Baker v. Baker

ARTHUR, J. This case concerns the interpretation of an agreement to divide marital property in connection with a divorce. The case ⁴⁰² specifically concerns whether the wife relinquished her interest in a capital-loss carry-forward that resulted from activity in the couple’s jointly-titled investment accounts when she relinquished any interest “in” the accounts themselves. Holding that she had, the Circuit Court for Anne Arundel County directed the entry of summary judgment in her ex-husband’s favor. We shall reverse.

Questions Presented Ms. Baker presents several questions and sub-questions for our review, which we restate as follows: I. Did the circuit court err in denying Ms. Baker’s motion for summary judgment on the ground that the marital property agreement unambiguously entitled Mr. Baker to 100 percent of the capital-loss carry-forward as an interest in the couple’s jointly-owned investment accounts?

II

Alternatively, did the circuit court err in not finding an ambiguity in the agreement as to how the capital-loss carry-forward should be divided, thus precluding summary judgment for either party and requiring a trial on the facts?

III

Should this Court, if it reverses and remands in Ms. Baker’s favor on the issue of breach of contract, reinstate Mr. Baker’s prior alternative claim of unjust enrichment? 1 ⁴⁰³ For the reasons that follow, we answer affirmatively as to the first issue, reverse the circuit court’s judgment, and direct the court to enter summary judgment in Ms. Baker’s favor. We find it unnecessary to reach the second issue, as the agreement was not ambiguous. As to the third issue, we hold that Mr. Baker cannot reassert a quasi-contractual claim for unjust enrichment when he is bound by an express, written contract. Factual and Procedural History I. Terms of Divorce Agreement Christopher and DeAnn Baker were divorced in the Circuit Court for Anne Arundel County on September 15, 2010.

Their Voluntary Separation and Property Settlement Agreement (the “Agreement”) was incorporated, but not merged, into the judgment of absolute divorce. The Agreement addressed the issues of alimony, child support, child custody, the division of marital property, and visitation. It allocated various parcels of real estate to one spouse or the other and, in the case of one parcel, arranged for it to be sold and for the proceeds (and capital gains) to be equally divided. Similarly, the Agreement set the terms for the division of the parties’ automobiles and their personal property.

In addition, the Agreement required Mr. Baker to pay $1,135 million to Ms. Baker, as a monetary award, over the course of five years. Section 19 of the Agreement set the terms for allocation of the couple’s investment accounts. Section 19.02, which forms the crux of this dispute, states as follows: Wife hereby relinquishes to Husband any interest she might have in any jointly titled investment or bank accounts. It is agreed that Wife shall promptly sign whatever assignments, waivers, or other documents are reasonably necessary to effect a transfer of interest from both parties into the sole ⁴⁰⁴ and exclusive ownership of Husband.

Husband shall be solely responsible for any loans associated with or secured by those accounts.

II

The Capital-Loss Carry-Forward At the time of the divorce, the parties had a capital-loss carry-forward that resulted from losses in their investment accounts. The carry-forward came about because the Internal Revenue Code (the “I.R.C.”) limits the amount of a capital loss that taxpayers may use to reduce their tax liability in any given year, but allows taxpayers to defer (or carry-forward) the excess loss to reduce tax liabilities in future years. Hence, a capital-loss carry-forward is, in essence, a kind of a deferred tax-benefit. To illustrate, if an individual taxpayer generates a capital loss (ie., the loss from the sale or exchange of any capital asset) in a given year, the taxpayer, to reduce a tax liability, may offset the loss against any capital gains from that year.

If the taxpayer’s aggregate losses exceed the capital gains in that year, he or she may also deduct up to $8,000.00 of the excess loss against ordinary income. See I.R.C. § 1211(b). The taxpayer then may “carry forward” any unused capital losses to the following year. See I.R.C. § 1212(b).

