24CA2039 US Bank v 355 Lake 12-11-2025
COLORADO COURT OF APPEALS
Court of Appeals No. 24CA2039 Pitkin County District Court No. 22CV30080 Honorable Christopher G. Seldin, Judge Honorable Laura C. Makar, Judge
U.S. Bank National Association, as the successor trustee for the holders of the Thornburg Mortgage Securities Trust 2007-5,
Defendant-Appellee,
v.
335 Lake Avenue LLC, a Colorado limited liability company,
Defendant-Appellant,
and
James K. Daggs,
Appellant.
JUDGMENT AFFIRMED
Division III Opinion by JUDGE LIPINSKY Dunn and Kuhn, JJ., concur
NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced December 11, 2025
Kutak Rock LLP, Jeremy D. Peck, Denver, Colorado, for Defendant-Appellee
Fairfield and Woods, P.C., John M. Tanner, Lee Katherine Goldstein, Denver, Colorado, for Defendant-Appellant and Appellant ¶1 For seventeen years, James K. Daggs (Daggs) and U.S. Bank
National Association, as trustee on behalf of the holders of the
Thornburg Mortgage Securities Trust 2007-5 Mortgage Loan
Pass-Through Certificates Series 2007-5, have been embroiled in
legal battles that ultimately rest on a single issue — whether Daggs
must repay a residential mortgage loan that he obtained in 2007.
The procedural history of this case encompasses two nonjudicial
foreclosure proceedings, a decade-long civil action, an unsuccessful
appeal of that judgment, a bankruptcy case, and the interpleader
action that is the subject of this appeal.
¶2 Daggs and his limited liability company, 335 Lake Avenue LLC
(355 Lake) (jointly, the Daggs parties), appeal three orders entered
in the interpleader action: (1) an order granting the trustee’s motion
to dismiss 335 Lake’s cross-claims; (2) an order granting the
trustee’s motion for summary judgment; and (3) an order denying
335 Lake’s request to take discovery from the trustee. We affirm.
I. Background
¶3 On August 3, 2007, Daggs and Ellen G. Daggs obtained a
mortgage loan from UBS AG Tampa Branch (the original
noteholder). (Ellen G. Daggs is not a party to this appeal.) As part
1 of the loan transaction, Daggs and Ellen G. Daggs executed and
delivered to the original noteholder a promissory note (the original
note) in the principal amount of $4,770,000 and, to secure the
original note, a deed of trust encumbering residential real property
located at 335 Lake Avenue in Aspen (the property). The original
noteholder assigned the original note to Thornburg Mortgage
Securities Trust 2007-5 Mortgage Loan Pass-Through Certificates
Series 2007-5.
¶4 Daggs stopped making payments on the original note in 2010
and transferred ownership of the property to 335 Lake the next
year.
A. The Two Nonjudicial Foreclosures
¶5 After Daggs defaulted on the original note, the trustee filed a
nonjudicial foreclosure proceeding on June 23, 2009. The trustee
withdrew the 2009 foreclosure proceeding, however, after Daggs
executed a modified promissory note (the modified note).
¶6 Daggs defaulted on the modified note, and the trustee filed a
second nonjudicial foreclosure proceeding on June 24, 2011. The
trustee voluntarily dismissed that proceeding on April 24, 2012,
after the Daggs parties filed the civil action described below.
2 B. The Prior Case
¶7 The Daggs parties filed suit against the original noteholder,
the trustee, and other defendants in the Pitkin County District
Court (the prior case) on July 6, 2011. In the prior case, the Daggs
parties asserted claims to quiet title in the property, for declaratory
judgments that no money was due and owing under the modified
note and that the modified note and deed of trust were
unenforceable, and for an injunction against any foreclosure based
on the modified note and deed of trust.
¶8 On December 3, 2019, following a bench trial, the district
court entered a final judgment (the 2019 judgment) against the
Daggs parties. In the 2019 judgment, the district court held, as
relevant here:
• The modified note is “valid and enforceable.”
• The deed of trust is “valid and enforceable.”
• The deed of trust “encumbers the [p]roperty.”
