Consolidated Construction Services, Inc. v. Simpson

Decision Date23 December 2002
Docket NumberNo. 35,35
Citation372 Md. 434,813 A.2d 260
PartiesCONSOLIDATED CONSTRUCTION SERVICES, INC. et al., v. Robert C. SIMPSON et al.
CourtMaryland Court of Appeals

Jeffrey M. Kotz (Kandel, Klitenic, Kotz, Betten & Chernow, LLP, on brief), Towson, for petitioners.

Douglas A. Rubel (Douglas A. Rubel, PLLC, Cary, NC; Roger A. Hayden, II, of Pasternak & Fidis, P.C., Bethesda), all on brief, for respondents.

Argued before BELL, C.J., and ELDRIDGE, RAKER, WILNER, CATHELL, HARRELL and BATTAGLIA, JJ. CATHELL, Judge.

This case arises out of several cases involving the development of a Howard County residential community, "Pleasant Chase." On January 5, 1996, New Panorama Development Corporation ("New Panorama"), a developer, filed suit against Consolidated Construction Services, Inc. (CCS), a contractor, for various claims, including a claim for damages, involving CCS's installation of sewers and water lines in the Pleasant Chase development. Soon thereafter, New Panorama also filed suit for damages against several sub-contractors, including Atlas Plumbing and Mechanical, Inc. (Atlas), Maryland Paving and Sealant, Inc. (MPS) and Professional Service Industries, Inc. (PSI). All of these claims were consolidated into one case, hereinafter "New Panorama v. CCS." The parties involved filed numerous cross-claims, counter-claims and third party claims.

In August 1996, Robert C. Simpson, et. al., respondents, filed suit against New Panorama1 for defaulting on a mortgage for the purchase of the Pleasant Chase property. On February 20, 1997, respondents obtained a judgment against New Panorama. Respondents then served writs of garnishment on several companies and individuals, including CCS, Atlas, MPS, PSI, Donald J. McCartney and Jeffrey M. Kotz.2 These entities and persons, together with New Panorama, are petitioners in the case sub judice.

On January 7, 1999, petitioners entered the terms of a settlement agreement into the record of the New Panorama v. CCS litigation and later executed that agreement between June and September of 1999. On May 12, 1999, respondents filed a Motion to Intervene and a Motion to Enforce Garnishments in the New Panorama v. CCS litigation; both motions were denied by order on September 21, 1999. An appeal of that order was stayed pending the outcome of the garnishment issues in the Simpson v. New Panorama litigation.

On January 13, 2000, Atlas, CCS, MPS, PSI and Kotz filed a Motion to Terminate Garnishments in the Simpson v. New Panorama litigation. McCartney subsequently filed a Motion to Terminate Garnishment on March 24, 2000. The Circuit Court held a hearing on April 14, 2000 and entered on order terminating the garnishments on May 1, 2000. Respondents filed a timely appeal. The Court of Special Appeals then consolidated this appeal with respondents' appeal in the New Panorama v. CCS litigation.

On February 6, 2002, the Court of Special Appeals affirmed the trial court's denial of respondents' Motion to Intervene in the New Panorama v. CCS litigation. Simpson v. Consol. Constr. Serv., Inc., 143 Md.App. 606, 795 A.2d 754 (2002). That court affirmed in part and reversed in part in reference to the trial court's dismissal of respondents' garnishments, and then remanded the case for further proceedings.3 On May 1, 2002, petitioners filed a Petition for Writ of Certiorari with this Court. On May 20, 2002, respondents filed an Opposition to Petition for Writ of Certiorari. On June 20, 2002, we granted the petition. Consolidated v. Simpson, 369 Md. 570, 801 A.2d 1031 (2002). Petitioners present two questions for our review:

"1. Whether funds generated by a settlement agreement between multiple parties are subject to garnishment by a judgment creditor of one of the parties, where that judgment debtor does not contribute to or receive any funds under the settlement agreement?

"2. Whether Section 10-501 of Maryland's Business Occupations and Professions Article provides an attorney's lien on funds generated by a pretrial settlement agreement?"

We answer in the negative to petitioners' questions. We hold that respondents' writs of garnishment are not valid and that McCartney did not have a statutory attorney's lien on the settlement funds.

