United Book Press, Inc. v. Maryland Composition Co.

JAMES R. EYLER, J. United Book Press, Inc., appellant, brought suit in the Circuit Court for Baltimore County against Maryland Composition Co., Inc., appellee, alleging breach of contract and seeking indemnity. Appellant appeals from a judgment entered in favor of appellee after the circuit court, at trial, granted appellee’s motion for judgment at the close of appellant’s case. In addition to general principles of contract law, including the duty to mitigate damages, the parties have urged consideration of judicial estoppel, equitable estoppel, waiver, merger, accord and satisfaction, and the preclusive effect of a confessed judgment. For reasons that follow, we shall reverse the judgment of the circuit court and remand for a new trial.

Factual Background Because we are reviewing the grant of a motion for judgment rendered at the close of appellant’s case, we shall summarize the evidence introduced by appellant. Appellant was in the business of manufacturing books. It entered into a contract with Strathmore Directories, Ltd. (Strathmore), to print a “Who’s Who” directory. Strathmore provided appellant with a computer disc containing the text to be included in the book.

Appellant entered into a contract with appellee, a typesetter, to typeset the text. Appellant gave the disc to appellee. Appellant presented testimony that appellee was obligated to proof read its work. Appellee omitted the “K” section from the type that was set, and the error was not discovered until after 4,962 books had been printed and delivered to Strathmore.

Strathmore learned of the error from one of its customers. It advised appellant, and appellant advised appellee. According to testimony at trial, appellee acknowledged that the “K” section had ⁴⁶⁵ been deleted from its typeset and explained that it occurred when the disc was converted to a format that was compatible with its type setting system. Strathmore refused to pay for the books.

Appellant attempted to correct the error in part by providing a limited number of the missing “K” sections to be placed in some of the books. This was done at a cost of $3,000.00. Appellant contacted appellee and asked appellee to split the cost. Ap-pellee agreed and, subject to a $1,500.00 credit, appellant paid appellee’s bill.

Strathmore continued to refuse to pay its bill. On June 30, 1999, appellant filed a complaint in the Circuit Court for Baltimore County against Strathmore. Appellant sought a judgment by confession based on (1) the contract between it and Strathmore which contained a confessed judgment clause; and (2) a supporting affidavit. Appellant alleged in the complaint that, pursuant to the contract between it and Strathmore, appellant provided page proofs to Strathmore for approval prior to printing the books, and the books as printed conformed to the page proofs as approved by Strathmore.

Appellant further alleged that it delivered 4,962 books to Strathmore and issued invoices in the total amount of $97,667.64. Appellant asserted that Strathmore refused to pay the invoices based upon the absence of the “K” section in the books even though that section was absent from the page proofs that had been approved by Strathmore. The attached affidavit, in pertinent part, stated that the amounts claimed were “justly due and payable.” On June 30, 1999, a confessed judgment was entered in favor of appellant in the amount of $97,667.64, attorneys fees in the amount of $14,650.15, and costs. On July 13, 1999, a notice of confessed judgment was served on Strathmore.

The notice advised Strathmore, a nonresident, that pursuant to Rules 2-611(c) and 2-321(b)(l), it had 60 days from the date of service to file a motion to open, modify, or vacate the judgment. On August 26, 1999, within that 60 day period, appellant entered into a settlement with Strathmore. Pursuant to the settlement, Strathmore paid appellant $75,000.00 and the ⁴⁶⁶ parties executed a mutual general release. Appellant released Strathmore from any further liability but did not release any other entities.

The confessed judgment was not vacated, and there was no motion filed seeking to vacate it. The judgment was not entered satisfied on the record. On July 6,1999, appellant filed a complaint against appellee in the case now before us. The complaint alleged breach of contract and indemnity.

In pertinent part, appellant alleged that appellee had breached its contract with appellant by omitting the “K” section from the directory, and as a result, Strathmore had refused to pay for the books. Appellant also alleged that “if it is found that [appellant] breached its contract with Strathmore, then [appellee’s] breach of contract proximately caused [appellant’s] breach”. Appellant sought damages in the amount of $97,667.64, attorneys fees, interest, and costs. On January 4, 2001, the case was tried non jury.

At trial, appellant claimed damages in the amount of $22,667.64, its invoice amount less the $75,000.00 received pursuant to the Strathmore settlement. At the close of appellant’s case, the circuit court granted appellee’s motion for judgment. Because we are called upon to apply the doctrines argued by the parties to the oral opinion rendered by the trial court, we shall quote liberally from the trial court’s opinion. In pertinent part, the court stated: “So there is a contract and I think this case can be decided under simple contract law.

United Book Press had a contract with Strathmore. The contract said if United Book Press publishes this book Strathmore will pay $97,000. In fact, United Book Press, their position is, we published the book. Strathmore didn’t pay for it so they confessed judgment.

They obtained a judgment against Strathmore for not paying the $97,000 that they agreed to pay to publish the book. It’s alleged by the Plaintiff that Strathmore’s position was, we don’t have to pay you for this book, because it doesn’t have a K section in it. Sounds like a pretty good ⁴⁶⁷ defense. What good is a book that leaves out — I can’t imagine anybody, can’t imagine too many people buying a book that has that deficiency in it.

