Eastern Shore Title Co. v. Ochse , 453 Md. 303 ( 2017 )

Eastern Shore Title Company v. Steven J. Ochse, et al., No. 16, September Term, 2016.
Opinion by Getty, J.
TORTS — NEGLIGENCE — DAMAGES — COLLATERAL LITIGATION
DOCTRINE — Maryland follows the “American Rule,” which provides that the costs and
expenses of litigation, other than the usual and ordinary court costs, are not recoverable in
an action for damages. However, the American Rule is not an absolute bar and, in
Maryland, the collateral litigation doctrine is an exception to the American Rule. The
collateral litigation doctrine permits the recovery of attorney’s fees incurred by the plaintiff
where the wrongful acts of a defendant involved the plaintiff in litigation with others and
made it necessary to incur expenses to protect his or her interest, and such costs and
expenses should be treated as legal consequences of the original act.
TORTS — NEGLIGENCE — DAMAGES — COLLATERAL LITIGATION
DOCTRINE — ELEMENTS — If a plaintiff incurred litigation expenses, then the
plaintiff may recover collateral litigation expenses as damages by demonstrating that such
expenses were the natural and proximate consequence of the injury complained of, were
incurred necessarily and in good faith, and were a reasonable amount.
TORTS — NEGLIGENCE — DAMAGES — COLLATERAL LITIGATION
DOCTRINE — CALCULATION OF DAMAGES — To calculate damages in a
negligence action based on the collateral litigation doctrine, the trial court is permitted to
take judicial notice of the attorney’s fees and litigation costs incurred as a result of the
original litigation, and use those fees and costs as a measure of damages in the collateral
litigation lawsuit.
TORTS — NEGLIGENCE — DAMAGES — COLLATERAL LITIGATION
DOCTRINE — CONTRACTUAL FEE-SHIFTING PROVISION — A plaintiff may
only recover collateral litigation expenses as damages in a negligence cause of action if the
plaintiff actually incurred the attorney’s fees. Thus, if the plaintiff recovered the collateral
litigation expenses pursuant to a contractual fee-shifting provision, then the plaintiff cannot
also recover those same attorney’s fees under a collateral litigation doctrine theory of
damages.
Circuit Court for Talbot County
Case No. 20-C-10-007315
Argued: October 6, 2016
IN THE COURT OF APPEALS
OF MARYLAND
No. 16
September Term, 2016
EASTERN SHORE TITLE COMPANY
v.
STEVEN J. OCHSE, ET AL.
Barbera, C.J.
Greene,
Adkins,
McDonald,
Watts,
Getty,
Battaglia, Lynne A.
(Senior Judge, Specially Assigned),
JJ.
Opinion by Getty, J.
Filed: May 31, 2017
“The long and winding road
that leads to your door
Will never disappear
I’ve seen that road before
* * *
But still they lead me back
to the long winding road . . .”
The Beatles, The Long & Winding Road (Apple Records 1970).
In this case, the long and winding road virtually disappeared and, more regrettably,
went undetected during the title search for the 2001 sale of a five-acre residential lot in
Dorchester County. Eastern Shore Title Company (“ESTC”), Petitioners and Cross-
Respondents, conducted the title search for Mr. Steven Ochse and Ms. Shari Ochse (“the
Ochses”), Respondents and Cross-Petitioners, when they purchased the lot from Mr.
William Henry and Ms. Jessie Henry (“the Henrys”).
However, vestiges of the road leading to the Ochses’ door were evident in the
physical remains of a gravel roadbed. To further compound the confusion, an outline of
the roadbed was documented on the Henrys’ subdivision plat1 but was mistakenly
designated as a “driveway.” In the course of improving the property, a landscape contractor
advised the Ochses about his suspicions that the gravel roadbed was more than just a
“driveway.” After further investigation, the Ochses filed their initial lawsuit to quiet title
against the Henrys (“the Henry litigation”).
1
Land Records of Dorchester County, Plat Cabinet M.L.B. 46, p. 108B.
After residing on the property for approximately seven years, the Ochses finally
learned during the Henry litigation that the “driveway” encumbrance bisecting their lot was
actually part of a thirty-foot-wide strip of land, which had been granted in fee simple
determinable to Dorchester County by a 1919 deed for the purpose of making a new county
road. Thereafter, the Ochses’ melancholy ballad took a long winding road through
Maryland’s appellate courts (see E. Shore Title Co. v. Ochse, No. 0999, 2015 WL 9590716,
at *1 (Md. Ct. Spec. App. 2015); Ochse v. Henry, 216 Md. App. 439 [hereinafter Ochse 2],
cert. denied, 439 Md. 331 (2014); Ochse v. Henry, 202 Md. App. 521 (2011) [hereinafter
Ochse 1], cert. denied, 425 Md. 396 (2012)); but still it leads them back to this Court on
issues of the collateral litigation doctrine and the collateral source rule.
The underlying case to this appeal is a lawsuit collateral to the Henry litigation that
was filed by the Ochses on June 25, 2010 in the Circuit Court for Talbot County against
Chicago Title Insurance Company (“Chicago Title”)2 and ESTC, the title examiner, in
which the Ochses alleged that ESTC breached the contract intended to benefit the Ochses
and was negligent in its title examination. The trial court found in favor of the Ochses and,
as a result, awarded them compensatory damages for their litigation costs and expenses,
including a $215,710.60 judgment against ESTC and Chicago Title, which was the amount
of the attorney’s fees awarded to the Ochses in the Henry litigation.
2
We note that Chicago Title Insurance Company (“Chicago Title”) is not a party to
this appeal and did not join Eastern Shore Title Company (“ESTC”) in the appeal to the
Court of Special Appeals, E. Shore Title Co., 2015 WL 9590716, at *1.
2
ESTC and Chicago Title thereafter moved to alter or amend that judgment, pointing
out that the Henrys had already paid the attorney’s fees awarded in the Henry litigation.
The trial court granted that motion and reduced its judgment against ESTC and Chicago
Title by the full $215,710.60—the amount of attorney’s fees that the Ochses had already
recovered from the Henrys in the Henry litigation. The Ochses and ESTC appealed the
case to the Court of Special Appeals. In an unreported opinion, the Court of Special
Appeals remanded the case for a determination of whether the collateral litigation doctrine
applied and to clarify the attorney’s fees award. E. Shore Title Co., 2015 WL 9590716, at
*18, *21.
ESTC petitioned this Court for a writ of certiorari, and the Ochses filed a cross-
petition. We granted both the petition and the cross-petition on May 20, 2016. E. Shore
Title Co. v. Ochse, 448 Md. 29 (2016). We hold that, in order to recover attorney’s fees
against a negligent title searcher using the collateral litigation doctrine theory of damages,
the plaintiff must show that the title searcher’s negligence proximately caused the plaintiff
to file a necessary collateral action, resulting in the plaintiff incurring reasonable litigation
costs or expenses necessarily and in good faith, and that the plaintiff has not otherwise
received compensation for those costs and expenses. Thus, we reverse the judgment of the
Court of Special Appeals, and affirm the judgment of the trial court.
3
I
Background
A. Factual Background
The underlying facts and procedural paths of this case and the collateral case have
been thoroughly described in three appellate opinions. See E. Shore Title Co., 2015 WL
9590716, at *1; Ochse 1, 202 Md. App. at 521; Ochse 2, 216 Md. App. at 439. We restate
the facts that are relevant to this appeal, all of which are uncontested.
1919 County Road Deed
The elusive 1919 county road deed was executed on March 2, 1919, and was
recorded on May 27, 1919 among the Land Records for Dorchester County Maryland in
Liber W.H.M. 6, folio 332. A total of fourteen property owners conveyed portions of their
land to Dorchester County to create a thirty-foot-wide strip of land, “for the purpose of
making a new county road.” According to the deed, the strip of land had been “marked
out, partly cut out and opened.”3 Dorchester County thus acquired a fee simple
determinable interest in the strip of land.4 However, the deed included a reversionary
3
At trial, Ms. Ochse testified that the road was a “gravel run,” and Mr. Ochse
testified that the road had “a thin amount of stone, laid down and you could see that there
was occasional access over it.”
