Opinion
Civil Action CV-16-154
06-13-2018
STATE OF MAINE, Plaintiff v. DANIEL B. TUCCI, SR., BEATRIX T. TUCCI, and MARCH 31, LLC, Defendants.
JUDGMENT AND ORDER
Lance E. Walker, Justice Maine Superior Court
Before the Court is Plaintiff State of Maine's ("State") complaint for fraudulent transfer against Defendants Daniel B. Tucci, Sr. ("Tucci"), Beatrix T. Tucci ("Beatrix"), and March 31, LLC. A bench trial was held on February 12 and 13, 2018. For the following reasons, the Court will enter judgment for the State and grant relief as outlined below.
I. Findings of Fact
The Court makes the following fact findings based on the record of this case, including evidence received at the bench trial. On January 23, 2009, Defendant Tucci inherited from his father a ¼ interest in the property located at 104 Monument Street, Portland, Maine, valued at approximately $81,000. Tucci and his family have been longtime residents of the property. On February 24, 2009, Tucci transferred his interest to himself and his wife, Beatrix, as joint tenants. The release deed was recorded in the Cumberland County Registry of Deeds at Book 26666, Page 277. While Tucci claims he made this transfer to provide for his family in the event anything happened to him, he also acknowledged at trial that "A lot of things can happen. You get sued by the Attorney General's office, or you get sued by Ms. Mitchell, or whatever." (Tr. 11:88.) There was no consideration for this transfer.
On September 23, 2009, Tucci formed March 31, LLC. Beatrix and the Tuccis' three children were named members of the LLC; Tucci is not a member. On November 24, 2009, Tucci and Beatrix conveyed their joint ¼ interest in 104 Monument Street to March 31, LLC. The release deed was recorded in the Cumberland County Registry of Deeds at Book 27424, Page 68. There was no consideration for this transfer. The Tucci family continues to live at this property.
On his 2009 tax return, Tucci claimed he paid $6,000 in "rent" and paid no real estate property taxes. Tucci again claimed to have paid $6,000 in "rent" in 2010 and paid no property taxes.
For many years, Tucci has secreted a substantial amount of cash in his bedroom ceiling, some of which was saved over his many years of living with his parents, some of which was the result of a worker's compensation lawsuit, and some of which was the result of a personal injury lawsuit. At trial, Tucci testified that as of January 2010, he had roughly $65,000 stashed in this location. However, it appears Tucci actually kept as much as $90,000 there. Throughout this litigation, this money has been referred to as Tucci's "nest egg." Despite this substantial nest egg, because he failed to disclose the existence of this money to the Maine Department of Health & Human Services ("DHHS"), Tucci received MaineCare from 2003 until at least 2012. Following a stroke in 2010, Tucci began to receive Social Security Disability Income ("SSDI"). Tucci also began receiving TANF benefits in late 2010, after falsely claiming he had no income or liquid assets.
Beginning no later than 2000, Tucci was engaged in business as a sole proprietor doing various handyman and home repair projects. Tucci has been the target of numerous customer complaints. For example, in 2008, Tucci was convicted of Class B theft after charging $10,000 to a customer's credit card without her permission. In March 2009, another customer obtained a $750 judgment against Tucci for damage done to her home. The customer had to take Tucci to disclosure court in order to execute the judgment. Another customer obtained a $3,500 judgment against Tucci in 2009; she was also forced to take Tucci to disclosure court and eventually settled for $ 1, 800. This is only a small sampling of the customers who have been harmed by Tucci within the last decade.
Around 2011, after receiving a number of consumer complaints, the Consumer Protection Division of the Attorney General's Office, led by AAGs Linda Conti and Carolyn Silsby, began investigating Tucci. In November 2011, AAG Conti issued to Tucci a civil investigative demand ("CID") for documents and testimony. Tucci produced no documents in response to the CID, and during his testimony, Tucci said he was receiving food stamps and SSDI and needed help from his church. He never disclosed the existence of March 31, LLC or his nest egg.
