Premier Capital, LLC v. Citizens Bank of Pa.

PREMIER CAPITAL, LLC v. CITIZENS BANK OF PENNSYLVANIA

No. 00029

COURT OF SPECIAL APPEALS OF MARYLAND

September Term, 2017

July 13, 2018

Circuit Court for Montgomery County

Case No. 283503V

UNREPORTED

Graeff, Nazarian, Fader JJ.

Opinion by Fader, J.

* This is an unreported opinion, and it may not be cited in any paper, brief, motion, or other document filed in this Court or any other Maryland Court as either precedent within the rule of stare decisis or as persuasive authority. Md. Rule 1-104.

Premier Capital, LLC appeals from an order of the Circuit Court for Montgomery County granting Citizens Bank of Pennsylvania's motion to vacate a default judgment related to a property garnishment. Because Citizens waited until more than 30 days after the judgment was entered before filing its motion to vacate, the judgment could only be vacated for fraud, mistake, or irregularity. Md. Rule 2-535(b). The circuit court set it aside based on both fraud and irregularity. We reverse.

BACKGROUND

Premier obtained a foreign judgment against Charles Koehler, an individual who was, during the relevant period, an employee of Citizens. After enrolling the judgment in Maryland, Premier requested two writs of garnishment against Citizens: (1) in October 2015, a Writ of Garnishment of Property; and (2) in January 2016, a Writ of Garnishment of Wages. The circuit court issued the writs and Premier effected service of process of each on Citizens's resident agent in Maryland, CSC-Lawyers Incorporating Service Company ("CSC").

Citizens does not dispute the validity of service. Indeed, Citizens admitted below that unexplained communication errors—either between CSC and Citizens or within Citizens—had resulted in the proper department within Citizens not receiving documents that were properly served on CSC in other cases as well as this one.¹ Regardless, for reasons having nothing to do with Premier or its counsel, the appropriate department withinCitizens apparently did not receive timely notice of either of the writs. As a result, Citizens failed to respond to either garnishment.

On February 4, 2016, the circuit court entered an order of default against Citizens on the property garnishment. On May 16, 2016, Premier filed and served on CSC: (1) a motion for judgment by default as to the property garnishment; and (2) a motion to show cause as to the wage garnishment. Throughout, Citizens remained silent.

In early June 2016, nearly eight months after Premier first sought a writ of garnishment against Citizens as to non-wage property, Premier's counsel reached out directly to Citizens to find out why it had not responded. The first contact appears to have been telephonic, followed by an e-mail exchange on June 6 between Premier's counsel's assistant and Daniel Miceli, a Citizens Payroll Tax & Garnishment Specialist. The level of communication quickly escalated. By June 9, Premier's counsel was corresponding with Lois Eastman, Citizens's Payroll Tax, Garnishment and Relocation Manager, VP. Citizens's in-house counsel, Harold Kofman, became involved by June 14. Although different personnel were involved, all of the e-mails in the record are in a single chain covering the initial contact on June 6 through August 9.

The circuit court concluded that the e-mails demonstrate fraud on behalf of Premier's counsel in failing to disclose that Premier had moved for judgment on the property garnishment. However, Premier's counsel mentioned the motion for judgment in the e-mails twice. On June 7, in an admittedly imprecise e-mail, Premier's counsel referenced "a pending motion to show cause and for judgment." Mr. Miceli's response the following day indicated a belief, purportedly based on a prior telephone conversation,(1) that this was a single motion and (2) that it would be withdrawn if Citizens came into compliance with the wage garnishment. Premier's counsel's June 9 response corrected both of these misunderstandings. It clarified that there were two separate motions by referencing both: "the motion to show cause or the motion for default judgment." It also expressly (1) insisted that the money overdue under the wage garnishment must be paid and (2) stated that doing so would not fully resolve the "pending motions." Although the response arguably hinted that both garnishments might be resolved if Citizens were to pay not only the amounts owed under the wage garnishment but also an amount to cover Premier's counsel and other fees, no promise was made and Premier's counsel also stated that Citizens's "failure to properly respond to two garnishments deprived my client of money for months and caused a lot of extra time and money." Moreover, as we shall see, it is clear that Citizens did not believe any settlement had been reached or promised.

