Eun Kim v. Parcel K- Tudor Hall Farm LLC, No. 11-2274 (4th Cir. 2012)

Annotate this Case

Download PDF

UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 11-2274 EUN O. KIM; AMY HSIANG CHI TONG; CHIN KIM; DANIEL I. KIM; GOOM Y. PARK; GYEASOOK KIM; KAP J. CHUNG; HONG S. CHUNG; LENA KIM; MI YOUNG KIM; MYONG HO NAM; YOUN HWAN KIM; YOUNG JOO KANG; ALAN YOUNG CHENG; SHUI QUI ZHANG; EVA YIHUA TU; HELENA LEE; KI N. LEE; SUN H. LEE; KWANG BAG LEE; KWANG JON KIM; NAM DOLL HUH, Plaintiffs - Appellants, v. PARCEL K TUDOR HALL FARM LLC, Defendant - Appellee, and DOUGLAS A. NYCE; NYCE AND CO., INC., Defendants. No. 11-2298 EUN O. KIM; AMY HSIANG CHI TONG; CHIN KIM; DANIEL I. KIM; GOOM Y. PARK; GYEASOOK KIM; KAP J. CHUNG; HONG S. CHUNG; LENA KIM; MI YOUNG KIM; MYONG HO NAM; YOUN HWAN KIM; YOUNG JOO KANG; ALAN YOUNG CHENG; SHUI QUI ZHANG; EVA YIHUA TU; HELENA LEE; KI N. LEE; SUN H. LEE; KWANG BAG LEE; KWANG JON KIM; NAM DOLL HUH, Plaintiffs - Appellees, v. PARCEL K TUDOR HALL FARM LLC, Defendant - Appellant, and DOUGLAS A. NYCE; NYCE AND CO., INC., Defendants. Appeals from the United States District Court for the District of Maryland, at Greenbelt. Alexander Williams, Jr., District Judge. (8:09-cv-01572-AW) Argued: October 25, 2012 Decided: December 17, 2012 Before KING and FLOYD, Circuit Judges, and R. Bryan HARWELL, United States District Judge for the District of South Carolina, sitting by designation. Affirmed in part, vacated in part, and remanded by unpublished per curiam opinion. ARGUED: James P. Koch, Baltimore, Maryland, for Appellants/Cross-Appellees. Stephen Ari Metz, SHULMAN, ROGERS, GANDAL, PORDY & ECKER, PA, Potomac, Maryland, for Appellee/Cross-Appellant. ON BRIEF: Morton A. Faller, SHULMAN, ROGERS, GANDAL, PORDY & ECKER, PA, Potomac, Maryland, for Appellee/Cross-Appellant. Unpublished opinions are not binding precedent in this circuit. 2 PER CURIAM: In 2004, Sunchase Capital Partners XI, LLC, purchased 141 acres of real property from Tudor Hall Farm, Inc. This property included Appellee a parcel Cross-Appellant title. To known Parcel raise as K Tudor funding individuals including Parcel Eun Hall for O. K, to which Farm, the LLC, purchase, Kim and the (PK-THF) Sunchase other and took asked twenty-one appellants and cross-appellees (collectively the Investors ) to invest in the bankruptcy. Tudor Hall project. Sunchase ultimately filed for Under its Chapter 11 plan, Sunchase sold all of the Farm property except Parcel K, and the Investors received nothing. The Investors brought a cause of action against PK-THF, seeking to according impose to a the constructive Investors, PK-THF Sunchase s fraudulent behavior. Investors motion for trust on came Parcel to own K it because, due to The district court granted the summary judgment constructive trust in the amount of $50,640. and imposed a The Investors now appeal, challenging the method the district court used to value the constructive trust, and PK-THF cross-appeals the district court s decision to impose the trust. For the reasons set forth in the district court s opinion, we affirm the district court s imposition of a constructive trust and its proportionality approach to value the trust. 3 adoption of the See Kim v. Nyce, 807 F. Supp. 2d 442 (D. Md. 2011). However, because we find that its the district proportionality court erred approach, we in vacate application in part and an Agreement of the remand for further proceedings. I. A. In April 2004, Sunchase signed of Sale to purchase property from Tudor Hall Farm, Inc., for $15 million. The Agreement concerned 141 acres of real property Parcels A, B, C, E, F, G, H, I, J, and K. known as Pursuant to the Agreement, PK-THF obtained title to Parcel K, which consisted of 7.88 acres, and Sunchase took title to the remaining parcels. Both Sunchase and Tudor Hall Farm possessed initial membership stakes in PK-THF, with Sunchase taking an eighty-percent membership interest and Tudor Hall Farm taking the remaining twenty-percent stake. Nyce & Co., Inc. a company owned by Douglas A. Nyce was a Class B member of Sunchase and had the sole authority to make all decisions with respect to Sunchase s management and operations. To property, raise the Sunchase $15 million offered 100 necessary Class A to purchase membership units the in Sunchase for $150,000 each. The Investors purchased these Class A Confidential units. Pursuant to the Summary of Offering, which described the investment plan, the Minimum Offering was 4 fifty Class A units or $7.5 million. The Confidential Summary also specified that, if Sunchase did not raise $15 million by selling 100 Class A units the Maximum Offering and could not obtain alternate funding, it would not purchase the property. As part of their transaction