Estate of Lunt v. Gaylor

2005 DNH 114

• Court: District Court, D. New Hampshire
• Decided: August 4, 2005
• Docket: CV-04-398-PB
• Status: Published

Opinion

Estate of Lunt v. Gaylor CV-04-398-PB 08/04/05

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Estate of Margaret P . Lunt

v. Civil No. 04-CV-398-PB Opinion No. 2005 DNH 114 Gregory A. Gavlor

MEMORANDUM AND ORDER

The Estate of Margaret P. Lunt moves for partial summary

judgment on several counts in its complaint against Gregory

Gaylor. In support of its motion, the Estate argues that

Gaylor is collaterally estopped from challenging these counts

because of prior criminal convictions that arise from the same

facts. Gaylor objects, arguing that collateral estoppel does not

apply because the Estate's claims are dissimilar in character,

context, and factual basis from his convictions. For the reasons

set forth below, I grant the Estate's motion in part, and deny it

in p a r t .

I. BACKGROUND

A. The Moultonboro Neck Limited Partnership

On March 5, 1987, Gaylor and Lunt formed the Moultonboro

Neck Limited Partnership ("Partnership") for the purpose of acquiring, developing, and selling real estate. Def.'s Ex. No. B

at 1-2. As a limited partner. Bunt's sole responsibility was to

transfer 60 acres of land to the Partnership that she owned in

the Lake Winnepesaukee area ("Lunt Property"). I d . at 4. In

return, Lunt was to receive an annual distribution of 50 percent

of the Partnership's profits. Id. Gaylor made no contributions

to the Partnership but served as the Partnership's general

partner. Id.

In May 1987, Gaylor used the Lunt Property as security for a

$250,000 line of credit from the New Hampshire Savings Bank.

Def.'s A n s . 5 9. At an unspecified later date, Gaylor increased

this initial line of credit to $765,194.53. Def.'s Ans. 5 10.

On April 27, 1989, Gaylor transferred two parcels from the Lunt

Property to Chindwin Realty Trust and Dudh Kosi Realty Trust, two

organizations for which he served as the trustee. Pl.'s Ex. 3 at

3. On August 8, 1991, Gaylor also conveyed real property owned

by the Partnership to Tejas Timber Resources, an entity for which

he served as the registered agent. Def.'s Ans. 5 IC. Gaylor

sold the majority of the remaining Lunt property to Robert and

Shirley Delong on July 18, 1991, for $1.5 million. Def.'s Ans. 5

11. The proceeds from this sale were used to discharge several

- 2 - writs of attachment which had been applied to the property. Id.

at 5 12.

Lunt claims that she never received any of the proceeds from

this sale or any other return on her initial contribution to the

Partnership. Pl.'s Ex. No. 2. She also asserts that she

contributed an additional $300,000 in cash to the Partnership but

was never repaid. Id.

B. Gavlor's Criminal Prosecution

Between July 18, 1987 and December 24, 1991, Gaylor made, or

caused to be made, 61 transfers from the Partnership's accounts

for his personal benefit. Pl.'s Ex. No. 3-6. Among the illicit

transactions were checks written for (1) a 23-foot, 1986 model

Cobalt Condesa boat, (2) a Chris Craft antique wooden boat, (3)

the transportation and mooring of said boats, and (4) a 1967

Jaguar automobile. Pl.'s Ex. No. 3 at 1-3. In total, Gaylor

misappropriated $612,347.77 of the Partnership's funds. Pl.'s

Ex. No. 3-4.

Based upon the preceding facts, a grand jury indicted Gaylor

on numerous felony and misdemeanor counts of theft in December

1997. Pl.'s Ex. No. 7 at 1. On April 14, 1999, following a

three week trial, a jury found Gaylor guilty of (1) 52 counts of

- 3 - Class A theft by misapplication, (2) nine counts of Class B theft

by misapplication, and (3) one count Class A theft by

misapplication for misuse of a partnership credit card. Pl.'s

Ex. Nos. 3-5. Gaylor, however, fled while the jury was

deliberating. As a result, the Merrimack Superior Court issued a

warrant for his arrest. Pl.'s Ex. No. 8 at 2.

Gaylor was sentenced in absentia on June 29, 1999 to 14-and-

a-half to 29 years in prison. Pl.'s Ex. Nos. 3-5. The court

also required him to pay $635,061.63 in restitution. Id. Gaylor

was finally apprehended in Switzerland in November 1999 and,

following a prolonged extradition hearing, was returned to New

Hampshire in August 2000 to serve his sentence in the New

Hampshire state prison. Pl.'s Ex. No. 6 at 2.

