Tate v. Tate

MOYLAN, J. This dispute between the appellant, Donald L. Tate, and the appellee, Susan R. Tate, is over their respective entitlements ⁵²⁸ to certain funds owing, as of July 1, 1999, to one or both of them by a partnership in which each owned a 25% interest. 1 On October 21, 1999, Donald Tate filed a Complaint for Declaratory Judgment in the Circuit Court for Anne Arundel County, asking that court to declare that he had exclusive entitlement to the disputed funds. Numerous depositions and other documents were filed. Extensive discovery was conducted. After the filing of a Motion for Summary Judgment by Donald Tate and a Counter Motion for Summary Judgment by Susan Tate, Judge Philip T. Caroom filed a seven-page Opinion and Order as to Declaratory Relief and Related Matters on Summary Judgment.

That Opinion declared that twice the amount of the disputed funds in question was owed by Severn Valley to Donald Tate and to Susan Tate in equal amounts, in effect granting summary judgment in favor of Susan Tate as to her one-half share of that amount. Donald Tate has brought the present appeal. The appellant and the appellee were married on April 9, 1960, and separated more than thirty years later on October 4, 1990. They were divorced in the Circuit Court for Anne Arundel County on November 5, 1993.

A comprehensive Voluntary Separation and Property Settlement Agreement, also dated November 5, 1993, was approved and incorporated into the Judgment of Absolute Divorce. The partnership in question was the Severn Valley Farms LLC (“Severn Valley”). The partnership was initially formed in 1985, when Donald Tate and Baldwin Enterprises, Inc. purchased two parcels of real property in Anne Arundel County. Both Donald Tate and Baldwin Enterprises initially became 50% owners of Severn Valley.

The ownership of the partnership changed in 1987, however, when by virtue of an Agreement of General Partnership, Donald L. Tate and Susan R. Tate each became the owner of a 25% interest in Severn ⁵²⁹ Valley. Baldwin Enterprises retained its 50% ownership interest. Both parties to this appeal agree that the reason for making Susan Tate a partner in Severn Valley was because Donald Tate had received and approved the recommendation of his lawyers that the new arrangement would be advisable “for estate planning purposes.” The agreement making Susan Tate a partner was backdated to June 1, 1985. During the remaining years of the Tates’ marriage, Susan Tate’s involvement in partnership decisions was exclusively a passive one.

As Judge Caroom’s Opinion declared, “The wife was present when some discussions were held between the original partners, but she did not participate or pay much attention.” The funds in dispute in this case were initially part of the assets of Severn Valley acquired on July 1, 1999, when Severn Valley sold a tract of real property in Anne Arundel County to Winchester Homes, Inc. for approximately $4,000,000. From those assets, Severn Valley was to “repay” its partners, with interest, for certain payments into Severn Valley which had earlier been made by its partners. As far as the Tates were concerned, four such payments were in issue, payments made to Severn Valley on behalf of one or both of the Tates 1) in October of 1988 for $39,500; 2) on October 25, 1989 for $34,500; 3) on August 25, 1992 for $72,772.66; and 4) on September 21, 1993 for $15,910.50. The full amount of those loans, plus accrued interest, came to $468,774.76.

Donald Tate claimed that that full amount was owed by Severn Valley exclusively to him. Susan Tate maintained that one-half of that amount, $234,387.38, was owed by Severn Valley to her. 2 To protect her interest in the claimed $234,387.38, Susan Tate, as a 25% partner in Severn Valley, informed Donald ⁵³⁰ Tate that she would not agree to the sale of the real property to Winchester Homes, Inc., unless he agreed to place that amount in escrow at settlement from his portion of the proceeds. Accordingly, he placed that amount in escrow. The entitlement to those funds represents the sole issue that was before Judge Caroom.

The Denial of Summary Judgment in Favor of Donald Tate On the books of Severn Valley, all of the payments made to Severn Valley by either of the Tates were recorded as “loans” made to Severn Valley by Donald Tate. On the basis of those bookkeeping entries, Donald Tate contends that Judge Caroom erroneously failed to grant summary judgment in his (Donald Tate’s) favor. He claims that Paragraphs 5d and 20G of the November 5, 1993, Voluntary Separation and Property Settlement Agreement are dispositive as to property “titled in his own name.” Section 5d of the Agreement provided: “Except as otherwise provided in this Agreement, each party shall retain, as his or her sole and separate property, any stocks, bonds, or other securities, savings or checking accounts, certificates of deposit, money market funds, pensions, profit-sharing plans, individual retirement accounts, deferred compensation of any kind, and any other assets of any kind or nature in his or her own name, free and clear of any interest of the other.” (Emphasis supplied). Section 20G of the Agreement provided: “Except as otherwise provided in this Agreement, the parties agree that any property titled in the name of a party shall remain the sole property of that party, free from any claim of the other party.” (Emphasis supplied).

