Cohn v. Freeman

DAVIS, J. FACTUAL AND PROCEDURAL BACKGROUND Appellant, Bernice Cohn, filed the instant appeal, aggrieved by the Order of the Circuit Court for Anne Arundel County, which established the date to begin the accrual of post-judgment interest of her award of $151,838 as of November 14, 2003, rather than January 14, 2000. The case reaches this Court for the third time, and appellant and appellees, Ernest Freeman, Redge Mahaffey, Louis Biosca, Kerry Hurlebaus, and XLG Cellular Partnership (XLG), agree that the facts have been thoroughly set forth in the two unreported opinions, Ernest Freeman, et al. v. Bernice Cohn, et al, No. 1673, ²⁵⁷ September Term, 2000, 142 Md.App. 713 (filed Jan. 10, 2002) (Freeman I), and Ernest Freeman, et al. v. Bernice Cohn, No. 2231, September Term, 2003, 159 Md.App. 739 (filed November 23, 2004) (Freeman II). We shall recite briefly the facts as set forth in Freeman II in order to provide context for this appeal. The parties were involved in a partnership, XLG, for the purpose of pooling their applications for cellular licenses awarded by lottery by the Federal Communications Commission (FCC).

Freeman II, slip op. at 1. The group also intended to profit from the sale of any licenses awarded. Id. The partnership applied to the first lottery with several partners winning licenses and the resulting cellular systems.

Id. at 3 (citing Freeman I). The profits, totaling over eight million dollars, were distributed evenly among the partners. Id. In a second lottery, Hurlebaus was selected as the winner of the cellular licensing rights for the RSA services for Lebanon, Pennsylvania and Claibourne, Louisiana.

Id. at 3-4 (Quoting Freeman I). Hurlebaus, by the time he was selected to receive the cellular licenses, had become involved in the ownership of several radio stations, including WMTO in Florida. Id. at 4. Through a series of maneuvers, a majority of the XLG group invested in WMTO.

Id. The WMTO group entered into an agreement and, additionally, Hurlebaus promised the group investing in WMTO that they would not lose any money on their investment. Id. at 5. More than two years after the agreement was entered into by the WMTO group, Hurlebaus wired $1.56 million dollars to the XLG account, without explanation.

Id. Aware that the Lebanon RSA system had been sold, it was assumed that the wire transfer represented the profits from the sale minus Hurlebaus’ one-fifth share. Id. Mahaffey deducted $603,352 from the wire and distributed the remaining balance equally among the other XLG partners.

Id. The deducted amount was the sum required to reimburse the WMTO group for their losses. Id. at 6. ²⁵⁸ Appellant sued for her one-fourth share of the $603,352. The case was tried without a jury and the court found in favor of appellant in the amount of $151,308, plus pre-judgment interest at 6% from December 1, 1993.

Appellees appealed and we quote from Freeman II the disposition of the appeal and the subsequent remand. In Freeman I, the argument by the defendants was that they had invested the monies in WMTO LP not only in the hope of making a profit but also for the purpose of preserving Hurlebaus’s position as a winning applicant for the Lebannon RSA cellular license. Under those circumstances, defendants argue, CA § 9-401(2) authorized their majority action and bound the plaintiff to the agreement of September 1991, without her consent. On that point this Court said: “[A] partner is [not], as a matter of law, barred from recovery under Section 9-401(2) when the partnership has more than one purpose for making payments.

Nevertheless, one purpose of the partner’s investment must be for the preservation of its business or property and that purpose must be reasonable. The trial court did not say whether it believed that appellants invested in WMTO with such reasonable purpose in mind. Motivation is generally a factual matter, to be decided by the trier of fact.” Specifically, we directed the circuit court “to make two factual findings: (1) a determination as to whether the investment into WMTO was made in the ordinary and proper conduct of XLG’s business; and (2) a determination as to whether one reasonable purpose of appellant’s investment was to preserve the partnership property within the meaning of [CA] Section 9-401(2).” On remand, the parties agreed to proceed by memoranda and oral argument, based on the unsupplemented trial testimony and exhibits. The circuit court answered both questions in the negative.

