Cianchette v. Verrier

• Decision Date: 08 May 1959
• Citation: 155 Me. 74,151 A.2d 502
• Parties: Joseph R. CIANCHETTE in the name of Edward S. Titcomb, Trustee in Bankruptcy of Maine State Raceways v. Robert A. VERRIER et al.
• Court: Maine Supreme Court

Page 502

151 A.2d 502

155 Me. 74

Joseph R. CIANCHETTE in the name of Edward S. Titcomb Trustee in Bankruptcy of Maine State Raceways v. Robert A. VERRIER et al.

Supreme Judicial Court of Maine.

May 8, 1959.

C. Keefe Hurley, Boston, Clair Cianchette, Pittsfield, James L. Reid, Augusta, for plaintiff.

Robinson, Richardson & Leddy, Verrill, Dana, Walker, Philbrick & Whitehouse, Hutchinson, Pierce, Atwood & Allen, Portland, for defendants.

Before WILLIAMSON, C. J., and WEBBER, TAPLEY, DUBORD and SIDDALL, JJ.

DUBORD, Justice.

This cause is before the court upon plaintiff's appeal from a decree of the sitting justice allowing defendants' pleas of estoppel by judgment and dismissing plaintiff's bill in equity.

Pursuant to permission granted by the United States District Court, Joseph R. Cianchette brought a bill in equity, dated January 3, 1956, in the name of Edward S. Titcomb, duly appointed trustee in bankruptcy of Maine State Raceways, a Maine corporation. Joseph R. Cianchette alleges in the bill that he is a creditor and stockholder of Maine State Raceways and that he brings the bill on behalf of himself and all others similarly situated.

The bill alleges that the defendants 'did willfully and intentionally scheme and conspire at a time when some of the defendants occupied a fiduciary relationship with respect to Maine State Raceways and the others acting with full knowledge thereof, and by the use of corporate and other deviees, to defraud the said Maine State Raceways by obtaining legal title to extremely valuable race track properties by unlawful means and placing same in the name of defendant, Scarborough Downs, (a Maine Corporation) and causing the said Maine State Raceways to become a bankrupt corporation to the detriment of its creditors and stockholders.'

Other allegations in the bill, and evidence disclosed by the transcript, indicate that it was the contention of Joseph R. Cianchette that title to the race track properties, known as Scarborough Downs, was acquired by the present owner through fraud and deceit.

The bill prays for

(1) An accounting on the part of the defendants;

(2) That defendants be declared to be trustees for Maine State Raceways in respect to all profits, cash, properties or securities found to have been realized or received by the defendants in connection with their operation and control of the race track property at Scarborough Downs;

(3) That the defendants, Scarborough Downs and Scarborough Holding Company be decreed to be trustees with respect to all properties relating directing or indirectly to the race track properties for Maine State Raceways, or the trustee in bankruptcy of Maine State Raceways;

(4) That defendants be ordered to convey the assets of the aforesaid race track properties to Maine State Raceways or to the trustee in bankruptcy for the benefit of its creditors and stockholders; and

(5) That the defendants be enjoined from operating the aforesaid race track.

Upon motions filed by the defendants, Rebecca Goldfine, Executrix, Morton Goldfine and Sidney Goldfine, the actions against these defendants were dismissed for want of jurisdiction.

The other defendants filed pleas of collateral estoppel by judgment inserted in their answers to the bill.

The pleas of the remaining individual defendants and corporate defendants were as follows:

'II. And Defendant Robert A. Verrier further pleads to the Plaintiff's Bill, and for plea says: On the 1st day of October, 1951, Maine State Raceways filed a debtor's petition for reorganization under Chapter X of the Federal Bankruptcy Act. 11 U.S.C. §§ 501-676. This petition listed in Paragraph 11 the possibility of the Corporation having 'assets consisting of claims against officers, directors and others not shown on the books of the corporation'.

'The issue of the claims of the corporation against these defendants was an essential element of the hearings on the petition for reorganization. Furthermore, such issue was actually brought into the hearings by the attorney for Plaintiff Cianchette and the debtor corporation, C. Keefe Hurley, and testimony was taken under oath in relation thereto.

'The allegations in the present Bill in Equity relating to the alleged unlawful fraud or scheme perpetrated by the defendants were alleged in essentially the same manner and to the same effect in the aforesaid reorganization proceedings. Comparison of the allegations in the Plaintiff's Bill with those made in the reorganization proceedings as shown in the record on appeal is set forth in Exhibit A attached hereto and made a part hereof.

