Della Ratta v. Dyas

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 ⁵⁶¹ 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. 2 ⁵⁶² 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 ⁵⁶³ 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 Rat-ta 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, ⁵⁶⁴ 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? ⁵⁶⁵ 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. Venus Della Ratta argues that the Circuit Court for Anne Arundel County did not have the subject matter jurisdiction to dissolve Bay View and to supervise the winding up of Spa GP. Specifically, Della Ratta focuses on language found in three sections of the Corporations and Associations Article describing the appropriate arbiter for such matters, i.e., “the circuit court of the county in which the principal office of the partnership is located[.]” 6 He argues that Dyas’s claims for dissolution and ⁵⁶⁶ wind up of both Spa GP and Bay View were inappropriately submitted to and heard by the wrong court because Montgomery County is, indisputably, the location of the principal place of business for both entities. 1. Statutory Interpretation The cardinal rule of statutory interpretation is to ascertain and effectuate legislative intent. See Johnson v. Mayor & City Council of Balt.

City, 387 Md. 1, 11 , 874 A.2d 439, 445 (2005). “The first step in determining legislative intent is to look at the statutory language and if the words of the statute, construed according to their common and every ⁵⁶⁷ day meaning, are clear and unambiguous and express a plain meaning, we will give effect to the statute as it is written.” Id. (quotation marks and citations omitted). If, however, the statute is ambiguous, the court may supplement its analysis by turning to legislative materials, such as “related statutes, pertinent legislative history and other material that fairly bears on the ... fundamental issue of legislative purpose or goal____” Id. at 12 , 874 A.2d at 446 (quotation marks and citations omitted). Throughout this process, this Court “must always be cognizant of the fundamental principle that statutory construction is approached from a ‘commonsensical’ perspective.

Thus, we seek to avoid constructions that are illogical, unreasonable, or inconsistent with common sense.” Frost v. State, 336 Md. 125, 137 , 647 A.2d 106, 112 (1994) (citations omitted). 2. Dissolution and Wind Up of Spa GP Della Ratta concedes that any court can order the dissolution of a partnership. CA Section 9A-801 provides in pertinent part: A partnership is dissolved, and its business must be wound up, only upon the occurrence of any of the following events: ... (5) On application by a partner, a judicial determination that: ... [it is not reasonably practicable to carry on the business of the partnership].

(emphasis added). Here, there is no question that the General Assembly did not restrict which court could make the “judicial determination” of whether dissolution of a partnership is appropriate and render an order accordingly. Thus, the Circuit Court for Anne Arundel County possessed the subject matter jurisdiction to hear the dissolution count for Spa GP and would have been able to issue the final order of dissolution rather than transfer the matter to the Circuit Court for Montgomery County. Della Ratta instead challenges the validity of the order for the wind up of Spa GP on grounds that the application requesting wind up was made in the Circuit Court for Anne ⁵⁶⁸ Arundel County when it should have been made in Montgomery County.

There is no dispute that the Circuit Court for Montgomery County supervised the wind up of Spa GP, but Della Ratta asserts that the language of CA Section 9A-803 (“on application of any partner, ... the circuit court for the county in which the principal office of the partnership is located ... may order judicial supervision of the winding up”) required Dyas to file his application for wind up in Montgomery County. Judge Rodowsky, writing for the CSA, rejected this argument, stating that the use of “application” in the statute was meant to refer to the class of persons who can request judicial supervision of the winding up process, rather than to limit the filing of an application to a specific court. Della Ratta v. Dyas, 183 Md.App. 344, 363 , 961 A.2d 629, 640 (2008). We agree.

The statute permits an order for judicial supervision of winding up of a partnership “on application of any partner, partner’s legal representative, or transferee.... ” CA § 9A-803 (emphasis added). The General Assembly could have, but did not, describe the petition for judicial supervision as an “application to the circuit court for the county in which the principal office of the partnership is located.” Instead, the General Assembly coupled the word “application” with “of a partner, [etc.],” indicating its intention to regulate who would have standing to make such an application, not the place where persons with standing could file such an application. The CSA also rejected Della Ratta’s challenge to the order for wind up of Spa GP on the grounds that requiring severance of Dyas’s dissolution actions from his other twelve claims would not be a commonsense application of the statute. Della Ratta, 183 Md.App. at 364 , 961 A.2d at 641 .

It noted that actions for involuntary dissolution are often linked to claims of breach of fiduciary duty, breach of contract, and possibly fraud. Id. As Dyas did not seek dissolution of Spa GP until after he had filed his other claims in Anne Arundel County, Della Ratta’s theory would require Dyas to file a separate claim for dissolution in Montgomery County rather ⁵⁶⁹ than attaching the count onto his third amended complaint in Anne Arundel County. Id. at 364 , 961 A.2d at 640 (“Ordinarily, Dyas would have been entitled to a stay of the dissolution action, pending resolution of his claims in Anne Arundel County.”).

