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Maine Shipyard v. Lilley, corrected 1-21-00

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MAINE SUPREME JUDICIAL COURT					Reporter of Decisions
Decision:	2000 ME 9
Docket:	Cum-99-234
Argued:	January 5, 2000
Decided:	January 21, 2000



	[¶1]  Daniel G. Lilley and Annette P. Lilley, trustees of the Lilley
Trust, and Daniel Lilley, individually, appeal from the judgment entered in
the Superior Court (Cumberland County, Mills, J.) finding Daniel Lilley and
the Lilley Trust liable on a claim of unjust enrichment.  Lilley asserts that the
Superior Court erred when it held him personally liable; that competent
evidence did not support the court's award of damages; and that the court
erred by admitting evidence concerning the Trust's settlement with the
party responsible for the damage to its property.  We disagree and affirm the
	[¶2]  Daniel and Annette Lilley are both trustees and beneficiaries of
the Lilley Trust, an inter vivos trust.  As trustees, they hold title to certain
waterfront property in South Portland known as Sunset Marina.  This
property was damaged by an oil spill in September 1996.  A tanker, the Julie
N., spilled oil in Portland harbor.  After the incident, Daniel Lilley asked
George Drivas, the president of Maine Shipyard and Marine Railway (Maine
Shipyard), the company that owned the property adjacent to Sunset Marina,
if his company could clean the Sunset Marina docks the same way it was
going to clean its own docks.  Drivas quoted Lilley a charge of $20,000 to
clean the docks with a pressure hose, but that did not include repairing the
docks.  During these negotiations, Lilley never disclosed his status as a
trustee or a beneficiary of the Lilley Trust.  Rather, he negotiated with Drivas
as if he alone were the outright owner of the docks.
	[¶3]  Crawford & Company and the Maritime Oil Corporation (MOC)
represented the owners of the Julie N. during the clean up process.  When
they arrived on the scene, together with U.S. Coast Guard officers, to inspect
the damage caused by the Julie N., Drivas was informed that the clean up
had to be in accord with their procedures and that he could not just wash off
the docks as he had planned.  At the direction of MOC and Crawford, Maine
Shipyard built decontamination pools on its property; dismantled the docks;
and moved them to the decontamination area.  The shipyard then lifted the
docks with a crane into the decontamination pools and began the
decontamination process.  The decontamination process consisted of
placing the float material in special bags, sealing and removing the bags and
then washing the floats with a hot sea or high-pressure wash.  MOC and
Crawford insisted that the Sunset docks be cleaned in the same manner. 
	[¶4]  Drivas informed Lilley that the MOC requirements involved
much more complicated work than they had originally discussed. Without
discussing payment, Lilley instructed Drivas to "go ahead and do what MOC
wanted."  Lilley told Drivas not to negotiate with Crawford regarding the
damage to the Sunset docks because Lilley himself would handle such
negotiation.  Lilley also requested Drivas clean his seven docks at Portland
	[¶5]  Maine Shipyard cleaned the docks from October 1996 to
January 1997 in the same manner it cleaned its own docks.  Unlike Drivas,
who made an agreement with Crawford for Crawford to provide material to
repair the floats after they were dismantled and cleaned, Lilley did not make
such an agreement.  Maine Shipyard, therefore, did not have the necessary
materials to rebuild Lilley's docks.  After the floats were cleaned, the
shipyard picked up the floats by crane and stored them across the street
from its property.  The shipyard cleaned between 105 and 110 docks.
	[¶6]  Drivas finished the cleaning phase in January 1997.  He
submitted a bill for $20,000 to Lilley for the hauling and cleaning of the
Sunset docks.  Drivas waited until Lilley instructed him to repair the docks
before Maine Shipyard performed any more work.  Lilley sent Drivas a letter
instructing Maine Shipyard to repair the docks.  Lilley agreed to pay another
$20,000 to repair the docks and to negotiate further expenditures.  Drivas
responded that it would cost more than $20,000 to make the necessary
repairs.  Lilley then sent a letter to Drivas confirming that he would pay
Maine Shipyard the cost of repairing the docks to pre-spill conditions. 
	[¶7]  In February 1997, Drivas; his superintendent, Arthur Randall;
