Klun v. Klun , 442 P.3d 88 ( 2019 )

Opinions of the Colorado Supreme Court are available to the
public and can be accessed through the Judicial Branch’s homepage at
http://www.courts.state.co.us. Opinions are also posted on the
Colorado Bar Association’s homepage at http://www.cobar.org.
ADVANCE SHEET HEADNOTE
June 3, 2019
2019 CO 46
No. 18SA266, Klun v. Klun—Contracts—Settlement Agreement—Fee-Shifting.
In this case, the Supreme Court is asked to decide whether the defendant is entitled
to recover his attorney fees pursuant to a fee-shifting provision of a prior settlement
agreement between him and the 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, the plaintiffs’ claims, in
substance, sought relief based on allegations that the defendant had breached the terms
of the settlement agreement, and the defendant responded by arguing that it was the
plaintiffs’ claims that were inconsistent with that agreement. In these circumstances, the
court concludes that the plaintiffs’ claims constituted an effort to enforce the terms of the
settlement agreement. Indeed, consistent with this conclusion, the plaintiffs themselves
had asserted a claim for fees pursuant to the fee-shifting clause at issue.
Accordingly, the court holds that the 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. The court therefore reverses the water court’s order
denying an award of such fees and remands this case for a determination of the trial and
appellate fees to be awarded to the defendant.
2
The Supreme Court of the State of Colorado
2 East 14th Avenue • Denver, Colorado 80203
2019 CO 46
Supreme Court Case No. 18SA266
Appeal from the District Court
Pueblo County District Court, Water Division 2, Case No. 17CW3033
Honorable Larry C. Schwartz, Water Judge
Plaintiffs-Appellees:
Thomas Klun and Joseph Klun, Jr.
v.
Defendant-Appellant:
Michael Klun,
and Concerning,
Appellee Pursuant to C.A.R. 1(e):
Bill Tyner, Division Engineer, Water Division 2.
Order Reversed
en banc
June 3, 2019
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.
JUSTICE GABRIEL delivered the Opinion of the Court.
2
¶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
3
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
4
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.
¶8 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
5
valve, and Alfalfa Valve. Plaintiffs further claimed that defendant moved the shut-off
valve onto his property, constructed a new road and large berm on the southern property
line of his parcel, and excluded plaintiffs from all ingress and egress on the parcels that
were transferred to defendant under the Settlement Agreement.
¶9 In light of the foregoing, and based on their view that under the express terms of
the Settlement Agreement, they had retained all historical rights of ingress and egress,
including access to all valves, head gates, and ditch roads on all parcels whether they
were exchanged or not, plaintiffs filed the present action in the water court. In this action,
plaintiffs asserted claims for (1) a temporary restraining order and preliminary injunction
precluding defendant from denying plaintiffs reasonable historical access to the head
gate that was the sole access point to the only lateral that provided irrigation water to
plaintiffs’ farm land; (2) a declaration that defendant shall not limit reasonable access to
head gates and valves historically used to irrigate plaintiffs’ farm operation, shall not
exclude plaintiffs from historical easements affecting plaintiffs’ farm operation, and shall
remove the above-referenced berm, which plaintiffs alleged restricted the natural flow of
irrigation water on which plaintiffs relied; (3) conversion of plaintiffs’ personal property
by taking possession of plaintiffs’ air vent, valves, and pipeline, among other property,
as well as by diverting plaintiffs’ water from the newly constructed diverter box; and
(4) trespass by destroying and restricting access to plaintiffs’ property without legal right
or plaintiffs’ consent.
¶10 Plaintiffs subsequently filed a motion for partial summary judgment, alleging,
among other things, that (1) pursuant to the Settlement Agreement, they had retained all
6
of their historical rights of ingress and egress, including access to all valves, head gates,
and ditch roads on all parcels whether they were exchanged or not, and (2) “[t]he clear
and unambiguous terms of the Settlement Agreement demonstrate that the Parties
intended and did in fact contractually agree that all rights of ingress and egress would
survive the exchange of the parcels.” Based on these allegations, plaintiffs asserted, “The
defendant has breached the Settlement Agreement by unilaterally restricting the
Plaintiffs’ access to all historical rights of way, while maintaining that he has unfettered
access to the Plaintiffs’ property.”
¶11 Defendant also moved for partial summary judgment, specifically as to plaintiffs’
declaratory judgment, conversion, and trespass claims. As pertinent here, he argued that
plaintiffs were not entitled to relief on these claims because they had “voluntarily
divested themselves of the property rights they now seek to recapture by executing the
June 4, 2015, Warranty Deed and [the Settlement Agreement].” Thus, like plaintiffs’
motion, defendant’s motion focused on the Settlement Agreement.
