Preliminary Considerations-Choice of Remedies

JurisdictionMaryland

II. PRELIMINARY CONSIDERATIONS-CHOICE OF REMEDIES

A. General

A domestic client is often best served by settlement of the case where such a course is consistent with the client's rights and needs. There are many areas of discretion in domestic law, and accurate predictions of outcome are difficult. Trial of domestic cases can be difficult, expensive, and very draining to both client and counsel and frequently fails to produce results commensurate with the effort.

Settlement, particularly because of the emotional overlay so often present in the domestic case, is also difficult. It requires a strategy. A successful settlement combines the setting of attainable goals based upon accurate predictions of likely outcome if the case is tried, flexibility in finding methods of dividing assets and providing cash flow, and often the subtle (or not so subtle) exercise of pressure in meeting those goals. Many times, the strongest negotiating position is obtained after filing an action. To attain the strongest negotiating position, strategic consideration and employment of certain non-domestic causes of action, along with more traditional remedies, may provide a more effective mechanism for either forcing a favorable settlement or winning a favorable litigated outcome. Where issues relate to the acquisition and division of property or, in the alternative, involve insolvency or aggravated tortious misconduct, other forms of action may be superior tools.

A number of non-domestic actions not amounting to the traditional divorce, custody, annulment, or alimony proceedings may be available, depending upon the overall circumstances and the remedies your client is seeking. Some of these potential actions may be available where grounds for the traditional domestic remedy are lacking.

With the demise of interspousal tort immunity, it is incumbent on the practitioner to investigate and consider the existence of tort actions against a spouse.

B. Non-Domestic Remedies

1. Partnerships and corporations

A partnership between the spouses may provide alternative approaches.213 No written agreement is required to find the existence of a partnership; rather, there must be a finding of an intention to create a partnership from all of the facts and circumstances. After such a determination, a partnership can be dissolved pursuant to Md. Code Ann., Corporations and Associations §§ 9A-601-9A-603 (2014 & Supp. 2022) (hereinafter Corps. & Ass'ns § ___). Absent an agreement to the contrary, each partner is entitled to an equal share of profits from the partnership, regardless of unequal contributions of capital or services.214

This approach may also be useful within a divorce proceeding. A court has no authority to take one spouse's property and transfer it to the other spouse; it may only determine the ownership of real and personal property.215 However, once a partnership is found to exist, the court has authority to order a dissolution. There would appear to be a number of permutations available involving the interaction of the Marital Property Act and the finding of the existence of a partnership.

The issue arose in a different context in Wilen v. Wilen.216 Husband owned a partnership with other individuals. The Court stated that partnership property cannot be marital property because the incidents of partnership property set out by then Corps. & Ass'n S § 9-502(b) preclude property owned by the partnership from being marital property.217 This applied even to property held in the individual's name since record title is not controlling in determining whether property is partnership property. However, the spouse can claim a marital property interest in the partnership itself, that is, husband's right to share in the profits and losses thereof.218

2. Resulting and constructive trusts

The declaration and imposition of a resulting trust for the dependent spouse is permitted in domestic cases.219 A resulting trust arises when consideration given for property is furnished, in whole or in part, by one party while legal title is taken by the other. Such a trust rests on the "presumed intentions" of the parties. Fraud is not required. This remedy would arguably be available when the co-signing spouse guarantees corporate obligations or co-signs for loans to the economically dominant spouse.

In Cottman v. Cottman,220 wife originally sought imposition of a constructive trust on assets held by husband, on the theory that assets held by him included proceeds from sale of a jointly owned home. Wife could not obtain service on husband and subsequently learned that husband had transferred the property to his brother. Her attorneys then sought to impose a constructive trust on the property, naming the brother as a defendant. The brother lost a sale of the property as a result. Thereafter, the complaint against the brother was dismissed; he then filed an action against the attorneys and wife for malicious prosecution and abuse of process. Summary judgment was granted to the defendants.