In each future year in which that carried-forward loss remains, the taxpayer again may offset the loss against future capital gains, and against up to $3,000.00 of ordinary income, until all losses are exhausted or until the taxpayer dies. As a leading treatise explains: When carried forward, capital losses retain their short- or long-term character and are treated as sustained in the year to which they are carried. They are amalgamated with losses actually sustained in the year to which they are carried in determining the taxpayer’s net capital gains and losses and the amount to be deducted from ordinary income. Like losses actually sustained in the carryover year, they must be used to the extent possible even if it could be more advantageous to hold them in abeyance for use in a later ⁴⁰⁵ year....

Unused capital loss carryovers expire on the taxpayer’s death. 2 Boris I. Bittker & Lawrence Lokken, Federal Taxation of Income, Estates & Gifts ¶ 46.2.6 (3d ed. 2000) (footnotes omitted).

III

The Litigation Over the Capital-Loss Carry-Forward After the divorce, Ms. Baker used about 50 percent of the capital-loss carry-forward to offset the gains that she realized from the sale of the one of the couple’s parcels of real property. Contending that he alone had the sole right to the carry-forward, Mr. Baker filed suit in the Circuit Court for Anne Arundel County on January 23, 2012. He alleged breach of contract and unjust enrichment and requested a declaratory judgment, as well as an award of attorneys’ fees under the Agreement. 2 A year later, after a reasonable period of time for discovery, Ms. Baker moved for summary judgment. In support of her motion, Ms. Baker argued that, under the unambiguous language of the Agreement, she had not relinquished her interest in the capital-loss carry-forward because it was an interest separate and apart from the couple’s jointly-titled investment accounts.

Mr. Baker opposed the motion, arguing that the Agreement was ambiguous. On July 15, 2013, the court heard argument on the motion. At the hearing, Mr. Baker shifted ground, arguing that the agreement was not ambiguous and that, under its unambiguous terms, his ex-wife had relinquished her interest in the carry-forward. The circuit court agreed with Mr. Baker, holding that the text of the Agreement unambiguously allocated the capital-loss carry-forward to him.

It memorialized its ruling in a written order dated August 21, 2013, which left open the determination of the award of attorney’s fees to Mr. Baker as the ⁴⁰⁶ prevailing party. Because the court had found in Mr. Baker’s favor on the breach of contract claim, it dismissed his unjust enrichment claim as moot. After the parties reached agreement on the amount of Mr. Baker’s damages because of his ex-wife’s use of the carry-forward ($43,370.00) and the amount of his attorneys’ fees ($8,668.00), the court entered a final judgment. Ms. Baker then filed a timely notice of appeal to this Court.

Discussion I. Circuit Court Erred in Entering Summary Judgment in Favor of Mr. Baker Ms. Baker challenges the circuit court’s decision to grant summary judgment in her husband’s favor on the issue of breach of contract. In brief summary, she argues that the capital-loss carry-forward is a tax asset that, by operation of law, was distributed equally to her and Mr. Baker upon their divorce and that nothing in the Agreement dictates otherwise. Mr. Baker, by contrast, principally argues that the carry-forward is an interest in the jointly-titled investment accounts that his ex-wife unambiguously relinquished to him under the express terms of the Agreement. Because we conclude that the carry-forward is, as a matter of law, not an “interest in” the jointly-titled investment accounts within the meaning of section 19.02 of the Agreement, we reject Mr. Baker’s interpretation and hold that the circuit court erred in directing entry of summary judgment against his ex-wife.

A. Standard of Review For motions for summary judgment, the applicable legal standards are well known: under Rule 2-501 (f), “[t]he court shall enter judgment in favor of or against the moving party if the motion and response show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” ⁴⁰⁷ “[T]he summary judgment standard is akin to that of a directed verdict, ie., whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented.” Seaboard Sur. Co. v. Richard F. Kline, Inc., 91 Md.App. 236, 244 , 603 A.2d 1357 (1992); accord May v. Air & Liquid Sys. Corp., 219 Md.App. 424, 429 , 100 A.3d 1284 (2014). Thus, a court must view the facts, and all reasonable inferences that may be drawn from them, in the light most favorable to the non-moving party.

