Pearlstein v. Maryland Deposit Insurance Fund

BLOOM, Judge. This appeal is but another episode in the seemingly never-ending saga of the collapse of Old Court Savings & Loan, Inc. (Old Court). The players in this installment are by now familiar ones: appellant, Allan H. Pearlstein, is a former officer and director of Old Court and one of its principal stockholders; appellee, Maryland Deposit Insurance Fund (MDIF) is the statutory receiver for Old Court. The litigation that spawned this appeal is part of MDIF’s continuing efforts to recover assets it claims were improperly taken or diverted or misappropriated from Old Court in a variety of ways by a large number of individuals, corporations, partnerships, and other business entities acting alone or in concert with one another.

One peculiar twist in this brief interlude is that our disposition of the appeal — dismissal for lack of jurisdiction — will undoubtedly be far more disturbing to the appellee than to the appellant. ⁴⁴ This particular action was filed by MDIF in the Circuit Court for Baltimore City against Pearlstein and a myriad of other defendants, including Jeffrey A. Levitt and Pearlstein Levitt Investments (PLI), a partnership. Following a brief preliminary skirmish over pleadings, MDIF filed an amended complaint, 1 some description of which is necessary to an understanding of this appeal and our disposition of it. THE PLEADING The amended complaint takes up some 163 typewritten pages, the last 20 of which are in the nature of an appendix entitled “Partial List of Old Court Subsidiaries and Affiliates.” The first eight pages of the complaint itself consist of titling, i.e., names and addresses of the parties. That is followed by three full pages of “Introduction,” in the nature of an explanation of what was amended and why, together with a list of the parties defendant.

The allegations of the complaint begin on page 12 with thirty-seven numbered paragraphs plus several lettered subparagraphs identifying the defendants and their relationship with Old Court and each other. Paragraphs Nos. 38 through 179 (pages 24 through 72) purport to contain allegations common to all counts. That designation is patently inaccurate, but innocuously so; to the extent that any allegations of any of those paragraphs do not apply to any given count in the amended complaint, those allegations may be deemed to be harmless surplusage. The bulk of the remainder of the amended complaint is rather arbitrarily divided into fifteen counts, one for money due and owing and fourteen which charge the defendants, in varying combinations, with a variety of types of tortious misconduct, ranging in nature from “Diversion of Corporate Opportunity” to “Waste” to outright fraud.

The degree of nefariousness of conduct alleged ranges from negligence to gross negligence to willful, deliberate, and intentional ⁴⁵ wrongdoing. Each count incorporates the first 179 numbered paragraphs of the complaint, adds more allegations, and concludes with the plaintiff seeking “compensatory damages in an amount to be determined by the [Circuit] Court, and equitable relief.” Those counts alleging intentional or grossly negligent misconduct also seek “punitive damages in the amount of $200 million.” The last three pages of the amended complaint itself is a sort of overall prayer for relief apparently intended to apply to all counts, in which MDIF repeated its request for compensatory damages in an amount to be determined by the court plus $200 million in punitive damages, to which it added costs of suit, legal fees, and a shopping list of equitable remedies including accountings, impositions of constructive trusts and equitable liens, restitution, and declaratory and injunctive relief. A complaint in this form violates the first principle of good pleading, which is to inform and enlighten, not to confuse and obscure. Moreover, this particular complaint violates Rule 2-303(a), which requires that each cause of action be set forth in a separately numbered count, and Rule 2-303(b), which requires that each averment be simple, concise, and direct, containing only such statements of fact as may be necessary to show the pleader’s entitlement to relief.

It is little wonder that the court, appellant, and probably even the pleader, became confused as what constitutes a single, entire claim asserted against appellants by any count in MDIF’s amended complaint. And therein lies the problem. THE PROCEEDINGS MDIF was naturally anxious to recover as much of Old Court’s assets as it could as soon as it could. At some stage in the proceedings it concluded that it could relatively easily establish certain facts entitling it to recover a substantial sum of money from Pearlstein.

