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Country World Casinos, Inc. v. Tommyknocker Casino Corp.

Citation: 29 ELR 21253
No. No. 98-1342, 181 F.3d 1146/48 ERC 1833/(10th Cir., 06/23/1999)

The court holds that the amount a bankrupt casino paid to the casino's previous owner for environmental remediation does not offset a debt owed the previous owner. The casino was to make monthly payments to the previous owner under the terms of a promissory note. It suspended payment, however, after the previous owner, in violation of the terms of the purchase agreement, failed to secure the release of a deed of trust that encumbered the property. The previous owner then began foreclosure proceedings in state court.

The court first holds that the district court erroneously held that the casino was required to pay interest on the promissory note duringthe time it justifiably withheld monthly payments. Although the promissory note does not authorize a suspension of interest on the previous owner's default, a party to a contract cannot claim its benefits where that party is the first to violate the contract's terms. The court also holds that the district court erred in failing to award attorneys fees, costs, and expenses to the casino as the "prevailing party" in litigation relating to the promissory note. Where a claim exists for a violation of a contractual obligation, the party in whose favor the decision or verdict on liability is rendered is the prevailing party for purposes of awarding attorneys fees. Here, the district court found that the casino was not in default and as a result was not liable for default interest under the note.

The court then holds that environmental contamination is not an encumbrance on title and that the casino, therefore, was not entitled to a set-off for the amount paid to the previous owner for remediation. The overwhelming weight of authority indicates that environmental contamination is not an encumbrance. Moreover, there was no specific warranty regarding environmental conditions on the property. In fact, the casino knew the property needed remediation. Further, the acquisition agreement's cap on remediation costs did not apply to actual cleanup costs after closing.

Counsel for Appellant
Gary S. Cohen
Lindquist-Kleissler & Cooper
950 S. Cherry St., Denver CO 80246
(303) 691-9774

Counsel for Appellee
Michael E. Romero
Pendleton, Friedberg, Wilson & Hennessey
17th & Grant Bldg.
303 E. 17th Ave., Ste. 1000, Denver CO 80203
(303) 839-1204

Before Tacha, J., with Anderson, J., dissenting in part