The lost investments in WMTO LP were not in the ordinary and proper conduct of XLG’s business because the circuit court found that “[t]he only ²⁵⁹ business or purpose of XLG was to distribute the profits resulting from successful applications and sales of cellular licenses.” In rejecting that the lost investments were “for the preservation of [XLG’s] business or property,” the circuit court analyzed the evidence as set forth below: -“It is quite clear, based on the circumstances, Mahaffey, Biosca, and Freeman invested in WMTO to make a personal profit. Only when the ‘plan’ fell through did they claim said investment was for the preservation of XLG’s interests.” -The Cohns were not included in the September 1991 meeting. -They were not alerted to the WMTO LP transaction. -Nothing in the record suggested that the defendants would have shared profits from WMTO LP had it been successful. -“[I]t is quite clear, as this Court found before, Defendants’ ‘investment’ in the radio station was purely personal in nature. It was a venture to bail Hurlebaus out of a bad financial situation, and to make some money based on a promise by Hurlebaus that Defendants would not lose any money.” -The defendants, “after the fact[,] tried to claim their motivation or intention was to protect XLG in order to have their personal expense absorbed by XLG.” Id. at 7-9 (emphasis in original). Following the decision by the circuit court, on November 13, 2003, on remand, appellees once again appealed, on December 16, 2003.

Their principal argument on appeal, in Freeman II, was “that the record compelled a finding that the investment was to preserve an asset of XLG.” Id. at 10. We disagreed with appellees and, on November 23, 2004, issued an unreported opinion in that case, reasoning: The purpose of the remand was to give the defendants an opportunity to persuade the finder of fact that the investment by the partners of WMTO LP was both to make a ²⁶⁰ profit and to protect the interest of XLG in any sale of a Lebanon license awarded to Hurlebaus. It is perfectly clear that the defendants failed to meet their burden of justifying why the plaintiff, an equal partner in XLG, was treated unequally. In addition to the reasons given by the trial court, and presented in bulletin form above, we note the following: -It is not inconsistent with the known facts for Hurlebaus to have taken off the top of the Lebanon license sale the expenses he incurred in protecting that license with the FCC. -The defendants never presented a clear explanation of the relationship between money paid to Radionet to acquire WMTO and elimination of any jeopardy to the Lebenon license. -Other than a witness from the FCC, the person who was in the best position to explain the connection was Hurlebaus, but he testified that there was no connection. -Even if Hurlebaus’s share of the $336,750 purchase price paid by WMTO LP for the assets of Radionet was used by him to clear up some unspecified problems that had adverse FCC implications for the award to him of the cellular license for Lebanon, the individual defendants took an additional $266,602 ($603,352-$336,750) off the top of the $1.56 million wired to XLG.

This action reinforces that the defendants were acting in their self interest as partners in WMTO LP and not for the benefit of XLG. Id. at 14-15. After we affirmed the trial court’s decision in Freeman II, appellees filed a Motion for Order of Satisfaction on January 13, 2005. The motion asserted that an escrow account had been established, in lieu of an appeal bond, and the account, as of November 30, 2004, contained $270,904.16.

The motion also claimed that the parties were unable to agree on the amount due under the judgment and explained that appellees had reached their figure of $268,362.70 based upon the Court of Appeals’ decision in Carpenter Realty Corp. v. Imbesi, 369 ²⁶¹ Md. 549, 567, 801 A.2d 1018 (2002). Appellees began the accrual of post-judgment interest in their calculation from November 14, 2003, and their calculation included pre-judgment interest at 6% from December 1, 1993 through November 13, 2003. The motion requested relief in the form of an Order declaring the judgment had been satisfied in the above amount. Appellant filed a response claiming that the amount due was $306,505.73 and that appellees had miscalculated the interest, which should have been calculated from January 14, 2000, the date of the court’s original decision.

Appellant’s calculation included pre-judgment interest for the period of December 1, 1995 through June 14, 2000, and post-judgment interest from June 15, 2000 through January 18, 2004. A hearing was held and, on April 29, 2005, the court entered an order finding that the commencement date to begin calculating post-judgment interest was November 14, 2003. The Order of Court stated that the case was governed by Carpenter Realty Corp., supra. The court, after analyzing the rationale undergirding the opinion, stated: In the instant case, the first appellate decision was to vacate and remand the case to the trial court for consideration of two questions that could have totally altered the result of the case.

If the trial court had answered those questions affirmatively, rather than negatively, the result would have been a judgment in favor of Defendants not Plaintiff. Thus, it cannot be said that the vacating of the original judgment was intended to preserve Defendants’ liability to Plaintiff as originally determined by the trial court. Vacating the original judgment had the effect of eliminating that judgment and requiring the trial court to enter a new judgment based upon additional fact finding. That the trial court’s second judgment resulted in the same amount had no bearing on the analysis.

