Helferstay v. Creamer

• Decision Date: 05 April 1984
• Docket Number: No. 677,677
• Citation: 473 A.2d 47,58 Md.App. 263
• Parties: Charles HELFERSTAY, et al. v. Ronald E. CREAMER, et al., T/A Weinberg & Green. Sept. Term 1983.
• Court: Court of Special Appeals of Maryland

Page 263

58 Md.App. 263

473 A.2d 47

Charles HELFERSTAY, et al. v. Ronald E. CREAMER, et al., T/A Weinberg & Green.

No. 677 Sept. Term 1983.

Court of Special Appeals of Maryland.

April 5, 1984.

David Freishtat, Baltimore, with whom were Paul Mark Sandler, M. Theresa McDonough and Freishtat & Sandler, Baltimore, on brief, for appellants.

J. Alan Galbraith, Washington, D.C., with whom were Brendan V. Sullivan, Jr., Michael S. Sundermeyer and Williams & Connolly, Washington, D.C. and M. Natalie McSherry and Whiteford, Taylor, Preston, Trimble & Johnston, Baltimore, on brief, for appellees.

Argued before MOYLAN, LISS and BELL, JJ.

LISS, Judge.

This case represents an appeal by Charles Helferstay, et al., appellants (hereinafter the Investors), from a denial by the Superior Court (now Circuit Court) for Baltimore City, of their motion for equitable relief and replication on equitable grounds. The appeal is taken from a November 8, 1982 oral ruling by Judge David Ross in favor of the appellees, Ronald E. Creamer, individually, and t/a the law firm of Weinberg and Green (hereinafter W & G).

The underlying litigation in this case began on July 9, 1976, when the Investors brought suit against W & G and against individual members of the firm. In Creamer v. Helferstay, 294 Md. 107, 448 A.2d 332 (1982), the Court of Appeals summarized the facts upon which this continuing dispute is based: ¹

Several limited partners of a real estate partnership which had invested in a land venture known as the Route 29--Lewis Property Partnership, brought suit in the Superior Court of Baltimore City against the Baltimore law firm of Weinberg & Green and several of its partners individually, alleging negligent breach of fiduciary duties, breach of contract and fraud. These allegations arose out of the law firm's concurrent representation of the real estate limited partnership and of the general partner thereof (who is not a party to this case). In essence, the limited partners claimed that Weinberg & Green's representation of the general partner personally, and its relationships with him in business dealings, had created a conflict of interest and had resulted in financial loss to the limited partners. The limited partners alleged that Weinberg & Green had had a duty to disclose the full extent of its relations with the general partner and that, had it made this disclosure, the limited partners would not have invested in the partnership. The limited partners sought compensatory damages and, under the fraud count, punitive damages. Weinberg & Green counterclaimed for damages, alleging that, to the extent that the law firm caused the limited partnership to have lost money, the loss was due to the failure of certain of the limited partners to have disclosed information to the law firm which would have enabled the venture to have been profitable.

Responding to the suggestion of the trial judge presiding in the case, the parties negotiated a partial settlement agreement which was signed on October 24, 1979. The limited partners agreed to dismiss with prejudice the fraud count and to release Weinberg & Green from all other claims of fraud or conspiracy relating to the real estate partnership. Weinberg & Green agreed to dismiss its counterclaim, and "to enter into good faith settlement negotiations" on the negligence and breach of contract counts. The following provision was also included in the written agreement:

"This agreement ... constitute[s] the entire agreement of the parties. There are no additional promises made by the parties except those expressly set forth in this agreement."

Pursuant to the settlement agreement, the fraud count and the counterclaim were dismissed. Thereafter, the parties met three times to negotiate on the remaining counts, and at the third meeting Weinberg & Green offered $80,000 in settlement. The limited partners rejected this offer, and, as found by the trial court, their counsel "immediately announced his intention to seek rescission [of the settlement agreement] and acted upon that intention the following day by filing the motion for appropriate relief."

The limited partners argued that the settlement agreement should be rescinded and the fraud count reinstated because, they alleged, Weinberg & Green had intentionally made "false representations" during the negotiations which had induced the limited partners to enter into the settlement agreement. Specifically, the limited partners alleged that during negotiations they had repeatedly stated that any settlement would have to be in the range of $275,000 to $550,000. Weinberg & Green, however, refused during those negotiations to agree expressly in writing or orally to a specific settlement range. Nevertheless, the limited partners claimed that, by certain statements, the law firm had caused them to understand that, even though the settlement agreement provided only for "good faith settlement negotiations," in reality the agreement was different. According to the limited partners, the law firm represented that, as soon as the fraud count was dropped, the law firm would offer to settle for between $275,000 and $550,000.