But, United Book says, that would have been a good defense and you may not have had to pay us the $97,000 except for the fact that you are the one that said, we will pay for this published book, even without the K section we will pay for this book that you intend to publish because nobody took the time at Strath-more to review it, to look at it, to be able to say, no, we are not going to pay for that book because that’s without a K section. We waive the right to do that. We are not going to check the book blues. We are not going to look at that.

We are going to approve, whatever you publish we are paying for. [T]hey pay for it anyway, $75,000, because that’s probably a real good argument they — assessment, you know, we blew it. We didn’t look at the book blues, we didn’t tell United Book Press, wait a minute, don’t print 4900 copies of this thing, it’s defective. We are not paying for it. So, in fact, United Book Press had a right and did, in fact, get a judgment against Strathmore for the $97,000 plus attorney’s fees and interest.

United Book Press had a right to collect, to execute on that judgment from Strathmore. They choose [sic] not to do it. They chose to accept a settlement of the 97,000 plus 14,000. They chose to compromise what they were entitled to.

That choice can’t serve as a basis of liability against Maryland Composition. Maryland Composition — and, in fact, what’s relevant it seems to me, is even after United Book Press knew that Maryland Composition didn’t completely fulfill their contract with United Book Press, apparently United Book Press thought it was substantial performance because they paid them for it. That, in fact, United Book Press paid the contract that they had with Maryland Composition so they must have thought ⁴⁶⁸ it was substantial performance. It seems to me that the damages that United Book Press sustained are solely attributable to its decision to accept less than it was entitled to accept or get from Strathmore.

Well, that can’t be assessed against Maryland Composition, because United Book Press makes that decision to compromise its claim and take less money than it’s entitled to. If, in fact, they had taken what they were entitled to from Strathmore, if they had executed on their judgment that was entered in this court, that was never struck, they would have gotten everything that they were entitled to. Why should Maryland Composition pay for that? As a matter of contract law it seems to me that as a matter of law they are not obligated, they are not liable for that amount of money.

Now, if United Book Press feels that Maryland or, that Maryland Composition didn’t fulfill its contract with them, and I have already stated, one can’t understand why they would then pay them for the contract.” Discussion The circuit court, in granting appellee’s motion for judgment, expressly relied on general principles of contract law as the conceptual basis for its decision. It did not expressly refer to the other doctrines argued by the parties on appeal. Appellant’s position may be summarized as follows. First, there was uncontradicted evidence that appellee breached its contract with appellant.

Second, the confessed judgment against Strathmore was not final when entered, and appellant settled its claim with Strathmore before the judgment became final; thus, the confessed judgment had no preclusive effect. Third, appellant’s settlement with Strathmore represented a reasonable mitigation of damages with respect to its claim against appellee. Appellee asserts that the circuit court judgment should be affirmed based on theories of judicial estoppel, waiver, equitable estoppel, merger, and accord and satisfaction. ⁴⁶⁹ We shall shortly begin our analysis by addressing the theories advanced by appellee to support the circuit court’s ruling. First, however, we point out an issue that is not before us.

After a confessed judgment was entered in favor of appellant against Strathmore, the parties entered into a settlement and executed a mutual release. No order of satisfaction was filed in that case, however, and there was no docket entry marking the case satisfied. Consequently, we do not have before us the effect of such an entry which would give rise to the question of whether a party could go behind that entry and attempt to establish that the judgment was only partially and not completely satisfied. See, e.g., Franzen v. Dubinok, 290 Md. 65 , 427 A.2d 1002 (1981).

What we do have before us is the effect of a confessed judgment that was never vacated and was not marked satisfied. Judicial Estoppel Appellee contends appellant sought and obtained a judgment against Strathmore for the full amount of the damages claimed on the basis of an assertion, under oath, that Strath-more was solely responsible for the alleged loss. Appellee concludes that appellant is judicially estopped from now asserting a right to collect an amount from appellee which appellant was legally entitled to collect from Strathmore. Appellee relies on the following cases, which we shall discuss.

In Edes v. Garey, 46 Md. 24 (1877), residuary legatees filed a complaint in equity to enforce the personal liability of sureties on a testamentary bond, based on alleged wrongdoing by the executor. In a prior proceeding, the plaintiffs had alleged facts totally inconsistent with the wrongdoing and totally inconsistent with any alleged loss. Edes, 46 Md. at 41 . The Court found plaintiffs were estopped from denying those facts.

Id. at 42 . In Hall v. McCann, 51 Md. 845 (1879), there was an attack on a lien securing an indebtedness on the ground that the indebtedness had been paid. The Court held that it would not act because the claimant had testified in another proceeding that the plaintiff had no interest in the lien. Hall, 51 Md. at 351. ⁴⁷⁰ The Court of Appeals, in Van Royen v. Lacey, 266 Md. 649 , 296 A.2d 426 (1972), on an appeal from a motion to enforce a judgment (the third appeal in the litigation) applied judicial estoppel where the plaintiff had alleged during the trial and prior appeals that the defendants were joint tenants but subsequently sought to allege a tenancy by the entireties.

