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Hartford Fire Insurance Co. v. Estate of Sanders

Court of Special Appeals of Maryland

March 2, 2017

HARTFORD FIRE INSURANCE COMPANY
v.
ESTATE OF ROBERT L. SANDERS

          Eyler, Deborah S., Kehoe, Shaw Geter, JJ.

          OPINION

          Eyler, Deborah S., J.

         This estate case is in the unusual posture of being on its third level of court review. Hartford Fire Insurance Company ("Hartford"), the appellant, is the surety on a $20, 000 personal representative bond obtained by Vanessa Sims, the former personal representative of the Estate of Robert L. Sanders ("Estate"), the appellee. In a proceeding to which Hartford was not on notice, the Orphans' Court for Baltimore City entered an order finding that Sims had misappropriated $13, 566.23 in Estate assets. When Sims failed to repay the Estate, Charleen Price, the present personal representative of the Estate, brought an action against the bond in that court. After a hearing in which Hartford participated, the orphans' court entered an order condemning the bond for $13, 566.23.

         Hartford appealed the orphans' court's judgment to the Circuit Court for Baltimore City. In a trial de novo, the court entered judgment condemning the bond for $3, 256.96. The Estate obtained review of that judgment by a three-judge in banc panel of the circuit. The in banc court reversed the trial court and entered judgment against Hartford, condemning the bond for $13, 566.23. After the in banc court denied a motion to alter or amend, Hartford noted this appeal.

         FACTS AND PROCEEDINGS

         Orphans' Court Proceedings

         On October 28, 2002, Robert L. Sanders died without a will. He had been a plaintiff in ongoing asbestos-related litigation that continued after his death. Princess Sanders, his infant daughter, was his sole heir. Charleen Price is Princess's mother.

         Price opened a small estate to receive settlement payments in the asbestos-related litigation, which were expected to be made periodically for some time into the future.[1]On April 14, 2003, the Orphans' Court for Baltimore City appointed Price and Vanessa Sims, Sanders's sister, co-personal representatives of the Estate. The Law Firm of Peter T. Angelos ("Angelos Firm") represented Sanders and, after his death, the Estate.

         Eight years went by. On March 18, 2011, Sims filed a petition to remove Price as co-personal representative. By order of May 9, 2011, the orphans' court granted the petition and named Sims as the sole personal representative of the Estate. The record does not reveal the basis for Price's removal.

         On March 18, 2013, at the suggestion of the Angelos Firm, Sims obtained from Hartford the $20, 000 personal representative's bond central to this case. The bond was filed with the register of wills on March 20, 2013. Five months later, on August 28, 2013, the Angelos Firm filed a motion in the orphans' court to withdraw its appearance for the Estate. In support, it asserted that, on July 12, 2012, Sims had misappropriated $2, 500 from the Estate and since then had repeatedly refused to return the funds to the Estate. The orphans' court granted the motion on September 3, 2013. Three days later, on September 6, 2013, Price filed a petition to remove Sims as personal representative.

          Apparently with Sims's consent, the orphans' court issued an order on January 8, 2014, docketed the next day, removing her as personal representative and appointing Price as successor personal representative ("January 2014 Order"). The January 2014 Order stated that Sims "shall turn over to the Successor Personal Representative [Price], within five (5) days of the date of this order, all known assets, property, and records pertaining to [the] [E]state." Sims did not do so.

         On May 22, 2014, Price filed a petition for the return of the Estate assets allegedly misappropriated by Sims. The orphans' court issued a show cause order directing Sims to appear on July 21, 2014, to account for the missing Estate funds. Hartford was not notified of the petition or the show cause order.

         At the July 21, 2014 hearing, the court received evidence and found that Sims had misappropriated $13, 566.23 from the Estate. It authorized Price to bring an action against the bond if Sims did not pay that sum to the Estate within 30 days. These rulings were memorialized in an order entered on July 28, 2014 ("the July 2014 Order"). Sims filed a timely motion for reconsideration, which was denied. She did not pay $13, 566.23 to the Estate within the 30-day timeframe, or at all, and did not appeal the July 2014 Order.

