Ochse v. Henry

CHARLES E. MOYLAN, JR., J. (Retired, Specially Assigned). This appeal is the latest chapter in a long running battle between the appellants, Steven J. Ochse and Shari Ochse (“the Ochses”), and their neighbors, the appellees, William 0. Henry and Jessie Henry (“the Henrys”), over title to residential real ⁴⁴⁸ property the Ochses purchased from the Henrys on December 14, 2001.

The dispute concerned a 30-foot wide strip of land traversing the property that, unbeknownst to the parties at the time of the Ochses’ purchase, had been conveyed to Dorchester County by a previous owner in 1919 for a county road that was never built. The Ochses filed a four-count complaint against the Henrys in the Circuit Court for Dorchester County on December 11, 2007, later adding Dorchester County as a defendant, seeking reformation of the deed, declaratory relief, injunctive relief, and damages for breach of contract, breach of special warranties, and fraud in the inducement. The Henrys filed a counterclaim seeking an award of attorney’s fees pursuant to a provision of the contract of sale that specifically survived merger with the deed. On August 4, 2008, the circuit court ruled on cross-motions for summary judgment, declaring that Dorchester County owned the 30-foot wide strip of land in fee simple.

After a bench trial, the court also found that the contract of sale merged into the deed and that there was no breach of special warranties of title. Pursuant to the fee-shifting provision that survived merger with the deed, the court entered an award in favor of the Henrys and against the Ochses in the amount of $100,020.00. The court denied all other relief. The Ochses appealed to this Court.

As a result of Court-ordered mediation, Dorchester County executed a quitclaim deed granting its interest in the 30-foot wide strip of land to the Ochses and was dismissed from the case. On December 21, 2011, this Court issued a reported opinion, Ochse v. Henry, 202 Md.App. 521 , 33 A.3d 480 (2011), cert. denied, 425 Md. 396 , 41 A.3d 571 (2012), reversing the circuit court’s grant of summary judgment and vacating the award of attorney’s fees in favor of the Henrys. We remanded for the circuit court to reconsider its award of attorney’s fees because, as a result of our holding that the Henrys had breached their contractual duty to convey marketable title to the Ochses, the Ochses became the prevailing party entitled to a fee award. ⁴⁴⁹ On remand, without a hearing, the circuit court awarded $215,710.60 in fees against the Henrys and in favor of the Ochses. This was substantially less than the $333,354.00 the Ochses had initially requested and the $355,731.78 the Ochses requested in a supplemental motion.

The Ochses have now appealed from the court’s fee award in their favor. We find no abuse of discretion in the court’s approach, but we shall vacate the award and remand for reconsideration in light of the Ochses’ April 27, 2012 supplemental motion for fees, which the circuit court appears to have overlooked. Facts and Proceedings Before we address the circuit court’s decision on remand, we must first examine our reported opinion that ordered the remand. 1 The Ochses did not achieve a landslide victory. On the contrary, we affirmed the circuit court on all but one legal issue.

We held that the Henrys did not breach a special covenant against encumbrances, 202 Md.App. at 532 , 33 A.3d at 487 , and that the Henrys did not breach a covenant of special warranty of title, id. at 535 , 33 A.3d at 489 . In order to sue on the contract of sale, which would ordinarily merge with the deed, the Ochses had to show either fraud or mistake. Although the Ochses claimed that evidence of the Henrys’ material misrepresentations was “overwhelming and consistent,” we affirmed as not clearly erroneous the circuit court’s factual finding that the Henrys did not fraudulently induce the Ochses to purchase the property because, though Mr. Henry knew that the area had been used as a road, he honestly believed that it was merely an old dirt road and had no reason to suspect that Dorchester County owned a segment of the property. Id. at 541 , 33 A.3d at 492 .

We also rejected the Ochses’ claim that the Henrys had been willfully blind to the possibility of a county road over the property. Id. at 542 , 33 A.3d at 492 . ⁴⁵⁰ We reversed only on the issue of mutual mistake of fact, an issue that had been so peripheral at trial that we felt it necessary to first address whether it had been preserved for our review. Id. at 542 , 33 A.3d at 492-93 . Although we decided this issue in favor of the Ochses, we also explained that it was, for purposes of resolving title to the property, moot.

The factual scenario in this case could not have occurred in the absence of fraud or mutual mistake. If the Henrys knew that there was a road across the property and did not disclose this to the Ochses, there was fraud. If neither party was aware of the road across the property, there was mutual mistake of material fact. Because the circuit court found the absence of fraud, there must have been mutual mistake.