4
The deed described the public county road as follows:
[B]eginning at a bridge over a branch called “Miles Branch”, the said branch
being at that point the line of division between Caroline County and
Dorchester County, Maryland, and from thence in an even width of thirty
feet over the course heretofore surveyed by Richard Dixon, formerly road
engineer for Dorchester County, as laid down by said engineer, over and
through the lands of [Grantors] to what is called the “New Ferry Road”
leading from the bridge at Harrison’s Ferry to Finchville . . . being located in
the Fork or Election district No. 1 of Dorchester County, Maryland, the said
4
clause, which stated that “if the [county road] is abandoned by the said County
Commissioners of Dorchester County, or their successors in interest, the lands hereby
conveyed shall revert back to the said grantors, their heirs and assigns, so far as the same
are within the bounds of the lands of the respective grantors heretofore mentioned.”
Chronology of Pertinent Property Interests
One of the fourteen property owners was Henry B. Messenger, who held title to
approximately 150 acres of land in this vicinity south of Federalsburg.5 Over the years,
portions of Mr. Messenger’s property were conveyed to various property owners. Of
significance to this litigation, one of those conveyances—Mr. Messenger’s conveyance on
August 30, 1966 of two parcels to the Mayor and Council of Federalsburg for conservation
efforts along Marshythorpe Creek, which adjoined his property—referenced two plats that
road and the said strip of land hereby conveyed being thirty feet wide its
entire length[.]
5
By deeds recorded on October 29, 1902, November 21, 1914, and March 17, 1916.
Land Records of Dorchester County, Plat Cabinet Liber C.L. 27, folio 205; Plat Cabinet
Liber W.L.R. 8, folio 202; Plat Cabinet Liber W.H.M. 2, folio 31.
Subsequently, Mr. Messenger was delinquent in tax payments, and a tax sale of his
property took place by a deed dated November 23, 1929. However, the following year, the
property sold at the tax sale was conveyed back to Mr. Messenger by a deed dated June 17,
1930. Land Records of Dorchester County, Plat Cabinet Liber C.L. 25, folio 9; Plat
Cabinet Liber C.L. 69, folio 250.
5
depict a roadway labeled as a “county road” within the vicinity of Mr. Messenger’s
remaining property (the “1966 plats”).6
Subsequently, a thirty-five-acre parcel of the Messenger property was conveyed on
June 29, 1972 by Esther White Messenger7 to R.T.R., Inc. On March 18, 1987, R.T.R.,
Inc. conveyed the same property by deed8 to the Henrys. This thirty-five-acre parcel
ultimately purchased by the Henrys included the county road owned by Dorchester County
as referenced in the 1919 deed and 1966 plats.
In 1998, the Henrys subdivided this parcel to create a lot of approximately five acres
that included the county road, known as 2890 Mowbray Creek Road, Federalsburg. 9 Then,
on September 13, 2001, Mr. and Ms. Ochse entered into a contract with the Henrys to
purchase the subdivided parcel of land for $325,000.00 (the “Contract of Sale”). The
Contract of Sale, which was in the standardized form of a Maryland Residential Contract
of Sale, provided that “[t]itle to the Property . . . shall be good and merchantable, free of
liens and encumbrances except as specified herein.”
6
The plats and deed were recorded among the Land Records of Dorchester County
in Liber P.L.C. 149, folio 129 (Sheet 1), Liber P.L.C. 149, folio 130 (Sheet 2), and Liber
P.L.C. 149, folio 131.
7
H.B. Messenger, Jr., and his wife Esther White Messenger held title to the thirty-
five-acre parcel as tenants by the entireties. Land Records of Dorchester County in Liber
P.L.C. 174, folio 603. H.B. Messenger, Jr. died on May 11, 1965. Id.
8
The deed was recorded among the Land Records of Dorchester County in Liber
P.L.C. 243, folio 743.
9
The subdivision plat was recorded among the Dorchester County Land Records,
Plat Cabinet M.L.B. 46, p. 108B.
6
Significantly to this appeal, the Maryland Residential Contract of Sale, signed by
the parties, contained a standard form fee-shifting provision, which stated:
In any action or proceeding between the [Ochses] and the [Henrys] based in
whole or in part, upon performance or no performance of the terms and
conditions of this Contract, including, but not limited to, breach of contract,
negligence, misrepresentation or fraud, the prevailing party in such action or
proceeding shall be entitled to receive reasonable attorney’s fees from the
other party as determined by the court arbitrator.
The Contract of Sale further specified that “[t]he [attorney’s fees] provision . . . shall
survive closing and shall not be deemed to have been extinguished by merger with the
deed.”
Ochse Property Title Search
The Ochses received a policy of title insurance from Chicago Title, which
guaranteed and represented that the Ochses’ property title was precisely as depicted in the
1998 subdivision plat. As an agent of Chicago Title, and for the benefit of the Ochses,
ESTC performed the title search, prepared a title insurance binder and drafted the deed. It
is uncontested that the Ochses were the customers of ESTC and dealt directly with ESTC.
The title search and title insurance binder were intended to “permit [the Ochses] to make
an informed decision whether to proceed with the purchase.”10
10
Steven J. Ochse, et ux. v. Chicago Title Insurance Co., et al., Case No. 20-C-10-
007315, Docket No. 160 (Circuit Court for Talbot County June 12, 2013) (memorandum
opinion and judgment).
7
Closing on the 2890 Mowbray Creek Road Property
On December 14, 2001, at a real estate closing conducted by the general manager
of ESTC, Veronica Wainwright, the Ochses acquired as tenants by entireties, via deed,11 a
fee simple interest in 2890 Mowbray Creek Road. The Ochses’ deed included a provision
(the “driveway provision”) indicating that their property interest was “SUBJECT,
HOWEVER, to the rights of others legally entitled to the use of a ‘Driveway’, for purpose
of ingress, egress and regress, over [the Ochse Property].”
At a subsequent trial proceeding, the Ochses testified that they asked Ms.
Wainwright about the meaning of the provision’s language during the closing, and that she
verbally advised the Ochses that the driveway provision referred to utility easements, with
the utility companies being the unidentified “others” in the provision.12
Discovery of Ochses’ Property Title Defect
After residing at the property for four years, the Ochses hired a contractor in 2005
to undertake significant renovations and landscaping to their home. Based upon an inquiry
from the contractor and prior to finalizing the renovation plans, Ms. Ochse reviewed the
property deed to determine whether the gravel roadbed could be removed and contacted
ESTC for clarification. In response to Ms. Ochse’s questions, ESTC performed a second
title search. This second title search again failed to uncover the 1919 county road deed.
11
The deed was recorded among the Land Records of Dorchester County in Liber
M.L.B. 468, folio 385.
12
Ms. Wainwright testified that she did not so advise the Ochses.
8
Based on this second attempt, ESTC offered a new theory that the “driveway provision” in
the Ochses’ deed was not for utility easements, as originally represented to the Ochses at
closing, but instead a right-of-way for the benefit of the Henry property. ESTC offered to
prepare a release for the Henrys’ signature to quitclaim any and all rights and eliminate the
driveway provision from the Ochses’ deed. However, when presented with the draft
release, the Henrys would not agree to sign it or to relinquish their claims to any right-of-
way over the Ochses’ property.
The Ochses subsequently wrote a letter to their title insurer, Chicago Title, alerting
the insurer to the presence an “undisclosed right of-way” that they contended ESTC had
either “failed to pick up on” during the course of the title search, or failed to list in their
Owners Policy. In the letter, the Ochses requested that Chicago Title “initiate a claim on
[their] behalf against Eastern Shore Title Company.” Chicago Title denied the claim,
referring to a portion of the Ochses policy that excepted from coverage “easements . . . and
other limitations” shown on the 1998 subdivision plat. The Ochses subsequently retained
an attorney who continued to pursue obtaining a release from the Henrys, but without
success.13
B. Procedural History
The Henry Litigation
Consequently, on December 11, 2007, the Ochses filed a complaint against the
Henrys in the Circuit Court for Dorchester County (“the circuit court”) seeking reformation
13
During the course of these further conversations with the Henrys, the Ochses’
counsel was alerted to the possibility that a public road may exist on the property. The
9
of their deed and for declaratory, injunctive, and related relief. The Ochses sought damages
for breach of contract, breach of special warranties, and fraud in the inducement based on
the driveway provision in their deed.