         On August 25, 2014, Price filed a petition to condemn the bond. Two days later, the orphans' court issued an order directing Hartford to show cause in writing why the petition should not be granted. The order was served on counsel for Hartford. Hartford responded and an evidentiary hearing on the petition to condemn the bond was scheduled and went forward on November 3, 2014. On November 10, 2014, the orphans' court entered an order finding that Sims had "misappropriated estate funds as stated in this Court's [July 2014 Order]"; condemning the bond for $13, 566.23; authorizing Price to recover that sum from Hartford as surety; and entering judgment in favor of Hartford against Sims for that sum ("November 2014 Order").

         Appeal of Orphans' Court's November 2014 Order to Circuit Court for Baltimore City

         Under section 12-502 of the Courts and Judicial Proceedings Article, Md. Code (1973, 2013 Repl. Vol.) ("CJP"), a final judgment of the orphans' court may be appealed to the circuit court.[2] Such an appeal "shall be heard de novo by the circuit court[, ]" CJP section 12-502(a)(1)(ii), and "shall be treated as if it were a new proceeding and as if there had never been a prior hearing or judgment by the orphans' court." Id. at § 12-502(a)(1)(iii). "The circuit court shall give judgment according to the equity of the matter." Id. at § 12-502(a)(1)(iv). To take an appeal to the circuit court, an "order for appeal" must be filed with the register of wills "within 30 days after the date of the final judgment [of the orphans' court] from which the appeal is taken." Id. at § 12-502(b)(1).

         On November 20, 2014, Hartford noted a timely appeal of the orphans' court's November 2014 Order to the Circuit Court for Baltimore City. The circuit court held a trial de novo on January 27, 2015. The Estate took the position that the bond should be condemned for the full $13, 566.23 misappropriated by Sims. Hartford took the position that the bond only could be condemned for sums misappropriated by Sims after the March 18, 2013 date of the bond and before Sims was removed as personal representative, and those sums were less than $13, 566.23.

         Without objection, the Estate moved into evidence copies of the orphans' court's May 9, 2011 Order removing Price as personal representative; the bond; the orphans' court's January 2014 Order removing Sims as personal representative; and the orphans' court's July 2014 Order finding that Sims had misappropriated $13, 566.23 in assets from the Estate. It also introduced a spreadsheet, to which the parties had stipulated, showing the asbestos-related litigation payments made to the personal representative(s) of the Estate from March 29, 2004, to February 26, 2014. The gross settlements totaled $33, 794, but after attorneys' fees and litigation costs were deducted, the net payments received by the Estate came to $22, 106.20.[3] The spreadsheet reflected that from March 18, 2013 (the date of the bond) to January 8, 2014 (the date Sims was removed as personal representative), three asbestos-related litigation net payments were made to Sims as personal representative: 1) $2, 847.50, on June 10, 2013; 2) $237.93, on August 7, 2013; and 3) $171.53, on November 18, 2013.

         Hartford called Sims as a witness. She identified a check she signed on July 19, 2013, for $2, 847.50, on the Estate's bank account, payable to "Charleen Price for Princess Sanders, minor." ("July 2013 Check"). The "memo" line on the check reads "Pfizer Global Settlement Dist." The check is attached to an August 5, 2013 letter to Price from counsel with the Angelos Firm, stating that it "represents a distribution to [Princess] as the sole heir of" the Estate. The July 2013 Check with attached letter was moved into evidence without objection, and Sims then was asked, in vague terms, whether there also were checks written for $237 and $171 during the period from March 18, 2013, until January 8, 2014. She responded yes. (No such checks were produced or offered into evidence.)

