The plaintiff in the civil action below, having prevailed on the merits of his claims in Superior Court, appealed the form of the judgment ordered by the trial judge with respect to the remedies granted against certain relief defendants
1. Background. This case arises out of a thirty-year-old art theft in Berkshire County and the plaintiff’s eventual recovery of seven stolen paintings from the defendant, Robert M. Mardiro-
The case before us arises not from this criminal prosecution, but from civil claims brought by the victim of the theft, Michael Bakwin, against Mardirosian in Superior Court while the criminal proceedings against Mardirosian were pending. Bakwin sued Mardirosian for fraud and conversion in order to recoup over $3.4 million he had spent in his efforts to recover the stolen paintings.
Following a six-day jury trial on the civil claims, the jury returned a special verdict finding Robert Mardirosian liable for conversion and awarding more than $3 million in damages to Bakwin. The jury further found that Robert Mardirosian had made seven transfers that were fraudulent within the meaning of the UFTA. See G. L. c. 109A, §§ 5 (a), 6 (a). After two lengthy hearings on the form of the judgment to be entered on the jury’s verdict against Robert
Bakwin appeals the form of the judgment entered against the relief defendants on the grounds that money judgments should have been ordered against each of them rather than the equitable remedy of reconveyance, or in the case of the trust funds
2. The Falmouth residence. On March 13, 2006, soon after Robert had been revealed publicly as holder of the stolen paintings, Robert and his wife, Madeline, together executed a deed transferring title of their home in Falmouth to Madeline’s name alone. Robert and Madeline had purchased the home in 2004 for $1.05 million and taken title as tenants by the entirety. The March, 2006, transfer to Madeline was made for only nominal consideration. The jury found that this constituted a fraudulent transfer of Robert’s one-half interest in the home, and the jury valued his interest at $531,300. Consequently, as equitable relief from this fraudulent transfer, the judge ordered that the transfer be avoided and that the house be restored to its pre-transfer status with title held by both Robert and Madeline as tenants by the entirety. The judge further ordered that Robert’s interest in the home be subject to attachment by Bakwin in satisfaction of the money judgment against Robert. Bakwin appeals the form of this judgment, arguing that the judge erred in ordering a reconveyance of the property rather than a money judgment against Madeline. We conclude that the form of the judgment ordered by the judge as to the Falmouth residence was not error.
The UFTA provides several equitable remedies for creditors, including avoidance of a fraudulent transfer to the extent necessary to satisfy a creditor’s claim. G. L. c. 109A, § 8 (a). Additionally, to the extent a transfer is voidable under § 8 (a) (1) of the statute, a creditor may recover a money judgment against the recipient of the fraudulently transferred asset, subject to adjustment of the value “as the equities may require.” G. L. c. 109A, § 9 (b), (c).
Bakwin argues that the judge erred by ordering a judgment
Additionally, Bakwin argues that reconveyance of the property weighs against equitable principles and public policy because reconveyance benefits Robert and Madeline and “equity will not aid a wrongdoer.” Specifically, Bakwin argues that Robert and Madeline voluntarily severed their tenancy by the entirety through their transfer of the Falmouth property to Madeline alone. Therefore, they relinquished the protections afforded to the nondebtor spouse in a tenancy by the entirety and should not receive the benefit of a reconveyance of the property to its pretransfer status. Bakwin also contends that by failing to order a money judgment against Madeline, the judge denied Bakwin creditor status as to Madeline and thereby prevented him from executing on the judgment against the Falmouth home, which in turn deprived him of his statutory remedy and frustrated the
None of these arguments is availing. The UFTA, by its terms, provides for a range of possible remedies and forms of judgment to be entered against a fraudulent transferor or transferee in order to aid a creditor in obtaining repayment of a debt. G. L. c. 109A, § 8. None of these remedies is mandatory, and the statute commits the form of the judgment to the discretion of the trial judge. G. L. c. 109A, § 8 (a). Rivera v. Club Caravan, Inc.,
Indeed, other jurisdictions that have adopted and applied the UFTA have held that money damages are generally an appropriate form of judgment against a transferee only when the transferee has disposed of the asset transferred. See United States v. Ver-duchi,
Equity generally regards as done that which ought to be done. Matter of Bergman,
Furthermore, although Bakwin argues that Robert and Madeline voluntarily severed their tenancy by the entirety by deed, the jury were not asked to, and did not find, that Madeline shared Robert’s intent to defraud his creditors when she received the transfer.
