Shah v. HealthPlus, Inc.

• Court: Maryland Court of Appeals
• Writing for the Court: Argued before HOLLANDER and THIEME, JJ., and ROBERT F. FISCHER; THIEME
• Citation: Shah v. HealthPlus, Inc., 696 A.2d 473, 116 Md.App. 327 (Md. App. 1996)
• Decision Date: 01 September 1996
• Docket Number: No. 1845,1845
• Parties: Gita K. SHAH, et al. v. HEALTHPLUS, INC., et al. ,

Page 327

116 Md.App. 327

696 A.2d 473

Gita K. SHAH, et al. v. HEALTHPLUS, INC., et al.

No. 1845, Sept. Term, 1996.

Court of Special Appeals of Maryland.

July 1, 1997.

Richard L. Swick (Swick & Shapiro, P.C., on the brief), Washington, DC, for Appellants.

Benjamin Rosenberg (Brenda J. Wilson, Rosenberg, Prout, Funk & Greenberg, Baltimore and Alan Richard Sachs, Towson, on the brief), for Appellees.

Argued before HOLLANDER and THIEME, JJ., and ROBERT F. FISCHER, J., (Retired, Specially Assigned).

THIEME, Judge.

This is an appeal from an order of the Circuit Court for Prince George's County dismissing appellant's third amended complaint. For the reasons set forth herein, we shall vacate the judgment of the lower court and remand for further proceedings.

FACTS

On 7 November 1974, a group of physicians formed the Prince George's County Health Services Foundation, Inc., as a nonprofit, non-stock, individual practice association ("IPA"). Each physician initially contributed a minimum of $500 to capitalize the IPA and, as a result thereof, attained the status of a "participating member." Under the bylaws of the IPA, this status was conferred indefinitely, subject to termination for good cause.

Simultaneously, the members of the IPA also formed HealthPlus, Inc., a health maintenance organization, to provide marketing and other integral administrative support to the IPA. The operations of the two entities were so intertwined that they could be viewed as one and the same.

In April of 1984, the Board of Directors of the IPA ("the Board") voted to convert the IPA into a for-profit, stock corporation. Correspondence dated 28 September 1984 was sent to the members, indicating that each would be issued stock subsequent to the return of enclosed shareholders' and physicians' (or specialists') agreements. Appellants make numerous contentions with respect to this letter. Some allege that it was received. Some contend that it was not received. Others allege that the letter was received without enclosure; still others contend that the letter was received and the enclosed documents were executed and returned, despite appellees' claims that they were never received.

In 1992, HealthPlus made a tender offer to purchase the outstanding stock of the IPA members. Appellants, learning of this offer, expected to receive distributions accordingly. When no payments were received, Dr. Gita Shah wrote the IPA, therein documenting her membership, and demanded payment for her proportional share. Return correspondence to Dr. Shah indicated that there was no record of her returning the shareholders' agreement in 1984. Consequently, Shah had never been issued any stock and no longer had a membership interest in the IPA entitling her to any distribution. Other members, when made aware of Dr. Shah's experience also demanded that the IPA "make good" on the tender offer. Each received a letter similar to that received by Dr. Shah.

A complaint was filed in the Circuit Court for Prince George's County. During the course of discovery, the complaint was twice amended. The court granted appellees' motion to dismiss appellants' third amended complaint.

In lodging its timely noted appeal from that judgment, appellants propound the following issues for this Court's adjudication:

1. Whether appellants, members of the nonstock, non-profit corporation, Prince George's Health Services Foundation, Inc., had property interests in that corporation.

2. Whether the Board of Directors of the IPA owed legal duty to protect appellants' property interests when the IPA converted from a non-stock, nonprofit corporation into a for-profit, stock corporation.

3. Whether the Board of Directors of the IPA breached the legal duties it owed to appellants by initially failing to, and later refusing to, issue to appellants stock in the new for-profit corporation, notwithstanding the fact that other members had received such stock.

4. Whether appellants' claims against appellees are barred by the statute of limitations.

5. Whether the motions court erred in dismissing appellants' third amended complaint.

We shall answer "No" to question four and "Yes" to question five, and, accordingly, vacate the lower court's order of dismissal without reaching the merits of the other issues posed.

