Opinion
CV156059224S
08-08-2016
Brown & Welsh, P.C. v. J. Hanson Guest et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
A. Susan Peck, Judge
This action was commenced on April 28, 2015, pursuant to interpleader statute, General Statutes § 52-584, by Brown & Welsh, P.C., a Connecticut professional corporation engaged in the practice of law. The named defendants in the case are J. Hanson Guest, Donald Eldon, Peter Murrugarra, Walter Reddy, Dorothy Gagnon and Lisa Zackowski. All of the defendants answered the complaint except Lisa Zackowski who was defaulted for failure to appear by the clerk on September 8, 2015 (#128). A motion for interlocutory judgment of interpleader was granted on December 7, 2015.
The title of the statute is actually " Action in the nature of interpleader."
On May 14, 2015 (#104), the defendant filed a suggestion of death on the record concerning the defendant Dorothy Gagnon, who passed away on April 13, 2015. On July 17, 2015, the plaintiff moved to substitute Lisa Zackowski, the fiduciary of Gagnon's estate as a defendant (#117), which motion was granted by the court on August 3, 2015 (117.86).
Lisa Zackowski was served with the interpleader complaint and accompanying documents on August 11, 2015 at her usual place of abode (#123).
General Statutes § 52-484 reads as follows: " Whenever any person has, or is alleged to have, any money or other property in his possession which is claimed by two or more persons, either he, or any of the persons claiming the same, may bring a complaint in equity, in the nature of a bill of interpleader, to any court which by law has equitable jurisdiction of the parties and amount in controversy, making all persons parties who claim to be entitled to or interested in such money or other property. Such court shall hear and determine all questions which may arise in the case, may tax costs at its discretion and, under the rules applicable to an action of interpleader, may allow to one or more of the parties a reasonable sum or sums for counsel fees and disbursements, payable out of such fund or property; but no such allowance shall be made unless it has been claimed by the party in his complaint or answer."
A trial to the court was held on March 8, 2016 and March 18, 2016. The last post-trial brief was filed on April 20, 2016. At trial, the following defendants testified: Walter Reddy, J. Hanson Guest and Peter Murragarra. Houston Putnam Lowry, formally of the law firm Brown & Welsh, P.C., and present counsel for the plaintiff, testified on behalf of the plaintiff. Pursuant to the testimony at trial and the evidence submitted as full exhibits at trial, the court finds the following facts.
I
FINDINGS OF FACT
Brown & Welsh, P.C. (" Brown & Welsh"), is a Connecticut professional corporation engaged in the practice of law. Attorney Houston Putnam Lowry, during the relevant time period, was a member and President of Brown & Welsh, P.C. Guest was the principal attorney of Guest & Associates, LLC (" Guest law firm"). Eldon, Gagnon, Murrugarra, and Reddy are all former clients of the Guest law firm. Guest began having mental health issues following the death of his wife in May 2010. On May 15, 2014, Guest requested that the law firm of Brown & Welsh assist him in collecting attorneys fees in the case of JP Morgan Chase Bank, N.A. v. Eldon (" the Eldon case"), Docket No. FST-CV10-6004512-S, a foreclosure action. Brown & Welsh filed an appearance in that case on behalf of Eldon as co-counsel on May 30, 2014.
On October 1, 2014, Attorney Lowry was appointed trustee for Guest, who was placed on inactive status in the matter of Disciplinary Counsel v. Guest, Docket No. HHD-CV14-6053946-S, by Hartford Superior Court Presiding Judge, Antonio C. Robaina. On October 9, 2014, in the Eldon case, attorneys fees were awarded by the court (Adams, J.T.R.), in the amount of $72,226.95, as follows: Guest & Associates--$67,340.50; Brown & Welsh, P.C.--$2,917.70; and Lampert, Williams & Toohey--$1,968.75.
See Practice Book § 2-64.
