Medical Mutual Liability Insurance Society v. Davis

BELL, C.J. The issue we are required in this case to decide is whether a judgment creditor, indisputably entitled to post-judgment interest on its judgment, who accepts a remittitur, may receive interest on that portion of the post-judgment interest paid pursuant to a court order, entered in a writ of garnishment proceeding, determining that post-judgment interest begins to run when the judgment is entered, rather than when the remittitur is accepted, where, prior to the initiation of the garnishment proceedings, the judgment debtor’s insured had paid into the court the judgment debtor’s policy limits and the post-judgment interest at issue accrued after the judgment creditor’s acceptance of the remittitur. The Circuit Court for Prince George’s County concluded that Williette Davis and Massaquai Kamara, the appellees, were entitled to the post-judgment interest they sought from Medical Mutual Liability Insurance Society of Maryland, the appellant, reasoning that a money judgment had been entered in the garnishment proceedings they initiated. This Court, on its own initiative, granted the appellant’s petition for writ of certiorari before the Court of Special Appeals acted. Medical Mutual Liability Insurance Society of Maryland v. Davis, 371 Md. 613 , 810 A.2d 961 (2002).

We shall reverse the judgment of the Circuit Court. I. This is the second time this case has reached this Court. On the first, the issue we addressed was when post-judgment interest began to accrue on a money judgment returned by a jury, where the jury’s verdict is subsequently reduced by the ⁹⁹ trial court, pursuant to a remittitur. Medical Mutual Liability Insurance Society of Maryland v. Davis, 365 Md. 477, 478 , 781 A.2d 781, 781 (2001). 1 This Court affirmed the judgment of the Circuit Court.

Id. at 487 , 781 A.2d at 787 . Applying Maryland Rule 2-604(b), 2 “in accordance with the purpose of post-judgment interest and the considerable case-law governing the running of post-judgment interest,” 3 id. at 484 , 781 ¹⁰⁰ A.2d at 785, we held that the appellees “were entitled to the loss of income on the $2,350,000.00 [the amount of the remitted judgment] from November 13, 1996,” observing: “Presumably, Medical Mutual earned interest on that sum during the ten-month period from November 1996 to September 1997.” Id. at 485, 781 A.2d at 785 . The appellant paid the post-judgment interest in the amount ordered. 4 Its effort to have the appellees’ judgment entered on the docket as fully paid and satisfied met with opposition from the appellees, however, whereupon it filed a Motion To Enter Judgment As Fully Paid And Satisfied. 5 The appellees claimed that additional post- ¹⁰¹ judgment interest on the judgment had become due during the litigation and, what’s more, has remained unpaid. The Circuit Court held a hearing on the appellant’s motion, after which, agreeing with the appellees, it ordered that the appellant pay interest on the post-judgment interest it had previously paid.

At issue on this appeal, therefore, is the propriety of the order entered by the Circuit Court that “assess[ed] judgment interest on the judgment of garnishment ... from January 29, 1999 to the present and continuing.” II. Garnishment is a form of attachment, Fico, Inc. v. Ghingher, 287 Md. 150, 158-59 , 411 A.2d 430, 436 (1980); Catholic University of America v. Bragunier Masonry Contractors, Inc., 139 Md.App. 277, 293 , 775 A.2d 458, 467 (2001), aff'd, 368 Md. 608 , 796 A.2d 744 (2002), and method of execution. Northwestern Nat’l. Ins. v. William G. Wetherall, Inc., 267 Md. 378, 384 , 298 A.2d 1, 5 (1972).

See Parkville Fed. Sav. Bank v. Maryland Nat'l Bank, 343 Md. 412, 418 , 681 A.2d 521 (1996) (“A writ of garnishment is a means of enforcing a judgment.”). As such, it is derived from a “special and limited statutory power.” Belcher v. Government Employees’ Ins. Co., 282 Md. 718, 720 , 387 A.2d 770, 772 (1978), quoting Cole v. Randall Park Holding Co., 201 Md. 616, 623 , 95 A.2d 273, 277 (1953); see Killen v. American Casualty, 231 Md. 105, 108 , 189 A.2d 103, 105-06 (1963); Coward v. Dillinger, 56 Md. 59, 60-61 (1881).

