STATE OF MAINE
CUMBERLAND, ss.
SUPERIOR COURT
CIVIL ACTION
QOCKET NO: CV-I0-450
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NEW ENGLAND GUARANTY
INSURANCE COMPANY, INC.,
Plaintiff,
ORDER ON DEFENDANT JOHN
HARVEY AND COASTAL
RESTORATION, INC.'S MOTION
TO DISMISS
v.
ROBERT A. MASCIADRI,
JOHN HARVEY d/b/a/ COASTAL
RESTORATION SERVICES, INC., and
COASTAL RESTORATION, INC.,
flk/ a COASTAL RESTORATION
STATE OF MAINE
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CUmberland, SS
Defendants
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Defendants John Harvey and Coastal Restoration, Inc., move to dismiss
this action against them for failure to state a claim.
BACKGROUND
According to plaintiff New England Guaranty Insurance Company's
complaint, defendunt Robert Masciadri purchased property in Leeds, Maine, on
September 28, 2007. (CompI. err 7.) He took out a $132,000.00 loan from Quality
Investments, LLC, to finance the transaction. (CompI. err 8.) The loan was secured
by a mortgage on the property. (CompI. err 8.) Mr. Masciadri insured a building
on the property through a homeowner's insurance policy issued by plaintiff New
England Guaranty. (CompI.
as a mortgagee. (CompI.
err
err
11.) Quality Investments was listed on the policy
12.)
On or about September 6, 2008, a fire at the property damaged the insured
building. (CompI.
err
13.) Mr. Masciadri retained defendant John Harvey of
1
Coastal Restoration Services, Inc., as a public adjuster to assist with the
adjustment of the fire loss. (CampI. <JI<j[ 14-15.) Mr. Harvey worked with New
England Guaranty's representatives to assemble property and repair estimates.
(CampI. 9I 17.) Based on their work, Mr. Masciadri and New England Guaranty
agreed on a replacement coast of $68,124.26 for the damage to the property from
fire, minus the policy's $500.00 deductible. (CampI.
<j[<j[
18-19.)
Disputes arose over and among the multiple payees named on the check
for the payment. (CampI.
<j[
21.) Over the course of several months, New England
Guaranty had to issue and reissue the check several times at Mr. Harvey's
direction. (Compl. 9I 21.) During this time, Mr. Harvey instructed New England
Guaranty that Quality Investments was to be named as a payee on the check
because there was an outstanding balance on Mr. Masciadri's mortgage. (CampI.
9[ -22.) New England Guaranty issued its final check to Mr. Harvey on February 4,
2010, in the agreed amount of $67,624.26 made payable solely to Mr. Masciadri.
(CampI. 9[ 23.) This was an error. (CampI.
<j[
23.) New England Guaranty
mistakenly omitted Quality Investments and other payees from the check.
(CampI. 9[ 23.)
Mr. Harvey turned the check over to Mr. Masciadri, despite knowing that
Mr. Masciadri was not entitled to the full amount of the check and that Quality
Investments should have been listed as a payee. (CampI.
<j[
24.) Likewise, Mr.
Masciadri took the check knowing that he was not entitled to retain the full
,Hnount tendered. (CampI. 9I 25.) Mr. Masciadri and Mr. Harvey discussed New
England Guaranty's failure to include Quality Investments as a payee, and Mr.
Masciadri told Mr. Harvey that he had made an arrangement with New England
Guaranty whereby Quality Investments did not need to be listed on the check.
2
(Compl. err91 26-27.) This was false. (CompI. err 27.) Mr. Masciadri subsequently
deposited or cashed the check and presumably disappeared with the money.
(CompI. Cf[err 25, 30.) New England Guaranty and Quality Investments each made
a demand on Mr. Masciadri and Mr. Harvey for the check or the funds. (CompI.
<[Cf[ 28-29.) The complaint does not indicate when these demands were made. For
the purpose of this motion to dismiss, the court will assume a demand was made
on Mr. Harvey before he gave the check to Mr. Masciadri. All demands were
ignored or denied. (CompI. err<rr 28-29.)