• Daggs is “the maker of the [modified] [n]ote.”
• The mortgage loan’s “outstanding principal balance [wa]s
$5,080,497.18.”
3 • “[T]he total amount due as of September 1, 2019, was
$7,197,669.42.”
• The trustee is “the bearer [of the modified note] entitled
to payment.”
¶9 The Daggs parties unsuccessfully appealed the 2019 judgment
(the prior appeal). See 335 Lake Ave., LLC v. U.S. Bank Nat’l Ass’n
ex rel. Holders of the Thornburg Mortg. Sec. Tr. 2007-5 Mortg. Loan
Pass-Through Certificates Series 2007-05, (Colo. App. No.
20CA0101, Aug. 12, 2021) (not published pursuant to C.A.R. 35(e)).
The 2019 judgment became final when the supreme court denied
the Daggs parties’ petition for a writ of certiorari in April 2022.
C. The Bankruptcy Case
¶ 10 During the pendency of the prior appeal, 335 Lake filed for
protection under Chapter 11 of the United States Bankruptcy Code
(the bankruptcy case). See In re 335 Lake Ave., LLC, No.
20-12378-JGR (Bankr. D. Colo. Aug. 19, 2021). The trustee filed a
claim in the bankruptcy case to collect on the modified note. 335
Lake objected to the trustee’s claim and filed a motion for leave to
sell the property, free and clear of any interest the trustee may
claim in it (the sale motion). The trustee opposed the sale motion.
4 ¶ 11 In its order granting the sale motion (the sale order), the
bankruptcy court said that “[the trustee]’s lien on the property,
which [335 Lake] disputes, shall attach to the proceeds of the sale,
which shall be [in] an account earning the highest interest rate
possible while still being compliant with 11 U.S.C. § 345.” In re 335
Lake Ave., LLC, No. 20-12378-JGR (Bankr. D. Colo. Apr. 7, 2021)
(unpublished order).
¶ 12 After the bankruptcy court entered the sale order, 335 Lake,
the trustee, and First Western Trust Bank (the escrow agent)
entered into an escrow agreement (the escrow agreement) for the
purpose of authorizing the escrow agent to “take possession of the
net sales proceeds from the sale of the [p]roperty . . . pending the
outcome of the [prior appeal] and all disputes” relating to the
trustee’s claim in the bankruptcy case to collect on the modified
note. In addition, the escrow agreement said that the trustee “need
not take additional steps to perfect its lien in the [sale] proceeds.”
The bankruptcy court approved the escrow agreement.
¶ 13 335 Lake then sold the property to a third party, and, under
the terms of the escrow agreement, the net sale proceeds were
delivered to the escrow agent. As provided in the escrow agreement,
5 the escrow agent held the net sale proceeds and all other accrued
amounts (the escrowed funds) in an escrow account. (According to
the escrow agreement, the net proceeds from the sale of the
property were estimated to be $8,319,328.36.)
¶ 14 After the division affirmed the 2019 judgment in the prior
appeal, the bankruptcy court entered an order dismissing the
bankruptcy case. The bankruptcy court further ordered that the
escrowed funds “shall only be disbursed upon written agreement of
the parties or an order from a Colorado state court having
jurisdiction over the matter.”
D. The Interpleader Action
¶ 15 After the supreme court denied the Daggs parties’ petition for
a writ of certiorari, the trustee sent the escrow agent a written
request for the trustee’s portion of the escrowed funds, calculated
based on the district court’s findings in the 2019 judgment
regarding the unpaid balance of the mortgage loan. Two days later,
the Daggs parties objected in writing to the trustee’s disbursement
request.
¶ 16 Because the trustee and the Daggs parties were unable to
resolve their disbursement dispute, the escrow agent filed an
6 interpleader action to obtain a determination as to which entity or
entities were entitled to the escrowed funds and in what amounts.
The escrow agent later filed an amended complaint.
¶ 17 335 Lake filed an answer to the escrow agent’s amended
complaint, as well as cross-claims against the trustee. In its
cross-claims, 335 Lake sought a declaratory judgment that the
escrowed funds belonged to 335 Lake alone and asked the district
court to quiet title to the escrowed funds in its favor.