Thereafter, on February 22, 2008, seven years after purchasing the 2890 Mowbray
Creek Road property, the Ochses finally learned of the true legal status of the gravel
roadbed—which up until that time they had presumed was, as stated in their deed, a
driveway within property which they owned and over which some others merely had rights-
of-way—when an attorney representing the Henrys mailed a letter to the Ochses’ counsel
revealing the existence of the 1919 county road deed, and Dorchester County’s ownership
of the county road. Then, the Henrys’ attorney mailed a second letter to the Ochses’
counsel stating that the Ochses’ only remedy was to petition Dorchester County to convey
the county road to the Ochses and that any judgment against the Henrys was fruitless
because they could not deliver title for the roadbed to the Ochses.
Instead, on April 11, 2008, the Ochses filed an amended complaint, in which they
added Dorchester County as an interested party defendant, while maintaining the same
claims as in their earlier complaint: reformation of the deed, declaratory relief, injunctive
relief, and damages for breach of contract, breach of special warranties, and fraud in the
inducement. The amended complaint requested the circuit court to remove the driveway
provision from the Ochses’ deed, and to declare that Dorchester County did not have a fee
Ochses then contacted Dorchester County to determine if a nearby road ending in Caroline
County extended onto their property, and were informed that Dorchester County was not
responsible for that road.
10
simple interest in the county road. The Henrys thereafter filed a counterclaim seeking an
award of attorney’s fees pursuant to the fee-shifting provision of the Contract of Sale that
specifically survived merger with the deed.
On May 13, 2008, Dorchester County filed an answer to the Ochses’ amended
complaint and asserted its fee simple interest in the county road. On August 4, 2008,
Dorchester County filed a motion for summary judgment asserting that there was no
dispute of material fact regarding Dorchester County’s ownership of the county road,
including that portion of it described as a “driveway” in the Ochses’ deed. Dorchester
County asserted that it did not abandon, convey away, or otherwise dispose of its interest
in the county road. On October 29, 2008, after a hearing, the circuit court granted
Dorchester County’s motion for summary judgment declaring that Dorchester County
owned the thirty-foot-wide strip of land in fee simple.
The circuit court subsequently held a two-day bench trial, on May 26 and 27, 2009,
as to the surviving claims made in the Ochses’ amended complaint, as well as the Henrys’
counterclaim for attorneys’ fees pursuant to the fee-shifting provision in the Contract of
Sale. Ultimately, in a written opinion and order entered September 18, 2009, the circuit
court denied relief to the Ochses, “conclud[ing] that the [Contract of Sale] merged into the
deed and that there was no breach of the special warranties of title.” Ochse 1, 202 Md.
App. at 528. The circuit court, however, granted the Henrys’ counterclaim, and
11
subsequently, in a supplemental order entered on October 20, 2009, awarded the Henrys
$100,020.00 in attorney’s fees14 to be paid by the Ochses.
The Ochses appealed all of the circuit court’s judgments to the Court of Special
Appeals. Ochse 1, 202 Md. App. at 521. The Ochses also filed a petition with the County
Council for Dorchester County, requesting that the county close, abandon, and convey to
them the portion of the county road lying across their property.15 E. Shore Title Co., 2015
WL 9590716, at *6. Following court-ordered mediation before the Court of Special
Appeals, the parties filed a consent motion to stay proceedings before that court pending
the disposition of the petition by Dorchester County. After that petition was granted
through a bill passed by the Dorchester County Council, “the county conveyed its interest
in the 30-foot wide strip to the Ochses” through a quit-claim deed.16 Ochse 1, 202 Md.
App. at 525. Dorchester County was then dismissed from the Court of Special Appeals
case.
14
The parties stipulated at trial that the attorney’s fees were reasonable.
15
Oddly, at this juncture Chicago Title retained counsel to represent the Ochses in
the petition. E. Shore Title Co., 2015 WL 9590716, at *6 n.10. Chicago Title took the
position that Dorchester County’s ownership of the driveway was a matter covered under
their title insurance policy. Id. As previously noted, Chicago Title had previously refused
to represent the Ochses in any litigation against the Henrys, and would not reimburse the
Ochses for attorney’s fees incurred in that litigation, taking the position that the litigation
against the Henrys was prompted by the 1998 plat’s implication of a driveway that had
been disclosed to the Ochses or by the Ochses’ own choice. Id.
16
The Quit Claim Deed was recorded among the Land Records of Dorchester
County in Liber D.L.P. 996, folio 468.
12
The Court of Special Appeals then proceeded to review the circuit court’s judgments
to deny the Ochses’ breach of contract, breach of special warranties, and fraud in the
inducement claims, and to grant the Henrys’ attorney’s fees counterclaim. The
intermediate appellate court determined that the circuit court did not err in its conclusions
that the Henrys had neither breached the special warranties of encumbrance or of title, nor
fraudulently induced the Ochses into entering the Contract of Sale. Id. at 530-42. But, the
Court of Special Appeals also determined that there was a mutual mistake between the
Henrys and Ochses and, therefore, the Contract of Sale did not merge into the deed, “and
the Ochses should have been able to sue on the contract.” Id. at 542-43.17 The intermediate
appellate court held, however, that the central issue underpinning the Ochses’ suit against
the Henrys based upon the Contract of Sale—the issue of clear title to the Ochses’
property—had been “resolved” by the successful petition to the Dorchester County Council
and resultant quitclaim deed to the thirty-foot wide strip of land to the Ochses. Id. at 543.
As to the issue of attorney’s fees, the Court of Special Appeals held that, despite its
finding that there was a mutual mistake of fact that prevented the Contract of Sale from
merging into the deed, “the circuit court was acting within the terms of the contract and
deed by awarding attorney’s fees,” because “[r]egardless of whether the contract merged
with the deed, the attorney’s fees provision of the contract survived.” Id. at 544. But, the
17
The Court of Special Appeals held that the Ochses had not pleaded a claim of
mutual mistake at the trial level, but nevertheless had preserved that claim for appellate
review by arguing it orally during the trial proceedings before the Circuit Court for
Dorchester County. Id. at 542.
13
Court of Special Appeals felt that, in light of its holdings, the apportionment of legal fees
to the Henrys was in error. Id. The intermediate appellate court explained that “at the time
of the conveyance [of the 2890 Mowbray Creek Road property], the Henrys did not convey
marketable title to the Ochses, breaching the [Contract of Sale].” Id. Therefore, the Court
of Special Appeals vacated the attorney’s fees award to the Henrys and remanded the case
to the circuit court. Id.
The Court of Special Appeals’ holdings in Ochse 1 that the fee-shifting provision
survived and the Henrys’ had breached the Contract of Sale meant that the Ochses were
the “prevailing party” in the litigation and, pursuant to the fee-shifting provision, entitled
to “receive reasonable attorney’s fees from the other party.” See id. at 526 n.2 (noting that
“[b]ecause the [Contract of Sale] contained an attorney’s fees provision, the Ochses are
entitled to attorney’s fees,” and that even though the title issues had been resolved in favor
of the Ochses through the county petition process, the circuit court “must view the case as
it appeared when initiated” in issuing that award). Consequently, after the case was
remanded to the circuit court, the Ochses filed, on January 24, 2012, a motion requesting
attorney’s fees to be awarded in the amount of $333,354.00 for the attorney’s fees incurred
through the litigation to that point. Ochse 2, 216 Md. App. at 449. On April 27, 2012, the
Ochses filed a supplemental motion for fees that reflected the additional costs incurred in
their certiorari petition to this Court,18 which revised the total to $355,731.78. Id.
18
The petition for a writ of certiorari was denied on April 23, 2012. Henry v. Ochse,
425 Md. 396 (2012).
14
On July 16, 2012, the circuit court issued an order and opinion granting attorney’s
fees to the Ochses. Id. The circuit court explained that, because the Ochses had
“prevail[ed] on some issues in [the] case but [did] not prevail on other issues,” it had
concluded that a “proportionate award” was appropriate. Id. at 453. Specifically, the
circuit court noted that “the substantial majority of the time in trial and litigation effort put
forth by [the Ochses] addressed the issue of willful fraud,” an issue on which they did not
prevail in their appeal in Ochse 1. Id. at 453. The circuit court concluded that the
appropriate “proportionate award” was “the entirety of the post-trial and appeal costs, as
well as one-fourth of the attorney’s fees expended in trial.” Id. at 454. Therefore, starting
from the Ochses’ initial request of $333,354.00, the circuit 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 it determined to be a double entry in the Ochses’ motion for fees), to reach an award
of $215,710.60. In its opinion and order, the circuit court made no mention of the Ochses’
April 27, 2012 supplemental motion for fees. Id.
