Byron Lasky & Associates, Inc. v. Cameron-Brown Co.

Ross, J., delivered the opinion of the Court. Resolution of the central issue in this case requires the first appellate construction of Rule 582 which was added to 'the Maryland Rules July 1,1974 and reads as follows: “RULE 582. VOLUNTARY DISMISSAL. a. Court Order — When Notice Required.

A party may dismiss his action, claim, counterclaim, cross-claim or third-party claim only with leave of court. The order of court shall specify whether the dismissal is with or without prejudice. Notice of an opportunity to object to the dismissal shall be given to any other party who has separately appeared. The notice shall be in the manner the court directs or approves. b.

Costs. Subject to the provisions of § 7-202 (b) of the Courts Article and unless otherwise provided by order of court, the dismissing party is responsible for all costs as to the action or part dismissed.” After hearing on plaintiffs’ (appellants’) motion to dismiss without prejudice, the bill of complaint was dismissed with prejudice over plaintiffs’ objection on the theory that § a gave the chancellor discretionary power to do so even though there had been no hearing and determination on the merits. We hold that § a does not give the chancellor discretionary power and therefore reverse. The appellant corporations are general partners in a partnership which executed a deed of trust securing loans ²³³ made to the partnership by the appellees to finance development of and residential construction on the entrusted land in Crofton, Maryland.

The appellants also executed agreements guaranteeing completion of and payment for the residential construction. The bill of complaint sought an injunction against foreclosure under the deed of trust, a declaration that the deed of trust was null and void, and general relief. It was alleged in the bill that following a default under the deed of trust the appellees had “entered into an oral modification of said construction lending agreement resulting in a joint venture * * * for profit” pursuant to which development and construction were to continue and that the appellees had precipitated the default for which the foreclosure was sought by withholding payments they had agreed to make. A petition for ex parte and interlocutory injunctions was filed with the bill of complaint on May 15,1975.

On the same day an order was entered ex parte enjoining foreclosure and setting the case for hearing on the ex parte injunction on May 23,1975. See Maryland Rules BB72 and W76 b. Hearing on the ex parte injunction and the application for an interlocutory injunction began on Friday, May 23, and concluded Monday, May 26, 1975. On May 27, 1975 an order was entered dissolving the ex parte injunction and denying the application for an interlocutory injunction.

Over appellees’ opposition the chancellor, on June 10, 1975, entered a stay of the May 27 order on condition that a bond in the amount of $129,162.00 be filed. No bond was filed. There were no further proceedings until September 26, 1975 when appellants filed a “Motion To Dismiss Without Prejudice Or In The Alternative To Stay Proceedings.” The memorandum of points and authorities filed with the motion explained that appellants had filed an action at law in the Circuit Court for Montgomery County seeking damages from appellees for breach of contract and fraud and the appellees had moved to dismiss on the ground that the instant action, which involved the same subject matter, was pending in Anne Arundel County. The appellees’ motion in the Montgomery County action was taken under ²³⁴ advisement pending action by the Anne Arundel County Court on the appellants’ application for dismissal or stay.

The appellants’ motion was expressly filed pursuant to Maryland Rule 582. and requested that the “Court dismiss this action only without prejudice.” In their “opposition” to the motion to dismiss the appellees alleged that appellants had filed three law actions in Montgomery County all involving “essentially the same causes of action as alleged in this case.” At the hearing on the motion November 21, 1975, they urged the chancellor either to dismiss with prejudice or to set the case for prompt trial on the merits. An order dismissing the action “with prejudice” was entered November 24. At the core of appellees’ position is the contention that Maryland Rule 582 a gives an equity court discretionary power to dismiss an action with prejudice over a plaintiffs objection even though there has been no hearing on the merits. A careful reading of the rule discloses no express grant of such a power.

