Spivery-Jones v. (In re Receivership Estate of Trans Healthcare, Inc.)

• Decision Date: 19 May 2014
• Docket Number: No. 66,Sept. Term, 2013.,66
• Citation: 438 Md. 330,91 A.3d 1172
• Parties: Francina SPIVERY–JONES v. In the Matter of the RECEIVERSHIP ESTATE OF TRANS HEALTHCARE, INC., et al.
• Court: Maryland Court of Appeals

438 Md. 330

91 A.3d 1172

Francina SPIVERY–JONES

v.In the Matter of the RECEIVERSHIP ESTATE OF TRANS HEALTHCARE, INC., et al.

No. 66, Sept. Term, 2013.

Court of Appeals of Maryland.

May 19, 2014.

Isaac R. Ruiz–Carus (Tampa, FL; George F. Ritchie, Lawrence D. Coppel, Gordon Feinblatt, LLC, Baltimore, MD), on brief, for petitioner.

Glenn E. Bushel (Alan M. Grochal, Tydings & Rosenberg, LLP, Baltimore, MD), on brief, for respondents.

Argued before BARBERA, C.J., HARRELL, BATTAGLIA, GREENE, ADKINS, McDONALD, and JOHN F. McAULIFFE (Retired, Specially Assigned), JJ.

BATTAGLIA, J.

This case presents us with an opportunity to explore the law of receiverships in Maryland and the appealability of an order denying a “ motion to vacate receivership order for lack of subject matter jurisdiction and declare receivership order void ab initio and request for hearing”, either as an interlocutory order, appealable under Section 12–303(3)(iv) of the Courts and Judicial Proceedings Article, Maryland Code (1974, 2006 Repl.Vol.), ¹ or alternatively, as a collateral order.²

A “receivership” is a mechanism by which a court orders that property be placed in the control of a “receiver,” or a “[a] disinterested person appointed by a court ... for the protection” of the property. Black's Law Dictionary (9th ed.2009). Maryland recognizes two types of receiverships; a chancery receivership, the receivership which was developed in the chancery courts and which became part of our common law, as well as a statutory receivership that is “purely the creature[ ] of statutes and without which statutes no receiver could be appointed ....” Ralph E. Clarke, A Treatise on the Law and Practice of Receivers 22 (1918).

Prior to 1868,³ only “equitable” or “chancery” receiverships existed or those that had their genesis in the chancery courts of England. ⁴ Clarke, supra, at 6, 18. As initially created by the English chancery courts, the appointment of a receiver was a “remedy” designed to protect property that was subject to a claim between two parties from being dissipated, because injunctive relief had not proven to be effective. ⁵Id. The chancery court would appoint a “receiver,” who would act as an officer of the court and take possession or custody of the property to preserve it for the person or entity to which it was entitled. Id.

The first reported Maryland opinion to substantially discuss the law of receiverships, Williamson v. Wilson, 1 Bland 418 (Md.Ch.1826), an opinion by the High Court of Chancery of Maryland,⁶ traced the roots of the power to appoint a receiver back to the chancery courts of England. The authority to appoint a receiver in Maryland, therefore, was derived as part of Maryland's adoption of the English common law in existence in 1639.⁷ Such authority, apparently, had become “questionable” in the time period between the adoption of the English common law and the High Court of Chancery's opinion in Williamson. See id. at 420. The Chancery Court in Williamson, however, put to rest any such doubts and was explicit that the appointment of a receiver was a power that inhered to equity courts in Maryland:

That this Court should have the power in unusual and pressing emergencies, at the instance of a party interested, effectually and without delay to put its hand upon property, so far as to prevent waste, inextricable confusion, or total destruction, seems to be admitted by all to be clearly right, or at least highly beneficial.

Id. at 421.

Although the law applicable to receiverships continued to develop in the High Court of Chancery, this Court first had occasion to seminally explicate and apply the law applicable to the appointment of a receiver in Blondheim v. Moore, 11 Md. 365 (1857). In Blondheim, Moore sued Blondheim, alleging that Blondheim was heavily indebted and insolvent and that Blondheim had made a number of conveyancesintended to delay and defraud his creditors. The complaint sought to set aside the allegedly fraudulent conveyances and also sought the appointment of a receiver. The circuit court appointed a receiver, and in considering the propriety of that decision, this Court looked to the “leading decisions” ⁸ of the chancery court, “wherein the doctrine applicable to the appointment of a receiver” was “clearly laid down” and derived the following principles:

1st. That the power of appointment is a delicate one, and to be exercised with great circumspection. 2nd. That it must appear the claimant has a title to the property, and the court must be satisfied by affidavit, that a receiver is necessary to preserve the property. 3rd. That there is no case in which the court appoints a receiver merely because the measure can do no harm. 4th. That “fraud or imminent danger, if the intermediate possession should not be taken by the court, must be clearly proved;” and 5thly. That unless the necessity be of the most stringent character, the court will not appoint until the defendant is first heard in response to the application.