Proceedings via writ of garnishment permit the attachment of the property of the judgment debtor in the ¹⁰² possession of third parties and, when the writ has been issued and served, require the garnishee, the third party possessor, to keep safe the property in his possession or that may come into possession. Parkville, 343 Md. at 419 , 681 A.2d at 524 ; Fico, 287 Md. at 162 , 411 A.2d at 437 . See also Bragunier Masonry, 139 Md.App. at 293 , 775 A.2d at 467-68 . In that way, such proceedings enable the judgment creditor to enforce its judgment against the judgment debtor even though the judgment debtor is not in possession of the property.

Parkville, 343 Md. at 418 , 681 A.2d at 524 (“[A writ of garnishment] allows a judgment creditor to recover property owned by the debtor but held by a third party.”) See PAUL V. NIEMEYER AND LINDA M. SCHUETT, MARYLAND RULES COMMENTARY at 518 (2nd ed.1992). This Court has characterized, at length, the nature and function of a garnishment proceeding. E.g., Bragunier Masonry Contractors, Inc. v. Catholic University of America, 368 Md. 608, 621-24 , 796 A.2d 744, 751-53 (2002); Parkville, 343 Md. at 418 , 681 A.2d at 524 ; Fico, 287 Md. at 158-59 , 411 A.2d at 436 , and cases therein cited, concluding and emphasizing “the principle growing out of the nature and function of a garnishment proceeding, that the creditor merely steps into the shoes of the debtor and can only recover to the same extent as could the debtor.” Bragunier Masonry, 368 Md. at 623 , 796 A.2d at 752 . Fico is illustrative.

There, we commented: “A garnishment proceeding is, in essence, an action by the judgment debtor for the benefit of the judgment creditor which is brought against a third party, the garnishee, who holds the assets of the judgment debtor. Northwestern Nat’l Ins. Co. v. William G. Wetherall, Inc., 272 Md. 642, 652 , 325 A.2d 869, 874 (1974); Messall v. Suburban Trust Co., 244 Md. 502, 506 , 224 A.2d 419, 421 (1966). An attaching judgment creditor is subrogated to the rights of the judgment debtor and can recover only by the same right and to the same extent that the judgment debtor might recover.

Northwestern Nat’l Ins. Co., 272 Md. at 650-51 , 325 A.2d at 874 ; Myer v. Liverpool, London & Globe Ins. ¹⁰³ Co., 40 Md. 595, 600 (1874). The judgment itself is conclusive proof of the judgment debtor’s obligation to the judgment creditor. The sole purpose of the garnishment proceeding therefore is to determine whether the garnishee has any funds, property or credits which belong to the judgment debtor.

Northwestern Nat’l Ins. Co. v. William G. Wetherall, Inc., 267 Md. 378, 384 , 298 A.2d 1, 5 (1972).” 287 Md. at 159 , 411 A.2d at 436 . See also Peninsula Ins. Co. v. Houser, 248 Md. 714, 717 , 238 A.2d 95, 97 (1968); Cole v. Randall Park Holding Co., 201 Md. 616, 623-24 , 95 A.2d 273, 277 (1953).

From this principle, it follows, and is well settled, moreover, that garnishment proceedings are not designed or intended “ ‘to place the garnishee in a worse position, in reference to the rights and credits attached, than if he had been sued by the defendant [judgment debtor].’ ” Bragunier Masonry, 368 Md. at 624 , 796 A.2d at 753 , quoting Farmers’ & Merchants’ Bank of Baltimore v. Franklin Bank of Baltimore, 31 Md. 404, 412 , 1869 WL 2863 , ⁵ (1869). See Employers’ Liability Assur. Corp. v. Perkins, 169 Md. 269, 284 , 181 A. 436, 443 (1935); Farley v. Colver, 113 Md. 379, 385 , 77 A. 589, 591-92 (1910). Thus, we have explained: “The attaching creditor seeks to have himself substituted to the rights of his debtor as against the garnishee, and by laying his attachment, he acquires no superior right to that of his debtor.

