Thomas Klun and Joseph Klun, Jr. Plaintiffs-Appellees
Michael Klun, and Concerning, Defendant-Appellant Bill Tyner, Division Engineer, Water Division 2. Appellee Pursuant to C.A.R. 1(e)
from the District Court Pueblo County District Court, Water
Division 2, Case No. 17CW3033 Honorable Larry C. Schwartz,
Attorneys for Defendant-Appellant: Carlson, Hammond &
Paddock, LLC Karl D. Ohlsen Katrina B. Fiscella Denver,
Attorneys 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 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.
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 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
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
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."
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, liens or other
interests on the Property to be transferred." And
section 13(a) included, as pertinent here, a fee-shifting
clause that entitled the prevailing party in any action to
enforce the Settlement Agreement, regardless of the means of
enforcement, to an award of costs, including reasonable
attorney fees. In consideration of plaintiffs'
representations and contractual promises, defendant agreed to
provide plaintiffs with a full release and to file an
appropriate satisfaction of judgment and dismissal of all
remaining claims against plaintiffs. Pursuant to the
Settlement Agreement, plaintiffs conveyed parcels A, B, and C
to defendant by general warranty deed.
Prior to the Settlement Agreement, the parties' family
farm had been operated as a single unit. The fragmentation
effectuated by the Settlement Agreement almost immediately
led to conflicts and confrontations among the parties.
According to plaintiffs, shortly after signing the Settlement
Agreement, defendant, contrary to property lines that were
acknowledged and acquiesced to for over fifty years, began
preventing plaintiffs from accessing head gates, valves, and
ditch roads that they needed to access to irrigate their
property, and defendant allegedly damaged a divider box weir
to divert extra water into his lateral. In addition,
plaintiffs alleged that defendant had dug up plaintiffs'
pipeline at a head gate and permanently removed an air vent,
shut-off valve, and Alfalfa Valve. Plaintiffs further claimed
that defendant moved the shut-off valve onto ...