¶12 The water court granted partial summary judgment in defendant’s favor on the
portions of plaintiffs’ declaratory judgment claim requesting that the court order
defendant to return the irrigation pipe to its prior condition (including returning
plaintiffs’ air vent, Alfalfa Valve, and shut-off valve to where they were previously), to
move the road from on top of plaintiffs’ pipeline, and to preclude defendant from
padlocking any common valves. The court otherwise denied both parties’ motions for
partial summary judgment.
7
¶13 The case proceeded to trial, and during the trial, the water court dismissed certain
of plaintiffs’ claims pursuant to C.R.C.P. 41(b)(1). After the conclusion of the evidence
and the submission of written closing arguments by the parties, the court then issued
detailed and comprehensive findings of fact and conclusions of law, ruling against
plaintiffs on all of their remaining claims and entering judgment for defendant. As
pertinent here, the court rejected plaintiffs’ claims for conversion and trespass because
plaintiffs had “failed to present any credible evidence supporting their theoretical
property line.” The court also rejected plaintiffs’ easement claims because, among other
things, those claims were contrary to both the Settlement Agreement’s plain language
and plaintiffs’ repeated agreements to convey their “entire interest” without any
indication or statement of intent to reserve access rights to the transferred property.
¶14 Defendant then requested attorney fees pursuant to section 13(a) of the Settlement
Agreement. Plaintiffs opposed this motion, contending that section 13(a) “clearly and
unambiguously applies to claims of breach of the agreement and suits to obtain specific
performance” and that defendant was not entitled to attorney fees because the provision
was silent as to claims for declaratory relief.
¶15 The water court sided with plaintiffs and denied defendant’s fee motion. In so
ruling, the court stated, in pertinent part:
The Court finds that Section 13(a) of the parties’ Settlement Agreement does
not provide a basis for an award of attorney fees to Defendant under the
facts of this case. Plaintiffs did not contend that Defendant breached the
settlement agreement, did not pursue a breach of contract or specific
performance claim. Plaintiffs sought only a declaratory judgment and
injunctive relief. Therefore, Plaintiffs’ claims in this matter did not violate
8
the Settlement Agreement. The litigation in this case did not involve
enforcement of the Settlement Agreement.
¶16 Defendant now appeals from this order.
II. Analysis
¶17 After setting forth the applicable standard of review, we consider whether
section 13(a) of the Settlement Agreement mandates an award of attorney fees on the facts
of this case. We conclude that it does.
A. Standard of Review
¶18 Contract interpretation presents a question of law that we review de novo. Ad
Two, Inc. v. City & Cty. of Denver ex rel. Mgr. of Aviation, 9 P.3d 373, 376 (Colo. 2000). In
construing a contract, our primary goal is to determine and give effect to the intent of the
parties. Id. We determine the parties’ intent primarily from the language of the
instrument itself. Id. When a written contract is complete and free from ambiguity, we
will deem it to express the intent of the parties, and we will enforce it according to its
plain language. Id. In ascertaining whether provisions of an agreement are ambiguous,
we review the instrument’s language and construe it consistent with the plain and
generally accepted meaning of the words employed. Id.
¶19 Terms used in a contract are ambiguous when they are susceptible of more than
one reasonable interpretation. Id. The mere fact that the parties may interpret the
agreement differently, however, does not alone establish an ambiguity in the agreement.
Id. at 377. Absent such ambiguity, we will not look beyond the four corners of the
agreement to determine the meaning intended by the parties. Id. at 376–77.
9
B. Application
¶20 Section 13(a) of the Settlement Agreement provides:
Nothing in this Agreement will be construed so as to impair any legal or
equitable right of either Party hereto to enforce any of the terms of this
Agreement by any means, including without limitation, an action for damages
or a suit to obtain specific performance of any or all of the terms of this
Agreement. In the event of such action, the prevailing Party shall be
awarded all costs of the action, including reasonable attorneys’ fees, in
addition to any other relief to which such Party may be entitled.
(Emphases added.)
¶21 On the facts before us, we conclude that this provision mandates an award of
attorney fees to defendant in this case.
¶22 As an initial matter, we note that, contrary to plaintiffs’ assertion and the water
court’s ruling, the language of this provision is not limited to claims for breach of contract
or specific performance. Rather, it unambiguously mandates an award of fees to the
prevailing party in any action to enforce the agreement, regardless of the means by which
enforcement is sought (i.e., enforcement “by any means”), including “without limitation”
actions for damages or specific performance. On its face, then, the provision
contemplates claims to enforce the agreement beyond just damages actions for breach of
contract and suits to obtain specific performance. The contrary reading by plaintiffs and
the water court gives no meaning to the phrase “by any means, including without
limitation.” Accordingly, we cannot agree with the narrow interpretation advanced by
plaintiffs and the water court.
¶23 The question thus becomes whether plaintiffs’ claims amounted to an effort to
enforce any of the Settlement Agreement’s terms. We conclude that they did.