The right of condemnation must, therefore, be subject to any such right of set-off or discharge existing at the time of garnishment, as would be available to the garnishee if he were sued by the defendant. Any other rule would, in many cases, work gross injustice, and might, moreover, be subject to great abuse.” Farmers’ & Merchants’ Bank, 31 Md. at 412 , 1869 WL at ⁵. Similarly, in Perkins , we said: “The plaintiffs in the attachment proceedings have no right superior to that of the assured. They stand in his place, and the same defenses which the insurance carrier had against the right of action on the part of the assured on the ¹⁰⁴ policy of insurance are available to the assurer as the garnishee of the plaintiffs.

So, the assured’s breach of a condition precedent with which the assurer may bar a recovery by the assured is equally a bar to an attachment laid in the hands of the assurer by a creditor of the assured. The law does not permit the garnishee to be put in a worse position by the issue of a writ of attachment.” 169 Md. at 284 , 181 A. at 443 , citing Hodge and McLane on Attachments, § 148; 76 A.L.R. pp. 235, 236. The provisions of the pertinent sections of Maryland Rule 2-645, the Rule “govern[ing] garnishment of any property of the judgment debtor, other than wages subject to Rule 2-646 and a partnership interest subject to a charging order, in the hands of a third person for the purpose of satisfying a money judgment,” subsection (a), are consistent. Rule 2-645(a) defines the property to which it is applicable as including “any debt to the judgment debtor, whether immediately payable or unmatured.” Subsection (b) prescribes the process for obtaining issuance of a writ of garnishment.

It requires that a request for writ of garnishment, containing inter alia the caption of the case and “the amount owed under the judgment,” be filed in the same action in which the judgment was entered. When issued, the Rule provides, the writ will contain the information provided in the request and contain instructions and notices relevant to any answer that may be made. Rule 2-645(c). Rule 2-645(e) pertains to the garnishee’s answer.

It permits the garnishee, if he timely files an answer, to admit or deny indebtedness to the judgment debtor, to admit or deny possession of any property and, if possessed, how much, to specify the nature and amount of any debt to the judgment debtor and describe the property, and “assert any defense that the garnishee may have to the garnishment, as well as any defense that the judgment debtor could assert.” If an issue is joined between the judgment creditor and the garnishee, by the garnishee’s timely filing of an answer and the judgment creditor’s timely filing of a response, the garnishment proceeding “shall proceed as if it were an original action between the judgment creditor as plaintiff and the ¹⁰⁵ garnishee as defendant and shall be governed by the rules applicable to civil actions.” Rule 2-645(g). Nevertheless, “[t]he judgment against the garnishee shall be for the amount admitted plus any amount that has come into the hands of the garnishee after service of the writ and before the judgment is entered, but not to exceed the amount owed under the creditor’s judgment against the debtor and enforcement costs.” Rule 2-645(j). Subsection (/) provides for the judgment creditor to file a statement of satisfaction when the garnishee satisfies the judgment entered against it, setting forth the amount paid, and, in the event of a default in that regard, for the garnishee to proceed pursuant to Rule 2-626.

III

Emphasizing the nature of a garnishment proceeding — “an action by the judgment debtor for the benefit of the judgment creditor which is brought against a third party, the garnishee, who holds the assets of the judgment debtor,” Bragunier Masonry, 368 Md. at 622 , 796 A.2d at 752 , quoting Parkville Federal Savings Bank v. Maryland National Bank, 343 Md. 412, 418 , 681 A.2d 521, 524 (1996) — and its ancillary and auxiliary aspect — it grows out of and is dependent on the action out of which the judgment issued — , the appellant argues that no additional post-judgment interest is payable by it in respect to the judgment the appellees obtained against its insured, since it does not hold assets of its insured. It explains: “The judgment debtor in this case has no right of interest on the interest accrued on the original judgment. Medical Mutual satisfied all of its obligations under the terms of the liability policy when it paid post judgment interest of $206,670.58. [The appellees] have come forward with no evidence to the contrary.” The appellant also argues that the appellees are seeking to recover compound interest. The recovery of compound interest is not permitted, it contends, the language of the applica ¹⁰⁶ ble statute, Md.Code (1973, 2002 Repl.Vol.) § 11-107(a) of the Courts and Judicial Proceedings Article, 6 being in terms of simple interest and this Court having so held, in Walker v. Acting Director, Dept. of Forests and Parks, 284 Md. 357, 367 , 396 A.2d 262, 267 (1979).

