Town of Freeport v. Island Rover Foundation

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss CIVIL ACTION . DOCKET NO. CV-17-58

TOWNOF FREEPORT,

Plaintiff

v. ORDER

Plaintiff-Wendy Paradis, Esq. ISLAND ROVER FOUNDATION, et al., Defendant Island Rover and Harold Arndt­ Twin Braden, Esq. Defendants Defendant Falls Point-David Silk, Esq. Defendant Becker-Jason Theobald, Esq.

.T his case is anoutgrowthof Town ofFreeport v. Island Rover Foundation, CV-14-28. In

that case a consent order was entered on September 2, 2014 dir~cting the Island Rover

Foundation (IRF) to perform its obligations under a consent agr(::ement reached with the Towri of ' . ·. ' : ·' '. . . .

.. < .Freeportto move an 89 or90-foo.t. steel schoonerto a site outside ofFreepmt orto a conforming ,• -. .

site under the Freeport zoning code by September 9, 2016. : - .·· : .·· . ·. . .. .: . : .· .

,The vessd was not moyed by the. deadline. That led to various proceed1ngs in CV-l 4'-28,

inch1ding a findingof contempt against the IRF on Jtme 26, 2917. Since then, proceeciings in .· -~ .• CV-14~28 have apparently stalled, in pa~t because of ~ertain transfers and encumbrances_ (or ..

· •. .what the Tmvn claims are purported transfers and encumbrances) which are the .subjectof this : .. ' '. '

action.

In its amended complaint in the easy at bar, the Town is seeking the following relief: (1) a

declaratory judgment that a s~curity interest in the vessel, a later transfer of a 75% ownership .. interest in the vessel, and a mortgage cm ce1iain real property ~ all grm1ted to defendant Carter

Becker.~ are subordinate to the rights of the Town; and (2) ' . ·. ' .. . : ·. . an order setting aside the transfers ... ·. .· : . .

and encumbrances : . in question and seeking monetary damages against Becker under the Uniform • , . • .. I

·Fraudulent Transfer Act.

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Named as defendants in the amended complaint are Becker and the IRF, along with Falls

Point Marine, Inc., a company of which defendant Becker is the President and 50% owner, and Harold Arndt, the founder and president ofIRF.

Before the court is a motion for summary judgm~nt by all defendants.

Summaiy Judgment

Sunnnary judgment should be gi.'anted if there is -no genuine dispute as to any material

fact and the movant is entitled to jud&ment'as a matter of faw... Ii1 considering a· motion for . .

smnniary judgment, the court is requi1·ed to consider only the portions _of the record referred to

and the material facts s~t forth in the parties' Rule 56(h)statements. E.g., _Johnsoii v. lvlcNeil,

2002 ME99 l8, 80.0 A.2d 702. -The facts m~st b,e ~onsideredjn the Hght most favorable to the

-.non-inoving party;-: Id. Tlms, forpuiposes of $Ulllll1aryjudgment,any factual disputes_must be res~lved against the n:lOvant. .· Moreover, in considering .a: ;motion for SUIDIIlary judgment, the .court .m~st give the·· nonmoving part), the fall :be~efit. ·of all .favon1ble inferences·_ tl1c1t _niay be ._·..·

d~avV~ from the evide~ce. Curtis v. Port~r, 2001 ME 581 9,]84 A..2d 18. . · ' : in this case the:~Olltt has conside1:e4thel40-para~r,aphstatement of material facts(SME)­

submitted by,defenda11ts_pursuant to Rule 56(h)(l), 1 JheTown's•responses. thereto,·ilie Town's­ _,' 36-paragraph $tateme11t of acklitional :~aterial fact~ pirr~i{atit to R{ile 56(h)(2), the defendants;

· reply_ statement of material _facts pursuanLJo- Rul~ 56(h)(3), and a response to certain of · · defendants' objections sub~itted by the .Town pt~suant to Rule :s 6(i). ·.

Defendants have n1ised yarfous objections to the . Town; s respQnses _to th~ · factual ·assertions in defendant's SMF as unsupported, and a number ofthose objections ~re weU~takeri.

:I Defendants' overlong SMF is an example (althcmgh not the worst the comt has seen) of what appears to . .be a· strategy of including, not just the facts· that the moving party contends are undisputed,. but also a · more expansive factual naiTativeidesign:ed to c~st the moving party's actions in ·the most sympathetic . light This strattgy makes motions fm; summary judgment v~stly more cumbersome and time-consuming _ . . and. is one of the problems with summary juclgment practice. No matter how symp11thetic the moving .. party's actions may be, summary judgment m1.1stbe den:ied ifthere are fachial disputes fodrial. . . .

