E. Shore Title Co. v. Ochse

EASTERN SHORE TITLE COMPANY v. STEVEN J. OCHSE, ET AL.

No. 16

COURT OF APPEALS OF MARYLAND

Argued: October 6, 2016

September Term, 2016

May 31, 2017

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

Barbera, C.J. Greene, Adkins, McDonald, Watts, Getty, Battaglia, Lynne A. (Senior Judge, Specially Assigned), JJ.

Opinion by Getty, J.

"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").

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.

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.

IBackground

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 reversionaryclause, 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 thatdepict 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."

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,

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