Daily Record Staff//November 21, 2010
//November 21, 2010
Credit Agreement Act
BOTTOM LINE: The statute of frauds provision in the Maryland Credit Agreement Act did not bar consideration of whether borrowers’ counterclaims, alleging negligence, fraud, and breach of fiduciary duty, were sufficient grounds to open, modify, or vacate the confessed judgment entered against them; however, parol evidence was inadmissible as grounds for declaring the loan agreement void ab initio.
CASE: Pease v. Wachovia SBA Lending, Inc., No. 76, Sept. Term, 2009 (filed Oct. 21, 2010) (Judges HARRELL, Battaglia, Greene & Barbera) (Judges Bell, Murphy & Adkins dissenting). RecordFax No. 10-1021-20, 47 pages.
FACTS: In 2005, William and Michele Pease relocated their family to Maryland, where they purchased a residence for $820,000, paying $300,000 in cash and financing the balance. Around the same time, William learned from a business brokerage firm that David Kolper was seeking to sell his Maryland-based plumbing company, Bush Plumbing & Heating.
The Peases established two entities to purchase Bush: VLP Industries, Inc., a Maryland corporation, and VLP Real Estate, LLC, a Maryland limited liability company. To finance the purchase of Bush, William contacted Jeffrey Martin at Wachovia SBA Lending, Inc. to obtain a Small Business Administration (SBA) loan.
Between March and August of 2005, William alleged that he repeatedly told Martin that he did not want to utilize the new home as collateral toward repayment of the SBA loan. Allegedly, Martin informed William that, pursuant to Wachovia’s normal lending procedures, the only way the Peases would not be required to pledge their house as collateral was if they had less than 20% equity in the value of the home. Since the Peases’ equity exceeded 20%, Martin suggested the Peases encumber the home with a home equity line of credit with Wachovia. Thus, the Peases received from Wachovia a $218,000 line of credit on their residence.
At the same time, William began the process of reviewing the business affairs and finances of Bush to ensure the company was valued as estimated by Kolper. Wachovia’s certified appraiser valued Bush at $950,000 as a going concern. Further, a separate real estate appraiser valued the real property on which the Bush business was located at $450,000.
A few weeks prior to settlement on the SBA loan, Martin allegedly admitted to William that, according to the documentation supplied to Wachovia, Bush’s financial health was weaker than Kolper had indicated. Martin urged William to cause VLP Industries, Inc. to execute a promissory note in the amount of $95,000, payable to Kolper, as additional financing for the purchase of Bush and as a way to ensure that Wachovia could authorize the financing for the balance of the purchase price.
At settlement on the purchase of Bush, Bush’s operating assets were transferred to VLP Industries, Inc., and the real property on which Bush was situated was transferred to VLP Real Estate, for a total purchase price of $1.5 million.
On the same day, to finance the majority of the purchase price, VLP Industries, Inc. executed a commercial loan with Wachovia in the amount of $1.1 million. Both William and Michele signed the loan agreement, which contained a confessed judgment clause.
Less than one week after settlement, the Peases paid back the $218,000 home equity. On the $95,000 note, however, the Peases made no payments to Kolper. Further, on November 30, 2007, VLP Industries, Inc. defaulted on the commercial loan, on which $1.1 million was owed at that time.
Wachovia accelerated the commercial loan and informed the Peases of their obligation to pay the outstanding amount in full. On January 28, 2008, having not received the accelerated payments, Wachovia instituted confessed judgment proceedings in the circuit court. Confessed judgments for $1.2 million were entered against the Peases and their business entities.
The Peases filed a motion to open, modify, or vacate the confessed judgments, asserting allegations of negligence, fraud, and breach of fiduciary duty. In support of these allegations, the Peases attached an affidavit by a purported expert in banking standards of care, stating that Wachovia failed to comport with commercially reasonable banking standards when it authorized the commercial loan and when it induced the Peases into taking out the home equity loan.
The hearing judge denied the Peases’ motion. The Court of Appeals, which granted certiorari before the intermediate appellate court could decide the Peases’ appeal, reversed.
LAW: Pursuant to Rule 2-611(e), a court must open, modify, or vacate a confessed judgment “if [it] finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action.”
The Maryland Credit Agreement Act provides that “[a] credit agreement is not enforceable by way of action or defense unless it: (1) [i]s in writing; (2)[e]xpresses consideration; (3)[s]ets forth the relevant terms and conditions of the agreement; and (4)[i]s signed by the person against whom enforcement is sought.” CJ §5-408(b). This section serves as the statute of frauds portion of the Act.
