LaMontagne Builders, Inc. v. Bowman Brook Purchase Grp.
| Decision Date | 24 November 2003 |
| Docket Number | No. 2002–478.,2002–478. |
| Court | New Hampshire Supreme Court |
| Parties | LaMONTAGNE BUILDERS, INC. v. BOWMAN BROOK PURCHASE GROUP and another. |
The Law Office of Rodney L. Stark, P.A., of Manchester (Rodney L. Stark and Sherry M. Hieber on the brief, and Mr. Stark orally), for the plaintiff.
Law Office of Joshua L. Gordon, of Concord (Joshua L. Gordon on the brief and orally), for the defendants.
This case involves a dispute over a construction agreement entered into in 1996 between the defendants, Bowman Brook Purchase Group and R. Scott Brooks, and the plaintiff, LaMontagne Builders, Inc. The defendants appeal an order by the Superior Court (Sullivan , J.) holding Brooks personally liable for $465,292.85 owed to the plaintiff under the construction agreement and awarding attorney's fees against the defendants. We affirm.
LaMontagne Builders, Inc. (LBI) is a corporation engaged in road building, site development, house construction and other construction activities in the Bedford area. Its principal stockholder and president is Robert S. LaMontagne (LaMontagne). Bowman Brook Purchase Group (the partnership) is a New Hampshire Limited Partnership with HABS/CDM, Inc., a New Hampshire corporation, as its general partner. R. Scott Brooks was an officer of HABS/CDM, Inc. during the time of the dispute over the construction agreement. Brooks also served as an officer of Bowman Green Development Corporation (BGDC), a New Hampshire corporation, which was incorporated in 1996. From 1994 until May 1997, Attorney Charles F. Cleary, pursuant to a formal arrangement, jointly represented LBI, LaMontagne, Brooks, the partnership and BGDC, in several matters including the disputed construction agreement.
On October 14, 1996, LBI entered into a road and utility construction agreement with the partnership to construct roads and make infrastructure improvements on real estate in Bedford. The real estate was owned by the partnership and known as the Bowman Green Subdivision (subdivision). By the end of November 1996, LBI completed the road construction and nearly all of the infrastructure improvements in the subdivision.
During this time, discussions began between LBI and the partnership regarding a joint venture to develop the subdivision. As part of the joint venture, LBI and the partnership agreed to form a new corporation, later established as BGDC, that would own and develop the subdivision. The purpose of creating the new corporation was, in part, to enable Brooks to obtain financing from a bank because the partnership was subject to an outstanding Federal Deposit Insurance Corporation (FDIC) federal court judgment and related lien in the amount of two million dollars and was thus unable to obtain financing.
In approximately November 1996, Brooks applied for a bank loan to develop the subdivision. In his application, Brooks submitted a package of written materials including financial statements and a description of the project. The description of the project stated that the infrastructure had already been built. The financial statement represented over one million dollars in assets and a total liability of $687,000 in the form of a note payable to Great Oaks Family Holdings, L.P. (Great Oaks), an entity controlled by Brooks and his father. While at the time of the loan application no money had been paid for the construction of the infrastructure, there was no mention in any of the materials submitted by Brooks to the bank of any money owed to LBI.
On December 10, 1996, LBI billed Brooks for $315,459, which represented the entire contract price for the roadwork, plus "extras," and less credits for minor portions of the contract that had not yet been completed. A dispute arose between LBI and Brooks regarding the payment of the bill and, as a result, LBI halted work on the site. When LBI continued to demand payment from Brooks, Brooks stated that he was seeking financing for the project that would enable him to pay LBI.
Before closing on the loan, Attorney Cleary, who was still working under the joint representation agreement, asked LaMontagne whether he objected to Cleary representing Brooks in connection with the bank loan, in light of the ongoing dispute concerning LBI's claim that it was owed money for the construction completed in the subdivision. LaMontagne told Cleary that he did not object to his representation of Brooks on the condition that he ensured that LBI would be paid from the proceeds of the loan. Cleary spoke to Brooks and Brooks agreed to pay LBI's bill out of the proceeds of the loan. Cleary documented the promise in a memo. The bank, however, was never made aware of this agreement. Rather, the loan officer at the bank believed that all work performed by LBI on the site had been paid for by Great Oaks because of the representations made by Brooks both prior to and at the closing on the loan.
On April 30, 1997, as part of the same closing, the partnership transferred the subdivision property to BGDC, which then completed the loan transaction with the bank. The purpose of the transfer was to allow BGDC to borrow the $840,000 from the bank. The proceeds of the loan to BGDC were to be used to repay Brooks and his father for money they claimed to have put into the development of the subdivision project as investors. In connection with the loan, Brooks, on behalf of BGDC, executed a promissory note to the bank and granted the bank a mortgage on the subdivision.
At the closing, Brooks again represented that all improvements were paid for by executing mechanic's lien affidavits. Brooks also signed, on behalf of BGDC and Great Oaks, the financial statements originally submitted to the bank, which did not indicate that there was any debt to LBI. Brooks added the notation, "I represent no material change."
After the closing, Brooks failed to honor his agreement and did not pay LBI. Instead, all of the loan proceeds went to Brooks individually or to his father or members of the Brooks family, either directly or through Great Oaks. Brooks made subsequent promises to pay LBI if certain work was performed; LBI performed the work, but still was not paid. Despite his promises, Brooks later claimed at trial that he did not have to pay LBI because they did not comply with the road and utility construction agreement. Brooks, however, did not assert this claim until after LBI had relied on his promise to pay it out of the loan proceeds by not seeking a mechanic's lien, which had allowed the loan to proceed.
On July 31, 1997, LBI attempted to secure payment under the contract and filed a petition for a mechanic's lien. The matter was sent to arbitration and, on May 10, 2001, the arbitrator issued an award in favor of LBI in the amount of $465,292.85.
In late 1999, while the arbitration was pending, the bank commenced foreclosure on the subdivision. LBI filed an action in superior court claiming that the transfer of the subdivision from the partnership to BGDC was fraudulent. LBI's petition requested that the court award attorney's fees and either impose a constructive trust on the subdivision, compel payment of foreclosure proceeds into the court or enjoin the foreclosure. The superior court denied LBI's request: (1) to set aside the conveyance as fraudulent; and (2) to enjoin the bank's foreclosure against the subdivision. The superior court further held that LBI was entitled to: (1) a judgment in the amount of $465,292.85 against Brooks personally; and (2) an award against Brooks personally, the partnership, and BGDC for "all of the costs, expenses and attorneys' fees it has incurred in pursuit of payment for its services." This appeal followed.
On appeal, the defendants argue that the trial court: (1) committed an unsustainable exercise of discretion when it awarded damages against Brooks personally and attorney's fees against Brooks and the partnership; (2) improperly pierced the corporate veil to hold Brooks personally liable; and (3) improperly awarded attorney's fees against Brooks and the partnership. We address each argument in turn.
First, the defendants argue that the trial court erred in awarding damages and attorney's fees against them because the court raised the claims "sua sponte without providing any notice of those claims." The defendants contend that because LBI filed a petition to set aside a fraudulent conveyance, they were not on notice of any claims for damages or attorney's fees against them. We conclude, however, that the issue was...
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