Maryland Court of Appeals
Criminal Procedure; Consent to breath test: Where a police officer failed to read in Spanish a DR-15 Advice of Rights form to the defendant, a native Spanish speaker, before administering a breath test, the trial court erred in denying without a hearing the defendant’s motion to suppress the test results because there was an issue of fact to be determined by the suppression court as to whether the officer’s actions reasonably conveyed the warnings and rights in the implied consent statute of the Transportation Article. Portillo v. State, No. 65, Sept. Term, 2019.
Torts; Intentional interference with inheritance: Although the tort of intentional interference with an inheritance or gift is a recognizable cause of action in Maryland, under the standards set forth in §19 of the Restatement (Third) of Torts: Liability for Economic Harm, which state that when one intentionally interferes with an inheritance, one is interfering with the relationship between the testator and a potential legatee, the plaintiff failed to state a claim for intentional inheritance interference where the predicate harm, groundless litigation against the estate and the plaintiff personally, occurred after the testator’s death. Barclay v. Castruccio, No. 30, Sept. Term, 2019.
Maryland Court of Special Appeals
Commercial Law; Debt collection: A creditor did not violate the Maryland Consumer Debt Collection Act, §14-202(8) of the Commercial Law Article, by using wage garnishment to collect the filing fee for a writ of garnishment. Chavis v. Blibaum Associates, P.A.; Moore v. Peak Management LLC, Nos. 334, 528, Sept. Term, 2019.
Corporate Law; Close corporations: Section 4-603(a) of the Corporations and Associations Article, which states that any one or more stockholders who desire to continue the business of a close corporation may avoid the dissolution of the corporation or the appointment of a receiver by electing to purchase the stock owned by the petitioner at a price equal to its fair value, may not be used to avoid the appointment of an equitable receiver outside of the dissolution context. Bartenfelder v. Bartenfelder, No. 934, Sept. Term, 2018, and No. 2052, September Term 2019.
Maryland Court of Appeals
Consent to breath test
BOTTOM LINE: Where a police officer failed to read in Spanish a DR-15 Advice of Rights form to the defendant, a native Spanish speaker, before administering a breath test, the trial court erred in denying without a hearing the defendant’s motion to suppress the test results because there was an issue of fact to be determined by the suppression court as to whether the officer’s actions reasonably conveyed the warnings and rights in the implied consent statute of the Transportation Article.
CASE: Portillo v. State, No. 65, Sept. Term, 2019 (filed June 30, 2020) (Judges Barbera, McDonald, Watts, Hotten, GETTY, Booth & Biran).
FACTS: Maryland, like all states, has adopted an “implied consent” law to encourage suspected drunk drivers to submit to chemical testing. Maryland’s current implied consent statute states that, by driving on Maryland’s roads, a driver has consented to taking a chemical test when properly requested. After a police officer gives sufficient “Advice of Rights,” a driver must choose between submitting to chemical testing or refusing and incurring administrative penalties. In most cases, an officer must merely read in English an “Advice of Rights” form, commonly referred to as a DR-15 form, to provide sufficient advice of rights. Certain circumstances, however, can render advice of rights insufficient, even when the officer reads a DR-15 form.
On the morning of October 14, 2018, Montgomery County Police Officer Devon Sharkey observed a red pickup truck stopped in the right-most lane of New Hampshire Avenue. The truck’s brake lights were on, and when Sharkey approached the passenger side on foot, he noticed that the keys were in the ignition, the engine was running, and the gearshift was in drive. The driver, later identified as Walter Portillo, had his foot on the brake pedal and was slumped over the wheel, apparently not awake. There was an open can of Corona beer in the cup holder in the center console.
After backup arrived, the police woke Portillo, removed him from his vehicle, and escorted him to the sidewalk, where he was able to stand without assistance. According to Sharkey, Portillo gave off “a consistent strong odor of alcoholic beverage” and had “bloodshot watery eyes.” Returning to the truck, officers found two additional cans of beer, one empty in the compartment along the driver’s door and one unopened on the front passenger floorboard.
Sharkey began by asking background questions to Portillo. It quickly became apparent that English was not Portillo’s primary language. Sharkey opted not to wait for a translator or to utilize Language Line, a telephonic translation service available to the police department. During questioning, Portillo struggled to answer basic questions posed in English.
After Portillo failed several field sobriety tests, the officers brought him to the station, where an officer read in English the DR-15 form to Portillo. Portillo, by signing the DR-15 form, agreed to take a breath test, which he failed. The State charged Portillo by citation with driving under the influence of alcohol, driving while impaired by alcohol, driving under the influence of alcohol per se, and negligent driving.
On April 16, 2019, Portillo was convicted in the district court. He noted an appeal to the circuit court. On the day before the scheduled trial in the circuit court, Portillo moved in limine to exclude the field sobriety tests and the breath test, claiming that he did not understand the field sobriety test instructions or the advice of rights because he had limited English proficiency. Without hearing any evidence, the trial court denied the motions, stating that the English comprehension issue was a matter of weight, not admissibility.
