De Arriz v. Klingler-De Arriz

DAVIS, J. The action of the circuit court in the instant appeal presents a classic case of the proverbial, “No good deed goes unpunished.” The court attempted to remediate retrospectively its earlier effort to absolve appellant of what it viewed as oppressive interest payments which would accrue on the monetary award granted appellee. We are tasked to determine whether it properly applied Maryland Rules 9-210 and 2-648 to prevent appellant’s law firm from establishing priority in the proceeds from the sale of the marital home over the marital award granted to appellee. Appellants, Raul deArriz and the law firm of Brodsky, Greenblatt, Renehan & Pearlstein, Chartered, 1 appeal from an Order of the Circuit Court for Montgomery County entered on June 29, 2007, in favor of appellee, Laura Klinger-deArriz. The Order grants appellee’s Emergency Motion To Reconsider, To Revise and to Alter and/or Amend the Court’s Order Entered on April 28, 2006 (Emergency Motion) and orders the clerk of the court to enter a money judgment against the ⁴⁶² Brodsky firm in favor of appellee in the amount of $110,000.

Appellants filed this timely appeal, presenting the following issues for our review, 2 which we have rephrased and consolidated as follows: I. Whether the trial court erroneously granted appellee’s Emergency Motion.

II

Whether the trial court erroneously entered a money judgment against the Brodsky firm in favor of appellee in the amount of $110,000. For the reasons that follow, we resolve the issues in favor of appellants and, accordingly, reverse the judgment of the Circuit Court for Montgomery County. FACTUAL AND PROCEDURAL BACKGROUND Since appellee’s Complaint for Absolute Divorce was filed on October 21, 2004, appellant and appellee have been engaged in contentious and protracted litigation regarding their divorce and ancillary matters. After a seven-day divorce trial on the merits, the trial judge made extensive findings of fact and rulings of law, which are included in her thirty—nine page Memorandum Opinion that accompanies her Judgment, of Absolute Divorce, both entered on April 28, 2006. 3 ⁴⁶³ At issue in this appeal is the circuit court’s Order in its Judgment of Absolute Divorce that commanded that “[appellee] shall be and is hereby granted a monetary award against [appellant] in the amount of $110,000 ... and said award shall be payable upon settlement of the sale of the [marital home located at 5905 Griffith Road, Laytonsville, Maryland].” Significantly, the trial judge did not reduce the monetary award to a judgment, explaining on the record that, if the court had entered a judgment, but stayed the judgment’s execution until the date of settlement, substantial interest would have accrued and, thus, as a benefit to appellant, the judge did not enter a money judgment.

On October 20, 2006, appellant and appellee entered into a contract to sell their marital home for $1,075,000. Settlement was scheduled for January 16, 2007. Prior to settlement, on January 11, 2007, appellant and appellee received a draft settlement sheet, whereupon appellee learned, for the first time, that the Brodsky firm had filed a deed of trust in the amount of $145,534.28, excluding interest, against appellant’s interest in the marital home on October 5, 2006. With the purchase money mortgage, as the first mortgage encumbering the property, the Brodsky firm’s deed of trust comprised one-half of appellant’s net proceeds from the expected sale.

On January 12, 2007, four days before settlement, the Brodsky firm filed another deed of trust; this time in the amount of $101,862.30, excluding interest. On that same day, upon the filing of a petition for contempt by the Montgomery County Office of Child Support Enforcement, appellant consented to a judgment in the amount of $22,993.98 for child support arrearages. Thus, at the time of settlement, four liens encumbered appellant’s title to the marital home, effectively eliminating appellant’s interest in the marital home. Appellant conveyed to the Brodsky firm the two deeds of trust as payment for a portion of his attorney’s fees owed in relation to his legal representation in the domestic relations ⁴⁶⁴ case. 4 Because appellant would receive no proceeds from the sale of the marital home, appellee objected to the Brodsky firm’s liens taking priority over the monetary award.

Due to the controversy regarding the deeds of trust, settlement did not proceed as scheduled. On January 24, 2007, appellant filed an Emergency Motion to Appoint A Trustee to Sell the Former Marital Home and to Enforce the Parties Agreement. In it, he requested that a trustee be appointed to consummate the sale of the marital home, that the appointed trustee be compensated for its service from appellee’s net proceeds of the sale and that the Brodsky firm be paid all o f the ne t proceeds due and owing to appellant. On January 30, 2007, appellee filed an opposition to appellant’s motion and, additionally, submitted to the trial court an Emergency Motion, requesting that the court revise the Judgment of Absolute Divorce nunc pro tunc, thereby giving appellee’s monetary award priority over the Brodsky firm’s two liens.

