Davis v. Attorney General

DEBORAH S. EYLER, J. Katherine Anne Porter, the famous 20th Century American writer, died testate in Maryland on September 18, 1980. Her will created a charitable trust, designated the “Literary Trust” (or “Trust”), which is the subject of this appeal. From July 18, 1983, until June 20, 2007, the Circuit Court for Montgomery County assumed supervisory jurisdiction over the Trust. The supervision ended after the court, by order, accepted a “Notice of Trust Termination” filed by trustee Barbara T. Davis, the appellant.

Several months later, the Attorney General of Maryland filed a petition in the circuit court to rescind the order terminating the Trust and to award damages against Davis for breach of trust. The Attorney General’s petition was filed on behalf of the State and the University of Maryland College Park, the beneficiary of the Trust, and the Dean of the University of Maryland Libraries, the appellees. After receiving evidence by way of documents and affidavits, and holding a hearing, the court issued on March 10, 2008, an order that, among other things, vacated the order terminating the Trust and reinstated the court’s supervision ¹¹⁶ over the Trust. Davis noted this appeal.

The appellees have moved to dismiss the appeal as not allowed by law. For the reasons that follow, we hold that Davis’s appeal of that part of the March 10, 2008 order vacating the Trust termination order is allowed by law; it is within this Court’s authority to review the other interlocutory rulings Davis is challenging in this appeal; we shall uphold those rulings; and the circuit court did not err or abuse its discretion in vacating the Trust termination order and re-assuming supervisory jurisdiction over the Trust. FACTS AND PROCEEDINGS Porter executed her last will (“Will”) in 1972. 1 By Article VI, later amended by three codicils, she created the Literary Trust, granting “all of my literary works, my writings, my papers, my notes, my letters to and from others and all property rights attendant to such literary works, writings, papers, notes, and letters” to a named trustee. It was Porter’s expressed intention to dispose of all her literary works and rights by way of the Literary Trust.

Porter named as beneficiary of the Trust the University of Maryland College Park. During her life, Porter had given and sold literary works and tangible personal items to the University of Maryland, which established and maintained the “Katherine Anne Porter Collection.” Further by Article VI, Porter gave her executor, E. Barrett Prettyman, Jr. (a lawyer and friend) “the power to designate one or more successor trustees to serve at any time and from time to time, concurrently or consecutively” should the named trustee of the Trust fail to qualify or complete his or her duties, or should it otherwise become necessary. The Will did not identify a successor to Prettyman, however. The original trustee of the Literary Trust died on July 18, 1993.

Prettyman designated Davis, a close friend of Porter’s, ¹¹⁷ as the successor trustee. The court ratified that appointment by order of November 29, 1993. Twelve years went by. On December 14, 2005, the court approved appointments, by Prettyman, of two sequential literary trustees, to serve in the event that Davis could not continue to do so.

These appointments were made by Pretty-man upon Davis’s request. Beginning in the spring of 2006, and continuing for about a year, Prettyman, Davis, and Charles B. Lowry, then-Dean of the University of Maryland Libraries, exchanged a series of letters about the future of the Trust. Lowry proposed to Prettyman that the Office of Dean of the University of Maryland Libraries be appointed as permanent successor trustee of the Trust. Davis disagreed with the proposal, and sought to persuade Prettyman otherwise.

For purposes of this appeal, it is not necessary to explore the reasons underlying the disagreement as to the future of the Literary Trust. It is enough to say that Lowry and Davis felt strongly about their divergent positions and that Prettyman, having the sole power to appoint a trustee, was in the role of decisionmaker. On May 10, 2007, Prettyman wrote to Davis, saying he was drawing near to making a decision and giving Davis an opportunity to reply to Lowry’s latest correspondence before he did so. On May 23, 2007, Davis (through her husband, an attorney) incorporated the “Katherine Anne Porter Foundation” (“Foundation”), which was organized as a charitable foundation under the federal tax code.