At trial, the State presented as evidence the field sobriety tests and breath test. Portillo, on cross-examination, challenged the weight of that evidence on grounds that he did not understand English. At the conclusion of the State’s case, the circuit court granted Portillo’s motion for judgment of acquittal for the negligent driving charge, but denied the motion as to the other three charges. At the close of all evidence, Portillo renewed his motion for judgment of acquittal as to the remaining charges, and the court again denied that motion. The jury returned a verdict of guilty on all three remaining charges: driving under the influence of alcohol, driving while impaired by alcohol, and driving under the influence of alcohol per se. He was sentenced to imprisonment for one year with all but eight days suspended in favor of two years’ probation.
Portillo appealed to the Court of Appeals, which reversed the judgment of the circuit court and remanded for a new trial at which the breath test would have to be suppressed.
LAW: Portillo argued that because Officer Sharkey read aloud the DR-15 form in English, he was deprived of his right to knowingly and voluntarily consent to the chemical breath test in violation of Courts and Judicial Proceedings Article (“CJ”) §10-309 of Courts and Judicial Proceedings Article (“CJ”) §10-309 and Transportation Article (“TR”) §16-205.1 of the Maryland Code. Advocating for adoption of a standard requiring police officers to advise drivers of their rights in a language that the driver speaks and understands, he asserted that exclusion of the breath test was required because he did not understand English. Therefore, he contended, the trial court erred in denying his motion to suppress the beat test results..
Maryland, like all states, has adopted an implied consent statute, which states that any person who drives a motor vehicle on a highway is deemed to have consented to take a test if the person should be detained on suspicion of driving or attempting to drive while under the influence of alcohol. TR §16-205.1(a)(2). Even so, for a breath test to be admissible, police officers must strictly adhere to the procedural requirements of the implied consent and advice of rights statute. See CJ §10-309(a)(l)(ii). Procedures include detaining the suspect, requesting that the suspect take a test, and, as relevant to Portillo’s case, advising the suspect of the administrative sanctions and criminal penalties that accompany either refusing the test or a test reflecting a blood alcohol concentration above .08 percent. TR §16-205.1(b)(2).
Although the primary purpose of the implied consent statute is to rid the State of the evils of drunk driving, there is a secondary purpose: to advise the driver of the potential sanctions for either submitting to or refusing a breath test. Thus, while reading the DR-15 aloud or giving a copy of it to the driver to read may fully advise the driver of the sanctions for a test refusal, a driver may not be fully advised if the police officer confuses the driver about the sanctions. Motor Vehicle Admin. v. Barrett, 467 Md. 61, 71-72 (2020). There are few “road blocks” more detrimental to comprehension of sanctions than a language barrier. Reading the form in a language the driver does not understand is as good as not reading the form at all.
While no Maryland court had previously addressed whether TR §16-205.1 advisements must be given in a language the driver understands, other jurisdictions have addressed similar contexts within similar statutory schema. Of the other jurisdictions that have addressed the issue in this case, three general lines of authority have emerged. Portillo urged the Court to adopt the first and most strict approach, which requires the police to accommodate non-English speakers by providing them with advisements of rights in languages they speak and understand. See State v. Marquez, 998 A.2d 421 (N.J. 2010). The second approach, a middle-of-the-road position, requires that police “reasonably convey” the advisements, which would entail giving them in a foreign language when practicable. The third and most flexible approach allows the police to provide advisements in English even to drivers who do not understand them.
The appropriate approach under the Maryland implied consent law was the reasonableness approach employed by Wisconsin, Iowa, North Dakota, and New Hampshire. As reasoned by the Supreme Court of New Hampshire, “inform” means “to communicate knowledge to” and “make acquainted,” but this definition does not create an affirmative obligation on the officer to deeply probe into an arrested person’s preferred language in order to convey the warnings in the language of preference. State v. Mfataneza, 210 A.3d 874, 878 (N.H. 2019). Under the reasonableness approach, Maryland police officers must use methods that reasonably convey the warnings and rights in the implied consent statute. State v. Paddington, 623 N.W.2d 528, 540 (Wis. 2001). Sufficient advice of rights is a low hurdle, and is satisfied as long as the steps taken by the officer are reasonable under the circumstances.
It is not unreasonable to expect Maryland police officers acknowledge and accept the challenge of serving drivers who speak other languages. As Officer Sharkey admitted at trial, Montgomery County provides translators and telephonic translation services. The Motor Vehicle Administration also provides resources to law enforcement agencies for the enforcement of Maryland motor vehicle laws, including a Spanish audio reading of the DR-15 form.
When Portillo moved to suppress evidence of the breath test, he put before the trial court a preliminary question of admissibility that the court was obligated to determine, and state its factual findings on the record. Md. Rule 4-252. The trial court erred in several respects. First, the court should have exercised its discretion to take evidence on Portillo’s motions prior to trial and outside the presence of the jury. Further, it was not necessary for Portillo to request a separate pretrial hearing. Portillo should have been afforded all of the procedures required at a Rule 4-252 hearing. Lastly, the trial court erred when it failed to make a finding, on the record, whether Officer Sharkey provided sufficient advice of rights by reading the DR-15 form to a driver with limited English proficiency.