DISCUSSION

We recently stated in Warner v. Lerner, 115 Md.App. 428, 431, 693 A.2d 394 (1997):

Upon [an] appeal from the granting of a motion to dismiss filed under Maryland Rule 2-322(b)(2), an appellate court must assume the truth of all well-pleaded relevant and material facts in the complaint, as well as all inferences that can reasonably be drawn therefrom. Odyniec v. Scheider [Schneider], 322 Md. 520, 525 [588 A.2d 786] (1991). Dismissal is proper only if the alleged facts and permissible inferences, so viewed, would nonetheless fail to afford relief to the plaintiff if proven. Morris v. Osmose Wood Preserving, 340 Md. 519, 531, 667 A.2d 624 (1995); Faya v. Almarez [Almaraz], 329 Md. 435, 443 [620 A.2d 327] (1993).

115 Md.App. at 431-32, 693 A.2d at 395. Thus, when reviewing an original pleading, we cannot sustain its dismissal if the facts therein set forth present, on their face, a legally sufficient cause of action.

Paragraph 27 of appellants' third amended complaint states that "plaintiffs learned for the first time in 1992 and 1993 that their ownership interests had been extinguished due to their alleged failure to return the shareholder's agreement--an agreement of which they were unaware." (Emphasis supplied.) Assuming this statement to be true under the Warner standard, and under the discovery rule and duty to inquire, discussed infra, limitations did not begin in the action underlying this appeal until 1992.

The trial court, in its memorandum opinion and order, stated:

"[T]hat these plaintiffs had actual knowledge that [the] IPA had converted to a stock corporation and of their option to take stock in the corporation. Further, they had actual knowledge of the necessity to sign and return a "shareholders agreement" in order to be issued a stock certificate. Therefore, any cause of action to be recognized as stockholders accrued at the time the defendant failed to provide the requisite shareholders agreement and issue a stock certificate. We hold that the three year statutory period mandated by § 5-101 of the Courts and Judicial Proceedings article began to run in 1984."

The trial court's order of dismissal improperly and erroneously made a factual determination on the merits, inasmuch as at that stage of the litigation such an adjudication was inappropriate. Although Maryland Rule 2-322(c) permits the disposition of a motion to dismiss, within whose adjudication the court consults matters outside the pleadings, to be treated as one for summary judgment, pursuant to Maryland Rule 2-501, the trial judge clearly ruled on the motion to dismiss appellants' claims. The dismissal resolved factually facial disputes raised within the four corners of the complaint despite the fact that until 1992 appellants specifically claimed a lack of knowledge as to the deprivation of their interests in the IPA. And while the record does not suggest that the lower court relied on any extrinsic material in reaching its conclusion, its findings not only went beyond and contravened the allegations of the complaint, but also deprived the parties of their day in court to litigate contested matters. Not only is this strictly prohibited on a procedural basis, but it is also contrary to the very notions of our system of justice. We accordingly hold that the trial court committed reversible error by dismissing appellants' third amended complaint.

Statute of Limitations

Normally, appellate adjudication of the propriety of a motion to dismiss is limited to just that. Looking beyond that issue in the case sub judice, a question of both law and fact was superfluously answered by the trial court. As an instructive matter, we think it incumbent upon this Court to comment on the resolution of that issue so as "to guide the trial court or to avoid the expense and delay of another appeal." Maryland Rule 8-131(a). And while an adjudication on the merits has not yet occurred, we shall nonetheless discuss that issue, confining ourselves to those matters relied upon by the lower court in its memorandum opinion. Assuming the factual conclusion of the lower court to be correct, the analysis set forth herein is for the edification of all concerned parties. If during litigation alternative conclusions are made, our discussion will only apply to the extent that the facts warrant.

The circuit court's dismissal of appellants' case was largely predicated upon the expiration of the statute of limitations. Appellants' demand for relief, as stated in paragraph 34 of their third amended complaint, states:

Plaintiffs request the court to enter judgment in favor of plaintiffs and against defendant for the amount of money which was due plaintiff[s] for any dividends or other distributions of profit and or capital. Plaintiffs further request that the court enter an order:

(a) declaring that plaintiffs are shareholders of defendant corporations with all the rights and privileges of shareholders;

(b) directing that all records pertaining to plaintiffs' status as members of defendant corporations be corrected to reflect that plaintiffs have full rights as shareholders;

(c) directing that all necessary documents pertaining to the plaintiffs' status as shareholders[,] including any shareholders' agreements, stock certificates, or stock registers[,] be accomplished (sic) to reflect plaintiffs' status as shareholders;

(d) ordering other and further relief as may be deemed appropriate in order to provide plaintiffs full and complete relief.

Irrespective of the fact that only injunctive relief is demanded by appellants, an accounting is the only vehicle by which the relief prayed for can be attained. Although to date no...