council. App. A10. In addition, the court of appeals

concluded that the August Exemption violated the

)

;

te rte nee

Colorado Constitution’s prohibition of retrospective laws

(App. A18).

STATEMENT OF STANDARD OF REVIEW -

STATUTORY CONSTRUCTION IS A

QUESTION OF LAW

This case centers on the construction of a Denver

ordinance, and a municipal ordinance is to be treated as a

statute for the purpose of reviewing a decision of the

court of appeals holding the ordinance unconstitutional.

City of New Orleans v. Dukes, 427 U.S. 297, 301 (1976).

Statutory construction is clearly established as a question

of law, and legal questions are subject to plenary review.

In re Sierra Steel Corporation, 88 B.R. 314, 316 (D.C. Colo.

1987). See also Sharon Steel Corp. v. National Gas Distrib.

Corp., 872 F.2d 36, 43 (3d Cir. 1989); Truck Drivers Local 807

v. Carey Transportation Inc., 816 F.2d 82, 88 (2d Cir. 1987).

Therefore, this Court sits in the same position as the

lower courts, and is not bound by the lower courts’

construction of the Denver Ordinances; de novo review is

the applicable standard.

REASONS FOR GRANTING THE PETITION

I. COURT OF APPEALS MISCONSTRUED THE COL-

- ORADO CONSTITUTION.

The court of appeals erred in construing the Colorado

Constitution, and in construing the case law thereunder,

by its holding that the August Exemption is unconstitu-

tional retrospective legislation (App. A18). Legislation in

Colorado is presumed constitutional, and the assailant

thereof has the burden of proving its unconstitutionality

beyond a reasonable doubt. City of Leadville v. Rood, 198

Colo. 328, 600 P.2d 62, 63 (1979).

Section 11 of Article II of the Colorado Constitution

provides, as follows:

No ex post facto law, nor law impairing the

obligation of contracts, or retrospective in its

operation, or making any irrevocable grant of

special privileges, franchises or immunities,

shall be passed by the general assembly.

Section 12 of Article XV of the Colorado Constitution,

reads in part, as follows:

The general assembly shall pass no law for the

benefit of a railroad or other corporation, or any

individual or association of individuals, retro-

spective in its operation. .. .

However, through judicial interpretation, the consti-

tutional prohibition against laws retrospective in their

application “have been engrafted with various exceptions

whereby legislation operating retroactively is permitted

notwithstanding seemingly clear and absolute prohibi-

tion against it.” Smith v. Putnam, 250 F.Supp. 1017, 1018

(D.Colo. 1965).

A. A RETROACTIVE LAW IS VALID IF NOT

“RETROSPECTIVE” IN OPERATION.

Continental conceded that an exception to the restric-

tions of the Colorado Constitution exists. A retroactive

law is constitutionally valid if it is not “retrospective” in

operation. A law is retrospective if the statute impairs

vested rights, creates a new obligation or duty, or

attaches a new disability with respect to past transactions

(also known as the “Story Definition” after Judge Story’s

often cited definition of retrospective laws). Martin v.

Board of Assessment Appeals, 707 P.2d 348, 351 (Colo. 1985)

(citing Judge Story from Society for the Propagation of the

Gospel v. Wheeler, 22 F.Cas. 756 (C.C.N.H. 1814)).

The Colorado Supreme Court has applied substantive

amendments in a city’s Safety Code to structures built

prior to the Code’s amendment, using the Story Defini-

tion of vested rights impairment and new disabilities. Van

Sickle v. Boyes, 797 P.2d 1267, 1271 (Colo. 1990). The court

held that application of the amended Safety Code to

existing buildings, constructed when a different safety

code was in effect, did not constitute unconstitutional

retrospective legislation. Id., at 1271.

(i) No vested rights in exemption. The courts have

held that statutes which provide for deductions or

exemptions from taxation do not confer contract rights or

other vested rights, and therefore, may be modified or

repealed by the legislature. People ex rel. Clyde v. Gilchrist,

262 U.S. 94, 98-99 (1923). Helvering v. U.S. Trust Company,

111 F.2d 576, 578 (2d Cir. 1940), cert. denied, 45 U.S. 678

(1940); see also Van Sickle v. Boyes, supra, at 1271.

In Colorado, tax exemptions are considered a matter

of grace and privilege, and not of right. People v. Water-

man’s Estate, 108 Colo. 263, 116 P.2d 204, 210 (1941);

Murray v. Board of Commissioners of Montrose County, 28

Colo. 427, 65 P. 26, 27 (1901).

Thus, Continental does not have a vested right in the

tax exemption formerly contained in the February

Exemption.

(ii) No new obligation, duty, or disability. Conti-

nental did not specifically allege, nor did the court of

appeals find, that Continental had a vested right in the

February Exemption. Rather, Continental contended, and

the court of appeals held, that the retroactive August

Exemption created a new disability (payment of use tax)

on past transactions, violating the Colorado Constitu-

tion’s prohibition on retrospective legislation (App. A18).

The court of appeals, by this holding, misconstrued

the Colorado Constitution, and the applicable case law.

(a) Waiver of new disability argument by failure to

set up reserve. In construing the February Exemption, the

district court held that the reserve requirements con-

tained in the last paragraph of the February Exemption

must be applied. According to the district court, the

failure of Continental to establish the reserve account also

caused Continental to not satisfy the statutory prerequi-

sites of the February Exemption. 149 B.R., at 90; App.

C33.

The reserve account requirement is contained in the

last paragraph of the February Exemption and reads:

This exemption may be applicable to the first

and second years of operations at the facility

provided that the utility establishes a reserve

account for the tax for its return to the city at the

end of the third year of operations should less

than two thousand (2,000) employees be

employed at the facility in said third year.

Continental conceded that it did not establish a reserve

account for use tax under the February Exemption (App.

C32); 149 B.R., at 89. The court of appeals disagreed with

the district court, finding that the reserve account only

applied to a new facility and did not apply to Continen-

tal’s existing buildings. (App. A14). The bankruptcy court

did not address the reserve account in its opinion. The

court of appeals and the bankruptcy court erred as a

matter of law by failing to apply the reserve account

requirements to Continental. See 149 B.R., at 89; App.

C32.

Continental argued that, because its operations at

Stapleton Airport were established more than three years

prior to the enactment of the February Exemption, the

reserve requirement of the February Exemption did not

apply to it. However, this argument ignores the specific

condition of establishing a reserve account imposed by

the February Exemption. Even if the condition could be

met by events occurring in the 1940's, when Continental

began operations at Stapleton, the fact of the matter is

that Continental did not satisfy the reserve requirement

at any time.

The statutory intent behind the February Exemption

was to create a tax incentive to entice new business. It

would make no sense to attribute to City Council an

intention to extend the exemption to existing structures.

Courts are not to presume that a legislative body used

language without meaning. Blue River Defense Comm. v.

Town of Silverthorne, 33 Colo. App. 10, 516 P.2d 452, 454

(1973). Therefore, the reserve requirement should be

strictly construed as being applicable to all transportation

utilities that attempt to utilize the February Exemption,

regardless of how long they have been in operation.

The district court noted that “If the Court reads the

reserve account requirement as Continental suggested

(that it only applies to new operations) then that lends

credence to the argument of Denver that the statute was

only intended to encompass a new facility.” 149 B.R., at

90; App. C33.

(b) Payment of tax into reserve account was

required, thus, no new disability. Denver contends that no

new disability, obligation, or duty (hereafter and collec-

tively “disability”) has been created by the retroactive

application of the August Exemption, because any trans-

portation utility that wanted to claim the February

Exemption had to pay all use tax on exempt transactions

into the reserve account, for its return to the City if the

conditions for exemption were not satisfied for three

years following the point at which the exemption is first

claimed (App. C15; F2). 149 B.R., at 83. The district court

properly found that the reserve requirement applied to

Continental. 149 B.R., at 90; App. C33.

dar year, creates no new disability. In Welch v. Henry, 305

U.S. 134, 146-147 (1938), this Court upheld the retroactive

application of a Wisconsin income tax statute, stating that

“[tlaxation is neither a penalty imposed on the taxpayer

nor a liability which he assumes by contract. . . . Since no

citizen enjoys immunity from that burden, its retroactive

imposition does not necessarily infringe on due pro-

cess....” (Emphasis added). This Court also specifically

noted that property taxes, like taxes on income, may be

retroactively applied. Id., at 147.

he a ee See mae

i Sea ele tas Sued aah os

ae i

The Colorado Supreme Court adopted the analysis

set forth in Welch v. Henry in determining that a Colorado

property tax statute was constitutionally valid retroactive

law, stating,

The test of constitutionality set forth in Welch is

to consider the nature of the tax and the circum-

stances in which it is laid. Under fifth amend-

ment due process analysis, retroactive operation

is constitutional where it is not harsh, arbitrary

or unfair.

While we must enforce a more specific prohibi-

tion than that found in the Due Process Clause,

we agree with the analysis set forth in Welch... .

Martin v. Board of Assessment Appeals, supra, 707 P.2d, at

354 (citing Welch, supra, 146-147).

The Colorado court then upheld the retroactive

change in a Colorado property tax statute, after determin-

ing that taxpayers had no vested right in the factors used

to determine the value of assessed property. Id., at 354.

The court of appeals erred in rejecting Martin, stating

that the Martin case addressed only a retroactive change

in assessment factors and not a discrete transaction. The

court of appeals failed to examine the detailed analysis

that the Martin court performed in examining all types of

retrospective tax legislation (App. A17-A18). Martin, at

352-354. The Colorado Supreme Court's analysis in Mar-

tin is particularly insightful on how the Colorado

Supreme Court would likely analyze and construe the

August Exemption. Ibid. See also City of Aurora, Colorado.

v. Bechtel Corp., 599 F.2d 382, 386 (10th Cir. 1979) (a

federal court of appeals must attempt to construe a Colo-

rado statute in the manner in which the Supreme Court of

Colorado would interpret the statute; in doing so a fed-

eral court may look to all resources, including decisions of

other states, as well as Colorado and federal decisions)

(emphasis added).

The court in Martin instructs us that the majority of

states which have tested tax provisions which apply prior

to their date of enactment against specific state constitu-

tional prohibitions similar to Colorado’s have held tax

amendments may impose changes retroactively effective

during the year of enactment. Id., at 352 (citing Hanson v.

Town of Flower Mound, 539 S.W.2d 178 (Tex. Civ. App.

1976); Estate of Kennett v. State, 115 N.H. 50, 333 A.2d 452,

455 (1975)); see Roberts v. Gunter, 251 Ga. 276, 304 S.E.2d

369, 376 (Ga. 1983).

In the case of Hanson v. Town of Flower Mound, supra,

the Texas court held that a municipal tax enacted on

November 23, 1974, may lawfully be levied against prop-

erty located within the City as of January 1, 1974, without

violating the Texas State constitutional prohibition

against retrospective legislation. The Texas Constitution

provides: “No bill of attainer, ex post facto law, retroactive

law, or any law impairing the obligation of contracts, shall

be made.” Tex. Const., Art. I, § 16. The Texas court also

laid out the dispositive case law: “Laws authorizing taxes

are not retrospective so far as the year in which they are

authorized is concerned.” Id., at 179.

The New Hampshire Supreme Court, using the

vested rights impairment and new disability test, has

held that a tax provision passed in April of 1970 and

taxing business profits retroactively to January 1, 1970,

did not violate the specific constitutional prohibition

against retrospective legislation. Estate of Kennett v. State,

supra, 333 A.2d, at 455 (citing N.H. Const., Pt. I, Art. 23).

See also, Roberts v. Gunter, supra, 303 S.E.2d, at 376 (in

construing constitutional prohibition (Ga. Const., Art. I,

§ IL, ¥ VII) that “no . . . retroactive law . . . shall be

passed,” held: that a bank share tax statute passed in

March 1975 lawfully applied retroactively to January 1,

1975).

(d) The withdratal of a privilege (i.e., the exemp-

tion from the tax) does net create a disability. As discussed

above, tax exemptions in Colorado are clearly a matter of

grace and privilege. Waterman's Estate, supra, 116 P.2d, at

210; Murray, supra, 65 P., at 27; State of Colorado v. Fisch’s

Estate, supra, 387 P.2d, at 285. Also, this Court has held

that taxation is neither a penalty imposed on the taxpayer

nor a contractual liability. Welch v. Henry, supra, 305 U.S.,

at 146 (1938). It, thus, logically follows that the retroactive

withdrawal of privilege does not create a new disability.

En en ae Sines Seater ere We Merten ean tage sero les |

Pee 1D

B. IN THE ALTERNATIVE, THE AUGUST

EXEMPTION IS A CONSTITUTIONALLY

VALID RETROACTIVE CLARIFICATION.

Continental conceded that in addition to the excep-

tion created under the Judge Story Definition (vested

rights impairment, new disability test), a second excep-

tion exists to the constitutional prohibition on retrospec-

tive laws: a retroactive application of a statute is

; permissible under the constitutional prohibition against

: retrospective laws where a change is curative or pro-

j cedural in nature. In re Colorado Mercantile Co., 299

F.Supp. 55, 57 (D.Colo. 1969); Smith v. Putnam, 250 F.Supp.

| 1017, 1018 (D.Colo. 1965). Furthermore, the Tenth Circuit

: has established that not every change in phraseology

indicates a desired change in substance. An amendment

may be made for the purpose of expressing more clearly

; and accurately the same intent. Oklahoma Tax Commission

v. Standolind Pipe Line Co., 113 F.2d 853, 856 (10th Cir.

SNE Ae CEE CE MBN ali AOS his te PA LG

1940), cert. denied, 311 U.S. 616 (1940). An amendment to a

statute to eliminate ambiguity is a valid retroactive “cura-

tive statute”. Washington Waste Systems, Inc. v. Clark

County, 115 Wash.2d 74, 794 P.2d 508, 511 (1990).

In addition the Tenth Circuit has recognized

it is a general rule of construction that by

amending a statute the legislature intended to

make a substantial change in the preexisting

law, but like others, that rule has its exceptions. It

is not every change in phraseology that indicates a

desired change in substance and effect. It may be

made for the purpose of expressing more clearly

and accurately the same intent or to improve

diction. Or it may be to meet a new and unan-

ticipated condition brought about by judicial

interpretation of the preexisting law.

Oklahoma Tax Commission v. Stanolind Pipe Line Co., 113

F.2d 853, 856 (10th Cir. 1940), cert. denied, 311 U.S. 616

(1940) (emphasis added). In Stanolind Pipe, the court

accepted as the declared intent of the legislature, when it

enacted the original tax code, an amendment that retroac-

tively construed and clarified the code. Ibid.

Also, a line of cases holds that when a tax statute is

amended at a time when taxpayers are resisting taxation

under a statute, the inference arises that the amendment

was intended as a clarification rather than a substantive

change of preexisting law. International Business Machines

v. State Board, 26 Cal.3d 923, 609 P.2d 1, 9-(1980) (retroac-

tively applying an amendment to sales tax exemption

contained in state statute) (citing City of Los Angeles v.

Rancho Holmes, Inc., 40 Cal.2d 764, 256 P.2d 305 (1953);

Bermite Powder Company v. Franchise Tax Board, 109

Cal.App.2d 524, 242 P.2d 9 (1952)). See also BOP Industries

v. State Bd. of Equalization, 694 P.2d 337, 345 (Colo.App.

RIE Sat REED A NEM eR acti SOROS

ee ee ee es aur uses chs

1984) (a subsequent legislative-pronouncement statute

clarifying the intent of a prior statute is entitled to great

weight in construing the prior statute).

