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Powell v. Charles Dhyse Trust

Superior Court of Maine, Waldo

June 11, 2019

JOHN M. POWELL and KATHLEEN M. POWELL, Plaintiffs,
v.
CHARLES DHYSE TRUST, TEMPLE HEIGHTS MAINE LLC, FREDERICK G. DHYSE REVOCABLE TRUST, and ALAN TETERVIN, Defendants.

          DECISION AND JUDGMENT

          Robert E. Murray, Justice

          A trial on the pending Complaint was held before the Court on January 2 and 3, 2019. Following the trial, the parties filed written Closing Arguments and Reply memoranda for the Court's further consideration.

         PROCEDURAL BACKGROUND

         Plaintiffs John and Kathleen Powell filed a Complaint against a number of defendants in 2012 alleging violations of the Maine Uniform Fraudulent Transfer Act, 14 M.R.S. §§3571-3582 (2018) ("UFTA"). A default was entered against Charles Dhyse, the person at the center of this controversy, on May 7, 2013. Charles Dhyse thereafter sought to set aside the default, but this Court denied that motion on September 18, 2013. In the same order, the Court deferred ruling on a request for a default judgment made by Plaintiffs. The case proceeded along until it was removed to federal bankruptcy court on June 1, 2015. It remained there through December 29, 2016, when the federal bankruptcy court remanded it back to this Court. Thereafter, on February 22, 2017, the parties stipulated to the dismissal of Charles Dhyse as a defendant. Eventually, the case was set for a bench trial that was held on January 2 and 3, 2019.

         Attorney Susan Thiem represented Plaintiffs at trial; attorney Stephen Wade represented Defendants the Charles Dhyse Trust, the Frederick G. Dhyse Revocable Trust, and Temple Heights Maine LLC;[1] attorney Aaron Fethke represented Defendant Alan Tetervin, At the start of trial, the parties stipulated to the admission of Plaintiffs' Exhibits 1-16, 28-44, and 46-49. They further stipulated to the admission of the Trust Defendants' Exhibits 1-16, 19, 44-45, 51-53, and 56. The remainder of the exhibits admitted during the course of the trial are reflected in the recording log. Mark Powell, Ashley Landry, James Nealley, Ronald Recht, Charles Dhyse, and Alan Tetervin were called to testify by Plaintiffs. The Trust Defendants called Edward Collins to testify.

         FACTS

         These factual findings are made from the exhibits stipulated for admission, the exhibits admitted without objection, the exhibits admitted over objection, and the testimony of the witnesses that the Court found helpful and credible.

         This case involves a number of separate pieces of real estate in Northport, Maine. Plaintiffs seek to have three transfers of interests made by Charles Dhyse in two pieces of real estate declared to be fraudulent transfers. The first piece of real estate at issue in this case was acquired by Charles Dhyse in October 2004 (the "Stowers Property"). The second piece of real estate (the "Boathouse Property") is located along Rt. 1. Charles Dhyse acquired an interest in the Boathouse Property in February 1996. Plaintiffs attack subsequent transfers of these properties due to Charles Dhyse's default on a loan Plaintiffs had made to him (the "Powell Loan") in order to facilitate Charles Dhyse's purchase of other real estate in Northport. The Court will address each of the relevant pieces of property and associated transactions in turn.

         1. The Stowers Property,

         Charles Dhyse purchased the Stowers Property from Stanley Stowers on October 13, 2004. The purchase was financed by Camden National Bank ("CNB"), and CNB took back a mortgage on the Stowers Property in the amount of $ 157, 540. Charles Dhyse soon defaulted on his payments on the loan for the Stowers Property, and CNB obtained a judgment of foreclosure on June 5, 2006. The judgment of foreclosure reflects that Charles Dhyse owed CNB $ 130, 911 at that time. CNB swept Charles Dhyse's personal accounts and recovered approximately $40, 000.

         Following that, Charles Dhyse attended the foreclosure sale for the Stowers Property in late 2006 and, with his parents' trust's assistance, [2] he was the successful bidder. He attended the foreclosure auction at his parents' request because they were trying to help him out at a time of severe financial difficulty. The reacquisition of the Stowers Property was paid for by the Frederick Trust through its attorneys at the time, Kelly & Associates. The amount paid by Kelly & Associates was $105, 000. The Frederick Trust then took back a mortgage on the property for $105, 000 to secure that payment to Charles Dhyse to purchase the property.[3] CNB deeded the property to Charles Dhyse on December 5, 2006, and Charles Dhyse executed the aforementioned mortgage in the Frederick Trust's favor on January 19, 2007. Both the deed and the mortgage were recorded in the Waldo County Registry of Deeds on January 29, 2007. Despite reacquiring the Stowers Property from CNB, Charles Dhyse's financial issues persisted.

