Bartenfelder v. Bartenfelder

• Decision Date: 28 October 2020
• Docket Number: No. 2052, Sept. Term, 2019,No. 0934, Sept. Term, 2018,0934, Sept. Term, 2018,2052, Sept. Term, 2019
• Parties: Kimberly BARTENFELDER v. Thomas BARTENFELDER
• Court: Court of Special Appeals of Maryland

248 Md.App. 213

241 A.3d 16

Kimberly BARTENFELDER

v.Thomas BARTENFELDER

No. 0934, Sept. Term, 2018

No. 2052, Sept. Term, 2019

Court of Special Appeals of Maryland.

October 28, 2020

Argued by: Brian S. Jablon (Wellens & Jablon, LLC, on the brief) Severna Park, MD, for Appellant.

Argued by: M. Celeste Bruce (Christopher J. Olsen, Rifkin, Weiner Livingston, LLC, on the brief), Bethesda, MD, for Appellee.

Wright, Gould, Glenn T. Harrell, Jr. (Senior Judge, Specially Assigned) JJ.^*

ON MOTION FOR RECONSIDERATION

Gould, J.

This is a dispute between two stockholders of two close corporations. One sought the appointment of a receiver to take charge of the companies to prevent the continued alleged wrongdoing of the other. The alleged wrongdoer sought to leverage the demand for the appointment of a receiver into a statutory right to buy out the complaining stockholder. The issue we must decide is whether a complaint seeking the appointment of a receiver but not the dissolution of the company, triggers the statutory right of another stockholder, under Section 4-603(a) of the Corporations and Associations Article of the Maryland Code Annotated ("CA") (1975, 2014 Repl. Vol.), to purchase the complainant's stock in the subject company. We hold that, in the absence of a petition for dissolution, the request for a receiver does not trigger the statutory purchase right. For the reasons that follow, therefore, we shall reverse the ruling of the Circuit Court for Harford County.¹

FACTUAL AND PROCEDURAL BACKGROUND

Kimberly Bartenfelder and Thomas Bartenfelder are the sole stockholders of two Maryland close corporations, Bartenfelder Sanitation Service, Inc. ("Bartenfelder Sanitation"), and Bartenfelder Landscape Service, Inc. ("Bartenfelder Landscape," and together with Bartenfelder Sanitation, the "Corporations"), and the sole members of a Maryland limited liability company, 3340 Forge Hill LLC (the "LLC").²

In February 2017, Ms. Bartenfelder filed a complaint in the Circuit Court for Harford County against Mr. Bartenfelder and the three companies. Ms. Bartenfelder accused Mr. Bartenfelder of assorted wrongdoings in connection with the three companies, including the alleged misuse or misappropriation of company funds and corporate waste.

The complaint included two counts. In Count I, styled "Injunctive Relief/Receivership," Ms. Bartenfelder alleged that she would suffer immediate and irreparable injury, loss, or damage if Mr. Bartenfelder was:

• "permitted to continue to prevent Plaintiff from acting in her role as President and majority shareholder of Sanitation, and as an officer, and/or managing member and/or 50% shareholder of the other Business";

• "permitted to continue to dissipate and convert corporate assets to his own personal use, as the loss of funds and revenue to the Business will result in a loss of future business opportunities and revenue that cannot be accurately determined"; and

• "permitted to continue to transfer the clients, jobs, and operations of the [three companies] to third parties in which Plaintiff has no interest, as this will cause the [three companies] to incur a loss of revenue as a result in an amount that cannot be definitely determined."

Count I requested injunctive relief to stop Mr. Bartenfelder from interfering with Ms. Bartenfelder's alleged lawful acts with regard to the three companies and to stop Mr. Bartenfelder's alleged misuse of corporate funds and assets, and the appointment of "a receiver to have full and sole power over the accounts and operations of" the three companies and to prevent Mr. Bartenfelder from firing or threatening to fire any employee. Count I also requested that the receiver be authorized "to retain a forensic accountant to trace all transfers from the [three companies] and use of funds," and further requested an award of damages, expenses, attorneys’ fees, and costs. Count II sought declaratory relief and asked the court to find that certain acts that Ms. Bartenfelder undertook regarding Bartenfelder Sanitation were "effective, binding and lawful."

Upon receipt of the complaint, Mr. Bartenfelder's counsel delivered a letter to Ms. Bartenfelder's counsel claiming that Ms. Bartenfelder's lawsuit triggered his right under CA § 4-603(a) to acquire her shares in the Corporations, and that Mr. Bartenfelder elected to exercise that right.

