MAINE SUPREME JUDICIAL COURT Reporter of Decisions Decision: 2018 ME 1 Docket: Pen-17-233 Argued: November 15, 2017 Decided: January 9, 2018
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
ESTATE OF STEPHEN E. LIBBY
GORMAN, J.
[¶1] Sherryl L. Albert, individually and as personal representative of
the Estate of Stephen E. Libby (Stephen Sr.), appeals from a purported
judgment of the Penobscot County Probate Court (R. Bradford, J.) adopting the
report of a referee and imposing a constructive trust on her interests in real
property. Sherryl argues that the court erred because there was insufficient
evidence to support the referee’s conclusion that she committed constructive
fraud. We hold that the court did not err in adopting the referee’s report
imposing a constructive trust, but we remand to the Probate Court with
direction to enter an effective judgment.
I. BACKGROUND
[¶2] Stephen Sr. died in November of 2013 and his will, which named
Sherryl as personal representative of his estate, was filed with the Penobscot
County Probate Court in January of 2014. Stephen Sr. identified his five 2
children, including Sherryl, in his will. At issue in this appeal are transfers of
real property that took place in 2001, 2011, and 2013 from Stephen Sr. to
Sherryl. As a result of these transfers, upon Stephen Sr.’s death, Sherryl was
the sole legal owner of two properties, and she owned a one-half interest in
six additional properties as a tenant in common with Nancy Libby, Sherryl’s
mother and Stephen Sr.’s estranged wife.
[¶3] While the probate of Stephen Sr.’s estate was underway, Sherryl
filed a complaint against Stephen E. Libby II (Stephen Jr.), her brother and
Stephen Sr.’s son, and he responded by filing a nine-count counterclaim
against Sherryl. By agreement of the parties and an order dated
February 9, 2016, the Probate Court assigned a referee to hear Sherryl’s claim
and Stephen Jr.’s counterclaim.1 14 M.R.S. § 1151 (2017); M.R. Prob. P. 53;
M.R. Civ. P. 53(b)(1).
[¶4] Stephen Jr.’s counterclaim alleged, in part, that Stephen Sr.
conveyed his property interests to Sherryl conditioned on her agreement that
she would hold the property for the benefit of all his children and would
convey her interests back to the estate or into an appropriate trust after
Stephen Sr.’s death. Sherryl refused to convey her interests after Stephen Sr.’s
1 Sherryl’s complaint consisted of three counts, none of which is at issue in this appeal. The
parties agreed to proceed on Stephen Jr.’s counterclaim, which forms the basis for this appeal. 3
death and Stephen Jr. argued that her refusal constituted constructive fraud.
Stephen Jr. requested a judgment imposing a constructive trust on the
property at issue.2
[¶5] The referee held a two-day testimonial hearing regarding
Stephen Jr.’s counterclaim on December 14 and 16, 2016. The referee’s
report, dated January 17, 2017, found in pertinent part that Stephen Sr. “held
his daughter, Sherryl Albert, in a position of trust,” and found “by clear and
convincing evidence that all of the Maine real estate conveyed to Sherryl for
no consideration or payment was conveyed to her to hold in trust for [Stephen
Sr.’s] children.” The referee concluded that Sherryl committed constructive
fraud and recommended the imposition of a constructive trust on all of the
Maine real estate Stephen Sr. conveyed to Sherryl in 2001 and thereafter.
[¶6] Sherryl filed a timely objection to the referee’s report. See M.R.
Civ. P. 53(e)(2). The Probate Court held a hearing on Sherryl’s objections and,
finding no errors, adopted the referee’s report and ordered judgment “entered
in the record.” See 14 M.R.S. § 1155 (2017); M.R. Civ. P. 53(e)(2). Sherryl
appeals. 18-A M.R.S. § 1-308 (2017); M.R. App. P. 2 (Tower 2016).
2 The referee found and the parties do not appear to dispute that Stephen Sr. was motivated to
make the property transfers to Sherryl, at least in part, to prevent his estranged wife from getting his property when he died. 4
II. DISCUSSION
[¶7] “When a trial court accepts a report of a referee, the findings of the
referee become the trial court’s findings, and we review those findings
directly.” Wechsler v. Simpson, 2016 ME 21, ¶ 12, 131 A.3d 909 (quotation
marks omitted). The referee’s “findings are entitled to very substantial
deference because of the referee’s opportunity to observe and assess the
witnesses’ testimony.” Karamanoglu v. Gourlaouen, 2016 ME 86, ¶ 11,
140 A.3d 1249 (quotation marks omitted). We review the referee’s factual
findings for clear error and the application of the law to the facts de novo. Id.
