Arrow Cab v. Himelstein

ROBERT L. KARWACKI, Judge (retired), Specially Assigned. The question presented in this case is whether a claimant may satisfy a default judgment entered against an unincorporated association of taxicab permit holders by filing a writ of garnishment against the Motor Vehicle Administration (“MVA”), attaching a letter of credit that was posted with the MVA as security pursuant to the Maryland Self-Insurance Program. Pursuant to regulations promulgated by the MVA, taxicab owners are permitted to form associations to establish the requisite number of vehicles required in order to participate in the self-insurance program. COMAR 11.18.02.03.

Participants in the self-insurance program are required to ⁵⁶⁰ post security with the MVA in order to secure their participation as a self-insured and to provide protection for the public. In this case the security posted with the MVA was in the form of an irrevocable letter of credit in the amount of $100,000 naming the MVA as the beneficiary. We are asked to decide whether Arrow Cab participated in the self-insurance program as an unincorporated taxicab association and whether the letter of credit is an asset of the association subject to garnishment by the judgment creditor. The automobile accident giving rise to this controversy occurred on October 28, 1988.

Michelle Himelstein, the Respondent, was a passenger in a taxi cab bearing the name Arrow Cab and painted in the familiar green and white colors of that taxicab association. The driver evidently misjudged the distance needed to complete a right turn and consequently hit the curb causing the taxi to ricochet off the curb and back into the street. As a result of this occurrence the Respondent suffered injuries. On August 14, 1991, the Respondent filed suit in the Circuit Court for Baltimore City naming Arrow Cab as defendant and listing David Granat as the president of Arrow Cab and the party to be served.

Apparently David Granat initially refused service stating that there was no such company. The summons was returned by the sheriff non est stating as the reason “Arrow Cab Company—No such company.” Subsequent to the running of the statute of limitations the Respondent filed two amended complaints naming as defendants G & G Cars International, Inc. t/a Arrow Cab Company, Taxi Management, Inc., Jane T. Gensler, Inc., Taxi Leasing, Inc. and Guy Stafford. Primarily as a result of the running of the statute of limitations all of the defendants except Arrow Cab Company were dismissed from the action. A final amended complaint was filed naming as defendants Arrow Cab Company and David H. Granat, trading as Arrow Cab.

Service of process was finally effected for Arrow Cab Company on November 28,1998, when a private process server served David Granat, president of Arrow Cab. On April 18, 1994, a trial was scheduled and David Granat, individually, was dismissed from ⁵⁶¹ the action whereupon he left the courtroom. No answer was ever filed on behalf of Arrow Cab and no one appeared on behalf of Arrow Cab; consequently, a default judgment was entered in favor of the Respondent in the amount of $19,-878.09. On July 19, 1994, a Writ of Garnishment was issued by the court to garnishee, the MVA, which filed an answer stating that defendant/judgment debtor, Arrow Cab Company, was a participant in Maryland’s Self-Insurance Program and that it held assets of Arrow Cab in the form of an irrevocable letter of credit.

The MVA further answered that upon order of the court it would instruct the bank to issue a draft to Ms. Himelstein in the amount specified in the Writ of Garnishment in order satisfy her judgment. A Motion to Intervene was then filed by G & G Cars International, Inc., New Pikesville Cab, Inc. and individual owners trading as Arrow Cab (“Petitioners”), which was granted by the trial court. The Petitioners then filed a Motion to Quash Garnishment or in the alternative for summary judgment. The trial court denied Petitioners’ motion and ordered that the matter proceed to trial on the sole evidentiary issue presented by the original writ of garnishment and the answers of the garnishee, plaintiff and intervening defendants specifically concerning whether the letter of credit/security posted on behalf of the garnishee is an asset of defendant, Arrow Cab, and can be garnished to satisfy plaintiffs judgment.

The trial was held on December 13-14, 1995. The only witness who testified was Mr. Raymond Leard, Manager for the Self-Insurance Program for Automobile Liabilities for the State of Maryland, Motor Vehicle Administration, Department of Transportation, who testified on behalf of the Respondent. During the course of Mr. Leard’s testimony, the unique corporate structure of the taxicab operation in this case was revealed. In effect, the Petitioners have created a corporate layer cake as to all of the parties associated with the operation of this taxicab. ⁵⁶² The taxicab in which the Respondent was a passenger at the time of her injury was owned by G & G Cars International, Inc. which had leased it to Taxi Management, Inc. under lease number 46.

The president of G & G Cars International, Inc., David Granat is also the president of Taxi Management, Inc. According to the terms of the lease G & G Cars International, Inc. was to be responsible for providing liability coverage on the vehicle. In order for a vehicle to be operated as a taxicab in the State of Maryland it must have a permit that is issued by the Public Service Commission. According to the regulations “taxicabs under permits of this Commission shall have the full name of the owner of each taxicab for which a permit has been issued, permanently painted on one door on each side of the taxicab in letters at least 2 1/2 inches high.” COMAR 20.90.02.16(A)(1). Thus it is the name of the permit holder that appears on the side of the cab and not the name of the vehicle owner, G & G Cars International, Inc. Taxi Management, Inc. was then responsible for matching up the vehicles with the valid permit holders which are required to create a vehicle that can be operated as a taxicab.

