Thompson v. Horne

NANCY LEE KATHRYN THOMPSON v. ROBERT M. HORNE, ESQ., et al.

Nos. 1353-2020, 0370-2021

Court of Special Appeals of Maryland

April 13, 2022

Circuit Court for Baltimore County Case No. 03-C-16-003714

Fader C.J., Zic, Salmon, James P. (Senior Judge, Specially Assigned), JJ.

OPINION ^[*]

Zic J.

This case arises from a family dispute over funds used to acquire property and to construct a home on that property. Robert M Horne and Jennifer Schenuit Horne sought to purchase unimproved property and to build a home. To acquire both the lot and the home, Mrs. Horne's mother, Nancy Lee Kathryn Thompson, provided funds in a series of transactions. Ms. Thompson later filed suit against the Hornes, alleging that Mr. Horne committed fraud and converted her money. After a bench trial, the Circuit Court for Baltimore County found in favor of Mr. Horne and Mrs. Horne. The court then awarded attorney's fees in favor of Mr. Horne. Ms. Thompson then appealed.

BACKGROUND

Nancy Thompson is the mother of Jennifer Horne and mother-in-law to Robert Horne, a Maryland barred attorney who practices civil law, including the practice of business law and trusts and estates. Ms. Thompson owns a business entity, Broadway Electric.^[1] Mr. and Mrs. Horne separated in March 2016 and there is a pending divorce action in a separate case which is not before us in this appeal.

Land Acquisition

In August 2012, Mr. and Mrs. Horne entered into a contract to purchase land at 33 A Brett Manor Court in Baltimore County. They purchased the property as tenants by the entirety for $396, 000.00. The contract specified that the Hornes' ability to purchase the property was contingent on obtaining a loan of $220, 000.00. Ms. Thomson is not listed as a purchaser and the contract does not specify who is to provide the loan. The contract also detailed that there was a "Gift of Funds Contingency Addendum." That addendum states that the contract "is contingent on the ability of [Mr. and Mrs. Horne] to obtain a gift of cash" of $100, 000.00. The addendum provides that Mr. and Mrs. Horne "shall provide [the] seller," within 30 days of executing the addendum, documentation of "Evidence of Receipt of Gift Funds" and "Statement from Lender." Documentation of the "Name of Gift Donor" and "Executed Gift Letter" are struck out without initials.

Concerned that someone else would still be able to purchase the lot, Mrs. Horne contacted the selling real estate agent on September 5, 2012 to inquire about the status of the lot. After that conversation, Mrs. Horne had a discussion with Ms. Thompson about securing the lot.

Mr. and Mrs. Horne jointly applied for a loan of $220, 000.00 from Susquehanna Bank. On September 12, 2012, Susquehanna Bank requested a "[f]ully executed gift letter in the amount of $100, 000, copy of cancelled gift check, and copy of deposit slip showing funds being deposited into an already verified account." Mr. Horne forwarded this information to Mrs. Horne in an email, stating:

This is our fall back lender if your mom is unable to make the loan. They need the evidence of gift as well. We are not as pressed to provide them with the evidence, provided that your mom commits to the loan. Note that as indicate[d on] the prior email, we need a written loan commitment 45 days from Contract Acceptance (September 30^th I believe). Thus the question is whether your mom will be willing to commit in writing on that date or if we must have our fall back lender in line by that date? [sic]

In a subsequent email to Mrs. Horne, Mr. Horne wrote that "[i]f we don't close, then we have $100, 000 in the bank and have to work out with your mom what to do/how to treat it (whether it's a gift or a return of your capital investment, etc.)" and "[w]hat we are NOT going to do is get into the habit of repeatedly exchanging $100, 000 with your mom (her to us, then us to her if stuff falls apart) and thereby begging for an IRS gift tax audit."

On September 14, 2012, Mr. Horne wrote to Susquehanna Bank, stating:

I will have a copy of the checks (to be deposited) on Monday, however, I doubt that I will be able to obtain a gift letter (per my prior discussions with Robert Reilly^[2]). These funds are not necessarily a 'gift' in the tax sense and we don't want to have a writing in place that could jeopardize a tax reporting position.

On that same day, Ms. Thompson wrote a personal check to Mrs. Horne for $100, 000.00. The check was deposited on September 17, 2012.

On September 25, 2012, a Susquehanna Bank employee emailed Mr. Horne requesting a time to talk about sourcing the funds and that he did not believe that a gift letter was going to be a viable option. On October 23, 2012, Mr. Horne withdrew the Susquehanna Bank loan application.

