United Bank v. Buckingham, 364

• Decision Date: 10 May 2018
• Docket Number: No. 364,364
• Parties: UNITED BANK v. DAVID T. BUCKINGHAM, ET AL.
• Court: Court of Special Appeals of Maryland

UNITED BANK v. DAVID T. BUCKINGHAM, ET AL.

No. 364

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2017

May 10, 2018

Circuit Court for Montgomery County

Case No. 363481V

UNREPORTED

Eyler, Deborah S., Fader, Wilner, Alan M. (Senior Judge, Specially Assigned), JJ.

Opinion by Eyler, Deborah S., J.

*This is an unreported opinion and therefore may not be cited either as precedent or as persuasive authority in any paper, brief, motion, or other document filed in this Court or any other Maryland court. Md. Rule 1-104.

In this appeal, United Bank ("the Bank"), successor in interest to Virginia Commerce Bank,¹ the appellant, challenges a declaratory judgment entered by the Circuit Court for Montgomery County after a bench trial. Among other things, the court declared that an agreement by Sun Control Systems, Inc. ("Sun Control"), executed by John D. Buckingham ("John"), to assign to the Bank three whole life insurance policies on John's life in exchange for the Bank's agreement to forbear from enforcing certain loans extended to Sun Control was void because the Bank knew that John was incompetent when he executed the agreement. The court further declared that John's assignments of two of the policies, pursuant to the promise made in the agreement, were void because his signature was forged, and the third assignment was void because John was incompetent when he executed it. John died during the pendency of the declaratory judgment action and the proceeds of the insurance policies were paid into the court registry.

The John D. Buckingham Family Trust ("the Family Trust") was the designated beneficiary of one of the life insurance policies. The court ordered that the proceeds of that policy be paid to the co-trustees, who are three of John's children and the appellees: David T. Buckingham ("David"), Susan Buckingham ("Susan"), and RichardBuckingham ("Richard"). The Blue Heron Trust was the designated beneficiary of the other two life insurance policies. David was the sole trustee of the Blue Heron Trust and the beneficiaries were David, Richard, and Susan. The court ordered that the proceeds of those two policies remain in the court registry pending the resolution of a federal lawsuit challenging the creation of the Blue Heron Trust.

The Bank noted an appeal from the declaratory judgment in 2014, but that appeal was dismissed as not having been taken from a final judgment. The appellees had dismissed claims against the other two Buckingham children, Thomas Buckingham ("Thomas") and J. Daniel Buckingham, Jr. ("Daniel"), without prejudice and with the stated intent to resurrect those claims at a later point in time. See Virginia Commerce Bank v. David T. Buckingham, et al., No. 2216 (Sept. Term 2013). On remand from the dismissal, the Bank moved for reconsideration or, in the alternative, for a new trial based upon newly discovered evidence. The court denied that motion and, by separate order, dismissed the outstanding claims against Thomas and Daniel, as well as one claim against the Bank, with prejudice. This second appeal followed.

The Bank presents four questions for review,² which we have condensed and rephrased as three:

I. Did the trial court err in ruling that David, as trustee of the Blue Heron Trust, had standing to challenge John's agreement to assign two life insurance policies to the Bank; and, if so, did Richard and Susan have standing to assert those claims at the time of the bench trial?

II. Did the trial court err by finding that the Bank knew or should have known that John was incompetent when he agreed to assign the life insurance policies to the Bank because it had actual knowledge that John was suffering from advanced dementia?

III. Did the trial court abuse its discretion when, on remand from the dismissal of the first appeal, it denied the Bank's motion for reconsideration or, in the alternative, for a new trial based upon new evidence bearing on David's credibility?

For the following reasons, we shall affirm the judgment of the circuit court.

FACTS AND PROCEEDINGS

In 1979, John formed Sun Control, a Maryland corporation that subcontracts the fabrication and installation of customized window treatments for newly constructed office buildings. All the Buckingham children worked for Sun Control at one time or another, but Thomas and Daniel were the most involved and only Thomas acquired an ownership interest in the company. David, an attorney, frequently represented Sun Control.

For more than twenty-five years, the Bank and its predecessors in interest made loans to Sun Control. Throughout this time, R.E. "Randy" Anderson was the chieflending officer for the Bank (and its predecessors). John and Anderson developed a personal friendship during the many years they transacted business together.

