Gordon, Feinblatt, Rothman, Hoffberger & Hollander v. Gerhold

³⁶² ALPERT, Judge. This appeal is about the priority of writs of attachment. The appellant asks us to decide whether a court may grant one spouse, at the termination of a divorce proceeding, an ex parte order to eliminate the automatic stay of enforcement of judgments in her favor. The appellant also asks us to determine whether the lower court erred in denying its motions for release of attached property and in declaring null and void certain of its writs of garnishment and dismissing others.

While we would answer the first inquiry in the negative, we shall nevertheless affirm. FACTS This appeal began with a series of sorry events not directly at issue in the case sub judice: Lee Gerhold (Lee) and Helen Gerhold (Helen) (one of the appellees) had been married more than fourteen years when Lee was arrested and charged with conspiring to murder Helen. Lee entered guilty pleas, and is incarcerated, where he likely will remain for the rest of his life. 1 Immediately after Lee was arrested, Helen filed a Complaint for Divorce, and a motion requesting an order enjoining Lee from transferring his assets. On January 4, 1989, the trial court granted this motion, and enjoined Lee from selling or spending any of his assets without the court’s approval. 2 The court later amended the injunction to allow for the sale of the Gerholds’ house, the proceeds from which were held by their attorneys in trust for the benefit ³⁶³ of both Lee and Helen.

The interest-bearing escrow accounts contain in excess of $317,000, and their disposition is the source of the present controversy. Helen also proceeded against Lee in a tort action, suing him for damages for intentional and negligent infliction of emotional distress, fraud, and other torts. That case was Gerhold v. Gerhold, Case No. 1122242, Circuit Court for Anne Arundel County. Although the tort case was not consolidated for appeal with the other cases discussed infra, it is relevant to the instant appeal in that Helen obtained a writ of garnishment pursuant to an order allowing attachment before judgment, and this writ is among those in issue here.

Appellant, Gordon, Feinblatt, Rothman, Hoffberger and Hollander (the law firm) obtained from Lee two Confessed Judgment Promissory Notes: one for $20,000, and the other for $55,000. Lee owed the firm these sums for the payment of fees and disbursements in connection with the firm’s ongoing legal representation of him, including representing him in the divorce proceedings. On January 27, 1989, the Circuit Court for Anne Arundel County entered judgment for $20,000; 3 on May 24, 1990, the same court entered judgment for $55,000. 4 We note that Lee signed the $20,-000 note just two and one-half weeks after the court enjoined him from transferring his assets. Lee signed the other note in May, 1990, also after the injunction issued.

The Gerholds’ divorce case proceeded to trial in early September, 1990. Helen’s counsel informed the court of the $20,000 judgment; Helen’s attorney was unaware of the $55,000 judgment, and Lee’s counsel did not volunteer the information. In the week before closing arguments, Helen’s counsel discovered the $55,000 judgment and also discovered that Writs of Garnishment had been issued, and that the law firm stood ready to garnish $75,000 of the ³⁶⁴ funds it held with Helen’s counsel in trust. 5 The court appointed as trustee P. Tyson Bennett, Esquire, and directed that the funds be divided for deposit at Maryland National and three other financial institutions: Farmers National Bank of Maryland, Annapolis Bank and Trust, and Augusta Federal Savings Bank. On January 11, 1991, the court entered a judgment of divorce, and granted Helen a monetary award of $522,000, as well as more than $44,000 in attorneys’ fees. 6 That same day, Helen also obtained an ex parte order eliminating the automatic ten day stay on enforcing judgments so that she could execute her judgments immediately.

The court granted Helen multiple writs of garnishment, including writs to garnish Lee’s interest in the accounts administered by Bennett. 7 Helen’s purpose in obtaining the ex parte order and the writs of garnishment was to establish a priority in her favor against Lee’s other judgment creditors: the trust account being Lee’s sole remaining substantial asset, Helen’s only serious hope of obtaining payment of her judgments is to be first in line among his creditors. Helen’s writs of garnishment were served on Bennett on January 11; they were served on the banks on January 14. ³⁶⁵ On January 18, Helen filed two motions to alter or amend the judgments entered in the divorce case. On January 16, 1991, Helen also obtained in the tort suit an order allowing her to attach before judgment the funds Bennett held. She obtained a writ of garnishment and served this on Bennett.

On January 18, the law firm sought and was issued writs of garnishment in the confessed judgment cases. These were served against Bennett and the banks to garnish Lee’s interest in the trust accounts. The writ intended for Bennett was served upon his secretary, however, who was not authorized to accept personal service on Bennett’s behalf. On January 21, Lee filed a motion to vacate Helen’s January 11 ex parte order and to quash her writs of garnishment on the ground that the order eliminating the ten day stay of execution was improper.

