Buxton v. Buxton

⁶³⁸ WILNER, Judge. Through his appointed guardian, Robert Buxton, a retarded adult, filed this lawsuit in the Circuit Court for Montgomery County against his father, Rex Buxton, and his step-mother, Antoinette Bozievich Buxton, accusing them, as fiduciaries, of the misuse, mismanagement, and misappropriation of his funds and property. Rex Buxton died during the pendency of the action. After a 10-day non-jury trial and the consideration of post-trial motions, the court entered an aggregate judgment of $617,342 against Rex’s estate for the misuse, conversion, and misappropriation of various items of Robert’s funds and property, a joint and several judgment of $312,710 against Rex’s estate and Antoinette for failing to keep a house deeded to Robert by his parents profitably rented, and a judgment for $55,000 against Antoinette alone by reason of an encumbrance she placed on that house.

The actual loss of rent from the house was determined to be $83,916, which, on post-trial motion, the court increased to $312,710 to take account of the earnings that it found could have been realized if the $83,916 in rent that should have been received from the property had been invested in stocks and bonds during the approximate 20-year period at issue. Rex’s estate acquiesced in the judgments against it, but Antoinette appealed those entered against her, raising issues of laches, sufficiency of evidence, and the boosting of the $83,916 to $312,710 by the addition of what Antoinette regarded as inappropriate pre-judgment interest. The Court of Special Appeals found no merit in the laches argument. It did, however, find some merit in her complaints regarding the manner in which Robert’s losses arising from the non-rental of the house were calculated, and it disagreed entirely with the calculation of what it regarded as pre-judgment interest, and thus remanded the case to the Circuit Court for further proceedings.

Neither Robert nor Antoinette were satisfied with the intermediate appellate court’s disposition. We granted their cross-petitions to consider the issues of laches, the additional amount added to the $83,916 (whether characterized as pre-judgment interest or additional damages), and whether ⁶³⁹ the Circuit Court erred in admitting certain expert witness testimony regarding the calculation of lost rent. BACKGROUND As a result of oxygen deprivation during the birthing process, Robert, who was 52 when this suit was filed, was left mentally retarded. From the time he was a child, his parents began making investments for him to assure his security after their death.

In 1961, they purchased a house on Montauk Avenue in Bethesda, initially for his brother, Wayne, but which, in 1968, they deeded to Robert. A mortgage that was placed on the home was paid off in 1983. At first, the house was rented out, and the rent received was placed in a custodial account controlled by Rex. In 1970, through a Federal program for the handicapped, Robert’s mother obtained a job for him in the mail room at the National Institutes of Health (NIH), where, at the time of trial, he continued to be employed and earned about $24,000/year.

In 1973, upon his mother’s efforts, Robert began living in a group home for retarded individuals. The seeds of ensuing strife were sown in 1976-77, when Robert’s parents went through a very bitter divorce. One consequence of that divorce was the departure of Robert’s mother from the scene — she moved to Florida and then to the Deep Creek area, eventually became ill and disabled, and died in either 1995 or 1997, the record being somewhat inconsistent as to the date. Another was the removal of Robert from the group home.

At some point, Rex developed a relationship with Antoinette, and, in September, 1976, he moved Robert into Antoinette’s home in Potomac. In December, 1977, Rex and Antoinette were married, and he moved into the home as well. In the meanwhile, from 1976 to 1988, Rex permitted one Coy Thomas to live in the Montauk Avenue house. It does not appear that Mr. Thomas paid any rent during that 12-year period, although he said that he made between $8,000 and $10,000 in repairs and improvements to the house at his own expense.

Antoinette confirmed that no rent was paid. At various times during his stay, at least three other people also ⁶⁴⁰ lived in the house rent-free — Jack Brookman, Sara Gerber, and Amy Collins. Some evidence was presented that Brook-man assisted in making some repairs and that Amy Collins was allowed to live rent-free in settlement of a possible claim that she may have had against Robert by reason of having been raped on the property. The basis of any such claim was not explained and no specific finding was made regarding it.

