Hoffman v. Stamper

• Decision Date: 27 February 2004
• Docket Number: No. 560,560
• Citation: 843 A.2d 153,155 Md. App. 247
• Parties: Arthur J. HOFFMAN, et al. v. Toyome STAMPER, et al.
• Court: Court of Special Appeals of Maryland

843 A.2d 153

155 Md. App. 247

Arthur J. HOFFMAN, et al. v. Toyome STAMPER, et al.

No. 560, Sept. Term, 2002.

Court of Special Appeals of Maryland.

February 27, 2004.

James E. Carbine, Baltimore, Daniel J. Tobin (Kirkpatrick & Lockhart, LLP, on the brief), Washington, for appellant.

Andre R. Weitzman, Baltimore (Cheryl L. Hystad, on the brief), Baltimore, for appellee.

Panel: KENNEY, DEBORAH S. EYLER and CHARLES E. MOYLAN, JR. (Ret'd, Specially Assigned), JJ.

DEBORAH S. EYLER, Judge.

In a civil case in the Circuit Court for Baltimore City, a jury found Robert Beeman ("Beeman"), Suzanne Beeman, and their company, A Home of Your Own, Inc. ("AHOYO"), liable for conspiracy to defraud, fraud, and violations of the Maryland Consumer Protection Act ("MCPA"), for perpetrating a scheme to sell the appellees, plaintiffs below, dilapidated residential properties at grossly inflated prices. Through Beeman, AHOYO purchased the properties for small sums and quickly sold them to the appellees (whom for ease of discussion we shall from time to time call "buyers") at huge profits.¹ Although by agreement of counsel the word "flipping" was not used at trial, that is the colloquialism for the type of fraudulent scheme practiced by the Beemans and their company.

The Beemans and AHOYO are not parties to this appeal, and their fraud and consequent liability in tort to the buyers are not in question.² The appellants are three co-defendants who were tried jointly with the Beemans and AHOYO: Irwin Mortgage Corporation ("Irwin"), the lender that extended FHA financing to each buyer; Joyce Wood ("Wood"), a loan officer employed by Irwin who handled the financing for each transaction; and Arthur J. Hoffman ("Hoffman"), the appraiser who performed the property valuation in each transaction. The buyers' theory of liability against Irwin was based solely on vicarious liability for the wrongful acts of Wood.

At trial, the appellants claimed to have known nothing about Beeman's scheme and to have been his unwitting victims. The buyers asserted, on the contrary, that Wood and Hoffman (and Irwin, through Wood) not only knew about but also participated in Beeman's design to sell them dilapidated houses at vastly inflated prices. The jury agreed with the buyers and found Irwin, Wood, and Hoffman liable for conspiracy to defraud and fraud, and for violations of the MCPA.

The buyers were awarded a total of $129,020.03, in economic damages, and $1,305,000, in non-economic damages, against all the defendants.³ Because the court granted a motion for judgment that kept the issue of punitive damages against Irwin, Wood, and Hoffman from the jury's consideration, that issue went to the jury against the Beemans and AHOYO only. The jurors decided that punitive damages were warranted. Thereafter, in a separate proceeding, they awarded the buyers $1,800,000 in punitive damages against the Beemans and AHOYO.

After denying post-trial motions for judgment notwithstanding the verdict ("JNOV") and new trial or remittitur, the trial court granted the buyers' petition for attorneys' fees under the MCPA, awarding them fees of $195,591.26, against all the defendants. The court ruled that the fee award would be reduced by the amount of fees recovered on the judgment for fraud, however.

The appellants have raised a multiplicity of questions for review on appeal. We have combined and rephrased the questions, as follows:

I. Did the circuit court err in denying Hoffman's motion for removal?

II. Did the trial court err in denying the defense motions for judgment and JNOV on the conspiracy to defraud, fraud, and MCPA claims; and Irwin and Wood's motion for JNOV on the affirmative defense of fraud?

III. Did the trial court err in denying the defense motions for judgment, JNOV, and new trial/remittitur on the issue of non-economic damages?

IV. Did the trial court err in declining to instruct the jury on the defense of equitable estoppel; in giving an erroneous instruction on economic damages; and in declining to give a curative instruction during closing argument?⁴ The appellees noted a cross-appeal, raising two questions, which we have reworded as follows:

V. Did the trial court err in granting motions for judgment in favor of Irwin, Wood, and Hoffman on punitive damages?

VI. Did the trial court err in ruling that the amount received by the buyers' counsel for the common law claims pursuant to the contingency fee agreement would be deducted from its award of attorneys' fees under the MCPA?

