Opinion
HHDCV166064925S
02-21-2017
Rogin Nassau, LLC v. Christine Quinn et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
A. Susan Peck, J.T.R.
The plaintiff, Rogin Nassau, LLC (" Rogin Nassau"), brings this interpleader action, pursuant to General Statutes § 52-484, to resolve several competing claims for a fund of money being held on behalf of its client, Edgar W. Schade. The fund is comprised of the settlement proceeds of two lawsuits brought by Rogin Nassau on behalf of Schade. The first lawsuit, captioned Edgar Schade v. Donald Rittman et al., Docket No. HHD-CV-126031435-S (fraudulent transfer case), was one of a number of claims that Schade had against D.C.S.R., Inc. (" D.C.S.R."), and its former shareholders. It alleged fraudulent transfer, breaches of fiduciary duty, and unfair trade practices, among other claims. Schade himself is a former shareholder of D.C.S.R. Upon resolution of that lawsuit, Rogin Nassau received settlement funds of $180,000 on Schade's behalf. In addition, Rittman became obligated to pay Schade an additional $75,000 to be paid in installments of $15,000 per year on or before each of October 1, 2016, October 1, 2017, October 1, 2018, October 1, 2019 and October 1, 2020. Pursuant to its fee agreement with Schade, Rogin Nassau withdrew $60,000 in legal fees and $5,220.55 in costs, leaving a balance of $114,779.45 in its Clients' Funds account on Schade's behalf. Subsequently, a second lawsuit, Edgar Schade v. Donald Rittman et al., Docket No. HHD-CV-14-6054664-S (third-party beneficiary case), was also resolved resulting in additional settlement proceeds of $15,000. From the latter settlement, pursuant to its fee agreement with Schade, Rogin Nassau withdrew $5,000 in legal fees and $905 in costs, leaving a balance of $9,059 in net settlement proceeds then added to its Clients' Funds account on Schade's behalf. Further, Rogin Nassau claims $6,993 in legal fees and $846.50 in costs, a total of $7,839.50 in connection with the pending action. Thus, at the present time, the net proceeds being held by Rogin Nassau, subject to the pending action, is $116,034.95 (hereinafter " interpleader fund").
The title of the statute is actually " Action in the nature of interpleader."
An amended complaint dated March 23, 2016, is the operative complaint.
Rogin Nassau seeks an order from the court determining to whom the monies now being held, as well as any future proceeds received, should be paid and in what amounts.
I
GENERAL STATUTES § 52-484
" 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. at 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).
" 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).
II
CLAIMS OF NAMED DEFENDANTS
The named defendants are Christine Quinn, Jill E. Jarvis, T.R. Paulding, Jr., Esq., Marc Darren, Esq., Candice Hudson, Executrix of the Estate of Edward McGhie, Rogin Nassau, LLC, and Edgar W. Schade. Each of the named defendants answered the complaint. A motion for interlocutory judgment of interpleader was granted on April 26, 2016. Thereafter, each defendant filed a statement of claims as follows:
As explained by the plaintiff's counsel, the named defendants are not all the potential creditors of Schade at the time of the commencement of this action. Rather, the named defendants are all the known creditors of Schade who had " express, discrete claims" against the escrowed funds.
General Statutes § 52-484 statute 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."
Christine Quinn, Schade's first wife, claims a priority judicial lien arising out of a separation agreement reached by the parties in the case of Schade v. Schade, Superior Court, judicial district of Hartford, Docket No. HHD-FA04-0735506-S, based on an alimony arrearage of $420,326.99.
Jill Jarvis, Schade's second wife, has a judicial lien, established by the court (Westbrook, J.), on March 17, 2014, in the case of Jarvis v. Schade, Superior Court, judicial district of Hartford, Docket No. HHD-FA11-4058113-S arising out of the dissolution of her marriage to Schade. Jarvis also seeks a reasonable attorneys fee for this action.
Candace Hudson, Executrix of the Estate of Edward McGhie claims $35,000 from the interpleader fund arising out of the settlement of a lawsuit based on fraud against Edgar Schade and his former insurance agency on September 18, 2013, known as Edward McGhie v. Harris-Adelberg and Strauss Insurance Agency, Inc. et al., Superior Court, judicial district of Hartford, Docket No. HHD-CV12-6031474-S. The lawsuit was commenced by service of process on May 4, 2012.
