O'HARA v. Kovens

BLOOM, Judge. On November 22, 1978, the appellants herein, Michael and James O’Hara, individually and as guardians for their mother, Josephine O’Hara, 1 filed a civil action in the Superior Court of Baltimore City (now part of the Circuit Court for Baltimore City) against the appellees, former Governor Marvin Mandel, W. Dale Hess, Harry W. Rodgers III, William A. Rodgers, Ernest N. Cory Jr., Irving T. Schwartz, Eugene B. Casey, and Irvin Kovens, collectively referred to as the Kovens Group. The declaration alleged common law fraud and violations of the Maryland Securities Act in connection with the Kovens Group’s acquisition of the O’Hara’s stock in the corporation that owned and operated the Marlboro Race Track. 2 The Kovens Group pleaded ⁶²² limitations as a bar to all claims; the O’Haras conceded that the Securities Act violations claim was barred by that Act’s one year statute of limitations, Md. Corps. & Ass’ns Code Ann. § 11 — 703(f)(2)(ii), but maintained that the statute of limitations applicable to the fraud claim did not begin to run until they discovered the fraud, which was less than three years prior to the filing of their suit. After extensive discovery proceedings, appellees’ motion for summary judgment on their plea of limitations was granted and judgment was entered for the defendants.

In this appeal from that judgment, the O’Haras contend that: I. The trial court erred in determining that in this case the accrual date for limitations under the discovery rule should be determined by the court and not a jury, because the issue involves interpretation of inferences, state of mind, and evaluation of credibility, about which reasonable persons could differ.

II

The accrual date for limitations applicable to the O’Hara children does not apply to Mrs. O’Hara when her children served as de facto guardians, because her estate would be improperly penalized without a legal remedy. We disagree with the first contention but agree with the second. Accordingly, we will affirm the judgment as to Michael and James O’Hara but reverse it as to the estate of Josephine O’Hara. Factual Background By the passage of House Bill 1128 during the 1971 legislative session, the Maryland General Assembly greatly increased the value of appellants’ race track stock by transferring eighteen racing days from the Hagerstown Race Track to the Marlboro Race Track in Prince George’s County.

Then Governor Mandel vetoed HB 1128 on May 28, ⁶²³ 1971, thereby reducing the value of appellants’ stock. In December of that year, the O’Haras sold their stock to appellee Ernest Cory for $12 per share, a price which they considered to be fair without Marlboro’s acquisition of the additional racing days. The O’Haras knew that Cory was acting for undisclosed principals, and they concluded that the purchasers were persons with sufficient political influence to obtain additional racing days for Marlboro. Appellants were not surprised, therefore, when the General Assembly overrode the governor’s veto of HB 1128 on January 12, 1972, just two weeks after the stock sale to Cory, making that stock worth considerably more than the $12 per share the O’Haras received for it.

Later, a bill was passed consolidating Marlboro with Bowie Race Track, further increasing the value of the Marlboro stock. Subsequent to the veto override, various members of the Kovens Group became the subject of a federal grand jury investigation by the United States Attorney’s Office. The investigation concerned political corruption in Maryland and in particular focused on allegations that various friends and political fund raisers of Marvin Mandel had received lucrative business contracts in exchange for political and financial favors rendered to the former governor. 3 Beginning in 1978, widespread media coverage accompanied the investigation and included speculation that the race track had been purchased by friends of Mandel. Front page newspaper articles in early 1975 reported that Harry Rodgers and his brother William Rodgers, along with Dale Hess, had held undisclosed ownership interests in Marlboro Race Track.

Although Mandel himself was not formally notified that he ⁶²⁴ was a subject of the investigation until late in June 1975, newspaper headlines in April of that year revealed that Mandel’s biggest political fund raiser, Irvin Kovens, had loaned $200,000 to Harry Rodgers to purchase an interest in Marlboro Race Track. In November 1975 the press reported that Ernest Cory and Irving Schwartz, another Mandel associate, had testified before the grand jury in connection with the race track deal. On March 15, 1975, Ernest Cory admitted that he had acted as the front man for a group of close political and personal associates of Mandel in concealing their interest in Marlboro Race Track. Cory’s admission made the headlines, and days later newspaper articles emerged suggesting that Schwartz also held an undisclosed interest in Marlboro Race Track.

Although. Mandel initially denied knowledge of the undisclosed ownership interests of Dale Hess and Harry Rodgers, on April 3, 1975, Mandel’s admission that he knew of the track purchase made the headlines. In addition to publicity concerning his secret role in the acquisition of Marlboro Race Track, Irvin Kovens received national media attention as the target of a nationwide graft probe. National publications reported the investigation of the 1971-72 race track purchase by July of 1975, and local newspapers covered the affair on a daily basis.