In 1985, Rex, Antoinette, and Robert moved from Antoinette’s home in Potomac to a larger property that she bought in Pleasant Hill. In conjunction with that move, Rex and Antoinette borrowed $79,000 in order to pay off some of Rex’s bills and to improve space in the Pleasant Hill home that Rex used as an office. To secure that loan, Rex and Antoinette caused a mortgage to be placed on the Montauk Avenue house. At some point, according to Antoinette, she, Rex, and Robert decided to fix up the Montauk Avenue property and move there, in part because of Rex’s deteriorating health.

In 1988, she sold the Pleasant Hill home and, from the proceeds of the sale, paid off the mortgage on the Montauk Avenue home. After a brief stay in a rental property while extensive repairs and improvements were made to the Montauk Avenue home, they moved to the renovated house in 1990. According to Antoinette, she invested about $76,000 of her money to make those repairs and improvements. In May, 1991, she and Rex had Robert transfer by deed a half-interest in the Montauk Avenue house to her, and she placed another deed of trust, in the amount of $80,000 on the property.

Robert received no consideration for the transfer. Antoinette testified that she took the 50% interest “as a protection to me that when the property was sold, the note would be paid.” The deed of trust went into default and to the point of foreclosure four times during the next four years. At the time of trial, the loan balance was $77,600. In 1991, concerned about Robert’s perceived unhappiness, complaints by him that Rex or Antoinette were taking all of his money, and reports from one of his co-workers at NIH that he was scrounging in garbage cans for things to eat, Robert’s sister, Priscilla, made a complaint to the Montgomery ⁶⁴¹ County Department of Adult Protective Services. 1 When the agency spoke to Robert, he asked that the matter not be pursued, and Priscilla dropped it.

In January, 1996, however, she and her brothers moved Robert out of the Montauk Avenue home, and, in September, with Robert’s consent, she succeeded in having herself appointed guardian of his property. A month later, she filed this lawsuit on Robert’s behalf. Rex and Antoinette responded with (1) a motion to dismiss based on laches and other defenses, and (2) a counterclaim against Robert for breach of contract and unjust enrichment. The essence of the counterclaim, which eventually was resolved in Robert’s favor, was that Robert agreed to the conveyance of a half-interest in the property in exchange for Antoinette’s investment and that, if she is required to relinquish her interest, Robert will be unjustly enriched.

Much of the evidence presented at trial dealt with bank accounts, pensions, and other assets of Robert that are no longer at issue. We are concerned only with the findings and remedies pertaining to the Montauk Avenue property. In that regard, the court announced from the bench its findings of fact that (1) there was a confidential relationship between Robert, on the one hand, and Rex and Antoinette, on the other, (2) as to financial matters other than minimal day-today expenditures, there was a total dependence by Robert and a reposing of trust by him, (3) there was dominion over virtually everything Robert did by Rex and there was dominion by Antoinette both personally and on financial matters, (4) there was “absolutely no need” for Antoinette to obtain an ownership interest in the house, (5) Robert had little or no ability to appreciate the significance of or supposed need for transferring a half-interest in the property to her, (6) Coy Thomas’s occupancy of the house for 12 years was not for Robert’s benefit but rather entirely for the benefit of Rex and Antoinette — that it was, in effect, recompense for services he rendered to them, (7) the repairs and improvements that ⁶⁴² Thomas allegedly made did not materially improve the property, (8) Robert received no benefit from the occupancy by Brookman, Gerber, and Collins, (9) rent should have been set aside for Robert during the period 1989-1995, (10) the rental value of the property during that period, ie., the rent lost to Robert, was $83,916, (11) of the amounts invested by Antoinette in 1989-90, only $35,000 inured to Robert’s benefit, the rest of the work being for the benefit of Rex or Antoinette, and (12) Robert’s execution of the 1991 mortgage arose from a breach of the confidential relationship — that he did not understand the ramification of the mortgage and did not truly assent to it. It was upon those findings that the court announced its intention to enter a joint and several judgment against Rex’s estate and Antoinette for $83,916 and a separate judgment against Antoinette for $55,000.

