Morton v. Burr

• Decision Date: 16 January 2014
• Docket Number: Docket No.: BCD-RE-13-03
• Citation: Morton v. Burr, Docket No.: BCD-RE-13-03 (Me. Jan 16, 2014)
• Court: Maine Supreme Court
• Parties: SCOTT H. MORTON, GARY PATNODE, MAINE TIMBER & BEAM, INC., MORTON & FURBISH AGENCY, and MARBLES STATION DEVELOPMENT LLC, Plaintiffs, v. CARLL S. BURR, III, CARLL S. BURR, JR., INC., HOMESOLUTIONS PROPERTIES, LLC, 2010-3 SFR VENTURE LLC, JULIE BURR, DENISE KUMMER, and DANIEL KUMMER, Defendants

SCOTT H. MORTON, GARY PATNODE,MAINE TIMBER & BEAM, INC.,MORTON & FURBISH AGENCY,and MARBLES STATION DEVELOPMENT LLC, Plaintiffs, v. CARLL S. BURR, III, CARLL S. BURR, JR., INC.,HOMESOLUTIONS PROPERTIES, LLC,2010-3 SFR VENTURE LLC, JULIE BURR,DENISE KUMMER, and DANIEL KUMMER, Defendants

Docket No.: BCD-RE-13-03

STATE OF MAINE CUMBERLAND, ss BUSINESS AND CONSUMER COURT

FILED: January 17, 2014

Date: January 16, 2014

Location: Portland

DECISION AND ORDER

(Motions to Dismiss)

Defendants HomeSolutions Properties, LLC (HomeSolutions), Julie Burr, Denise Kummer, and Daniel Kummer move to dismiss the complaint of Plaintiffs Scott H. Morton, Gary Patnode, Maine Timber & Beam, Inc. (Maine Timber), Morton & Furbish Agency (M&F Agency), and Marbles Station Development LLC (MSD) for lack of personal jurisdiction pursuant to M.R. Civ. P. 12(b)(2) or, in the alternative, M.R. Civ. P. 12(b)(6).¹ Each Defendant asserts that its contacts with the State of Maine are insufficient to justify the exercise of personaljurisdiction by Maine courts. Alternatively, each Defendant asserts that Plaintiffs have failed to state a claim upon which relief can be granted.

FACTUAL AND PROCEDURAL BACKGROUND

The following facts are based on the Plaintiffs' Amended Complaint, the exhibits to the Amended Complaint, and the affidavits submitted by Defendants. See Dorf v. Complastik Corp., 1999 ME 133, ¶¶ 13-14, 735 A.2d 984. Defendant Carl S. Burr, III is the president of Defendant Carll S. Burr, Jr., Inc. (Burr, Inc.), a Florida corporation. (Amend. Compl. ¶ 6.) The members of MSD are Burr, Inc., Morton, Patnode, Maine Timber, and M&F Agency; Burr, Inc. has a 75% ownership interest in MSD. (Amend. Compl. ¶¶ 1-2, 4.) Burr, Inc. (80%), Maine Timber (10%), and MSD (10%) collectively own a 15-lot subdivision in Rangeley, Maine (the MSD property). (Amend. Compl. ¶¶ 7-9.) Morton is the manager of MSD. (Amend. Compl. ¶ 3.)

HomeSolutions is a Florida limited liability company with a principal place of business in Northport, New York. (Amend. Compl. ¶ 23; De. Kummer Aff. ¶ 2.)² Julie Burr and Denise Kummer each own 50% of HomeSolutions. (De. Kummer Aff. ¶ 1.) Carll Burr is married to Julie Burr; Denise Kummer is married to Daniel Kummer. (De. Kummer Aff. ¶¶ 15, 17.) Julie Burr and the Kummers are all New York residents. (Da. Kummer Aff. ¶ 1; Amend. Compl. caption.) Carll Burr is a New York resident, but he owns vacation property at 17 Burr Road in Rangeley, Maine (the Burr property). (Amend. Compl. ¶ 5; Amend. Compl. Exh. 10.)

