Kramer v. Emche

GETTY, Judge. This is an appeal by Richard E. Kramer and Harold E. Mirsky from several rulings and an Order of Judgment by the Circuit Court for Baltimore City regarding an unrecorded mortgage and a “General Release of All Claims and Covenant Not to Sue.” Background On December 6, 1980, John and Anna Emche (appellees herein) entered into an Agreement of Sale to sell their home, located on Northern Parkway in Baltimore City, to Van and Lois Durrer for $86,000.00. The Agreement also contained a financing clause which provided that the Durrers would execute a first mortgage to the Emches in the amount of $60,000. The settlement for the property took place on February 27, 1981, at the office of P. Paul Cocoros, a Baltimore attorney.

At that time, the Emches executed and acknowledged a deed conveying the property to the Durrers. The Durrers, in turn, executed and acknowledged a mortgage on the property in the principal amount of $60,000 plus 14% per annum interest. Cocoros retained the mortgage for recording and, because the Durrers did not have sufficient funds to discharge the Emches’ existing mortgage or to pay their share of the real estate taxes, recording fee and transfer costs, Cocoros also retained the deed. Possession of the property was nevertheless surrendered to the Durrers at the conclusion of the settlement. ³² In March of 1981, the Emches were notified by the First American Bank of Maryland that their existing mortgage had not yet been paid off.

Mr. Emche phoned Cocoros to determine why the mortgage had not been discharged and Cocoros explained that the Durrers had not yet delivered the necessary funds for payment. At this time the Emches engaged the services of Ms. Dorothy Beaman, another attorney, to look into the matter. In June of 1981, the First American Bank notified the Emches that the Durrers had discharged the mortgage held by that bank. Mr. Emche immediately filed the release of this mortgage and sent a copy of the release to Cocoros, requesting that he file the mortgage held by the Emches.

This request was ignored. Over the next year the Emches and Ms. Beaman, their attorney, communicated frequently with Cocoros regarding the filing of the mortgage. Cocoros initially blamed his failure to record the mortgage on the fact that Mr. Durrer’s check was no good, but in April of 1981 he notified Ms. Beaman that Mr. Durrer had made arrangements to continue to make the monthly payments. In July of 1981, and again in September of that year, inquiries by the Emches disclosed that their mortgage was still unrecorded.

In November of 1981, Ms. Beaman wrote to Mr. Cocoros and requested that he send the deed and mortgage to her for recording. Cocoros responded that he was still attempting to obtain the funds to record the mortgage. Ms. Beaman made several other requests that Cocoros forward the deed and mortgage to her, but to no avail. Throughout this year long period, the Durrers made four quarterly interest payments to the Emches pursuant to the mortgage.

The fourth payment was the last one the Emches would ever receive from the Durrers. In March of 1982, the Durrers executed two deeds of trust to Richard Kramer and Howard Mirsky (appellants herein), as trustees, on the Northern Parkway property. The deeds of trust were given to secure repayment of ³³ several outstanding loans incurred by the Durrers. Mr. Durrer phoned Cocoros and advised him that a messenger would pick up the deed and mortgage to deliver them to Richard Kramer.

Cocoros then instructed his secretary to turn the documents over to Mr. Durrer’s messenger, and she apparently did so. 1 Afterwards, Cdcoros stated that he phoned Mr. Kramer’s office on several occasions but apparently never spoke to him directly. The first deed of trust was dated March 12,1982, and was given to secure payment of $30,000, together with interest of 24% per annum to Michael and Stephen Levitt, the beneficiaries named in the deed. The second deed was dated March 17, 1982, and was given to secure the repayment of $38,500 plus interest at the rate of 24% per annum, to Arnold and Jane Finkelstein. For both of these transactions Mirsky served as mortgage broker, an occupation in which he was engaged for six or seven years prior to trial.