On November 25, 2014, pursuant to a bank execution, the awarded fees were recovered by Marshal David F. Hubbs. Marshal Hubbs paid the seized amounts to Brown & Welsh, P.C., which deposited them into its clients' fund account. During the time he served as trustee of the Guest law firm, Attorney Lowry has been unable to locate any clients' funds accounts maintained by Guest or the Guest law firm; nor was he able to locate any clients' funds records that showed billings against any possible retainers paid by clients. However, during the time period that Attorney Lowry served as trustee, Gagnon, Reddy, Murrugarra, and Eldon contacted him or the plaintiff, to indicate that Guest was holding money that should be returned to them. While acting as trustee, the only funds Attorney Lowry or the plaintiff was able to recover was the attorneys fees awarded in the Eldon case. Because the plaintiff, Guest and Eldon were not able to reach an agreement on the allocation of the $72,226.95 fee award, the plaintiff elected to commence this interpleader action and deposited the full amount of the recovered funds, $72,226.95, into court.
See Rule of Professional Conduct 1.15(f).
As previously noted, the present interpleader action was commenced on April 28, 2015. Thereafter, pursuant to a joint motion by the plaintiff and Eldon, to pay Eldon, $17,003.13 from the $72,226.95 fund, was granted by the court, Sheridan, J., absent objection, on July 6, 2015 (#108.86), thus reducing the fund to $55,223.82. Although he did not represent Eldon and Murragarra, Attorney Lowry provided assistance to them in support of their claims.
Eldon arrived at the amount of $17,003.13 as follows: He agreed Brown & Welsh was due $14,028.58, based on a prior agreement with Attorney Lowry and Brown & Welsh, and a December 5, 2014 bill. Eldon also claimed that he was entitled to the $1,968.75 awarded to Lampert, Williams & Toohey, as reimbursement for fees he paid to that firm before retaining Guest. After deducting $14,028.58, plus $1,968.75, from Judge Adams' total award of $72,226.95, there remains a balance of $56,229.62. Based on Eldon's further calculations, which factored in a prior payment to Guest of $30,000, Eldon concluded he was due 26.69% of the fees awarded to Guest, or $15,034.38, from Guest's portion of the fee award. The total of $15,034.38 and $1,968.75 is $17,003.13. The court notes that these calculations may be slightly off but any difference is de minimus.
The remaining claims against the fund balance of $55,223.82 are as follows: the plaintiff claims it is entitled to the sum of $14,028.58, pursuant to its fee arrangement with Eldon in the Eldon case, as a priority because it created the res. Both Murrugarra and Reddy are former clients of the Guest law firm. Murrugarra claims he is due $25,000 as a refund of fees paid to Guest related to a potential foreclosure, unrelated to the Eldon case; Reddy claims that he is due $20,000 as a refund of fees paid to Guest for services that were not rendered; Reddy's legal counsel, Attorney Jeremy Baver, seeks legal fees of $8,007, for his representation of Reddy in connection with this interpleader action. While Guest essentially concedes that Murrugarra is entitled to refund of $25,000, he disputes that Reddy is owed any amount because the legal services Reddy received exceeded the total amount paid by Reddy. On the other hand, the paucity of information about work performed for Murragarra confirms that very little, if any, legal services were provided by Guest or his firm to Murragarra. Attorney Lowry seeks an additional attorneys fee for prosecuting this interpleader action in the amount of $24,536.88. Finally, Guest claims that he is entitled to the attorneys fees awarded by Judge Adams of $67,340.50, less the amount paid to Eldon of $17,003.13, thereby reducing his claim against the fund to $50,227.37. Therefore, the total claims against the existing fund of $55,223.82 amounts to $141,799.83.
It has been determined that a claimant may bring an interpleader action even though it claims an interest in the res. See Millman v. Paige, 55 Conn.App. 238, 738 A.2d 737 (1999).
