Monarc Construction, Inc. v. Aris Corp.

³⁸⁰ DAVIS, J. Appellant, Monarc Construction, Inc. (Monarc), appeals from the grant of the Motion To Dismiss of appellees, Aris Corporation, (Aris), J. Carlos Fuentes (Fuentes) and Amalia Fernandez a/k/a Amalia Fuentes (Fernandez) by the Circuit Court for Montgomery County. The genesis of this appeal is appellant’s claim for breach of a Settlement Agreement and Mutual Release (Settlement Agreement) entered into between the parties on January 31, 2005. On March 7, 2008, appellant filed suit in the Circuit Court for Montgomery County to recover damages, including attorneys’ fees and costs incurred in the prosecution and collection of a judgment entered against appellees, pursuant to the Settlement Agreement between the parties. On May 22, 2008, appellees filed a Motion to Dismiss, alleging that the Settlement Agreement merged into prior judgments obtained by appellant and that, as such, there was no legal basis for appellant’s claim to attorney’s fees.

After a July 10, 2008 hearing on the Motion to Dismiss, the circuit court (Rubin, J.) granted appellees’ Motion to Dismiss. Appellant filed a Motion to Alter or Amend Judgment, which was denied by the circuit court on August 13, 2008. Appellant filed this timely appeal and presents the following questions, 1 which we have condensed and reworded, for our review: ³⁸¹ I. Did the trial court err in dismissing appellant’s claim for attorney’s fees, when that claim was based on a provision for attorney’s fees contained in the Settlement Agreement that merged into a prior judgment of the court?

II

Did the trial court erroneously apply the doctrines of res judicata and collateral estoppel to bar appellant’s claim for attorney’s fees based on a judgment obtained in a Virginia state court? For the reasons that follow, we answer the first question in the negative and decline to address the merits of the second issue. Accordingly, we affirm the judgments of the trial court’s dismissal of appellant’s complaint. FACTUAL & PROCEDURAL BACKGROUND For purposes of our review of the trial court’s decision to grant appellees’ Motion to Dismiss, we shall set forth the facts as averred in appellant’s complaint.

On December 28, 2001, the parties entered into a subcontract agreement (the Subcontract), under which appellees agreed to perform work on the construction of the North Arcade and Spanish Ballroom at Glen Echo Park located in Montgomery County, Maryland. As a result of disputes between appellant and appellees, two suits were filed in the Circuit Court for Montgomery County. On January 31, 2005, the parties entered into a Settlement Agreement aimed at resolving their disputes. Accordingly, the parties agreed, inter alia, to dismiss the litigation.

The Settlement Agreement, however, did not signify the end of litigation between the parties. Appellant alleged that ap-pellees failed to perform their obligations under the Settle ³⁸² ment Agreement and sued appellees for breach of the Settlement Agreement. As a result, appellant obtained a default judgment against appellees on June 28, 2006, in the amount of $184,574.70. The June 28, 2006 order does not differentiate between compensatory damages and attorney’s fees.

Appellant concedes, however, that (1) the basis of the suit was appellees’ breach of the Settlement Agreement, (2) the judgment included attorney’s fees incurred by appellant through the date of judgment and (3) attorney’s fees were recoverable under Paragraph 15 of the Settlement Agreement, which provided: This Agreement shall be construed according to and governed by the laws of the State of Maryland, exclusive of any provisions relating to the conflicts of laws. The Parties agree and acknowledge that if any term or condition of this Agreement is breached or requires enforcement, any party may seek an appropriate remedy in a court of law. The Parties further agree and acknowledge that the Circuit Court for Montgomery County, Maryland is the correct venue and shall have sole jurisdiction to enforce this Agreement, and the Parties agree that they each submit to the personal jurisdiction of that Court as an express term and condition of this Agreement. The Parties agree and acknowledge that any party may seek the equitable remedy of specific performance of this Agreement, including any injunctions or restraining orders necessary to effectuate the terms and conditions of this Agreement.

In the event that any party is required to enforce the terms or conditions of this Agreement in court, the prevailing party shall recover all costs and expenses incurred in or arising from such action, including reasonable attorney’s fees. (Emphasis added). When satisfaction of the June 28, 2006 judgment by appel-lees was not forthcoming, appellant recorded the judgment in the Circuit Court for Fairfax County, Virginia, a county in which appellees Fuentes and Fernandez owned real property. Appellant then instituted suit against Fuentes and Fernandez in the Fairfax County Circuit Court, seeking an order from ³⁸³ that court decreeing the sale of the real property owned by Fuentes and Fernandez in order to satisfy the judgment obtained in Montgomery County.

