Duvall v. McGee

• Decision Date: 16 June 2003
• Docket Number: No. 39,39
• Parties: Robert Ryon DUVALL, et al. v. James Calvert McGEE, et al.
• Court: Maryland Court of Appeals

826 A.2d 416

375 Md. 476

Robert Ryon DUVALL, et al. v. James Calvert McGEE, et al.

No. 39, Sept. Term, 2002.

Court of Appeals of Maryland.

June 16, 2003.

Allen W. Cohen (Cohen & Greene, P.A., on brief), Annapolis, for appellants.

Ronald A. Baradel (Council, Baradel, Kosmerl & Nolan, P.A., on brief), Annapolis, for appellees.

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

BELL, Chief Judge.

The issue presented for resolution by this case is whether a tort judgment may be satisfied by invading the principal of a spendthrift trust held for the benefit of the tortfeasor. The Circuit Court for Anne Arundel County, recognizing that Maryland law only allows invasion of a spendthrift trust by a narrow class of creditors, and, only in limited circumstances, declined to expand the class or the circumstances. It opined that to hold that tort judgment creditors are among the class of creditors that have traditionally been allowed to invade a spendthrift trust in satisfaction of a judgment, would be to "rewrite" Maryland law. Such a revision of Maryland law, it pointed out, is properly addressed by the Maryland General Assembly or this Court. We shall affirm the judgment of the Circuit Court.

I.

James Calvert McGee ("McGee"), one of the appellees in the case sub judice, was convicted of felony-murder for his participation in a robbery that resulted in the killing of Katherine Ryon.¹ Robert Ryon Duvall, the appellant, is the Personal Representative of the Estate of Katherine Ryon. He brought suit, in that capacity, in the Circuit Court for Anne Arundel County against McGee, seeking both compensatory and punitive damages, plus costs of the suit,² for the battery of Katherine Ryon and the conversion of her personal property. The parties settled this action, negotiating and executing an Agreement for Entry of Judgment/Partial Release of Claims ("Settlement Agreement"), pursuant to which, in satisfaction of the conversion count, the parties agreed to the entry of judgment against McGee, and in favor of the appellant, for $100,000.00 in compensatory damages and $500,000.00 in punitive damages.³ The Settlement Agreement acknowledged that McGee is the beneficiary of a trust established by his deceased mother, which, at the time of the settlement, was valued at approximately $877,000.00, exclusive of early withdrawal penalties and taxes. Under the terms of the trust, periodic monetary payments are to be made to McGee, and to others on his behalf, by Frank B. Walsh, Jr., the Trustee of the trust ("the Trustee)," the other appellee in the case sub judice. Another provision of the trust established what is commonly referred to as a "Spendthrift" Trust.⁴ That provision prohibited McGee from alienating the trust principal ("corpus") or any portion of the income from the trust while in the hands of the Trustee, and specifically shielded both the corpus and the income from claims of McGee's creditors. The trust instrument also gives broad discretion to the Trustee to terminate the Trust at any time and pay the trust assets and any undistributed income to McGee or to any of the remaindermen to which the trust referred.⁵ The Settlement Agreement also provided that:

"The [appellant] hereby forever releases, waives, relinquishes and abandons any rights he may have to satisfy or have paid any portion of the above-mentioned judgment by way of attachment, garnishment or any other post-judgment collection efforts directed against any periodic payments made by the Trustee of the Trust to [McGee] as the beneficiary of the Trust, or directed against any periodic payment made to any other person or entities for the benefit of [McGee]. The amount of any periodic payments which are immune to such post judgment collection efforts hereunder shall not exceed the amount of the periodic payment previously made during the preceding three (3) years, exclusive of payments made for legal fees. The parties understand and specifically agree that the Trustee will continue to pay the legal fees on behalf of [McGee] and such payment of legal fees shall be immune to any post-judgment collection efforts as outlined above. [McGee] agrees that he shall provide an annual accounting in August of each year beginning in the year 2002 outlining the periodic payments received by him or made to others on his behalf (exclusive of legal fees) during the preceding year."

Thus, it prohibited the appellant from attaching or garnishing any of the periodic payments the Trustee made to McGee from the Trust.

Having surrendered all rights to attach McGee's periodic payment from the Trust, but armed with the judgment entered pursuant to the Settlement Agreement, the appellant sought to satisfy the judgment by invading the corpus of the trust. Thus, the appellant served a Writ of Garnishment on the Trustee. Answering the Writ, the Trustee defended on the grounds that the trust was a spendthrift trust; the Trustee was not indebted to McGee; and the Trustee was not in possession of any property belonging to McGee.