A day before the rescheduled settlement date, on February 8, 2007, the trial court heard oral arguments on the motions. During the hearing, as a temporary solution, the Brodsky firm agreed to the withdrawal of their liens in the amount of $110,000 with the understanding that the firm would maintain its filing date for purposes of determining priority at a later court hearing. 5 The trial court made no ruling and took the matter under advisement. On February 9, 2007, settlement occurred as planned and the settlement company deposited $110,000 into the court registry pursuant to a consent order. 6 On February 20, 2007, ⁴⁶⁵ appellant filed an opposition to appellee’s Emergency Motion; appellee thereafter filed a reply to that opposition. A second hearing took place on March 16, 2007, during which the parties disputed whether the Brodsky firm had a right to the escrowed funds.

During the hearing, the trial court engaged in a colloquy with counsel for appellant, examining the ethical ramifications of the Brodsky firm’s deeds of trust in relation to Rules 1.7 and 1.8 of the Maryland Lawyers’ Rules of Professional Conduct. At the conclusion of the hearing, the trial court took the matter under advisement and scheduled another hearing for May 10, 2007. Prior to the May 10 hearing, the trial judge informed counsel to address the applicability of Maryland Rules 9-210(b) and 2-648. The day before the hearing, the Brodsky firm filed a memorandum specifically addressing the court’s inquiry.

Because the trial court was contemplating the entry of a judgment against the Brodsky firm, the firm retained independent counsel and was represented by that counsel at the hearing. All parties addressed the issues raised by the trial judge and attempted to answer the judge’s query of whether the court may enter a money judgment against the Brodsky firm in favor of appellee in the amount of the marital award. The trial court took the matter under advisement and allowed appellee the opportunity to respond in writing to appellant’s written submissions. Counsel for the Brodsky firm was also permitted to file a response.

On June 29, 2007, the trial court granted appellee’s Emergency Motion and ordered the clerk of the court to enter a money judgment against the Brodsky firm in favor of appellee in the amount of $110,000 pursuant to Rule 2-648. In support of the Order, the trial court issued a Memorandum Opinion and Notice of Judgment. Additional facts will be provided, hereafter, as warranted. ⁴⁶⁶ ANALYSIS I Appellants initially argue that, upon an examination of the record, the facts do not support a finding of fraud, mistake or irregularity and, thus, the trial court erroneously granted appellee’s Emergency Motion. While appellants acknowledge that the trial court’s ruling on a motion pursuant to Maryland Rule 2—535(b) 7 is reviewed for an abuse of discretion, they submit that the trial court is not yielded “unfettered discretion” in revising an enrolled judgment and that “a court’s revisory powers do not provide for the amendment of an enrolled judgment on the ground of ‘fundamental unfairness.’ ” Wells v. Wells, 168 Md.App. 382, 394 , 896 A.2d 1082 (2006); Thacker v. Hale, 146 Md.App. 203, 231 , 806 A.2d 751 (2002).

Appellee, however, contends that, under Rules 9-210(b) and 2-648, the trial court properly entered a money judgment against the Brodsky firm and, thus, did not abuse its discretion in granting the Emergency Motion. Notwithstanding this fact, appellee concedes that the trial court would not have erred if it had indeed resolved the controversy pursuant to Rule 2-535(b). On February 8, 2007, appellee filed an Emergency Motion, requesting that the trial court revise the Judgment of Absolute Divorce, pursuant to Maryland Rule 2-535(b), 8 nunc pro tunc. Appellee argued that the Judgment of Absolute Divorce and accompanying Memorandum Opinion clearly indicate that the trial court entered a money judgment for the monetary award as of the date of the divorce decree and merely stayed its payment until appellant and appellee sold the marital home.

Alternatively, appellee contended that, even if the trial ⁴⁶⁷ court did not reduce the monetary award to a judgment, the express language of the Memorandum Opinion demonstrates that the court intended to do so and, therefore, the court can fix the irregularity. Appellant responded that the trial court lacked the authority to revise its Judgment of Absolute Divorce under Rule 2-535(b) and (d) because the “error” was not an irregularity or clerical mistake within the judicially accepted meaning of the terms. Consequently, appellant argued that the court was without authority to revise the Judgment of Absolute Divorce nunc pro tunc. At the May 10 hearing, counsel for appellant and appellee presented their arguments under Rule 2-535.

