Opinion
No. X05 CV 02 4009795 S
March 1, 2010
MEMORANDUM OF DECISION PLAINTIFF'S MOTION FOR AWARD OF ATTORNEYS FEES AND COSTS (#212.10)
Introduction
This is a collection action on a demand promissory note, a note in the original amount of one million dollars. Because it is a note whose maker is now deceased, and has been for many years, the co-executors of the maker/decedent's estate were named as the defendants. The plaintiff unsecured creditor and noteholder is now moving the court for the imposition of costs and attorneys fees, following a 2009 jury trial which was held before the undersigned. The jury returned a verdict in favor of the plaintiff and against the decedent's estate on the balance due under the terms of the note. In addition to an applicable interest rate, the jury found that the plaintiff had proven by a fair preponderance of the evidence that the principal balance of the note was $810,245.59. (Verdict Form, ¶¶ 1 and 2.) The total award on the note, including interest, amounts to over two million dollars. The jury also found that the plaintiff had proven, "by a fair preponderance of the evidence, that it is entitled to costs of collection, including reasonable attorneys fees and court costs." (Verdict Form, ¶ 5.) This latter finding is the subject of this memorandum of decision, as the court reserved to itself the calculation of the actual amount of fees and costs to be so awarded to the plaintiff.
The parties had briefed the issue of whether, in the event of a plaintiff's verdict, the actual amount of fees and costs to be awarded should be determined by the court, or by the jury. Following a hearing, the court determined it was properly a matter for the court to rule upon as a post-verdict matter collateral to the decision on the merits. The court finds that a calculation of the amount of attorneys fees based on a contract such as the Note in this case presents an equitable issue of accounting, one which does not implicate a right to a jury trial. Accordingly, a separate hearing was held on this issue post-trial. This memorandum of decision is the result.
By way of background, the story behind this commercial collection case begins almost 25 years earlier, with a different set of parties than the litigants that eventually went to trial here in 2009. The court heard all the witnesses and the arguments of counsel at the trial. It learned of the history of the several parties involved in the case, both through trial testimony and exhibits, as well as through the rulings and opinions issued by other judges and appellate panels. This motion for fees and costs gives the court the opportunity to briefly comment upon the evidence the jury heard, and upon which the jury made its findings of fact. Because the court is writing in a post-verdict world, the word "allegation" will not be found in this decision, except perhaps as it relates to some of the plethora of other litigations Cadle has pursued over the years. The jury has spoken on all dispositive issues on this collection case, save this one as to the amount of attorneys fees. This is a decision which is within the sound discretion of the trial court itself. However, before that specific issue is addressed, a summary of the history of this matter is appropriate, as it provides the context for the court's award of fees and costs. That context will be apparent from the following narrative.
The 1985 Demand Promissory Note: F. Francis D'Addario and the Bank of New Haven
In 1985, the late F. Francis D'Addario (D'Addario), a businessman and entrepreneur, borrowed the sum of one million dollars ($1,000,000.00) from the Bank of New Haven in New Haven, Connecticut. That indebtedness, which was not secured by any real estate or other collateral, was documented by a demand promissory note signed by D'Addario. This demand note, in the original principal amount of one million dollars, was received into evidence at trial and was executed by D'Addario (as borrower) in favor of the Bank of New Haven (as holder) on May 31, 1985 (Note). The Note called for D'Addario to make regular monthly payments with interest to the Bank of New Haven, beginning in June 1985, with successive payments thereafter, which served to reduce the amount of principal and interest owed.
Following the execution of the Note, and before the indebtedness represented by the Note had been fully repaid and satisfied, several significant events occurred. First and foremost, less than one year after signing the Note, D'Addario died testate in Illinois in a plane crash while on a business trip on March 5, 1986. At the time, D'Addario the maker of the Note was a resident of Trumbull, Connecticut, and his will was accordingly admitted to probate in the Probate Court of Trumbull. The D'Addario estate remains open there to this day. Pursuant to the terms of D'Addario's will, several parties were appointed in 1986 as executors of his estate. The executors included two of the decedent's children, his sons David D'Addario and Lawrence D'Addario.
The evidence at trial showed that during his lifetime, F. Francis D'Addario had made some monthly payments to the Bank of New Haven as required by the terms of the Note. Following the probating of D'Addario's will, it was found that the Bank of New Haven had filed a timely claim in probate court against the D'Addario estate in connection with the Note. As the named defendants in the above-captioned collection action, David and Lawrence D'Addario are now the sole remaining executors of their father's estate. The plaintiff's proof at trial was based largely on Bank of New Haven records introduced into evidence, and the demand for payment (exclusive of interest) was for somewhat less than the original principal amount of the Note. The jury chose to credit the validity of these Bank of New Haven records.
The Bank of New Haven itself ceased to exist in August 1997, but its business records pertaining to the Note and the balance due on the Note were authenticated at trial through former bank employees.