May, 219 Md.App. at 429 , 100 A.3d 1284 ; Dobkin v. Univ. of Baltimore Sch. of Law, 210 Md.App. 580, 590-91 , 63 A.3d 692 (2013). Nonetheless, when a movant has carried its burden of demonstrating sufficient grounds for summary judgment, “ ‘the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts.’ ” Hamilton v. Dackman, 213 Md.App. 589, 606 , 75 A.3d 327 (2013) (quoting Seaboard Sur. Co., 91 Md.App. at 244 , 603 A.2d 1357 ); accord May, 219 Md.App. at 430 , 100 A.3d 1284 . “In reviewing the grant of a motion for summary judgment, appellate courts focus on whether the circuit court’s grant of the motion was legally correct.” Sierra Club v. Dominion Cove Point LNG, L.P., 216 Md.App. 322, 330 , 86 A.3d 82 (2014) (citing Laing v. Volkswagen of Am., Inc., 180 Md.App. 136, 152-53 , 949 A.2d 26 (2008)); accord May, 219 Md.App. at 430 , 100 A.3d 1284 . Thus, we conduct a plenary, de novo review of the grant of summary judgment.

See, e.g., May, 219 Md.App. at 430 , 100 A.3d 1284 ; Reiner v. Ehrlich, 212 Md. App. 142, 151 , 66 A.3d 1132 cert. denied, 433 Md. 514 , 72 A.3d 173 (2013); Dobkin, 210 Md.App. at 590-91 , 63 A.3d 692 . B. Capital-Loss Carry-Forwards and Marital Property In the absence of any agreement, the United States Treasury regulations specifically provide that if spouses file separate returns after having previously filed a joint return, any capital-loss carry-forward is “allocated to the spouses on the basis of their individual net capital loss which gave rise to such capital loss carryover.” Treas. Reg. § 1.1212 — l(c)(l)(iii). 3 In ⁴⁰⁸ other words, if spouses stop filing joint returns, any capital-loss carry-forward is divided between them in proportion to the extent to which their individual losses gave rise to the carry-forward. Id.

In the case of jointly-titled assets in which the spouses had an equal interest, this would mean that the carry-forward would be divided equally between them. Nonetheless, most courts have held that a capital-loss carry-forward is a form of marital property, which the spouses can allocate between themselves at the time of a divorce. See, e.g., Mills v. Mills, 663 S.W.2d 369, 372 (Mo.Ct.App.1983) (ruling that “court did not err in finding the ... capital loss carry forward was marital property”); Finkelstein v. Finkelstein, 268 A.D.2d 273 , 701 N.Y.S.2d 52, 54 (2000) (concluding “that a capital loss carry forward accumulated by the parties constituted a marital asset subject to distribution”); see also Magee v. Garry-Magee, 833 N.E.2d 1083, 1092-93 (Ind.Ct.App.2005) (concluding that capital-loss carry-forward was property subject to distribution in divorce proceeding); cf. Haley v. Haley, 936 So.2d 1136, 1139-40 (Fla.App.2006) (capital-loss carry-forward was not marital property and could not be allocated among divorcing spouses where loss arose from property that was not a marital asset). We agree that a capital-loss carry-forward, when generated by a capital loss from the sale of marital property, is itself marital property, which the spouses can agree to allocate as they wish at the time of a divorce.

Consequently, the question in this case becomes whether the Agreement allocates the capital-loss carry-forward between Mr. and Ms. Baker. If it does, the terms of the Agreement govern; if it ⁴⁰⁹ does not, the background principles of law in the Treasury Regulations allocate the carry-forward between the spouses in proportion to the extent to which their individual losses gave rise to the carry-forward. C. Section 19.02 Unambiguously Does Not Allocate the Carry-Forward to Mr. Baker Accepting Mr. Baker’s arguments, the circuit court held that section 19.02 of the