Poultry Processing, Inc. v. OLD ORCHARD OCEAN PIER, CO.

• Decision Date: 11 December 1991
• Docket Number: Civ. No. 88-0126-P-C.
• Citation: 780 F. Supp. 846
• Parties: POULTRY PROCESSING, INC., Plaintiff, and The Pier Leasing Company, Inc., Party-in-Interest, v. OLD ORCHARD OCEAN PIER COMPANY, et al., Defendants.
• Court: U.S. District Court — District of Maine

780 F. Supp. 846

POULTRY PROCESSING, INC., Plaintiff and The Pier Leasing Company, Inc., Party-in-Interest, v. OLD ORCHARD OCEAN PIER COMPANY, et al., Defendants.

Civ. No. 88-0126-P-C.

United States District Court, D. Maine.

December 11, 1991.

Allen Hrycay, William Jordan, Portland, Me., for Poultry Processing, Inc.

Michael Kaplan, Preti, Flaherty, Beliveau & Pachios, Portland, Me., Ronald Caron, Caron & Sullivan, Biddeford, Me., Zbigniew Kurlanski, Portland, Me., for Old Orchard Ocean Pier Co.

Stephen Hessert, Portland, Me., for Roderick Rovzar.

Mark O'Brien, SBA, Augusta, Me., for Small Business Admin.

Philip Kilmister, Asst. Atty. Gen., Augusta, Me., for Maine Employment Securities.

Matthew Goldfarb, Portland, Me., for Coca-Cola Bottling.

Michael Feldman, Golver & Feldman, Brunswick, Me., for Nancy Sales Co.

David Ordway, Biddeford, Me., for Robert Lopreste, Charlene Lopreste.

Gregory Woodworth, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, Me., for Pier Leasing Co.

OPINION

GENE CARTER, Chief Judge.

This case arose out of the foreclosure sale of the Old Orchard Beach Pier (hereinafter "Pier"), ordered by the Court in an Opinion and Order dated March 17, 1989. The Court found that Defendants Old Orchard Ocean Pier Company, et al. (hereinafter "OOOPCo") and Catherine Duffy Petit (hereinafter "CP") had breached the conditions of the mortgage and security agreements held by Poultry Processing, Inc. (hereinafter "PPI"). The Court entered a Summary Judgment of Foreclosure and Sale on April 4, 1989. OOOPCo had a ninety-day redemption period following the Court's entering of summary judgment but it did not redeem the property. Accordingly, a public foreclosure auction was held on September 12, 1989 to sell the Pier, at which the mortgagee of the Pier, PPI, purchased the Pier as high bidder for $850,000.

PPI filed its first Report of Sale and Request for Entry of Deficiency Judgment on August 29, 1990. Defendants filed an Objection to Report of Sale and Complaint of Law and in Equity on September 28, 1990.¹ The Court on November 30, 1990, sustained Defendants' Objection to Plaintiff's Report of Sale and ordered Plaintiff to file a new Report of Sale. Plaintiff responded to the Court's Order by submitting an Affidavit of Counsel and Response of Plaintiff to Objection to Report of Sale and Complaint of Law and in Equity on December 27, 1990.

Defendants filed a Second Objection to Report of Sale on January 29, 1991. On March 19, 1991, the Court again sustained Defendant's Objection to Report of Sale and ordered Plaintiffs to file a new Report of Sale and request for deficiency judgment. The Court stated in its Order that the "filing should be sufficiently detailed and documented to generate the issue of the adequacy of sale and disbursement of the proceeds in a full, complete, and comprehensible manner. Failure to adequately document or explain the accounting shall constitute a waiver as to any disputed disbursement." Id. at 2 (emphasis added). On April 9, 1991, Plaintiff filed a Third Report of Sale, to which Defendants filed a Third Objection to Report of Sale on May 9, 1991.

A bench trial was held on September 19 and 20, 1991 on the disputed issues concerning Plaintiff's Report of Sale and on Defendants' Counterclaim. At the conclusion of Defendants' case, the Pier Leasing Co., Inc. (hereinafter "PLC"), and then PPI and the Small Business Administration (hereinafter "SBA"), made an oral motion,² which was heard on the record by the Court, for involuntary dismissal of the Counterclaim under Federal Rule of Civil Procedure 41(b).³ The Court noted that it would take the motion under advisement and that it would hear argument thereon in written form. Trial Transcript 446-47 (hereinafter "Tr."). Following the conclusion of all of the evidence, PLC and PPI renewed their motion for involuntary dismissal. Tr. 487.⁴

I. INVOLUNTARY DISMISSAL

Pursuant to Federal Rule of Civil Procedure 52(c):⁵

If during a trial without a jury a party has been fully heard with respect to an issue and the court finds against the party on that issue, the court may enter judgment as a matter of law against that party on any claim, counterclaim, cross-claim or third-party claim that cannot under the controlling law be maintained or defeated without a favorable finding on that issue, or the court may decline to render any judgment until the close of all the evidence.

Motions under Rule 41(b), the precursor to Rule 52(c), have not been favored in this circuit and dismissal under this rule should be granted "sparingly." Central Maine Power Co., 116 F.R.D. at 341 (quoting D.P. Apparel Corp. v. Roadway Express, Inc., 736 F.2d 1, 3 (1st Cir.1984)). The First Circuit has noted that:

Except in unusually clear cases the district judge can and should carry the defendant's Rule 41(b) motion with the case — or simply deny it, since the effect will be the same — let the defendant put on his evidence, and then enter a final judgment at the close of the evidence.