Additionally, the parties, including the Brodsky firm, responded to the trial judge’s query regarding the applicability of Rules 9-210(b) and 2-648. The court took the matter under advisement and, on June 29, 2007, granted appellee’s Emergency Motion. The Order 9 10 specifically incorporates the Memorandum Opinion, wherein the trial court, after summarizing the arguments of appellant and appellee regarding Rule 2-535(b), opined that “[b]oth [appellee] and [appellant] present cogent arguments in support of their respective positions on this issue. The [c]ourt finds it unnecessary to resolve this dispute given the resolution of the controversy on other grounds.” The trial court thereafter proceeded to discuss in detail Rules 9-210(b) and 2-648, ultimately concluding that “[f]or the foregoing reasons, and in accordance with Md. Rule 2-648(b), this ⁴⁶⁸ [c]ourt enters a money judgment against the Brodsky [f]irm in favor of [appellee] in the amount of One Hundred and Ten Thousand Dollars ($110,000).” When reading the Order and Memorandum Opinion as a whole and interpreted in light of the facts on which they are based, it is clear that the trial court granted appellee’s requested relief, but did not grant appellee’s Emergency Motion based upon Rule 2-535(b).

The instant matter came before the trial court via appellee’s Emergency Motion. Throughout the three hearings and responsive pleadings filed, appellee consistently maintained that she was entitled to the $110,000 held in the court registry. Thus, by granting appellee’s Emergency Motion, the court was granting appellee’s entitlement to those funds. The trial court did not expand its power to revise an enrolled judgment because the court did not technically revise or amend the Judgment of Absolute Divorce.

Platt v. Platt, 302 Md. 9 , 485 A.2d 250 (1984). The terminology employed by the trial court was intended to show that the Order was entered in favor of appellee. It was pursuant to Rule 2-648 that the trial court enforced the Judgment of Absolute Divorce by entering a money judgment against the Brodsky firm. Accordingly, to review the trial court’s ruling we must determine whether appellant is a non-complying obligor pursuant to Rule 9-210(b) and whether, under Rule 2-648(b), the Brodsky firm is a transferee with knowledge, which we shall discuss infra.

Prior to doing so, however, we examine the arguments of appellant and appellee regarding Rule 2-535(b). Appellants assert that appellee failed to establish the evidence necessary for the trial court to find fraud, mistake or irregularity by clear and convincing evidence. Thacker, 146 Md.App. at 217 , 806 A.2d 751 . By contrast, appellee contends that there was a “combination of irregularity and/or fraudulent behavior” sufficient for the trial court to resolve the controversy pursuant to Rule 2-535(b).

An irregularity, which will permit a court to exercise revisory powers over an enrolled judgment, is defined as “the ⁴⁶⁹ doing or not doing of that, in the conduct of a suit at law, which, comformable to the practice of the court, ought or ought not to be done.” Weitz v. MacKenzie, 273 Md. 628, 631 , 331 A.2d 291 (1975). Consequently, an irregularity, in the contemplation of Rule 2-535(b), usually means “irregularity of process or procedure,” not an error, “which in legal parlance, generally connotes a departure from truth or accuracy of which a defendant had notice and could have challenged.” Id. (internal citations omitted). Courts, therefore, have held “that if the judgment under attack was entered in conformity with the practice and procedures commonly used by the court that entered it, there is no irregularity justifying the exercise of revisory powers under Rule 2-535(b).” Thacker, 146 Md.App. at 221 , 806 A.2d 751 (citing Home Indem.

Co. v. Killian, 94 Md.App. 205, 217 , 616 A.2d 906 (1992)). Section 8-205(c) of the Family Law Article of the Maryland Annotated Code provides that a trial court “may reduce to a judgment any monetary award made under [§ 8-205], to the extent that any part of the award is due and owing.” The trial court intentionally decided not to enter a money judgment in the amount of the monetary award as a benefit to appellant. Thus, the failure to reduce the monetary award to a judgment was not an irregularity or a clerical mistake. Because the Judgment of Absolute Divorce was entered in conformity with the practice and procedures commonly used by the trial court, appellee is unable to establish an irregularity by clear and convincing evidence, justifying the exercise of revisory powers under Rule 2-535(b).

