Simpson v. CONSOLIDATED CONSTRUCTION SERVICES

KRAUSER, Judge. A debtor must be just before he is generous. Unfortunately, that principle was not observed here. Appellee and judgment debtor, New Panorama Development Corporation (“New Panorama”), used a settlement agreement, resolving lawsuits it had filed against its contractors, to direct that settlement funds, contributed by those contractors, be used to pay its legal fees and one of its contractors, at the expense of its judgment creditors.

Payment was then made by those contractors to a settlement fund, created by that agreement, even though writs of garnishment had been served on all but one of them by New Panorama’s judgment creditors. While New Panorama was arguably generous — at least to its attorney and one contractor — it was hardly just. And that is the gist of this appeal. This case began when New Panorama purchased land in Howard County from Robert F. Simpson and the estates of Julia V. Simpson and Willis E. Simpson (collectively, the “Simpsons”), for the purpose of developing a residential com ⁶¹³ munity to be known as “Pleasant Chase.” To purchase that property, it signed a mortgage agreement with Robert F. Simpson, who was then acting individually and as the personal representative of the two estates.

That agreement required New Panorama to make an initial down payment and then monthly payments to the Simpsons until the date upon which the balance of the mortgage was due. When New Panorama failed to make those payments, the trustees of the estate of the now deceased Robert F. Simpson, together with the new personal representative of the estates of Julia V. Simpson and Willis E. Simpson, filed suit in the Circuit Court for Howard County against New Panorama (“Simpson v. New Panorama”) and obtained a judgment. In the meantime, the roads at Pleasant Chase that had been paved had begun to settle and rupture. That led New Panorama to file lawsuits in that same court against the contractors that it believed were responsible for the failure of the roads (“New Panorama v. CCS”).

Those contractors were also served with writs of garnishment by the Simpsons, now judgment creditors of New Panorama, in the event that New Panorama obtained a judgment against some or all of the contractors. To avoid those garnishments and to dispose of all cross and counter-claims, New Panorama and its contractors entered into a settlement agreement whereby no money would ever touch New Panorama’s hands; but one of its contractors, Consolidated Construction Services, Inc., as well as New Panorama’s lawyer, Donald J. McCartney, would be paid from a settlement fund 1 established by the parties, monies allegedly owed them by New Panorama. This legal legerdemain was contingent, however, upon the dismissal of all outstanding writs of garnishment by the circuit court. ⁶¹⁴ Learning of that agreement, the Simpsons filed a motion to intervene in New Panorama v. CCS to protect and enforce their garnishments. That motion was denied.

The circuit court then dismissed, upon motion, all of the writs of garnishment that had been served on New Panorama’s contractors as well as those that were later served on McCartney and the settlement fund’s escrow agent, Jeffrey M. Kotz. At issue here are two orders: one denying the judgment creditors’ motion to intervene in New Panorama v. CCS, the other granting the motions of New Panorama’s contractors and others to terminate the judgment creditors’ garnishments in Simpson v. New Panorama. In this consolidated appeal from those orders, the judgment creditors, appellants Robert C. Simpson and J. Kevin Doyle, trustees of Robert F. Simpson Trust and personal representatives of the estates of Julia V. Simpson and Willis E. Simpson, seek to reverse the order denying them entry into appellee New Panorama’s suit against appellee contractors, Atlas Plumbing and Mechanical Inc. (“Atlas”), Consolidated Construction Services, Inc. (“CCS”), Maryland Paving and Sealant, Inc. (“MPS”), and Professional Services Industries, Inc. (“PSI”), and to reinstate the writs of garnishments served on them as well as the ones served on appellees, Donald J. McCartney (“McCartney”), and Jeffrey M. Kotz (“Kotz”). This appeal therefore presents two questions: I. Did the circuit court err in dismissing appellants’ writs of garnishment?

II

Did the circuit court err in denying appellants’ motion to intervene? For the reasons that follow, we shall reverse the order of the circuit court terminating the wits of garnishment that were served on appellees CCS, PSI, Atlas, MPS, McCartney, and Kotz, affirm the termination of the writ of garnishment served on McCartney, and remand this case to that court for further proceedings consistent with this opinion. Additionally, the denial of appellants’ motion to intervene shall be affirmed. ⁶¹⁵ BACKGROUND Appellee New Panorama is a real estate development company that develops home sites for resale to residential builders. To do so, New Panorama purchases raw land, prepares a site plan, obtains necessary permits, installs sewer lines, water lines, and roads, and then sells individual lots to residential builders.