Appellant filed this timely appeal, presenting one issue for our review: Whether the trial court erred in determining that the appropriate date from which to begin assessing post-judg ²⁶² ment interest was November 14, 2003, rather than June 14, 2000[.] LEGAL ANALYSIS Appellant claims that the trial court erred in finding that post-judgment interest began to accrue on November 14, 2003, rather than June 14, 2000. She argues that the proper inquiry is whether the purpose of awarding post-judgment interest has been served. The circumstances under which this case was decided, she asserts, when considered in light of the proper inquiry, can only lead to the conclusion that post-judgment interest should be calculated from the date of the original judgment. Additionally, appellant argues that the trial court’s reliance upon Carpenter Realty Corp. was misplaced because, in the instant matter, the decision of the trial court was not reversed.

The argument is that it was necessary in order to permit the court to make its additional findings, as a procedural matter, to vacate the original order, which did not have the effect of a reversal. This case, she contends, is much closer to Brown v. Medical Mut. Liab. Ins.

Soc’y, 90 Md.App. 18 , 599 A.2d 1201 , cert. denied, 326 Md. 366 , 605 A.2d 101 (1992). Appellees disagree with appellant’s contention that Carpenter Realty Corp. is inapplicable to this case. They contend that the case was correctly decided by the trial court and, to vacate a judgment, is the equivalent of a reversal. See Schlossberg v. Citizens Bank of Maryland, 341 Md. 650 , 672 A.2d 625 (1996).

They argue that the true reason for remand was the necessity to make factual findings, which impact on the outcome of the case. Post-judgment interest is specifically authorized by Maryland Rule 2-604(b). That Rule provides, “A money judgment shall bear interest at the rate prescribed by law from the date of entry.” Rule 2-604 replaced Maryland Rule 642, which provided: A judgment by confession or by default shall be so entered as to carry interest from the time the judgment was ren ²⁶³ dered. A judgment on verdict shall he so entered as to carry interest from the date on which verdict was rendered.

A judgment nisi entered by the court following a special verdict pursuant to Rule 560 (special verdict) or by the court without jury pursuant to Rule 564 (Trial by Court) shall be so entered as to carry interest from the date of entry of judgment nisi, (emphasis supplied.) See Brown, 90 Md.App. at 22 , 599 A.2d 1201 . Thus, the Court explained that Rule 2-604(b), while simplifying the rule by removing references to judgments nisi, was not intended to change the substantive law. Id. at 22-23 , 599 A.2d 1201 . The Court stated, referring to the minutes of the Committee on Rules of Practice and Procedure, that “in the ordinary case when judgment is entered on a jury verdict, it is intended that the judgment will carry interest from the date on which the verdict is entered as a judgment____” Id. at 23 , 599 A.2d 1201 .

Several cases have considered the issue raised by this appeal, albeit in a different context, procedurally. In Cook v. Toney, 245 Md. 42 , 224 A.2d 857 (1966), the plaintiff sued Toney and two other individuals for damages related to an automobile accident. Id. at 44 , 224 A.2d 857 . The trial concluded on March 29, 1960, with a judgment nisi for $5,000 entered against Toney and one other concurrent tortfeasor.

Id. at 45 , 224 A.2d 857 . On April 1, 1960, Toney moved for Judgment n.o.v. or, in the alternative, for new trial and, on April 2, 1960, judgment absolute was entered against the concurrent tortfeasor. Id. Toney was granted a new trial on April 22, 1960.

Id. The case finally reached its conclusion on September 20, 1965, when a jury rendered a verdict against Toney, which became a judgment absolute on September 23, 1965. Id. at 46 , 224 A.2d 857 . Thereafter, the plaintiff filed a bill for declaratory judgment against Toney for interest on the judgment from April 2, 1960.

Id. at 47 , 224 A.2d 857 . The Bill for Declaratory Judgment was dismissed with prejudice and the court ruled that plaintiff was not entitled to interest on the judgment from April 2, 1960 to October 4, 1965, the date on which the judgment was paid. Id. at 47-48 , 224 A.2d 857 . ²⁶⁴ The Court explained that the granting of a new trial as to Toney eliminated entirely the judgment nisi and the case as to Toney was in the same position as if no trial had been held. Id. at 49 , 224 A.2d 857 .

