Bizzoco v. Chinitz

• Court: Connecticut Supreme Court
• Writing for the Court: PETERS
• Citation: Bizzoco v. Chinitz, 193 Conn. 304, 476 A.2d 572 (Conn. 1984)
• Decision Date: 29 May 1984
• Parties: , 39 UCC Rep.Serv. 540 Elizabeth BIZZOCO v. Leon CHINITZ et al.

Page 572

476 A.2d 572

193 Conn. 304, 39 UCC Rep.Serv. 540

Elizabeth BIZZOCO v. Leon CHINITZ et al.

Supreme Court of Connecticut.

Argued April 12, 1984.

Decided May 29, 1984.

Dean F. Radke, Hartford, for appellants (defendants).

Charles E. Moller, Jr., Wethersfield, for appellee (plaintiff).

Before PETERS, HEALEY, SHEA, GRILLO and HENNESSY, JJ.

PETERS, Justice.

This case concerns the personal liability of an accommodation endorser of a corporate note and the avoidability of the endorser's transfer of his property to his wife. The plaintiff, Elizabeth Bizzoco, brought an action against Leon Chinitz to recover amounts due on six defaulted promissory notes, and against Leon Chinitz and his wife Mildred Chinitz to set aside as fraudulent a conveyance of property from Leon to Mildred. The trial court found five of the six notes to be uncollectible because they were usurious, but rendered judgment for the plaintiff on the remaining note and on the challenged conveyance. The defendants have appealed.

The trial court found the following facts. The F.H. Crygier Tobacco Company from 1971 to 1976 borrowed moneys totalling $137,000 in the form of six promissory notes payable to the plaintiff. The defendant Leon Chinitz was the president of the corporation and owned 50 percent of its shares. His brother Martin, ¹ who was its vice president, and his father Nathan owned the remaining shares. All of the promissory notes were drafted by the defendant. The notes which the trial court held unenforceable because of usury ² were instruments which had three co-makers: the corporation, the defendant and his brother. These notes expressly indicated that all the co-makers were individually and collectively responsible for payment. The remaining note, the fifth in chronological sequence, which is the subject of this appeal, was a note in the amount of $67,000 signed on its face by a single maker, the corporation, and endorsed on its back by the defendant. This note was intended to bear interest at the rate of 18 percent, a lawful rate for corporate borrowers. The corporation had repaid $97,880 of the total amount borrowed on all six notes when it ceased making further payments. On August 15, 1977, it filed a voluntary petition in bankruptcy and was subsequently discharged.

The defendant Leon Chinitz conveyed his interest in real estate at 46 Mohawk Drive, West Hartford, the family home, to his wife, for no consideration, on June 28, 1977. Leon Chinitz had paid all of the consideration for this property when it was acquired, and had paid all of the payments required to discharge its mortgage. After this conveyance, Leon Chinitz was unable to pay the plaintiff's debt. The conveyance was made at a time when Leon Chinitz knew that the corporation was in financial trouble. He was then trying to sell it on a "wash sale basis," an exchange of its assets for an assumption of its indebtedness.

On the basis of this factual record, the trial court held that the defendant Leon Chinitz was obligated to the plaintiff in the amount of $39,120, plus attorney's fees in the amount of $5868, plus costs. The court further held that the June 28, 1977 conveyance of the family home was null and void as to the plaintiff. The defendants' appeal challenges each of these conclusions. We shall consider first those claims that relate to the personal liability of Leon Chinitz on the promissory note for $67,000, and then the claim that relates to the fraudulent conveyance. We find no error.

I

The defendant Leon Chinitz raises three claims of error with regard to the personal judgment against him on the promissory note which he endorsed. He argues that the trial court erred in finding: (1) that the note represented a corporate debt and that it was not usurious as to him; (2) that the amount due the plaintiff was the $39,120 claimed in her complaint; and (3) that the plaintiff was entitled to an attorney's fee in the amount of $5868. These claims are unpersuasive.

The defendant's principal argument is that the promissory note was usurious as to him and therefore unenforceable. He concedes that if his role was that of a guarantor of a corporate note, then he could not successfully rely on a defense of usury when, as here, that defense was unavailable to the underlying corporate borrower. Associated East Mortgage Co. v. Highland Park, Inc., 172 Conn. 395, 405-406, 374 A.2d 1070 (1977). He maintains, however, that Associated East Mortgage Co. is inapposite because he was not a guarantor. He claims instead that because of his ownership of 50 percent of the shares of the corporate borrower, he was primarily liable on the fifth note as a co-maker and not as guarantor, and hence was entitled to the same personal defense that the trial court had recognized with regard to the sixth promissory note.