Accordingly, the judgment of the circuit court was reversed and the case was remanded for a new trial at which the breath test evidence would have to be suppressed.
COMMENTARY: Portillo also argued that the circuit court erred in denying his motion to exclude the standardized field sobriety tests on the basis that the instructions were given in English, which he did not understand. However, unlike a breath test, field sobriety tests are not “protected” by advice of rights requirements. A driver’s confusion or inability to follow instructions is circumstantial evidence of that driver’s impairment. Cf. Ford v. State, 462 Md. 3, 46 (2018). The fact that there may be innocent explanations for the evidence does not mean that the evidence is unduly prejudicial under Rule 5-403. Id. at 50. Portillo took the opportunity at trial to offer the innocent explanation that he did not understand the field sobriety test instructions. The trial court did not abuse its discretion by allowing the State to introduce video footage and Officer Sharkey’s testimony regarding the field sobriety tests.
PRACTICE TIPS: As with advisement of rights regarding the implied consent statute, Miranda warnings must be sufficiently conveyed to non-native English speakers. Thus, Miranda warnings provided in English to a Mexican immigrant who did not speak or comprehend English were deemed constitutionally sufficient only where the officer painstakingly and successfully managed to convey the balance of the Miranda warnings in Spanish.
Intentional interference with inheritance
BOTTOM LINE: Although the tort of intentional interference with an inheritance or gift is a recognizable cause of action in Maryland, under the standards set forth in §19 of the Restatement (Third) of Torts: Liability for Economic Harm, which state that when one intentionally interferes with an inheritance, one is interfering with the relationship between the testator and a potential legatee, the plaintiff failed to state a claim for intentional inheritance interference where the predicate harm, groundless litigation against the estate and the plaintiff personally, occurred after the testator’s death.
CASE: Barclay v. Castruccio, No. 30, Sept. Term, 2019 (filed June 30, 2020) (Judges Barbera, McDonald, Hotten, Getty, Booth, ADKINS (Senior Judge, Specially Assigned) and Wilner (Senior Judge, Specially Assigned)).
FACTS: Darlene Barclay, the residuary beneficiary of the Estate of Dr. Peter A. Castruccio, alleged that Sadie Castruccio, Peter’s widow, maliciously depleted her inheritance by forcing the Estate’s expenditure of attorneys’ fees to defend against Sadie’s groundless lawsuits and efforts to initiate criminal charges. Litigation surrounding the Estate had previously made its way to the Court of Special Appeals eleven times. The case was now before the Court of Appeals for the second time.
The Castruccios were wealthy and had several business ventures together. Darlene began working for Peter in 1984, before transitioning to working with the Castruccios’ real estate business in the early 1990s, where she worked until Peter’s death in 2013. According to Darlene’s complaint, Peter, who had no children of his own, regarded Darlene as his daughter.
Sadie did not share the same affection for Darlene. For the final 16 months of Peter’s life, Sadie prevented Darlene from entering the family home and allegedly refused to let Peter visit her at the office. When Peter passed away, Sadie made clear that Darlene was not welcome at the funeral.
According to Darlene, Peter disliked his wife’s extended family and did not want his share of their joint estate to pass to Sadie’s extended family. He also did not want his share to pass to his extended family (except for a niece). For this reason, he unsuccessfully attempted to convince Sadie to participate in a joint estate plan. When Sadie refused to participate in the planning, Peter went forward with a plan to dispose of his portion of the estate. To this end, the Castruccios divided their joint assets, including eight pieces of real property, through seven deeds. After these conveyances, each spouse ended up with various solely-owned properties, roughly equal in value.
Peter signed his last will and testament on September 29, 2010, bequeathing $800,000 to Darlene, and $100,000 each to two other individuals. The remainder of the Estate was left to Sadie, provided that she: (a) survived Peter; (b) wrote and executed a will prior to Peter’s death; and (c) filed that will with the Register of Wills in Anne Arundel County. If she failed to fulfill those terms, then the Will named Darlene as the residuary beneficiary. Peter died on February 19, 2013, at which point Sadie had not fulfilled the Will’s final requirement. Darlene, therefore, inherited the residuary Estate, worth approximately $6.7 million.
Darlene claimed that Sadie began interfering soon after Peter’s death, filing seven
lawsuits in order to overturn Peter’s estate plan and trying to bring criminal charges against Darlene by filing a 21-page memorandum with the Office of the State’s Attorney for Anne Arundel County. In February 2017, Darlene filed suit in the circuit court, alleging intentional interference with an expectancy, malicious use of process, and abuse of process. Following a hearing, the circuit court granted Sadie’s motion to dismiss.
Darlene appealed to the Court of Special Appeals, challenging only the dismissal of the intentional interference with an expectancy claim. The Court of Special Appeals affirmed, holding that the complaint could not support a claim for interference with expected inheritance. Darlene then appealed to the Court of Appeals, which affirmed the judgment of the Court of Special Appeals.
LAW: Darlene argued that the circuit court erred when it ruled that there was no cause of action under Maryland law for intentional interference with an inheritance. She urged recognition of the tort of intentional interference with an inheritance or gift, with adoption of its elements as stated in Section 19 of the Restatement (Third) of Torts: Liability for Economic Harm. She asserted that the facts as stated in her complaint were sufficient to maintain the cause of action.