The Ochses again appealed to the Court of Special Appeals—this time challenging
the rationale of the circuit court’s judgment concerning the award of attorney’s fees. Id. at
449. The Court of Special Appeals rejected the Ochses’ claim that they were entitled to
the full amount of fees claimed pursuant to the “common core of facts” doctrine, under
which a court may 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.” Id.
at 459. The intermediate appellate court noted that it had previously recognized that the
“common core of facts” doctrine “comports with Maryland law,” but had not held that its
15
application was mandatory. Id. at 467 (discussing Weichert Co. of Md. v. Faust, 191 Md.
App. 1 (2010), aff’d on other grounds, 419 Md. 306 (2011)). The Court of Special Appeals
noted that the circuit court “did not view the Ochses’ first appellate victory as an excellent
result” and held that the circuit court “was free to consider,” as part of its overall
determination as to attorney’s fees, “the thin relationship between the Ochses’ appellate
success and the thrust of their efforts at trial.” Id. at 468-69. The Court of Special Appeals
therefore held that the circuit court did not abuse its discretion in using its “proportionate
award” approach to calculate attorney’s fees instead of relying on the “common core of
facts doctrine.” Id. at 469. However, the Court of Special Appeals remanded the case for
the circuit court to correct computational errors and to consider the Ochses’ supplemental
motion for fees, which the circuit court had overlooked. Id. On remand, the circuit court
recalculated its award for attorney’s fees and awarded a total of $228,771.89 in attorney’s
fees to the Ochses.
ESTC Litigation
While the Henry litigation was still progressing through the courts, the Ochses filed
a complaint against ESTC and Chicago Title on June 25, 2010 in the Circuit Court for
Talbot County (“the trial court”). In that complaint, the Ochses alleged breach of contract
against Chicago Title, and breach of contract, negligence, and negligent misrepresentation
against ESTC, all stemming from the improper preparation of the Ochses’ deed and failure
to discover the 1919 deed. The Ochses subsequently filed an amended complaint on July
16
29, 2011 that added negligence and negligent misrepresentation claims against Chicago
Title.
The case proceeded to a four-day bench trial beginning on July 9, 2012. At that
trial, the circumstances surrounding the faulty title search were revealed. William Price
was the title abstractor who performed the title search on the property at 2890 Mowbray
Creek Road on behalf of ESTC. Mr. Price testified that he searched deeds in the chain of
title back to 1902, and that, in his title abstract forwarded to ESTC settlement staff, he had
alerted ESTC to the possible existence of a right-of-way running through the property.
However, Mr. Price also testified that he had reviewed the 1966 plats in the Ochses’ chain
of title that noted a “county road” but found them not pertinent to his title search, and had
skipped a search of the Grantor Index forward from 1902 that he conceded would have
uncovered the 1919 deed that showed the existence of a county road on the property. The
Ochses presented expert testimony that, under the circumstances, the 1919 deed should
have been discovered and disclosed to the Ochses.
At the conclusion of the Ochses’ case, the trial court granted a motion for judgment
on behalf of both Chicago Title and ESTC as to the negligent misrepresentation counts,
finding that they were barred by the statute of limitations. Then, on June 12, 2013, the trial
court issued a memorandum opinion and judgment as to the remaining claims in the case.
The trial court began that opinion by tracing what it described as the “peculiar and
extraordinary route” of the litigation stemming from the failure to detect the 1919 county
road deed and the 30-foot wide public road running across the 2890 Mowbray Creek Road
property prior to the Ochses’ purchase of that property. The trial court first summarized
17
the course of the Henry litigation before the Circuit Court for Dorchester County, in which
the Ochses had pursued declaratory relief against the Henrys and Dorchester County to
gain clear title to the 30-foot wide strip of land. The trial court then described the ESTC
litigation pending before it, in which the Ochses pursued breach of contract and negligence
claims against ESTC and Chicago Title for failing to alert the Ochses to the presence of
the county road across the 2890 Mowbray Creek Road property, a failure that the Ochses
alleged caused them to have incurred significant attorney’s fees in the Henry litigation to
obtain clear title to their property.
As to the specific claims before it, the trial court concluded that Chicago Title could
not be held vicariously liable for any negligence of its title searcher agent, ESTC, and
therefore dismissed the negligence count against Chicago Title. However, the trial court
found in favor of the Ochses as to all remaining counts. The court determined that Chicago
Title breached its contract with the Ochses because “Chicago Title refused to act or provide
a defense” during the initial course of the Henry litigation, as well as because “Chicago
Title, through its agent [ESTC] failed to address the unresolved ‘driveway’ issue.” The
trial court also held that ESTC was negligent because it had “breached the standard of care
in its title examination” by not discovering the 1919 county road deed and that, even though
the county road was not in use at the time of the Henry litigation, that breach was
“significantly damaging” to the Ochses, as the cloud in title would have been a major
constraint on their ability to sell or develop the property. Finally, the trial court concluded
that ESTC’s failure to discover the 1919 deed had also breached its contractual obligation
18
to the Ochses to prepare the title search and title insurance binder so that the Ochses’ could
make an informed decision as to whether to purchase the property.
Turning to the issue of damages, the trial court determined that the Ochses were not
entitled to noneconomic damages, but awarded economic damages based upon the
attorney’s fees and costs the Ochses had incurred. The trial court entered judgment for the
breach of contract claims against Chicago Title and awarded $471,947 to the Ochses for
that claim, which the court broke down into $256,237.35 in expenses in the case before it,
as well as $215,710.60 in attorney’s fees for the Henry litigation. The trial court also
entered judgment for the breach of contract and negligence claims against ESTC, and
awarded $215,710.60 to the Ochses as to those claims. The $215,710.60 amount was, as
the court noted, the amount that the Circuit Court for Dorchester County had determined
that “the Ochses were entitled for the Henry litigation.” Although relying on that amount,
the Circuit Court for Talbot County also stated that the judgment from the Circuit Court
for Dorchester County was at that time on appeal, implicitly recognizing that the amount
was subject to change.
On June 18, 2013, ESTC and Chicago Title filed a motion to alter or amend the
judgment and a motion to stay enforcement, seeking a clarification that the damages would
be reduced by any recovery made by the Ochses in the Henry litigation. ESTC and Chicago
Title attached the Henrys’ motion to record satisfaction of money judgment filed in the
Henry litigation on June 13, 2013, documenting that the Henrys had paid $218,901.89 to
19
the Ochses.19 On June 28, 2013, the trial court granted ESTC and Chicago Title’s motion
and reduced the judgment in the instant case against both ESTC and Chicago Title by the
$215,710.60 paid by the Henrys in the Henry litigation. As a result, the judgment against
ESTC was reduced to $0.00, and the judgment against Chicago Title was reduced to
$256,237.35. 20 The trial court’s order stated:
Assuming the motion is approved by the Circuit Court for Dorchester County
in the Henry litigation, the judgments in the instant litigation will be reduced
[or otherwise satisfied] against Chicago Title and ESTC by $215,710.65.
While presently the “satisfaction” would satisfy the judgment amount against
ESTC as of the judgment date, i.e. June 12, 2013, that is subject to change
due to the ongoing appeal by plaintiffs of the attorney’s fees award in the
Henry litigation. The Henrys understand, and defendants in the instant case
should also, that “. . . any additional fees assessed pursuant to the August 8,
2012 appeal would constitute a supplemental judgment.”
The Court will enter the orders for clarification of the judgments against
Chicago Title and ESTC, reducing each judgment by the amount of recovery
in the Henry litigation.
19
Although unclear from the record, the difference between the $218,901.89
amount paid and the $215,710.60 judgment likely reflects post-judgment interest. See
Maryland Rule 2-604 (“a monetary judgment shall bear interest at the rate prescribed by
law from the date of entry”); Maryland Rule 11-107 (providing that, generally, “the legal
rate of interest on a judgment shall be at the rate of 10 percent per annum on the amount of
judgment”).