Id. at 374. We determined, ultimately, that there were insufficient allegations of fraud to justify the appointment of a receiver and, thus, reversed the order of the Circuit Court for Baltimore City that had done so.

Since Moore, chancery receivers have been appointed in a myriad of situations, including partnership disputes, Lust v. Kolbe, 31 Md.App. 483, 356 A.2d 592 (1976), to collect rents and profits in a dispute between a mortgagor and a mortgagee, Baker v. Baker, 108 Md. 269, 70 A. 418 (1908), and even to preserve disputed properties in a divorce proceeding, Greenpoint v. Schlossberg, 390 Md. 211, 216, 888 A.2d 297, 300 (2005). Despite its diverse application, however, consistent with our pronouncement in Blondheim, the appointment of a chancery receiver has been limited to “extraordinary” circumstances, Lipskey v. Voloshen, 155 Md. 139, 144, 141 A. 402, 404 (1928), in which “there is fraud, danger of spoliation, or imminent prospect of loss or injury to property.” Del–Mar–Va Hardware Corp. v. Boss Mfg. Co., 230 Md. 477, 480, 187 A.2d 693, 694 (1963).

The legislative creation of the corporation posed a unique problem for courts in establishing receiverships, because a chancery or equity court could not dissolve a corporation absent statutory authority. Mason v. Supreme Court of Equitable League, 77 Md. 483, 484, 27 A. 171, 171 (1893); see also Clark, supra, at 236 (observing that a corporation “is created by the legislature and a court of equity without direct power by statute from the legislature has no power to wind up or dissolve that which the legislature has created.”). As we explained in Mason, the appointment of a receiver by a court would effectively result in dissolution of the corporation, thereby accomplishing indirectly what a judge had no direct authority to do:

Apart from statutory power, a Court of equity cannot dissolve a corporation. “It is true,” says Mr. High in his book on Receivers, (section 288,) “equity may properly compel officers of corporations to account for any breach of trust in their official capacity; yet, in the absence of statutes extending its jurisdiction, it will usually decline to assume control over the management of the affairs of a corporation upon a bill * * * * alleging fraud, mismanagement, and collusion on the part of the corporate authorities, since such interference would necessarily result in the dissolution of the corporation, and the Court would thus accomplish indirectly what it has no power to do directly.”

“The remedial power exercised by Courts of equity, in such cases, ordinarily extends no further than the granting of an injunction against any special misconduct on the part of the corporate officers; and, although the facts shown may be sufficient foundation for such an injunction, the Court will not enlarge its jurisdiction by taking the affairs of the corporation out of the management of its own officers, and placing them in the hands of a receiver.”

Mason, 77 Md. at 484–85, 27 A. at 171;see also Harford Agr. & Breeders' Ass'n v. Somerville, 120 Md. 572, 87 A. 937, 940 (1913); Barton v. Fraternal Alliance, 85 Md. 14, 36 A. 658 (1897).⁹

The Legislature did, however, empower courts to dissolve corporations and appoint receivers with the enactment of Section 189 of Chapter 471 of the Maryland Laws of 1868, which provided:

That if the court shall upon consideration of the bill, or of the bill, answers and proof, if any answers have been filed or proof taken, be of opinion that the corporation is insolvent, or that for any reason a dissolution of the said corporation will be beneficial to the stockholders, and not injurious to the public interests, a decree shall be entered dissolving the said corporation, and appointing one or more receivers of estate and effects, and such corporation shall thereupon be dissolved; any of the Directors, Trustees, Managers or other officers, or any of the stockholders of any corporation, may be appointed its receivers, or such other person or persons as the courts may select.

Section 3–411 of the Corporations and Associations Article, Maryland Code (1975, 2007 Repl.Vol.), now provides for the appointment of a receiver when a corporation chooses to voluntarily dissolve:

(a) Who may file petition.—A director, stockholder, or creditor of a Maryland corporation which is dissolving voluntarily may petition a court of equity to take jurisdiction of the liquidation of the corporation.

(b) Power of court.—After notice and hearing, the court for good cause shown may order the corporation liquidated under court supervision either by the directors or by one or more receivers appointed by the court.

(c) Effect of appointment of receiver.—The authority of the directors terminates when a court appoints a receiver.

Similarly, Section 3–414 of the Corporations and Associations Article¹⁰ permits the Circuit Court to appoint a receiver to, inter alia, dissolve and wind down the affairs of the corporation, should a...