Maryland recognizes the tort action for wrongful interference with contractual or business relationships in two general forms: inducing the breach of an existing contract, and more broadly, maliciously or wrongfully interfering with economic relationships. Alexander & Alexander Inc. v. B. Dixon Evander & Assocs., Inc., 336 Md. 635 (1994). When one of these torts applies, the interference must be “independently wrongful or unlawful, quite apart from its effect on the plaintiff’s business relationships.” Id., 336 Md. at 657. “Wrongful or unlawful acts” are defined as common law torts and violence or intimidation, defamation, injurious falsehood or other fraud, violation of criminal law, and the institution or threat of groundless civil suits or criminal prosecutions in bad faith. Anderson v. Meadowcroft, 339 Md. 218, 224 (1995).
In the present case, “groundless civil suits” was the predicate wrongful act relied on by Darlene in her complaint. Alexander, 336 Md. at 650. Application of this tort to inheritances or gifts would fit in the broader category of malicious or wrongful interference with economic relationships. The relationship must be among three parties – the parties to a contract or other economic relationship, and the interferer. K & K Mgmt., Inc. v. Lee, 316 Md. 137, 154 (1989).
Darlene urged adoption of the intentional interference with an inheritance tort as stated in Section 19 of the Third Restatement of Torts. This Section states that a defendant is subject to liability for interference with an inheritance or gift if: (a) the plaintiff had a reasonable expectation of receiving an inheritance or gift; (b) the defendant committed an intentional and independent legal wrong; (c) the defendant’s purpose was to interfere with the plaintiff’s expectancy; (d) the defendant’s conduct caused the expectancy to fail; and (e) the plaintiff suffered injury as a result. A claim under this Section is not available to a plaintiff who had the right to seek a remedy for the same claim in a probate court.
North Carolina was one of the first states to adopt the tort of inheritance interference, in the seminal case of Bohannon v. Wachovia Bank & Tr. Co., 188 S.E. 390 (N.C. 1936). The tort of intentional interference with an inheritance or gift has been recognized by courts in about half the states, including most of those that have considered the issue. See Restatement (Third) of Torts §19 rep. n. a (Scope and rationale). As in North Carolina, it is settled law in Maryland that one may recover for wrongful interference with contractual or economic relations. See Macklin v. Robert Logan Assocs., 334 Md. 287, 301 (1994). Logically, interfering with an expected inheritance is just a species of interference with economic expectancy. As such, there was no principled reason to deny liability for inheritance interference when while recognizing liability for other instances of wrongful interference with economic expectancy.
In sum, the tort of intentional interference with a prospective gift or inheritance is recognized as a cause of action in Maryland under the standards set forth in Section 19 of the Third Restatement of Torts. However, Darlene’s complaint, as alleged, was insufficient to state a claim. Therefore, the judgment of the Court of Special Appeals was affirmed.
COMMENTARY: Darlene’s claim was based on the serial litigation between Sadie and her or the Estate. However, Darlene’s complaint contained no allegation whatsoever that Sadie interfered in any way with Dr. Castruccio’s designation of Darlene as the beneficiary of his estate. In other words, the alleged interference came after Peter’s death. Darlene cited no cases that were predicated, as this one was, strictly on wrongful acts that occurred after the relationship had ended – in this case by Peter’s death.
Based on a review of the Restatement and precedent from inside and outside of Maryland, at the time of the alleged interference, there must be something to interfere with, i.e., a current or prospective relationship or contract. That crucial relationship was absent in Darlene’s claim, because the alleged interference occurred after Peter died. And while serial frivolous litigation might have interfered with Darlene’s eventual receipt of her inheritance because it was reduced by attorneys’ fees, that was not the same as interfering with her relationship with Peter. As such, Darlene’s claim was improper because the predicate harm, groundless litigation against the Estate and Darlene personally, occurred after Peter’s death.
PRACTICE TIPS: Tortious interference with inheritance offers an opportunity for litigants to recover directly from a bad actor, rather than from an estate. Probate can strike from the will something that is in it as a result of fraud, but it cannot add to the will a provision that is not there nor can the probate court bring into being a will which the testator was prevented from making and executing by fraud. Probate remedies are hardly adequate where a will contest would never enable a litigant to probate a favorable will because such a will never existed.
Maryland Court of Special Appeals
BOTTOM LINE: A creditor did not violate the Maryland Consumer Debt Collection Act, §14-202(8) of the Commercial Law Article, by using wage garnishment to collect the filing fee for a writ of garnishment.
CASE: Chavis v. Blibaum Associates, P.A.; Moore v. Peak Management LLC, Nos. 334, 528, Sept. Term, 2019 (filed July 2, 2020) (Judges BERGER, Arthur & Gould).
