Johnson v. Nadwodny

Lowe, J., delivered the opinion of the Court. This case, appealed from the Circuit Court for Anne Arundel County, was concluded on the trial judge’s grant of appellees’ motions for directed verdicts on the only counts appealed here (fraud and conspiracy to defraud). The decision was based upon his holding that the cause of action (for fraud and conspiracy to defraud) was not filed within the three year period of limitations pursuant to Md. Cts. & Jud. Proc.

Code Ann. § 5-101 (1980 Repl. Vol.) which provides that: "A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced.” The primary issue on appeal is whether: ²²⁹ "The Trial Court erred in directing verdicts in favor of all Defendants on the basis of the Statute of Limitations when the facts, viewed in a light most favorable to the Plaintiff, showed that she could not have discovered her causes of action for fraud and conspiracy to defraud.” The docket entries show that the fraud suit was filed June 19, 1981, alleging that appellant and appellees had collaborated in what appeared to be a joint venture to purchase and operate a restaurant. The cause of action thus must have accrued on or after June 19, 1978 if limitations is not to be a bar. At settlement on June 17, 1975, appellant signed papers, apparently without reading them, that assigned her interest in the contract of sale to L.C.D., Ltd., one of the appellees, whereupon another appellee, Nadwodny, purchased by deed propitiously recorded, the restaurant real estate in his name alone.

Relying upon appellee-attorney, appellant presumably assigned her rights in exchange for a stock option in L.C.D., Ltd., the corporation which the venturers had formed (the stock of which was held solely in the name of the new restaurant owner and his sons). Appellant apparently believed this corporation would take or had taken title to the restaurant despite her assignment during her participation at the settlement. She and her husband (another venturer and appellee here) worked in the restaurant for wages, but she contended that her managerial capacity was assumed in reliance upon her belief that she had a stock option at her individual election. On February 22,1977, appellant’s employment role with the restaurant was involuntarily terminated and she was "told” to leave her husband.

Despite assurances that her interest in the restaurant would be "taken care of’, appellant became apprehensive and, upon the suggestion of appellee-attorney, consulted a Montgomery County attorney named "Len Cardy” in March of 1977. In that same month, without further explanation regarding Mr. "Cardy”, we are told by the declaration that: ²³⁰ "Plaintiff [appellant] became concerned about her portion of the stock option and consulted an attorney, T. Joseph Touhey, Esq., about how to proceed.” Correspondence from Mr. Touhey to appellant dated May 31, 1977, assured her that, under Maryland law, her stock option was not exercisable without the consent of every stockholder in the close corporation; that the other stockholders would not consent; and such a representation was fraudulent but could be overcome by court action although "time was of the essence” in procuring a judicial remedy. He proceeded on her behalf to attempt to obtain (by an equity suit requesting specific performance) the exercise of her stock option. For reasons not here relevant the suit did not succeed despite the subsequent intervention of another attorney in the suit on her behalf.

A fourth attorney, her present one, also intervened in the litigation but was unable to breathe new life in the equity suit commenced in May-September, 1977. 1 The fraud theory was then addressed by that attorney in the suit filed on June 19,1981, which was tried the following year and terminated by a verdict directed against appellant as we have indicated. Because the focus of this appeal is upon the judge’s determination that the cause of action accrued more than three years before suit was filed, an initial controversy arises concerning our standard of review. In determining the accrual date of the cause of action, appellant contends that the trial judge (and we upon review) must view the facts in a light most favorable to the plaintiff-appellant to determine whether she could have discovered her causes of action for fraud and conspiracy to defraud. Appellees precipitiously contradict that assertion and contend that our recent decisions in Decker v. Fink, 47 Md. App. 202, 211 (1980) and Moy v. Bell, 46 Md. App. 364, 368-370 (1980), expressly state that the application of limi ²³¹ tations is strictly a legal question and the facts necessary to determine its application must be judicially determined.

We noted that while trial judges (and this Court on appeal) view evidence, for purposes of motions to dismiss or for directed verdicts, solely for its legal sufficiency in the light most favorable to the plaintiff, that test does not apply in regard to legal questions such as limitations of actions. Those cases, however, were predicated upon the then held general rule that the running of limitations against a right or cause of action is triggered (accrued) upon the occurrence of the alleged wrong and not when it was discovered. Leonhart v. Atkinson, 265 Md. 219, 223 (1972). The factual findings to determine when a wrong occurred were minimal, seldom in conflict, and in most instances either uncontroverted or even set out in the plaintiffs own pleadings.

