Opinion
No. X08 CV02-0193031S
July 6, 2009
Memorandum of Decision
Procedural Background
This inter-sibling dispute involving the estate and a trust and a limited partnership of the parties' deceased father Kenneth Stuart, Sr., was commenced in 2002. Shortly after the case was commenced the court (Brennan, J.), entered a temporary injunction prohibiting the sale of assets and appointed a Special Master to take control of certain funds generated from prior asset sales by the defendant (The "Special Master's Fund"). The Special Master was charged with the duty of reviewing all expenses for partnership payment and forwarding his recommendation for payment or rejection to the court. The case was tried by Judge Adams during a twenty-five-day bench trial in 2003. Judgment entered for the plaintiffs on June 28, 2004 by written memorandum of decision. Jonathan Stuart, et al. v. Kenneth Stuart, Jr., et al., No. X08 CV02-0193031, Superior Court, Complex Litigation Docket, Judicial District of Stamford/Norwalk at Stamford, (June 28, 2004, Adams, J.), 2004 Ct.Sup. 10367, 37 Conn. L. Rptr. 367. Among other things the court held that the creation of the limited partnership, Stuart Sons, was null and void, and that all partnership assets must be transferred to the estate of Kenneth Stuart, Sr., and that the defendant Kenneth Stuart, Jr. had violated fiduciary duties owed to Kenneth Stuart, Sr., had committed statutory theft, and that a corporation controlled by him, Christman Stuart Interiors, Inc. or "CSI" had been unjustly enriched, and had engaged in unfair or deceptive trade practices in violation of the Connecticut Unfair Trade Practices Act. ("CUTPA") Conn. Gen. Stat. § 42-110a et seq. In addition to the transfer of partnership assets to the estate, the court awarded damages of $2,375,528.38 to be paid by the defendant Kenneth Stuart, Jr. to the estate of Kenneth Stuart, Sr., and $60,539.19 to be paid to the estate by CSI. The court also ordered the Special Master to wind up the business of the Stuart Sons partnership, and imposed a constructive trust in favor of the plaintiffs upon two-thirds of the assets in dispute pending their transfer, as directed, to the estate of Kenneth Stuart.
The judgment of this court was appealed by defendant Kenneth Stuart, Jr. The plaintiffs filed a cross appeal in the Appellate Court. While the appeal was pending Kenneth Stuart, Jr. withdrew his appeal, but the plaintiffs' cross appeal was not withdrawn. On January 20, 2009 the Appellate Court affirmed the judgment of this court, William A. Stuart, et al. v. Kenneth J. Stuart, Jr., et al., 112 Conn.App. (2009). On petition of the plaintiffs the Supreme Court has granted certification to appeal, limited to the issue: "Did the Appellate Court properly affirm the trial court's application of the clear and convincing standard of proof to claims brought pursuant to Conn. Gen. Stat. § 52-564." [Section 52-564 is the statutory theft provision].