20
In the four-day trial before the Talbot County circuit court, the Ochses introduced
into evidence the contract appointing ESTC as an agent of Chicago Title that was in effect
at the time of the title insurance search conducted by ESTC in this case. That contract
contains a provision that ESTC “shall be liable to and agrees to indemnify [Chicago Title]
for all attorney’s fees, court costs, expenses and loss or aggregate of losses resulting from
. . . [e]rrors and/or omissions in the abstracting or examination of title by [ESTC] or
[ESTC’s] employees and/or subcontractors . . .” Thus, even though the judgment against
ESTC was reduced to $0.00, it may still be liable to Chicago Title for some or all of the
remaining $256,237.35 judgment assessed against Chicago Title through its agency
agreement.
20
(Footnote and citation omitted.)
The Ochses and ESTC appealed the trial court’s judgment to the Court of Special
Appeals. E. Shore Title Co., 2015 WL 9590716, at *1. In an unreported opinion, the Court
of Special Appeals remanded the case to the trial court to determine whether the collateral
litigation elements were satisfied and to determine whether the collateral source rule
applied. Id. at *2. The Ochses and ESTC petitioned this Court for a writ of certiorari,
which this Court granted. 448 Md. 29 (2016). We have rephrased their questions.21
ESTC presents the following question for our review:
1. Does the collateral litigation doctrine permit a party to recover their
attorney’s fees as “damages”?
The Ochses raise the following questions for review:
1. Did the Circuit Court for Talbot County err in its calculation of damages
awarded pursuant to the collateral litigation rule?
2. Does the collateral source rule apply to an award of attorney’s fees as
damages when they are awarded pursuant to the collateral litigation doctrine?
II
Discussion
21
ESTC’s question presented was “May a party recover their attorney’s fees for the
exact same matter more than one time as ‘damages’, even in separate cases?”
The Ochses presented two questions:
1. Did the trial court and the Court of Special Appeals err in the legal standard
used to determine the correct amount of the damages awarded pursuant to
the collateral litigation rule for legal expenses incurred?
2. Does the collateral source rule apply to an award of damages for the breach
of two separate contracts involving different parties under different
circumstances in different courts, where separate consideration was paid for
each contract?
21
A. Standard of Review
The standard of review for a non-jury trial is governed by Maryland Rule 8-131(c),
which states:
When an action has been tried without a jury, the appellate court will review
the case on both the law and the evidence. It will not set aside the judgment
of the trial court on the evidence unless clearly erroneous, and will give due
regard to the opportunity of the trial court to judge the credibility of the
witnesses.
B. Collateral Litigation Doctrine
The first issue this Court is asked to decide is whether the collateral litigation
doctrine applies. In their briefs and at oral argument, ESTC and the Ochses focused on the
proximate cause element of the collateral litigation doctrine.22 ESTC asserts that the
collateral litigation doctrine does not apply in this case because the Ochses did not present
sufficient evidence to support the necessary elements for the collateral litigation doctrine,
specifically that ESTC’s negligence proximately caused the Henry litigation. The Ochses
respond that the collateral litigation doctrine does apply, and permits attorney’s fees to be
used as a measure of damages. The Ochses contend that ESTC’s professional negligence
22
This is likely because the Court of Special Appeals remanded this issue to the trial
court to make a factual determination on the record of whether ESTC’s wrongful conduct
proximately caused the Ochses to initiate litigation against the Henrys, and if that conduct
did, to what extent that litigation related to the injury caused by ESTC.
22
forced them into litigation with the Henrys to reform their property deed, which satisfies
the proximate cause element of the collateral litigation doctrine.
The trial court found that ESTC was negligent in exercising its duty of care to the
Ochses, which arose from the contractual relationship between Chicago Title, ESTC, and
the Ochses. In 100 Investment Ltd. Partnership v. Columbia Town Center Title Co., 430
Md. 197 (2013), this Court held that a title company owes a duty of care, in tort, when
conducting a title search. However, the issue of how to measure damages in the negligence
action was not before the Court.
A plaintiff in a negligence cause of action has the burden to demonstrate “1) that the
defendant was under a duty to protect the plaintiff from the injury, 2) that the defendant
breached that duty, 3) that the plaintiff suffered actual injury or loss, and 4) that the loss or
injury proximately resulted from the defendant’s breach of the duty.” Hamilton v. Kirson,
439 Md. 501, 523-24 (2014) (quoting Taylor v. Fishkind, 207 Md. App. 121, 148 (2012)).
Consequently, a trial court cannot award damages to a plaintiff unless the plaintiff shows
that he or she suffered an actual injury.
The Ochses’ theory of damages was that ESTC should be liable for the attorney’s
fees from the Henry litigation pursuant to the collateral litigation doctrine. In the trial
court, the Ochses also sought “non-economic damages related to stress and other
maladies.” However, the trial court considered these damages as “wildly speculative and
not consistent with the purely financial issues of the case.” The Ochses do not challenge
this finding on appeal.
23
When attorney’s fees are sought by a party, then “[o]ur basic point of reference
when considering the award . . . is the bedrock principle known as the American Rule:
Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides
otherwise.” Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (quoting
Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252-53 (2010)). The American
Rule is rooted in “common law reaching back to at least the 18th century.” Id. (citing
Arcambel v. Wiseman, 3 U.S. 306 (1796)).
Maryland follows the American Rule. Nova Research, Inc. v. Penske Truck Leasing
Co., 405 Md. 435, 445 (2008); Friolo v. Frankel, 403 Md. 443, 456 (2008); see also St.
Luke Evangelical Lutheran Church, Inc. v. Smith, 318 Md. 337, 344-46 (1990) (tracing the
history of the American Rule). However, in Maryland, there are four exceptions to the
American Rule, and an award for attorney’s fees is permitted (1) where a statute allows for
the recovery of attorney’s fees; (2) where the parties to a contract have an agreement
regarding attorney’s fees; (3) where the wrongful conduct of a defendant forces a plaintiff
into litigation with a third party; or (4) where a plaintiff in a malicious prosecution action
can recover damages from the defense of the criminal charge. Hess Constr. Co. v. Bd. of
Educ., 341 Md. 155, 160 (1996). The third exception is pertinent to this case, and is
commonly known as the collateral litigation doctrine.
The collateral litigation doctrine permits Maryland courts to award legal expenses
as damages from a separate litigation against another party that was caused by the wrongful
acts of the defendant. Empire Realty Co. v. Fleisher, 269 Md. 278, 286 (1973). The
24
collateral litigation doctrine was explained by this Court in McGaw v. Acker Merrall &
Condit Co.:
The general rule is that costs and expenses of litigation, other than the usual
and ordinary Court costs, are not recoverable in an action for damages, nor
are such costs even recoverable in a subsequent action; but, where the
wrongful acts of the defendant has involved the plaintiff in litigation with
others, or placed him in such relations with others as make it necessary to
incur expense to protect his interest, such costs and expense should be treated
as the legal consequences of the original wrongful act.
111 Md. 153, 160 (1909); see also St. Luke Evangelical Lutheran Church, Inc., 318 Md. at
345-46 (“[A]ttorney’s fees may be awarded when . . . the wrongful conduct of a defendant
forces a plaintiff into litigation with a third party.”); Kromm v. Kromm, 31 Md. App. 635
(“The allowance of such expenses manifestly was grounded on the fact that the wrong there
complained of had imposed a necessary obligation upon the plaintiff to institute the
collateral action[.]”), cert. denied, 278 Md. 726 (1976).
Collateral litigation expenses are only recoverable “for legal services in a separate
litigation against another party[,] which the wrongful act of the defendant had required,”
and not the legal services rendered in the instant litigation. Freedman v. Seidler, 233 Md.
39, 47 (1963). A plaintiff may recover collateral litigation expenses as damages by
demonstrating that such expenses were the natural and proximate consequence of the injury
complained of, were incurred necessarily and in good faith, and were a reasonable amount.
See Fowler v. Benton, 245 Md. 540, 550 (1967).
In this case, the Ochses are seeking to recover the attorney’s fees from a separate
litigation, the lawsuit against the Henrys. The trial court found that the Ochses sufficiently
demonstrated that the wrongful act of ESTC, the negligent title search, required the Henry
25
litigation and that the attorney’s fees were a natural and proximate consequence of ESTC’s
negligence. The trial court found that ESTC’s title search was negligent because the
Ochses’ deed included a drafting error by including the “12-foot driveway” that “ESTC
questioned but never resolved.” The trial court found that “ESTC never came up with the
1919 deed, even though they [twice] searched the title, the first such search of the chain of
title went back to 1902. Internal memoranda of ESTC noted the concerns in December,
2005, but were not conveyed to the Ochses or their representatives.” Additionally, the trial
court found that ESTC incorrectly advised the Ochses that the driveway language related
to “utility easements,” when “the driveway was actually found to be part of the 30’ public
roadway.” Consequently, the trial court found that the wrongful act of ESTC required the
Henry litigation because eventually there would have been an issue with the Ochses’ title,
“particularly when the Ochses went to sell the property,” and the county road “greatly
limited the Ochses’ use, development, marketability, and merchantability of the property.”