with Sunchase, each investor signed a Subscription Agreement that required Sunchase to terminate the offer and return each investor s payment if subscription[s] for at least 50 Units [were] not received and Company on or prior to April 29, 2005. accepted by the Each investor also signed an Operating Agreement, which obligated Nyce to act at all times in a fiduciary manner toward the Company and the Members. Sunchase closed on the Tudor Hall Farm property on May 2, 2005, despite its failure to raise the $15 million required in the Confidential Summary. As of the closing date, Sunchase had made selling $3.125 million by Class A membership units. Sunchase sold an additional $3.972 million in Class A membership units over the next three months, bringing its total to $7.097 million, $3.120 million of which came from the Investors. This total fell $403,000 short of the Minimum Offering and $7.903 million short of the Maximum Offering. In light of this shortfall, Sunchase negotiated a modification of the Agreement of Sale, which installments allowed under the Sunchase terms of 5 to a pay Tudor Purchase Hall Farm in Money Note in exchange for a $500,000 increase in the purchase price of the property. A first deed of trust on the property secured the Purchase Money Note. When Sunchase experienced difficulties making payments on the Purchase Money Note, Nyce asked William D. Pleasants to make a $5.25 million investment in Sunchase. Via the 2003 Trust of the Descendants of William D. Pleasants, Jr. (Pleasants Trust), Pleasants made exchange for a a $5.315 Class a million A investment membership in Sunchase interest, twenty-five-percent Class in leaving A the Investors with membership interest. 1 The Pleasants Trust created Tudor Hall Funding, Inc., to oversee the investment, and Tudor Hall Funding ultimately purchased the Purchase Sunchase eventually initiate foreclosure property. Parcel Money Note defaulted, causing proceedings K was from Tudor Tudor the included not against in Hall Farm. Hall Funding Tudor Hall the to Farm foreclosure proceedings. On September 10, 2007, Sunchase filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for 1 We arrive at this figure by adding the Investors $3.12 million contribution, the non-litigant Class A investors $3.977 million contribution, and the Pleasants Trust s $5.315 investment, creating a sum of $12.412 million. The Investors $3.12 million contribution is approximately twenty-five percent of $12.412 million. 6 the District of Maryland. Sunchase and Tudor Hall Funding proposed a Chapter 11 plan that required Sunchase to sell the property to Tudor Hall Funding free of any liens, claims, and encumbrances to satisfy Sunchase s obligation under the Purchase Money Note. The sale did not affect Parcel K, which PK-THF continued to own. Under the plan, Sunchase s Class A members including the Investors received nothing, their equity interests were eliminated, and they were prohibited from bringing certain claims against Tudor Hall Funding. The plan allowed Sunchase to assign its eighty-percent membership interest in PK-THF to Tudor Hall Funding. In a separate transaction, Tudor Hall Funding acquired Tudor Hall Farm s twenty-percent interest in PK-THF, making Tudor Hall Funding interests in PK-THF. the sole owner of all membership On March 13, 2009, the bankruptcy court confirmed the proposed plan. B. The Investors allege that Nyce created a constructive trust in Parcel K when he used fraudulent methods to sell Sunchase s Class A membership units and purchase the property. Although PK-THF obtained title to Parcel K, the Investors contend that their funding is traceable to the purchase of that property, giving them an equitable claim to Parcel K. On October 1, 2009, the district court entered default judgments against Nyce and 7 Nyce & Co. in the amount of $3.12 million, which left the Investors constructive trust cause of action against PK-THF as their only remaining claim. The district court granted the Investors motion for summary judgment on the constructive trust issue on September 2, 2011, holding in relevant part that (1) Sunchase had used the Investors funds to purchase Parcel K, (2) Nyce had obtained those funds through fraud or other improper conduct, (3) it would be unjust for PK-THF to retain the benefit of this fraud, and (4) Sunchase s Chapter 11 plan did not enjoin the Investors claims. To determine the appropriate valuation for the constructive trust, the district court invited both parties to submit memoranda regarding which portion of the Investors $3.12 million contribution Sunchase used to purchase Parcel K. On November 2, 2011, the district court found that the Investors were entitled to a constructive trust on Parcel K in the amount of $50,640. 