United States Court of Appeals
For the First Circuit
No. 00-1302
ACHILLE BAYART & CIE,
Plaintiff, Appellant,
v.
BYRON A. and RUTH CROWE,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
Before
Torruella, Chief Judge,
Bownes, Senior Circuit Judge,
and Boudin, Circuit Judge.
Graydon G. Stevens, with whom U. Charles Remmel, II and Kelly,
Remmel & Zimmerman were on brief, for appellants.
Robert J. Keach, with whom Michael A. Fagone and Bernstein, Shur,
Sawyer & Nelson were on brief, for appellees.
January 26, 2001
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BOWNES, Senior Circuit Judge. This is a fraudulent transfer
action brought by the plaintiff-appellant, Achille Bayart & Cie
(“Achille Bayart”), to recover the value of its debt plus double
damages from the defendants-appellees, Byron and Ruth Crowe. The case
was tried before a jury. At the conclusion of the plaintiff's case,
the defendants moved for judgment as a matter of law pursuant to Fed.
R. Civ. P. 50(a). Finding the plaintiff's evidence insufficient to
permit a jury to conclude that there was value in the assets of the
defendants' corporation which were over and above the amount of its
secured debt, which was the plaintiff's theory of the case, the
district court granted the defendants' motion. The plaintiff appeals.
For the reasons stated below, we affirm the district court.
I. BACKGROUND
Andrew Crowe & Sons, Inc. d/b/a Crowe Rope Company (“Crowe
Rope”) manufactured rope, twine, and related products. The defendant,
Byron Crowe,1 was the president and sole shareholder of Crowe Rope. The
plaintiff, Achille Bayart, supplied raw materials to Crowe Rope and was
owed $132,827.20.
Crowe Rope's manufacturing operations were conducted at
plants located on real estate owned by or leased to Crowe Rope. Crowe
Rope owned three pieces of real estate. Byron and Ruth Crowe
1 His wife, Ruth Crowe, is also named as a defendant, but
apparently she did not participate in the operation of Crowe Rope.
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personally owned myriad parcels of real estate, four of which were
leased to Crowe Rope; two others were undeveloped. Six other parcels
of real estate were leased to Crowe Rope by Portco, Inc. and Floatation
Products, Inc. Byron Crowe owned all of the outstanding stock of
Portco and Floatation Products.
Crowe Rope was in severe financial difficulty. As of
December 12, 1995, it was indebted in the amount of $8,491,493.82 to
Fleet National Bank of Massachusetts (“Fleet Bank”)2 pursuant to three
promissory notes executed by Crowe Rope and certain of its affiliates,
including Portco and Floatation Products. In addition, Byron Crowe
personally owed Fleet Bank $50,223.61 and Portco was indebted to Fleet
Bank in the amount of $150,670.83. Crowe Rope was the guarantor of
these debts and was obligated to pay Fleet Bank upon any default. In
total, Crowe Rope, either directly or as guarantor, owed Fleet Bank
$8,692,388.26. This debt was secured by mortgages on, and security
interests in, all of the assets of Crowe Rope.
After Crowe Rope failed to meet its obligations to Fleet
Bank, the bank demanded payment in full; Crowe Rope defaulted. Crowe
Rope also defaulted on debts due to other creditors. The plaintiff
Achille Bayart was among these other creditors.
2 The original loan transactions had been with Shawmut National
Bank, N.A. (“Shawmut Bank”). Shortly before December 12, 1995, Shawmut
Bank was acquired by and merged into Fleet Bank. By this acquisition
and merger, Fleet Bank acquired the loans and security positions of
Shawmut Bank.
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In December of 1995, the defendants entered into an agreement
with J.P. Bolduc (“Bolduc”). Bolduc had negotiated an agreement with
Fleet Bank whereby Bolduc would acquire the debt owed by Crowe Rope to
Fleet Bank. Through an entity known as JPB Maine Holdings, LLC
("Holdings"), Bolduc acquired all of the Fleet Bank debts by paying
Fleet Bank approximately $8.4 million. In exchange for such payment,
Fleet Bank transferred to Holdings loan documents evidencing
obligations in the total amount of $8,692,388.26. The net result of
this transaction was that Holdings became a secured creditor of Crowe
Rope, Floatation Products, Portco, and the defendants.