¶ 18 The trustee filed an answer to the amended complaint,
cross-claims against 335 Lake, and a third-party complaint against
Daggs. In those claims, the trustee pleaded causes of action for
breach of the escrow agreement and a declaratory judgment that it
was entitled to a portion of the escrowed funds sufficient to satisfy
all amounts due to it. (The trustee pleaded its breach of contract
claim against only 335 Lake and pleaded its declaratory judgment
claim against both of the Daggs parties. We refer to those claims as
the trustee’s claims.) The trustee requested an order directing the
clerk of court to disburse the trustee’s portion of the escrowed
funds to the trustee. The district court entered an order
authorizing the escrow agent to deposit the escrowed funds into the
7 court registry, and the escrow agent did so. The district court then
dismissed the escrow agent from the interpleader action, with
prejudice.
¶ 19 In addition, the trustee filed a motion to dismiss 335 Lake’s
cross-claims under C.R.C.P. 12(b)(5) (the motion to dismiss). In the
motion to dismiss, the trustee argued that 335 Lake’s cross-claims
were “barred by claim preclusion [and] issue preclusion” and
“otherwise fail[ed] as a matter of law.”
¶ 20 “[F]or reasons stated in [the trustee]’s briefing,” the district
court entered an order granting the motion to dismiss (the
dismissal order). In the dismissal order, the district court
concluded that the 2019 judgment barred 335 Lake from litigating
the issues raised in its cross-claims under, “at a minimum[,] . . . the
doctrine of claim preclusion”; the district court’s rulings in the 2019
judgment “with respect to [the trustee]’s entitlement to payment”
were not dicta, as 335 Lake had argued; and the 2019 judgment
and the prior appeal established that the trustee was “free . . . to
enforce the [modified] note.” The district court also rejected the
Daggs parties’ argument that “the statute of limitations bar[red] [the
trustee] from acting on the [2019] judgment.”
8 ¶ 21 Four months later, the trustee filed a motion for summary
judgment in its favor on its claim against 335 Lake for breach of the
escrow agreement and its claim “seeking a declaration that,
pursuant to the mortgage loan and [the 2019 judgment], the
[trustee] is entitled to a portion of the escrow[ed] funds sufficient to
satisfy all amounts due and owing to it, including reasonable
[attorney] fees and costs” (the summary judgment motion).
¶ 22 The district court granted the summary judgment motion (the
summary judgment order), in part. The district court incorporated
the dismissal order into the summary judgment order and
concluded that the doctrine of claim preclusion barred the Daggs
parties’ arguments. The district court determined that 335 Lake
was liable to the trustee on the trustee’s claim for breach of the
escrow agreement and entered judgment in the trustee’s favor. The
district court said, however, that the trustee’s damages claim
presented disputed issues of material fact and therefore required a
trial.
¶ 23 The trustee then filed a motion for an award of damages and
entry of a final judgment (the damages motion). In support of the
damages motion, the trustee attached an affidavit from the trustee’s
9 document control officer, who said under oath that the amount due
and owing to the trustee under the mortgage loan, as of September
28, 2024, was $8,216,858.00. In the affidavit, the document
control officer also said that, beginning on September 29, 2024, and
“continuing on each day thereafter, the amount due and owing
under the subject mortgage loan increase[d] by $798.74 per day.”
¶ 24 In their response to the damages motion, the Daggs parties
said that, “[w]ithout waiving their right to appeal from the
underlying summary judgment as to liability,” they did not “object
to entry of final judgment in the amount of [$8,216,858.00] plus a
per diem of $798.74 for each day since September 26, 2024, as
prayed for in the [damages] [m]otion.” The Daggs parties also said
they did not object to “the registry of the court paying that amount
to [the trustee] immediately” and vacation of the pending trial
setting.
¶ 25 The district court entered a final judgment in favor of the
trustee and against the Daggs parties, jointly and severally, in the
amount of $8,248,807.60, together with postjudgment interest at a
per diem rate of $798.74.