On January 22, Helen asked for additional writs of garnishment; the court issued these on January 23. Among these was an additional writ for Bennett, and this was served on January 28. The law firm also sought to obtain a share of Lee’s assets in the divorce case: arguing that its writs of garnishment had priority over Helen’s writs of garnishment, the firm on February 11 filed on its own behalf four motions for release of property to release from Helen’s garnishments Lee’s interest in the accounts. In late February, the court conducted a hearing on open motions, and on February 21 and 22, 1991, ordered the cases consolidated for the garnishment proceedings.

It also ordered that all writs of garnishment to the banks were null and void. It ordered Bennett to continue to hold the funds in trust, except for sums to be disbursed to Helen. It dismissed the writs of garnishment served on Bennett, and denied the law firm’s motion to release property. The court also denied the law firm’s motions to vacate Helen’s ex parte order, and to quash the writs issued on her behalf. ³⁶⁶ Finally, the court ruled on the parties’ several motions to amend or alter the judgments in the divorce case.

The law firm now appeals. The firm’s two confessed judgment cases and the divorce case were consolidated for appeal. 8 The law firm’s questions on appeal are as follows: 1. Did the court err in granting Helen Gerhold’s ex parte motion to eliminate the automatic stay of enforcement of the judgments in her favor? 2. Did the court err in denying the Law Firm’s Motions For Release of Property to release from Helen Gerhold’s garnishments Lee Gerhold’s interest in the accounts held by the Banks and Bennett and declaring its writs of garnishment on the Banks null and void and in dismissing its writ of garnishment on Bennett?

THE EX PARTE MOTION ELIMINATING THE AUTOMATIC STAY OF ENFORCEMENT The law firm argues that the court was powerless to eliminate the automatic ten day stay of enforcement provided in Maryland Rule 2-632 because this case does not fall within any of that rule’s exceptions. Helen’s motion to eliminate the automatic stay in part was based upon that rule, and upon Maryland Rule 1-204, which ostensibly allows a court to shorten the period required by other rules. The law firm attacks this foundation on several fronts. It argues that Rule 1-204 does not apply to the instant case because Maryland Rule 2-632(b) prohibits enforcement of a judgment for ten days, and is not a provision “allowing” or “requiring” that an act be done.

Furthermore, it argues that Rule 1-204’s purpose is to modify the time during which a pleading or paper must be filed, and that it cannot be used to eliminate the stay of enforcement in issue here. Finally, it contends that the court had no basis for issuing ³⁶⁷ an ex parte order 9 because “[t]he only ‘prejudice’ which Helen Gerhold alleged is that she would lose the opportunity to effect a priority in her favor, which she has no right to in the first place.” 10 Maryland’s Stay of Enforcement rule is derived from Federal Rule of Civil Procedure 62, and although there are some differences, their contents are substantially the same. Maryland Rule 2-632(b) provides that: [ejxcept as otherwise provided in this Rule, enforcement of a judgment is automatically stayed until the expiration of ten days after its entry. An order granting an injunction or appointing a receiver is not automatically stayed unless the Court so orders. ³⁶⁸ See also F.R.C.P. 62(a) (“no execution shall issue upon a judgment nor shall proceedings be taken for its enforcement until the expiration of 10 days after its entry”).

Both rules were intended to give the opposing party an opportunity to file post-trial motions. The Court of Appeals Standing Committee on Rules of Practice and Procedure meeting minutes contain the following explanation of the automatic stay provision: In section (a) of this Rule, enforcement is automatically stayed to allow the defendant time to file any of several motions made available under the trial rules. The ten day time period correlates with the time for filing such motions pursuant to those trial rules. While this automatic stay affords the defendant time to file allowable motions, the ten days does not postpone levy so significantly as to afford the judgment debtor an unnecessary head start.

However, since all enforcement, including levy, is delayed ten days, it should be unnecessary for the sale rule to expressly provide for delay of sale of levied property until thirty days after entry of the judgment. Rules Committee Minutes, May 21/22, 1982 at 12. See also 7 Moore’s Federal Practice ¶ 62.03 (1990) (Rule 62(a) gives party time to prepare for appeal or determine what other method of review should be taken). Although we find no Maryland cases on point, our survey of federal case law makes clear that where an appeal is not in issue, either because an appeal is unavailable or because the stay would impede some other judicial purpose, the automatic stay may be eliminated.

Where the judgment is appealable, however, or where its suspension would not thwart some other legitimate judicial purpose, the stay remains in force. For example, in Iowa Beef Processors v. Bagley, 601 F.2d 949, 955 (8th Cir.1979), cert. denied, 441 U.S. 907 , 99 S.Ct. ³⁶⁹ 1997, 60 L.Ed.2d 376 , the court of appeals found that Rule 62(a)’s automatic stay provision does not apply where no appeal lay from a district court order partially lifting a protective order allowing a congressional subcommittee to take possession of documents in the course of discovery. The appellant was a meat packing concern that had been the subject of numerous private antitrust suits. After the departure of one of its vice presidents, the appellant alleged that the vice president had taken with him confidential business documents and disclosed them to others.