The Act provides that a “credit agreement” is a “covenant, promise, undertaking, commitment, or other agreement by a financial institution to: 1.[l]end money; 2.[f]orbear from repayment of money, goods, or things in action; 3.[f]orbear from collecting or exercising any right to collect a debt; or 4.[o]therwise extend credit.” §5-408(a)(2)(i). The Act goes on to explain that the term “‘credit agreement’ includes agreeing to take or not to take certain actions by a financial institution in connection with an existing or prospective credit agreement.” §5-408(a)(2)(ii).
Pursuant to the plain language and the legislative history of the Maryland Credit Agreement Act, a court should only engage the statute of frauds portion of the Act when, either through affirmative claim or defense, a commercial borrower or lender either attempts to recover on a verbal promise to lend/borrow, or seeks to enforce a verbal modification of an existing credit agreement.
The Peases asserted that, if successful in opening or vacating the confessed judgment, they will employ their allegations of negligence, fraud, and breach of fiduciary duty as the bases for counterclaims against Wachovia.
The statute of frauds portion of the Act only applies to bar assertion of the Peases’ counterclaims if they constitute an attempt to enforce either (1) an oral credit agreement; or (2) a verbal modification of their existing loan agreement.
The filing of offensive counterclaims using the tort theories of negligence, fraud, and breach of fiduciary duty would be on the basis that any recovery on such claims would serve as a set-off against any judgment on the guarantees in favor of Wachovia. Accordingly, where such counterclaims are allowed to be filed, the Peases would not seek thereby to enforce or modify an oral agreement, but would be asserting such claims notwithstanding the implicitly conceded enforceability of the credit agreement (the SBA commercial loan and guarantees).
On the other hand, the legislative history of the Act is clear that, if the Peases were asserting the counterclaims as a means to defeat directly or attain a modification of the credit agreement with Wachovia, the Maryland Credit Agreement Act would be triggered and bar consideration of the underlying allegations and evidentiary proffers in determining whether the confessed judgments should be opened, modified, or vacated. See Notes to H.B. 704 (1989).
Because the Peases would be asserting the counterclaims against Wachovia for negligence, fraud, and breach of fiduciary duty, not to enforce a verbal agreement to borrow or to modify their existing agreement to borrow, but to constitute a set-off against any recovery obtained by Wachovia under a concededly enforceable credit agreement, these counterclaims plainly are not the sort of situation to which the General Assembly intended the Act apply. See Bahls, Farm and Ranch Credit: Duty-Based Theories of Lender Liability, 19 WM. MITCHELL L.REV. 367, 399 (1993). As such, §5-408(b) does not bar at the threshold the circuit court from considering the Peases’ allegations as grounds to open, modify, or vacate the confessed judgment.
Therefore, because the trial judge did not make a determination whether, pursuant to Rule 2-611(e), there existed a “substantial and sufficient basis for an actual controversy as to the merits of the action,” the case was remanded so that the court may consider whether the Peases’ allegations of negligence, fraud, and breach of fiduciary duty meet this threshold.
COMMENTARY: The Peases asserted in the alternative that, if successful in opening or vacating the confessed judgments, they will use their allegations-sounding in negligence, fraud, and breach of fiduciary duty-as the bases for arguing that the SBA loan agreement and guarantees were void ab initio.
The SBA note and the accompanying guarantees set forth the rights and duties of the Peases and Wachovia. These rights and duties included the Peases’ duty to repay Wachovia $1.1 million, and, if default and acceleration occur under the note, failing repayment, Wachovia’s right to execute on the guarantors’ assets, including the real property upon which Bush is situated and the Peases’ residence.
The Peases’ attempts to declare the credit agreement void ab initio, at least on the bases appearing in this record, constitute an attempt to have a court declare that they need not pay back the $1.1 million or that Wachovia may not execute on the borrowers’ or the guarantors’ assets; as such, the Peases are arguing for the enforcement of what is, in effect, an oral modification of the original terms of the loan and guarantees. This was precisely the type of maneuver that the statute of frauds portion of the Maryland Credit Agreement Act was enacted to forestall.
