Matthew Benoit v. ARNE, LLC

THE STATE OF NEW HAMPSHIRE

SUPREME COURT

In Case No. 2020-0190, Matthew Benoit v. ARNE, LLC, the
court on December 7, 2020, issued the following order:

Having considered the briefs and record submitted on appeal, we
conclude that oral argument is unnecessary in this case. See Sup. Ct. R. 18(1).
The defendant, ARNE, LLC (ARNE), appeals orders of the Circuit Court (Kent,
R., approved by Lyons, J.) that: (1) denied its motion to vacate a default
judgment in the amount of $5,000 plus interest and costs entered in favor of
the plaintiff, Matthew Benoit, on a small claim complaint; and (2) granted
Benoit attorney’s fees associated with his defense of a related lawsuit brought
by ARNE in superior court (ARNE II). We affirm the denial of the motion to
vacate the default judgment, but reverse the award of attorney’s fees.

Benoit commenced this litigation by filing his small claim complaint on
March 21, 2018, seeking a final payment of $5,000 pursuant to a framing
subcontract. He asserted that the payment was due upon the completion of an
inspection, that ARNE’s agent, Raymond Donahue, had “repeatedly lied to
[him] about speaking with the building inspector to set up the inspection,” and
that Benoit himself had “confirmed with the building inspector that he has
never been contacted for an inspection.” Pursuant to RSA 503:6 (Supp. 2019),
the trial court served ARNE by mailing written notice of the claim to Donahue
on March 26, 2018. See RSA 503:6, I; Dist. Div. R. 4.2(a). Evidence in the
record establishes that, as early as March 29, 2018, three days after service,
Donahue sent a text message to the building inspector stating that Donahue
“had been sued” by Benoit, and that Benoit had claimed “in court documents”
both that Donahue had “lied to him . . . [that Donahue] couldn’t get a framing
inspection,” and that Benoit “had spoken to you and you were willing to do it.”
The record does not indicate that the notice was returned as undelivered. See
RSA 503:6, III (requiring “service . . . as in all other actions at law” only if the
notice is returned as undelivered); Dist. Div. R. 4.3(b).

ARNE did not respond to the small claim, and on April 27, 2018, the trial
court entered default in favor of Benoit in the amount of $5,000 plus interest
and costs. See RSA 503:6, II; Dist. Div. R. 4.3(c). Also on April 27, the trial
court mailed notice of the default to Donahue. As with the small claim notice,
the notice of default was not returned as undeliverable.
 Benoit subsequently moved for periodic payments of the judgment. See
RSA 524:6-a (Supp. 2019). The trial court issued an order of notice for a
payment hearing, which Benoit attempted to serve by certified mail on August
1, 2018, and when he was unable to confirm that Donahue had received it, the
trial court issued a new order of notice, which was served in hand on October
17, 2018. See Dist. Div. R. 4.10(c) (providing that, if the defendant does not
sign the return receipt on an order of notice served by certified mail, in-hand
service shall be required). The order of notice required ARNE to appear at a
payment hearing on November 2, 2018.

ARNE filed ARNE II in superior court on September 24, 2018, alleging
that Benoit had breached the contract, and that on April 5, 2018, after the
small claim had been filed, the framing work had failed inspection. ARNE
failed to appear at the November 2 payment hearing in circuit court, and the
circuit court issued an order stating that an arrest warrant would issue.
Counsel for ARNE then filed an appearance in circuit court, and on November
6, 2018, moved to stay the circuit court case pending ARNE II. In the motion,
ARNE claimed that it had “not been lawfully served with” the small claim
complaint. We note that the record on appeal does not contain any affidavit or
other statement signed under penalty of criminal prosecution attesting to the
truth of the assertion concerning service. See Dist. Div. R. 1.8(B).

On November 7, 2018, counsel for Benoit entered appearances for him in
both matters, and moved to dismiss ARNE II on the basis that it was barred by
the default judgment rendered in the small claim. See Osman v. Gagnon, 152
N.H. 359, 362 (2005). In the motion to dismiss, Benoit specifically argued that
ARNE II was “an evasive litigation tactic amounting to an act of bad faith,” and
requested an award of attorney’s fees pursuant to Harkeem v. Adams, 117 N.H.
687 (1977). On December 5, 2018, the superior court granted the motion to
dismiss ARNE II, but did not expressly rule on the attorney’s fees request.