A Judgment of Foreclosure and Sale was issued by the Androscoggin
County Superior Court in favor of Quality Investments on February 8, 2010.
(CompI. err 9.) The insured property was sold at foreclosure on June 15, 2010,
presumably leaving a deficiency. (CompI. err 10.) New England Guaranty was
forced to pay Quality Investments $67,624.26, because Mr. Masciadri had failed
to do so out the funds he received. (CompI. Cf[ 30.) In return, New England
Guaranty received an Assignment and Release Agreement executed by Quality
Investments. (Com pI. err 30.)
On September 8, 2010, New England Guaranty filed this complaint against
Mr. Masciadri, Mr. Harvey, and Coastal Restoration as Mr. Harvey's employer.
Three of the nine counts name Mr. Harvey. Count I asserts that Mr. Harvey had a
duty under the insurance policy, the mortgage, and "other sources" to assure
that Mr. Masciadri only accepted insurance proceeds due to him. Likewise, Mr.
Harvey had a duty to assure that proceeds due to Quality Investments were
paid. Counts II and III accuse Mr. Harvey of converting funds due to New
England Guaranty and Quality Investments, respectively. Finally, Count IX
3
claims that Coastal Restoration is accountable for Mr. Harvey's actions under the
doctrine of respondeat superior.
On October 18, 2010, defendants Mr. Harvey and Coastal Restoration filed
a one-page motion to dismiss. The motion argues that the allegations show that
as a negotiable instrument the check was the property of Mr. Masciadri at
issuance, and that Mr. Harvey merely delivered it. The motion does not contain
any citations to supporting law.
DISCUSSION
"A motion to dismiss tests the legal sufficiency of the complaint." Heber v.
LlICeme-i/1-Mai71C Village Corp., 2000 ME 137,
<IT
7, 755 A.2d 1064, 1066 (quoting
McAfee v. Cole, 637 A.2d 463,465 (Me. 1994)). The Court examines "the complaint
in the light most favorable to the plaintiff to determine whether it sets forth
elements of a cause of action or alleges facts that would entitle the plaintiff to
relief pursuant to some legal theory." Id. (quoting McAfee, 637 A.2d at 465). "For
purposes of a 12(b)(6) motion, the material allegations of the complaint must be
taken as admitted." McAfee, 637 A.2d at 465. "Dismissal is warranted when it
appears beyond a doubt that the plaintiff is entitled to no relief under any set of
facts that rs]he might prove in support of [her] claim." Jo],a/1son v. Dunnington,
2001 ME 169, err 5, 785 A.2d 1244, 1245-46.
Plaintiff's Count I alleges negligence. To recover for negligence, the
plaintiff must show: (1) the defendants owed him a duty; (2) the defendants
breached that duty; and (3) the breach proximately caused him injury. Brown v.
Crown Equip. Corp., 2008 ME 186, 114, 960 A.2d 1188, 1193. While the defendants'
motion does contain a vague allusion to Article III of the Uniform Commercial
4
Code, the core of their argument appears to be that Mr. Harvey did not owe a
duty to either New England Guaranty or Quality Investments.
The 1986 case of Northeast Bnnk of LC'"wist071 & Auburn v. Murphy dealt with
facts similar to those alleged in the present case, and its reasoning is instructive.
521 A.2d 344 (Me. 1986). In Murphy, the plaintiff bank had a judgment lien
against one Ms. Crochere on any proceeds she might recover in a separate
personal injury lawsuit. [d. at 346. Daniel Murphy was Ms. Crochere's attorney.
Jd. Ms. Crochere's case ul timatel y settled, and the defendant's insurance
company mailed Murphy a settlement check. Jd.
Attorney Murphy and the insurance company both knew of the bank lien,
but the insurance company negligently failed to protect the bank when issuing
the settlement check. [d. On realizing its error, the insurance company
immediately contacted Murphy, who agreed to use the money to satisfy the lien.
ld. Murphy then proceeded to disburse the funds to himself, certain physicians
and a hospital, and to Ms. Crochere. Jd. No money was disbursed to the bank,
and Ms. Crochere declared bankruptcy shortly thereafter. [d.