Accordingly, the contract of sale did not merge into the deed, and the Ochses should have been able to sue on the contract. Nevertheless, as a result of the mediation this Court ordered, the Ochses received Dorchester County’s interest in the 30-foot wide strip across the Ochses’ parcel. The issue of title is thus resolved because the Ochses now own the entirety of the U.791 acre parcel in fee simple absolute. Id. at 543 , 33 A.3d at 493 (emphasis supplied).

For all practical purposes, the Ochses had been made whole and no longer had any claim of injury as of the time Dorchester County conveyed to them its interest in the driveway. From that point on, the Ochses possessed un-clouded fee simple title to the entire property. Success on the breach of contract claim against the Henrys—indeed, success on any aspect of the post-mediation appeal—was purely academic in all respects but one: it meant that the Ochses would qualify as the “prevailing party” and be entitled to an award of attorney’s fees pursuant to the fee-shifting provision in the contract of sale. As the circuit court had determined that the Henrys were the prevailing party and entered a fee award in their favor, we ⁴⁵¹ vacated that award and remanded for reconsideration.

We explained: In light of our holdings above, we conclude that the circuit court was acting within the terms of the contract and deed by awarding attorney’s fees. Regardless of whether the contract merged with the deed, the attorney’s fees provision of the contract survived. The apportionment of attorney’s fees, however, was in error. While the Henrys did not breach the special covenants because the defect in title was created by their predecessors in title, the Henrys had a duty to convey marketable title to the 4.791 acres in the contract, which survives merger with the deed on the basis of mutual mistake.

The Ochses now own the 4.791 acre parcel in fee simple, but at the time of the conveyance, the Henrys did not convey marketable title to the Ochses, breaching the contract. As such, we shall vacate the circuit court’s determination of attorney’s fees and remand for that court to reconsider its award of attorney’s fees in light of this opinion. Id. at 544 , 33 A.3d at 494 . In response to a motion for reconsideration, we further explained: [O]ur previously filed opinion in this matter has been clarified to indicate that the Ochses are able to sue on the underlying contract based on mutual mistake or misrepresentation, avoiding merger of the contract with the deed.

Because the contract contained an attorney’s fees provision, the Ochses are entitled to attorney’s fees. While title issues have been resolved, the circuit court must view the case as it appeared when initiated. Id. at 526 n. 2, 33 A.3d at 483 n. 2. On remand, the Ochses filed a motion requesting a fee award on January 24, 2012.

They sought a total of $333,354.00 and provided itemized billing records. They specified that, of that total, $176,525.37 was incurred “up to the time of trial.” This was similar to the fees incurred by both of the defendants through the trial, $174,143.20. ⁴⁵² On April 28, 2012, the Court of Appeals denied the Henrys’ petition for a writ of certiorari to review our decision in the first appeal, as well as the Ochses’ conditional cross-petition. On April 27, 2012, the Ochses filed a supplemental motion for fees that reflected the additional costs incurred in relation to the certiorari petition. The supplemental motion requested a revised total of $355,731.78.

On July 12, 2012, the circuit court ruled without a hearing 2 and explained its $215,710.60 award in a six-page opinion. Although the court confused our holding regarding breach of a special warranty against encumbrances with our holding regarding breach of contract and mutual mistake of fact, the court correctly noted that we “upheld [its] findings as to all counts except Count III.” 3 The court recognized the Ochses’ new status as the prevailing party and acknowledged our direction “to ‘view the case as it appeared when initiated’ and to disregard the subsequent resolution of title issues resulting from the court-ordered mediation.” The court followed our direction in Congressional Hotel Corp. v. Mervis Diamond Corp., 200 Md.App. 489, 499-500 , 28 ⁴⁵³ A.3d 75, 81-82 (2011) (citing Monmouth Meadows Homeowners Ass’n v. Hamilton, 416 Md. 325, 336-37 , 7 A.3d 1, 7-8 (2010)), to consider the eight factors specified in Maryland Lawyers’ Rule of Professional Conduct 1.5. The court also noted that it could consider “any other factor reasonably related to a fair award of attorneys’ fees.” Congressional Hotel, 200 Md.App. at 500 , 28 A.3d at 82 (quoting Monmouth Meadows, 416 Md. at 337-38 , 7 A.3d at 8 ). In the court’s estimation, a critical “other factor” was the limited nature of the Ochses’ appellate victory on the merits, as well as the limited relationship between this victory and the thrust of the Ochses’ efforts at trial.

