Sydnor v. Hathaway

228 Md.App. 691

142 A.3d 658

Kim L. SYDNOR, et al.

v.Alvin C. HATHAWAY, et al.

No. 2319, Sept. Term, 2014.

Court of Special Appeals of Maryland.

July 27, 2016.

Kevin S. Dobson, Wilmington, MD, for Appellant.

Robert F. Dashiell & Senchal D. Barrolle (Law Office of Robert Fulton Dashiell, PA, on the brief), Pikesville, MD, for Appellee.

Panel: DEBORAH S. EYLER, MEREDITH, and ALAN M. WILNER (Retired, Specially Assigned), JJ.^*

DEBORAH S. EYLER, J.

This appeal is the culmination of a decade's long dispute between the Union Baptist Development Corporation (“the Corporation”) and the Union Baptist Church of Baltimore, Inc. (“the Church”) over real property situated at 1201 Druid Hill Avenue, in Baltimore City (“the Property”). The Property is part of the land on which a large Head Start Center building (the “Head Start Center”) is located. The Head Start Center also covers 1203, 1205, 1207, and 1209 Druid Hill Avenue and 408 Dolphin Street. The appellants are Kim Sydnor, the most recent past President of the board of directors of the Corporation, which had forfeited its charter, and Joseph Howard and Sandra Dobson, members of that board (the “ Corporation Parties”). The appellees are the Church, Alvin Hathaway, its senior pastor, and Samuel Billups, a parishioner (the “Church Parties”).

In the Circuit Court for Baltimore City, the Corporation Parties sued the Church Parties for declaratory and injunctive relief.¹ After a bench trial, the court entered a judgment declaring that the Corporation is the sole owner of the Property; the Corporation's charter was forfeited and its revival was ineffective; a transfer of the Property from the Corporation to the Church by quitclaim deed was ineffective; and a later dissolution of the Corporation also was ineffective. The court went on to order, however, “as a matter of equity pursuant to [Md. Code (1975, 2014 Repl. Vol.), section 5–209 of the Corporations and Associations Article (‘CA’) ],” that the Property be transferred to the Church.² To accomplish the transfer of the Property, the Court ratified the quitclaim deed, declaring it effective at the time of the judgment. Finally, the court declared that the Corporation was dissolved.

More than ten days after the judgment was entered, the Corporation Parties filed a motion to alter or amend, under Rule 2–534, which the court treated as a motion for reconsideration, under Rule 2–535.³ The Corporation Parties also filed a Rule 1–341 motion for sanctions. The Corporation Parties filed a notice of appeal within 30 days of the entries of orders denying those motions, but not within 30 days of the entry of the declaratory judgment.

For the following reasons, we shall affirm the judgment of the circuit court in part and reverse it in part. Specifically, we shall affirm the judgment transferring the Property from the Corporation to the Church; affirm the judgment denying attorneys' fees; and reverse the judgment dissolving the Corporation.

FACTS AND PROCEEDINGS

The Church, founded in 1852, is located at 1219 Druid Hill Avenue, in the Upton neighborhood of West Baltimore. In 1978, Vernon N. Dobson, the senior pastor, announced as a vision for the Church a ministry to revitalize the immediate neighborhood, which was impoverished, to help the people in it. The first project of that ministry was a coffee house to serve the needs of the elderly in the community. Reverend Dobson obtained a commitment from the City of Baltimore (“the City”) for a grant to fund the project.

The Church contracted to purchase the Property, a dilapidated row house on the northwest corner of Druid Hill Avenue and Dolphin Street, to rehabilitate it for use as a coffee house. The grant from the City covered the purchase price and closing costs for the Property and the cost to renovate it. Because the Church is a religious organization, the City would not pay the grant money directly to it. Reverend Dobson formed the Corporation to receive the grant money from the City and to take title to the Property. The deed conveying the Property to the Corporation was recorded in the Land Records for Baltimore City (“Land Records”) on April 3, 1981.

At the Corporation's inception and for almost 30 years thereafter, Reverend Dobson served as chairman of the board of directors. At a board meeting on April 9, 1981, he gave his “perspective” on the relationship between the Church and the Corporation. Speaking in reference to the planned coffee house, he explained that “the entire corporation is an extension of the church and that anything which is done should be done from that standpoint.” The minutes of that meeting reflect that the board members agreed with “this philosophy.”