Therefore, we hold that a remand on the issue of proximate cause is not necessary,
because the trial court found that ESTC’s negligence required the Henry litigation in which
the attorney’s fees were incurred. However, our analysis does not end here. We still must
determine whether the Ochses have established the remaining elements of their negligence
cause of action, based on the collateral litigation doctrine, against ESTC. Specifically, we
must determine whether the Ochses “suffered actual injury or loss.” Kirson, 439 Md. at
523-24 (quoting Taylor, 207 Md. App. at 148). This consists of a two-part inquiry: 1) In
determining the Ochses’ damages in this negligence action, did the trial court properly
calculate the attorney’s fees incurred by the Ochses in the Henry litigation? and 2) Did the
26
trial court properly consider the Henrys’ satisfaction of those attorney’s fees to offset the
Ochses’ damages? We shall address each of these questions in turn.
C. Calculation of Attorney’s Fees
Next, we must determine whether the trial court, in determining the Ochses’
damages in their negligence action against ESTC, properly calculated the attorney’s fees
incurred by the Ochses in the Henry litigation. The Ochses assert that the damages were
improperly calculated because the trial court took judicial notice of the attorney’s fees
awarded in the Henry litigation instead of independently calculating the attorney’s fees
based upon the evidence submitted by the Ochses in the instant case. The Ochses also state
that the lodestar method of calculating attorney’s fees should have been used, and that they
should have been awarded a higher amount of attorney’s fees. ESTC asserts that the
damages awarded were unreasonable and improper. In the alternative, ESTC contends that
the trial court was permitted to consider the Henry litigation because the entire record was
admitted as evidence in the instant case by stipulation. The trial court found that the
attorney’s fees in the Henry litigation were incurred necessarily and in good faith, and that
the fees were reasonable. We hold that the trial court did not abuse its discretion in equating
the attorney’s fees incurred by the Ochses in the Henry litigation as the Ochses’ damages
in its negligence action against ESTC.
This Court has stated that “[d]ecisions concerning the award of counsel fees rest
solely in the discretion of the trial judge.” Petrini v. Petrini, 336 Md. 453, 468 (1994)
(citing Jackson v. Jackson, 272 Md. 107, 111-12 (1974)). “The trial court’s determination
of the reasonableness of attorney’s fees is a factual determination within the sound
27
discretion of the court, and will not be overturned unless clearly erroneous.” Myers v.
Kayhoe, 391 Md. 188, 207 (2006). Thus, “[a]n award of attorney’s fees will not be reversed
unless a court’s discretion was exercised arbitrarily or the judgment was clearly wrong.”
Petrini, 336 Md. at 468 (citing Danziger v. Danziger, 208 Md. 469, 475 (1955)).
The collateral litigation doctrine permits the court to award as damages the legal
fees from the separate litigation. See Empire Realty Co., 269 Md. at 286. As explained by
the Supreme Court of Colorado,
[L]itigation expenses and attorneys’ fees incurred by a party in one case may,
in certain circumstances be an appropriate measure of damages against a
third party in a subsequent action. . . . “[W]hen the natural and probable
consequence of a wrongful act has been to involve [a] plaintiff in litigation
with others, the general rule is that the reasonable expenses of the litigation
may be recovered from the wrongdoer.”
Rocky Mountain Festivals, Inc. v. Parsons Corp., 242 P.3d 1067, 1071 (Colo. 2010)
(second alteration in original) (citations omitted). The doctrine applies when the plaintiff
is “placed in a position of having to bring suit as plaintiff to defend his rights.” Id. (quoting
Elijah v. Fender, 674 P.2d 946, 951 (Colo. 1984)).
The doctrine does not establish a stand-alone cause of action, nor is it an
exception to the so-called American [R]ule that parties are responsible for
their own litigation costs and fees. Rather, the doctrine is but an
acknowledgement that the litigation costs incurred by a party in separate
litigation may sometimes be an appropriate measure of compensatory
damages against another party.
Id. (emphasis added) (footnotes and citations omitted).
The Restatement (Second) of Torts defines “compensatory damages” as “the
damages awarded to a person as compensation, indemnity or restitution for harm sustained
28
by him.” Restatement (Second) of Torts § 903 (Am. Law Inst. 1979).23 Compensatory
damages can be divided into “economic” and “noneconomic damages.” The Restatement
notes that “[c]ompensatory damages that will not be awarded without proof of pecuniary
loss[, i.e. economic damages,] include compensation for (a) harm to property, (b) harm to
earning capacity, and (c) the creation of liabilities.” Id. at § 906. In contrast,
“[c]ompensatory damages that may be awarded without proof of pecuniary loss[, i.e.
noneconomic damages,] include compensation (a) for bodily harm, and (b) for emotional
distress.” Id. at § 905.
In this case, the Ochses sought both economic and noneconomic compensatory
damages in their negligence action against ESTC. The trial court found that the Ochses
were not entitled to noneconomic damages, and the Ochses do not contest that finding on
appeal. However, regarding the economic damages, the Ochses assert that the trial court
should have independently computed the attorney’s fees incurred in the Henry litigation
based upon the evidence submitted by the Ochses in this case.
The trial court calculated the Ochses’ economic damages against ESTC by taking
judicial notice of the amount of attorney’s fees awarded by the circuit court in the Henry
litigation:
23
Compensatory damages are in contrast to “nominal damages,” which are defined
as “a trivial sum of money awarded to a litigant who has established a cause of action but
has not established that he is entitled to compensatory damages,” Restatement (Second) of
Torts § 907, and “punitive damages,” which are defined as “damages, other than
compensatory or nominal damages, awarded against a person to punish him for his
outrageous conduct and to deter him and others like him from similar conduct in the
future.” Restatement (Second) of Torts § 908.
29
With respect to economic damages, while the Ochses argue that this Court
should not consider the judgment of $215,710.60, this Court believes it must
do so. Recognizing that the case is on appeal, the Circuit Court for
Dorchester County determined this amount to be the amount to which the
Ochses were entitled for the Henry litigation. Consequently, judgment in the
amount of $215,710.60 will be entered against ESTC and in favor of the
Ochses on the negligence and breach of contract counts.
Maryland Rule 5-201 permits trial judges to take judicial notice24 of adjudicative
24
Maryland Rule 5-201 states:
(a) Scope of Rule. This Rule governs only judicial notice of adjudicative
facts. Sections (d), (e), and (g) of this Rule do not apply in the Court of
Special Appeals or the Court of Appeals.
(b) Kinds of facts. A judicially noticed fact must be one not subject to
reasonable dispute in that it is either (1) generally known within the territorial
jurisdiction of the trial court or (2) capable of accurate and ready
determination by resort to sources whose accuracy cannot reasonably be
questioned.
(c) When discretionary. A court may take judicial notice, whether requested
or not.
(d) When mandatory. A court shall take judicial notice if requested by a
party and supplied with the necessary information.
(e) Opportunity to be heard. Upon timely request, a party is entitled to an
opportunity to be heard as to the propriety of taking judicial notice and the
tenor of the matter noticed. In the absence of prior notification, the request
may be made after judicial notice has been taken.
(f) Time of taking notice. Judicial notice may be taken at any stage of the
proceeding.
(g) Instructing jury. The court shall instruct the jury to accept as conclusive
any fact judicially noticed, except that in a criminal action, the court shall
instruct the jury that it may, but is not required to, accept as conclusive any
judicially noticed fact adverse to the accused.