Because the Act applies to bar evidence aiming to show that a credit agreement is void ab initio, such parol evidence cannot constitute a “substantial and sufficient basis as to the merits of the action,” and is therefore barred from consideration in the context of deciding whether to grant a motion to open, modify, or vacate a confessed judgment based on the credit agreement.
DISSENT: According to the dissent, the majority correctly concluded that the Maryland Credit Agreement Act does not apply to, and therefore did not preclude, the Peases’ counterclaims of fraud, negligence, and breach of fiduciary duty. However, the majority characterized a claim that a contract is void ab initio as one barred by the statute because “it is an attempt to enforce a verbal modification of the credit agreement.” Certainly, the Act bars using oral agreements to prove a contract modification in a suit to enforce the modified contract. However, if the claim is that a party’s tortious conduct prevented the contract from ever forming at the outset, then there is simply nothing to enforce, and the Act does not apply.
Accordingly, the Act would not bar a claim that a bank’s tortious conduct rendered the original commercial loan void ab initio.
PRACTICE TIPS: It is a well settled rule of law that a successful claim of fraudulent inducement renders the contract voidable at the election of the parties affected by the fraud, not void ab initio, which is as if the contract never existed. See Julian v. Buonassissi, 414 Md. 641, 666 (2010).
BOTTOM LINE: Trial court violated defendant’s constitutional right to confront a witness when it prohibited defendant from cross-examining the witness as to potential bias arising from certain matters, such as the fact that the State nolle prossed criminal charges against the witness several days before he testified for the State.
CASE: Martinez v. Maryland, No. 67, Sept. Term, 2009 (filed Oct. 26, 2010) (Judges Bell, Harrell, Battaglia, Greene, Murphy, Adkins & BARBERA). RecordFax No. 10-1026-21, 16 pages.
FACTS: One morning in September 2006, police officers in Prince George’s County found two men, Carlos Humberto Castro-Ventura and Santos Lorenzo Mejicanos, lying on the ground with multiple stab wounds. Castro-Ventura later died from his wounds. Mejicanos, however, survived.
Detective Troy Harding led the investigation of the stabbings. Harding testified that he visited Mejicanos at the hospital and showed him a photo array of potential suspects. The array included Eduardo Escobar Martinez, whom Mejicanos identified as his assailant. Harding also showed Mejicanos a photo of a crucifix tattoo. Mejicanos identified that tattoo as the same one he had seen on the arm of one of his assailants. Roberto Nicolas, known to Detective Harding as a potential suspect in the attacks, has such a tattoo.
Harding obtained a warrant to search the residence of Nicolas. Two screwdrivers believed to be used in the attack were recovered. Subsequent testing disclosed the presence of Nicolas’ DNA on one of the screwdrivers, but no DNA of Martinez, or anyone else, on the other screwdriver.
The police arrested Nicolas. During interrogation, Nicolas implicated several persons, including Martinez, and stated that Martinez used one of the screwdrivers in the stabbing.
Martinez was charged with the murder of Castro-Ventura, the attempted murder of Mejicanos, and related counts. Nicolas and Mejicanos were the State’s key witnesses at trial.
Nicolas testified that he, Martienz, Carlos Garcia, and William Mercado went to a park to drink beer. Around midnight, they made their way to nearby apartments. Along the way, they observed three individuals walking in their direction. When the two groups met, Nicolas saw Martinez and one of the members of the other group, later identified as Mejicanos, exchange angry words. Nicolas, a self-described MS-13 gang member, punched Mejicanos in the face. Nicolas was prompted to do that because Mejicanos, who claimed to be a MS-13 gang member, smoked crack-cocaine in violation of gang rules.
Nicolas further testified that Mejicanos attempted to run away, but Martinez, Garcia, and Mercado attacked him. When Mejicanos fell to the ground, Martinez stabbed him with a screwdriver. The attackers were momentarily distracted by neighbors’ screams and Mejicanos was able to escape. Moments later, Martinez, Garcia, and Mercado began assaulting Castro-Ventura. During the assault, Martinez repeatedly stabbed Castro-Ventura with a screwdriver. As the fight ended, Nicolas kicked Castro-Ventura and left him bleeding on the ground. The group then left the scene, after which Nicolas saw Martinez cleaning the screwdriver in a creek.
