No Unequal Bargaining Power Required: N.H. Supreme Court Affirms Constructive Trust and Applies Discovery Rule to Latent Ownership Claims in Family Business

Introduction

In Michael L. McLaughlin v. J. Martin McLaughlin (Case No. 2024-0254), the Supreme Court of New Hampshire affirmed a superior court order imposing a constructive trust in favor of the plaintiff, Michael L. McLaughlin, over fifty percent of the shares of McLaughlin Moving Company, Inc. (MMCI). The case arises out of a long-running family business arrangement in which two brothers operated multiple related moving companies that had been acquired and managed by their father, John H. McLaughlin (John H.).

The core dispute centered on whether an oral agreement from 1973 obligated the defendant, J. Martin McLaughlin, to hold and later distribute half of MMCI’s shares to the plaintiff, and whether the plaintiff’s 2020 suit was time-barred under RSA 508:4’s statute of limitations. The Supreme Court addressed two principal issues:

Whether clear and convincing evidence supported the imposition of a constructive trust over fifty percent of MMCI’s shares.
Whether the plaintiff’s claim was timely in light of the discovery rule under RSA 508:4 (both the pre-1986 common law formulation and the codified statutory version).

The Court affirmed on both grounds, offering clarifications that will resonate in New Hampshire equity jurisprudence, particularly in unjust enrichment and limitations defenses in closely held and family-owned business disputes.

Summary of the Opinion

The Court held that:

Clear and convincing evidence supported the trial court’s finding of an enforceable oral agreement by which John H. purchased MMCI for both sons, with title temporarily placed in the defendant’s name until the plaintiff reached majority, and that the defendant would later distribute fifty percent of the shares to the plaintiff.
The unjust enrichment element required for a constructive trust was satisfied. The defendant’s retention of 100% of MMCI after decades of the plaintiff’s labor and shared resources would be unconscionable. The Court explicitly rejected the defendant’s argument that “unconscionability” demands proof of grossly unequal bargaining power.
The plaintiff’s action, filed in July 2020, was not time-barred. Under both the pre-1986 common law discovery rule and the current codified version of RSA 508:4, the trial court’s factual finding that the plaintiff did not discover, and could not reasonably have discovered, the defendant’s claim to sole ownership before 2019 was supported by the record. Thus, the claim was timely under either the six-year period (pre-1986) or the three-year period (current statute).

The Court therefore affirmed the constructive trust over fifty percent of MMCI’s shares.

Analysis

Precedents Cited and How They Shaped the Decision

Elter-Nodvin v. Nodvin, 163 N.H. 678 (2012) and In re Estate of Couture, 166 N.H. 101 (2014): The Court drew on these cases to reiterate that constructive trusts have “no rigid requirements” and are a flexible equitable remedy imposed when clear and convincing evidence shows a confidential relationship, a transfer of property, and unjust enrichment. This flexibility undergirds the Court’s rejection of the defendant’s attempt to narrow “unconscionability.”
Patey v. Peaslee, 101 N.H. 26 (1957) and Lamkin v. Hill, 120 N.H. 547 (1980): These cases articulate the equitable foundation of constructive trusts—restitution to prevent unjust enrichment. The Court relied on this restitutionary rationale to frame the unjust enrichment analysis.
Salisbury v. Lowe, 140 N.H. 82 (1995), Shaka v. Shaka, 120 N.H. 780 (1980), and Drucker’s Case, 133 N.H. 326 (1990): These decisions guided the standard of review and deference to trial court credibility determinations. Salisbury also affirmed that a constructive trust can be imposed despite conflicting documentary evidence if the fact-finder credits witness testimony under the clear and convincing standard.
Clooney v. Clooney, 118 N.H. 754 (1978) and Milne v. Burlington Homes, Inc., 117 N.H. 813 (1977): The Court cited Clooney to show that significant contributions made in the belief of ownership can establish unjust enrichment. By invoking Milne and Clooney, the Court signaled that unconscionability in unjust enrichment is not limited to contexts of gross bargaining power disparities.
Clapp v. Goffstown School District, 159 N.H. 206 (2009) and Cadle Co. v. Bourgeois, 149 N.H. 411 (2003): Clapp confirms unjust enrichment may be available where a contract is breached or invalidated; Cadle provides the counterpoint that there is no unjust enrichment where the benefit is retained according to a valid agreement. The Court positioned this case on the Clapp side: the defendant’s retention exceeded what the oral agreement allowed.
Chase v. Ameriquest Mortgage Co., 155 N.H. 19 (2007): Cited for the judiciary’s “broad and flexible equitable powers,” supporting an adaptable approach to constructive trusts and unjust enrichment rather than rigid constraints like a bargaining-power requirement.
Balzotti Global Group, LLC v. Shepherds Hill Proponents, LLC, 173 N.H. 314 (2020), Beane v. Dana S. Beane & Co., 160 N.H. 708 (2010), McCollum v. D’Arcy, 138 N.H. 285 (1994), French v. R.S. Audley, Inc., 123 N.H. 476 (1983), and Black Bear Lodge v. Trillium Corp., 136 N.H. 635 (1993): These cases structure New Hampshire’s discovery rule analysis. The Court reaffirmed the two-prong test (knowledge of injury and causal connection) from Balzotti and recognized that reasonable diligence is a fact question (French, Black Bear Lodge). McCollum and Beane addressed the evolution from common law to statutory discovery rule and confirm continuity in approach.
Town of Lincoln v. Chenard, 174 N.H. 762 (2022) and Crowley v. Crowley, 72 N.H. 241 (1903): Support deference to trial court factfinding and the plaintiff’s burden (preponderance) to invoke the discovery rule.
Raymond v. Eli Lilly & Co., 117 N.H. 164 (1977): Informs the “interest balancing” threshold inquiry for whether to apply the common law discovery rule under the pre-1986 statute, which the Court clarified is distinct from the separate factual question of when the plaintiff should have discovered the injury and its cause.

