Court Opinion

ID: 2968548
Source: CourtListenerOpinion
Date Created: 2015-09-22 07:31:23.060198+00
Date Added: 2024-06-11T15:28:42.925097
License: Public Domain

UNPUBLISHED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Affirmed in part, vacated in part, and remanded by unpublished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Unpublished opinions are not binding precedent in this circuit.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.

                                               7
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

                                          8
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.

                                                  9
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

                                               10
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

                                           11
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

                                       12
before   the   court   and   argument    would   not   aid   the   decisional

process.

                                                         AFFIRMED IN PART,
                                                          VACATED IN PART,
                                                              AND REMANDED

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