         Shortly after the sale back to Charles Dhyse, CNB obtained and recorded against all real property of Charles Dhyse's the following: (1) an ex parte order of attachment; (2) a deficiency order and judgment; and (3) a writ of execution. By the time the writ of execution was issued on January 19, 2007, the total amount owed to CNB by Charles Dhyse was more than $55, 000. Soon thereafter, Edward Collins, a Rockland-area attorney, became the Frederick Trust's attorney.

         Upon his hiring, Attorney Collins began investigating title encumbrances on the Stowers Property that might affect the Frederick Trust's mortgage on that property. Collins's investigation revealed a number of duly recorded liens against Charles Dhyse's property, including the Stowers Property. The liens against Charles Dhyse's property included Town of Northport real estate tax liens, State of Maine sales tax liens, the CNB execution lien, and a lien from a local lumber yard (Viking, Inc.). Attorney Collins discussed these vulnerabilities to the Frederick Trust's mortgage on the Stowers Property with Frederick and Suzanne. In those discussions, he laid out two possible paths. First, the Frederick Trust could walk away from its $105, 000 mortgage on the Stowers Property, Second, the Frederick Trust could clean up all the liens against Charles Dhyse's property and, in return, Charles would convey the property to an LLC to be formed to own the property. After consultation with Attorney Collins, Frederick and Suzanne chose the latter path.

         The Frederick Trust then commenced the plan to clean up the liens. Ail liens were eventually discharged or released after the Frederick Trust paid the amounts of the Kens, and the discharges and releases were recorded with the Waldo County Registry of Deeds. Payment was made to CNB for the mortgage deficiency in the amount of $51, 769.91. The Frederick Trust also paid $3, 633, 24 to the State of Maine for the sales tax liens, $2, 217.39 for the Town of Northport real estate tax liens, and $5, 705.39 Tor the Viking, Inc. execution lien.

         Then, in accordance with the plan, Attorney Collins formed an LLC for the purpose of holding the Stowers Property once Charles Dhyse transferred it following the satisfaction of the liens. An LLC was formed (Temple Heights Maine LLC) on May 8, 2007, and the membership units of the LLC were set to be wholly owned by Frederick and Suzanne Dhyse as trustees of the Frederick Trust. Thus, in consideration of satisfaction of the $105, 000 mortgage and the $63, 325.60 paid to clear the liens against Charles Dhyse's property held by his creditors, Charles Dhyse executed a deed for the Stowers Property to Temple Heights Maine LLC.[4], [5] At the time Charles Dhyse deeded the property to the LLC, it was encumbered by valid liens totaling more than $168, 000.[6] The deed was recorded with the Waldo County Registry of Deeds on May 14, 2007.[7]

         Both Frederick and Suzanne Dhyse passed away in 2008. Suzanne passed away on May 8, 2008, and Frederick passed away shortly thereafter on June 25, 2008. Upon their passing, a new trust came into existence. That trust was the Charles Dhyse Trust (CDT). The CDT inherited and now owns the membership interest in Temple Heights Maine LLC. Ronald Recht, an attorney in Maryland and Washington, D.C., is the co-trustee of the CDT with another individual who is an accountant [8], [9] Since Temple Heights Maine LLC became the owner of the Stowers Property it has paid approximately $2, 100 per year in real estate (axes and liability insurance. There is some evidence of work being done on the property hi the early part of the 2010s, but Attorney Recht was not aware of any work being done in the past several years. The Stowers Property was listed for sale in 2012 for $95, 000, with that price being at the recommendation of the listing broker. However, it received no interest from any buyers and was taken off the market when this lawsuit was commenced.

         2. The Boathouse Property.

         In 1996, Charles Dhyse decided he wanted to operate a boat business and he identified a location on Rt. 1 in Northport He had known Alan Tetervin[10] since the 1980s, and Charles Dhyse convinced Tetervin to purchase the location for Dhyse to run the boat business. Tetervin agreed to purchase the property for Dhyse to run his boat business.[11] As part of the purchase, the Boathouse Property was deeded to Tetervin and Dhyse as tenants in common. Because Tetervin was putting up all the money for the purchase, Tetervin and Dhyse entered into a co-tenancy agreement in 1996 that dictated the terms of the relationship regarding the property.[12] The co-tenancy agreement called for Tetervin to put up all the money for the purchase In the event the properly was sold, Tetervin would get his money back first (assuming it was sold for a profit). The agreement required Dhyse to operate his business and to pay the taxes on the property, If Dhyse were to fail in his obligations, title to the Boathouse Properly was to revert fully to Tetervin.

         Dhyse paid real estate taxes for several years, but Tetervin has been consistently making the tax payments on the property since approximately 2006.[13] Tetervin never worked at the Boathouse business and he never received any funds from any sales for Dhyse's Boathouse business. On March 27, 2009, Dhyse executed a quitclaim deed for the Boathouse Property releasing all of his ...


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