Legal Reasoning

Standard of Review and Evidentiary Burdens

The Court reviewed sufficiency of the evidence as a matter of law and upheld findings unless lacking evidentiary support or tainted by legal error.
The plaintiff had to prove the elements of constructive trust by clear and convincing evidence; for the statute of limitations discovery rule, the plaintiff bore a preponderance burden.
Viewing the record in the light most favorable to the plaintiff, the Court deferred to the trial court’s credibility determinations and weighing of conflicting testimony and documents.

Constructive Trust: The Oral Agreement as “Transfer”

The Court affirmed that clear and convincing evidence established an oral agreement in 1973: John H. purchased MMCI for both sons, placed title solely in the defendant’s name because the plaintiff was a minor, and the defendant agreed to reserve half the shares for later distribution to the plaintiff.

Key evidentiary pillars included:

Direct testimony by the plaintiff regarding a dinner-table conversation with John H. and the defendant in 1973, explaining the purchase for both sons and the temporary titling under the defendant.
Consistent circumstantial evidence from long-term employees and the family’s accountant that they understood MMCI to be jointly owned by the brothers.
Evidence about the formation and purpose of the McLaughlin Group (a holding company) in the 1980s, including the defendant’s memorandum stating the holding company “owns McLaughlin Moving Company, Inc.,” and undisputed equal ownership of the holding company by the brothers, which aligned with shared ownership of MMCI.
Testimony about the family’s imperfect recordkeeping, which plausibly explained inconsistencies in corporate paperwork, supporting the trial court’s decision not to treat corporate records as dispositive against the oral agreement.

By crediting this mix of direct and circumstantial evidence, the Court held that a reasonable factfinder could find an oral transfer arrangement notwithstanding later-inconsistent corporate formalities.

Unjust Enrichment Without a Bargaining-Power Requirement

The Court’s most salient doctrinal clarification is that “unconscionability” in unjust enrichment does not require grossly unequal bargaining power. Instead, unjust enrichment can arise from a defendant’s passive acceptance of benefits that would be inequitable to retain. The Court grounded this in:

The plaintiff’s five decades of labor and management contributions to MMCI undertaken in the belief of a 50% ownership interest (consistent with Clooney).
Evidence that MMCI enjoyed shared resources from the related company, MTSI, at reduced rates based on the shared-ownership understanding—benefits the defendant passively accepted for decades.
The oral agreement’s allocation of only 50% of MMCI’s equity to the defendant; retaining 100% would exceed his rightful share and thereby result in unjust enrichment at the plaintiff’s expense (Clapp; contrasted with Cadle).

By rejecting the defendant’s proposed narrow test for unconscionability, the Court reaffirmed the “broad and flexible” nature of equitable remedies. This flexibility allows courts to prevent unjust enrichment in relational contexts (such as family businesses) where formal bargaining-power disparities may be absent but inequity is nonetheless present.

Statute of Limitations and the Discovery Rule (RSA 508:4)

The Court assumed without deciding which version of RSA 508:4 governed (pre-1986 six-year statute with common law discovery rule or post-1986 three-year statute codifying the discovery rule) because the outcome was the same under both. The Court reaffirmed:

Under the statutory discovery rule, the limitations period starts when the plaintiff knows or reasonably should know both that he has been injured and that the injury was caused by the defendant (Balzotti).
The plaintiff must show that at least one of these prongs was not satisfied within the three-year window preceding suit (Balzotti; Beane).
Reasonable diligence is a fact question (French; Black Bear Lodge), and appellate courts defer to supported trial findings (Chenard).

Applying these principles, the Court upheld the trial court’s findings that:

The plaintiff did not discover—and could not reasonably have discovered—the defendant’s claim to exclusive ownership until 2019, when a friend alerted him.
The plaintiff’s operational role (as opposed to financial management, which the defendant controlled) reasonably limited his opportunity to detect an adverse ownership claim earlier.
A 2013 newspaper article, which contained a brief reference suggesting the defendant “bought his own moving firm,” did not suffice to put the plaintiff on notice; the trial court deemed it “puffery,” not a repudiation of the plaintiff’s ownership interest.
The fact that corporate documents listed the defendant as sole shareholder—some signed by the plaintiff as corporate secretary—did not, in context, supply notice. The family rarely issued shares in real time; the plaintiff believed his shares had simply not yet been issued, consistent with the family’s practices and testimony from other relatives.

