Norino Props., LLC v. Balsamo

• Decision Date: 15 December 2021
• Docket Number: No. 1343, Sept. Term, 2020,1343, Sept. Term, 2020
• Parties: NORINO PROPERTIES, LLC, et al. v. Joseph J. BALSAMO
• Court: Court of Special Appeals of Maryland

253 Md.App. 226

265 A.3d 1109

NORINO PROPERTIES, LLC, et al.

v.Joseph J. BALSAMO

No. 1343, Sept. Term, 2020

Court of Special Appeals of Maryland.

December 15, 2021

Argued by: Todd M. Reinecker (Pilieromazza PLLC, Annapolis, MD, Matthew E. Kreiser, Pilieromazza PLLC, Washington, DC, Robert S. Brennen, Miles & Stockbridge PC, Baltimore, MD), on the brief, for Appellant.

Argued by: William N. Sinclair (Todd W. Hesel, Silverman, Thompson, Slutkin & White, LLC, on the brief), Baltimore, MD, for Appellant.

Panel: Graeff, Reed, Ripken, JJ.

Graeff, J.

This appeal involves an ongoing business dispute between appellants, John Zorzit and Norino Properties, LLC ("Norino Properties"),¹ and appellee, Joseph Balsamo. Mr. Zorzit and Mr. Balsamo are co-owners of Balsamo and Norino Properties, LLC ("BNP"), a real estate investment company created in 1998. In 2012, Mr. Balsamo filed suit in the Circuit Court for Baltimore County seeking, among other things, to dissolve BNP. The court did not dissolve BNP, but it granted some relief to Mr. Balsamo. Mr. Balsamo appealed, and we affirmed the circuit court's judgment. See Balsamo v. Zorzit , No. 761, Sept. Term, 2017, 2018 WL 3359642 (filed July 9, 2018), cert. denied , 461 Md. 487, 194 A.3d 938 (2018) (" Balsamo I ").

In 2019, Mr. Balsamo, individually and derivatively on behalf of BNP, filed in the Circuit Court for Baltimore County a Complaint, and a First Amended Complaint, against appellants seeking, among other things, a judicial dissolution of BNP. Appellants filed a Joint Motion to Dismiss, arguing that the claims were barred by the doctrine of res judicata , and the Amended Complaint failed to state a claim upon which relief could be granted. The court granted the motion to dismiss. It subsequently denied Mr. Balsamo's Motion to Alter or Amend Judgment and his accompanying request for leave to amend the complaint.

Mr. Balsamo requested in banc review, and the circuit administrative judge designated three judges to review the court's decision as a panel in banc. The in banc panel reversed the court's denial of the request for leave to amend and granted Mr. Balsamo 30 days to file another complaint.

On appeal, appellants present the following questions for this Court's review, which we have rephrased slightly, as follows:

1. Did the in banc panel lack jurisdiction to consider the appeal pursuant to Article IV, § 22 of the Maryland Constitution because the circuit court's dismissal of the Amended Complaint for failure to state a claim was not a "trial"?

2. Did the in banc panel err in concluding that it was an abuse of discretion for the circuit court to refuse to grant Mr. Balsamo leave to amend his complaint?

For the reasons set forth below, we shall affirm the judgment of the in banc panel.

FACTUAL AND PROCEDURAL BACKGROUND²

I.Events Prior to the Litigation Subject to Appeal

BNP, a limited liability company, was formed on November 18, 1998. Mr. Balsamo and Mr. Zorzit each have a 50% membership interest in BNP. Although they did not have a "comprehensive written operating agreement" for BNP, they established BNP "for the purpose of buying, selling, leasing, improving and otherwise investing in real estate to create and preserve assets to fund each member's retirement." Mr. Zorzit is BNP's managing member.

Norino Properties is a limited liability company that was formed on September 15, 1997. Mr. Zorzit is the majority owner and "manager or managing member" of Norino Properties. James Parks, a certified public accountant, is Norino Properties' minority member. Mr. Balsamo does not have a membership interest in Norino Properties.

On November 18, 1998, Norino Properties and BNP entered into an Agreement for Management Services ("Management Agreement"), which provided that Norino Properties would "provide construction, maintenance and supporting services to BNP in exchange for largely unspecified compensation paid by BNP to Norino Properties." The Management Agreement "does not include any specific rates for compensation and is of indefinite duration." On November 1, 2010, Mr. Balsamo and Mr. Zorzit affirmed the Management Agreement through an Affirmation.³

In 2012, Mr. Balsamo, individually and derivatively on behalf of BNP, filed suit against appellants, asserting multiple claims, including negligence and breach of fiduciary duties, breach of contract, unjust enrichment, and indemnification. Mr. Balsamo alleged that Mr. Zorzit wasted his and BNP's assets, stating that Mr. Zorzit "caused BNP to loan him or companies he controlled over $900,000 to purchase property in Canada," which Mr. Zorzit subsequently mismanaged, "without a promissory note in place to evidence the loan or any writing memorializing his obligations to BNP." Mr. Balsamo alleged that Mr. Zorzit harmed BNP "by using its funds to satisfy a tax lien imposed upon Nick's Amusement, another company of which Mr. Zorzit is the sole owner."