Mejicanos testified as a State’s witness, under a writ of body attachment to secure his presence at trial after he failed to attend court on the first day of trial. The record reflected that Mejicanos was incarcerated from sometime on the second day of trial until the third day of trial, when he gave his testimony. Just before Mejicanos took the stand, defense counsel asked the court for permission to ask Mejicanos about his unrelated felony charges. Those charges were nolle prossed by the State six days before Mejicanos testified at a pre-trial motions hearing in the present case. The court denied the request and defense counsel refrained from cross-examining Mejicanos about either his custody status or the nolle prossed charges.
Martinez was convicted and sentenced to 40 years imprisonment. The Court of Special Appeals affirmed, holding that the circuit court did not abuse its discretion in ruling that the probative value of the proposed inquiries was outweighed by other concerns expressed in Maryland Rule 5-403.
Martinez appealed to the Court of Appeals, which reversed.
LAW: The Confrontation Clause of the Constitution and Article 21 of the Maryland Declaration of Rights guarantee a criminal defendant the right to confront the witnesses against him. Delaware v. Van Arsdall, 475 U.S. 673, 678 (1986); Church v. State, 408 Md. 650, 663 (2009). The right of confrontation includes the opportunity to cross-examine witnesses about matters relating to their biases, interests, or motives to testify falsely. Davis v. Alaska, 415 U.S. 308, 316-17 (1974); Marshall v. State, 346 Md. 186, 192 (1997).
The ability to cross-examine witnesses, however, is not unrestricted. Van Arsdall, 475 U.S. at 679; Smallwood v. State, 320 Md. 300, 307 (1990). A trial court may impose reasonable limits on cross-examination when necessary for witness safety or to prevent harassment, prejudice, confusion of the issues, and inquiry that is repetitive or only marginally relevant. Lyba v. State, 321 Md. 564, 570 (1991). The court, nevertheless, “must allow a defendant wide latitude to cross-examine a witness as to bias or prejudices” so long as the questioning does not “obscure the trial issues and lead to the factfinder’s confusion.” Smallwood, 320 Md. at 307-08. Only when defense counsel has been “permitted to expose to the jury the facts from which jurors, as the sole triers of fact and credibility, could appropriately draw inferences relating to the reliability of the witness[,]” is the right of confrontation satisfied. Davis, 415 U.S. at 318. Consequently, a trial court may exercise its discretion to limit cross-examination only after the defendant has been afforded the “constitutionally required thresh-old level of inquiry.” Smallwood, 320 Md. at 307.
The recent decision in Calloway v. State, 414 Md. 616 (2010), informed the resolution of this present case. In Calloway, it was held that the trial court committed reversible error when it prohibited the defense from cross-examining a State’s witness, who was incarcerated for unrelated offenses pending trial, concerning whether the witness had volunteered to testify for the State with the hope that he would receive some benefit in those cases then pending against him. Id. at 619-20. The defense had learned that, before Calloway’s trial, the witness was released from jail; charges that had been pending against the witness were nolle prossed; and, notwithstanding unequivocal evidence that the witness had violated probation in another case, no violation of probation charge was filed against him. The effect of the trial court’s ruling was characterized as having “excluded circumstantial evidence of [the witness’s] self interest that was based upon what actually occurred before he was called to testify against” Calloway. Id. at 636-37. It was concluded that whether the witness had stepped forward with information that implicated Calloway “in the hope of being released from detention, and whether he was testifying at trial in the hope of avoiding a violation of probation charge, should have been decided by the jury[.]” Id. at 637.
It was clarified, moreover, that, “[b]ecause the issue is whether [the witness] had a hope that he would benefit from volunteering to testify against [Calloway], it is of no consequence that the State had not offered to make any deal or bargain with [the witness] regarding his charges and his testimony in [Calloway’s] case.” Id. at 637. Nor was it of consequence that the witness might not have admitted under cross-examination that his direct testimony was motivated by self interest.
When the trier of fact is a jury, questions permitted by Rule 5-616(a) should be prohibited only if (1) there is no factual foundation for such an inquiry in the presence of the jury, or (2) the probative value of such an inquiry is substantially outweighed by the danger of undue prejudice or confusion.” Id. at 638. “When determining whether a particular item of circumstantial ‘bias’ evidence should be excluded on the ground that it is unfairly prejudicial and/or confusing, the trial court is entitled to consider whether the witness’s self interest can be established by other items of evidence.” Id. Applying these principles, it was held that “there was a solid factual foundation for an inquiry into [the witness’s] self interest, and the circumstantial evidence of [the witness’s] self interest was not outweighed-substantially or otherwise-by the danger of confusion and/or unfair prejudice to the State.” Id. at 639.