However, other objections raised by defendants are hypeliechnical at best, and some come close

to hair-splitting.2 Summary judgment practice is technical enough already without adding any

additional technicalities or formalism.

On the Towrt' s part,. a number of its record citations are inaccurate · and its final

submission pursuant to Rule 56(i) goes beyond simply responding to the objections raised in

defendants' reply SMF and improperly includes a reiteration of its arguments in opposition to

summary judgment.

In acting. on the motion1 the court has disregarded the .factual assertions not properly supported and the objections and argument improperly raised.

. . . .l ~ Operati~e Facts·.··.

:Th~ issues with respect to both of the claims in the alTiended con1plaint are ,interrelated.-' ·under the,.SepteII1ber 2, '2014 Cori;ent .Order ,and the agfo~ments intorporated in thc:tt order, IRF

' . ' was:r~q~ired to movethe vessel oµtsicle thejm'isdictfon oftheJ'~wnor toa)ocation within t}ie..· ····Town conformh1g to the:Zoning Code .Oll or beforeSeptember 9, 2019.·.: .··

•.•. ·.·.• A~: partof the, Consent. Ord et a~d th~:incorpor'1te1 agreements IIZF was also. l'eqllired (1) ·.•.

. . t~ provide. to tlie rriediator; it~ be held in escrow, awarranty qeed ·. transfer(ing the. property. on .. : ....· ·.. ·,which the ves~el:was.locatedto theTo~,along;ith adeclarationofvali1e:~o ~h~deedcouldbe

focorded; and (2) to provide to th.e mediator, also to be held in escrow, a bill of s~le transfen-ing

the.vessel . t~ ..the iown. .. .· The.. war~anty . . deed . and the. biU ' . of sale ;e~e . ' to. be destrnyed .· . . ifIRF moved. ' '

. the vessel in :compliance with the consentorder but if not, were tq be deli~en':d to Jhe .Town. . . .· Carter Becker .and his company, defendant Falls f>oint Marine (FPM), p~rformed a·

considetable~ountof work on the vessel. Although. defe11~ts contend that it is undisputed

·that Becket anci JiPM were to be paid for all ~f tµat work, there fa evidence in the .record raising a •.... 2 By way ~fexample, defendarits object to ce11:ain: of the Town's responses. to specific p~ragraphs of .. defendants' SMF because the Town chose to reference so·me of its prior responses rather than: reiterating tho,$e responses again. · · · ·· · · ·

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d_isputed issue of fact as to whether at least some portion of Becker and FPM's work was donated

to the IRF for the Island Rover project. There were no written contracts covering_ any of the work

performed by Becker or ·FPM, and Becker acknowledged there were no repayment terms for the

_obligations he contends were owed by IRF to himself and to FPM .

In November 2015 a lawyer for Becker informed the Town that Becker was seeking security for labor and materials he had provided and raised the possibility that Arndt, as the

president· of IRF, -could provide Becker with a mortgage on -the propetty where the vessel was

being built. The lawyer's ·1etter referenced the consent decree and the deed that had been

d~livered in escrow and asked whether the Town would consent to such a mortgage. 3 The Town

dicl not consent.

On or about -April 2\2016 Arndt, as pi;esident of IRF, signed a document stating that

IRF granted·asecurity intere~t in··~schooner "whichsch9onerlsland_Royer Foundationowns"-·fo ­

: Falls ·Poh1f Ma~;ine for labor and nrnterials. On or about June 6, 2016 a UCC-1 financing .. ·state~ent wasfiled with"theSecretary o:f State... '

·.- _-_In:_Septemb6r"2016 ·(l· bill of sale was"Bigned_by.Harold Arµdtas "owner". transferring th~

-_vessel:to Cart~r Becker-~-~ the bilye/ This document ',\TM.dated-September' 5,}2Ql6 and was .. : nbtarized oh September 8,"_2016---, oheday -beforethebill of sale fo the Townthath~d peen ·. - . placed-ine~crowwas·d~~ tober~leased to theTowr1be~a~se ofIRF;s failure fomovetheves~eL _ .:

.F~n~lly, although the wmarity deed transfen-irig IRF;s property to the Town WliS _released .

whenJRF failed to move the v~ssel in compliance \\lith the_ Consent D~cree, theTown did not

rec~rclthat deed i~ediately. 4 When theTownrm~llJ'.!ecorded.the deed on December 2, 2016, -- - •- - .- it iearnecl th&t Be9ker had_recmdeda $250,000 mortgage o~ the property eat·lier that s~e day.