The Corporation was registered with the Maryland State Department of Assessments and Taxation (“SDAT”) as a nonstock corporation. Section THIRD of its Articles of Incorporation lists as its purposes:

a. to stabilize and restore the 1200 Block of Druid Hill Avenue and the surrounding neighborhood by purchasing and rehabilitating residential units[;]

b. to purchase and develop the property known as 1201 Druid Hill Avenue [the Property], and create therein a coffee house which will provide a daylight haven for the elderly in the neighborhood[; and]

c. to engage in any and all other acts, ventures and/or businesses which are lawful under the law of Maryland so long as the same are not engaged in for purposes of individual profit.

Section NINTH, paragraph 3 states the Corporation “shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code ... or (b) by a corporation, contributions to which are deductible under Section 170(c)(2) of the Internal Revenue Code[.]” Paragraph 4 of that section states that upon dissolution of the Corporation,

the Board of Directors shall, after paying or making provision for the payment of all the liabilities of the corporation, dispose of all of the assets of the corporation exclusively for the purposes of the corporation in such manner, or to such organization or organizations organized and operated exclusively for charitable, religious purposes as shall at the time qualify as an exempt organization or organization under Section 501(c)(3) of the Internal Revenue Code ... as the Board of Directors shall determine. Any of such assets not disposed of shall be disposed by the Circuit Court of Baltimore City or such other courts sitting in equity in the political subdivision in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said court shall determine, which are organized or operated exclusively for such purposes.^{[4 ]}

Reverend Dobson and several parishioners who served on the Corporation's board worked closely with the Church. The Property was rehabilitated as planned and was operated as a coffee house frequented by the elderly in the community. Around this time, the Church acquired property located at 408 Dolphin Street, which was behind the Property, and operated it as a laundromat.

On dates in the late 1980s and early 1990s, the owners of 1203, 1205, 1207, and 1209 Druid Hill Avenue, all dilapidated properties, donated them to the Church. These properties, comprising all the lots between the Church and the Property, and the 408 Dolphin Street property, surrounded the Property (“the Surrounding Properties”). In 1992, at a function celebrating the Church's 140th anniversary, Reverend Dobson announced a new Church ministry to raze the rehabilitated row house on the Property and the structures on the Surrounding Properties and in their place erect a Head Start Center to house a community Head Start Program, facilities for other programs that would advance other of the Church's ministries, and a new coffee house.

The Church obtained a $1 million grant from the State to build the Head Start Center, conditioned on its matching the State's funding. The Church launched the “Child First Campaign” to secure the matching funds. It raised over $400,000 from members of the congregation and the community and obtained a $600,000 loan from a local bank, guaranteed by the State. The State distributed the grant money directly to the Church. The Corporation played no role in raising money for the Head Start Center or in its planning or construction. The Head Start Center opened in November 1995. The Head Start Program began operation shortly thereafter. That program always has been operated under the auspices of the Church, and the Union Baptist Church School, Inc., continues to operate it today.

As these facts reveal, the Head Start Center, a large, indivisible structure, was built on the ground of the Property, owned by the Corporation, and on the grounds of the Surrounding Properties, all owned by the Church. The Corporation could have sought and obtained tax-exempt status under the Internal Revenue Code and state law, but it never did so. Consequently, it was required to pay property taxes on the Property. In 1994, before the Head Start Center was completed, the Corporation asked the City to consolidate the Property with the Surrounding Properties, under the address 1201 Druid Hill Avenue, for the purpose of receiving a single property tax bill. The request was denied on several grounds, including that there was not a single owner. However, on March 21, 1995, the consolidation request was granted and forwarded to the SDAT. The SDAT real property record for 1201 Druid Hill Avenue was changed to show that it covered .29 acres, which is all the ground for the 1201, 1203, 1207, and 1209 addresses, and the 408 Dolphin Street address. The mailing address was listed as 1219 Druid Hill Avenue, which, as noted, is the Church's address.

It appears that, until 2004, the Church, not the Corporation, paid the property taxes for the Property. That year, the Church fell on hard times financially and was not able to pay the...