BOTTOM LINE: Defendant was not entitled to a default judgment against plaintiff for failure to answer defendant’s counterclaim because defendant did not show a substantial and sufficient controversy as to the merits, plaintiff’s failure to plead was excusable given that his original attorney had left his firm and paperwork was inadvertently neglected, and defendant did not suffer any harm as a result of court’s failure to enter a default.
CASE: Abrishamian v. Wash. Med. Group, P.C., No. 49, Sept. Term, 2013 (filed Mar. 4, 2014) (Judges Woodward, NAZARIAN & Kenney (Retired, Specially Assigned)). RecordFax No. 14-0304-02, 32 pages.
FACTS: After Azizolah Abrishamian suffered a head injury in an automobile accident, his physician referred him to Washington Medical Group, P.C. (“WMG”) for treatment. At his first visit to WMG, Abrishamian signed an Authorization and Assignment Agreement (the “A&A”), in which he agreed to pay WMG’s medical bills out of the proceeds of any settlement or judgment he might recover from the lawsuit. Abrishamian recovered $30,000 in that suit, but never paid any of those proceeds to WMG. Instead, according to WMG, Abrishamian filed an interpleader action in the circuit court to dispute the amounts owed to his medical providers.
On January 11, 2010, WMG filed suit in the district court to enforce the A&A, seeking to recover unpaid medical bills totaling $11,510, plus interest and attorneys’ fees. After discovering that it had received payments shortly after the accident from Abrishamian’s Personal Insurance Protection policy (“PIP”) that it mistakenly had failed to apply to Abrishamian’s account, WMG refiled its complaint and reduced the amount in dispute to $4,810. Abrishamian contended that WMG harbored an ulterior fraudulent motive for filing its initial complaint, and made much of the trial court’s (rather routine) decision to allow WMG to refile the complaint.
After WMG refiled the case in district court, it attempted repeatedly, without success, to serve Abrishamian and his counsel, Edward Brown. The court entered an order allowing alternative service, and denied Brown’s motion to reconsider that order. The court entered an Affidavit Judgment against Abrishamian on August 4, 2011, and mailed a Notice of Judgment on August 18, 2011. Abrishamian claimed not to have received either. Nevertheless, on September 2, 2011, Abrishamian filed pro se a Motion to Vacate the Affidavit Judgment on the same day that Brown’s office filed a Motion to Vacate the Affidavit Judgment on his behalf. Both Abrishamian’s Motion and counsel’s Motion accused WMG of fraud. The court vacated the Affidavit Judgment on November 14, 2011.
On December 12, 2011, Abrishamian filed a Counterclaim, also in district court, alleging that WMG, through Dr. Macedo, had received payments from him to testify in the underlying personal injury litigation, but refused to do so. The Counterclaim also included a demand for a jury trial, which caused the case to be transferred to the circuit court. On January 25, 2012, Abrishamian filed a Motion for Order of Default (the “Default Motion”) in the circuit court on the ground that WMG had not filed an Answer to the Counterclaim. The court denied the motion, reasoning that Abrishamian had already filed an Answer (in the “Order Denying Default”). The circuit court apparently mistook the Motion for Default as filed by WMG, and apparently denied the motion based on Abrishamian’s answer to the original Complaint.
On January 31, 2012, WMG filed an Opposition to the Motion for Default, along with an Answer to the Counterclaim. On February 28, 2012, WMG moved to disqualify Mr. Brown. WMG argued that the core dispute in the case (whether Dr. Macedo agreed to serve as an expert witness) centered around a conversation between Dr. Macedo and Mr. Brown about whether Dr. Macedo had agreed unequivocally to testify. The court granted the Motion to Disqualify in an Order, dated March 29, 2012 (the “Disqualification Order”). However, Mr. Brown apparently did not view the Disqualification as a total bar; on April 30, 2012, WMG moved to strike a notice of deposition (the “Motion to Strike Macedo Deposition”), that Mr. Brown had signed as counsel for Abrishamian and that purported to note Dr. Macedo’s deposition.
After receiving the Motion to Strike Macedo Deposition, and at the request of WMG’s counsel, the Court called the parties in and held a hearing. The docket entry characterized the court’s ruling as a “partial” grant of the Motion to Strike Macedo Deposition, and the record contained no other reference to the remaining requests in that motion. On May 7, 2012, Abrishamian moved to reconsider what he referred to as the “May 3, 2012 Order” (the “Motion for Reconsideration”), although that “order,” which issued from the bench, simply clarified the scope of the Disqualification Order that the court issued on March 29, 2012. The court denied the Motion for Reconsideration on June 5, 2012.
Over the next several months, the parties filed various motions to quash, motions for postponement, and motions for attorneys’ fees. WMG told the court that it would seek attorneys’ fees and pre-judgment interest from the court if it prevailed, not from the jury. The case was subsequently tried to a jury, and the jury returned a verdict in favor of WMG for $2,900. The court granted WMG’s petition for attorneys’ fees in the amount of $966, and interest in the amount of $2,262.
Abrishamian appealed to the Court of Special Appeals, which affirmed.
LAW: Abrishamian first argued that the circuit court erred in failing to enter a default and that that error alone entitled him to victory. Maryland Rule 2-613 provides that if the time for pleading has expired, the court, on written request of the plaintiff, shall enter an order of default. Md. Rule 2-613(b). The Rule then requires the Clerk to issue a notice of default to the defendant, who may file a motion within 30 days asking the court to vacate the order. Md. Rule 2-613(c). The motion to vacate must state the reasons for the failure to plead and the legal and factual basis for the defense to the claim. Md. Rule 2-613(d).
Importantly, and in light of the overarching preference that judgments reflect the merits of a dispute, the court must vacate the default if it finds that there is a substantial and sufficient basis for an actual controversy as to the merits of the action and that it is equitable to excuse the failure to plead. Md. Rule 2-613(e). Abrishamian contended that the circuit court was required to enter an order of default against WMG on his Counterclaim (there was no issue of default regarding WMG’s claims against him, so nothing in this section related at all to the jury verdict or ensuing judgment) 30 days after he filed the Default Motion. While he was correct on that discrete point, the logic of his subsequent contention, that judgment in his favor would have followed inexorably from an order of default, was fatally flawed.
Had the Clerk entered an order of default, the next step would not have been a judgment on the Counterclaim, but notice to WMG and a 30-day opportunity to file a motion to vacate the entry of default. Based on the actual progression of events, it seemed apparent that WMG would have filed such a motion, made the arguments it raised (successfully) in the Opposition to Default Motion, and that Abrishamian would have opposed such a motion with the arguments it made in the Default Motion. In other words, it was clear that WMG would not have conceded the merits of the Counterclaim (because it fought them), and the circuit court in fact considered and decided the same issues and arguments an order of default would have placed before it, even if somewhat later in the life of the case. Thus, in all reasonable likelihood, the circuit court would have vacated an order of default under Rule 2-613(c), just as it declined to impose a default later, and that the Clerk’s ministerial error did not prejudice Abrishamian.
The appropriate standard of review of a denial of a motion for default was reviewed in detail in Holly Hall Publ’ns, Inc. v. Cnty. Banking & Trust Co., 147 Md. App. 251, 262 (2002), where the trial court refused to vacate an entry of default. With regard to the requirement that a party show a “substantial and sufficient basis for a controversy as to the merits,” a conclusory statement that merely tracks the language of the rule is insufficient. Holly Hall, 147 Md. App. at 260. Second, the Holly Hall Court explained that the goal of the Rule’s requirement that the court consider whether “it is equitable to excuse the failure to plead” is to ensure that justice is done, which requires consideration of all relevant circumstances in any given case. Id. at 265.