FACTS: In the first of two consolidated cases, tenants Bryione Moore, Albert Grantham, Patricia Grantham, Sharone Crowell, and Larry Chavis defaulted on their residential leases with their landlord, Peak Management LLC. Peak hired Blibaum & Associates to collect on the judgments entered against the tenants. Blibaum obtained judgments against the tenants, which they failed to satisfy. As a result, Blibaum initiated collection activities against the tenants, which included filing and obtaining writs of garnishments. Blibaum sought to collect the fee that it incurred for filing the writs of garnishment, as well as post-judgment interest in the amount of ten percent. Chavis and Grantham satisfied the judgments obtained against them in full. Moore and Crowell did not satisfy the judgments entered against them.
The tenants subsequently filed suit against Peak in the circuit court for Baltimore City, seeking damages for the debt collection activities by Peak. The tenants sought declaratory and injunctive relief, damages for violations of the Maryland Consumer Debt Collection Act (“MCDCA”), Md. Code (1975, 2013 Repl. Vol.), §14-202(8), of the Commercial Law Article (“CL”), damages and attorney’s fees for violations of the Maryland Consumer Protection Act (“MCPA”), CL §13-301 et. seq., as well as restitution in the amount of the overpayments made to Peak. Their primary contention was that Blibaum’s utilization of a ten percent post-judgment interest rate was contrary to Maryland law, which authorizes a post-judgment interest rate of six percent for the collection of rent of residential premises.
Following a hearing, the circuit court dismissed both the MCDCA and the MCPA counts against Peak. Thereafter, the tenants filed a Fourth Amended Complaint, which added claims for permanent injunctive relief, a new MCPA claim based on CL §13-303(1) and a claim, pursuant to CL §15-605, that Peak was not entitled to collect a fee in order to file a writ of garnishment. Peak filed a motion to dismiss. The circuit court dismissed the new claims under the MCPA and CL §15-605 and denied the tenants’ request for the entry of a declaratory judgment, permanent injunction, and an order for restitution.
The tenants filed their first Motion for Class Certification on May 14, 2018. The only remaining count at that time was an action for unjust enrichment. Following a hearing, the circuit court denied the motion. In an effort to resolve the concerns expressed by the court when it denied the first motion, the tenants filed a Second Motion for Class Certification that included the deposition testimony of Gary Blibaum. The circuit court denied the second motion for class certification without a hearing.
Both Peak and the tenants filed cross-motions for summary judgment. The circuit court granted judgment in favor of Peak with respect to Moore’s and Crowell’s unjust enrichment claims. The court further entered judgment in favor of Albert Grantham, Patricia Grantham, and Larry Chavis with respect to their claims of restitution.
In a second, separate case, Larry Chavis, Patricia Grantham, Laronda Green, and Cassandra Reid defaulted on their residential leases with Peak. Blibaum was retained by Peak to file claims against the tenants for breach of contract, seeking damages caused by the breaches. Blibaum obtained judgments against the tenants, on behalf of Peak, which included a ten percent pre-judgment interest rate. When the tenants failed to satisfy the judgments entered against them, Blibaum began to garnish their wages. Blibaum utilized a ten percent post-judgment interest rate when calculating the amount the tenants owed on the judgments.
The tenants filed a complaint against Blibaum in the circuit court for Baltimore County, similarly alleging violations of the MCDCA and requesting attorney’s fees pursuant to the MCPA. Blibaum filed a motion to dismiss the complaint. While the motion was pending, the tenants filed their First Amended Class Action Complaint. Blibaum moved to dismiss the complaint in its entirety. Following a hearing, the circuit court granted the motion to dismiss.
The tenants in both cases appealed to the Court of Special Appeals, which consolidated the cases and affirmed the judgments of the circuit court.
LAW: The tenants argued that the circuit court erred when it dismissed their claims under the Maryland Consumer Debt Collection Act. They alleged that Blibaum and Peak violated the MCDCA, CL §14-202(8), for their collection of two “unauthorized charges.” First, the tenants contended that it was a violation of the MCDCA to collect ten percent post-judgment interest when the legal rate was six percent. Second, the tenants contend that Blibaum and Peak violated the MCDCA by collecting the filing fees associated with obtaining writs of garnishments by adding those fees to the amounts it sought to collect through the garnishments.
CL §14-202(8) provides that in collecting or attempting to collect an alleged debt a collector may not claim, attempt, or threaten to enforce a right with knowledge that the right does not exist. The MCDCA, and in particular §14–202, is meant to proscribe certain methods of debt collection and is not a mechanism for attacking the validity of the debt itself. Fontell v. Hassett, 870 F. Supp. 2d 395, 405 (D. Md. 2012). A collector who violates any provision of this subtitle is liable for any damages proximately caused by the violation, including damages for emotional distress or mental anguish suffered with or without accompanying physical injury. CL §14-203.
The tenants relied heavily on Allstate Lien & Recovery Corp. v. Stansbury, 219 Md. App. 575, 577 (2014), and Mills v. Galyn Manor Homeowner’s Ass’n, Inc., 239 Md. App. 663, 676 (2018), aff’d sub nom., Andrews & Lawrence Prof’l Servs., LLC v. Mills, 467 Md. 126 (2020), in support of their argument that the defendants collected or attempted to collect two “unauthorized charges.” Critical to both the Allstate and Mills holdings was that the creditors sought to collect fees that it did not have the right to collect. Neither holding suggested that a debtor may use the MCDCA to challenge the amount of a debt, which the creditor had a right to collect.
