2020 COA 58
Colo. Ct. App.2020Background
- Commercial lease between landlord DIG HP1, LLC (DIG) and tenant Western Stone & Metal Corp. (WSMC) contained a fee‑shifting clause that expressly defines "prevailing party" by reference to specified litigation outcomes (including initiation, withdrawal, and degree of relief obtained).
- WSMC brought multiple claims under the lease; the trial court found in favor of WSMC on some claims (including what it called the "controlling issue"), in favor of DIG on others, and WSMC withdrew several claims; the damages awarded to WSMC were materially less than sought.
- Both parties moved for attorney fees and costs under the lease's prevailing‑party provision.
- The trial court declined to award fees to either party, applying the common‑law prevailing‑party test (party who prevailed on liability) and reasoning that each party prevailed on different claims.
- DIG appealed, arguing the court should have applied the lease's contractual definition of "prevailing party"; WSMC defended the trial court's use of the common‑law test and alternatively claimed it was the prevailing party.
- The Court of Appeals held that where a contract defines "prevailing party," the contractual definition controls and reversed and remanded for the trial court to determine entitlement under the lease (it did not decide which party prevailed).
Issues
| Issue | Plaintiff's Argument (WSMC) | Defendant's Argument (DIG) | Held |
|---|---|---|---|
| Whether the common‑law "prevailing party" definition or the contract's explicit definition controls application of the lease fee clause | Trial court correctly applied common‑law test for prevailing party | Contract definition governs; trial court erred by using common law | Contractual definition controls when parties have defined "prevailing party" in the agreement |
| Whether the trial court correctly declined to award fees / which party prevailed under the lease | Lease allows finding that neither party prevailed or that WSMC prevailed | Trial court abused discretion; lease should be applied and will identify prevailing party (DIG urged it prevailed) | Court reversed and remanded for the trial court to apply the lease's definition and determine entitlement; appellate court declined to decide who prevailed |
Key Cases Cited
- Dennis I. Spencer Contractor, Inc. v. City of Aurora, 884 P.2d 326 (Colo. 1994) (articulates common‑law test that prevailing party is the one receiving a favorable ruling on liability where contract does not define term)
- USI Properties E., Inc. v. Simpson, 938 P.2d 168 (Colo. 1997) (unambiguous contract terms must be enforced as written)
- Morris v. Belfor USA Group, Inc., 201 P.3d 1253 (Colo. App. 2008) (contractual fee‑shifting provisions should be applied according to their terms)
- Wheeler v. T.L. Roofing, Inc., 74 P.3d 499 (Colo. App. 2003) (trial court best positioned to determine prevailing party where both parties partially prevail)
- Bledsoe Land Co. v. Forest Oil Corp., 277 P.3d 838 (Colo. App. 2011) (parties may redefine technical terms by mutual assent in a contract)
- Harwig v. Downey, 56 P.3d 1220 (Colo. App. 2002) (general proposition that prevailing party may recover fees only when authorized by statute or contract)