Judge Caroom ruled that those sections of the Agreement were not dispositive in Donald Tate’s favor because 1) the meaning of § 5d’s “in his name” did not embrace the characterization made by a third-party bookkeeper and 2) the book ⁵³¹ keeping entry was not a sufficient “instrument” to confer legal title. The husband’s primary basis for retaining the disputed SVF loan funds is this: once the settlement agreement resolved the parties’ marital property issues, it also provided that “... [E]ach party shall retain, as his or her sole and separate property, any ... assets of any kind or nature in his or her name, free and clear of any interest of the other.” What does “in his ... name” mean? Interestingly, the phrase does not appear in Black’s Law Dictionary (7th Ed.1999). Maryland appellate case law is full of references to this phrase, but over 90% of these are coupled with the more specific qualification “titled in the name” or “indorsed in the name,” etc., referring a specific legal designation....

This Court takes note that other usage of the phrase may be more equivocal; for example, someone might say, “Osa-ma Bin Laden may not be held criminally responsible simply because an offense was committed in his name” or “The neighborhood association’s board agreed the treasurer could keep the funds in his own name, but for the benefit of the association.” Given these various possible uses, the undersigned concludes that in itself the phrase is ambiguous and must be construed from context and any appropriate extrinsic evidence. Because SVF never asked [for] or obtained from the wife any contribution when needed for the loan accounts, and because SVF carried the funds on its ledgers in his name alone, the husband contends that these “accounts” must remain his sole legal property. However, the undersigned is persuaded that SVF’s characterization of these funds is not decisive and does not represent “title” ownership of the disputed funds. “Title” is defined by Black’s, supra, as 1. The union of all elements (as ownership, possession, and custody) constituting the legal right to control and dispose of property; the legal link between a person and the property itself.... 2.

Legal evidence of a person’s oumership rights in property; an instrument (such as a deed) that constitutes such evidence. ⁵³² The ledger certainly is not an “instrument” in the legal sense of that word. As evidence, it would be hearsay (notwithstanding the business records exception), not emanating from someone with personal knowledge; therefore, as extrinsic evidence, its corroborative value is weak. (Emphasis supplied). The various depositions that had been submitted to Judge Caroom indisputably supported his conclusion that neither Donald Tate nor Susan Tate had ever given any instruction to the bookkeeper as to how the payments from the joint checking account of Donald and Susan Tate were to be recorded or characterized, notwithstanding that the checks were signed by Donald Tate.

Rather, the strongest evidence of the parties’ intent must come from the parties themselves. Here, neither Baldwin nor his bookkeeper recall any explicit instructions from either the husband or the wife as to how these funds should be treated. The wife confirms-that she never gave any such instructions because she was hardly aware of the transac- • tions by which that the funds were being paid into SVF. The husband also never gave any instructions as to how these funds should be treatedsee his deposition, attached to Defendant’s Opposition to ... [Second] ...

Summary Judgment and ... Counter-Motion ..., exhibit A, (“Q: Did you, or had you previously told [SVF] to do that, i.e., to carry the notes or the payments strictly as notes payable to you? A: I didn’t instruct them at all. Q: So you had nothing to do with how [SVF] carried those payments on its books? ...

A: I did not. ”) Indeed, neither party had even seen the SVF account ledger books prior to the litigation, although each had the right of access to these as partners. (Emphasis supplied). At stake was approximately half a million dollars held by the Severn Valley partnership for one or both of the Tates, each a 25% partner in Severn Valley. Rather than accepting a strained reading of the general and boilerplate language of a subsection, to wit, 5d, of § 5, dealing with “PERSONAL ⁵³³ PROPERTY;” or a subsection, to wit, 20G, of § 20, dealing merely with “MISCELLANEOUS,” Judge Caroom looked to the larger context of the Property Agreement in its totality and to the specific provision of § 19, spelling out precisely the equal interests of Donald Tate and Susan Tate in the Severn Valley partnership.