Here, there was no dispute that the Blibaum and Peak had a right to collect pre-judgment and post-judgment interest. The only dispute pertained to the amount of pre-judgment and post-judgment interest. As such, the circuit courts correctly dismissed the tenants’ MCDCA claims.
The tenants also contended that the defendants assessed an “unauthorized charge” by including the fee for the filing of a writ of garnishment in the amount they attempted to collect through the garnishments. They argued that the cost of the filing fee for the writ of garnishment was not included in the costs “actually assessed in the cause,” as required by CL §15-605. However, CL §15-605(c) refers only to the order that a judgment creditor must follow when it receives payments from a garnishee. It does not restrict the types of costs that a creditor is entitled to receive. Therefore, the defendants were entitled to recover the fee for filing the writ of garnishment.
Because there was no error in the additional rulings of the circuit courts, the judgments of the circuit courts were affirmed.
COMMENTARY: The tenants also argued that the circuit court erred when it dismissed their claims under the Maryland Consumer Protection Act. The tenants contended that Peak violated CL §13-301(1) because the reports sent to the tenants when it garnished their wages included ten percent post-judgment interest and misstated the amount of the court costs. The tenants averred that these reports deceived them into believing that they owed more than what they legally did, and that they suffered an economic loss when their wages were garnished for a greater amount than they legally owed.
Under CL §13-303 a person may not engage in any unfair, abusive, or deceptive trade practice in the collection of consumer debts. Unfair, abusive, or deceptive trade practices include any false, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers. CL §13-301. The tenants asserted that the incorrect statements of the amounts owed on their judgments were “deceptive” under CL §13-303 because the statements caused them to believe they owed more on their judgments than they did, causing more of their wages to be garnished than should otherwise have been garnished. The tenants relied on Powell v. Palisades Acquisition XVI, LLC, 782 F.3d 119 (4th Cir. 2014) in support of their argument that a misstatement of the amount due on a judgment is deceptive and can influence a consumer’s decision on what to pay or agree to as a settlement.
However, the tenants’ reliance on Powell was misplaced. In Powell, the consumer was sent a report that essentially charged attorney’s fees twice, which was reflected in the total judgment amount, and listed separately. Critically, the reports sent to the tenants here did not inaccurately reflect payments that were made toward the satisfaction of the judgments. Instead, the tenants were charged the “incorrect” amount of post-judgment interest based on their interpretation of a novel legal issue. Moreover, as discussed, the defendants had the right to collect the fee associated with filing the writ of garnishment. Therefore, there was no merit to the tenants’ argument that the court costs were reflected inaccurately because this fee was included. As such, the dismissal of the tenants’ claims pursuant to the MCPA was also affirmed.
PRACTICE TIPS: In 2018, the Maryland General Assembly amended the MCDCA by adding CL §14-202(11), which includes protections for consumers under federal law. Effective October 1, 2018, in collecting or attempting to collect an alleged debt, a collector may not engage in any conduct that violates §§804 through 812 of the Federal Fair Debt Collection Practices Act. Because there was no indication that the legislature intended these amendments to be applied retroactively, the amendments to the MCDCA do not apply retroactively.
BOTTOM LINE: Section 4-603(a) of the Corporations and Associations Article, which states that any one or more stockholders who desire to continue the business of a close corporation may avoid the dissolution of the corporation or the appointment of a receiver by electing to purchase the stock owned by the petitioner at a price equal to its fair value, may not be used to avoid the appointment of an equitable receiver outside of the dissolution context.
CASE: Bartenfelder v. Bartenfelder, No. 934, Sept. Term, 2018, and No. 2052, September Term 2019 (filed July 2, 2020) (Judges Wright, GOULD, & Harrell (Senior Judge, Specially Assigned)).
FACTS: Kimberly Bartenfelder and Thomas Bartenfelder were the sole stockholders of two Maryland close corporations, Bartenfelder Sanitation Service, Inc., and Bartenfelder Landscape Service, Inc., and, the sole members of a Maryland limited liability company, 3340 Forge Hill LLC. In February 2017, Kimberly filed a complaint in the circuit court against Thomas and the three companies, accusing Thomas of assorted wrongdoings in connection with the three companies, including the alleged misuse or misappropriation of company funds and corporate waste. In the complaint, Kimberly sought both injunctive and declaratory relief.
Upon receipt of the complaint, Thomas’s counsel delivered a letter to Kimberly’s counsel claiming that Kimberly’s lawsuit triggered his right under Maryland Code Annotated (1975, 2014 Repl. Vol.), Corporations and Associations Article (“CA”), §4-603(a), to acquire her shares in the corporations, and that he elected to exercise that right. Thomas filed an answer to a part of the complaint, asking the court to enforce his election to purchase Kimberly’s stock in the corporations. Thomas also moved to dismiss the complaint and to stay further proceedings.