The 1994 Sale of the Note to the Cadle Company by the Bank of New Haven
Another event with significance in the history of this Note, especially as it relates to this court's findings, occurred in 1994. That was when the original holder of the Note, the Bank of New Haven, sold the Note itself and the unsecured indebtedness it represented to a third party, the Cadle Company (Cadle), the current plaintiff. A vice president of the Bank of New Haven endorsed the Note over to Cadle on September 23, 1994. This was done as part of a sale by the bank of certain aged receivables, with the Note at issue included in a bundle of some nonperforming loans the bank had made. As the current holder of the Note, Cadle is the plaintiff in the above-captioned collection action. In purchasing the Note from the Bank of New Haven in 1994, Cadle became the holder of the Note, thereby stepping into the shoes of the Bank of New Haven, and acquiring all of the bank's rights under the Note. In 2002, as part of a number of different and ongoing legal challenges, Cadle filed this action against the co-executors of the D'Addario estate to collect on the Note.
The "All Costs of Collection" Language in the Note
The relevant portion of the Note, in terms of the issue currently before this court on the plaintiff Cadle's motion for attorneys fees and costs, is found in a single clause. That clause in the Note provides that the Borrower [D'Addario] shall pay to the Holder [formerly Bank of New Haven; now Cadle Company] "all costs of collection of this Note . . . incurred by the Holder, including reasonable attorneys fees, plus court costs . . ." The amount to be awarded by the court in attorneys fees and costs in this case hinges upon the interpretation of the term "all costs of collection of this Note," which is not further defined in the Note itself.
Not surprisingly, the plaintiff Cadle urges the court to adopt an expansive and unlimited interpretation of this term, placing great stress on the Note's use of the word "all." The executors of the D'Addario estate, on the other hand, espouse a Note construction limited solely to the reasonable costs and fees incurred for the "collection" case itself. If the court were to apply an overly broad interpretation of the term, it would be unfairly and improperly enlarging the legal obligations of the maker of the Note, while an overly restrictive interpretation would impair the legal rights of the holder of the Note. The court must consider the reasonable expectations of both sides to the original contract, that is, the Bank of New Haven as holder of the Note, and F. Francis D'Addario as the maker of the Note. The court must consider these expectations at the time when the Note was executed, balancing the interests of both debtor and creditor now before the court.
"In interpreting contract items, we have repeatedly stated that the intent of the parties is to be ascertained by a fair and reasonable construction of the written words and that the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms." (Internal quotation marks omitted.) Wolosoff v. Wolosoff, 91 Conn.App. 374, 381, 880 A.2d 977 (2005). Moreover, "[w]here there is definitive contract language, the determination of what the parties intended by their contractual commitments is a question of law." (Internal quotation marks omitted.) Stevenson Lumber Co. Suffield, Inc. v. Chase Associates, Inc., 284 Conn. 205, 218, 932 A.2d 401 (2007).
"Where a contract provides for the payment of attorneys fees by a defaulting party, those fees are recoverable solely as a contract right . . . Therefore, the language of the note governs the award of fees . . . Such attorneys fees incurred language has been interpreted by our Supreme Court . . . as permitting recovery upon the presentation of an attorney's bill, so long as that bill is not unreasonable on its face and has not been shown to be unreasonable by countervailing evidence or by the exercise of the trier's own expert judgment." (Citations omitted; internal quotation marks omitted.) Atlantic Mortgage Investment Corp. v. Stephenson, CT Page 6391 86 Conn.App. 126, 134, 860 A.2d 751 (2004).
The case of Nussenfeld v. Smith, 110 Conn. 438, 148 A. 388 (1930), involved the interpretation of a mortgage note. That note contained a provision with "all costs" of collection language much broader than that found in the D'Addario Note at issue in this case. The court construed a statute which permitted the inclusion of the costs of collection in the sum due on a negotiable instrument. As to the meaning of the word "costs" in that context, the Supreme Court stated, " [t]he word means the expenses naturally incident to the collection of the note." (Emphasis added.) Id., 442. This court finds the Nussenfeld court's interpretation to be an eminently fair and reasonable construction of the term, one whose relevance to this issue is not diminished by the passage of time since the opinion was written. Indeed, it is an interpretation with the added advantage of a grounding in common sense, which has no shelf life. Accordingly, the court holds that the term "all costs of collection" under the Note means all those expenses naturally incident to the collection of the Note. Now the question arises as to the fees and costs incurred in the other lawsuits Cadle filed, some of which were directed not at the co-executors of the decedent estate, the maker of the Note, but at David D'Addario and Lawrence D'Addario personally. Are such expenses naturally incident to the collection of the Note?
The note at issue in that case stated: "We agree to pay all costs, charges and expenses, including reasonable attorneys fees incurred by the payee in any foreclosure or other legal proceeding for the collection of the debt hereby secured and in any other litigation or controversy arising from or connected with this note or the debt secured by a mortgage." Nussenfeld, supra, 110 Conn. 440.
The Law of Attorneys Fees and Costs
"Connecticut case law follows the general rule, frequently referred to as the American Rule, that attorneys fees are not allowed to the prevailing party as an element of damage unless such recovery is allowed by statute or contract." (Internal quotation marks omitted.) Atlantic Mortgage Investment v. Stephenson, supra, 86 Conn.App. 132. The plaintiff's claim for an award of counsel fees in this case does not arise from any statute. Cadle's claim is entirely contractual in nature, being based on the above-quoted "all costs of collection" language found in the Note which Cadle had purchased from the Bank of New Haven in 1994.