his attorney, William Kany; Lilley and Lilley's attorney, David Perkins, met to
discuss the cost of fixing the docks.  Arthur Randall was responsible for
providing the materials and labor to repair Sunset's docks.  At the meeting,
Randall estimated that the labor to repair the docks would cost about
$1,000 per dock.  Lilley told Drivas to bill Crawford for the work that he
	[¶8]  Following Lilley's instructions, Drivas billed Crawford $115,000
for the cleaning, transport, and storage of 119 floats.  Unbeknownst to
Drivas, Lilley had previously settled the Trust's claim against the Julie N. 
Drivas learned of this settlement when Crawford returned his bill with a
letter explaining that it had already settled with Lilley and Sunset Marina for
the hauling and relaunching of the Sunset docks.  Drivas then submitted the
bill to Lilley.  When Lilley failed to respond, Drivas filed a mechanic's lien
against the Trust's property.  After Drivas filed the lien certificate, Lilley
continued to prod Drivas to complete the work.
	[¶9]  Maine Shipyard completed the repairs of the Sunset and
Portland docks and billed Lilley $260,456.66 for the work performed at
Sunset Marina and $5,400 for the work completed at Portland Pier.  Lilley
never paid Maine Shipyard for either charge.  To perfect its mechanic's lien,
Maine Shipyard filed suit and included counts for breach of contract and
unjust enrichment in its complaint.{1}  
	[¶10]  At trial, over Lilley's objection, the court ruled that evidence
of the settlement negotiations between Lilley and the representatives of the
Julie N. was admissible.  A representative of the Julie N., Meredith William
Meyers, testified in a video deposition admitted at trial, that the settlement
only included the costs of cleaning and repairing the floats and docks at
Sunset and that the settlement was determined on a square footage basis. 
He testified that the Sunset docks were 27,590 square feet and that the
insurers of the Julie N. settled with Lilley for $17.87 per square foot,
including electrical services and material.  
[¶11] The court found that no contract existed between Lilley and Maine Shipyard and entered a summary judgment on that claim. Lilley's counterclaims were submitted to the jury. Maine Shipyard's mechanic's lien and unjust enrichment claims were decided by the court. The jury found against Lilley and the Lilley Trust. The court dissolved the mechanic's lien finding that the shipyard filed prematurely. The court found the Lilley Trust and Daniel Lilley individually liable for unjust enrichment. The court determined that Lilley did not reveal his trustee status to Drivas. The court also stated that Maine's Probate Code did not "preclude finding Mr. Lilley individually liable on this equity as opposed to contract claim." The court awarded Maine Shipyard $132,604.75 for unjust enrichment.
	[¶12]  Before the Superior Court determined the damages for the
unjust enrichment claim, it heard various trial testimony regarding the cost
of cleaning and repairing the docks.  Walter Shivik, an expert for Maine
Shipyard, testified that the materials and labor necessary to clean and repair
the Sunset Marina would cost $223,364.  He also testified that Maine
Shipyard's charge of $260,000 was reasonable.  Another witness, Roger
Hale, testified that he estimated the cost of cleaning and repairing to be
between $400,000 and $500,000.  A defense expert, Charles Poole,
estimated that it would cost $35,972 to repair forty-six docks.  And as
stated above, the superintendent of the Maine Shipyard had estimated that
it would cost $1,000 to repair each dock. 
	[¶13]  After weighing all the testimony, the court found not credible
several of plaintiff and defense witnesses' estimates on damages.  Shivik's
testimony was based on inaccurate information regarding the number of
docks and square footage.  Poole's estimates were based on "inaccurate
assessments of the scope of that work" and, thus, understated.  The court
found the testimony of Arthur Randall credible and based its estimation of
labor costs on his testimony.  The court also relied on Maine Shipyard's
invoices for supplies to calculate material costs.  Subsequently, Lilley brought
this appeal.  
	[¶14]  The court did not err when it held Daniel Lilley jointly liable
with the Lilley Trust for unjust enrichment.  At common law, the trustee
"has full and primary liability."  Charles E. Rounds, Jr. & Eric P. Hayes,
