Saint Annes Development Company v. Neal Trabich , 443 F. App'x 829 ( 2011 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 10-2078
SAINT ANNES DEVELOPMENT COMPANY, INCORPORATED; AARON YOUNG,
Plaintiffs - Appellees,
v.
NEAL TRABICH; TERRY TRABICH,
Defendants – Appellants,
and
RONALD CORUZZI; IRENE CORUZZI,
Defendants,
v.
ADELBERG, RUDOW, DORF & HENDLER, LLC,
Respondent,
v.
ANDREW RADDING,
Movant.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. William D. Quarles, Jr., District
Judge. (1:07-cv-01056-WDQ)
Submitted: June 14, 2011 Decided: August 17, 2011
Before TRAXLER, Chief Judge, and WILKINSON and DAVIS, Circuit
Judges.
Affirmed in part, vacated in part, and remanded by unpublished
per curiam opinion.
David W. Lease, SMITH, LEASE AND GOLDSTEIN, LLC, Rockville,
Maryland, for Appellants. Steven B. Gould, BROWN & GOULD, LLP,
Bethesda, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Saint Annes Development Company, LLC (“SADC”) and Aaron
Young, one of SADC’s members (together, the “Plaintiffs”),
brought this action against Neal and Terry Trabich and Ronald
and Irene Coruzzi, asserting claims of fraud and breach of
contract. The district court granted summary judgment in favor
of SADC and Young on the breach of contract claim and later,
after a bench trial, entered judgment in favor of SADC and Young
on the fraud claim. The Trabiches appeal. We affirm in part,
vacate in part, and remand.
I.
The claims at issue in this case spring from a financing
agreement (the “Facility Agreement”) to provide funding for the
Trabiches and the Coruzzis to develop and build the “Saint Annes
Project,” a golf and residential community in Middletown,
Delaware. Under the Facility Agreement, SADC agreed to arrange
through a third-party lender a credit facility that would permit
the Trabiches and the Coruzzis to borrow up to one million
dollars under a revolving line of credit. The Facility
Agreement, which was executed on May 2, 2006, required repayment
of the line of credit, plus all fees imposed by the third-party
lender, by December 31, 2009. Under the Facility Agreement, the
Trabiches and the Coruzzis were obligated to pay SADC annual
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fees in the amount 10% of the principal balance borrowed under
the credit facility. The Facility Agreement also required the
Trabiches to pay SADC fees for consulting services to be
provided over a 20-year period after the termination of the
underlying credit facility -- $100,000 per year for the first
ten years, and $75,000 per year for the next ten years. The
Facility Agreement did not specify the nature of the consulting
services that SADC would provide.
Young sought the assistance of a colleague, and the
colleague was able to obtain a $1,000,000 line of credit through
Wachovia Bank. The Trabiches executed a promissory note in
favor of Wachovia and immediately withdrew the full amount
available under the line of credit.
In November 2006, approximately six months after the
Wachovia line of credit was established, the Trabiches sued
Wachovia, SADC, and SADC’s members in state court in New York.
The Trabiches alleged, inter alia, that the Facility Agreement
was usurious and thus void and unenforceable under New York law.
The verified complaint filed in that action was signed, under
oath, by Trabich, and it included various factual allegations
that were inconsistent with the terms of the Facility Agreement.
For example, the Facility Agreement stated that the credit
facility was for commercial purposes and that the funds would be
used exclusively for the Saint Annes Project. In the verified
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complaint, however, Trabich asserted that, as to the Trabiches,
the Facility Agreement had no commercial purpose. Trabich also
alleged that the consulting-services provision in the Facility
Agreement was a sham because there was no expectation by any
party that any consulting services would ever be provided by
SADC. See J.A. 89-90, 694, 697.
After filing the New York action, the Trabiches continued
to perform their obligations under the Facility Agreement for
some period of time, making interest payments to Wachovia
through October 19, 2007. In November 2007, the Trabiches’ New
York attorney informed SADC that no further interest payments
would be made and that all matters would be resolved at trial.
SADC thereafter issued a notice of default and demanded
that the Trabiches and Coruzzis make the required payments to
cure the default. Neither the Trabiches nor the Coruzzis cured
the defaults, and SADC notified them of its election to
accelerate all payments due under the Facility Agreement and the
promissory note. SADC paid the principal and interest owed to
Wachovia under the line of credit, and the Plaintiffs then
brought this action asserting fraud and breach of contract
claims against the Trabiches and the Coruzzis.