Finally, we acknowledge that some Federal courts interpreting other States’ fraudulent transfer acts in light of the Federal Bankruptcy Code have declined to restore fraudulently transferred property to its pretransfer status. See, e.g., In re Young,
First, the rationale is based in part on the text of the Federal Bankruptcy Code, which is not relevant in a case based purely on State fraudulent transfer law. See, e.g., Tavenner v. Smoot,
3. Citizens Bank certificate of deposit and savings account.
Prior to the deposit of a portion of the proceeds from the CD, the savings account contained a total of $121,798. Therefore, following the deposit of the proceeds from the CD, the savings account held a total of $435,968. Four days later, on February 10, $60,000 was withdrawn from the account. On that same day, Robert and Madeline’s daughter, Andrea (Mardirosian) Barber, deposited $60,000 into a bank account held in the name of her husband, David Barber. Subsequently, prior to trial, but almost two years after the funds from the CD had been withdrawn and a portion of the proceeds transferred to the savings account, Bakwin obtained a trustee attachment on the savings account. The amount reported in the trustee’s answer as present in the account at the time of attachment was $339,599.
Based on these facts, the jury found that Robert fraudulently had transferred to Madeline his one-half interest in the CD in
The judge accepted all these findings and ordered a judgment against Madeline requiring her to remit Robert’s one-half interest in the savings account. Bakwin appeals the form of the judgment entered on the savings account on the basis that the judgment requires Madeline to remit at most one-half of the amount in the account at the time of the tmstee attachment, yet the jury found that Robert transferred to Madeline his one-half interest in the CD and his one-half interest in the savings account totaling $347,367. Bakwin contends that the UFTA entitles him to a money judgment against Madeline for the value of the assets transferred at the time they were transferred to her, such that the judge should have ordered a money judgment against Madeline for $347,367. We conclude that the judgment with respect to the portion of the savings account available to Bak-win was proper. However, we also conclude that judgment must enter not against Madeline, but against Robert.
Although the UFTA does permit money judgments against fraudulent transferees, such judgments are only one available remedy. G. L. c. 109A, §§ 8, 9. The statute makes a full range of equitable remedies available to plaintiffs and commits the
In limiting relief to one-half of the value of the savings account, the judge recognized Madeline’s one-half interest in both the CD and the savings account. The law regarding joint accounts in Massachusetts is well settled. See Astravas v. Petronis,
Evidence presented at trial indicated that at all relevant times, both the CD and the savings account were held in both Robert’s and Madeline’s names. Although Madeline testified at trial that the money used to purchase the CD was Robert’s and that he controlled the account, this testimony alone is not enough to rebut the presumption that by opening the account in both his and Madeline’s names, Robert had the intent to grant Madeline an interest in the account. Furthermore, evidence presented at trial indicated that most all of the couple’s other property, including their previous and current marital residences, as well as the savings account and a brokerage account held by Citizens Investment Services, was owned jointly by both Robert and Madeline and that the couple’s financial resources were used and enjoyed by both of them.
Further, at trial, the plaintiff emphasized that he did not seek to reach any assets that rightfully belonged to the relief defendants prior to Robert’s fraudulent transfers to them. Therefore, the judge acted within his discretion in fashioning an equitable remedy that protected Madeline’s one-half interest in the CD and the savings account prior to any of the transfers at issue.
Although we agree that Bakwin is entitled to reach only one-half of the amount in the savings account at the time of the trustee attachment, we do not agree that judgment should enter against Madeline with respect to this account. The jury’s finding that Robert fraudulently transferred his original one-half interest in the joint savings account to Madeline, valued at $60,899, is not supported by the evidence and is contrary to law.
Under the UFTA, a transfer is defined as “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance.” G. L. c. 109A, § 2. No evidence was presented to the jury that Robert withdrew his one-half of the savings account, relinquished control of it, or changed title in the account at any point between Bakwin discovering his
We therefore remand this case for entry of a judgment permitting Bakwin to recover from Robert, rather than Madeline, Robert’s one-half interest in the savings account. This does not change the amount of the judgment ordered by the trial judge with respect to the savings account, only the form of the judgment. This judgment will then permit Bakwin to make a motion to charge the trustee for one-half of the contents of the savings account based on the value of the account at the time of attachment. Arthur D. Little, Inc. v. East Cambridge Sav. Bank,
4. Citizens Investment Services brokerage account. In March, 2006, approximately one month after Robert’s possession of the paintings was revealed publicly, Robert transferred title in a Citizens Investment Services account (brokerage account), which he and Madeline had owned as joint tenants, to Madeline’s name alone. Robert and Madeline had opened the account with proceeds from the sale of their previous residence, a home they
Approximately four months later, in April 2008, Bakwin filed an ex parte motion to attach Robert’s one-half interest in the brokerage account. In his motion, Bakwin contended that the value of Robert’s interest was $351,926, which is one-half of the value of the brokerage account immediately prior to Madeline’s transfer of the account to the MMM Family Trust. The court authorized the attachment by trustee process in the amount of $351,926, also in April, 2008.