         On cross-examination, Sims was shown a document entitled "6th Supplemental Schedule - B" that was filed in the orphans' court on March 19, 2013. She acknowledged that she signed the document on March 5, 2013. In Paragraph 1, the document reports that the Estate has "Total Gross Assets" of $25, 250.97, comprised of $10, 971.72 in "Assets previously reported" and $14, 279.25 in "Partial asbestos-related assets[.]" An attached addendum breaks down the "Partial Asbestos Related Settlements" by date and amount received, from November 2009 to December 2012.

         In closing argument, the Estate's lawyer asserted that 1) the July 2014 Order of the orphans' court, establishing that Sims misappropriated $13, 566.23 from the Estate, was a final judgment that was not timely challenged on appeal; 2) only the orphans' court's November 2014 Order condemning the bond for $13, 566.23 was timely appealed and before the circuit court in the trial de novo; and 3) the sole issue in the appeal from the November 2014 Order-the amount for which the bond would be condemned-was conclusively determined by the July 2014 Order. Therefore, the correct outcome was an affirmance of the orphans' court's November 2014 Order condemning the bond for $13, 566.23.

         Hartford's lawyer responded that the bond only could be condemned for the amount misappropriated by Sims between the date of the bond and the date she was removed as personal representative; and that, according to Sims's testimony, she wrote three checks on the Estate's account during that time-for $2, 847.50, $237.93, and $171.53-totaling $3, 256.96. He maintained that there was no evidence that those sums were misappropriated at all, but if they were, they were the maximum amount for which the bond could be condemned. Therefore, the correct outcome was a reversal of the orphans' court's November 2014 Order and a judgment completely in favor of Hartford or a judgment condemning the bond for $3, 256.96 at most.

         In rebuttal, counsel for the Estate argued that the $20, 000 penalty sum for the bond covered all the funds that should have been in the Estate when Sims was personal representative, not just the funds she misappropriated after the date of the bond and before she was removed as personal representative.

         After closing arguments, the trial judge announced that because the appeal was de novo, she would not accept the orphans' court's July 2014 Order as proof that Sims had misappropriated $13, 566.23 from the Estate. She stated that she "really [did not] know" how the orphans' court had arrived at that number, and it was the Estate's burden to produce evidence to show that Sims had misappropriated that amount from the Estate. At that point, counsel for the Estate sought to move into evidence "the numbers that [he] submitted" in the orphans' court to support the $13, 566.23 misappropriation figure.

          Counsel for Hartford objected to any additional evidence being taken, because the parties had rested and closing arguments were finished. The objection was sustained.

         The trial judge proceeded to make findings on the amount of Estate funds, if any, the Estate had proven Sims had misappropriated. After commenting that she had reviewed the exhibits, she recounted what had ensued in the orphans' court, as shown in the record of that court underlying the November 2014 Order. She took note of the Angelos Firm's August 29, 2013 motion to strike appearance on the ground that Sims had taken $2, 500 from the Estate checking account for her own use on July 12, 2012, and the firm's unsuccessful efforts to have her repay the Estate; and that the motion had been granted on September 3, 2013. The judge further recited that in Price's petition to return Estate funds, she alleged that on January 10, 2014, Sims had withdrawn $2, 847.50 from the Estate checking account without permission and for her own use.[4]

         The trial judge found that the spreadsheet showed that the asbestos-related litigation payments to the Estate totaled $33, 794.[5] She further found that the spreadsheet showed a "check[] written" for $2, 847.50 while Sims was the sole personal representative of the Estate; and that the July 2013 Check was written for "the exact same amount."

          The judge stated that she did not see "any check or the reasons why there was 237.93 for August 7th, 2013" and that "there was a check in the amount of 171.53, that was November 18th, 2013." The judge could not tell "why [those checks] were written."