Attorney Marc Darren claims $15,000, pursuant to a promissory note from Schade and an " Irrevocable Lien Agreement, " executed by Schade, on July 24, 2012, " upon funds received by myself or through Counsel (presently the Law Offices of Rogin Nassau LLC) . . ." Defendants' Exhibit K. The note and agreement also state that additional legal fees, which may be incurred at the rate of $200 per hour, are also included. Based on a subsequent promissory note to him from Schade, dated May 18, 2016, in the amount of $50,000, " for legal services and expenses for the time period of January 1, 2010 through May 11, 2016, Darren claims a total of $50,000 in legal fees. See Defendants' Exhibit N. Unlike Exhibit K, however, Exhibit N consists of a promissory note only, while Exhibit J contains a promissory note and the lien agreement.
Attorney T.R. Paulding claims $7,800 for the balance of attorneys fees due in connection with his representation of Schade in a criminal case known as, State of Connecticut v. Edgar W. Schade, Docket No. H14H-CR13-9666690-S, consisting of thirteen counts, including one count of Larceny 1st degree, in violation of General Statutes § 53a-122 and twelve counts of Forgery 2nd degree, in violation of General Statutes § 53a-139. The total fee was $10,000, toward which Schade paid only $2,200. As a result of Paulding's efforts, the charges against Schade were all nolled on January 10, 2014, and eventually dismissed by operation of law.
Edgar Schade claims, through his counsel, Rogin Nassau, " at least an equitable share of any escrowed funds not deemed by the court to be due and owing to any of the other codefendants in this action." Post-Trial Brief of Edgar Schade and Rogin Nassau, LLC, p. 7.
Finally, Rogin Nassau claims a one-third (1/3) contingent fee on the future four payments of $5,000.
III
FINDINGS
Based on the competing claims of the parties to the interpleader fund, the court finds as follows:
1. Christine Quinn, Schade's first wife, pursuant to a court order entered June 15, 2016, (Albis, J.), in the case of Schade v. Schade, Superior Court, judicial district of Hartford, Docket No. HHD-FA04-0735506-S, claims 75% of the interpleader fund, net of Rogin Nassau's fee for services, as a priority creditor. In that dissolution action, Quinn's priority was established by the court (Adelman, J.), on February 15, 2011. Seventy-five percent (75%) of the existing interpleader fund is $87,026.21. Based on her priority, Quinn is also be entitled to 75% of the net proceeds of the four remaining future installments of $15,000 each, less Rogin Nassau's fee of $5,000 per payment. Seventy-five percent (75%) of the $10,000 net of each installment is $7,500 per installment for a total of $30,000 of future payments due to Quinn.
2. Jill Jarvis, Schade's second wife has a judicial lien, as established by the court (Westbrook, J.), on March 17, 2014, in the case of Jarvis v. Schade, Superior Court, judicial district of Hartford, Docket No. HHD-FA11-4058113-S. Judge Westbrook held that Jarvis was entitled to fifteen percent (15%) of the net proceeds of any settlement of the first and second lawsuits after Quinn's lien was satisfied. The proceeds remaining after the Quinn's judicial lien is satisfied is $29,008.74. Fifteen percent (15%) of that amount is $4,351. Therefore, Jarvis is entitled to $4,351 of the existing interpleader fund. In addition, Jarvis is also be entitled to 15% of the net proceeds of the four remaining future installments after Quinn is paid her 75%. As stated, Quinn is entitled to $7500 from each of the four future payments, leaving net proceeds of $2500. Therefore, Jarvis is be entitled to $375 from each of the four future installment payments, an eventual total of $1,500.