Therefore, even if the provisions of the August

Exemption are considered as constitutionally invalid ret-

roactive law, the August Exemption may be read as a

constitutionally valid clarification, and that should be

controlling in interpreting the February Exemption as to

legislative intent (or be afforded “great weight” in inter-

preting the February Exemption). BQP, supra, at 345. As

discussed above, the provisions of the August Exemption

and its preamble should be dispositive: “facility” in the

February Exemption means a new, single building that

meets the square footage and employment requirements

(App. C28-C29). 149 B.R., at 88.

Il. THE COURT OF APPEALS SUPPORTED ITS

DECISION BY AN ERRONEOUS USE OF THE

RULES OF STATUTORY CONSTRUCTION IN

DIRECT CONFLICT WITH THE DECISIONS OF

THIS COURT AND THE COLORADO COURTS.

A. STRICT CONSTRUCTION AGAINST EXEMP-

TIONS REQUIRED.

Continental concedes, and the court of appeals cor-

rectly found, that the maxim that a tax statute is to be

interpreted liberally in favor of a taxpayer has no appli-

cability in construing a tax exemption statute; tax exemp-

tions are to be strictly construed in favor of government

and against granting the exemption (App. A10). The tax-

payer has the burden to prove it is entitled to the exemp-

tion by clear and convincing evidence. Atlantic Coast Line

Railroad Company v. Phillips, 332 U.S. 168, 172 (1947); State

of Colorado v. Fisch’s Estate, supra, 387 P.2d, at 285. A

legislature is not presumed to have relinquished its

power of taxation beyond the narrowest rational reading

of a tax exemption. The potential need of all govern-

mental powers and fairness in the distribution of burdens

or enjoyment of privileges preclude a broad reading.

Atlantic Coast Line, 332 U.S., at 173.

The court of appeals and the bankruptcy court

agreed that strict construction against Continental was

the standard, although both courts failed to apply this

standard. 138 B.R. at 435; App. A10, D11. The court of

appeals found that a facility of a transportation utility,

such as an airline, may consist of one building or may

consist of multiple buildings (App. A11-A12). Strict con-

struction against granting the exemption requires that the

“one building” definition prevail, under which Continen-

tal fails to satisfy a condition for the exemption. Fisch’s

Estate, supra, 387 P.2d, at 282.

B. THE PLAIN-MEANING DOCTRINE IS SUB-

SERVIENT TO A DISCERNIBLE LEGISLA-

TIVE PURPOSE.

The court of appeals’ decision to disregard legislative

intent is in direct conflict with the decisions of this Court,

with its own decisions, with other courts of appeals, and

with Colorado courts.4 See United States v. American

4 The court of appeals and the bankruptcy court erro-

neously disregarded the legislative intent of the Denver City

Council, holding that legislative intent is only relevant to the

extent that the language of the Ordinance is unclear or ambig-

uous (App. Al11-12, D18). The district court stated “The

Trucking Ass'n, 310 U.S. 534, 546-549 (1940) (when the

plain meaning produces results at variance with legisla-

tive purpose the court will follow the purpose rather than

the literal words); United States v. Ron Pair Enterprises, 489

U.S. 235, 242 (1989) (where the literal application of a

statute will produce results at odds with legislative

intent, the intent of the drafters, rather than the plain

language, controls); In re Channel Home Centers, Inc., 989

F.2d 682, 687 (3d Cir. 1993) (even unambiguous statutory

language need not be followed when a literal interpreta-

tion will produce results at odds with the intention of its

drafters); United States v. Alvarez-Sanchez, 975 F.2d 1396,

1400 (9th Cir. 1992); Lewis v. Grinker, 965 F.2d 1206, 1215

(2d Cir. 1992). For Colorado decisions, see People ex rel.

Dunbar v. Trinidad State Jr. Col., 184 Colo. 305, 520 P.2d

736, 738 (1974) (“Any construction which is inconsistent

with the general purposes of a statute must be rejected in

favor of that construction which furthers the legislative

intent.”); People v. Meyers, 182 Colo. 263, 510 P.2d 430, 432

(1973) (a statutory exemption may not be construed in a

way as to defeat obvious legislative intent).

As set forth in the above line of cases this recognized

rule, that legislative intent controls over literal interpreta-

tion, was again confirmed by the Colorado Court of

Appeals in the case of Walgreen Company v. Charnes, 859

Bankruptcy Court interpreted the City of Littleton [v. County

Com’rs], 787 P.2d 158[, 161 (Colo. 1990)] as standing for the

proposition that only in cases where the statute is found to be

ambiguous should a Court turn to legislative intent for statu-

tory construction purposes. Clearly, however, under Colorado

law, the controlling principle is that the Court is instructed to

uphold the legislative intent in enacting a statute.” (App. C24, n.

2). 149 B.R., at 86, n. 2.

P.2d 235, 240-41 (Colo.App. 1993), cert. denied (Sept. 27,

1993). In construing Denver ordinances the intermediate

Colorado court stated,

Our primary task in construing a statute (or

ordinance) is to determine and give effect to the

intent of the body enacting it. Jones v. Cox, 828

P.2d 218 (Colo. 1992).

Here the stated intent of the City [of

Denver] is that ‘every person who stores, uses,

distributes or consumes . . . tangible personal

property purchased at retail’ be subject to the

use tax. Denver Revised Municipal Code

§ 53-92(a).

‘ * *

Statutes (or ordinances) must be construed as a

whole and in a way as not to defeat obvious

legislative intent. [/d., at 240-241]

The court of appeals misinterpreted Colorado case

law, and failed to apply its own precedent and the deci-

sions of this Court by its finding that “[w]hen the lan-

guage of a statute is clear and unambiguous, there is no

need to inquire into the legislative purpose concerning a

particular statutory provision beyond applying the lan-

guage as written.” (App. All, citing Kane v. Town of Estes

Park, 786 P.2d 412, 415 (Colo. 1990); Triad Painting Co. v.

Blair, 812 P.2d 638, 644 (Colo. 1991); and American Respira-

tory Care Servs. v. Manager of Revenue, 835 P.2d 623, 625

(Colo. App. 1992). If, in fact, the term “facility” were not

ambiguous, the district court and the court of appeals

would not differ in their conclusions, and the parties

would not be before this Court.

However, even assuming that the term is not ambig-

uous, the court of appeals erred, for in Kane, supra, the

Nsceeeerereerreeeremeeeaeiaieinmnaiaaiiaiiiiad

ix dene init

te Ma, lag BS ie ct i Ny

a a aS a OL ee lt ey re!

court states: “In interpreting statutes our primary task is to

determine and give effect to the legislature's intent.” Id., 786 P.2d

at 415 (emphasis supplied). See also, Triad, supra, 812 P.2d, at

644 (“In interpreting a statute we seek to determine the intent

of the legislature... .”, citing Kane v. Town of Estes Park, supra,

786 P.2d, at 415) (emphasis added) and American Respiratory

Care, supra, 835 P.2d, at 625 (“Interpretation or construction

of a statute is a question of law and the primary objective is

to ascertain the intent of the General assembly. . . . ). Thus,

the Jegislative intent must be the key focus even if the term

“facility” has only the common meaning of that given it by

the court of appeals.

In the case at bar, the legislative intent and purpose

are unquestionably set forth in the August Exemption, in

the legislative history, and in reading the February

Exemptions in pari materia. The legislative purpose must

be followed regardless of the ambiguity of the February

Exemption.

As suggested above, before the plain-meaning doc-

trine can be applied to a statute, and “[bJefore it can be

said that no ambiguity exists, it must he concluded that

the questioned words or language are capable of [only]

one interpretation”; the language must be “so clear that it

can only be read one way.” Landtech Corp. v. State Mutual

Life Ass'n. Co., 605 F.2d 75, 80 (3d Cir. 1979). See also

Black’s Law Dictionary, 5th Ed., at 1366, which defines

“unambiguous” as “susceptible of but one meaning”.

The February Exemption used the term “facility” in

the context of a transportation utility. The court of

appeals misapprehended “unambiguous” by its holding

that “facility” in the February Exemption is unam-

biguous, then finding that a transportation facility is

capable of more than one meaning: “A transportation

‘facility’ can consist of one building or several buildings

used in conjunction to transport cargo or passengers.”

App. Al1-A12; emphasis added.

Any ambiguity in the February Exemption must be

construed in favor of Denver and against the exemption.

State of Colorado v. Fisch’s Estate, supra, 387 P.2d, at 285

(“[{I]n Colorado . . . exemptions are a matter of grace and a

claimed exclusion will not be granted unless given by the

Constitution or unless the statute is clear and unam-

biguous.”) (emphasis added); Security Life and Accident Co.

v. Heckers, 177 Colo. 455, 495 P.2d 225, 226 (1972) (burden

is on the taxpayer who claims an exemption to clearly

establish the right to such exemption).

C. THE COMMON-USAGE-OF-WORDS RULE IS

SUBSERVIENT TO LEGISLATIVE PURPOSE;

MOREOVER, THE COMMON USAGE OF THE

TERM AIRPORT “FACILITY” IS A SINGLE

BUILDING.

The court of appeals’ decision is also contrary to that

court’s own precedent, to the decisions of this Court, and

to the decisions of the Colorado courts, in that the court

of appeals fails to apply the dispositive rule that the

common usage of words must also be subservient to

apparent legislative purpose. United States v. American

Trucking Ass‘n, supra, 310 U.S., at 546-549; People ex rel.

Dunbar, supra, 520 P.2d, at 738 (“We need not concern

ourselves with what the term ordinarily means, but

rather, with what it means in the context of the statute.”).

Even if a word in a statute has a generally accepted

common-law meaning, the courts will not impose that

meaning if there are grounds for inferring an affirmative

instruction from the legislature to define it otherwise.

United States v. Everett, 700 F.2d 900, 904 (3d Cir. 1983).

(i) Interpretation of Facility by Colorado Court. The

court of appeals also erred as a matter of law by failing to

apply the Colorado Court of Appeals’ interpretation of

“facility” when construing the February Exemption. The

granting of this Petition by the Court is necessary to secure

and maintain uniformity with Colorado case law. See, City

of Aurora, Colorado, supra, 599 F.2d at 386 (a federal court of

appeals must attempt to construe a Colorado statute in the

same manner in which the Supreme Court of Colorado

would construe it). In the Colorado case of Longbottom v.

State Bd. of Comm. Colleges and Occupational Ed., __ P.2d

__, No. 92CA0410 (Colo. App. May 20, 1993), petition for

cert. filed, No. 935C467 (July 26, 1993), the court equated

the word “facility” with the words “building” and “pub-

lic building”. Id., at ___; slip op., at 6-7. The Colorado

court looked to the definition of “facility” in Webster's

Third New International Dictionary, unabridged, at 812

(1976), and, after discussing the plain-meaning rule, the

court stated, “Our primary task in construing a statute is

to give effect to the intent of the General Assembly”. [bid.

The analysis by the court of appeals is further flawed

in that the court cited no authority other than general

dictionary definitions when it interpreted “facility” (App.

Al11-A12).

(ii) Must Construe in Context. The district court

observed that the common usage of a word must be inter-

preted in “context”, which in this case is in relation to a

transportation utility. Den. Mun. Rev. Code § 1-3; 149 B.R., at

86; App. C24. Also, this Court has repeatedly warned against

the dangers of an approach to statutory construction which

confines itself to the bare words of a statute, for “literalness

may strangle a meaning.” Lynch v. Overholser, 369 U.S. 705,

709 (1962).

Numerous cases, United States Treasury Regulations,

Federal Aviation Statutes, and Colorado statutes that use

“facility” in the context of an airport facility, connote the

use of the term “facility” as a single building (or space

within a building). 149 B.R., at 86; App. C24 (citing Treas.

Reg. § 1.103-8(e)(2)).

(iti) Continental's Interpretation. Continental itself refers

to its buildings at Stapleton Airport as “facilities”. In its Plan

for Reorganization, as filed with the bankruptcy court,

Continental states:

CAL intends to construct a major new mainte-

nance faciliiy before 1995. The new facility is neces-

sary in part to replace CAL’s facilities at Denver,

which are scheduled to close in early 1994.

(App. L3; emphasis added.) 149 B.R., at 86; App. C25.

(iv) Legislative History. After finding the term “facil-

ity” ambiguous, the district court reviewed the legislative

history to determine the intent, which establishes the cen-

tral purpose of the February Exemption. It was to attract

new construction of a new facility by a transportation

utility. The February Exemption was enacted, in part, in

response to a proposal by United Airlines to build an

airline maintenance facility in Denver that would consist

of a single, 1,500,000 square foot structure to which 2,000

or more employees would regularly report (App. C26-

C27). 149 B.R., at 87.

(v) In Pari Materia. Further, Ordinance No. 74, Series

of 1991 (exemption from occupational privilege tax),

enacted concurrently and in pari materia with the February

Exemption, uses the word “facility” interchangeably with

the word “structure” (App. E1-E2).

(vi) Legislative Declaration in August Exemption. The

August Exemption clarifies that Continental does not qual-

ify under the February Exemption. In the August Exemp-

tion, the City Council specifically declared its intent in

enacting the February Exemption. The preamble language

of the August Exemption states in part:

WHEREAS, it was at the time of the introduction,

assage, and enactment of Ordinance No. 75,

Series of 1991, and is presently the intention of

the Council that only a) uses of machinery, tools,

and equipment in the operation of an equipment

maintenance facility at a single industrial building

meeting the square footage and employment require-

ments and b) uses of building and construction

materials for use in the construction of a mainte-

nance facility .. . be exempted from the use tax in

conjunction with the construction and use of a

new, enclosed structure; and

_ said Ordinance No. 75 was, and this ordi-

nance is, intended to encourage a transportation util-

ity to construct and operate such a maintenance

facility in the City and County of Denver;. . . .

App. G1-G2; emphasis added. See also 149 B.R., at 88;

App. C27-C28.

Thus, the intent of City Council in enacting the Febru-

ary Exemption was to provide an exemption only to a

facility consisting of a new, single building. Continental

failed to meet these qualifications.

The district court held that “the August 1991 enact-

ments and discussion of intent are relevant and entitled to

weight in determining the Denver City Council’s intent in

passing Ordinance No. 75.” 149 B.R, at 88; App. C27-C28.

See BOP Industries, supra, 694 P.2d, at 345 (subsequent

declaration of intent by legislature is entitled to great

weight in the statutory construction of prior statute);

Andrus v. Shell Oil Co., 446 U.S. 657, 667, n. 8 (1980)

(arguments predicated on subsequent legislative actions

“should not be rejected out of hand as a source that a court

may consider in the search for legislative intent.”) The

court of appeals erred in finding the August Exemption

and its preamble language as “not relevant” (App. A11-

A12); see also 149 B.R., at 88; App. C27-C28.

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be granted.

Respectfully submitted,

Auice J. FiscHer, Esa.

(Counsel of Record)

Assistant City Attorney

City and County of Denver

Danie. E. Muses, Esa.

City Attorney

Rosert F. Strenski, Esa.

Assistant City Attorney

Office of the City Attorney

353 City and County Building

Denver, Colorado 80202-5375

Telephone: (303) 640-3611

Facsimile: (303) 640-5609

Attorneys for Petitioner,

Patricia Beer, Manager of Revenue

of the City and County of Denver

January 1994

In The

Supreme Court of the United States

October Term, 1993

In re: CONTINENTAL AIRLINES, INC., et al.,

Debtors.