Thacker, 146 Md.App. at 217 , 806 A.2d 751 ; see, e.g., Alban Tractor Co. v. Williford, 61 Md.App. 71 , 484 A.2d 1039 (1984), cert. denied, 302 Md. 680 , 490 A.2d 718 (1985) (holding that a clerk’s failure to send a copy of the final order to the defendant may be an “irregularity”); Mutual Benefit Soc’y of Baltimore, Inc. v. Haywood, 257 Md. 538 , 263 A.2d 868 (1970) (holding that dismissal without notice is an “irregularity” as defined in Rule 2-535(b)). ⁴⁷⁰ With respect to fraud as a basis for the court’s revisory power, we draw the distinction between “extrinsic” and “intrinsic” fraud. A litigant seeking to set aside an enrolled decree must prove extrinsic and not intrinsic fraud. In Manigan v. Burson, 160 Md.App. 114, 120-21 , 862 A.2d 1037 (2004), we explained the principle underlying the rule that an enrolled decree will not be vacated, even though obtained by the use of forged documents, perjured testimony, or any other frauds which are “intrinsic” to the case itself: [O]nce parties have had the opportunity to present before a court a matter for investigation and determination, and once the decision has been rendered and the litigants, if they so choose, have exhausted every means of reviewing it, the public policy of this State demands that there be an end to that litigation----This policy favoring finality and conclusiveness can be outweighed only by a showing “that the jurisdiction of the court has been imposed upon, or that the prevailing party, by some extrinsic or collateral fraud, has prevented a fair submission of the controversy.” Id. (citing Billingsley v. Lawson, 43 Md.App. 713, 719 , 406 A.2d 946 (1979)).

Appellants have neither imposed upon the jurisdiction of the circuit court nor have they prevented an adversarial trial and, thus, appellee has failed to demonstrate intrinsic fraud. II Maryland Rules 9-210(b) and 2-648 Appellants next argue that, notwithstanding the procedural anomaly in granting appellee’s Emergency Motion under Rules 9-210 and 2-648, the record does not support the trial court’s finding that appellee is entitled to relief. Asserting that appellant is not a non-complying obligor and that the Brodsky firm is not a transferee with knowledge, appellants contend that the trial court erroneously entered a money judgment against the Brodsky firm in favor of appellee in the amount of $110,000. Specifically, appellants argue that the Judgment of Absolute Divorce’s “nebulous dictate regarding ⁴⁷¹ the timing of payment of the monetary award was not directed toward any specific or particular property” and, thus, they cannot be subject to the strictures of Rules 9-210 and 2-648.

Appellee responds that “it is truly audacious” for appellants to argue that the trial court erroneously entered a money judgment against the Brodsky firm and, in support of her contention, incorporates the trial court’s Memorandum Opinion verbatim. Rule 9-210(b) provides, in pertinent part, “When the court has ordered ... a monetary award, the property of a noncomplying obligor may be seized or sequestered in accordance with the procedures of Rules 2-648....” Id. Appellant failed to pay the monetary award upon settlement of the sale of the marital home and, therefore, appellant is unquestionably a non—complying obligor. Accordingly, we turn to Rule 2-648 for guidance in determining how a court may order the seizure or sequestration of appellant’s property to the extent necessary to compel compliance with the Judgment of Absolute Divorce.

Rule 2-648 provides: (a) Generally. When a person fails to comply with a judgment prohibiting or mandating action, the court may order the seizure or sequestration of property of the noncomplying person to the extent necessary to compel compliance with the judgment and, in appropriate circumstances, may hold the person in contempt pursuant to Rules 15-206 and 15-207. When a person fails to comply with a judgment mandating action, the court may direct that the act be performed by some other person appointed by the court at the expense of the person failing to comply. When a person fails to comply with a judgment mandating the payment of money, the court may also enter a money judgment to the extent of any amount due.

(b) Against Transferee of Property. If property is transferred in violation of a judgment prohibiting or mandating action with respect to that property, and the property is in the hands of a transferee, the court may issue a subpoena for the transferee. If the court finds that the transferee had actual notice of the judgment at the time of the ⁴⁷² transfer, the transferee shall be subject to the sanctions provided for in section (a) of this Rule. If the court finds that the transferee did not have actual notice, the court may enter an order upon such terms and conditions as justice may require.