Subsequent e-mails reflect Citizens's efforts to comply with the wage garnishment, including garnishing Mr. Koehler's wages going forward and compensating Premier for amounts that should have been garnished previously and for attorney's fees owed as a result of Citizens's failure to respond timely to the wage garnishment. The e-mails do not reflect any similar movement as to the property garnishment, apparently because Citizens had concluded that it did not hold any of Mr. Koehler's non-wage property.

Shortly after he became involved (around June 14), Mr. Kofman, Citizens's in-house counsel, asked Premier's counsel for "proof of service of the levy on Mr. Koehler's non-wage property." In response, Premier's counsel provided him with the writ of garnishment, the request for order of default, the order of default, and proof of service.Premier's counsel did not attach the motion for judgment, nor did Mr. Kofman request a copy of that motion.

According an affidavit provided by Mr. Kofman, he informed Premier's counsel in June that Citizens did not have any non-wage garnishable property of Mr. Koehler and asked if Premier would vacate the default if Citizens could provide an affidavit to that effect. Premier's counsel did not respond until August 5, when he declined. Mr. Kofman then "immediately made arrangements" to retain outside counsel.

On August 15, acting on the motion for judgment that had been filed almost three months earlier, the circuit court entered judgment against Citizens as to the property garnishment in the amount of $31,222.18, plus costs and post-judgment interest from the date of the original 2007 judgment. Notably, the judgment was entered directly against Citizens for the entire amount of Mr. Koehler's debt, not just against any of Mr. Koehler's property that Citizens might be holding. The clerk sent notice of the entry of default judgment to, among others, CSC.²

Citizens filed a motion to vacate the judgment on September 16, 32 days after the judgment was entered. Apparently unaware of the limited grounds on which a judgment can be vacated upon a motion filed more than 30 days after entry, see Md. Rule 2-535(b), Citizens's motion argued primarily (1) that it did not have any garnishable property of Mr. Koehler, (2) that collecting from Citizens would thus be unfair and would unjustly enrichPremier, and (3) that judgment was improper because Premier had not been required to prove its damages. Citizens argued in the alternative that the court should revise the judgment pursuant to Rule 2-535 to limit it to "any and all non-wage property of Defendant Koehler in Citizens['s] possession at the time the Writ was filed." Citizens's motion did not invoke Rule 2-535(b) nor did it make any allegation of fraud, mistake, or irregularity.

In a hearing on the motion, the circuit court raised sua sponte whether the conduct of Premier's counsel in his communication with Citizens "was a form of intrinsic fraud on the Court." Following arguments of counsel—neither party presented any evidence—the court granted the motion and vacated the judgment. The court recognized that it could not vacate the judgment on the grounds advocated by Citizens in its filings and so focused on grounds Citizens had not raised: fraud and irregularity.

Addressing fraud, the court found that Premier had committed extrinsic fraud because although "counsel [for Premier] . . . provided documents" in response to Mr. Kofman's request for copies of pleadings, he "did not include the motion for a default judgment which had been filed a full month earlier."³ The court also concluded that Premier's counsel had allowed Citizens's in-house counsel to believe that the entire dispute would be resolved through their discussions about resolving the wage garnishment.⁴

Turning to irregularity, the court concluded that the clerk's office should have sent the judgment not to CSC, but to Ms. Eastman. The basis for the court's conclusion was an affidavit of service in the court's file showing that, in July, Premier's counsel had served a copy of its motion and order to show cause as to the wage garnishment on Ms. Eastman rather than on CSC.⁵ The court concluded that this affidavit of service provided notice to the clerk that Ms. Eastman's address, not CSC's, was the proper service address, and that the failure to use that address constituted an irregularity under Rule 2-535(b).

Following an unsuccessful attempt to alter or amend the ruling under Rule 2-534, Premier filed this appeal.⁶

DISCUSSION

"The existence of a factual predicate of fraud, mistake, or irregularity, necessary to support vacating a judgment under Rule 2-535(b), is a question of law." Wells v. Wells, 168 Md. App. 382, 394 (2006) (citing In re Adoption/Guardianship No. 93321055/CAD, 344 Md. 458, 475 n.5 (1997)). If a factual predicate exists, we review a trial court's ruling for abuse of discretion, Benson v. State, 389 Md. 615, 653 (2005), which occurs "where no reasonable person would take the view adopted by the [trial] court," or when the court acts "without reference to any guiding rules or principles." Powell v. Breslin, 430 Md. 52, 62 (2013) (quotation omitted). "We will find an abuse of...