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Miller v. Strudwick

United States District Court, D. Maryland

September 28, 2018

CHRISTOPHER MILLER, et al., Plaintiffs,
v.
MARTIN BARRY STRUDWICK, et al., Defendants.

          MEMORANDUM OPINION

          GEORGE L. RUSSELL, III UNITED STATES DISTRICT JUDGE

         THIS MATTER is before the Court on: (1) Plaintiffs Christopher Miller and Kathleen Miller's (the “Millers”) Motion for Partial Summary Judgment (ECF No. 70); and (2) Defendants Martin Barry Strudwick (“Strudwick”), Stacey Murray, Stephanie Green, Strudwick Management, LLC, Strudwick & Associates, Inc. (“S&A”), Monterey Del Pacifico Partners, LLLP[1] (“Monterey Del Pacifico”), Grupo Del Pacifico Development, LLC, Del Pacifico Sales, LLC, Grupo Del Pacifico Development Venture Sociedad Anonima (“Grupo Venture”), and Monterey De Playa Sociedad Anonima's (“Monterey De Playa”) Motion for Partial Summary Judgment (ECF No. 72). This action arises from the Millers' purchase of real estate in Costa Rica for just over a quarter of a million dollars and subsequent inability to resell the property in accordance with the terms of the underlying purchase and sale agreement. The parties' Motions are ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2016). For the reasons outlined below, the Court will grant in part and deny in part both Motions.

         I. BACKGROUND[2]

         In 2008, Defendants piqued the Millers' interest in both S&A's investment advisory services and an opportunity to invest in real estate in Del Pacifico at Esterillos (the “Del Pacifico Project”), located in Puntarenas, Costa Rica. (Compl. & Demand Jury Trial [“Compl.”] ¶¶ 16-27, ECF No. 1). The Del Pacifico Project was described to the Millers as a “hard asset investment with a solid floor, ” with emphasis that investors could expect a “guaranteed 40% return” on their investment. (Id. ¶¶ 18-21). After visiting the Del Pacifico Project in April 2008, the Millers formalized their relationship with Defendants. (Strudwick Aff. ¶¶ 13-18, ECF No. 72-3).

         In early March 2009, the Millers entered into an Investment Advisory Agreement (“IA Agreement”) with S&A. (Compl. ¶ 27; Inv. Advisory Agreement [“IAA”], ECF No. 70-3). The Agreement establishes a fiduciary relationship between the Millers and S&A, with Strudwick acting as the latter's representative. (Compl. ¶ 27).

         Two months later, on May 13, 2009, the Millers entered into a Purchase and Sale Agreement (“P&S Agreement”) to purchase Lot 11 of the Del Pacifico Project for $265, 000.00. (Id. ¶ 31; Purchase & Sale Agreement [“PSA”], ECF 70-9). The P&S Agreement indicates that the Millers are the “Buyer” and Monterey De Playa and “affiliated companies, ” “represented by [Strudwick], ” are the “Seller.” (PSA at 1). Strudwick signed the P&S Agreement on Monterey De Playa's behalf, in his capacity as President. (Id. at 8). Under the terms of the P&S Agreement, the Millers purchased Lot 11 by buying 100% of the shares in “White Cloud View W.C. Once S.A.” (“White Cloud”), a registered Costa Rican business that was the “legal and sole owner of Lot 11, ” which, in turn, was owned by Monterrey De Playa. (Compl. ¶¶ 31-32; PSA at 1). The Repurchase Provision, located at paragraph 5 of the P&S Agreement, provides the Millers with two options in the event that they chose not to construct a residence on the lot. (Compl. ¶ 36; PSA at 2). The Millers selected the second option, “Option B.” (Compl. ¶ 37). It states that, should the Millers exercise Option B within sixty months of the closing date-that is, by May 12, 2014-Grupo Venture, the named third-party “Repurchaser, ” would be obligated to repurchase from them 100% of the shares of White Cloud for $371, 000.00. (Id. ¶¶ 35-37; PSA at 2). The repurchase price under Option B amounts to a “40% appreciation” of the price the Millers initially paid for the White Cloud shares. (Compl. ¶ 38; see PSA 1-2).

         Over the next five years, correspondence between the parties tapered off. Approximately four and a half years later, in December 2013, Strudwick informed the Millers that Grupo Venture was on the “brink of failure” and would not be able to fulfill its repurchase obligation under the P&S Agreement. (Compl. ¶¶ 44, 50-51). On May 12, 2014, the Millers contacted Strudwick, requesting that Grupo Venture honor the repurchase obligation. (Id. ¶ 53). Strudwick informed the Millers that he was seeking new investors to fund the Del Pacifico Project, but that “no return was ever guaranteed.” (Id.).

