Davis v. Attorney General

Decision Date09 July 2009
Docket NumberNo. 123, September Term, 2008.,123, September Term, 2008.
Citation975 A.2d 362,187 Md. App. 110
PartiesBarbara T. DAVIS, Trustee v. ATTORNEY GENERAL of Maryland, et al.
CourtCourt of Special Appeals of Maryland

DEBORAH S. EYLER, J.

Katherine Anne Porter, the famous 20th Century American writer, died testate in Maryland on September 18, 1980. Her will created a charitable trust, designated the "Literary Trust" (or "Trust"), which is the subject of this appeal.

From July 18, 1983, until June 20, 2007, the Circuit Court for Montgomery County assumed supervisory jurisdiction over the Trust. The supervision ended after the court, by order, accepted a "Notice of Trust Termination" filed by trustee Barbara T. Davis, the appellant. Several months later, the Attorney General of Maryland filed a petition in the circuit court to rescind the order terminating the Trust and to award damages against Davis for breach of trust. The Attorney General's petition was filed on behalf of the State and the University of Maryland College Park, the beneficiary of the Trust, and the Dean of the University of Maryland Libraries, the appellees.

After receiving evidence by way of documents and affidavits, and holding a hearing, the court issued on March 10, 2008, an order that, among other things, vacated the order terminating the Trust and reinstated the court's supervision over the Trust. Davis noted this appeal. The appellees have moved to dismiss the appeal as not allowed by law.

For the reasons that follow, we hold that Davis's appeal of that part of the March 10, 2008 order vacating the Trust termination order is allowed by law; it is within this Court's authority to review the other interlocutory rulings Davis is challenging in this appeal; we shall uphold those rulings; and the circuit court did not err or abuse its discretion in vacating the Trust termination order and re-assuming supervisory jurisdiction over the Trust.

FACTS AND PROCEEDINGS

Porter executed her last will ("Will") in 1972.1 By Article VI, later amended by three codicils, she created the Literary Trust, granting "all of my literary works, my writings, my papers, my notes, my letters to and from others and all property rights attendant to such literary works, writings, papers, notes, and letters" to a named trustee. It was Porter's expressed intention to dispose of all her literary works and rights by way of the Literary Trust. Porter named as beneficiary of the Trust the University of Maryland College Park. During her life, Porter had given and sold literary works and tangible personal items to the University of Maryland, which established and maintained the "Katherine Anne Porter Collection."

Further by Article VI, Porter gave her executor, E. Barrett Prettyman, Jr. (a lawyer and friend) "the power to designate one or more successor trustees to serve at any time and from time to time, concurrently or consecutively" should the named trustee of the Trust fail to qualify or complete his or her duties, or should it otherwise become necessary. The Will did not identify a successor to Prettyman, however.

The original trustee of the Literary Trust died on July 18, 1993. Prettyman designated Davis, a close friend of Porter's, as the successor trustee. The court ratified that appointment by order of November 29, 1993.

Twelve years went by. On December 14, 2005, the court approved appointments, by Prettyman, of two sequential literary trustees, to serve in the event that Davis could not continue to do so. These appointments were made by Prettyman upon Davis's request.

Beginning in the spring of 2006, and continuing for about a year, Prettyman, Davis, and Charles B. Lowry, then-Dean of the University of Maryland Libraries, exchanged a series of letters about the future of the Trust. Lowry proposed to Prettyman that the Office of Dean of the University of Maryland Libraries be appointed as permanent successor trustee of the Trust. Davis disagreed with the proposal, and sought to persuade Prettyman otherwise. For purposes of this appeal, it is not necessary to explore the reasons underlying the disagreement as to the future of the Literary Trust. It is enough to say that Lowry and Davis felt strongly about their divergent positions and that Prettyman, having the sole power to appoint a trustee, was in the role of decisionmaker. On May 10, 2007, Prettyman wrote to Davis, saying he was drawing near to making a decision and giving Davis an opportunity to reply to Lowry's latest correspondence before he did so.