10 E. 335 Lake’s Discovery Requests
¶ 26 While the summary judgment motion was pending, counsel for
the Daggs parties contacted counsel for the trustee regarding dates
for a C.R.C.P. 30(b)(6) deposition and submitted proposed
deposition topics.
¶ 27 The trustee objected to the proposed deposition topics. When
the trustee raised the issue with the district court, it argued that
the topics were “wholly inconsistent” with the 2019 judgment, the
prior appeal, and the dismissal order. The trustee asserted that the
Daggs parties were attempting to take discovery to “reinvestigate,
relitigate, and otherwise revisit discovery, issues, and/or claims
that were, or could have been, brought and litigated” in the prior
case.
¶ 28 Following a “discovery dispute conference,” the district court
entered an order denying 335 Lake’s request to take further
discovery (the discovery order). The district court noted that its
entry of the dismissal order alone justified denying 335 Lake’s
discovery requests.
11 F. This Appeal
¶ 29 In this appeal, the Daggs parties contend that the district
court erred by entering the dismissal order, the summary judgment
order, and the discovery order.
II. Analysis
A. The District Court Did Not Err by Entering the Dismissal Order
1. Standard of Review
¶ 30 “We review a 12(b)(5) motion de novo and apply the same
standards as the [district] court.” Denv. Post Corp. v. Ritter, 255
P.3d 1083, 1088 (Colo. 2011).
2. 335 Lake’s Cross-Claims Fail Under the Doctrine of Issue Preclusion
¶ 31 335 Lake argues that its cross-claims were not subject to
dismissal under C.R.C.P. 12(b)(5) based on an affirmative defense,
such as claim preclusion. It further contends, in the alternative,
that the district court erred by granting the dismissal motion
because it misapplied the doctrine of claim preclusion with respect
to 335 Lake’s cross-claims, incorrectly concluded that the doctrine
did not bar the trustee’s claims, and misinterpreted the statute of
limitations governing the trustee’s claims.
12 ¶ 32 Under 335 Lake’s reasoning, because the trustee’s claims
failed, only the Daggs parties had a valid claim to the escrowed
funds.
¶ 33 We begin by examining whether 335 Lake’s cross-claims were
subject to dismissal under an affirmative defense.
¶ 34 Although “[a]n affirmative defense, such as issue preclusion, is
typically raised in an answer,” such a defense may serve as the
basis for a dismissal motion when “the applicability of the defense
[is] clearly indicated” and appears “on the face of the pleading to be
used as a basis for the motion.” Bristol Bay Prods., LLC v. Lampack,
2013 CO 60, ¶¶ 41, 45, 312 P.3d 1155, 1163-64 (quoting 5B Wright
& Miller’s Federal Practice & Procedure § 1357, at 708-13 (3d ed.
2004)); see Williams v. Rock-Tenn Servs., Inc., 2016 COA 18, ¶ 20,
370 P.3d 638, 642 (“[B]ecause the factual allegations in the
complaint established a clearly applicable affirmative defense, that
affirmative defense provided a proper basis for dismissal pursuant
to C.R.C.P. 12(b)(5).”); see also Dave Peterson Elec., Inc. v. Beach
Mountain Builders, Inc., 167 P.3d 175, 176-77 (Colo. App. 2007)
(noting that an overwhelming majority of federal and state
jurisdictions have “concluded that a defendant may assert a claim
13 preclusion defense for the first time in a motion to dismiss where
the plaintiff fails to show prejudice”).
¶ 35 335 Lake asserts that nothing in its cross-claims “indicate[d]
the existence of an affirmative defense that w[ould] bar the award of
any remedy,” Bristol Bay Prods., ¶ 44, 312 P.3d at 1164 (quoting 5B
Wright & Miller’s Federal Practice & Procedure § 1357, at 708), and
that no such defense appeared “on the face of” the cross-claims, id.
at ¶ 45, 312 P.3d at 1164 (quoting 5B Miller & Wright’s Federal
Practice & Procedure § 1357, at 708-13). We disagree.