The difficulty with this argument is that it finds no factual support in the record. Under the Uniform Commercial Code, the defendant's anomalous endorsement, out of the chain of title, gave notice of its accommodation character. General Statutes § 42a-3-415(4). ³ Accommodation status, itself a form of guaranty, makes an accommodation party "liable in the capacity in which he has signed." General Statutes § 42a-3-415(2). See generally Peters, Suretyship Under Article 3 of the Uniform Commercial Code, 77 Yale L.J. 833, 844-61 (1968); White & Summers, Uniform Commercial Code (2d Ed.1980) §§ 13-12, 13-13. Between the immediate parties, the inferences normally to be drawn from what appears to be an accommodation endorsement may perhaps be rebutted, because, in such cases, General Statutes § 42a-3-415(3) states that "the accommodation character may be shown by oral proof." A statute that permits parol variation does not, however, compel the trier of fact to conclude that the variation has been proven. The defendant has the burden of rebutting the statutory inference that he was an accommodation endorser who, under General Statutes § 42a-3-414(1), ⁴ had engaged to pay the instrument, according to its tenor at the time of his endorsement. ⁵ The defendant, who himself testified that the loan was exclusively a corporate debt to be repaid out of corporate moneys, has failed to prove that his status on the instrument was anything other than what it appeared to be.

The defendant's next claim is that the trial court erred in calculating the amount of his indebtedness on the $67,000 promissory note. This claim is twofold. First, he maintains that the public policy against usury requires that all payments made to the plaintiff after the issuance of this note be allocated to reduction of this indebtedness. Such an allocation would reduce the outstanding balance to $1130 rather than the amount of $39,120 claimed by the plaintiff. Second, he maintains that, even if some of the payments were properly allocated to the usurious notes, the remaining weekly payments received by the plaintiff after the $67,000 loan totalled $30,360 so that the maximum amount of his liability should be $36,640.

We conclude that the trial court's judgment was correct. The defendant himself admitted that all of the payments made on all of the notes represented payments of interest rather than a return of principal. In these circumstances, our usury statute is of no avail to him, for it expressly provides that voluntary payments of interest may not be "set off or [recovered] back, by any proceeding in court." General Statutes § 37-2; Matz v. Arick, 76 Conn. 388, 390-91, 56 A. 630 (1904); Hinman v. Goodyear, 56 Conn. 210, 213-15, 14 A. 804 (1888). Furthermore, the plaintiff would have been entitled to recover all of the unpaid principal, i.e., $67,000, rather than the lesser amount which she sought in her complaint. While oral renunciations of negotiable instruments, like oral unexecuted gifts, are not fully effective; see General Statutes § 42a-3-605; ⁶ this defendant has shown no prejudice from the plaintiff's failure to manifest her largesse in a more formal fashion.

Finally, the defendant claims that the trial court improperly awarded the plaintiff an attorney's fee of $5868, which was 15 percent of the amount of the judgment. The $67,000 promissory note expressly authorized the recovery of a reasonable attorney's fee. As we have repeatedly held, an award under such a clause requires an evidentiary showing of reasonableness. Appliances, Inc. v. Yost, 186 Conn. 673, 680, 443 A.2d 486 (1982); Storm Associates, Inc. v. Baumgold, 186 Conn. 237, 245-46, 440 A.2d 306 (1982). The defendant argues that the evidence at trial was insufficient because there was nothing before the court about the services performed by the plaintiff's counsel or about the hours that counsel had spent on the case. We disagree. As we emphasized in Appliances, Inc. v. Yost, 186 Conn., supra, 680-81, 443 A.2d 486, and Piantedosi v. Florida, 186 Conn. 275, 279, 440 A.2d 977 (1982), 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 attorney's fees. In this case, the trial court knew that the plaintiff's counsel had taken a lengthy deposition, had engaged in a two-day trial, and had prepared a post-trial brief. The court was in a position to evaluate the complexity of the issues presented and the skill with which counsel had dealt with these issues. This record was sufficient to support the award made by the court.

II

The defendants Leon and Mildred Chinitz claim that the trial court erred in concluding that the transfer to Mildred of Leon Chinitz' interest in their West Hartford family home was a fraudulent conveyance under General Statutes § 52-552. ⁷ The trial court concluded that the plaintiff was entitled to have this transfer set aside on two grounds: (1) the transfer was without adequate consideration, was made with the intent to avoid the debt to the plaintiff, and left Leon Chinitz unable to pay the plaintiff's debt; and (2) at...