Mr. Bartenfelder filed an answer to a part of Count I of the complaint—specifically, Ms. Bartenfelder's request for the appointment of a receiver. In his answer, Mr. Bartenfelder asked the court to enforce his election to purchase Ms. Bartenfelder's stock in the Corporations. The prayer for relief in Mr. Bartenfelder's answer stated:

WHEREFORE, Mr. Bartenfelder seeks to have this Honorable Court stay the Dissolution Count as he has exercised his statutory right to purchase whatever interest in the Companies that Ms. Bartenfelder holds pursuant to Corp. & Assoc. Art. 4-603. Since the parties will not be able to reach an agreement on the fair value of Ms. Bartenfelder's interest, Mr. Bartenfelder has also moved the Court to establish a bond in accordance with the statute and determine a fair value of Ms. Bartenfelder's interests. Mr. Bartenfelder respectfully also requests such other and further relief as the Court deems appropriate.

Mr. Bartenfelder also moved to dismiss the complaint and to stay further proceedings. In support of his motion to stay, Mr. Bartenfelder argued that because he had exercised his right to purchase Ms. Bartenfelder's stock in the Corporations and because they could not agree on the fair value of her stock, the court was required under CA § 4-603(b) to stay further proceedings while the parties and the court implemented the valuation process outlined in the statute.

Additional motions practice ensued, primarily by Mr. Bartenfelder, including a motion for summary judgment and a motion for injunctive relief to bar Ms. Bartenfelder's involvement in the Corporations and to enforce Mr. Bartenfelder's election to purchase her stock.

In January 2018, Ms. Bartenfelder filed a verified amended complaint with four counts. In Count I, Ms. Bartenfelder again requested equitable relief related to the three companies but dropped the request for the appointment of a receiver. In Count II, she again asserted a claim for declaratory judgment as to Ms. Bartenfelder's actions in connection with Bartenfelder Sanitation. In Count III, she asserted a breach of contract claim for damages and a temporary restraining order with respect to, among other things, a shareholders’ agreement for one of the companies. In Count IV, she alleged that Mr. Bartenfelder breached a contractual covenant not to compete with one of the companies and sought injunctive relief and damages. Mr. Bartenfelder moved to strike the amended complaint.³

The court convened a hearing on April 30, 2018, to resolve the open motions. The court began with Mr. Bartenfelder's motion for a stay of the proceedings pending the valuation of Ms. Bartenfelder's stock. Mr. Bartenfelder's counsel argued that Ms. Bartenfelder's requested relief, if granted, would require the court to "take control of the business from the companies and then never get it back or dissolve." Accordingly, he contended that Ms. Bartenfelder's complaint triggered his statutory right to purchase her stock in the Corporations, and that the court's intervention was necessary to determine the price for the stock.

Ms. Bartenfelder's counsel countered that Ms. Bartenfelder requested an equitable receiver, not a statutory receiver appointed in a dissolution proceeding. Ms. Bartenfelder's counsel further argued that, because the complaint did not seek to dissolve the Corporations, the statutory election right was not triggered.

The court agreed with Mr. Bartenfelder and ruled as follows:

In this matter one thing that has become abundantly clear to the Court is that the parties cannot co-manage the business as co-owners. In this case the Court has to make a determination about whether what Ms. Bartenfelder was asking for was, in fact, an equitable receivership or as Mr. Bartenfelder has asked or has characterized as whether it is an opportunity for his election under the Corporations and Associations statute to elect to purchase her shares.

* * * *

In large part, I don't think that a receivership under this Court's direction as Ms. Bartenfelder has asked the Court to do is going to work. I say that it is not going to work, one, because of the parties[’] inability to co-manage the business, to operate the business as co-owners; but, two, also because I also find that pursuant to that statute, even though [Ms. Bartenfelder] didn't want to call it a receivership as arising from the statute, that really is the only option that works given the facts of the case.

So, at this point I am going to find that—and the parties agree on the fact that this is a close corporation.

* * * *

I don't think that that is an issue. At this point I do think that the statute is triggered for the Court to then appoint the appraisers to determine what the fair value is of the stock in this case. That Mr. Bartenfelder, then based on what the Court determines after it receives the report of those appraisers, make a determination as to what should then happen at that point.

I would at this point then direct that the bond be in the amount of $60,000.00. I would ask that both counsel provide me with names of individuals that you know that are qualified in this area. The Court also will make its own inquiries as to appropriate appraisers and then make a determination as to which three to appoint.

The court did not enter a written order, but the docket entry regarding the court's ruling (the "First Order") stated:

Arguments heard from counsel as to Defendant's Motion to Stay and Plaintiff's Motion for Equitable Receivership.^{[4 ]} Court rules that an appraiser is to be appointed to determine fair value of business. Both parties to advise court of three appraisers

...