In this case, the Opposition to Default Motion did not address whether WMG had a meritorious defense. Technically, however, it was not required to, because it was not styled as a Rule 2-613 motion in the first place. Based on the circuit court record, the answer to the question of whether WMG had a meritorious defense was obvious, given that WMG prevailed at trial when the court granted its motion to dismiss.
As to the second prong of the Holly Hall analysis, WMG’ss explanation for failing to answer tracked the argument that succeeded in Holly Hall. WMG’s original attorney had left his law firm in August 2011, when Abrishamian filed the Counterclaim, and through inadvertence (or at worst, benign neglect), the answer to the Counterclaim slipped through the cracks. WMG opposed the Default Motion within six days of filing (even though it had already been denied), within two months after Abrishamian filed the Counterclaim, and filed its Answer the same day.
Finally, Abrishamian did not suffer any harm from the court’s denial of the Default Motion. There was no connection between the Clerk’s error in not entering an order of default on the counterclaim and the disqualification of his counsel, which arose because counsel testified as part of Abrishamian’s defenses to WMG’s claims. Rather than pressing for an order of default well before trial, Abrishamian proceeded with discovery and the remainder of the litigation, effectively acting as if the court had denied the Default Motion. It would be inappropriate to reward Abrishamian’s decision to wait until the morning of trial to demand a default, a litigation tactic that would subvert the recognized goal of conforming to principles of justice and right espoused in Holly Hall. Holly Hall, 147 Md. App. at 265.
Accordingly, the judgment of the circuit court was affirmed.
COMMENTARY: Abrishamian also challenged the trial court’s decision to disqualify Mr. Brown as his counsel. However, the governing ethical rule precludes lawyers from serving both as counsel and a witness in a case, save for three narrow circumstances, none of which applied here. Md. Rule 16-812, Rules of Prof. Conduct, Rule 3.7(a). As such, the circuit court properly disqualified Mr. Brown because his role as fact witness mandated his absence from the trial table, and from all other aspects of the case, including discovery, under Rule 3.7(a).
PRACTICE TIPS: Only certain kinds of facts are subject to judicial notice. A judicially noticed fact must be one not subject to reasonable dispute in that it is either: (1) generally known within the territorial jurisdiction of the trial court; or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned.
Search of mobile phone
BOTTOM LINE: Trial court properly denied defendant’s 4th Amendment motion to suppress physical evidence obtained from an examination of defendant’s mobile phone because police had defendant’s mobile phone number from an independent source as well as from examining the phone itself, and a detective obtained a judicially issued court order for the phone company to produce the company’s records of calls to and from defendant’s cell phone.
CASE: Williams v. State, No. 1782, Sept. Term, 2012 (filed Feb. 26, 2014) (Judges Zarnoch, Graeff & MOYLAN (Retired, Specially Assigned)). RecordFax No. 14-0226-01, 24 pages.
FACTS: Frank Williams was charged with multiple crimes relating to the shooting death of 19-year-old Rodney Pridget, who had spent the afternoon of December 19, 2011, at a shopping mall, Christmas shopping with his 17-year-old girlfriend, Nautica Reynolds. The two did not realize that throughout the afternoon their movements in the mall had been observed by five persons stalking who were in immediate cell phone communication with one another. At 6:30 p.m., as Pridget and Nautica left the mall and entered the parking garage, a gunshot rang out.
When Nautica looked up, she saw Pridget lying on the ground and heard a volley of gunshots. She described the shooter, tall and wearing a mask, who then ran deeper into the garage. Rodney Pridget died of eight gunshot wounds.
Baltimore County Police Officer Kurt Parker was among the first officers to respond. Another Police Officer, Daniel Burns, pointed out an individual, later identified as Williams, who was frantically running up and down steps in the parking garage. Williams was wearing a gray and black hoodie with a black hat, and was talking into his cell phone as he ran. With weapon drawn, Officer Parker caught up with Williams and ordered him to lie prone on the ground. The officer conducted a quick frisk and seized it Williams’s cell phone from his hand.
Williams was then handcuffed, but after a failed attempted identification by a witness, Williams’s handcuffs were promptly removed. However, Williams was transported to the police station because the police officers still wanted to talk to him. At the station house, Officer Jednorski turned Williams over to detectives, but kept Williams’s cell phone. He was interviewed by Detective Jim Lambert. After the interview, which concluded shortly after midnight, Detective Lambert had Williams transported to the destination of his choice.
The details of Pridget’s murder became clear only a few days later, when Jermell Brandon, who had been arrested the day after the murder and charged with the murder, was persuaded to cooperate with the prosecution. As part of a plea agreement, Brandon testified as a State’s witness against the other conspirators. Brandon knew Williams and two other men, William Ward and Tyrone Brown, as members of the Black Guerilla Family (“B.G.F.”). Brandon was also aware that there had recently been a shooting of one Dustin Smith by the ultimate murder victim, Rodney Pridget. Dustin Smith was the cousin of Williams.
Brandon was later present with Williams, William Ward, and Tyrone Brown, as they all joined together to discuss the shooting of Dustin Smith and to decide what to do about it.
They debated who was going to draw the assignment of killing Pridget, and it was Williams who gave the order of retaliation on Pridget. Brandon agreed to participate. Brandon went on to describe how on December 19, 2011, he, William Ward, Tyrone Brown, and Williams, along with several companions, showed up at the shopping mall and carried out their plan to murder Pridget.
Following a jury trial, Williams was convicted of premeditated murder in the first degree, conspiracy to commit first-degree murder, and the use of a handgun in the commission of a crime of violence. He appealed his convictions to the Court of Special Appeals, not challenging the sufficiency of evidence of his guilt but contending that the trial court had erred in denying his motion to suppress certain evidence. The Court of Special Appeals affirmed the judgment of the circuit court.
LAW: On appeal, Williams first challenged the warrantless seizure of his cell phone. Whether Williams was literally and formally under arrest when the police subjected him to a hard “take down” in the parking garage was highly problematic. While the short-term restraints were severe, the longer-term status was uncertain.
Obviously, as Officer Parker ran through the parking garage, adrenaline pumping and weapon in hand, the last thing on his mind was the paradigm of a good search incident to lawful arrest. Regardless of whether Williams had been arrested, it was clear that that Williams was “un-arrested” as of the time Detective Lambert finished his interview of Williams at shortly after midnight and had Williams transported to any destination of his choice. What was not clear was whether Williams had been continuously “un-arrested” from his initial detention at 6:30 p.m. throughout the evening or whether, at some later magical moment, he crossed the critical meridian between arrest and non-arrest.
A cell phone may be seized and searched (i.e., examined) as a valid search incident to lawful arrest. Sinclair v. State, 214 Md. App. 309 (2013). However, the right to search a cell phone as an incident of a lawful arrest does not confer a right to search the cell phone of a person who is no longer under arrest, as the twin exigencies that justify a warrantless search incident to arrest no longer abide. If the thing seized as an incident of an arrest turns out to be an instrumentality of crime (a weapon), a fruit of crime (stolen goods), contraband, or other evidence, it may be retained even after the arrest to which its search and seizure were incident has itself come to an end. If none of those categories is satisfied before the arrest is terminated, however, there is no longer a justification for retaining the property of the former arrestee. The property should be returned and is not vulnerable to further examination.