Following the announcement of those conclusions, Robert moved for a clarification of the award. Although that motion is not in the record extract, it appears that Robert sought an increase in the damages awarded for lost rentals from the Montauk Avenue property in accordance with the calculations made by one of his witnesses, Thomas Borzilleri. Dr. Borzil-leri, through testimony and an exhibit, calculated the net loss in rental for each year from 1976 through 1995 — the aggregate being $83,916, determined the investment returns that could have been earned on those annual amounts based on the Standard and Poor 500 index and the yields from corporate bonds, long-term Government bonds, and 5-year Government bonds, and, assuming a mix of 40% stock investment and 60% bond investment, opined that, had the property been rented at the amounts determined and had the rentals then been invested in that 40/60% mix, the aggregate pre-tax return to Robert would be $312,170. The court apparently found that evidence persuasive, for, on January 21, 1999, it entered a written judgment that incorporated a judgment for $312,710 jointly and severally against Rex and Antoinette.

As noted, another part of that judgment was one for $55,000 against Antoinette alone “for her liability in connection with encumbering [Robert’s] property with the ⁶⁴³ Deed of Trust ... in the original amount of $80,000 which still exists as an encumbrance against the property.” Upon the denial of her motion to alter or amend the judgment, Antoinette noted an appeal. The Court of Special Appeals found several problems with the trial court’s analysis, calculations, and judgments. It first noted two obvious facial errors — the unexplained conversion of the $312,170 sought in the motion for clarification to $312,710 in the judgment, and the arithmetic error of $10,000 arising from the findings relating to the deed of trust and repairs. The 1991 deed of trust was for $80,000.

The court found that only $35,000 of the repairs made by Antoinette benefited Robert and intended to give her credit only for that amount. Under the Circuit Court’s own determination, therefore, the net amount owed by Antoinette by reason of the deed of trust should have been a maximum of $45,000 ($80,000 less $35,000, without consideration of the reduction of the deed of trust obligation to $77,600), but, without any further explanation, the court entered the judgment for $55,000. Exercising its authority under Maryland Rule 8-604(c), the appellate court modified the two judgments to $312,170 and $45,000, respectively. Based on the Circuit Court’s express findings that Robert was a disabled person and that no prejudice was suffered by Rex or Antoinette by the delay in filing this lawsuit, the Court of Special Appeals rejected Antoinette’s claim of laches, holding that Robert’s mental incapacity served to toll a claim of laches.

With respect to the judgment itself, however, the appellate court found a number of problems, mostly emanating from the lack of specific factual findings. It was not clear when Antoinette first became responsible for renting out the Montauk Avenue property; no finding was made with respect to the contention that Amy Collins was allowed to live in the property rent-free in settlement of a possible claim she might have had against Robert; no finding was made whether Robert was denied any use of his property while he was living in it; no finding was made whether (or why) Antoinette was responsible for paying rent to Robert during the period 1990- ⁶⁴⁴ 1995, when she, Rex, and Robert were occupying the property together; and no explanation was given for how the court calculated the $35,000 credit allowed to Antoinette for the repairs she made. Finally, the appellate court struck entirely what it regarded as the pre-judgment interest added in response to the motion for clarification. It held that there was no duty on the part of Antoinette to invest lost rentals in a mix of stocks and bonds and that any pre-judgment interest must be limited to the 6% permitted under Art. Ill, § 57 of the Maryland Constitution.