¶ 36 335 Lake peppered references to the prior case, including an
express reference to the 2019 judgment, throughout ten paragraphs
of its cross-claims. Moreover, the escrow agent referenced the 2019
judgment in its pleadings and attached it as an exhibit to its
amended complaint. The district court could therefore view the
2019 judgment in its entirety in the court file.
¶ 37 Thus, the district court properly considered the rulings in the
2019 judgment when it adjudicated the motion to dismiss. See id.
at ¶¶ 41, 45, 312 P.3d at 1163-64; see also City of Aurora v. 1405
Hotel, LLC, 2016 COA 52, ¶ 13, 371 P.3d 794, 799-800 (“[A] court
may consider documents referenced in a complaint and matters of
14 which it may take judicial notice without converting a motion to
dismiss into a motion for summary judgment.”).
¶ 38 Because the 2019 judgment showed that 335 Lake was
attempting to relitigate issues that the district court decided against
it in the prior case, in the interpleader action, the district court did
not err by considering whether to dismiss 335 Lake’s cross-claims
based on a preclusion theory.
¶ 39 Taking 335 Lake’s affirmative defense argument to its logical
conclusion, a party that lost a civil action could simply raise in a
new case the issues decided against it in the prior action and then
argue that the court in the new case must ignore its blatant attempt
to take a second bite of the apple. This conclusion is a recipe for
unnecessary duplicative litigation and a waste of judicial resources,
contrary to the Colorado courts’ “steady march toward streamlining
litigation and reducing costs for litigants.” Smith v. Terumo BCT,
Inc., 2025 COA 85, ¶ 44, ___ P.3d ___, ___ (Grove, J., concurring
dubitante).
¶ 40 We thus reject 335 Lake’s argument that its cross-claims
could not be dismissed on issue or claim preclusion grounds.
15 ¶ 41 Next, we examine whether 335 Lake’s cross-claims failed
under the doctrines of claim preclusion and issue preclusion.
¶ 42 Claim preclusion bars a claim in a later proceeding if four
elements are met: (1) “the judgment in the prior proceeding was
final”; (2) “the prior and current proceeding involved identical
subject matter”; (3) “the prior and current proceeding involved
identical claims for relief”; and (4) “the parties to both proceedings
were identical or in privity with one another.” Foster v. Plock, 2017
CO 39, ¶ 12, 394 P.3d 1119, 1123 (quoting Meridian Serv. Metro.
Dist. v. Ground Water Comm’n, 2015 CO 64, ¶ 36, 361 P.3d 392,
398). “In the broadest sense, claim preclusion prevents the
perpetual [relitigation] of the same claim or cause of action. The
goal of the doctrine is to promote judicial economy by barring a
claim litigated in a prior proceeding from being litigated again in a
second proceeding.” Id. at ¶ 12, 394 P.3d at 1122.
¶ 43 In contrast, issue preclusion “prevents the [relitigation] of
discrete issues, rather than causes of action.” Id. at ¶ 13, 394 P.3d
at 1123. Under the doctrine of issue preclusion, “once a particular
issue is finally determined in one proceeding, parties to this
proceeding are barred from [relitigating] that particular issue again
16 in a second proceeding, even when the actual claims for relief in the
two proceedings are different.” Id. “[T]he doctrine of issue
preclusion is broader than the doctrine of claim preclusion because
it applies to claims for relief different from those litigated in the first
action, but narrower in that it applies only to issues actually
litigated.” Id.
¶ 44 Issue preclusion prohibits litigation of an issue in a second
proceeding if four elements are met:
(1) the prior proceeding was decided on a final judgment on the merits; (2) the issue in the current proceeding is identical to the issue actually adjudicated in a prior proceeding; (3) the party against whom issue preclusion is asserted had a full and fair opportunity to litigate the issue in the prior proceeding; and (4) the party against whom issue preclusion is asserted is a party or in privity with a party in the prior proceeding.