Because the plaintiff filed suit in July 2020, the claim was timely under both the pre-1986 six-year period (as tolled by the common law discovery rule) and the current three-year period (as tolled by the codified discovery rule).

The Court also clarified that, when applying the pre-1986 statute, interest balancing pertains to whether the common law discovery rule should apply at all; determining the date on which the plaintiff should have discovered the injury is a separate factual inquiry. The defendant’s attempt to collapse these steps was rejected.

Impact

Unjust Enrichment Doctrine Clarified: New Hampshire law does not require grossly unequal bargaining power to find “unconscionability” in unjust enrichment. This clarification aligns unjust enrichment with equitable flexibility and will likely be cited in future disputes involving close relationships (family, partnerships, closely held corporations), where formal bargaining dynamics may not resemble arm’s-length negotiations.
Constructive Trusts in Family Businesses: The case demonstrates that oral agreements, corroborated by credible testimony and circumstantial evidence (employee and accountant understandings, internal memoranda, holding-company structures), can satisfy the clear and convincing standard—even against inconsistent corporate paperwork—if the trial court finds the evidence credible.
Discovery Rule in Latent Ownership Disputes: The decision underscores that corporate records alone may not trigger discovery in a family-run enterprise where roles are divided and share issuance is informal or delayed. Courts may consider operational-versus-financial responsibilities, longstanding practices, and reasonable expectations in deciding when a plaintiff should have discovered an adverse claim.
Practical Governance Lessons: Families and close corporations should formalize ownership allocations and share issuances contemporaneously, especially when minors or estate planning objectives are involved. Internal communications (like the McLaughlin Group memo) can later serve as powerful admissions of ownership reality.
Litigation Strategy: Advisory juries (RSA 491:16) can be effective in equity-related factual disputes; their unanimous advisory verdict here was adopted. Parties should be prepared to offer both direct testimony and coherent circumstantial evidence (e.g., accountants’ and bookkeepers’ understandings, historic memos, and practice patterns).

Complex Concepts Simplified

Constructive Trust: An equitable remedy that makes someone who holds property act as a trustee for the rightful beneficiary. It is imposed to prevent unjust enrichment, not to punish wrongdoing. It typically requires proof of a confidential relationship, a transfer of property, and unjust enrichment, proved by clear and convincing evidence.
Unjust Enrichment: Occurs when a person unfairly benefits at another’s expense. It can be shown either by wrongful acts or by passively accepting benefits that it would be unfair to keep. A stark imbalance of bargaining power is not required to find unconscionability in this context.
Unconscionability (in unjust enrichment): For equity, retention of benefits is “unconscionable” when, under the circumstances, keeping them would be unfair or inequitable. This can arise from reliance, expectations, or informal arrangements in family/closely held businesses.
Discovery Rule (RSA 508:4): Tolls (pauses) the statute of limitations until the plaintiff knew or reasonably should have known both that he was injured and that the injury was caused by the defendant. Reasonable diligence is a fact-specific inquiry.
Clear and Convincing Evidence: A higher evidentiary standard than “preponderance of the evidence.” The proof must show that the claim is highly probable, not just slightly more likely than not.
Advisory Jury (RSA 491:16): In equity matters, a trial judge may use a jury to render an advisory verdict on factual issues. The judge may adopt or reject the advisory verdict when entering equitable relief.
Transfer via Oral Agreement: In equity, an oral agreement can evidence a transfer or allocation of beneficial interests even if formal legal title (e.g., stock certificates) has not yet been issued, provided the agreement is established by clear and convincing evidence.

Conclusion

The Supreme Court of New Hampshire’s decision in McLaughlin v. McLaughlin solidifies two important principles:

Unjust enrichment supporting a constructive trust does not hinge on proof of grossly unequal bargaining power. Courts may deem retention “unconscionable” where a party passively accepts substantial benefits inconsistent with the parties’ agreement and equitable expectations.
The discovery rule in RSA 508:4 remains a practical, fact-driven doctrine. In family business contexts with divided roles and informal share practices, courts will carefully evaluate when a plaintiff reasonably should have discovered an adverse ownership claim. Corporate documents alone will not necessarily trigger accrual if context shows reasonable reliance on a different understanding.

As a result, this opinion will likely be cited frequently in New Hampshire for its flexible, equity-centered approach to constructive trusts, its clear rejection of a rigid bargaining-power test for unconscionability in unjust enrichment, and its pragmatic application of the discovery rule to latent ownership disputes in closely held and family enterprises. The ruling underscores the importance of clear documentation in family businesses and warns that courts will prioritize equitable realities over imperfect formalities.