In 1992, it purchased real property in Howard County from Robert F. Simpson, now deceased, which it later developed into a residential community known as “Pleasant Chase.” In developing that community, New Panorama contracted with CCS to do utility work, PSI to conduct soil testing, and MPS to perform road work. Atlas was hired by Lovell Regency, a residential builder, to provide plumbing services. Shortly after being paved, the roads began to settle, resulting in ruptures and depressions that required extensive repair. This, in turn, led to a dispute among the contractors and New Panorama as to who was responsible for this problem.

When the dispute was not resolved, New Panorama, represented by appellee McCartney, filed separate suits against each of the contractors in the Circuit Court for Howard County. 2 These suits were eventually consolidated. In response to New Panorama’s suit, CCS and PSI filed counter-claims against New Panorama, claiming that it had failed to pay for services rendered by them for Pleasant Chase. 3 MPS also filed a counter-claim against New Panorama. In that counter-claim, it alleged that New Panorama ⁶¹⁶ breached its contract with MPS by failing to provide MPS with a prepared site and thereby prevented it from installing roads, gutters, and curbs at Pleasant Chase. In addition to these counter-claims, all of the contractors, but CCS, filed cross-claims.

MPS and Atlas filed cross-claims against each other and against all of the other contractors, 4 and PSI filed cross-claims against MPS and Atlas. 5 After this tangle of cross-claims and counter-claims was filed, appellants filed a complaint against New Panorama claiming, among other things, that New Panorama had defaulted under the terms of the mortgage agreement it had entered into to purchase the property on which it built Pleasant Chase. Appellants obtained a judgment against New Panorama for $791,857.80. To enforce that judgment, appellants served writs of garnishment on CCS, PSI, and Atlas to garnish any monies that may have been owed by those entities to New Panorama. Thereafter, New Panorama and its contractors, including those that had already been served with appellants’ writs of garnishment, agreed to resolve their differences by entering into a “Settlement Agreement, Mutual Release and Escrow Agreement.” That agreement was read into the record and subsequently executed by all the parties to it, which included New Panorama, PSI, CCS, MPS, Atlas, International Fidelity Insurance Company (“IFIC”) (New Panorama’s bonding company), McCartney, and Kotz, who was named by the agreement as escrow agent for the settlement funds.

In the agreement, the parties stated that it was their “intention and desire” to “resolve any disputes” among them relating to the Pleasant Chase development “by paying CCS ⁶¹⁷ $77,500 plus interest in satisfaction of its counter-claim, third party claim, and indemnity claim,” although CCS had not yet brought an indemnity claim. They further stated that “[f]or purposes of this Settlement Agreement ... PSI, MPS, and Atlas concede that CCS would have the right to institute a claim against them for indemnity, contribution, and/or negligence ... with respect to damages that could conceivably be awarded in favor of New Panorama against CCS and paid by CCS as a result of the Litigation.” The agreement also provided that McCartney would be paid “$95,000 plus interest in satisfaction of his attorney’s lien,” stating that McCartney had served “written notice of his lien ... established pursuant to § 10-501 of the Business Occupations and Professions Article, Annotated Code of Maryland, and Rule 2 — 652(b) of the Maryland Rules of Civil Procedure” upon all parties to the settlement agreement for legal services he had rendered in New Panorama v. CCS. According to the settlement agreement, McCartney’s lien was for “fees, expenses, costs and other compensation ... in the amount of one-third of the gross amount of any recovery or actual attorney’s fees, whichever is greater.” To generate the funds to be paid to CCS and McCartney, the settlement agreement required that, upon execution, Kotz, as escrow agent of the settlement fund, be paid $75,000.00 by PST, $47,500.00 by the insurance company for CCS, $45,000.00 by the insurance company for MPS, and $5,000.00 by the insurance company for Atlas.

