Ratta v. Dyas

• Citation: 414 Md. 556,996 A.2d 382
• Decision Date: 09 June 2010
• Docket Number: No. 23,2009.,23
• Parties: Joseph M. DELLA RATTA, et al.v.Edward J. DYAS, Jr.
• Court: Court of Appeals of Maryland

414 Md. 556

996 A.2d 382

Joseph M. DELLA RATTA, et al.v.Edward J. DYAS, Jr.

No. 23, Sept. Term, 2009.

Court of Appeals of Maryland.

June 9, 2010.

COPYRIGHT MATERIAL OMITTED

James E. Carbine (James E. Carbine, P.C. of Baltimore, MD), on brief, for petitioners.

David M. Sheehan (Michael E. Blumenfeld of Brown & Sheehan, LLP of Baltimore, MD), on brief, for respondent.

Argued before ^* BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, ADKINS and BARBERA, JJ.

ADKINS, J.

This case requires us to determine whether, with respect to the dissolution and winding up of a LLC and the winding up of a partnership, the “principal office” clause in Sections 4A-903, 4A-904(b) and 9A-803(a) of the Corporations and Associations Article (“CA”) restricts subject matter jurisdiction to the circuit court of the county in which the principal office of the business entity is located. Specifically, Petitioner Della Ratta argues that the Circuit Court for Montgomery County's orders dissolving his partnership and LLC are invalid because the original petition for dissolution was filed in the Circuit Court for Anne Arundel County, a tribunal that lacked subject matter jurisdiction over the issue. We hold that the statutes limit subject matter jurisdiction for ordering dissolution to the particular county where the principal office is located. Nevertheless, the Circuit Court for Anne Arundel County had jurisdiction over the other counts in the complaint filed by Respondent Dyas, and jurisdictional problems with the claim for dissolution were avoided when the case was transferred to the Circuit Court for Montgomery County before entry of judgment on the dissolution and winding up claims.

Della Ratta also appeals the trial court's decision to dissociate him from his partnership with Dyas, its exclusion of an accounting exhibit during the winding up phase of the action, and its finding that the parties entered into a fixed price contract for the construction of a hotel. The Court of Special Appeals (“CSA”) held that sufficient evidence existed to support the trial court's conclusions, and affirmed the judgment of the lower court. We agree, and therefore affirm the judgment of the intermediate appellate court.

FACTS AND LEGAL PROCEEDINGS

This dispute follows the disintegration of a twenty-year business relationship between Joseph M. Della Ratta and Edward J. Dyas. Dyas alleges that Della Ratta swindled him throughout the course of their collaboration to build three Ocean City resorts: the Best Western Sea Bay Inn, completed in 1988 (“Sea Bay”); the Maresol Condominiums, in 2004 (“Maresol”); and the Best Western Hotel and Suites, finished in 2006 (“the New Hotel”). Dyas further alleges that in 2004, Della Ratta attempted to “wrongfully squeeze out” Dyas from the partnership by maliciously calling in Dyas' indebtedness to the entities that the two developers formed for the projects.

Dyas and Della Ratta formed both a partnership-Spa Motel General Partnership ¹ (“Spa GP”)-in 1987 and a limited liability company-Bay View Condominiums, LLC (“Bay View”)-in 2002. The two men utilized the partnership for the construction of both Sea Bay and the New Hotel, while opting for the LLC when commencing Maresol.²

Marked differences between the accounting practices of both men contributed to the downfall of their partnership. Dyas always created a new LLC for each of his projects in order to protect himself from liability if the job went bad. Also, Dyas preferred bank financing as much as that was possible. Della Ratta, on the other hand, had a more “loose” accounting practice whereby “he freely transferred money back and forth between [his own two corporate entities] to meet construction costs, overrun, et cetera.” One of his corporate entities, a construction company called Della Ratta, Inc. (“DRI”), provided construction for all three projects. Moreover the two hotels were managed by Commercial Management Company (“CMC”), also solely owned by Della Ratta. When Sea Bay's opening was delayed because it could not acquire financing for furniture, fixtures, and equipment, Della Ratta provided a loan from CMC to cover the leasing of those items. The terms of that loan were very favorable to CMC, and Dyas cites this as the first in a series of instances in which Della Ratta (in favoring his own interests) systematically fleeced him.

Later, in the Maresol project, Dyas and Della Ratta could not agree as to how to spend Bay View's newly acquired revenue following the sale of forty condominiums. Dyas disagreed with Della Ratta's desire to use the money to pay off a bank loan because the loan was not yet in default. Dyas alleges that Della Ratta then deceptively and unilaterally disposed of Bay View's funds to repay the loan and then attempted to force Dyas out of the partnership by seeking an assignment of the loan documents in order to foreclose on Dyas.