Therefore, the question is whether the power is granted by implication. A dismissal with prejudice is a final adjudication and it is fundamental that an action can be finally adjudicated over objection of the plaintiff only after a hearing on the merits or through imposition of sanction for default or conduct proscribed by law. Cross v. Cohen, 3 Gill 257 (1845); Royston v. Horner, 75 Md. 557 (1892); Fledderman v. Fledderman, 112 Md. 226 (1910); Mendelis v. Broening, 168 Md. 488 (1935); Bailey v. Bailey, 181 Md. 385 (1943); Wooddy v. Wooddy, 270 Md. 23 (1973); Corey v. Tuttle, 144 N. E. 230 (Mass. 1924); Bissell v. Village of Williamsville, 254 N.Y.S. 33 (1931); Mayflower Industries v. Thor Corp., 86 A. 2d 293 (N.J. Super. 1952); Kelley v. Mallory, 277 P. 2d 767 (Ore. 1954); Ensher v. Ensher, Alexander & Barsoom, Inc., 9 Cal. Rptr. 732 (Dist.

Ct. of App. 3rd Dist. 1960). A rule expressly authorizing discretionary dismissal with prejudice over objection of the plaintiff and before there has been a hearing on the merits or some default or proscribed conduct by the plaintiff would be open to serious constitutional challenge. Consider Articles 20 and 23 of the ²³⁵ Maryland Declaration of Rights and the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Certainly such a power should not be lightly read into a rule by implication.

Maryland Rule 2 a provides that “[t]hese Rules shall be interpreted as declaratory of the practice and procedure as it existed prior to their adoption except insofar as is otherwise expressly provided or they are inconsistent therewith, or as may result from necessary implication.” The practice and procedure with respect to voluntary dismissal in equity as it existed prior to adoption of Rule 582 was succinctly stated in Camden Sewer Co. v. Mayor and City Council, 157 Md. 175 (1929) at 184: “It appears, therefore, to be well settled that when equity proceedings have progressed to such a point as to entitle the defendant to affirmative relief, or where, as stated by Chancellor Bland, [Hall v. McPherson], he becomes virtually clothed with the rights of an actor, the right of the complainant to dismiss as a matter of course ceases. We are of the opinion that ordinarily and as a general rule the complainant is master of his own litigation and has the right to dismiss his proceedings at any time up to a final determination of the case, by following the approved practice of making application to the court for leave so to do; but that when at any point of the proceedings the defendants become entitled to affirmative relief which it is proper for them to enforce in the proceedings then pending, the complainant no longer, as of course, has the right to dismiss * * *.” (Emphasis added.) Maryland Rule 582 is no more than a codification of this long standing practice. The first sentence of § a merely reiterates the rule that leave of court is necessary for voluntary dismissal. * Camden Sewer and Potomac Edison ²³⁶ Co. v. Public Service Commission, 165 Md. 458 (1933), make it clear that the requirement of prior court approval does not in itself limit the right of the plaintiff to dismissal. The obvious reason for the requirement is to prevent unilateral dismissal of cases in which a defendant has acquired a right to affirmative relief.

In any event, the most that can be implied from a requirement of court approval is the power to deny the requested relief. It is clear that discretionary power to dismiss with prejudice cannot be implied from the first sentence of § a. The purpose of the second sentence of § a, which requires that the order “specify whether the dismissal is with or without prejudice,” is to eliminate the doubt which sometimes arises when the order of dismissal fails to state whether it is with or without prejudice. See, e.g., Fledderman v. Fledderman, supra.

Not all dismissals prior to hearing on the merits are without prejudice. Voluntary dismissal with prejudice is the traditional entry upon settlement before trial. See the first note to Maryland Rule Appendix Form 21 b. There may be other circumstances in which a party may wish to dismiss his claim with prejudice.

See, e.g., Murphy v. Board of County Commissioners, 13 Md. App. 497 (1971). Thus, there is no basis for implication of a discretionary power to dismiss with prejudice from the second sentence of § a. No other part of Maryland Rule 582 is even arguably suggestive of such an implied power. The notice provision complements the requirement of court approval and is part of the scheme to avoid unilateral dismissal of cases in which a party other than the dismissing party has a right to affirmative relief which he wishes to pursue in that action. ²³⁷ There has been no healing on the bill of complaint in this case.

Before the chancellor the appellants argued that the foreclosure proceedings had rendered moot their requests for purely equitable relief and that the remaining claims for damages could more