Ross v. American Iron Works

DAVIS, J. Appellant Richard T. Ross filed complaints in the Circuit Court for Prince George’s County against his co-partner appellee Philip Savopoulos, their partnership, appellee Inwood Associates (Inwood), and appellee American Iron Works (AIW) on August 27, 2001. In his complaint against Savopoulos, appellant requested a judicial dissolution of Inwood, an accounting of its assets, and a sale of the partnership’s property. Appellant, asserting his rights as a former shareholder of AIW, alleged that he had not received payment for his 270 shares that were purchased through a merger between AIW and AIW Holdings Inc. on September 7, 1999. AIW filed a motion to dismiss on November 13, 2001 and Savopoulos and Inwood filed an Answer on November 30, 2001.

AIW then filed a Motion for Summary Judgment on December 31, 2001. Upon Savopoulos’s motion, the trial judge (Casula, J.) was specially assigned and, additionally, the two cases were consolidated by an order dated February 12, 2002. After a period of discovery, Savopoulos and Inwood filed their own Motion for Summary Judgment on October 31, 2002. Appellant timely responded to both motions and, on November 18, 2002, the motions were argued before the trial judge.

On December 20, 2002, the trial judge granted summary judgment in favor of all of the appellees. Appellant timely noted an appeal on January 10, 2003. Appellant presents two questions for our review, which we rephrase as follows: I. Did the trial court err by granting summary judgment in favor of Savopoulos and Inwood? ⁵ II. Did the trial court err by granting summary judgment in favor of AIW?

We answer the first question in the affirmative and the second question in the negative. Accordingly, we shall reverse in part and affirm in part the judgment of the trial court and remand for proceedings consistent with this opinion. FACTUAL BACKGROUND Prior to 1986, appellant and Savopoulos were involved in several inter-related business entities. They were partners in P & R Properties (P & R), a partnership that owned an improved parcel of land located at 900 Evarts Street in Northeast Washington, D.C.

(Evarts Street Property). Appellant and Savopoulos, along with a third individual, were shareholders in AIW, a Maryland corporation that was involved in the business of fabricating and installing metal products for construction projects in the Washington, D.C. area. In addition to being shareholders, they held positions on the board of directors and as officers. Appellant and Savopoulos were also shareholders in Milestone Industries, Inc. (Milestone), another Maryland corporation, which provided management services to AIW.

On December 1,1986, appellant and Savopoulos entered into a Partnership Agreement (Agreement) to form Inwood, a new partnership in which they were equal partners. By virtue of the Agreement, Inwood acquired several parcels of real property as well as equipment used in the metal fabrication process. On December 29, 1986, Inwood purchased 68,925 square feet of improved land located at 3201 Kenilworth Avenue, Bladensburg in Prince George’s County, Maryland (Inwood Property). Inwood then entered into a Commercial Lease Agreement with AIW, on January 1, 1987, to lease the Inwood Property for AIW’s use.

Milestone and AIW entered into a Management Agreement on March 20, 1987, whereby Milestone would provide management services such as marketing, bidding, and supervising for AIW’s business. After the formation of Inwood, the business conducted by appellant ⁶ and Savopoulos consisted of three inter-related entities: In-wood owned the land and equipment, AIW provided the labor for the fabrication and installation of the metal products, and Milestone oversaw the management aspects of AIW’s business. In late 1995, the business relationship between appellant and Savopoulos began to sour. On December 7, 1995, a special meeting of AIW shareholders was held that resulted in appellant’s removal from the board of directors and as an officer of ÁIW.

Additionally, the new directors of AIW terminated the Management Agreement with Milestone. The Commercial Lease between Inwood and AIW expired on December 31, 1995 and was renewed via a Rider made effective on the same day for a period of three years. The monthly rent was set at $6,500. Savopoulos signed the Rider acting as both a general partner for Inwood and president of AIW.

Savopoulos informed appellant, in a letter dated January 5, 1996, that Citizens Bank, the holder of the note on the Inwood Property, was preparing to foreclose on the property because' payments were past due. Savopoulos stated in the letter that he would be willing to personally guarantee up to fifty percent of the loan. On January 19, 1996, correspondence from Citizens Bank indicated an offer to extend the maturity date of the loan for a period of six months from the original due date of December 15, 1995. The extension was contingent upon appellant and Savopoulos each personally guaranteeing fifty percent of the loan.