If Dyas had been successful on his other claims (as he was here), collateral estoppel would lead to an order of dissolution in Montgomery County. “By trying the issues in Anne Arundel County, and transferring the entire action to Montgomery County prior to the order of dissolution, Dyas has achieved the same result.” Id. at 364 , 961 A.2d at 641 . Again, we agree with the CSA. 3. Dissolution and Wind Up of Bay View, LLC To contest both the dissolution and the winding up of Bay View, 7 Della Ratta focuses on the General Assembly’s authorization of “the circuit court of the county in which the principal office of the limited liability company is located” both to decree the dissolution of an LLC (under CA Section 4A-903) and to wind up the affairs of the LLC (under CA Section 4A-904(b)). 8 Della Ratta claims that the statute is unambiguous and requires any adjudication of dissolution to be in the county described. The CSA disagreed, reasoning that the statute was ambiguous because it was unclear as to whether the language restricted jurisdiction to a specific county or simply indicated a non-binding preference for a particular county.

We disagree with the CSA, however, because, in our view, such a holding contravenes the statutory interpretation ⁵⁷⁰ canon that a court should read a statute “as a whole to ensure that no word, clause, sentence or phrase is rendered surplus-age, superfluous, meaningless or nugatory.” Addison v. Lochearn Nursing Home, LLC, 411 Md. 251, 275 , 983 A.2d 138, 153 (2009) (quotation marks and citation omitted). Reading the language as a mere preference for a particular county would render it surplusage because, pursuant to the “carries on a regular business” clause in the Maryland’s general venue statute, 9 venue would exist in the county where the principal office is located regardless of the existence of the “principal office” provision. Furthermore, such a reading would render the provision nugatory because a plaintiff could ignore the preference and bring a dissolution action in any county permitted by the general venue statute. See Maryland Code (1974, 2006 Repl.

Vol.), § 6-201 of the Courts and Judicial Proceedings Article. Accordingly, because this Court should not read any portion of the statute as ineffectual, we do not interpret Section 4A-903 as signaling simply a “legislative preference.” Thus, we conclude that the statute confers exclusive subject matter jurisdiction for ordering dissolution of an LLC on the county where the principal office of the LLC is located. Even if this Court were to agree with the CSA that Section 4A-903 is ambiguous, we would still interpret the statute as we did above because of its legislative and statutory history. Again, we disagree with the CSA on this point.

The CSA explored the legislative history of the Maryland Limited Liability Company Act (“MLLCA”) (CA Title ’4A), the Maryland Uniform Partnership Act (“MUPA”) (CA Title 9), the Maryland Revised Uniform Partnership Act (“MRUPA”) (CA Title 9A), and the Maryland Revised Uniform Limited Partnership ⁵⁷¹ Act (“MRULPA”) (CA Title 10). According to a special Joint Committee of the Sections of Taxation and Business Law of the Maryland State Bar Association (“the Committee”), which drafted the legislative bill that became the MLLCA, CA Section 4A-903 was derived from MRULPA’s Section 10-802, and it was “intended that all circumstances which justify judicial dissolution under [MRULPA] will justify judicial dissolution of a limited liability company.” Draft of Third Report of the Special Joint Committee on the Maryland Limited Liability Company Act 84 (1992). Both CA Sections 4A-903 and 10-802 10 contain the “principal office” provision, and the CSA relied on the Committee’s statement in holding that the MLLCA dissolution section contained the provision simply because it was in the MRULPA. See Della Ratta, 183 Md.App. at 360 , 961 A.2d at 638-39 .

The comment to CA Section 10-802 (found in Chapter 801 of the Acts of 1981) explains that the Section is derived from CA Section 9-603(a)(4) of MUPA and “is not intended to modify existing law.” 1981 Md. Laws 3047 . Section 9-603(a)(4) does not contain the “principal office” provision. 11 Therefore, the CSA reasoned, the language in Section 4A-903 does not limit subject matter jurisdiction because its statutory genesis did not restrict which courts could order the dissolution of a partnership. ⁵⁷² We agree with Della Ratta’s challenge to the CSA’s reliance on the Committee’s stated intention not to modify the law as it existed before the adoption of CA Section 10-802. Relying on the Third Report of the Special Joint Committee on the Maryland Limited Liability Company Act (June 1,1992), Della Ratta asserts that the intent was only to “borrow the ‘circumstances which justify judicial dissolution’ from the [MRULPA,]” not the law on subject matter jurisdiction. We believe this is the best reading of the comment.