On December 15, 1995, the defendants transferred their
undeveloped property to the Bolduc-owned JPB Maine Capital Limited
Liability Company ("Real Estate LLC"). Crowe Rope transferred all of
its real estate and business assets including machinery, equipment, and
inventory to another Bolduc entity known as Crowe Rope Industries
Limited Liability Company ("Operating LLC"). Holdings then foreclosed
on the real estate owned by both Real Estate LLC and Operating LLC and
subsequently sold it to Real Estate LLC. In addition, Holdings
foreclosed on the machinery and equipment owned by Operating LLC and
sold it to Operating LLC. Holdings LLC retained the inventory owned by
Operating LLC in satisfaction of debt.3
3 Intellectual property in the form of patents owned by Byron
Crowe was included in the December 15, 1995 transactions. The buyer
estimated that the patents had no value and attributed no value to it
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Byron Crowe and Bolduc also entered into a non-competition
and consulting agreement whereby Byron Crowe would receive $60,000.00
in exchange for his availability for consulting purposes as well as his
agreement not to compete with Bolduc in the rope-making industry. The
Crowes also received an annuity of $40,000.00 “for so long as either
Byron Crowe or Ruth Crowe are living.” The plaintiff's expert
testified that the value of the annuity was $532,637.00.
The plaintiff brought suit pursuant to the Maine Uniform
Fraudulent Transfer Act, Me. Rev. Stat. Ann. tit. 14, §§ 3751 et seq.
(West Supp. 1999) (“Maine UFTA”), arguing that there remained equity in
Crowe Rope over and above the amount paid by Bolduc to Fleet Bank in
satisfaction of the secured debt. The plaintiff claimed that the
Crowes were paid $600,000.00 while the unsecured creditors of Crowe
Rope, the plaintiff included, received nothing.
The plaintiff brought suit against the Crowes personally to
recover the value of its debt in the amount of $132,827.00 plus double
damages. The case was tried before a jury. At the conclusion of the
plaintiff's case, the defendants moved for judgment as a matter of law
pursuant to Fed. R. Civ. P. 50(a). Finding the plaintiff's evidence
insufficient to permit a jury to conclude that there was value in the
assets of the defendants' corporation over and above the amount of its
secured debt, the district court granted the defendants' motion.
in the transactions.
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On appeal, the plaintiff argues that the district court erred
when it granted the defendants' motion for judgment as a matter of law.
It contends that “the evidence submitted was sufficient to establish
that the value of Crowe Rope's assets exceeded its secured debt by more
than the amount of Achille Bayart's claim.” The plaintiff's claim
hinges on “Plaintiff's Exhibit 23 and all reasonable inferences which
can be drawn therefrom”. The plaintiff also contends that the district
court erred by excluding Plaintiff's Exhibit 6. We will address each
of these contentions in turn.
II. DISCUSSION
We review judgments entered as a matter of law under Rule
50(a) de novo, viewing the evidence in the light most favorable to the
nonmoving party. Ed Peters Jewelry Co. v. C & J Jewelry Co., 124 F.3d
252, 261 (1st Cir. 1997); see also Coyante v. Puerto Rico Ports Auth.,
105 F.3d 17, 21 (1st Cir. 1997). “To warrant submission of an issue to
the jury, the plaintiff must present more than a mere scintilla of
evidence and may not rely on conjecture or speculation.” Katz v. City
Metal Co., 87 F.3d 26, 28 (1st Cir. 1996) (internal quotation marks
omitted). We review the exclusion of evidence for abuse of discretion.
Drohan v. Vaughn, 176 F.3d 17, 23 (1st Cir. 1999).
A. Rule 50(a) and Exhibit 23
The plaintiff contends that the district court improperly
dismissed its case under Fed. R. Civ. P. 50(a) because the plaintiff
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had submitted sufficient evidence to permit a jury to conclude that
there was value in the assets of Crowe Rope over and above the amount
of its secured debt. Rule 50(a)(1) states:
If during a trial by jury a party has been fully
heard on an issue and there is no legally
sufficient evidentiary basis for a reasonable
jury to find for that party on that issue, the
court may determine the issue against that party
and may grant a motion for judgment as a matter
of law against that party with respect to a claim
or defense that cannot under the controlling law
be maintained or defeated without a favorable
finding on that issue.
Fed. R. Civ. P. 50(a).
Under the provisions of the Maine UFTA, a transfer may be
defined as fraudulent if the debtor made the transfer or incurred the
obligation with actual intent to hinder, delay, or defraud any creditor
of the debtor or without receiving a reasonably equivalent value in
exchange for the transfer while the debtor was insolvent at the time.
