Bragunier Masonry Contractors, Inc. v. Catholic University of America

• Decision Date: 15 April 2002
• Docket Number: No. 87 Sept. Term, 2001.,87 Sept. Term, 2001.
• Citation: 796 A.2d 744,368 Md. 608
• Parties: BRAGUNIER MASONRY CONTRACTORS, INC. v. THE CATHOLIC UNIVERSITY OF AMERICA.
• Court: Maryland Court of Appeals

796 A.2d 744

368 Md. 608

BRAGUNIER MASONRY CONTRACTORS, INC. v. THE CATHOLIC UNIVERSITY OF AMERICA.

No. .

Court of Appeals of Maryland.

April 15, 2002.

James A. Johnson (Christopher R. West of Semmes, Bowen & Semmes, on brief), Baltimore, for petitioner/cross-respondent.

James B. Sarsfield (Hamilton and Hamilton, LLP, on brief), Washington, D.C., for respondent/cross-petitioner.

Argued before BELL, C.J., ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL, and BATTAGLIA, JJ.

CATHELL, J.

Bragunier Masonry Contractors, Inc., petitioner, as a subcontractor, initiated a breach of contract action and obtained a judgment in a Maryland court against Edward M. Crough, Inc. (Crough, Inc.), a general contractor, to recover approximately $200,000 allegedly due to petitioner for construction work performed by it for an earlier project (the "North Village Residence Project") on the campus of The Catholic University of America.

Petitioner, unable to collect this judgment from Crough, Inc., later commenced a garnishment proceeding in Maryland against The Catholic University of America, respondent, alleging that respondent held funds that remained payable to Crough, Inc. for a subsequent construction project (the "Old Gymnasium Project"). These funds were, under the garnishment proceeding, alleged to be payable to petitioner by respondent as a judgment debtor of Crough, Inc. Petitioner, as far as the record reflects, was not a subcontractor on the "Old Gymnasium Project."

Two years after petitioner commenced the garnishment action against respondent, the Circuit Court for Montgomery County held a trial on the merits. The Circuit Court issued its Memorandum Opinion on June 1, 2000, entering a judgment against respondent for the sum sought by petitioner as a result of its prior judgment (including post-judgment interest) against Crough, Inc.

Respondent noted a timely appeal to the Court of Special Appeals. On July 31, 2001, the Court of Special Appeals reversed the judgment of the Circuit Court for Montgomery County. The Catholic University of America v. Bragunier Masonry Contractors, Inc., 139 Md.App. 277, 775 A.2d 458 (2001).

On August 17, 2001, petitioner filed a Petition for Writ of Certiorari with this Court, and respondent subsequently filed a Cross Petition for Writ of Certiorari. On October 12, 2001, we granted both petitions. Petitioner presents two questions for our review:

"1. When a defrauded Creditor brings a fraudulent conveyance action by way of garnishment pursuant to Commercial Law Article § 15-209(a)(2), Md.Code, is the Creditor merely the subrogee of the Debtor/Transferor so that:

(a) The limitations period on the fraudulent conveyance action begins to run even before the fraudulent conveyance occurs; and

(b) The limitations period on the fraudulent conveyance action begins to run before the defrauded Creditor knows or has reason to know of the fraudulent conveyance?

"2. Did the Court of Special Appeals err in holding, as an alternative, that this case should be reversed and remanded because the trial court did not consider all of the facts and circumstances by erroneously applying the parol evidence rule and principles of equitable estoppel to find that a contract existed where, in fact, the trial court did hear and did consider all the evidence relating to the existence and validity of the contract, did not exclude any relevant evidence, and based its conclusion that a contract existed on the totality of the evidence, and not on application of the parol evidence rule or principles of equitable estoppel?"

In responding to the issues raised by petitioner, The Catholic University of America presents seven questions for our review:

"1. Did the Court of Special Appeals properly decline to extend the limitations period by application of the discovery rule to a claim for fraudulent conveyance where the aggrieved party elected to forego a direct action in favor of a garnishment proceeding, a statutorily created remedy in derogation of the common law whose application therefor must be narrowly construed, and where the judgment creditor's claim depended on the viability of the judgment debtor's claim against the garnishee and which would be barred by limitations?

"2. Did the Court of Special Appeals correctly decide that evidence demonstrating a lack of intent to form a binding contract by the parties to a purported agreement should have been received and considered by the trial court?