         Concluding, the trial judge determined:

[T]here's been no testimony in evidence how, through this accounting, [[6]from the period of March 18, 2013 to January 8, 2014, there's no evidence that supports that Ms. Sims specifically misappropriated Estate funds of 13, 566.23.
Rather, the total amount that I see is 2, 847.50, plus 237.93, plus 171.53 equals 3, 256.96. That is the total amount that, based on the testimony and the evidence, this Court can find that Ms. Sims misappropriated while she was the Personal Representative of the Estate of Robert L. Sanders, between March 18, 2013 to January 8, 2014.

         Thus, the trial judge ruled that the relevant time period for determining whether the bond would be condemned was from March 18, 2013, to January 8, 2014, and the only evidence before the court was that Sims misappropriated $3, 256.96 during that time. On those bases the court entered an order condemning the bond for $3, 256.96.

         Review By In Banc Panel of the Circuit

         After the trial court entered its order, the Estate filed a timely notice for in banc review by a three-judge panel of the circuit. The parties filed memoranda, and the in banc court held a hearing on June 16, 2015. On September 16, 2015, it docketed a memorandum opinion and order reversing the trial court's judgment and condemning the bond for $13, 566.23.

         The in banc court reasoned that the July 2014 Order was a "final judgment" of the orphans' court that was not appealed and consequently was a conclusive determination, binding on Hartford in the action against the bond, that Sims had misappropriated $13, 566.23 from the Estate. The de novo appeal to the circuit court, being taken from the orphans' court's November 2014 Order condemning the bond for $13, 566.23, only concerned the amount for which the bond would be condemned, not whether Sims had misappropriated funds from the Estate. The Estate was not required to prove in the de novo appeal that Sims had misappropriated funds from the Estate. Moreover, the bond applied retroactively, under Brown v. Murdock, 16 Md. 521 (1861), and properly was condemned for the entire $13, 566.23 misappropriated by Sims regardless of whether some of the Estate funds were misappropriated before the date of the bond. Although not dispositive, but relevant to our analysis infra, the in banc court concluded that the Estate had waived its alternative argument that Hartford was liable on the bond for the full amount misappropriated by Sims, including misappropriations that predated the bond, because Sims failed to turn over the funds that should have been in the Estate when she was removed as personal representative.

         On September 24, 2015, Hartford filed a motion to alter or amend the judgment of the in banc court, citing Rule 2-534. It argued that the in banc court had erred as a matter of law in holding that the bond could apply retroactively to misappropriations pre-dating the March 18, 2013 date of the bond and asked that the in banc court revise its judgment accordingly. On October 6, 2015, the Estate filed an opposition. On October 22, 2015, the in banc panel entered an order, docketed four days later, denying Hartford's motion. Hartford noted this appeal on November 17, 2015.

         STANDARD OF REVIEW AND QUESTIONS PRESENTED

         As explained, an appeal to the circuit court from a final judgment of the orphans' court is de novo. So here, the January 27, 2015 trial in the circuit court was a substitute for the November 3, 2014 evidentiary hearing in the orphans' court that resulted in the November 2014 Order.

         Article IV, section 22 of the Maryland Constitution, as implemented in civil cases by Rule 2-551, grants a party against whom a decision was made by the circuit court a right to in banc review by a three-judge panel of the circuit.[7] The in banc court "functions 'as a separate appellate tribunal[.]'" Bienkowski v. Brooks, 386 Md. 516, 553 (2005) (quoting Board v. Haberlin, 320 Md. 399, 406 (1990)). For the party seeking it, in banc review serves as a substitute for an appeal to this Court. Haberlin, 320 Md. at 406. For that reason, the role of the in banc court is not to reconsider the decision of the trial court. Dabrowski v. Dondalski, 320 Md. 392, 396 (1990). Instead, it is to engage in appellate review of the trial court's decision. Azar v. Adams, 117 Md.App. 426, 429 (1997) ("[T]he in banc panel sits to review the findings of the trial court and, as such, sits in an appellate capacity.").

