John B. Parsons Home, LLC v. John B. Parsons Foundation

BERGER, J. This case arises out of an order of the Circuit Court for Wicomico County granting summary judgment in favor of appellee, the John B. Parsons Foundation (“the Foundation”), against appellant, John B. Parsons Home, LLC (“JBPH”). This appeal requires us to determine the rightful beneficiary of a trust executed by Francis C. Baker in 1964 (“the Baker Trust”). The circuit court concluded that the Foundation is the rightful beneficiary to the Baker Trust and, therefore, granted the Foundation’s request for declaratory judgment. Additionally, the circuit court dismissed the Foundation’s trover and conversion claim, as well as its accounting claim.

Manufacturers and Traders Trust Company (“M & T”) is the trustee of the Baker Trust. 1 On appeal, M & T contends that the rightful beneficiary of the Baker Trust is neither the Foundation nor JBPH. Rather, M & T argues that the rightful beneficiary is Harrison Enterprises (“Harrison”), the corporate parent of JBPH. Prior to awarding summary judgment to the Foundation, the circuit court denied Harrison’s motion to intervene. M & T asserts error in the circuit court’s failure to allow Harrison to intervene and further argues that the circuit court erred in dismissing M & T’s claim of constructive fraud against JBPH.

On appeal, JBPH presents two issues for our review, which we rephrase and consolidate as one issue: ⁴⁶ 1. Whether the circuit court erred in concluding that the Foundation is the rightful beneficiary of the trust. Additionally, the Foundation cross-appeals and presents one issue 2 for our review: 1. Whether the circuit court erred in dismissing the Foundation’s claim for trover and conversion.

M & T also cross-appeals and presents four issues for our review, which we rephrase and consolidate as follows: 1. Whether the circuit court erred in failing to require Harrison’s intervention as an indispensable party. 2. Whether the circuit court erred in granting the Foundation summary judgment. 3. Whether the circuit court erred in dismissing M & T’s constructive fraud claim against JBPH.

For the reasons that follow, we affirm the judgment of the Circuit Court for Wicomico County. FACTUAL AND PROCEDURAL BACKGROUND The material facts of this case are not in dispute. On July 1, 1964, Francis C. Baker established a trust (“the Baker Trust”). The trust instrument (“the Deed”) provides that, upon the death of certain named individuals (“the trigger event”), the trust will terminate, with the remaining proceeds distributed to three “named institutions, or [their] respective successor^].” Each of the three named institutions are charitable organizations. 3 One such institution is the “John B. Parsons—Salisbury Home for the Aged.” At the time the Baker Trust was executed, an entity known as the John B. Parsons—Salisbury Home for the Aged (“JBP ⁴⁷ Salisbury”) owned and operated a residential and health care home for the elderly (“the Home”), located at 300 Lemmon Hill Lane, Salisbury, Maryland 21801.

The Home and the entity that owned the Home shared the name the “John B. Parsons—Salisbury Home for the Aged” at the time the Baker Trust was established. 4 Due to economic considerations, JBP Salisbury subsequently solicited the financial and managerial support of J.P. Harrison, Incorporated (“J.P. Harrison”), a Pennsylvania corporation, to run the day-to-day operations of the Home. In 1983, J.P. Harrison and JBP Salisbury executed a lease agreement for J.P. Harrison to manage and operate the Home for a period of five years. Included in the lease agreement was an option agreement, which provided that, after five years, J.P. Harrison could purchase the Home from JBP Salisbury for a purchase price of $925,000. 5 Specifically, the option agreement provided: [JBP Salisbury] does hereby grant unto [J.P. Harrison Incorporated], its heirs or assigns, an option to purchase for the sum of Nine Hundred Twenty-Five Thousand Dollars ($925,000) the real estate more particularly described in “Exhibit A” ... [a]lso included with the real estate and covered by this Option are the inventory, equipment, furnishings, fixtures, accounts receivable, contract rights and any other personal or business assets located on the premises and/or regularly used by the John B. Parsons—Salisbury Home for the Aged. (Emphasis added).