Davis wrote her reply letter to Pretty-man that same day, stating that, due to her concerns about the eventual lapse in authority to appoint a successor trustee that would happen upon Prettyman’s demise, and to address Lowry’s issues, she was in the process of forming the Foundation as the legal entity that “will be solely and perpetually dedicated to preseiving Katherine Anne’s intellectual property rights and legacy.” Davis commented that in her view, as trustee, the Foundation would be “better suited to use the Trust property to carry out the wide variety of Katherine Anne’s ¹¹⁸ intentions as outlined in her Will” than would be the University of Maryland, which, in Davis’s opinion, “ha[d] failed to maintain educational and literary programs in keeping with the advantageous use of the assets of the Trust.” Prettyman responded to Davis by letter of June 4, 2007, expressing “shock[ ]” at her plan to terminate, unilaterally, the Literary Trust, and informing her, among other things, that as of that date he had appointed Lowry and Beverly Lowry (no relation) “as co-Literary Trustees to serve with you.” (It appears, however, that the court was not asked to ratify, and did not ratify, the two new co-trustees at that or any other relevant time.) On June 8, 2007, Davis transferred all of the Trust’s assets to the Foundation. She did not inform Prettyman or Lowry of that fact. Exactly a week later, she filed in the circuit court a “Notice of Trust Termination.” By order docketed on June 20, 2007 (“June 20 Order”), the court terminated the Trust subject to Davis’s filing a final accounting. The final accounting then was filed and approved by order of July 17, 2007.

Around five months later, on December 27, 2007, the appellees filed an unverified “Petition for Re-Assumption of Jurisdiction and Complaint for Breach of Trust” (“Petition”). They alleged that none of them had been given the notice required by law of Davis’s “Notice of Trust Termination,” or of the entry of the June 20 Order. They asked among other things . that the June 20 Order be rescinded and that the court re-assume jurisdiction over the Trust. On January 3, 2008, the court issued an order directing Davis to show cause why the relief sought by the appellees should not be granted.

The court scheduled a show cause hearing for March 3, 2008. Davis filed a motion to dismiss because the Petition was not verified. She enumerated other grounds for her motion as well, including that, for the appellees to obtain the relief they were seeking, the court would have to vacate its June 20 Order, but the facts alleged in the Petition were not sufficient to show fraud, mistake, or irregularity under Rule 2-535(b). ¹¹⁹ Davis did not file a substantive response to the allegations in the Petition, including the allegations of lack of notice. Approximately one week later, she filed a motion to strike the show cause order and to postpone the show cause hearing.

On February 26, 2008, the Attorney General’s Office filed a “Verified Petition for Re-Assumption of Jurisdiction and Complaint for Breach of Trust” (“Verified Petition”), signed by Lowry. Except for the verification, the Verified Petition was exactly the same as the originally filed Petition. Three days later, the Attorney General’s Office supplemented its Verified Petition with affidavits and documents supporting them, which we shall discuss in greater detail below. The show cause hearing went forward as scheduled on March 3, 2008.

After counsel made their arguments, the court found “that there was such procedural irregularities here that the Court, sitting in equity and as the supervising court exercising its jurisdiction [over the Trust] since 1983, not only is permitted to reopen this case but has an obligation to do that.” The court characterized the “Notice of Trust Termination” as “woefully deficient” and found, “[t]here has been a procedural irregularity. The rules were not complied with and they were not even minimally complied with.” The court rejected Davis’s counsel’s argument that, even if there were a procedural irregularity in filing the “Notice of Trust Termination,” it did not matter, because as trustee Davis had such broad powers to transfer the assets of the Trust that it would have made no difference to the outcome of the case had the appellees received notice. The court determined that the “Notice of Trust Termination” procedure had been “highly improper” so as to “rise[ ] to the level [of] clear and convincing evidence that there was an irregularity here.” On that ground the court decided to vacate the June 20 Order. On March 10, 2008, the court entered an order doing so (and vacating the July 17, 2007 follow-up order as well); re-assuming jurisdiction over the Trust; and denying Davis’s motions to dismiss and to strike ¹²⁰ show cause order (“the March 10 Order”).

That order further directed that [Davis], as Literary Trustee, shall file with the Trust Clerk of this Court, with service on Assistant Attorney General Gary W. Kuc, a written notice of intent with proposed order before any asset held by the Literary Trust immediately prior to the transfer described in the Notice of Termination ..., or representing income from such transferred assets, is disbursed or made the subject of a contract. The Literary Trustee shall ensure that such assets and income are not disbursed or made the subject of a contract absent prior approval by order of the Court, unless otherwise agreed between counsel as to ordinary expenses. Davis filed her notice of appeal within 30 days of the entry of the March 10 Order. She poses three questions for review, which we have rephrased slightly: I. Did the circuit court abuse its discretion, or fail to exercise discretion, by vacating the June 20 Order pursuant to Rule 2-535(b)?

II

Did the circuit court abuse its discretion by denying her motion to strike show cause order and continue hearing?

