Bakwin v. Mardirosian

• Decision Date: 02 April 2014
• Docket Number: SJC–11393.
• Citation: 467 Mass. 631,6 N.E.3d 1078
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court
• Parties: Michael BAKWIN v. Robert M. MARDIROSIAN & others.

467 Mass. 631
6 N.E.3d 1078

Michael BAKWIN
v.
Robert M. MARDIROSIAN & others.¹

SJC–11393.

Supreme Judicial Court of Massachusetts,
Barnstable.

Argued Dec. 3, 2013.
Decided April 2, 2014.

[6 N.E.3d 1081]

Thomas J. Carey, Jr. (Michael A. Collora with him), Boston, for the plaintiff.

Cynthia B. Hartman, Quincy, for the defendants.

Present: IRELAND, C.J., SPINA, CORDY, BOTSFORD, GANTS, DUFFLY, & LENK, JJ.

SPINA, J.

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 ² pursuant to the plaintiff's claims under the

[6 N.E.3d 1082]

Uniform Fraudulent Transfer Act (UFTA), G.L. c. 109A. We granted the plaintiff's application for direct appellate review, and we affirm in part and reverse in part.

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. Mardirosian, a Massachusetts attorney who had represented the suspected thief, David Colvin, prior to Colvin's death in 1979.³ The facts surrounding the defendant's botched attempts to profit from having found the paintings, and the circuitous path to their recovery, from Stockbridge, to London, to Geneva, and eventually back to the plaintiff, are set forth in detail in United States v. Mardirosian, 602 F.3d 1, 4, 5, 6 (1st Cir.), cert. denied, ––– U.S. ––––, 131 S.Ct. 287, 178 L.Ed.2d 141 (2010). Suffice it to say, Robert Mardirosian was convicted by a jury in Federal court of one count of possessing, concealing, or storing the stolen paintings in violation of 18 U.S.C. § 2315 (2006). Id. at 4. The United States Court of Appeals for the First Circuit affirmed both his conviction and his sentence of seven years in prison and three years of supervised release. Id. at 4, 6–7. Mardirosian also was ordered to pay a $100,000 fine and to return the paintings still in his possession. Id. at 7.

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.⁴ Bakwin also brought claims under the UFTA as a result of several transfers of assets by Mardirosian to his family members in the weeks and months following the revelation of his identity as the holder of the stolen paintings.⁵ Bakwin also

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brought claims for relief under the UFTA against those family members whom he alleged had received the fraudulent transfers.

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 ⁶ as well as his family members, judgment was entered against Robert for a sum totaling over $4.3 million in damages, interest, and costs. Additionally, the judge ordered various equitable remedies against the relief defendants for the purposes of identifying specific assets that had been fraudulently conveyed and could be subject to attachment or reconveyance in satisfaction of the judgment against Robert. Finally, the judge dismissed the claim against one of the relief defendants, David Mardirosian, concerning assets in a shared trust because all the funds in the trust had been dissipated.

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 transferred to David Mardirosian, dismissal of the claim.⁷ We describe in greater detail the relevant transfers, the judgment ordered with respect to each transfer, and our conclusions regarding each of the judgments in turn.

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 pretransfer 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

[6 N.E.3d 1084]

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 providing for avoidance of the transfer and attachment of Robert's interest, rather than a money judgment against Madeline. Specifically, Bakwin argues that restoring the title to a tenancy by the entirety may have the effect Robert desired, of placing the Falmouth home out of reach of Bakwin as a judgment creditor, which would in turn frustrate the purposes of the UFTA. Such a result could occur because Massachusetts law protects nondebtor spouses who hold property in a tenancy by the entirety. G.L. c. 209, § 1. Although the debtor spouse's interest in the tenancy by the entirety may be attached, the nondebtor spouse is protected from execution against that property during his or her lifetime, so long as the property is his or her principal residence (and in certain other circumstances not applicable here). Id. Peebles v. Minnis, 402 Mass. 282, 283, 521 N.E.2d 1372 (1988). Additionally, each holder of a tenancy by the entirety has an indestructible right of survivorship. Should the debtor spouse die first, the debtor's attached interest is extinguished and the nondebtor spouse will take the property free of the creditor's attachment. Coraccio v. Lowell Five Cents Sav. Bank, 415 Mass. 145, 151, 612 N.E.2d 650 (1993). Therefore, according to Bakwin's argument, reconveyance of the property to a tenancy by the entirety may undermine the UFTA's goal of assisting creditors in reaching assets of debtors in satisfaction of their debts in the event that Robert predeceases Madeline and she takes title free of the attachment of Robert's interest.

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 purposes of the UFTA. See In re Edmonston, 107 F.3d 74, 75 (1st Cir.1997) (creditor of both spouses may reach and apply joint tenancy property).

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

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commits the form of the judgment to the discretion of the trial judge. G.L. c. 109A, § 8 ( a ). Rivera v. Club Caravan, Inc., 77 Mass.App.Ct. 17, 26–27, 928 N.E.2d 348 (2010). Furthermore, the statute expressly calls for its provisions to be supplemented by the “principles of law and equity.” G.L. c. 109A, § 11. The UFTA, like its predecessor, the Uniform Fraudulent Conveyance Act, provides a means by which a creditor may avoid transfers intended to frustrate the creditor's claims. G.L. c. 109A, § 8. Jorden v. Ball, 357 Mass. 468, 470, 258 N.E.2d 736 (1970). The statute does not create new claims, nor does it contemplate placing the creditor in a more favorable position than would have existed without the fraudulent transfer. See Jorden, supra. The remedies set forth in the UFTA assist a creditor in restoring the debtor's assets to their pretransfer status in order to enable the creditor to reach those assets that...