In discussing these facts, the court defined constructive trust: such a trust converts the legal title holder into a trustee for one who "in good conscience" should reap the benefits of possession of that property. It is applied in fraud and misrepresentation cases and where the circumstances render it inequitable for the party holding title to retain it. Unjust enrichment is the key.221

The court, noting that malicious prosecution suits are not favored against attorneys, stated that if attorneys cannot act and advise clients without constant fear of being harassed by suits and actions at law, parties cannot obtain their legal rights. As a result, the court adopted a two-prong standard to determine whether an attorney has probable cause to bring such an action:

(1) The attorney must have a subjective belief that the claim merits litigation, that is, a reasonable and honest belief that the client has a tenable claim. This need not be a conviction that the client will prevail on the claim.
(2) This belief must meet an objective standard, that is, whether any competent and reasonable attorney familiar with the law of the forum would consider that the claim was worthy of litigation on the basis of facts known by the attorney who brought the suit.

In Whitaker v. Whitaker,222 appellee asked for imposition of a resulting trust following denial of a monetary award, all based on ownership in appellant. The relief was denied based on res judicata.

3. Bankruptcy

When substantial debt problems affect both spouses but one spouse cannot use the bankruptcy statutes, the other spouse may nonetheless find that substantial relief or leverage may be obtained by filing bankruptcy. If both spouses avail themselves of this remedy, however, the result may be a boon to creditors and the loss of the anticipated leverage.223

Generally, an award of counsel fees against a spouse is not dischargeable by that spouse in bankruptcy since, under Fam. Law § 11-110 and case law, the award of counsel fees is in the nature of alimony and therefore non-dischargeable.224

4. Corporate ownership

Where both spouses own stock of a closely held corporation, leverage may be obtained through corporate action or judicial intervention in the corporate context. See Corps. & Ass'nS §§ 3-201-3-213, and § 4-603 outlining circumstances in which a stockholder can force payment of the fair value of his or her stock, and §§ 3-413 and 4-602 for forcing the dissolution of a close corporation.

An additional method of dealing with corporations held by married persons is shown in Colandrea v. Colandrea.225 Corporate misconduct and abuse amounting to fraud and misrepresentation resulted in the piercing of the corporate veil.

5. Torts

It may be appropriate to proceed against a spouse in tort. In Boblitz v. Boblitz,226 the Supreme Court of Maryland effectively eliminated the rule of interspousal immunity in negligence cases. The ruling is applied prospectively to cases accruing after June 30, 1983; the holding is constitutional.227

In Lusby v. Lusby,228 the Supreme Court of Maryland sustained wife's cause of action against her husband for an intentional tort against her. See Vance v. Vance229 for a discussion of intentional or reckless infliction of emotional distress and negligent misrepresentation. That case involved a 20-year marriage relationship which was actually bigamous.

In Bender (Penaelope) v. Bender,230 one of the parties' children, at wife's direction, gained access to husband's safe and removed a substantial sum of cash and jewelry. Wife turned over all but $25,000 to her attorneys. Husband filed suit for conversion, naming, among others, wife and her attorneys. The assets held by the attorneys were deposited in a trust account and subsequently returned to husband. Husband obtained summary judgment against wife for the $25,000 which was not accounted for.

The attorneys' motion to dismiss was granted. The Court analyzed the elements of conversion and characterized the attorneys' holding of the money as, at best, constructive conversion. The controlling fact was that the attorneys made no effort to exercise any control over the funds. Conversion requires that the refusal to return the money be an absolute and unconditional denial of husband's claim to the money.

Wife raised the defense of interspousal immunity. The Court, citing Lusby v. Lusby,231 held that the doctrine did not bar an action for an intentional tort under such circumstances. The Court also noted that Lusby did not distinguish between intentional torts against the person and against property. Lusby is therefore to be construed as indicating that an intentional tort against either person or property may be outside the doctrine of interspousal immunity. In Bozman v. Bozman, 376 Md. 461, 830 A.2d 450 (2003), the Court expanded upon its ruling in Lusby. The Court held that notwithstanding other remedies that may be available within the Family Law Article, a married...

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