In January 2018, Kimberly filed a verified amended complaint with four counts. In Count I, Kimberly again requested equitable relief related to the three companies but dropped the request for the appointment of a receiver. In Count II, she again asserted a claim for declaratory judgment as to Kimberly’s actions in connection with Bartenfelder Sanitation. In Count III, she asserted a breach of contract claim for damages and a temporary restraining order with respect to, among other things, a shareholders’ agreement for one of the companies. In Count IV, she alleged that Thomas breached a contractual covenant not to compete with one of the companies and sought injunctive relief and damages. Thomas moved to strike the amended complaint.
Following a hearing, the circuit court ruled in favor of Thomas. The court did not enter a written order, but the docket entry regarding the first order stated that an appraiser was to be appointed to determine fair value of business. Kimberly filed a motion for reconsideration, which the circuit court denied.
Kimberly appealed to the Court of Special Appeals. The appeal was docketed as No. 934, September Term 2018. While the first appeal was pending, the case proceeded in the circuit court with the appraisal process to determine the fair value of Kimberly’s stock. Although the docket entry did not mention the stay of the proceedings as requested by Thomas pursuant to CA §4-603(b), the proceedings, other than the valuation process, were in fact stayed as no further actions were taken by either the parties or the court regarding Kimberly’s claims. In June 2019, the appraisers filed their valuation reports, which determined the fair value of Kimberly’s interest in Bartenfelder Landscape to be $560,000, and the fair value of Kimberly’s interest in Bartenfelder Sanitation to be $0. Neither party filed exceptions to the valuations.
Thomas filed a motion to confirm the appraisers’ reports and to establish the purchase price and a payment schedule, which Kimberly did not oppose. On November 6, 2019, the circuit court issued a second order, granting Thomas’s motion and ordering him to pay to Kimberly two installments of $280,000, plus post-judgment interest, for her stock in the corporations. The court granted Thomas’s motion for leave to deposit the installment payments with the court.
Kimberly then appealed from the second order. The second appeal was docketed as Number 2052, September Term, 2019. After depositing the purchase funds into the court registry, Thomas moved to declare what he referred to as the November 6, 2019 judgment as satisfied in full. Unopposed by Kimberly, the circuit court granted the motion.
The Court of Special Appeals consolidated the appeals and reversed the judgment of the circuit court.
LAW: Substantively at issue was whether Kimberly’s complaint triggered the buy-out right in CA §4-603(a), which provides that “any one or more stockholders who desire to continue the business of a close corporation may avoid the dissolution of the corporation or the appointment of a receiver by electing to purchase the stock owned by the petitioner at a price equal to its fair value.” Kimberly argued that the word “receiver” applied only to receivers appointed by the court in a corporate dissolution proceeding, and that her complaint requested the appointment of a receiver of an entirely different kind: an equitable receiver. She contended, therefore, that her complaint did not trigger the buy-out right under CA §4-603(a).
Thomas countered that in simply using the word “receiver,” subsection (a) did not distinguish between statutory and equitable receivers. In any event, he contended, because Kimberly’s complaint requested the appointment of a receiver with the same authority conferred by Maryland’s dissolution statute, his purchase right under the dissolution statute was triggered. Therefore, he asserted, the circuit court correctly determined that he exercised his valid buy-out right under CA §4-603.
The distinguishing feature of a close corporation most relevant here is the restraint placed on the ability of stockholders to transfer their stock. See Uninsured Employers’ Fund v. Lutter, 342 Md. 334, 340 n.3 (1996). By default, and unlike other types of Maryland corporations, stock in a close corporation is not transferrable without the consent of the other stockholders. See CA §4-503(b). The rationale is that in such an intimate business relationship, people should have the right to choose their partners. See William G. Hall, Jr., The New Maryland Close Corporation Law, 27 Md. L. Rev. 341, 351 (1967).
A natural consequence of this default restriction, however, is that, in the absence of consent to transfer stock, a stockholder can be trapped in an investment that, for whatever reason, is no longer desired. To address this predicament, CA §4-602 gives the trapped stockholder the right to seek a dissolution of the corporation if consent is denied or for certain other enumerated reasons, thus enabling the stockholder to receive value for the stock through the liquidation of the company. Standing alone, such dissolution rights would tip the balance of power in favor of the stockholder who wants to exit the company and against the stockholder who wants to continue with the business. To level the playing field, CA §4-603 gives a stockholder the ability to prevent the dissolution, or the appointment of a receiver, by electing to purchase the stock of the dissolution-seeking stockholder. See Hall, at 349. However, this purchase right applies only in the context of a dissolution proceeding.
First, although the specific provision at the center of this dispute was found in the first sentence of CA § 4-603(a), the mandate to construe the relevant provisions in their proper context required examination of both CA §4-603 and the immediately preceding section, CA §4-602. Section 4-602 is captioned “Involuntary dissolution” and §4-603 is captioned “Avoidance of dissolution by purchase of petitioner’s stock.” Moreover, the specific subsection at issue here, CA §4-603(a), is captioned “Stockholder’s right to avoid dissolution.” Here, the captions to the sections were part of the bills the General Assembly considered when it enacted the statute. The captions assigned to CA §4-602 and CA §4-603, therefore, supported the conclusion that the purchase right applies only in a dissolution proceeding.