During this time, Mirsky and Kramer shared office space and frequently worked together in real estate transactions. At trial in the Circuit Court for Baltimore City, Mirsky testified that the procedure he followed in processing the March 1982, loans was the same procedure he followed in making other business loans. Mirsky stated that he would first appraise the property to assure himself that there was sufficient equity to cover the loan. He would then make two title searches: the first to determine the existence of any liens on the property; and the second, made after the filing of the lien, to verify that the mortgage or deed of trust securing the loan was reflected in the record.

Mirsky recalled that in the Durrers’ case, the property was appraised at $90,000 which indicated sufficient equity for the contemplated loans. When Mirsky ordered a title report, however, he discovered that the Emches, not the Durrers, were the record owners of the property. When ³⁴ Mirsky confronted Mr. Durrer, Burrer explained that while he was the owner of the property, the deed reflecting this fact had not yet been recorded because he did not have the money to pay the property and transfer taxes. Mirsky then advanced his own money to pay the taxes, and the loans went through.

The deed, the Levitt deed of trust and the Finkelstein deed of trust were all recorded on March 17, 1982. Two weeks after the Levitt and Finkelstein deeds of trust were recorded, on April 15, 1982, Cocoros recorded the Emche mortgage. When the Emches discovered that their mortgage was in a subordinate position to the previously recorded deeds of trust, they filed the present suit against Kramer, Mirsky, Cocoros and the Durrers seeking a declaratory judgment, injunctive relief and damages.' At trial, the Emches proceeded against Kramer and Mirsky seeking to have their mortgage placed as a first lien against the property. The Durrers failed to appear and judgment by default was entered against them.

The declaration, as to Cocoros and the Durrers, sought compensatory and punitive damages for negligence, fraud and conspiracy; breach of fiduciary duty was also alleged as to Cocoros. Prior to commencement of trial the Emches reached a settlement with respect to all of the claims against Cocoros. The terms of the settlement were embodied in an eight page document entitled “General Release of All Claims and Covenant Not to Sue,” which recited a monetary consideration of $80,000 paid by Cocoros to the Emches. The Release further specifies that the parties “have further agreed to allocate the $80,000 portion of the consideration given by [Cocoros] to [the Emches] for this Release as follows.” What follows is a recitation of five separate categories of monetary allocation, the sum of which equals $80,000: (1) $35,000 for attorneys fees said to have been incurred by the Emches in pursuing their claims; (2) $3,150 for “expenses of litigation” apart from the attorneys fees; ³⁵ (3) $39,000 for the Emches’ agreement to forebear to press a claim for punitive damages; (4) $1,000 for the Emches’ agreement to forebear from complaining to the Attorney Grievance Commission; (5) $1,850 for the Emches’ agreement not to take the case to the media.

The document further specifies the following: The Party of the First Part and the Party of the Second Part agree that this Release and Covenant not to Sue is not to be construed as and is not intended to be a joint tort-feasor release. The Party of the First Part and the Party of the Second Part further agree that this Release and Covenant not to Sue shall in no way release Richard E. Kramer, Howard E. Mirsky, Van C. Durrer or Lois E. Durrer from any claim against one or all of them by the Party of the First Part whether arising out of the Lawsuit or not. * * * * * * It is the express and clear understanding of the parties hereto that this Release is intended only to release the Party of the Second Part based upon the consideration set forth herein and the Covenant not to pursue the causes of action set forth herein against the Party of the Second Part, hereby expressly reserving all rights the Party of the First Part has against all other parties to the Lawsuit other than the Party of the Second Part. Also prior to commencement of trial, the deeds of trust on the Durrer property were foreclosed and the proceeds from the sale of the property, totaling some $91,851.95 were deposited into escrow accounts pending the outcome of the case. The case was tried on October 8, 9, and 10,1984.

Cocoros immediately submitted to the court a request for Order of Dismissal as to Cocoros, based on the Emches’ Release of All Claims against him. Kramer and Mirsky thereupon moved that the dismissal not be granted or, if granted, that all parties be dismissed or, failing that, that a continuance ³⁶ be granted to enable Kramer and Mirsky to file a claim of their own against Cocoros and the Emches. The court denied all of the motions requested by Kramer and Mirsky and granted an Order of Dismissal as to Cocoros. The court also entered a judgment by default as to the Durrers, who had failed to appear at trial.