While Gaylor was at large, his attorneys continued to

represent his interests by appealing his conviction to the New

Hampshire Supreme Court. Id. Upon his return to the state,

Gaylor was informed that the Supreme Court had refused to

consider his appeal. Id. He responded by filing a petition for

writ of habeas corpus in the state court, asserting fourteen

different grounds for relief. Id. Of the fourteen claims, all

but one were dismissed by the Merrimack Superior Court on August

- 4 - 2, 2002. Id. The court ruled that the remaining claim, Gaylor's

averment of ineffective assistance of counsel, required an

evidentiary hearing for proper adjudication. I d . at 3. This

hearing was conducted on January 17, 2003, and on July 28, 2003,

the court denied Gaylor's habeas petition. I d . at 3-4.

Gaylor's subsequent motion to reconsider was denied on

September 24, 2003 and his appeal to the New Hampshire Supreme

Court was likewise denied on December 23, 2003. I d . at 5-6.

Undeterred, Gaylor filed an amended Motion for New Trial (which

included a request for further evidentiary hearings), a Motion

for Sanctions, and a Motion to Expedite Hearing. I d . at 10. By

order dated October 20, 2004, the Superior Court once again

denied Gaylor's requests. Id. Gaylor responded by filing a new

petition for habeas relief in the federal district court pursuant

to 28 U.S.C. § 2254. See 04-CV-372-PB. That petition remains

pending.

C. Procedural Posture of the Civil Suits

The current case was preceded by a suit brought by Lunt

against both Gaylor and Tejas Timber Resources in the Carroll

County Superior Court on September 21, 1994. Def.'s Ex. No. F.

That suit, which arose out of the same operative facts and

- 5 - circumstances, alleged that Gaylor had negligently managed the

Partnership's assets and breached his fiduciary duty. See Lunt

v. Gavlor. 150 N.H. 96, 96 (2003). Lunt sought monetary damages,

as well as rescission of the deed transferring portions of the

Lunt property into the exclusive control of Tejas Timber

Resources. Id.

Gaylor failed to appear at trial. Id. Consequently, in

August 1995, Lunt was awarded a default judgment for the

requested rescission and over $2 million in damages. Id.

Gaylor's failure to appear was later determined, however, to have

resulted from defective service of process. Ri at 97. Thus, on

July 19, 2002, the Superior Court vacated the default judgment.

Id. Gaylor appealed this ruling to the New Hampshire Supreme

Court claiming that the entire suit should have been dismissed as

well. In an October 1, 2003 ruling, the New Hampshire Supreme

Court agreed and dismissed the action without prejudice. Id.

Lunt died on June 10, 2000, prior to this ruling. Aff.

Russell Lunt 5 8. On August 11, 2000, Arthur H. Nighswander,

Esq., was appointed as executor of her estate. Pl.'s Ans. To

Interrog. No. 1. hunt's estate then re-filed the Complaint on

September 29, 2004 in Carroll County Superior Court, and Gaylor

- 6 - removed the case to federal court pursuant to 28 U.S.C. § 1441,

on October 25, 2004. (Doc. No. 3) .1 The Estate now moves for

partial summary judgment.

II. STANDARD OF REVIEW

Summary judgment is appropriate when "the pleadings,

depositions, answers to interrogatories, and admissions on file,

together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law." Fed. R. Civ. P.

56(c).

In ruling on a motion for summary judgment, I "construe the

record evidence in the light most favorable to, and [draw] all

reasonable inferences in favor of, the non-moving party." ATC

Realty. LLC v. Town of Kingston. 303 F.3d 91, 94 (1st Cir.

2002)(citation and internal quotations omitted). The moving

party "bears the initial responsibility of informing the district

court of the basis for its motion, and identifying those portions

[of the record] which it believes demonstrate the absence of a

1 Tejas Timber Resources has since been dismissed as a party to this case. (Doc. No. 16).

- 7 - material fact." Celotex v. Catrett, 477 U.S. 317, 323 (1986)

(citation and internal quotations omitted). Once that burden is

met, the non-moving party must "produce evidence on which a

reasonable finder of fact . . . could base a verdict for it," or

else the motion will be granted. Avala-Gerena v. Bristol Mvers-

Squibb C o ., 95 F.3d 86, 94 (1st Cir. 1996)(citation omitted).

Ill. ANALYSIS

The Estate contends that Gaylor's prior criminal convictions

for misapplication estop him from litigating his liability as to

Counts II, III and IV of the Complaint. Gaylor objects, arguing

that collateral estoppel does not apply because the Estate's

claims are dissimilar in character, context, and factual basis

from his convictions for theft by misapplication under N.H. Rev.

Stat. Ann. § 637:10.2

Under New Hampshire law,3 "a judgment in favor of the

2 Gaylor also attempts to defend against summary judgment by reiterating the affirmative defenses stated in his answer. I decline to address these arguments in this Memorandum and Order.

