Hansei Wei v. Xiaodong Xu

HANSEI WEI, Plaintiff, v. XIAODONG XU, et al., Defendants

Civil Action No. ELH-21-601

United States District Court, D. Maryland

May 4, 2022

MEMORANDUM OPINION

Ellen L. Hollander United States District Judge

Plaintiff Hansi Wei, individually and derivatively on behalf of The Patterson Partnership and The Statesboro Partnership (the “Partnerships”), filed a “Complaint For Partnership Dissolution And Injunctive Relief” against Xiaodong Xu, Guanhua Xu, and Cruikshank Ersin, LLC (“CELLC”). ECF 1 (the “Complaint”).^[1] The Complaint contains twelve counts asserting claims for breach of contract, unjust enrichment declaratory judgment, breach of partnership agreement, and breach of fiduciary duty. It also seeks an accounting and dissolution of the Partnerships. And, plaintiff seeks to enjoin CELLC “from distributing the proceeds of sale of the Patterson Property until directed by this Court.” Id. at 8.

Summons were returned executed on May 5, 2021, which evidenced service on Mr. Xu and Ms. Xu on March 12, 2021, and on CELLC on April 30, 2021. ECF 7; ECF 8; ECF 9. Pursuant to Fed.R.Civ.P. 12(a)(1)(A)(i), defendants' answers to the suit were due by April 2, 2021, and May 21, 2021 respectively. However, they never responded to the Complaint. Indeed, at no point in the litigation has any defendant ever noted an appearance, submitted any filings, or otherwise participated. See Docket.^[2]

On April 20, 2021, plaintiff asked the Clerk of Court to enter an order of default as to Mr. and Ms. Xu, because they had not responded to the Complaint. ECF 6. The Clerk entered an order of default against Mr. and Ms. Xu on May 6, 2021. ECF 10. And, on May 24, 2021, plaintiff asked the Clerk to enter an order of default as to CELLC, likewise for want of answer or other defense. ECF 12. An order of default was entered against CELLC on June 9, 2021. ECF 13.

Each entry of default was accompanied by a Notice of Default mailed to the defaulting party, advising the party of the right to file a motion to vacate the order of default, due within thirty days. ECF 11; ECF 14. However, no defendant ever filed such a motion. See Docket.

On August 12, 2021, the Court ordered plaintiff to file a status report by September 2, 2021. ECF 15. Thereafter, on August 18, 2021, plaintiff moved for default judgment as to CELLC. ECF 16. The motion represented that CELLC held $192, 264.89 in escrow for the parties from the sale of the Patterson Partnership's sole asset (the “Patterson Sale Proceeds”), and asked the Court to order CELLC to pay this sum into the Court's registry, pending its distribution according to further proceedings between plaintiff and Mr. and Ms. Xu. Id. ¶¶ 6-11. Moreover, the motion indicated that CELLC did not oppose the relief sought. See id. ¶ 12.

No objections having been received, the Court granted the motion for default judgment on September 2, 2021, and ordered the requested relief. ECF 19. A check for the appropriate sum was received by the Court from CELLC. See Docket. The funds have remained in the registry of the Court.

Plaintiff submitted the requested status report on September 2, 2021. ECF 18. He indicated that he intended to move for summary judgment in order to dissolve and terminate the Partnerships and as to distribution of proceeds. See ECF 18; see also ECF 20 (status report of October 15, 2021).

Thereafter, on November 7, 2021, plaintiff moved for summary judgment as to Mr. and Ms. Xu. ECF 21. The motion is accompanied by a memorandum (ECF 21-1) (collectively, the “Summary Judgment Motion” or the “Motion”) and several exhibits. ECF 21-2 to ECF 21-9. The Motion reflects that developments following the filing of the Complaint have resolved some of plaintiff's claims against Mr. and Ms. Xu. Accordingly, the Motion seeks more limited relief than that sought by the Complaint. Specifically, the Motion asks the Court to enter judgment dissolving the Partnerships, and directing certain actions related to the winding up of both Partnerships. See id. at 9-15. The Court discusses these actions in more detail, infra.

Plaintiff served the Summary Judgment Motion by mail on Mr. and Ms. Xu. ECF 21 at 2. In addition, the Clerk of Court mailed a notice to Mr. and Ms. Xu, advising them they if they did not file a timely written response within 28 days, the Court could dismiss the case and enter judgment against them without further opportunity to present written argument. ECF 24.^[3]However, Mr. and Ms. Xu never responded to the Motion, and the time to do so has passed.

Plaintiff has also filed two petitions for attorneys' fees and costs, one for work by counsel on behalf of the Patterson Partnership (ECF 22, the “Patterson Attorneys' Fees Petition”), and one for work by counsel on behalf of the Statesboro Partnership. ECF 23 (the “Statesboro Attorneys' Fees Petition”). Each petition is accompanied by exhibits. See ECF 22-1 to ECF 22-5; ECF 23-1 to ECF 23-5. I refer to these petitions collectively as the “Attorneys' Fees Petitions.” Again, no response or opposition to the Attorneys' Fees Petitions has been received.

