Blackwelder v. Millman

• Decision Date: 21 July 1975
• Docket Number: No. 74-1846,74-1846
• Citation: 522 F.2d 766
• Parties: Leroy J. BLACKWELDER, Appellant, v. Richard M. MILLMAN et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 766

522 F.2d 766

Leroy J. BLACKWELDER, Appellant, v. Richard M. MILLMAN et al., Appellees.

No. 74-1846.

United States Court of Appeals, Fourth Circuit.

Argued April 9, 1975.

Decided July 21, 1975.

Thomas J. Harrigan, Arlington, Va. (Harrigan, Morris & Artz, Arlington, Va., on brief), for appellant.

Grayson P. Hanes, Fairfax, Va. (John J. Sabourin, Jr., Hazel, Beckhorn & Hanes, Fairfax, Va., on brief), for appellee Continental Mortgage Investors.

Richard A. Hibey, Washington, D. C., for appellee Richard M. Millman.

George D. Varoutsos, Arlington, Va. (Louis Koutoulakos and Robert J. Arthur, Arlington, Va., on brief), for appellees Lester Dworman and Dworman Building Corp. (Charles Jay Pilzer, Ronald D. Jacobs, Jacobs, Pilzer & Speiller, Washington, D. C., on brief), for appellee Charles S. Bresler.

Before WINTER, CRAVEN and BUTZNER, Circuit Judges.

CRAVEN, Circuit Judge:

This is an appeal by Leroy Blackwelder from an adverse ruling, on defendants' motion for summary judgment, that his claim of conspiracy to defraud was barred by the statute of limitations because Blackwelder, at a time not within the limitations period, knew or should have known that he had a cause of action. Taking an entirely different view of the claim and those essential facts which are undisputed, we hold that Blackwelder's action is not time-barred and therefore reverse and remand for a trial on the merits.

I.

Some background history is necessary to understand the questions presented on this appeal. At the heart of this protracted litigation lies Moorefield Farms, a large tract of land in Fairfax County, Virginia, the ownership and profits from which have been in dispute in the United States District Court for the Eastern District of Virginia since 1964. Originally, John Sterling, represented by defendant lawyer Richard Millman, filed a diversity suit against his brother, David Sterling, Blackwelder, plaintiff here, and Mrs. Blackwelder, to settle their respective interests in Moorefield Farms. It was therein determined that David Sterling had deeded Moorefield to Blackwelder with a parol agreement that the latter would hold it in trust to secure compensation for Blackwelder's development of the parcel. John Sterling was also found to have been a subsequent assignee of one-half of David's interest. ¹ Rejecting John's claim that the oral trust conveyance to Blackwelder should be rescinded, this court affirmed and remanded for a full accounting, noting that a physical partition might be necessary. Sterling v. Blackwelder, 383 F.2d 282 (4th Cir. 1967) (Blackwelder I ).

While Blackwelder I was pending, the lower court (Judge Lewis), without objection from the parties, conducted proceedings culminating in conformation of the sale of Moorefield to one Holladay for $1,000,000, receiving a deposit of $50,000. ² That sale, however, was subsequently aborted Holladay backed out in late 1967, claiming certain undisclosed encumbrances (public utility easements) on Moorefield. ³ Shortly thereafter, in March and April 1968, Judge Lewis received a bid from and confirmed sale of Moorefield to defendant Lester Dworman for $730,000. At Dworman's behest, and pursuant to a recorded assignment of his bid to defendant Paris Properties, Inc. (Paris), a Maryland holding corporation, title to Moorefield was placed in Paris in April 1968. Blackwelder appealed from this sale to Dworman; Millman, representing appellee John Sterling, asserted in this court in January 1969 that the $730,000 sale price was reasonable. Since Blackwelder had failed to file a proper supersedeas bond, we dismissed the appeal as moot. Sterling v. Blackwelder, 405 F.2d 884 (4th Cir. 1969) (Blackwelder IV).

Moorefield was then sold by Paris to DeLuca Enterprises in July 1969 for $1.35 million; DeLuca in turn mortgaged Moorefield to American Realty Trust by deed of trust as security for.$1.8 million. Blackwelder, noting the obvious disparity in the selling prices for Moorefield, then advanced some rather serious charges to this court concerning Millman's role with Dworman in Paris' resale to DeLuca. At that time we were considering Blackwelder's appeal from the aborted sale to Holladay. In an unpublished opinion, we affirmed the return of the deposit, noted the charges leveled against a member of the bar, and remanded to Judge Lewis with directions to conduct an "inquiry . . . to protect (the district court's) own integrity." ⁴