Then yet another company, Taxi Leasing, Inc. leased the taxicabs bearing the name Arrow Cab and the distinctive green and white color scheme to taxicab drivers. Apparently Taxi Leasing, Inc. is a corporation created for the sole purpose of matching up the vehicles leased by Taxi Management, Inc. with taxi drivers. The trial court denied Respondent’s Motion for Judgment against the garnishee, MVA, and granted Petitioners’ Motion to Quash Garnishment, holding that the letter of credit is not an asset of Arrow Cab, although the court did acknowledge the existence of the unincorporated association. The court stated the following: “So the difficulty is that, in effect, though Arrow Cab may be an entity, which is an association, it, in my view, is not an entity for which the MVA holds any assets, which are subject to garnishment to satisfy the plaintiffs judgment. ⁵⁶³ I will agree with my own prior characterizations that certainly in the particular way that those persons, those individuals, those permit holders, those corporations provide taxi service, flying the colors of Arrow Cab, certainly may be confusing for a mere mortal to determine who or what may be responsible.” (E.48).

The Respondent noted an appeal to the Court of Specials Appeals; that court reversed the ruling of the trial court and held that the irrevocable letter of credit held by the MVA is an asset of the unincorporated association, Arrow Cab, which is subject to garnishment. The case was remanded to the trial court for further proceedings. Himelstein v. Arrow Cab, 113 Md.App. 530 , 688 A.2d 491 (1997). The Petitioners then sought a writ of certiorari.

We issued the writ and shall affirm the holding of the Court of Special Appeals. Although Petitioners have submitted eight questions for our review 1 we have consolidated and presented the questions as follows: ⁵⁶⁴ I. Was the Court of Special Appeals correct in holding that Petitioners are members of an unincorporated association of taxicabs, namely Arrow Cab, which allowed them to participate in and benefit from Maryland’s Self-Insurance program that is administered by the MVA?

II

Was the Court of Special Appeals correct in holding that the irrevocable letter of credit posted to the MVA by Petitioners in compliance with COMAR, security requirements for self-insurers was an asset of the unincorporated association, Arrow Cab, which was subject to garnishment to satisfy judgments entered against the association? We shall answer both questions in the affirmative. As an initial matter it is important to remember why the General Assembly has enacted financial responsibility laws in the first instance. We clearly held in Pennsylvania Nat.

Mut. Cas. Ins. Co. v. Gartelman, 288 Md. 151, 154 , 416 A.2d 734, 736 (1980) that “[I]n Maryland, there is an established legislative policy designed to make certain that those who own and operate motor vehicles in this State are financially responsible.

This legislative policy has the overall remedial purpose of protecting the public by assuring that the operators and owners of motor vehicles are financially able to pay compensation for damages resulting from motor vehicle accidents.” We further explained that in order to “effectuate this legislative policy, the owner of a motor vehicle registered in Maryland is required to provide security, usually in the form of a vehicle liability insurance policy.” Maryland Code (1992 Repl.Vol.) § 17-103, § 17-104 of the Transportation Article. Id. at 154, 416 A.2d 734 . ⁵⁶⁵ In a recent case, the Court of Special Appeals, when considering the self-insurance program, reaffirmed that the legislative “purpose behind adopting motor vehicle regulations that require insurance on vehicles is to promote the established legislative policy in Maryland that seeks to assure that victims of automobile accidents have a guaranteed avenue of financial redress.” Rentals Unlimited, Inc. v. Aetna Cas. & Sur. Ins. Co., 101 Md.App. 652, 660 , 647 A.2d 1278, 1282 (1994).

However, the statute also provides that “[t]he Administration [MVA] may accept another form of security in place of a vehicle liability insurance policy if it finds that the other form of security adequately provides the benefits required by subsection (b) of this section.” Md.Code (1992 Repl.Vol.) § 17-103(a)(2) of the Transportation Article. The Administration is authorized by Md.Code (1992 Repl.Vol.) § 12-104(b)(l) of the Transportation Article to adopt rules and regulations to carry out those aspects of the Maryland Vehicle Law that it is charged with administering. The regulations that govern the self-insurance program are codified in COMAR Title 11, Subtitle 18, Chapter 02 and are in relevant part as follows: “Chapter 02 Self-Insurers .01 Scope. These regulations are designed to govern all self-insurers in the State, except the State government and the federal government. .02 Definitions.

A. In this chapter, the following terms have the meaning indicated. B. Terms Defined. (1) “Administration” means the Motor Vehicle Administration. (3) “Class B self-insurer” means: (a) A Maryland Taxicab company; or ⁵⁶⁶ .03 Conditions for Certification as a Self Insurer.

A. An applicant for certification as a self-insurer shall: (1) Provide the same benefits required by Transportation Article, Title 17, Annotated Code of Maryland, and by a political subdivision, regulatory agency, or commission which regulates the self-insurer; (2) File an application for Maryland self-insurance annually accompanied by: (b) A security of a type and amount acceptable to the Administration; (c) A listing of vehicles that includes for each vehicle the: (i) Make, (ü) Model, (iii) Year, (iv) Vehicle identification number, (v) Tag number, and (vi) Title number; and (3) Own or lease 26 or more vehicles directly or by an association approved by the Administration: (7) Comply with all applicable rules and regulations as set forth by the Public Service Commission or the local jurisdiction; E. The letters of credit required in § D(2) of this regulation shall: (3) Be payable on demand to the Motor Vehicle Administration upon presentation of a final judgment against the named self-insured, within statutory limits, that remains unsatisfied, and____” (Emphasis added). We now turn to the facts of the instant case in light of the legislative purpose behind the adoption of financial responsi ⁵⁶⁷ bility laws as implemented by the regulations adopted by the MVA. Petitioners contend that the MVA issued the Certificate of Self-Insurance No. 0092 to Petitioner G & G Cars International, Inc., the owner of the vehicle involved in the accident. Petitioners further assert that Mr. Leard testified that G & G Cars International, Inc. owned 77 vehicles and obtained self-insured status on that basis.

Both of these assertions are patently incorrect. The certificate of self-insurance lists the persons granted approval for self-insurance as Individual Owners T/A Arrow/New Pikesville Cab and G