At a subsequent meeting between Tucci and the AAGs, Tucci produced a copy of a bank statement showing he had $14.06 in a joint account with his wife. Based on Tucci's representations, the AAGs believed him to be judgment-proof but continued to pursue a permanent injunction barring him from conducting business. In February 2012, the State filed a complaint against Tucci alleging he had violated the Unfair Trade Practices Act (UTPA). Throughout discovery, Tucci never disclosed the existence of March 31, LLC. He disclosed the existence of three bank accounts and claimed each contained a balance of $25 or less. At the UTPA trial, one consumer testified that in 2011, Tucci testified in disclosure court to having no assets and no money. Another consumer testified that Tucci had invited a lawsuit, saying, "I got nothing and you will not get anything."
By judgment dated April 9, 2013, the Superior Court permanently enjoined Tucci from operating a home repair or handyman business. He was ordered to pay $236,500.50 in restitution for the benefit of the consumers he had harmed. He was also ordered to pay $140,000 in civil penalties, which were to be suspended as long as Tucci paid $250 per month toward the restitution. To date, Tucci has made no payments toward the judgment.
Following trial, AAG Conti requested that Tucci fill out a financial disclosure form. Tucci never completed the form. Until March 29, 2016, based on the various representations Tucci made to the AAGs, his tax returns, and testimony of consumers at the UTPA trial, AAGs Conti and Silsby believed Tucci had no significant assets and was a tenant in an apartment at 104 Monument Street. Believing a disclosure proceeding would be futile, the AAGs chose not to disclose Tucci.
On March 29, 2016, the AG's office received a tip from the adult child of one of Tucci's victims that Tucci may have an ownership interest in 104 Monument Street and that the property was listed for sale for $2.5 million. At that point, AAG Conti asked that a title search be done and discovered for the first time the transfers of 104 Monument Street from Tucci to himself and his wife and then to March 31, LLC.
The State served Defendants with a summons and complaint for fraudulent transfer on April 8, 2016. The State thereafter filed the complaint and returns of service with this Court on April 19, 2016. During the litigation of this case, the State subpoenaed records from four different financial institutions where Tucci had accounts and learned that he had misrepresented the amounts in some of his bank accounts during the UTPA litigation. The State submitted expert evidence that Tucci's ¼ interest in 104 Monument Street was worth $81,000 in 2009.
II. Conclusions of Law
A. Applicable law
This case was brought pursuant to the Uniform Fraudulent Transfer Act, 14 M.R.S.A. § 3571 et seq. Following partial summary judgment against the State, the only remaining claim is raised under Section 3575(1)(A), which states: "A transfer made ... by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made ..., if the debtor made the transfer ... [w]ith actual intent to hinder, delay or defraud any creditor of the debtor...." Section 3575(2) contains a number of non-exclusive factors that may be considered in determining actual intent. These factors are whether:
A. The transfer or obligation was to an insider;
B. The debtor retained possession or control of the property transferred after the transfer;
C. The transfer or obligation was disclosed or concealed;
D. Before the transfer was made or obligation was incurred, the debtor sued or [was] threatened with suit;
E. The transfer was of substantially all the debtor's assets;
F. The debtor absconded;
G. The debtor removed or concealed assets;
H. The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
I. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
J. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
K. The debtor transferred the essential assets of the business to a lienor who had transferred the assets to an insider of the debtor.Id. § 3575(2); see Morin v. Dubois, 1998 ME 160, ¶ 5, 713 A.2d 956. The State must prove intent by clear and convincing evidence. Morin, 1998 ME 160, ¶ 3, 713 A.2d 956. The State is a creditor within the meaning of 14 M.R.S.A. § 3572(4), and Tucci is a debtor within the meaning of 14 M.R.S.A. § 3572(6).
The UFTA contains a statute of limitations which provides that a cause of action under Section 3575(A)(1) is extinguished unless it is brought "within 6 years after the transfer was made ... or, if later, within one year after the transfer ... was or could reasonably have been discovered by the claimant...."Id. § 3580(1).
B. Statute of limitations
Before proceeding to the merits of the State's claim, the Court must first determine whether the statute of limitations in 14 M.R.S.A. § 3580(1) is applicable to the State, and if so, whether Tucci may successfully assert the statute of limitations as an affirmative defense.