In June of 2008, HomeSolutions signed a master note for a line of credit in the amount of $1,000,000 with Rockbridge Commercial Bank (Rockbridge). (Amend. Compl. Exh. 12.)³ Assecurity for the HomeSolutions credit line, Carll Burr signed a personal guaranty in the amount of $1,000,000 and pledged the Burr property. (Amend. Compl. Exhs. 10, 17.) The note listed the Burr property as security for the initial loan. (Amend. Compl. Exh. 12.) Daniel Kummer also signed a personal guaranty in the amount of $1,000,000 to secure the initial HomeSolutions credit line. (Amend. Compl. Exh. 25.)

The amount of the credit line was increased to $2,000,000 in August of 2008 and then to $3,000,000 in November of 2008 (Amend. Compl. Exhs. 13-15); Carll Burr and Daniel Kummer personally guaranteed each increase in debt (Amend. Compl. Exhs. 18-19, 26-27). As further security, Burr, Inc. and MSD mortgaged the MSD property to secure the credit line from Rockbridge to HomeSolutions. (Amend. Compl. Exh. 5.) Burr, Inc. executed the mortgage documents on February 12, 2009, on its own behalf and as the "Majority Member" of MSD, which documents were recorded on June 26, 2009 (the 2009 mortgage). (Amend. Compl. ¶¶ 20-21; Amend. Compl. Exh. 5 at 1, 25.) Nevertheless, from the first increase in credit in August of 2008,⁴ each amended and restated master note listed the mortgage on the MSD property as security for the loan to HomeSolutions, LLC. (Amend. Compl. Exhs. 13-15.) Each amended and restated master note also listed the mortgage on the Burr property as security for the loan to HomeSolutions, LLC. (Amend. Compl. Exhs. 12-15.)

Plaintiffs assert that the grant of the mortgage by MSD and Burr Inc. was unauthorized by MSD and without the consent or vote of the other MSD members. (Amend. Compl. ¶ 20.) Prior to Burr, Inc. executing the 2009 mortgage, Rockbridge had drafted the mortgagedocuments and listed MSD, Burr, Inc., and Maine Timber as mortgagors. (Amend. Compl. ¶ 16.) Morton, on behalf of MSD, and Maine Timber refused to sign the documents. (Amend. Compl.¶¶ 17-18.)

After HomeSolutions defaulted on the credit line, HomeSolutions, the Burrs, and the Kummers signed a forbearance agreement with Rockbridge on June 16, 2009, in which agreement Rockbridge agreed not to pursue the collateral securing HomeSolutions's credit line until January 30, 2010. (Amend. Compl. Exh. 16.) The forbearance agreement lists, among others, the following items of collateral securing the loan to HomeSolutions: the mortgage on Carll Burr's vacation home in Rangeley, Maine; the mortgage on the MSD property in Rangeley, Maine; and personal guarantees signed by Carll Burr, Julie Burr, Daniel Kurnmer, and Denise Kurnrner. (See Amend. Compl. Exh. 16 recitals B, C.)

Rockbridge subsequently failed, and the MSD property mortgage was assigned to Defendant 2010-3 SFR Venture LLC (SFR). (Amend. Compl. ¶ 35; Amend. Compl. Exh. 22.) SFR has noticed the default and foreclosure of the mortgage of the MSD property. (Amend. Compl. ¶ 42; Amend. Compl. Exh. 20.) The amount due as of January 17, 2013, was $3,563,130. (Amend. Compl. ¶ 43; Amend. Compl. Exh. 21.)

Plaintiffs filed suit on September 24, 2012, in Franklin County Superior Court. Plaintiffs amended their Complaint on March 13, 2013. Plaintiffs assert the following causes of action against HomeSolutions: unjust enrichment (Count VI) and fraud, conversion, and violations of the Uniform Fraudulent Transfer Act (UFTA), 14 M.R.S. §§ 3571-82 (2013), (Count VII). Against Julie Burr, Daniel Kurnmer, and Denise Kurnrner, Plaintiffs assert fraud, conversion, and UFTA violations (Count VIII). Plaintiffs also seek a declaratory judgment that the 2009 mortgage of the MSD property is void (Count I).