Appellant also sought attorney’s fees in that Fairfax County litigation. On December 20, 2007, the Fairfax County Circuit Court issued a decree ordering a judicial sale of appellees’ property to satisfy appellant’s judgment lien. The initial decree, which included an award of attorney’s fees incurred by appellant in its effort to enforce the June 28, 2006 judgment, was later modified to remove the attorney’s fees award, upon the filing of appellees’ motion to vacate and/or reconsider the decree of sale in the Fairfax County Circuit Court arguing, inter alia, that (1) appellant had failed to provide notice in its complaint that it would seek attorney’s fees and (2) that the June 28, 2006 Montgomery County judgment did not provide for attorney’s fees. Appel-lees, on February 21, 2008, remitted payment in satisfaction of the judgments against them in the amount of $211,739.11, an amount which reflected the principal due on the judgment plus accrued interest, court costs and commissioners’ fees.

Thereafter, in an attempt to recover attorneys’ fees and related costs incurred by appellant after the date of the original June 28, 2006 Maryland judgment, appellant filed the instant suit in the Circuit Court for Montgomery County. On May 22, 2008, appellees responded by filing a Motion to Dismiss, which recited the procedural history relevant to the June 28, 2006 Montgomery County judgment and the December 20, 2007 Fairfax County judgment and asserted that, as a matter of law, the Settlement Agreement merged into the prior judgments, such that appellant’s suit on the Settlement Agreement could not be brought for purposes of recovering additional attorney’s fees. Appellant, in response, filed its opposition to the Motion to Dismiss. During the course of the hearing on appellees’ Motion to Dismiss on July 10, 2008, the trial court questioned the parties as to the rule of merger and the effect of the Fairfax County Circuit Court’s ruling on appellant’s attorney’s fees claim.

On July 10, 2008, by way of order entered on July 17, 2008, the circuit court granted appellees’ Motion to Dismiss. ³⁸⁴ Appellant subsequently filed a Motion to Alter or Amend Judgment, pursuant to Maryland Rule 2-534, focusing principally on what appellant perceived to be an issue raised sua sponte by the trial court, pertaining to the preclusive effect of the Virginia court’s ruling on appellant’s subsequent endeavor to recover attorney’s fees. On August 13, 2008, the circuit court denied appellant’s Motion to Alter or Amend Judgment. This timely appeal followed. Additional facts will be set forth, as necessary, throughout the remainder of our discussion.

STANDARD OF REVIEW Although appellant’s brief is not entirely clear on this point, appellant appears to attack both the circuit court’s July 10, 2008 order granting appellees’ Motion to Dismiss appellant’s complaint and the August 13, 2008 order denying its Motion to Alter or Amend Judgment. We review de novo a trial court’s granting of a motion to dismiss. Gasper v. Ruffin Hotel Corporation of Maryland, Inc., 183 Md.App. 211, 226 , 960 A.2d 1228 (2008), cert. granted, Ruffin Hotel v. Gasper, 408 Md. 149 , 968 A.2d 1064 (2009). In that review, “we must assume the truth of the well-pleaded factual allegations of the complaint, including the reasonable inferences that may be drawn from those allegations.” Adamson v. Correctional Medical Services, Inc., 359 Md. 238, 246 , 753 A.2d 501 (2000) (citations omitted).

Ultimately, “dismissal is proper only if the alleged facts and permissible inferences, so viewed, would, if proven, nonetheless fail to afford relief to the plaintiff.” In sum, because we must deem the facts to be true, our task is confined to determining whether the trial court was legally correct in its decision to dismiss. Adamson, 359 Md. at 246 , 753 A.2d 501 (internal citations omitted). By contrast, in an appeal, as in the case sub judice, in which a party files a Motion to Alter or Amend Judgment pursuant to Maryland Rule 2-534, we review an order denying ³⁸⁵ such motion under an abuse of discretion standard. Wells v. Wells, 168 Md.App. 382, 394 , 896 A.2d 1082 (2006) (citing, inter alia, Benson v. State, 389 Md. 615, 653 , 887 A.2d 525 (2005)); Prince George’s County v. Hartley, 150 Md.App. 581, 586 , 822 A.2d 537 (2003) (citations omitted).

Moreover, an appellate court will affirm a circuit court’s judgment on any ground adequately shown by the record, even one upon which the circuit court has not relied or one that the parties have not raised. Faulkner v. American Cas. Co., 85 Md.App. 595, 629 , 584 A.2d 734 (1991). Therefore, it is within our province to affirm the trial court if it reached the right result for the wrong reasons.

Id. Pope v. Board of Sch. Comm’rs, 106 Md.App. 578, 591 , 665 A.2d 713 (1995). With these standards of review in mind, we turn to our discussion of the issues.