III

Did the trial court abuse its discretion by enjoining her from using the Foundation’s assets without court order or consent? DISCUSSION Motion to Dismiss Ordinarily, an order vacating an enrolled judgment is treated as a final judgment, and therefore is immediately appealable. Ventresca v. Weaver Bros., Inc., 266 Md. 398, 403 , 292 A.2d 656 (1972) (quoting Mutual Benefit Soc’y of Balt., Inc. v. Haywood, 257 Md. 538, 540 , 263 A.2d 868 (1970)); see also Kraft v. Sussex Constr. Corp., 35 Md.App. 309, 311 (1977).

Citing Gay Investment Co. v. Angster, 231 Md. 318 , 190 A.2d 95 (1963), the appellees argue that an exception to this general ¹²¹ rule applies here. According to the appellees, because Davis did not serve them with or give them notice of the “Notice of Trust Termination,” the June 20 Order never became a final judgment, and thus is not appealable. Davis counters that the appellees’ reliance upon Gay is misplaced, and that lack of notice does not affect an order’s finality or enrollment. We agree with Davis that the Gay case is not controlling in these circumstances.

In Gay, a confessed judgment note was entered against the defendant. Pursuant to then Maryland Rule 645, a summons was issued, but was returned without being served. Almost three years later, the defendant filed a motion to strike, which was granted. The plaintiff noted an appeal.

The defendant moved to dismiss the appeal, arguing that the order was not a final judgment and therefore was not appealable. In deciding whether to dismiss the appeal, the Court of Appeals explained that it was necessary to determine whether the confessed judgment was a final and enrolled judgment, or if it was not final because there was not service of process upon the resident defendant, pursuant to Rule 645. The Court found that the Rule had not been complied with, thus rendering the confessed judgment not final. The Court therefore granted the defendant’s motion to dismiss on that basis.

Unlike in Gay, where the issue was lack of service of process, here the issue was lack of notice. This was an ongoing case, in which the court had obtained jurisdiction decades ago. All that was required procedurally for the Trust termination issue to be properly raised and before the court was for Davis to “serve all interested persons and all others exercising control over any of the fiduciary estate by mailing to them, by ordinary mail, a copy of the petition and a show cause order.” Md. Rule 10-505(b) (2007). 2 Because service of process was not required, and only notice was required, Gay is ¹²² inapplicable. While there was not proper notice pursuant to Rule 10—505(b), the court addressed this problem by vacating the June 20 Order.

Thus, the lack of notice issue has been addressed, and the March 10 Order is properly treated as appealable. As noted above, in this appeal, Davis challenges more than the circuit court’s decision to vacate the June 20 Order. She also challenges the court’s denial of her motion to strike show cause order and for continuance, and the court’s directive, in its March 10 Order, that she obtain court approval before transferring or encumbering any Trust assets. These are interlocutory rulings that are not themselves subject to appeal.

And, if the court’s ruling vacating the June 20 Order is upheld, the case will proceed in circuit court, and thus shall continue. The denial of a motion to vacate an enrolled judgment is a final order, subject to appeal, as there is nothing left to be done in the circuit court. See First Federated Commodity Trust Corp. v. Comm’r of Sec., 272 Md. 329, 333 , 322 A.2d 539 (1974); Kraft, supra, 35 Md.App. at 311 , 370 A.2d 570 . The grant of a motion to vacate an enrolled judgment is not a final order, as it does not resolve the case; indeed, it reopens it.

As we have explained, however, such an order is treated as final for purposes of appeal. The rationale for that well-established principle is that the person who benefitted from the now-vacated enrolled judgment has lost an important right, and therefore an appeal of the ruling is necessary to vindicate that right, if it was wrongfully lost. See Ventresca, supra, 266 Md. at 403 , 292 A.2d 656 . Because the March 10 Order is treated as a final appealable judgment, this Court has jurisdiction over this appeal.

There is no issue of a jurisdictional defect. Ordinarily, in an appeal from a final judgment, all prior interlocutory orders are subject to review. Rule 8-131(d). The Court of Appeals has made plain, however, that review of prior interlocutory orders “only applies to appeals from final judgments in the usual sense” and does not usually apply to statutorily ¹²³ sanctioned appeals from interlocutory orders or appeals from orders that are not final, but are treated as if they are.

Snowden v. Balt. Gas & Elec. Co., 800 Md. 555 , 559-60 n. 2, 479 A.2d 1329 (1984). However, to the extent such previous rulings directly control and are inextricably bound to the order that is treated as final for purposes of appeal, those rulings may be challenged.

See id. at 560 n. 2, 479 A.2d 1329 (quoting United Stales v. Fort Sill Apache Tribe, State of Okla., 507 F.2d 861, 863-64 (Ct.Cls.1974). See also Shaffer v. Globe Protection, Inc., 721 F.2d 1121, 1122, 1124 (7th Cir. 1983)). In this case, the rulings Davis challenges all are included in the March 10 Order and all are intertwined with the court’s decision to vacate the June 20 Order. Accordingly, those rulings properly may be challenged in this appeal.