In addition, the opening words of CA §4-603(a) expressly confirm what its caption indicates: the purchase right exists to spare the company from extinction. The phrase “stockholders who desire to continue the business of a close corporation” implies an impending termination of the business. Moreover, throughout CA §4-603, some variation of the base word “petition” is used, the meaning of which is discernable only in the context of CA §4-602. The use of a variation of “petition” throughout CA §4-603 make sense only when construed in conjunction with CA §4-602. The “petitioner” as used throughout CA §4-603 – including in its caption – is the stockholder seeking the dissolution in CA §4-602(a), and the “petition for dissolution” in CA §4-603(b) is the “petition for dissolution” referenced in CA §4-602(b)(1)(ii).
It would be impossible to consummate the purchase and sale transaction in the manner contemplated under the plain language of CA §4-603 in any context other than a dissolution proceeding. There cannot be a transaction without first determining the price, and under CA §4-603(a), the price of the stock is “equal to its fair value.” Under CA §4-603(b), the fair value shall be determined “as of the close of business on the day on which the petition for dissolution is filed.” Compliance with that provision would be impossible unless there is, in fact, a petition for dissolution.
The legislative history of the statute confirmed the conclusion that the purchase right in CA §4-603(a) applies only in dissolution proceedings. First, it showed that the legislative purpose is served only if the purchase right is triggered in a dissolution proceeding. See Papillo v. Pockets, Inc., 119 Md. App. 78, 83-90 (1997). When initially enacted, the dissolution provisions for close corporations now found in CA §4-602 and CA §4-603 were set forth within a single section, Article 23, §109. That fact alone indicated that CA §4-602 and CA §4-603 had always been intended to be construed together.
Thomas also argued that CA §4-603 applied to Kimberly’s complaint because she requested the appointment of a receiver with statutory powers – that is, the powers authorized by CA §3-414. However, Kimberly was entitled to seek an equitable remedy short of dissolution without triggering the rights of a non-petitioning stockholder in a dissolution proceeding. She did so when she filed a complaint seeking the appointment of a receiver vested with equitable powers short of a dissolution.
In sum, because Kimberly’s complaint did not request a dissolution under CA §4-602, the purchase right under CA §4-603(a) was not triggered, and, therefore, Kimberly was not compelled to sell her stock to Thomas. This result aligned with the plain language as well as the structure and context of the statute, its legislative history, and the distinction between statutory and equitable receivers. This result also had the added benefit of common sense: a stockholder who seeks equitable relief to stop alleged oppression should not have to do so at the risk of being forced to sell her stock to the alleged oppressor.
Accordingly, the judgment of the circuit court was reversed, and the case was remanded for further proceedings.
COMMENTARY: As a preliminary matter, Thomas moved to dismiss the second appeal as moot. He argued that after Kimberly noted her first appeal, the circuit court appointed appraisers to determine the fair value of her stock, the appraisers filed their reports, Kimberly did not object to the appraisals, and Thomas moved to confirm the appraisers’ reports and establish the purchase price based on the appraisals and to establish the terms of payment. Thomas also asserted that Kimberly did not oppose his motion and that the court subsequently entered the second order, which he claimed constituted a judgment. Thomas asserted that by failing to object to the appraisals or to his motion to confirm, Kimberly acquiesced to the second order and waived her right to appeal it.
In fact, there was no basis for dismissing the second appeal. As Thomas pointed out in his response to the show cause order, Kimberly filed for bankruptcy on June 14, 2019, resulting in an automatic stay of all litigation. Thomas moved in the bankruptcy court to lift the stay of, among other matters, this litigation, which the bankruptcy court granted on September 9, 2019. The monies deposited by Thomas remained in the court registry, and Kimberly had not requested access to, or the benefit of, those funds. Thus, although Thomas might have paid the money into the court registry, he did not contend that Kimberly made any effort to accept the funds, and there was no indication that she had done so. The funds were still in the court registry, and the stay of enforcement was still in place. As such, the second appeal was not moot.
In addition, Kimberly was not required to file exceptions to the appraisals or oppose Thomas’s various post-appraisal motions in order to preserve this issue on appeal. Rule 8-131 states that an appellate court will not ordinarily decide a non-jurisdictional issue unless it plainly appears by the record to have been raised in or decided by the trial court. Here, the issue of whether the purchase right under CA § 4-603(a) was triggered by Kimberly’s complaint was both raised and decided in the circuit court. Nothing more was required to preserve the only substantive issue that has been raised in these appeals. For these reasons, Thomas’s motion to dismiss the second appeal was denied.
PRACTICE TIPS: A close corporation is a creature of statute that allows a small business to operate like a partnership, although in a corporate form. A close corporation typically has few stockholders, active stockholder participation in the business, no liquid market for the stock, close personal relationships between or among the stockholders, flexibility to operate without a board of directors, and few, if any, of the corporate formalities required of general corporations. Unlike “close corporations,” which are defined by statute in Maryland, a closely held corporation has no single, generally accepted definition. However, closely held corporations commonly possess the following attributes: (1) a small number of stockholders; (2) no ready market for the corporate stock; and (3) substantial majority stockholder participation in the management, direction and operations of the corporation.
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