The Court then explained why, under then Maryland Rule 642, no post-judgment interest could be assessed against Toney from the verdict rendered on March 29,1960. In that regard, the Court stated: “A judgment on verdict shall be so entered as to carry interest from the date on which the verdict was rendered.” (Emphasis supplied). As the verdict of March 29, was completely eliminated by the granting of the new trial on April 22, 1960, that verdict against Toney obviously cannot be made the basis of a later judgment against Toney for any purpose whatever including the date from which interest would run, and, as already observed, the plaintiff-appellant does not so contend. Id. at 50 , 224 A.2d 857 .

The Court continued, There is no doubt that if the motion of Toney for a new trial had been overruled or if the granting of a new trial had in the limited cases in which the granting of such a motion is appealable, been reversed by this Court on appeal, the plaintiff would have been entitled to interest from March 29, 1960, ... Id. The Court indeed determined that the plaintiff was not entitled to post-judgment interest as of April 2,1960: There can be no question, however, that although the amount of damages was concluded by the judgment of April 2,1960, against the concurrent tortfeasor, Toney’s obligation to pay did not attach until a verdict was rendered against him on September 20, 1965, and the judgment absolute entered on that verdict on September 23, 1965. It was this verdict of September 20, from which interest would run pursuant to the applicable provision of Maryland Rule 642 as indeed this is the first and only verdict in legal contemplation against Toney.

Id. at 51 , 224 A.2d 857 (citations omitted). In Great Coastal Express Inc. v. Schruefer, 39 Md.App. 88 , 383 A.2d 74 (1978), the appellant complained that the trial ²⁶⁵ court erred in granting post-judgment interest from the date of the original verdict in the case following a mandate from this Court, filed in the circuit court, which was as follows: ‘Judgment in favor of Shasta Beverages affirmed; Judgments in favor of Darlin Sue Schruefer, Richard Lynn Schruefer, Barbara Ann Schruefer and Travelers Indemnity Company vacated and remanded for modification and entry of proper judgments in accordance with this opinion.... ’ (Emphasis added.) Id. at 91-92 , 383 A.2d 74 . The case was remanded following the first appeal, because we determined that the trial court erred in entering a separate judgment for Travelers. Id. at 90 , 383 A.2d 74 .

While we could have altered or modified the judgment, we were unable to do so; therefore, remand was necessary. Id. On appeal, following the remand and entry of judgments and interest thereon, we determined that the plaintiffs were entitled to interest from the date of the original judgment in March of 1976, rather than May 31, 1977-the date upon which the court entered its order modifying the judgments. We stated, “In the instant appeal, the verdicts in favor of the plaintiffs below remained wholly undisturbed and unaffected by the technical requirement of our mandate ...” Id. at 92 , 383 A.2d 74 .

After distinguishing the case from Cook, supra, on the ground that no new trial had been granted, we reasoned: In this case, the original verdicts were untouched by our action and the plaintiffs (appellees) were the successful suitors as of the date of rendition in March 1976, and, as such, appellees were entitled to interest as of that time. Id. at 92-93 , 383 A.2d 74 . We again had the opportunity to consider the date upon which post-judgment interest was to begin to accrue in Brown, supra, relied upon by appellant. In that case, following a jury verdict in favor of the plaintiff, the trial court granted the defendant’s motion for j.n.o.v. Brown, 90 Md.App. at 20 , 599 A.2d 1201 .

The plaintiffs appealed the grant of j.n.o.v. and we reversed the circuit court, issuing a mandate which provided: ²⁶⁶ Judgment notwithstanding the verdict reversed; judgment entered for appellants [the Browns] on the verdict of the jury; appellee to pay costs. Id. at 20-21 , 599 A.2d 1201 (citing Brown v. Meda, 74 Md.App. 331, 346 , 537 A.2d 635 (1988)). Thereafter, the judgment was paid along with post-judgment interest from the date we issued our mandate to the date the judgment was paid. Id. at 21, 599 A.2d 1201 .

The Browns argued that our reversal of the j.n.o.v. entitled them to interest from the date of the initial judgment. Id. The appellee, Med. Mutual, argued that the circuit court’s grant of its motion for j.n.o.v. functioned just as the grant of a new trial, eliminating the original verdict and any interest thereon.

Id. at 24 , 599 A.2d 1201 . We held in favor of the appellant, Brown, that post-judgment interest was to begin accruing from the date of the original judgment for two reasons. Id. at 25