No hearing is necessary to resolve the motions. See Local Rule 105.6. For the reasons that follow, I shall grant the Summary Judgment Motion. And, I shall grant the Attorneys' Fees Petitions, except as to costs.

I. Factual Background^[4]

According to the Complaint, plaintiff is a resident of Baltimore, and Xiaodong Xu and Guanhua Xu, who are married, are residents of Loudon County, Virginia. ECF 1, ¶¶ 1-3. Plaintiff is a part owner of the Partnerships. ECF 21-2 (Hansei Wei Aff.), ¶ 2. Mr. and Ms. Xu were business partners with Zhong Jun Wei, plaintiff's father. Id. ¶¶ 4, 24. Beginning in 2016, Zhong Jun Wei and Mr. and Ms. Xu sought to invest in, and manage, residential rental properties. Id. ¶ 5. The Partnerships at issue here, the Patterson Partnership and the Statesboro Partnership, relate to this activity.

As part of their investment business, on March 21, 2016, Zhong Jun Wei and Mr. Xu executed an agreement establishing the Patterson Partnership. Id. ¶ 5; see ECF 21-3 (the “Patterson Agreement”). At about the same time, they also purchased property on Patterson Park Drive in Lawrenceville, Georgia (the “Patterson Property”) as a residential rental investment. ECF 21-2, ¶ 6.

The Patterson Agreement recites that Mr. Xu and Zhong Jun Wei, referred to as “Tenants in Common, ” jointly acquired fee title to the Patterson Property, with each holding an equal and undivided interest of 50%. ECF 21-3 at 1. The Patterson Agreement imposes certain limitations on the right of each Tenant in Common to dispose of or transfer his undivided interest in the Patterson Property, subject to certain exceptions. Id. at 1. One exception provides that, upon the death of a Tenant in Common, his interest could be transferred to a “related individual.” Id.

The Patterson Agreement also provides: “The profits and losses from the operation of the [Patterson] Property shall be determined in written [sic] and signed by both parties at a later time.” Id. at 2. To this end, on the same day, Mr. Xu and Zhong Jun Wei agreed to a “Profit and loss addendum” to the Patterson Agreement. ECF 21-4 (the “Patterson Addendum”).^[5] The Patterson Addendum specifies that Mr. Xu contributed $10, 000 as an initial investment in the Patterson Property, as a tenant in common, while Zhong Jun Wei contributed $10, 000 as a tenant in common and $53, 000 via a loan, at 5.5% interest. Id. Further, the Patterson Addendum states that income through rent is divided evenly between the Tenants in Common, after payment of interest on Wei's loan and costs. Id. Upon the sale of the property, if the amount of the sale exceeds the initial investment, the proceeds would also be divided evenly between the Tenants in Common, after payment of any remaining sum due on Wei's loan, including interest. Id.

Several other provisions of the Patterson Agreement are of relevance. The Patterson Agreement terminates upon the sale of the Patterson Property and the distribution to the Tenants in Common of the net proceeds of the sale, or as otherwise agreed to by the Tenants in Common in writing. ECF 21-3 at 2. The agreement is “governed by the laws of the State of Maryland without giving effect to any conflicts of law provisions.” Id. at 3. Notably, “[i]f any action at law or in equity is brought to enforce or interpret the provisions of [the Patterson Agreement], the prevailing party will be entitled to reasonable attorney's fees ....” Id.

In 2018, Zhong Jun Wei passed away. ECF 21-2, ¶ 8. Plaintiff, who is Zhong Jun Wei's “sole son and heir, ” became the successor-in-interest to his father's rights, title, and interest in and to the Patterson Partnership, under the “Transfer to Related Individual” clause of the Patterson Agreement. Id. ¶ 9.^[6]

However, in breach of the Patterson Agreement, Mr. Xu failed to pay either plaintiff or plaintiff's father “any payments or profits” due to them under the Patterson Agreement, “despite the Patterson Partnership having obtained profits from and after 2017.” Id. ¶ 10. Instead, Mr. and Ms. Xu “unlawfully diverted said monies to themselves.” Id. ¶ 11. In addition, “despite repeated demand, ” Mr. Xu “failed to make even simple efforts to repair the Patterson Property or find paying tenants, ” leaving the Patterson Property vacant since July 2019. Id. ¶ 12. As a result, according to plaintiff, the conduct of Mr. and Ms. Xu has made it “not reasonably practicable” for the Tenants in Common to carry on the business in partnership with one another, and in conformity with the Patterson Agreement. Id. ¶¶ 13, 14.^[7]

In January 2021, the Patterson Property was sold for the sum of $192, 264.89. Id. ¶¶ 16, 17. As noted this amount is currently being held in ...