In an opinion, the trial court found that there was "no evidence of intentional misrepresentation" by Weinberg & Green. However, the court did find that Weinberg & Green had made an "honest misrepresentation" which had induced in the respondents the belief that Weinberg & Green intended to negotiate a settlement in the $275,000-$550,000 range. The court further found that the limited partners had entered into the settlement agreement in reliance upon this misrepresentation. The trial court entered an order rescinding the settlement agreement and reinstating the counterclaim and the fraud counts. The trial court based his order of rescission on the alternative grounds of misrepresentation and unilateral mistake. Weinberg & Green appealed to the Court of Special Appeals which affirmed on the ground of unilateral mistake. Creamer v. Helferstay, 47 Md.App. 243, 422 A.2d 395 (1980). The law firm then filed a petition for a writ of certiorari, arguing that neither misrepresentation nor unilateral mistake furnished grounds for rescission of the settlement agreement under the circumstances of this case. [Footnotes omitted]. [294 Md. at 109-12, 448 A.2d 332].

The Court of Appeals vacated this Court's judgment and remanded with instructions to vacate the judgment of the Superior Court and remand for further proceedings not inconsistent with that opinion. The Court noted "[t]he Superior Court of Balitmore City was clearly without the power to order rescission of the settlement agreement in this case ...." As a result, the dismissed claims in the underlying (1976) litigation, including Investors' fraud-conspiracy count, remained dismissed with prejudice pursuant to the dismissals filed in connection with the partial settlement agreement. The Court of Appeals advised, however, that upon remand the Investors "may be able to invoke Rule 342 d. 1 and make the argument or file a replication that grounds exist upon which a court of equity would rescind the settlement agreement." 294 Md. at 115-16, 448 A.2d 332. Because the Court of Appeals envisioned the possibility of further proceedings upon remand, the Court furnished guidance on the two legal issues raised by W & G in its certiorari petition and then in its brief, specifically instructing the trial court to permit appellants to present additional evidence and raise issues in addition to misrepresentation and unilateral mistake "such as the meaning of the term 'good faith settlement negotiations' and whether the law firm breached their contractual promise, thereby relieving the limited partners from their obligations under the settlement agreement." Id., at 132-33, 448 A.2d 332.

Appellants subsequently filed a replication on equitable grounds, alleging intentional misrepresentation, negligent misrepresentation, breach of contract, fraud, estoppel and mutual mistake.

On November 8, 1982, the trial court ruled against the appellants on each ground alleged. Judge Ross reiterated his 1979 ruling that the Investors were not induced to enter the partial settlement agreement through fraud, nor was the agreement induced by mutual mistake. ² The Investors' estoppel argument was rejected on the ground that the conduct by W & G about which the Investors complained preceded the partial settlement agreement, but under the opinion of the Court of Appeals, the contract controlled. ³

Judge Ross concluded that negligent misrepresentation was the tort side of innocent misrepresentation, and ruled that negligent misrepresentation was therefore not a viable ground for equitable relief under the opinion of the Court of Appeals in this case.

Judge Ross then stated, "That brings us down, as I read it, as I analyze it, to the final and only viable remaining basis for relief for the plaintiffs, and that is the question of breach of contract. There are two parts of that issue. (1) What does the contract mean; and (2) taking that meaning, was the contract breached." Judge Ross held that "good faith negotiations" was an un ambiguous term and that it was therefore to be accorded its objective meaning. He then defined its objective meaning, and found as a fact that W & G negotiator Howard Miller negotiated in good faith.

Finally, Judge Ross addressed Investors' contention that W & G improperly invoked attorney-client privilege to foreclose inquiry into conversations that W & G negotiator Howard Miller had with W & G attorneys in the course of educating himself about the underlying 1976 litigation against W & G. Judge Ross ruled that the assertion of privilege was proper, and that, even if he were to draw an adverse inference from the assertion of privilege, such adverse inference would not change the result.

The docket entries indicate that at the conclusion of Judge Ross's oral opinion an order was entered...