Bartenfelder v. Bartenfelder

1

THOMAS BARTENFELDER v. KIMBERLY BARTENFELDER

No. 1023-2021

Court of Special Appeals of Maryland

October 25, 2022

Circuit Court for Harford County Case No. 12-C-17-000355

Berger, Nazarian, Albright, JJ.

OPINION ^[*]

ALBRIGHT, J.

This case stems from an ongoing dispute between an estranged husband and wife, Thomas Bartenfelder and Kimberly Bartenfelder, regarding the management of two close corporations and one limited liability company (collectively "the companies"). The companies are solely owned and operated by the Bartenfelders. In 2017, Ms. Bartenfelder filed a civil complaint in the Circuit Court for Harford County naming Mr. Bartenfelder and the three companies as defendants. Ms. Bartenfelder requested the appointment of a receiver, and Mr. Bartenfelder replied by seeking a forced buy-out of Ms. Bartenfelder's interest in the companies. After an appraisal, the circuit court set a price for the buy-out, Ms. Bartenfelder appealed, and we reversed the circuit court's appraisal- and buy-out orders. Bartenfelder v. Bartenfelder, 248 Md.App. 213, 252-53 (2020) ("Bartenfelder I").

In 2018, before the appeal, Ms. Bartenfelder amended her complaint, dropping all three companies as defendants among other changes. In 2021, Ms. Bartenfelder requested that her future attorney's fees and expert witness fees be paid from the companies' funds on an ongoing basis. The circuit court granted her motion. Mr. Bartenfelder then filed this interlocutory appeal, presenting three questions for our review, which we have rephrased and consolidated into a single question:^[1]

Did the circuit court err in ordering that Ms. Bartenfelder's attorneys' and expert witness fees be paid from company funds, where there was no contractual or statutory fee-shifting provision authorizing such an award, where the court did not determine the amount of fees incurred and the reasonableness of those fees, and where the companies were not parties to the litigation?

Ms. Bartenfelder, who filed an opposition brief, has also moved to dismiss this appeal, asserting that Mr. Bartenfelder lacks standing to request relief on behalf of the companies.

For the reasons that follow, we decline to reach Ms. Bartenfelder's motion to dismiss and the merits of the parties' contentions on appeal. Instead, we will vacate the circuit court's order granting Ms. Bartenfelder ongoing fees.

BACKGROUND^[2]

Mr. Bartenfelder and Ms. Bartenfelder are the sole stockholders of two close corporations, Bartenfelder Sanitation Service, Inc. ("Sanitation") and Bartenfelder Landscape Service, Inc. ("Landscape"). They are also the sole members of a third company, 3340 Forge Hill LLC ("Forge").^[3] Ms. Bartenfelder owns 51% of the outstanding stock of Sanitation; 50% of the outstanding stock of Landscape; and a 50% membership interest in Forge. Mr. Bartenfelder owns 49% of the outstanding stock of Sanitation; 50% of the outstanding stock of Landscape; and a 50% membership interest in Forge. Sanitation and Landscape are Maryland close corporations. As its name suggests, Forge is a limited liability company, also organized under the laws of Maryland.

According to the organizational documents attached to Ms. Bartenfelder's amended complaint, the Bartenfelders' ability to control the companies is not uniform company to company. Landscape operates without a board of directors, but its stockholders, Mr. Bartenfelder and Ms. Bartenfelder, manage the company^[4] subject to bylaws and a unanimous shareholders' agreement. Thus, both Ms. Bartenfelder and Mr. Bartenfelder must approve the "disposal of the whole or any part of the business, undertaking, or assets of the Company outside the normal course of business[,]" among other things. Sanitation operates without a board of directors, but, apparently, has no shareholders' agreement.^[5] Mr. Bartenfelder is the managing member of Forge, but Forge, apparently, has no operating agreement.^[6]

In 2017, Ms. Bartenfelder filed a civil complaint against Mr. Bartenfelder and the companies, alleging that, among other things, Mr. Bartenfelder misused and misappropriated the companies' funds. Ms. Bartenfelder requested injunctive relief, declaratory relief, damages, and attorney's fees and costs. For each company, she designated Mr. Bartenfelder as the person to be served, and the circuit court issued summonses for the companies to be served on him. Four days later, apparently, Mr. Bartenfelder and the companies were served.