1. Applicability of statute of limitations.
The parties dispute the applicability of the statute of limitations to the State in this case. The State typically is not bound by a statute unless it is expressly named in the statute. Dep't of Corrs. v. Pub. Utils. Comm 'n, 2009 ME 40, ¶¶ 11-12, 968 A.2d 1047; Jenness v. Nickerson, 637 A.2d 1152, 1158 (Me. 1994). The UFTA defines a "creditor" as "a person who has a claim." 14 M.R.S.A. § 3572(4). The act in turn defines "person" to include "government or governmental subdivision or agency." Id. § 3572(9). However, the statute of limitations in Section 3580(1) does not use the term "creditor." Instead, it states that the cause of action is extinguished if not brought "within one year after the transfer ... was or could reasonably have been discovered by the claimant." "Claimant" is not defined in the act. Because the government is not specifically named or referenced in Section 3580(1), it is not entirely clear that the Legislature intended the UFTA's statute of limitations to apply to the State.
2. Equitable estoppel.
The Court finds that even if the statute of limitations does apply to the State, Tucci is equitably estopped from asserting it as an affirmative defense in this case. See 14 M.R.S.A. § 3581 ("Unless displaced by the provisions of this Act, the principles of law and equity, including ... estoppel ..., supplement its provisions."). "Estoppel prevents a defendant from asserting the statute of limitations when the defendant has acted to induce the plaintiff to reasonably refrain from commencing timely legal action that the plaintiff otherwise would have taken." Vacuum Sys., Inc. v. Bridge Constr. Co., 632 A.2d 442, 444 (Me. 1993). Equitable estoppel requires the State to show by a preponderance of the evidence that (1) Tucci's statements or conduct induced the State to act or fail to act; (2) the State relied on Tucci's statements or conduct to its detriment; and (3) the State's reliance was reasonable. See Auburn v. Desgrosseilliers, 578 A.2d 712, 714 (Me. 1990); Townsend v. Appel, 446 A.2d 1132, 1134 (Me. 1982).
Tucci's arguments against application of equitable estoppel focus largely on the fact that he never made misrepresentations to the State regarding the transfer of his property; indeed, the State never asked about any property transfers, and Tucci never volunteered the information. However, it is inescapable fact that Tucci misrepresented his overall financial condition to the State on multiple occasions, and those misrepresentations led the State to conclude that Tucci was judgment-proof. Tucci intended to - and in fact did - mislead the State into believing he had no money and no assets. As simple as it would have been for the State to conduct an online search of the Cumberland County Registry of Deeds, Tucci led the State to believe that such a search would be fruitless, as he had created the impression that he did not own real estate. Tucci, by his misrepresentations to the State regarding his financial condition throughout the UTPA investigation, induced the State to fail to institute a disclosure proceeding or otherwise investigate Tucci's assets.
Furthermore, the State relied on Tucci's misrepresentations to its detriment. Because the State did not investigate Tucci's assets until 2016 - seven years after the transfers were made and three years after the UTPA judgment was entered - the State was put at risk of losing its fraudulent transfer claim due to the statute of limitations that Tucci now argues as an affirmative defense. The State did not learn of the transfers of Tucci's property during the UTPA proceedings because Tucci intentionally and successfully misled the State into believing he had no assets of any significant value. The State affirms that had the State learned in 2013 of the transfers, it would have filed this action at that time. The State filed this lawsuit less than two weeks after learning of the transfers in 2016.
The final element of equitable estoppel requires a determination of whether the State's reliance on Tucci's misrepresentations was reasonable. On this point, Tucci's argument is well-taken that his behavior leading up to and during the litigation of the UTPA case should have put the State on notice that he was not trustworthy and that any information received from Tucci should be independently verified. However, the State based its belief not only on what Tucci told the AAGs during the UTPA proceeding, but also on the fact that Tucci invited at least one customer to sue him by claiming he had no assets, and representations Tucci made to the disclosure court in 2011 wherein Tucci claimed to have no money and no assets. The State also looked to apparent documentary evidence of Tucci's financial conditions such as bank statements showing only a few dollars in his bank accounts and tax returns indicating he was paying "rent" and not paying property taxes. Furthermore, the fact that Tucci was receiving MaineCare and TANF benefits indicated to the AAGs that the State in other contexts had been satisfied that Tucci had no money or assets. On multiple fronts, Tucci persistently crafted the illusion that he was judgment-proof. The Court concludes it was reasonable for the State to rely on Tucci's misrepresentations of his financial condition when it chose not to further investigate his assets.