Application of Calloway to this case required reversal of Martinez’s convictions. The facts that a mere six days before Mejicanos testified, the State nolle prossed charges that had been pending against him, and that he was incarcerated pursuant to a writ of body attachment pending his testimony, presented circumstantial evidence of bias, motivated by self-interest. It mattered not whether the nolle prossed charges were the result of a deal with the State, or that the court, not the State, held the keys to Mejicanos’s release from the body attachment at the conclusion of his testimony; it matters only what Mejicanos might have thought about those two facts.
When a defendant seeks to cross-examine a State’s witness to show bias or motive, “the crux of the inquiry insofar as its relevance is concerned, is the witness’s state of mind.” Smallwood, 320 Md. at 309. Here, there was a solid factual foundation for the defense’s inquiry into Mejicanos’s potential bias. Therefore, the trial court’s ruling prevented the jury from considering the possibility that Mejicanos had a motive to testify as he did, resulting in a violation of Martinez’s right of confrontation. The error entitled Martinez to a new trial.
Accordingly, the judgment of the Court of Special Appeals was reversed.
COMMENTARY: The State argued that, under Maryland Rule 5-403, the trial court properly exercised its discretion to limit that line of cross-examination because any probative value of the proposed impeachment was outweighed by the potential to mislead and confuse the jury.
Rule 5-403 provides: “Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”
Here, such inquiry was not outweighed at all by the danger of confusion to the jury or unfair prejudice to the State. See Calloway, 414 Md. at 638-39. On one side of the balance, circumstantial evidence that Mejicanos, a key State’s witness, was motivated by self-interest to testify falsely was highly probative of the defense’s theory that his testimony was not to be trusted. On the other side, the State did not even suggest at trial that the defense’s inquiry would confuse the jury or would unfairly prejudice the State, much less substantially so.
PRACTICE TIPS: “Questions alone can impeach. Apart from their mere wording, through voice inflections and other mannerisms of the examiner-things that cannot be discerned from the printed record-they can insinuate; they can suggest; they can accuse; they can create an aura in the courtroom that the trial judge can sense but about which we could not speculate. The most persistent denials, even from articulate adult witnesses, may not suffice to overcome the suspicion they can engender … .” Elmer v. State, 353 Md. 1, 15 (1999).
Survival of benefits
BOTTOM LINE: Since husband presented insufficient evidence to show that his deceased wife had “a legal obligation to support” him at the time of her death, any right to claim her permanent partial benefits did not pass to him.
CASE: WalMart Stores, Inc. v. Holmes, No. 141, Sept. Term, 2009 (filed Oct. 25, 2010) (Judges Harrell, Battaglia, GREENE, Murphy & Barbera) (Judges Bell & Adkins dissenting). RecordFax No. 10-1025-21, 46 pages.
FACTS: Patricia and Larry Holmes were married in 1969. In November 1999, Patricia was injured in the course of her employment with Wal Mart. The Workers’ Compensation Commission awarded Patricia temporary total disability benefits. Although she and Larry were not living together at the time of Patricia’s injury, the couple reunited in 2003.
Patricia received compensation for her injury until November 2006, when she was found to have reached maximum medical improvement from her injuries. At that time, Patricia could have applied to the Commission for an award of either permanent partial or permanent total disability benefits. Unfortunately, Patricia died of unrelated causes before she could seek such benefits.
Patricia’s attorney filed post-mortem issues with the Commission seeking permanent disability benefits and alleging that the right to collect those benefits should pass to Larry as the surviving spouse. The Commission determined that Larry was not a dependent of Patricia and that she had no surviving minor children. Consequently, Larry’s ability to pursue his wife’s claim was controlled by LE §9-632(d).
Applying LE §9-632(d), the Commission found that Larry had presented insufficient evidence to show that Patricia had “a legal obligation to support” him at the time of her death and therefore, any right to claim her permanent partial benefits did not pass to him. The circuit court affirmed.
The Court of Special Appeals reversed, holding that benefits survive to the spouse “unless the spouse has agreed to or has been adjudicated to have given up his or her right of support.”
The Court of Appeals reversed the Court of Special Appeals and remanded.
LAW: LE §9-632(d) provides that if the covered employee has no surviving dependents and, on the date of death, the covered employee had a legal obligation to support a surviving spouse, the right to compensation survives jointly to the surviving spouse of the covered employee.