Nevertheless, under the “independent source” doctrine which has been applied to evidence acquired not only through Fourth Amendment violations but also through Fifth and Sixth Amendment violations, illegally obtained evidence may be admitted when the challenged evidence has an independent source. Murray v. United States, 487 U.S. 533 (1988). Under the independent source doctrine, evidence that was in fact discovered lawfully, and not as a direct or indirect result of illegal activity, is admissible. Williams v. State, 372 Md. 386, 410-11 (2002).
Here, the information that Williams argued should have been suppressed fell into two categories. The first was the phone number of Williams’s cell phone itself. By itself, it has no inculpatory significance. Derivatively, however, it could have facilitated the police request to the telephone company for the company’s records of Williams’s cell phone use. When Williams first sat down for his interview with Detective Lambert, however, he freely provided his cell phone number on the personal information sheet he filled out. Thus, when the police subsequently asked the phone company for Williams’s cell phone records, they had it from the independent source as well as from looking at the phone itself. This was a classic application of the independent source principle.
The second category of evidence that Williams sought to have suppressed consisted of the cell phone numbers, and the identity of the owners of the cell phones, who had called him or whom he had called during the critical late afternoon hours on December 19, 2011. During the late evening of December 19, Officer Jednorski had jotted down the numbers of those calling Williams. The telephone company, on the other hand, had those numbers and others independently in its own recorded database. As part of the ongoing investigation of this case, Detective Lambert obtained a judicially issued court order for the phone company to produce the company’s records of calls to and from the phone. The phone company complied with that order and produced the requested records.
At trial, Detective Lambert and Detective Chuck Gruss provided the jury with detailed descriptions of the cell phone records not only of Williams but also of Jermell Brandon, William Ward, Crystal Harris, and Marilyn Hollemand, all of whom were in regular contact with one another before, during, and after the shooting of Rodney Pridget. This detailed analysis was based on the telephone company records, not on the observations of Officer Jednorski. The source of the information was an independent source not subject to Fourth Amendment exclusion. As such, the independent source doctrine applied, and the evidence of the various phone calls was properly not suppressed.
Accordingly, the judgment of the circuit court was affirmed.
COMMENTARY: Williams also contended that he was in custody when interviewed by Detective Jim Lambert at police headquarters at approximately 11 p.m. on the evening of the shooting but that he had not been Mirandized. He moved, therefore, to have everything he said to Detective Lambert suppressed. However, in the course of the interview, after which Williams left the police station of his own accord and un-arrested, Williams said nothing of inculpatory significance. Even assuming, arguendo, that Williams was in custody and non-Mirandized when he was interviewed by Detective Lambert, it was apparent beyond a reasonable doubt that his innocuous acknowledgment of presence at the mall had no remote influence on the jury’s verdict of guilt. Dorsey v. State, 276 Md. 638, 659 (1976). As such, this argument was not grounds for reversal of Williams’s convictions.
PRACTICE TIPS: The grant or denial of a motion for mistrial is a matter within the discretion of the trial court. The grant of a mistrial is “an extreme sanction” that courts generally resort to only when no other remedy will suffice to cure the prejudice. Whether a mistrial is warranted thus hinges upon the extent to which, if at all, the defendant has been unfairly prejudiced.
BOTTOM LINE: Agreement between natural gas company and environmental group, under which the company could use designated area for activities including “marine operations involving the importing of” liquid natural gas and the “receipt by tanker and the receipt or delivery by pipeline of LNG,” was unambiguous and, taken as a whole, did not bar the company from constructing a new facility within the designated area or transferring LNG from designated area to offshore pier.
CASE: Sierra Club v. Dominion Cove Point LNG, L.P., No. 2429, Sept. Term, 2012 (filed Feb. 28, 2014) (Judges Meredith, Kehoe & HOTTEN). RecordFax No. 14-0228-02, 28 pages.
FACTS: The Sierra Club, a non-profit California corporation, and the Sierra Club Maryland Chapter brought this appeal in response to the circuit court’s ruling in a declaratory judgment action filed by Dominion Cove Point LNG, L.P. Columbia Gas was Dominion’s predecessor in ownership of a 1,017-acre parcel of land in Maryland located at, and referred to as, Cove Point. In 1972, Columbia Gas began to construct a liquid natural gas (“LNG”) import terminal on a portion of the land.
Natural gas is liquified in order to transport it because in its gaseous state, it takes up 600 times as much space as LNG. At that time, it was necessary to transport natural gas because it was only available if imported from foreign nations. In 1978, after interested parties expressed concern regarding potential harm to the environment, Columbia Gas, the Sierra Club and the Maryland Conservation Counsel Inc. (“MCC”) entered into an agreement regarding the use of Cove Point. After the 1978 agreement went into effect, Columbia Gas began importing LNG at Cove Point, but suspended operations in 1980.
In 1994, Columbia Gas desired to reopen Cove Point to add new “peaking” services. Peaking is a service that allows energy providers to store natural gas for future use by utility companies during peak energy use time periods. Providing peaking services would require Colombia Gas to construct liquification capabilities at the Cove Point facility. The three parties negotiated a new agreement, granting Columbia Gas the ability to liquefy, store and regasify natural gas. In 2002, Dominion purchased Cove Point from Columbia Gas.
Between 1994 and 2005, Cove Point was used only to import natural gas and for peaking services. However, in 2005, Dominion sought to expand its Cove Point operations to meet rising domestic natural gas demand. As a result, Dominion, Sierra Club and MCC negotiated a new agreement, which they agreed would replace in its entirety all previous agreements and understandings regarding use of Cove Point.
The 2005 agreement provided that Dominion could use the area designated as the LNG Terminal Site solely to perform “LNG Terminal Operations.” The 2005 Agreement defined “LNG Terminal Operations,” in relevant part, as any use or activity related to the construction, operation or maintenance of facilities and equipment associated with certain activities, including “marine operations involving the importing of LNG” and “the receipt by tanker and the receipt or delivery by pipeline of LNG, revaporized LNG or natural gas at or from the LNG Terminal Site,” as well as the construction, operation or maintenance of facilities and equipment directly supporting such activities.
After 2005, the domestic natural gas market changed dramatically. A new procedure known as hydraulic fracturing (“fracking”) unlocked vast new supplies of natural gas in the United States. In 2011, in response to the new fracking developments, Dominion announced plans to expand its Cove Point operations in order to add new export capabilities. Dominion applied to the Federal Energy Regulatory Commission (“FERC”) to obtain permission to construct and operate the exporting facilities. It also sought approval from the federal Department of Energy to export natural gas to foreign countries.
Unlike the practice followed in prior instances of negotiating agreements prior to seeking approval of expansion, Dominion did not approach Sierra Club until several months after it sought federal approval. Dominion then approached the Sierra Club and MCC, as required by the 2005 Agreement, to seek approval for the project. During discussions, the Sierra Club expressed that it did not intend to approve the proposed expansion. As a result, Dominion revised its plans and proposed to construct new facilities outside of the Terminal Operations area that was subject to the 2005 Agreement. The Sierra Club then asserted that the 2005 Agreement did not authorize LNG to be exported from the Terminal Site.
Dominion thereafter filed an action for declaratory judgment against Sierra Club and MCC in the circuit court. The parties filed cross motions for summary judgment. The circuit court found that the agreement was unambiguous and issued an opinion and order in favor of Dominion, confirming Dominion’s right to construct new liquefaction facilities within the Fenced Area and its right to transfer LNG from Cove Point to the offshore pier.
The Sierra Club appealed to the Court of Special Appeals, which affirmed the judgment of the circuit court.
LAW: The Sierra Club contended that the 2005 Agreement did not authorize LNG to be exported from the Terminal Site. Specifically, it asserted that LNG could be received by tanker but not delivered to tankers and that the only “marine operations” the 2005 Agreement authorized were those involving the importing of LNG.