The General Assembly’s insertion of language restricting the court that may order dissolution in the MLLCA and the MRULPA, while omitting the same language in MRUPA’s dissolution statute, indicates that Maryland’s legislative body intended to impose an additional limitation. There is no question that the General Assembly considered such language when it promulgated the MRUPA because the clause is present in the MRUPA’s winding up statute. Thus, we conclude that the deviation is intentional and a more substantive restriction on subject matter jurisdiction. Ultimately, the plain language of CA Section 4A-903 as well as a logical examination of legislative and statutory history persuades us that the MLLCA accords subject matter jurisdiction exclusively in the circuit court of the county in which the principal office of the LLC is located. 12 We also read the ⁵⁷³ same restriction in the plain language of CA Sections 4A-904(b) and 9A-803.

A Transfer of the Action Although, as we explained above, the MLLC and the MRUPA restrict subject matter jurisdiction of this action to the Circuit Court for Montgomery County, the trial court’s transfer of the case to that circuit court and Judge Caroom’s special designation as a judge of that court cured the jurisdictional problem. Judge Caroom, sitting as a judge for the Circuit Court for Anne Arundel County, made findings regarding the appropriate relief on all fourteen counts presented by Dyas. At that time, he found that the evidence indicated that Dyas and Della Ratta could not reasonably carry on with Bay View LLC and thus dissolution was warranted. Judge Caroom, however, was very careful to explain that the judgement of dissolution was not final because Anne Arundel County did not have the jurisdiction to adjudicate the matter: I find that the facts are sufficient for the Court to grant the dissolution but that I don’t have the subject matter jurisdiction so the Court will transfer it to Montgomery County.

And the Circuit Court there, unless there is something else presented to persuade it otherwise, in all likelihood would find that it might be appropriate to grant that relief. Through an order dated June 23, 2006, Chief Judge Bell specially assigned Judge Caroom to sit as a Judge for the Circuit Court of Montgomery County. In his Amended Interlocutory Judgment issued from Anne Arundel County, Judge Caroom transferred the case to the Circuit Court for Montgomery County, effective August 7, 2006. On March 12, 2007, Judge Caroom, sitting specially as a judge of the Circuit Court for Montgomery County, ordered the dissolution of Spa GP and Bay View LLC.

To be sure, the mere transfer of a case for the formality of issuing an order will not comply with the dictates of CA Section 4A-903. Yet in this case, Judge Caroom did not close the dissolution matter before transferring it to Montgomery ⁵⁷⁴ County. 13 As the judge’s statement indicates, Della Ratta would have had the opportunity to persuade him, when sitting as a judge of the Montgomery County Circuit Court, that the facts did not justify dissolution. According to the orders dissolving Spa GP and Bay View, the parties were able to advance their arguments during a February 28, 2007 telephone conference, and those arguments along with the applicable law and the record in the case prompted Judge Caroom to order dissolution. 14 During oral argument, Dyas conceded that no additional evidence was presented on dissolution once the case was transferred. Absent some proffer of additional evidence by Della Ratta, however, it was appropriate for Judge Caroom to rely on his findings regarding the other twelve counts in the Anne Arundel County case.

Indeed, once the Anne Arundel County judgment became final, Della Ratta would be collaterally estopped from disputing the findings on the other twelve counts, and those issues could provide the necessary support for dissolution. The exercise of subject matter jurisdiction does not depend on the parties’ decisions to submit additional evidence, but rather on whether the matter was adjudicated by the appropriate court. Thus, by providing the parties the chance to convince the Montgomery County court that dissolution was not necessary, Judge Caroom ensured that the order for dissolution did not violate the statutory restriction on subject matter jurisdiction. Accordingly, the ⁵⁷⁵ Circuit Court made no error with respect to the dissolution and winding up of Spa GP and Bay View.

B. Dissociation Della Ratta also takes issue with the trial court’s decision to dissociate him from Spa GP. He does not challenge the trial court’s factual findings, but claims that the trial court erred by ordering his dissociation from the partnership based on his management of Bay View. He contends that the court inappropriately “pierce[d] the corporate veil” because it was obvious that the trial judge was extremely upset about Mr. Della Ratta’s diversion of Bay View cash to DR Palm Beach,[ 15 ] CMC, DRI and himself in repayment for advances they made to cover cost overruns on the construction of the Maresol condominiums ... [as well as] Mr. Della Ratta’s refusal to put Maresol’s top floor units on the market. As this is conduct associated with Bay View, Della Ratta asserts that it cannot serve as the basis for the trial court’s decision and must be disregarded.

The third ground for dissolution, according to Della Ratta, was his sloppy bookkeeping, which he insists is cancelled out by Dyas’s neglect of his own duties. Della Ratta concludes that the nullification of these three reasons removes any grounds that could support the order of dissolution. The trial court ordered Della Ratta’s dissociation from Spa GP pursuant to CA Section 9A-601(5)(iii) 16 because it determined