Upon the appellant’s suit against its former vice president and those to whom he allegedly disclosed the documents, the district court issued a protective order preventing disclosure of the concern’s confidential business information. In the meantime, a congressional subcommittee became interested in meat industry pricing practices, and served upon the defendants subpoenas compelling production, inter alia, of the protected documents. At the former vice president’s request, the district court dissolved the protective order, to the extent necessary to allow him to comply with the subpoena. When the subcommittee learned of the district court’s order, it took physical possession of the documents.

The meat packing concern meanwhile appealed, and the question presented was whether the district court abused its discretion in granting the vice president’s motion to lift the protective order. Although the subcommittee was not a party either to the underlying litigation or to the appeal, the meat packing concern asked the court of appeals to order the subcommittee to return the documents and to refrain from revealing their contents. See id. at 955. The meat packers argued that the subcommittee unlawfully obtained the documents: that Federal Rule of Civil Procedure 62(a) operated automatically to stay for ten days the order partially lifting the protective order.

Id. The appeals court found that the subcommittee did not violate the protective order when it took possession of the documents. Id. The district court order that partially lifted the protective order was not a ‘final decision’ because ³⁷⁰ the order is not one that ends the litigation, leaving the court nothing to do except to execute the judgment.

See id. at 952 (quoting Catlin v. United States, 324 U.S. 229 , 65 S.Ct. 631 , 89 L.Ed. 911 (1945)). In that the order was not a final decision, no appeal was possible, and the automatic ten day stay provision does not apply. Id. at 955. This theme echoes the one expressed in In re Manufacturers Trading Corp., 194 F.2d 948 (6th Cir.1952), in which the appellant was not entitled to an automatic stay because the order was not appealable.

A loan company filed a petition in bankruptcy for reorganization, whereupon the district court appointed a trustee to investigate the loan company, and to make a report to creditors, stockholders, and to the SEC. The appellant was served with a subpoena requiring him to appear before a special master in the bankruptcy proceedings and to bring documents relating to accounting work he performed for the loan company. Id. at 950 . The appellant appeared before the Special Master, and inquired of the Trustee in Bankruptcy what his purpose was in examining the appellant.

The Trustee responded that he was trying to determine whether there was a basis for a cause of action in the Trustee’s favor against the appellant’s accounting firm arising from its preparation of audit reports over the years. Id. at 950-51 . The appellant thereupon submitted to the Special Master a motion to quash the subpoena, arguing that the Trustee’s purposes were improper. The Special Master denied this motion on the ground that fishing expeditions of this sort are appropriate; he also assured the appellant that the transcript of the bankruptcy proceedings could not be used as evidence.

Id. at 951 . The examination proceeded, but the appellant repeatedly refused to answer one of the Trustee’s questions. The appellant applied to the district court to sustain the motion to quash, but the district court also denied the motion, and directed the appellant to continue the examination before the Special Master. The appellant again refused to answer the question.

The Special Master certified the ³⁷¹ proceedings to the district court, and recommended that the court punish the appellant for contempt. The district court eventually held the appellant in contempt, putting him into custody until he obeyed the court by submitting to the examination. On appeal, the appellant argued, inter alia, that the district court improperly denied his motion to quash the subpoena and ordered him to submit to examination; he also complained that the judge erred by entering the order adjudging him guilty of contempt during the period in which the appellant claimed that he was entitled to an automatic ten day stay after entry of the orders. Id. at 952 .

The Sixth Circuit Court of Appeals wrote that “[i]n order to qualify ... for the automatic ten-day stay, a judgment or order must be one from which an appeal may be taken.” Id. The court found that although the United States Code grants appeals from interlocutory orders in proceedings in bankruptcy (of which this was one), “this does not mean that every order in the course of the proceedings is appeal-able. Due regard for the efficiency of the administration and dispatch of the proceedings necessitates a commonsense interpretation ... of the statute in order that the right to appeal be limited within reasonable bounds.” Id. The court concluded that the district court’s order denying the appellant’s motion to quash is not of the class of proceedings reviewable on appeal, notwithstanding the fact that it might affect some substantial right of the appellant. “[T]he order denying the motion to quash does not substantially determine any issue in the proceeding; and an interlocutory order which determines nothing is not appealable.” Id. at 953 .

The court added that “where the granting or refusal of a motion in bankruptcy is within the discretion of the court, and there is no claim or showing of an abuse of discretion, the order should not be considered an appealable order entitled to an automatic stay of ten days.” Id. at 954 . The court next considered whether the appellant was entitled to an automatic ten day stay from entry of the ³⁷² order adjudging him guilty of contempt. Id. at 955 . The court found the order appealable, but upon considering whether it was a ‘judgment’ entitling the appellant to an automatic stay, the court noted that “a proceeding for contempt of court is summary in form and swift in execution ... and its efficiency as a means of securing the unimpeded administration of the law depends upon its summary character.” Id. at 956 (citations omitted).

The court concluded that: There can be no question that a contempt order, directed to making a witness answer