Opinion
LLICV155007694S
04-28-2016
Warren L. Wilford v. Berkshire Stone, LLC et al
UNPUBLISHED OPINION
MEMORANDUM OF DECISION
HON. RUPAL SHAH, J.
The plaintiff, Warren Wilford, brings this collection action to enforce a debt against the defendants, Berkshire Stone, LLC (Berkshire Stone) and Joshua Brooks. The plaintiff is the prior owner of Berkshire Stone, a stone fabrication business. The plaintiff and Brooks agreed to the purchase and sale of Berkshire Stone, and Brooks executed a promissory note in favor of the plaintiff for the purchase of the business. The plaintiff claims that Brooks has defaulted on the note and seeks to enforce payment of the note against the defendants. The defendants allege a special defense of unclean hands against the plaintiff and a counterclaim alleging that the plaintiff engaged in tortious interference.
The matter was tried before the court on February 10, 2016. The parties presented numerous documents into evidence and the court heard the testimony of the plaintiff, Brooks, and an employee of Berkshire Stone.
FINDINGS OF FACT
Based on the documents submitted into evidence and the testimony heard at trial, the court makes the following findings of fact.
The plaintiff formed Berkshire Stone in 1996. By 2010, the plaintiff was interested in relocating his business instead of renewing the lease where he operated Berkshire Stone. The plaintiff met with Brooks for the purpose of considering the renewal of the lease and the parties ultimately discussed a potential business deal.
As a result of their negotiations, the plaintiff and Brooks agreed upon the sale of Berkshire Stone to the defendant for $700,000. Brooks wanted to acquire the stone fabrication business because it complemented his other businesses. Conventional financing through a bank was not an available option and Brooks did not have cash to pay for the purchase of the business. Therefore, the parties agreed to structure the payment in the form of a promissory note from Brooks in favor of the plaintiff for the full purchase price of the business.
The plaintiff and Brooks entered into the purchase and sale transaction on April 22, 2010, pursuant to a purchase and sale agreement and a promissory note in the amount of $700,000 executed by Brooks in favor of the plaintiff. The parties also entered into the following agreements in connection with the sale: a note guaranty agreement executed by Berkshire Stone, a note holder's agreement, and an assignment of membership interest. Brooks provided the plaintiff a security interest in all of the assets of Berkshire Stone and a pledge of the membership interest as collateral.
The parties also entered into a gentleman's agreement regarding certain mutual understandings with respect to the operation of the business, which included, among other things, the plaintiff referring business to Berkshire Stone. Brooks also agreed to upgrade equipment every few years and remove the plaintiff as a personal guarantor on a loan to Berkshire Stone. The plaintiff made referrals to Brooks based on this understanding, including referrals of the Brodsky Organization, a long-time business client of the plaintiff. At one point when the business relationship between the plaintiff and Brooks was becoming more tenuous, the plaintiff shared these difficulties with the Brodsky Organization.
Berkshire Stone had another member in addition to the plaintiff, Francis Phillips, who held a ten percent share of ownership. Brooks made the initial payments under the promissory note to Phillips; once he was paid in full in the first year of the agreement, his membership interest transferred to the plaintiff. Soon thereafter, in November or December 2010, Brooks defaulted on the promissory note. While Brooks made some intermittent payments, those payments were insufficient to meet the interest that was accruing on the debt.
Berkshire Stone made payments on the plaintiff's health insurance premiums in the amount of $11,994, which remain unreimbursed by the plaintiff. The defendants claim a credit against any amounts owed to the plaintiff for these payments.
The plaintiff sought a prejudgment remedy after filing this action, and the parties agreed that an attachment would issue on the assets of Berkshire Stone, but it would be held in abeyance if Brooks posted a $350,000 bond within ten days of the prejudgment remedy hearing; Brooks never posted the bond and a marshal executed the attachment and seized all the equipment and machinery of Berkshire Stone in August 2015.
At the time of the last payment by the defendants in November 2014, the principal amount due under the note was $500,000 and accrued interest due was $156,182.89.