The settlement agreement stated that “New Panorama [did] not have any legal or equitable interest in the Settlement Funds,” but did have the right “to compel the disbursement [of the funds] by the Escrow Agent in accordance with [the] Settlement Agreement.” The settlement agreement also declared that it was “contingent upon the termination of [appellants’] garnishments.” It specified that Kotz could neither distribute the settlement funds nor file a stipulation of dismissal until, among other things, he had received a court order “dismissing with prejudice [appellants’] garnishments” and until that order had ⁶¹⁸ become final after “the conclusion of all appellate review thereof and further proceedings on remand.” The settlement agreement also stated that “in the event that any court rules that the Settlement Funds or any portion thereof are subject to garnishment by [appellants] ... the settlement contemplated herein shall be deemed null and void ab initio, and the parties shall resume their positions in the Litigation as if [the] Settlement Agreement were never entered into.” If that occurred, “any party who ha[d] deposited funds into the Escrow Account may, at its option, leave said funds in the Escrow Account pending an alternative resolution of the [New Panorama v. CCS case] or demand that the Escrow Agent refund said money.” After learning of the agreement, appellants filed a motion to intervene and a motion to enforce garnishments in New Panorama v. CCS. In their motion to intervene, appellants argued that appellees’ “settlement is specifically designed to avoid [appellants’] judgment against New Panorama and [appellants’] garnishment liens.” They therefore claimed that under Maryland Rule 2-214 they were entitled to both permissive intervention and intervention as of right “for the purpose of protecting and enforcing their security interest in the proceeds” of appellees’ settlement agreement. Appellees opposed appellants’ motions, asserting, among other things, that appellants’ interests were adequately protected “through the garnishment proceedings” that were instituted in their case against New Panorama, Simpson v. New Panorama, and that that case was the proper forum in which to enforce the writs of garnishment. After a hearing on those motions, the circuit court denied appellants’ motion to intervene, stating that intervention as a matter of right was not appropriate because “it’s anticipated that Motions to Terminate the Garnishments are going to be filed” and that appellants’ “interests [would be] adequately protected” in the garnishment proceedings.

The court also ruled that permissive intervention was not warranted “because there is no question of law or fact in common with the issues ⁶¹⁹ and facts in the C.C.S. case.” From the denial of that motion, appellants noted an appeal to this Court. Appellants’ then served writs of garnishment on MPS, Kotz, and McCartney whereupon CCS, PSI, Atlas, MPS, and Kotz filed a joint “Motion to Terminate Garnishments” in Simpson v. New Panorama, while McCartney filed a separate motion in that case seeking the same relief. When those motions were granted, appellants noted a second appeal to this Court, which was thereafter consolidated with their earlier appeal. GARNISHMENTS For the uninitiated, garnishment is a particularly mysterious and fearsome weapon in the arsenal of debt collection.

It therefore behooves us to review briefly the nature of a garnishment and the proceedings that attend it. Garnishment is a form of attachment. Catholic Univ. of America v. Bragunier Masonry Contractors, Inc., 139 Md.App. 277, 293 , 775 A.2d 458 (2001). It is “a means of enforcing a judgment,” which “allows a judgment creditor to recover property owned by the debtor but held by a third party,” the garnishee.

Parkville Federal Savings Bank v. Maryland National Bank, 343 Md. 412, 418 , 681 A.2d 521 (1996). “Once [a] writ of garnishment is issued and laid in the hands of the garnishee, he is bound to safely keep the assets of the debtor in his possession, together with any additional assets that come into his possession up to the time of trial.” Catholic Univ., 139 Md.App. at 293 , 775 A.2d 458 . To be more precise, a writ of garnishment, when served, creates “an ‘inchoate lien’ that is binding and prevents the garnishee from disposing of those of the assets in his possession until such time as a judgment is entered in the garnishment proceeding.” Id. at 294 , 775 A.2d 458 . “[I]f the property possessed by the garnishee, after service but prior to judgment, is not in the hands of the garnishee at the time of the judgment hearing, because the garnishee surrendered the property to the debtor, the garnishee is liable for the value of the debtor’s property which came into her hands from the time she was served with ⁶²⁰ the writ until the time of the hearing, and a judgment in personam will be rendered against the garnishee for any deficiency.” Flat Iron Mac Associates v. Foley, 90 Md.App. 281, 292 , 600 A.2d 1156 (1992). Nevertheless, a judgment creditor “can recover only by the same right and to the same extent that the judgment debtor might recover,” Fico v. Ghingher, 287 Md. 150, 159 , 411 A.2d 430 (1980), and “[f]or this reason ... the rights of the plaintiff/judgment creditor against the defendant/gamishee, cannot rise above the rights of the judgment debtor.” Catholic Univ., 139 Md.App. at 294 , 775 A.2d 458 . Finally and, as we shall see, of special importance to our resolution of the issues before us, attachable property “includes any debt owed 'to the judgment debtor, whether immediately payable, unmatured, or contingent.” Md. Rule 2-645(a).

