Preview:

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND

No. 949 September Term, 2002

GALE MOLOVINSKY, et al. v. THE FAIR EMPLOYMENT COUNCIL OF GREATER WASHINGTON, INC., et al.

Hollander, Salmon, Barbera, JJ.

Opinion by Barbera, J.

Filed: December 22, 2003

Appellants, Gale S. and Arlene M. Molovinsky, appeal from an order of the Circuit Court for Montgomery County awarding

appellees, The Fair Employment Council of Greater Washington, Inc., et al., ("the Council"), $152,628.78 in attorneys' fees and costs. The Molovinskys present nine questions for our review which, with the exception of minor stylistic changes, we set forth as they appear in the Molovinskys' brief: I. Whether the transfer of assets from the testamentary trust established under the last will and testament of Ruth Irene Molovinsky and pursuant to a trust termination agreement dated December 17, 1998, to Arlene Molovinsky, a contingent beneficiary of the trust, constituted a "conveyance" from Gale Molovinsky to Arlene Molovinsky, his wife, within the meaning of Sections 15-201, 15-204, 15-206 and 15-207 of the Maryland Fraudulent Conveyance Act. If the transfer was a conveyance to Arlene Molovinsky, whether under Sections 15-204 and 15206 of the Act, Arlene Molovinsky gave consideration, fair or otherwise, as defined in Section 15-203 of the Act, for the conveyance of the trust assets to her.

II.

III. If Arlene Molovinsky did not give consideration, fair or otherwise, for the conveyance of the trust assets to her, was consideration required under the circumstances of the transaction complained of by the Molovinskys. IV. V. Whether Gale Molovinsky was insolvent at the time he renounced his interest in the trust. Whether the Council was barred from the relief sought by equitable reasons, inter alia, by the failure to bring a petition for attorneys' fees for nearly six (6) years after the underlying case was decided, and by the failure to serve Gale Molovinsky with the petition for attorneys' fees in the underlying action.

VI.

Whether the Council was barred from the relief sought by the doctrine of accord and satisfaction.

VII. Whether the Council was barred from the relief sought by perpetrating a fraud upon Gale Molovinsky, to wit, by procuring a settlement of the underlying judgment without disclosing the claim for attorneys' fees. VIII.Whether the trial court erred in awarding a money judgment in favor of the Council when the relief sought was an order setting aside the alleged "conveyance." IX. Whether the trial court erred in permitting, over objection, the testimony of Donald LaBarre, through the reading of his deposition taken in a prior action, thereby denying the Molovinskys' counsel the opportunity to cross-examine said witness.

For the reasons that follow, we affirm the judgment of the circuit court. FACTS AND LEGAL PROCEEDINGS The litigation underlying this appeal commenced in 1991, when the Council sued Gale Molovinsky for violations of the District of Columbia Human Rights Act ("the Act"), relating to Molovinsky's operation of his employment counseling business. A 1993 jury trial resulted in a verdict for the Council against Molovinsky in the amount of $79,000.00 ("the original judgment"). Molovinsky

appealed the original judgment to the District of Columbia Court of Appeals. While the appeal was pending, the Council filed, on April 1, 1994, a fee petition pursuant to the Act, seeking an award of fees and expenses of $72,000.00. This amount represented services

-2-

rendered up to and including the jury trial.

The superior court

stayed action on the petition pending resolution of the appeal. On October 3, 1996, the District of Columbia Court of Appeals affirmed the jury's verdict. Molovinsky v. Fair Employment Council of Greater Washington, Inc., 683 A.2d 142 (D.C. 1996). One week

later, on October 10, 1996, Molovinsky directed Lafayette Federal Credit Union to remove his name from savings account No. 2822005, which he held jointly with his wife, Arlene. In 1997, the Council commenced discovery in aid of execution of the original judgment. In the course of discovery, the Council

issued interrogatories, a document request, and deposed Molovinsky about his assets. The Trust Gale Molovinsky was a beneficiary of a testamentary trust established under the will of his mother, Ruth Irene Molovinsky. By its terms, the trust's income was to be paid to Melvin

Molovinsky, Gale's father, for the balance of his life, then to Gale, until he reached age sixty. At that time, the trust was to The trust further

terminate and the corpus distributed to Gale.

provided that if Gale died before reaching age sixty, the income would go to his wife, Arlene, for the balance of her life and, upon her death, the entire proceeds were to be distributed per stirpes to their children. The trustee was Donald LaBarre, a Pennsylvania

lawyer who had represented Ruth and Melvin Molovinsky.