This amount has fluctuated in the course of this litigation. Reddy originally claimed he paid Guest more than $33,000 as a retainer for legal services, which exceeded the amount of work performed. Although Reddy does not dispute that Guest performed work on his behalf, he is uncertain of how much work was actually done because Guest never sent him a bill. Although Guest has submitted what he claims to be an accounting of the work performed by his firm on behalf of Reddy in connection with FST CV 09-5010722-S, Deutsche Bank, N.A. v. Walter Reddy, he created the accounting long after the work was performed and the sources he relied upon to compile the numerous entries are questionable. No invoice or accounting was ever presented to Reddy until after the present interpleader action was filed. Baver challenges Guest's accounting even though he worked for Guest during the time period that Reddy was a client of the Guest firm. Guest's reconstructed time records and accounting reflect 24.32 hours of Baver's time. Although Guest insists that Reddy underpaid for the legal services provided by his firm, Reddy claims that he is entitled to return of $20,000, plus $8,007, for Baver's attorneys fees in the present interpleader action. Reddy has also filed a claim with the Client's Security Fund. No similar accounting has been produced by Guest in connection with Murragarra. Guest admits that he did much less work for Murragarra than he did for Reddy and would like to see Murragarra refunded most of what he paid to the Guest firm.
II
GENERAL STATUTES § 52-484
" Actions pursuant to § 52-484 involve two distinct parts . . . In the first part, the court must determine whether the interpleader plaintiff has alleged facts sufficient to establish that 'there are adverse claims to the fund or property' at issue . . . If the court considers interpleader to be proper under the circumstances, then the court may render an interlocutory judgment of interpleader . . . Only once an interlocutory judgment of interpleader has been rendered may the court hold a trial on the merits, compelling the parties to litigate their respective claims to the disputed property." (Citations omitted; internal quotation marks omitted.) Trikona Advisers Ltd. v. Haida Investments Ltd., 318 Conn. 476, 482-84, 122 A.3d 242 (2015).
" Although interpleader originally derived from common law and equity, in [1893], the legislature adopted a broad statutory bill in the nature of interpleader that did not incorporate the traditional equitable restriction[s] [on interpleader]. Except for the addition of a provision for costs and fees and for a few trivial language modifications, this statute remains as Connecticut's interpleader rule . . . Section 52-484 provides in relevant part: 'Whenever any person has, or is alleged to have, any money or other property in his possession which is claimed by two or more persons, either he, or any of the persons claiming the same, may bring a complaint in equity, in the nature of a bill of interpleader, to any court which by law has equitable jurisdiction of the parties and amount in controversy, making all persons parties who claim to be entitled to or interested in such money or other property. Such court shall hear and determine all questions which may arise in the case . . ."
[I]nterpleader is a broad joinder device to facilitate consolidation of related claims so as to avoid multiple litigation as well as protection against multiple liability . . . The classic interpleader action existing in equity, prior to the enactment of the statute, was brought by a disinterested stakeholder to establish the undivided ownership of money or property claimed by two or more entities or individuals . . . After the passage of the forerunner to § 52-484 in 1893, the rule that an interpleader action be maintained only by a stakeholder with no interest in the disposition of the fund was relaxed . . . Section 52-484 does not preclude an action . . . in which all claimants, including an interested possessor, as defendants, seek all or a portion of the amount being held by one of the defendants . The equitable purpose of the statute is to give all those interested or entitled to all or a portion of a fund held by another an opportunity to resolve all questions in a single action." (Citations omitted; emphasis added; internal quotation marks omitted.) Trikona Advisers Ltd. v. Haida Investments Ltd., supra, 318 Conn. 482-83.
General Statutes § 52-484 provides that the trial court " may tax costs at its discretion and, under the rules applicable to an action of interpleader, may allow to one or more of the parties a reasonable sum or sums for counsel fees and disbursements, payable out of such fund . . ." It is well settled that this statute allows the court to award a stakeholder reasonable attorneys fees and expenses. Phoenix Ins. Co. v. Carey, 80 Conn. 426, 431, 68 A. 993 (1908). The trial court has a wide discretion in making its awards, subject to review only for an abuse of that discretion. Tuxis-Ohr's, Inc. v. Gherlone, 76 Conn.App. 34, 47, 818 A.2d 799, cert. denied, 264 Conn. 907, 826 A.2d 179 (2003) (" The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court"); Driscoll v. Norwich Savings Society, 139 Conn. 346, 351-52, 93 A.2d 925 (1952); Podzunas v. Prudential Ins. Co., 125 Conn. 581, 583, 7 A.2d 657 (1939).