On October 24, 2012, Mr. Horne emailed Myles Lichtenberg, an attorney hired to handle the settlement for the property. Mr. Horne sought clarification regarding the lender's duties at closing:

[D]oes the Lender fund at Closing? Does the Lender (my mother-in-law) put money [e]scrow with you in advance, not to be released without her instruction? Are Closing documents held in [e]scrow until she funds? My mother-in-law has a prior engagement from which she cannot be diverted on the 30^th (it arose after we selected the C[l]osing Date). Anything else she, as Lender, needs to be thinking about?

In later emails, Mr. Horne emailed Mr. Lichtenberg the contact information for Ms. Thompson and Broadway Electric. Mr. Horne also relayed that Ms. Thompson "would prefer to do a certified check" and asked whether she may write two checks, one from her personal account and one from her business account.

On November 10, 2012, Mr. Horne emailed Ms. Thompson a draft Non-Recourse Note, which provided that in the event of default, Ms. Thompson would proceed against the property and not the Hornes individually. The draft note specified that the Hornes owed Ms. Thompson $232, 037.50. In the email, Mr. Horne stated the following:

Please review the Note. If you have legal questions, you have to rely on someone other than me about them, as we are technically adverse in this transaction. I have tried to be fair . . . however, it is possible that if you were represented by counsel (S)he may insist on additional or more stringent terms than what I have drafted.

On November 12, 2012 at 10:10 a.m., Mr. Horne emailed Ms. Thompson a draft of the purchase money mortgage and another draft of the note that the Hornes intended to provide to her at closing. He asked her to "review the mortgage" and provided the same disclaimer as his November 10 email above. The draft mortgage identifies Ms. Thompson as the "lender" and contains a signature block for Ms. Thompson. The draft also identifies Ms. Thompson as the "party secured" in the lender's oath. The Hornes are identified as "borrowers." The draft specified that the Hornes are indebted to Ms. Thompson in the amount of $232, 037.50.

At 11:07 a.m. that same day, Mr. Horne emailed Mr. Lichtenberg a draft purchase money mortgage and note, asking him to "advise of any necessary changes." Both the draft note and the draft mortgage identified the Hornes as "borrowers" and Ms. Thompson as "lender" for $232, 037.50. The 11:07 a.m. draft mortgage does not contain a signature block for Ms. Thompson and a blank line replaces Ms. Thompson's name as the "party secured" in the lender's oath.

At closing, multiple checks were presented. There is a cashier's check from Broadway Electric for $232, 037.50 dated November 13, 2012; a check from Mr. Horne's personal account for $2, 787.54 for the closing costs dated November 12, 2012; a cashier's check from Mrs. Horne for $170, 000.00 dated November 13, 2012; and a cashier's check from Ms. Thompson for $6, 000.00 dated November 13, 2012. Mr. and Mrs. Horne signed a purchase money mortgage on November 12, 2012, which was recorded (Liber 032830, folio 191). Similar to the draft mortgages, the Hornes are listed as "borrowers" and Ms. Thompson is listed as "lender." The purchase money mortgage specifies that the Hornes are to repay Ms. Thompson $232, 037.50 "[a]s more fully set forth in the Non-Recourse Promissory Note." Roy Garfinkle, another settlement agent, is listed on the blank line as the secured party. The original copy of the purchase money mortgage was to be returned to Mr. Horne. The court found that there was no document indicating that the $232, 037.50 was to be a draw against Mrs. Horne's inheritance and found that there was no evidence of a written agreement between the Hornes and Ms. Thompson or between the Hornes and Broadway Electric.

House Acquisition

After the land was purchased, Mr. and Mrs. Horne sought to have a home built on the property. Architectural Design Works, Inc. ("ADW") sent the Hornes a proposal on January 18 2013. Emails between Mr. Horne and an individual identified as "Pat"^[3]indicate that there was a delay due to the Hornes needing "Construction Loan Apps" and other budgetary concerns. Mrs. Horne subsequently emailed Mr. Horne to "forget about doing anything" and that "mom agrees with me and is going to make the loan directly to me so we can proceed." Mrs. Horne further wrote that "I am going to sign the contract. [F]rom what you said you are making it look like we can't even afford the house and you have [al]ready set up a really bad relationship with him. [R]eally off to the right start so we either switch builders or I proceed alone."

On March 13, 2013, Ms. Thompson tendered a check to Colbert Matz Rosenfelt, Inc. for $3, 000.00 for a property line issue. On March 19, 2013, Ms. Thompson also tendered a check from the Broadway Electric company account to ADW for $1, 500.00.

The Hornes then signed an agreement with ADW on March 20, 2013 to build...