Wells Fargo Bank, N.A. v. Diamond Point Plaza Ltd. Partnership

⁴⁹² MATRICCIANI, J. The litigation giving rise to this appeal has its genesis in November 2002, when Diamond Point Plaza Limited Partnership, owner of a shopping center in Baltimore County, defaulted on a mortgage loan that was secured by the shopping center property. Appellant Wells Fargo Bank, N.A. (“Wells Fargo”), as trustee for the assignees of the mortgage, brought an action in the Circuit Court for Baltimore County against two sets of defendants: the Konover Defendants, appellees in 1 the appeal now before us, and the Wal-Mart Defendants. 1 Wells Fargo alleged breach of contract, fraud and misrepresentation, and conversion of funds against the Konover Defendants, and breach of lease agreement provisions against the Wal-Mart Defendants. Following a bench trial and various earlier rulings, including a partial summary judgment in favor of the Wal-Mart Defendants concluding that they did not violate a radius restriction in the lease, the circuit court ruled in favor of Wells Fargo.

The court entered judgment against the Konover Defendants in the amount of approximately $22.8 million, roughly $3.5 million of which, plus interest, was identified as a “prepayment premium,” and against the Wal-Mart Defendants in the amount of approximately $1.3 million. Despite evidence of contractual provisions providing for attorney’s fees, the court ruled that Wells Fargo had not satisfied its burden of proof because it had failed to itemize and apportion its fees among the various defendants and claims. Wells Fargo appealed the court’s ruling on attorney’s fees, and both sets of defendants appealed the court’s rulings on the merits. On appeal before this Court, we affirmed in part and ⁴⁹³ vacated in part the circuit court’s judgments on the merits.

Wells Fargo Bank Minnesota, N.A. v. Diamond Point Plaza L.P., 171 Md.App. 70 , 908 A.2d 684 (2006). We also vacated the circuit court’s judgments regarding attorney’s fees and remanded the case for further hearings on that issue. The Court of Appeals granted cross-petitions for writs of certiorari, Wal-Mart v. Wells Fargo, 396 Md. 524 , 914 A.2d 768 (2007), and affirmed this Court’s judgment with respect to the Konover Defendants on both the merits and the issue of attorney’s fees. Diamond Point Plaza L.P. v. Wells Fargo Bank, N.A., 400 Md. 718 , 929 A.2d 932 (2007).

On remand in the Circuit Court for Baltimore County, the Konover Defendants filed a pre-hearing memorandum opposing Wells Fargo’s request for attorney’s fees. In that memorandum, the Konover Defendants argued that any award of attorney’s fees would be unreasonable because the circuit court had erroneously overcompensated Wells Fargo in its original judgment by including the $3.5 million prepayment premium, which the Konover Defendants argued was never due under the loan documents. 2 The court agreed with the Konover Defendants, stating that, although Wells Fargo met its burden in proving that it was entitled to $1,443,208.81 in attorney’s fees, that award was unreasonable given the court’s previous error. Consequently, the circuit court denied Wells Fargo any attorney’s fees. 3 Wells Fargo appealed that judgment, and presents one issue for our review: Whether the circuit court erroneously refused to award Wells Fargo attorney’s fees in the amount of $1,443,208.81 from the Konover Defendants on the ground that the court’s earlier final $23,674,331.06 judgment against those Defen ⁴⁹⁴ dants improperly included a prepayment premium of $3,546,437.05. For the reasons we explain, we reverse the circuit court’s judgment.

FACTS AND PROCEEDINGS The Diamond Point Plaza shopping center, owned by Diamond Point Plaza Limited Partnership, was developed in 1988 and consists of three buildings containing space for commercial tenants. Two of its largest tenants were Sam’s P.W., Inc. (“Sam’s”), which operated a Sam’s Club wholesale store, and Ames Department Stores (“Ames”). Ames filed for bankruptcy in August 2001, and closed its store at Diamond Point Plaza in October 2002. Sam’s closed its store at Diamond Point Plaza in July 2002.