On the following day, ARNE filed a motion in the circuit court to vacate
the default judgment, claiming that Benoit’s final $5,000 payment was not due
until his work had passed inspection, and that his work had failed inspection
on April 5, 2018. Thus, ARNE claimed that Benoit had “either lied, or
misrepresented the situation in his” March 26, 2018 small claim complaint.
ARNE further argued that the complaint failed to state a claim upon which
relief could be granted, and that Donahue “did not believe he had been properly
served with a viable Complaint.” As to the latter claim, the motion stated that
“Donahue recalls that Mr. Benoit told him he was going to sue him by phone or
in a TXT message,” and that Benoit “failed to alert [Donahue’s attorney] about
the suit as instructed by Donahue.” We note that the record on appeal does
not contain an affidavit or other statement signed under penalty of criminal
prosecution attesting to the truth of these assertions. See Dist. Div. R. 1.8(B).

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 On January 4, 2019, the circuit court denied ARNE’s November 6, 2018
motion to stay, and stated that it would schedule an expedited hearing on the
motion to vacate the default. The trial court held a hearing on the motion to
vacate the default on March 15, 2019. Benoit asserts, and ARNE does not
specifically dispute, that the trial court took offers of proof at the hearing. We
note that ARNE has not provided a transcript of this hearing on appeal. See
Bean v. Red Oak Prop. Mgmt., 151 N.H. 248, 250 (2004) (stating that appealing
party bears burden to provide record sufficient to decide issues on appeal).

The trial court denied the motion to vacate, observing that ARNE had
been served by mail with both the complaint and notice of default, that such
documents were “never returned to the court,” and that Donahue’s March 29,
2018 text exchange with the building inspector demonstrated his knowledge of
the suit. The trial court rejected ARNE’s argument that the complaint failed to
state a claim, observing that the complaint was “clear enough to apprise the
Defendant about the nature of [the] claim and the amount sought.” As to
ARNE’s claim of “fraud,” the trial court determined that the argument was
essentially the same claim ARNE had asserted in ARNE II, and that while the
purported “fraud” may have supported a defense or counterclaim, it did not
justify vacating the default judgment.

Subsequently, Benoit moved for an award of attorney’s fees, arguing in
part that ARNE II was a bad faith attempt to “circumvent this court’s default
judgment,” under Harkeem. The trial court granted the motion, reasoning that
“[p]roper appeals from Small Claims are to the Supreme Court,” and that the
“collateral action in the Superior Court following the Small Claims decision and
subsequent motions, requests and hearings in the District Court . . . was
unreasonable and demonstrates bad faith.” Thus, the trial court awarded
Benoit “all attorney’s fees and costs associated with the Superior Court action,”
and ordered Benoit to “submit a taxation of costs and attorney’s fees.”

On May 29, 2019, counsel for Benoit filed an affidavit of fees in the
circuit court, asserting that Benoit had incurred $2,883.75 in attorney’s fees
“for . . . time billed in the superior court matter.” Counsel further asserted that
ARNE had appealed ARNE II, and that he would supplement the affidavit to
include attorney’s fees incurred in the appeal at a later date. The record
reflects that ARNE timely appealed ARNE II on April 1, 2019, and that Benoit
did not cross-appeal the superior court’s failure to award attorney’s fees. On
August 8, the circuit court, sua sponte, stayed its order on attorney’s fees,
noting that the order “allowed the collection of . . . those [attorney’s] fees
connected with [ARNE’s] filing of an action in the Superior Court to attack the
decision in this case,” and that it had learned of the ARNE II appeal.

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 On September 13, 2019, we issued our final order in ARNE II upholding
the superior court’s dismissal order. See ARNE, LLC v. Benoit, No. 2019-0183,
2019 WL 4861398 (N.H. Sept. 13, 2019). Benoit did not file a motion with this
court seeking an award of attorney’s fees incurred in the ARNE II appeal. See
Sup. Ct. R. 23. On September 27, 2019, Benoit filed a motion in the circuit
court to lift the August 8 stay in light of our order in ARNE II, and sought
$7,818.75 of additional fees “for . . . time billed . . . in connection with [the
ARNE II] appeal.” Added to the $2,883.75 in fees that Benoit had previously
sought, Benoit requested a total attorney’s fee award of $10,702.50.

