Fisher v. McCrary Crescent City, LLC, 1282, September Term, 2007.

Citation186 Md. App. 86,972 A.2d 954
Decision Date08 June 2009
Docket NumberNo. 1282, September Term, 2007.,1282, September Term, 2007.
PartiesStuart FISHER a/k/a Neil Fisher v. McCRARY CRESCENT CITY, LLC, et al.
CourtCourt of Special Appeals of Maryland

Steven D. Silverman & Richard Winelander (Erin Murphy, Silverman, Thompson, Slutkin & White, The Winelander Law Group, on the brief), Baltimore, for Appellant.

Richard Falcon (William H. Murphy, Jr., Kenneth B. Frank, The Murphy Firm, on the brief), Baltimore, for Appellee.

Panel: JAMES R. EYLER, WRIGHT, EMORY A. PLITT, JR., (Specially assigned), JJ.

JAMES R. EYLER, Judge.

This appeal arises from a judgment entered by the Circuit Court for Baltimore City against appellants, Edward V. Giannasca, II ("Giannasca"), Stuart Cornelius Fisher, a.k.a. "Neil Fisher" ("Stuart"), Tamara Jeanne Fisher ("Tamara"), TJ Biscayne Holdings, LLC ("TJB"), Giannasca Crescent City, LLC ("GCC"), Market Street Properties Palm Beach, LLC ("MS"), and Crescent City Estates, LLC ("CCE"), in favor of appellees, Michael C. McCrary ("McCrary"), McCrary Crescent City, LLC ("MCC"), MR Crescent City, LLC ("MRCC"), and CCE.1 The following chart illustrates the status of the parties in this litigation:

                   ---------------------------
                    Plaintiffs Defendants
                (Appellees) (Appellants)
                   --------------------------
                      McCrary      Giannasca
                        MCC          Stuart
                       MRCC          Tamara
                        CCE           GCC
                                       MS
                                      TJB
                                      CCE
                    -----------------------
                

McCrary owns MCC. MCC owns MRCC. Giannasca and Stuart own GCC.2 MRCC and GCC each owned a 50% interest in CCE. CCE owned the New Orleans building ("the building") that is at issue in this case. Tamara, Stuart's wife or exwife,3 owns TJB. Stuart and Tamara jointly own MS.4 The following chart illustrates the organization of the parties with respect to each other5:

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

The circuit court, by "Second Revised Order and Judgment" dated September 16, 2008, entered the judgment after entering orders of default as to liability against Giannasca, Stuart, and Tamara because they violated court orders and committed discovery failures; entering judgment as to liability against TJB, MS, GCC, and CCE after they failed to answer the complaint; and sanctioning Giannasca, Stuart, Tamara, MS, and TJB by precluding them and their counsel from participating at the damages hearing because they violated court orders and committed discovery failures. The circuit court awarded approximately (1) $17.8 million in compensatory damages in favor of CCE against all appellants with the exception of CCE; (2) $15.8 in million punitive damages in favor of all appellees against all appellants with the exception of CCE; and, (3) $8.9 million in compensatory damages in favor of McCrary, MCC, and MRCC against CCE. The following chart illustrates the structure of the damages award:

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

On appeal, appellants present several contentions, but we need only decide whether the circuit court erred when it denied Stuart's motion to dismiss, denied Tamara's motion to dismiss, entered orders of default and imposed sanctions, and awarded punitive damages and other remedies. We shall affirm the orders of default as to liability but we shall vacate the judgment and remand for further proceedings because of errors relating to the assessment of damages.

Background

Appellees claim that Giannasca, Stuart, and Tamara, acting individually and through their respective entities, fraudulently concealed certain insurance proceeds that should have been paid to CCE. CCE was owned one-half by the McCrary entities and one-half by Giannasca and Stuart through GCC. The operative complaint6 is lengthy and contains detailed factual allegations. In circuit court, Giannasca and the Fishers disputed many of the facts, but the orders of default established the operative facts, giving rise to liability. We shall provide an overview at this point and include some additional information, as relevant, when we discuss the issues.

As previously mentioned, McCrary owns MCC, and MCC is the sole owner and member of MRCC (all three hereinafter "McCrary" except when necessary to distinguish them). In February 2005, Giannasca, who co-owned GCC with Stuart, approached McCrary about an investment opportunity. Giannasca asked McCrary to partner with him to buy a building in New Orleans, and convert it into "up-scale" residential condominiums.