The strictly legal question of applying a limitations statute from the accrual of the occurrence of the alleged wrong entailed few, if any, of the requisite factfinding insights, such as drawing inferences, weighing conflicting testimony and judging credibility of witnesses. The "discovery” rule for determining when a cause of action accrues has, however, been substituted by the Court of Appeals (in Poffenberger v. Risser, 290 Md. 631 (1981)), for the occurrence-of-the-wrong rule in all actions. Thereafter, a cause of action accrues for purposes of limitations when the claimant in fact knew, or reasonably should have known, of the wrong. Id. at 636 .

This change traumatically affected the relative ease with which a court could apply limitations as a matter of law because the crucial accrual date is no longer so clearly ascertainable. Holding that constructive notice which rests on strictly legal presumptions does not constitute the requisite knowledge within the meaning of the rule, the Poffenberger Court explained that "the discovery rule contemplates actual knowledge •— that is express cognition, or awareness implied from ²³² knowledge of circumstance which ought to have put a person of ordinary prudence on inquiry [thus, charging the individual] with notice of all facts which such an investigation would in all probability have disclosed if it had been properly pursued.” Id. at 637 . Actual knowledge is usually uncontroverted and may be as easily ascertainable as the occurrence of wrong. Implied notice, however, is simply circumstantial evidence known to the claimant which would lead him, "by the exercise of due diligence”, to the knowledge of the principal fact.

It arises from inferences of fact upon which it rests, and as such brings into play all of the insights required of and reserved for a factfinder. See Poffenberger, supra at 637 . Even before the general adoption of the discovery rule in Maryland, the Legislature long ago adopted an equitable principle comparable to the discovery rule to apply even in law cases where a party is kept in ignorance of a cause of action by the fraud of an adverse party. Wear v. Skinner, 46 Md. 257 (1877).

It was enacted in 1868 by the Legislature and was the predecessor of Md. Cts. & Jud. Proc. Code Ann. § 5-203 (1980 Repl. Vol.), which states that: "If a party is kept in ignorance of a cause of action by the fraud of an adverse party, the cause of action shall be deemed to accrue at the time when the party discovered, or by the exercise of ordinary diligence should have discovered the fraud.” The statutory test of "ordinary diligence” parallels the Poffenberger implied knowledge test of "ordinary prudence” and the cases under the statute offer some guidance then for the direction which may be taken by the Court of Appeals under that prong of the Poffenberger test.

Significantly for our purposes, the determination of when a plaintiff (having properly invoked the rule, Piper v. Jenkins, 207 Md. 308, 318 (1955)) had exercised due diligence, was ordinarily a question for the trier of fact, Herring v. Offutt, 266 Md. 593 (1972), or, as more colloquially termed, a "jury question”. ²³³ New England Ins. Co. v. Swain, 100 Md. 558 (1905); see also Henderson, Ex’r v. Henderson and Egnor, 54 Md. 332 (1880). Whether the Poffenberger adoption of the discovery rule generally will cause the determination of disputed and obscure accrual dates to be submitted to factfinders in all cases is an issue we hope, in light of the predictable influx of post Poffenberger cases, to have addressed by the Court of Appeals before we are faced with the deluge which appears already to have commenced. For purposes of this case even if we look to past precedent in those cases of allegedly concealed causes of action for fraud (all of which seem to have been submitted to finders of fact), we still find no error in the directed verdict because express knowledge of the cause of action not only was admitted by appellant, but was set forth in her own pleadings, leaving no issue of fact for the jury to determine in that regard.

Before addressing the facts presented at trial and the holding on the motion for directed verdict, however, in order to avoid a blurring of the "fraud” allegations to be considered here, it is significant that under § 5-203, when referring to an action for fraud that has been allegedly concealed by the fraud of the adverse party, the statute does not require that in all cases the party must commit a second fraud distinct from, and independent of, the original fraud for the purpose of keeping the party in ignorance of his cause of action. The original fraud may in some cases be of such character as to conceal itself, causing the injured party to remain in ignorance without any lack of diligence on his part. Swain, supra at 572 ; Wear v. Skinner, supra at 267. In the case before us, the alleged fraud was so "inherently concealed” that the court below could find little, if any, evidence that it had even been perpetrated.

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