The opinion of the court was delivered by: CHIN
Before the Court are defendant Dr. Carlo M. Croce's requests for (1) attorneys' fees and expenses and (2) prejudgment interest. For the reasons set forth below, I will allow costs and prejudgment interest but not attorneys' fees.
In 1992, plaintiff Christie's Inc. advanced $ 3.1 million to Dr. Croce. The advance was secured by Dr. Croce's Old Master paintings and drawings, which had been appraised by Christie's Inc. and Christie, Manson & Woods, Ltd. (together, "Christie's") at a value ranging from $ 4.6 to $ 6.6 million. Christie's and Dr. Croce executed a Consignment Agreement and Secured Promissory Note And Security Agreement and agreed that the paintings and drawings were to be auctioned off to repay the advance. The paintings were to be sold first and the drawings were to be sold only if the proceeds of the auction of the paintings were insufficient to repay the advance.
Unfortunately, the paintings sold for just over $ 1 million. Hence, the drawings had to be sold as well. In the end, after all the paintings and drawings were sold, there remained a shortfall of some $ 612,000 on the advance. Dr. Croce refused to pay it.
Christie's sued Dr. Croce for the shortfall as well as attorneys' fees and interest. Dr. Croce counterclaimed for, among other things, fraud, negligent misrepresentation, and breach of fiduciary duty.
The case was tried from April 16 to 28, 1998. The jury returned a verdict in favor of Dr. Croce on his negligent misrepresentation claim and awarded him damages of $ 816,000. Because the jury also found, however, that Dr. Croce was 40% at fault, the damages award must be reduced by 40% to $ 489,600. In addition, the jury rejected Dr. Croce's claims for fraud and breach of fiduciary duty. As a consequence of its finding in Dr. Croce's favor on the negligent misrepresentation claim, judgment will be entered as a matter of law against Christie's on its claim against Dr. Croce for the shortfall.
1. Attorneys' Fees and Expenses
Dr. Croce seeks attorneys' fees and expenses pursuant to section 5-327 of the New York General Obligations Law, which provides in part as follows:
Whenever a consumer contract provides that the creditor, seller or lessor may recover attorney's fees and expenses incurred as the result of a breach of any contractual obligation by the debtor, buyer or lessee, it shall be implied that the creditor, seller or lessor shall pay the attorney's fees and expenses of the debtor, buyer or lessee incurred . . . in the successful defense of any action arising out of the contract commenced by the creditor, seller or lessor.
N.Y. Gen. Oblig. Law § 5-327(2) (McKinney 1989 & Supp. 1997-98).
Dr. Croce contends that he is entitled to attorneys' fees and expenses under this provision because the consignment agreement and note (together, the "Agreement") constituted a "consumer contract," the Agreement provides for the recovery of attorneys' fees and expenses in the event of successful litigation against Dr. Croce, and ...