On May 23, 2007, Davis (through her husband, an attorney) incorporated the "Katherine Anne Porter Foundation" ("Foundation"), which was organized as a charitable foundation under the federal tax code. Davis wrote her reply letter to Prettyman that same day, stating that, due to her concerns about the eventual lapse in authority to appoint a successor trustee that would happen upon Prettyman's demise, and to address Lowry's issues, she was in the process of forming the Foundation as the legal entity that "will be solely and perpetually dedicated to preserving Katherine Anne's intellectual property rights and legacy." Davis commented that in her view, as trustee, the Foundation would be "better suited to use the Trust property to carry out the wide variety of Katherine Anne's intentions as outlined in her Will" than would be the University of Maryland, which, in Davis's opinion, "ha[d] failed to maintain educational and literary programs in keeping with the advantageous use of the assets of the Trust."

Prettyman responded to Davis by letter of June 4, 2007, expressing "shock[]" at her plan to terminate, unilaterally, the Literary Trust, and informing her, among other things, that as of that date he had appointed Lowry and Beverly Lowry (no relation) "as co-Literary Trustees to serve with you." (It appears, however, that the court was not asked to ratify, and did not ratify, the two new co-trustees at that or any other relevant time.)

On June 8, 2007, Davis transferred all of the Trust's assets to the Foundation. She did not inform Prettyman or Lowry of that fact. Exactly a week later, she filed in the circuit court a "Notice of Trust Termination." By order docketed on June 20, 2007 ("June 20 Order"), the court terminated the Trust subject to Davis's filing a final accounting. The final accounting then was filed and approved by order of July 17, 2007.

Around five months later, on December 27, 2007, the appellees filed an unverified "Petition for Re-Assumption of Jurisdiction and Complaint for Breach of Trust" ("Petition"). They alleged that none of them had been given the notice required by law of Davis's "Notice of Trust Termination," or of the entry of the June 20 Order. They asked among other things that the June 20 Order be rescinded and that the court re-assume jurisdiction over the Trust.

On January 3, 2008, the court issued an order directing Davis to show cause why the relief sought by the appellees should not be granted. The court scheduled a show cause hearing for March 3, 2008.

Davis filed a motion to dismiss because the Petition was not verified. She enumerated other grounds for her motion as well, including that, for the appellees to obtain the relief they were seeking, the court would have to vacate its June 20 Order, but the facts alleged in the Petition were not sufficient to show fraud, mistake, or irregularity under Rule 2-535(b). Davis did not file a substantive response to the allegations in the Petition, including the allegations of lack of notice. Approximately one week later, she filed a motion to strike the show cause order and to postpone the show cause hearing.

On February 26, 2008, the Attorney General's Office filed a "Verified Petition for Re-Assumption of Jurisdiction and Complaint for Breach of Trust" ("Verified Petition"), signed by Lowry. Except for the verification, the Verified Petition was exactly the same as the originally filed Petition. Three days later, the Attorney General's Office supplemented its Verified Petition with affidavits and documents supporting them, which we shall discuss in greater detail below.

The show cause hearing went forward as scheduled on March 3, 2008. After counsel made their arguments, the court found "that there was such procedural irregularities here that the Court, sitting in equity and as the supervising court exercising its jurisdiction [over the Trust] since 1983, not only is permitted to reopen this case but has an obligation to do that." The court characterized the "Notice of Trust Termination" as "woefully deficient" and found, "[t]here has been a procedural irregularity. The rules were not complied with and they were not even minimally complied with." The court rejected Davis's counsel's argument that, even if there were a procedural irregularity in filing the "Notice of Trust Termination," it did not matter, because as trustee Davis had such broad powers to transfer the assets of the Trust that it would have made no difference to the outcome of the case had the appellees received notice.

The court determined that the "Notice of Trust Termination" procedure had been "highly improper" so as to "rise[ ] to the level [of] clear and convincing evidence that there was an irregularity here." On that ground the court decided to vacate the June 20 Order. On March 10, 2008, the court entered an order doing so (and vacating the July 17, 2007 follow-up order as well); re-assuming jurisdiction over the Trust; and denying Davis's motions to dismiss and to strike show cause order ("the March 10 Order"). That order further directed that

[Davis], as Literary Trustee, shall file with the Trust Clerk of this Court, with service on...

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