30
facts.25 This Court has stated, “Judicial discretion has been defined as ‘that power of
decision exercised to the necessary end of awarding justice and based upon reason and law,
but for which decision there is no special governing statute or rule[.]’” Dashiell v. Meeks,
396 Md. 149, 177 (2006) (quoting Jenkins v. College Park, 379 Md. 142, 164 (2003)). In
other words, “judicial discretion ‘is defined as the power of a court to determine a question
upon fair judicial consideration with regard to what is right and equitable under the law
and directed by reason and conscience to a just result.’” Id. (quoting Schneider v. Hawkins,
179 Md. 21, 25 (1940)).
In reviewing a trial court’s exercise of judicial discretion, this Court will not find an
abuse of discretion unless there is a “showing that a court acted in a harsh, unjust,
capricious and arbitrary way.” Id. at 178. There was no such showing here. Both parties
stipulated to the admission of the entire Henry litigation. The record includes all of the
documents up to and including the petition for a writ of certiorari to this Court after the
first appeal. One of the few documents missing from the record of the Henry litigation was
the trial court’s order and opinion awarding the Ochses attorney’s fees after this Court
denied the petition. Therefore, the trial court did not abuse its discretion by taking judicial
notice of the Henry litigation attorney’s fees or by calculating the Ochses’ damages as
equivalent to the reasonable attorney’s fees awarded in the Henry litigation.
25
An adjudicative fact is a fact “about the parties and their activities, businesses and
properties. They usually answer the questions of who did what, where, when, how, why,
with what motive or intent[.]” Dashiell v. Meeks, 396 Md. 149, 175 n.6 (2006) (quoting
Montgomery County v. Woodward & Lothrop, Inc., 280 Md. 686, 711-12 (1977)).
31
Next, we address the Ochses’ argument that the trial court should have used the
“lodestar method” of calculating attorney’s fees. The lodestar method is a method of
calculating attorney’s fees by “multiplying the number of hours reasonably spent pursuing
a legal matter by a ‘reasonable hourly rate’ for the type of work performed.” Monmouth
Meadows Homeowners Ass’n v. Hamilton, 416 Md. 325, 333 (2010) (citing Hensley v.
Eckerhart, 461 U.S. 424, 433 (1983), abrogated in part on other grounds, Gisbrecht v.
Barnhart, 535 U.S. 789 (2002)). “This amount is then adjusted by the court, depending on
the effect of numerous external factors bearing on the litigation as a whole.” Id. The
lodestar method is not used for all attorney’s fees awards and is “generally appropriate in
the context of fee-shifting statutes.” Id. at 334. The lodestar approach has public policy
goals and “is designed to reward counsel for undertaking socially beneficial litigation in
cases where the expected relief has a small enough monetary value that other methods
would provide inadequate compensation.” Id. at 334-35 (quoting Krell v. Prudential Life
Ins. Co. of Am., 148 F.3d 283, 333 (3d Cir. 1998)).
The Henry litigation did not involve a fee-shifting statute, and therefore the lodestar
method of calculation would not be appropriate. See id. at 335. The litigation arose from
a dispute between private parties concerning a breach of contract, and does not represent a
substantial threat to the public interest that would justify the application of the lodestar
method. See id. at 335-36. Although the Contract of Sale did contain its own fee-shifting
provision, the public policy underlying the use of the lodestar method in cases involving
fee-shifting statutes is inapplicable to a fee-shifting provision contained within a real estate
32
contract between private parties. Therefore, the trial court properly declined to use the
lodestar method.
Furthermore, because the collateral litigation doctrine requires the plaintiff to
establish that the fees and expenses from the first litigation were incurred necessarily and
in good faith, it was appropriate for the trial court to limit the Ochses’ damages to the
amount of attorney’s fees awarded by the circuit court in the Henry litigation, rather than
engage in its own independent calculation. In the Henry litigation, the circuit court used
the “proportionate award” approach to arrive at what it determined to be a reasonable fee,
and entered judgment accordingly against the Henrys. Although the Ochses asked for a
greater amount, the circuit court determined that those additional fees were not reasonable.
In this collateral litigation action, the Ochses essentially attempt to relitigate this point—
whether the fees awarded in the Henry litigation were reasonable. We decline to second
guess the reasonableness of attorney’s fees awarded in the Henry litigation when the
Ochses have already argued this issue in their second appeal to the Court of Special
Appeals, and we denied a request to grant a petition for certiorari from that appeal. See
Ochse 2, 216 Md. App. at 449, cert. denied, 439 Md. 331 (2014). Because the circuit court
in the Henry litigation determined that the additional fees requested by the Ochses, beyond
those that it awarded, were unreasonable, it follows that those fees were not “incurred
necessarily.” Therefore, it was appropriate for the trial court in this case to limit its
calculation of damages to the attorney’s fees awarded by the circuit court in the Henry
litigation, because any other fees requested by the Ochses had already been declared
unreasonable, and thus not “incurred necessarily.”
33
The Court of Special Appeals remanded this case to the trial court to clarify whether
the Ochses’ damages were awarded for ESTC’s negligence or breach of contract.
However, the trial court found that the contract gave rise to the tort “duty to[] accurately
and completely report the state of the title in the property the Ochses were undertaking to
purchase.” It is clear from the record that the attorney’s fees were awarded pursuant to the
negligence action, the duty of which arose from the contract. This is supported by the trial
court’s conclusion that the attorney’s fees were awarded for both the negligence and breach
of contract action. As we stated in 100 Investment Ltd. Partnership, “It is a settled and
‘familiar proposition that not every duty assumed by contract will sustain an action
sounding in tort.’” 430 Md. at 212 (quoting Mesmer v. Md. Auto. Ins. Fund, 353 Md. 241,
252 (1999)). “There are situations, however, when responsibilities imposed by a
contractual relationship are supplemented with tort duties.” Id. (citing Jacques v. First
Nat’l Bank of Md., 307 Md. 527, 534 (1986)). Thus, a plaintiff can recover “in tort for
economic losses caused by the negligent services of a professional.” Id. at 228 (quoting
Columbia Town Ctr. Title Co. v. 100 Inv. Ltd. P’ship, 203 Md. App. 61, 105 (2012)
(Meredith, J., dissenting), rev’d, 430 Md. 197 (2013)).
Therefore, we conclude that the trial court properly calculated the damages on the
Ochses’ negligence claim by taking judicial notice of the attorney’s fees incurred
necessarily and awarded by the circuit court in the Henry litigation, rather than
independently calculating the attorney’s fees based on the evidence submitted by the
Ochses.
34
D. Collateral Source Rule
Finally, we must decide whether the collateral source rule applies in this case. The
trial court reduced the Ochses’ damages by the amount satisfied by the Henrys in the Henry
litigation. If the collateral source rule applies, then the trial court was not permitted to
consider the Henrys’ satisfaction of the attorney’s fees in its award of damages to the
Ochses. But if the collateral source rule does not apply, and the trial court was permitted
to consider the Henrys’ satisfaction, then the Ochses would be unable to establish one of
the elements of the collateral litigation doctrine—namely, that their litigation expenses
were “incurred necessarily”—and thus the Ochses would be unable to recover.
The Ochses assert that the trial court was not permitted to consider the Henrys’
satisfaction because the Henrys are a collateral source and the collateral source rule
precluded ESTC from presenting evidence of the Henrys’ satisfaction to offset ESTC’s
liability in the instant case. As a result, the Ochses contend that the trial court erred by
reducing the Ochses’ damages by the amount of attorney’s fees satisfied by the Henrys in
the Henry litigation. ESTC responds that the collateral source rule does not apply because
the Restatement (Second) of Torts limits collateral sources to four types of benefits
received by a plaintiff—insurance policies, employment benefits, gratuities, and social
legislation benefits. See Restatement (Second) of Torts § 920A, cmt. c. ESTC contends
that the list in the Restatement is exhaustive, and the payment of attorney’s fees is not
listed.
The Maryland Association for Justice, Inc. (“MAJ”) submitted an amicus brief that
disputes ESTC’s contentions. MAJ states that ESTC’s position would carve out the first
35
exception to the collateral source rule. MAJ asserts that attorney’s fees fall within the
ambit of the collateral source rule, and that Maryland law allows tort victims to receive any
potential windfall.
“[T]he collateral source rule has been applied in this State to permit an injured
person to recover in tort the full amount of his provable damages regardless of the amount
of compensation which the person has received for his injuries from sources unrelated to
the tortfeasor.” Motor Vehicle Admin. v. Siedel Chevrolet, Inc., 326 Md. 237, 253 (1992).
The collateral source rule is an English common law rule, Narayen v. Bailey, 130 Md. App.