In Maryland, when interpreting a contract, courts seek to ascertain and effectuate the intention of the contracting parties. Phoenix Services Ltd. Partnership v. Johns Hopkins Hosp., 167 Md. App. 327, 391 (2006). In ascertaining the parties’ intent, Maryland adheres to the objective theory of contract interpretation. See Dumbarton Imp. Ass’n, Inc. v. Druid Ridge Cemetery Co., 434 Md. 37, 51 (2013). When the language of the contract is plain and unambiguous there is no room for construction, and a court must presume that the parties meant what they expressed. In these circumstances, the true test of what is meant is not what the parties to the contract intended it to mean, but what a reasonable person in the position of the parties would have thought it meant. Myers v. Kayhoe, 391 Md. 188, 198 (2006).
Language in a contract may be ambiguous if it is “general” and may suggest two meanings to a reasonably prudent layperson. Pac. Indem. Co. v. Interstate Fire & Cas. Co., 302 Md. 383, 389 (1985). If the court finds that a contract is unambiguous, then it must only look to the language of the contract to determine the intent of the parties. See Phoenix Services, 167 Md. App. at 392. If, however, a court finds that the contract is ambiguous, it must consider parol and/or extrinsic evidence to determine the parties’ intent when the contract was made. Id. at 393.
While the Sierra Club did not explicitly argue that the 2005 Agreement was ambiguous, averred that the Court should consider parol evidence, namely the parties’ prior agreements and the state of the LNG market at the time of the contract’s inception. The parties’ dispute concerned what activities were permitted by the phrase “receipt by tanker and the receipt or delivery by pipeline.” The American Heritage Dictionary defines “receipt” as “the act of receiving something” and delivery as “the act of conveying or delivering.” American Heritage Dictionary (5th. Edition 2013). Of the listed definitions for the preposition “by,” the only one that logically applied to the phrase as written was the definition “with the use of; through.” The American Heritage Dictionary, 182 (1981). As such, the 2005 Agreement was not ambiguous.
It was next necessary to look to its language to determine whether it explained what the parties intended. The crux of the dispute was not whether a term provided for the performance of some activity, but rather whether the failure to prohibit exportation meant that it was permissible. Maryland courts have held that where the language of the agreement was unambiguous and plainly did not prohibit the type of behavior sought, the behavior was permissible. See John Newell et al. v. Johns Hopkins University, 215 Md. App. 217 (2013).
Here, the dispute centered around whether exporting LNG qualified as an LNG Terminal Operation under the clause “the receipt by tanker and the receipt or delivery by pipeline of LNG, revaporized LNG or natural gas at or from the LNG Terminal Site.” Reading the contract as permitting exportation did not create ambiguity in other parts of the contract or render the contract illogical. Additionally, it was notable that Sierra Club took the opportunity to explicitly prohibit particular actions in the 2005 Agreement. Thus, had it intended that Cove Point be used exclusively for import, it was free to seek to include that restriction in the substantive provisions.
Considering the Agreement as a whole, the recital that Cove Point was “for the importation, storage, regasification and transmission of LNG” was not sufficient to preclude exports. Because the 2005 Agreement’s language was clear and unambiguous, the circuit court did not err in granting Dominion’s declaratory judgment. Accordingly, the judgment of the circuit court was affirmed.
COMMENTARY: Even if the 2005 Agreement were ambiguous, the outcome of the case would remain the same because, even considering extrinsic evidence, the Agreement still authorized exports. The Sierra Club’s first proffered extrinsic evidence was the history of LNG in the US and the fact that exporting was not possible in 2005 and thus could not have been intended. However, the fact that new applications of technology changed the circumstances did not negate the language of the 2005 contract. Slice v. Carozza Properties, Inc., 215 Md. 357 (1958). Since the words of the contract permitted exportation, objective contract interpretation required that it be allowed.
The Sierra Club next pointed to extrinsic evidence that the 1972 and 1994 agreements only authorized import and not export. In fact, the 1972 and 1994 agreements did not clearly demonstrate that the Cove Point was to be used only for importing, and, therefore, these prior agreements would not be useful in clarifying any ambiguity in the 2005 Agreement. Finally, the Sierra Club asserted that its primary concern was that Dominion’s Cove Point activities posed “serious risks for the region and the country.” However, the Sierra Club had an opportunity when it drafted the Agreement to address these concerns. The activities Dominion wished to perform now were permitted by the 2005 Agreement. As such, extrinsic evidence would not have successfully supported the Sierra Club’s claims.
Estates & Trusts
BOTTOM LINE: Charitable foundation was entitled to declaratory judgment that it was the rightful beneficiary of a trust because, contrary to claim of organization claiming to be foundation’s “successor,” the foundation never transferred “all or substantially all” of the assets of the trust; rather, it only transferred “all or substantially all” of its real and personal property associated with a home for the elderly that was operated by the foundation.
CASE: John B. Parsons Home, LLC v. John B. Parsons Found., No. 109, Sept. Term, 2013 (filed Mar. 4, 2014) (Judges Eyler, D., BERGER & Rodowsky (Retired, Specially Assigned)). RecordFax No. 14-0304-00, 33 pages.
FACTS: On July 1, 1964, Francis Baker established the Baker Trust. The trust instrument (“the Deed”) provided that, upon the death of certain named individuals (“the trigger event”), the trust would terminate, with the remaining proceeds distributed to three named institutions, or their respective successors. All of the three named institutions were charitable organizations. One such institution was the “John B. Parsons — Salisbury Home for the Aged.”
At the time the Baker Trust was executed, an entity known as the John B. Parsons — Salisbury Home for the Aged (“JBP Salisbury”) owned and operated a residential and health care home for the elderly (“the Home”). The Home and the entity that owned the Home shared the name the “John B. Parsons — Salisbury Home for the Aged” at the time the Baker Trust was established. Due to economic considerations, JBP Salisbury subsequently solicited the financial and managerial support of J.P. Harrison, Incorporated, a Pennsylvania corporation, to run the day-to-day operations of the Home.
In 1983, J.P. Harrison and JBP Salisbury executed a lease agreement for J.P. Harrison to manage and operate the Home for a period of five years. Included in the lease agreement was an option agreement, which provided that, after five years, J.P. Harrison could purchase the Home from JBP Salisbury for a purchase price of $925,000. On January 1, 1989, Harrison Enterprises, on behalf of its corporate subsidiary, J.P. Harrison, exercised the option, and JBP Salisbury conveyed the Home to Harrison.
The January 1, 1989 bill of sale provided that JBP Salisbury conveyed “all that certain personal property, tangible and intangible, which now or has been located on or about the premises of the John B. Parsons Home” including, but not limited to, all furniture, furnishings, fittings, fixtures, shrubbery, walks, fences, equipment, machinery, appliances, accessories, supplies, apparatus, inventory, equipment, accounts, records pertaining to the said John B. Parsons Home…” The articles of sale to the conveyance similarly provided.
In 1992, as part of a corporate restructuring, JBP Salisbury changed its corporate name from JBP Salisbury to the John B. Parsons Foundation (“the Foundation”). Despite its sale of the Home, the Foundation continued to exist as a charitable non-profit organization. Among the continued philanthropic endeavors of the Foundation was the care for the elderly. In 1995, J.P. Harrison was reorganized and converted to Salisbury Retirement Center, Inc. (“SRC”), which took over responsibility of the day-to-day operations of the Home. In 2003, the Harrison entities again restructured and reorganized. Included in the restructuring was the management of the Home, which was transferred from SRC to appellant, John B. Parsons Home, LLC (“JBPH”).