Less than a year later, Ms. Bartenfelder amended her complaint to, among other things, remove the companies as defendants and proceed solely against Mr. Bartenfelder. She set forth four causes of action in her amended complaint. First, she sought various injunctive and equitable relief related to the companies. Second, she sought declaratory relief regarding Ms. Bartenfelder's rights as president and majority shareholder of Sanitation. Third, she claimed that Mr. Bartenfelder breached Landscape's shareholder agreement and certain other fiduciary obligations by failing to allow Ms. Bartenfelder to take draws from the companies. And fourth, she claimed that Mr. Bartenfelder breached a non-compete clause in Landscape's shareholder agreement. Throughout these various causes of action, Ms. Bartenfelder alleged that Mr. Bartenfelder had assumed control of the companies; had saddled the companies with debt; that his other actions had resulted in a loss of business and revenue for the companies; and that, if left unchecked, Mr. Bartenfelder would "completely deplete, waste, and/or transfer the value of the operations of the Businesses to third parties or himself."

Over the next few years, Ms. Bartenfelder and Mr. Bartenfelder filed many motions and other papers.^[7] On July 30, 2021, Ms. Bartenfelder filed a "Motion for Payment of Attorneys and Expert Witnesses from Company Funds," which is the subject of this appeal. In that motion, Ms. Bartenfelder argued that, due to Mr. Bartenfelder's actions in denying her access to company funds, she was destitute and unable to pay her attorneys' fees or hire expert witnesses, all while Mr. Bartenfelder had continued" . . . to enjoy a high standard of living using income generated by the companies . . ." Ms. Bartenfelder also asked that she be "allowed to use the companies' assets to satisfy her financial obligations to counsel and to retain experts" and alleged that her rights would be prejudiced if she was not granted such access. Mr. Bartenfelder opposed the motion, arguing in part that the Ms. Bartenfelder's claims were derivative claims that would fail without the companies as necessary parties. Nonetheless, Ms. Bartenfelder did not seek to re-join the companies, nor did she make any showing as to why the companies could not be joined or why the case should proceed in their absence.

On August 11, 2021, after shortening Mr. Bartenfelder's time to respond, the circuit court entered a written order granting Ms. Bartenfelder's motion. That order stated that Ms. Bartenfelder's "attorney['s] fees and expert witness fees, reasonably incurred in connection with this action, shall be paid from assets of one or more of the companies, with the decision as to which company's (or companies) assets will be used left to the consensus business judgment of the parties." It contained no findings about why the companies could not be joined as parties or why the case should proceed in the companies' absence. This timely interlocutory appeal followed.^[8]

SCOPE AND STANDARD OF REVIEW

An appellate court will generally only consider issues properly raised by the parties, except when the issue concerns the jurisdiction of the trial or appellate court. Moats v. City of Hagerstown, 324 Md. 519, 524-25 (1991). Appellate courts, however, have discretion to consider issues that are not properly raised. Id. at 525. And we may also address sua sponte "a narrow category of issues which come to our attention even though not raised by an appellant [or appellee], and which may require a reversal of the judgment below." Joseph H. Munson Co. v. Sec'y of State, 294 Md. 160, 169 (1982), aff'd sub nom. Sec'y of State of Md. v. Joseph H. Munson Co., 467 U.S. 947 (1984). An issue concerning the necessary parties, for instance, "may be raised for the first the time on appeal, Bodnar v. Brinsfield, 60 Md.App. 524, 532 (1984), or even sua sponte by the appellate court." Serv. Transp., Inc. v. Hurricane Exp., Inc., 185 Md.App. 25, 34 (2009) (citation omitted). In determining whether a party is "necessary," we have declined to determine whether to apply an abuse of discretion or a de novo standard of review, as the result is typically the same. Serv. Transp., Inc., 185 Md.App. at 37. That observation also applies here.

DISCUSSION

Mr Bartenfelder argues that the circuit court erred in ordering that Ms. Bartenfelder's ongoing attorneys' fees and expert witness fees be paid from the companies' coffers, asserting that the court did not have the power to issue such an order because-at all relevant times-the companies were not parties to the litigation. Separately, he points out that the "American Rule" would prevent an award of fees here because no contract or statute provides for such an award in this context.

Ms. Bartenfelder, however, argues that Mr. Bartenfelder's appeal should be dismissed because he does not have standing to request relief on behalf of the companies. On the merits, Ms. Bartenfelder argues that the "American Rule" does not apply here because the circuit court's order does not shift fees among adverse parties. She also contends that the circuit court was sitting as a court of equity, and that it had the power to grant the relief requested because doing so was "clearly in the interests of justice."

We...