Finally, on November 24, 1975, Marvin Mandel and all but two of the defendants here were indicted by the federal grand jury. Nearly three years after the indictments, the O’Haras instituted this lawsuit. The declaration somewhat abstrusely alleged that Mandel and the other members of the Kovens Group knowingly and intentionally conspired to acquire the controlling interest in the Marlboro Race Track. The gravamen of the suit was that the Kovens Group conspired to accomplish the veto of HB 1128 as well as the subsequent override of the veto in a fraudulent scheme to obtain the O’Haras’ stock at a reduced price.

The O’Haras claimed that when Cory purchased their stock he was acting for Irving Schwarz, who was in turn acting for Irvin Kovens. In addition, the pleading alleged that the former ⁶²⁵ governor and his associates induced the General Assembly to pass the race track consolidation bill, which further augmented the value of the Marlboro stock. APPLICABILITY OF THE SUMMARY JUDGMENT RULE TO THE STATUTE OF LIMITATIONS Appellants’ first argument is that summary judgment on the issue of limitations was inappropriate because material facts relating to the date their cause of action accrued were in dispute. According to appellants, disputed issues of fact included: (1) whether it could be inferred from circumstantial evidence that appellants were aware that Mandel vetoed HB 1128 in conjunction with the Kovens Group’s conspiracy to devalue the O’Hara stock; (2) whether, under the circumstances of this case, the O’Haras acted with due diligence and prudence; and (3) whether the O’Haras had an effective means to conduct an investigation, if they were charged with implied notice of questionable circumstances.

We begin our consideration of that argument with a discussion of the principles governing summary judgments. Summary Judgment The summary judgment rule, as of the date judgment was entered in this case, provided that when sought, summary judgment “shall be rendered forthwith if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Former Md.Rule 610 d 1. The current rule, Rule 2-501(e), although different in language, is identical in effect to that portion of the former rule quoted above. The function of the summary judgment procedure is not to try the case or decide issues of fact.

It is merely to determine whether there is an issue of fact to be tried and, ⁶²⁶ if there is none, to cause judgment to be rendered accordingly. Coffey v. Derby Steel Co., 291 Md. 241 , 434 A.2d 564 (1981); Berkey v. Delia, 287 Md. 302 , 413 A.2d 170 (1980). If properly granted, a summary judgment does not usurp the function of the jury. Impala Platinum, Ltd. v. Impala Sales (U.S.A.), Inc., 283 Md. 296 , 389 A.2d 887 (1978).

The court does not attempt to decide any issue of fact or of credibility but only whether such issues exist. If the affidavits or other evidence disclose the existence of a genuine conflict as to material facts, the court must deny the motion and leave the resolution of that conflict to the trier of fact. White v. Friel, 210 Md. 274 , 123 A.2d 303 (1955). Thus, the function of the judge is much the same as that which he performs at the close of all the evidence in a jury trial when motions for directed verdict or requests for peremptory instructions require him to determine whether an issue requires resolution by a jury or is to be decided by the court as a matter of law.

Berkey v. Delia, supra, 287 Md. at 305 , 413 A.2d 170 . In Berkey , the Court, quoting Fenwick Motor Co. v. Fenwick, 258 Md. 134, 138 , 265 A.2d 256 (1970), said, “ '[E]ven where the underlying facts are undisputed, if those facts are susceptible of more than one permissible inference, the choice between those inferences should not be made as a matter of law, but should be submitted to the trier of fact.’ ” 287 Md. at 305 , 413 A.2d 170 . The Court in Berkey also pointed out that “in reviewing a motion for summary judgment the facts must be considered most favorably to the party opposing the motion.” Id. at 306 , 413 A.2d 170 . We proceed now to a discussion of the statute of limitations in the context of the summary judgment rule.

Limitations in Tort Actions The statute of limitations applicable to appellants’ claim is Md.Cts. & Jud.Proc.Code Ann., § 5-101, which provides: A civil action at law shall be filed within three years from the date it accrues unless another provision of the ⁶²⁷ Code provides a different period within which an action shall be commenced. 4 As Judge Adkins recently pointed out for this court in Lutheran Hospital v. Levy, 60 Md.App. 227 , 482 A.2d 23 (1984), a fundamental question arising under the statute is when a cause of action accrues. When it was deemed, as it formerly was in most tort cases, that the cause of action accrued when the tort occurred, that question was usually simple to answer. Under the “occurrence of the wrong” test, there was little basis for factual dispute, so limitations was a matter left to judicial determination. The statute of limitations, therefore, was recognized as a proper ground for granting a motion for summary judgment.

