“Unjust enrichment may exist when an individual receives a benefit as a result of his wrongful acts, or when he innocently receives a benefit and passively accepts it.”
How later courts described this case
- “Unjust enrichment may exist when an individual receives a benefit as a result of his wrongful acts, or when he innocently receives a benefit and passively accepts it.”
Written by the judges who cited it.
The opinion
Notinger v . Brown, et a l . 08-CV-005-SM 11/20/08
UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Steven M . Notinger, Trustee
in Bankruptcy of David Deaver Brown
and Simply Media, Inc.,
Plaintiff
v. Civil N o . 08-cv-05-SM
Opinion N o . 2008 DNH 202
Christina Brown, individually and as
Trustee of First Marcus Trust,
Defendant
O R D E R
This case arises out of the bankruptcies of Simply Media,
Inc. and David Deaver Brown. The trustee in bankruptcy became
convinced that Christina Brown (wife of the debtor, Deaver Brown)
had improperly diverted Simply Media’s assets to her personal
use, so filed suit seeking to recover those assets for the
benefit of the estate. Two of the trustee’s original claims were
tried to a jury. In the first, the trustee asserted that
Christina Brown, both individually and in her capacity as trustee
of the First Marcus Trust (title holder of her residence in
Lincoln, Massachusetts), fraudulently transferred assets of the
debtor in bankruptcy (Simply Media) and diverted them to personal
use. In the second, the trustee claimed Christina Brown
participated in a civil conspiracy whose unlawful object was to
transfer money out of Simply Media in order to hinder, delay, or
defraud its creditors.
Following a four day trial, the jury returned a verdict in
favor of the trustee and awarded damages as follows:
Count one (fraudulent transfer)
Christina Brown, individually: $ 871,613.76
Christina Brown, as trustee: $ 231,894.84
Count Two (civil conspiracy)
Christina Brown: $2,968,071.00
Jury Verdict Form (document n o . 6 8 ) . Defendants moved for
remittitur, which the court granted as to the civil conspiracy
count. Notinger v . Brown, 2008 DNH 188 (D.N.H. Oct. 6, 2008).
Subsequently, rather than proceed to a re-trial limited to the
issue of damages on his civil conspiracy claim, the trustee
accepted a reduced damages award in the amount of $1,648,000 on
that count.
Some issues were tried to the court: the trustee’s claim
seeking to impose a constructive trust upon Christina’s residence
in Lincoln, Massachusetts (the “Lincoln Residence”) or to obtain
turnover of that property, and his claim that Christina was
unjustly enriched by virtue of her conversion, to personal use,
of Simply Media’s assets. Prior to trial the court noted that a
jury verdict in the trustee’s favor would likely render his
bench-tried claims unnecessary, and it seemed the trustee agreed.
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Counsel to the trustee has made inquiry of the clerk, however,
regarding the status of those claims, so it appears the trustee
expects a resolution — adding bungy cords to the belt and
suspenders already in hand.
Discussion
I. Unjust Enrichment and Constructive Trust.
As the New Hampshire Supreme Court has recognized, the
doctrine of unjust enrichment provides that “one shall not be
allowed to profit or enrich himself at the expense of another
contrary to equity.” American Univ. v . Forbes, 88 N.H. 1 7 , 19
(1936). See also Petrie-Clemons v . Butterfield, 122 N.H. 1 2 0 ,
127 (1982) (“Unjust enrichment may exist when an individual
receives a benefit as a result of his wrongful acts, or when he
innocently receives a benefit and passively accepts it.”) (citing
Nute v . Blaisdell, 117 N.H. 2 2 8 , 232 (1977)). Here, as the court
has previously held, the evidence introduced at trial amply
supported the jury’s conclusion that Christina Brown fraudulently
diverted assets of Simply Media from corporate to personal use.
To the extent she did s o , both she and the First Marcus Trust
were plainly unjustly enriched at Simply Media’s expense.
Consistent with the jury’s verdict, the court concludes,
based on the overwhelming evidence presented, that Christina
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Brown, in her personal capacity, was unjustly enriched in the
amount of $871,613.76 and Simply Media is entitled to restitution
of the same. See, e.g., Kowalski v . Cedars of Portsmouth Condo.
Ass’n, 146 N.H. 1 3 0 , 133 (2001) (“A trial court may require an
individual to make restitution for unjust enrichment if he has
received a benefit which would be unconscionable for him to
retain. To entitle one to restitution, it must be shown that
there was unjust enrichment either through wrongful acts or
passive acceptance of a benefit that would be unconscionable to
retain.”) (citations and internal punctuation omitted).
The court also concludes, based upon the overwhelming
evidence presented, that Christina Brown, in her capacity as
trustee of the First Marcus Trust, was unjustly enriched in the
amount of $231,894.84.
In addition to restitution in that amount, Simply Media says
it is also entitled to the benefit of a constructive trust upon
the assets of the First Marcus Trust. As to the imposition of a
constructive trust, the New Hampshire Supreme Court has held that
it is warranted when:
clear and convincing evidence demonstrates a
confidential relationship existed between two people,
that one of them transferred property to the other, and
that the person receiving the property would be
unjustly enriched by retaining the property, regardless
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of whether the person obtained the property honestly.
