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Storer v. Jacobs

Superior Court of Maine, Lincoln

May 21, 2019

SUSAN STORER Plaintiff,
v.
DEAN W. JACOBS and SARAH A. PLUMMER Defendants.

          JUDGMENT

          Daniel I. Billings, Justice.

         Trial was conducted in this matter on December 13, 2018. Plaintiff brought suit under the Uniform Fraudulent Transfer Act §§ 3571-3582 ("UFTA").

         BACKGROUND

         The following facts were established at trial: Defendant Dean Jacobs ("Dean") purchased land at 85 Old County Road in Damariscotta in 1990 and subsequently built a home there. 85 Old County Road ("Property" or "marital home") is the center of this dispute. Dean married Defendant Sarah Plummer ("Sarah") in 2000. The two of them treated the Property as their marital home and raised their two minor children there. The Property remained solely in Dean's name for thirteen or fourteen years. In September 2002 Dean bought shares of a pharmaceutical company from John Higgins ("John") and signed a promissory note for $1, 040, 000. Sarah was aware that Dean was purchasing a business from John, but was not aware of the purchase price. Sarah became aware of the purchase price sometime between 2010 and 2012. Through that time only interest payments were made towards the debt and nothing was paid towards the principal.

         In spring 2014/ Dean told Sarah that John said he was going to sue him for the debt owed. Sarah was upset because of how that would affect the family. In September 2014, Sarah asked Dean to transfer a one-half interest of the Property to her. She had not been aware that she had no legal interest in the home she had been contributing to and raising a family in with Dean. Dean testified credibly that this was a marital decision, and he felt it was the right thing to do as Sarah had been living there for so many years. Dean made this transfer and recorded it in the Registry of Deeds, Dean did not believe he was insolvent at this time and was generally paying the family's living expenses and other bills as they came due. Sarah did not pay any monetary value for the one-half interest.

         In May 2015, John and Dean entered into a settlement agreement in which Dean acknowledged that he owed John over $1.7 million. Sarah was generally aware of this agreement. Dean did not pay John all that was owed under the agreement. Dean paid John $100, 000 but nothing more.[1]

         Sometime in 2015, or the first half of 2016, Dean and Sarah's marriage deteriorated. In late June 2016 Sarah had filed a petition for judicial separation. In July 2016, they were still married but not living together in the marital home. Dean had moved out in the spring and was not welcome in the home. Sometime in July a sheriff came to the home to serve Dean with a lawsuit from John. This increased Sarah's concerns about maintaining the marital home for her minor children. In July 2016, at Sarah's request, Dean transferred his remaining one-half interest in the Property to Sarah and recorded it with the Registry of Deeds.[2] At the time of the transfer, Dean knew the marriage was uncertain but was hoping to save it and agreed to the transfer. Dean would have done anything at that point to save the marriage. Dean did not believe he was insolvent at this time and was generally paying his and the family's living expenses and other bills.

         Before the transfer in 2016, Dean lost his job and driving privileges due to personal issues. Dean had been the primary financial provider during the marriage[3] and he and Sarah had amassed various assets over the course of their marriage. These assets included a condo in Carrabassett Valley. Dean and Sarah owned three cars together with a net value of approximately $25/000. Marital personal property totaled roughly $50, 000.

         Dean also owned some separate real estate. Dean had inherited the home he was residing in separately from Sarah, owned two properties as a tenant in common with his sister, and owned a small lot that he inherited individually. Dean owned an inherited one-quarter interest in the Professional Building of Damariscotta, LLC.

         Dean also owned Jacobs LTC Pharmaceutical Holdings, LLC. That LLC did not operate a business, but instead owned one-quarter of another LLC, Guardian Pharmacy of Maine. Dean had owned shares in Guardian Pharmacy, but was bought out as part of a separation agreement for $1, 262 million on July 14, 2016.

         Dean also owned debts, including the debt to John and a home equity line of credit for just under $98, 000. Sarah had no debts to speak of and no significant assets other than the marital home that Dean transferred to her.