Van Royen, 266 Md. at 651-52 , 296 A.2d 426 . The plaintiff was estopped from doing so. In Stone v. Stone, 230 Md. 248 , 186 A.2d 590 (1962), a widower, during the probate of his wife’s estate, took the position that certain securities were part of the corpus of a trust of which he was trustee. Subsequently, in an action for distribution of the securities upon termination of the trust, he took the position that the securities were his individual property.

Applying estoppel, the Court stated: Under the unique situation which prevailed we find that appellant was estopped from successfully contending that when he made and executed these statements and documents he was acting only as a co-administrator of his wife’s estate and not as trustee of the trust which he had established. ‘The test [of estoppel by admissions] is not as to whether the admission is true, but as to whether it would be contrary to public policy and good morals to allow it to be disputed.’ Jones, Evidence, § 374. ‘Generally speaking, a party will not be permitted to occupy inconsistent positions or to take a position in regard to a matter which is directly contrary to, or inconsistent with, one previously assumed by him, at least where he had, or was chargeable with, full knowledge of the facts and another will be prejudiced by his action.’ 19 Am.Jur., Estoppel, § 50. Under these circumstances appellant is estopped from denying that when he made or executed these instruments he did not have knowledge of the consequences to the trust nor of the injury to the beneficiaries if he later denied them or that he was acting in the capacity of trustee. Stone, 230 Md. at 253 , 186 A.2d 590 . In Wilson v. Stanbury, 118 Md.App. 209 , 702 A.2d 436 (1997), the plaintiff filed suit as a result of a motor vehicle ⁴⁷¹ accident and alleged in the complaint that the accident was caused solely by the named defendant.

The plaintiff filed the suit, knowing that the defendant was not negligent, because the plaintiff had missed the statute of limitations with respect to the negligent party. Wilson, 118 Md.App. at 210 , 702 A.2d 436 . Subsequently, after settling that action, the plaintiff filed a malpractice action against his attorney, alleging that the attorney was negligent in missing the statute of limitations. The Court applied judicial estoppel and barred the claim for the express purpose of protecting the courts from being used inappropriately.

Id. at 215 , 702 A.2d 436 (recognizing the similarity between judicial estoppel and the “clean hands” doctrine). In Kramer v. Globe Brewing Co., 175 Md. 461 , 2 A.2d 634 (1938), a personal injury action, the defendant stated in a pleading in a prior case that plaintiff was the defendant’s employee, that the injuries arose out of the employment, and that the defendant had complied with workers compensation laws. Kramer, 175 Md. at 464-65 , 2 A.2d 634 . In reliance on that statement, the plaintiff dismissed the action and filed a workers compensation claim.

Id. at 465 , 2 A.2d 634 . The Court held that the defendant was estopped to deny in the workers compensation proceeding that the plaintiff was its employee. Id. at 471 , 2 A.2d 634 . Finally, in WinMark v. Miles & Stockbridge, 345 Md. 614 , 693 A.2d 824 (1997), the question before the court was whether a debtor’s nondisclosure of a claim as an asset during a reorganization under Chapter 11 of the bankruptcy code barred the debtor from post-confirmation litigation of that claim against defendants not creditors in the bankruptcy action.

The Court did not apply judicial estoppel but, as this Court did in Wilson , noted that the policy underlying judicial estoppel is the same as that underlying the clean hands doctrine. WinMark, 345 Md. at 627-28 , 693 A.2d 824 (citing Manown v. Adams, 89 Md.App. 503 , 598 A.2d 821 (1991)). The Court explained that the doctrine is to protect the courts from having to reward inequitable conduct. Id. at 628 , 693 A.2d 824 .

The Court also recognized the difference between ⁴⁷² judicial estoppel and equitable estoppel, noting that the former focuses on the connection between litigants and the judicial system, and the latter focuses on the relationship between the parties. Id. at 623 , 693 A.2d 824 (citing Oneida Motor Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 419 (3d Cir.1988)). In the case before us, even though the books in question were defective, appellant had at least a colorable claim against Strathmore based on the fact that Strathmore, as part of its contract, agreed to review the page proofs and check them for accuracy and completeness, and it did so. Appellant also had at least a colorable claim against appellee based on its omission of the “K” section.

It is hornbook law that a claimant is only entitled to one satisfaction, i.e., one payment of its loss. See Lanasa v. Beggs, 159 Md. 311, 320 , 151 A. 21 (1930) (“It is neither just nor lawful that there should be more than one satisfaction for the same injury, whether that injury be done by one or more.”); Mathews v. Gary, 133 Md.App. 570, 582 , 758 A.2d 1019 (2000) (“The rationale for this rule is that the remedy provided to an injured person is to receive only one full compensation for the wrong done to him.”); Huff v. Harbaugh, 49 Md.App. 661, 670 , 435 A.2d 108 (1981) (“[T]here can be but one recovery