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Zeke Coffee, Inc. v. Pappas-Alstad Partnership

Court of Appeals of Colorado, Third Division

July 30, 2015

Zeke Coffee, Inc., a Colorado corporation, and Darren Spreeuw, Plaintiffs-Appellees and Cross-Appellants,
Pappas-Alstad Partnership, Defendant-Appellant and Cross-Appellee

Page 262

[Copyrighted Material Omitted]

Page 263

         Editorial Note:

         This Opinion is subject to revision upon final publication.

          City and County of Denver District Court No. 09CV11786. Honorable Edward D. Bronfin, Judge.


         Daniel J. Culhane, LLC, Daniel J. Culhane, Denver, Colorado, for Plaintiffs-Appellees and Cross-Appellants.

         EasonRohde, LLC, David R. Eason, Bruce E. Rhode, Denver, Colorado, for Defendant-Appellant and Cross-Appellee.

         Opinion by JUDGE DAILEY. Lichtenstein and Fox, JJ., concur.


Page 264

         DAILEY, JUDGE

          [¶1] In this landlord-tenant dispute, defendant, Pappas-Alstad Partnership, appeals the district court's restitutionary award of $167,024 plus statutory interest to plaintiffs, Zeke Coffee, Inc., d/b/a Perk Hill Cafe, and Darren Spreeuw, president of Zeke Coffee (collectively, Zeke). We affirm and remand for an award of attorney fees.

         I. Background

          [¶2] The underlying facts of the case are fully set forth in Zeke Coffee, Inc. v. Pappas-Alstad Partnership, (Colo.App. Nos. 11CA0744 & 11CA2317, Apr. 26, 2012) (not published pursuant to C.A.R. 35(f)) ( Zeke I ).

          [¶3] As pertinent here, in March 2004, Zeke leased, for five years, a retail space from Pappas-Alstad to use as a coffee shop. In September 2008, Zeke notified Pappas-Alstad of its intent to exercise an option to extend the lease for an additional five-year term. Pappas-Alstad, however, said Zeke had breached a term of the lease and, after Zeke refused to cure the alleged breach, it notified Zeke that the lease had been terminated and converted into a month-to-month tenancy. In June 2009, Pappas-Alstad served a three-day demand for compliance or possession on Zeke, again alleging that Zeke had breached the lease. Zeke acted to cure the alleged breaches.

          [¶4] Several months later, Zeke filed an action in the district court seeking a declaratory judgment that the lease remained in effect and that Pappas-Alstad had breached it. In response, Pappas-Alstad served Zeke with a notice to quit under the forcible entry and detainer statute, section 13-40-107, C.R.S. 2014, and included in its amended answer a counterclaim seeking Zeke's eviction.

          [¶5] The district court entered judgment in favor of Pappas-Alstad on the counterclaim and issued a writ of eviction restoring possession of the property to Pappas-Alstad. After Pappas-Alstad successfully opposed Zeke's requests for a stay of execution of judgment, Pappas-Alstad evicted Zeke from the premises.

          [¶6] On appeal, a division of this court reversed and remanded the case with directions. See Zeke I. The division held, among other things, that

o the district court erroneously determined that Zeke's alleged breaches of the lease supported Pappas-Alstad's rejection of Zeke's exercise of the five-year option on the lease;
o Zeke had properly exercised the option, meaning that the lease had not been converted to a month-to-month tenancy and was " in full force and effect on the date of judgment" ; and
o Zeke was " entitled to an appropriate remedy for this situation."

Id. at 14, 21-22. The division remanded the case so the district court could determine an " appropriate remedy." Id. at 22.

          [¶7] On remand, the parties disagreed as to the appropriate remedy. Zeke argued that, because it had been wrongfully evicted, it should be awarded actual, consequential, and special damages for the loss of its business, as well as possible punitive damages; Pappas-Alstad argued that because, in evicting Zeke, it was relying on a validly entered but ultimately erroneous court order at the time of the eviction, Zeke should receive only restitution equal to any benefit realized by Pappas-Alstad.

Page 265

          [¶8] In a written order, the district court determined that, because Zeke had lost its right to possession of the retail space as a result of an erroneous court order, restitution was the appropriate remedy. After an evidentiary hearing at which both parties presented expert testimony on the amount of restitution owed, the court awarded Zeke $167,024 (plus 8% statutory interest from the date of eviction), representing the value of (1) the rent Pappas-Alstad had received from its new tenant in the retail space; (2) the rent it would receive through the remainder of Zeke's lease term (i.e., through April 30, 2019), discounted at the rate yielded by United States Treasury Bills; and (3) the rent Pappas-Alstad would have received had the new tenant moved in and begun making payments immediately following the eviction.[1]

          [¶9] Pappas-Alstad appeals and Zeke conditionally cross-appeals. In its appeal, Pappas-Alstad contends that the court erroneously calculated the amount of restitution Zeke was due by (1) basing it on actual and potential rental income from the premises and (2) using the Treasury Bill rate to discount the amount of future rent proceeds to present value. In its cross-appeal, Zeke contends that if we conclude that the court erred in determining the amount awarded, then, but only then, should we remand the case with directions to the district court to apply damages for a " wrongful eviction" as the appropriate remedy, not restitution.

         II. Pappas-Alstad's Appeal: Calculating Restitution

         A. Actual and Potential Rental Income as Bases for the Award

          [¶10] Pappas-Alstad first contends that the district court erred in using its actual and potential rental income from the premises as a measure of the appropriate restitution because this measure (1) did not " account for the full effect of the erroneous judgment" and the gain actually realized by Pappas-Alstad; (2) left Pappas-Alstad " worse off" than if the erroneous judgment had never occurred; (3) provided a corresponding windfall to Zeke; and (4) violates public policy. We are not persuaded.

          [¶11] Whether the district court has applied the correct legal standard in determining the availability of a particular equitable remedy is reviewed de novo. SeeRedd Iron, Inc. v. Int'l Sales & Serv. Corp., 200 P.3d 1133, 1136 (Colo.App. 2008). But the power to determine the components of such a remedy is ...

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