-3-

Melvin Molovinsky died in 1994, at which time Gale became the sole income beneficiary of the trust. The trust contained about

$500,000.00 in municipal bonds, and the trust income distributed to Gale amounted to approximately $35,000.00 annually.1 Events Leading to the Termination of the Trust In May 1997, LaBarre produced, at Gale's behest, a first draft of the trust termination agreement. Under this draft, the trust

was to be terminated and the entire proceeds placed in a new Merrill Lynch account in the joint names of Gale and Arlene Molovinsky. offered at According to the deposition testimony of LaBarre trial could in this the case, Gale was concerned account if that it his was Gale

creditors

reach

Merrill

Lynch

registered under the joint names of his wife and himself.

sought LaBarre's opinion as to whether the assets would be immune from his creditors if the account was in the Molovinskys' joint names. Sometime in 1997, Gale informed LaBarre that the District of Columbia Court of Appeals had affirmed the 1993 jury verdict. In

light of the now-final unpaid judgment, LaBarre declined to proceed with the trust termination agreement. In February 1998, the Council took Gale's deposition in aid of execution of the judgment. At the deposition, the Council learned

1 The record contains differing assertions concerning the average annual trust income. The court, however, found that the income was approximately $35,000.00. Neither party contests this finding, so we accept it as fact. Md. Rule 8-131(c).

-4-

that Melvin Molovinsky had died four years earlier, that Gale had become the sole income beneficiary of the trust, and that he was entitled to receive the monthly income from it. Three months later, the Council instituted garnishment

proceedings against LaBarre, as trustee of the trust. In response, LaBarre notified Gale that, "until this matter gets resolved," LaBarre would have to cease sending him payments of trust income. By October 1998, Gale and LaBarre had agreed that LaBarre would invade the corpus of the trust to pay the judgment, and the interest thereon, so that Gale could resume receiving the monthly trust income payments. Gale told LaBarre, however, that, in

connection with paying the judgment, he wanted (1) a release of any claim by the Council for attorneys' fees; and (2) an agreement that the Council would not file any objection to his pending petition to get reinstated to the bar of the District of Columbia.2 LaBarre duly wrote to the Council's Pennsylvania attorney, Catherine Nelson. He advised her of Gale's offer to pay the entire

amount of the judgment, plus accrued interest, in return for a "complete release" from any further claim of legal fees and

assurance that the Council would not oppose Gale's reinstatement as a member of the District of Columbia bar.

2 Gale Molovinsky was disbarred in the District of Columbia and in Maryland following his conviction in federal court of conspiracy to counterfeit. See United States v. Molovinsky , 688 F.2d 243 (4th Cir. 1982), cert. denied , 459 U.S. 1221 (1983).

-5-

After conferring with her co-counsel in Washington, D.C., Nelson told LaBarre that the issue of the attorneys' fees was being handled not by the Philadelphia law firm, but by the "civil rights attorneys" (Washington Lawyers Committee for Civil Rights, cocounsel for the Council in these proceedings) in Washington, D.C. Nelson further advised LaBarre that she was explicitly directed not to offer any release of the claim for fees. Instead, Gale would

receive only a receipt reflecting the payment, and a praecipe marking the judgment as paid. In addition, there would be no

promise not to oppose Gale's reinstatement to the bar. Nelson followed this conversation with a letter to LaBarre confirming the conversation. That letter read, in part: "Upon

full satisfaction of the judgments, Plaintiffs will issue a receipt of payment and arrange for the Court to mark the judgment satisfied and paid in full." LaBarre gave this information to Gale. He nonetheless elected to go forward with the payment of the judgment, so he could resume obtaining income from the trust assets. LaBarre returned to work on a revised trust termination agreement that would transfer all assets of the trust to Arlene. LaBarre completed the agreement and sent it to Gale on December 15, 1998. LaBarre later testified that he agreed to the premature

termination of the trust in an effort to protect those trust assets that remained after the payment of the original judgment, from any

-6-

of Gale's creditors or potential creditors.