Accordingly, it moved for summary judgment against Pearlstein for certain sums of money that Pearlstein had allegedly drained out of ⁴⁶ Old Court’s coffers in the form of unearned fees paid to Pearlstein as Levitt’s partner in PLI by Old Court Investment Corporation (OCIC), a wholly owned subsidiary of Old Court. The allegations pertaining to this alleged wrongful conduct constitutes part of what MDIF chose to plead as a much larger claim against several defendants for a variety of acts coming under the broad general heading of “breach of fiduciary duty.” That claim, for all damages arising from a number of unrelated breaches of fiduciary duty by a number of defendants who allegedly owed duties of a fiduciary nature to Old Court, was pled alternatively in Count II as “Intentional Breach of Fiduciary Duty,” Count III as “Grossly Negligent Breach of Fiduciary Duty,” and Count IV as “Negligent Breach of Fiduciary Duty.” The circuit court granted MDIF’s summary judgment motion and pursuant to Md. Rule 2-602 entered a final judgment against Pearlstein for $1,099,000 plus accrued interest. Pearlstein appealed, and we reversed, holding that the case was not a proper one for summary judgment because essential elements of MDIF’s action had not been established as undisputed facts. 2 Pearlstein v. State of Maryland Deposit Insurance Fund Corporation, Receiver, No. 1591, September Term, 1986 (unreported, filed September 8, 1987). After we remanded the case to the circuit court for further proceedings, MDIF decided to proceed against Pearlstein and PLI by a trial of the same issues on which the court had granted summary judgment.

The court acceded to MDIF’s request and set those issues in for a ⁴⁷ non-jury trial, under the authority of Md. Rule 2-503(b), which provides: (b) Separate Trials. — In furtherance of convenience or to avoid prejudice, the court, on motion or on its own initiative, may order a separate trial of any claim, counterclaim, cross-claim, or third-party claim, or of any separate issue, or of any number of claims, counterclaims, cross-claims, third-party claims, or issues. Pearlstein’s request for a jury trial was denied. The court ruled that the proceeding was in equity rather than law because (1) the allegations of breach of fiduciary duty state a claim more readily cognizable in equity than in law; (2) the relief sought against Pearlstein individually was couched in terms of restitution, an equitable remedy; and (3) the relief sought against PLI, of which Pearlstein was a partner, was the imposition of a trust, which is clearly equitable in nature. 3 The trial resulted in a judgment entered on May 25, 1988, against Pearlstein and PLI, jointly and severally, in the amount of $1,888,000 plus prejudgment interest at the rate of 10 percent per annum dating back to May 1, 1985. On June 15, 1988, the court revised that judgment, at MDIF’s request, by adding the following: 2.

The Court has considered the following factors in regard to this judgment: (1) Plaintiff, as Receiver for Old Court Savings & Loan, Inc., has an immediate need for payment of all monies due it, in order to meet Old Court’s financial obligations, and delay of entry of final judgment in this action will have a harsh economic effect on Plaintiff, as Receiver; (2) There is no likelihood that a determination of the remaining claims before this Court in the action would render moot any appeal of this judgment; ⁴⁸ (3) An appeal of this judgment would not require a determination by any appellate court of questions that are still to be adjudicated in this action by this Court. Accordingly, the Court hereby determines, pursuant to Maryland Rule 2-602, that there is no just reason for delaying the entry of a final judgment on the underlying claims and hereby directs the Clerk to enter judgment pursuant to this Order.” THIS APPEAL Appealing from the revised judgment of June 15, 1988, Pearlstein seeks to raise a pentad of issues, relating to the denial of his request for a jury trial, the propriety of trying the case against him on the theory of restitution of funds that have never been in his possession, the propriety of entering a judgment on behalf of Old Court with respect to funds in which it had no legal interest, the court’s determination that his conduct constituted a breach of a fiduciary duty owed to Old Court, and whether it was permissible for MDIF, a State agency, to predicate its case against him on assertions diametrically opposed to those upon which the State had secured his conviction in an earlier criminal proceeding. These are interesting issues, but we cannot address them. Although neither of the parties to this appeal has challenged our jurisdiction, we must dismiss the appeal nostra sponte because of an improper application of Rule 2-602.

Potter v. Bethesda Fire Department, Inc., 302 Md. 281, 285 , 487 A.2d 288 (1985); Biro v. Schombert, 285 Md. 290, 293 , 402 A.2d 71 (1979); Allstate Insurance Co. v. Angeletti, 71 Md.App. 210, 215 , 524 A.2d 798 (1987). Appellate jurisdiction is determined by constitutional provisions, statutory provisions, and rules; jurisdiction cannot be conferred by consent of the parties. Biro v. Schombert, 285 Md. at 293 , 402 A.2d 71 ; East v. Gilchrist, 293 Md. 453, 458 , 445 A.2d 343 (1982); Eastgate Associates v. Apper, 276 Md. 698, 700-701 , 350 A.2d 661 (1976). ⁴⁹ Generally, for an appellate court to have subject matter jurisdiction, an appeal must be from a final judgment