ANALYSIS Appellant raises a multi-pronged challenge to the circuit court’s judgment. We address appellant’s arguments seria-tim. I Appellant first contends that the trial court “prematurely and impermissibly dismissed [appellant’s] complaint” because it failed to assume the truth of the facts pleaded in appellant’s complaint, specifically, (1) the existence of the Settlement Agreement between the parties that provided, in the event of a breach of the agreement, that the non-breaching party would be entitled to recover attorney’s fees expended in enforcing the Settlement Agreement and (2) that appellant had never been compensated for damages it sustained in the form of attorney’s fees, which were incurred as a result of appellees’ breach of the Settlement Agreement. Appellant further argues that contractual attorney’s fees provisions are ³⁸⁶ enforceable in Maryland.

Thus, according to appellant, the trial court was required to “assume as true [appellant’s] well-pleaded facts that the Settlement Agreement between the parties is valid and enforceable[.]” As appellant points out, the “grant of a motion to dismiss is proper if the complaint does not disclose, on its face, a legally sufficient cause of action.” Rossaki v. NUS Corp., 116 Md.App. 11, 18 , 695 A.2d 203 (1997) (quoting Hrehorovich v. Harbor Hospital, 93 Md.App. 772, 785 , 614 A.2d 1021 (1992)). While the trial court was required to assume the veracity of well-pleaded facts in appellant’s complaint in determining whether appellant stated a sufficient cause of action against appellees, the gravamen of appellees’ Motion to Dismiss, and of their argument on appeal, is that, even under the facts as pleaded by appellant, there was no legally enforceable contract binding appellees to the attorney’s fees provision, because that contract merged into the judgment appellant obtained against appellees. The transcript of the July 10, 2008 hearing on the Motion to Dismiss, relevant portions of which are excerpted infra, reveals that the trial court was predominantly concerned with this legal issue of merger, ie., whether the contractual provision regarding attorney’s fees contained in the Settlement Agreement survived the judgments obtained by appellant against appellees. It was the trial court’s role to determine whether the well-pleaded facts, assumed to be true, nonetheless failed legally to afford relief to appellant.

There is no indication that the trial court misunderstood or misapplied the standards governing its decision as to appellees’ Motion to Dismiss. Moreover, because the gravamen of appellees’ Motion to Dismiss was the effect of the rule of merger on appellant’s ability to assert a cause of action for breach of the Settlement Agreement, a fact evidenced by the degree to which the trial court focused on this issue at the July 10, 2008 hearing, we need not consider, in any detail, appellant’s arguments in its appellate brief asserting that Maryland has jurisdiction over this dispute, pursuant to the “forum-selection” clause in the ³⁸⁷ Settlement Agreement. 2 Appellees’ claim, in their Motion to Dismiss, that the court lacked personal jurisdiction over appel-lees, concerned itself not with the enforceability of the forum-selection clause, but rather, with the existence of the Settlement Agreement itself as a legally enforceable document, i.e., whether the Settlement Agreement had merged into the judgments obtained by appellant. This, too, is made clear by the focus of the court’s discussion at the July 10 hearing. II Appellant next argues that the trial court erred when it “prematurely dismissed [appellant’s] complaint on the grounds that [appellant] was attempting to re-litigate an issue previously adjudicated.” Appellant summarizes its position on this issue as follows: Although the trial court did not explicitly dismiss [appellant’s] Complaint on the grounds of either res judicata or collateral estoppel, such a result is necessarily inferred from the trial court’s statements made during the July 10, 2008 hearing that this was the trial court’s rationale.

Since the trial court did not elaborate on the legal basis for its July 10, 2008 ruling, [appellant] contends that the trial court’s error resulted from its careless application of the doctrine of res judicata and/or collateral estoppel in reaching its conclusion. Specifically, the trial court’s error originated from its inquiry concerning the fact that at one point during the Fairfax County Litigation, [appellant] requested, but ultimately did not recover its attorneys’ fees and related costs as part of the Decree of Sale. The mere fact that [appellant] requested, and was ultimately denied, the relief in a prior litigation, is by itself insufficient to warrant application of the doctrines of either res judicata or collateral estoppel. ³⁸⁸ Res judicata, or the doctrine of claim preclusion, “bars the relitigation of a claim if there is a final judgment in a previous litigation where the parties, the subject matter and causes of action are identical or substantially identical as to issues actually litigated and as to those which could have or should have been raised in the previous litigation.” The doctrine embodies three elements: (1) the parties in the present litigation are the same or in privity with the parties to the earlier litigation; (2) the claim presented in the current action is identical to that determined or that which could have been raised and determined in the prior litigation; and (3) there was a final judgment on the merits in the prior litigation. R & D 2001, LLC v. Rice, 402 Md. 648, 663 , 938 A.2d 839 (2008) (internal citations omitted).