See Me. Rev. Stat. Ann. tit. 14, § 3575. A debtor is deemed insolvent
if the sum of the debtor's debts is greater than all of the debtor's
assets at a fair valuation or if the debtor is generally not paying its
debts as they become due. See id. §§ 3573 (1), (2). To recover under
the Maine UFTA, a plaintiff must prove that there was some determinable
amount of value in the assets of the debtor over and above the amount
of the secured debt. See Ed Peters, 124 F.3d at 262 (holding, under
virtually identical provisions of the Rhode Island Uniform Fraudulent
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Transfer Act, that the plaintiff must establish there was value in the
debtor over and above the secured debt). The district court, by
granting the defendants' Rule 50(a) motion, determined that the
plaintiff submitted insufficient evidence to meet its burden.
The plaintiff, on appeal, focuses on the district court's
refusal to allow the jury to analyze the evidentiary significance of
Exhibit 23 and the jury's lack of opportunity to draw reasonable
inferences therefrom. Exhibit 23, a proposal letter from Key Bank of
Maine extending to Bolduc asset-based financing in the amount of
$11,500,000.00, was submitted by the plaintiff as the predicate for
determining the amount of money ultimately borrowed by Bolduc to
finance the Crowe Rope acquisition.
The plaintiff's theory is as follows:
By process of elimination, if one removes from
the total assets of $11,500,000 all of the real
estate value (which would include the $750,000 in
new capital to pay down mortgages) and Bolduc's
injection of $750,000 in working capital, the
value of the remaining assets of Crowe Rope
Industries - which consists of the machinery and
equipment acquired from Crowe Rope - exceeds the
Fleet debt by more than $600,000.4
4 The plaintiff provides the following summary of its analysis:
11,500,000 Combined assets of Crowe Rope Industries and
JPB Maine Capital
(1,415,950) Transfer of tax values of real estate
10,084,050 VALUE OF CROWE ROPE INDUSTRIES
10,084,050 Value of Crowe Rope Industries
(8,692,493) Crowe Rope debt to Fleet
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The plaintiff maintains that by not allowing the jury to
engage in the analysis of Exhibit 23, a document admitted into evidence
without objection, the district court erred in failing to assess the
sufficiency of the contents of the document to support the inferences
the plaintiff wished to draw therefrom. Furthermore, the plaintiff
claims that the contents of Exhibit 23 were substantive evidence which
the jury should have been allowed to consider in determining the facts
and sufficiency of evidence to support a verdict.
After careful review of the entire record, we agree with the
district court that Exhibit 23 is not a sufficient predicate to permit
a jury to draw any rational conclusions as to whether or not the fair
value of Crowe Rope's assets exceeded the amount owed to Fleet Bank
under its various debt instruments, mortgages, and security agreements.
Exhibit 23 was a preliminary, marked-up, unsigned draft proposal and
was not the final document pursuant to which Bolduc completed his loan
negotiations. The initial proposal was subject to contingencies of
which there is no evidence in the record of satisfaction. For example,
this draft proposal states, in pertinent part, that:
[t]he loans are subject to Bank commissioned,
Borrower funded appraisal of Machinery and
Equipment as well as appraisals of all real
estate . . . . The appraisals must indicate
( 750,000) Equity Injection
641,557 VALUE OF CROWE ROPE OVER FLEET DEBT
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collateral value deemed adequate by the Bank, and
will be performed by Bank-approved appraisers.
Furthermore, there is no evidence in the record that Key Bank actually
loaned Bolduc $11.5 million. Bolduc did not testify that he received
$11.5 million from Key Bank and did not testify to the exact amount
that he ultimately received from Key Bank. He merely testified that
the proposal was eventually finalized, but that final document could
not be located and Bolduc could not recall its terms. Therefore, a
jury could only speculate as to the amount Bolduc actually received
from Key Bank. A jury should not be asked to decide an issue that
relies solely on conjecture and speculation. See Katz, 87 F.3d at 28
(“To warrant submission of an issue to the jury, the plaintiff must
present more than a mere scintilla of evidence and may not rely on
conjecture or speculation.”).
The plaintiff had the burden of proving that there was some
determinable amount of value in the assets of the debtor over and above
the amount of the secured debt. Ed Peters, 124 F.3d at 262. Based on
the entire record, specifically Exhibit 23, the plaintiff was unable to
meet its burden without speculation and conjecture.