In 2003, the first trigger event occurred and, accordingly, the Baker Trust trustee began making distribution payments. Between July 2003 and 2012, Manufacturers and Traders Trust Company (“M&T”) and its corporate predecessor made payments to JBPH in the amount of approximately $117,191. No request or demand was made by JBPH for such payment and JBPH allegedly learned of the Baker Trust’s existence only because of the distribution payments. Upon learning of M&T’s payments to JBPH, the Foundation demanded that M&T cease making payments to JBPH, claiming that the Foundation, not JBPH, was the rightful beneficiary to the Baker Trust, and that M&T was erroneously making distribution payments to JBPH. M&T complied with the Foundation’s request pending the outcome of the present litigation.
On April 17, 2012, the Foundation filed a complaint in the circuit court seeking declaratory relief that it was the rightful beneficiary to the Baker Trust and demanding an accounting of all monies, gifts, or bequests received by JBPH on behalf of JBP Salisbury since 1984. In addition, the Foundation alleged trover and conversion claims against JBPH, as well as breach of trust against M&T due to M&T’s allegedly improper distribution payments to JBPH.
During the course of litigation, Harrison moved for leave to intervene as a party defendant. The circuit court denied Harrison’s motion for permissive intervention.
Subsequently, the parties filed competing cross-motions for summary judgment. The circuit court eventually dismissed M&T’s claim of constructive fraud against JBPH. The circuit court issued a memorandum opinion granting the Foundation summary judgment on the Foundation’s declaratory judgment action. The circuit court also dismissed the Foundation’s claims alleging trover and conversion, as well as the Foundation’s request for an accounting.
JBPH and M&T appealed to the Court of Special Appeals, which affirmed the judgment of the circuit court.
LAW: The central issue on appeal was whether the circuit court erred in determining the rightful beneficiary of the Baker Trust. JBPH asserted that it was the “successor” to JBP Salisbury because of its acquisition, ownership, and operation of the Home. JBPH further contended that it was the beneficiary because it allegedly acquired “all or substantially all” of JBP Salisbury’s assets, including JBP Salisbury’s unknown beneficiary rights to the Baker Trust. Specifically, JBPH alleged that it was the institutional “successor” to JBP Salisbury and, therefore, was the rightful beneficiary of the Baker Trust.
To determine this issue, it was necessary to evaluate the plain language of the Deed to the Baker Trust. The Deed provided, in relevant part, that the trust should be paid to the three “named institutions, or [their] respective successor[s],” including the “John B. Parsons-Salisbury Home for the Aged.” Critically, the Foundation continued to operate under the same corporate entity as JBP Salisbury (albeit under a different corporate name), which was the same entity named in the Deed. Although the Foundation divested itself of its ownership rights in the Home (and the personal property associated with the Home), the Foundation did not relinquish or transfer its rights to the unknown Baker Trust. Indeed, a careful evaluation of the documents associated with the JBP Salisbury—J.P. Harrison conveyance reflected that only the real and personal property associated with the Home was conveyed.
First, the articles of sale provided that JBP Salisbury conveyed “all or substantially all of its property and assets…as hereinafter set forth.” Thus, the qualifying words “as hereinafter set forth,” limited he conveyance to the property listed in the articles of sale. Paragraph nine of the articles of sale specified that the conveyance was for all of JBP Salisbury’s interest in land in Wicomico County. The words of “as hereinafter set forth” clearly limited the conveyance to the real and personal property associated with the Home.
Moreover, the articles of sale clearly limited the transfer to the real property associated with the Home. Md. Code (1975, 2007 Repl. Vol.), §3-115 of the Corporations and Associations Article (“C.A.”) provides that the assets of the transferor, including any legacies which it would have been capable of taking, transfer to, vest in, and devolve on the successor to the extent provided in the articles without further act or deed. C.A. §3-115(b)(1). Thus, pursuant to C.A. §3-115(b)(1), it was necessary to review only the articles of sale to determine whether any “legacies,” such as the Baker Trust, were transferred to JBPH. As discussed, the articles of sale provided only for the transfer of the real property associated with the Home. As such, pursuant to the articles of sale, JBP Salisbury did not convey its rights to the Baker Trust.
JBPH further relied on C.A. §1-101 for the proposition that it was the corporate “successor” to JBP Salisbury and, therefore, entitled to the Baker Trust distributions. C.A. §1-101(b)(4) defines a corporate successor as a “vendee, lessee, or other transferee in a transfer of assets.” As mentioned, however, JBP Salisbury did not transfer “all or substantially all” of its assets, but rather “all or substantially all” of its assets specifically relating to the real and personal property associated with the Home. Indeed, the Foundation’s continued corporate existence belied JBPH’s argument that it was the “successor” to JBP Salisbury. If JBP Salisbury had truly transferred all of its assets, it would not continue to exist as a charitable organization.
Both parties relied on The Wesley Home, Inc. v. Mercantile-Safe Deposit and Trust Co., 265 Md. 185 (1972). In fact, Wesley Home supported the Foundation’s contentions and demonstrated that a surviving corporate entity is the rightful beneficiary when it is named in the trust instrument and carries on the same philanthropic objectives. The plain language of the Baker Trust demonstrated that the purpose of the Trust was to benefit the elderly, a noble purpose still being carried out by the Foundation.
Accordingly, the circuit court’s award of summary judgment to the Foundation was affirmed.
COMMENTARY: M&T’s central claim in its cross-appeal was that the circuit court erred in denying Harrison’s motion to intervene or, alternatively, that Harrison’s intervention was now required as a necessary party. Specifically, M&T claimed that unless and until Harrison was made a party to this case, the circuit court did not have jurisdiction to proceed further in its consideration of the issues. However, M&T never argued that Harrison should be permitted to intervene in the proceedings before the circuit court. In fact, no party objected to the circuit court’s denial of Harrison’s motion to intervene. M&T could not now cry foul over the failure to include Harrison as an indispensable party when M&T failed to raise the issue below.
Furthermore, Harrison’s interests were already fully and adequately represented by JBPH. Harrison, therefore, was not an indispensable party and was not entitled to intervene as a matter of right. Thus, in sum, this issue was not properly preserved for appellate review and, even if it were so preserved, Harrison’s rights were fully and adequately represented by JBPH. Therefore, the circuit court did not err in failing to require Harrison’s intervention.
PRACTICE TIPS: Conversion is an intentional tort, consisting of a physical act combined with a certain state of mind. The general rule is that monies are intangible and, therefore, not subject to a claim for conversion. An exception exists, however, when a plaintiff can allege that the defendant converted specific segregated or identifiable funds. Nonetheless, when funds are co-mingled, the monies lose their “separateness” and thus are not subject to a claim of conversion.
Estates & Trusts
BOTTOM LINE: The beneficiary of a testamentary trust may not file exceptions to an administration account after the statutory deadline for doing so, even when the beneficiary did not receive notice of the filing of the account.
CASE: Vito v. Klausmeyer, No. 0044, Sept. Term, 2013 (filed Mar. 4, 2014) (Judges Woodward, Berger & EYLER, J. (Retired, Specially Assigned)). RecordFax No. 14-0304-01, 12 pages.
FACTS: On October 26, 2008, E. Edward Klausmeyer (“decedent”), died testate. He was survived by two children, Margaret Vito and Edward Klausmeyer, Jr. (“Klausmeyer”). On December 3, 2008, pursuant to the terms of the will, Klausmeyer was appointed personal representative. The will directed that the residuary estate be divided into two equal shares. The decedent bequeathed one share to Klausmeyer and the other share, in trust, to Vito. The will appointed Klausmeyer trustee of the trust.
