Notinger v. Brown, et al.

2008 DNH 202

Opinion

Notinger v . Brown, et a l . 08-CV-005-SM 11/20/08 UNITED STATES DISTRICT COURT DISTRICT OF NEW HAMPSHIRE

Steven M . Notinger, Trustee in Bankruptcy of David Deaver Brown and Simply Media, Inc., Plaintiff

v. Civil N o . 08-cv-05-SM Opinion N o . 2008 DNH 202 Christina Brown, individually and as Trustee of First Marcus Trust, Defendant

O R D E R

This case arises out of the bankruptcies of Simply Media,

Inc. and David Deaver Brown. The trustee in bankruptcy became

convinced that Christina Brown (wife of the debtor, Deaver Brown)

had improperly diverted Simply Media’s assets to her personal

use, so filed suit seeking to recover those assets for the

benefit of the estate. Two of the trustee’s original claims were

tried to a jury. In the first, the trustee asserted that

Christina Brown, both individually and in her capacity as trustee

of the First Marcus Trust (title holder of her residence in

Lincoln, Massachusetts), fraudulently transferred assets of the

debtor in bankruptcy (Simply Media) and diverted them to personal

use. In the second, the trustee claimed Christina Brown

participated in a civil conspiracy whose unlawful object was to

transfer money out of Simply Media in order to hinder, delay, or

defraud its creditors. Following a four day trial, the jury returned a verdict in

favor of the trustee and awarded damages as follows:

Count one (fraudulent transfer)

Christina Brown, individually: $ 871,613.76

Christina Brown, as trustee: $ 231,894.84

Count Two (civil conspiracy)

Christina Brown: $2,968,071.00

Jury Verdict Form (document n o . 6 8 ) . Defendants moved for

remittitur, which the court granted as to the civil conspiracy

count. Notinger v . Brown, 2008 DNH 188 (D.N.H. Oct. 6, 2008).

Subsequently, rather than proceed to a re-trial limited to the

issue of damages on his civil conspiracy claim, the trustee

accepted a reduced damages award in the amount of $1,648,000 on

that count.

Some issues were tried to the court: the trustee’s claim

seeking to impose a constructive trust upon Christina’s residence

in Lincoln, Massachusetts (the “Lincoln Residence”) or to obtain

turnover of that property, and his claim that Christina was

unjustly enriched by virtue of her conversion, to personal use,

of Simply Media’s assets. Prior to trial the court noted that a

jury verdict in the trustee’s favor would likely render his

bench-tried claims unnecessary, and it seemed the trustee agreed.

2 Counsel to the trustee has made inquiry of the clerk, however,

regarding the status of those claims, so it appears the trustee

expects a resolution — adding bungy cords to the belt and

suspenders already in hand.

Discussion

I. Unjust Enrichment and Constructive Trust.

As the New Hampshire Supreme Court has recognized, the

doctrine of unjust enrichment provides that “one shall not be

allowed to profit or enrich himself at the expense of another

contrary to equity.” American Univ. v . Forbes, 88 N.H. 1 7 , 19

(1936). See also Petrie-Clemons v . Butterfield, 122 N.H. 1 2 0 ,

127 (1982) (“Unjust enrichment may exist when an individual

receives a benefit as a result of his wrongful acts, or when he

innocently receives a benefit and passively accepts it.”) (citing

Nute v . Blaisdell, 117 N.H. 2 2 8 , 232 (1977)). Here, as the court

has previously held, the evidence introduced at trial amply

supported the jury’s conclusion that Christina Brown fraudulently

diverted assets of Simply Media from corporate to personal use.

To the extent she did s o , both she and the First Marcus Trust

were plainly unjustly enriched at Simply Media’s expense.

Consistent with the jury’s verdict, the court concludes,

based on the overwhelming evidence presented, that Christina

3 Brown, in her personal capacity, was unjustly enriched in the

amount of $871,613.76 and Simply Media is entitled to restitution

of the same. See, e.g., Kowalski v . Cedars of Portsmouth Condo.

Ass’n, 146 N.H. 1 3 0 , 133 (2001) (“A trial court may require an

individual to make restitution for unjust enrichment if he has

received a benefit which would be unconscionable for him to

retain. To entitle one to restitution, it must be shown that

there was unjust enrichment either through wrongful acts or

passive acceptance of a benefit that would be unconscionable to

retain.”) (citations and internal punctuation omitted).

The court also concludes, based upon the overwhelming

evidence presented, that Christina Brown, in her capacity as

trustee of the First Marcus Trust, was unjustly enriched in the

amount of $231,894.84.

In addition to restitution in that amount, Simply Media says

it is also entitled to the benefit of a constructive trust upon

the assets of the First Marcus Trust. As to the imposition of a

constructive trust, the New Hampshire Supreme Court has held that

it is warranted when:

clear and convincing evidence demonstrates a confidential relationship existed between two people, that one of them transferred property to the other, and that the person receiving the property would be unjustly enriched by retaining the property, regardless

4 of whether the person obtained the property honestly. A confidential relationship exists if there is evidence of a family or other personal relationship in which one person justifiably believes that the other will act in his or her interest. A person may be unjustly enriched if he or she obtains title to property by fraud, duress, or undue influence, or violates a duty that arises out of a fiduciary relation to another.