'The United States District Court for the District of Maine on April 1, 1952 appointed as Trustees in the aforesaid reorganization proceedings Franklin G. Hinckley, Esq. of Portland, Maine, bar, and Cornelius J. Russell of Bangor. The Trustees were specifically ordered by said court as follows:

"9.d. To institute, prosecute and defend, intervene in or become a party to such other actions or proceedings in law or in equity, in State or Federal Courts, as may in their judgment be necessary or advisable for the protection, maintenance and preservation of the property and assets of the within Estate.'

"13. That said trustees be, and they hereby are, directed to investigate the acts, conduct, property, liabilities and financial condition of said Debtor, the operation of its business and the desirability of the continuance thereof, and any other matter relevant to the proceeding or to the formulation of a plan * * *'

'These aforesaid trustees represented by counsel, Edmund P. Mahoney, Esq. and Barnett I. Shur, Esq., pursuant to the foregoing orders, examined all persons having any knowledge bearing thereon, including this Defendant, at hearings on July 9th, 10th, 15th and 21st of 1952. This testimony was not made a part of the record on appeal. All parties to the present Bill in Equity were present either in person and/or represented by counsel at all the aforesaid hearings.

'The aforesaid trustees reported to the United States District Judge as instructed on July 28, 1952. Their finding was as follows:

"Many mistakes were made which were to be expected in the operation of a new enterprise, but with exceptions of isolated instances of alleged misconduct, which so far remain unproven, no substantial evidence of fraud has been discovered.' (Record on Appeal, page 580).

'The aforesaid trustees investigated said defendants and their relations with Maine State Raceways prior to leasing the properties of said corporation and reported the results of such investigation to the District Court. The Court in an Opinion dated April 15, 1952 stated:

"They (the trustees) concluded Mr. Verrier, Mr. Mourkas and their attorney, Mr. Mayo S. Levenson, and the Goldfines, were persons in whom this Court could repose complete confidence.'

"* * * I feel also that everyone should be satisfied that the above-named parties have demonstrated that they are alert and worthy of the confidence of the Court.' (Record on Appeal, pages 237-238).

'This opinion was later expanded in formal manner by the reported opinion and decision of the District Court, dated June 19, 1952, [In re Maine State Raceways], 105 F.Supp. 620. (Record page 477.)

'The District Court approved and confirmed each and every report of the trustees in its entirety, and on January 16, 1953 dismissed the reorganization proceedings notwithstanding the contention that the Corporation, namely, Maine State Raceways, had a valuable asset in the form of a cause of action against these defendants. The decisions of the District Court were appealed to the United States Court of Appeals for the First Circuit by Joseph R. Cianchette, the real plaintiff in this action. In that appeal, the said C. Keefe Hurley again raised the issue of the alleged fraud practiced by these defendants against Maine State Raceways, praying that all the orders of the District Court be vacated, and that the matter be returned to the District Court for further reorganization proceedings.

'All offers of proof of fraud and conspiracy, rulings thereon, and all opinions and orders of the Referee, the Special Master, and the District Judge relating to the same were specifically included in the Statement of Points, twenty-one in number, relied on by the present plaintiff in his appeal. (Record of Reorganization Proceedings, p. 1063).

'The Court of Appeals for the First Circuit of January 15, 1954 affirmed per curiam all the actions of the aforesaid District Court for Maine, thus judicially determining that there was no basis for the charges of fraud alleged in that action and identical with those alleged in the present Bill.

'All issues raised by the Bill in this proceeding have been raised at least once in prior proceedings to which all the parties hereto or their predecessors in interest, were also parties and all such issues have been determined adversely to the claims of the Plaintiff in the present suit. For these reasons the prosecution of the present suit in equity is barred and estopped.'

The pleas of the individual defendants were numbered paragraph II and the pleas of the corporate defendants were numbered paragraph III.

The cause was heard by the sitting justice upon a complete record of all prior proceedings in the bankruptcy matter of Maine State Raceways, including motions, petitions, hearings before bankruptcy referees, special masters, and the United States District Court, (together with transcripts of the evidence in several of the hearings), decrees, orders and reports of the referees, special masters, and the trustees in reorganization, orders and opinions of the United States District Court, and the complete record of appeal of the plaintiff herein from the orders and decrees of the refenees and of the United States District Court to the Circuit Court of Appeals of the United States for the First Circuit.

After a hearing the sitting justice sustained the pleas...