In 2009, Vito filed a petition to caveat the decedent’s will. The orphans’ court transmitted issues to the circuit court. After a period of discovery, Vito dismissed the petition. On April 25, 2011, Klausmeyer filed a first administration account. On April 28, 2011, the orphans’ court approved the account, subject to the filing of exceptions. No exceptions were filed. On December 8, 2011, Klausmeyer filed a second and final administration account. By order of the same date, the orphans’ court approved the account, subject to the filing of exceptions. No exceptions were filed.
On August 22, 2012, Vito filed in the orphans’ court a petition to vacate: (1) the orders approving both administration accounts; and (2) an order approving personal representative’s commissions. The petition also contained exceptions to the administration accounts. The petition to vacate the orders approving the administration accounts stated that Vito did not receive notice of the filing of either account. Vito argued that, because she was not given notice, she should have the right to file exceptions, even though the deadlines for doing so had passed. Klausmeyer filed an opposition and motion to dismiss Vito’s petition.
Following a hearing, the orphans’ court filed an opinion and order denying Vito’s petition. While acknowledging that Vito had standing to file exceptions, the court ruled that she was not entitled to notice of the filing of the administration accounts; thus, she was not excused from the statutory requirement that exceptions be filed within 20 days after the filing of each account.
Vito appealed to the Court of Special Appeals, which affirmed.
LAW: Vito presented the question of whether she was entitled to file exceptions to an administration account after the time period for filing exceptions had expired on the ground that she did not receive notice of the filing of the administration account. A personal representative is required to file administration accounts with a certification that he or she mailed a notice of the filing to all “interested persons.” Md. Code (2011 Repl. Vol.), Estates and Trusts Article (“ET”) 7-501(a). A trust beneficiary is not an “interested person” as defined in section 1-101(i) and, therefore, is not entitled to notice under §7-501(a).
ET §7-501(b) and Maryland Rule 6-417(f) require that exceptions to an administration account must be filed within 20 days after approval of the account by the court. Rule 6-417(g) makes clear that, in the absence of fraud, mistake, or irregularity, if timely exceptions are not filed, the order of the court approving the account becomes final. Brewer v. Brewer, 386 Md. 183, 198 (2005). Vito acknowledged that she was not an “interested person” as defined in the Estates and Trusts Article. Relying on Spry v. Gooner, 190 Md. App. 1 (2010), she observed that a beneficiary of a testamentary trust has standing to file exceptions to an administration account. Vito contended, nevertheless, that the beneficiary does not lose the right to file exceptions unless the beneficiary receives notice of the filing of the account.
Relying on ET §§7-501 and 7-502, Vito argued that the orders approving the accounts were not final. She reasoned that such orders become final only if all persons with standing receive notice. As noted, under Spry, Vito had standing to file exceptions. However, because she was not a statutory “interested person,” the issue now before the Court, i.e., the effect of lack of notice to a non-“interested” person,” was not addressed in Spry.
Vito argued that the orders approving the accounts were not final because she did not receive notice. ET §7-501 provides that exceptions to an account must be filed with the register within 20 days of the approval of the account by the court, and that exceptions may not be filed concerning an item which has become final and binding under §7-502 of this subtitle. ET §7-502 requires proper notice to “interested” persons and provides that unless there was fraud, material mistake, or substantial irregularity in the proceeding, or request for a hearing is filed within 20 days of the sending of the notice, any action taken by the court on the petition is final and binding on all persons to whom the notice was given.
Vito urged a holding that an order approving an account is final only if all who have standing to object are given notice. However, the concepts of notice and standing are different. The former is based on statutory interpretation, and the latter is based on common law. All persons with standing to challenge an action are not necessarily entitled to notice of the contemplated action. When read in context, §7-502(b) refers to persons to whom notice was required to be given. By negative implication, persons entitled to notice as “interested persons” are not bound if notice is not given. This has no bearing on persons to whom notice was not required.
Md. Rule 6-417(g) is consistent with that conclusion. It states that, in the absence of the filing of timely exceptions, the order of the court approving the account becomes final. The legislature clearly defined persons to whom notice is required, i.e., “interested persons.” ET §1-101(i). While the term does not include a beneficiary of a trust, it does include a trustee.
Accordingly, the judgment of the circuit court was affirmed. Any complaint that Vito has relating to funding and administration of the trust should be directed to the trustee.
COMMENTARY: In the alternative, Vito argued that, if the orders were final, the lack of notice was a procedural irregularity, and deprived her of procedural due process. Certainly, a process or procedure that satisfies due process is required in all proceedings before the Orphans’ Court. A failure to provide a process that satisfies due process requirements is an irregularity in the proceedings. See Radcliff v. Vance, 360 Md. 277, 292 (2000).
In Radcliff, an “interested person” within the statutory definition did not receive notice of a petition by the personal representative for an order approving the payment of estate funds to a creditor. After learning of the order after it had been entered, the interested person challenged the payment, and the court ordered repayment of the funds to the estate. The Court of Appeals held that the court had the power to correct its mistakes. Radcliff v. Vance, 360 Md. at 292-93.
Thus, Radcliff stands for the proposition that if a person does not receive notice required by law, there is an irregularity sufficient to vacate the order in question. As discussed, however, Vito was not entitled to notice, and, as such, there was no irregularity to correct. Therefore, Vito’s alternative argument was without merit.
BOTTOM LINE: Trial court did not err in declining to impute earned income to wife in its alimony award determination where wife presented evidence establishing over 20 years of unemployment, continuing medical difficulties, and a luxurious standard of living for many years preceding the divorce, and, given the unconscionable disparity in the parties’ standards of living, the alimony award was not an abuse of discretion.
CASE: Reynolds v. Reynolds, No. 1691, Sept. Term, 2012 (filed Feb. 26, 2014) (Judges MATRICCIANI, Hotten & Eyler, J. (Retired, Specially Assigned)). RecordFax No. 14-0226-00, 31 pages.
FACTS: This case involved divorce proceedings of John and Valerie Reynolds. John and Valerie graduated from Yale Law School in the 1980s and took jobs with prestigious law firms in the Washington, D.C., area. After they married in 1989, Valerie became pregnant with twin boys and stopped working due to medical complications.
The twins’ health problems continued after their premature birth, and the parties decided that Valerie would not return to practice and would instead raise their two children, who were joined by their younger brother in 1994. When Valerie stopped working, she had been making approximately $120,000 per year. John continued to work in private practice and by 2010 was earning over $800,000 per year. This income afforded the parties an affluent lifestyle, which included a residence worth approximately $2 million, and two international vacations each year.
However, John’s heavy workload put a strain on the parties’ relationship. By 2009, the parties were sleeping in separate parts of the house. After attempts at counseling failed, they separated on July 29, 2010. John rented a house at the cost of $5,000 per month. Meanwhile, Valerie purchased a $1.52 million home, known as “Warren Place,” jointly with her father, who also gave her over $100,000 between June 2010 and April 2011. In addition, Valerie received interest and dividend income.
Valerie sued for absolute divorce on September 16, 2010, and John counter-sued for the same on November 12, 2010. The parties reached a custody agreement in April of 2011, giving them joint legal and shared residential custody of their youngest son, who was the only minor child at time. Valerie voluntarily dismissed her original suit on June 8, 2011, but she then brought a new complaint on November 3, 2011, demanding alimony, child support, monetary award, and other relief.
