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Ezrin v. Stack

September 5, 2003

HERBERT S. EZRIN, PLAINTIFF,
v.
BRENDAN C. STACK, DEFENDANT.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Herbert S. Ezrin sues Brendan C. Stack, D.D.S., for alleged breaches of Dr. Stack's fiduciary duties as a director of SEB, Inc., a defunct corporation, and for payment of District of Columbia taxes owed by SEB, Inc., and allegedly assessed against Mr. Ezrin personally. These are helpfully labeled the "Corporate Assets Claim" and the "Tax Claim" in the complaint. Dr. Stack has filed a motion to dismiss and for summary judgment, arguing that the claims have no merit and that these parties have twice litigated these issues in State courts in Virginia and Maryland. Mr. Ezrin, appearing pro se here, was represented by counsel in those earlier incarnations of this long-running dispute. He wants this Court to hear the case and argues that the prior rulings were not dispositive of his current arguments. Because the doctrine of res judicata bars the re-litigation proposed here, the Court will grant Dr. Stack's motion for summary judgment on this ground without addressing the merits.

Background Facts

SEB, Inc., a closely-held corporation in which stock was held by Mr. Ezrin, Dr. Stack, and others not involved in this suit, once operated a restaurant in Washington, D.C., known variously as Café Petitto and/or Café Parma.*fn1 Dr. Stack held a 50% interest in SEB and Mr. Ezrin held a 20% interest. Mr. Ezrin states that he operated and managed the restaurant and SEB from December 11, 1995 to October 24, 1997.

The restaurant(s) did not prosper and SEB filed a petition for reorganization pursuant to Chapter 11 of the Bankruptcy Code on July 15, 1997. On October 24, 1997, Dr. Stack became the President of SEB and took over its management and operation. The Chapter 11 bankruptcy case was dismissed on June 19, 1998. Dr. Stack then closed the SEB restaurant. He is alleged to have signed a new lease for the restaurant space and to have sold the assets of SEB at less than fair market value to Capital City Bistros, Inc. ("Capital City"), a new corporation he set up and wholly owned. Further, Dr. Stack is alleged to have later sold the new restaurant for approximately $200,000.00, and to have retained the entire proceeds without regard to the interests of any shareholders of SEB.

The complaint also alleges that Dr. Stack failed to pay any taxes, past or current, or to file tax reports during the period of time he operated SEB. Mr. Ezrin asserts that Dr. Stack falsely told the District of Columbia, in June 1998, that Mr. Ezrin was responsible for all taxes even though Dr. Stack was operating SEB at that time. It appears that the District of Columbia assessed taxes, interest and penalties against Mr. Ezrin for the full amount due by SEB which, through July 29, 2000, amounted to $244,594.83.

Prior to, and separate from, these events, Dr. Stack had also loaned money to Mr. Ezrin by way of a series of five promissory notes. In August 1999, the two men met and Dr. Stack "offered Ezrin that if he accepted sole responsibility for District of Columbia tax assessments, then Stack would credit Ezrin against... certain promissory notes due Stack from Ezrin." Compl. ¶ 19. Mr. Ezrin asserts that he "refused to sign the proposed letters" that would have acknowledged his tax liability to the District of Columbia. Id. He also claims that he first learned of the sale/transfer of SEB assets to Capitol City at this meeting.

The Previous Litigation

Dr. Stack sued Mr. Ezrin in the Circuit Court of Fairfax County, Virginia, in January 2000, seeking judgment on the unpaid promissory notes. (Although Dr. Stack lives in Virginia and Mr. Ezrin lives in Maryland, the promissory notes specified that the law of the Commonwealth of Virginia would apply.) Mr. Ezrin filed defenses and a counterclaim. The counterclaim included Count III for "Indemnification" by which Mr. Ezrin claimed that Dr. Stack should pay the District of Columbia taxes assessed against Mr. Ezrin. The counterclaim also included Count IV for "Breach of Fiduciary Duty" and Count V for "Constructive Trust." These two counts alleged that Dr. Stack had engaged in improper activities with SEB, converted its assets through the use of Capital City, and retained the proceeds for himself.

After full briefing and argument, Circuit Court Judge Robert W. Wooldridge, Jr. sustained Dr. Stack's demurrer to Count III without leave to amend on December 15, 2000, and to Counts IV and V on December 20, 2000. Counts IV and V were dismissed with prejudice without leave to amend. During trial on the remaining counts, Dr. Stack and Mr. Ezrin settled the outstanding issues and Mr. Ezrin consented to the entry of judgment in favor of Dr. Stack in the sum of $105,000.00, together with interest at 9% per year until paid. The final order contained the statement "This Order adjudicates all issues contained in Plaintiff's Motion for Judgment, the remaining Counts of Defendant's Counterclaim which were not previously dismissed with prejudice by the orders of this Court dated 12/15/2000 and 12/22/2000, and Plaintiff's affirmative defenses to Defendant's Counterclaim of Set-Off of the Petitto Note Settlement." Defendant's Motion to Dismiss Pursuant to FRCP 12(b)(6) and Motion for Summary Judgment Pursuant to FRCP 56(b), Exh. 5 (hereafter "Defendant's Motion to Dismiss").

The judgment from Fairfax County, Virginia, was docketed in the Circuit Court of Montgomery County, Maryland, for purposes of enforcement. In July 2001, Mr. Ezrin filed a motion for judgment in Maryland asserting that the Fairfax County judgment was paid and satisfied based upon "set-off." The basis for the set-off Mr. Ezrin sought is identical to the complaint before this Court, i.e., the Corporate Assets Claim and the Tax Claim. See Defendant's Motion to Dismiss, Exh. 6. On October 26, 2001, after Mr. Ezrin's motion was fully briefed, Circuit Judge Nelson W. Rupp., Jr. denied it. See Defendant's Motion to Dismiss, Exh. 10.

Standard of Review

Summary judgment is appropriate when the record shows that no genuine issue exists as to any material fact and the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is not a "disfavored legal shortcut[;]" rather, it is a reasoned and careful way to resolve cases fairly and expeditiously. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). In determining whether a genuine issue of material fact exists, the court must view all facts and reasonable inferences in the light most favorable to the nonmoving party. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio, 475 U.S. 574, 587 (1986).

Federal courts must give a state court judgment"the res judicata effect which the judgment would be accorded in the state which rendered it." Durfee v. Duke, 375 U.S. 106, 109 (1963). Because final orders were issued in Virginia and Maryland, the allegations of the complaint must be analyzed ...


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