The last straw for Dyas came during the construction of the New Hotel in December 2004, when Della Ratta issued three “capital call letters” to Dyas, demanding repayment of costs associated with Sea Bay and the New Hotel, as well as other cash advances purportedly made by Della Ratta. On January, 10, 2005, Dyas filed a complaint in the Circuit Court for Anne Arundel County, seeking a temporary restraining order invalidating Della Ratta's three capital call letters. On February 9, 2005, Dyas amended his complaint, requesting judicially supervised dissolution of Spa GP.

On November 3, 2005, Della Ratta moved to transfer the case to the Circuit Court for Montgomery County, arguing that Section 9A-803(a) of the Revised Uniform Partnership Act ³ conferred exclusive jurisdiction over the dissolution action on Montgomery County because Spa GP's principal office was located in that county. See Md.Code (1975, 1999 Repl. Vol.) § 9A- 803(a) of the Corporations and Associations Article (“CA”).⁴ Dyas responded by filing a third amended complaint, in which he requested judicial dissolution of Bay View under CA Section 4A-903. Della Ratta also challenged the court's ability to hear this dissolution matter, articulating the same subject matter jurisdiction argument he presented in defense against the dissolution of Spa GP.

Despite Della Ratta's protests, the Circuit Court for Anne Arundel County held a ten-day trial on the merits. After a bench trial, Judge Caroom ruled in favor of Dyas, enjoining Della Ratta's capital calls and appointing an auditor to inspect the accounts of Dyas and Della Ratta with respect to Spa GP and Bay View. The judge determined that Della Ratta's conduct prevented the partnership from continuing in a reasonably practicable manner, and therefore ordered Della Ratta dissociated from Spa GP pursuant to CA Section 9A-601(5)(iii), but reserved the actual order for dissolution of Spa GP and Bay View LLC pending the transfer of the case to Montgomery County. On June 23, 2006, Chief Judge Bell pursuant to Article IV, Section 18 of the Constitution of Maryland,⁵ specially designated Judge Caroom to sit as a Judge of the Circuit Court for Montgomery County in this case and thereafter to render a verdict. Sitting in that capacity, Judge Caroom officially ordered the dissolution of Spa GP and Bay View and instructed Della Ratta to return over three million dollars to Bay View before the dissolution.

Following the trial on the merits, the dispute crossed into its accounting phase, during which the auditor prepared a statement of the accounts of both entities. During this phase, on April 17, 2007, the trial court held a hearing on all open motions. At the hearing, Della Ratta sought to introduce into evidence Defendant's Exhibit L26, which comprised twelve checks made payable to Spa GP and signed by Della Ratta. The trial court declined to reopen the evidence for the admission of L26, finding that Della Ratta's accounting practices rendered “the records [ ] woefully incomplete, inaccurate and unreliable.” After two interim accounts and distributions, the auditor submitted his final report, which was approved by final judgment.

Della Ratta appealed the trial court's final judgment, and, in Della Ratta v. Dyas, 183 Md.App. 344, 961 A.2d 629 (2008), the CSA affirmed. Della Ratta then filed a timely petition for writ of certiorari to this Court, and we granted his petition to consider the following issues:

I. Did the Trial Court have the subject matter jurisdiction to dissolve Bay View and judicially supervise the winding up of Spa GP?

II. Did the Trial Court err in dissociating Della Ratta as a general partner of Spa GP based on his conduct in Bay View?

III. Did the Trial Court err in refusing to allow Della Ratta the opportunity to introduce proffered exhibit L26 into the record before the court appointed auditor during the accounting phase of the case?

IV. Did the lower courts err when they found that the parties formed an enforceable agreement to construct the Maresol Condominiums on a firm, fixed price basis?

DISCUSSION

I. Standard of Review

Pursuant to Maryland Rule 8-131(c), where, as here, an action has been tried without a jury, the appellate court will review the case on both the law and the evidence. We will not set aside the judgment of the trial court on the evidence unless clearly erroneous. Md. Rule 8-131(c). “The appellate court must consider evidence produced at the trial in a light most favorable to the prevailing party....” Ryan v. Thurston, 276 Md. 390, 392, 347 A.2d 834, 835 (1975). “If there is any competent evidence to support the factual findings below, those findings cannot be held to be clearly erroneous.” Solomon v. Solomon, 383 Md. 176, 202, 857 A.2d 1109, 1123 (2004) (quotation marks and citation omitted). The trial court's conclusions of law, however, are not entitled to the deference of the clearly erroneous standard. See Clancy v. King, 405 Md. 541, 554, 954 A.2d 1092, 1099 (2008).

II. Analysis

A. Subject Matter Jurisdiction vs. Venue

Della Ratta argues that the Circuit Court for Anne...