State, Central Collection v. Dld Associates Ltd. P'ship

MOYLAN, Judge. The State of Maryland Central Collection Unit (CCU), the appellant, filed a complaint in the Circuit Court for Baltimore County seeking payments for workers’ compensation insurance premiums allegedly owed by DLD Associates Limited Partnership (DLD), the appellee, to the Injured Workers’ Insurance Fund (IWIF). The trial court granted DLD’s motion to dismiss the complaint, and this appeal ensured. The trial court did not specify what grounds argued by DLD formed the basis for its decision to grant DLD’s Motion to Dismiss, and therefore, this Court must address the following questions: 1.

Did the trial court err in finding that the Injured Worker’s Insurance Fund is not an instrumentality of the State of Maryland for the purposes of the statute of limitations? 2. If IWIF is an instrumentality of the State, did the trial court err in finding that the Legislature has waived its sovereign immunity as to the statute of limitations on written contracts? ⁵⁰⁷ 3. Did the trial court err in finding that the State of Maryland Central Collection Unit was not the real party in interest? Factual Background On or about February 25, 1991, DLD applied for a workers’ compensation insurance policy with IWIF.

The coverage was effective on January 1, 1991, and coverage ceased on July 27, 1991, when the policy was cancelled. CCU alleges that at the time the policy was cancelled by IWIF, DLD continued to owe a balance. On May 11,1992, a letter was sent by the Office of the Attorney General instructing DLD that it owed $25,117.27 to IWIF, and that if that sum were not paid within five days, the account would be turned over to CCU for further action. On September 29,1995, CCU filed a complaint in the Circuit Court for Baltimore County seeking to recover unpaid workers’ compensation insurance premiums, in the amount of $25,-117.27, and collection/attorney fees in the amount of $4,280.14, allegedly owed by DLD to IWIF.

CCU contended that, as the statutory assignee of IWIF, it was entitled to bring this action. On October 25, 1995, DLD filed a Motion to Dismiss, arguing that (1) IWIF is not a state agency, and as such, the three-year statute of limitations would apply and would time bar CCU’s complaint, (2) even if IWIF is a state agency, sovereign immunity has been waived as to the statute of limitations involving contracts, and thus, CCU’s complaint is still time-barred, and (3) CCU is not the real party in interest. The trial court, thereafter, entered an order granting DLD’s motion. I. IWIF AS AN INSTRUMENTALITY OF THE STATE FOR PURPOSES OF THE STATUTE OF LIMITATIONS This Court is once again asked to revisit the issue of sovereign immunity.

As has been oft repeated, ⁵⁰⁸ [t]he doctrine of sovereign immunity from suit, rooted in the ancient common law, is firmly embedded in the law of Maryland. Although originally based on the tenet that “the King can do no wrong,” the doctrine is presently viewed as a rule of policy which protects the State from burdensome interference with its governmental functions and preserves its control over State agencies and funds. Katz v. Washington Sub. San.

Comm’n, 284 Md. 503, 507 , 397 A.2d 1027, 1030 (1979) (citations omitted). Sovereign immunity is not only applicable to the State itself, but also to its agencies and instrumentalities, unless the Legislature has waived immunity directly or by necessary implication. God-win v. County Comm’rs, 256 Md. 326, 334 , 260 A.2d 295, 299 (1970); Katz, 284 Md. at 507-08 , 397 A.2d at 1030 . Thus, whether IWIF enjoys sovereign immunity hinges on the answer to the question: Is IWIF an agency or instrumentality of the State?

The importance of the answer to this question lies in the fact that neither “the statute of limitations nor laches applies to the State when it sues in its sovereign capacity in its own courts.” Cent. Collection v. Gettes, 321 Md. 671, 675 , 584 A.2d 689, 691 (1991). Therefore, if this question yields an answer in the affirmative, absent a finding that sovereign immunity has been waived by the Legislature, DLD will not be permitted to raise the statute of limitations defense. “[TJhere is no single test for determining whether a statutorily-established entity is an agency or instrumentality of the State for a particular purpose. All aspects of the interrelationship between the State and the statutorily-established entity must be examined in order to determine its status.” A.S. Abell Pub.

Co. v. Mezzanote, 297 Md. 26, 35 , 464 A.2d 1068, 1072 (1983). See also, O & B, Inc. v. Md.-Nat'l Cap. P & P, 279 Md. 459, 462 , 369 A.2d 553, 555 (1977). The appellee stress to this Court, however, that the Legislature has taken the “guess-work” out of the proces of determining IWIF’s status.