It submits: “[The appellees’] claim is for interest on unpaid interest. [The appellees] could not recover interest on the unpaid interest if this action was against Dr. Mody directly. [The appellees], therefore, cannot recover against [the appellant] for interest on the unpaid interest.” The judgment awarded against it being for what is, in effect, compound interest, it concludes, must be reversed. The appellees see it differently, as one might expect. They acknowledge that “Medical Mutual is correct that with the payment of $206,670.58 it discharged its duty under its liability insurance policy.” They maintain, however, that the appellant remained “liable for post judgment interest on the judgment of garnishment entered against it in favor of the Appellees.” Presuming that the appellant was able to invest the interest on the remitted judgment amount and thereby earn substantial returns, the appellees’ position is premised on its belief that “[a] judgment of garnishment is a money judgment [and, therefore, r]egardless of the underlying nature of the debt, once the debt is reduced to a judgment, the statutorily provided interest should begin to accrue.” 7 Pursuant to Maryland ¹⁰⁷ Rule 2-604, they point out, statutorily provided post-judgment interest applies to all money judgments. 8 Because the purpose of post-judgment interest is to compensate the plaintiff for the loss of the use of the money represented by a judgment and it is this deprivation during litigation that is the “evil” sought to be addressed by the allowance of post-judgment interest, the appellees view the appellant’s argument that Maryland Rule 2-604(b) does not apply to “a judgment debt for interest bearing post judgment interest,” as illogical and, what is more, as carving out an unwarranted exception. 9 Notwithstanding their concession that a claim for compound interest is forbidden, the appellees, noting their inability to invest or otherwise realize a return from the interest that was the subject of the previous appeal, justify their characterization of the appellant’s argument on the absence, in this case, of an intervening judgment against a new party: “The distinction between a claim for compound interest on a judgment ... and the claim in this case is that in this case the Appellees had already sought to collect, been refused and thereafter reduced their claim for simple interest to a judgment in garnishment.” Despite their awareness of the nature of garnishment proceedings, the relationship of such proceedings to the judgments they are designed to enforce or execute and that their rights are limited by the rights of their judgment debtor, the ¹⁰⁸ appellees argue that “a garnishment is the functional equivalent of a direct action by the debtor, albeit with a realignment of the parties.” It follows, therefore, the appellees submit, that, just as the judgment their judgment debtor would receive in a suit by that debtor against his insurance carrier would be a money judgment, so, too, would they receive a money judgment in a garnishment action against the same carrier. 10 They reason: “In a garnishment action, where the judgment creditor steps into the shoes of the judgment debtor, he is limited by the rights the judgment debtor has against the garnishee. However, it is equally clear that the Maryland Rules of Procedure, by providing that a garnishment proceeding concludes with the entry of judgment, contemplate that along with those limitations come correlative benefits, one of which is entitlement to judgment interest.” Of the statement in Walker v. Acting Director, Dept. of Forests & Parks, 284 Md. at 367 , 396 A.2d at 267 , that “[ajllowance of interest on the unpaid interest amounts to compound interest on a judgment,” on which the appellant relies, the appellees dismiss it as “dicta.” They emphasize, moreover, that, rather than a subsequent judgment against a ¹⁰⁹ different party, as in the case sub judice, what was disallowed in Walker was “detention damages sought in the same action from the same party in the form of ‘interest’ in a judgment of condemnation.” IV.

Post-judgment interest begins to run on a money judgment from the date of the entry of that judgment, Maryland Rule 2 — 604(b), and it accrues, at the rate of 10 percent per annum, the rate prescribed by law, § 11-107 of the Courts and Judicial Proceedings Article. Post-judgment interest continues to accrue until the judgment is satisfied by payment. Maryland State Highway Admin. v. Kim, 353 Md. 313, 327 , 726 A.2d 238, 245-46 (1999); I.W. Berman Prop. v. Porter Bros., 276 Md. at 24, 344 A.2d at 79. See Mayor and City Council of Baltimore v. Kelso Corp., 294 Md. 267, 271 , 449 A.2d 406, 408 (1982) (Post-judgment interest serves to “compensate the judgment creditor for the loss of the monies due and owing to him by the judgment debtor from the time the judgment is entered until it is paid.”).

