LaMontagne Builders, Inc. v. Brooks

• Decision Date: 20 October 2006
• Docket Number: No. 2005–409.,2005–409.
• Citation: 154 N.H. 252,910 A.2d 1162
• Court: New Hampshire Supreme Court
• Parties: LaMONTAGNE BUILDERS, INC. v. R. Scott BROOKS and another.

154 N.H. 252

910 A.2d 1162

LaMONTAGNE BUILDERS, INC.

v.R. Scott BROOKS and another.

No. 2005–409.

Supreme Court of New Hampshire.

Argued: May 11, 2006.

Opinion Issued: Oct. 20, 2006.

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.

James M. McNamee, PLLC, of Nashua (James M. McNamee on the brief and orally), for defendant R. Scott Brooks.

DUGGAN, J.

The defendant, R. Scott Brooks, appeals a decision of the Superior Court (Sullivan, J.), awarding the plaintiff, LaMontagne Builders, Inc. (LBI), attorney's fees and costs. Defendants Bank of New Hampshire, Bowman Green Development Corporation, and HABS/CDM, Inc. did not participate in this appeal. We affirm in part, reverse in part and remand.

This case involves protracted litigation over payment for services under a construction agreement between LBI and defendants Bowman Brook Purchase Group and R. Scott Brooks. This is the second time this matter has come before us. A detailed account of the underlying facts of this case can be found in our previous decision, see LaMontagne Builders v. Bowman Brook Purchase Group, 150 N.H. 270, 837 A.2d 301 (2003). For the purpose of this appeal, however, we recite the pertinent factual and procedural background below.

LBI is a corporation engaged in road building, site development, house construction and other construction activities in the Bedford area. Id. at 271, 837 A.2d 301. Bowman Brook Purchase Group (the partnership) is a New Hampshire limited partnership with HABS/CDM, Inc., a New Hampshire corporation, as its general partner. Id. R. Scott Brooks was an officer of HABS/CDM, Inc. during the time of the dispute over payment under the construction agreement. Id. Brooks also served as an officer of Bowman Green Development Corporation (BGDC), a New Hampshire corporation incorporated in 1996. Id.

On October 14, 1996, LBI entered into an agreement with the partnership to construct roads and make infrastructure improvements on real estate owned by the partnership and known as the Bowman Green Subdivision (the subdivision). Id. By the end of November 1996, LBI had completed most of the construction work called for in the agreement. Id.

Also at about the same time, with LBI's consent, Brooks arranged to transfer ownership of the property to BGDC. Id. The purpose of the transfer was, in part, to enable Brooks to obtain financing from a bank. Id. Brooks was previously unable to obtain funding 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. Id. at 271–72, 837 A.2d 301.

In November 1996, Brooks applied for a bank loan to develop the subdivision. Id. at 272, 837 A.2d 301. In his application, Brooks submitted financial statements and a description of the project, which stated that the infrastructure had already been built. Id. The financial statements represented assets worth one million dollars 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. There was no mention in any of the application materials of the money owed to LBI for its work on the project. Id.

In December 1996, LBI billed Brooks $315,459 for the work it had completed. Id. A dispute arose between LBI and Brooks regarding payment of the bill, and as a consequence, LBI halted work on the site. Id. LBI continued to demand payment from Brooks, who responded that he was seeking financing for the project that would enable him to pay LBI. Id. Subsequently, LBI and Brooks executed a written document in which Brooks agreed to pay LBI out of the proceeds of the bank loan. Id. The bank was never made aware of this agreement. See id.

In the spring of 1997, the parties closed on the loan. At the closing, Brooks again represented to the bank that all improvements were paid for, but neglected to disclose the debt to LBI. Id. at 273, 837 A.2d 301. After the closing, Brooks failed to honor his prior agreement to use the loan proceeds to pay LBI. Id. Instead, all of the loan proceeds went to Brooks individually, or to members of his family, either directly or through Great Oaks. Id.