The court explained: The Court, unlike an appointed arbitrator, has been involved in the dispute between the Ochses and the Henrys throughout the pendency of this litigation. The substantial majority of the time and effort put forth by the Ochses’ counsel during the pendency of the litigation in [the] trial court addressed Count IV, the claim against the Henrys for Fraud in the Inducement. In spite of the length of time spent litigating the fraud issue, this Court ultimately determined that there was a lack of any substantial evidence that the Henrys made fraudulent misrepresentations to the Ochses. It is a significant factor for this Court that the substantial majority of the time in trial and litigation effort put forth by Plaintiffs addressed the issue of willful fraud.

After a careful review of the record of hearings, trial, and the Court’s notes, this Court finds that only a small fraction of the effort expended towards litigation at the trial level focused on the issue of the breach of the special warranty against encumbrances[ 4 ] Because the Ochses had “prevailed] on some issues in [the] case but [did] not prevail on other issues,” the court decided that a “proportionate award” was appropriate. The court ⁴⁵⁴ distinguished this private contractual dispute from “civil rights and other statutory provisions which provide for fee-shifting to encourage certain forms of advocacy.” The court believed that awarding the total fees the Ochses had requested would not be “appropriate or desirable” because [i]f the Court were to blindly award all expended attorneys’ fees in a case when a party prevailed on any claim, such awards would serve as a financial incentive for attorneys to tack on and excessively litigate as many far-flung claims as possible, so long as they believed they could prevail on at least one claim in a case with a fee-shifting provision. (Emphasis in original). The court found a reasonable award to be “the entirety of the post-trial and appeal costs, as well as one-fourth of the attorney’s fees expended in trial.” Thus, from the Ochses’ initial request of $333,354.00, the court deducted $114,731.40 (its calculation of three fourths of the attorney’s fees through the trial), as well as $2,912.00 (which the court determined to be a double entry), to reach an award of $215,710.60.

The court made no mention of the Ochses’ April 27, 2012 supplemental motion for fees. On July 16, 2012, judgment was entered in favor of the Ochses and against the Henrys, jointly and severally, in the amount of $215,710.60. Discussion On this appeal, the Ochses contend that the circuit court erred in reducing the award they requested to reflect the fact that they ultimately prevailed on only one of the four counts of their amended complaint, which count was not the primary focus of their time and effort at trial. The Ochses maintain, relying on our opinion in Weichert Co. of Md. v. Faust, 191 Md.App. 1 , 989 A.2d 1227 (2010), aff'd on other grounds, 419 Md. 306 , 19 A.3d 393 (2011), that, instead of fashioning a proportionate award, the court should have viewed all of their claims as arising out of a common core of facts and granted the full amount they had requested.

They argue that their unsuccessful efforts to prove fraud at trial were necessary to their ultimate success on their breach of contract claim and, in ⁴⁵⁵ any event, all of their claims were based on the premise that the Henrys had breached the contract of sale by not conveying fee simple title to the whole property. The Ochses also contend that the circuit court failed to consider fees they incurred in mediating their appeal against Dorchester County and in successfully opposing the Henrys’ petition for a writ of certiorari, as reflected in their supplemental motion for fees. The Henrys contend that the circuit court properly awarded the Ochses the amount of fees that it deemed reasonable. The Henrys agree that the Ochses were successful in the litigation, insofar as they achieved their goal “of having the driveway become a ‘dead end’ for their use only.” Nevertheless, the Henrys maintain that, ever since the 1919 deed was discovered and disclosed to the Ochses on March 28, 2008, litigation against them was futile as far as that practical objective was concerned because Dorchester County was the only party that “could fix the driveway problem.” The Henrys point to at least $47,500 in claimed attorney’s fees that, in their view, could be attributed strictly to the Ochses’ fight against the County.

The Henrys contend that the circuit court properly entered a “proportionate award” because the “common core of facts” doctrine does not apply to contractual fee-shifting provisions concerning private disputes. They assert that the doctrine is limited to statutory fee-shifting provisions implicating some broader social policy, such as civil rights cases, where the doctrine provides “an added incentive to attorneys to take socially important cases that might otherwise be undesirable.” On remand from our December 21, 2011 decision, the circuit court had no discretion as to whether to grant an award or whether to grant an award to the Ochses as the prevailing party. Its only area of discretion was with regard to the amount of the award the Ochses would receive. Nevertheless, that discretion is wide.