At trial, Valerie testified that she had rheumatic heart disease and would likely need valve replacement surgery, and that she required psychiatric therapy. Valerie testified that she continued to employ a housekeeper, and that she spent an average of $908 per month on vacations and contributed $500 per month to a retirement savings account. Valerie admitted that she had not looked for work during the parties’ separation because of the divorce proceedings and her continued responsibility for the parties’ youngest son.
John and Valerie stipulated that the Warren Place property was worth $1.52 million. The court found that the non-marital portion of Valerie’s down-payment was 55.7%, with the remaining 44.3% owing to marital funds. The court used that figure to determine the marital portion of Valerie’s one-half interest in the property’s net equity, arriving at an ultimate marital property value of $106,001. With respect to Valerie’s claim for alimony, the circuit court declined to impute any income to Valerie, who had not worked in over two decades. The trial court awarded Valerie indefinite alimony of $13,400 per month. Finally, the court entered a monetary award in favor of Valerie for $14,970.
Both parties filed motions to alter or amend, each of which the court granted in part and denied in part. First, the trial court increased the alimony award to $14,194 to account for Valerie’s state tax liability, as shown in her 2011 federal tax return. Second, the court found that the entire down-payment for Warren Place was directly traceable to non-marital assets titled solely to Valerie, and to distributions from the children’s trust accounts, which were also non-marital property. The court thus concluded that Warren Place was wholly non-marital and amended its monetary award, accordingly. Third, the court refused to consider Valerie’s evidence of additional funds that John had overpaid in taxes, as well as her evidence of the pre-marital rate of return on her IRA.
John and Valerie respectively appealed and cross-appealed to the Court of Special Appeals, which affirmed the judgment of the circuit court.
LAW: John first argued that the circuit court erred in its determination of Valerie’s income. Specifically, John contended that the trial court erred when it declined to impute any income to Valerie. Generally, John’s arguments failed to distinguish between the law governing alimony and child support awards, which are authorized, respectively, by Titles 11 and 12 of the Family Law Article. While there are certainly similarities between the two awards, they have distinct purposes and, as such, the same facts may lead to different results for each.
Technically, “imputed income” is a child support concept predicated on a finding of voluntary impoverishment, which asks the court to consider several facts about a party’s ability to work, including: (1) his or her current physical condition; (2) his or her respective level of education; (3) the timing of any change in employment or other financial circumstances relative to the divorce proceedings; (4) the relationship between the parties prior to the initiation of divorce proceedings; and (5) his or her efforts to find and retain employment. Lorincz v. Lorincz, 183 Md. App. 312, 331 (2008). Although alimony is a separate issue from child support, it similarly requires the court to consider “the ability of the party seeking alimony to be wholly or partly self-supporting” and “the time necessary for the party seeking alimony to gain sufficient education or training to enable that party to find suitable employment,” FL §11-106(b)(1), (b)(2). Most, if not all, of the voluntary impoverishment factors will be relevant to alimony under FL §11-106(b)(1) and (b)(2); therefore, a finding of voluntary impoverishment would ordinarily entail a finding, for purposes of alimony, that the impoverished party could support him or herself, but chooses not to.
While alimony and child support awards are ultimately within the trial court’s discretion, John attacked their factual premises. Specifically, he argued that the trial court should have found that Valerie can earn between $30,000 and $40,000 annually. While John stressed Valerie’s education and past earnings, that evidence was more than two decades old. There was no evidence of what her present earnings would be, as a 56-year-old who has been unemployed for the latter half of her adult life and evidently has significant health issues.
In the present case, Valerie had the burden of proof concerning her earning capacity. See Turner v. Turner, 147 Md. App. 350, 389 (2002). The trial court was satisfied that Valerie had met this burden, because the evidence demonstrated that she lacked the resources to pay her ongoing expenses, without additional income. As to her present ability to earn a reasonable living, the evidence showed that she had not practiced law for more than two decades and now suffered from health problems and advanced age, factors which would limit her employment prospects. Because John did not then come forward with evidence to prove that she was still employable, as an attorney or in any other capacity, the trial court was left with merely his argument that Valerie could earn at least $30,000 to $40,000 per year, presumably because she once earned three or four times as much.
The trial court was not required to draw John’s proposed inference here because it would have been of little value to its indefinite alimony considerations. Even with $40,000 annually in earned income, it was apparent that the unconscionable disparity in the parties’ standards of living in the future could not be remedied. See Tracey v. Tracey, 328 Md. 380, 392-93 (1992). In the trial court’s conservative estimation, accounting for all of John’s reasonable expenses still left him with over $30,000 per month in disposable income, whereas Valerie’s income was $5,813.16 and left her with a monthly deficit of nearly $10,000. The final determination of alimony was a matter of the trial court’s discretion, including whether Valerie should be “required” to work. In light of what Valerie did establish on the record (over 20 years of unemployment, continuing medical difficulties, and a luxurious standard of living for many years preceding this divorce), the trial court did not abuse its discretion by declining to impute earned income to Valerie in its alimony award determination.
Because John’s other arguments were also without merit, the judgment of the circuit court was affirmed.
COMMENTARY: Valerie, in her cross-appeal, argued that the trial court erred in accounting for their marital property when it deducted John’s post-trial expenses from his assets. Valerie conceded that, based on the trial court’s ruling that closed evidence as of March 30, 2012, any evidence discovered after the last day of regular trial would have to have been introduced in new proceedings. It was nonetheless disclosed on May 7 that John had received approximately $70,000 in a final distribution from his previous law firm.
However, the court found that the funds had been expended reasonably on attorney’s fees and tuition expenses and, as such, these funds no longer existed. The court therefore did not adjust its marital property findings or award to account for John’s distribution. Valerie argued that, having accounted for John’s “post-trial” fees and expenses, the trial court acted inconsistently (and thus in error) when it did not also account for her post-trial fees and expenses. Any error, however, was harmless in light of the trial court’s ruling that closed evidence as of March 30, 2012.
By the terms of that ruling, the court should have admitted neither evidence of John’s $70,000 distribution, nor evidence of either party’s post-trial expenses. Consequently, the trial court should not have adjusted its monetary award to account for either party’s post-trial expenses, and indeed it did not. The end result was therefore the same as if the court had adhered strictly to its ruling that no post-trial evidence would be admitted, and Valerie’s argument that the court’s inconsistency was reversible error failed.
PRACTICE TIPS: In the context of divorce and alimony proceedings, an important factor in determining the parties’ financial “needs” is the station in life of the parties at the time of the divorce or enforced separation. Thus, where a spouse’s income allows, it is not an abuse of discretion for a court to require alimony payments consistent with maintaining the parties’ former standard of living.
BOTTOM LINE: Circuit court’s contempt order against father in arrearage on court-ordered child support, which required that father periodically file job search logs but sentenced father to 179 days’ immediate incarceration, was legally deficient because it did not afford father the opportunity at to purge his contempt prior to incarcerating him.
CASE: Stevens v. Tokuda, No. 2724, Sept. Term, 2012 (filed Feb. 25, 2014) (Judges Eyler, D., WOODWARD & Zarnoch). RecordFax No. 14-0225-03, 25 pages.
FACTS: Derek Stevens and Yoko Tokuda were the parents of Raiden, who was born January 14, 1999. On August 27, 2009, the circuit court entered a judgment of absolute divorce between the parties. As part of the divorce judgment, the court ordered Stevens to pay $1,000 per month in child support to Tokuda.