LaBarre testified

that, based on his conversations with Gale, he understood Gale to be acting for the same reason. LaBarre also testified that both he and Gale were aware at the time the agreement was being prepared that the Council's claim for attorneys' fees had not been acted upon by the District of Columbia Superior Court. LaBarre testified that he also was aware that,

given the Council's pending fee claim, transferring the trust assets to Arlene could be viewed as a fraudulent conveyance. On December 7, 1998, the trust termination agreement was executed. It provided that, after payment of the original

judgment, the remaining assets, approximately $400,000.00, would be transferred to a new Merrill Lynch account that had been opened in the sole name of Arlene Molovinsky. Both before and after the

transfer to Arlene, the $35,000.00 in annual income from the trust was used to pay the household expenses of the Molovinsky family. Events Following Termination of the Trust In February 1999, LaBarre used the trust assets to pay the original judgment, plus accrued interest, for a total payment of $106,570.75. Shortly thereafter, the Council filed a praecipe

marking the judgment satisfied. One month later, the Council filed in the District of Columbia Superior Court a renewed and amended petition for attorneys' fees. The Council sought fees and expenses for the entire case, including

-7-

both the pre-judgment phase covered by the original fee petition filed in 1994, and the post-judgment phase covering the appeal and collection efforts. On May 9, 1999, the court (Bartnoff, J.)

entered judgment against Gale on the fee petition in the amount of $152,628.78. Gale filed a motion to vacate that judgment. He claimed that

he had never been served with a copy of the amended fee petition, and argued, inter alia, that there should be no fee award because the Council had agreed (through LaBarre) to forego any request for fees in consideration of being paid the original judgment. The Council filed an opposition to Gale's motion to vacate, and included an affidavit from Catherine Nelson. Nelson swore in

her affidavit that she never made any such agreement with LaBarre; to the contrary, she had always told LaBarre that the attorneys' fees claim was not waived, and would be dealt with separately by her Washington, D.C. co-counsel. Gale did not file any counter-

affidavit by LaBarre, nor did he reply to the Nelson affidavit in any way. On June 30, 1999, the superior court (Bartnoff, J.) entered an order denying the motion to vacate. The court found that the

amended fee petition had in fact been served on Gale, and found no merit to his additional arguments for vacation of the judgment. In May 1998, not knowing that the trust had been dissolved, the Council once again initiated garnishment proceedings against

-8-

the trustee, LaBarre.

This time, LaBarre responded by saying that

the trust had been terminated and the assets transferred to Arlene Molovinsky. After learning of the circumstances surrounding the trust termination, the Council filed a fraudulent conveyance action in Pennsylvania, where the trust termination had taken place. The

Molovinskys filed a motion to dismiss for lack of jurisdiction, in response to which the Council voluntarily dismissed the action. On January 7, 2000, the Council re-filed the action in the Circuit Court for Montgomery County, where the Molovinskys reside. The three-count complaint alleged that the transfer of the trust funds constituted a fraudulent conveyance under Maryland's Uniform Fraudulent Conveyance Act. On April 17, 2000, the Council filed a motion for summary judgment. The Molovinskys opposed the motion, and also filed a

cross-motion for summary judgment. The motions came on for a hearing on July 12, 2000. close, the court stated: [I]t is the Court's determination that with respect to the issue of whether [there] was a transfer and/or a conveyance, that the [the Council's] motion for summary judgment at tab 14 shall be granted. The Court determines based upon the undisputed facts before it that there is no material dispute of fact as to whether or not there was a transfer or a conveyance. The only dispute as we have debated is what is the legal significance of that which occurred. At its

-9-

It appears from the undisputed evidence that under the existence of the trust agreement which was under the will of [Gale's] mother, that the monies were held in trust, that the trustee had the right to invade

Download Molovinsky v. Fair Employment.pdf

Maryland Law