Robert complains about the holding that wiped out the increase from $83,916 to $312,170, asserting that the Court of Special Appeals erred in regarding that increase as prejudgment interest. Antoinette presses her claim that the entire action was barred by laches, defends, in part, the treatment of the increase as pre-judgment interest, but asserts that no pre-judgment interest is permissible under the circumstances of this case, and attacks the method by which Dr. Borzilleri calculated the $83,916 in lost rentals. No complaint is made about any of the other rulings or adjustments made by the intermediate appellate court. DISCUSSION Laches Citing Staley v. Staley, 251 Md. 701, 703 , 248 A.2d 655, 657 (1968), the Court of Special Appeals noted that laches is an equitable defense that bars a plaintiffs action if the plaintiff was negligent or lacked diligence in asserting his rights, causing prejudice or injury to the defendant.

It observed as well that whether laches applies in any given case depends on the facts and circumstances of the case. Responding to Antoinette’s argument that Priscilla’s complaint to the county agency in 1991 demonstrated that the claims made in this action could have been made much earlier, the appellate court concluded that, because Priscilla was not then Robert’s guardian but a mere volunteer she had no duty to pursue the complaint on his behalf at the time. It stated that its “holding ⁶⁴⁵ that mental incapacity tolls a claim of laches until a court appoints a guardian” was consistent with Maryland Code (1998), Cts. & Jud. Proc. art., § 5-201, which tolls the statute of limitations for minors or individuals who are mentally incompetent.

In that regard, it noted that, in determining whether to apply the doctrine of laches, the statute of limitations applicable to actions at law “may be used as a guideline” and that the court had previously held that, for purposes of the statute of limitations, a mentally incompetent person’s claim does not begin to accrue until a guardian capable of having the knowledge or awareness of the alleged wrong is appointed by a court. Antoinette regards that analysis as a “new bright-line rule that erases all distinction between the doctrine of laches and the statute of limitations in actions brought on behalf of an incompetent person” and that makes the individual facts of the case “irrelevant to analysis of a laches defense asserted against an incompetent.” She urges that this “new analysis begins and ends with finding that the plaintiff is incompetent and that suit was filed within the statute of limitations, commencing when the guardian was appointed” and that it never considers whether the incompetent person had sufficient knowledge or awareness to have brought the action earlier, whether the particular delay was undue, or whether there was prejudice to the defendant. We set forth the basic principles regarding laches in Parker v. Board of Elec. Sup., 230 Md. 126, 130-31 , 186 A.2d 195, 197 (1962).

Those principles still apply. Laches is a defense in equity against stale claims; the word, itself, derives from the old French word for laxness or negligence. We observed in Parker that “[tjhere is no inflexible rule as to what constitutes, or what does not constitute, laches; hence its existence must be determined by the facts and circumstances of each case.” Id. The passage of time, alone, does not constitute laches but is simply “one of the many circumstances from which a determination of what constitutes an unreasonable and unjustifiable delay may be made.” Id.

In that ⁶⁴⁶ regard, there is a relationship between laches and the statute of limitations, although the statute does not govern. We held that, “[i]n a purely equitable action, a lapse of time shorter than the period of limitations may be sufficient to invoke the doctrine; and, where the delay is of less duration than the statute of limitations, the defense of laches must include an unjustifiable delay and some prejudice to the defendant.” Id. “What amounts to ‘prejudice,’ such as will bar the right to assert a claim after the passage of time, depends upon the facts and circumstances of each case, but it is generally held to be anything that places him in a less favorable position.” Id. Finally, and of particular relevance here, we stated in Parker that “since laches implies negligence in not asserting a right within a reasonable time after its discovery, a party must have had knowledge, or the means of knowledge, of the facts which created his cause of action in order for him to be guilty of laches.” Id. at 181 , 186 A.2d at 197 . One area in which the courts have found a close affinity between the law dealing with limitations and that dealing with laches is where the plaintiff is or has been under a legal or mental disability.