DISCUSSION

I. PERSONAL JURISDICTION

A. Standard of Review

"Maine's jurisdiction over nonresident defendants is controlled by its long-arm statute," 14M.R.S. § 704-A (2013), which "is co-extensive with the due process clause of the United States Constitution, U.S. Const, amend. XIV, § 1." Murphy v. Keenan, 667 A.2d 591, 593 (Me. 1995). Thus, the Court "need only consider whether due process requirements have been satisfied" in addressing the question of personal jurisdiction. Suttie v. Sloan Sales, Inc., 1998 ME 121, ¶ 4, 711 A.2d 1285. "Due process is satisfied when: (1) Maine has a legitimate interest in the subject matter of the litigation; (2) the defendant, by his or her conduct, reasonably could have anticipated litigation in Maine; and (3) the exercise of jurisdiction by Maine's courts comports with traditional notions of fair play and substantial justice." Connelly v. Doucette, 2006 ME 124, ¶ 7, 909 A.2d 221 (quotation marks omitted). Plaintiffs must satisfy the first two prongs of this test, "based on specific facts in the record," and then the burden shifts to Defendants "to demonstrate that the exercise of jurisdiction does not comport with traditional notions of fair play and substantial justice." Bickford v. Onslow Mem'l Hosp. Found., Inc., 2004 ME 111, ¶ 10, 855 A.2d 1150.

Because the Court is proceeding on the motion based upon the pleadings and affidavits, Plaintiffs "need only make a prime facie showing that jurisdiction exists" over each Defendant, and the Court construes the facts in Plaintiffs' favor. See Dorf, 1999 ME 133, ¶ 14, 735 A.2d 984. Plaintiffs' showing must be made on specific facts set forth in the record, going "beyond the pleadings and mak[ing] affirmative proof . . . by affidavit or otherwise." Id. ¶ 13 (quotationmarks omitted); see also Cossaboon v. Me. Med. Ctr., 600 F.3d 25, 31 (1st Cir. 2010) (discussing plaintiff's burden of proof upon a motion to dismiss for lack of personal jurisdiction).

B. Analysis

Defendants argue that none of the prongs of the due process test have been satisfied: 1) Maine does not have a legitimate interest in the subject matter of the litigation; 2) Defendants could not have reasonably anticipated litigation in Maine; and 3) the exercise of jurisdiction would not comport with the notions of fair play and substantial justice.

1. Maine's legitimate interest in the litigation

Defendants assert, and the court agrees, that Plaintiffs must demonstrate that Maine has an interest in the litigation beyond "providing its citizens with a means of redress against nonresidents." Murphy, 667 A.2d at 594. Such interests include "the protection of state 'industries, the safety of its workers, or the location of witnesses and creditors within its border,'" Commerce Bank & Trust Co. v. Dworman, 2004 ME 142, ¶ 15, 861 A.2d 662 (quoting Murphy, 667 A.2d at 594)), the protection of Maine citizens from fraudulent employment practices, Suttie, 1998 ME 121, ¶ 5, 711 A.2d 1285, and the protection of Maine citizens from false credit reports, Bickford, 2004 ME 111, ¶ 11, 855 A.2d 1150.

Plaintiffs argue that Maine's legitimate interest in the subject of this litigation is the allegedly unauthorized and potentially fraudulent encumbrance of Maine real estate owned in part by Maine residents to secure a loan to a non-resident. The Law Court has concluded that "Maine has a legitimate interest in . . . preventing debtors from using our boundaries as a shelter to shield their persons and their Maine real estate from process and creditors." Dworman, 2004 ME 142, ¶ 15, 861 A.2d 662. Dworman involved the attachment of Maine real estate owned by a non-resident debtor, see 14 M.R.S. § 704-A(2)(C) (providing that a person submits to the...