Appellant signed the correspondence. Savopoulos’s signature, however, does not appear on the document. Inwood was informed by counsel for Citizens Bank on February 8,1996 that foreclosure proceedings had commenced on the Inwood Property. To avoid foreclosure, appellant, Savopoulos, and Inwood agreed to pay the entire amount of the loan in late March 1996.

Appellant, Savopoulos, and Inwood paid $180,000, $170,000, and $18,225.73, respectively, to pay off the loan on the Inwood Property. ⁷ In a letter dated March 20, 1996, Savopoulos, as president of AIW, informed appellant that Inwood had defaulted on a promissory note, dated January 18, 1986 and secured by a deed of trust in the land records of Prince George’s County on February 23, 1996. Counsel for appellant responded the next day in a letter asserting that appellant had no knowledge of any such promissory note or deed of trust. On August 25, 1999, the Board of Directors for AIW approved a cash for stock merger between AIW and AIW Holdings, Inc., a Delaware corporation. On September 7, 1999, the shareholders of AIW approved the Merger Agreement.

Appellant, who was present with counsel when the vote was taken, voted against the Merger Agreement. His voting shares, however, were insufficient to overcome the two-thirds majority. Appellant also filed written objections at the meeting. The Merger Agreement provided that AIW Holdings, Inc. would become the “merged corporation” and that AIW would continue its corporate existence as the “successor corporation.” Pursuant to the terms of the Merger Agreement, all of the capital stock held in AIW immediately prior to the merger would be “cancelled and cease to exist.” The holder of such capital stock would then be entitled to $2,583.33 per share as compensation.

The compensation would be paid over the course of ten years in ten equal installments without interest. Under the terms of the Merger Agreement, appellant, who owned 270 shares at the time of the merger, was entitled to $679,499.10 over ten years in equal installments without interest. The State Department of Assessments and Taxation (SDAT) approved the Merger Agreement on September 8, 1999. By letter dated September 23, 1999, appellant informed AIW that he formally objected to the merger for two reasons.

First, he claimed that the amount of compensation was inadequate because the $2,583.33 per share was well below the fair market value of his capital stock. Appellant also contended that the ten-year pay-out plan without interest further devalued the compensation for his shares. ⁸ On August 27, 2001, appellant filed a complaint against Savopoulos and Inwood. 1 In the complaint, Count I alleged that a judicial dissolution of Inwood was necessary due to the hopeless deadlock between the two parties and Savopoulos’s “aggressive actions” toward Ross that negatively affected Inwood’s business. Counts II and III requested that the lower court order an accounting and sale of all of the partnership property. On the same day, appellant also initiated an action against AIW, alleging that appellant had not been compensated for his 270 shares of capital stock in accordance with the Merger Agreement between AIW and AIW Holdings, Inc. Appellant requested judgment for $2,583.33 per share for his 270 shares or $679,499.10, plus interest from September 7, 1999.

After appellees were served with process in middle to late October 2001, they filed their respective responsive pleadings. AIW filed Motions to Dismiss and for Sanctions on November 13, 2001. Savopoulos and Inwood filed their Answer to Complaint and Counterclaim on November 30, 2001. The counterclaim requested that a judicial dissolution be granted in favor of Savopoulos because of alleged wrongdoings by appellant towards Inwood.

On December 31, 2001, AIW filed a Motion for Summary Judgment, to which appellant responded on January 2, 2002. By an order dated February 12, 2002, the trial judge was specially assigned and appellant’s cases against Savopoulos, Inwood, and AIW were consolidated into a single proceeding. ⁹ After a period of discovery, Savopoulos and Inwood filed a Motion for Summary Judgment on October 31, 2002. Appellant responded, on November 15, 2002, with a Motion in Opposition to the Motion for Summary Judgment. On November 18, 2002, the motions for summary judgment came before the trial judge for argument.

After holding the motions under advisement, the trial judge issued his rulings on December 20, 2002. The trial judge granted the Motion for Summary Judgment filed by Savopoulos and Inwood. He also ordered that Inwood be dissolved and that Savopoulos be permitted to possess and control the partnership’s assets and business. He further ordered an accounting of Inwood’s assets and liabilities, including “real property wrongfully appropriated from the partnership by [appellant].” Appellant was required to produce all records to assist in the accounting, including any records pertaining to the Evarts Street Property and any partnership funds in his possession and control.

Savopoulos was ordered to post a bond in the amount of appellant’s partnership interest. Finally, thé trial judge granted AIW’s Motion for Summary Judgment. This appeal followed. LEGAL ANALYSIS Before we address the substantive issues in this matter, we must consider a preliminary issue regarding the manner in which the trial judge rendered his decision.