GARNISHMENT PROCEEDINGS A garnishment proceeding is an action in which it is determined “whether the garnishee has any funds, property or credits which belong to the judgment debtor.” Fico, 287 Md. at 159 , 411 A.2d 430 . It is “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.” Id. It “brings to a test whether the garnishee has in his hands funds, property or credits for which the debtor would himself have a right to sue.” Northwestern Nat’l Ins. Co. v. William G. Wetherall, Inc., 267 Md. 378, 384-85 , 298 A.2d 1 (1972).

A judgment creditor initiates the garnishment process by filing a request for a writ of garnishment “in the same action in which the judgment was entered.” Md. Rule 2-645(b). Once a request is filed, “the clerk ... issue[s] a writ of garnishment directed to the garnishee.” Id. The writ of garnishment must then be “served on the garnishee in the manner provided by Chapter 100” of Title Two of the Maryland Rules. Md. Rule 2-645(d).

Upon being properly served, a garnishee may file an answer to the writ. In the answer, ⁶²¹ the garnishee must “admit or deny that [he] is indebted to the judgment debtor or has possession of property of the judgment debtor.” Md. Rule 2 — 645(e). It may also “assert any defense that the garnishee may have to the garnishment, as well as any defense that the judgment debtor could assert.” Id. If a timely answer is not filed, the judgment creditor may seek a default judgment against the garnishee.

Md. Rule 2-645(f). “If the garnishee files a timely answer,” however, “the matters set forth in the answer [are] treated as established for the purpose of the garnishment proceeding unless the judgment creditor files a reply contesting the answer within 30 days after its service.” Md. Rule 2-645(g). Once the reply is filed, the matter then proceeds “as if it were an original action between the judgment creditor as plaintiff and the garnishee as defendant and shall be governed by the rules applicable to civil actions.” Id. STANDARD OF REVIEW To determine the appropriate standard of review, we must first determine the procedural posture of the order or judgment that is before us. Appellants maintain that the motions to terminate garnishments were in effect motions to dismiss for failure to state a claim upon which relief can be granted and that we should apply the standard of review applicable to such motions.

Attached to those motions, however, were several “matters outside the pleading,” including a copy of the appellees’ settlement agreement. 6 Md. Rule 2-322(c). According to Maryland Rule 2-322(c), “[i]f, on a motion to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment.” Because “matters outside the pleading [were] presented,” and not excluded by the circuit court, we conclude that the ⁶²² motions to terminate garnishments were treated as motions for summary judgment by the circuit court and not as motions to dismiss, as appellants contend. In fact, our review of the record shows that not only did appellees rely heavily on that settlement agreement in seeking an order terminating the writs of garnishment, but so did the court in terminating the garnishments. In rendering its decision, the court explained that “none of th[e] [appellees] hold any property of New Panorama or expect to have any property of New Panorama,” and that the settlement that was “entered into would not dictate otherwise.” Having concluded that we should review the circuit court’s decision, terminating the garnishments in question, as one granting summary judgment, we must determine, given that there are no material facts in dispute, whether the circuit court’s decision was “legally correct.” Heat & Power Corp. v. Air Prods. & Chems., Inc., 320 Md. 584, 591 , 578 A.2d 1202 (1990).

DISCUSSION I Appellants contend that the circuit court erred in granting appellees’ motions to terminate appellants’ writs of garnishment. They claim that, under the terms of appellees’ settlement agreement, “Atlas, CCS, [MPS] and PSI agreed to pay — -and actually paid — the sum of $ 172,500.00 to New Panorama, or (for what amounts to exactly the samé thing) to others on New Panorama’s behalf.” Those monies, they argue, were therefore subject to appellants’ writs of garnishment. Before considering whether the writs of garnishment were properly terminated, however, we must first address the question of whether appellants had a right to serve such writs on appellees in the first place. Appellees claim that appellants did not. ⁶²³ Contingent Debts Appellees maintain that a judgment debtor’s contingent interest in property held by a third party is not subject to attachment.

They argue that because “New Panorama’s claims against CCS, PSI, MPS, and Atlas for damages arising out of the Pleasant Chase development project are uncertain and contingent at best,” they are not attachable by garnishment. Although this argument was not presented below and “[ojrdinarily” we do not decide any issue “unless it plainly appears by the record to have been raised in or decided by the trial court,” Md. Rule 8-131(a), we shall do so now for the guidance of that court, which no doubt will face this issue upon remand. In support of their assertion that the claims in the case sub judice were contingent and therefore not attachable, appellees rely on Fico v. Ghingher, 287 Md. 150 , 411 A.2d 430 (1980). In that case, the Court of Appeals held that although an “unmatured” interest is “subject to attachment” under Maryland’s attachment statute, a “contingent” interest is not.

