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Nearly two years after hearing arguments in a family dispute, the Court of Appeals has concluded that it lacked jurisdiction to hear a woman’s appeal of an order that she provide an accounting of the trust her late husband left for her and his son.
The question of jurisdiction first arose during oral argument on Jan. 8, 2010, when the court asked whether the order was a final judgment that could be appealed. The woman’s stepson, who sought the accounting, had never raised the question and the Court of Special Appeals had not addressed it in upholding the Calvert County Circuit Court order.
The stepson’s attorney said he has no objection to the high court’s having decided the case on an issue he did not argue.
“A win is a win,” said Frederick R. Franke Jr., an Annapolis solo practitioner. “We get our accounting.”
Franke declined to comment on the 23-month interval between the oral argument and decision, which was authored by retired Judge John C. Eldridge, other than to say he does not think the wait adversely affected James’ potential financial interests under the trust. Much of the trust’s assets are in real property, Franke said.
The accounting will enable James Michael Johnson to discover the value of the Johnson Family Trust and to monitor more closely how his stepmother, Catherine A. Moreland Johnson, handles the assets as trustee, Franke said.
Catherine Moreland Johnson’s attorney, F. Robert Troll Jr., could not be reached for comment. Troll is with O’Malley, Miles, Nylen & Gilmore PA in Calverton.
In its 7-0 decision Wednesday, the high court cited a 188-year-old precedent in saying the circuit court’s accounting order could not be appealed because it was not a final resolution of the dispute between Catherine and James.
Eldridge, in his opinion, quoted from the Court of Appeals’ 1823 Snowden v. Dorsey decision dismissing an appeal of Chancellor William Kilty’s order that the parties to a financial dispute provide an accounting.
“It has been settled in Maryland for almost 200 years that an order for an accounting or similar referral is not appealable as a final judgment because ‘by [the order], nothing is finally settled between the parties, and … the order for an account … was only preparatory to a final decree,’” wrote Eldridge, a retired judge sitting by special assignment.
The decision also cited an 1846 Maryland law that permits an accounting order to be appealed only if it determines “a question of right between the parties” The law, now Courts and Judicial Proceedings §12-303, has remained “virtually unchanged” over the past 165 years, the high court stated.
“[As] the trial court’s order in this case did not decide any issue concerning the parties’ rights, the order was not appealable,” Eldridge wrote. Franke, while conceding that “it certainly would be bad manners” to quarrel with a high-court victory, said he disagrees with the reasoning.
“I happen to believe [an order for an accounting] is an appealable order because of the nature of what that order is and how it acts on the parties,” Franke said. “It establishes rights.”
Specifically, an accounting order enables beneficiaries to know their potential financial interest in the trust, Franke said. This knowledge helps them monitor and, if necessary, challenge in court how the trustee spends those assets, he added.
Similarly, the denial of an accounting deprives a beneficiary of that knowledge and monitoring ability, Franke said.
Catherine Morrison Johnson and her husband, Edward R. Johnson, created the trust in August 2004, naming each as a co-trustee. The trust was created to avoid federal estate tax exposure following either of their deaths, according to the Court of Special Appeals’ opinion.
Edward died in 2006, leading to the creation of a “Trust A,” which was under Catherine’s exclusive control and distribution via will upon her death, and “Trust B,” which required her to leave any remaining funds to the children or grandchildren she shared with her late husband.
Any funds not disbursed to the couple’s descendants would go to James, if he outlives Catherine.
After his father’s death, James twice asked Catherine for an accounting but received no answer, according to court papers.
James then filed a motion for an accounting in Calvert County Circuit Court.
That court granted the motion on Feb. 12, 2008 and ordered Catherine to provide an accounting by April 25, 2008.
Catherine noted an appeal to the Court of Special Appeals on March 5, 2008, staying the order.
The intermediate court upheld the motion in a reported opinion on March 10, 2009. Catherine then sought review by the Court of Appeals.
What the court held
Case:
Catherine Johnson v. James Johnson, CA No. 63 Sept. Term 2009. Reported. Opinion by Eldridge, J. (retired, specially assigned). Argued Jan. 8, 2010. Filed Dec. 14, 2011.
Issue:
Is a court order for the accounting of a trust appealable?
Holding:
No; an accounting order is not appealable because it is not a final judgment and does not decide an issue concerning the parties’ rights.
Counsel:
F. Robert Troll Jr. for petitioner; Frederick R. Franke Jr. for respondent.
RecordFax # 11-1214-20 (9 pages).
