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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1232 September Term, 2001

GENE VAUGHN v. JAY VAUGHN

Kenney, Eyler, Deborah S., Rodowsky, Lawrence F. (Ret'd, Specially Assigned), JJ. Opinion by Eyler, Deborah S., J.

Filed: September 5, 2002

The Circuit Court for Prince George's County, sitting without a jury, returned a verdict in favor of Jay Vaughn ("Jay"), the appellee, and against his wife, Gene Vaughn ("Gene"), the

appellant, on claims for breach of contract and conversion, and entered judgment for $7,060. counterclaim for conversion. The court found against Gene on her In doing so, it made a finding on the

record that certain United States Treasury Bonds titled in Gene's name are Jay's property. Gene appeals from the judgment of the circuit court, posing the following question for review, which we have rephrased: Did the trial court err in ruling that the United States Treasury Bonds titled in her name are Jay's property? For the following reasons, we shall vacate the judgment of the circuit court on Gene's counterclaim and remand the case to that court with instructions.

FACTS AND PROCEEDINGS
Jay and Gene were married on October 15, 1996. second marriage for each. It was the

They had no children together, though

each have children from prior marriages. For the first ten months of the marriage, Jay and Gene lived apart. They began cohabiting in August 1997, when Jay moved into Jay and Gene

Gene's house, in Brandywine, Prince George's County. separated on June 23, 2000.

On December 1, 2000, in the Circuit Court for Prince George's County, Jay sued Gene for conversion, breach of contract, abuse of

process, fraud in the inducement, and injunctive relief ("the tort action"). Jay alleged that when the parties separated, he moved

out of the marital home and left behind several items of personal property. Later, Gene agreed to give him access to the marital When the

home at a specific date and time to remove those items.

agreed date and time arrived, however, Gene refused to let Jay in the house. His items of personal property thus remained in the

marital home. Jay claimed that Gene's conduct was a breach of their agreement and a conversion of his items of personal property. He attached to his complaint a list of the items he claimed Gene had converted, with valuations. items totaled $21,470. According to Jay, the value of the

Gene filed an answer in the tort action on January 4, 2001. On January 23, 2001, also in the Circuit Court for Prince George's County, Jay filed a complaint for limited divorce against Gene ("the divorce action"), alleging he and Gene had mutually and voluntarily separated on June 23, 2000, with the intention of ending their marriage. Jay asked the court to resolve any dispute

between them respecting their property. On February 12, 2001, Gene filed an answer in the divorce action, admitting the parties had separated as alleged, with the intention of ending their marriage. The same day, she filed a

counterclaim for conversion in the tort action, alleging that when Jay left the marital home, he took certain of her personal property

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and converted it to his own use. Gene attached to her counterclaim an itemized list of the items she claimed Jay had converted, with valuations. The most valuable items listed were certain United States Treasury Bonds, titled in Gene's name, that she claimed were worth $28,000. Gene assigned the other items (all small pieces of Gene alleged that she

personal property) values totaling $1,000.

had demanded the return of the items but Jay had refused. On July 3, 2001, Gene filed a counter-complaint for absolute divorce in the divorce action. the tort action, pending the She also filed a motion to stay in outcome of the divorce action,

asserting that the same property was in dispute in both actions. Jay opposed the motion, and on July 11, 2001, the court issued an order denying it. On July 12, 2001, the parties appeared before the court for a bench trial in the tort action. At the outset, Gene renewed her

motion to stay, arguing that the property at issue was "disputed marital and non-marital property"; that a spouse cannot convert marital property, and therefore it was necessary for the court to determine whether the property at issue was marital or non-marital for it to decide the conversion claim and counterclaim; and the proper forum for that determination was the divorce action, not the tort action. In response, Jay's lawyer acknowledged that, with respect to the counterclaim, the parties were disputing whether the United