McCrary agreed,7 and MRCC and GCC formed CCE. CCE's operating agreement appointed Giannasca as manager. MRCC and GCC each held a 50% ownership in CCE. CCE purchased a building in New Orleans (the "building"). CCE also obtained property damage insurance on the building from Lexington Insurance Company ("LIC") and One Beacon Insurance Company ("OBIC").

In late August 2005, Hurricane Katrina struck New Orleans. Hurricane Katrina caused damage to the building's internal mechanical systems, and created several environmental hazards within the building. Accordingly, CCE filed insurance claims with LIC and OBIC, and retained a public insurance adjuster named Richard Agid to represent CCE in pursuing the insurance claims. McCrary was informed about the insurance claims, but was not informed about the substance of the claims or that Agid represented CCE.

In early October 2005, McCrary asked Giannasca and Stuart about the progress of the insurance claims. Stuart told Giannasca that an early meeting with the insurance companies had "gone well," but cautioned that "we will have to wait and see."

A few weeks later, LIC issued a check to CCE for $1 million, representing the first insurance payment. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, the next day, Giannasca paid $450,000 of the insurance proceeds to himself, $150,000 of the insurance proceeds to Stuart, and $150,000 of the insurance proceeds to TJB. TJB is a Florida entity owned and managed by Tamara.

In late October 2005, Giannasca hosted a conference call with Stuart and McCrary in his Baltimore City office. Giannasca and Stuart told McCrary that the insurance claims probably would be denied.

On November 9, 2005, CCE sold the building to an unrelated party. CCE used the sale proceeds to pay its debts, including a loan for $3.5 million that McCrary made to CCE. Ultimately, CCE made a profit of approximately $6.3 million off of the sale. Giannasca and Stuart told McCrary that they needed to use a substantial portion of the proceeds to pay CCE's outstanding operating expenses. Giannasca and Stuart told McCrary that the expenses totaled approximately $1.7 million, but never provided any proof of the expenses. After expenses, CCE was left with approximately $4.7 million. McCrary was paid approximately $2.35 million, in accordance with his 50% ownership interest in CCE.

Giannasca met with McCrary at Giannasca's Baltimore office in December 2005. Giannasca told McCrary that the insurance companies denied CCE's insurance claims, and that CCE would not receive any insurance proceeds.

Two months later, in February 2006, LIC paid CCE $2 million in additional insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, Stuart paid approximately $1.72 million to himself.

In March 2006, LIC paid CCE $7 million in additional insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, Stuart wired $700,000 to a private trust account, and paid $5 million to TJB. TJB invested the $5 million in another real estate investment project called the Entergy Project. MS is a member of an organization that is the owner and developer of the Entergy Project. Tamara and Stuart jointly own MS.

In April 2006, OBIC paid CCE $2 million in insurance proceeds. Neither Giannasca nor Fisher told McCrary that CCE received this payment. Instead, Stuart transferred $800,000 to Giannasca, $200,000 to Tamara, and $200,000 to himself.

McCrary, Giannasca, and Stuart all attended Tamara's birthday party in July 2006. Agid, the insurance adjuster, attended the party as well. McCrary met Agid at the party for the first time. Agid introduced himself to McCrary as the public insurance adjuster retained by CCE who "got the pot of gold for you guys." Surprised and confused, McCrary asked Agid for further details. Agid revealed that the insurance proceeds totaled $12 million. McCrary confronted Giannasca at the party, asking him "How much did we get from insurance?" McCrary asked the question four times. Giannasca responded "what?," "huh?," "what are you talking about?," and "I don't know." McCrary then asked Giannasca the question a fifth time. Giannasca replied "Two or three million.... Ask [Stuart]." After the party, McCrary contacted Giannasca and Stuart multiple times via email, and asked them to account for the insurance proceeds. Giannasca and Stuart never complied.

Appellees filed suit on February 23, 2007, against appellants, with the exception of the Tamara Fisher entities, who were added at a later time. On August 24, 2007, appellees filed the third amended complaint. The gist of the action was fraudulent concealment of insurance proceeds, but it also contained counts alleging breach of contract, unjust enrichment, breach of fiduciary duty, violation of a Louisiana antifraud statute, conspiracy and aiding and abetting, and a derivative claim by MRCC and MCC on behalf of CCE. In addition to damages, appellees sought an accounting, injunctive relief, and the imposition of a trust on assets.

On July 2, 2007, the court entered a scheduling order, which established a discovery cutoff date of February 21, 2008 and a trial date of June 17, 2008.

Giannasca, GCC, TJB, and CCE never answered the complaint or subsequent complaints, or filed motions to dismiss. None of the appellants complied with temporary restraining orders...

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