Achille Bayart & CIE v. Crowe

• Decision Date: 06 October 2000
• Docket Number: No. 00-1302,00-1302
• Court: U.S. Court of Appeals — First Circuit
• Parties: (1st Cir. 2001) ACHILLE BAYART & CIE, Plaintiff, Appellant, v. BYRON A. and RUTH CROWE, Defendants, Appellees. Heard

Page 44

238 F.3d 44 (1st Cir. 2001)

ACHILLE BAYART & CIE, Plaintiff, Appellant, v. BYRON A. and RUTH CROWE, Defendants, Appellees.

No. 00-1302

United States Court of Appeals For the First Circuit

Heard October 6, 2000

Decided January 26, 2001

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MAINE. [Hon. Gene Carter, U.S. District Judge] Graydon G. Stevens, with whom U. Charles Remmel, II and Kelly, Remmel & Zimmerman were on brief, for appellants.

Robert J. Keach, with whom Michael A. Fagone and Bernstein, Shur, Sawyer & Nelson were on brief, for appellees.

Before Torruella, Chief Judge, Bownes, Senior Circuit Judge, and Boudin, Circuit Judge.

BOWNES, Senior Circuit Judge.

This is a fraudulent transfer action brought by the plaintiff-appellant, Achille Bayart & Cie ("Achille Bayart"), to recover the value of its debt plus double damages from the defendants-appellees, Byron and Ruth Crowe. The case was tried before a jury. At the conclusion of the plaintiff's case, the defendants moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(a). Finding the plaintiff's evidence insufficient to permit a jury to conclude that there was value in the assets of the defendants' corporation which were over and above the amount of its secured debt, which was the plaintiff's theory of the case, the district court granted the defendants' motion. The plaintiff appeals. For the reasons stated below, we affirm the district court.

1. BACKGROUND

Andrew Crowe & Sons, Inc. d/b/a Crowe Rope Company ("Crowe Rope") manufactured rope, twine, and related products. The defendant, Byron Crowe,¹ was the president and sole shareholder of Crowe Rope. The plaintiff, Achille Bayart, supplied raw materials to Crowe Rope and was owed $132,827.20.

Crowe Rope's manufacturing operations were conducted at plants located on real estate owned by or leased to Crowe Rope. Crowe Rope owned three pieces of real estate. Byron and Ruth Crowe personally owned myriad parcels of real estate, four of which were leased to Crowe Rope; two others were undeveloped. Six other parcels of real estate were leased to Crowe Rope by Portco, Inc. and Floatation Products, Inc. Byron Crowe owned all of the outstanding stock of Portco and Floatation Products.

Crowe Rope was in severe financial difficulty. As of December 12, 1995, it was indebted in the amount of $8,491,493.82 to Fleet National Bank of Massachusetts ("Fleet Bank")² pursuant to three promissory notes executed by Crowe Rope and certain of its affiliates, including Portco and Floatation Products. In addition, Byron Crowe personally owed Fleet Bank $50,223.61 and Portco was indebted to Fleet Bank in the amount of $150,670.83. Crowe Rope was the guarantor of these debts and was obligated to pay Fleet Bank upon any default. In total, Crowe Rope, either directly or as guarantor, owed Fleet Bank $8,692,388.26. This debt was secured by mortgages on, and security interests in, all of the assets of Crowe Rope.

After Crowe Rope failed to meet its obligations to Fleet Bank, the bank demanded payment in full; Crowe Rope defaulted. Crowe Rope also defaulted on debts due to other creditors. The plaintiff Achille Bayart was among these other creditors.

In December of 1995, the defendants entered into an agreement with J.P. Bolduc ("Bolduc"). Bolduc had negotiated an agreement with Fleet Bank whereby Bolduc would acquire the debt owed by Crowe Rope to Fleet Bank. Through an entity known as JPB Maine Holdings, LLC ("Holdings"), Bolduc acquired all of the Fleet Bank debts by paying Fleet Bank approximately $8.4 million. In exchange for such payment, Fleet Bank transferred to Holdings loan documents evidencing obligations in the total amount of $8,692,388.26. The net result of this transaction was that Holdings became a secured creditor of Crowe Rope, Floatation Products, Portco, and the defendants.

On December 15, 1995, the defendants transferred their undeveloped property to the Bolduc-owned JPB Maine Capital Limited Liability Company ("Real Estate LLC"). Crowe Rope transferred all of its real estate and business assets including machinery, equipment, and inventory to another Bolduc entity known as Crowe Rope Industries Limited Liability Company ("Operating LLC"). Holdings then foreclosed on the real estate owned by both Real Estate LLC and Operating LLC and subsequently sold it to Real Estate LLC. In addition, Holdings foreclosed on the machinery and equipment owned by Operating LLC and sold it to Operating LLC. Holdings LLC retained the inventory owned by Operating LLC in satisfaction of debt.³

Byron Crowe and Bolduc also entered into a non-competition and consulting agreement whereby Byron Crowe would receive $60,000.00 in exchange for his availability for consulting purposes as well as his agreement not to compete with Bolduc in the rope-making industry. The Crowes also received an annuity of $40,000.00 "for so long as either Byron Crowe or Ruth Crowe are living." The plaintiff's expert testified that the value of the annuity was $532,637.00.