         A party who seeks and obtains in banc review "has no further right of appeal." Md. Rule 2-551(h). That does not preclude another party from taking an appeal to this Court, however. Specifically, a party who did not seek and obtain in banc review may appeal from the judgment of the in banc court, to the extent the judgment otherwise is appealable. Id.

         In the case at bar, the Estate lost Hartford's de novo appeal to the trial court; sought and obtained in banc review of the trial court's judgment; and prevailed before the in banc court, which reversed the trial court's judgment. If the Estate had not prevailed before the in banc court, its right to appeal to this Court would have been foreclosed. Hartford, which had prevailed before the trial court in the de novo appeal, did not seek and obtain in banc review and, having lost before the in banc panel, could note a further appeal to this Court.

         The questions Hartford presents in this appeal are phrased in terms of our reviewing the judgment of the in banc court and, more particularly, the decisions underlying that judgment, as opposed to the judgment of the trial court. Before addressing the questions, we must ascertain our standard of review and determine from that whether the questions should be rephrased to focus on the rulings by the trial court as opposed to the decision of the in banc court.

         As an appellate tribunal, the in banc court "is subordinate to this Court just as we are subordinate to the Court of Appeals." Azar, 117 Md.App. at 433. See also Langston v. Langston, 136 Md.App. 203, 221 (2000) (stating "[i]f the in banc panel functions like an intermediate appellate court, then our role is akin to the Court of Appeals, in the sense that we provide an additional level of appellate review"), aff'd on other grounds, Langston v. Langston, 366 Md. 490 (2001). Thus, it is helpful to examine the reviewing roles of this Court and the Court of Appeals in a case that comes before the former and then the latter on the same issue.

         The "scope of review" for both Maryland appellate courts, set forth in Rule 8-131, is identical, with the exception of certain limitations the Court of Appeals imposes upon itself by virtue of the issues on which it grants certiorari. See Md. Rule 8-131(b). For an action tried without a jury, "the appellate court, " that is, either the Court of Appeals or this Court, "will review the case on both the law and the evidence" and "will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses." Md. Rule 8-131(c). In other words, ordinarily, whether this Court is reviewing a ruling that comes before us on appeal from the trial court, or the Court of Appeals is reviewing the same ruling that comes to it on a grant of a petition for certiorari, after review by this Court, ultimately it is the judgment of the trial court that is under review.

         Consistent with this concept, the same standards of review apply to appeals in both courts. When a pure question of law comes before either this Court or the Court of Appeals, the standard of review is de novo, that is, neither Court gives any deference to the trial court's interpretation of the law. See Nesbit v. Gov't Emps. Ins. Co., 382 Md. 65, 72 (2004); Walter v. Gunter, 367 Md. 386, 392 (2002). This means, necessarily, that when the Court of Appeals grants certiorari to review a legal issue decided by the circuit court and addressed by this Court on appeal, it will not defer to this Court's decision. To be sure, the Court of Appeals may consider our reasoning and explain why it agrees or disagrees with it; and its mandate will affirm, reverse, or otherwise dispose of this Court's judgment. But ordinarily its decision will come down to whether the trial court's ruling was legally correct.

         Likewise, when this Court has decided whether a factual finding by a trial court was or was not clearly erroneous, our decision will not be entitled to deference on further review by the Court of Appeals, because our decision is itself a legal ruling. Appellate courts do not make factual findings or substitute the factual findings they would rather the trial court have made for the non-clearly erroneous factual findings that were made. In other words, we are not making findings of fact but are making a legal assessment as to whether the trial court's factual finding satisfies the clearly erroneous standard of appellate review. See Md. Rule 8-131(c); Agency Ins. Co. v. State Farm Mut. Auto Ins. Co., 193 Md.App. 666, 671-72 (2010); Thomas v. Capital Mgmt. Assocs., LLC, 189 Md.App. 439, 453 (2009). A decision by this Court that a trial court's factual finding was or was not supported by competent and material evidence in ...


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