         On May 16, 2017, the District Court (Wiscasset, Raimondi, J.) granted the parties a judicial separation.[4] The Judgment of Judicial Separation incorporated a Marital Settlement Agreement ("MSA") of the same date executed by the parties. In its equitable division of the property, the court awarded Dean the non-marital real estate in his name, and Sarah the marital home at 85 Old County Road. The court determined that the remainder of the other property, assets, and debts had been equitably divided and allocated according to the MSA and adopted it. Specifically, the MSA addressed the marital debt owed by Dean to John's[5] estate, and the remaining funds totaling $830, 000 that were paid to Dean from Guardian Pharmacy LLC as a result of the buyout.

         The MSA required that the parties establish an escrow account to repay the debt to John's estate. It obligated $250, 000 to Sarah as her equitable share of the marital debt to John. Out of the $830, 000 in remaining funds, $165, 000 was set aside to Sarah as her separate property, and $250, 000 was set aside to the escrow account. The remaining funds were set aside to Dean as his separate property and a portion towards his share of the escrow account. On November 3, 2017, the District Court (Wiscasset, Martin, Mag.[6]) entered a Divorce Judgment.[7] A second MSA of even date was incorporated into the Judgment. The Property at 85 Old County Road was set aside to Sarah and the remaining property in Dean's name was set aside to him.

         DISCUSSION

         Two Counts of Plaintiff's Complaint are before this court.[8] Count I alleges that Dean's transfers of the Property to Sarah are both fraudulent under 14 M.R.S. § 3576(1), which provides that a transfer is fraudulent under the UFTA if the transfer is made without receiving a reasonably equivalent value in exchange for the transfer and the debtor was either insolvent at that time or became insolvent as a result of the transfer.[9] Count II alleges that both the transfers were made with "actual intent to hinder, delay or defraud" the Plaintiff as Dean's creditor. § 3575(1)(A). Alternatively, the Plaintiff alleges fraudulent transfers under section 3575(1)(B). Under that theory, Plaintiff first claims that Dean received no "reasonably equivalent value in exchange for the transfer" and Dean was engaged in a transaction for which his remaining assets were unreasonably small in relation to the transaction. Id. § 3575(1)(B)(1). Next, Plaintiff avers that Dean received nothing in exchange for the transfer, and that he intended, believed, or "reasonably should have believed that he would incur[] debts beyond his ability to pay as the debts became due." Id. § 3575(1)(B)(2). Because Plaintiff's claims under sections 3575(1)(B) and 3576(1) both involve whether Dean received reasonably equivalent value in exchange for the transfers, this court first addresses whether Dean made the transfer with an actual intent to defraud the Plaintiff.

         I. Did Dean Make the Transfers to Sarah with Actual Intent to Hinder, Delay, or Defraud the Plaintiff?

         A creditor challenging the validity of a transfer must prove by clear and convincing evidence that the conveyance was fraudulent. Morin v. Dubois, 1998 ME 160, ¶ 3, 713 A.2d 956. Because debtors are unlikely to admit an intent to defraud creditors, the UFTA provides a comprehensive, but not exclusive, list of factors for courts to consider in determining whether a transfer was made with the requisite intent. Id. ¶ 4. The factors to be considered are whether:

A. The transfer or obligation was to an insider;
B. The debtor retained possession or control of the property transferred after the transfer;
C. The transfer or obligation was disclosed or concealed;
D. Before the transfer was made or obligation was incurred, the debtor [was] sued or threatened with suit;
E. The transfer was of substantially all the debtor's assets;
F. The debtor absconded;
G. The debtor removed or concealed assets;
H. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
I. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
J. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
K. The debtor transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the debtor.

§3575(2).

         In the case at bar, this court determines that the Plaintiff has not proven, by clear and convincing evidence, that Dean made the transfers with the intent to hinder, defraud, or delay the Plaintiff. Although some of the factors to be considered weigh in the Plaintiff's favor, they are not overwhelming. Dean did make the transfer to an insider as Sarah was his wife at the time of the transfers, but it is clear to the court that this is not a sham separation and divorce. This is evidenced by Dean's credible testimony that he would have done anything to save his marriage. Moreover, Sarah is not the typical insider but rather a sort of hostile insider. This is shown by ...


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