The district court granted summary judgment in favor of
SADC on the breach of contract claims, and the case proceeded to
trial on the remaining fraud claims. After a bench trial, the
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district court rejected two of the fraud claims asserted by the
Plaintiffs, but the court found in favor of SADC on Count IV and
found in favor of Young on Count V. The court thereafter
entered final judgment, and this appeal by the Trabiches
followed.
II.
We turn first to the Trabiches’ challenge to the grant of
summary judgment on the Plaintiffs’ breach of contract claims.
In these claims, SADC sought from the Trabiches and the Coruzzis
recovery of the principal and interest SADC paid to Wachovia,
along with certain other payments and fees that were due under
the Facility Agreement. SADC also sought only from the
Trabiches an award of $1,750,000 (plus post-judgment interest),
the accelerated total of the 20 years of consulting fees the
Trabiches were obligated to pay under the Facility Agreement.
The district court granted summary judgment in favor of SADC on
these claims, finding the Trabiches and the Coruzzis jointly and
severally liable for approximately $1,250,000, plus post-
judgment interest, on the Wachovia claim, and finding the
Trabiches liable for $1,750,000, plus post-judgment interest, on
the consulting-fees claim.
The Trabiches filed a motion for reconsideration. As to
the Wachovia claim, the Trabiches argued that there were
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material issues of fact in dispute that precluded the grant of
summary judgment. As to the consulting-fees claim, the
Trabiches argued, inter alia, that the acceleration of the
consulting fees due under the Facility Agreement amounted to an
unenforceable penalty and that, in any event, any award
representing future consulting fees should have been reduced to
present value. The district court denied the motion, concluding
that the Trabiches failed to satisfy the requirements for
amending a judgment under Rule 59(e) of the Federal Rules of
Civil Procedure. See J.A. 68-69.
On appeal, the Trabiches do not challenge the district
court’s disposition of the Wachovia claim, but instead focus
only on the grant of summary judgment in favor of SADC on the
consulting-fees claim. They argue that the summary judgment
order was an interlocutory order subject to revision at any
time, and that the district court erred by considering their
motion for reconsideration under the standard governing motions
filed under Rule 59(e) of the Federal Rules of Civil Procedure.
We agree.
Motions to alter or amend under Rule 59(e) may be granted
if necessary “(1) to accommodate an intervening change in
controlling law; (2) to account for new evidence not available
at trial; or (3) to correct a clear error of law or prevent
manifest injustice.” Pacific Ins. Co. v. Am. Nat’l Fire Ins.
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Co., 148 F.3d 396, 403 (4th Cir. 1998). Rule 59(e), however,
applies only to final judgments. See Fayetteville Investors v.
Commercial Builders, Inc., 936 F.2d 1462, 1469 (4th Cir. 1991).
As the Trabiches contend, the district court’s summary judgment
order, which did not resolve all claims against all parties, was
interlocutory and thus subject to revision at any time. See
Fed. R. Civ. P. 54(b) (Unless certified as final, “any order or
other decision, however designated, that adjudicates fewer than
all the claims or the rights and liabilities of fewer than all
the parties does not end the action as to any of the claims or
parties and may be revised at any time before the entry of a
judgment adjudicating all the claims and all the parties’ rights
and liabilities.”); American Canoe Assoc. v. Murphy Farms, Inc.,
326 F.3d 505, 514-15 (4th Cir. 2003) (“[A] district court
retains the power to reconsider and modify its interlocutory
judgments, including partial summary judgments, at any time
prior to final judgment when such is warranted.”).
The power to reconsider or modify interlocutory rulings “is
committed to the discretion of the district court,” and that
discretion is not cabined by the “heightened standards for
reconsideration” governing final orders. American Canoe, 326
F.3d at 514-15; see also Fayetteville Investors, 936 F.2d at
1473 (interlocutory orders “are left within the plenary power of
the Court that rendered them to afford such relief from them as
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justice requires” (quoting 7 Moore’s Federal Practice ¶ 60.20)).