The appellee argues that Md.Code Ann., Lab. & Emp. § 10-105 (1991 & Supp.1996), which states that IWIF “is independent of all State units,” effectively expresses the ⁵⁰⁹ Legislature’s determination that IWIF is not an agency or instrumentality of the State. We disagree. We construe the phrase “independent of all State units” as the Legislature’s expressed intent to have IWIF operate independently of other governmental departments or agencies, and not as an expressed intent to disavow IWIF, in its own right, as an agency or instrumentality of the State. Indeed, the intent that this language be one of separation rather than exclusion is evident in the fact that similar language has been used in other situations, albeit with more clarity, to express the desire of the Legislature to have an agency or instrumentality act independently of other units of government.

See Lab. & Emp. § 9-301 (The Workers’ Compensation Commission is characterized as “an independent unit of the State government.”); Md.Code Ann., State Fin. & Proc. § 5-102 (1995) (The Office of Planning is characterized as “a separate unit of the State of Maryland.”), Md.Code Ann., State Gov’t § 9-906 (1995 & Supp.1996) (The Maryland Veterans Commission treated as “an independent unit, and except by statute, may not be made a part of another unit of the State government.”); State Gov’t § 9-1602 (The Office of Administrative Hearings made “an independent unit in the Executive Branch of State government.”); Md. Ann.Code, Fin. Inst. § 13-702(c) (Supp.1995) (The Maryland Stadium Authority classified as “an independent unit in the Executive Branch of State Government.”). We conclude, therefore, that the Legislature has not expressly addressed whether IWIF is an agency or instrumentality of the State. Nevertheless, we recognize that the failure of the General Assembly to designate IWIF as an agency or instrumentality does not preclude a finding that IWIF is an agency or instrumentality of the State.

Indeed, on some occasions, the General Assembly has expressly characterized certain entities that it has established as State “agenc[ies].” ... Other entities established by the General Assembly have been expressly characterized as “not a department, agency, or instrumentality of the State.” In some cases, the General Assembly has not expressly stated ⁵¹⁰ whether an entity that it has established is or is not an agency or instrumentality of the State.... Whether such an entity is characterized as an agency or instrumentality of the State for a particular purpose depends on the facts. A.S. Abell, 297 Md. at 39 , 464 A.2d at 1074-75 (citations omitted).

A consideration of the entire relationship between IWIF and the State leads this Court to conclude that IWIF is an agency or instrumentality of the State. IWIF was established by the Legislature, and continues to be extensively controlled by state statute. Lab. & Emp. § 10-101, et seq. In creating IWIF, the Legislature subjected IWIF to various laws that are designed to apply to agencies or instrumentalities of government.

For example, IWIF is classified by statute as a public body for purposes of the Open Meetings Act, and is subject to the Maryland Public Ethics Law. Lab. & Emp. § 10-105(b)(2). IWIF is subject to State Gov’t §§ 10-611 to 10-628, which govern access to public records. Interestingly, public records are defined by the Legislature as records “made by a unit or instrumentality of the State government or of a political subdivision or received by the unit or instrumentality in connection with the transaction of public business.” State Gov’t § 10 — 611(f)(l)(i) (emphasis added).

The Legislature has expressly subjected IWIF to Title 12 of the State Government Article, which directly deals with sovereign immunity and liability of state agencies, instrumentalities, and personnel. Lab. & Emp. § 10-105(b)(2)(iii). IWIF also enjoys special property tax exemption status enjoyed by the State. Lab. & Emp. § 10-105(b)(3).

Therefore, by subjecting IWIF to various statutes that apply only to State agencies or instrumentalities, the Legislature has implicitly acknowledged that IWIF is an agency or instrumentality of the State. Moreover, the management and the financial operation of IWIF indicates that it is a state agency or instrumentality. As to the management of IWIF, the Governor, with the advice and consent of the Senate, appoints all seven members of the Board, and may remove a member of the Board for incompetence or misconduct. Lab. & Emp. § 10-110(a) & (e). ⁵¹¹ Each member of the Board is required to be a citizen of the State, and to take the oath required by Article I, § 9 of the Maryland Constitution.

Lab. & Emp. § 10 — 110(b)—(c). The Board is required to prepare capital and operating budgets, and submit those budgets to the Senate Budget and Taxation Committee and the House Appropriations Committee for informational purposes. Lab. & Emp. § 10-120(b). The Board is also required to