Loring: A Trustee's Handbook § 7.3 (1997) (citing to Restatement (Second) of
Trusts § 261 (1959)).  A trustee may be personally liable to third parties
based upon contract, tort or the trustee's status as legal owner of the trust
property.{2}  See Restatement (Second) of Trusts §§ 248, 261, 265 (1959);
see also George Gleason Bogert, Trusts & Trustees, §§ 712, 731 (2nd ed.
1982 & Supp. 1999) [hereinafter Trusts & Trustees].
	[¶15]  Equitable remedies are also available against the trustee.  See
Haley v. Palmer, 107 Me. 311, 315, 78 A. 368, 370 (1910) (applying
equitable liability to trustee for debts of beneficiary); Trusts & Trustees,
§ 717 (discussing specific performance against trustee); Trusts & Trustees,
§ 725 (stating that "equity will shape its remedies to meet the facts of each
particular situation in order to prevent unjust enrichment.")  One equitable
remedy available to the court is unjust enrichment.  Unjust enrichment is
appropriate when "one party unjustly benefits from labor and materials
rendered by another with the expectation of payment."  See A.F.A.B., Inc. v.
Town of Old Orchard Beach, 639 A.2d 103, 104 (Me. 1994).  
	[¶16]  Although the court found no contract between Lilley and
Maine Shipyard, Lilley and the Lilley Trust received a benefit from Maine
Shipyard without compensation.  Thus, unjust enrichment liability is
appropriate.  Lilley's refusal to pay Maine Shipyard for the work from which
he and the Lilley Trust benefitted further affronts equity.  Lilley is a
beneficiary of the Lilley Trust as well as a trustee.  See Ware v. Gulda, 117
N.E.2d 137, 138 (Mass. 1954) (holding that a person "cannot place his
property in trust for his own benefit and keep it beyond the reach of his
creditors").  The Superior Court did not err when it found Daniel Lilley
liable as in individual for unjust enrichment.  A trustee is individually
amenable to equitable remedies available under the common law.
	[¶17]  Lilley contends that the court's damages award was not
supported by competent evidence.  We will sustain a damage award provided
some evidence exists to support the award.  See VanVoorhees v. Dodge, 679
A.2d 1077, 1081 (Me. 1996).  "Recovery under the doctrine of unjust
enrichment is measured by the value of benefits that the plaintiff proves are
actually received and retained by the defendant." A.F.A.B., 639 A.2d at 106. 
The trial court should consider all of the costs of improvements, including
the value of the work, labor, services, and materials furnished, when
determining the benefit of the value conferred.  See id. 
	[¶18]  Contrary to Lilley's contentions, the Superior Court based its
award of damages on competent evidence.  When determining the benefit
conferred, the court had a duty "to reconcile conflicting testimony, to
determine its relative weight, and to determine what part of the testimony
is credible and worthy of belief."  State v. Cotton, 673 A.2d 1317, 1321
(Me. 1996).  The court found the estimation of damages testimony of several
plaintiff and defense witnesses not credible.  After considering all the
evidence presented, the court found Arthur Randall's testimony most
credible and relied on his estimate of $1,000 per dock as a base for
awarding damages.  In its order, the court explained that it relied on
Randall's testimony because Randall, an employee of Maine Shipyard, gave
the estimate after completing three and one-half months of repair work on
the docks, but before the relationship between Lilley and Drivas had greatly
deteriorated and before Maine Shipyard filed its lien or lawsuit.  
	[¶19]  The court also based its materials cost on the total invoices
Maine Shipyard presented from its suppliers for materials used to repair the
docks.  The court properly based the damages on costs of improvements. 
A.F.A.B., 639 A.2d at 106 (noting that the court should consider the cost of
improvements when determining the value of the benefit conferred).  The
court had a plethora of evidence before it and weighed the evidence as to
credibility and determined damages based on the testimony it found most
credible.  See Cotton, 673 A.2d at 1321.  This is not error.  
	[¶20]  Lilley contends that the court should have excluded the
evidence of settlement negotiations between Lilley and the representative of
the Julie N. pursuant to M.R. Evid. 403 and 408.  We review evidentiary
rulings for clear error and abuse of discretion.  See Kay v. Hanover Ins. Co.,
677 A.2d 556, 558 (Me. 1996).