On January 1, 1989, Harrison Enterprises (“Harrison”), on behalf of its corporate subsidiary, J.P. Harrison, exercised the ⁴⁸ option and JBP Salisbury, therefore, conveyed the Home to Harrison. 6 The articles of sale to the conveyance provide that: [JBP Salisbury] does hereby agree to sell, assign and transfer all or substantially all of its property and assets to [Harrison], its successors and assigns, as hereinafter set forth. (Emphasis added). The confirmatory deed for the articles of sale provides that “the conveyance of the property described herein ... constitutes all or substantially all of [JBP Salisbury’s] remaining assets.” (Emphasis added). The confirmatory deed further provides that JBP Salisbury conveyed “all those tracts or parcels of land situate[d] and lying in the Town of Wicomico County.” The January 1, 1989 bill of sale similarly provides that JBP Salisbury conveyed: all that certain personal property, tangible and intangible, which now or has been located on or about the premises of the John B. Parsons Home on Lemmon Hill Lane in Salisbury, Maryland including, but not limited to, all furniture, furnishings, fittings, fixtures, shrubbery, walks, fences, equipment, machinery, appliances, accessories, supplies, apparatus, inventory, equipment, accounts, records pertaining to the said John B. Parsons Home, contract rights, choses in action, good will and any other tangible or intangible property now or formerly located on or associated with the said John B. Parsons Home, or which was intended to be conveyed pursuant to a certain Option Agreement....

In 1992, as part of a corporate restructuring, JBP Salisbury changed its corporate name from JBP Salisbury to the John B. Parsons Foundation (“the Foundation”). Despite its sale of the Home, the Foundation continues to exist as a philanthropic and charitable non-profit organization. Among the continued philanthropic endeavors of the Foundation is the care for the elderly. ⁴⁹ In 1995, approximately six years after its acquisition of the Home, J.P. Harrison was reorganized and converted to Salisbury Retirement Center, Inc. (“SRC”), which took over responsibility of the day-to-day operations of the Home. In 2003, the Harrison entities again restructured and reorganized.

Included in the restructuring was the management of the Home, which was transferred from SRC to appellant, John B. Parsons Home, LLC (“JBPH”). 7 In 2003, the first trigger event occurred and, accordingly, the Baker Trust trustee 8 began making distribution payments. 9 Between July 2003 and 2012, M & T, and its corporate predecessor, made payments to JBPH in the amount of approximately $117,190.84. No request or demand was made by JBPH for such payment and JBPH allegedly only learned of the Baker Trust’s existence because of the distribution payments. Upon learning of M & T’s payments to JBPH, the Foundation demanded that M & T cease making payments to JBPH. The Foundation claimed that the Foundation, not JBPH, was the rightful beneficiary to the Baker Trust, and that M & T was erroneously making distribution payments to JBPH.

M & T complied with the Foundation’s request pending the outcome of the instant litigation. On April 17, 2012, the Foundation filed a complaint in the Circuit Court for Wicomico County. 10 In its complaint, the ⁵⁰ Foundation sought declaratory relief that it was the rightful beneficiary to the Baker Trust and demanded an accounting of all monies, gifts, or bequests received by JBPH on behalf of JBP Salisbury since 1984. In addition, the Foundation alleged trover and conversion claims against JBPH, as well as breach of trust against M & T due to M & T’s allegedly improper distribution payments to JBPH. During the course of litigation, Harrison moved for leave to intervene as a party defendant.

In its motion, Harrison set forth the Harrison corporate structure and explained that Harrison, not J.P. Harrison, was the entity that acquired “all or substantially all” of JBP Salisbury’s assets by virtue of the JBP Salisbury-J.P. Harrison conveyance. Harrison, however, only moved for permissive intervention, pursuant to Md. Rule 2-214(b) and (c). 11 The Foundation opposed Harrison’s motion to intervene and argued that Harrison’s interests were fully and adequately represented by JBPH because JBPH is the corporate subsidiary of Harrison. The Foundation further argued that permitting Harrison to intervene would cause unnecessary delay. On October 1, 2012, the circuit court denied Harrison’s motion to intervene.