I. A circuit court’s power to revise its judgments is governed by Md.Code (1973, 2006 Repl.Vol.), section 6-408 of the Courts and Judicial Proceedings Article (“CJ”), and Rule 2-535. CJ section 6^08 provides: For a period of 30 days after the entry of a judgment, or thereafter pursuant to [a] motion filed within that period, the court has revisory power and control over the judgment. After the expiration of that period the court has revisory power and control over the judgment only in case of fraud, mistake, irregularity, or failure of an employee of the court or of the clerk’s office to perform a duty required by statute or rule. Rule 2-585(a) likewise provides that, “[o]n motion of any party filed within 30 days after entry of judgment, the court may exercise revisory power and control over the judgment.” Under Rule 2-535(b), “[o]n motion of a[ ] party filed at any time, the court may exercise revisory power and control over the judgment in case of fraud, mistake, or irregularity.” The existence of fraud, mistake, or irregularity must be shown by “clear and convincing evidence.” Das v. Das, 133 ¹²⁴ Md.App. 1, 18, 754 A.2d 441 (2000).

See also Weinreich v. Walker, 236 Md. 290, 296 , 203 A.2d 854 (1964); Bowen v. Rohnacher, 15 Md.App. 280, 284 , 290 A.2d 560 (1972). Once fraud, mistake, or irregularity has been shown, the court may vacate the judgment upon consideration of equitable factors, including whether the moving party has shown that he has acted in good faith and with ordinary diligence, and that he has a meritorious cause of action or defense, as the case may be. See Thacker v. Hale, 146 Md.App. 203, 217 , 806 A.2d 751 (2002) (“Moreover, the party moving to set aside the enrolled judgment must establish that he or she ‘act[ed] with ordinary diligence and in good faith upon a meritorious cause of action or defense.’ ” (quoting Platt v. Platt, 302 Md. 9, 13 , 485 A.2d 250 (1984))); see also J.T. Masonry Co. v. Oxford Constr. Servs., Inc., 314 Md. 498, 506 , 551 A.2d 869 (1989) (“The power of the circuit court to revise a final judgment which has been entered for more than thirty days requires, in addition to fraud, mistake, irregularity or clerical error, ‘that the person seeking the revision acts with ordinary diligence and in good faith upon a meritorious course of action or defense.’ ” (quoting Platt, supra, 302 Md. at 13 , 485 A.2d 250 )); Md. Lumber Co. v. Savoy Constr.

Co., 286 Md. 98, 102 , 405 A.2d 741 (1979); Williams v. Snyder, 221 Md. 262, 270 , 155 A.2d 904 (1959). We review a circuit court’s determination of whether there was fraud, mistake, or irregularity for clear error and legal correctness. See In re: Adoption/Guardianship No. 93321055/CAD, 344 Md. 458 , 475-76 n. 5, 687 A.2d 681 (1997) (noting that, if a court denies a motion to vacate judgment because the “event or conduct underlying the motion did not constitute cognizable fraud, mistake, or irregularity,” the issue on appeal is “a purely legal one”), overruled in part on other grounds, In re Adoption/Guardianship Nos. 11387 & 11388, 354 Md. 574 , 731 A.2d 972 (1999). We review the court’s exercise of discretion to vacate the judgment, upon consideration of the equitable factors, for abuse.

See Bland v. Hammond, 177 Md.App. 340, 347 , 935 A.2d 457 (2007); Wells v. Wells, 168 Md.App. 382, 394 , 896 A.2d 1082 (2006). ¹²⁵ An “irregularity” is “ ‘the doing or not doing of that, in the conduct of a suit at law, which, conformable to the practice of the court, ought or ought not to be done.’ ” Autobahn Motors, Inc. v. Mayor and City Council, 321 Md. 558, 562 , 583 A.2d 731 (1991) (quoting Weitz v. MacKenzie, 273 Md. 628, 631 , 331 A.2d 291 (1975)); see also Hughes v. Beltway Homes, Inc., 276 Md. 382, 388 , 347 A.2d 837 (1975) (quoting Weitz, supra, 273 Md. at 631 , 331 A.2d 291 ); Minger v. State, 157 Md.App. 157, 169 , 849 A.2d 1058 (2004) (quoting Gautt v. State, 99 Md.App. 100, 104 , 635 A.2d 97 (1994)). Furthermore, an