"The amount of attorneys fees to be awarded rests in the sound discretion of the trial court and will not be disturbed on appeal unless the trial court has abused its discretion. Sound discretion, by definition, means a discretion that is not exercised arbitrarily or wilfully, but with regard to what is right and equitable under the circumstances and the law. Judicial discretion is always a legal discretion, exercised according to the recognized principles of equity. The trial court's discretion imports something more than leeway in decision making and should be exercised in conformity with the spirit of the law and should not impede or defeat the ends of substantial justice . . .
"It is axiomatic that the determination of reasonableness of attorneys fees appropriately takes into consideration a range of factors. It is well established that a trial court calculating a reasonable attorneys fee makes its determination while considering the factors set forth under Rule 1.5(a) of the Rules of Professional Conduct. These factors include the time and labor spent by the attorneys, the novelty and complexity of the legal issues, fees customarily charged in the same locality for similar services, the lawyer's experience and ability, relevant time limitations, the magnitude of the case and the results obtained, the nature and length of the lawyer-client relationship, and whether the fee is fixed or contingent. When awarding attorneys fees, the court must consider all of the factors and not seize on one to the exclusion of others." (Citation omitted; emphasis added; internal quotation marks omitted.) Rodriguez v. Ancona, 88 Conn.App. 193, 201-02, 868 A.2d 807 (2005).
"We have long held that there is an undisputed requirement that the reasonableness of attorneys fees and costs must be proven by an appropriate evidentiary showing . . . We have also noted that courts have a general knowledge of what would be reasonable compensation for services which are fairly stated and described . . . and that courts may rely on their general knowledge of what has occurred at the proceedings before them to supply evidence in support of an award of attorneys fees." (Citations omitted; emphasis in original; internal quotation omitted). Smith v. Snyder, 267 Conn. 456, 471, 839 A.2d 589 (2004).
"[T]he initial estimate of a reasonable attorneys fee is properly calculated by multiplying the number of hours reasonably expended on the litigation times a reasonable hourly rate . . . The courts may then adjust this lodestar calculation by other factors . . . For guidance in adjusting attorneys fees, Connecticut courts have adopted the twelve factors set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). The Johnson factors are (1) the time and labor required, (2) the novelty and difficulty of the questions, (3) the skill requisite to perform the legal service properly, (4) the preclusion of other employment by the attorney due to acceptance of the case, (5) the customary fee for similar work in the community, (6) whether the fee is fixed or contingent, (7) time limitations imposed by the client or the circumstances, (8) the amount involved and the results obtained, (9) the experience, reputation and ability of the attorneys, (10) the undesirability of the case, (11) the nature and length of the professional relationship with the client, and (12) awards in similar cases." (Citations omitted; internal quotation marks omitted.) Ernst v. Deere Co., 92 Conn.App. 575, 576, 886 A.2d 845 (2005).
The "list of factors [the Johnson factors] is not . . . exclusive. The court may assess the reasonableness of the fees requested using any number of factors." (Internal quotation marks omitted.) Id., 576 n. 3. Similarly, a contract clause providing for reimbursement of incurred fees permits recovery upon the presentation of an attorney's bill, so long as that bill is not unreasonable upon its face and has not been shown to be unreasonable by countervailing evidence or by the exercise of the trier's own expert judgment. N.E. Leasing v. Paoletta, 89 Conn.App. 766, 778, 877 A.2d 840 (2005), citing Storm Associates, Inc. v. Baumgold, 186 Conn. 237, 246, 440 A.2d 306 (1982).
As to the hourly rates charged on the numerous bills for legal services submitted in connection with this motion, and the related affidavits of counsel, the court agrees with Cadle and its counsel that those hourly rates are themselves reasonable. Because of Cadle's negotiations with counsel it retains, those rates are consistent with (if not somewhat lower than) prevailing rates in the industry. The crux of this case, however, is not so much the hourly rates charged or even the number of hours Cadle expended in fees and costs on the collection case itself. It is, rather, whether this court should order reimbursement for the attorneys fees in the other cases in accordance with "recognized principles of equity."
Discussion
"A court has few duties of a more delicate nature than that of fixing counsel fees." (Internal quotation marks omitted.) Schoonmaker v. Lawrence Brunch, Inc., 265 Conn. 210, 258 (2003). That is because in most cases, courts do not concern themselves with how much money any party chooses to spend to advance its interests in any court proceeding. That is, the court need neither endorse nor disapprove such fees. A party may follow what they believe is the best counsel's legal strategy, and may expend substantial funds to achieve those goals. However, when it comes to cases in which the court is asked to award attorneys fees, the "in most cases" qualifier used above does not apply. The court is being asked to order one side to pay the other's legal expenses for having put that party to its proof. That is, to order reimbursement to pay for the trouble of vindicating a legal right spelled out in a contract, in this case, the language of the promissory demand Note. However, unlike an award of attorneys fees pursuant to a public statute, this type of fee award in a commercial collection case is a creature of private contract. Therefore, it can extend no farther in meaning, no further in restitution for billable hours to the victor's counsel, than the wording of the contract, the terms of the Note itself, will allow.