[¶8] A trial court may impose a constructive trust on real property
when a grantee commits constructive fraud. Baizley v. Baizley, 1999 ME 115,
¶ 7, 734 A.2d 1117. We have explained that
[c]onstructive fraud occurs when the grantor transfers property to the grantee, who promises or agrees to hold the property for the benefit of the grantor or a third party, and the grantor is induced to act through reliance on a relationship of trust which may be founded on moral, social, or personal, as well as legal duties. In such situations, the grantee abuses the resulting fiduciary relationship if he fails to perform, and he will then be treated by the court as a constructive trustee for the beneficiary.
Id. (citations omitted) (quotation marks omitted). To impose a constructive
trust on this basis, the court must find that “there is clear and convincing
evidence of an agreement between the grantor and the grantee to benefit 5
another party.” Id. ¶ 8. When the standard at trial is clear and convincing
evidence, we consider on appeal “whether the factfinder could reasonably
have been persuaded that the required factual finding was or was not proved
to be highly probable.” Id. (quotation marks omitted).
[¶9] Contrary to Sherryl’s contentions, the record contains evidence
from which the referee “could reasonably have been persuaded that it was
highly probable,” Baillargeon v. Estate of Daigle, 2010 ME 127, ¶ 17,
8 A.3d 709, that (1) a relationship of trust existed between Stephen Sr. and
Sherryl and (2) Stephen Sr. and Sherryl agreed that she would “hold the
property for the benefit” of all of Stephen Sr.’s children. See Baizley,
1999 ME 115, ¶¶ 7, 9, 734 A.2d 1117. “Because clear and convincing evidence
existed of a constructive fraud, the court did not err when it imposed a
constructive trust on the property.”3 Id. ¶ 9.
[¶10] Although we conclude the court did not err in adopting the
referee’s report, the court’s docket entry does not comply with Rules 58 and
79 of the Maine Rules of Probate Procedure regarding the entry of judgment.
See M.R. Prob. P. 58, 79(a). The docket entry stated merely, “THE REFEREE’S
3 Because we conclude the court did not err regarding the constructive fraud count, we do not
address Sherryl’s arguments relating to the referee’s findings and conclusions on the count alleging abuse of a fiduciary relationship. 6
REPORT IS HEREBY ADOPTED AND JUDGMENT IS HEREBY ENTERED ON THE
RECORD.” Because imposing a constructive trust would affect Sherryl’s—and
her sibling’s—rights and duties regarding the properties at issue, “[t]he
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MAINE SUPREME JUDICIAL COURT Reporter of Decisions Decision: 2018 ME 1 Docket: Pen-17-233 Argued: November 15, 2017 Decided: January 9, 2018
Panel: SAUFLEY, C.J., and ALEXANDER, MEAD, GORMAN, JABAR, HJELM, and HUMPHREY, JJ.
ESTATE OF STEPHEN E. LIBBY
GORMAN, J.
[¶1] Sherryl L. Albert, individually and as personal representative of
the Estate of Stephen E. Libby (Stephen Sr.), appeals from a purported
judgment of the Penobscot County Probate Court (R. Bradford, J.) adopting the
report of a referee and imposing a constructive trust on her interests in real
property. Sherryl argues that the court erred because there was insufficient
evidence to support the referee’s conclusion that she committed constructive
fraud. We hold that the court did not err in adopting the referee’s report
imposing a constructive trust, but we remand to the Probate Court with
direction to enter an effective judgment.
I. BACKGROUND
[¶2] Stephen Sr. died in November of 2013 and his will, which named
Sherryl as personal representative of his estate, was filed with the Penobscot
County Probate Court in January of 2014. Stephen Sr. identified his five 2
children, including Sherryl, in his will. At issue in this appeal are transfers of
real property that took place in 2001, 2011, and 2013 from Stephen Sr. to
Sherryl. As a result of these transfers, upon Stephen Sr.’s death, Sherryl was
the sole legal owner of two properties, and she owned a one-half interest in
six additional properties as a tenant in common with Nancy Libby, Sherryl’s
mother and Stephen Sr.’s estranged wife.
