BRADY DOUGAN v. TOMOKO HAMADA DOUGAN, SC 18410
Judicial District of Stamford-Norwalk
Dissolution; Property; Whether Provision in a Stipulated Judgment Requiring Payment of Interest, Upon Default, from the Date of the Stipulated Judgment to the Date of Default is Invalid as Against Public Policy. On June 16, 2005, the parties entered into a stipulated agreement, which provided that the plaintiff would pay the defendant $15,325,000 in two installments. The stipulation further provided that, "[i]n the event payment is not made when due, interest at ten [percent] per annum shall accrue from the date [of the stipulated judgment] until fully paid . . . ." At the dissolution hearing, the plaintiff testified that the stipulated agreement, taken as a whole, was fair and reasonable. On June 17, 2005, the trial court rendered judgment dissolving the marriage and incorporated by reference the stipulated agreement, which the court found was fair and equitable. The plaintiff paid the second installment, which was due on or before June 16, 2006, twelve days late. He also paid the defendant an additional sum representing twelve days of interest at ten percent. Subsequently, the defendant filed a motion for enforcement of the stipulation in which she requested that the court order the plaintiff to pay her interest in accordance with the interest provision of the stipulated judgment; that is, from June 17, 2005. The trial court denied the motion, concluding that because the prime purpose of the clause requiring payment of interest from the date of the stipulated judgment was to "deter" the plaintiff from breaching the stipulated agreement, the interest provision was an invalid liquidated damages provision and, therefore, unenforceable as against public policy. The defendant appealed from that ruling. The Appellate Court (114 Conn. App. 379) determined that it was not necessary to decide whether the interest provision constituted an invalid penalty for breach of contract. The court found that the government had an interest in encouraging private agreements in dissolution cases since such agreements conserve judicial resources and promote the private resolution of family issues. Thereafter, taking into account this governmental interest and the fact that the parties, represented by counsel, had entered into the agreement with knowledge of its terms and that the agreement had been approved by the trial court as fair and equitable, the Appellate Court reversed the trial court's judgment. It ruled that, under the totality of the circumstances and in light of current societal expectations, public policy weighed in favor of enforcing the agreement. Alternatively, the court ruled that, even if the interest provision constituted an unconscionable penalty clause, the plaintiff could not challenge the interest provision because its incorporation into the dissolution judgment was an error induced by the plaintiff. In this appeal, the Supreme Court will review the Appellate Court's decision.