While the Note is on its face rather unremarkable, and seems fairly typical of commercial paper executed during this time frame, it may be said with some degree of understatement that the unsecured indebtedness referenced by this Note has been a fertile source of litigation in several forums over the years. It has evoked for one trial court a comparison to the interminable legal proceedings featured in the Charles Dickens novel Bleak House. Each side has accused the other of improprieties, or of acting upon less than honorable motives. All these filings in various forums have generated their own corresponding legal fees and expenses, and it is these for which Cadle, armed with its jury verdict, now seeks reimbursement as the successful Note holder. The court notes at the outset that based on the language of the Note, there seems to be every reason for the court to award Cadle reasonable attorneys fees and costs incurred as a result of this trial, the collection case the court presided over. These are expenses naturally incident to the collection of the Note.
"Writing some twenty-one years after the death of F. Francis D'Addario, the various allegations and suits marking the litigious relationship between these parties were described as a "Dickensian series of protracted legal actions in both the probate and superior courts with no apparent end in sight." Cadle Company v. D'Addario, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 064010178 (April 12, 2007, Shay, J.) (with footnote reference to Bleak House).
But in addition to the above-captioned collection case, which was the case that went to the jury, and the costs and attorneys fees which were expended on that effort, by its submission of other voluminous billing records and affidavits of various counsel, Cadle is seeking much more. It is also seeking the award of attorneys fees for virtually all its legal work. This includes suits against the co-executors of the estate of the decedent, the maker of the Note. But Cadle's request also goes beyond the parties to the Note, and includes requested reimbursements for its unsuccessful suits against David D'Addario and Lawrence D'Addario in their individual capacities as well. That is really saying something, as there have been a number of proceedings, a number of challenges launched by Cadle, largely unsuccessfully. One must start with the Probate Court in Trumbull, then onto several different lawsuits in Connecticut Superior Court, not to mention a federal action brought in the United States District Court in Connecticut. The litigation has also resulted in appeals to the Connecticut Appellate Court and the Connecticut Supreme Court. Fees and costs are now sought for all, in an amount totaling $691,543.59.
While these legal fees were all obviously incurred by Cadle, the reimbursement of all such fees under the Note is far from obvious. While the jury has found that Cadle is entitled to the costs of collection on the Note, in order to recover a specific amount as an award of attorneys fees against the D'Addario estate, Cadle bears the burden of proof. That burden of proof is not "arguable relevance" to the collection of the Note, for that would unfairly and improperly enlarge the legal obligations of the maker of the Note. Rather, pursuant to Nussenfeld, the plaintiff must establish that as to each of the attorneys fees it is seeking, that these fees are both reasonable and are naturally incident to the costs of collection of the Note.
The jury verdict in this collection case determined the principal balance of the Note, which is the amount of damages awarded here. The jury also determined that Cadle is entitled to costs of collection, including reasonable attorneys fees and court costs. The court's inquiry is now twofold. First, were the legal fees and costs sought by Cadle in each instance expended as legitimate "costs of collection" as required by the terms of the Note? Second, assuming the answer to the first inquiry is in the affirmative, as to the legal fees and costs determined to be allowable as "all costs of collection," are the amounts sought reasonable?
The court agrees with Cadle that the costs and fees sought for each case must be assessed on a case by case basis. Therefore, each of the different legal actions for which Cadle is seeking to recoup its fees and costs is discussed, infra. Because it is both the most straightforward, and the case on which the jury made its finding of Cadle's entitlement to reasonable fees and costs, the court will start with this above-captioned collection case. Although the Note in question was acquired by Cadle in 1994, this collection case against the co-executors of the decedent's estate was not filed until 2002, and it was actually not the first lawsuit that Cadle commenced against the D'Addarios.
The amounts cited are based on Cadle's original submission of fees and costs (#217) and supporting documentation, as supplemented in certain instances by its reply memorandum of law dated Oct. 9, 2009 (#222).
CT Page 6396
The Collection Case
Cadle is seeking costs and attorneys fees for the collection case totaling $299,160.72. Although disputing this amount as unreasonable, "[d]efendants agree that the Note permits Cadle to recover the costs and reasonable attorneys fees it incurred in the Collection Case." (Def. brief, 9/10/09, p. 17.) In this, the above-captioned collection case, the plaintiff Cadle Company sued D'Addario's sons in their capacities as co-executors of the D'Addario estate in order to collect the balance due under the terms of the Note they had purchased from the Bank of New Haven. The matter was tried to the jury in Stamford before the undersigned.Cadle's memorandum of law in support of its motion for costs and fees lists a variety of time consuming matters and motions and discovery Cadle undertook to prosecute this collection matter over the years that resulted in the fees it is seeking for this particular case. Despite the defendants' objection to the amount sought, and although the fees are substantial, the court finds those fees and costs to be both reasonable and naturally incident to the collection of the Note. Accordingly Cadle is awarded the sum of $299,160.72 in fees and costs.