Sam’s continued to pay monthly rent but Ames did not, rejecting its lease in bankruptcy court. As a result of Ames’ failure to pay' rent to Diamond Point Plaza Limited Partnership, Diamond Point Plaza Limited Partnership failed to make its November 2002 loan payment to Wells Fargo. In March 2003, Wells Fargo filed its initial complaint, which it later amended three times. Following a six-day trial that began on April 4, 2005, the court requested that the parties submit Proposed Findings of Facts and Conclusions of Law.

The court reviewed the parties’ submissions, and in August 2005, the court issued its Findings of Fact and Conclusions of Law. 4 In those Findings of Fact and Conclusions of Law, the court found, inter alia, both that “[t]he prepayment premium is due regardless of whether the Borrower voluntarily chooses to repay the Loan or the Borrower defaults on the Loan,” and, “[ujnder the Mortgage and other applicable Loan Documents, Diamond Point [Plaza Limited Partnership] agreed to reimburse Wells Fargo its reason ⁴⁹⁵ able and necessary attorney’s fees incurred in enforcing the Loan Documents.” The court also adopted Wells Fargo’s itemized calculation of damages, which totaled $22,862,899.66, and which included a line item entitled “Prepayment premium” in the amount of $3,546,437.05. In its Final Amended Judgment, entered on December 5, 2005, the court stated: Judgment in favor of Plaintiff, Wells Fargo bank, N.A., as trustee, is hereby entered against Defendants, Diamond Point Plaza Limited Partnership, Oriole Commercial Associates Limited Partnership and Diamond Point Management Corporation for breach of ¶ 55(A) and (B) of the Mortgage for intentional misrepresentation and gross negligence and against Defendant, Konover Management Corporation, now known as Peerless Corp., for breach of the Guaranty of Recourse Obligations, under Counts 1, 2, 3, and 4 of the Third Amended Complaint, in the amount of $22,862,399.66 ... together with prejudgment interest thereon at the rate of $5,799.51 per day from April 5, 2005, [or] $811,931.40, [which totals $23,674,331.06,] and post-judgment interest from the date of entry of Final Judgment until finally paid. This judgment is entered jointly and severally against each of these Defendants. The court also reiterated its conclusion that, “for the reasons stated on the record on August 24, 2005,” Wells Fargo “has not met its burden of proof for its claims to recover its reasonable and necessary attorney’s fees incurred in connection with pursuing its claims for judgment against Defendants, Diamond Point Plaza Limited Partnership, Konover Management Corporation now known as Peerless Corp., Oriole Commercial Associates Limited Partnership, and Diamond Point Management Corporation pursuant to [the Note] and related loan documents.” On August 24, 2005, the court explained that it did not find Wells Fargo’s request for attorney’s fees reasonable because it had not adequately itemized and apportioned its fees among the various defendants and claims.

On that point, the court stated: “I don’t believe it is possible that fees are reasonable and necessary without undertaking a line- ⁴⁹⁶ by-line analysis of each legal bill. Most reluctantly, I don’t believe that is possible.” On appeal before this Court, we affirmed in part and vacated in part the circuit court’s judgments on the merits. Wells Fargo, 171 Md.App. at 137 , 908 A.2d 684 . Notable to the appeal now before us, we affirmed the circuit court’s calculation of damages against the Konover Defendants.

Id. at 125, 134-37 , 908 A.2d 684 . On the issue of attorney’s fees, we acknowledged the complexity of the case, but nevertheless stated that, instead of completely denying Wells Fargo attorney’s fees, the circuit court “should have compelled Wells Fargo to resubmit the bills for which it sought payment with a clearer indication of exactly what those charges represented.” Id. at 110 , 908 A.2d 684 . Consequently, we vacated the circuit court’s judgment regarding attorney’s fees and remanded the case for further hearings on that issue. Id. at 110-11 , 908 A.2d 684 .