ARNE objected to the request for attorney’s fees incurred on appeal and
responded to the motion to lift the stay, arguing that “[i]t is simply untenable to
award fees in a Small claims matter for work done in the Superior Court,” that
“[t]he proper forum/venue for those fees would have to have been the Superior
Court not this Court,” and that “neither the Superior Court nor the New
Hampshire Supreme Court made any suggestion that they thought ARNE’s
honest, if late, attempts to achieve justice in this matter were brought in bad
faith or for any improper purpose.” (Bolding and footnote omitted.)

The Trial Court (Kent, R., approved by Chabot, J.) granted the requested
fees. ARNE moved to reconsider, arguing in part that “[l]itigants seeking fee
shifting awards must plead them and recover them in the Court having
jurisdiction over the matter for which they seek fees,” that in this case, Benoit
would be limited to an award of attorney’s fees incurred in defending the
motion to vacate the default judgment, and that “the mere . . . bringing [of the
motion to vacate the default] should not justify the extraordinary remedy of
shifting legal fees.” The trial court denied the motion, reasoning that, by
pursuing ARNE II, ARNE had “pressed fruitless and bad faith litigation in the
superior court over and against the . . . authority of the Circuit Court to control
the small claim proceedings,” that by pursuing ARNE II, ARNE had “unfairly
undermined the value of [the] small claim judgment,” and that the attorney’s
fee award was “an appropriate sanction designed to control an unreasonably
obstinate defendant and to restore to Mr. Benoit the value of his small claim
judgment by awarding attorney’s fees he should not have incurred . . . but for
ARNE’s pursuit of a bad faith and fruitless suit in the superior court.” With
respect to ARNE’s argument that the award of fees should not include fees
incurred on appeal, the trial court reasoned that “the chain of bad faith did not
break when ARNE filed its appeal.” This appeal followed.

We first address whether the trial court erred by denying ARNE’s motion
to vacate the default. We will not disturb the trial court’s ruling unless it erred
as a matter of law or unsustainably exercised its discretion. In the Matter of
Birmingham & Birmingham, 154 N.H. 51, 55 (2006). ARNE argues that the
trial court erred by denying its motion to vacate the default because: (1) the
trial court never held a hearing on damages under Cole v. Hobson, 143 N.H. 14

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(1998); (2) the small claim complaint “was legally deficient” since, at the time of
the complaint, no inspection had been completed; and (3) the default was
allegedly obtained “by fraud.” We disagree.

In his small claim complaint, Benoit alleged that he had fully performed
the contract, that ARNE was preventing a contractual requirement for his final
payment of $5,000 – acceptance of the work by the building inspector – from
occurring by refusing to schedule an inspection with the building inspector,
and that he was, therefore, entitled to his final contract payment of $5,000.
These allegations sufficiently stated a claim under the contract. See Smith v.
B., C. & M. Railroad, 36 N.H. 458, 488 (1858) (stating that a party who
prevents a contractual condition from occurring cannot benefit by its
nonoccurrence); cf. Birch Broad. v. Capitol Broad. Corp., 161 N.H. 192, 198-99
(2010) (upholding finding of breach of implied covenant of good faith and fair
dealing based upon defendant’s refusal to timely close on transaction thereby
allowing the agreement to expire). In its motion to vacate the default, ARNE
agreed that, under the contract, Benoit’s final payment was $5,000 and that it
was due upon the building inspector’s acceptance of the completed work.
ARNE simply disputed that Benoit had satisfactorily performed the work,
asserting that, after Benoit filed suit, his work was inspected and rejected.

As the trial court correctly observed, ARNE’s allegations in its motion to
vacate do not establish the sort of “fraud” necessary to vitiate a judgment, but
merely establish its defense to the merits of the case. See Conant v. O’Meara,
167 N.H. 644, 651-52 (2015); Bricker v. Sceva Speare Hosp., 115 N.H. 709,
711 (1975). Nor do the allegations concern damages. See Cole, 143 N.H. at 16
(upholding trial court’s refusal to consider defendant’s evidence at post-default
hearing on damages because evidence went to liability, and not damages).
Indeed, as noted above, ARNE effectively conceded that, under the contract,
Benoit would be entitled to $5,000 upon satisfactory completion of the work.
Finally, we note that ARNE has not provided a transcript of the offers-of-proof
hearing on the motion. See Bean, 151 N.H. at 250. Accordingly, we assume
that the evidence was sufficient to support the trial court’s factual findings,
including its findings establishing that ARNE was properly served with notice of
the small claim by first class mail, and received the trial court’s mailing, in
accordance with RSA 503:6, I. See Bean, 151 N.H. at 250. Upon this record,
we cannot conclude that the trial court’s denial of the motion to vacate the
default was either legally erroneous or an unsustainable exercise of discretion.