The Probate Case
Cadle is seeking a total of $86,208.82 in fees and costs for this matter. The Bank of New Haven had filed an initial notice of claim against the decedent's estate on the Note in the Trumbull Probate Court. Following Cadle's purchase of the Note from the bank, Cadle was substituted as a party in the probate court. Cadle is correct in observing that pursuant to General Statutes § 45a-390, creditors in probate cases must proceed first in the probate court before proceeding to the Superior Court. The court further agrees with Cadle that it was required both legally and practically to participate in that forum to protect its interests as the Noteholder, and that its fees and costs are reasonable. The court further finds such fees to be naturally incident to the collection of the Note. Accordingly, Cadle is awarded the sum of $86,208.82 in fees and costs.
The Removal Case
Cadle is seeking a total of $355,490.20 in fees and costs for this matter. Cadle argues that the breadth of its actions against the D'Addarios were dictated in part by the Probate Court's failure to properly monitor the D'Addario co-executors; (Plaintiff's briefs, 7/31/09 and 10/9/09, p. 13, and p. 20, respectively); but no court has ever made such a finding. In 1997, Cadle filed a motion for order with the probate court. That motion sought both the removal of David and Lawrence D'Addario as co-executors, and an accounting and liquidation of the estate. The Probate Court denied the motion for order, and Cadle appealed that decision to the Superior Court. The defendants claimed that due to the manner in which the Bank of New Haven had originally notified the co-executors of the unsecured debt represented by the Note, that no proper claim had been filed with the estate as required by statute. Therefore, the defendants argued, Cadle did not have standing to bring a motion for order in the probate court. The trial court (McWeeny, J.) ruled in favor of Cadle on the issue of standing, but dismissed Cadle's appeal sua sponte at the conclusion of its case-in-chief. Cadle then appealed that dismissal to the Supreme Court. The Supreme Court dismissed the appeal and affirmed the actions of the trial court, but also affirming Cadle's standing to bring its claim against the estate. Cadle Company v. D'Addario, 268 Conn. 441, 844 A.2d 836 (2004).
It is this last finding by the Supreme Court that provides the only basis for Cadle to recoup any of the legal fees it expended in this litigation. Even though the defendants oppose Cadle's motion seeking an award for fees and costs for this litigation, they qualify their opposition by noting, "except to the extent that Plaintiff can allocate costs and reasonable attorneys fees from the Removal Case to the litigation over the validity of its claim." (Def. brief, 9/10/09, p. 18.) In its reply brief, Cadle elected not to do so, maintaining its entitlement to the full amount of fees and costs. It, therefore, falls upon the court perform the allocation in the exercise of its equitable jurisdiction.
Cadle incurred over $150,000 in expert costs on the issue of whether or not the D'Addario co-executors had breached their fiduciary duties and should therefore be removed. One expert witness was a probate attorney, while the other was a forensic accountant. According to Cadle's submission to this court as part of its motion for fees and costs, the probate attorney's testimony was disallowed by the trial court as consisting of improper legal conclusions. The forensic accountant reviewed the D'Addario estate's inventory and tax returns in an effort to support Cadle's arguments for removal of the co-executors. However, Judge McWeeny indicated that this witness "would not have been allowed to testify at a jury trial." (Def brief, 9/10/09, Exhibit B, p. 49.) The court further destroyed his probative value by noting, "[t]he expert evidence is not supported by corroborative evidence, ignores existing probate filings, tax returns, court rulings and is also replete with many errors." (Def. brief, 9/10/09, Exhibit B, p. 51.) None of these costs are allowed, as none go to the issue of Cadle's standing, which is the only tenable claim for any award as to this litigation.
"In a case tried before a court, the trial judge is the sole arbiter of the credibility of the witnesses and the weight to be given specific testimony." Cadle Company v. D'Addario, supra, 268 Conn. 462. In dismissing Cadle's appeal on that case, the Supreme Court stated, "[u]pon careful review of the evidence, we conclude that the trial court reasonably could have concluded that the plaintiff did not sustain its burden of proof." Id. In a like manner, upon careful review of Cadle's motion for fees and costs as to this unsuccessful appeal, this trial court concludes that the plaintiff has not sustained its burden of proof that is, Cadle has not established that these were all reasonable expenses naturally incident to the collection of the Note, within the meaning of that term as previously discussed. Cadle characterizes its strategy as "novel;" (Plaintiff's brief 7/31/09, p. 20); one that raised "an issue worthy of resolution." Id. All those statements may be true, but they do not thereby make such fees and costs, however associated with issues worthy of resolution, recoverable over objection. Cadle's repeated failure to sustain its burdens of proof at the probate, trial and appellate levels is fatal to its claim for the bulk of its fees and costs sought here. To state it another way, having lost at all three court levels — Probate Court, Superior Court and finally, the Supreme Court — it strains credulity for Cadle to now claim reimbursement for all of these expenses.