Both parties moved for summary judgment. Although acknowledging that this Court, in Smith v. Towers, 69 Md. 77, 14 A. 497 (1888), upheld the validity of spendthrift trusts in Maryland and, thus, prohibited their invasion for the payment of debt, the appellant maintained that, over time, this Court has carved out, on public policy grounds, exceptions to the spendthrift doctrine, pursuant to which some classes of persons are permitted to invade spendthrift trusts. Noting one of the rationales of the Smith decision—that because "[a]ll deeds and wills and other instruments by which [spendthrift] trusts are created are required by law to be recorded in the public offices ... creditors have notice of the terms and conditions on which the beneficiary is entitled to the income of the property," 69 Md. at 89, 14 A. at 499—the appellant argued that tort-judgment creditors should be included among those excepted, since such creditors had no opportunity to investigate the credit-worthiness of the tortfeasor prior to suffering from the tortious conduct giving rise to the claim. Furthermore, the appellant continued, the public policy of this State dictates that tort-judgment creditors be deemed a special class of creditors entitled to invade a spendthrift trust.

The trial court held:

"Maryland law is what governs this case, however, and Maryland law is clear. A spendthrift trust may not be reached in order to satisfy the judgment in the case sub judice. Although the facts involving the murder of the late Ms. Ryon, and the further facts relating to the beneficiary status of the Defendant McGee, a felony murderer, are very tempting, this Court may not rewrite the law; the Maryland Legislature has the responsibility of that task, or the Appellate Courts of this State must further interpret the law.... This Court has a responsibility to apply and uphold the laws of the state as its interprets they now exist, not create new law."

Thus, the appellant's motion for summary judgment was denied and the appellees' cross-motion, granted. The appellant noted a timely appeal to the Court of Special Appeals. This Court, on its own initiative, issued the writ of certiorari to address this novel issue of Maryland law, prior to any proceedings in the intermediate court. Duvall v. McGee, 369 Md. 570, 801 A.2d 1031 (2002).

In this Court, the appellant argues that the public policy of this State favors a rule allowing a tort-judgment creditor's claim to be satisfied by invading the corpus of a spendthrift trust. He directs our attention to Maryland precedent, reflecting the recognition of spendthrift trusts, the rationale for that recognition and the development of exceptions to the spendthrift trust doctrine. More particularly, the appellant relies on Maryland's public policy against permitting criminals to benefit financially from their crimes. As to that, he relies on the Maryland statute, known as the "Son of Sam" statute, enacted to prevent criminals from profiting from their own crimes through "notoriety of crimes contracts," Curran v. Price, 334 Md. 149, 154, 638 A.2d 93, 96 (1994), and the like, see Md. Code (1957, 1992 Repl.Vol., 1993 Cum. Supp.), Article 27, § 854;⁶ this Court's creation in the common law of this State of a "slayer's rule," pursuant to which a person who kills another is prohibited from being tangibly enriched by the death. Ford v. Ford, 307 Md. 105, 107-08, 512 A.2d 389, 390 (1986); Schifanelli v. Wallace, 271 Md. 177, 315 A.2d 513 (1974); Chase v. Jenifer, 219 Md. 564, 150 A.2d 251 (1959); Price v. Hitaffer, 164 Md. 505, 165 A. 470 (1933); and Maryland Code (1973, 2002 Repl.Vol.), §§ 5-1001-et seq. of the Courts and Judicial Proceedings Article (Prisoner Litigation Act, requiring Department of Correction to notify victim's family if a prisoner successfully prosecutes a civil action and is awarded compensatory or punitive damages).

By way of rebuttal, the appellees counter that accepting the appellant's argument would require and, thus, constitute a change in Maryland law and, in any event, the public policy goals argued by the appellant will not be advanced by allowing garnishment of a spendthrift trust by a tort-judgment creditor under the circumstances of the case sub judice. As to the former, the appellees emphasize that the obligations, for the satisfaction of which this Court has allowed invasion of the corpus and income of a spendthrift trust have not been simple or ordinary contract debt; rather they have been "... dut[ies], not... debt." Safe Deposit & Trust Co. of Baltimore v. Robertson, 192 Md. 653, 662, 65 A.2d 292, 296 (1949). See Zouck v. Zouck, 204 Md. 285, 298, 104 A.2d 573, 579-80 (1954)

(equating a contract for child support to "the decree of a court awarding support to the child or alimony to a wife."). With respect to the latter, they argue that the public policy against a criminal benefitting from his...