Id. Similar to claim preclusion, the doctrine of issue preclusion
“protect[s] litigants from needless relitigation of the same issues,
further[s] judicial economy, and promote[s] the integrity of the
judicial system by affirming that one can rely upon judicial decrees
because they are final.” Wolfe v. Sedalia Water & Sanitation Dist.,
2015 CO 8, ¶ 14, 343 P.3d 16, 22.
17 ¶ 45 Although the prior case and the interpleader action both
centered on alleged breaches of contract, the cases involved the
alleged breach of different contracts. The central question in the
prior case was whether Daggs breached the modified note by failing
to pay it, while the interpleader action arose from 335 Lake’s alleged
breach of the escrow agreement.
¶ 46 By the time the Daggs parties and the trustee asserted their
respective claims in the interpleader action, the parties were no
longer litigating how much, if anything, Daggs owed the trustee
under the modified note. Rather, they disputed whether the Daggs
parties had breached the escrow agreement by blocking the trustee
from recovering out of the escrowed funds the unpaid balance of the
mortgage loan — a sum that the district court adjudicated in the
2019 judgment to be the amount Daggs owed the trustee.
¶ 47 For this reason, we disagree with the district court’s
application of the doctrine of claim preclusion. Claim preclusion
did not apply because the prior case and the interpleader action did
not involve the identical subject matter or identical claims for relief.
See Foster, ¶ 12, 394 P.3d at 1123.
18 ¶ 48 But this disagreement does not mean that the district court
reached the wrong result in granting the motion to dismiss. We
next consider whether, under the doctrine of issue preclusion, the
issues decided in the 2019 judgment barred 335 Lake from
litigating its cross-claims in the interpleader action. See City of
Aurora v. Dep’t of Revenue, 2023 COA 17, ¶ 11, 529 P.3d 1254,
1256 (explaining that an appellate court may “affirm on any ground
supported by the record” (quoting McLellan v. Colo. Dep’t of Hum.
Servs., 2022 COA 7, ¶ 10, 507 P.3d 1025, 1029)). We therefore
turn to the four elements that must be satisfied for issue preclusion
to apply.
¶ 49 First, as the 2019 judgment and the prior appeal demonstrate,
the prior case was decided on a final judgment on the merits. See
Foster, ¶ 13, 394 P.3d at 1123.
¶ 50 Second, the issues raised in 335 Lake’s cross-claims in the
interpleader action were identical to the issues actually adjudicated
in the prior case. See id. In the prior case, the Daggs parties
asserted claims (1) to quiet title in the property; (2) to obtain
declaratory judgments that no amounts were due and owing under
the modified note and that the modified note and deed of trust were
19 unenforceable; and (3) for an injunction against any foreclosure
based on the modified note and deed of trust. As explained above,
in the 2019 judgment, the district court resolved the Daggs parties’
claims by finding, among other facts, that the modified note and the
deed of trust were valid and enforceable; the deed of trust
encumbered the property; the mortgage loan’s “outstanding
principal balance [was] $5,080,497.18, and the total amount due as
of September 1, 2019, was $7,197,669.42”; and the trustee was
“the bearer [of the modified note and was] entitled to payment.”
¶ 51 In its cross-claims, the Daggs parties sought to relitigate the
trustee’s right to recover the unpaid balance of the mortgage loan in
the context of the trustee’s claim to a portion of the escrowed funds.
See id.
¶ 52 Third, the Daggs parties had a full and fair opportunity in the
prior case to litigate the issues that 335 Lake sought to reopen
through its cross-claims in the interpleader action. See id. Indeed,
the Daggs parties pursued the prior case for more than a decade,
during which they had an ample opportunity to litigate whether the
trustee was entitled to recover the unpaid mortgage loan balance
from Daggs.
20 ¶ 53 Fourth, the Daggs parties were parties to the prior case and
the interpleader action. See id.
¶ 54 We now turn to 335 Lake’s two remaining arguments against
the application of claim preclusion or issue preclusion to bar its
cross-claims — (1) the trustee’s claim to recover the unpaid balance
of the mortgage loan was barred under the doctrine of claim
preclusion because it was a compulsory counterclaim in the prior
case that the trustee never asserted in that proceeding; and (2) the
trustee’s claim to recover a portion of the escrowed funds was time
barred.