3 "Because jurisdiction in this case rests on diversity and because the case relied on by the part[y] invoking estoppel was decided by a [New Hampshire] court, [I] apply [New Hampshire] law on collateral estoppel" in deciding this motion. Kowalski v. Gagne, 914 F.2d 299, 302 (1st Cir. 1990) (citation omitted). prosecuting authority [in an earlier criminal case] is preclusive

in favor of a third person in a later civil action . . . against

the defendant in the criminal prosecution." Hopps v. Utica

Mutual Insurance Co., 127 N.H. 508, 511 (1985) (following the

Restatement (Second) of Judgments § 85(2)(a) (1982)). For this

general rule to be applicable, however, "the issue to which

preclusion [will apply, must] have been contested and actually

litigated in the prior action." I d . (citation omitted)

Additionally, the party against whom collateral estoppel is

sought must have had a "full and fair opportunity to litigate"

the issue in the prior case and a final judgment must have been

rendered. See Aubert v. Aubert, 129 N.H. 422, 427-28 (1987).

Collateral estoppel bars a party from relitigating "any question

of fact that was actually litigated and determined against them

in a prior suit." State v. Charpentier. 126 N.H. 56, 60 (1985).

There can be little doubt that Gaylor was given a "full and

fair opportunity" challenge his criminal convictions. The

procedural history of that case is a testament to the due process

the criminal justice system affords defendants. By exhausting

nearly every available avenue of appeal, Gaylor was given more

- 9 - than five opportunities to argue his case,4 and in each instance

the underlying jury verdict was upheld.

Furthermore, notwithstanding Gaylor's pending petition for

habeas corpus relief, he has had a full and fair opportunity to

litigate the issues presented at his criminal trial to a "final

judgment." See Gephart v. Daigneault, 137 N.H. 166, 172

(1993)(collateral estoppel will not be applicable where there is

no final judgment). Although the New Hampshire Supreme Court has

yet to address the effect a habeas petition has on the finality

of a criminal conviction in the context of a collateral estoppel

claim, several other courts have determined that it would be

injurious to allow defendants to use habeas corpus as a tool to

bar collateral estoppel. See, e g .. Mueller v. J.C. Penney Co..

173 Gal. A p p . 3d 713, 719 (1985)(collateral estoppel properly

applied based on facts established by a criminal conviction even

4 Before being convicted, Gaylor was afforded a full trial in which he was permitted to litigate all of the charges against him with the assistance of counsel. Following his conviction, Gaylor (1) appealed to the New Hampshire Supreme Court, (2) filed a motion to reconsider in response to the denial of his appeal, and (3) moved to clarify and reopen after his motion to reconsider was denied. Pl.'s Ex. 6 at 2. Gaylor then filed a petition for habeas relief in Merrimack Superior Court asserting 14 bases for relief, all of which were subjected to close scrutiny and ultimately rejected.

- 10 - though defendant had a pending habeas corpus petition before

Ninth Circuit Court of Appeals). In accord with this position,

the Restatement (Second) of Judgments explains that "the wisest

course [in such situations] is to regard the prior decision of

the issue as final for the purpose of issue preclusion without

awaiting the end judgment." Restatement (Second) of Judgments §

13(G) (1982).5 Because the New Hampshire Supreme Court has cited

the Restatement favorably in deciding that a criminal conviction

could be the basis for collateral estoppel in a later civil suit,

see Hopps, 127 N.H. at 511, I conclude that it would likely do

the same in resolving this issue.

The remaining question, then, is whether Gaylor's numerous

convictions for theft by misapplication encompass, either

expressly or implicitly, legal and factual determinations which

permit the resolution of Counts II, III and IV of the Estate's

5 The drafters of the Restatement recognized that a problem may arise "[i]f judgment is rendered in the second action on the basis of judgment in the first, and the judgment in the first is then nullified." Restatement (Second) of Judgments § 16(A). They thus explain that "[i]t has been contended that the later judgment should then be automatically nullified," however, under the current doctrine "the later judgment remains valid, but a party, upon a showing that the earlier judgment has been nullified and that relief from the later judgment is warranted, may by appropriate proceedings secure such relief." I d . at (C).

- 11 - Complaint. I address each of these claims in turn.

A. Count II

The Estate charges in Count II that Gaylor breached a

fiduciary duty owed to the Partnership by wasting, depleting, and

misappropriating $2.8 million in cash and assets of the

Partnership's funds. The Estate further argues that Gaylor's

conviction for theft by misapplication collaterally estops him

from litigating his liability as to all of Count II.

As general partner, Gaylor had a fiduciary duty6 to "account

to the partnership for any benefit, and hold as trustee for it

any profits derived by him without consent of the other partners

from any transaction connected with the formation, conduct, or

liquidation of the partnership or from any use by him of its

property." N.H. Rev. Stat. Ann. § 304-A:21; see also N.H. Rev.