3. Candace Hudson, Executrix of the Estate of Edward McGhie claims $35,000 from the interpleader fund arising out of the settlement of a lawsuit against Edgar Schade and his former insurance agency on September 18, 2013 alleging conversion, unjust enrichment, violation of the Connecticut Unfair Trade Practices Act and Breach of Fiduciary Duty. See Edward McGhie v. Harris-Adelberg and Strauss Insurance Agency, Inc. et al., Superior Court, judicial district of Hartford, Docket No. HHD-CV12-6031474-S. In consideration for withdrawal of the referenced lawsuit, Schade personally promised to pay the amount claimed upon any " settlement, judgment or recovery" by Schade in the fraudulent transfer case (Docket No. HHD-CV-126031435), one of the cases that has given rise to the interpleader fund.
4. Attorney Marc Darren claims $50,000, based on the promissory notes and lien agreement contained in Exhibits K and N. Although the note and agreement, dated July 24, 2012, contained in Exhibit K, is in the amount of $15,000, it provides for " additional legal fees that may accrue at the rate of $200.00 per hour." The total amount claimed by Attorney Darren is obscured by the fact that Exhibit N states a principal amount of $50,000 " for the time period of January 1, 2010 through May 11, 2016, and therefore, overlaps with the legal services for whatever time period predated the promissory note contained in Exhibit K. Although Attorney Darren's statement of claim and Exhibit N broadly describe a number of family court proceedings, there is no detail describing these services and the time expended for each such service in evidence in support of Darren's claim. Darren's testimony was no more specific. He also stated he has only received a total of $2,000 from Schade but it is unclear if that amount figures into the amounts claimed in Exhibits K and N. While it seems fairly clear that Darren is entitled to a claim of $15,000 from the interpleader fund for the past legal services he has provided based on the lien agreement executed by Schade in Darren's favor on July 24, 2012, as reflected in Exhibit K. However, due to the paucity of information and documentation underlying the $50,000 note (Exhibit N), the court is unable to verify a claim on behalf of Attorney Darren for that amount. Further, the court is unable to determine the extent to which the $50,000 note includes anticipated, but as yet unearned fees. Accordingly, the court rejects Attorney's claim beyond $15,000 as unverifiable.
Although at least two of the co-defendants' suggest that Darren's lien agreement with Schade is an improper " charging lien, " the court rejects this argument. The lien claimed by Darren is not in the nature of an improper charging lien on marital assets as addressed in Olszewski v. Jordan, 315 Conn. 618, 636, 109 A.3d 910 (2015).
The note actually states it is for " the sum of $15,100.00 (Fifteen Thousand Dollars), plus any and all additional legal fees that may accrue at the rate of $200.00 per hour." The court assumes the numerical portion of the note contains a typographical error and the note is in meant to state the amount of $15,000.00.
5. Attorney Paulding claims $7,800, consisting of a past due balance for legal fees, based on his written fee arrangement with Schade, executed on October 20, 2013. Admittedly, he has no specific claim or connection to the interpleader funds. Unlike the claims of Hudson and Darren, Schade did not promise Attorney Paulding a stake in the settlements that gave rise to the interpleader fund.
6. Schade claims that as the primary beneficiary of the settlement proceeds which comprise the interpleader fund that he is entitled to a share of the fund. However, the court notes that legitimate and substantial claims against Schade far exceed the amount of money in the interpleader fund. Both Quinn and Jarvis have judicial liens against the fund arising out of Schade's failure to meet his obligations to them in connection with the dissolution of their marriages. Further, in consideration of the withdrawal of a lawsuit against him, Schade entered into a contract with McGhie/Hudson, whereby Schade promised to pay McGhie $35,000 from the proceeds of the fraudulent transfer case. Schade also executed a promissory note and assigned to Attorney Darren a minimum of $15,000 from the same fund in consideration for past and ongoing legal services. Finally, Schade basically stiffed Attorney Paulding for his successful defense of serious criminal charges against him. All of the foregoing claims are legally enforceable and are based on promises made by Schade that he had to know he could not keep. Accordingly, the court finds that, as a matter of equity, Schade is not entitled to share in the interpleader fund as there are insufficient funds to go around and he has promised away any share of those funds to which he may have otherwise been entitled.
The court finds that the judicial liens of Quinn and Jarvis are priority claims and grants their claims in accordance with the orders entered by Judges Adelman and Westbrook, in their respective dissolution actions. Quinn's established lien to date is $87,026.21 from the present fund, plus $7,500 from each of the four remaining installment payments. As previously determined, Jarvis' lien amounts to $4,351 from the present fund, plus $375 from each of the four remaining installment payments.