2 The Investors argued that the court 2 The district court referred to this amount as the constructive trust lien. The Investors suggest that this terminology is internally inconsistent because a party cannot have the unlimited ownership interest that a constructive trust provides and have a lien valued at less than that amount. The district court was presumably determining the value of the constructive trust, which at least one other court has allowed. See generally Pike v. Commodore Motel Corp., Civ. A No. 940, 1989 WL 57026 (Del. Ch. May 25, 1989). To mirror the terminology that other courts have employed, we refer to the 8 should take a commingled funds approach and impose a trust equivalent in value to the Investors total investment: million. $3.12 Instead, the district court arrived at the $50,640 figure by adopting PK-THF s proposed proportionality approach. Because the Investors contributed $3.12 million or approximately twenty percent of the total purchase price for the Tudor Hall Farm property the district court found that the trust should equal twenty percent of the purchase price of Parcel K. The court any acknowledged that the parties had not introduced direct proof as to what dollar amount of the acquisition went toward Parcel K and decided to use the consideration recited in the deed $253,200 as trust s value. amount stems the purchase price when calculating See Kim, 807 F. Supp. 2d at 455, 457. from Maryland s tax assessment of Parcel the This K and contradicts the value included in the Operating Agreement, which sets Parcel K s value at $1 million for all purposes. In this appeal, the Investors challenge the district court s decision to employ a proportionality approach, and PKTHF cross-appeals the court s finding that a constructive trust was appropriate. impose a We affirm the district court s decision to constructive trust and its adoption of the value or amount of the trust rather than a constructive trust lien. 9 proportionality approach to calculate the trust s value. However, we vacate in part the district court s grant of summary judgment and remand for further consideration of (1) whether $253,200 is the appropriate purchase price to use when calculating the trust s value and (2) whether the trust should equal twenty percent of the purchase price of Parcel K. II. Having had the benefit of oral argument and after carefully reviewing the briefs, record, and controlling legal authorities, we agree with the district court s analysis with respect to its decision that the facts of this case warrant the imposition of a constructive trust. Specifically, we See Kim, 807 F. Supp. 2d at 448-49, 451-52. agree that (1) the Investors funds are traceable to Parcel K, (2) Nyce and Nyce & Co. obtained those funds through fraud, (3) it would be unjust for PK-THF to retain the benefit of this wrongful conduct, and (4) Sunchase s Chapter 11 plan does not enjoin the Investors claims. Accordingly, we affirm the district court s decision to impose a constructive trust on the reasoning of the district court. 10 III. A. We also agree that the district court correctly adopted PKTHF s proposed proportionality approach rather Investors suggested commingled funds approach. F. Supp. 2d at 456-58. than the See Kim, 807 We therefore affirm the district court s decision to use the proportionality approach on the reasoning of the district court. the district court However, as discussed below, we find that erred in its application of the proportionality approach. B. Summary judgment is appropriate only genuine dispute as to any material fact. 56(a). if there is no Fed. R. Civ. P. Under this standard, [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 v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a summary judgment motion must view the facts in the light most favorable to the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam). this case concerns cross-motions for summary Because judgment, we consider each motion . . . individually, and [view] the facts relevant to each . . . in the light most favorable to the non11 movant. Mellen v. Bunting, 327 F.3d 355, 363 (4th Cir. 2003). We review de novo both the district court s decision to grant the Investors motion for summary judgment and its conclusions of law. Moore Bros. Co. v. Brown & Root, Inc., 207 F.3d 717, 724 (4th Cir. 2000); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir. 1994). The Investors claim that the district court erred in determining the value of Parcel K, which resulted in the court incorrectly computing the amount of the constructive trust. The Investors make two arguments regarding why the district court erred when it set Parcel K s value at $253,200. Investors contend that the