A confidential relationship exists if there is evidence
of a family or other personal relationship in which one
person justifiably believes that the other will act in
his or her interest. A person may be unjustly enriched
if he or she obtains title to property by fraud,
duress, or undue influence, or violates a duty that
arises out of a fiduciary relation to another.
Cadle C o . v . Bourgeois, 149 N.H. 4 1 0 , 419-420 (2003) (citations
omitted). Here, it is plain that the First Marcus Trust was
unjustly enriched (at Simply Media’s expense) as a result of
Christina Brown’s fraudulent conduct. Among other things, the
trustee demonstrated that Christina Brown wrongfully used Simply
Media’s assets to pay the mortgage loan secured by the Lincoln
Residence, to maintain and repair the Lincoln Residence, and to
pay utility bills associated with that property. He also
demonstrated that, by virtue of her positions at Simply Media and
her access to the corporation’s checking accounts, a
“confidential relationship” existed between the two. Simply
Media i s , then, entitled to the imposition of a constructive
trust on the assets of the First Marcus Trust in the amount of
$231,894.84.
II. Turnover of the Lincoln Residence.
Finally, the trustee seeks an order compelling the turnover
of the Lincoln Residence to the estate of Deaver Brown, asserting
that:
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Deaver Brown has retained a secret interest i n , and
exercised complete dominion and control over, the Brown
Lincoln Residence and, therefore, equity requires the
Court to find that Deaver Brown’s bankruptcy estate
holds a one hundred percent equitable interest in the
Brown Lincoln Residence via a constructive trust and
such equitable interest shall be turned over to the
Plaintiff.
Plaintiffs’ Memorandum (document n o . 96) at 3 (emphasis
supplied). The court disagrees. The evidence introduced at
trial was insufficient to demonstrate that Deaver Brown retained
a secret, controlling interest in the Lincoln Residence
sufficient to warrant an order compelling Christina (as trustee)
to convey a one hundred percent interest in that property to him
(so it might be included in his bankruptcy estate). Moreover,
the trustee’s current position on this issue is at odds with the
one he adopted in the related case involving the Browns’ property
in New Hampshire. See Brown v . Reifler, 2008 DNH 195 (D.N.H.
Oct. 2 3 , 2008). In that case, the trustee sought to establish
that property in New Hampshire should be included in Deaver’s
bankruptcy estate. As part of that case, the trustee pointed out
that Deaver had little contact with, or interest i n , the Lincoln
Residence and that Christina, rather than h e , used it as a
primary residence. Instead, said the trustee, Deaver’s primary
residence was in New Hampshire. In any event, the trustee failed
to meet his burden of persuasion on that issue in this case.
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Conclusion
Consistent with the evidence introduced at trial, as well as
the jury’s verdict, the trustee is entitled to judgment on his
claim that Christina Brown, both individually and in her capacity
as trustee of the First Marcus Trust, was unjustly enriched at
the expense of Simply Media. Specifically, the evidence
overwhelmingly demonstrates that, in her personal capacity,
Christina was unjustly enriched in the amount of $871,613.76 and,
in her capacity as trustee of First Marcus Trust, she was
unjustly enriched in the amount of $231,894.84. Simply Media is
entitled to restitution of the full amount ($1,103,508.60).
Moreover, in addition to restitution, Simply Media is also
entitled to the benefit of a constructive trust upon the assets
of the First Marcus Trust, in the amount of $231,894.84. But,
the trustee has failed to meet his burden of proof and has not
established that he is entitled to an order compelling Christina,
as trustee of the First Marcus Trust, to convey a one hundred
percent interest in the Lincoln Residence to Deaver.
The foregoing, together with the prior opinions and orders
issued by the court in this case, shall constitute the findings
of fact and conclusions of law required by Rule 52 of the Federal
Rules of Civil Procedure. See Applewood Landscape & Nursery C o .
v . Hollingsworth, 884 F.2d 1502, 1503 (1st Cir. 1989) (quoting
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Morgan v . Kerrigan, 509 F.2d 5 8 0 , 588 n.14 (1st Cir. 1974));
Kelley v . Everglades Drainage Dist., 319 U.S. 415, 422 (1943)
(per curiam). If either party believes that additional specific
findings of fact and conclusions of law would be helpful or are
necessary, a written request for (a limited number o f , and
specific) additional findings and conclusions may be filed within
ten (10) days of the date of this Order. Any other requests for
findings of fact or rulings of law not expressly or implicitly
granted in the body of this opinion are hereby denied.
The clerk shall enter an amended judgment reflecting the
court’s resolution of the issues tried to the bench.
SO ORDERED.
Steven J. ____ cAuliffe
Chief Judge
November 20, 2008
cc: Bruce A. Harwood, Esq.
Stephen F. Gordon, Esq.
Todd B. Gordon, Esq.
Andrew G. Bronson, Esq.
James V. Tabner, Esq.
Douglas A. Grauel, Esq.
Geraldine L. Karonis, Esq.
Dudley C. Goar, pro se
Middlesex Savings Bank, pro se
Angelika Thumm, pro se
Katherine San Filippo, pro se
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