892 A.2d 520 (Md. 2006), 35, Myers v. Kayhoe

Docket Nº:35
Citation:892 A.2d 520, 391 Md. 188
Opinion Judge:The opinion of the court was delivered by: Raker, J.
Party Name:Steven C. MYERS, et al. v. Douglas KAYHOE, et al.
Case Date:February 09, 2006
Court:Court of Appeals of Maryland

Page 520

892 A.2d 520 (Md. 2006)

391 Md. 188

Steven C. MYERS, et al.


Douglas KAYHOE, et al.

No. 35

Court of Appeals of Maryland

February 9, 2006

Page 521

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Michael G. Rust (Griswold & Lee, P.A., on brief), Easton, for petitioners, cross/respondents.

William M. Ferris (Lynn T. Krause, Krause & Ferris, on brief), Annapolis, for respondents/cross-petitioners.


Raker, J.

In this case, we must decide three issues arising out of a contract for sale of real estate. Appellants ask us to reverse the trial court's refusal, after granting summary judgment to appellants in their action to recover their deposit, to award attorney's fees under a provision in a sale contract providing for the award of attorney's fees to the prevailing party in a dispute under the contract. Appellees, in their cross-appeal, ask us to reverse the trial court's grant of summary judgment, arguing that there were remaining disputes of material fact as to whether a financing commitment contingency clause in the contract was satisfied or waived. We shall hold that trial court's grant of summary judgment to appellants was proper, but that the court failed to apply the appropriate construction of the contract provisions governing the award of attorney's fees to appellants' request for fees. Accordingly, we shall remand the case to the trial court for reconsideration of appellants' claim for attorney's fees.


On April 12, 2002, appellants, Steven Myers and Linda Barrett, contracted with appellees, Douglas Kayhoe and Ruth Ann Kayhoe, to purchase residential real property located at 351 Kehm Road, Queenstown, MD. 1 Paragraph 19 of the agreement further provided that it was contingent upon appellants obtaining financing in the form of a 30 year loan for $245,000 at 7% interest, and the subsequent paragraph

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contained the following provision relating to this financing:

"20. FINANCING APPLICATION AND COMMITMENT: Buyer agrees to make written application for the financing herein described within five (5) days from the date of Contract Acceptance. If such written financing commitment is not obtained by Buyer within thirty (30) days from the date of Contract Acceptance, this Contract of Sale shall be null and void and of no further legal effect, and all deposits hereunder shall be disbursed in accordance with the terms of this Contract."

The next paragraph specified conditions under which the requirements of ¶¶ 19 and 20 could be satisfied by alternate financing, and provided that "[n]othing in this paragraph shall relieve Buyer of the obligation to apply for and diligently pursue the financing described in the 'Financing' Paragraphs 19 and 20." The purchase agreement further provided that a prevailing party in litigation under the agreement between buyer and seller "shall be entitled to receive reasonable attorney's fees from the other party as determined by the court or arbitrator." Appellants paid a $2,000 deposit under the agreement, and the agreement provided for a closing date of June 21, 2002. The agreement expressly provided that time was not of the essence.

The purchase agreement also contained an addendum provision stating that the agreement was contingent upon executing a sale agreement for the purchase of appellants' then current home and a successful closing on appellants' home before the closing date under the agreement. At the time of the purchase agreement, appellants' home was under contract for sale. Presumably for this reason, the sale addendum originally did not specify a date by which appellants needed to have their home under contract to satisfy the contingency. The prospective purchasers of appellants' home decided they did not want to go through with the sale, and appellants agreed to a release. On May 4, 2002, appellants and appellees executed a new addendum to the original purchase agreement, revising the sale contingency clause to specify that the contract was contingent upon appellants entering into a sale contract for their home by May 24, 2002. This addendum provided that time was of the essence with respect to the contract date. 2 Appellants did not enter into a sale agreement until after May 24, 2002.

On June 6, 2002, after appellants had entered into a sales contract for their home, appellants and appellees executed a second new addendum to the purchase agreement. It provided as follows:

"All parties agree and understand that the contract of sale dated 4/12/02 will hereby be re-enacted with revisions and all other terms and conditions will remain in full force. Buyers have revised purchase price and the contract reflects the contingency of a successful settlement of their home."

Appellants then applied for financing on the terms specified in the purchase agreement with NovaStar Financial. They had discussed financing previously with NovaStar, but NovaStar informed them that it could not consider an application until it had a purchase contract. On June 6, appellants faxed a request to NovaStar for an application form. They received the application on June 12, and completed and faxed it to NovaStar later on the 12th of June. NovaStar declined appellants' application after a review of the original appraisal of the property revealed that its v

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value had been overstated in the original appraisal. NovaStar sent an email to appellants informing them of its decision to decline their application on June 24, 2002.

Darlene Weingartner, appellants' real estate agent, gave the following testimony at her deposition:

"Q: Did you ever discuss with Mr. Myers or Ms. Barrett their attempts to obtain a mortgage for the revised contract—revived contract of June 6th?

A: I discussed it with them when we did the revision to the contract. I asked them how—what's going on with your loan and they said, 'We're good to go. The loan's in place.' "

In their summary judgment motion, appellees claimed that "[a]t the time of this second addendum, [appellees] had been advised by Ms. Weingartner that the financing was in place." 3

Appellants did not obtain alternate financing. After the appraisal was rejected and appellants' initial application denied, NovaStar offered to lend them $225,000.00. Appellees' real estate agent, Karen Kilheffer, also offered to arrange financing for the appellees on the terms called for in the purchase agreement through her brokerage firm after appellee's initial application was denied. Appellants did not accept either of these offers, and the transaction did not close. Appellees later sold the home to another buyer for less than the price in the agreement with appellants.

In March 2004, appellees sued appellants in the Circuit Court for Queen Anne's County, claiming they had breached the purchase contract. Appellants counterclaimed for return of their security deposit, as well as attorney's fees. On cross-motions for summary judgment, the Circuit Court granted summary judgment for appellants on the issue of the security deposit, but awarded no attorney's fees, basing this decision on its finding that "there was a second contract between the parties" that arose as a result of the June 6, 2002 addendum. Appellants and appellees both filed motions for reconsideration, which were both denied.

Appellants noted a timely appeal to the Court of Special Appeals, and appellees noted a cross‑appeal. We granted certiorari on our own initiative before decision in the Court of Special Appeals. 388 Md. 97, 879 A.2d 42 (2005).


Appellants argue before this Court that the plain language of the attorney's fees provision in the purchase agreement that "the prevailing party . . . shall be entitled to receive reasonable attorney's fees from the other party as determined by the court" required the court to determine what amount of the attorney's fees actually incurred by the appellants were reasonable given the nature of the services rendered, and to enter a judgment for the appellants in such an amount. They claim that the trial court's refusal to award any attorney's fees was not supported by its conclusion that the June 6, 2002 addendum created a new contract rather than a modification of the original sale contract, because the addendum expressly provided that "all other terms and conditions" of the new contract would "remain in full force," including the attorney's fees provision.

Appellees reply that the decision of the trial court on the issue of attorney's fees is supported by the language in the attorney's

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fees provision providing that...

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