The net result of that inquiry which has its own history ⁵ was that certain questions regarding the rights of the various parties (in C.A. No. 3207) to the proceeds of Moorefield's sale were referred to Judge Hoffman. Of those, only one is relevant here: John Sterling's claim to one-half of David Sterling's share, opposed by the latter on the grounds that the February 1964 assignment was fraudulently procured and that its admission into evidence pursuant to the 1966 judgment was a fraud on the court. Blackwelder subsequently filed, in March 1972, a motion ⁶ under Rule 60(b), Fed.R.Civ.P., aligning himself with David Sterling's claim that the original assignment was fraudulent and requesting that the 1966 judgment be set aside. He also prayed that the instant defendants, as well as DeLuca and American Realty Trust, be joined as adverse parties, in order to pursue a damage award from the former and reconveyance of Moorefield to him from the latter. Denying relief, Judge Hoffman made several rulings: (1) he denied, without prejudice, that part of Blackwelder's motion seeking to expand No. 3207 to include damage claims against the instant defendants; ⁷ (2) Millman was provisionally ordered to be made a defendant; (3) the claim that the 1966 judgment should be set aside on the basis of fraud pressed by David Sterling and Blackwelder was rejected, and John Sterling's one-quarter share in the proceeds by virtue of that judgment was reaffirmed; ⁸ (4) to the extent that Blackwelder's motion sought to overturn the 1968 sale on the basis of fraud on the court, i. e., Millman's role as "undisclosed purchaser," relief was denied because Moorefield had since been sold and resold and the "fair and reasonable price" received under the circumstances "did not cause a 'manifestly unconscionable' result as would be required (to find) fraud on the court;" ⁹ (5) the prior order making Millman a defendant was rescinded. ¹⁰

This court affirmed, ¹¹ holding that as a matter of equity the lower court had not abused its discretion in refusing to overturn the sale.

II.

After he had been denied (without prejudice) the opportunity to enlarge the proceeding before Judge Hoffman, in March 1972, by order entered May 1972, and after Judge Hoffman had in September 1973 ruled against overturning the sale, Blackwelder filed the instant action on November 2, 1973. ¹²

The Complaint

Blackwelder charged that Millman, his wife, ¹³ Dworman (and Dworman Building Corporation), Paris, Charles Bresler, a real estate broker, and Continental Mortgage Investors (CMI), ¹⁴ had entered into a conspiracy to defraud him out of his ownership rights in and fair market value of Moorefield, all for their own personal gain. The agreement, it is alleged, was carried out by the following overt acts: (1) prior to the sale, Dworman requested a loan commitment from CMI for the purpose of purchasing Moorefield, agreeing to lend the credit and assets of his corporation as security; (2) the defendants secured an appraisal of Moorefield, which valued it at $1,625,000; (3) CMI then made a loan commitment of $900,000, and further agreed to become a financing principal with Millman, Dworman, and Bresler, in exchange for 20 percent of the net profits accruing upon resale of Moorefield; (4) Dworman, Millman, and Bresler at the same time agreed to split equally the remaining 80 percent of the net profits accruing upon resale; (5) Dworman, having agreed to conceal the profit-sharing plan from Blackwelder and the court, successfully bid Moorefield in at $730,000 on March 29, 1968; (6) Millman, acting as attorney for John Sterling, successfully urged Judge Lewis to accept the bid as reasonable and representative of fair market value under the circumstances, without disclosing his relationship with Dworman or his role as potential profit-sharer; (7) Dworman thereafter assigned his bid to Paris, of which Millman was president, and Paris, then the recorded owner, in turn mortgaged Moorefield to CMI to secure the latter's loan of $700,000 (recorded April 30, 1968); (8) in January 1969 Millman, again without disclosure, urged this court to affirm Judge Lewis' finding that the price was reasonable; (9) in late July 1969 Millman, as president of Paris, deeded Moorefield to DeLuca Enterprises for $1,350,000, DeLuca thereafter placing a mortgage on Moorefield for $1,800,000; (10) CMI, Dworman, Millman, and Bresler then divided up their respective shares of the $620,000 profits. Blackwelder prayed for $2,070,000 compensatory damages (with interest from July 29, 1969) and $10,000,000 punitive damages. ¹⁵

Millman's Motion

Millman moved to dismiss the complaint or alternatively for summary judgment claiming that (1) Blackwelder's complaint sought to adjudicate that which was barred by res judicata and collateral estoppel; (2) an action of this nature was barred by Virginia's one-year statute of limitations; (3) service of process was defective. Judge Bryan denied the motion in all respects, ruling first that language in Judge Hoffman's May 1972 order denying Blackwelder's motion to enlarge clearly indicated that the conspiracy-to-defraud allegations against defendants here raised questions different than those presented in the equitable proceeding seeking to overturn the sale to Dworman. Secondly, he held Virginia's five-year limitations period applied to Blackwelder's claim because under Virginia law it was survivable and alleged direct injury to his interest in Moorefield. ¹⁶ The court noted that Millman had not contended that...