As the trial court stated in the removal case, "[t]he plaintiff's claim has not been disallowed by the estate, the plaintiff has not given written notice to the fiduciaries of any intention to file suit on its claim, nor is this case a suit on a claim that the plaintiff has against the estate." (Emphasis added.) Cadle Company v. Probate Court Appeal, Superior Court, judicial district of Waterbury, Docket No. CV 98 0156334 (May 18, 2000, McWeeny, J.). For purposes of this fee award, Cadle's only valid takeaway from the removal case was that it had standing to assert its claim on the Note. Cadle is seeking a total of $202,654.40 in legal fees for the removal case, which it also characterizes as "General Collection Strategy" (Plaintiff's reply brief, 10/9/09, p. 23.) That strategy obviously includes amounts that are not recoverable as expenses naturally incident to the collection of the Note, as they were not, in Judge McWeeny's words, "a suit on a claim that the plaintiff has against the estate." Therefore, the court will award Cadle $50,000, or approximately one-quarter of that total amount as reasonable legal fees and costs for the removal case.
The Breach of Fiduciary Duty Cases: Federal and State Courts
Cadle initiated two separate actions alleging breach of fiduciary duty on the part of the D'Addario co-executors. One was filed in 2001 in federal court, the United States District Court for the District of Connecticut, and it included other D'Addario family members as defendants. The second was filed by Cadle in state Superior Court in 2006. Cadle is seeking a combined total of $112,360.12 in fees and costs for both breach of fiduciary duty cases. Cadle has not provided the court with a breakdown of the amounts it expended in each matter separately as to the state versus the federal action. Instead, Cadle has submitted its request as a single amount under the rubric "breach of fiduciary duty cases." The court will discuss the federal action first, followed by the state case.
The Federal Case: Cadle Company v. David D'Addario, 2005 WL 3499998 (D.Conn.)
In 2001, Cadle brought an action in federal court against David and Lawrence D'Addario, both in their capacities as co-executors of the D'Addario estate and individually. Cadle also sued the executors of the estates of two other former D'Addario estate coexecutors, as well as three D'Addario family members who are beneficiaries of the estate under D'Addario's will. Cadle asserted five causes of action: breach of fiduciary duties, unjust enrichment, conversion, statutory theft, and violations of the Connecticut Unfair Trade Practices Act. Cadle also alleged that the co-executors engaged in self-dealing in their management of the estate, and a claim for a constructive trust on loans made by the estate to the beneficiaries.
The defendants first moved to dismiss the federal suit in 2001, while Cadle's suit to remove the co-executors (discussed above) was still pending in state Superior Court. After the Supreme Court affirmed the dismissal of Cadle's removal case, the federal court (Nevas, J.), granted the defendants' motion to dismiss because of the probate exception to federal diversity jurisdiction. In addition to the fact that the estate was still being probated, the federal court also noted that at the time there were five separate cases pending between Cadle and the D'Addario estate in probate court or Superior Court, and that Cadle also asserted in federal in personam claims against the co-executors and beneficiaries in their personal capacities and not against the D'Addario estate itself. In wishing to avoid the scenario of a "double recovery for Cadle," Judge Nevas stated, "[t]he court agrees with the [d]efendants that asserting jurisdiction over Cadle's claims would interfere impermissibly with the process that is continuing, albeit slowly, in the probate court." Cadle Company v. David D'Addario, 2005 WL 3499998, *1 (D.Conn.).
The State Case: Cadle Company v. D'Addario, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 064010178 (April 12, 2007, Shay, J.)In 2006, Cadle filed this action in seven counts in Superior Court against the defendants, David D'Addario and Lawrence D'Addario. The D'Addarios were named both individually and in their capacities as co-executors of the D'Addario estate. Cadle alleged breach of fiduciary duty, self-dealing, unjust enrichment, conversion, statutory theft and violation of the Connecticut Unfair Trade Practices Act. It also sought a statutory accounting. As in the federal action before Judge Nevas, this case was dismissed by the trial court. The state case was dismissed on the grounds that Cadle's claims were not yet ripe for review. The Appellate Court affirmed. Cadle Company v. D'Addario, 111 Conn.App. 80, 957 A.2d 536 (2008).
Cadle concedes that it "employ[ed] litigation strategies that are not required in `run of the mill' cases." (Plaintiff's reply brief, 10/9/09, p. 1.) However, in seeking its unlimited fee award, Cadle's briefs also repeatedly advances the argument that Judge Shay had "already found that the cases were all filed and prosecuted to collect amounts due on the Note." Id. Judge Shay had presided over and then dismissed the state breach of fiduciary duty case, and also presided for a time over the above-captioned collection case before it was reached for trial. In support of that argument, Cadle cites to the following colloquy from a hearing held on July 23, 2007. It concerned a motion to reargue and a motion to amend the scheduling order in, as Judge Shay put it, "Cadle versus D'Addario in one of its manifestations." (Transcript [Tr.], 7/23/07, p. 1.)
At that hearing, counsel for the co-executors of the D'Addario estate, Attorney Gary Klein, noted in part that, "[t]he initial piece of litigation started [by Cadle] in October of `97 was not to collect the debt. It was to remove the executors. Now the ultimate goal then may have been to remove the executors to get the debt paid sooner, or something like that." (Tr., 7/23/07, p. 15.) The court replied:
Excuse me, Mr. Klein. I think — I hope that we are way, way, way beyond that. I mean the interaction between the Cadle Company and the estate of D'Addario started with efforts to collect the debt. And because, for whatever reason, there was a parting of the ways between the Cadle Company and the executors of the estate, Cadle, who had already filed in the probate court, decided to try to remove the executors.