I. Facts

New Panorama is a developer of land for residential homes. New Panorama generally purchases a parcel of land, prepares a site plan, obtains the necessary development permits, installs lines for water, sewer and storm drainage, builds roads and later sells the finished lots to builders. In 1992, New Panorama purchased land in Howard County from respondents4 with plans to develop it into a residential community to be known as Pleasant Chase. New Panorama signed a mortgage with respondents, which required an initial down payment and subsequent monthly payments to respondents until the entire balance was paid. After New Panorama failed to make those payments, respondents filed suit in Howard County Circuit Court against New Panorama alleging that New Panorama had defaulted under the mortgage used to purchase Pleasant Chase.

Before its default on its mortgage with respondents, New Panorama entered into a contract with CCS for CCS to dig trenches for water, sewer and storm drainage lines, install the lines and complete other utility work in the Pleasant Chase community. PSI was the engineering firm hired by New Panorama to test the soil, i.e., to monitor and test the areas surrounding the community's utilities to ensure the proper compaction of the backfill prior to the construction of the community's roads. MPA was hired to pave the roads. Atlas, a sub-contractor hired by Lovell Regency, a residential builder, was hired to connect the individual homes to the water and sewer lines and otherwise complete the plumbing work. Within a few months, the paved roads within Pleasant Chase began to settle and rupture, thus causing considerable damage rendering the roads in need of extensive repair.

New Panorama retained McCartney in reference to possible claims arising out of the damage to the roads. In 1996, after a dispute over who was responsible for the road damage, New Panorama filed separate suits claiming damages against CCS and the sub-contractors.5 There was a third party claim,6 along with several counter-claims and cross-claims,7 filed, which led to the suits being consolidated in early 1997.8

As indicated supra, subsequent to the initiation of the New Panorama v. CCS litigation, respondents obtained a judgment, arising out of a default under the terms of the original mortgage on the property, against New Panorama in the Circuit Court of Howard County in the amount of $791,897.80. Seeking enforcement of that judgment, respondents subsequently served writs of garnishment on CCS, PSI and Atlas to garnish any money that they owed to New Panorama.

In 1999, after three years of litigation and after the writs of garnishment had been served, McCartney and Kotz9 and the parties to the New Panorama v. CCS litigation, including New Panorama, PSI, CCS, IFIC, MPS and Atlas, devised a settlement agreement, entitled "Settlement Agreement, Mutual Release and Escrow Agreement," to dispose of all current cross and counter-claims, as well as any future claims arising out of the Pleasant Chase project. The agreement was read into the record on January 7, 1999, but was not executed by the parties until between June and September of 1999. The Court of Special Appeals discussed the terms of the settlement agreement as follows:

"In the agreement, the parties stated that it was their `intention and desire' to `resolve any disputes' among them relating to the Pleasant Chase development `by paying CCS $77,500 plus interest in satisfaction of its counter-claim, third party claim, and indemnity claim,' although CCS had not yet brought an indemnity claim. They further stated that `[f]or purposes of this Settlement Agreement ... PSI, MPS, and Atlas concede that CCS would have the right to institute a claim against them for indemnity, contribution, and/or negligence... with respect to damages that could conceivably be awarded in favor of New Panorama against CCS and paid by CCS as a result of the Litigation.'

The agreement also provided that McCartney would be paid `$95,000 plus interest in satisfaction of his attorney's lien,' stating that McCartney had served `written notice of his lien ... established pursuant to § 10-501 of the Business Occupations and Professions Article, Annotated Code of Maryland, and Rule 2-652(b) of the Maryland Rules of Civil Procedure' upon all parties to the settlement agreement for legal services he had rendered in New Panorama v. CCS. According to the settlement agreement, McCartney's lien was for `fees, expenses, costs and other compensation ... in the amount of one-third of the gross amount of any recovery or actual attorney's fees, whichever is greater.'

To generate the funds to be paid to CCS and McCartney, the settlement agreement required that, upon execution, Kotz, as escrow agent of the settlement fund, be paid $75,000.00 by PSI, $47,500.00 by the insurance company for CCS, $45,000.00 by the insurance company for MPS, and $5,000.00 by the insurance company for Atlas. The settlement agreement stated that `New Panorama [did] not have any legal or equitable interest in the Settlement Funds,' but did have the right `to compel the disbursement [of the funds] by the Escrow Agent in accordance with [the] Settlement Agreement.'

The settlement agreement also declared that it was `contingent upon the termination of ... [respondents'] garnishments.' It specified that Kotz could neither distribute the settlement funds nor file a stipulation of dismissal until, among other things, he had received a court order `dismissing with prejudice... [respondents'] garnishments' and until that order had become final after `the conclusion of all appellate review thereof and further proceedings on remand.'

The settlement agreement also...

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