The phrase “a legal obligation to support” as used in §9-632(d) is ambiguous because it is susceptible to two equally plausible interpretations. Accordingly, an appeal to extrinsic considerations was necessary in aid of construction of the statute. Lewis v. State, 348 Md. 648, 653 (1998).
The preamble to Maryland’s original Workers’ Compensation legislation noted the dangers and costs of the rapidly industrialized workplace. Polomski v. Baltimore, 344 Md. 70, 77 (1996). The Act, unlike tort law, is not designed to make the injured worker whole, but rather to provide financial support following an injury. Cf. Pineland Lumber Co. v. Miles, 228 Md. 584, 588 (1962). The Act is construed “as liberally in favor of injured employees as its provisions will permit in order to effectuate its benevolent purposes.” Soper v. Montgomery County, 294 Md. 331, 335 (1982).
The Employers and Employees Cooperative Insurance and Liability Article was enacted in 1902 to provide compensation to workers in the mining profession. Chapter 139 of the Acts of 1902. Subsequently, Maryland enacted the Maryland Workers’ Compensation Act on April 16, 1914. Originally, the Act did not provide for the survival of benefits because they were intended to address the problem of lost income for the individual due to disability, not to compensate dependents or survivors for injury. Meadowood v. Keller, 353 Md. 171, 178 (1999) (quoting 4 LARSON’S WORKERS’ COMPENSATION LAW, §58.42).
While initially there was no provision for the survival of benefits beyond the death of a covered employee, the Legislature did provide for the payment of death benefits to the dependents of a worker killed in the course of his or her employment. Chapter 800 of the Acts of 1914, § 35. A survival provision was added in 1920 as part of a general liberalization of the Act. In the permanent partial disability benefits sub-section, the General Assembly provided that “if an employee dies, the right to any compensation payable under this Sub-Section, unpaid at the date of his death, shall survive to and vest in his personal representatives.” Chapter 456 of the Acts of 1920, § 36. The derivative right to the unpaid benefits inured to the employee’s personal representatives, i.e. his estate, not to any dependents.
In 1945, the class was expanded to include both surviving dependents and personal representatives. Finally in 1947 the phrase “a legal obligation to support” was inserted into the statute. Chapter 895 of the Acts of 1947, §35. There have been no substantive changes to this section despite several re-codifications that were limited to making the language gender-neutral and reorganizing the benefit sections to achieve greater clarity. See Meadowood, 353 Md. at 183.
Significantly, the bill that added the phrase “a legal obligation to support” as originally proposed limited survival of benefits to dependents alone. In addition to addressing who would be entitled to step into the shoes of the deceased covered employee to take his or her benefits, S.B. 252 eliminated the presumption of dependency afforded the wife or minor children of a covered employee. Chapter 895 of the Acts of 1947; Kendall v. Housing Authority, 196 Md. 370, 375-376 (1950). Dependency would henceforth be determined solely on the basis of actual support. It may be reasonably inferred, therefore, that the intention of the Legislature in amending the Act was to contract the right to survival benefits, rather than to expand it.
The Legislature crafted a provision for the survival of benefits to wives and minor children of employees, as they would no longer be afforded a presumption of dependency. The Legislature gave an unqualified right to the survival of benefits to minor children in the absence of dependents; however, it chose not to grant the survival of benefits to all spouses, but to limit the right to whomever the employee had a legal obligation to support. §9-632(d), (e).
The impact of the right being derivative is that a surviving spouse that claims to be a qualified beneficiary of the covered employee’s right to compensation “steps into the shoes” of that employee. No party has an independent claim to those benefits under § 9-632.
When the Act came into effect in 1914, Maryland courts recognized the common law doctrine of necessaries. See Condore v. Prince George’s Co., 289 Md. 516 (1981). “Under the common law of Maryland, prior to the adoption of the [Equal Rights Amendment], the husband had a legal duty to supply his wife with necessaries suitable to their station in life, but the wife had no corresponding obligation to support her husband, or supply him with necessaries, even if she had the financial means to do so.” Id. at 520.
In 1947, prior to the Equal Rights Amendment, the common law doctrine of necessaries provided an “enforcement mechanism” by which a creditor could pursue satisfaction of the wife’s debts against the husbands resources. See Dudley v. Montgomery Ward Co., 255 Md. 247, 253 fn. 4. (1969).