III
DISTRIBUTION OF PROCEEDS
" An action of interpleader was recognized as a proceeding in equity in this State before the enactment of the statute as to interpleader . . . and the action is still governed by equitable principles . . . Indeed, the statute itself authorizes the bringing of a 'complaint in equity' and restricts the proceedings to courts having equitable jurisdiction." (Citation omitted.) Century Indemnity Co. v. Kofsky, 115 Conn. 193, 199-200, 161 A. 101 (1932). " Equity regards as done what ought to be done . . . Equity always looks to the substance of a transaction and not to mere form . . . and seeks to prevent injustice." (Citations omitted; internal quotation marks omitted.) Natural Harmony, Inc. v. Normand, 211 Conn. 145, 149, 558 A.2d 231 (1989). " The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court." (Internal quotation marks omitted.) May v. Retarides, 83 Conn.App. 286, 295, 848 A.2d 1222, cert. denied, 271 Conn. 908, 859 A.2d 562 (2004).
Our courts have found, particularly in actions in interpleader, that " [w]henever several persons are all entitled to participate in a common fund, or are all creditors of a common debtor, equity will award a distribution of the fund, or a satisfaction of the claims, in accordance with the maxim, equality is equity; in other words, if the fund is not sufficient to discharge all claims upon it in full, or if the debtor is insolvent, equity will incline to regard all the demands as standing upon equal footing, and will decree a pro rata distribution or payment." Century Indemnity Co. v. Kofsky, supra, 115 Conn. 200; see also May v. Retarides, supra, 83 Conn.App. 295; Millman v. Paige, 55 Conn.App. 238, 242-43, 738 A.2d 737 (1999) (finding interpleader action by an interested stakeholder and equitable distribution of funds by trial court proper). However, in the present case, the court finds that the parties are not on an equal footing and that a pro rata distribution would not be fair or equitable.
As previously stated, the total claims against the existing fund of $55,223.82 amount to $141,799.83. Pursuant to § 52-484, and the principles of equity, given that the claims far exceed the available fund, the court finds that an equitable division of the remaining $55,223.82 is as follows: Since the res was substantially the result of the efforts of the plaintiff, and underwritten at the expense of Eldon, based on the agreement of those parties, the plaintiff is entitled to the $14,028.58 fees it earned and was owed from the Eldon case. The court also awards an additional $10,000 to the plaintiff, inclusive of fees and costs, in connection with the prosecution of this interpleader action. Although Guest also contributed to the creation of the res, and, under other circumstances, may have been entitled to a share of the balance, his failure to implement proper financial controls and billing procedures for his law firm has caused financial harm and substantial inconvenience to his former clients. Accordingly, under the circumstances, equity demands that reducing his clients' losses be given priority over the payment of fees to him. Therefore, the court finds that Guest is not entitled to any share of the res. Because it is undisputed that Murragarra paid Guest no less than $25,000 and received very little, if anything, in return, the court hereby awards him $21,000 of the res. The court awards the balance of $10,195.24 to Reddy as he did receive some beneficial legal services and evidence of the amount of the loss claimed by him is far less compelling than that of Murragarra. Finally, to the extent that Baver is entitled to fees in connection with this litigation, there is no reason in equity that dictates that he is entitled to be paid those fees out of a share of the res. The work that he has performed in connection with the present case has been for the sole benefit of Reddy, his client. Therefore, only Reddy should contribute to his fee.
CONCLUSION
For all the foregoing reasons, the court hereby orders judgment in accordance with the following equitable distribution of the fund of $55,223.82:
Brown & Welsh, P.C.
/24, 028.58
Peter Murragarra
$21,000.00
Walter Reddy
$10,195.24
TOTAL FUND
$55,223.82