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States Treasury Bonds were marital property; he agreed, for that reason, that the divorce action was the proper forum in which to resolve that dispute. With respect to Jay's conversion claim,

however, Jay's lawyer pointed out that of the 67 items Jay was claiming were non-marital and that Gene had converted, 15 were items Gene already had acknowledged as being non-marital, in answers to interrogatories. Jay's lawyer suggested that the court

proceed with the tort action as to those items only. Ultimately, and over Gene's protest, the court left to Jay the decision whether to go forward with the conversion claim on all or some of the items he was claiming Gene had converted, and with the counterclaim for conversion of the bonds. Despite his lawyer's

advice to the contrary, Jay asked the court to proceed with his conversion claim on all the property, including the items of disputed marital property, and to proceed with the counterclaim. The court then did so. Jay testified that in 1993, he purchased some United States Treasury Bonds to fund his children's education. titled in his name. The bonds were

By 1997, after he and Gene had married, Jay He decided to try

found himself in debt and pursued by creditors.

to hide the bonds from his creditors by redeeming them and giving the proceeds to Gene. Further to his plan, in late June 1997, Jay redeemed the bonds for approximately $35,000 and gave the money to Gene. Documents

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moved into evidence included checks Jay wrote to Gene in July 1997, after he redeemed the bonds, for sums totaling approximately $35,000. Also in July 1997, Gene used the money from Jay to

purchase United States Treasury Bonds, which she titled in her name. According to Jay, Gene agreed to hold the new bonds for him; therefore, the new bonds were not marital property. Rather, they were "[Jay's] property that [Gene] was holding for [him]." In 1999, Jay filed for bankruptcy. He did not include any

bonds in his disclosure of personal property in the bankruptcy case. Jay further testified that he is a cab driver and throughout the marriage he was working in that capacity and earning an annual income of approximately $20,000. Gene testified that before moving into her house, in August 1997, Jay announced that he planned to continue running a start-up business that had yet to turn a profit, and that he did not intend to continue driving a cab. Because Jay was not going to be

bringing any income to the marriage, he agreed to redeem his United States Treasury Bonds and give Gene the proceeds to contribute to the household and otherwise use as she saw fit. After Jay redeemed the bonds and gave her the proceeds, Gene decided to use the money to purchase her own United States Treasury Bonds. titled them in her name. daughter's education. She did so, and

She planned to use the bonds to fund her

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Gene is an accountant, and was employed in several positions during the course of the marriage. Gene further testified that when the parties first experienced marital problems, in March 2000, Jay moved out of their bedroom into an extra room in the house. Gene's United States Treasury Bonds were in a box in that room. When Jay moved out of the house,

he took several boxes, including the box containing the bonds. Gene demanded that Jay return the bonds, but he refused. At the conclusion of the evidence and after hearing argument of counsel, the court ruled from the bench. It granted motions for

judgment on Jay's claims for abuse of process and fraudulent inducement, and then ruled in Jay's favor on his breach of contract and conversion claims. Jay's itemized list of personal property

allegedly converted by Gene had been admitted into evidence. The court rejected the values assigned to the items on that list, but with some exceptions, accepted the values testified to by Jay, which totaled $10,710. The court excluded several items that it identified and in one case ruled was marital property, and then valued the remaining items of personal property at $7,060. The court found that the parties had entered into an oral agreement for Jay to have access to the marital home to retrieve those items of personal property and that Gene had breached the agreement. It further found that Gene had "exercised... dominion

over [the] property," thereby committing the tort of conversion.