DISCUSSION
I. Defendants' Default on the Promissory Note
In the present case, the court finds that the plaintiff has established the elements necessary to enforce the debt that is owed by the defendants. Although the defendants claim a special defense of unclean hands and assert their own counterclaim, the defendants do not dispute that they are obligated to the plaintiff pursuant to the promissory note and guaranty agreement. They also presented insufficient evidence to contradict the essential facts the plaintiff claims in order to enforce the terms of the note.
" A promissory note is nothing more than a written contract for the payment of money, and, as such, contract law applies." Alco Standard Corp. v. Charnas, 56 Conn.App. 568, 571, 744 A.2d 924 (2000). A promissory note that is (1) payable to order or to bearer, (2) payable on demand or at a definite time, and (3) contains an unconditional promise or order to pay a fixed amount of money, is a negotiable instrument governed by General Statutes § 42a-3-104. Florian v. Lenge, 91 Conn.App. 268, 277, 880 A.2d 985 (2005). " To prevail in an action to enforce a negotiable instrument, the plaintiff must be a holder of the instrument or a nonholder with the rights of a holder." (Internal quotation marks omitted.) Cadle Co. v. Errato, 71 Conn.App. 447, 456, 802 A.2d 887, cert. denied, 262 Conn. 918, 812 A.2d 861 (2002).
In the present case, pursuant to the terms of the promissory note, the plaintiff is the holder of the note, the note is for a specific sum, the note is payable to the plaintiff, and the plaintiff has the right to seek full payment upon any default. " If default be made by the Maker [Brooks] in the performance of any of the Maker's obligations to the Lender [plaintiff] . . . or if default should be made in the payment of any installment of any monthly payment due under this Note . . . then in any of the foregoing events, the entire principal sum and all accrued interest then due on this Note shall, at the option of the Holder hereof, become immediately due and payable." Plaintiff's Exhibit 1, Promissory Note.
The plaintiff provided evidence of the defendants' default in November or December 2010, and the defendants did not dispute their lack of payment. Accordingly, the court finds that the plaintiff may seek all sums due and owing under the promissory note with a credit against the health insurance premiums paid by the defendants for the plaintiff's benefit.
The defendants also claim a credit for certain payments made by Berkshire Stone for the use of a 3-D scanner but the court cannot credit such payments since the defendants leased the scanner and did not purchase it and transfer ownership to the plaintiff. Brooks simply leased it through another company he owned and that company is not a party to this action.
II. Special Defense
The defendants assert a special defense of unclean hands against the plaintiff's enforcement of the promissory note. The doctrine of unclean hands is an equitable defense that requires " [t]he party seeking to invoke the clean hands doctrine . . . [to] show that his opponent engaged in wilful misconduct with regard to the matter in litigation." (Internal quotation marks omitted.) Monetary Funding Group, Inc. v. Pluchino, 87 Conn.App. 401, 407, 867 A.2d 841 (2005). " The doctrine . . . expresses the principle that where a plaintiff seeks equitable relief, he must show that his conduct has been fair, equitable and honest as to the particular controversy at issue . . . The clean hands doctrine is applied not for the protection of the parties but for the protection of the court." (Internal quotation marks omitted.) Id. " The application of the equitable maxim rests in the sound discretion of the trial court and generally should not be employed to insulate the party who asserts it from the consequences of his own wrongdoing. See De Cecco v. Beach, [174 Conn. 29, 35, 381 A.2d 543 (1977)]; 30 C.J.S. Equity § 99." Cohen v. Cohen, 182 Conn. 193, 204, 438 A.2d 55 (1980).
The defendants presented insufficient evidence that the plaintiff engaged in willful misconduct with respect to the promissory note and the business transaction in which the parties entered. The defendants make a claim regarding a " gentleman's agreement" in which the plaintiff failed to refer as much business as the defendants expected, thus causing the defendants to lack sufficient funds to make the payments on the note. The defendants also claim the plaintiff failed to agree to a modification of a loan that hindered their ability to make payments. The defendants' claims regarding the plaintiff's actions are quite tenuous given that Brooks purchased Berkshire Stone and did not make his payments under the promissory note contingent anywhere in any of the written agreements between the parties on these claims regarding plaintiff's conduct. While the parties may have had a gentleman's agreement, the terms of the agreement are not clear and the court cannot find any such breaches would prevent the parties' express rights under the promissory note or the purchase and sale agreement. Accordingly, the court finds that the defendants did not meet their burden of proof and finds for the plaintiff with respect to the unclean hands special defense.