The Court of Appeals affirmed the circuit court’s judgments with respect to the Konover Defendants, but like this Court, concluded that “the case must be remanded for reconsideration of attorney’s fees.” Diamond Point, 400 Md. at 727 , 929 A.2d 932 . Specifically, the Court stated that the circuit court incorrectly regarded “the requirement of a line-by-line analysis [not] as a mere preference, but as [a] legal requirement that was not met.” Id. at 760 , 929 A.2d 932 . Characterizing that view as “too rigid,” the Court stated that, although “the best evidence ordinarily would be a clear delineation in the attorneys’ billings of the time spent and expenses incurred with respect to the particular claims upon which the fee request is based[, b]ecause such a precise delineation may not always be practicable, however, we do not regard it as a sine qua non of the right to recover, for to conclude otherwise would, in many cases, deny all recovery where some recovery is clearly warranted.” Id. at 760-61 , 929 A.2d 932 . The Court’s mandate read, in pertinent part: JUDGMENT OF COURT OF SPECIAL APPEALS VACATED; CASE REMANDED TO THAT COURT WITH INSTRUCTIONS TO REMAND TO CIRCUIT COURT ⁴⁹⁷ FOR BALTIMORE COUNTY FOR FURTHER PROCEEDINGS WITH RESPECT TO WELLS FARGO’S CLAIM FOR ATTORNEY’S FEES IN ACCORDANCE WITH THIS COURT’S OPINION BUT OTHERWISE TO AFFIRM JUDGMENTS OF THE CIRCUIT COURT[.] Id. at 762 , 929 A.2d 982 .

On remand before the circuit court, the Konover Defendants filed a Memorandum of Law in Opposition to Plaintiffs Request for Attorney’s Fees. In that memorandum, the Konover Defendants argued that the circuit court had erred in including the prepayment premium in its judgment, and requested that the court take that error into consideration when ruling on Wells Fargo’s request for fees. At the conclusion of a lengthy hearing, the circuit court made its ruling from the bench on May 21, 2008. The court noted that Wells Fargo requested nearly $2.8 million in attorney’s fees, but after a detailed analysis, it concluded that the amount of fees for which Wells Fargo had satisfied its burden of proof was $1,443,208.81.

The court continued: That’s the amount that I would award if it were not for another argument made by the [Konover] Defendants. The total judgment that was awarded against those defendants was $23,674,331.06, which includes prejudgment interest. And that was the number I took off of [one of Wells Fargo’s attorney’s fees hearing exhibits]. I didn’t go back to the amended judgment, but I’m going to assume it’s the same.

For the reasons that were set forth in the [Konover Defendants’] Memorandum of Law in Opposition to Plaintiffs request for attorney’s fees concerning the [prepayment] premium, the Court is not going to award fees against the [Konover Defendants] in this matter. The [prepayment] premium that was previously awarded in this case as well as the prejudgment interest and all of the other fees and costs which are contained in that amended judgment are, in this Court’s judgment, sufficient to cover the attorney’s fees which have been sought in this ⁴⁹⁸ proceeding. Awarding another million dollars in fees would, in this Court’s view, be unreasonable under these circumstances. Wells Fargo noted a timely appeal. 5 DISCUSSION Wells Fargo argues that the circuit court erred in denying its request for attorney’s fees by improperly reconsidering the inclusion of the prepayment premium in the court’s original judgment against the Konover Defendants.

Wells Fargo argues that the court’s denial on that ground violated the doctrines of res judicata, the law of the case, and the mandate rule. Wells Fargo alternatively argues that the court erred in reconsidering its earlier judgment insofar as Rule 1.5 of the Maryland Rules of Professional Conduct does not permit the outright denial of a contractually-based attorney’s fees award on considerations unrelated to the rendering of legal services. Again in the alternative, Wells Fargo argues that, even if those doctrines or that rule did not preclude the court’s consideration of its inclusion of the prepayment premium in its original judgment, the court erred in concluding that it had erroneously included the prepayment premium because Wells Fargo was entitled to it under the loan documents. The Konover Defendants concede that they “did not introduce evidence or present arguments