Mr. Balsamo also alleged that, although BNP owned commercial real property in Baltimore County (the "Baltimore County Property"), Mr. Zorzit "wrongfully held that property in the name of Norino Properties." Chick-fil-A leased the Baltimore County Property, which was valued at $3.5 million. Mr. Balsamo further alleged that Mr. Zorzit assisted Mr. Parks in, among other things, falsely claiming a membership interest in BNP. Mr. Balsamo sought damages, a judicial dissolution and winding up of BNP, and a declaratory judgment "that the Baltimore County Property was owned by and for the benefit of BNP; that Mr. Parks had no interest in BNP; and that BNP's agreements with Mr. Zorzit's companies," including the Management Agreement with Norino Properties, "were not binding or enforceable upon BNP."

In June 2014, a fifteen-day bench trial ensued. On March 4, 2015, the court issued an Order, with Findings of Fact and Conclusions of Law.⁴ The court did not dissolve BNP, noting that the parties had agreed in the beginning that Mr. Zorzit was the sole authorized representative to conduct business for BNP. Although there had been disputes between the parties in recent years, the court found that it was "reasonably practicable to carry on the business in conformity with the articles of organization."⁵ The court did, however, grant some relief to Mr. Balsamo, including ordering an independent accounting of BNP member capital accounts.

II.Amended Complaint at Issue in the Present Case

In August 2019, Mr. Balsamo filed a new Complaint, and in September 2019, he filed an Amended Complaint, against Norino Properties and Mr. Zorzit. In Count One, Mr. Balsamo, in his individual capacity, requested dissolution of BNP because it was "not reasonably practicable to carry on the business in conformity with the articles of organization or the operating agreement." In Counts Two and Three, he alleged breach of contract and constructive fraud. In Counts Four through Seven, Mr. Balsamo alleged, "for the use and benefit of BNP," negligence and breach of fiduciary duties, unjust enrichment, constructive fraud, and corporate waste. In Count Eight, for the use and benefit of BNP, he sought a declaratory judgment that the Management Agreement was terminable at any time.

The Amended Complaint alleged that, since October, 2017, Mr. Zorzit had operated BNP "for the primary benefit of himself" and "his other companies," including Norino Properties. It alleged that Mr. Zorzit had "breached his fiduciary duties and other obligations, and since October 1, 2017, had engaged in, and caused BNP to engage in, a course of fraudulent, deceptive, oppressive, illegal and inequitable conduct," including: (1) illegitimate loans; (2) obfuscation of business records; (3) self-dealing; and (4) fraudulent or otherwise unlawful acts.

Regarding illegitimate loans, Mr. Balsamo alleged that Mr. Zorzit "frequently caused BNP to make loans unrelated to BNP's business purpose," without Mr. Balsamo's consent, and thereby treated BNP as his personal lender. Four loans, in particular, had "provided BNP no legitimate business advantage and apparently were instead intended to benefit Mr. Zorzit and his other businesses."

First, the Amended Complaint alleged that BNP, through Mr. Zorzit, made an "undocumented, unsecured, interest-free loan" to an administrative law judge ("ALJ") for "tens of thousands of dollars" to "curry favor" with the ALJ. The loan served no business purposes of BNP, and ultimately, it caused a loss to BNP because the ALJ did not repay the loan after it was discharged in bankruptcy.

Second, BNP, through Mr. Zorzit, made a loan of $61,567.77 to an unspecified borrower, who secured the loan with a mortgage on real property located in Catonsville, Maryland. The loan documents and mortgage were in BNP's name. After the borrower refinanced the secured loan and repaid the principal amount, plus interest, in the total amount of $77,309.29, "Mr. Zorzit contended that the loan repayment actually belonged to Norino Properties, and he transferred the repayment funds, including accrued interest, from BNP to Norino Properties."

Third, BNP, through Mr. Zorzit, made a loan to Amer. Inc. ("Amer"), which "operates a bar on real estate owned by one of Mr. Zorzit's other companies." After Mr. Zorzit disbursed the loan funds from BNP, Amer "used the funds to pay Mr. Zorzit's other businesses." Amer has not repaid the loan from BNP, and "Mr. Zorzit has not collected any late fees on BNP's behalf."

Fourth, BNP, through Mr. Zorzit, made a "substantial loan" to a Canadian corporation that Mr. Zorzit owned pursuant to a Non-Negotiable Promissory Note that provided "for no interest or periodic payments but only a single balloon payment upon maturity in 2024." Mr. Zorzit's corporation used the loan proceeds to purchase real property in Ontario, Canada in its name, but BNP paid the property taxes. Consequently, rather than BNP's "loan balance being paid down over time, it currently continues to increase as Mr. Zorzit causes BNP to make additional disbursements for taxes and...