[¶3] While the probate of Stephen Sr.’s estate was underway, Sherryl
filed a complaint against Stephen E. Libby II (Stephen Jr.), her brother and
Stephen Sr.’s son, and he responded by filing a nine-count counterclaim
against Sherryl. By agreement of the parties and an order dated
February 9, 2016, the Probate Court assigned a referee to hear Sherryl’s claim
and Stephen Jr.’s counterclaim.1 14 M.R.S. § 1151 (2017); M.R. Prob. P. 53;
M.R. Civ. P. 53(b)(1).
[¶4] Stephen Jr.’s counterclaim alleged, in part, that Stephen Sr.
conveyed his property interests to Sherryl conditioned on her agreement that
she would hold the property for the benefit of all his children and would
convey her interests back to the estate or into an appropriate trust after
Stephen Sr.’s death. Sherryl refused to convey her interests after Stephen Sr.’s
1 Sherryl’s complaint consisted of three counts, none of which is at issue in this appeal. The
parties agreed to proceed on Stephen Jr.’s counterclaim, which forms the basis for this appeal. 3
death and Stephen Jr. argued that her refusal constituted constructive fraud.
Stephen Jr. requested a judgment imposing a constructive trust on the
property at issue.2
[¶5] The referee held a two-day testimonial hearing regarding
Stephen Jr.’s counterclaim on December 14 and 16, 2016. The referee’s
report, dated January 17, 2017, found in pertinent part that Stephen Sr. “held
his daughter, Sherryl Albert, in a position of trust,” and found “by clear and
convincing evidence that all of the Maine real estate conveyed to Sherryl for
no consideration or payment was conveyed to her to hold in trust for [Stephen
Sr.’s] children.” The referee concluded that Sherryl committed constructive
fraud and recommended the imposition of a constructive trust on all of the
Maine real estate Stephen Sr. conveyed to Sherryl in 2001 and thereafter.
[¶6] Sherryl filed a timely objection to the referee’s report. See M.R.
Civ. P. 53(e)(2). The Probate Court held a hearing on Sherryl’s objections and,
finding no errors, adopted the referee’s report and ordered judgment “entered
in the record.” See 14 M.R.S. § 1155 (2017); M.R. Civ. P. 53(e)(2). Sherryl
appeals. 18-A M.R.S. § 1-308 (2017); M.R. App. P. 2 (Tower 2016).
2 The referee found and the parties do not appear to dispute that Stephen Sr. was motivated to
make the property transfers to Sherryl, at least in part, to prevent his estranged wife from getting his property when he died. 4
II. DISCUSSION
[¶7] “When a trial court accepts a report of a referee, the findings of the
referee become the trial court’s findings, and we review those findings
directly.” Wechsler v. Simpson, 2016 ME 21, ¶ 12, 131 A.3d 909 (quotation
marks omitted). The referee’s “findings are entitled to very substantial
deference because of the referee’s opportunity to observe and assess the
witnesses’ testimony.” Karamanoglu v. Gourlaouen, 2016 ME 86, ¶ 11,
140 A.3d 1249 (quotation marks omitted). We review the referee’s factual
findings for clear error and the application of the law to the facts de novo. Id.
[¶8] A trial court may impose a constructive trust on real property
when a grantee commits constructive fraud. Baizley v. Baizley, 1999 ME 115,
¶ 7, 734 A.2d 1117. We have explained that
[c]onstructive fraud occurs when the grantor transfers property to the grantee, who promises or agrees to hold the property for the benefit of the grantor or a third party, and the grantor is induced to act through reliance on a relationship of trust which may be founded on moral, social, or personal, as well as legal duties. In such situations, the grantee abuses the resulting fiduciary relationship if he fails to perform, and he will then be treated by the court as a constructive trustee for the beneficiary.
Id. (citations omitted) (quotation marks omitted). To impose a constructive
trust on this basis, the court must find that “there is clear and convincing
evidence of an agreement between the grantor and the grantee to benefit 5
another party.” Id. ¶ 8. When the standard at trial is clear and convincing
evidence, we consider on appeal “whether the factfinder could reasonably
have been persuaded that the required factual finding was or was not proved
to be highly probable.” Id. (quotation marks omitted).