This is consistent with the purpose of post-judgment interest, “to compensate the successful suitor for the same loss of the use of the monies represented by a judgment in its favor, and the loss of income thereon, between the time of entry of the judgment ... —• when there is a judicial determination of the monies owed it — ■ and the satisfaction of the judgment by payment.” Medical Mutual Liability Insurance Society of Maryland v. Davis, 365 Md. at 484 , 781 A.2d at 785 (2001), quoting I.W. Berman Prop. v. Porter Bros., 276 Md. at 24, 344 A.2d at 79. Judgment was entered in favor of the appellees and the estate of their son, and against the appellant’s insured, albeit in an amount greater than the amount ultimately determined to be due, on November 13, 1996. There followed thereafter post-trial proceedings, lasting close to a year, resulting in the ordering of a new trial unless the estate remitted all of the medical expenses awarded to the estate. The estate accepted the remittitur on September 25, 1997, ¹¹⁰ thus finalizing the judgment amount due the appellees.

Several months thereafter, on February 19, 1998, the appellant paid the judgment by tendering its insured’s policy limits. It also tendered post-judgment interest, but only in an amount calculated from the date of the acceptance of the remittitur. Believing that additional post-judgment interest was due, that post-judgment interest began to run with the initial entry of the judgment, and relying on the appellant’s contractual undertaking to pay post-judgment interest in respect to any judgment entered against its insured, Medical Mutual Liability Insurance Society of Maryland v. Davis, 365 Md. at 480 n. 3, 781 A.2d at 782 n. 3, the appellees filed directly against the appellant a garnishment proceeding to recover the additional post-judgment interest. This Court concluded that, notwithstanding that the judgment amount was reduced as a result of post-trial proceedings, post-judgment interest accrued when the judgment was entered and, consequently, the appellees were entitled to a portion of the additional post-judgment interest they sought.

Id. at 487 , 781 A.2d at 786-87 . Consistent with that order, the appellant paid the amount of additional post-judgment interest found to be due. On February 19, 1998, when the appellant paid its insured’s policy limits, in payment of the judgment against its insured, and partial post-judgment interest, the appellees were entitled to receive, and the appellant’s insured was obligated to pay, an amount equal to the amount of the judgment, plus interest accrued from the date of the entry of the judgment. Contractually, the appellant was required to pay that amount on behalf of its insured.

Because the appellant’s payments were not sufficient to discharge the total indebtedness, the insured remained indebted to the appellees to the extent of the unpaid post-judgment interest. Likewise, the appellant remained contractually obligated to its insured to the same extent and, thus, possessed property, of that value, belonging to the appellees’ judgment debtor. Maryland Rule 2-645(a). When, however, the appellant paid the post-judgment interest determined by this Court to be payable to the appellees, the judgment debtor’s, the appellant’s insured’s, total obli ¹¹¹ gation under the judgment had been satisfied; the judgment had been paid and so, too, had the appellees been compensated for the delay between the entry of judgment and its payment.

In addition, as the appellees concede, the appellant also discharged its contractual obligation to its insured to pay accrued post-judgment interest on any judgment against its insured. Consequently, no longer being indebted to its insured, the appellant no longer possessed any property of the judgment debtor. It is well settled, as we have seen, Bragunier Masonry, 368 Md. at 622 , 796 A.2d at 752 , that the judgment creditor in a garnishment proceeding is subrogated to the rights of the judgment debtor and can “recover from the garnishee only to the extent that the judgment debtor could have done so.” The creditor’s rights may not rise above the rights the debtor would have had against the garnishee. Id. at 623 , 796 A.2d at 753 ; see Peninsula Ins.

Co. v. Houser, 248 Md. 714, 717 , 238 A.2d 95,97 (1968); Messall v. Suburban Trust Co., 244 Md. 502, 506 , 224 A.2d 419, 421 (1966); Bendix Radio Corp. v. Hoy, 207 Md. 225, 229 , 114 A.2d 45, 47 (1955); Thomas v. Hudson Sales Corp., 204 Md. 450 , 105 A.2d 225, 227 (1954); Cole v. Randall Park Holding Co., 201 Md. 616, 623-24 , 95 A.2d 273, 277 (1953). Consequently, the appellees may recover from the appellant only to the extent that its insured, the judgment creditor, could recover. Because the appellant does not possess any of its insured’s property and