Mattingly Lumber Co. v. Equitable Bldg. & Savings Assoc., 176 Md. 403, 408 , 5 A.2d 458 (1939). The Property Settlement Agreement of November 5, 1993, contained, as § 19, the one very specific provision that covered the respective interests of the appellant and the appellee in the Severn Valley Farms Partnership. “Husband and Wife are each owners of a separate twenty-five percent (25%) interest in the Severn Valley Farms Partnership which owns real property located in Anne Arundel County, which is currently being developed. From the date of this Agreement, each party shall be solely responsible for the capital and any other monetary contributions required on account of his or her respective twenty-five percent ownership of the Severn Valley Farms Partnership.” We hold that Judge Caroom was not in error in declining to grant summaiy judgment, on the basis of §§ 5d and 20G of the Property Settlement Agreement, in favor of Donald Tate. An Alternative Rationale Judge Caroom actually supplied a tentative “backstop” or alternative rationale supporting his ruling.

We note initially that the disputed funds owing from Severn Valley to the Tates (twice the amount placed in escrow) totaled almost half a million dollars. This was self-evidently no de minimis asset. In the course of the divorce litigation, Donald Tate submitted to Susan Tate his S74 Financial Statement. It did not identify the disputed $468,774.76 as his property or refer to it as an asset belonging to him.

At another point in the divorce litigation, Donald Tate submitted to Susan Tate a previously prepared financial statement, which again failed to identify the $468,774.76 as his property or to refer to it as an asset belonging to him. ⁵³⁴ In his deposition, Donald Tate acknowledged these failures and simply stated, “I overlooked them.” When pressed, he explained: “It was overlooked as an asset. * * * Well, I prepared financial statements all my business life and these never appeared on there and I can’t explain why. Just I overlooked it as an asset.” That oversight contrasts significantly with § 10 of the Property Settlement Agreement, entitled “TATE NOTES,” in which the appellant, over the course of six and one-half pages, provides precise details as to other comparable assets. Indeed, it was not until the settlement on July 1, 1999, that Donald Tate advised Susan Tate, for the first time, that he was viewing the entire $468,774.76 in the hands of Severn Valley as his sole property. As a “backstop” rationale for his ruling, Judge Caroom took a dim view of this massive non-disclosure.

Arguably, if the parties’ agreement were construed not to have expressed this intent, the Court would be left with another question of whether the wife should be entitled to a constructive trust, or to reformation of the parties’ agreement, due to their mutual mistake in omitting a material item of marital property from consideration. Such a remedy indeed properly would have been available to the wife. The wife, by counsel, alleges that such a remedy should be permitted, despite the final divorce judgment due to the husband’s fraud in omitting reference to the SVF loan funds from his financial statements and discovery. The undersigned finds that these allegations are only conclusory.

Cf., Bennett v. Baskin & Sears, 77 Md.App. 56, at 70 , 549 A.2d 393 (1988). While the undersigned does not find that fraud is supported by the undisputed evidence herein, it is not needed for the relief sought. Mutual mistake, under Maryland law, is a sufficient basis for reformation of a contract to supply provisions omitted by oversight. Here, there is no dispute but that neither party recalled the existence of the funds until they ⁵³⁵ sat down at the settlement table when their SVF interests were sold in 1999.

As Justice Story once said, [a] court of equity would be of little value ... if it could suppress only positive frauds, and leave mutual mistakes, innocently made, to work intolerable mischiefs contrary to the intention of the parties. It would be to allow an act, originating in innocence, to operate ultimately as a fraud by enabling the party, who receives the benefit of the mistake, to resist the claims of justice under the shelter of a rule framed to promote it ... Equity reforms an instrument not for the purpose of relieving against a hard or oppressive bargain, but simply to enforce the actual agreement of the parties to prevent an injustice.... Quoted in Housing Authority v. Macro Housing, 275 Md. 281, at 286-287 , 340 A.2d 216 (1975).

Moreover, the undersigned would find that the husband’s negligence in omitting reference to SVF loan funds amounted to “gross negligence” as it violated his obligations not only under Maryland Rule 9-203(g), 9-206 and discovery, but also his fiduciary duty as the dominant financial party in the marriage upon whom the wife clearly relied. Thus, even under the terms of the parties’ agreement, the wife would be entitled, to seek reformation of the agreement to seek the relief sought. (Emphasis supplied). The Disposition of This Case Did Not Turn On Interpreting Terms of a Contract In reviewing the propriety of Judge Caroom’s 1) denial of summary judgment in favor of Donald Tate and 2) grant of summary judgment in favor of Susan Tate, we decline to be confined within the analytic box framed by the appellant’s configuring of his contentions.

