Klun v. Klun

Page 89

          Appeal from the District Court, Pueblo County District Court, Water Division 2, Case No. 17CW3033, Honorable Larry C. Schwartz, Water Judge

         Attorneys for Defendant-Appellant: Carlson, Hammond & Paddock, LLC, Karl D. Ohlsen, Katrina B. Fiscella, Denver, Colorado

         Attorneys for Plaintiffs-Appellees: Stinnett Masters & Massey LLP, Jeff A. Massey, Colorado Springs, Colorado

          No appearance on behalf of Division Engineer.

         OPINION

         JUSTICE GABRIEL

Page 90

         [¶1] Defendant Michael Klun appeals the water court’s 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.

         [¶2] 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.

         [¶3] Accordingly, we hold that defendant, as the prevailing party on all claims below, is entitled to recover his attorney fees pursuant to the Settlement Agreement’s fee-shifting clause, and we therefore reverse the water court’s 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

         [¶4] 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.

         [¶5] Several months later, the parties reached a mediated settlement in which plaintiffs agreed to buy out defendant’s interest in the partnership, including defendant’s 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."

         [¶6] Several weeks later, plaintiffs filed petitions in bankruptcy seeking reorganization under Chapter 11. Defendant participated in the bankruptcy proceedings as plaintiffs’ largest unsecured creditor.

         [¶7] 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, ...