So you know, technically speaking I suppose one could look at the filing of a claim with the probate court as the initial step in the litigation. So I think that really it truly is an effort to collect a debt. I mean otherwise that is the only reason Cadle is in business.
So it is not — I am really not buying the argument that there are other — that they've been doing other things other than to collect the debt. Everything, everything that they have done, I can say this with 100 percent certitude or pretty close, everything that they have done has been an effort to collect the debt. (Tr., 7/23/07, pp. 15, 16.)
Unfortunately for Cadle, and with all due respect to Judge Shay, Cadle's reliance on this statement is misplaced. It is of no assistance to them or to this court on the fee issue now before this court in a different case. It is submitted that by no stretch of the imagination was Judge Shay deciding the issue of Cadle's eligibility for reimbursement of its attorneys fees for all of the lawsuits it initiated. Cadle's quotation of Judge Shay's observation in its brief also does not include what Judge Shay went on to say immediately after the passage cited above. After expressing an opinion that Cadle's actions were in an effort to collect the debt, Judge Shay qualified his opinion by noting, " Now whether or not they [Cadle] have done that properly or not, that is a legitimate question." (Emphasis added.) Id., p. 16.
On this score, Judge Shay's opinion voiced during a hearing on a different docketed case — a case in which Judge Shay dismissed Cadle's claims — does not even come close to approaching the settled "law of the case" in this Note collection action here, as the law of the case doctrine is understood and applied. See Brown Brown, Inc. v. Blumenthal, 288 Conn. 646, 656, 954 A.2d 816 (2008). Moreover, to get at the "legitimate question" this court must now answer, it is not whether Cadle acted properly or improperly in all of the different lawsuits it filed; rather, it is the propriety or impropriety of reimbursing all of Cadle's fees and costs under the language of the Note itself. As stated previously, that standard is not "arguable relevance" to the collection of the Note, but rather, are all such fees and costs naturally incident to the collection of the Note?
In affirming the dismissal of Cadle's claims in the state breach of fiduciary duty case, the Appellate Court observed, "any injury sustained by the plaintiff stemming from the allegations of the defendants' misconduct are, at this point, hypothetical." Cadle Company v. D'Addario, supra, 111 Conn.App. 83. As the court further explained, "[h]ere, because the estate remains open and there is no allegation that the estate is insolvent, it is impossible to ascertain whether the plaintiff has sustained any injury as a result of the defendants' alleged misconduct." Id., 84. Because of these holdings, it is likewise impossible for this court to find that the attorneys fees and costs expended by Cadle in seeking redress for "hypothetical" injuries in its failed breach of fiduciary duty cases in federal and state courts constitute reasonable expenses naturally incident to the collection of the Note, within the meaning of that term as previously discussed.
Accordingly, the defendants' objection to an award of these sums is sustained, and these amounts are disallowed.
The Probate Appeals
Cadle is seeking a total of $23,663.43 in legal fees and costs for what it characterizes as two appeals from probate court to the Superior Court. The issues concern an interim account of the D'Addario estate and Cadle's objections to it, and permission by Cadle to conduct discovery. Cadle argues that because it is acting to protect its rights in the probate court, these fees and costs should be awarded. The court is not persuaded that these additional amounts — amounts beyond the $86,208.82 in fees and costs it is already awarding Cadle for probate court fees and costs — are reasonable expenses naturally incident to the collection of the Note. Accordingly, the defendants' objection to an award of these sums is sustained.
When the D'Addario co-executors refused to pay the balance on the Note, they in effect told the Cadle plaintiff, "No." The message was no. But instead of challenging the message directly, Cadle instead sought unsuccessfully to remove the messenger (the D'Addario sons as co-executors) in the Probate Court of Trumbull, and later appealed that decision to Superior and Supreme Court. It also alleged breaches of fiduciary duty by the coexecutors in state and federal court. All of these failed efforts are simply not compensable under the Note as collection costs. As previously stated, legal expenses connected to Cadle's filing a notice of claim in Probate Court and monitoring those admittedly protracted proceedings are a compensable cost of collection, but additional actions taken by Cadle in probate court seeking to remove those co-executors themselves are not subject to an order of reimbursement. Removal of an executor under these facts cannot be construed as part of the collection language of the Note without doing violence to the contractual terms.
Holding the Note, a single negotiable instrument, the plaintiff is an unsecured creditor, one of a number of creditors of an estate. From the record, that estate has tens of millions of dollars in assets and perhaps a similar amount of liabilities. Failed actions by a single unsecured creditor to remove the co-executors of an estate, or dismissed allegations of breaches of fiduciary duty in several different venues against the co-executors of an estate are not compensable as "all costs of collection," as they are not naturally incident to the collection of the Note. Since they acquired the Note in 1994, Cadle has employed many different legal theories and strategies. So be it. That was their prerogative. But such legal expenditures do not thereby become compensable and recoverable under the Note simply because Cadle chose to incur them. It is the reasonable interpretation of "all costs of collection" in the Note that must govern here, which is not necessarily the unlimited meaning a party chooses to adopt in order to maximize its reimbursement for legal fees. In reviewing the circuitous route taken to finally collect on the Note, one wonders whether some of the tactics chosen by Cadle were dictated by the actions of the D'Addario co-executors, or a belief by Cadle that regardless of what it spent on legal fees here and there, it would all constitute compensable "costs of collection" in the end.