A. The Life Insurance Policies

In 1988, Northwestern Mutual Life Insurance Company ("Northwestern") issued Policy No. 10737530, a whole life policy insuring John's life with a face value of $1,000,000. The policy beneficiary was the trustee of a trust created in John's will. On July 31, 2000, Northwestern issued Policy No. 15419985, a second whole life policy insuring John's life with a face value of $750,000. The policy beneficiary was designated as John's estate. We shall refer to these two policies as the "JDB Policies."

On May 15, 1991, in the interim between the issuance of the JDB Policies, John and his wife, Elizabeth, established the Family Trust, an irrevocable life insurance trust, and named their five children as trustees and beneficiaries. The trust documents were executed by John, Elizabeth, Thomas, and Daniel. On November 26, 1991, Northwestern issued Policy No. 11848616 to the trustees of the Family Trust ("the Family Trust Policy"). The Family Trust Policy was a "Joint Life Protection" policy insuring the lives of John and Elizabeth, payable on the "second death."³ It had a face value of $1,000,000and the Family Trust was the owner and beneficiary. By its terms, the Family Trust required the consent of all five trustees to dispose of any trust assets. The Family Trust Policy was the sole asset of the Family Trust.

B. The Forbearance Agreement

In the late 2000s, Sun Control's business was faltering. By 2009, Sun Control was in default on its line of credit with the Bank and on other loan obligations to the Bank. At that time, John was Sun Control's CEO, president, and manager. He and Elizabeth had personally guaranteed many of the company's loans, as had Thomas and his wife, Erin.

On May 13, 2009, Sun Control and the Bank entered into a Forbearance Agreement. John, Elizabeth, Thomas, Erin, and two other companies owned by John and/or the Buckingham children were parties to the agreement as well.⁴ Also on that day, the same parties executed a First Amendment to Forbearance Agreement ("FirstAmendment"). The terms of the Forbearance Agreement and the First Amendment are not at issue in this appeal.

In July 2009, Thomas took over as president of Sun Control. John remained as CEO and manager. Within six months, Sun Control had defaulted under the terms of the Forbearance Agreement and the First Amendment. Shortly thereafter, the Bank engaged Steven Wexler, a financial consultant and turnaround specialist, as its "Special Assets Officer" to develop a "work-out plan" for Sun Control.

C. John's Dementia

While Sun Control's financial problems were spiraling out of control, John's mental health was in decline. Beginning around 2004, Elizabeth and the Buckingham children began noticing lapses in his memory. John resisted efforts by the family to be evaluated by a neurologist. By the fall of 2007, Daniel was so concerned that he suggested to David that John be involuntarily committed so he could undergo a full mental health evaluation. Ultimately, this option was not pursued because John agreed to be evaluated at the Mayo Clinic.

In January 2008, Richard accompanied John to a medical appointment with a neurologist at the Mayo Clinic. The neurologist diagnosed John with "[e]arly cortical dementia, possibly early Alzheimer's."

In the year that followed, John's mental condition deteriorated rapidly. Dr. William Sadlock, an orthopedist treating Elizabeth, became concerned about John's behavior and advised David to have John reevaluated. David made an appointment for John with Ned Sacktor, M.D., a neurologist at The Johns Hopkins Hospital. Initially, John refused to go to the appointment, and David was forced to cancel it.

John eventually relented and, on April 20, 2009, was evaluated by Dr. Sacktor. Dr. Sacktor gave John a "mini mental" examination, on which he scored 18/30. That result was "suggestive of moderate stage dementia." In Dr. Sacktor's opinion, John was "totally disabled" because of his dementia as of that time. Dr. Sacktor referred John for additional neuropsychological testing. That testing, performed in late 2009, resulted in a diagnosis of Pick's disease, or fronto temporal dementia, a "rare progressive degenerative disease of the brain, similar in clinical manifestations and course to Alzheimer's disease." Dorland's Illustrated Medical Dictionary, 541 (32nd ed. 2012). The condition causes memory problems, behavioral disturbance, and language difficulties. It is not curable and is terminal. The progression of the dementia can be slowed with medication, however.

In January 2010, David sent an e-mail to his four siblings with the subject line "Dad's Prognosis — Confidential." He explained Dr. Sacktor's diagnosis. He also informed his siblings that Dr. Sacktor believed that John would die within one to two years. David explained that John did not know about his prognosis and that Dr. Sacktordid not think it would be advisable to tell him at that time. David stated that while John continued to "decline at a very rapid rate," he still had "lots of very lucid moments." He suggested that his siblings arrange to spend time with their father soon, before his dementia progressed further.

D. The Bank's Knowledge of...