[¶9] Contrary to Sherryl’s contentions, the record contains evidence
from which the referee “could reasonably have been persuaded that it was
highly probable,” Baillargeon v. Estate of Daigle, 2010 ME 127, ¶ 17,
8 A.3d 709, that (1) a relationship of trust existed between Stephen Sr. and
Sherryl and (2) Stephen Sr. and Sherryl agreed that she would “hold the
property for the benefit” of all of Stephen Sr.’s children. See Baizley,
1999 ME 115, ¶¶ 7, 9, 734 A.2d 1117. “Because clear and convincing evidence
existed of a constructive fraud, the court did not err when it imposed a
constructive trust on the property.”3 Id. ¶ 9.
[¶10] Although we conclude the court did not err in adopting the
referee’s report, the court’s docket entry does not comply with Rules 58 and
79 of the Maine Rules of Probate Procedure regarding the entry of judgment.
See M.R. Prob. P. 58, 79(a). The docket entry stated merely, “THE REFEREE’S
3 Because we conclude the court did not err regarding the constructive fraud count, we do not
address Sherryl’s arguments relating to the referee’s findings and conclusions on the count alleging abuse of a fiduciary relationship. 6
REPORT IS HEREBY ADOPTED AND JUDGMENT IS HEREBY ENTERED ON THE
RECORD.” Because imposing a constructive trust would affect Sherryl’s—and
her sibling’s—rights and duties regarding the properties at issue, “[t]he
docket entry in this instance does not specify the form of [equitable] relief and
thus does not constitute an effective entry of judgment.” See Rossignol v.
Raynes, 650 A.2d 935, 936 (Me. 1994); York Mut. Ins. Co. of Me. v. Mooers,
415 A.2d 564, 566 (Me. 1980) (“An order to the clerk to enter ‘judgment for
the defendants’ does not adjudicate what the respective rights, duties and
liabilities of the various parties . . . may be.”).
[¶11] While we normally dismiss appeals lacking an effective entry of
judgment, see Town of Freeport v. Ocean Farms of Me., Inc., 600 A.2d 402, 403
(Me. 1991); Dufour v. Silsby, 405 A.2d 737, 739 (Me. 1979), in this case we
conclude that the court intended to “reflect[] an adjudication of the dispute[s]
before the court” when it adopted the referee’s report. Murphy v. Maddaus,
2002 ME 24, ¶ 12, 789 A.2d 1281 (quotation marks omitted); see Bank of Me.
v. Giguere, 309 A.2d 114, 117 (Me. 1973) (“We believe that the language of the
Justice—although somewhat equivocal—was intended to be his judgment that
the rights of the parties are as the Referee has determined them . . . .”). “When,
as here, the issue is clearly presented and neither party has questioned the 7
sufficiency of the court’s order, we determine that judicial economy is best
served by affirming the court’s clear intention.” 3 W Partners v. Bridges,
651 A.2d 387, 389 (Me. 1994); see 4 M.R.S. § 57 (2017). While we affirm the
court’s adoption of the referee’s report recommending the imposition of a
constructive trust based on constructive fraud, “we must direct that the court
enter an appropriate judgment on remand.” 3 W Partners, 651 A.2d at 389.
The entry is:
Order adopting referee’s report affirmed. Remanded with direction that the court order entry of judgment as outlined in the referee’s report, describing with particularity the property subject to a constructive trust, the interests of the parties in that property, and the obligations of the parties pursuant to the judgment, and that the clerk enter the judgment on the docket in accordance with Rules 58 and 79 of the Maine Rules of Probate Procedure.
Thomas L. Douglas, Esq. (orally), and Sarah A. McDaniel, Esq., Douglas McDaniel & Campo LLC, PA, Westbrook, for appellants Sherryl L. Albert and the Estate of Stephen E. Libby
Charles E. Gilbert, III, Esq. (orally), Gilbert & Greif, P.A., Bangor, for appellee Stephen E. Libby II
Penobscot County Probate Court docket number 2014-040-4 FOR CLERK REFERENCE ONLY