Claim preclusion “encompasses the law of merger and bar.” Kent County Bd. of Educ. v. Bilbrough, 309 Md. 487, 490 , 525 A.2d 232 (1987) (quoting Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75 , 77 n. 1, 104 S.Ct. 892 , 79 L.Ed.2d 56 (1984)); see Hughes v. Insley, 155 Md.App. 608, 625-26 , 845 A.2d 1 (2003). The “somewhat allied doctrine” of collateral estoppel, or issue preclusion, looks to issues of fact or law that were actually decided in an earlier action, whether or not on the same claim.

We have articulated the doctrine thusly: “When an issue of fact or law is actually litigated and determined by a valid and final judgment, ... the determination is conclusive in a subsequent action between the parties, whether on the same or a different claim.” R & D 2001, 402 Md. at 663 , 938 A.2d 839 (citations omitted). We summarized the key points distinguishing these two doctrines: With this background, it is possible to construct a simple comparative checklist for determining which, if either, of the two doctrines is applicable. For either to apply, the second action must be between the same parties or those in privity with them. For direct estoppel to apply, it must be shown, ³⁸⁹ in addition, that the two causes of action are the same.

Collateral estoppel does not require that the causes of action be the same, but it applies only with respect to issues of fact actually determined in the earlier proceeding. John Crane, Inc. v. Puller, 169 Md.App. 1, 25 , 899 A.2d 879 (2006) (quoting Klein v. Whitehead, 40 Md.App. 1, 15 , 389 A.2d 374 (1978)). Based on our review of the Motion to Dismiss and the July 10, 2008 hearing transcript, we discern that neither the doctrine of res judicata nor the doctrine of collateral estoppel, as it pertains to the Virginia judgment, are to be accorded the weight that appellant assigns to them in its challenge to the trial court’s judgment. 3 Rather, the central issue was the availability vel non of a legally cognizable basis by which appellant could seek attorney’s fees for its attempts to enforce a judgment it obtained on June 28, 2006, against appellees in ³⁹⁰ the Circuit Court for Montgomery County, in the amount of $184,574.70, for breach of the Settlement Agreement. At the hearing, appellees argued that, under the doctrine of merger, appellant’s contractual claim for attorney’s fees merged into the judgment: [APPELLEES’ COUNSEL]: We’re here this afternoon, Your Honor, on [appellees’] motion to dismiss this case.

The Court had commented earlier in its docket on the interesting nature of res judicata. Well, this case involves its poor cousin, the doctrine of merger of judgment. THE COURT: It’s not a poor cousin. [APPELLEES’ COUNSEL]: This case, though, Your Honor, is the fifth case— THE COURT: It’s a good issue. [APPELLEES’ COUNSEL]: It is a good issue. This case is the fifth case between these parties.

All litigation has to come to an end, and I would suggest this is the place it should do so. The position, simply put, basing it on [United Book Press, Inc. v. Maryland Composition Co., Inc., 141 Md.App. 460 , 786 A.2d 1 (2001) ], [4] is that the claim has merged into the judgment. If we took [appellant’s] logic to its conclusion in this case, [appellant] would, if they were able to obtain a judgment in this case today, okay, or whenever it comes to fruition, and then go back across the river ... and ultimately collect on that judgment, would then be able to come back into Montgomery County, file another suit seeking attorney’s fees, go back across, get its judgment there, go back across the river, come back, file yet another suit. All litigation has to come to an end.

When the trial court asked appellees’ counsel if appellant was asking the court to “undo” the Virginia judgment, appel-lees’ counsel explained: I don’t believe they’re asking, that isn’t how they’re framing the suit. They’re framing the suit that they’re entitled, ³⁹¹ under the Settlement Agreement, to the attorney’s fees they expended in attempting to recover the judgment that this Court entered in 267181. And the position here, simply, Your Honor, is that any rights under that Settlement Agreement, any claim they had, merged into the judgment. Appellees’ counsel stressed that there was “no provision in the [Maryland Rules] providing for the collection of attorney’s fees for efforts in the enforcement of a judgment....” 5 The trial court asked appellant’s counsel to explain the basis for maintaining the suit in light of the merger argument and the concession of appellant’s counsel that he was aware of no case allowing for post-judgment collection of contractually-based attorney’s fees.

Appellees’ counsel then argued that the plain language of the provision for attorney’s fees in the Settlement Agreement restricted the scope of that provision to those fees arising from the action on the Settlement Agreement: [I]f we look to the agreement, if it is the agreement and solely the agreement that [appellant] relies upon in paragraph 15, the last sentence provides, “In the event that any party is required to enforce the terms or conditions of this agreement in court, the prevailing party shall recover all costs and expenses incurred for in or arising