- 3 Both sides find some stipportfor Jheir argu~ents in the lawyer's letter. Defendants argue that it I .demonstrates that Becker expected to be paid for his worl<.; ·the Tpwn argues that it demonstrates that -- Becker was aware 9f the provisions ofthe Corisen~ Order. · · · · · ·

.4 Th~ Town has offered evidence that .one reason it did not pro:mptly record the deed was because tl~e accompanying declaration of value was· 1acking certain info1mation, that it contacted an atton1ey for IRF to resolve that issue·, and that itnever heard back.

Declaratory Judgment Sought by the Town in Count One

Contra1y to the position taken by defendants, there is a material factual dispute for trial as

to the ownership of the vessel. The 2014 Consent Order and incorporated agreenients are based

on the premise that IRF owned the vessel, and the bill of sale transferring the vessel to the.Town

of Freeport that was placed into escrow is signed by Harold Arndt as President of IRF. Arndt

then signed a document, as president of IRF, granting a security interest in the schooner ­

expressly described as owned by iRF - to Falls Point Marine. That security interest woi1ld be

\-Vmthless if IRF did not own the vessel. .. ' . ·.

If IRF owned th~ vessel, the sale of a 75% interest in the- vessel to Carter Becker by .· ' ·. . .

',• H~roktA.mdtas the purported "o~ner" would not have any legal effect. Inthat case the bill of

. ' sale to the.Town would 'determine the ·ownership of the vessel'. This remains an issue' for tri~l .on ·th~. i:' own' s ~laim for a eiec1~ratoryj11dgment.s . ·.·- · · ·.. . .• Defe~da:n.ts· ·argue that the Town's. memorandum · of la':" in opposition to. summary

' ·. judgment focuses all of its legal argume~ts on the fraudulen(transfer. claim and Jhereby, ' '

: apcording' to defendants,' concedes that defendants are·.:entided to SUh1n1ary judgmenfori the

._ declanitory j1.1dgmeht claim ... Whete the Tow.n's opposition arid. its Rule-56(h)(2)st8:tenient

affirmatively demonstrates thaf the validity. of Arndt' s bill of _sale to Becker. is -disputed,·. the

>Town ll~snot conc~d~d~hat issue. ·. .. .. : •··.·. · .. i . -. · .. · · . __ : .•. • ·.. ·.1,foreover, .defe~dants are the parties who ~e movi~g for summary judgrn.ent,· and a , .

factu~i dispute as to the ownership' of the vessel is 'evid.ent 'froni defendants' own· sub~issio~s'. .•. '

' . . . ·seer e.g., Defe~dant's sMF·in (referencing escrowedbill··of sale from ]RF trans;erdn~ the. vesseho the Town); ,r 94 (referencing a security interest in the vessel grafl:ted by IRF); ,r 1_07 .

(ref~~ericing biU ofsalefrom Arndt as owner).A movant whose o;n papel'sdo not demonstrate

.· 5 Alternatively, if Arridt own~d the vessel all al~ng, then the security_interest toFPM and the:mortgage to Becker, both granted by lRF, would potentially he called into question because Becl(e(s and FPM's work would then have been perfonned for Arndt rather than for IRR See 11 M.R.S; § 9-: 1203 (stating that value must be given for a security interest to be enforceable) '

that the movant is entitled to judgment based on undisputed facts is not entitled to summary

. judgment.

Defendants are correct, however, that the Town has conceded that the warranty deed to

certain. real property that the Town received from IRF and filed on December 2, 2016 is

subordinate, as a matter of real estate law, to the $250,000 mortgage filed by Becker earlier that

-same day. See Defendants' SMF 1119 and Town's response thereto. That concession, however,

is subject to the Town claim for relief setting the mortgage aside as a fraudulent transfer.

Town's Fraudulent Transfer Claim in Count Two

.... Under the Uniform Fraudulent Transfer Act, 14 M.R.S. § 3575(1)(A), a transfer is

· ··fi'.aii.dulent as to a creditor and may be avoided undei' § 3578{1)(.A.) if the debtor made the transfer .