10
Specifically, the general allegations of plaintiffs’ complaint began by quoting the
Settlement Agreement. The complaint then proceeded to describe defendant’s actions
that plaintiffs maintain were contrary to that Agreement. Although the complaint did
not expressly allege breaches of the Agreement, that was the import of the allegations,
and plaintiffs’ motion for partial summary judgment made clear that that was precisely
what plaintiffs were alleging. Thus, as noted above, in their motion, plaintiffs asserted
that (1) pursuant to the Settlement Agreement, they had retained all of their historical
rights of ingress and egress on all parcels whether they were exchanged or not; (2) “[t]he
clear and unambiguous terms of the Settlement Agreement demonstrate that the Parties
intended and did in fact contractually agree that all rights of ingress and egress would
survive the exchange of the parcels”; and (3) “[t]he defendant has breached the
Settlement Agreement by unilaterally restricting the Plaintiffs’ access to all historical
rights of way, while maintaining that he has unfettered access to the Plaintiffs’ property.”
¶24 Similarly, in their reply in further support of their motion, plaintiffs contended,
“The clear and unambiguous terms of the Settlement Agreement demonstrate that the
Parties intended and did in fact contractually agree that all rights of ingress and egress
would survive the exchange of the parcels, whether on the Plaintiffs’ property or the
Defendant’s property.” And plaintiffs asserted that defendant was attempting to alter
the terms of the Settlement Agreement to refuse access to plaintiffs but continue
unfettered access to plaintiffs’ property “in direct conflict with the express terms of the
Settlement Agreement and established water law jurisprudence.”
11
¶25 Accordingly, plaintiffs’ own pleadings made clear that their claims turned on their
interpretation of the Settlement Agreement, the alleged terms of which plaintiffs were
seeking to enforce.
¶26 Notably, defendant and the water court likewise appear to have understood that
plaintiffs’ claims implicated the terms of the Settlement Agreement. Accordingly, in his
motion for partial summary judgment, defendant contended that through their claims for
relief in this case, plaintiffs were seeking to regain the rights that they had prior to the
Settlement Agreement and that their effort to do so was “contrary to the express terms of
the settlement, the conveyance, the circumstances surrounding dissolution, and the
continued conflict between the parties.” Defendant further asserted, “Plaintiffs
voluntarily divested themselves of the property rights they now seek to recapture by
executing the June 4, 2015, Warranty Deed and [the Settlement Agreement].”
¶27 Similarly, notwithstanding its later order denying defendant’s motion for attorney
fees, the water court found, among other things, that plaintiffs’ requested easements were
contrary to the plain terms of the Settlement Agreement.
¶28 In our view, the foregoing facts make clear that through their claims for relief,
plaintiffs were, in fact, seeking to enforce the terms of the Settlement Agreement. Indeed,
consistent with this conclusion, plaintiffs themselves repeatedly asserted a right to
attorney fees under the fee-shifting provision of the Settlement Agreement. Plaintiffs
requested fees in their complaint. They did so in their C.R.C.P. 26(a)(1) disclosures, in
which they expressly stated that they were seeking “reasonable attorney fees pursuant to
the written agreement between the parties.” And they did so in their written closing
12
argument, when they reiterated their request for “their attorney fees and costs incurred
in prosecuting this matter.”
¶29 Plaintiffs’ contemporaneous actions and course of performance speak louder than
their post-judgment words. Cf. Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1315
(Colo. 1984) (noting that extrinsic evidence of the parties’ performance under a contract
before any controversy arose is indicative of their intent at the time of contracting).
Indeed, it was only after the water court ruled against them and in defendant’s favor on
all claims in this case that plaintiffs changed their position and argued that their claims
did not implicate the fee-shifting provision of the Settlement Agreement. Having
themselves sought attorney fees under that provision, plaintiffs tacitly acknowledged
that their claims sought to enforce the Settlement Agreement’s terms. Having done so,
plaintiffs cannot now take the opposite position, merely because their lack of success at
trial rendered them liable for defendant’s attorney fees under the Settlement Agreement.
¶30 For these reasons, we conclude that defendant is entitled to attorney fees pursuant
to section 13(a) of the Settlement Agreement.
III. Conclusion
¶31 Because (1) section 13(a) of the Settlement Agreement provided that the prevailing
party in an action to enforce, by any means, any of the terms of that Agreement shall be
awarded reasonable attorney fees; (2) plaintiffs’ claims, in substance, sought to enforce
the Agreement; (3) plaintiffs’ own pleadings in this case evinced their understanding of
this fact; and (4) defendant prevailed on all claims below, we conclude that defendant is
entitled to recover his attorney fees in this case.
13
¶32 Accordingly, we reverse the water court’s order denying an award of such fees,
and we remand this case to that court with instructions that the court determine and
award the reasonable attorney fees that defendant incurred at trial and in these appellate
proceedings.
14