See Note, 41 Md.L.Rev. 451 (1982). An exception to the “occurrence of the wrong” test, recognized as early as 1917, was an action for medical malpractice, to which the Court of Appeals applied the “discovery of the wrong” test. Hahn v. Claybrook, 130 Md. 179 , 100 A. 83 (1917). This “discovery of the wrong” test was eventually made applicable to all tort actions in Poffenberger v. Risser, 290 Md. 631 , 431 A.2d 677 (1981), in which the Court of Appeals traced the gradual application of the “discovery” rule in this state 5 and concluded that plaintiffs who might be “blamelessly ignorant” of the fact that a wrong has occurred should not be “charged with slumbering on rights they were unable to ascertain.” 290 Md. at 635 . ⁶²⁸ The rule, as stated in Poffenberger , is that a “cause of action accrues when the claimant knew or reasonably should have known of the wrong.” 290 Md. at 635 , 431 A.2d 677 .

As noted in Lutheran Hospital v. Levy, supra, at 233, 482 A.2d 23 , mere constructive knowledge is not enough; the rule as explicated in Poffenberger contemplates actual knowledge — that is, express cognition, or awareness implied from knowledge of circumstances 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. Since the “discovery rule” requires actual knowledge of at least some facts or circumstances to constitute the accrual of the cause of action, appellants assert that Poffenberger has diminished the role of the trial judge in determining the accrual date of a cause of action. They argue that since the extent of the claimant’s knowledge as of a particular date is an issue of fact, that issue must be submitted to the trier of fact; the decision is not for the judge to make. As Judge Lowe noted for this court in Johnson v. Nadwodny, 55 Md.App. 227, 231 , 461 A.2d 67 (1983), the change from the “occurrence” rule to the “discovery” rule “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.” In Johnson v. Nadwodny, supra, we upheld the granting of a directed verdict for the defendant because, by her own admission, the facts upon which the plaintiff’s asserted cause of action was based were within her knowledge more than three years prior to the filing of her suit.

In Lutheran Hospital v. Levy, supra, we held that the trial court erred in denying the defendant’s motion for directed verdict because the plaintiff admittedly had actual knowledge, more than three years before suit was filed, of such facts and circumstances as to put her on notice that she may have been tortiously injured. These cases are not particularly ⁶²⁹ instructive on the issue raised by appellants, however, since the accrual date in both was easily ascertainable from undisputed facts. Appellants’ argument is not lacking in logic, and it might even be persuasive if we were writing on a clean slate. As we have noted, however, Poffenberger did not announce a new principle of law; it merely extended the application of a well established concept from a narrow range of cases to all actions in tort.

The very point in issue was decided by this court in Decker v. Fink, 47 Md.App. 202 , 422 A.2d 389 (1980), cert. denied 289 Md. 735 (1981). In Decker , a pre Poffenberger medical malpractice case, we held that under the “discovery rule” exception to the “occurrence of the wrong” test, limitations is still a matter for the judge rather than the jury even if the facts concerning discovery are disputed. Decker involved the granting of a directed verdict but, as we have seen, the function of the judge is much the same whether ruling on a motion for directed verdict or a motion for summary judgment. Berkey v. Delia, supra, 287 Md. at 305 , 413 A.2d 170 .

In either situation, the general rule is that all conflicts in the evidence are to be resolved in favor of the plaintiff; the court must assume the truth of all evidence and such inferences as may naturally and legitimately be deduced therefrom which tend to support the right of the plaintiff to recover. Any choice as to what evidence to believe or what inferences to draw from the evidence should not be made as a matter of law but should be submitted to the trier of fact. Nevertheless, as Judge Liss pointed out for this court in Decker , there is an exception to that general rule when such motion [for directed verdict or summary judgment] is predicated upon a purely legal question (such as limitations) which would end the case if, from the plaintiff’s own case, that issue is found factually to apply. In such instance the judge becomes the factfinder for purposes of determining the applicability of the statute of ⁶³⁰ limitations and we may not set aside his factual findings unless he was clearly in error. 47 Md.App. at 211 , 422 A.2d 389 ; Md.Rule 1086.

See also, Moy v. Bell, 46 Md.App. 364, 368-69 , 416 A.2d 289 (1980). Consequently, we will review the decision of the hearing judge in light of the “clearly erroneous” standard. In so doing, we note that the evidence pertaining to the accrual date of the statute of limitations is not the same for Michael and James O’Hara as it is for their mother. Michael and James O’Hara In his deposition, appellant Michael O’Hara admitted that he was well aware of the extensive publicity that preceded and then attended the indictment and trial of the appellees.

We will not attempt to summarize the pertinent information contained in the newspapers that Michael acknowledges he read. It is sufficient to note that well in advance of November 22, 1975