An award of attorney’s fees will not be disturbed unless the court “exercised [its] discretion arbitrarily or [its] judgment was clearly wrong.” Danziger v. Danziger, 208 Md. 469, 475 , 118 A.2d 653, 656 (1955). ⁴⁵⁶ See also Atlantic Contracting & Material Co., Inc. v. Ulico Cas. Co., 380 Md. 285, 316 , 844 A.2d 460, 478 (2004). The Court of Appeals has drawn a firm line between contractual fee-shifting cases, which arise out of a private agreement, and statutory fee-shifting cases, which involve some overriding public policy. Statutory fee awards generally make use of the lodestar approach, by which the court simply multiplies the time an attorney spent on a case by a reasonable hourly rate and then adjusts the result up or down to arrive at a reasonable award based on the circumstances of the case and after considering factors such as the twelve enumerated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974).

See Friolo v. Frankel, 373 Md. 501, 528-30 , 819 A.2d 354, 370-71 (2003). Although statutory fee-shifting provisions “were not designed as a form of economic relief to improve the financial lot of attorneys, nor were they intended to replicate exactly the fee an attorney could earn through a private fee arrangement with his client,” they are intended “to enable private parties to obtain legal help in seeking redress for injuries resulting from the actual or threatened violation of specific ... laws” by assuring an attorney “that he will be paid a ‘reasonable fee.’ ” Friolo, 373 Md. at 526 , 819 A.2d at 369 (quoting Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546, 565 , 106 S.Ct. 3088, 3098 , 92 L.Ed.2d 439 (1986)). In other words, statutory fee-shifting provisions are designed to encourage attorneys to take on cases that might otherwise be financially undesirable but which serve some greater, legislatively-established, social purpose. In contractual fee-shifting cases, the Court of Appeals has rejected the lodestar approach in favor of an approach based on Maryland Lawyers’ Rule of Professional Conduct 1.5, 5 in part to discourage awards that bear no ⁴⁵⁷ rational relationship to the work a case reasonably requires of an attorney or the amount at issue in the litigation. [U]nlike the lodestar method, Rule 1.5 does not carry with it the notion that the importance of the right vindicated will justify an expenditure of attorney time that is hugely disproportionate to the dollar amount at issue in the case.

Indeed, when applying Rule 1.5, trial judges should consider the amount of the fee award in relation to the principal amount in litigation, and this may result in a downward adjustment. Although fee awards may approach or even exceed the amount at issue, the relative size of the award is something to be evaluated. Monmouth Meadows Homeowners Ass’n v. Hamilton, 416 Md. 325, 337 , 7 A.3d 1, 8 (2010) (emphasis supplied). This Court has reiterated that, in determining reasonableness, a court should be guided by the factors set forth in Rule 1.5, but also “may consider, in its discretion, any other factor reasonably related to a fair award of attorneys’ fees,” and “should consider the amount of the fee award in relation to the principal amount in litigation.” Congressional Hotel Corp. v. Mervis Diamond Corp., 200 Md.App. 489, 500 , 28 A.3d 75, 82 (2011) (emphasis supplied).

Although the factors considered under the lodestar and Rule 1.5 approaches are similar, the underlying policy differ ⁴⁵⁸ enees are clear. As we further explained in Congressional Hotel: A contractual fee-shifting provision is designed by the parties, not by the legislature. Such a provision is simply an agreement between private parties to pay the attorneys’ fees and costs reasonably incurred in the course of litigation. Thus, it usually serves no larger public purpose than the interests of the parties.

And, therefore, while an award of attorneys’ fees and costs in a contractual fee-shifting case “may approach or even exceed the amount at issue,” the “relative size of the award” takes on added significance in such a case because the contractual provision lacks the “public policy underpinnings” of a statutory fee-shifting provision. 200 Md.App. at 505 , 28 A.3d at 84-85 . Above all, a court’s duty in fashioning an award pursuant to a contract is to determine the reasonableness of a party’s request. As the Court of Appeals explained in Myers v. Kayhoe: Contract provisions providing for awards of attorney’s fees to the prevailing party in litigation under the contract generally are valid and enforceable in Maryland. Even in the absence of a contract term limiting recovery to reasonable fees, trial courts are required to read such a term into the contract and examine the prevailing party’s fee request for reasonableness.