The plaintiff brought suit pursuant to the Maine Uniform Fraudulent Transfer Act, Me. Rev. Stat. Ann. tit. 14, §§ 3751 et seq. (West Supp. 1999) ("Maine UFTA"), arguing that there remained equity in Crowe Rope over and above the amount paid by Bolduc to Fleet Bank in satisfaction of the secured debt. The plaintiff claimed that the Crowes were paid $600,000.00 while the unsecured creditors of Crowe Rope, the plaintiff included, received nothing.

The plaintiff brought suit against the Crowes personally to recover the value of its debt in the amount of $132,827.00 plus double damages. The case was tried before a jury. At the conclusion of the plaintiff's case, the defendants moved for judgment as a matter of law pursuant to Fed. R. Civ. P. 50(a). Finding the plaintiff's evidence insufficient to permit a jury to conclude that there was value in the assets of the defendants' corporation over and above the amount of its secured debt, the district court granted the defendants' motion.

On appeal, the plaintiff argues that the district court erred when it granted the defendants' motion for judgment as a matter of law. It contends that "the evidence submitted was sufficient to establish that the value of Crowe Rope's assets exceeded its secured debt by more than the amount of Achille Bayart's claim." The plaintiff's claim hinges on "Plaintiff's Exhibit 23 and all reasonable inferences which can be drawn therefrom". The plaintiff also contends that the district court erred by excluding Plaintiff's Exhibit 6. We will address each of these contentions in turn.

II. DISCUSSION

We review judgments entered as a matter of law under Rule 50(a) de novo, viewing the evidence in the light most favorable to the nonmoving party. Ed Peters Jewelry Co. v. C & J Jewelry Co., 124 F.3d 252, 261 (1st Cir. 1997); see also Coyante v. Puerto Rico Ports Auth., 105 F.3d 17, 21 (1st Cir. 1997). "To warrant submission of an issue to the jury, the plaintiff must present more than a mere scintilla of evidence and may not rely on conjecture or speculation." Katz v. City Metal Co., 87 F.3d 26, 28 (1st Cir. 1996) (internal quotation marks omitted). We review the exclusion of evidence for abuse of discretion. Drohan v. Vaughn, 176 F.3d 17, 23 (1st Cir. 1999).

A. Rule 50(a) and Exhibit 23

The plaintiff contends that the district court improperly dismissed its case under Fed. R. Civ. P. 50(a) because the plaintiff had submitted sufficient evidence to permit a jury to conclude that there was value in the assets of Crowe Rope over and above the amount of its secured debt. Rule 50(a)(1) states:

If during a trial by jury a party has been fully heard on an issue and there is no legally sufficient evidentiary basis for a reasonable jury to find for that party on that issue, the court may determine the issue against that party and may grant a motion for judgment as a matter of law against that party with respect to a claim or defense that cannot under the controlling law be maintained or defeated without a favorable finding on that issue.

Fed. R. Civ. P. 50(a).

Under the provisions of the Maine UFTA, a transfer may be defined as fraudulent if the debtor made the transfer or incurred the obligation with actual intent to hinder, delay, or defraud any creditor of the debtor or without receiving a reasonably equivalent value in exchange for the transfer while the debtor was insolvent at the time. See Me. Rev. Stat. Ann. tit. 14, § 3575. A debtor is deemed insolvent if the sum of the debtor's debts is greater than all of the debtor's assets at a fair valuation or if the debtor is generally not paying its debts as they become due. See id. §§ 3573 (1), (2). To recover under the Maine UFTA, a plaintiff must prove that there was some determinable amount of value in the assets of the debtor over and above the amount of the secured debt. See Ed Peters, 124 F.3d at 262 (holding, under virtually identical provisions of the Rhode Island Uniform Fraudulent Transfer Act, that the plaintiff must establish there was value in the debtor over and above the secured debt). The district court, by granting the defendants' Rule 50(a) motion, determined that the plaintiff submitted insufficient evidence to meet its burden.

The plaintiff, on appeal, focuses on the district court's refusal to allow the jury to analyze the evidentiary significance of Exhibit 23 and the jury's lack of opportunity to draw reasonable inferences therefrom. Exhibit 23, a proposal letter from Key Bank of Maine extending to Bolduc asset-based financing in the amount of $11,500,000.00, was submitted by the plaintiff as the predicate for determining the amount of money ultimately borrowed by Bolduc to finance the Crowe Rope acquisition.

The plaintiff's theory is as follows:

By process of elimination, if one removes from the total assets of $11,500,000 all of the real estate value (which would include the $750,000 in new capital...