PATRICIA BEER, MANAGER OF REVENUE OF THE

CITY AND COUNTY OF DENVER, COLORADO,

Petitioner,

CONTINENTAL AIRLINES, INC., et al.,

Respondents.

Petition For A Writ Of Certiorari To The

United States Court Of Appeals

For The Third Circuit

APPENDIX TO PETITION FOR A

WRIT OF CERTIORARI

eR 6 Ee Aen | ah Nati Ty aie >

mee

ee eee ee ae er et

ami ay

TABLE OF CONTENTS

FOR APPENDIX

A. OPINION OF THE UNITED STATES COURT

OF APPEALS FOR THE THIRD CIRCUIT; IN

RE: CONTINENTAL AIRLINES, INC., NO.

93-7088 (SEPTEMBER 20, 1993) .............

1. ORDER DENYING PETITION FOR

REHEARING; UNITED STATES COURT

OF APPEALS FOR THE THIRD CIRCUIT;

IN RE: CONTINENTAL AIRLINES, INC.

(OCTOBER 21, 1993).....................

ORDER STAYING ISSUANCE OF THE

MANDATE; UNITED STATES COURT OF

APPEALS FOR THE THIRD CIRCUIT: IN

RE: CONTINENTAL AIRLINES, INC. .....

ORDER AND OPINION OF THE UNITED

STATES DISTRICT COURT FOR THE DIS-

TRICT OF DELAWARE; IN RE: CONTINEN.-

TAL AIRLINES, INC., 23 Bankr.Ct.D. 1499, 149

B.R. 76 (D.DEL. 1993) .......................

ORDER AND OPINION OF THE UNITED

STATES BANKRUPTCY COURT FOR THE

DISTRICT OF DELAWARE; IN RE: CONTI.

NENTAL AIRLINES, INC., 138 B.R. 430

(BKRTCY.D.DEL. 1992).......................

DENVER ORDINANCE NO. 74, SERIES OF

1991 (EXEMPTION FROM BUSINESS OCCU-

PATIONAL PRIVILEGE TAX)...............

DENVER ORDINANCE NO. 75, SERIES OF

1991 (FEBRUARY EXEMPTION FROM USE

SE Sie Se rs

DENVER ORDINANCE NO. 568, SERIES OF

1991 (AUGUST EXEMPTION FROM USE TAX)...

PAGE

Tri

... B4

focm

.Gl

TABLE OF CONTENTS

FOR APPENDIX —- Continued

DENVER ORDINANCE NO. 571, SERIES OF

1991 (INCLUDES PROSPECTIVE AUGUST

BS PEUGD oe av ceverbeconsdecdaceaeviaess

SECTIONS 53-92 AND 53-93, DENVER

REVISED MUNICIPAL CODE...............

EEE WEEE URES CIE SUMED 6s vccveevengececs:

EXCERPT FROM ORAL ARGUMENT

BEFORE THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF DELAWARE;

OCTOBER 22, 1992 (TRANSCRIPT AT 35-36)...

EXCERPT FROM DISCLOSURE STATEMENT;

JOINT PLAN OF REORGANIZATION; CON-

TINENTAL AIRLINES, INC., ET AL.........

PAGE

.Kl

rere

App. Al

APPENDIX A

Not for Publication

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 93-7088

IN RE: CONTINENTAL AIRLINES; CONTINENTAL

AIRLINES HOLDINGS, INC.; CHELSEA CATERING

CORPORATION; CML HOLDINGS, INC.; TAC 30]

. CORPORATION; TAC 302 CORPORATION: TAC 303

CORPORATION; TAC 304 CORPORATION: TAC 306

CORPORATION; TAC 307 CORPORATION. TAC 309

CORPORATION; TAC 312 CORPORATION: TAC 313

CORPORATION; TAC 314 CORPORATION. TAC 315

CORPORATION; TAC 318 CORPORATION. TAC 319

CORPORATION; TAC 320 CORPORATION. TAC 321

| CORPORATION; TAC 322 CORPORATION: TAC 325

| CORPORATION; TAC 326 CORPORATION. TAC 327

CORPORATION; TAC 328 CORPORATION: TAC 329

CORPORATION; TAC 330 CORPORATION: TAC 33]

| CORPORATION; TAC 332 CORPORATION: TAC 333

CORPORATION; TAC 334 CORPORATION: TAC 376

| CORPORATION; TAC 401 CORPORATION: TAC 402

CORPORATION; TAC 811 CORPORATION: TAC 818

CORPORATION; TAC 819 CORPORATION. TAC 820

CORPORATION; TAC 823 CORPORATION: TAC

833-834 CORPORATION; TAC 835 CORPORATION:

TAC FUEL MANAGEMENT, INC.: TEXAS AIR

LEASING CORPORATION; BRITT AIRWAYS, INC.

ROCKY MOUNTAIN AIRWAYS, INC., CONTINENTAL

AIRLINES HISTORICAL SOCIETY, INC;

CONTINENTAL AIR MANAGEMENT SERVICES, INC.:

CONTINENTAL-TRUK HOTEL CORPORATION:

FRONTIER AIRLINES, INC.; NEW YORK AIRLINES,

App. A2

INC.; SYSTEM ONE HOLDINGS, INC.; SYSTEM ONE

TRAVEL RESOURCES, INC.; SYSTEM ONE DIRECT

ACCESS, INC.; MAXPIU INTERNATIONAL, INC.,

Debtors.

~ PATRICIA BEER, MANAGER OF REVENUE OF THE

CITY AND COUNTY OF DENVER, COLORADO,

CONTINENTAL AIRLINES; CONTINENTAL AIRLINES

HOLDINGS, INC.; CHELSEA CATERING

CORPORATION; CML HOLDINGS, INC.; TAC 301

CORPORATION; TAC 302 CORPORATION; TAC 303

CORPORATION; TAC 304 CORPORATION; TAC 306

CORPORATION; TAC 309 CORPORATION; TAC 309

CORPORATION; TAC 312 CORPORATION; TAC 313

CORPORATION; TAC 314 CORPORATION; TAC 315

CORPORATION; TAC 318 CORPORATION; TAC 319

CORPORATION; TAC 320 CORPORATION; TAC 321

CORPORATION; TAC 322 CORPORATION; TAC 325

CORPORATION; TAC 326 CORPORATION; TAC 327

CORPORATION; TAC 328 CORPORATION; TAC 329

CORPORATION; TAC 330 CORPORATION; TAC 332

CORPORATION; TAC 333 CORPORATION; TAC 334

CORPORATION; TAC 376 CORPORATION; TAC 401

CORPORATION; TAC 402 CORPORATION; TAC 811

CORPORATION; TAC 818 CORPORATION; TAC 819

CORPORATION; TAC 820 CORPORATION; TAC 823

CORPORATION; TAC 833-834 CORPORATION; TAC

835 CORPORATION; TAC FUEL MANAGEMENT,

INC.; TEXAS AIR LEASING CORPORATION; BRITT

AIRWAYS, INC.; ROCKY MOUNTAIN AIRWAYS, INC.;

CONTINENTAL AIRLINES HISTORICAL SOCIETY,

INC.; CONTINENTAL AIR MANAGEMENT SERVICES,

INC.; CONTINENTAL-TRUK HOTEL CORPORATION;

FRONTIER AIRLINES, INC.; NEW YORK AIRLINES,

App. A3

INC.; SYSTEM ONE HOLDINGS, INC.; SYSTEM ONE

TRAVEL RESOURCES, INC.; SYSTEM ONE DIRECT

ACCESS, INC.; MAXPIU INTERNATIONAL, INC.

THOMAS E. ROSS,

Trustee

Continental Airlines, Inc.,

Appellant

On Appeal from the United States District Court

for the District of Delaware

(D.C. Civil No. 92-00244)

District Judge: Hon. Joseph J. Farnan, Jr.

Argued August 13, 1993

BEFORE: Scirica, Cowen and Seitz

Circuit Judges

(Filed SEP 20, 1993)

OPINION OF THE COURT

COWEN, Circuit Judge.

This case presents issues of statutory construction of

a municipal use tax exemption ordinance. For the rele-

vant time period, February 1 through August 8, 1991,

Continental Airlines, Inc. (“Continental”) was involved in

bankruptcy proceedings in the district of Delaware. The

City and County of Denver, Colorado (jointly “Denver”)

initiated this litigation by filing a motion with the bank-

ruptcy trustee for payment of an administrative assess-

ment of use taxes owed by Continental for the period

May 1 through August 8, 1991 (the “assessment period”).

App. A4

Continental answered that it was not liable for payment

of use tax because it qualified for an exemption. Conti-

nental cross-moved the bankruptcy court to order Denver

to refund or credit use tax paid for the period February 1

through April 30, 1991 (the “refund period”). Denver

maintains that Continental is liable for use tax on all

purchases made during both the assessment period and

the refund period (jointly the “entire period” or “dis-

puted time period”).

The dispute between the parties as to whether Conti-

nental is liable for payment of the use tax arises from

Continental's operations at Stapleton International Air-

port in Denver (“Stapleton”). Continental operates an

airline hub at Stapleton for which it leases more than one

million square feet and employs greater than six thou-

sand people. The leased area encompasses buildings used

for airplane maintenance and storage, terminal con-

courses and ticket counters, office space, and food pro-

duction. Some of the building space was vacant during

the disputed time period. Continental also leases parking

areas at Stapleton.

Denver imposes a use tax on all personal property

purchased out-of-state for in-state use. Den.Rev.Mun.C.

§ 53-96. This use tax applies to commercial airlines like

Continental which purchase supplies including aviation

fuel, airplane and vehicle parts, food, and tools from out-

of-state vendors. The procedure for paying the Denver

use tax differs from that of sales taxes, in which the seller

collects the tax from the purchaser and remits the balance

App. A5

to the taxing entity. Denver requires all vendees subject to

use tax to file a use tax return on the twentieth day of the

month covering all transactions from the previous month.

Den.Rev.Mun.C. § 53-98(i). Payment of use tax is due

concurrently with this filing.

~ eat Tactile He

In early 1991, the Denver City Council enacted an

ordinance providing an exclusion to the use tax for pur-

chasers who met certain criteria. Ordinance 75 exempted

from use taxation purchases of personal property by a

“transportation utility” for use, consumption, storage, or

distribution at a “facility (a) located within an enterprise

zone ... (b) that contains at least one million (1,000,000)

square feet of useable floor space and (c) that serves as

a... regular place of reporting for duty for at least two

thousand (2,000) employees.” Denver, Colo. Ordinance

75, § 2, Series of 1991, effective February 1, 1991,

Den.Rev.Mun.C. § 53-97(17) (repealed) (“February

exemption” or “Ordinance 75”). In addition, Ordinance

75 required taxpayers claiming a use tax exemption to

pay the normal tax amount into a reserve account for the

first two years of operation at the facility. Id. The purpose

of this reserve arrangement was to revoke the February

exemption in the event total employment at the transpor-

tation utility dropped below two thousand employees

during the third year of operations.

For the months of February, March, and April, 1991,

Continental timely filed its use tax return on or about the

20th day following the end of the month and enclosed

payment with its filing. Beginning with its June 20, 1991

filing, which covered transactions for the month of May,

1991, Continental claimed an exemption from the use tax

under Ordinance 75. For months in which Ordinance 75

Cl ti pti er mw he

App. A6

was in effect but Continental had paid its use tax, the

refund period, Continental claimed a refund and credit

with later filings. Specifically, Continental filed a refund

claim for the months of March and April, 1991 on July 19,

1991. Furthermore, Continental filed amended use tax

returns on July 19, September 4, and September 27, 1991

for the months of February, March, and April respec-

tively, for the purpose of requesting a tax credit in the

event its refund claims were rejected.

On August 5, 1991, the Denver City Council repealed

Ordinance 75 and replaced it with an exemption ordi-

nance further clarifying some eligibility requirements and

adding additional requirements. Denver, Colo. Ordinance

568, §§ 1-4, Series of 1991, effective August 9, 1991,

Den.Rev.Mun.C. § 53-97(16) & (17) (revised) (“August

amendment” or “Ordinance 568”). Because the parties

have stipulated that Continental is not exempt from use

tax liability under the terms of Ordinance 568, this dis-

pute encompasses only the time period from February 1

through August 8, 1991.

Denver proceeded to demand payment of use tax

from Continental for the period from May 1 through

August 8, 1991. Following the issuance of an assessment

against Continental for unpaid use taxes for the months

of May and June, 1991, on August 16, 1991 Denver filed a

motion for payment of administrative expenses in the

bankruptcy court pursuant to 11 U.S.C. § 503(a),

(b)(1)(B)(i), and (b)(1)(C). Denver amended its motion on

October 8, 1991 to request payment of additional use tax

assessments, interest, and penalties for the period cover-

ing July 1 through August 8, 1991. Continental challenged

all assessments by filing a written petition for a “revision,

en re

wh . P

App. A7

modification, or cancellation” with the appropriate reve-

nue official within twenty days of receipt. See

Den.Rev.Mun.C. § 53-117(c). Continental also cross-

moved the bankruptcy court to order Denver to refund or

credit use tax paid during the refund period.

IT.

This dispute between Continental and Denver pre-

sents three basic issues: (1) whether Continental met all

the requirements of Ordinance 75 so as to be exempt from

the use tax; (2) whether Ordinance 568, which expressed

the Denver City Council’s intent to repeal Ordinance

retrospectively, is constitutional as applied to Continental

in this dispute; and (3) whether Continental complied

with all necessary procedures in order to claim a refund

for use taxes paid, and to challenge assessments made by

Denver.

If.

In addressing the first question, the bankruptcy court

found that Continental met all the requirements of Ordi-

nance 75 so as to be exempt from use tax for the period

from February 1 through August 8, 1991. In re Continental

Airlines, Inc., 138 B.R. 430, 435-37 (Bankr. D. Del. 1992),

rev'd, 149 B.R. 76 (D. Del. 1993). The bankruptcy court

also concluded that the retrospective operation of Ordi-

nance 568 to prevent Continental from claiming use tax

exemption under Ordinance 75 violated provisions of the

Colorado Constitution. Id. at 437-38. As to procedural

defaults alleged by Denver, the bankruptcy court found

that the sixty day refund application period should run

App. A8&

from the time of use tax payment, not from the date of

purchase. Id. at 438. Thus, the refund application for

April, which was filed on July 19, 1991, was timely

according to the bankruptcy court. Although the refund

applications for February and March were not filed

within sixty days of payment, the bankruptcy court ruled

that Continental should receive a use tax credit for those

months. Id.

The district court disagreed with the bankruptcy

court as to whether Continental was exempt from the use

tax under the requirements of Ordinance 75. In re Conti-

nental Airlines, Inc., 149 B.R. 76, 85-90 (D. Del. 1993). In

addition, the district court found that Continental was

procedurally barred from receiving a use tax refund or

credit for the refund period because it did not file an

application within sixty days of purchase, nor did it ~

attach original invoices. Id. at 89. Since Continental did

not qualify for use tax exemption under the terms of

Ordinance 75, the district court did not consider whether

- Ordinance 568 unconstitutionally operated retrospec-

tively.

IV.

Continental appeals the order of the district court

which determined that it is subject to Denver use tax for

the entire period from February 1 through August 8,

1991. We have appellate jurisdiction pursuant to 28 U.S.C.

§ 158(d). This appeal presents issues of statutory con-

struction that are questions of law subject to plenary

review. Sharon Steel Corp. v. National Fuel Gas Distribution

Corp., 872 F.2d 36, 38-39 (3d Cir. 1989); Resyn Corp. v.