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The court concluded that it was not a sufficient remedy for Gene to return the converted items, because Jay had had to expend sums to replace them and, on that basis, entered judgment in favor of Jay for $7,060. The court denied Jay's request for injunctive relief, concluding it was moot. The court then turned its attention to Gene's counterclaim for conversion of the United States Treasury Bonds. It stated, "[t]he

[c]ourt is only concerned here with whose property it is, and I bel[ie]ve it [the bonds] was his...." Acknowledging "fraud" by

both parties, the court credited Jay's testimony that he had given the proceeds of his redeemed United States Treasury Bonds to Gene not for her to use but for her to hold, for his benefit, to keep the money from his creditors. Jay's lawyer then asked the court:

"Would you just indicate, just for clarity, that all the bonds that were purchased you found of (sic) [Jay's] property?" The court

responded, "Defendant's Exhibit two, those bonds that are in the name of Gene Vaughn belong to Jay Vaughn."1 Gene's counterclaim for conversion of the bonds. The clerk of court entered a form judgment order on July 20, 2001. Gene noted her appeal on August 7, 2001. The court denied

Thereafter, on September 14, 2001, at the request of Gene and over the objection of Jay, the circuit court (by a judge other than

Gene's Exhibit 2 consisted of copies of the United States Treasury Bonds titled in her name. -7-

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the one who presided over the tort action) stayed the divorce action, pending disposition of this appeal.

DISCUSSION
Gene only has appealed the circuit court's judgment against her on her counterclaim for conversion of the United States

Treasury Bonds titled in her name. She is not challenging on appeal the circuit court's judgment against her and in favor of Jay on his claims for conversion and breach of contract. The circuit court based its denial of Gene's counterclaim for conversion on its finding that the bonds titled in Gene's name are Jay's personal property. A conversion is "any distinct act of

ownership or dominion exerted by one person over the personal property of another in denial of his right or inconsistent with it." Interstate Ins. Co., v. Logan, 205 Md. 583, 588-89 (1954) (emphasis added). Accordingly, having found that the bonds belong

to Jay, the court necessarily could not find that he had converted them. are Gene argues that the circuit court's finding that the bonds personal property was clearly erroneous and was

Jay's

tantamount to a transfer of ownership of the bonds from one spouse to another, which the court was without power to do. Jay responds that the circuit court simply rejected Gene's testimony that the $35,000 he received and gave her when he redeemed his United States Treasury Bonds was a gift. Rather, it

accepted his testimony that he gave Gene that sum only temporarily -8-

and for the sole purpose of holding it for him to keep it away from his creditors. When asked in oral argument in this Court the significance, if any, of the circuit court's finding that the bonds are Jay's property, Jay's lawyer responded that the finding establishes that Jay is the owner of the bonds and they are his non-marital property; and that finding will have preclusive effect, under the doctrine of collateral estoppel, in the divorce action. For the reasons we shall explain, we are in partial agreement with Gene. We interpret Gene's argument about the power of the

circuit court to make a factual finding respecting ownership of the bonds as a challenge to the court's subject matter jurisdiction. We conclude that while it the court did abused not its lack subject matter by not

jurisdiction,

nevertheless

discretion

declining to exercise jurisdiction over this case during the pendency of the divorce action, i.e., by not staying the tort action until the divorce action was over. To explain our

reasoning, we first must set forth some general legal principles for context. The common law equity jurisdiction of the circuit court empowers it to decide property ownership disputes, including those between spouses. "[I]t has long been recognized that either a husband or wife can sue the other in equity for the protection of his or her property." Blumenthal v. Monumental Security Storage,

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Inc., 271 Md. 298, 302 (1974).

In a divorce action, however, the

circuit court does not sit in the exercise of its broad common law equity powers. Rather, its jurisdiction is limited and statutory; For

it has only the powers afforded it by the legislature.

example, while it is within the general equity power of the circuit court to transfer property from one person to another, including from one spouse to another, in a divorce action the circuit court "`has no power to transfer the property of either spouse to the other, or otherwise dispose of it,'" except as expressly permitted by statute. Gephard v. Gephard, 253 Md. 125, 129 (1969) (quoting Dougherty v. Dougherty, 187 Md. 21, 32 (1946)). Md. Code (1979 Repl. Vol., 2001 Supp.), section 8-202 of the Family Law Article (FL), authorizes the circuit court in a divorce case to determine ownership of property. Specifically, when a circuit court grants an annulment or a limited or absolute divorce, it "may resolve any dispute between the parties with respect to the ownership of personal property." FL

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