"3. Should District of Columbia Law have been applied to this transaction which arises out of the formation and performance of contracts in the District of Columbia, particularly where all affected parties elected District of Columbia law to control their dealings?

"4. Does the mandatory language of the garnishment rules operate to preclude recovery?

"5. Having concluded that the question of whether a binding contract had been crated by the parties had not been properly decided by the trial court, did the Court of Special Appeals err in concluding that subject matter jurisdiction existed over a debt arising from that purported contract rather than the improvements to real property conveyed in the District of Columbia?

"6. Was there a failure of proof of a fraudulent conveyance made by the judgment debtor where the only competent evidence demonstrated that the purported conveyance had no detrimental effect on the financial condition of the judgment debtor?

"7. Were nine years of post-judgment interest accumulated against the judgment debtor properly imposed on CUA as garnishee?"

We answer in the affirmative to respondent's question one. We hold that petitioner's cause of action is time-barred as the limitations period in which Crough, Inc. could have filed suit against respondent had already expired when petitioner initiated this garnishment action. As a result of our holding as to the question addressed, we need not resolve the other issues. We hold that the Court of Special Appeals properly decided the limitations issue. Accordingly, we affirm the judgment of the Court of Special Appeals.

I. Facts

a. Background

Edward M. Crough, the owner of Crough, Inc.,¹ was an alumnus of respondent. Mr. Crough had developed a successful construction business and had been involved in various construction projects on respondent's campus. In addition to participating in construction projects with respondent in the early 1980s, Mr. Crough became one of its personal benefactors.

In the latter part of the 1980s, respondent contracted with Crough, Inc. for it to serve as the general contractor for a dormitory construction project on respondent's campus called the "North Village Residence Project." Crough, Inc. subcontracted the masonry work for the "North Village Residence Project" to petitioner. The "North Village Residence Project" was timely and fully completed in 1990. Petitioner performed the masonry work on that project as required and received 90% of the agreed price under the contract from Crough, Inc., the general contractor. The remaining 10%, the amount in dispute in this action ($211,742.42 plus accrued interest), constituting the retainage,² was withheld by Crough, Inc. and not paid to petitioner, even after full completion of the project.

Around this same period in the late 1980s, respondent was considering another building project on its campus. It wanted to renovate an abandoned gymnasium and turn it into a new home for respondent's Department of Architecture. A proposal, initially termed the "Old Gymnasium Project," was drawn up and presented to respondent's then president, Reverend William J. Byron, S.J. (Father Byron), who was to be responsible for the necessary fund-raising. Father Byron approached Mr. Crough because of Mr. Crough's status as an alumnus and benefactor of respondent, with the plans for the "Old Gymnasium Project." Respondent sought to arrange to have Mr. Crough donate funds for this project, and in return respondent would name the renovated gymnasium the "Crough Center for Architecture."

After several meetings and Mr. Crough's rejection of several donative vehicles by which he could make such a gift to respondent, retaining both tax benefits of such a donation and some control over the use of the donation, Mr. Crough chose a particular solution. He decided to make the donation as a gift-in-kind, whereby his company, Crough, Inc., would donate the construction materials and services for the "Old Gymnasium Project" and, in that fashion, "gift" the building through the use of a Construction Manager Agreement (CMA) with respondent.³ On June 3, 1988, following this decision on the manner in which to make the donation to respondent, Crough, Inc. and respondent executed the CMA for the "Old Gymnasium Project."⁴ The CMA, similar to a previous agreement executed by Crough, Inc. and respondent for the completion of the "North Village Residence Project," was lengthy, had several attachments, and was divided into parts stating that the total payment by respondent for the project was to be $3,149,000. It was apparently understood by Mr. Crough and respondent that respondent would not have to actually remit such sums to Crough, Inc. and in that way the gift could be consummated. There are indications that Mr. Johnson, Vice President of Crough, Inc., was unaware of the unwritten understanding between Mr. Crough and respondent.

In 1988, after execution of the CMA, construction commenced on the "Old Gymnasium Project." Throughout the construction, as apparently anticipated by Mr. Crough and respondent, no payment requisitions were submitted to respondent by Crough, Inc., given Mr. Crough's representations that the work and materials were a donation. No payment was proffered or made by respondent to Crough, Inc. on the project. Crough, Inc., however, continued to carry in its financial records account receivables that ultimately charged to respondent the amount of $3,149,000, the total amount stated in the CMA for the ...