When the total payments due from the present fund to Quinn and Jarvis are subtracted from the current balance of the interpleader fund ($116,034.95 less $91,377.21), there remains a net balance of $24,657.74, in the fund to be distributed among the remaining claimants.
There is authority that common-law liens apply with equal force against settlements as well as judgments. This result is equitable and just in a situation, such as the present one, where the lien in question is created by a written settlement agreement that specifies that it is directly associated with a particular potential source of funds. See McNamara and Goodman v. Pink, 44 Conn.Supp. 592, 696 A.2d 1328 (1997), citing Koskoff, Koskoff & Bieder v. Allstate Ins. Co., 187 Conn. 451, 454-55, 446 A.2d 818 (1982) (the meaning of the phrase " recovers damages includes settlement proceeds"). Accordingly, the court finds that the settlement agreement between McGhie and Schade, Defendants' Exhibit L, constitutes a valid common-law lien.
Although more than one brief filed on behalf of individual defendants attributed this case to the Appellate Court, it is a published Superior Court decision that has no subsequent appellate history.
The court also finds, as discussed earlier in this memorandum, that Darren has a valid lien on the interpleader fund not to exceed $15,000, as established by Exhibit K and his testimony. The balance of Attorney Darren's claim is rejected by the court. Finally, because there is no relationship between Attorney Paulding's claim and the interpleader fund, and the total amount of the claims of the estate of McGhie and Attorney Darren substantially exceed the amount of money available to satisfy their established liens, the court, in fairness and equity, must reject Attorney Paulding's claim.
When more than one claimant is entitled to participate in a common fund and there are insufficient funds to satisfy each of the claims in full, " equity will incline to regard . . . the demands as standing on upon equal footing and will decree a pro rata distribution or payment . . ." (Citation omitted.) Century Indemnity Co. v. Kofsky, supra, 115 Conn. 200. Further, it is of no moment that the lien agreement between Attorney Darren and Schade predated the McGhie-Schade settlement. Id., 199. Accordingly, the court hereby awards the balance of the interpleader fund, $24,657.74, to the estate of McGhie and Attorney Darren on a pro rata basis. As stated herein, the Estate of McGhie has established a claim of $35,000 and Darren has established a claim of $15,000. On a pro rata basis, the Estate of McGhie is entitled to 70% of the balance of the fund, or $17,260.42, and Attorney Darren is entitled to 30% of the balance of the fund, or $7,397.32. In addition, as noted, after payment of an attorneys fee to Rogin Nassau, and payments to Quinn and Jarvis of their respective shares of the four future installments to be paid on October 1, 2017, October 1, 2018, October 1, 2019 and October 1, 2020, there will remain net proceeds of $2125 to be distributed from each of those payments. The court further finds that those payments should be paid to the Estate of McGhie and Darren 70-30 pro rata formula as previously determined. Accordingly, the Estate of McGhie is entitled to future payments of $1487.50, from each of the four future installment payments and Darren is to be paid $637.50, from each of the four future installment payments.
Finally, Quinn and Jarvis seek an award of attorneys fees in connection with this litigation. There is no reason, however, in law or equity, nor have they recited any, that dictates that either party would be entitled to such an award to be paid out of the interpleader fund.
CONCLUSION
Accordingly, the court hereby orders that the $116,034.95 balance in the interpleader fund being held by Rogin Nassau be disbursed as follows:
Christine Quinn
$87,026.21
Jill E. Jarvis
$4,351.00
Candace Hudson, Executrix
$17,260.42
Attorney Marc Darren
$7,397.32
$116,034.95
Further, the future installments payments of $15,000 per year to be paid by October 1, 2017, October 1, 2018, October 1, 2019 and October 1, 2020, are hereby ordered to be distributed as follows:
Rogin Nassau
$5,000.00
Christine Quinn
$7,500.00
Jill E. Jarvis
$375.00
Candace Hudson, Executrix
$1,487.50
Marc Darren
$637.50
$15,000.00
SO ORDERED.