Subsequently, the parties filed competing cross-motions for summary judgment. On December 14, 2012, the circuit court held a hearing on all outstanding motions, including the cross-motions for summary judgment. During the hearing, the Foundation argued that there could be no corporate “successor” to JBP Salisbury because the JBP Salisbury corporate entity still exists today, albeit under a different corporate name, i.e., the Foundation. The Foundation argued that it only transferred the real and personal property associated with the Home, not its unknown beneficiary rights to the Baker Trust.

The Foundation urged the circuit court to undertake a careful reading of the applicable conveyance ⁵¹ documents in assessing the rightful beneficiary of the Baker Trust. On the other hand, JBPH asserted that it was the institutional “successor” to JBP Salisbury because of its ownership of the Home and because it acquired “all or substantially all” of JBP Salisbury’s assets, including the beneficiary rights to the Baker Trust. JBPH argued it was the “institution” named in the Deed because the “institution” clearly referred to the Home itself, not whichever entity happened to own the Home. The circuit court held the matter sub curia in order to afford a careful reading of the applicable documents.

In addition, at the conclusion of the hearing, the circuit court dismissed M & T’s claim of constructive fraud against JBPH. 12 Subsequently, on February 25, 2013, the circuit court issued a memorandum opinion granting the Foundation summary judgment on the Foundation’s declaratory judgment action. In reaching its decision, the circuit court noted that it primarily relied on four documents: (1) the Francis C. Baker Trust dated July 1, 1964; (2) the option agreement between JBP Salisbury and J.P. Harrison dated December 29, 1983; (3) the articles of sale dated January 1, 1989; and (4) the bill of sale dated January 1, 1989. After reviewing the relevant documents, the circuit court concluded, inter alia, that the Foundation is the rightful beneficiary of the Baker Trust. The circuit court concluded that “the Option Agreement clearly intended to convey the option of purchasing real, personal and business property connected with the operation of the on-site nursing home, not the entire entity of ‘John B. Parsons Home-Salisbury Home for the Aged.’ ” ⁵² Moreover, the circuit court found it “impossible to conclude that the entire entity [of JBP Salisbury] had been sold” and found that “the documents, [when] read carefully, make clear that [JBPH] is not the successor to [JBP Salisbury].” Instead, the circuit court concluded that JBP Salisbury “continued to exist after the sale of the [Home],” and found, ultimately, that “[t]he Foundation, as a matter of law, is the beneficiary of [the Baker Trust].” The circuit court further determined that the alleged improper funds were intangible monies and, therefore, not subject to a conversion claim.

The circuit court, therefore, dismissed the Foundation’s claims alleging trover and conversion. 13 Additionally, the circuit court dismissed the Foundation’s request for an accounting. This timely appeal followed. We shall recite the relevant standard of review in the applicable sections of our “Discussion,” infra. DISCUSSION The central issue on appeal is whether the circuit court erred in determining the rightful beneficiary of the Baker Trust.

JBPH asserts that it is the “successor” to JBP Salisbury because of its acquisition, ownership, and operation of the Home. JBPH further contends that it is the beneficiary because it allegedly acquired “all or substantially all” of JBP Salisbury’s assets, including JBP Salisbury’s unknown beneficiary rights to the Baker Trust. The Foundation, however, argues that we need not reach the question of whether JBPH is the “successor” because the Foundation is the same entity as JBP Salisbury, albeit under a different corporate name. The Foundation alleges that the applicable conveyance documents transferred only the real and personal property associated with the Home.

The Foundation further maintains it ⁵³ continues in existence as a philanthropic non-profit organization that provides a multitude of philanthropic services, including the care for the elderly. As shall be discussed more fully infra, we agree with the Foundation and, therefore, affirm. I. Summary Judgment A. Standard of Review We review a circuit court’s entry of summary judgment de novo. Rodriguez v. Clarke, 400 Md. 39, 70 , 926 A.2d 736 (2007). “If no material facts are in dispute, we must determine whether summary judgment was correctly entered as a matter of law.” Id.