Stat Ann. § 304-B:24 (subjecting general partner to same

liability as partner in a partnership without limited powers).

6 A fiduciary relationship has been determined to "exist in cases where there has been a special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one reposing the confidence." Appeal of Concerned Corporators of Portsmouth Sav. Bank, 129 N.H. 183, 204 (1987); (citing Lash v. Cheshire County Savings Bank. Inc.. 124 N.H. 435 (1984)). Thus, as a matter of basic legal principle, Gaylor owed a fiduciary duty to the Partnership, irrespective of the findings of the jury.

- 12 - -13- To have convicted Gaylor of theft by misapplication, the

jury must have decided that he had used Partnership funds as if

they were his own.7 In fact, the indictment explicitly states

that such a finding was required.8 As a matter of law, the theft

of Partnership funds is a breach of the fiduciary duty to account

for and hold Partnership assets for the benefit of the partners.

Thus, Gaylor is estopped from challenging this conclusion in the

civil case.

The applicability of collateral estoppel arising from the

criminal convictions is limited, however, to those acts that are

explicitly identified in the indictment. Contrary to the

Estate's assertions, Gaylor was not charged with any crimes in

connection with his conveyance of land to the Chindwin Realty

Trust, Dudh Kosi Realty Trust, or Tejas Timber Resources. Nor

7 A person is guilty of theft by misapplication "if he obtains property from anyone or personal services from an employee upon agreement, or subject to a known legal obligation, to make a specified payment or other disposition to a third person, whether from that property or its proceeds or from his own property to be reserved in an equivalent or agreed amount, if he purposely or recklessly fails to make the required payment or disposition and deals with the property obtained or withheld as his own." N. H. Rev. Stat. Ann. § 637:10.

8 The indictment states that "Gaylor recklessly failed to make the required disposition of the Partnership's funds and treated them as his own." Pl.'s Ex. No. 3-5.

- 14 - did the indictment include any allegations concerning hunt's

claim that Gaylor had misappropriated $300,000 in cash that she

had conveyed to the Partnership. Thus, Gaylor can not be

collaterally estopped from challenging the Estate's assertions

concerning those transactions. Nor is Gaylor estopped from

raising any viable affirmative defenses he may have with respect

to this count.

B. Count III

Count III pleads, in the alternative, that Gaylor owed a

duty of care to the Partnership, which he breached by negligently

mishandling the Partnership funds. The Estate further contends

that the jury in Gaylor's criminal case has already determined

that Gaylor was negligent with respect to his duty and therefore

that Gaylor must be estopped from litigating this issue. I

agree. The jury in the criminal case found that Gaylor acted

recklessly when he misappropriated hunt's funds. Such a finding

necessarily encompasses a finding that Gaylor acted negligently.

I thus conclude that Gaylor must be collaterally estopped from

litigating his negligence, but only as to those facts stated in

the indictment. Again, he is not estopped from asserting any

otherwise viable affirmative defenses he may have with respect to

- 15 - this count.

C. Count IV

Lastly, the Estate contends in Count IV that the facts

substantiating Gaylor's criminal conviction for theft by

misapplication support a civil claim for conversion.9 The Estate

asserts that Gaylor is also estopped by his criminal conviction

from challenging this claim.

Under New Hampshire law, conversion involves the

"intentional exercise of dominion or control over a chattel which

. . . seriously interferes with the right of another to control

it." Muzzy v. Rockingham County Trust Co.. 113 N.H. 520, 523

(1973)(emphasis added)(citing Restatement (Second) of Torts §

222A(1)). In contrast, the jury convicted Gaylor for

"recklessly" failing to make required dispositions of the

partnership's funds. See Pl.'s Ex. No. 3-4. Because a finding

that Gaylor acted intentionally was not required to arrive at the

ultimate conviction for theft by misapplication, the jury did not

have occasion to consider whether Gaylor acted intentionally.

9 While the Complaint is admittedly vague as to the actual charge alleged in Count IV, the Estate sufficiently clarifies this ambiguity in its Motion for Partial Summary Judgment. See Pl.'s Motion for Partial Summary Judgment at 6.

- 16 - Gaylor's criminal conviction therefore does not estop him from

challenging plaintiff's claims in this count that he acted

intentionally.

IV. CONCLUSION

For the foregoing reasons, the Estate's Motion for Partial

Summary Judgment (Doc. No. 25) is granted in part. Gaylor

remains free to challenge any fact that was not established by

his criminal conviction. He also remains free to assert any

viable affirmative defenses he may have with respect to

plaintiff's claims.

SO ORDERED.

Paul Barbadoro United States District Judge

August 4, 2005

cc: Gregory A. Gaylor, pro se David H. Bownes, Esq.

- 17 -