Isnaini

Le BND lA. aetna ET a he

i ee i a en

App. A9

United States, 851 F.2d 660, 664 (3d Cir. 1988). The legal

determinations of both the district court and the bank-

ruptcy court “receive no presumption of correctness.”

Resyn, 851 F.2d at 664. When reviewing factual determina-

tions made by the bankruptcy court, the trial court of

initial jurisdiction, we employ the “clearly erroneous”

standard. Id.; Sharon Steel, 872 F.2d at 38.

We first address the issues concerning whether Con-

tinental met the substantive criteria of Ordinance 75 so

that it is exempt from use tax for the period from Febru-

ary 1 through August 8, 1991.1 Ordinance 75 contains

three primary criteria for a transportation utility to meet

in order to be exempt from use taxation. The first prereq-

uisite, that the use or distribution facility be “located

within an enterprise zone,” Den.Rev.Mun.C.

§ 53-97(17)(a), is not at issue as the parties have stipu-

lated that Stapleton falls within such a zone. The third

requirement, that the facility “serve[] as a... regular

place of reporting for duty for at least two thousand

(2,000) employees[,]” id. § 53-97(17)(c), likewise is not

disputed. Denver concedes that at least six thousand

Continental employees regularly report to work at Sta-

pleton.

' Applying the substantive criteria of Ordinance 75 as

interpreted by this Court to the present facts does not end our

inquiry because Continental may have forfeited its right to chal-

lenge a use tax assessment or to apply for a use tax refund by

not complying with the requisite procedures.

App. Al10

The primary dispute between the parties centers first

on whether Continental's occupation of multiple leased

buildings at Stapleton constitutes a “facility” in the con-

text of a “transportation utility” within the meaning of

Ordinance 75. Second, even if Continental’s operations

are interpreted to be a facility, Denver maintains that the

total area occupied and used by Continental at Stapleton

does not amount to one million square feet. Denver also

contends that Continental’s failure to pay its use tax

obligation into a reserve account, see id. § 53-97(17), dis-

qualifies it from receiving an exemption. We address each

issue in order.

A. Does “Facility” Refer Only To One Building?

Continental argues that the term “facility” as used in

Ordinance 75 is not ambiguous and that the ordinary

meaning of the term encompasses operations undertaken

in multiple buildings for a common purpose. Denver

responds that we should ignore the plain meaning of the

term “facility” to exclude Continental’s Stapleton opera-

tions from use tax exemption under Ordinance 75

because the legislative intent was to provide an exemp-

tion only for newly built facilities consisting of a single

building. We conclude that the term “facility” as used in

the February exemption is not ambiguous and that we

need not look beyond its plain meaning to determine that

Continental’s Stapleton operation is a facility for pur-

poses of applying Ordinance 75.

In Colorado, statutes granting tax exemptions are

narrowly construed against the taxpayer. American Respi-

ratory Care Servs. v. Manager of Revenue, 835 P.2d 623, 625

Decade. 4 dbiotiit

App. All

(Colo. App. 1992). Despite this presumption against the

taxpayer, the normal rules of statutory construction still

apply. When the language of a statute is clear and unam-

biguous, there is no need to inquire into the legislative

purpose concerning a particular statutory provision

beyond applying the language as written. Kane v. Town of

Estes Park, 786 P.2d 412, 415 (Colo. 1990) (en banc); Triad

Painting Co. v. Blair, 812 P.2d 638, 644 (Colo. 1991) (en

banc). These rules apply with equal force in the construc-

tion and interpretation of municipal ordinances. American

Respiratory Care, 835 P.2d at 625 (citing 1A Norman J.

Singer, Sutherland Statutory Construction § 30.06 (4th ed.

1985)). “When an ordinance is facially unambiguous, its

plain meaning should not be altered by judicial construc-

tion.” Catholic Archdiocese of Denver v. City and County of

Denver, 741 P.2d 333, 337 (Colo. 1987) (en banc).

The Denver City Council has not provided a defini-

tion for “facility” within Ordinance 75 or any related

ordinance adopted at that time. Without a statutory defi-

nition, a term should be given its ordinary meaning. A

“facility” is something that is built or installed to perform

a particular function. Black’s Law Dictionary 591 (6th ed.

1990); accord Webster’s II New Riverside University Dic-

tionary 460 (1984). When considered in the context of a

“transportation utility,” the subject of Ordinance 75, we

find the meaning of the term “facility” to be unam-

biguous.? A transportation “facility” can consist of one

2 By finding the term “facility” unambiguous as used in

section two of Ordinance 75, we need not address the argument

that the Denver City Council intended section two to be read in

pari materia with section one, where it specifically limited the

App. Al2

building or several buildings used in conjunction to

transport cargo or passengers. Having determined that

the use of the term “facility” in Ordinance 75 is clear on

its face, we must apply this definition in a straight for-

ward fashion, rather than looking for legislative intent

outside the statute language. Continental’s Stapleton air-

line hub is a facility within the plain meaning of Ordi-

nance 75.

B. Did Continental Have Over One Million Square Feet

Of Useable Floor Space At Its Facility?

Denver acknowledges that Continental leased greater

than one million square feet of floor space within the

boundaries of Stapleton. Nevertheless, Denver maintains

that Continental’s facility contained less than one million

square feet during the disputed period if vacant and

subleased space were excluded. At oral argument, coun-

sel for Denver conceded that if this Court includes sub-

leased and vacant space in the calculation of total area,

then Continental’s facility would have exceeded the stat-

utory minimum. We therefore review whether subleased

and vacant space should be included in the area require-

ment of Ordinance 75 de novo, as this determination

raises issues of statutory construction.

The Denver City Council expressed the floor space

requirement of Ordinance 75 only in terms of “useable

floor space.” Denver, Colo. Ordinance 75, § 2. There are

no other relevant limitations contained in February

exemption to a “new facility.” Compare Denver, Colo. Ordinance

75, § 2 with id., § 1.

eae AP te hha eel SAS A el ce 8 Siac til eR NAM ltl te eb ae Me wn BOSOM

ee ey ot ere

—s

App. A13

exemption. Relying on the maxims of statutory construc-

tion discussed above, we conclude that the term “use-

able” must be given its ordinary meaning.

Floor area rented by Continental that was capable of

being employed to further the company’s transportation

operations, whether vacant or subleased to a wholly-

owned transportation related subsidiary, was useable.

Continental could have occupied the vacant space to

further its transportation operations at any time. Further-

more, the subleased space occupied by a wholly-owned

subsidiary for the production of airline meals was actu-

ally being employed to further Continental’s transporta-

tion operations at Stapleton. Based on an application of

the plain language of Ordinance 75, and the concession

that the minimum area requirement is met if inclusive of

vacant and sublet space, we find that Continental’s Sta-

pleton facility encompassed more than one million square

feet during the disputed time period.

C. Did Continental Have to Maintain A Reserve

Account?

Even if Continental met all the other prerequisites

contained in Ordinance 75, Denver argues that Continen-

tal’s failure to establish a reserve account disqualifies it

from use tax exemption. The reserve requirement states

simply that the “exemption may be applicable to the first

and second years of operations at the facility provided

that the utility establishes a reserve account for the tax.”

Denver, Colo. Ordinance 75, § 2. In the event the trans-

portation utility reduces its total employment to less than

two thousand employees at any time during the first

App. Al4

three years, the tax reserve shall be returned to the City

of Denver. Id.

Consistent with our interpretation of the other rele-

vant provisions of Ordinance 75, we will not address

legislative intent when the statutory language is unam-

biguous. A straight forward reading of the language of

the reserve requirement indicates that a reserve account

need only be established during the first two years of

operation. We conclude that the reserve requirement is

not ambiguous and that it should be applied as written.

Continental has maintained a transportation facility at

Stapleton since 1986 that meets all the substantive prereq-

uisites contained in Ordinance 75. Thus, the requirement

mandating that a reserve account be established during

the first two years of operation does not apply to disqual-

ify Continental from use tax exemption under Ordinance

75.5

VI.

Before turning to the procedural issues raised by the

application of Ordinance 75 in the present case, we must

address whether Ordinance 568 appropriately applies ret-

rospectively so as to disqualify Continental from a use tax

exemption for the entire period. When adopting Ordi-

nance 568, the Denver City Council included a provision

stating that the “ordinance shall take effect February 1,

+ Because we conclude that the reserve requirement is not

applicable on its face, we need not address whether this provi-

sion violates the automatic stay provisions of the Bankruptcy

Code, 11 U.S.C. § 362.

aa Ot Raines 2 Br A RB ap Sy

2 Cer ane, dhs RE, >

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App. Al5

1991.” Denver, Colo. Ordinance 568, § 4. Thus, the Denver

City Council intended the revision to apply retrospec-

tively so that Continental would not be eligible for the

use tax exemption during the disputed time period. Con-

tinental argues that such a retrospective application of

the ordinance violates provisions of the Colorado Consti-

tution.

The Colorado Constitution contains two provisions

prohibiting retrospective legislation. See Colo. Const. art.

XV, § 12 (“The general assembly shall pass no law...

retrospective in its operation, or which imposes . . . a new

liability in respect to transactions or considerations

already past.”); Colo. Const. art. Il, § 11 (“No ex post

facto law, nor law .. . retrospective in its opera-

tion, . . . shall be passed by the general assembly.”).4 We

* We recognize that this dispute concerns the application of

a municipal ordinance passed by the Denver City Council, not a

statute passed by the Colorado Legislature. Nevertheless,

Colorado case law indicates that constitutional considerations

with respect to obligations imposed by statute apply with equal

force to obligations arising from municipal ordinances. See, ¢.g.,

Colorado Auto Auction Servs. Corp. v. City of Commerce City, 800

P.2d 998 (Colo. 1990) (en banc) (challenge of city transfer tax

ordinance under the federal due process and equal protection

clauses); Cherry Hills Farms, Inc. v. City of Cherry Hills Village, 670

P.2d 779 (Colo. 1983) (en banc) (challenge of city expansion fee

ordinance under the state uniform taxation provision); Spiker v.

City of Lakewood, 603 P.2d 130 (Colo. 1979) (en banc) (challenge

of city rezoning ordinance under state constitutional provision

prohibiting special legislation); Apple v. City and County of

Denver, 390 P.2d 91 (Colo. 1964) (en banc)- (challenge of city

housing code under due process and retrospective legislation

clauses). The Colorado Supreme Court has applied the state

constitution prohibition on retrospective legislation to

App. Al6

conclude that Ordinance 568 violates the Colorado prohi-

bition on retrospective legislation because it creates a

new use tax liability for transactions that have already

taken place.

As repeatedly articulated by the Colorado Supreme

Court, a law is retrospective in operation when it “ ‘takes

away or impairs vested rights acquired under existing

“a

laws, or creates a new obligation, imposes a new duty, or

attaches a new disability, in respect to transactions or

considerations already past.’ ” P-W Invs., 655 P.2d at 1371

(quoting Denver, South Park & Pacific Ry. Co. v. Woodward,

4 Colo. 162, 167 (1878)); Van Sickle v. Boyes, 797 P.2d 1267,

1270-71 (Colo. 1990) (en banc) (quoting same). Continen-

tal asserts that Ordinance 568 imposes a new disability by

changing the use tax exemption criteria for purchases

that had already taken place. We agree. The transactions

giving rise to the use tax obligation had already taken

place when Ordinance 568 made taxable the transactions

which were wholly tax-free at the time they occurred. The

Denver Code recognizes transfer of title on the date of

purchase as the event producing use tax liability. See, e.g.,

Den.Rev.Mun.C. § 53-111(b) (refund procedure requires

application to be made “within sixty (60) days after the

purchase of the goods”). Furthermore, “purchase” is

defined to take place upon transfer of title or possession.

Den.Rev.Mun.C. § 53-95(20). Therefore, purchases made

by Continental before August 9, 1991, the effective date of

Ordinance 568, were discrete transactions for which Con-

tinental was either obligated to pay use tax, or for which

municipal ordinances. See Apple, 390 P.2d at 94; P-W Invs., Inc. v.

City of Westminster, 655 P.2d 1365, 1370-72 (Colo. 1982) (en banc).

App. Al17

Continental was exempt from use tax under the terms of

Ordinance 75. Denver could not permissibly act to change

the use tax rules with respect to completed purchases.

Denver, however, argues that Colorado munici-

palities may act to change tax rules as long as such

changes are made before the close of the tax time period.

For this proposition, Denver cites Martin v. Board of

Assessment Appeals, 707 P.2d 348 (Colo. 1985) (en banc),

where the Colorado Supreme Court found that a change

in the formula or method of computing the amount of

property tax due during a given year was not unconstitu-

tionally retrospective. We find the Martin case distin-

guishable on two grounds. First, and most importantly,

the Martin court addressed only whether a municipality

could change assessment factors for an existing property

tax during a tax year that had not yet closed. Id. at 351-52.

In the present case, Ordinance 568 imposes a new use tax

on Continental by changing retrospectively the exemp-

tion eligibility criteria. The new ordinance made taxable a

past event which at the time it took place was a tax-free

exchange.

Second, a change in assessment factors as in Martin

did not produce additional tax liability for a discrete

transaction. Property tax liability had already attached

based upon ownership during the tax period. In our case,

the nature of use tax is such that liability attaches at the

time of purchase, when title or possession changes hands.

Here, Denver was seeking to impose the use tax for a

liability-creating transaction that had already taken place

(i.e., purchases made prior to August 9, 1991). Thus,

Martin is not controlling. Having found that Ordinance

App. Al8

568 operates to repeal retrospectively the use tax exemption

criteria of Ordinance 75 in violation of the Colorado Consti-

tution, we hold that Continental was exempt from use tax

under the terms of Ordinance 75 for the entire period.°

VIL.

We next address whether Continental complied with the

requisite procedural mechanisms called for in the Denver

Ordinance in order to preserve its right to apply for a refund

or challenge the assessments. With respect to February,

March, and April, 1991, we conclude that Continental failed

to comply with the refund application procedures required

by the Denver Code and, thus, forfeited any right to a refund

or credit for use tax paid. Continental did, however, preserve

its right to challenge assessments made by Denver for use

tax it withheld during the time period from May 1 through

August 8, 1991.

A. Refund Period Procedures

The Denver Code governing use tax provides only

one application procedure for obtaining refunds or

> Denver further argues that Ordinance 568 is only a cura-

tive modification of Ordinance 75 that is not retrospective new

legislation. Given that the parties agree Continental does not

qualify for use tax exemption under the terms of Ordinance 568,

and that they vehemently disagree whether Continental quali-

fies under the terms of Ordinance 75 to the point where they

have litigated this issue in the bankruptcy court, the district

court, and now this Court, we do not find this argument cred-

ible.

App. Al9

credits of taxes already paid. A purchaser such as Conti-

nental who has paid use tax but claims an exemption

under the use tax ordinance may receive a refund upon

determination by the revenue manager that the taxpayer

is entitled to a refund, but only after complying with all

conditions precedent. Den.Rev.Mun.C. § 53-111(a).°

There are three conditions precedent. First, the pur-

chaser must apply for a refund “within sixty (60) days

after the purchase of the goods.” Id. § 53-11 1(b). Second,

the purchaser must support the application for refund

with an affidavit “accompanied by the original paid

invoice or sales receipt.” Id. Third, the application must

contain such substance and be made on forms as set forth

by the revenue manager. Id. As the parties do not dispute

that Continental complied with the third condition prece-

dent, we discuss only the first two conditions.