Judge Caroom’s declaration as to the ownership of the escrowed funds did not depend upon some finding by him that the terms of the 1993 Property Settlement Agreement were ambiguous. His review of the undisputed evidence before him was not, in turn, a resort to extrinsic evidence to resolve an ambiguity in one or more terms of the Agreement. ⁵³⁶ The resolution of this case did not turn on either the plain meaning of the words “in his name” in § 5d of the Agreement or on what the Tates intended those words to mean. The resolution of this case did not turn on either the plain meaning of the words “titled in the name of a party” in § 20G of the Agreement or on what the Tates intended those words to mean. The unmistakable purport of Judge Caroom’s Opinion and Order was that §§ 5d and 20G, however clarion their meaning, simply did not apply to the escrowed funds owed by Severn Valley on July 1, 1999, to one or the other of the Tates.

Notwithstanding the appellant’s framing of his contentions, we decline to get mired down in an immaterial body of caselaw dealing with finding and resolving ambiguities in the terms of a contract. Judge Caroom’s final declaration did not depend on interpreting terms of the Agreement but on the legal significance of extrinsic events involving the partners and the Severn Valley partnership. [T]he funds held in escrow constitute a part of the equal interest in the Severn Valley Farm partnership which was given by Plaintiff to Defendant pursuant to the parties’ separation agreement. The meaning of § 19 of the Agreement, recognizing Donald Tate and Susan Tate as equal 25% partners in Severn Valley, was never in question. It is clear that the Tates intended for the very specific provisions of § 19 of the Property Settlement agreement to cover their respective interests in the Severn Valley partnership, without any necessary reference to other more general, miscellaneous, and boilerplate provisions of the Agreement.

There was no ambiguity with respect to § 19, and nothing that was declared by Judge Caroom suggested that there was. Payments Were Made to the Partnership By the Total, 50%, Tate Interest In the Partnership The $468,774.76 owed by Severn Valley to the Tates on July 1, 1999, was the result of the four payments, plus accrued ⁵³⁷ interest, made by the Tates into Severn Valley between 1987 and 1993. Although Donald Tate would prefer to phrase it otheiwise, the critical question is not BY WHOM those payments were made, but ON BEHALF OF WHOM those payments were made. It was undisputed that from the time she was made a 25% partner in Severn Valley in 1987 (backdated to 1985) until the final dissolution of the marriage in 1993, Susan Tate was essentially a passive partner.

Thomas Baldwin, the managing partner, 3 continued, after 1987, to deal with the collective 50% Tate family interest exclusively through Donald Tate. All communication between the managing partner and the combined Tate family interest in the partnership was through the medium of Donald Tate. All requests for payments to the partnership—whether they be characterized as “cash calls,” requests for capital contributions, or requests for loans—were directed to Donald Tate. All statements showing the financial situation of the partnership were sent to Donald Tate.

As Judge Caroom declared from the undisputed facts: [BJetween 1985 and 1993, SVF continued to issue tax documents in the husband's name only and to issue requests for financial contributions in the husband’s name only. The husband made payments to SVF, in response to the requests for financial contributions, by using the parties’ joint checking account. (Emphasis supplied). The mere fact that all communications between the managing partner, on behalf of Severn Valley, and the full 50% Tate family interest in the partnership, representing Donald Tate’s 25% share and Susan Tate’s 25% share, came through the physical medium or agency of Donald Tate is not at all dispositive of the critical question of whether Donald Tate’s responses, particularly to the requests for payments, were 1) ⁵³⁸ on Ms own personal behalf, acting as a single 25% partner; or 2) on behalf of himself and Susan Tate, acting as the representative of the combined 50% Tate family interest in the partnership.

For purposes of this appeal, Donald Tate refers to the three or four critical payments made to Severn Valley as “loans,” rather than as “cash calls” or “capital contributions.” Even if he were to prevail with respect to this characterization of the payments, it would by no means be dispositive of the larger issue in his favor. Although, to be sure, Donald Tate signed the checks by which payment was made, the monies paid came out of the joint checking account of Donald and Susan Tate. The “loans” to Severn Valley, if they were such, might readily have been by Donald Tate personally. They might as readily, however, have been made to Severn Valley on behalf of both Donald and Susan Tate, representing the