Appellant and the Brodsky firm entered into an agreement whereby the Brodsky firm was authorized to impose two liens, totaling $247,396.58, on appellant’s interest in the marital home as remuneration for services rendered. See Pence v. Norwest Bank Minnesota, N.A., 363 Md. 267, 277 , 768 A.2d 639 (2001) (“The modern conception of a lien is that it is a right given by contract, statute or rule of law to have a debt or charge satisfied out of a particular property.”). The trial court found that, in reaching the agreement, appellant was represented by independent counsel and that there w as no evidence of fraud. At the time each deed of trust was filed, perfection occurred and the Brodsky firm established a priority right in the encumbered property with respect to third party creditors.

See Messinger v. Eckenrode, 162 Md. 63 , 158 A. 357 (1932) (holding that liens are effective from the date of entry and among “several judgments against the same debtor they take effect according to their date and are entitled to be satisfied in order of their seniority____”). The Judgment of Absolute Divorce, entered on April 28, 2006, did not reduce the monetary award to a judgment and, thus, with no other superseding liens on the property, the Brodsky firm’s deeds of trust establish the firm’s priority to the $110,000 held in the registry. See Md.Code Ann., Cts. & Jud. Proc. § 11-401(2) (2006) (“ ‘Money judgment’ does not include a judgment mandating the payment of money.”); § ll-402(b) (“If indexed and recorded as prescribed by the Maryland Rules, a money judgment of a court constitutes a lien to the amount and from the date of the judgment....”).

Given that the Brodsky firm held title to the funds in the court registry, the trial court utilized Rule 2-648(b) as a vehicle for entering a money judgment against the firm. To ⁴⁷³ fall within the ambit of Rule 2-648(b), property must be “transferred in violation of a judgment prohibiting or mandating action.” /(¿.(emphasis added). Contrary to appellants’ contentions, the Rule does not specifically provide that property must be transferred in violation of a “money judgment.” A “judgment” is defined as “any order of court final in its nature entered pursuant to these rules.” Md. Rule l-202(n). The Judgment of Absolute Divorce is a judgment that mandates appellant to pay a monetary award at the time of settlement of the sale of the marital home and, thus, constitutes a “judgment” for the purposes of Rule 2-648.

If property is transferred in violation of a judgment and is in the hands of the transferee, “the court may issue a subpoena for the transferee.” Md. Rule 2-648(b). The Brodsky firm was never issued a subpoena by the trial court and, hence, it argues that it was not afforded procedural due process. A subpoena “means a written order or writ directed to a person and requiring attendance at a particular time and place to take the action specified therein.” Md. Rule l-202(y). Every subpoena shall contain the caption of the action, the name and address of the person to whom it is directed, name of the person at whose request it is issued, the date, time and place where attendance is required and a description of any documents or other tangible things to be produced.

M d. Rule 2-510(c). The court informed counsel to prepare arguments regarding the applicability of Rules 9-210 and 2-648 for the May 10 hearing. Thus, as the Brodsky firm admits, it knew that the trial court was contemplating an entry of judgment against the Brodsky firm.

In anticipation thereof, the Brodsky firm retained independent counsel. Considering all the mandates required by Rule 2-510(c), we conclude that the trial court’s failure to issue a subpoena to the Brodsky firm is of no consequence. Furthermore, the Brodsky firm had available every opportunity to present its arguments before the trial judge and to submit any brief or memorandum with the court. ⁴⁷⁴ Next, in accordance with Rule 2—648(b), “If the court finds that the transferee had actual notice of the judgment at the time of the transfer, the transferee shall be subject to the sanctions provided for in subsection (a) of [the] Rule,” including contempt, seizure or sequestration of property and the entry of a money judgment. Finding that the Brodsky firm possessed actual notice of the mandate requiring appellant to pay appellee a monetary award at the time of settlement, the court reasoned: If the Brodsky [f]irm was a third party creditor with no notice of the Judgment of Absolute Divorce mandating the payment of a monetary award at the time of settlement, then the [c]ourt would look solely to [appellant] to remedy the unpaid monetary award.

Md. Rule 2-648(a). However, the Brodsky [f|irm as counsel for [appellant] throughout the underlying divorce proceedings, knew of and fully comprehended the obligations owed by [appellant] as a result of the Judgment of Absolute Divorce. Md. Rule 2-648(b). The Brodsky firm argued forcefully at the various hearings held on