¶ 55 First, 335 Lake argues that the trustee had no legal right to
any portion of the escrowed funds because its claim to recover such
monies was a compulsory counterclaim in the prior case that the
trustee never pleaded. Thus, 335 Lake reasons, the doctrine of
claim preclusion barred that claim, and only the Daggs parties had
a valid claim to the escrowed funds. We disagree.
¶ 56 335 Lake ignores the critical fact, discussed above, that, after
it sold the property and agreed to place the sale proceeds in escrow,
the trustee was no longer seeking to collect on the modified note
but, rather, was attempting to recover its share of the escrowed
21 funds — as quantified in the 2019 judgment. Once the 2019
judgment became final, it supplanted any claim to collect on the
modified note by specifying the unpaid balance of the mortgage loan
and determined that Daggs owed such sum to the trustee. The
escrow agreement then set forth the procedure for distributing the
sale proceeds, consistent with the ruling in the 2019 judgment that
Daggs owed the trustee $7,197,669.42, plus postjudgment interest.
¶ 57 The Daggs parties assumed the risk that they would face such
a judgment when they chose to file a civil action to challenge the
enforceability of the modified note and the deed of trust. By the
time the escrow agent filed the interpleader action, Daggs had lost
on the issues of whether he owed any monies to the trustee and, if
so, how much.
¶ 58 Second, 335 Lake argues that the trustee’s claim to recover a
portion of the escrowed funds was time barred under the statute of
limitations for actions to recover a debt. But 335 Lake focuses on
the wrong statute of limitations. As explained above, in the
interpleader action, the trustee asserted a claim for breach of the
escrow agreement, not for breach of the modified note. The trustee
alleged that 335 Lake breached the escrow agreement by objecting
22 to the trustee’s disbursement request in April 2022. The trustee’s
claim for breach of the escrow agreement did not come into
existence until 335 Lake submitted its objection on April 28, 2022.
¶ 59 The trustee asserts that the three-year limitation period for all
contract actions found in section 13-80-101(1)(a), C.R.S. 2025,
governed its claim for breach of the escrow agreement. That
limitation period did not start running until April 2022 — less than
six months before the trustee asserted the trustee’s claims. 335
Lake does not argue to the contrary; it apparently concedes that the
trustee’s claims were not time barred if the trustee was not
asserting a claim to enforce the modified note.
¶ 60 For these reasons, we hold that, under the doctrine of issue
preclusion, the issues resolved against the Daggs parties in the
2019 judgment barred 335 Lake’s cross-claims in the interpleader
action, and the district court therefore properly dismissed them.
See Foster, ¶ 13, 394 P.3d at 1123.
23 B. The District Court Did Not Err by Entering the Summary Judgment Order
¶ 61 “We review an order granting a motion for summary judgment
de novo.” Murry v. GuideOne Specialty Mut. Ins. Co., 194 P.3d 489,
491 (Colo. App. 2008)
2. The Trustee Was Entitled to Summary Judgment in Its Favor
¶ 62 The Daggs parties contend that the district court’s grant of the
summary judgment motion was “based on the same errors in
applying the law of claim preclusion and the [s]tatute of [l]imitations
that the [court] had made in connection with its granting of the
motion to dismiss.” Indeed, the Daggs parties rest their challenge
to the summary judgment order on the same arguments they
present in support of their contention that the district court erred
by entering the dismissal order. Those arguments fare no better in
the context of the summary judgment order than in the context of
the dismissal order.
¶ 63 Significantly, the Daggs parties do not assert any defenses to
the trustee’s claims other than to reassert that the 2019 judgment
barred them. See Foster, ¶ 12, 394 P.3d at 1123.
24 ¶ 64 Accordingly, we affirm the summary judgment order.
C. The District Court Acted Within Its Discretion by Denying the Discovery Motion
¶ 65 “We review a court’s discovery ruling for an abuse of
discretion.” Affiniti Colo., LLC v. Kissinger & Fellman, P.C., 2019
COA 147, ¶ 23, 461 P.3d 606, 613. “We will not reverse a court’s
ruling unless its ‘decision is manifestly arbitrary, unreasonable, or
unfair, or [it] applies incorrect legal standards.’” Id. (quoting
Medina v. Conseco Annuity Assurance Co., 121 P.3d 345, 347 (Colo.