Appellant alleges that the grant of summary judgment in favor of appellees was improper because the trial judge failed to set forth any reasons supporting his decision in the December 20, 2002 order. Appellee counters that a trial judge is not necessarily required to state the reasoning in support of a grant of summary judgment and a reviewing court may affirm the grant if the reasons are readily apparent from the record. It is well settled that, “ ‘[i]n appeals from grants of summary judgment, Maryland appellate courts, as a general rule, will consider only the grounds upon which the [trial] court relied in granting the summary judgment.’ ” Lovelace v. Anderson, 366 Md. 690, 695 , 785 A.2d 726 (2001)(quoting ¹⁰ PaineWebber v. East, 363 Md. 408, 422 , 768 A.2d 1029 (2001)). Ordinarily, we are not permitted to “ ‘speculate’ ” as to the trial judge’s reasoning.

Lovelace, 366 Md. at 695 , 785 A.2d 726 (quoting Gresser v. Anne Arundel County, 349 Md. 542, 552 , 709 A.2d 740 (1998)). Here, our review of the trial court’s grant of summary judgment in favor of appellees is made more difficult by the failure of the trial judge to state any grounds for his decision. Citing Bond v. NIBCO, 96 Md.App. 127, 133 , 623 A.2d 731 (1993), we observed in Williams v. Prince George’s County, 112 Md.App. 526, 538-39 , 685 A.2d 884 (1996): It would certainly be preferable to have before us the basis for the circuit court’s order. This would not only give us the benefit of the circuit court’s reasoning as to why summary judgment was proper but also make it clear whether the lower court found any of the asserted grounds lacked merit, i.e., did not support the grant of summary judgment.

In the absence of any such discussion, we must assume that the circuit court carefully considered all of the asserted grounds and determined that all or at least enough of them as to merit the grant of summary judgment were meritorious. More to the point, we are required, under the circumstances extant, to review each count of appellant’s c’omplaints, the arguments of the parties and the evidence in the record to determine whether any one of the arguments advanced by the moving parties would be “a legally correct and factually sufficient basis for the judgment.” Magee v. DanSources Technical Svcs., Inc., 137 Md.App. 527, 548 , 769 A.2d 231 (2001). In an exercise of our discretion, therefore, we decline to reverse the grant of summary judgment on the basis of the lower court’s failure to set forth its reasoning, but rather, we shall address the substantive issues regarding the propriety of the court’s ruling. I Appellant claims that Savopoulos and Inwood failed to meet their burden to show that there was no genuine dispute as to ¹¹ any material fact regarding the dissolution of the partnership in favor of Savopoulos.

Savopoulos and Inwood, however, assert that they met their burden by showing evidence of appellant’s wrongdoing concerning the partnership. A party to an action is entitled to summary judgment if “there is no genuine dispute as to any material fact and the party is entitled to judgment as a matter of law.” Md. Rule 2-501(a). We review a trial court’s grant of summary judgment “to determine whether a dispute of material fact exists, and whether the trial court was ‘legally correct.’ ” Thacker v. City of Hyattsville, 135 Md.App. 268, 285-86 , 762 A.2d 172 (2000). A material fact has been defined by Maryland courts as “a fact the resolution of which will somehow affect the outcome of the case.” Grimes v. Kennedy Krieger Inst., 366 Md. 29, 72 , 782 A.2d 807 (2001)(quoting King v. Bankerd, 303 Md. 98, 111 , 492 A.2d 608 (1985)).

We are required to consider any pleadings, motions, depositions, and affidavits that were-properly in the record before the trial court. Ashton v. Brown, 339 Md. 70, 79 , 660 A.2d 447 (1995). In reviewing these documents, we are mindful that all facts and reasonable inferences therefrom must be construed in favor of the non-moving party. Id.