(quoting Property and Casualty Insurance Guaranty Corp. v. Yanni, 397 Md. 474, 480-81 , 919 A.2d 1 (2007)). We are “obliged to conduct an independent review of the record to determine if there is a dispute of material fact.” Injured Workers’ Ins. Fund v. Orient Express Delivery Serv., 190 Md.App. 438, 450-51 , 988 A.2d 1120 (2010) (citing Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 714 , 922 A.2d 538 (2007)). “A material fact is one that will alter the outcome of the case, depending upon how the fact-finder resolves the dispute.” Id. at 451, 988 A.2d 1120 (citing Berringer v. Steele, 133 Md.App. 442, 470-71 , 758 A.2d 574 (2000) (citations omitted)). “Mere general allegations of conclusory assertions will not suffice.” Id. (citing Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 738 , 625 A.2d 1005 (1993)).

In Catalyst Health Solutions, Inc. v. Magill, 414 Md. 457, 471-72 , 995 A.2d 960 (2010), the Court of Appeals explained: The standard of review for a declaratory judgment entered as a result of the grant of a motion for summary judgment is whether that declaration was correct as a matter of law. We have held that [wjhile it is permissible for trial courts to resolve matters of law by summary judgment in declaratory judgment actions, the court must, in a separate document and in writing, define the rights and obligations of the parties or the status of the thing in controversy. This ⁵⁴ requirement is applicable even if the action is not decided in favor of the party seeking the declaratory judgment. (Citations and internal quotation marks omitted) (alteration in original).

B. The Rightful Beneficiary of the Baker Trust We begin our analysis with an evaluation of the plain language of the Deed to the Baker Trust. “[A]s a general rule, the construction or interpretation of all written instruments is a question of law for the court ...” and, therefore, subject to a de novo review. Olde Severna Park Improvement Ass’n v. Gunby, 402 Md. 317, 329 , 936 A.2d 365 (2007) (citations omitted). “In construing the language of a deed, the basic principles of contract interpretation apply.” Olde Severna Park Improvement Ass’n, Inc. v. Barry, 188 Md.App. 582, 611 , 982 A.2d 905 (2009) (citations omitted). “These principals require consideration of ‘the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution.’ ” Chevy Chase Land Co. v. United States, 355 Md. 110, 123 , 733 A.2d 1055 (1999) (quoting Calomiris v. Woods, 353 Md. 425, 436 , 727 A.2d 358 (1999) (citation omitted)). Ordinarily, “the court gives effect to the intention of the parties, gleaned from the text of the entire instrument, unless that would violate a principle of law.” Gunby v. Olde Severna Park Improvement Ass’n, 174 Md.App. 189, 242 , 921 A.2d 292 (2007) (citations omitted). “The intention of the grantor is a question of fact, and the surrounding circumstances ... must be analyzed in order to truly understand an unexpressed intention.” Id. (citation omitted). “The ‘true test’ of what was meant by the language of the deed is what a reasonable person in the position of the parties would have thought it meant.” Goss v. C.A.N. Wildlife Trust, Inc., 157 Md.App. 447, 459 , 852 A.2d 996 (2004) (citations and internal quotation marks omitted). “We construe a deed without resort to extrinsic evidence, if the deed is not ambiguous.” Id. at 243, 921 A.2d ⁵⁵ 292.

In “interpreting a deed whose language is clear and unambiguous on its face, the plain meaning of the words used shall govern without the assistance of extrinsic evidence.” Drolsum v. Horne, 114 Md.App. 704, 709 , 691 A.2d 742 (1997). We also consider the language of the deed “in light of the facts and circumstances of the transaction at issue as well as the governing law at the time of conveyance.” Chevy Chase, supra, 355 Md. at 123 , 733 A.2d 1055 . Turning to the instant case, JBPH asserts the straightforward proposition that, when it allegedly acquired “all or substantially all” of the Foundation’s assets by virtue of the conveyance, JBPH became the rightful beneficiary of the Baker Trust. Specifically, JBPH alleges that it is the institutional “successor” to JBP Salisbury and, therefore, is the rightful beneficiary of the Baker Trust.

