DiMaggio v. Rosario

• Decision Date: 07 April 2016
• Docket Number: No. 64A03–1505–PL–466.,64A03–1505–PL–466.
• Citation: 52 N.E.3d 896
• Parties: Victor J. DiMAGGIO III, Appellant–Plaintiff, v. Elias ROSARIO, Appellee–Defendant. Elias Rosario, Cross–Appellant/Counter–Plaintiff, v. Victor J. DiMaggio III, Cross–Appellee/Counter–Defendant.
• Court: Indiana Appellate Court

52 N.E.3d 896

Victor J. DiMAGGIO III, Appellant–Plaintiff

v.Elias ROSARIO, Appellee–Defendant.

Elias Rosario, Cross–Appellant/Counter–Plaintiff

v.Victor J. DiMaggio III, Cross–Appellee/Counter–Defendant.

No. 64A03–1505–PL–466.

Court of Appeals of Indiana.

Filed April 7, 2016.

Rehearing Denied June 21, 2016.

Kevin E. Steele, Burke Costanza & Carberry LLP, Valparaiso, IN, Attorney for Appellant.

Jonathan Halm, Abrahamson, Reed & Bilse, Hammond, IN, Attorney for Appellee.

DARDEN, Senior Judge.

Statement of the Case

[1] Victor J. DiMaggio appeals from the trial court's order granting summary judgment in favor of Elias Rosario on DiMaggio's complaint alleging breach of an oral contract; breach of fiduciary duty; and, usurpation of corporate opportunity. Rosario cross-appeals, contending, in the alternative, that the trial court erred by denying his first motion for summary judgment based on the statute of limitation. We affirm.

Issues

[2] DiMaggio presents the following issues for review:

I. Whether the trial court erred by granting summary judgment in favor of Rosario after finding there was no oral contract and thus no breach;

II. Whether the trial court erred by granting summary judgment in favor of Rosario on DiMaggio's claims of breach of fiduciary duty and usurpation of corporate opportunity.

Rosario cross-appeals raising the following issue for our review in the event we reverse the decision of the trial court:

III. Whether the trial court erred by denying Rosario's motion for partial summary judgment based on the statute of limitation.

Facts and Procedural History

[3] Since this is the third time the parties have appeared before this Court, perhaps a brief background of their relationship will help to put the case in its proper perspective.

[4] DiMaggio was the owner of Financial Advantage Corporation, a Delaware corporation based in Chicago that was in the business of providing financial services. From 1996 until 2002, Rosario served as an employee, officer, director, and shareholder of DiMaggio's company.

[5] In 1996 and again in 1997, DiMaggio and Rosario, both certified public accountants and entrepreneurs, decided to expand their business relationship. First, in January 1996, they formed Schererville Real Estate Holding, LLC, an Indiana limited liability corporation, for the purpose of investing in real estate with its principal place of business in Lake County, Indiana. Rosario and DiMaggio were each fifty percent shareholders in Schererville. Schererville owned real estate consisting of an office building and land in Schererville, Indiana.

[6] Next, on December 29, 1997, they formed Galleria Realty Corporation, an Indiana, closely-held corporation. Galleria's principal place of business was in Lake County, Indiana, and its purpose was to develop two mixed-use retail and office buildings located in Dyer, Indiana. They were the only two shareholders of Galleria. DiMaggio, who also holds a law degree, was the minority shareholder owning forty percent of the shares, with Rosario owning sixty percent of the shares. DiMaggio was to contribute his expertise in marketing, sales, and leasing of the property. Rosario was to contribute his expertise in the build-out of the tenant spaces. Although the record discloses that DiMaggio and Rosario were involved in Financial Advantage Corporation, Schererville Real Estate Holding, LLC, and Galleria, DiMaggio and Rosario may have been engaged in other joint business ventures not noted in the record before us.

[7] The first phase of the Galleria construction was completed in 2000, consisting of twenty four suites in a four-story 41,000 square foot mixed-use retail and office building. The second phase was completed in 2004, consisting of ten suites in a three-story 32,973 square-foot mixed-use retail and office building. Thus, after completion of the two phases, there was more than 73,000 total square feet of mixed-use retail and office building space.

[8] Rosario and DiMaggio developed an estimation of projected income for the years 2000 to 2009 for Galleria. The “Galleria Realty Corporation Projected Income Statement Years 2000 to 2009” was based upon a projection of potential income and planned joint contributions to the business endeavor of Galleria. Appellant's App. pp. 163–65.

[9] According to DiMaggio's answers to interrogatories dated October 31, 2014, sometime in early 2002, Rosario sent an abandonment letter¹ to DiMaggio. Apparently, DiMaggio wanted to discuss resolution of Rosario's abandonment letter, but received no compliance from Rosario. DiMaggio stated that Rosario's response to him on March 9, 2002, convinced him that Rosario was committed to abandoning the Galleria business venture. Id. at 429.