Tucci cannot benefit from his successful ruse to mislead the State into believing he was judgment-proof. "One who has induced another to believe what is untrue may not later assert the truth." Auburn, 578 A.2d 712, 714 (Me. 1990). Having found the State has established each of the elements of equitable estoppel, the Court concludes Tucci is equitably estopped from asserting his statute of limitations defense. As such, the Court will consider the merits of the State's claim.
C. Fraudulent transfer
Looking to the considerations outlined in 14 M.R.S.A. § 3575(2), it is clear that a number of these circumstances are present in this case. Tucci retained possession or control of the property transferred after the transfer, given that he and his family have continued to live in the apartment. Id. § 3575(2)(B). Before the transfer was made, Tucci repeatedly was sued or threatened with suit by dissatisfied customers. Id. § 3575(2)(D). In order to further create the impression of insolvency, Tucci concealed his nest egg by stashing it in his bedroom ceiling; even Beatrix claimed at trial that she did not know of its existence. Id. § 3575(2)(G). As the property was transferred entirely without consideration, the value of the consideration received was not equivalent to the property transferred. Id. § 3575(2)(H).
Furthermore, there is little room for dispute that March 31, LLC, as a company comprised entirely of Tucci's family members, was an "insider" to whom the property was transferred. Id. § 3575(2)(A). Although Tucci retained his nest egg, the transfer of his home was of substantially all of Tucci's known assets, and Tucci was functionally insolvent after the transfer was made because the concealed nest egg could not be reached by creditors. Id. § 3575(2)(E), (I).
Tucci's purported reason for the transfer is that he wanted to make provision for his family in case some misfortune befell him. This reason is doubtful as a valid excuse to absolve Tucci of liability for fraudulent transfer, as our Law Court has noted "if one transfers assets while insolvent in order to provide for one's family, it is no less a fraudulent transfer." Morin, 1998 ME 160, ¶ 7, 713 A.2d 956. Furthermore, as the State argues, even if this reason were sufficient to make the transfer valid, that goal was accomplished when Tucci transferred the property to himself and Beatrix as joint tenants; it still does not explain the transfer to March 31, LLC. Given that Tucci was experiencing a number of customer complaints in 2008 and 2009, it is apparent that he was attempting to keep his assets out of reach of potential creditors.
Arguably, because Tucci appeared to be insolvent after transferring his property, his apparent insolvent status emboldened him to continue defrauding consumers to even greater extents, as evidenced by the larger projects he took on in 2011 and 2012 and for which he was ordered to pay extensive restitution in the 2013 UTPA judgment.
The State has shown clearly and convincingly that Tucci transferred his property with actual intent to hinder, delay, or defraud creditors. Pursuant to 14 M.R.S.A. § 3578, the Court will void the 2009 transfers and enjoin Defendants from further transferring the property. Because the State has obtained a judgment against Tucci, the State may file a lien on the property that was the subject of the 2009 transfers pursuant to 14 M.R.S.A. § 3578(2). As requested by the State, Defendants will also be ordered to pay the State's attorney's fees pursuant to 14 M.R.S.A. § 3578(1)(C)(3). See Samsara Mem'l Trust v, Kelly, Remmel & Zimmerman, 2014 ME 107, ¶¶ 48-50. The State is also entitled to recover its costs from Defendants. 14 M.R.S.A. § 1501. Pursuant to 14 M.RS.A, § 3578(1)(C)(3), attorney's fees and costs must be capped at twice the value of the transferred property.
III. Conclusion
For the foregoing reasons, judgment is entered for the State of Maine. The Court hereby voids the November 24, 2009 transfer and the February 24, 2009 transfer of Tucci's ¼ interest in 104 Monument Street. The Court enjoins Daniel B. Tucci, Sr., Beatrix T. Tucci, and March 31, LLC, as well as their heirs and assigns, from further transferring the property that was the subject of the 2009 transfers. It is further ordered that the State may file a lien on the subject property. Defendants are ordered to pay the State's reasonable attorney's fees and costs up to a maximum of twice the value of the transferred property, The Clerk is directed to incorporate this Judgment and Order into the docket by reference pursuant to MR. Civ. P. 79(a).