Appeal from the District Court, Pueblo County
District Court, Water Division 2, Case No. 17CW3033,
Honorable Larry C. Schwartz, Water Judge
for Defendant-Appellant: Carlson, Hammond & Paddock, LLC,
Karl D. Ohlsen, Katrina B. Fiscella, Denver, Colorado
for Plaintiffs-Appellees: Stinnett Masters & Massey LLP, Jeff
A. Massey, Colorado Springs, Colorado
appearance on behalf of Division Engineer.
Defendant Michael Klun appeals the water courts order
denying his motion for attorney fees after he prevailed on
all claims brought against him in the underlying action by
plaintiffs Thomas Klun and Joseph Klun, Jr. (because the
parties are brothers and share the same last name, we will
consistently refer to Michael Klun as "defendant"
and Thomas Klun and Joseph Klun, Jr., as
"plaintiffs," even though in the initial litigation
between them, which we discuss below, their roles were
reversed). Defendant here asserts that he is entitled to
recover his attorney fees pursuant to a fee-shifting
provision of a prior settlement agreement (the
"Settlement Agreement") between him and plaintiffs.
The fee-shifting clause at issue provided that the prevailing
party in an action to enforce, by any means, any of the terms
of the Settlement Agreement shall be awarded all costs of the
action, including reasonable attorney fees. Here, plaintiffs
claims, in substance, sought relief based on allegations that
defendant had breached the terms of the Settlement Agreement,
and defendant responded by arguing that it was
plaintiffs claims that were inconsistent with that
Agreement. In these circumstances, we conclude that
plaintiffs claims constituted an effort to enforce the terms
of the Settlement Agreement. Indeed, consistent with this
conclusion, plaintiffs themselves had asserted a claim for
fees pursuant to the fee-shifting clause at issue.
Accordingly, we hold that defendant, as the prevailing party
on all claims below, is entitled to recover his attorney fees
pursuant to the Settlement Agreements fee-shifting clause,
and we therefore reverse the water courts order denying an
award of such fees and remand this case for a determination
of the trial and appellate fees to be awarded to defendant.
I. Facts and Procedural History
In 2011, defendant sued plaintiffs for dissolution and
winding up of their family-held partnership, Klun Farm &
Cattle, which owned certain farm property and associated
shares of water stock.
Several months later, the parties reached a mediated
settlement in which plaintiffs agreed to buy out defendants
interest in the partnership, including defendants interest
in the farm property and associated shares of water stock.
Plaintiffs ultimately did not fulfill their obligations under
this settlement, however, and over the next two years,
defendant filed four motions in the Pueblo district court to
enforce the settlement. These proceedings culminated in 2014,
when the court entered a money judgment against plaintiffs in
excess of $1.6 million and ordered defendant to convey the
farm property and water shares to plaintiffs upon payment in
full by plaintiffs. The court also awarded attorney fees to
defendant based on plaintiffs "groundless and frivolous
defense and obdurate litigation behavior."
Several weeks later, plaintiffs filed petitions in bankruptcy
seeking reorganization under Chapter 11. Defendant
participated in the bankruptcy proceedings as plaintiffs
largest unsecured creditor.
The parties subsequently resolved the bankruptcy proceedings
by entering into a memorandum of understanding that was
subsequently finalized into the Settlement Agreement at
issue. As pertinent here, section 2 of the Settlement
Agreement required plaintiffs to convey their entire interest
in three parcels of land (parcels A, B, and C), as well as
the shares of water stock associated with those parcels, to
defendant. Section 7 provided, in pertinent part, "The
Parties acknowledge that all existing right away [sic]
accesses remain unaffected." In section 10, the parties
represented and warranted that they had neither made nor
caused to be made "any encumbrances, ...