Ultimately, if any genuine dispute of material fact exists, then summary judgment should not be granted and the case should proceed to trial. See Delia v. Berkey, 41 Md.App. 47, 51 , 395 A.2d 1189 (1978). There is no dispute that Inwood is a Maryland partnership and, as a result, is governed by the provisions of the Maryland Uniform Partnership Act (UPA). 2 See Md.Code (1999 Repl. ¹² Vol., 2003 Supp.),, Corps. & Ass’ns (C.A.) §§ 9-101 et seq. Section 9-603 of the UPA provides that a partnership will be judicially dissolved upon application by a partner and a showing that (1) A partner has been declared a lunatic in any judicial proceeding or is shown to be of unsound mind; (2) A partner becomes in any other way incapable of performing his part of the partnership contract; (3) A partner has been guilty of such conduct as tends to affect prejudicially the carrying on of the business; (4) A partner willfully or persistently commits a breach of the partnership agreement, or otherwise so conducts himself in matters relating to the partnership business that it is not reasonably practicable to carry on the business in partnership with him; (5) The business of the partnership can only be carried on at a loss; or (6) Other circumstances render a dissolution equitable.

The UPA contemplates that, after dissolution, one or more partners will continue the business of the partnership to wind up its affairs. See §§ C.A. 9-604 to 9-612. The right to wind up the partnership affairs is delineated in C.A. § 9-608, which states that, “[ujnless otherwise agreed, the partners who have not wrongfully dissolved the partnership ... ha[ve] the right to wind up the partnership affairs.” (Emphasis added.) Additionally, in the event of a dissolution, the property of the partnership may be applied to its liabilities and, then, any remaining surplus is paid to the remaining partners. C.A. § 9-609(a).

However, in the event of a dissolution “caused in contravention of the partnership agreement,” the partners who have wrongfully caused the dissolution can be liable to the ¹³ non-offending partners for breach of the agreement. C.A. § 9—609(b)(1)(ii). Thus, partners who commit wrongful acts that cause the dissolution of a partnership are only entitled to the value of their partnership interest minus “any damages caused to his copartners by the dissolution.” C.A. § 9-609(b)(3)(ii). Therefore, a proper analysis of whether a partnership should be dissolved, who should continue the partnership’s business and to what extent a partner is entitled to partnership property necessarily entails a determination of which partner, if any, wrongfully caused the dissolution of the partnership.

In his complaint, appellant requested that the trial court dissolve Inwood on several grounds. First, appellant alleged that he and Savopoulos are “hopelessly deadlocked” and “are unable to effectively manage the affairs of the partnership.” Second, appellant believed Savopoulos’s actions as president of AIW, including appellant’s removal as officer and director in 1995 and divestiture of his shares in September 1999, prejudicially affected the partnership’s business and made the carrying on of the partnership’s business “not reasonably practicable.” C.A. § 9-603(a)(3),(4). Finally, appellant alleged other “equitable” grounds, citing the lack of trust between appellant and Savopoulos and the extensive history of litigation between them. In their answer to appellant’s complaint, Savopoulos and Inwood filed a counterclaim that also requested a judicial dissolution because of appellant’s alleged wrongful conduct toward the partnership.

Specifically, they stated that appellant had misappropriated and converted funds and property from Inwood’s accounts for his personal use. Savopoulos and Inwood also alleged that appellant’s actions in filing several previous lawsuits against Savopoulos, Inwood, and AIW had created an atmosphere of tension and mistrust between the two partners. Finally, appellant’s actions had allegedly violated the partnership agreement, warranting a judicial dissolution. Savopoulos requested that a decree of judicial dissolution be granted in his favor. ¹⁴ The allegations were reiterated in more detail in a Motion for Summary Judgment filed by Savopoulos and Inwood, which was primarily supported by an affidavit executed by Savopoulos on October 23, 2002.

In the affidavit, Savopoulos claimed that the Evarts Street Property, originally owned by P & R, was transferred to Inwood some time after Inwood’s formation. In November 1995, Savopoulos alleges that appellant started to collect the rental payments from the Evarts Street Property for himself instead of distributing the payments to Inwood. According to Savopoulos, appellant then “sold or otherwise transferred or re-titled” the Evarts Street Property to another individual to the exclusion of Savopoulos and Inwood. Appellant countered the allegation in his response to the motion for summary judgment with his affidavit dated November 15, 2002.

He stated that the Evarts Street Property was never actually transferred to Inwood in 1986, although it was the intention of the parties to do so at the time. Further, appellant claimed that the Evarts Street Property continues to be in the control and possession of Inwood and, contrary to Savopoulos’s' assertions, it has never been sold or re-titled. Savopoulos also alleged in his affidavit that appellant had misappropriated funds from Inwood’s accounts for his personal use around December 1995 and has continuously refused to replace the funds. Appellant’s response in his affidavit explains that, at the time that the Inwood property was in danger of foreclosure, Inwood had failed to pay its December 1995 and January 1996