Denver urges this Court to apply the plain language

of the first condition precedent to find that Continental

® Continental alleges that an alternative procedure for chal-

lenging use taxes is to file an amended return seeking credit for

the amount paid. Continental bases this allegation on disputed

testimony from a Denver tax revenue officer that the Depart-

ment of Revenue has accepted and acted upon amended returns

in the past. Counsel for Continental acknowledged at oral argu-

ment that such a challenge procedure is not expressly provided

for in the Denver Code. Furthermore, tax ordinances providing

exemptions should be strictly construed against the taxpayer.

Cf. Atlantic Coast Line R.R. Co. v. Phillips, 332 U.S. 168, 172 (1947);

American Respiratory Care, 835 P.2d at 625. The burden lies with

the taxpayer to establish by clear and convincing evidence that

an alternative procedural appeal mechanism exists and that

they complied with its terms. On this record, we conclude that

Continental has failed to meet this burden.

App. A20

failed to timely apply for a refund or credit. In support of

this position, the Denver Code defines “purchase” as

taking place upon “transfer, conditionally or absolutely,

of title or possession or both of the tangible personal

property.” Id. § 53-95(20). Thus, the sixty day appeal time

period allowed by the ordinance begins to run upon

transfer of title when the tax obligation arises, not at

some later date such as when the use tax is due.

Continental would like this Court to interpret the

appeal timing provision consistently with the bankruptcy

court, which held that the sixty day window does not

open until the use tax is payable (approximately twenty

days after the close of the month for the particular trans-

action in dispute). See Continental Airlines, 138 B.R. at 438.

We find no convincing support for this position and

conclude that the sixty day appeal timing provision

begins to run from the date of the transaction giving rise

to the use tax obligation, not from the date the use tax is

due.

When addressing issues of statutory construction, we

look first to the statutory language in order to determine

the legislature’s intent. Triad, 812 P.2d at 644; Kane, 786

P.2d at 415. Ordinary language should be interpreted

according to its plain meaning. Triad, 812 P.2d at 644.

Here, the plain language of the statute indicates that the

refund application must be filed within sixty days after

“purchase.”

This reading of the plain language of the use tax

ordinance is supported by a Colorado Supreme Court

case interpreting a similar provision of the state gasoline

sales tax. Armstrong v. Driscoll Constr. Co., 110 P.2d 652-53

App. A21

(Colo. 1941). “The right to a refund rests solely on the

statute, which does not authorize any excuse for delay in

filing the application therefor.” Id. at 653. We conclude

that the Denver City Council meant what it said, that the

sixty day period within which an application for refund

must be filed begins to run at the time of purchase.

Applying our interpretation of the Denver Code to

the present facts leads to the conclusion that all filings

made by Continental with respect to refund period

months were not made within the sixty day window. The

refund applications for March and April, 1991 were sub-

mitted on July 19, 1991. The sixty day period expired at

the latest on June 30, 1991 for purchases made in April.

The refund period for March purchases expired even

earlier. In addition, Continental filed amended use tax

returns, seeking tax credits, on dates even further

removed from the actual time of purchase. Therefore, we

find that Continental failed to comply with the timing

requirement contained in the Denver Code in order to

apply for a use tax refund for the refund months.

The second condition precedent requires the taxpayer

to attach original purchase invoices to its refund applica-

tion. Continental admits that it failed to attach invoices to

its applications. Nevertheless, Continental argues that its

filing of use tax returns provided a substantial equivalent

to original invoices because both disclose the amount of

purchases on which taxes should be paid if owed. Again,

we need not plumb the depths of legislative intent when

the statutory language is clear on its face. Here, the

relevant clause within the refund provision states that the

application “must” be accompanied by an “original paid

invoice or sales receipt.” Den.Rev.Mun.C. § 53-111(b).

App. A22

Continental's failure to attach invoices to its refund appli-

cations for the months of February, March, and April,

1991 was a fatal procedural bar to recovery by refund or

credit of use taxes paid.

B. Assessment Period Procedures

Continental's challenge of assessments levied by

Denver for failure to pay use tax for the period from May

1 through August 8, 1991 involves a separate appeal

provision with different procedural prerequisites. In

order to challenge a use tax assessment, the taxpayer

must petition the revenue manager by stating the

grounds upon which relief should be granted within

twenty days of receipt in order to prevent the assessment

from becoming final and due. Den.Rev.Mun.C.

§ 53-117(c). The revenue manager’s decision can then be

reviewed by the state district court by filing a petition or

complaint within thirty days of the date of final decision.

Den.Rev.Mun.C. § 53-124.

The bankruptcy court expressly found that “Conti-

nental has preserved its right of appeal to the Denver

District Court from the Department of Revenue’s final

assessment for the period May 1-August 8, 1991.” Conti-

nental Airlines, 138 B.R. at 432-33.” Implicit in this conclu-

sion is that the bankruptcy court made findings of fact

that Continental filed assessment appeals on certain

dates. At oral argument, counsel for Denver did not

7 Both parties acknowledge that they agreed to stay the

proceedings in Denver District Court pending the resolution of

this dispute in this Court.

App. A23

contest that Continental filed the assessment appeals in a

timely manner. Further, Denver invoked the jurisdiction

of the bankruptcy court for payment of the use tax assess-

ments, which necessarily required a determination of the

assessment challenge procedural issues. Without evi-

dence to the contrary, we will not disturb the bankruptcy

court’s conclusion that Continental complied with the

necessary procedures in order to challenge Denver’s

assessments for use taxes during the assessment period.

Because we conclude that Continental met the prerequi-

sites for exemption from use tax during the entire period,

and because Continental perfected its appeal of assess-

ments levied by Denver, Denver is not entitled to recover

use tax assessments from the bankruptcy estate.

VIII. Conclusion

We conclude that Continental’s Stapleton facility

complies with ail the substantive prerequisites contained

in Ordinance 75, such that it was eligible for an exemp-

tion from use tax for the entire period (February 1

through August 8, 1991). Further, Ordinance 568 cannot

operate to deny Continental eligibility for use tax exemp-

tion under Ordinance 75 because the adoption of a retro-

spective ordinance that imposes a new disability on a

taxpayer violates the Colorado Constitution. Neverthe-

less, Continental failed to comply with procedural

requirements contained in the Denver Code which oper-

ate to prohibit recovery of use tax paid during the refund

period (February, March, and April, 1991). Continental is

not entitled to a use tax refund or credit for the refund

period months. Continental did comply with the neces-

sary procedures in order to challenge assessments made

—

RR Ip op A Lp te hin 0 ok OIE eRe

roe se

App. A24

by Denver during the assessment period (May, June, July,

and August 1-8, 1991). Continental is entitled to a use tax

exemption under Ordinance 75 for the assessment period.

Accordingly, we will reverse in part, and affirm in

part, the Order of the district court dated January 12,

1993. We will remand to the district court for further

remand to the bankruptcy court for entry of an Order

denying Denver’s motion for payment of an administra-

tive expense claim for unpaid use tax, penalties, and

interest during the assessment period, and for the bank-

ruptcy court to enter an Order denying Continental's

cross-motion for a refund or credit for use taxes paid

during the refund period.

TO THE CLERK OF THE COURT:

Please file the foregoing opinion.

/s/ Robert E. Cowen

Circuit Judge

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App. B1

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 93-7088

IN RE: CONTINENTAL AIRLINES; CONTINENTAL AIR-

LINES HOLDINGS, INC.; CHELSEA CATERING COR-

PORATION; CML HOLDINGS, INC.; TAC 301

CORPORATION; TAC 302 CORPORATION; TAC 303

CORPORATION; TAC 304 CORPORATION; TAC 306

CORPORATION; TAC 307 CORPORATION; TAC 309

CORPORATION; TAC 312 CORPORATION; TAC 313

CORPORATION; TAC 314 CORPORATION; TAC 315

CORPORATION; TAC 318 CORPORATION; TAC 319

CORPORATION; TAC 320 CORPORATION; TAC 321

CORPORATION; TAC 322 CORPORATION; TAC 325

CORPORATION; TAC 326 CORPORATION; TAC 327

CORPORATION; TAC 328 CORPORATION; TAC 329

CORPORATION; TAC 330 CORPORATION; TAC 331

CORPORATION; TAC 332 CORPORATION; TAC 333

CORPORATION; TAC 334 CORPORATION; TAC 376

CORPORATION; TAC 401 CORPORATION; TAC 402

CORPORATION; TAC 811 CORPORATION; TAC 818

CORPORATION; TAC 819 CORPORATION; TAC 820

CORPORATION; TAC 823 CORPORATION; TAC 833-834

CORPORATION; TAC 835 CORPORATION; TAC FUEL

MANAGEMENT, INC.; TEXAS AIR LEASING CORPO-

RATION; BRITT AIRWAYS, INC.; ROCKY MOUNTAIN

AIRWAYS, INC., CONTINENTAL AIRLINES HISTORI-

CAL SOCIETY, INC.; CONTINENTAL AIR MANAGE-

MENT SERVICES, INC.; CONTINENTAL-TRUK HOTEL

CORPORATION; FRONTIER AIRLINES, INC.; NEW

YORK AIRLINES, INC.; SYSTEM ONE HOLDINGS, INC.;

SYSTEM ONE TRAVEL RESOURCES, INC.; SYSTEM

App. B2

ONE DIRECT ACCESS, INC.; MAXPIU INTERNA-

TIONAL, INC.,

Debtors.

PATRICIA BEER, MANAGER OF REVENUE OF THE

CITY AND COUNTY OF DENVER, COLORADO,

CONTINENTAL AIRLINES; CONTINENTAL AIRLINES

HOLDINGS, INC.; CHELSEA CATERING CORPORA-

TION; CML HOLDINGS, INC.; TAC 301 CORPORATION;

TAC 302 CORPORATION; TAC 303 CORPORATION;

TAC 304 CORPORATION; TAC 306 CORPORATION;

TAC 307 CORPORATION; TAC 309 CORPORATION;

TAC 312 CORPORATION; TAC 313 CORPORATION;

TAC 314 CORPORATION; TAC 315 CORPORATION;

TAC 318 CORPORATION; TAC 319 CORPORATION;

TAC 320 CORPORATION; TAC 321 CORPORATION;

TAC 322 CORPORATION; TAC 325 CORPORATION;

TAC 326 CORPORATION; TAC 327 CORPORATION;

TAC 328 CORPORATION; TAC 329 CORPORATION;

TAC 330 CORPORATION; TAC 332 CORPORATION;

TAC 333 CORPORATION; TAC 334 CORPORATION;

TAC 376 CORPORATION; TAC 401 CORPORATION;

TAC 402 CORPORATION; TAC 811 CORPORATION;

TAC 818 CORPORATION; TAC 819 CORPORATION;

TAC 820 CORPORATION; TAC 823 CORPORATION;

TAC 833-834 CORPORATION; TAC 835 CORPORATION;

TAC FUEL MANAGEMENT, INC.; TEXAS AIR LEASING

CORPORATION; BRITT AIRWAYS, INC.; ROCKY

MOUNTAIN AIRWAYS, INC.; CONTINENTAL AIR-

LINES HISTORICAL SOCIETY, INC.; CONTINENTAL

AIR MANAGEMENT SERVICES, INC.; CONTINENTAL-

TRUK HOTEL CORPORATION; FRONTIER AIRLINES,

INC.; NEW YORK AIRLINES, INC.; SYSTEM ONE

HOLDINGS, INC.; SYSTEM ONE TRAVEL RESOURCES,

INC.; SYSTEM ONE DIRECT ACCESS, INC.; MAXPIU

2: Faobee

App. B3

INTERNATIONAL, INC.

THOMAS E. ROSS,

Trustee

Continental Airlines, Inc.,

Appellant

SUR PETITION FOR REHEARING

BEFORE: SCIRICA, COWEN and SEITZ, Circuit

Judges

The petition for panel rehearing filed by appellant in

the above-entitled case having been submitted to the

panel, and no member of the pane! having asked for

rehearing, the petition for panel rehearing is denied.

By the Court,

/s/ Robert E. Cowen

Circuit Judge

Dated: OCT 21 1993

;

App. B4

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 93-7088

In Re: Continetal [sic] Airlines

Pursuant to Rule 41(b) of the Federal Rules of Appel-

late Procedure, it issORDERED that issuance of the certi-

fied judgment in lieu of formal mandate in the above

cause be, and it is hereby stayed until JANUARY 19, 1994.

/s/ Robert E. Cowen

Circuit Judge

Dated: NOV 17 1993

van hs ho Oe RO

App. Cl

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

IN RE:

CONTINENTAL

AIRLINES, INC., et al.,

arentans, Civil Action No.

PATRICIA BEER, Manager .: 92-244-]]F

of Revenue of the City

and County of Denver,

Colorado,

Appellant,

CONTINENTAL

AIRLINES, INC., et al.,

Appellees.

ORDER

At Wilmington this 12 day of January, 1993, for

the reasons set forth in the Opinion issued this date,

IT IS HEREBY ORDERED that the Decision and

Order of the Bankruptcy Court dated February 4, 1992,

is REVERSED.

/s/ Joseph J. Farnan, Jr.

UNITED STATES~

DISTRICT JUDGE

App. C2

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

IN RE:

CONTINENTAL

AIRLINES, INC., et al.,

Debtors. eA .

7 Civil Action No.

PATRICIA BEER, Manager . 92-244-]|F

of Revenue of the City

and County of Denver,

Colorado,

Appellant,

CONTINENTAL

AIRLINES, INC., et al.,

A ppellees.

S. David Peress, and Paul P. Welsh, of MORRIS NICHOLS

ARSHT & TUNNELL, Wilmington, Delaware. Attorneys

for Debtors /Apppellees [sic] Continental Airlines, Inc., et

al.

Jeoffrey L. Burtch, of COOCH & TAYLOR, Wilmington,

Delaware. Attorneys for Appellant Manager of Revenue

of the City and County of Denver, Colorado.

App. C3

OPINION

January 12, 1993

Wilmington, Delaware

/s/ Joseph J. Farnan, J.

FARNAN, District Judge.

Presently before the Court is the appeal of the City

and County of Denver, Colorado, of the February 4, 1992

Order and Opinion of the United States Bankruptcy

Court for the District of Delaware (“the Bankruptcy

Court”). The Bankruptcy Court determined that Conti-

nental Airlines, Inc. was entitled to an exemption for

certain use taxes from February, 1991, through August,

1991. This Court has jurisdiction over the appeal pur-

suant to 28 U.S.C. § 158(d).

|. PROCEDURAL HISTORY

On August 16, 1991, the City and County of Denver,

Colorado (“Denver”) filed a Motion for Payment of

Administrative Expenses in the Bankruptcy Court pur-

suant to 11 U.S.C. § 503(a),(b)(1)(B)(i) and (C). In the

motion, Denver claimed that it was owed certain use

taxes in the amount of $1,494,940.00 plus penalties and

interest. Denver amended its motion on October 1, 1991.

to seek additional interest and penalties, bringing the

total amount sought to $1,684,874.60. This figure repre-

sents past due taxes plus interest and penalties from May

|, 1991, to August 8, 1991.

Continental Airlines, Inc. (“Continental”) denied lia-

bility and filed a Cross Motion for Determination of Tax

Liability under 11 U.S.C. § 505. Continental sought to

App. C4

have the Bankruptcy Court determine that it was exempt

from tax assessment during the May 1, 1991 to August 8,

1991 time period. Moreover, Continental sought refunds

and/or credits totalling $1,259,271.58 for use taxes paid

from February 1, 1991 through April 30, 1991.

