Henderson v. Ayres

• Decision Date: 18 April 2013
• Docket Number: Record No. 120463.
• Citation: 285 Va. 556,740 S.E.2d 518
• Court: Virginia Supreme Court
• Parties: Thomas HENDERSON v. AYRES & HARTNETT, P.C.

285 Va. 556

740 S.E.2d 518

Thomas HENDERSON

v.AYRES & HARTNETT, P.C.

Record No. 120463.

Supreme Court of Virginia.

April 18, 2013.

Allan D. Zaleski (Protogyrou & Rigney, Norfolk, on brief), for appellant.

John F. Sawyer, Virginia Beach (Carl A. Eason; Virginia Beach, Wolcott Rivers Gates, on brief), for appellee.

PRESENT: All the Justices.

Opinion by Justice S. BERNARD GOODWYN.

In this appeal, we consider whether the circuit court erred in ordering Thomas Henderson to pay $130,000 to his attorney from proceeds deposited with the circuit court pursuant to a settlement agreement, and whether the circuit court erred in denying Thomas Henderson a jury trial on the attorney's fee issue. We also consider whether the circuit court erred in refusing to allow an appeal bond pursuant to Code § 8.01–676.1(C), which would have suspended execution of its award.

Background

Thomas Henderson (Henderson) retained Ayres & Hartnett, P.C. as his counsel in two cases filed against Henderson by his brother, James Henderson, in the Circuit Court of Northampton County. James Henderson filed two accounting actions against Henderson, one in Henderson's capacity as executor of the Estate of Edmund Henderson and trustee of Edmund Henderson's trusts and as attorney-in-fact under a power of attorney for Edmund Henderson, and the other in his capacity as executor of the Estate of Mary M. Henderson and trustee of Mary M. Henderson's trusts. James Henderson also asserted breach of fiduciary duty claims against Henderson.

The circuit court appointed an administrator c.t.a. who oversaw an accounting of the assets in the trusts and estates, and the distribution of the estates' property. The administrator analyzed forensic accounting reports, bank records, and explanations of transfers, and submitted a report to the circuit court.

The parties engaged in settlement discussions after the administrator submitted his report and reached an agreement on the eve of trial. As part of the settlement, it was agreed that Henderson would sell the decedents' former real property known as Wellington, allowing Henderson's siblings, Elizabeth Long and James Henderson, to recover the funds Henderson was deemed to owe them because of his breach of fiduciary duties and defalcations. The circuit court, by order approving the settlement and pursuant to the express terms of the settlement agreement, retained jurisdiction over the cases pending satisfaction of the settlement's terms.

A buyer entered into a contract to purchase Wellington. At closing, the HUD–1 statement (HUD–1) specified a seller's expense of $130,000 in attorney's fees to Ayres & Harnett to be paid out of Henderson's share of the sale proceeds. Henderson refused to finalize the sale of the property because he disputed the inclusion and amount of the attorney's fees to his counsel in the HUD–1.

Rather than jeopardize the sale of the property, all parties agreed to go forward with the closing and to pay certain proceeds from the sale, as reflected on the HUD–1, into the court for future distribution as directed by the court. After the proceeds were paid into court, the circuit court allowed any party that contested disbursement of the retained funds, in accordance with the original HUD–1, to object in writing. Henderson objected to the payment of Ayres & Hartnett's fees out of the sale proceeds. The circuit court, therefore, without objection, distributed the remaining proceeds from the sale of Wellington, except Ayres & Hartnett's disputed attorney's fees.

Henderson retained new counsel and requested a jury trial on the attorney's fees dispute. The circuit court denied the jury trial request and tried the matter without a jury, allowing the parties to present evidence on the propriety of the attorney's fees.

The circuit court found that Ayres & Hartnett's fees were reasonable and ordered distribution of the $130,000 in sales proceeds held by the court to Ayres & Hartnett. Henderson moved for the suspension of the execution of the award pending appeal. The circuit court denied Henderson's motion and ordered the immediate distribution of the attorney's fees to Ayres & Hartnett on the day of its ruling.

This Court granted an appeal on the following assignments of error:

1. The Trial Court erred in awarding a judgment in favor of Ayres & Hartnett, P.C. in the amount of $130,000.

2. The Trial Court erred in overruling the request of the Appellant for trial by jury on the issue of attorney fees to be awarded to his own attorney.

3. The Trial Court erred in determining that it had jurisdiction to determine that the Appellant was indebted to Hartnett and in what amount.

[285 Va. 561]4. The Trial Court erred in failing to order that the Appellant's share of the settlement funds be paid to him without any deduction for attorney fees to be paid to his own attorney.