App. 2005)).
2. The Preclusive Effect of the 2019 Judgment Compelled the Denial of 335 Lake’s Request to Take Discovery
¶ 66 The Daggs parties contend that the district court abused its
discretion by improperly relying on the dismissal order in entering
the discovery order. Further, the Daggs parties argue that the
discovery order was an “extraordinary ruling” that denied their
requested discovery “regarding still-pending affirmative defenses.”
We disagree.
¶ 67 The Daggs parties sought to take discovery on issues that the
district court resolved against them in the 2019 judgment, or that
25 were otherwise irrelevant to the claims in the interpleader action,
such as
• the trustee’s rationale for not asserting an affirmative
claim to collect on the modified note in the prior action;
• the reasons why the trustee voluntarily dismissed the
2011 nonjudicial foreclosure proceeding and did not file
any later nonjudicial foreclosure proceedings; and
• the circumstances of the trustee’s acquisition of an
interest in the modified note and the deed of trust.
¶ 68 As explained above, in the 2019 judgment, the district court
resolved against the Daggs parties all issues concerning the
trustee’s right to enforce the modified note and the sum Daggs owed
the trustee. Furthermore, once 335 Lake sold the property, the sale
proceeds were placed in escrow, and 335 Lake objected to the
trustee’s request for its share of the escrowed funds. Thus, the
remaining issues centered on whether 335 Lake had breached the
escrow agreement. As the division noted in the prior appeal,
because the 2019 judgment resolved the issue of whether the
trustee was the holder of the modified note, “any issues concerning
how [the trustee] came to hold the [modified] note [were] irrelevant
26 to its ability to enforce the [modified] note and the related deed of
trust.” 335 Lake Ave., No. 20CA0101, slip op. at ¶ 48.
¶ 69 The Daggs parties’ discovery requests in the interpleader
action ignored the preclusive effect of the 2019 judgment, as well as
the effect of the dismissal order. Those discovery requests were
part of their relentless campaign — in the face of the doctrine of
issue preclusion — to relitigate the trustee’s right to recover the
unpaid balance of the mortgage loan.
¶ 70 For these reasons, we affirm the discovery order.
D. Attorney Fees
¶ 71 The trustee requests an award of its reasonable attorney fees
under section 7(E) of the modified note and section 13-17-102(2),
C.R.S. 2025. Because the trustee’s claims arose from 335 Lake’s
breach of the escrow agreement and not from Daggs’s failure to pay
the modified note, the fee-shifting provision of the modified note
does not apply to the trustee’s fee request.
¶ 72 In addition, although section 8.6 of the escrow agreement
contains a fee-shifting provision, the trustee did not request an
award of attorney fees under that section, either in the trustee’s
claims, the summary judgment motion, or its opening brief. We will
27 not craft an argument for the trustee that the trustee itself did not
assert. See Gravina Siding & Windows Co. v. Gravina, 2022 COA
50, ¶ 71, 516 P.3d 37, 50.
¶ 73 Lastly, although a close call, we decline to award attorney fees
to the trustee under section 13-17-102(2). The trustee asserts that,
“[i]n their nearly 14[-]year campaign of meritless litigation, the
Daggs [p]arties have asserted claims and defenses that lack
substantial justification, have interposed the same for purposes of
delay or harassment, and have unnecessarily expanded these
proceedings.” Although the Daggs parties did not prevail in this
appeal — or in any of the related cases — the trustee does not
explain why their arguments lacked substantial justification. As
the supreme court has reminded us, we award appellate fees only
“in cases that are clear and unequivocal.” Glover v. Serratoga Falls
LLC, 2021 CO 77, ¶ 70, 498 P.3d 1106, 1122 (quoting Wood Bros.
Homes, Inc. v. Howard, 862 P.2d 925, 935 (Colo. 1993)). Based on
the briefing and the record, this case is not one of them.
¶ 74 Accordingly, we deny the trustee’s request for attorney fees.
III. Disposition
¶ 75 The judgment is affirmed.
28 JUDGE DUNN and JUDGE KUHN concur.