district decided this issue on summary judgment. court should First, the not have Although the district court concluded without discussion that the value recited in the Parcel K deed $253,200 constituted the best evidence of Parcel K s purchase price, the record contains additional evidence of Parcel K s value that the district court did not acknowledge: the $1 million figure that appears in the Operating Agreement. The Investors contend that the existence of two estimates of Parcel K s value created a genuine dispute of material fact, so the district court should not have resolved the issue on summary judgment. We agree. Second, the Investors argue that the district court erred when it used the value recited in the Parcel K deed as the 12 purchase price because this figure was Maryland s tax assessment of Parcel K. drawn directly from In E.L. Gardner, Inc. v. Bowie Joint Venture, the Maryland Court of Appeals explained that generally, in and of itself, assessed valuation is not admissible as evidence of valuation for purposes other than taxation. 494 A.2d 988, 991 (Md. 1985) (quoting C.C. Marvel, Annotation, Valuation for Show for Purposes, Value Other Taxation 39 (internal quotation marks omitted). Purposes as Admissible A.L.R.2d 209, § 2 to (1955)) The primary rationale for this rule is that the tax assessment value typically does not mirror the fair A.L.R.2d at § 2. market value of the property. Marvel, 39 The district court did not consider the deed value s connection to the Maryland tax assessment figure in its opinion. In their brief, the Investors illustrate the applicability of the rationale behind not using tax assessment values in nontax contexts in this case. The Investors explain that using the tax assessment as the purchase price yields a price per acre of $32,132 3 for Parcel K, which is drastically different from the 3 The Investors calculated the price per acre to be $32,106 because they rounded the deed price to $253,000. Our figure differs because we did not round the deed price. 13 $108,924 per acre 4 that Sunchase paid for the other Tudor Hall Farm parcels. By contrast, using the Operating Agreement s $1 million figure as the purchase price produces a price per acre of $126,904, which is more consistent with the price that Sunchase actually paid for the other parcels. The rule against using and tax assessments with alignment for rationale illustrates that the the non-tax district purposes behind court this that have may rule erred case s further when it assumed that the Parcel K deed was the best evidence of the property s value will qualifies value. affect as an Because the issue the outcome of dispute of material this regarding lawsuit fact, the Parcel and K s therefore district court should not have resolved the matter on summary judgment. C. In addition to contending that the district court erred in determining Parcel K s value on summary judgment, the Investors also argue that the district court erred in calculating which 4 We arrived at this amount by subtracting the Parcel K value recited in the Operating Agreement ($1 million) from the total purchase price ($15.5 million) to determine the purchase price of the other parcels. We then divided this figure ($14.5 million) by the acreage of the other parcels (133.12 acres). Using the $253,200 value recited in the deed as Parcel K s purchase price yields a price per acre of $114,534, which is an even starker contrast. 14 percentage of Parcel K s worth to allocate to the constructive trust. The district court decided to value the constructive trust at twenty percent of Parcel K s purchase price because the Investors $3.12 million investment represented twenty percent of the $15.5 property. million purchase price of Kim, 807 F. Supp. 2d at 457. contribution also represented a the Tudor Hall Farm However, the Investors twenty-five-percent Class A membership interest in Sunchase, and Class A membership sales financed Sunchase s purchase of the Tudor Hall Farm property. This discrepancy which the district court failed to address creates a genuine dispute of material fact regarding whether the Investors contributed twenty or twenty-five percent of Parcel K s purchase price. The district court therefore erred in resolving this issue on summary judgment. IV. For the foregoing reasons, we affirm in part, vacate in part, and remand for further proceedings consistent with this opinion. K s value On remand, the district court should determine Parcel and consider what percentage of the contribution financed the purchase of Parcel K. Investors It should then adjust the value of the constructive trust accordingly. AFFIRMED IN PART, VACATED IN PART, AND REMANDED 15

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.