The Foundation, however, argues that it only transferred the real and personal property associated with the Home. As such, the Foundation argues that it did not transfer its unknown beneficiary rights to the Baker Trust. Indeed, the Foundation is still the same entity, carrying on the same charitable activities, that existed at the time the Baker Trust was created. Therefore, according to the Foundation, there can be no corporate “successor.” As discussed supra, the Deed provides, in relevant part, that the trust shall be paid to the three “named institutions, or [their] respective successor^],” including the “John B. Parsons-Salisbury Home for the Aged.” (Emphasis added).

Critically, the Foundation continues to operate under the same corporate entity as JBP Salisbury (albeit under a different corporate name), which is the same entity named in the Deed. Although the Foundation divested itself of its ownership rights in the Home (and the personal property associated with the Home), the Foundation did not relinquish or transfer its rights to the unknown Baker Trust. 14 Indeed, a careful evaluation of the documents associated with the JBP Salisbury-J.P. Harri ⁵⁶ son conveyance reflects that only the real and personal property associated with the Home was conveyed. First, the articles of sale provide that JBP Salisbury conveyed “all or substantially all of its property and assets ... as hereinafter set forth.” (Emphasis added). The qualifying words “as hereinafter set forth,” therefore, limit the conveyance to the property listed in the articles of sale.

Paragraph nine of the articles of sale specifies that the conveyance is for “... all of [JBP Salisbury’s] interest in land in Wicomico County....” (Emphasis added). Thus, the words of “as hereinafter set forth” clearly limit the conveyance to the real and personal property associated with the Home. JBPH, however, argues that the language of the confirmatory deed to the articles of sale makes clear that “the conveyance of the property described herein by [JBP Salisbury] constitutes a conveyance of all or substantially all of [JBP Salisbury’s] remaining assets.” (Emphasis added). JBPH further alleges that neither the confirmatory deed nor the articles of sale “contain[ ] any words of limitation or restriction.” We disagree.

Critically, each of these documents expressly contain words of limitation. Specifically, the confirmatory deed limits the conveyance to the “property described herein,” namely, “all those tracts or parcels of land ... in the Town of Wicomico County.” (Emphasis added). As discussed above, the articles of sale limit the conveyance to the real property described “as hereinafter set forth,” namely all of JBP Salibury’s “interest in land in Wicomico County----” Moreover, the articles of sale clearly limit the transfer to the real property associated with the Home. Md.Code (1975, 2007 Repl.

Vol.), § 3-115 of the Corporations and Associations Article (“C.A.”) provides that: The assets of the transferor, including any legacies which it would have been capable of taking, transfer to, vest in, and ⁵⁷ devolve on the successor to the extent provided in the articles without further act or deed. C.A. § 3-115(b)(l). (Emphasis added). Thus, pursuant to C.A. § 3-115(b)(l), we need only review the articles of sale to determine whether any “legacies,” such as the Baker Trust, were transferred to JBPH.

As discussed supra, however, the articles of sale provide only for the transfer of the real property associated with the Home, specifically, “... all of [JBP Salisbury’s] interest in land in Wicomico County....” (Emphasis added). Accordingly, pursuant to the articles of sale, JBP Salisbury did not convey its rights to the Baker Trust. JBPH also makes much ado about the term “choses in action” contained in the bill of sale and claims that “choses in action” clearly contemplates trust beneficiary rights. Black’s Law Dictionary defines a “chose in action” as: “1) A proprietary right in personam, such as a debt owed by another person, a share in a joint-stock company, or a claim for damages in tort; 2) The right to bring an action to recover a debt, money, or thing; or 3) Personal property that one person owns but another person possesses, the owner being able to regain possession through a lawsuit.” Black’s Law Dictionary (9th ed. 2009).

We conclude that none of JBPH’s proffered definitions of “choses in action” applies to unknown trust beneficiary rights such as the rights to the Baker Trust. 15 Indeed, the Black’s Law Dictionary definition clearly includes an in personam right to bring a claim or action. Although a “chose in action” is certainly a property right, see, e.g., Hoffman Chevrolet, Inc. v. Washington Cnty. Nat. Sav.

