On another occasion, the partners disagreed on how to spend
revenue gained from the sale of forty condominiums. Della Ratta wished to pay
off a bank loan with the revenue, but Dyas believed the revenue should be used
for other reasons. Dyas alleged that Della Ratta deceptively used the
partnership funds to pay off the loan and tried to force Dyas out of the
partnership by obtaining an assignment of the loan to foreclose on Dyas. Dyas
became fed up with the partnership in December of 2004 during the construction
of the New Hotel. Della Ratta issued three capital call letters, requiring Dyas
to pay back costs associated with other construction projects and other alleged
advances. In January of 2005, Dyas filed a Complaint in the Circuit Court for
Anne Arundel County to obtain temporary restraining orders on Della Ratta's
capital call letters. The following month, Dyas amended his Complaint to include
judicially supervised dissolution of the partnership.
On November 2005, Della Ratta sought a transfer of the case
to the Circuit Court of Montgomery County. He argued that Section 9A-803(a) of
the Maryland Revised Uniform Partnership Act granted exclusive jurisdiction to
the Montgomery County Circuit Court because it is the location of the
partnership's principal office. Dyas amended the Complaint again to request
dissolution of the LLC under Section 4A-903 of the Corporations and Associations
Article. Della Ratta then challenged the subject matter jurisdiction of the
Circuit Court for Anne Arundel County with respect to the dissolution of the
LLC. The Circuit Court for Anne Arundel County held a trial on the merits and
ruled in favor of Dyas, granting an injunction on Della Ratta's capital calls
and ordering an auditor to inspect the books of the LLC and the partnership.
Judge Philip T. Caroom found that Della Ratta's conduct prohibited the
partnership from operating in a reasonably practical manner and ordered the
dissolution. But, he reversed the order of dissolution pending a transfer of the
case to Montgomery County.
In June 2006, Chief Judge Robert M. Bell, in accordance
with the Maryland Declaration of Rights, assigned Judge Caroom to preside over
the case in Montgomery County. Judge Caroom ordered the dissolution and further
ordered Della Ratta to return over $3 million to the LLC before dissolution.
After the judgment on the merits, an auditor prepared statements of the accounts
of both the LLC and the partnership. Della Ratta wanted to introduce evidence of
twelve checks that he drew, payable to the partnership. However, the circuit
court refused to reopen the evidence for the admission of the checks.
Della Ratta appealed to the Maryland Court of Special
Appeals, which affirmed the judgment of the lower court. Della Ratta then filed
a Petition for Writ of Certiorari to the Maryland Court of Appeals. The Court of
Appeals granted certiorari to decide the following issues : 1) whether the trial
court had subject matter jurisdiction to dissolve and supervise the winding up
of the partnership and LLC, 2) whether the trial court erred in disassociating
Della Ratta as a general partner based on his conduct, 3) whether the trial
court erred in refusing to allow Della Ratta to introduce evidence of checks
paid to the partnership, and 4) whether the lower courts erred in finding that
the parties entered into an enforceable fixed price contract to build
condominiums.
The Maryland Court of Appeals found, and Della Ratta
conceded, that Section 9A-801 of the Corporations and Associations Article
places no limitation on which court could make a judicial determination of
whether dissolution of a partnership is warranted. The Circuit Court of Anne
Arundel County possessed the authority to hear the dissolution matter and enter
the final order of dissolution. However, Della Ratta contented that the wind up
failed because the statute requires a partner to file for dissolution in the
county where the principal office of the partnership is located, in this case
Montgomery County, although any court may make a judicial determination. In
response to this contention, the Court agreed with the Intermediate Appellate
Court and found that the plain language of the statute does not require a
partner to apply for dissolution in the county where the principal office of the
partnership is located. In addition, the Court of Appeals disagreed with Della
Ratta's contention that the statute required severance of the dissolution
actions from Dyas' other claims. According to the Court, requiring such
severance of claims would not be a commonsense application of the statute.
With respect to the dissolution and winding up of the LLC,
the Court of Appeals, disagreeing with the Court of Special Appeals, found that
the statute conferred exclusive subject matter jurisdiction for ordering
dissolution of an LLC on the county where the principal office of the LLC is
located. The Court opined that the inclusion of the principal office provision
in the Maryland LLC statute and the exclusion of the provision in the Maryland
partnership statute reveals the General Assembly's intent to impose an
additional limitation in the LLC statute. While the LLC statute imposes the
jurisdictional element, the Court found that the special assignment of Judge
Caroom and transfer of the case to Montgomery County cured any jurisdictional
defect. In addition, when Judge Caroom sat in Anne Arundel County, he explained
that the judgment was not final because that Court lacked jurisdiction, although
the evidence supported an order of dissolution. Furthermore, Judge Caroom
appropriately relied on his findings in Anne Arundel County to enter the order
of dissolution in Montgomery County.
In response to Della Ratta's contention that the trial
court erred in deciding to disassociate him from the partnership, the Court of
Appeals held that the trial court had sufficient evidence to conclude that Della
Ratta's inappropriate conduct made it unreasonable and impracticable for the
partnership to continue with Della Ratta as a partner. The evidence showed Della
Ratta's attempts to issue capital calls after taking steps to deprive the
partnership and Dyas of the means to meet the obligations. The trial court found
that the capital calls were made in bad faith for the sole benefit of Della
Ratta. In regard to Della Ratta's challenge to the trial court's exclusion of
evidence proffered after the trial on the merits, the Court of Appeals noted
that the trial court gave guidelines for the accounting. One of the guidelines
limited the accounting to documents and exhibits provided by the parties in the
trial. The High Court of Maryland stated that the order limiting the documents
from which the accounting was based to those presented at trial was within the
discretion of the trial judge. Furthermore, the trial court's decision found
support in the fact that Della Ratta and his company, which was charged with
accounting for the LLC and partnership, did not comply with the partnership's
management agreement and was "an accountant's nightmare."Because the trial court
used its discretion when it excluded Della Ratta's untrustworthy evidence, the
Court of Appeals saw no error.
Finally, the Court of Appeals addressed the issue of the
fixed price contract. Della Ratta argued that the contract for his company to
build a hotel for the limited liability company was a cost-plus contract. He
argued that the indication in the contract of a fixed price contract was a
clerical error. The trial judge decided that Della Ratta's evidence was not
credible and ruled that the contract was for a fixed price. The Court of Appeals
believed that there was sufficient evidence to show that the parties entered
into a fixed price contract, and that the trial court's findings were not
clearly erroneous.