[10] At some point, Rosario had come to believe that DiMaggio was engaging in improper business practices with respect to Financial Advantage Corporation. As a result, on December 10, 2002, Rosario sought to enter into a stock redemption agreement for his forty shares of common stock, a promissory note for fifty payments totaling $50,000.00 for the stock, and a general release. DiMaggio signed a stock redemption agreement as President of Financial Advantage Corporation; however, no promissory note or general release was executed.

[11] In late 2002 or early 2003, Rosario commenced pursuing a real estate business venture in Porter County with Mark Nebel and William C. Haak. The three formed Liberty Lake Estates, LLC, in order to purchase an existing residential subdivision by the same name with the intent of improving it, and selling it to residential customers. Rosario's role in that venture was to oversee the development, which was comprised of thirty-eight residential lots.

[12] DiMaggio and Rosario met on August 27, 2003 at the Galleria complex. At that meeting, DiMaggio pressed Rosario to explain why he had abandoned his duties with Galleria. According to DiMaggio, Rosario replied that “it was something I had to do.” Id. at 434. Later, on September 9, 2003, Professional Building Services (PBS) in Crete, Illinois, requested a meeting with both DiMaggio and Rosario regarding the design of the second phase of the Galleria project. Although Rosario attended the meeting, apparently he did not participate in it and left early, and DiMaggio answered most if not all of the questions. DiMaggio, in response to interrogatories proposed by Rosario, acknowledged that Rosario did not participate in the meeting, left early, and PBS expressed concern over his lack of participation at the meeting. Id.

[13] Rosario claimed that in November 2003, DiMaggio changed the locks to the corporate offices of Galleria, thereby denying Rosario access to Galleria's corporate records, tax documents, financial documents, tenant leases, bank account information, and loan documentation. Rosario also claimed that he received no notice of corporate or shareholder meetings, and did not receive any K–1 tax reporting forms, profits, dividends, or money owed to him due to his status as shareholder in Galleria.

[14] On February 17, 2004, Financial Advantage Corporation filed a “Verified Complaint for Accounting and Other Relief” against Rosario in the Circuit Court of Cook County, Illinois. Appellee's App. p. 103. DiMaggio, as President of Financial Advantage Corporation, was present when Rosario's deposition was taken on March 14, 2006 in that case. Rosario answered questions about his involvement in Liberty Lake Estates. In DiMaggio's deposition taken on April 6, 2006, DiMaggio testified about conversations he had with others—the first in April of 2003, and the second in May of 2004—concerning his knowledge of Rosario's involvement in Liberty Lake Estates. Id. at 35.

[15] Subsequently, on March 26, 2008, DiMaggio filed a complaint against Rosario, Nebel, Haak, and Liberty Lake Estates, LLC, alleging among other things that they usurped a corporate opportunity from Galleria, causing damages to DiMaggio. The trial court granted a motion to dismiss filed by Nebel, Haak, and Liberty Lake Estates, LLC. This court affirmed the trial court's decision. See DiMaggio v. Rosario, 950 N.E.2d 1272 (Ind.Ct.App.2011), trans. denied.

[16] DiMaggio then requested leave to file an amended complaint naming Rosario and Nebel as the only defendants. After DiMaggio was granted leave to do so, Nebel filed a motion to dismiss the amended complaint, asserting that DiMaggio's claim against him personally was barred by res judicata. The trial court granted the motion to dismiss as to Nebel only and we affirmed the trial court's decision. See DiMaggio v. Rosario, No. 64A04–1204–PL–169 (Ind.Ct.App. Sept. 28, 2012). After Nebel was dismissed from the action, Rosario was the only defendant remaining in the case.

[17] After DiMaggio had filed the instant lawsuit on March 26, 2008, Galleria took out a promissory note with First DuPage Bank, signed by DiMaggio as President of Galleria, on April 30, 2008, in the principal amount of $3,826,746.69. The note was secured by a mortgage on both of the mixed-use office buildings. Galleria also entered into an assignment of rents to First DuPage Bank, signed by DiMaggio as President of Galleria, on that same date. DiMaggio also signed as personal guarantor providing that his share of the indebtedness would be limited to fifty percent of the principal amount, interest, collection costs, expenses, and attorneys' fees not to exceed $1,917,500.00. None of the documents contained Rosario's signature.

[18] On October 23, 2009, First Midwest Bank bought First DuPage Bank's title and interest in the note, mortgage, assignment of rents, and guaranty it held with respect to Galleria. Galleria stopped making payments beginning in November 2009 and continuing thereafter. On October 31, 2012, and also on November 5, 2012, First Midwest Bank served formal written notices of default and demand for payment and performance pursuant to the loan documents because Galleria had failed to make the required monthly payments.

[19]...