United States District Court, D. Maine
FINDINGS OF FACT AND CONCLUSIONS OF LAW
D. BROCK HORNBY, District Judge.
On April 10, 2014, Brentwood Investments, LLC filed this lawsuit against James G. Stanley, Jr. seeking to recover principal, interest, late payment charges, costs of collection, and attorney fees in connection with a Note that Stanley signed on January 27, 2011. Previously I denied the parties' cross-motions for summary judgment. I conducted a bench trial on September 22, 2015, and heard closing arguments on October 8, 2015. The following are my findings of fact and conclusions of law.
FINDINGS OF FACT
1. In 1987, James G. Stanley, Jr. began working for Michael Liberty and various entities through which Liberty conducted business. Stanley became chief financial officer and chief executive officer for several of the corporate entities that Liberty owned and was also responsible for several Liberty partnerships. In 2009, Stanley hired Robert Johnson as chief financial officer for various Liberty companies.
2. Michaael Liberty had no personal checking account. He used his various entities as well as his lawyers' client trust accounts as his source of funds not just for business purposes, but for personal expenses, needs, and desires as well. Financial employees for Liberty entities were required to do whatever Michael Liberty told them to do.
3. Often there were insufficient funds at a particular entity to make payroll or pay withholding taxes, insurance, or rent.
4. From time to time, Stanley and/or his wife advanced money to the Liberty entities or used their personal credit cards to maintain services (for example, providing a personal American Express card to Liberty's law firm and accounting firm to ensure continuing services).
5. The advances were not always documented with a Note.
6. The total amount due to the Stanleys decreased when the entities were able to repay them"for example, when the entities received management fees or had a "liquidity event" such as a refinancing.
7. In 2011, Stanley needed assistance in extricating himself from a condominium development deal that had not panned out as he had hoped.
8. Liberty personally offered to advance Stanley $300, 000, later reduced to $270, 000, to assist Stanley in making his peace with a bank lender.
9. Stanley wanted the amount to be credited against amounts Stanley had previously advanced to the Liberty entities, but Liberty insisted that Stanley sign a Note for this transaction, telling Stanley that Liberty in turn was borrowing the money and needed to demonstrate to his lender that there was security (in this case, an expected return to Stanley from an upcoming transaction involving Colorado real estate).
10. Accordingly, on January 27, 2011, Stanley signed a Note for $270, 000 to Brentwood Investments, LLC. By its terms, payment of the Note was due on February 28, 2011.
11. At the time, Brentwood Investments, LLC was a Florida limited liability company with its principal office in Portland, Maine. See Joint Ex. 20. Later, it converted to a Delaware limited liability company. See Pl. Ex. 9. Liberty was and is Brentwood's sole member and owner. As an LLC, Brentwood has no shareholders. Stanley has never been employed by Brentwood and never advanced money to Brentwood.
12. Liberty is one of Brentwood's two managers. The other is Brittany Abbass, who lives with Liberty. She performs the bookkeeping for Brentwood, but Liberty has the final say in how things are booked. Although Brentwood has a checking account, most of its business is transacted through Liberty's lawyers' client trust account.
13. Brentwood is an investment company that Liberty uses to invest in other companies and to pay personal expenses. Liberty runs most of his personal expenses through Brentwood, including the purchase of the Florida house in which he and Abbass live, and purchases of cars for himself, his children, Abbass, and her brother. When Brentwood pays for Liberty's personal expenses, it may treat the payment as a loan to Liberty or as a reduction of Liberty's equity in the company.
14. In exchange for the Brentwood Note, Stanley received a check for $270, 000 from Liberty's lawyers' client trust account. Abbass, the Brentwood manager and bookkeeper, "booked [the lawyers' trust] account like a bank account" on the Brentwood books. Def. Ex 7. She told Stanley and Johnson that the loan to Stanley "is on the [B]rentwood books unless you want that under AHPC, let me know." Id . AHPC stands for American Housing Preservation Corporation-another Liberty entity involved in Federal Housing Administration projects, of which Liberty is the sole shareholder. According to Johnson (AHPC's CFO), Liberty also uses AHPC to pay for personal expenses, including property maintenance, travel, and child support ...