         On July 18, 2014, the Millers sued Defendants. (ECF No. 1). They filed an eight-count Complaint alleging: breach of the P&S Agreement (Count I); breach of the IA Agreement (Count II); breach of fiduciary duty (Count III); misrepresentation (Count IV); conversion (Count V); violation of N.H. Rev. Stat. Ann. §§ 358-A:1 et seq. (2018) (Count VI), and conspiracy to violate the same (Count VII); and unjust enrichment (Count VIII). (Compl. ¶¶ 56-96). The Millers seek double or treble damages and their attorney's fees and costs. (Id. ¶¶ A-C).

         On November 15, 2017, the Millers filed a Motion for Partial Summary Judgment as to Counts I, III, VI, and VII. (ECF No. 70). On December 4, 2017, Defendants filed an Opposition (ECF No. 72-1), along with a Motion for Partial Summary Judgment (ECF No. 72) seeking judgment: (1) in their favor as to Counts II-VII; and (2) in favor of all Defendants other than Grupo Venture with respect to Counts I and VIII. On December 18, 2017, the Millers filed an Opposition to Defendants' Motion. (ECF No. 74). To date, the Court has no record that the parties have filed Replies.

         II. DISCUSSION

         A. Standard of Review

         In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the nonmovant, drawing all justifiable inferences in that party's favor. Ricci v. DeStefano, 557 U.S. 557, 586 (2009); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). Summary judgment is proper when the movant demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . admissions, interrogatory answers, or other materials, ” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A). Significantly, a party must be able to present the materials it cites in “a form that would be admissible in evidence, ” Fed.R.Civ.P. 56(c)(2), and supporting affidavits and declarations “must be made on personal knowledge” and “set out facts that would be admissible in evidence, ” Fed.R.Civ.P. 56(c)(4).

         Once a motion for summary judgment is properly made and supported, the burden shifts to the nonmovant to identify evidence showing there is a genuine dispute of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586- 87 (1986). The nonmovant cannot create a genuine dispute of material fact “through mere speculation or the building of one inference upon another.” Othentec Ltd. v. Phelan, 526 F.3d 135, 141 (4th Cir. 2008) (quoting Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985)).

         A “material fact” is one that might affect the outcome of a party's case. Anderson, 477 U.S. at 248; see also JKC Holding Co. v. Wash. Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001) (citing Hooven-Lewis v. Caldera, 249 F.3d 259, 265 (4th Cir. 2001)). Whether a fact is considered to be “material” is determined by the substantive law, and “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248; accord Hooven-Lewis, 249 F.3d at 265. A “genuine” dispute concerning a “material” fact arises when the evidence is sufficient to allow a reasonable jury to return a verdict in the nonmoving party's favor. Anderson, 477 U.S. at 248. If the nonmovant has failed to make a sufficient showing on an essential element of her case where she has the burden of proof, “there can be ‘no genuine [dispute] as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

         When the parties have filed cross-motions for summary judgment, the court must “review each motion separately on its own merits to ‘determine whether either of the parties deserves judgment as a matter of law.'” Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris Inc. v. Harshbarger, 122 F.3d 58, 62 n.4 (1st Cir. 1997)). Moreover, “[w]hen considering each individual motion, the court must take care to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable' to the party opposing that motion.” Id. (quoting Wightman v. Springfield Terminal Ry. Co., 100 F.3d 228, 230 (1st Cir. 1996)). This Court, however, must also abide by its affirmative obligation to prevent factually unsupported claims and defenses from going to trial. Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993). If the evidence presented by the nonmovant is merely colorable, or is not significantly probative, summary judgment must be granted. Anderson, 477 U.S. at 249-50.

         B. The Millers' Motion

         1. Count I - Breach of the Purchase Agreement

         To prevail on a breach-of-contract claim under Maryland law, [3] a plaintiff must show: (1) “a contractual obligation”; and (2) “a material breach of that obligation.” Chubb & Son v. C & C Complete Servs., LLC, 919 F.Supp.2d 666, 678 (D.Md. 2013) (quoting Cowan Sys. LLC v. Ocean Dreams Transp., Inc., WDQ-11-366, 2012 WL 4514582, at *3 (D.Md. Sept. 27, 2012)). A breach is material if “it renders any subsequent performance ‘different in substance from that which was contracted for, '” or “alters the purpose of the contract in a vital way.” Wright Sols., Inc. v. Wright, CBD-12-178, 2013 WL 1702548, at *3 (D.Md. Apr. 18, 2013) (quoting Jay/Dee Mole Joint Venture v. Mayor of Balt., 725 F.Supp.2d 513, 516 (D.Md. 2010)). The issue of “[w]hether a breach of contract is material is normally a question of fact, unless the issue is so clear that it may be decided as a matter of law.” White Marlin Open, Inc. v. Heasley, 262 F.Supp.3d 228, 253 (D.Md. 2017) (quoting Whiting-Turner Contracting Co. v. Capstone Dev. Corp., WDQ-12-3730, 2013 WL 5423953, at *8 (D.Md. Sept. 26, 2013)).