Bank, 297 Md. 691 , 701 n. 4, 467 A.2d 758 (1983), we hold that the beneficiary rights of the Baker Trust are not “choses in action.” 16 ⁵⁸ JBPH further relies on C.A. § 1-101 for the proposition that it is the corporate “successor” to JBP Salisbury and, therefore, entitled to the Baker Trust distributions. C.A. § 1-101(bb)(4) defines a corporate successor as, inter alia, a “vendee, lessee, or other transferee in a transfer of assets.” A “transfer of assets” means “to sell, lease, exchange, or otherwise transfer all or substantially all of the assets of a corporation.” C.A. § l-lOl(cc). As mentioned supra, however, JBP Salisbury did not transfer “all or substantially all” of its assets; rather, JBP Salisbury transferred “all or substantially all” of its assets specifically relating to the real and personal property associated with the Home. Indeed, the Foundation’s continued corporate existence belies JBPH’s argument that it is the “successor” to JBP Salisbury.

If JBP Salisbury had truly transferred all of its assets, it would not—and could not—continue to exist as a charitable organization. Both parties rely on The Wesley Home, Inc. v. Mercantile-Safe Deposit and Trust Co., 265 Md. 185 , 289 A.2d 337 (1972). In Wesley Home, the Court of Appeals considered the proper beneficiary under a trust. Id. at 189-190 , 289 A.2d 337 .

The trust provided that, upon termination of the trust, distribution payments were to be made to “The Anchorage of Baltimore City,” (“the Anchorage”) a charity that provided services and accommodations to merchant seamen staying in the city of Baltimore. Id. at 190-91 , 289 A.2d 337 . Subsequently, due to economic considerations, the Anchorage conveyed to the YMCA all of its assets “of every kind” including all assets “to which it may be entitled under any existing will already probated” and “any gifts, legacies or devises which may be given or left to [the Anchorage] by will or at any future time.” Id. at 191 , 289 A.2d 337 . Despite its sale of all of its assets and operational services to the YMCA, the Anchorage never officially terminated as an organization.

Id. at 193 , 289 A.2d 337 . Instead, the Anchorage continued to exist for the pur ⁵⁹ pose of avoiding complications in any will or legacy payments. Id. In 1955, following years of general decay of the Anchorage building, as well as the dwindling need for merchant seamen services, the branch ceased operations.

Id. at 192 , 289 A.2d 337 . Subsequently, upon the happening of a trigger event, the trustee filed a complaint “seeking a determination as to which of the various claimants were entitled to take and in what amounts.” Id. at 190 , 289 A.2d 337 . The Court of Appeals ordered that the trust distributions be paid to the surviving corporate entity, the Anchorage, but the Anchorage was then directed to transmit the funds to the YMCA. Id. at 204 , 289 A.2d 337 .

Critically, the Court concluded that the settlor’s intent was to benefit merchant seamen, but that the settlor never “intended to require the Anchorage to maintain its [ownership of the premises], or to otherwise operate forever as it did at the time of [the settlor’s] death.” Id. The Court in Wesley Home, therefore, concluded that the Anchorage was the rightful beneficiary, but that its receipt of distribution payments should inure in favor of the YMCA. Id. A critical distinction between Wesley Home and the instant case is that in Wesley Home, unlike here, the Anchorage transferred all of its assets, including its right to legacies and endowments.

Id. at 191 , 289 A.2d 337 . Nevertheless, the Court still directed that the distribution payments be paid to the Anchorage first because of its ongoing corporate existence. Id. at 204 , 289 A.2d 337 . Indeed, the Anchorage continued to exist solely as a “skeletal” organization.

Id. Nevertheless, the Court still concluded that the Anchorage was the rightful beneficiary. Id. In the instant case, the Foundation continues to exist as a philanthropic non-profit organization that provides a multitude of philanthropic services, including the care for the elderly.

Indeed, Wesley Home supports the Foundation’s contentions