In a parallel proceeding there was litigation pending in the United States District Court for the District of Connecticut between the Stuart Sons limited partnership and the Curtis Publishing Company involving contested ownership of three valuable original oil paintings by Norman Rockwell which had been created by the artist as covers for the former Saturday Evening Post magazine, published by Curtis. That action had been commenced in the name of the partnership by Kenneth Stuart, Jr. claiming ownership of the paintings through Kenneth Stuart, Sr. on the theory that Mr. Stuart, who had been the art director of Curtis Publishing, had acquired ownership of the original paintings by gift. The federal case was Stuart Sons, L.P. v. Curtis Publishing Company Inc., et al., No. 3:01-CV-1580 (AHN), U.S.D.C., D.Conn. The case was originally handled on behalf of the plaintiff Smart Sons by Attorney Peter Stern, of the New York bar, whose fees were paid by Kenneth Stuart, Jr. on behalf of the partnership. Atty. Stern had prepared, but had not filed, a motion for judgment on the pleadings in the federal case at the time Judge Adams issued his decision of this case in 2004. Since the judgment in this case voided the Stuart Sons limited partnership, it obviously could no longer claim ownership of the paintings in the federal case and all proceedings were put on hold so that an effort could be made to have all three Stuart brothers (Kenneth, Jr., the defendant in this case, and Jonathan and William, the plaintiffs in this case) jointly become the parties' plaintiff in the federal case. The plaintiffs at first resisted the suggestion of joining their estranged brother Kenneth in the federal case, but eventually relented from that position and joined Kenneth, Jr. as plaintiffs on the condition that their lawyer in this case, Atty. Sandra Akoury, would take over from Atty. Stern as counsel for the plaintiffs in the federal case. Atty. Akoury did take over the case and was ultimately successful in obtaining judgment on the pleadings against Curtis Publishing, establishing ownership of the three Rockwell paintings in the name of the estate of Kenneth Stuart, Sr. The fees of Attorney Akoury for her services in the federal case were paid by the plaintiffs herein, Jonathan and William Stuart.
There was a representation made to the court that Mr. Stuart, Jr. was reimbursed from the Special Master's fund for the legal fees paid to Atty. Stern or his law firm, but there was no actual evidence of that reimbursement and the court makes no finding in that regard.
Now before this court is a postjudgment motion first filed in this court on August 26, 2005 whereby the plaintiffs ask for an order of this court authorizing reimbursement from the Special Master Fund for the legal fees they have paid to Atty. Akoury for her representation of all three Stuart brothers as plaintiffs in the federal case. The motion was objected to by the defendant Kenneth Stuart, Jr. in 2005, but the motion and the objection were never heard or adjudicated. The motion was renewed on February 28, 2008 when the plaintiffs submitted their memorandum of law in support of motion for reimbursement. The defendant filed renewed objection to the motion for reimbursement on February 23 and April 8, 2008. The former included an attached detailed affidavit with exhibits signed by Atty. Peter Stern, challenging Atty. Akoury's claim that her efforts played a major role in the successful presentation of the plaintiffs' motion for judgment on the pleadings before Judge Nevas in the District Court.
This court heard argument on the motion for reimbursement on September 8, 2008. The defendants raised three jurisdictional points in urging the court not to act on the merits of the motion: (1) that there was an automatic stay in effect pursuant to Section 362 of the federal Bankruptcy Code because of a Chapter 11 Bankruptcy Petition filed by Kenneth Stuart, Jr. In the United States Bankruptcy Court in Bridgeport, which is still pending; (2) there is an appellate stay in effect pursuant to Section 61-11(a) of the Practice Book because of the appeal to the Appellate Court which has now become an appeal on certification presently pending in the Connecticut Supreme Court; and (3) the proper forum for this motion to be heard is the Probate Court for the District of Norwalk where the estate of Kenneth Stuart, Sr. is being probated. Each claim will be discussed.
This court issued an order on September 8, 2008, in which, by agreement of all parties, the final account of the Special Master was approved, and he was authorized to transfer the remaining funds in the Special Master's account ($23, 136.65) to Sandra Breck, Esq. as Administratrix of the Estate of Kenneth Stuart, Sr. By that time Kenneth Stuart, Jr. had been removed as executor of the estate and Atty. Breck had been substituted by order of the Norwalk Probate Court.
Discussion A. Bankruptcy Stay.
Since Kenneth Stuart, Jr. is a party defendant to this case, ordered by the judgment of this court to pay more than $2 million in damages to the estate of Kenneth Stuart, Sr., there seems to be no issue but that his filing of a petition in bankruptcy caused an automatic stay of all proceedings in this case under Bankruptcy Code, 11 USC § 362:
Except as provided in subsection (b) of this section, a petition filed under section 301, 302, or 303 of this title, or an application filed under section 5(a)(3) of the Securities Investor Protection Act of 1970, operates as a stay, applicable to all entities, of —
(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title;
(2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title;
(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate . . .
The funds on deposit in the Special Master's Account (now in the Administratrix' account) were placed there by the defendant on the order of the court (Brennan, J.). This motion for reimbursement seeks to obtain possession of those funds to reimburse the plaintiffs' legal fees, which would be stayed by subsection (3). The only issue seriously in dispute is whether or not that stay was lifted as to this post-trial motion for reimbursement by the Bankruptcy Court's orders of December 19, and December 30, 2005 granting by agreement motions for relief from stay filed by counsel for Jonathan and William Stuart. The court has reviewed copies of those motions as submitted by counsel and agrees with the defendant that the stay has not been lifted so as to allow this motion to proceed in the Superior Court. The latter motion only applies to certain motions then pending in the Norwalk Probate Court. The former motion granted relief from stay "to permit the adjudication and completion of the Connecticut appeal process before the Appellate Court and if necessary the Connecticut Supreme Court." There is no reference to lifting the stay for purposes of prosecuting this post-trial motion in the Superior Court. Plaintiff argues that relief for purposes of this motion should be presumed from the reference to the Appellate Court proceedings since the case might be remanded to this court after the conclusion of all appellate proceedings. The court disagrees, especially since this motion for reimbursement was first filed on August 26, 2005, some four months before the motion from relief from stay was filed in the Bankruptcy Court. If it was intended that relief from stay was to apply to the prosecution of this motion for reimbursement, specific reference to this motion could have and should have been included in the requested relief from stay. The stay is not applicable to this motion unless and until a new motion for relief from stay specifically referencing the motion for reimbursement in this court is approved by the Bankruptcy Court.
B. Appellate Stay
Practice Book Section 61-11(a) provides:
Except where otherwise provided by statute or other law, proceedings to enforce or carry out the judgment or order shall be automatically stayed until the time to take an appeal has expired. If an appeal is filed, such proceedings shall be stayed until the final determination of the cause. If the case goes to judgment on appeal, any stay thereafter shall be in accordance with Section 71-6 (motions for reconsideration), Section 84-3 (petitions for certification by the Connecticut supreme court, and Section 71-7 (petitions for certioari by the United States supreme court).
This motion for reimbursement would be a proceeding to enforce or carry out the 2004 judgment in this case, because it seeks reimbursement from a find created by court order into which the defendant and the Special Master were ordered to deposit funds attributable to the wrongful activities of the defendant. Since a petition for certification has been granted, Practice Book § 84-3 must be consulted. Section 84-3 instructs that when a petition for certification has been granted, "the proceedings shall be stayed . . . until the final determination of the cause." Relief from that stay can be granted "by the presiding judge of an appellate panel which heard the case" if he or she is of the opinion ". . . that the due administration of justice so requires."
There is an argument to be made that the stay should not apply here since the defendant withdrew his appeal in the Appellate Court and the parties who successfully petitioned for certification are the plaintiffs who are also the moving parties on the motion for reimbursement. But that argument, or any other argument from relief from stay, must be directed to the presiding justice of the panel of the Supreme Court which heard the petition. This court cannot proceed on the motion because clearly there has not yet been a "final determination of the cause."
C. Probate Court Jurisdiction
The defendant claims that — even if not stayed — this motion should and must be heard in the probate court administering the estate of Kenneth Stuart, Sr. There is no need to address that issue at this time and the court declines to do so. There was no evidence adduced as to the proceedings before Judge DePanfilis in the Norwalk Probate Court when the motion for reimbursement was presented there. There were just representations of counsel from memory of verbal statements made formally or informally at the probate court. This issue can be addressed in a more appropriate fashion when all applicable stays have expired or have been lifted. In fact, acting on the jurisdictional claims might even be a violation of one or more of those stays.
Order
For these reasons, this court declines to act further on plaintiffs' motion for reimbursement until all applicable stays have expired or relief from stay has been granted.