For the following reasons, we shall affirm the judgment of the circuit court for compensatory damages; reverse the judgment of the circuit court on the issue of punitive damages against Irwin, Wood, and Hoffman; vacate the attorneys' fees award against Irwin, Wood, and Hoffman; and remand the case for further proceedings not inconsistent with this opinion on the issue of punitive damages and on the petition for attorneys' fees.

FACTS AND PROCEEDINGS

Beginning in 1996, Beeman and his wife, Suzanne, through their company, AHOYO, embarked on a connivance to profit by buying up dilapidated residential properties in or near Baltimore City at low prices and quickly selling them to the unwary at hugely inflated prices. The Beemans and AHOYO targeted low income, unsophisticated renters in poor neighborhoods who dreamed of someday owning their own homes, and enticed them with promises that they could be homeowners for "only $500 down."

The scheme involved tricking a prospective buyer into thinking he or she was purchasing a "rehabbed" house, or one that would be fully renovated by the time of settlement, and having Beeman illegally pay settlement and other costs, including paying off the buyer's creditors, so the transaction could go to closing—at which time Beeman's profits would far exceed the money he had fronted to make the deal happen. The properties Beeman's company purchased were in slum conditions. He would make cosmetic changes to a property and pass it off as "rehabbed." After settlement, the buyer was left with a property that was either uninhabitable or in seriously decayed condition, and was worth far less than the mortgage loan taken to buy it. Beeman continued this practice until early 1998, when he became the subject of a federal criminal investigation.⁵

This case involves eight of Beeman's and AHOYO's real estate transactions. Seven went to closing between July and December 1997, and one closed in January 1998. There were two buyers in one transaction; hence, there were nine buyer/plaintiffs at trial. The basic facts of the eight transactions, showing the purchases by Beeman/AHOYO and sales to the buyers, are as follows (chronologically by settlement date):

1. 17 North Kresson Street/Buyer Jerry McFadden April 23, 1997: Purchased for $14,500 July 11, 1997: Sold for $52,000 2. 612 E. 41st Street/Buyer Carl Haley June 25, 1997: Purchased for $20,000 August 22, 1997: Sold for $57,200 3. 610 North Belnord Road/Buyer Gertrude Green June 18, 1997: Purchased for $12,500 September 8, 1997: Sold for $44,000 4. 5601 Force Road/Buyers Denise Brower and Forrest Spencer August 7, 1997: Purchased for $24,000 September 24, 1997: Sold for $65,900 5. 406 Oldham Street/Buyer Francine Henderson March 27, 1997: Purchased for $17,550 October 9, 1997: Sold for $65,000 6. 3132 Piedmont Road/Buyer Eva Elder September 5, 1997: Purchased for $29,551 October 22, 1997 Sold for $51,000 7. 6521 Lenhart Street/Buyer Toyome Stamper September 5, 1997: Purchased for $41,790 December 5, 1997: Sold for $87,250 8. 1127 Carroll Street/Buyer Inez Coward September 29, 1997: Purchased for $7,550 January 28, 1998: Sold for $58,000

The eight transactions were similar in most material respects and followed the same factual pattern. Through AHOYO, Beeman would buy up depressed residential properties and then advertise in newspapers in Baltimore City that he could help people with little income and with credit problems buy houses with down payments of no more than $500. Some of the buyers in this case read Beeman's advertisements. Most of them heard about Beeman and AHOYO through word of mouth from others who had read the advertisements or had dealt with Beeman directly. Each of the buyers wanted to own a house and called Beeman for help.

The buyers had similar backgrounds. Each lived in a rental unit in Baltimore City and had been employed for at least two years in a steady job that paid a modest wage. None had ever owned real property and none had any experience buying or selling real property. Most of the buyers had graduated from high school or held GEDs, but some had dropped out of high school. A few had taken some college courses. Each had experienced credit problems and for that reason had a marginal credit history. All were unsophisticated in business matters. Many were renting units in crime-ridden neighborhoods and wanted to move so their families would have a safe place to live.

After the buyer called Beeman and left a message on his pager, Beeman would return the call and agree to a meeting. Usually Beeman went to the buyer's home. At the meeting, Beeman obtained preliminary income information and ran a credit report. After determining that the buyer's credit problems were not so insurmountable as to preclude obtaining financing, Beeman would offer to assist the buyer in purchasing a house in a neighborhood the buyer liked in or near Baltimore City.

Beeman's sales pitch was "the American Dream." He told his prospective buyers that nothing made him happier than to see a poor person with bad credit problems become a homeowner, and promised to "walk the buyer through" the process of purchasing a house. The buyers all believed that Beeman was representing them in the home-buying process. Beeman seemed likeable, and all the buyers were impressed by him. As one buyer testified, Beeman was "smooth." They thought he was a nice man and a professional, and trusted him...