The plaintiff also argues that the money paid to the Crowes
personally was evidence that there was equity in Crowe Rope over and
above the secured debt. In essence, the plaintiff claims that it is
unfair that the Crowes received approximately $600,000.00 while the
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plaintiff and other creditors received nothing. After careful review
of the entire record, however, we find that this argument does not
support the plaintiff's theory that there was equity in Crowe Rope over
and above the secured debt. The payments to the Crowes can be
summarized in two parts: (1) Byron Crowe received from Bolduc
$60,000.00 pursuant to a consulting and non-competition agreement; and
(2) a $40,000.00 annuity to be paid to the Crowes “for so long as
either Byron Crowe or Ruth Crowe are living.” The value of the annuity
at the time was valued at $532,637.00.
These payments were made to the Crowes personally; not to
Crowe Rope. Byron Crowe and Bolduc agreed that Byron Crowe would
receive $60,000.00 for his consultation services. The testimony
revealed that Byron Crowe was an icon in the rope-making industry, with
thirty years of experience behind him. For those same reasons, Bolduc
and Byron Crowe agreed that Byron Crowe would not compete with Bolduc
in the rope-making industry. This $60,000.00 payment was to be made to
Byron Crowe individually; not to Crowe Rope. Likewise, the $40,000.00
annuity was given in exchange for various pieces of property owned by
the Crowes personally; these parcels were not owned by Crowe Rope,
though some of the property may have been leased to Crowe Rope by the
Crowes.
After careful review of the entire record, we find that the
plaintiff failed to prove that there was equity in Crowe Rope over and
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above the amount of its secured debt. The district court was correct
in granting the defendants' motion for judgment as a matter of law
pursuant to Fed. R. Civ. P. 50(a).
B. Exclusion Of Exhibit 6
The plaintiff next argues that the district court erred when
it excluded Exhibit 6. As noted above, we review the exclusion of
evidence for abuse of discretion. Drohan, 176 F.2d at 23. “We afford
wide latitude to trial courts in these purlieus.” United States v.
Winchenbach, 197 F.3d 548, 559 (1st Cir. 1999). “Only rarely--and in
extraordinarily compelling circumstances--will we, from the vista of a
cold appellate record, reverse a district court's on-the-spot
judgment.” Id.
Exhibit 6 is an “internal memorandum” written on August 21,
1995 by Byron Crowe's attorney, Gregory Tselikis, outlining the status
of Crowe Rope. The plaintiff tried to offer this document into
evidence twice. Both times, defense counsel objected to its
introduction into evidence on relevance grounds, arguing that “[i]t
could only be offered to establish some element of intent and Mr. Crowe
testified he never read the memorandum.” Both times, the district
court sustained the defendants' objection and excluded the exhibit. On
appeal, the plaintiff contends that this evidence was offered “as
circumstantial evidence that the assets of Crowe Rope had value over
and above the amount of secured debt.”
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Evidence is relevant only if it tends “to make the existence
of a fact that is of consequence” more or less probable. Fed. R. Evid.
401. Nothing in the record indicates that this memorandum shows that
there were assets over and above the secured debt. The plaintiff
directs our attention to a single sentence in the memorandum concerning
refinancing: “pull $400-600K out of refi [sic] to pay small dividend
to trade.” Based upon this single reference to a possible refinancing,
however, a jury would not be able to calculate the existence of equity
in the Crowe Rope assets. There are no specific references to the
terms of the refinancing nor the collateral that would have to be
offered for the purpose of carrying out this refinancing endeavor. We
agree with the district court that this document was irrelevant to
prove that there was equity in Crowe Rope over and above the secured
debt.
This document is also insufficient to prove that the
defendants intended to defraud their creditors. The two witnesses who
testified about this document, the defendant Byron Crowe and Matthew
Burns, a turn-around specialist hired by Crowe, stated that they may
have received the document, but never read it. Therefore, the
plaintiff's theory of intent is unsupported. We hold that the district
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court did not abuse its discretion when it excluded Exhibit 6 as
irrelevant.5
III. CONCLUSION
For the foregoing reasons, we affirm the district court.
Affirmed.
5 For the first time on appeal, the plaintiff claims that the
“testimony provided sufficient foundation to admit the evidence under
[Fed. R. Evid.] 801(d)(2)(D) as a statement by a party's agent
concerning a matter within the scope of the agency, made during the
existence of the relationship.” Because we agree with the district
court that this exhibit should be excluded on relevance grounds, Fed.
R. Evid. 401, we need not address Rule 801(d)(2)(D). Moreover, we do
not, except in rare circumstances, not applicable here, consider a
claim not raised in the district court.
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