The case then proceeded against Kramer and Mirsky alone. On October 23, 1984, after reviewing memoranda which he had asked counsel to file, the trial judge delivered his decision from the bench. The court then issued the following Order for Judgment: Upon a Trial and having considered Trial Memorandum by counsel and arguments thereon, it is by the Circuit Court of Maryland for Baltimore City this 30th day of October, 1984 Ordered, that [the Emches’] Mortgage be and is hereby placed in first position as to the property known as 10 West Northern Parkway, as a first lien thereon. Further Ordered, that the total amount due and owing by [Kramer, Mirsky and the Durrers] to [the Emches] to be released and distributed is $83,247.00, plus per diem interest subsequent to October 29, 1984 at the rate of $31.50 per day.

Further Ordered, that $83,247.00 of the net proceeds from the foreclosure sale of the property known as 10 West Northern Parkway, Baltimore, Maryland 21220, which have been placed in two escrow savings accounts be released and distributed by David R. Cohan and J. Fred Cohen, as the Escrow Agents for said funds as follows: (a) $60,000.00 to [the Emches] for the principal due on the property known as 10 W. Northern Parkway. (b) Interest due on the unpaid remaining balance at 14% per annum for a total of $21,882.00 through October 29, 1984, plus per diem interest subsequent to October 29, 1984 at the rate of $31.50 per day. ³⁷ (c) Late fees as provided in the Emche Mortgage (Clause 6) in the amount of $1,365.00. Kramer and Mirsky now appeal to this Court from the trial court’s rulings as to the Cocoros dismissal and Order of Judgment. The Dismissal Based on the Release Kramer and Mirsky argue that the trial court erred “in giving literal effect to the ‘allocations’ of consideration, thus allowing double recovery of the mortgage debt.” We agree in part.

Under Maryland law, the intent of the parties to an instrument of release dictates the interpretation to be given to the instrument as well as its scope and effect. Federal Land Bank of Baltimore, Inc. v. Esham, 43 Md.App. 446, 467 , 406 A.2d 928 (1979); Shriver v. Carlin & Fulton Co., 155 Md. 51 , 141 A. 434 (1928). See Wheaton Triangle Lanes, Inc. v. Rinaldi, 236 Md. 525 , 204 A.2d 537 (1964); Roe v. Citizens National Bank, 32 Md.App. 1 , 358 A.2d 267 (1976). As stated in Roe, 32 Md.App. at 6 , 358 A.2d 267 : “In order to give effect to the manifest intention of the parties as nearly as possible, the courts have ... held that a release with ... a reservation [of rights against other joint obligors] is in legal effect no release at all, but merely a covenant not to sue.

So in the case of joint and several liabilities, if the creditor while discharging the several liability expressly reserves the joint right, it is not discharged. Likewise, the joint liability may be released with a reservation of the several right. A right against other debtors is held to be reserved in any case where it appears from the terms of the release that it was not intended or expected that all the debtors should be released.” Kramer and Mirsky do not attempt to argue that the intention of the parties to the Release in the present case is unclear. The Release clearly and repeatedly indicates that it is to be given effect only as to Cocoros, and is not to ³⁸ affect any rights the Emches might have as against any other parties.

Kramer and Mirsky contend, however, that the Cocoros Release contravenes the one wrong-one recovery rule which precludes a party from double recovery for a single injury. See Grantham v. Prince George’s County, 251 Md. 28 , 246 A.2d 548 (1968); Cox v. Maryland Railways Co., 126 Md. 300 , 95 A. 43 (1915). Generally, when two or more parties have united to cause tortious harm to another the “same injury” to the individual is obvious, as for example where two people are engaged in a fight and a third person joins in on behalf of one of the combatants. There is but one fight and one compensable injury resulting therefrom.

The classic example is where the negligence of two drivers combines and results in injuries to a passenger in one of the vehicles. The problem becomes more