Bakwin sued David Barber in his capacity as trustee of the
Based on the jury’s verdict, the judge ordered entry of judgment against David Barber as trustee of the MMM Family Trust for $268,919 of the brokerage account, “subject to the proportional changes due to the market activities in the value of the account from [the date of the original transfer from Robert to Madeline] to the date of judgment.” Based on the hearings on the form of the judgment, the judge’s rationale for fashioning the remedy with the caveat regarding changes in market value appears to have been intended to acknowledge that one-half of the funds in the brokerage account have always belonged to
Bakwin appeals this judgment, arguing that the court should have ordered a money judgment against both Madeline and the trust (to be recovered only once).
We conclude that the judgment ordered regarding the brokerage account was not error because it protects Madeline’s original one-half interest in the brokerage account, which was not the subject of a fraudulent transfer and likely would not have been reachable by a creditor of her husband in any event. See G. L. c. 246, § 28A, as amended by St. 1975, c. 377, § 133; Doucette,
The UFTA permits the exercise of discretion by trial judges in selecting equitable remedies and fashioning relief as the
Furthermore, although case law from other jurisdictions interpreting the UFTA has permitted money judgments to be entered against fraudulent transferees, such judgments typically have been preserved for circumstances in which the asset is no longer available due to the transferees’ dissipation of it. See Verduchi,
5. Mardirosian Riverside Trust. Prior to 2007, Robert and his son David each held an interest in the Mardirosian Riverside Trust (Riverside Trust). Beginning in the late 1990s or early
According to the 2005 and 2006 tax filings of both Robert and David, each held a fifty per cent interest in the Riverside Trust. However, according to David’s testimony, his father never asserted any rights over the property, nor did he receive income from the trust or attempt to control the use or disposition of the trust property.
Robert and David’s 2007 tax filings evinced a change in ownership of the Riverside Trust, however, listing Robert as owning no interest in the trust and David as owning one hundred per cent. Also during 2007, David sold the property held by the trust. The 2007 tax filings for the trust therefore listed cash distributions from the trust totaling $573,460. The 2007 tax filings indicated that Robert received a distribution from the trust of $138,696 and David received a distribution of $434,764.
According to David’s testimony, however, Robert did not receive any of the proceeds of the sale of the Riverside Trust property. Additionally, based on the evidence presented at trial, a portion of the proceeds from the sale of the property was used to pay off one of the mortgages on the property, which David had obtained to generate funds for the restaurant, and the jury were presented with conflicting testimony as to what became of the remainder. Either it was held in escrow by the bank indefinitely, or David transferred the remaining proceeds of the sale to his corporation, Pasha, Inc., which owned and operated his Providence restaurant venture. In any event, there was no evidence that any portion of the proceeds went to Robert or that he received any consideration from David in exchange for his interest in the trust. Additionally, only a portion of the distributions listed on the 2007 tax filings, if any, were actually received by David. Furthermore, the Providence restaurant eventually failed, and Pasha, Inc., declared bankruptcy.
At the hearing on the judgment, Bakwin asked that a money judgment be ordered against David as a fraudulent transferee of Robert’s one-half interest in the Riverside Trust. The judge reasoned, however, that because David had dissipated all of the trust’s assets by investing them in his failed restaurant venture, no interest in the trust remained to be reconveyed to Robert. Therefore, the judge concluded that no remedy was available to Bakwin regarding the fraudulent transfer of the interest in the trust, and the judge ordered that the claim against David as to the trust be dismissed. This judgment was error, and we reverse.
In addition to equitable remedies, the UFTA expressly permits the entry of money judgments against recipients of a fraudulent transfer who do not take in good faith and for reasonably equivalent value. G. L. c. 109A, § 9 (a), (b). Indeed, other jurisdictions that have adopted the UFTA have concluded that money judgments against fraudulent transferees are particularly warranted in circumstances in which the transferee has dissipated the asset. See Verduchi,
Consequently, where entry of a money judgment against David was an available remedy under the UFTA, the judge erred in concluding that the Bakwin’s claim against David as a relief defendant must be dismissed. See G. L. c. 109A, § 9 (b) (2). Furthermore, because the fraudulently transferred interest in the trust was dissipated by David in furtherance of his restaurant venture, a money judgment is the most appropriate form of relief to be entered on the jury’s verdict on this claim. See Verduchi, supra; Scholes, supra.