Cadle C o . v . Bourgeois, 149 N.H. 4 1 0 , 419-420 (2003) (citations

omitted). Here, it is plain that the First Marcus Trust was

unjustly enriched (at Simply Media’s expense) as a result of

Christina Brown’s fraudulent conduct. Among other things, the

trustee demonstrated that Christina Brown wrongfully used Simply

Media’s assets to pay the mortgage loan secured by the Lincoln

Residence, to maintain and repair the Lincoln Residence, and to

pay utility bills associated with that property. He also

demonstrated that, by virtue of her positions at Simply Media and

her access to the corporation’s checking accounts, a

“confidential relationship” existed between the two. Simply

Media i s , then, entitled to the imposition of a constructive

trust on the assets of the First Marcus Trust in the amount of

$231,894.84.

II. Turnover of the Lincoln Residence.

Finally, the trustee seeks an order compelling the turnover

of the Lincoln Residence to the estate of Deaver Brown, asserting

that:

5 Deaver Brown has retained a secret interest i n , and exercised complete dominion and control over, the Brown Lincoln Residence and, therefore, equity requires the Court to find that Deaver Brown’s bankruptcy estate holds a one hundred percent equitable interest in the Brown Lincoln Residence via a constructive trust and such equitable interest shall be turned over to the Plaintiff.

Plaintiffs’ Memorandum (document n o . 96) at 3 (emphasis

supplied). The court disagrees. The evidence introduced at

trial was insufficient to demonstrate that Deaver Brown retained

a secret, controlling interest in the Lincoln Residence

sufficient to warrant an order compelling Christina (as trustee)

to convey a one hundred percent interest in that property to him

(so it might be included in his bankruptcy estate). Moreover,

the trustee’s current position on this issue is at odds with the

one he adopted in the related case involving the Browns’ property

in New Hampshire. See Brown v . Reifler, 2008 DNH 195 (D.N.H.

Oct. 2 3 , 2008). In that case, the trustee sought to establish

that property in New Hampshire should be included in Deaver’s

bankruptcy estate. As part of that case, the trustee pointed out

that Deaver had little contact with, or interest i n , the Lincoln

Residence and that Christina, rather than h e , used it as a

primary residence. Instead, said the trustee, Deaver’s primary

residence was in New Hampshire. In any event, the trustee failed

to meet his burden of persuasion on that issue in this case.

6 Conclusion

Consistent with the evidence introduced at trial, as well as

the jury’s verdict, the trustee is entitled to judgment on his

claim that Christina Brown, both individually and in her capacity

as trustee of the First Marcus Trust, was unjustly enriched at

the expense of Simply Media. Specifically, the evidence

overwhelmingly demonstrates that, in her personal capacity,

Christina was unjustly enriched in the amount of $871,613.76 and,

in her capacity as trustee of First Marcus Trust, she was

unjustly enriched in the amount of $231,894.84. Simply Media is

entitled to restitution of the full amount ($1,103,508.60).

Moreover, in addition to restitution, Simply Media is also

entitled to the benefit of a constructive trust upon the assets

of the First Marcus Trust, in the amount of $231,894.84. But,

the trustee has failed to meet his burden of proof and has not

established that he is entitled to an order compelling Christina,

as trustee of the First Marcus Trust, to convey a one hundred

percent interest in the Lincoln Residence to Deaver.

The foregoing, together with the prior opinions and orders

issued by the court in this case, shall constitute the findings

of fact and conclusions of law required by Rule 52 of the Federal

Rules of Civil Procedure. See Applewood Landscape & Nursery C o .

v . Hollingsworth, 884 F.2d 1502, 1503 (1st Cir. 1989) (quoting

7 Morgan v . Kerrigan, 509 F.2d 5 8 0 , 588 n.14 (1st Cir. 1974));

Kelley v . Everglades Drainage Dist., 319 U.S. 415, 422 (1943)

(per curiam). If either party believes that additional specific

findings of fact and conclusions of law would be helpful or are

necessary, a written request for (a limited number o f , and

specific) additional findings and conclusions may be filed within

ten (10) days of the date of this Order. Any other requests for

findings of fact or rulings of law not expressly or implicitly

granted in the body of this opinion are hereby denied.

The clerk shall enter an amended judgment reflecting the

court’s resolution of the issues tried to the bench.

SO ORDERED.

Steven J. ____ cAuliffe Chief Judge

November 20, 2008

cc: Bruce A. Harwood, Esq. Stephen F. Gordon, Esq. Todd B. Gordon, Esq. Andrew G. Bronson, Esq. James V. Tabner, Esq. Douglas A. Grauel, Esq. Geraldine L. Karonis, Esq. Dudley C. Goar, pro se Middlesex Savings Bank, pro se Angelika Thumm, pro se Katherine San Filippo, pro se