The Bankruptcy Court held a hearing on the motions

on October 24, 1991 and, on February 4, 1992, the Bank-

ruptcy Court issued its decision. The Bankruptcy Court

ordered that Denver’s motion for payment of administra-

tive expenses be denied and granted Continental's cross

motion. Insofar as the tax credits and refunds were con-

cerned, the Bankruptcy Court ordered Denver to calcu-

late the credits for February and March, 1991 as well as

the refund due for April, 1991. The Court further ordered

that interest was to accrue from February 4, 1992.

Il. THE BANKRUPTCY COURT DECISION

According to the Bankruptcy Court, the key issue in

the controversy between Denver and Continental is the

sé

meaning of the term “facility” within the context of ordi-

nances enacted by Denver in February, 1991. According to

the Bankruptcy Court’s Opinion, if the term “facility”

refers to only a single enclosed building, the exemption

would not apply to Continental's operation at Stapleton

Airport in Denver. In the Matter of Continental Airlines,

Inc., 138 B.R. 430, 435 (D. Del. 1992). If, on the other hand,

“facility” refers to one or more buildings, then Continen-

tal was exempt from the use tax. Id. Thus, the critical task

before the Bankruptcy Court was to interpret Denver

Ordinance No. 75 which exempted sales of personalty

from certain Denver sales and use taxes so long as the

App. C5

personalty was “to be used, consumed, stored, or distrib-

uted at a facility .. . (b) that contains at least one million

square feet of useable floor space and (c) that serves as

a... regular place of reporting for duty for at least two

thousand employees.” Denver Ordinance No. 75, Series

of 1991, effective February 1, 1991, Den. Rev. Mun. Code

§ 53-97(17) (the February exemption or Ordinance No.

75).

The Bankruptcy Court began its interpretation anal-

ysis by discussing that Denver is a “home rule” munici-

pality organized under the Colorado Constitution. In the

Matter of Continental, 138 B.R. at 435. Thus, any local

ordinances that are in conflict with state law supersede

the state law within the territorial limits of the munici-

pality. Id. citing, Colo. Const., Art. XX, § 6. Thus, the

Bankruptcy Court concluded that the Denver sales and

use tax provisions superseded any contrary state tax stat-

utes so long as the local ordinance comported with state

constitutional requirements. Id.

Under Colorado law, when interpreting statutes,

“words and phrases shall be read in context and con-

strued according to the rules of grammar and common

usage.” Id. citing Colo. Rev. Stat. Ann. § 2-4-202 (1991).

Further, legislative intent is to be considered only in the

event that the statute is ambiguous as to the legislature's

intent. Id. at 436, citing City of Littleton v. Board of County

Com’rs of Arapahoe County, 787 P.2d 158, 161 (Colo., 1990).

Given this background, the Bankruptcy Court deter-

mined that the term facility as used in Ordinance No. 75

is broad enough to encompass multiple buildings so long

as they exist to carry out a common purpose. Id. The

App. C6

Bankruptcy Court noted the term facility is not defined in

Ordinance No. 75 and so it looked to the definition

appearing in Webster’s Third New International Diction-

ary, unabridged (1981) and to one provided by a Colo-

rado tax statute that relates to enterprise zones. Id. The

Bankruptcy Court reasoned that absent a controlling defi-

nition the Court must rely on the common meaning of a

term. The Bankruptcy Court found that in the context of

an airport hub, common usage would direct the Court to

find that multiple buildings comprise a facility. Id. Thus,

the Bankruptcy Court concluded that Continental's oper-

ation at Stapleton is a facility because it is “operated for

the purpose of transporting passengers and cargo, natu-

rally consists of multiple buildings and area, all of which

are necessary to the operation.” Id.

Next, the Bankruptcy Court considered the argu-

ments of Denver as to whether Continental met all the

criteria for the tax exemption. One argument advanced by

“Denver was that Continental's facility did not contain “at

least one million square feet of useable floor space” as

required by Denver Ordinance No. 75. Id. The Bankruptcy

Court concluded the issue was the amount of space

leased by Continental, not the amount actually physically

occupied by it. The parties stipulated to the following

facts: (1) Continental’s lease agreement encompasses at

least one million square feet of useable space; (2) Sta-

pleton is an “enterprise zone” within the meaning of

Ordinance No. 75; and (3) at least two thousand Conti-

nental employees report to work at Stapleton. Id. Thus,

the Bankruptcy Court concluded Continental met all of

the requirements of Ordinance No. 75 and was entitled to

a tax exemption under the February 1991 exemptions. /d.

App. C7

In August, 1991 however, the February exemptions

were repealed and new exemptions were adopted. Id. The

parties stipulated that under the new ordinance, Ordi-

nance No. 568, Continental would not qualify for a tax

exemption but disagreed as to the retroactive effect of

Ordinance No. 568. Id.

After considering the language of Ordinance No. 568,

the preamble to Ordinance No. 568 and Colorado’s case

law relating to retroactive application of new legislation,

the Bankruptcy Court concluded that Ordinance No. 568

was not to be applied retroactively. Id. at 437. The Bank-

ruptcy Court reached this conclusion despite the fact that

section 4 of Ordinance No. 568 stated that the amended

use tax exemption was to be retroactively applied to

February 1, 1991.! Id.

Finally, the Bankruptcy Court considered whether

Continental was entitled to a refund or credit for over-

paid taxes for February, March, and April, 1991. Id. at 438.

With respect to this issue, Continental conceded that it

filed its March claim one month late, and never filed a

claim for February. Id. The Bankruptcy Court held that

Continental was entitled to a refund for the April pay-

ment as it was timely filed, however with respect to the

February and March payments, the Bankruptcy Court

' According to the preamble of the August ordinance, the

legislature was amending the tax exemption because it under-

stood that “no facility, building, or enclosed structure or group

of such facilities, buildings or enclosed structures currently, as

of the date of this enactment, and at all times prior thereto meets

the eligibility criteria established for the exemptions granted by

Ordinance 75...” Id. at 437-438.

App. C8

decided Continental was entitled only to a credit based

on the filed amended tax returns. Id.

lil. THE PARTIES’ CONTENTIONS 7

In its appeal, Denver raises several grounds for chal-

lenging the decision of the Bankruptcy Court.

A. JURISDICTIONAL CHALLENGES

As a preliminary matter, Denver challenges the juris-

diction of the Bankruptcy Court to grant a refund or

credit to Continental for the Denver use taxes paid.

According to Denver, the Bankruptcy Court erred, as a

matter of law, in entertaining Continental’s Cross motion

under 11 U.S.C. 505(a). (Docket Item (“D.I.”) 8, pp. 31 -

41).

Denver concedes that a Bankruptcy Court is given

broad authority under 11 U.S.C. § 505(a) to determine the

amount or legality of any tax imposed. (D.I. 8, p. 31). But,

Denver contends § 505(a) provides two explicit excep-

tions to the Bankruptcy Court’s authority:

(2) the court may not so determine -

(A) the amount or legality of a tax, fine,

penalty, or addition to tax if such

amount or legality was contested

before and adjudicated by a judicial or

administrative tribunal of competent

jurisdiction before the commencement

of the case under this title; or

(B) any right of the estate to a tax refund,

before the earlier of -

App. C9

(i) 120 days after the trustee prop-

erly requests such refund, from

the governmental unit from

which such refund is claimed; or

(ii) a determination of such govern-

mental unit of such request.

11 U.S.C. § 505(a)(2). Denver, while conceding that the

first exception to the Bankruptcy Court's power does not

apply, argues that the second exception is applicable.

(D.I. 8 at 32). According to Denver, the “request” referred

to in 11 U.S.C. § 505(a)(2)(B)(ii) is any request for a refund

properly made by the trustee as referred to in 11 U.S.C.

§ 505(a)(2)(B)(i). (D.1. 8 at 32). Further, Denver contends a

request is only properly made by the trustee when done

so in a timely manner under local law. (D.I. 8, p- 32).

Denver argues that Continental failed to properly

request a refund because it did not file a claim within the

limitations period set forth by the Denver Municipal

Code and, when it did submit a claim, Continental failed

to attach the proper documentation. (D.I. 8, p. 34). In

arguing this ground for appeal, Denver focuses on the

statutory framework provided by the Denver Municipal

Code for what constitutes a~timely filing and concludes

that none of the requests for a refund were timely. Thus,

Denver concludes that the Bankruptcy Court did not have

jurisdiction to grant Continental a refund. (D.1. 8, pp.

34-37).

As a second jurisdictional challenge, Denver argues

that even if the Court ignored the specific exceptions to a

grant of power under 11 U.S.C. § 505(a)(2) the Bank-

ruptcy Court was still without jurisdiction as 11 U.S.C.

§ 505 cannot be used to revive a claim that is stale due to

App. C10

the expiration of a limitations period. (D.I. 8, p. 39).

According to Denver, because the statute of limitations is

a jurisdictional question and Continental failed to raise a

claim prior to the expiration of the limitations period, the

Bankruptcy Court was without jurisdiction to determine

Continental’s entitlement to a refund or credit. (D.1. 8, pp.

39-41).

Continental responds that their right to a tax refund

or credit was properly before the Bankruptcy Court

under 11 U.S.C. § 505(a) and was before the Court by way

of Denver’s motion for administrative expenses pursuant

to 11 U.S.C. § 503. (D.I. 11, pp. 37-38). According to

Continental, the Bankruptcy Court was the only Court

with jurisdiction to entertain Denver’s administrative

claim and once that process began, it would be duplica-

tive for all issues relating to the use tax not to be deter-

mined in one proceeding. (D.I. 11, pp. 38-40).

With respect to the specific exceptions of jurisdic-

tional power present in 11 U.S.C. § 505(a)(2), Continental

disagrees with Denver’s interpretation of § 505(a)(2)(B).

(D.I. 11, p. 41). According to Continental, the second

exception provides a time limitation for the Court to

determine the right to a tax refund rather than providing

for an express denial of jurisdiction. (D.I. 11, p. 41).

Subpart (2) of subsection (a) provides that the court “may

not so determine — any right of the estate to a tax refund,

before the earlier of” and then provides two timing

events. (D.I. 11, p. 41). Continental contends it has

already fulfilled one of these timing requirements and

therefore, the other is irrelevant in deciding the Bank-

ruptcy Court’s jurisdiction. (D.I. 11, p. 41). Continental

contends that the Bankruptcy Court was vested with the

App. Cll

authority to hear its claim on August 15, 1991, the date

the City of Denver denied its request for a refund because

the local taxing authority made a determination in the

matter, and thus the earlier of the two time frames was

fulfilled. (D.I. 11, p. 41).

With respect to whether the claim by Continental was

properly filed or not, Continental concedes it did not

timely file its March, 1991 claim for refund and requested

the Bankruptcy Court to consider its claim a request for a

credit. (D.I. 11, p. 42). However, with respect to the April

refund request, Continental claims it was timely filed and

therefore properly before the Court. (D.I. 11, p- 42). In

this regard, Continental cites Denver legislative authority,

case law and public policy for the propositions that: (1)

an original filing is not required; (2) a claim for refund is

deemed filed upon mailing to the Manager of Revenue;

(3) a claim for refund is not due until 60 days after the

filing was required, as opposed to Denver’s contention

that the 60 days begins running prior to the time the

original filing was due; and (4) Continental complied

with all reasonable procedural requirements of the

Denver Claim for Refund process. (D.I. 11, pp- 42-46).

Finally, Continental argues that although refund

claims for February and March 1991 would have been

untimely, it filed amended returns to provide the Bank-

ruptcy Court with a record to determine the amount of

credit to which Continental was entitled. (D.I. 11, p.47).

Thus, the 60 day time limit applicable to the claim for a

refund is not a proper limitations period with respect to

February and March claims as those claims were for a

credit, not a refund. Further, the 60 day limitations period

was met for the April claim for refund and thus, the

App. C12

Bankruptcy Court had the authority to determine Conti-

nental’s right to a refund for April and its right to credits

for February and March pursuant to 11 U.S.C. § 505. (D.I.

11, p. 47). 7 ;

B. APPLICABILITY OF ORDINANCE NO. 75

1. MEANING OF THE TERM FACILITY

Denver contends the Bankruptcy Court made an

error of law by not construing the term facility in Ordi-

nance No. 75 to mean “a new single building.” (D.I. 8, p.

7). According to Denver, the ordinance applies only to

single structures and the Bankruptcy Court erred in

applying the exemption to Continental’s multiple build-

ings and leased areas at Stapleton Airport. (D.I. 8, p. 7).

Denver further argues that the Bankruptcy Court

improperly applied a state statutory definition of the

term facility when considering a municipal ordinance of a

“home rule” city. (D.I. 8, p. 20). According to Denver, the

Bankruptcy Court should not have turned to a state stat-

ute for a definition of the term facility because definitions

that appear in local ordinances supersede the definition

appearing in a state statute pursuant to Denver’s status

as a “home rule” city.

Finally, Denver contends that the word facility

appears in the ordinance only in the singular and plu-

ralizing‘it changes the meaning and intent of the legisla-

ture. In further support of this contention, Denver

presents the Court with several instances where Conti-

nental has pluralized the use of the word facility when

referring to its operations at a given airport and uses the

App. C13

word in its singular form when referring to a single

structure at a given airport. Therefore, according to

Denver, Continental views its operations within an air-

port as comprising multiple facilities, not just one. (D.I. 8,

p. 21).

Continental responds that under the clear and unam-

biguous language of Ordinance No. 75, the Bankruptcy

Court properly concluded that their operation at Sta-

pleton Airport would be considered a facility. (D.I. 11, pp.

16-17). According to Continental, only by inserting words

and doing a “tortured construction” of the original lan-

guage can one find that the ordinance was to apply only

to new, single structure buildings. (D.I. 11, p. 17).

Continental further contends that when considered

in light of Colorado’s statutory mandate that all “words

and phrases shall be read in context and construed

according to the rules of grammar and common usage”

Denver’s interpretation of the ordinance must fail. Colo.

Rev. Stat. § 2-4-101 (1986); Den. Rev. Mun. Code § 1-3

(1990). (D.I. 11, p. 17). Continental argues that Denver’s

interpretation of the term facility conflicts with state tax

statutes, in that there is no limitation that all areas must

be included in a single unit. Thus, Continental asserts the

Bankruptcy Court was correct in holding that multiple

buildings could comprise a facility. (D.I. 11, pp. 18-19).

Thus, according to Continental, the Bankruptcy Court

appropriately applied all governing rules of statutory

construction and came to the appropriate conclusion that

Continental’s operation at Stapleton Airport is a facility

within the meaning of Ordinance No. 75.

App. Cl4

Finally, Continental points to the City Council’s con-

temporaneous enactment of Ordinance No. 74. Ordinance

No. 74 specifically refers to the requirement that a struc-

ture be newly erected to qualify for a business occupation

privilege tax exemption, an exemption Continental did

not seek. Thus, Continental argues that had Denver

intended to limit Ordinance No. 75 to a newly erected

single unit it would have expressly done so and the

absence of such language is clear evidence that Denver

did not intend such a limitation. (D.I. 11, p. 20).

2. OTHER REQUIREMENTS OF ORDI-

NANCE NO. 75

Denver contends that although Continental leases

more than 1,000,000 square feet of useable floor space at

or near Stapleton Airport, it is not in a single building

and when considered separately, Continental has no sin-

gle building that meets the 1,000,000 or more square

footage requirement of Ordinance No. 75. (D.I. 8, pp. 8-9).