·.: .with ac:tual intent to. hinder, delay, .. .' ·.· ' or defraud any creditoL Afra11dulent transfe{· must be pr~ybll . . .. . ·: '.. . ··:

·' bydear and convincing evidence. Jvforin v. Dubois, 1998 ME 160, 3, 7l3 A.2d 956, ·. ·•. ·In. this case· there. is sufficient evidence, based o~ the timing ·of the. tnins~ctions and on

', ·..•... ' defendants: seeminglrshifting positions with tespect t~ the ownership ?f the vessel, from which

'. a trier ~f fact co~ld find by' dear and convinci~g evidence that all of the disputed transfers an,d '', -e~cumbranc~s in this case were made with actuaL~t~ntto 1inder, d:lay,or ~efraud the Town.

. Th~tissufficient to c:stablish that there ~re disputed issue~ for trial.~n co{mt two 9fthe.Town's .. <amended complaint .

· :This is particularly tr~e b~cat1se there is also evidence which raises a disputed •issue J~r

trial as to' whether Beckel', the recipient ·of two ofthe transfers and the president of FPM, wotrld

qualify asan "insider." Defenda~ts argue thatBecker d~esnot<meet the statut~ry definition of

insider, but the statutoryhst of insiders isnot exhaustive.See 14 M.R.S. § 3572(7) (definition of

--insider"includes .. ···;');,Huber v.- Williams, 2005 ME 40127 n.5, 869 A.2d 737("thestatut~ry

definition of 'insider' p;ovides an' inclusive, rnther than . an exclusive li~t . of 'insidersn').

Bankruptcy courts have held th~t an insider may be any person "wh~se relationship with the I

debtor is sufficiently close so as to subject the relationship to careful scrutiny." In re Craig Systems C01p., 244 B. R. 529, 539 (Banla. D. Ma. 2000) (collecting cases).

In this case Becker's own affidavit, as well as certain facts raised by the Town, raises a disputed issue of fact as to whether Becker would qualify as an insider. Becker had a multi-year

relationship with IRF and Arndt. He. provided office. space, attended board meetings, and

advocated on behalf of IRF before the Town and the court and with neighbors opposed to the

launching plan. Neither Becker nor his company ever had a written contract with IRF or Arndt. Becker paid real estate taxes and utility bills ·and permit fees for IRF. He personally purchased ' '

property. for the Island Rover launch site, and there is a document in the record whi~h states that

·..·the Island Rover Foundation granted Becker complete authority to speak for the IRF. ' . . . .

.···There are also disputed issues or' fact under section 3576(2) of the Uniform Fraudulent .. · ··Transfet .Act, .which applies to. transfers made toinsiders for antecedent debts at a time whenthe

debtor was insolv~nt and the insider had I'easonable cause to believe that the debtor was . insolvent. On' the issue of whether thete i~' a' factual. issue for·. trial as' tp whether Becker had ' ' .·· •.reasonable . . .- cause to believethat . ... ··. IRF was i~sohrent, .. ·. the co~rt does not ha.ve tolook beyond the·..•. . . . ·. .. . .. ·,. . . . . . . . .. ' .

statem~ntin Becker's affidavi(that he mf!dece1iain payments'for lRF because IRF di?.nothave ',

..·· ·~ the.mo~eYto mah~ those paym~nts.·Becker.Aff. ,r 36. ·.. ',• Defendants m-sue thatBecker is shielded by 14M.R.S'. § 3579(l), which provides:'a .'

.· ·defense to a transferee who '"took in 'good faith" and for a reasonable equivalent value. For the ...· reasons stat~d earlier, the ~ourt concludes there is a factual dispute for trial as to ;hether Becker

actedi~ good faith: There is alsoa factualdispute for.trial as to whether, even assuming Becker··

'actedi~ good .faith, the' security interests thathe and FPM received were fo~ .' . . .. areasonably ·. equivalentvalue.··.· . :··.·

·In conch1sion, the: co~rt is not suggesting that . . .· . . defendants ·. ·. .· .· . wiU be. unable to prevail at trial . ·_ .. ·.

on the :above issues. With the exception of the one issue that the Town ·has conceded, however,

.defendants have not demonstrated that there. are undisputed facts that entitle them to summary

judgment.

The entry shall be:

I. Defendants' motion for summary judgment is .granted with respect to plaintiff's declaratory judgment claim relating to whether the Town's deed· to certain real property is subordinate, as a matter of real estate law, to defendant Carter Becker's mortgage filed on December 2, 2016. ' '

·2. In all other respects defendants' motion for.summaryJudginent is denied. · J; The clerk is ·directed to incorporate this 9rder in the docket by reference pursmmt tb ·Rule 79(a). · ·· · ·· · - : ·. - .": .·. : ·. .· .·:.-···:

'Da~ed: December~, 2019

··.·.·.J~· .. Thomas D. Warren·.. ... . Justice, Superior Court· ·