The duty to provide necessaries was imposed by law only when the circumstances giving rise to that duty existed. Marriage was not the only precondition for taking remedial action against the husband: the husband must have failed to provide for his wife; husband and wife must have been living together, or separately through no fault of the wife; and the wife must have purchased items necessary to her support on his credit, only then could a creditor bring a successful action.
While the Legislature may have been contemplating the doctrine of necessaries, and its root in social norms in the late nineteenth and early twentieth centuries, when it used the language “a legal obligation to support” in §9-632(d), there is no evidence in legislative history or case law to suggest that the obligation arises independently of that doctrine, or of a contractual agreement, or court order.
Section 9-632(d) clearly contemplates an obligation that has been imposed by a court order or by lawful agreement. The survival of a right to collect benefits is intended to provide security for the dependents or others designated in §9-632, who are suddenly left without a means of support, following the death of an injured worker. By declining to extend the doctrine of necessaries, Condore implicitly rejected the notion that an affirmative duty of spousal support exists by virtue of the marital tie alone. See Hofmann v. Hofmann, 50 Md.App. 240, 243 (1981).
Thus, when the General Assembly enacted §9-632(d), one source of the term, “a legal obligation to support” arose by reason of the doctrine of necessaries, which was abolished by Condore, 289 Md. at 532. No other affirmative, legal obligation to support a spouse, solely by virtue of the marital tie and independent of the doctrine of necessaries, existed or now exists in Maryland case law. Therefore, Larry was not entitled to Patricia’s benefits on the basis of marriage alone.
Accordingly, the judgment of the Court of Special Appeals was reversed.
COMMENTARY: Larry maintained that FL §10-201, which punishes the willful non-support of a spouse as a misdemeanor, implicitly establishes a legal obligation of one spouse to provide for the support of the other spouse by virtue of the marital tie.
In describing the parameters of §10-201, the Court of Appeals explained: “To be guilty under the statute, the husband must willfully fail to provide for his wife without just cause. If the conviction is to be sustained, there must have been testimony from which the trier of the facts could have determined that the husband intentionally refused to support his wife, although he had the capacity to do so.” Ewell v. State, 207 Md. 288, 299 (1955).
Section 10-201 imposes a legal obligation to pay support in a marriage when a court of competent jurisdiction has determined that the factual circumstances of the case correlate to the elements of the provision and the purposes of the law, which are to “to assist spouses and children in directly procuring support and thereby preventing them from becoming public burdens, to punish the offense of failing to provide support, and, by the fear of punishment, to prevent the commission of such an offense.” State v. Berry, 287 Md. 491, 497 (1980).
Thus, the statute does not announce an affirmative, legal obligation by virtue of the marriage alone absent a court order to pay support.
Application of the criminal non-support statute involves more than just the marital tie. Even if there is sufficient evidence of voluntary impoverishment on the part of one spouse toward the other, the State would be required to show the absence of just cause. Accordingly, that would require proof of the ability to pay, and if there were no ability to pay, there would be no affirmative duty.
Patricia could not have met the requirements of §10-201 because she was incapable of providing support. Near the time of her death, Patricia had no earning power. She was not working just prior to the time of her death and her approximately $300 workers’ compensation benefits had expired. Therefore, she could not have been in violation of §10-201, and was under no legal duty within the meaning of LE §9-632(d) to support her husband.
DISSENT: According to the dissent, under FL §10-201, the relevant reciprocal relationship is not between the Holmes’ respective rights and duties. Rather, the legal right that corresponds with, and thus gives rise to, a spouse’s duty to support is the State’s inherent interest in protecting the spouse from becoming dependent on the State for support. Nowhere in §10-201 does the General Assembly mention a pre-existing court order or contractual obligation.
Accordingly, the dissent would remand to the circuit court to determine whether, at the time of her death, Patricia had the means to support Larry, and whether he needed that support.
PRACTICE TIPS: Since the Equal Rights Amendment means that sex is not a factor, courts have struck down as unconstitutional a number of family and spousal support laws, including abrogating the doctrine of necessaries, see, e.g., Condore, 289 Md. 516, holding that the parental obligation to provide child support is shared equally by both parents, see Rand v. Rand, 280 Md. 508 (1977), and holding the criminal non-support statute unconstitutional after passage of the ERA. See Coleman v. State, 37 Md.App. 322 (1977).