It has long been the case, as part of the statute of limitations itself, that the statute is tolled during the period that the plaintiff was an infant or mentally incompetent. See Funk v. Wingert, 134 Md. 523 , 107 A. 345 (1919). 2 The current statute, embodied in Maryland Code, § 5-201 of the Courts and Judicial Proceedings Article, tolls the running of limitations in favor of a “minor or mental incompetent” until “the disability is removed.” In Funk v. Wingert, supra, we ⁶⁴⁷ made clear that the disability at issue is not simply the lack of an ability to sue, but rather “the general disability of lunacy or infancy as to the care of property and the safe-guarding of rights.” 134 Md. at 527 , 107 A. at 346 . In Doe v. Maskell, 342 Md. 684, 698 , 679 A.2d 1087, 1093-94 (1996) (quoting with approval from Decker v. Fink, 47 Md.App. 202, 207 , 422 A.2d 389, 392 (1980)), we stated that the reach of § 5-201 was limited to plaintiffs “who are insane and ‘unable to manage [their] business affairs or estate, or to comprehend [their] legal rights or liabilities.’ ” It is generally well established that the kind of mental disability that will toll the statute of limitations will also prevent the operation of laches. See Fid. & Dep.

Co. v. State, 164 Md. 304, 314-16 , 165 A. 176, 180-81 (1933); Green v. Lombard, 28 Md.App. 1, 14 , 343 A.2d 905, 914 (1975); Restatement (Second) of Trusts § 219 cmt. d (1959) (Beneficiary of trust will not be barred by laches as long as he is under an incapacity); 3 Austin W. Scott & William F. Fratcher, The Law of Trusts § 219.3 (4th ed.1988) (“Where a beneficiary of a trust is under a legal incapacity, such as infancy or insanity, he is not barred by laches from holding the trustee liable for breach of trust as long as the incapacity continues. In this respect the rule as to laches is the same as the rule under statutes of limitations”). What is not clear is whether, for purposes of either the statute of limitations or laches, the notion of “insanity,” which is not a medical term but an imprecise legal one, can include a significant mental retardation or, if not, whether such retardation can nonetheless constitute an equivalent type of disability as insanity (or, using more archaic terms, lunacy or non compos mentis ). There is some authority for the proposition that the term “insanity,” as used in statutes of limitations, does not have a technical meaning and includes a broader range of mental incompetence.

See Hurd v. County of Allegany, 39 A.D.2d 499 , 336 N.Y.S.2d 952, 956-57 (1972), cited in Decker v. Fink, supra, 47 Md.App. at 207 , 422 A.2d at 392 . The more important question is whether it is the particular ⁶⁴⁸ form of mental incompetence that is significant or whether it' is the inability of the person, by reason of the incompetence, to understand that he or she has a cause of action and to take the necessary steps to file the action. If, as we believe is the case, it is the actual disability, rather than the particular nature of the mental dysfunction, that is critical, we see no reason why retardation, if severe enough to have that effect, cannot also serve as a basis for precluding the operation of laches. At least with regard to a mentally incompetent person, this principle is simply a corollary to the affirmative requirement that, for laches to operate, the plaintiff must have had knowledge, or the means of knowledge, of the facts that create his cause of action.

If the person is sufficiently incompetent mentally, whether by derangement or retardation, he or she is not likely to have that knowledge, or means of knowledge. In this regard, the law does not require that the person be in a mentally vacuous or vegetative state; it suffices if the person is unable, by reason of mental incompetence, to manage his or her own business affairs or comprehend his or her legal rights and liabilities. The Circuit Court made such a finding in this case, and there was sufficient evidence to support that finding. It would, of course, have been helpful if the findings made by the court in the guardianship proceeding had been placed in evidence, but we may properly assume, in the absence of evidence to the contrary, that, in appointing Priscilla as the guardian of Robert’s property, that court properly concluded, in accordance with Maryland Code (1991), Est.