Id. at 160 , 411 A.2d 430 . It distinguished between the two interests, stating that while an “unmatured interest exists when there is no question about the fact of the garnishee’s liability, although the amount of that liability may be uncertain,” a contingent interest “is one in which liability is not certain and absolute, but depends upon some independent event.” Id. The Court’s ruling was consistent with its earlier decision in Belcher v. Government Employees Ins. Co., 282 Md. 718 , 387 A.2d 770 (1978), and with Courts and Judicial Proceedings (“CJP”) § 3-305 of the Maryland Code Annotated (1973, 1998 Repl.Vol.).

In Belcher , the Court stated that it is a “long— established principle that where an interest is uncertain and contingent — in that it may never become due and payable — it is not subject to attachment as not within the scope of Maryland’s attachment statute.” Belcher, 282 Md. at 723 , 387 A.2d 770 . (citing Fairfax v. Savings Bank, 175 Md. 136, 141 , 199 A. 872 (1938); Safe D. & T. Co. v. Ind. Brewing Ass’n, 127 ⁶²⁴ Md. 463, 468-69, 96 A. 617 (1916); Suskin & Berry v. Rumley, 37 F.2d 304, 306 (4th Cir.1930)). And CJP § 3-305, according to the Belcher Court, stands for the same principle, as by its silence, it excludes contingent interests.

It states that “[a]n attachment may be issued against any property or credit, matured or unmatured, which belongs to a debtor,” but makes no mention of a contingent interest in property. CJP § 3-305. It is “obvious,” the Belcher Court observed, that because “that section provides for the attachment of unmatured interests without any mention of those which are contingent,” the legislature did not intend for such interests to be susceptible to attachment. Belcher, 282 Md. at 724 n. 3, 387 A.2d 770 .

After the Fico and Belcher decisions, however, the Court of Appeals adopted Maryland Rule 2-645, which governs the garnishment of any property of a judgment debtor other than wages and certain partnership interests. Md. Rule 2-645(a). That rule provides that garnishable property “includes any debt owed to the judgment debtor, whether immediately payable, unmatured, or contingent.” Id. (emphasis added).

In other words, notwithstanding the Fico and Belcher decisions and the limiting language of CJP § 3-305, Maryland Rule 2-645(a) expressly provides that contingent debts are attachable. But does that rule supersede all statutory and case law to the contrary? To answer that question, we must examine the relationship between these conflicting authorities. Our examination of this antinomy starts with the Maryland Constitution, the bedrock of Maryland law. “The Constitution of Maryland, in Sec. 18A of Art. IV, authorizes and directs the Court of Appeals from time to time to ‘make rules and regulations to regulate and revise the practice and procedure in that Court and in the other courts of this State, which shall have the force of law until rescinded, changed or modified by the Court of Appeals or otherwise by law.’ ” Hensley v. Bethesda Sheet Metal Co., 230 Md. 556, 558 , 188 A.2d 290 (1963). “The Court of Appeals exercises its rule-making authority,” conferred by Maryland’s Constitution, “upon the recommendations of the Standing Committee on the Rules of Practice and Procedure, which was established in ⁶²⁵ 1946.” J.A. Lynch, Jr. & R.W. Bourne, Modern Maryland civil Procedure § 1.1 at 2 (2000).

In Johnson v. Swann, 314 Md. 285 , 550 A.2d 703 (1988), the Court of Appeals addressed the interplay between the Maryland Rules adopted by the Court of Appeals and legislative enactments. The Court noted that Maryland Rules adopted by the Court of Appeals “ ‘have the force of law,’ ” Johnson, 314 Md. at 289 , 550 A.2d 703 (quoting Section 18 of Article IV of the Maryland Constitution), and “generally apply despite a prior statute to the contrary and until a subsequent statute would repeal or modify the rule.” Id. (citing County Fed. S. & L. Ass’n v. Equitable S. & L. Ass’n, 261 Md. 246, 253 , 274 A.2d 363 (1971)). CJP § 3-305 was enacted before Maryland Rule 2-645 was adopted.

And given that the “contingency” language of Maryland Rule 2-645 was adopted by the