On October 18, 2010, the circuit court found Stevens, in constructive civil contempt for failure to pay child support to Tokuda. The circuit court did not impose a sanction, but ordered Stevens, as a purge provision, to pay $300 per month toward his child support arrearage, as well as provide the court and Tokuda’s attorney with his job search information on a regular basis. When Stevens failed to comply with the purge provision, the court ultimately imposed 179 days of incarceration as a sanction in an order dated February 2, 2012.
During the same time period, Stevens filed a motion to modify his child support obligation. A hearing was held before a master, who recommended that Stevens’s child support payments be reduced from $1,000 per month to $708 per month, notwithstanding a finding that Stevens was currently unemployed. Stevens filed exceptions, and the court sustained those exceptions in part, but did not decide the new amount for Stevens’s child support payments.
Approximately six months later, the court again considered Stevens’s motion to modify child support. At that time, the court decided to remand the motion to the master for the purpose of taking additional evidence. The remand order was contained in the same February 2, 2012 order that imposed the sanction of incarceration for Stevens’s contempt.
Stevens appealed to the Court of Special Appeals, which vacated the balance of the 179-day sentence of incarceration ordered by the circuit court on February 2, 2012, and affirmed the order in all other respects.
LAW: Stevens asserted that the circuit court erred by ordering the punitive sanction of 179 days incarceration in the February 2, 2012 order, because the order did not give Stevens “the present ability to purge the contempt.” Specifically, Stevens argued that incarceration for constructive civil contempt is available only to compel immediate performance of an act, such as payment of a sum of money, which the Court finds the obligor is presently able to perform, but contumaciously refuses to. Stevens was correct in this assertion.
In support enforcement actions, contempt proceedings are guided by Maryland Rule 15-207. Jones v. State, 351 Md. 264, 272 (1998). Before a court may make a finding of contempt, the party seeking relief must prove by clear and convincing evidence that the alleged contemnor has not paid the amount owed, accounting from the effective date of the support order through the date of the contempt hearing. Md. Rule 15-207(e)(2). If the court concludes that the party has met its burden of proof, the burden shifts to the alleged contemnor to prove by a preponderance of the evidence that, from the date of the support order through the date of the contempt hearing, the alleged contemnor never had the ability to pay more than the amount actually paid and made reasonable efforts to become or remain employed or otherwise lawfully obtain the funds necessary to make payment, or enforcement by contempt is barred by limitations as to each unpaid spousal or child support payment for which the alleged contemnor does not make the required proof.
If the alleged contemnor is unable to meet his burden, the court is instructed to make a finding of constructive civil contempt and must issue a written order. See Md. Rule 15-207(e)(4).
In issuing a constructive civil contempt order, the trial court must specify: (A) the amount of the arrearage for which enforcement by contempt is not barred by limitations; (B) any sanction imposed for the contempt; and (C) how the contempt may be purged. Id. Rule 15-207(e)(4) further requires that, if the contemnor does not have the present ability to purge the contempt, the order may include directions that the contemnor make specified payments on the arrearage at future times and perform specified acts to enable the contemnor to comply with the direction to make payments. Id.
Of particular importance to the present case, the court may specify imprisonment as the sanction if the contemnor has the present ability to purge the contempt. If the contemnor does not have the present ability to purge the contempt, a direction to perform specified acts that a court may include in an order is a provision that an unemployed, able-bodied contemnor look for work and periodically provide evidence of the efforts made. If the contemnor fails, without just cause, to comply with any provision of the order, a criminal contempt proceeding may be brought based on a violation of that provision. Md. Rule 15-207 committee note. In this regard, unless and until the contemnor has been given an opportunity to show that he has neither the estate nor the ability to pay his obligation and fails to make such a showing, he should not be incarcerated. Jones, 351 Md. at 276.
To that end, a court may not impose incarceration as a sanction for civil contempt when the defendant is unable to meet the purge condition in time to avoid that incarceration. See Arrington v. Dep’t of Human Res., 402 Md. 79, 107 (2007). The Arrington Court discussed in detail situations where the court requires future acts as a purge condition, rather than the payment of a sum of money, stating that if unemployment is the problem, the court, upon determining the cause, may, under Rule 15-207(e)(4), enter reasonable and specific directives to deal with it. For instance, the court may order the defendant to pursue employment opportunities in a specific manner, or it may order the defendant to pursue necessary education or a diploma, degree, certificate, or license that may be necessary or helpful in making the defendant eligible for meaningful employment. Id.
In the present case, the circuit court’s February 2, 2012 contempt order was legally deficient. Although the court could properly require that Stevens periodically file job search logs, it erred by not affording Stevens the opportunity at the February 2 hearing to purge his contempt prior to incarcerating him. In civil contempt proceedings like in the present case, the sanction is coercive and must allow for purging. Dodson v. Dodson, 380 Md. 438, 448 (2004). There was nothing that Stevens could do under the court’s order of February 2, 2012 to prevent himself from being incarcerated on that day. Stevens was thus caught in an impermissibly punitive cycle: in order to purge the contempt, he was required to be in a work release program; however, in order to be in the work release program, he was required to be incarcerated. Requiring incarceration as a precondition to purging a contempt order was erroneous under Rule 15-207(e).
Accordingly, the balance of Stevens’s 179-day sentence was vacated; the remainder of the circuit court’s order was affirmed.
COMMENTARY: Stevens also contended that the circuit court erred in holding Stevens in contempt in its October 18, 2010 order. In support of this assertion, Stevens argued that the evidence before the circuit court at the October 14, 2010 hearing was such that the court was clearly erroneous in finding Stevens in contempt after concluding that Stevens did not sustain his burden of showing, by a preponderance of the evidence, that he was unable to pay more than he did pay. However, the Court of Appeals did not reach the merits of these contentions because no timely appeal was taken from the circuit court’s October 18, 2010 contempt order.
Stevens did not file an appeal until February 29, 2012. Ordinarily, an appeal will lie only from a “final judgment.” See Md. Code (1973, 2006 Repl. Vol.), §12-301 of the Courts and Judicial Proceedings Article (“CJ II”). Nevertheless, §12-301 does not apply to appeals in contempt cases, which are governed by §§12-304 and 12-402 of the Article. CJ II §12-302(b). A contempt proceeding, even though it may grow out of or be associated with another proceeding, is ordinarily regarded as a collateral or separate action from the underlying case and as separately appealable, with appellate review normally limited to the contempt order itself. Blake v. Blake, 341 Md. 326, 332 (1996). The time period for filing an appeal from a finding of contempt is 30 days after the entry of the order making that finding. See In re Ariel G., 153 Md. App. 698, 704 (2003).
Even if no party challenges the appealability of an order, appealability is a jurisdictional issue that the court must resolve sua sponte. See Johnson v. Johnson, 423 Md. 602, 605-06 (2011). In the present case, the circuit court issued a contempt order on October 18, 2010 and imposed the sanction of incarceration in an order dated February 2, 2012. The October 18, 2010 order was not formally entered on the docket until October 22, 2010. Stevens could have filed a timely appeal any time within 30 days after that date, i.e., on or before November 21, 2010. See Md. Rule 8-202(a). The instant appeal was not filed, however, until February 29, 2012, well over a year later. Thus, although the Court had jurisdiction over the February 2, 2012 order, it did not have jurisdiction over the October 18, 2010 order.
PRACTICE TIPS: Maryland law has long recognized a clear distinction between civil contempt and criminal contempt. Whereas a criminal probationer found to be in contempt may be immediately incarcerated, imprisonment of the civil contemnor is conditional. It is based entirely upon the contemnor’s continued defiance, and, thus, the civil contemnor is said to “hold the keys to the jailhouse door,” and may terminate the incarceration any time he or she satisfies the purge provision.