458, 466 (2000), and can be traced back in American jurisprudence to the United States
Supreme Court’s decision in Propeller Monticello v. Mollison, 58 U.S. 152 (1854). In
Mollison, the tortfeasor asserted that it was not liable for damages because the plaintiff
received satisfaction from its insurer. Mollison, 58 U.S. at 155. The Supreme Court held
that the tortfeasor could not avail itself of the insurance compensation because “[t]he
contract with the insurer [was] in the nature of a wager between third parties, with which
the [tortfeasor] ha[d] no concern.” Id. Thus, the collateral source rule “permits an injured
person to recover the full amount of his or her provable damages, ‘regardless of the amount
of compensation which the person has received from his or her injuries from sources
unrelated to the tortfeasor.’” Lockshin v. Semsker, 412 Md. 257, 285 (2010) (quoting
Haischer v. CSX Transp., Inc., 381 Md. 119, 132 (2004)).
Maryland adopted the collateral source rule as early as 1899 in this Court’s opinion
in Baltimore City Passenger Railway Co. v. Baer, 90 Md. 97 (1899). See Motor Vehicle
Admin., 326 Md. at 253-54 (tracing the history of the collateral source rule). In Baltimore
36
City Passenger Railway Co., the Court stated that “sick benefits received by the plaintiff
from any source other than the defendant were not to be considered by the jury in making
up their verdict.” Balt. City Passenger Ry. Co., 90 Md. at 108.
In Maryland, the collateral source rule “generally prohibits presentation to a jury of
evidence of the amount of medical expenses that have been or will be paid by health
insurance.” Lockshin, 412 Md. at 285 (citing Haischer, 381 Md. at 132). “The purpose of
the Collateral Source Rule is to preserve an injured party’s right to seek tort recovery from
a tortfeasor without jeopardizing his or her right to receive insurance payments for medical
care.” Narayen, 130 Md. App. at 466 (citing Michael F. Flynn, Private Medical Insurance
& the Collateral Source Rule: A Good Bet?, 22 U. Tol. L. Rev. 39, 41 (1990)). The policy
underlying the collateral source rule is to encourage “the maintenance of insurance.”
Haischer, 381 Md. at 132. Hence, the rule prevents a defendant from receiving the benefit
of a plaintiff’s insurance, for which the plaintiff paid consideration through premiums.
This Court has also barred evidence of disability and retirement benefits pursuant to the
collateral source rule. See CSX Transp., Inc. v. Pitts, 430 Md. 431, 473 (2013) (“[T]he
collateral source rule bars evidence of disability and retirement benefits[.]”).
However, the collateral source rule is not an absolute bar to the admissibility of
evidence demonstrating payment by a third party. The rule is applicable to tort cases and
is generally not applied in contract cases. Dennison v. Head Constr. Co., 54 Md. App. 310,
321-22 (1983) (“[The collateral source rule] has generally been applied only to tort
cases.”); see also Kremen v. Md. Auto. Ins. Fund, 363 Md. 663, 671-72 (2001); Seidel
Chevrolet, Inc., 326 Md. at 253 (“[M]ost courts have restricted application of the [collateral
37
source] rule to tort litigation[.]”). Additionally, the Restatement (Second) of Torts §
920A(c) limits the collateral source rule to four types of benefits:
The rule that collateral benefits are not subtracted from the plaintiff’s
recovery applies to the following types of benefits:
(1) Insurance policies, whether maintained by the plaintiff or a third party.
Sometimes, as in fire insurance or collision automobile insurance, the
insurance company is subrogated to the rights of the third party. This
additional reason for keeping the tortfeasor’s liability alive is not necessary,
however, as the rule applies to insurance not involving subrogation, such as
life or health policies.
(2) Employment benefits. These may be gratuitous, as in the case in which
the employer, although not legally required to do so, continues to pay the
employee’s wages during his incapacity. They may also be benefits arising
out of the employment contract or a union contract. They may be benefits
arising by statute, as in worker’s compensation acts or the Federal
Employers’ Liability Act. Statutes may subrogate the employer to the right
of the employee, or create a cause of action other than by subrogation.
(3) Gratuities. This applies to cash gratuities and to the rendering of services.
Thus the fact that the doctor did not charge for his services or the plaintiff
was treated in a veterans[’] hospital does not prevent his recovery for the
reasonable value of the services.
(4) Social legislation benefits. Social security benefits, welfare payments,
pensions under special retirement acts, all are subject to the collateral-source
rule.
The Ochses contend that the collateral source rule should apply to this case.
However, they do not cite any authority for the proposition that a fee-shifting provision in
a real estate sales contract is analogous to the collateral benefits listed in the Restatement.
Furthermore, the circumstances of this case are distinct from the insurance context, where
application of the collateral source rule normally prevents a defendant from receiving the
benefit of a plaintiff’s insurance for which the plaintiff paid consideration through
premiums. In this case, application of the collateral source rule would be inappropriate
38
because the Ochses did not pay separate consideration for the fee-shifting provision in their
Contract of Sale with the Henrys.
Therefore, we decline to extend the collateral source rule, which would preclude the
consideration of the Henrys’ satisfaction of the same damages that the Ochses sought to
recover in the instant case from ESTC. The collateral litigation doctrine only permits the
recovery of attorney’s fees actually incurred. Thus, the trial court did not err by considering
the satisfaction of the attorney’s fees by the Henrys pursuant to the fee-shifting provision
in the Contract of Sale. If the Henrys had not satisfied the attorney’s fees pursuant to the
fee-shifting provision in the Contract of Sale, then the Ochses’ theory of damages would
have sufficed. But, the Ochses cannot take advantage of the fee-shifting provision in the
Contract of Sale and of the collateral litigation doctrine to recover the same attorney’s fees.
“The object of tort law is to, so far as possible with money, place the injured party in the
position he would have been if no tort had been committed. It is to provide full recompense
but nothing more.” Paducah Area Pub. Library v. Terry, 655 S.W.2d 19, 23 (Ky. 1983).
In this case, the Ochses would be in a much better position than they were prior to ESTC’s
negligent title search if they were permitted to recover the attorney’s fees that have already
been satisfied.
We hold that the trial court properly declined to apply the collateral source rule in
this case, and did not err by reducing the damages awarded to the Ochses by the amount
previously satisfied by the Henrys. The Henrys’ satisfaction of the attorney’s fees from
the Henry litigation eliminated the Ochses’ injury, because the fees were not “incurred
necessarily.” Accordingly, the Ochses are unable to establish one of the basic elements of
39
a negligence cause of action: “that the plaintiff suffered actual injury or loss.” Kirson, 439
Md. at 523-24 (quoting Taylor, 207 Md. App. at 148). The Ochses would have been
permitted to recover the attorney’s fees as damages in this collateral litigation action
against ESTC but for the fee-shifting provision in the Contract of Sale and the Henrys’
satisfaction of the attorney’s fees pursuant to that provision. In other words, if the Henrys
had not satisfied the judgment for attorney’s fees in the Henry litigation, ESTC would have
remained liable, under the collateral litigation doctrine, for the fees awarded in that
litigation.
III
Conclusion
For the reasons set forth above, we hold that a party may recover attorney’s fees
actually incurred, as damages, pursuant to the collateral litigation doctrine, when the
expenses were the proximate result of the complained-of injury, incurred necessarily and
in good faith, and the amount is reasonable. However, the plaintiff has the burden in any
negligence action to demonstrate actual injury. If a plaintiff seeks to recover attorney’s
fees as damages pursuant to the collateral litigation doctrine, then the plaintiff must
demonstrate that he or she actually incurred the attorney’s fees. In this case, the Ochses
40
did not incur the attorney’s fees because the Henrys satisfied the attorney’s fees pursuant
to the fee-shifting provision in the Maryland Residential Contract of Sale.
Therefore, we reverse the judgment of the Court of Special Appeals and reinstate
the trial court’s order with respect to the judgment concerning ESTC.26
JUDGMENT OF THE COURT OF SPECIAL
APPEALS REVERSED. CASE REMANDED TO
THAT COURT WITH INSTRUCTIONS TO
REINSTATE THE JUDGMENT OF THE CIRCUIT
COURT FOR TALBOT COUNTY. COSTS TO BE
PAID BY RESPONDENTS/CROSS-PETITIONERS.
26
As we noted above, Chicago Title is not a party to this appeal, and we express no
opinion as to the correctness of the trial court’s order with respect to that party.
41