The bank brought a conversion action against the insurance company and
Murphy jointly, and the insurance company brought a cross-claim against
Murphy for indemnity. [d. After a non-jury trial, the Superior Court found that
Murphy and the insurance company were both liable for conversion, and that
Murphy was liable to indemnify the insurance company. [d.
On appeal, Murphy argued that he should not have to indemnify the
insurance company for its act of conversion. [d. at 350. The Law Court disagreed,
stating that the case was "an appropriate one for indemnity in order 'to do justice
within the law so that one guilty of an active or affirmative act of negligence [or
5
intentional act] will not escape liability, while another whose fault was only
technical or passive assumes complete liability.f1' Id. at 351 (quoting 41 Am. J1Ir.
2d Indemnity § 20, at 706 (1968)). Murphy knew that the bank was entitled to a
portion of the funds he had received from the insurance company, and had been
expressly told that the check was issued in error. Id. at 350-51. Furthermore, he
had entered into a contract with the insurance company by promising to
discharge the lien, and the insurance company reasonably relied on this
agreement. Id. at 351. Under the circumstances, Murphy was obligated to
indemnify the insurance company against the bank. rd. (citing Restatement of
Restitutio11 § 97 (1937)).
In the case at bar, the Quality Investments has already been made whole
by the insurer. New England Guaranty's claim against Mr. Harvey and Coastal
Restoration is, then, partially a claim for contribution or indemnification and
partially a claim under the bank's assigned rights. New England Guaranty
alleges that Mr. Harvey, like the attorney in Murphy, knew that Quality
Investments
W<l5
entitled to a portion of the funds issued to Mr. Masciadri. The
court must also infer that New England Guaranty told Mr. Harvey of the error
and demanded the erroneous check's return while it was in his possession.
The current action differs from Murphy in that there is no allegation that
Mr. Harvey promised to ensure that the funds went to the proper party, or that
New England Guaranty had reason to trust Mr. Harvey to protect them from
their own error. Nonetheless, the facts are close enough to those in Murphy that
dismissal would be premature. New England Guaranty has alleged a factual
scenario in which it may be able to prove that Mr. Harvey's own negligence or
6
recklessness compels him and his employer, Coastal Restoration, to share the
insurance company's loss.
Counts II and III allege that Mr. Harvey converted the check and the
funds it embodied. The elements of conversion are:
(1) a sh6wing that the person claiming that his property was
converted has a property interest in the property; (2) that he had
the right to possession at the time of the alleged conversion; and
(3) that the party with the right to possession made a demand for
its return that was denied by the holder.
Withers v. Hackett, 1998 ME 164,
err 7, 714
A.2d 798, 800. The plaintiff all eges that
Mr. Harvey knew or should have known that Mr. Masciadri was not entitled to
the full amount of the check made payable to him. The plaintiff had a right to
funds and made a demand on Mr. Harvey for the return of the check.
Taking the allegations as true, Mr. Harvey could be liable for conversion if
he possessed the check when the plaintiff demanded its return. The plaintiff had
a superior right to the funds represented by the check, demanded their return,
and Mr. Harvey refused the demand by giving the funds to another who
continues to claim them as his own. This would meet the elements of conversion
through wrongful interference. Mr. Harvey's employer could be liable for his
actions through respondeat superior.
The entry is:
The defendants' motion to dismiss is denied.
DATE:
J.&. Z,/t off
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0000 0 0 7 5 5 4"
HERZER, DAVID
415 CONGRESS STREET PO BOX 4600 PORTLAND ME 04112-4600
F
'NEW ENGLAND GUARANTY INSURANCE COMPANY I PL
02 0000008588
CONDON, BRIAN D JR
126 MAIN STREET PO BOX 169 WINTHROP ME 04364
F
COASTAL RESORATION INC
F
JOHN HARVEY
DEF
DEF
RTND
09/08/2010
RTND
RTND
10/05/2010
10/05/2010