D.P. Apparel Corp., 736 F.2d at 3 (quoting Riegel Fiber Corp. v. Anderson Gin Co., 512 F.2d 784, 793 n. 19 (5th Cir.1975)) (emphasis added). In the First Circuit, a 41(b) motion will not be granted unless "it is manifestly clear that plaintiff will not prove his case." Central Maine Power Co., 116 F.R.D. at 341 (quoting D.P. Apparel Corp., 736 F.2d at 3).

After having carefully reviewed all of the evidence, both testimonial and documentary, admitted during Defendants' case, the Court cannot conclude on the record made by Plaintiff's case-in-chief that it is "manifestly clear" that Defendants will not recover under their Counterclaim for fraud. Therefore, the Court will dismiss PLC's and PPI's motion for involuntary dismissal.

All of the evidence having now been heard and extensively briefed, the Court will herein exercise its discretionary authority to weigh and evaluate the evidence and render findings of fact for purposes of resolving issues generated by the third Report of Sale and Defendants' Counterclaim. The Court will render these findings of fact as it discusses the applicable law.

II. DISCUSSION

The parties dispute who has the burden of proof in this case. Both PLC and PPI argue that, because Defendants have alleged fraud, they must prove the alleged fraudulent conduct by clear and convincing evidence. See Post-Trial Brief of Party-in-Interest Pier Leasing Co., Inc. at 5 (hereinafter "PLC's Post-Trial Brief"); Post-Trial Brief of Plaintiff Poultry Processing, Inc. at 7 (hereinafter "PPI's Post-Trial Brief"). Defendants argue that PPI bears the burden of proof at all times and must demonstrate by a preponderance of the evidence that it has complied with Maine Revised Statutes Annotated, Title 14, section 6324, and the Court's Order. Defendants' Post-Trial Brief at 4.⁶

For the reasons that follow, the Court concludes that Defendants bear the burden of proving the alleged fraudulent conduct of PPI and PLC by clear and convincing evidence.

The parties dispute whether, as part of the alleged fraud committed by PPI and PLC, "PLC entered into an agreement with PPI prior to the foreclosure sale pursuant to which PLC purportedly agreed to purchase the Pier from PPI after the foreclosure sale." Trial Brief of Party-in-Interest The Pier Leasing Co., Inc. at 3 (hereinafter "PLC's Trial Brief"). According to Defendants, "principals of both PPI and PLC made statements consistent with the existence of a preagreement to sell the Pier to PLC during the spring and summer of 1989 prior to the auction." Defendants' Proposed Findings of Fact, ¶ 10(iv) (hereinafter "Defendants' Facts"). According to PLC, "no discussions regarding a sale of the pier by Poultry Processing to Pier Leasing occurred between Poultry Processing, its representatives and agents, and Pier Leasing, its representatives and agents, prior to the date of the foreclosure sale." PLC's Proposed Findings of Facts, ¶ 41 (hereinafter "PLC's Facts").⁷ PLC further noted that "prior to the date of the foreclosure sale, no agreement had been entered into by and between (a) Bernard Lewis, David Lewis or Poultry Processing and (b) Nat Golzbein, Paul Golzbein or Pier Leasing, relating to a sale of the pier." Id., ¶ 42.

Maine law has set forth the elements that must be proved to sustain a fraud claim:

A defendant is liable for fraud or deceit if he (1) makes a false representation (2) of a material fact (3) with knowledge of its falsity or in reckless disregard of whether it is true or false (4) for the purpose of inducing another to act or to refrain from acting in reliance upon it, and (5) the plaintiff justifiably relies upon the representation as true and acts upon it to his damage.

Jourdain v. Dineen, 527 A.2d 1304, 1307 (Me.1987) (quoting Letellier v. Small, 400 A.2d 371, 376 (Me.1979) (footnote omitted)); see also Butler v. Poulin, 500 A.2d 257, 260 (Me.1985); McKinnon v. Tibbetts, 440 A.2d 1028, 1030 (Me.1982); Emerson v. Ham, 411 A.2d 687, 689 (Me.1980). In addition, the plaintiff in an action for fraud "must prove every element of his claim by clear and convincing evidence, that is, evidence that establishes every factual element to be highly probable." Butler, 500 A.2d at 260 n. 5; see also Wildes v. Ocean National Bank, 498 A.2d 601, 602 (Me. 1985); Taylor v. Commissioner of Mental Health and Mental Retardation, 481 A.2d 139, 153 (Me.1984).⁸ The Maine Law Court has characterized a plaintiff's burden as "heavy" in this regard. Wildes, 498 A.2d at 602.

Under Maine law, PPI's and PLC's position that Defendant bears the burden of proof in alleging fraud is fully supported in that cases have set out the aforementioned elements of fraud or deceit and applied the "clear and convincing" standard of proof to both fraud and deceit actions. See, e.g., Jourdain, 527 A.2d at 1307 ("A defendant is liable for fraud or deceit if ..."); Butler, 500 A.2d at 260 ("The plaintiff in an action for fraud must prove...