A.  Rule 403

	[¶21]  Lilley contends that the admitted settlement evidence was
"clearly prejudicial and confirming to the jury."  Rule 403 does not allow the
court to exclude any prejudicial evidence; the evidence must be unfairly
prejudicial.{3}  See Saucier v. Allstate Ins. Co., 1999 ME 197, ¶ 32, __
A.2d __.  This settlement evidence did not create an undue tendency to
cause the fact finder to decide on an improper basis.  The evidence merely
provided an estimation of the cost to repair each dock.  It was relevant
because Maine Shipyard was required to prove the value of the benefit
conferred upon Lilley and relevant as to Lilley's estimate of the damage
sustained to the Trust's property.

B.  Rule 408 

	[¶22]  Lilley also contends that the court committed reversible error
by admitting the evidence of settlement negotiations because such evidence
is prohibited under Rule 408.{4}  We held, in LeClair v. Commercial Union Ins.
Co., 679 A.2d 90, 92 (Me. 1996), that statements made in negotiations
between one party to the suit and a third party are admissible under Rule
408.  See id.  "The rule's policy objective of encouraging out-of-court
disposition of disputes between parties is not threatened when settlement
evidence is admitted at trial and one of the parties to the agreement is not a
party to the present action." Id. at 92-93; Guy Gannett Publishing Co. v.
University of Maine, 555 A.2d 470 (Me. 1989) (stating that "Rule 408 in
terms bars the admissibility of settlement agreements only on substantive
issues in dispute between the parties to the agreement").  Rule 408 did not
bar the admission of the settlement evidence because in this case only one
party to the litigation was a party to the settlement agreement.  See LeClair,
679 A.2d at 92; Gannett, 555 A.2d at 472-73.  Thus, the court properly
admitted the evidence regarding Lilley's settlement negotiations with the
representatives of the Julie N. 
	The entry is:
Judgment affirmed.

Attorneys for plaintiffs: Carl W. Tourigny, Esq., (orally) S. James Levis, Esq. Levis & Hull, P.A. 409 Alfred Street Biddeford, ME 04005 Thomas E. Clinton, Esq., (orally) Clinton & Muzyka, P.C. One Washington Mall, Suite 1400 Boston, MA 02108 Attorney for defendants: David J. Perkins, Esq., (orally) Perkins, Olson & Pratt, P.A. P O Box 449 Portland, ME 04112-0449
FOOTNOTES******************************** {1} . Lilley and the Lilley Trust counterclaimed, inter alia, against Maine Shipyard for slander of title, slander, negligence, breach of contract and fraud. A jury found in favor of Maine Shipyard on all the counterclaims pertaining to the issue on appeal. {2} . Lilley asserts that the court erred because it found liability pursuant to 18-A M.R.S.A. § 7-306 (1998) and that his conduct does not fall within the statute. The court explicitly found liability on equity not the statute: "The Court concludes that § 7-306 of Maine's Probate Code does not preclude finding Mr. Lilley liable on this equity, as opposed to a contract claim. See 18-A M.R.S.A. § 7-306(a) (1998)." We note certain types of trusts are excluded from the Probate Code's definition of "trust." See 18-A M.R.S.A. § 1-201(45) (1998). We do not reach the issue of whether the Lilley Trust is or is not a trust as defined by the Probate Code. {3} . Rule 403 states: Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time or needless presentation of cumulative evidence. M.R. Evid. 403. {4} . Rule 408 states: Evidence of (1) furnishing or offering or promising to furnish, or (2) accepting or offering or promising to accept, a valuable consideration in compromise or attempting to compromise a claim which was disputed as to either validity or amount, is not admissible to prove liability for, invalidity of, or amount of the claim or any other claim. Evidence of conduct or statements made in compromise negotiations or in mediation is also not admissible on any substantive issue in dispute between the parties. M.R. Evid. 408.