Further, Denver argues that no single structure of Conti-

nental’s at Stapleton Airport has 2,000 or more employees

that report to it.

Continental claims that there is no requirement that

all the useable area actually be in use, be in the same

building or have all two thousand plus employees report

to it. (D.I. 11, p. 20-22). Rather, according to Continental,

so long as they are obligated by a lease to rent over

1,000,000 square feet, they have fulfilled the space

requirement of Ordinance No. 75. Further, Continental

argues that they have over 6,000 employees who report to

App. C15

work at Stapleton and that more than fulfills the employ-

ment requirement. (D.I. 11, p. 24).

C. RESERVE ACCOUNT REQUIREMENT

Alternatively, Denver contends that the Bankruptcy

Court erred, as a matter of law, by failing to apply to

Continental all requirements listed in Ordinance No. 75.

(D.I. 8, p. 22). In so arguing, Denver claims that the last

paragraph of Ordinance No. 75 contains a condition pre-

cedent to the applicability of the exemption, and that

Continental has failed to meet this condition, (D.I. 8, pp.

22-23). The last paragraph of Ordinance No. 75 reads as

follows:

This exemption may be applicable to the first

and second years of operations at the facility

provided that the utility establishes a reserve

account for the tax for its return to the city at the

end of the third year of operations should less

than two thousand (2,000) employees be

employed at the facility in said third year. ~

Ordinance No. 75. According to Denver, the Bankruptcy

Court failed to address this portion of the ordinance in

construing the statute and applying it to the facts before

it. Reading this paragraph as a condition of the exemp-

tion, Denver claims Continental is not entitled to the use

tax exemption as Continental has conceded that it did not

establish such a reserve account.

Continental responds that because it was in its fifth

year of operation at Stapleton, the reserve provisions of

App. Cl6

the last paragraph of Ordinance No. 75 are wholly inap-

plicable to their operation, (D.I. 11, p. 24). In Continen-

tal’s view, the last paragraph permits a reserve account to

be established for any new facility entitled to such an

exemption so that monies would exist and be set aside for

the purpose of paying the exempted taxes in the event

that following the third year of operation the facility no

longer qualified. (D.I—11, p. 24). Finally, Continental

asserts that even if the Ordinance required it to establish

the reserve account, it was prohibited from doing so

because of the automatic stay provisions of the Bank-

ruptcy Code. (D.I. 11, pp. 24-25).

D. EFFECT OF ORDINANCE NO. 568

As discussed earlier (supra, p. 5), in August, 1991 the

Denver City Council repealed Ordinance No. 75 by enact-

ment of Ordinance No. 568, Series of 1991, effective Feb-

ruary 1, 1991, Den. Rev. Mun. Code § 53-97(17) (August 9,

1991) (“Ordinance No. 568” or “the August exemption”).

In Ordinance No. 568, the City Council clarified their

intent in enacting Ordinance No. 75, repealed Ordinance

No. 75, redefined the requirements for the application of

the use tax exemption, and provided for retroactive appli-

cation of the amendment for a limited time period. See,

Denver Co. Ordinance No. 568 (1991).

Denver contends that the Bankruptcy Court erred as

a matter of law: (1) by concluding that Ordinance No. 568

did not have retroactive effect; and (2) by concluding that

the intent expressed in Ordinance No. 568 was not con-

trolling in determining the definition of facility under

Ordinance No. 75. (D.I. 8, pp. 23 - 30). Denver argues that

App. C17

retroactive application of Ordinance No. 568 does not

offend either the United States Constitution or the Consti-

tution of the State of Colorado. (D.I. 8, p. 25). Denver

asserts that under the Colorado Constitution, retroactive

application of legislation is proper so long as it “does not

impair vested rights, create new obligations or duties, or

attach disabilities with respect to past transaction.” (D.I.

8, p. 26 (citing, Zaragoza v. Director of Dept. of Revenue, 702

P.2d 274, 276 (Colo., 1985))). Denver argues that Ordi-

nance No. 568 does not create new obligations or duties

because, under Colorado case law, tax provisions may be

retroactively applied so long as it is not harsh, arbitrary

or unfair. (D.I. 8, pp. 26-27). Thus, Denver argues Ordi-

nance No. 568 is entitled to great weight in the interpreta-

tion of Ordinance No. 75. (D.1. 8, p. 30).

Continental, on the other hand, responds that retro-

active application of Ordinance No. 568 would violate

Article I, § 11 of the Denver Constitution which prohibits

ex post facto legislation. (D.I. 11, p. 26). According to

Continental, the Constitution prohibits implementing

laws that would retroactively affect obligations and there-

fore, the application of Ordinance No. 568 would create

new obligations that Continental would be subject to.

Further, Continental argues that the August 1991

amendments do not merely clarify the earlier ordinances,

rather they substantially change the meaning of those

ordinances and as such should not be retroactively

applied. (D.I. 11, pp. 35). Finally, Continental contends

that retroactive application of the August 1991 amend-

ments would violate the United States Constitution by

offending the Due Process Clause of the Fourteenth

Amendment. (D.I. 11, pp. 35-37).

App. C18

IV. STANDARD OF REVIEW

On appeal of a Bankruptcy Court decision, the dis-

trict court is to show deference to the Bankruptcy Court's

findings of fact unless they are found to be clearly erro-

neous. Fed. R. Bankr. P. 8013; Sharon Steel Corp. v. National

Fuel Gas Distribution Corp., 872 F.2d 36, 38-39 (3d Cir.

1989). However, legal questions are subject to plenary

review. Fed. R. Bankr. P. 8013. Generally, questions of

statutory construction are considered questions of law

and thus, on appeal, subject to de novo consideration. In re

Sierra Steel Corp., 88 B.R. 314, 316 (D. Colo., 1987).

While the determination of whether a statute is

ambiguous or not may be subject to a clearly erroneous

standard, the interpretation of that statute regardless of

its ambiguity is a plenary consideration. See, In re Barclay

Industries, Inc., 736 F.2d 75, 78 (3d Cir. 1984); Matter of

Dunes Casino Hotel, 63 B.R. 939, 944 (D.N.J. 1986).

V. DISCUSSION

A. JURISDICTIONAL CHALLENGES

Title 11 U.S.C. § 505(a) grants the Bankruptcy Court

broad authority to hear issues related to the determina-

tion of a debtor’s tax liability. This authority includes the

ability to determine:

[t]he amount or legality of any tax, any fine or

penalty relating to a tax, or any addition to tax;

whether or not previously assessed, whether or

not paid, and whether or not contested before

App. C19

and adjudicated by a judicial or administrative

tribunal of competent jurisdiction.

11 U.S.C. § 505(a)(1). While the authority of the Bank-

ruptcy Court is broad, it is not unrestricted. As previ-

ously discussed there are two express restrictions on the

authority of the Bankruptcy Court to make such deter-

minations. They are:

(2) The Court may not so determine -

(A) the amount or legality of a tax, fine,

penalty or addition to tax if such amount or

legality was contested before and adjudi-

cated by a judicial or administrative tribu-

nal of competent jurisdiction before the

commencement of the case under this title;

(B) any right of the estate to a tax refund,

before the earlier of —

(i) 120 days after the trustee prop-

erly requests such refund from the

governmental unit from which such

refund is claimed; or

(ii) a determination by such govern-

mental unit of such request.

11 U.S.C. § 505(2)(A), (B).

Denver contends that the Bankruptcy Court's juris-

diction was limited by 505(2)(B). Title 11 U.S.C.

§ 505(2)(B) provides that the Bankruptcy Court is without

power to determine the estate’s right to a tax refund prior ~

to the earlier of two alternative conditions. The first

condition requires a minimum of 120 days to pass from

the time the trustee requests the governmental unit to

App. C20

make such a refund. 11 U.S.C. § 505(2)(B)(i). The second

condition is a determination by the governmental unit

regarding the refund. 11 U.S.C. § 505(2)(B)(ii). Thus, the

trustee must have either permitted sufficient time to pass

following the request for a refund or the government

unit, with power to review a request for refund, must

have issued a determination prior to raising the question

in the Bankruptcy Court. If neither of these conditions are

met, then the Bankruptcy Court is without jurisdiction.

The Court concludes that the earlier of the two provi-

sions in 505(a)(2)(B) occurred on August 15, 1991. There

is no question that on August 15, 1991 the Department of

Revenue for the City and County of Denver issued a

decision regarding the claim for a tax refund submitted

by Continental. Thus, the Court concludes that the excep-

tion limiting the Bankruptcy Court’s power to determine

a claim for a tax refund is inapplicable in this case and

the Bankruptcy Court properly entertained the Cross

Motion for Determination of Tax Liability filed by Conti-

nental.

Denver would have this Court read into 505(a)(2)(B)

a provision that is not present. Denver’s argument is that

only claims for refunds that are timely asserted to the

local governmental entity may later be raised in a bank-

ruptcy proceeding and therefore since the Denver

Department of Revenue determined the requests for

refunds were not timely, the Bankruptcy Court was with-

out power to consider the claims. The Court disagrees.

The broad grant of power in § 505 cannot fail merely

because of a procedural default by the trustee. To decide

otherwise would be to say only determinations of a sub-

stantive nature are reviewable in a bankruptcy hearing

App. C21

and that any potential procedural default of the trustee

cannot be considered by the Bankruptcy Court.

Further, the Court does not agree with Denver’s

assertion that the time for requesting a refund is the

equivalent of a statute of limitations. The Court con-

cludes that the timeliness of the request for a refund does

not act as a statute of limitations bar for consideration by

the Bankruptcy Court of a tax claim. The Denver Depart-

ment of Revenue apparently agrees. The Department of

Revenue disallowed the refund based primarily on

untimeliness, but also referred to the merits of the claim

in denying the refund.

Alternatively, the Court concludes the only claim

subject to the restrictions in section 505(a)(2)(B) was the

claim by Continental for an April, 1991 refund. Continen-

tal was requesting a credit for the February and March

1991 taxes paid rather than a refund and thus, under the

Bankruptcy Code the Bankruptcy Court would have full

authority to determine the “amount or legality of these

taxes” pursuant to 505(a)(1).

After Continental converted the claims for February

and March, 1991 taxes paid into ones for a tax credit the

restrictions of section 505(a)(2) were no longer applicable.

The Bankruptcy Code clearly delineates between deter-

minations regarding the amount and legality of taxes and

those requests for refunds. Only in the later case is the

Bankruptcy Court's authority restricted so as to afford

the local governmental agency an opportunity to review

the request. Therefore, the February and March, 1991

requests for a tax credit could not, under any circum-

stances, be subject to the restrictions present in section

App. C22

505(a)(2), only the April request, which remained one for

a refund, could be subject to the restrictions present.

With respect to the April tax refund request, the

Bankruptcy Court found that the request was filed on

July 19, 199%, within the 60 day time limit imposed under

Denver Municipal law. Opinion at p. 438. The appeal does

not turn on this decision and the Court finds there is

support in the record to make such a finding. Thus, this

Court cannot say that the Bankruptcy Court’s finding was

clearly erroneous. Therefore, the request for a refund of

April taxes was timely filed within the provisions of the

Denver Code. In sum, the Court concludes the Bank-

ruptcy Court had jurisdiction to determine Continental’s

entitlement to tax credits and refunds for February

through April, 1991.

B. INTERPRETATION AND APPLICABILITY OF

ORDINANCE NO. 75

Having concluded the Bankruptcy Court had juris-

diction to determine Continental’s tax liability the Court

may now turn to other issues raised by Denver. Under

Colorado law, Courts must strictly construe tax exemp-

tion statutes against the taxpayer and it is the burden of

the taxpayer to prove they are entitled to the exemption.

by clear and convincing evidence. Atlantic Coast Line R.

Co. v. Phillips, 332 U.S. 168, 172, 67 S. Ct. 1584, 91 L.Ed.

1977 (1947); American Respiratory Care Services v. Manager

of Revenue, City and County of Denver, 835 P.2d 623, 625

(Colo. App., 1992) (citations omitted); Denver Center for

the Performing Arts v. Briggs, 696 P.2d 299, 308 (Colo.,

1985); State v. Fisch’s Estate, 153 Colo. 525, 387 P.2d 282,

App. C23

285 (Colo., 1963); Den. Rev. Mun. Code § 53-11. Thus,

only if Continental meets the requirements of the statute,

as interpreted by the Court, will they be entitled to the

exemption provided for in Ordi: ence No. 75.

The Court’s review of the Bankruptcy Court's inter-

pretation and application of Ordinance No. 75 and it

terms, including the use of the term “facility”, is plenary.

In Colorado, principles of statutory construction are

equally applicable in the interpretation or construction of

municipal ordinances. American Respiratory Care Services

v. Manager of Revenue, City and County of Denver, 835 P.2d

623, 625 (Colo. App. 1992). Therefore, it is necessary to

consider the guidance relating to statutory construction

that is available in the law of Colorado.

Under Colorado law, “the primary objective is to

ascertain the intent of the General Assembly for the lan-

guage used, and give effect to that intent if possible.”

American Respiratory Care Services, 835 P.2d at 625 (1992),

citing, Stephen v. City and County of Denver, 659 P.2d 666

(Colo., 1983); People v. District Court, Second Judicial Dist.,

713 P.2d 918 (Colo., 1986). In order to determine the

legislative intent, the Court first looks to the language of

the statute itself. American Respiratory Care Services, 835

P.2d at 625; People v. Warner, 801 P.2d 1187 (Colo., 1990);

Griffin v. S.W. Devanney & Co., Inc., 775 P.2d 555 (Colo.

1989). With respect to the language found in a statute

“wois3 and phrases shall be read in context and con-

strued according to the rules of grammar and common

usage.” American Respiratory Care Services, 835 P.2d at 625;

Colo. Rev. Stat. § 2-4-101; Den. Rev. Mun. Code § 1-3. If

the language is clear and the intent appears with reason-

able certainty, there is no need to resort to other rules of

App. C24

statutory construction. People v. District Court, Second

Judicial Dist., 713 P.2d at 918.2

1. Meaning of Term “Facility” as used in Ordi-

nance 75

The Court will first review the Bankruptcy Court's

findings and conclusions with regard to the meaning of

the term “facility” in Ordinance No. 75.

a. Ordinary Meaning of Words

In construing the term facility in Ordinance No. 75

the Bankruptcy Court, in applying the common usage of

the word principle, turned to Webster’s Third New Inter-

national Dictionary, unabridged (1981) to obtain a defini-

tion.

A Court is instructed to determine the common usage

of a word, but to do so “in context.” Colo. Rev. Stat.

§ 2-4-101; Den. Mun. Rev. Code § 1-3. In this case, the

context in which the word facility was used in the subject

ordinance is clearly in relation to a “transportation util-

ity See i rdinance No. “5. Thus, in determining the plain

meaning of the word f:-ility, the Court is required to do

so in the context of a transportation utility.

2 The Bankruptcy Court interpreted the City of Littleton, 787

P.2d 158 as standing for the proposition that only in cases where

the statute is found to be ambiguous should a Court turn to

legislative intent for statutory construction purposes. Clearly,

however, under Colorado law, the controlling principle is that

the Court is instructed to uphold the legislative intent in enact-

ing a statute.

App. C25

Denver has cited several statutes and reyulations that

contain a definition of the word facility im relation to a

transportation facility that would indicate 't refers to a

single building, rather than multiple buildings within the

context of an a-port. (D.I. 8, pp __; DI. 14 pp. 7-9).

Further, Denver provided the Court with examples of

Continental itself using the word facility to indicate a

single building and the word facilities when indicating

multiple buildings within the context of an airport. (D.I.