III. Counterclaim
The defendants also filed a counterclaim of tortious interference alleging the same conduct as in their special defense against the plaintiff. In order to establish a claim for tortious interference with a business expectancy, a party must establish " (1) a business relationship between the plaintiff and another party; (2) the [defendant's] intentional interference with the business relationship while knowing of the relationship; and (3) as a result, the plaintiff suffers actual loss." (Internal quotation marks omitted.) American Diamond Exchange, Inc. v. Alpert, 302 Conn. 494, 510, 28 A.3d 976 (2011). " [A party] need not prove that [the other party] caused the breach of an actual contract; proof of interference with even an unenforceable promise is enough . . . A cause of action for tortious interference with a business expectancy requires proof that the defendant was guilty of fraud, misrepresentation, intimidation or molestation . . . or that the defendant acted maliciously . . . It is also true, however, that not every act that disturbs a contract or business expectancy is actionable . . . [T]he plaintiff [is required] to plead and prove at least some improper motive or improper means." (Citations omitted; internal quotation marks omitted.) Biro v. Hirsch, 62 Conn.App. 11, 21, 771 A.2d 129, cert. denied, 256 Conn. 908, 772 A.2d 601 (2001).
For the same reasons discussed above with respect to the defendants' unclean hands special defense, the court cannot find the plaintiff liable for tortious interference based on the defendants' allegations. Although the plaintiff admitted to disclosing the difficulties he was having with the defendants with the Brodsky organization, the plaintiff did have a longstanding relationship with the Brodsky Organization and the court cannot find improper motive. The court also cannot find that the defendants established any actual losses as a result of such disclosure. Although the defendants claim they lost a $400,000 project, the defendants had only submitted a bid at the time, they did not have an actual existing contract, and they failed to submit evidence of the actual loss suffered. While the project may have been $400,000, there was no evidence presented of actual profit from such a project. Accordingly, the defendants' claim of tortious interference fails and the court finds for the plaintiff on the counterclaim.
DAMAGES
The court finds that the plaintiff has met its burden of proof and grants judgment for the plaintiff with respect to the promissory note. The court further finds that the defendants have not met their burden of proof on the special defense of unclean hands or the counterclaim of tortious interference. The court finds the plaintiff is entitled to damages as follows:
Principal balance:
$500,000
Interest and penalties through December 31, 2015:
$205,753.58
(Incl. Credit For Health Insurance Premiums:
-$11,994)
Interest at $123.54 per day from
December 31, 2015-April 28, 2016:
$14,454.18
Total damages:
$720,207.76
The plaintiff has submitted affidavits of attorneys fees dated March 11, 2016 and March 29, 2016, in the trial of this matter, which includes a summary of services performed and time expended in the pursuit of collection of the amounts due on the promissory note. The affidavits indicate that a total of 97.9 hours of attorney time had been spent in the prosecution of this matter up until the date of trial and 17.9 hours after trial. From the affidavits and the court's general knowledge of the case file and the trial of this matter, it can estimate the total number of attorney hours devoted thereto. See Appliances, Inc. v. Yost, 186 Conn. 673, 681 n.5, 443 A.2d 486 (1982). The amount of time and labor spent is one factor which the court may consider in awarding a reasonable attorneys fee. See Shapero v. Mercede, 262 Conn. 1, 7, 808 A.2d 666 (2002). " Where a contract expressly provides for the recovery of attorneys fees, an award under such a clause requires an evidentiary showing of reasonableness . . . A trial court may rely on its own general knowledge of the trial itself to supply evidence in support of an award of attorneys fees." (Citations omitted.) Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 77, 689 A.2d 1097 (1997).
Based on the evidence, including the case file, observation of the trial, and the affidavits of attorneys fees submitted by the plaintiff, the court concludes that the amount of $34,740 represents a reasonable attorneys fee in connection with the claim made on the promissory note.
Therefore, judgment will enter for the plaintiff in the amount of $754,947.76 plus costs to be taxed by the clerk.
So ordered.