102 A.3d 757
Me.2014Background
- KRZ (a Portland law firm) represented Raisin Memorial Trust in a foreclosure; unpaid fees accrued and KRZ withdrew. Raisin had earlier (without informing KRZ) transferred Bar Harbor property to Samsara (both trusts controlled by Fauna Stone).
- KRZ sued Raisin for unpaid fees and later added Samsara alleging the transfer was a fraudulent transfer under Maine’s Uniform Fraudulent Transfer Act (MFTA); KRZ recorded a lis pendens and sought attachment.
- Samsara sued KRZ (separate Superior Court action) for slander of title and tortious interference; procedural disputes followed (defaults set aside, dismissal for compulsory counterclaim, etc.).
- In the Cumberland Superior Court, after extensive discovery disputes and the trusts’ inadequate discovery responses/deposition (trusts’ designee lacked knowledge), the court entered defaults against Raisin and Samsara on KRZ’s fraudulent-transfer claim and held a damages hearing.
- The Superior Court awarded KRZ double the property value ($340,000) under 14 M.R.S. § 3578(1)(C)(3) and enjoined further transfers. The trusts appealed, also claiming judicial bias because the judge had a friendship with a former colleague now of counsel at KRZ.
Issues
| Issue | Plaintiff's Argument (Raisin/Samsara) | Defendant's Argument (KRZ) | Held |
|---|---|---|---|
| Whether judge should have recused/disclosed relationship with a former colleague now of counsel at KRZ | Failure to disclose/recuse required because friendship created appearance of partiality | No disqualifying conduct shown; relationship was ordinary collegiality and not disqualifying; issue was not raised timely | No obvious error; failure to timely raise recusal; friendship alone did not require recusal or disclosure |
| Whether § 3579(2) limits a first transferee’s liability to amount necessary to satisfy creditor’s claim | § 3579(2) limits Samsara’s liability to the amount needed to satisfy KRZ’s claim (not full asset value) | KRZ argued limitation applies only if creditor actually sought avoidance under § 3578(1)(A) | Court: § 3579(2) applies when the transfer is voidable; Samsara (first transferee) is limited to amount necessary to satisfy KRZ’s claim; award against Samsara vacated and remanded |
| Whether damages under § 3578(1)(C)(3) authorize awarding double the property value as the damages amount (i.e., $340,000) | Trusts: statute doesn’t authorize double-value award beyond creditor’s loss or equitable consideration; award improper | KRZ: statute allows damages up to double value; trial court acted within discretion to award double value given discovery misconduct | Court: § 3578(1)(C)(3) should be read as capping total recoverable damages at twice the asset’s value and intended to compensate creditor for claim plus costs from the fraudulent transfer; entry for Raisin vacated and remanded for recalculation of damages |
| Whether discovery defaults and sanctions were proper given trusts’ conduct in discovery | Trusts implied discovery issues were excusable or not warranting default | KRZ stressed pattern of delay, inadequate production, and evasive deposition designee warranted default | Court affirmed that defaults were warranted based on findings of willful, serious discovery violations; liability established by default (but damages recalculated per MFTA) |
Key Cases Cited
- Charette v. Charette, 60 A.3d 1264 (Me. 2013) (timeliness and forfeiture of recusal objections)
- In re Kaitlyn P., 12 A.3d 50 (Me. 2011) (motions for recusal must be timely)
- In re William S., 745 A.2d 991 (Me. 2000) (obvious-error standard when recusal not timely raised)
- MacCormick v. MacCormick, 513 A.2d 266 (Me. 1986) (motion for disqualification should come at earliest moment after knowledge)
- State v. Atwood, 988 A.2d 981 (Me. 2010) (mere belief a judge is partial is insufficient for recusal)
- Official Post Confirmation Comm. of Creditors Holding Unsecured Claims v. Markheim, 877 A.2d 155 (Me. 2005) (transfer is voidable under MFTA when proven fraudulent)
- McAlister v. Slosberg, 658 A.2d 658 (Me. 1995) (default established plaintiff’s factual allegations)
- Vance v. Speakman, 409 A.2d 1307 (Me. 1979) (statutory award of attorney’s fees requires clear legislative language)