9, ex. 20).

It is clear that the term facility has a much narrower

meaning when considered in the context of a transporta-

tion utility, than the meaning or definition set forth in

Webster’s. Since the Court’s task is to determine the

meaning of a disputed term “in context” the Court con-

cludes that the Bankruptcy Court erred in considering a

general definition of facility from Webster’s Dictionary

without giving consideration to the context in which it

was being used.

In this regard, it is difficult to determine the meaning

of the term facility with reasonable certainty by a plain

reading of Ordinance No. 75 because the Court finds the

term facility as used in Ordinance No. 75 to be reasonably

subject to differing meanings. The Court concludes the

term facility is ambiguous. Thus, a review of the legisla-

tive history regarding the enactment of the ordinance is

helpful to determine the intent of the legislative body.

App. C26

b. Legislative Intent

Denver claims that its intent in enacting the ordi-

nance was to attract new transportation utilities to the

Denver area. Denver supports its contention with certi-

fied copies of the agenda, minutes and handouts from the

meeting at which Ordinance No. 75 was considered and

passed. (See, D.I. 9, tab 12). The Bankruptcy Court sus-

tained the objection of Continental when Denver

attempted to move these exhibits into evidence on the

grounds that the statute was not ambiguous and there-

fore the legislative history was not relevant. (D.I. 9, tab 6,

Transcript pp. 214-216).°

The Court finds that the Bankruptcy Court erred

when it excluded the legislative history exhibits, partic-

ularly because of the need to consider the intent of the

Denver City Council in enacting Ordinance No. 75. Thus,

the Court will utilize the offered exhibits in its effort to

capture the legislative intent of the subject ordinance.

In reviewing the minutes of the Economic and Cul-

tural Development Committee, it is clear the intent of the

committee members in considering the enactment of

Ordinance No. 75 was to attract a proposed United Air-

lines Maintenance Facility. (D.I. 9, tab 12, pp. A-94, A-96

and A-97). The supporting documentation relating to the

economic impact to the Denver area of the proposed

3 Another ground for objection to the certified copies being

admitted into evidence was stated as follows: “[i]f somebody

wants to argue about what they [the statutes] mean in briefs at

some point, they can go ahead and do it. Everybody can read

legislative history and use it, but it is not evidence and should

not be admitted on that basis...” (D.I. 9, tab 6, p. 215).

App. C27

United Airlines Maintenance Facility indicates there

would be approximately 1.5 million new square feet built

and utilized under one roof. Further, as proposed, there

would have been sufficient jobs created to meet the

employment criterion to be required in Ordinance No. 75.

(D.I. 9, tab 12, pp. A-96 and A-97). This evidence supports

Denver’s contention that it intended only to exempt a

facility from use taxes if the facility was new and consis-

ted of a single structure.

The Court cannot ignore the clear intent of the com-

mittee and the council with regard to the type of facility

intended to be exempted by Ordinance No. 75. The clear

intent of the City Council was to attract new transporta-

tion utilities like United to the Denver area; it was not to

provide operating utilities, such as Continental, with a

tax break. By attracting new utilities or having current

utilities expand into a new facility, Denver intended to

increase its job base and support new economic develop-

ment. The Court concludes that the intent at the time of

the enactment of Ordinance No. 75 was to create a tax

exemption for transportation utilities, such as airlines,

within the Denver enterprise zone, which would con-

struct a substantial facility and guarantee a significant

number of new jobs.

Another indicator of the intent of the Denver City

Council in enacting Ordinance No. 75 is the preamble to

the August, 1991 Amendments. Under Colorado law,

although “a subsequent legislative pronouncement of

intent is not a part of the legislative history, such state-

ments may be considered in construing the statute in

question.” BOP Industries, Inc. v. State Bd. of Equalization of

the State of Colo., 694 P.2d 337, 344 (Colo. App., 1984)

App. C28

(citations omitted). Much like the case before the Court

now, the court in BQP Industries was concerned with a

subsequently amended statute:

Here, the same General Assembly that passed

the original statute subsequently stated in a res-

olution that it was intended to permit deprecia-

tion annually from the base year to the date of

assessment and that the resolution was passed

because the statutory provisions were being

interpreted and administered contrary to that

intent. Senate Joint Resolution No. 2, 51st Gen-

eral Assembly, Second Extraordinary Session.

In 1980 the General Assembly amended

§ 39-1-104(9), C.R.S. (1977 Cum. Supp.) to man-

date plainly, clearly, and unambiguously that

depreciation be allowed annually from the base

year to the date of assessment on personal busi-

ness property. Colo. Sess. Laws 1980, ch. 155, at

714. Such legislation clarifying the intent of an

earlier statute is entitled to great weight in stat-

utory construction. Red Lion Broadcasting Co. v.

F.C.C., 395 U.S. 367 (1969).

BOP Industries, 694 P.2d at 344-345.4

The Court finds that the August 1991 enactments and

discussion of intent are relevant and entitled to weight in

determining the Denver City Council’s intent in passing

4 In BOP Industries the Court was concerned with imposing

a tax obligation on an individual. In that context, a statute is to

be construed strictly in favor of the taxpayer. BOP Industries, 694

P.2d at 345. Again, in construing a statute which grants an

exemption, the burden of proof is on the taxpayer and the

statute is to be strictly construed against granting the exemp-

tion.

App. C29

Ordinance No. 75. Without instantly deciding the retroac-

tive application of these ordinances, the Court concludes

that the preamble to Ordinance No. 568 serves to further

clarify the intent of Ordinance No. 75.

Again, the Court is persuaded that Ordinance No. 75

was enacted to address the single structure contemplated

by the proposed United Airlines Maintenance Facility, not

the aggregation of multiple buildings of existing utilities.

The Court concludes that the joining of Continental's

multiple buildings at Stapleton Airport does not meet the

“facility” requirements of Ordinance No. 75 or Ordinance

No. 568 and therefore, Continental did not qualify for the

local use tax exemption allowed by the subject ordi-

nances. To do so, would be to read the ordinances too

broadly and in contravention of the Denver City Coun-

cil’s intent.

2. OTHER REQUIREMENTS OF ORDI-

NANCE NO. 75

The Court also concludes that Continental has failed

to fulfill the other requirements of Ordinance No. 75, in

particular the requirement that the facility contain one

million square feet of useable floor space. Regardless of

whether facility means a single structure or multiple

structures, the Court concludes that the portion of space

leased by Continental that is then subleased to others

should be excluded from the calculation to determine if

the 1,000,000 square foot space requirement is met.

Continental argued and the Bankruptcy Court agreed

that as long as Continental was obligated under leases for

App. C30

one million square feet of space within the designated

area they fulfilled the square footage requirement of

Ordinance No. 75. According to Continental, it should be

permitted to aggregate all space it leases and is thus

“responsible for,” regardless of whether it actually occu-

pies the space. The Court agrees that Continental may

include any space for which it is “responsible”, however,

Continental cannot include in the calculation space it has

subleased to others. (e.g. 45,894 square feet leased by

Chelsea Catering Corporation (D.I. 9, tab 6, pp. 148-149)).

The Court finds that Continental is no longer “respons-

ible” for such subleased space within the meaning of

Ordinance No. 75. The Court finds that space subleased

by Continental to others should be deducted for three

reasons. First, Continental is not responsible for the oper-

ation and maintenance of such space. Second, there is no

potential for sales of personalty that would qualify for

the tax exemption within the subleased area. Third, no

Continental employees could report for duty in such

space. Unlike unused space that Continental could even-

tually use in its operations, square footage that has been

subleased no longer can be occupied for purposes of

using, consuming, storing or distributing personalty. For

these reasons, the Court finds such space should be

excluded from consideration in calculating the total

square footage requirements of the ordinance.

When the square footage of the subleased area is

deducted from the total amount of leased space, Conti-

nental falls below the one million square footage require-

ment. Falling short of the minimum square footage

App. C31

requirement, Continental is not entitled to claim the

exemption.°

3. Procedural Default of Continental

Even if the Court were to hold that multiple pre-

existing structures could be considered a facility within

the context of the ordinance, the Court concludes Conti-

nental would still be unable to avail itself of the exemp-

tion. Ordinance No. 75 is explicit in terms of the timing

for requesting a refund. In order to be eligible for a

refund, Continental must have requested it within sixty

days. Continental failed to request a refund for February

and March 1991 within that time frame. Thus, the Court

concludes that Continental is unable to obtain a refund or

a credit for those months. While the Bankruptcy Court

placed significant weight on an apparent difference

between a credit and a refund the Court is unable to

discern any significant difference. The effect of granting a

tax credit or a refund in the context of the subject use tax

exemption is identical. Under either the credit or refund

theory, the practical result is that the use tax Continental

paid would be returned to it in a short period of time.

Thus, the Court concludes that the time for requesting a

> When this area is excluded from the calculation the total

useable area falls below one million square feet. According to

testimony, if only the unused space (42,913.06 square feet) were

deducted from the total leased space then the total square foot-

age would be under 1,000,000 square feet. Therefore, it follows,

that if only the subleased space (45,894 square feet) were to be

deducted from the total, the total useable floor space would also

necessarily be below the required 1,000,000 square feet.

App. C32

refund under Ordinance No. 75 is equally applicable to a

request for a credit and subject to the sixty day period

provided in the ordinance.

Further, Continental failed to supply the documenta-

tion required when requesting a refund. To later submit

amended tax returns that are not authorized within the

statutory framework in an effort to obtain a refund is an

empty act. The ordinance explicitly requires the party

seeking a refund to submit original invoices. Continental

failed to supply these. Regardless of whether Continental

was entitled to a refund, they failed to comply with the

statutory requirements for obtaining a refund. Thus, they

are not entitled to a refund or credit for taxes paid in any

of the relevant three months.

Although the Court does not find their non-compli-

ance with the statutory framework to create a jurisdic-

tional bar to the Bankruptcy Court hearing and deciding

this matter, the Court does conclude that the non-compli-

ance by Continental with the provisions of the ordinance

does act as a bar to any refund or credit. The require-

ments of the statute are explicit and Continental failed to

comply with the procedural requirements in requesting a

refund even if one were available to them under Ordi-

nance No. 75.

C. RESERVE ACCOUNT REQUIREMENT

The reserve account requirement has concededly not

been complied with by Continental. Continental argues

that because they have been in operation for more than

three years it need not comply with this requirement and,

App. C33

further, that even if it had to comply with the require-

ment it would have been unable to segregate the neces-

sary funds because they were a debtor in bankruptcy. The

Court is unpersuaded.

With respect to whether Continental could have seg-

regated the funds while in bankruptcy, the Court con-

cludes that is not a determination for the debtor, in its

discretion, to make.

In any event, the Court is persuaded that any reading

of the reserve account requirement hinders Continental’s

position. If the Court reads the reserve account require-

ment as Continental suggests (that it only applies to new

operations) then that lends credence to the argument of

Denver that the statute was only intended to encompass a

new facility. See, supra. However, if the Court reads the

reserve account requirement to apply to all operations

then a fair reading world be that any facility claiming the

exemption must comply with the requirement for the first

two years, which Continental admittedly did not do.

Since the burden remains on the taxpayer when claiming

a tax exemption, the Court concludes that Continental

has been unable to meet this burden by its failure to

comply with the applicable reserve account requirement.

VI. CONCLUSION

For the reasons discussed, the Court concludes Conti-

nental does not qualify for the local tax exemption cre-

ated by the enactment of Ordinance No. 75 by the Denver

City Council.

App. C34

Thus, the Court will reverse the Order of the Bank-

ruptcy Court dated February 4, 1992.

An order consistent with this Opinion will be

entered.

App. D1

APPENDIX D

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In the Matter of : Case Nos. 90-932

CONTINENTAL AIRLINES, through 90-984

INC., et al.,

Debtors.

MEMORANDUM OPINION AND ORDER

Daniel E. Muse Frances A. Koncilja

City Attorney Thomas H. Steele

Alice J. Fischer Mark E. Haynes

Assistant City Attorney 370 17th St., Suite 5200

353 City and County Denver, CO 80202

Building Attorneys for Debtors

Denver, CO 80202-5375

Attorneys for Manager

of Revenue of the City

and County of Denver

Jeoffrey L. Burtch William H. Sudell, Jr.

824 Market Street S. David Peress

P. O. Box 1680 1201 North Market Street

Wilmington, DE P.O. Box 1347

19899-1680 Wilmington, DE 19899-1347

Attorney for Manager Attorneys for Debtor

of Revenue of the City

and County of Denver

February 4, 1992

App. D2

MEMORANDUM OPINION

AND ORDER

HELEN S. BALICK, Bankruptcy Judge.

The Manager of Revenue for the City and County of

Denver (Denver or Manager) has brought this motion for

payment of an administrative «xpense claim for unpaid

use tax, penalties and interest. 11 U.S.C. §§ 503(a),

(b)(1)(B)(i) and (C). Continental Airlines, Inc. opposes

payment of the administrative claim on the grounds that

Continental is entitled to an exemption for the period at

issue. Den.Rev.Mun.C. § 53-97(17); 11 U.S.C. § 505(a)(1).

Continental has cross-moved for a refund or credit for

taxes already paid while the exemption was in effect. 11

U.S.C. § 505(a)(2)(B)(ii). This is a core proceeding under

sections 157(b)(2)(B) and (C) of Title 28.

For the reasons that follow Denver’s motion is

denied and Continental’s cross-motion is granted.

l. Background

Continental operates a large commercial airline hub

at Stapleton International Airport, approximately 15

miles north of Denver, Colorado. Continental leases. more

than one million square feet and employs more that 6,000

people at Stapleton. Among the buildings and areas occu-

pied are airplane hangars, terminal concourses, ticket

counters and office space.

Continental purchases supplies such as aviation fuel,

spare parts, and tools to operate its hub. Most of the parts

and tools come from out-of-state suppliers. Denver has

App. D3

enacted use tax ordinances applicable to purchases of per-

sonal property (including airline fuel, parts and tools) out-of-

state for use in-state. Den.Rev.Mun.C. § 53-96. Unlike sales

tax, which is collected by the seller, the buyer must file a use

tax return on the 20th of each month for purchases made the

preceding month. Den.Rev.Mun.C. § 53-98(i).

In early 1991 the Denver council enacted an exemp-

tion to the use tax ordinance. The ordinance exempted

sales of personalty “to be used, consumed, stored, or

distributed at a facility . . . (b) that contains at least one

million square feet of useable floor space and (c) that

serves as a... regular place of reporting for duty for at

least two thousand employees.” Denver Ordinance No.

75, Series of 1991, effective February 1, 1991,

Den.Rev.Mun.C. § 53-97(17) (the February exemption or

Ordinance No. 75). (A parallel provision, not relevant

here, was enacted for sales tax.)

Continental filed its use tax return as usual until June

of 1991 when it determined it was entitled to the Febru-

ary exemption and began withholding the tax.

Den.Rev.Mun.C. § 53-49. The exemption was claimed for

the period May 1-August 8, 1991, when the February

exemption was repealed and replaced with an amended

exemption. Ordinance No. 568, §§ 1-4, Series of 1991,

(effective August 9, 1991), Den.Rev.Mun.C. § 53-97(16)

(revised) (August amendment or Ordinance No. 568). The

parties agree Continental is not entitled to the exemption

after August 9, 1991.

aS a

App. D4

The partial payment of the use tax during the period

the February exemption was in effect has effected a pro-

cedural bifurcation of the tax issue, though the underly-

ing issue of entitlemen

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