We next address whether the trial court erred by awarding attorney’s
fees. ARNE argues, in part, that the circuit court erred by awarding all
attorney’s fees associated with ARNE II because ARNE II was “within the

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purview of” the superior court and this court, and because neither the superior
court nor this court found that ARNE II amounted to bad faith. We agree.1

We have held that a party’s failure to request an award of attorney’s fees
incurred on appeal under Supreme Court Rule 23 based upon the alleged
frivolous or bad faith nature of the appeal waives any claim for those fees in the
trial court. LaMontagne Builders v. Brooks, 154 N.H. 252, 258-59 (2006).
Moreover, we have held that res judicata applies to a trial court’s ruling on a
request for attorney’s fees. In the Matter of Hampers & Hampers, 166 N.H.
422, 429-31 (2014); Blevens v. Town of Bow, 146 N.H. 67, 74 (2001).

Benoit did not seek an award of attorney’s fees pursuant to Rule 23 in
ARNE II. Accordingly, he waived any claim for an award of the attorney’s fees
incurred in defending the appeal on the basis of ARNE’s alleged bad faith.
LaMontagne, 154 N.H. at 259. Moreover, Benoit specifically sought attorney’s
fees from the superior court on the basis that ARNE II was brought in bad faith
under Harkeem, and the superior court did not grant the request.

Contrary to Benoit’s argument, the fact that the superior court did not
expressly rule on his attorney’s fee request does not mean that the circuit court
was free to award attorney’s fees associated with ARNE II. A final judgment is
conclusive as to all claims that were raised or could have been raised on the
basis of the factual transaction at issue. See, e.g., Finn v. Ballentine Partners,
LLC, 169 N.H. 128, 147 (2016). Here, Benoit specifically requested an award of
attorney’s fees in his motion to dismiss ARNE II on the basis that ARNE II
constituted “an evasive litigation tactic amounting to an act of bad faith” under
Harkeem. Under these circumstances, we construe the superior court’s failure
to grant the request expressly as an implicit denial of it. See In the Matter of
Salesky & Salesky, 157 N.H. 698, 702 (2008) (stating that interpretation of trial
court order is a question of law, which we review de novo). Benoit’s recourse,
therefore, was limited to seeking reconsideration of, and appealing, the
superior court’s failure to grant his request. Blevens, 146 N.H. at 74.

1 We note that in Benoit’s circuit court motion for attorney’s fees, he had initially sought an

award of fees “incurred as a result of ARNE’s filing of its Motion to Vacate” the default
judgment in the circuit court. The trial court, however, did not award attorney’s fees incurred
in defending the circuit court motion to vacate, or base the award upon a finding that the
motion to vacate was filed in bad faith. Rather, the trial court awarded “all attorney’s fees and
costs associated with the Superior Court action” based upon its finding that the “collateral
action in the Superior Court . . . was unreasonable and demonstrate[d] bad faith.” (Emphasis
added.) Moreover, according to the affidavits submitted by Benoit’s counsel, the $10,702.50
that the trial court awarded represented counsel’s time “billed in the superior court matter”
and “in connection with [the] appeal of the superior court order.” (Emphasis added.) We note
further that Benoit has not cross-appealed the trial court’s failure to award attorney’s fees
incurred in connection with his defense of the motion to vacate the default judgment.

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Accordingly, we conclude that the circuit court erred by awarding Benoit “all
attorney’s fees and costs associated with” ARNE II.2

Affirmed in part and reversed
in part.

Hicks, Bassett, Hantz Marconi, and Donovan, JJ., concurred.

Timothy A. Gudas,
Clerk

2 Because we reverse the attorney’s fee award, we need not address whether awarding

$10,702.50, in addition to the $5,000 judgment, exceeded the circuit court’s jurisdiction, or
whether the attorney’s fees award amount to “costs” within the meaning of the small claim
statute. See RSA 503:1, I (Supp. 2019) (defining small claim as “any right of action . . . in
which the . . . damages, exclusive of interest and costs, does not exceed $10,000”); Thomas v.
Crete, 141 N.H. 708, 710 (1997) (holding that district court lacked authority to award damages
exceeding the small claim amount limitation of RSA 503:1, I).

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