Because the district court applied the wrong legal standard to
the Trabiches’ motion for reconsideration, we vacate that
portion of the partial summary judgment order finding the
Trabiches liable on the consulting-fees claims, and we remand
for reconsideration of the motion under the proper legal
standard. See RZS Holdings AVV v. PDVSA Petroleo S.A., 506 F.3d
350, 356 (4th Cir. 2007) (“By definition, a district court
abuses its discretion when it makes an error of law.”);
Fayetteville Investors, 936 F.2d at 1473-74 (reversing and
remanding because district court applied wrong legal standard to
motion seeking reconsideration of interlocutory order). * Nothing
*
We reject SADC’s contention that the Trabiches invited
the district court’s error by including a citation to Rule 59 in
the “Memorandum and Points of Authority” filed along with its
motion for reconsideration. See United States v. Jackson, 124
F.3d 607, 617 (4th Cir. 1997) (“The invited error doctrine
recognizes that a court cannot be asked by counsel to take a
step in a case and later be convicted of error, because it has
complied with such request.” (internal quotation marks
omitted)). Apart from the caption and signature block, the
Memorandum contained only a numbered list of four procedural
rules (Rules 56, 58, 59, and 60 of the Federal Rules of Civil
Procedure), with no elaboration, explanation, or discussion, see
Supp. J.A. 49; all substantive discussion and argument was
contained in the motion itself. The Trabiches did not cite Rule
59 in the motion or otherwise suggest that the motion was filed
under Rule 59, and the motion explicitly described the court’s
order as interlocutory. Under these circumstances, we do not
believe that the single, unexplained citation to Rule 59 can be
viewed as inviting the court to apply Rule 59 to the
interlocutory summary judgment order.
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in this opinion, however, should be understood as expressing a
view as to whether, upon application of the correct standard,
the Trabiches’ motion to reconsider should be granted.
III.
A.
In the bench trial that followed after the partial grant of
summary judgment, the district court concluded that the
Trabiches committed fraud by falsely representing (in the
Facility Agreement) that the credit facility was sought for
business or commercial purposes and that the funds obtained
through the Facility Agreement would be used exclusively for the
Saint Annes Project. The court therefore granted judgment in
favor of SADC on the fraud claim alleged in Count IV and in
favor of Young on the fraud claim alleged in Count V. After
reviewing the record and considering the arguments of the
parties, we find no error in the court’s legal analysis, nor
clear error in the court’s factual findings. See Universal
Furniture Int’l, Inc. v. Collezione Europa USA, Inc., 618 F.3d
417, 427 (4th Cir. 2010) (per curiam) (“We review a judgment
resulting from a bench trial under a mixed standard of review --
factual findings may be reversed only if clearly erroneous,
while conclusions of law are examined de novo.” (alteration and
internal quotation marks omitted)); TFWS, Inc. v. Franchot, 572
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F.3d 186, 196 (4th Cir. 2009) (“[I]f the district court’s
account of the evidence is plausible in light of the record
viewed in its entirety, we will not reverse the district court’s
finding simply because we have become convinced that we would
have decided the question of fact differently.” (internal
quotation marks omitted)). Accordingly, we reject the
Trabiches’ challenge to the district court’s conclusion that
they committed fraud.
B.
The fraud claim alleged in Count V was asserted by Young
individually against Neal Trabich only, and Count V was the only
claim on which Young (individually) prevailed. The formal order
of judgment directed that judgment be entered against Neal
Trabich in favor of Young on Count V, but the order also stated
that the Trabiches (that is, Neal and Terry Trabich) were
jointly and severally liable to Young for damages of more than
$66,000. See J.A. 110. On appeal, the Trabiches contend that
the district court erred by entering judgment on Count V against
Terry Trabich, given that Young did not assert his fraud claim
against her.
The Plaintiffs concede that the judgment did not track the
counts asserted in the complaint, but they argue that the court
structured the judgment as it did in order to avoid double
recovery through the damages awarded on the various claims on
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which Plaintiffs prevailed. While it is possible that the
Plaintiffs’ explanation of the judgment accurately reflects the
district court’s intention when it entered judgment, the
explanation depends on an assumption that the district court
intended to direct the Trabiches to pay over to Young (an SADC
member) damages that had been awarded to SADC and on an
assumption that such an action would have been proper. There is
nothing in the district court’s order that directly supports the
Plaintiffs’ hypothesis, however, and we are thus left with an
error (the entry of judgment against Terry Trabich on a count
for which she was not named as a defendant) that we cannot
conclude was harmless. Accordingly, we vacate the district
court’s entry of judgment against Terry Trabich in favor of
Young and remand for correction of the judgment. The district
court on remand is free to structure the judgment as necessary
to avoid double recovery, but the court should explain any such
adjustments in sufficient detail to facilitate review of that
judgment in the event of further appeals.
IV.
For the foregoing reasons, we affirm in part, vacate in
part, and remand for further proceedings consistent with this
opinion. We dispense with oral argument because the facts and
legal contentions are adequately presented in the materials
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before the court and argument would not aid the decisional
process.
AFFIRMED IN PART,
VACATED IN PART,
AND REMANDED
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