On July 31, 1997, LBI attempted to secure payment under the construction agreement and filed a petition for a mechanic's lien in superior court (docket no. 97–C–746). Id. Pursuant to the agreement, 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. Id. The arbitration award was affirmed by the superior court, and LBI filed a motion for an award of costs and attorney's fees. In an order dated October 24, 2001, the court ruled that it was not in a position to award attorney's fees based upon the claims raised by LBI "because the matter was never tried." The court denied LBI's motion without prejudice "to any request for attorneys' fees in connection with any other claims by [LBI] or alleged wrongful acts by the defendants in this case.... If the court finds that [LBI] has proven that the defendants ... acted in bad faith, the court will consider a request for attorneys' fees."

In late 1999 while the arbitration was still pending, the bank commenced foreclosure on the subdivision. LBI countered by filing another equity petition in superior court seeking to enjoin the foreclosure (docket no. 00–E–011). Id. LBI argued that the conveyance of the subdivision property from the partnership to BGDC was fraudulent, and requested that the court either impose a constructive trust on the subdivision or compel payment of the foreclosure proceeds into the court. LBI also asked the court to award attorney's fees. Id.

The superior court denied LBI's requests to set aside the conveyance as fraudulent and enjoin the bank's foreclosure. Id. However, the court 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 attorney's fees it has incurred in pursuit of payment for its services." Id. With respect to the issue of attorney's fees, the court found that the reasons asserted at trial by Brooks for not paying LBI were "disingenuous and raised in bad faith." Id. at 276, 837 A.2d 301.

The defendants appealed the superior court's ruling, arguing that the court: (1) committed an unsustainable exercise of discretion when it awarded damages against Brooks personally; (2) improperly pierced the corporate veil to hold Brooks personally liable; and (3) improperly awarded attorney's fees against Brooks and the partnership. Id. We held that the defendants' first argument was not preserved for appellate review, and otherwise affirmed the superior court's decision. See id. at 274–76, 837 A.2d 301. LBI made no request for costs or attorney's fees pursuant to Supreme Court Rule 23.

Following the appeal, the superior court conducted a hearing on December 6, 2004, to determine the amount of attorney's fees and costs to be awarded. The hearing was conducted in Cheshire County Superior Court because Justice Sullivan—who had previously presided over this case in Hillsborough County—was transferred to that county. Brooks filed a motion for change of venue and also a motion for Justice Sullivan to recuse himself, the basis for the latter motion being that the court's order awarding judgment against him personally was improper because it was issued sua sponte. The court denied both motions.

At the hearing, LBI argued that it was entitled to attorney's fees and costs totaling $518,073.73 for the petition for a mechanic's lien (97–C–746), the petition to enjoin the foreclosure (00–E–011) and other related actions. The defendants raised several objections, including an objection to the reasonableness and appropriateness of the fees. In its order dated February 11, 2005, the court found that although the amount of fees claimed was "significant," it was reasonable due to the extremely complicated nature of the litigation and "the unreasonable, deceitful, dishonest and uncooperative conduct of the defendant R. Scott Brooks."

Next, the court addressed whether attorney's fees and expenses were recoverable in each individual case before the superior court. The court concluded that attorney's fees and expenses in 97–C–746 totaling $162,301.83 were reasonable and necessary. Similarly, the court found that attorney's fees in 00–E–011 in the amount of $235,123.56 were reasonable and necessary. The latter amount included fees and expenses incurred in connection with the first appeal. LBI's requests for attorney's fees in other related cases were denied.

Finally, the court evaluated LBI's request for costs in the various cases. LBI's request for costs in 97–C–476 in the amount of $360.32 was granted. With respect to LBI's request for costs in 00–E–011, the court awarded $376.72; however, it denied LBI's request for costs in connection with subsequent post-judgment attachment proceedings. In all, the court awarded LBI $397,883.88 in attorney's fees and expenses, and $12,501.59 in costs.

Brooks filed a motion to reconsider arguing, among other things, that because there had been no finding that he had acted in bad faith during any of the proceedings following the trial of the issues in 00–E–011, it was error for the court to award attorney's fees and costs incurred during any of the post-trial proceedings. In its order on the motion to reconsider, the court acknowledged that there was no bad faith in the filing of any post-trial motions. The court explained that its award of fees and costs was based upon "the acts of Brooks ... which necessitated the entire litigation, including the appeal to the supreme court, the post judgment collection efforts and the hearing on the amount of attorney's fees to be awarded."...