         a. Grupo Venture's Liability

         The Millers contend that Grupo Venture's breach of the Purchase and Sale Agreement establishes liability. The Court agrees.

         In their briefs, the Millers assert that Grupo Venture was contractually obligated to purchase 100% of the White Cloud shares from them for $371, 000 in May 2014 under the P&S Agreement. (Mem. Support Pl.'s Mot. Partial Summ. J. [“Pl.'s Mem.”] at 17, ECF No. 70-1). They further assert that Grupo Venture breached the obligation by refusing, and continuing to refuse, to pay any portion of the funds owed. (Id.) Defendants concede these assertions. (Answer ¶¶ 57-59, ECF No. 36; Defs.' Mem. Opp'n Pl.'s Mot. Partial Summ. J. & Support Defs.' Mot. Partial Summ. J. [“Defs.' Mem.”] at 20, ECF 72-1). Accordingly, the Court will grant the Millers' Motion to the extent it seeks summary judgment against Grupo Venture as to Count I.

         b. Monterey De Playa and Monterey Del Pacifico's Liability

         The Millers seek to impose liability for breach of the P&S Agreement against Monterey De Playa and Monterey Del Pacifico.[4] The Millers acknowledge that, “generally, a party who is not a signatory to a contract cannot be held liable for a breach of the contract.” (Pls.' Mem. at 18). They nevertheless contend that “Strudwick's control and ownership of [Monterey De Playa] (a party to the P&S Agreement) and Monterey Del Pacifico . . . compel the conclusion that those entities should aslo [sic] be held liable for breach of the repurchase obligation, as should Strudwick.” (Id. at 19).

         Maryland courts do not “pierce the corporate veil between a parent and a subsidiary corporation if the subsidiary has some independent reason for its existence, other than being under the complete domination and control of another legal entity simply for the purpose of doing its act and bidding.” Kriesler v. Goldberg, 478 F.3d 209, 213 (4th Cir. 2007) (quoting Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 62 (4th Cir. 1993)).

         Here, Monterey Del Pacifico only owns 80% of Monterey De Playa. (Pls.' Mot. Partial Summ. J. [“Pls.' Mot.”] Ex. 24 at 1-2, ECF No. 70-26). The remaining 20% is owned by Monterey Park-an entity which, based on Defendants' 103.3 Corporate Disclosure, Strudwick likely owns in full. (Id. at 2; Local Rule 103.3 & FRCP 7.1 Disclosure at 1, ECF No. 37). The parties have not presented evidence that demonstrates Monterey De Playa is under the complete dominion of Monterey Del Pacifico. Monterey De Playa was formed to purchase and hold a 350-acre farm in Costa Rica, and to periodically subdivide the farm and sell parcels and lots. (Monterey De Playa Answers Interrogs. at 3, ECF No. 70-10). And in keeping with this purpose, Monterey De Playa has completed two major sales since its inception-to Villas del Pacifico Esterillos Sun S.A. and Del Pacifico Shopping Center S.A. (Id. at 5-7). Accordingly, the Court will not grant summary judgment in Plaintiff's favor as to Monterey Del Pacifico.

         c. Strudwick's Liability Under Alter Ego Doctrine

         Next, the Millers advance theories of fraud and paramount equity under Maryland's alter ego doctrine as grounds for piercing the corporate veil and imposing personal liability against Strudwick. The Court addresses each theory in turn. At bottom, the Court finds that a genuine dispute of material fact exists as to Strudwick's personal liability.

         i. Fraud

          Under Maryland law, the corporate entity will not be disregarded except “when necessary to prevent fraud or to enforce a paramount equity.” Dixon v. Process Corp., 382 A.2d 893, 899 (Md.Ct.Spec.App. 1978).

         In Maryland, fraud is established when:

(1) the defendant made a false representation to the plaintiff, (2) the falsity of the representation was either known to the defendant or the representation was made with reckless indifference to its truth, (3) the misrepresentation was made for the purpose of defrauding the plaintiff, (4) the plaintiff relied on the misrepresentation and had the right to rely on ...

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