5. The Trial Court erred in refusing to suspend execution of the judgment order in accordance with Section 8.01–676.1 of the Code of Virginia.

Analysis

Henderson argues that the circuit court erred in refusing to suspend execution of the judgment pending appeal. Henderson claims he had a statutory right to a supersedeas bond, and that the circuit court erred in ignoring this right.

Ayres & Hartnett responds that a supersedeas bond was inappropriate. Code § 8.01–676.1 prevents the execution of a judgment pending appeal. Ayres & Hartnett asserts that in this case, the funds had been paid into the court by the parties, and the dispute was over the distribution of the funds, not entry of a judgment. Thus, it claims that Code § 8.01–676.1 is not applicable.

“Because the issue before this Court is one of statutory interpretation, it is ‘a pure question of law which we review de novo.’ ” Brown v. Commonwealth, 284 Va. 538, 542, 733 S.E.2d 638, 640 (2012) (quoting Kozmina v. Commonwealth, 281 Va. 347, 349, 706 S.E.2d 860, 862 (2011)). “[T]he plain, obvious, and rational meaning of a statute is to be preferred over any curious, narrow, or strained construction.” Meeks v. Commonwealth, 274 Va. 798, 802, 651 S.E.2d 637, 639 (2007) (quoting Commonwealth v. Zamani, 256 Va. 391, 395, 507 S.E.2d 608, 609 (1998)).

The plain language of Code § 8.01–676.1(C) governs our analysis. The statute states, in pertinent part:

An appellant who wishes execution of the judgment or award from which an appeal is sought to be suspended during the appeal shall, subject to the provisions of subsection J, file an appeal bond or irrevocable letter of credit conditioned upon the performance or satisfaction of the judgment and payment of all damages incurred in consequence of such suspension, and ... execution shall be suspended upon the filing of such security and the timely prosecution of such appeal.

Code § 8.01–676.1(C). The plain language of Code § 8.01–676. 1(C) states that this section applies to judgments or awards. Code § 8.01–669 defines judgment as including “a decree, order, finding, or award.” The circuit court's order of disbursement of the proceeds from the sale of Wellington to Ayres & Hartnett was a judgment according to Code § 8.01–669. Consequently, Code § 8.01–676.1(C) applies to the ordered disbursement.

This Court has stated that “[t]he purpose of the statute is to secure payment of the full judgment amount and all damages incurred as a result of the suspension.” Tauber v. Commonwealth, 263 Va. 520, 545, 562 S.E.2d 118, 131 (2002). “A lesser amount would undermine the security of the judgment to which a prevailing party is entitled in the event that an appellant does not succeed on appeal.” Id. Additionally, this Court has held that a supersedeas bond “is one of indemnity, the object of which is to secure to a successful litigant the ultimate fruits of his recovery, in whole or in part, and to insure him against loss from the possible insolvency of his debtor, or from other cause, pending the appeal.” National Surety Co. v. Commonwealth, 125 Va. 223, 228, 99 S.E. 657, 658 (1919).

In this case, the funds the court awarded to Ayres & Hartnett were being held by the court. Henderson requested that the court continue to hold the funds pending the appeal and set an appeal bond covering the damages that might be incurred by Ayres & Hartnett because of the suspension, such as the loss of interest on the $130,000 and costs that might be assessed against Henderson. The circuit court declined to do so, ruling that Code § 8.01–676.1(C) was not applicable because the funds were held by the court, and ordered immediate disbursement of the funds. The circuit court erred in not setting a bond adequate to satisfy all damages resulting from suspending execution of the judgment as required by Code § 8.01–676.1(C).

Henderson also questions the authority of the circuit court to decide the attorney's fees issue because it was collateral to the underlying litigation. Henderson argues that the circuit court erred in determining that it had jurisdiction to resolve Ayres & Hartnett's fee dispute with its client because the subject matter of the estate litigation did not involve the dispute over Ayres & Hartnett's litigation fees. He asserts that the estate litigation created the proceeds deposited with the circuit court, that those funds belong to the estate litigants, and that Ayres & Hartnett has no claim to the funds.

“The resolution of this appeal is determined by ... whether the trial court had jurisdiction to resolve [the attorney's fees] claim[ ].... [This] inquir[y] present[s] questions of law which we review de novo.” Country Vintner, Inc. v. Louis Latour, Inc., 272 Va. 402, 410, 634 S.E.2d 745, 750 (2006) (citation omitted).

In Iron City Savings Bank v. Isaacsen, 158 Va. 609, 625, 164 S.E. 520, 525 (1932) (citations omitted), this Court stated:

Where some phase of the case alleged in a bill in chancery presents a good ground for equitable relief, and the court has acquired actual jurisdiction of all the parties, or of the res, necessary for the granting of some of...