The party requesting fees has the burden of providing the court with the necessary information to determine the reasonableness of its request. The trial court’s determination of the reasonableness of attorney’s fees is a factual determination within the sound discretion of the court, and will not be overturned unless clearly erroneous. 391 Md. 188, 207 , 892 A.2d 520, 532 (2006) (emphasis supplied). “In order to apply Rule 1.5 to a fee award, a court does not need to evaluate each factor separately, and it need not necessarily hold an evidentiary hearing to determine an appropriate award.” SunTrust Bank v. Goldman, 201 Md.App. 390 , ⁴⁵⁹ 402, 29 A.3d 724, 730 (2011). See also CR-RSC Tower I, LLC v. RSC Tower I, LLC, 429 Md. 387, 465 , 56 A.3d 170, 217 (2012). 6 The Ochses’ main contention is that the circuit court abused its discretion by granting a “proportionate award” instead of the full amount they requested. They maintain that they were entitled to the full amount, even though they failed on all but one of the claims they asserted, because all of their claims arose out of a common core of facts, and thus fees expended on successful and unsuccessful claims should have been combined rather than separated.

We see no error or abuse of discretion in the circuit court’s approach. The “common core of facts” doctrine exists as a bridge that allows a court to award a fully compensatory fee where an attorney may not have prevailed on each and every claim or defense but still has achieved excellent results. See Friolo, 373 Md. at 522-25 , 819 A.2d at 367-69 (discussing Hensley v. Eckerhart, 461 U.S. 424 , 103 S.Ct. 1933 , 76 L.Ed.2d 40 (1983)). It solves the problem of courts not being able to compensate attorneys for fees that cannot easily be allocated between fee-shifting claims and factually or legally related non-fee-shifting claims.

The doctrine removes the requirement of allocation and treats as one claims that are based on a common core of facts or related legal theories. In its purest form, it allows an award of not only those fees attributable to fee-shifting claims and fees common to fee-shifting and non-fee-shifting claims, but rather all fees attributable to fee-shifting and factually related non-fee-shifting claims. See Weichert, 191 Md.App. at 18 , 989 A.2d at 1237 (“If the court finds that two claims are factually related, the doctrine not only awards the costs common to all claims, but also awards costs that arise solely by virtue of the non-fee-shifting claim.”). ⁴⁶⁰ Although the common core of facts doctrine may be applied to both contractual and statutory fee-shifting, 7 in the court’s discretion, it does not rule out the proportionate award the circuit court fashioned in this case. The doctrine is merely one part of one factor a court should consider (the results obtained) when determining the reasonableness of a fee award, as part of the totality of the circumstances, when a prevailing party prevails on less than all of the asserted claims for relief.

It enlarges (rather than reduces) the wide discretion courts enjoy in fashioning reasonable fee awards pursuant to contractual fee-shifting provisions. The common core of facts doctrine derives from the Supreme Court’s decision in Hensley v. Eckerhart, 461 U.S. 424 , 103 S.Ct. 1933 , 76 L.Ed.2d 40 (1983). That case involved an award of attorney’s fees to a prevailing plaintiff in federal civil rights litigation pursuant to 42 U.S.C. § 1988 . Although ⁴⁶¹ Hensley was a statutory fee-shifting case, its reasoning is compatible with a contractual fee-shifting analysis.

The “results obtained” are a major factor common to both approaches. See Rule 1.5(a)(4). The issue before the Court in Hensley was whether, pursuant to 42 U.S.C. § 1988 , “a partially prevailing plaintiff may recover an attorney’s fee for legal services on unsuccessful claims.” Id. at 426, 103 S.Ct. at 1935-36 . At the outset, the Court noted that, once a plaintiff establishes that he is entitled to a fee award, “[i]t remains for the [trial] court to determine what fee is ‘reasonable.’ ” Id. at 433 , 103 S.Ct. at 1939 .

In the statutory fee-shifting reasonableness inquiry, the lodestar method is merely the starting point. The court must consider the award in the context of the results the plaintiff obtained. The product of reasonable hours times a reasonable rate does not end the inquiry. There remain other considerations that may lead the [trial] court to adjust the fee upward or downward, including the important factor of the “results obtained.” This factor is particularly crucial where a plaintiff is deemed “prevailing” even though he succeeded on only some of his claims for relief.

In this situation two questions must be addressed. First, did the plaintiff fail to prevail on claims that were unrelated to the claims on which he succeeded? Second, did the plaintiff achieve a level of success that makes the hours reasonably expended a satisfactory basis for making a fee award? Id. at 434 , 103 S.Ct. at 1940 (emphasis supplied).

Even though they may be part of the same lawsuit, services expended on “distinctly different claims for relief that are based on different facts and legal theories” than the successful claim must be excluded from a fee award. Id. at 434-35 , 103 S.Ct. at 1940 . On the other hand, where a plaintiff presents multiple claims “involv[ing] a common core of facts or ... based on related