However, G. L. c. 109A, § 9 (c), also provides that the value of a money judgment shall be subject to adjustment as the equities may require. Therefore, on remand, the judge may exercise his discretion in determining the precise value of the money judgment. See Cavadi,
6. Conclusion. The judgment with respect to the Falmouth residence is affirmed. The judgment with respect to the Citizens Bank savings account is reversed and remanded for entry of judgment against Robert Mardirosian. The judgment with respect to the Citizens Investment Services brokerage account is affirmed. The judgment against David Mardirosian with respect to the Mardirosian Riverside Trust is reversed, and the case is remanded for entry of a money judgment against David Mardiro-sian in the amount of the value of the asset at the time of transfer subject to adjustment as the equities may require.
So ordered.
Notes
The term “relief defendant” has been employed by Federal courts in cases involving civil securities law enforcement actions. See, e.g., Securities & Exch. Comm’n v. Cavanagh,
Robert Mardirosian had represented David Colvin in an unrelated criminal case following the theft of the paintings in 1978. United States v. Mardirosian,
The bulk of these costs was comprised of fees Bakwin paid to a London-based company, Art Loss Register (ALR), which assists in the retrieval of stolen art. ALR’s fees were based on their expenses as well as a percentage of the value of any art recovered. When ALR recovered the first of the seven stolen paintings, a work by Cézanne, the painting was worth approximately $28 million. Bakwin sold the painting because he did not have the resources to pay ALR’s fee and other expenses, which amounted to $2.6 million for the Cézanne. Bakwin later incurred additional costs associated with recovering four of the other paintings.
Under the Uniform Fraudulent Transfer Act (UFTA), G. L. c. 109A, a transfer by a debtor may be fraudulent as to a creditor if, among other things, the debtor made the transfer without receiving reasonably equivalent value and the debtor believed or reasonably should have believed that he would incur debts beyond his ability to pay as they became due. G. L. c. 109A, § 5. In re Rowanoak Corp.,
With the introduction of multiple family members with the same last name, we hereafter will refer to members of the Mardirosian family by their first names.
Bakwin does not appeal the money judgments that were ordered against relief defendants who received cash transfers, specifically the entry of a $30,000 money judgment against Andrea and David Barber (Robert’s daughter and son-in-law) and the entry of a $15,000 money judgment against David Mardirosian (Robert’s son).
Indeed, the judge stated during the hearings on the form of judgment that Bakwin’s theory of the case had been that Robert alone possessed the fraudulent intent to shield his assets from Bakwin.
We review the imposition of equitable remedies for an abuse of discretion. Cavadi v. DeYeso,
Following trial, the relief defendants David and Andrea Barber challenged this verdict in a motion for judgment notwithstanding the verdict on the basis that the jury’s finding was not supported by the evidence and represented an impermissible “compromise verdict.” See Simmons v. Fish,
We acknowledge that no party challenged either the characterization of the actions undertaken regarding these accounts as “transfers” or the jury’s verdict on these issues. Nonetheless, we cannot permit the entry of a judgment against Madeline that is not authorized by statute or justified by the record.
David Barber is an attorney. Based on his testimony and documentary evidence presented at trial, this $100,000 was distributed in large part to David Mardirosian, the son of Robert and Madeline, and to the business David owned at the time, Pasha, Inc.
Although neither Citizens Investment Services nor any of the relief defendants makes issue of this, corporate stock normally is attached prior to judgment by a bill to reach and apply, rather than by trustee process. G. L. c. 214, § 3 (7). Jordan v. Lavin,
The trustee therefore appears to have answered that the whole account
The UFTA permits the avoidance of a transfer in the hands of a subsequent transferee only if the transferee did not take the transfer in good faith and for value. G. L. c. 109A, § 9 (b) (2). Therefore, this finding was necessary to permit the judge to grant relief with respect to the brokerage account now in the possession of the MMM Family Trust and the trustee, David Barber.
The relief defendants imply that Bakwin waived any right to appeal this judgment on the basis that the parties agreed to, and in fact jointly drafted, the specific language of the judgment during the hearing on the form of judgment. We have reviewed the record of the hearings, and it is apparent that by the time the parties proposed this specific language, they did so to assist the judge with the wording of the judgment he intended to order, not because they necessarily agreed that the substance of the judgment was proper. Bakwin repeatedly argued in favor of the entry of a money judgment throughout the hearings, and we treat his rights as preserved on this point.
The withdrawal from the brokerage account subsequent to its transfer to the MMM Family Trust in the amount of $100,000 may constitute dissipation, however, and a money judgment may be warranted against David Mardirosian as a subsequent transferee. G. L. c. 109A, § 9 (b) (2).
Although we review a judge’s selection of a remedy under the UFTA for an abuse of discretion, here the judge’s determination that no remedy was available appeared to be based on a misapprehension of the UFTA and not an exercise of discretion in selecting the form of the judgment in light of the equities. When a judge concludes that a certain ruling is not within his or her power, when in fact it is discretionary, that is an error of law. Crenshaw v. Macklin,