The road to collection of the amount due on this Note lay in the form of the very litigation it ultimately pursued before this court, a collection action against the co-executors of the estate filed some eight years after Cadle bought the Note, which resulted in the jury verdict in Cadle's favor. That verdict resolved the material issue of fact which had been previously identified by the court in denying Cadle's motion for summary judgment on this collection case; namely, what amount is owed to Cadle on the Note. Cadle Company v. D'Addario, Superior Court, complex litigation docket at Stamford, Docket No. X05 CV 02 4009795 (February 21, 2008, Adams, J.). It is, therefore, apparent from this record, and the court so finds, that short of this jury trial, Cadle had no assurance that the removal of the D'Addario executors by the Probate Court, or the later appeal of that decision to the Superior Court and on to the Supreme Court, would have resulted in Cadle collecting on the Note.
Conclusion
The plaintiff Cadle Company's motion for costs and attorneys fees is GRANTED as specified herein, and the defendant co-executors' objections thereto are SUSTAINED IN PART AND OVERRULED IN PART. However, in declining to award the plaintiff all of the legal fees it is seeking for its various legal maneuvers in other cases, and in overruling in part the defendants' objections to the award, the court in no way intends its decision to be construed either as an endorsement of the actions of the D'Addario co-executors, or as a criticism of Cadle's overall legal strategy. These many lawsuits were undoubtedly pursued with a business strategy in mind. However, the connection of all of Cadle's many claims to the Note itself — the source of all power to collect reimbursement — is in many cases more inferential than direct, if not downright tenuous at times. Where the Note itself is not the focus, the "all costs of collection" language in the Note loses its focus, and additional legal expenses thereby lose their claim to reasonableness.
Cadle in its brief accuses the defendants of seeking "to avoid the consequences of their gamble." (Plaintiff's brief, 7/31/09, p. 10). However, that is an argument that cuts both ways. Aggressive or proactive tactics beyond the run of the mill but within the bounds of the law, and with an arguable relevance toward an ultimate goal are not the issue here. Reimbursement for them is. By this decision, the plaintiff is being awarded 100% of the legal fees and costs it incurred to prevail in this collection case, plus an additional $136,208.82, for a total award of $435,369.54.
One last comment about this Note collection case and the now-concluded jury trial. It marked the first time in the history of these parties' dealings that a group of citizens got to hear and decide upon the evidence about the Note and listen to the various arguments of counsel. In light of the testimony at that trial, and despite all the sound and fury that preceded this trial over the years in all the other courtrooms where the litigants found themselves, once the Note itself and the other exhibits were introduced into evidence through competent witnesses, the jury verdict on the Note was unsurprising, as it was fully supported by the evidence here. The plaintiff simply has not met its burden of proving to the court that all of the many legal steps it took over the years in state, federal and probate courts were all necessary conditions precedent to winning this jury verdict in this collection case. That verdict, and the "all costs of collection" provision in the Note itself, do not and cannot serve as an umbrella under which all of the various and sundry other legal fees the plaintiff Cadle incurred, including its unsuccessful lawsuits and appeals, may be gathered for reimbursement.
If the court were to adopt at Cadle's urging the expansive and unlimited interpretation of what "all costs of collection" means here, it would set a terrible precedent. Such a gloss, if adopted, would amount to a cost-free green light for holders of disputed commercial paper to "file away" in both state and federal courts, bearing an abundance of writs, summonses and complaints, with all sorts of concomitant motions requiring rulings over the years; all to collect on a single Note, a Note consisting of only two pages of text, as in this case. (Plaintiff's Exhibit 1.) Courts of equity have made far too much progress since the time of Charles Dickens to endorse this practice, at least in terms of preventing cost-shifting "all costs of collection" language from being taken too far.
"Cost-free" only as to creditors, that is. It would not be cost-free for debtors, or for the civil court systems required to adjudicate these many claims. The reasonable costs of collection are unaffected by this court's ruling here.
The expectations of parties in commercial transactions are recognized, and given full force and effect by the court only when they are reasonable, not when they are transformed by dint of creative theory into something else, something beyond what was bargained for and contemplated by the original parties here in 1985. One of those parties to the Note is now deceased, while the other is no longer in business. The fees and costs of collection ordered by the court on the Note here are reasonable. Just as the plaintiff Cadle is not therefore entitled to less than these additional amounts for its collection troubles, it is not entitled to more.
Accordingly, in addition to the jury's award of damages, the defendant co-executors of the estate of F. Francis D'Addario are hereby ORDERED to pay costs of collection and attorneys fees totaling $435,369.54 to the plaintiff Cadle Company. The judgment will so reflect this additional amount. These costs and attorneys fees are found by the court to be all the reasonable costs of collection. They are all the expenses naturally incident to the collection of the Note and to which the plaintiff is so entitled pursuant to the terms of the Note.
SO ORDERED,
CT Page 6407