Major v. First Virginia Bank-Central Maryland

• Decision Date: 01 September 1992
• Docket Number: BANK--CENTRAL,No. 1940,1940
• Parties: Otto MAJOR et al. v. FIRST VIRGINIAMARYLAND et al. ,
• Court: Court of Special Appeals of Maryland

Page 520

97 Md.App. 520

631 A.2d 127

Otto MAJOR et al. v. FIRST VIRGINIA BANK--CENTRAL MARYLAND et al.

No. 1940, Sept. Term, 1992.

Court of Special Appeals of Maryland.

Sept. 30, 1993.

Stuart L. Alison, Bel Air, for appellants

D. Christopher Ohly (Bruce L. Mann and Hazel & Thomas, P.C., on the brief), Baltimore, for appellee, First Virginia Bank, et al.

William A. Beale, for appellees, Harco Oldsmobile, Inc. and pro se.

Argued before BISHOP, BLOOM and CATHELL, JJ.

CATHELL, Judge.

This is an appeal from an order of the Circuit Court for Baltimore City granting attorneys' fees under Maryland Rule 1-341. Otto Major and Stuart Alison, appellants, represented the plaintiff in Veta McAnulty v. First Virginia Bank--Central As we have said, appellants were not parties in the underlying case but were plaintiff's attorneys. They appear here as appellants. In Legal Aid Bureau, Inc. v. Farmer, 74 Md.App. 707, 539 A.2d 1173 (1988), Judge Wilner, for this Court, addressed the further appealability of an award for reimbursement of attorney's fees after an appeal to the circuit court from a District Court. He noted that unless the circuit court judgment "pursuant to Md.Rule 1-341 has some special, collateral status, it would not be reviewable by us." Id. at 710, 539 A.2d 1173. In his discussion, Judge Wilner clarified that an award of attorney's fees "although ... emanat[ing] from an underlying civil action, ... it is not necessarily tied to the merits...." Id. at 713, 539 A.2d 1173.

                Maryland.   The defendants in that case, First Virginia Bank, Shirley Tittle, Harco Oldsmobile, Inc., and William A. Beale, Esquire, are appellees here
                

[A] distinction needs to be drawn between a judgment entered against a party to the action and one entered against counsel.... We conclude that, for purposes of appellate jurisdiction, a judgment entered by the circuit court against the attorney is sufficiently collateral to the underlying action as to fall within our bailiwick. ¹

Id. at 712, 539 A.2d 1173.

The underlying case was first filed in the Circuit Court for Baltimore City in June 1990. Plaintiff alleged that, in repossessing her vehicle, defendants engaged in fraud, conversion, conspiracy, and violated the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. (RICO). The defendants removed the case to Federal District Court where the RICO count was voluntarily dismissed. The federal court remanded the remaining claims back to state court. The entire complaint was dismissed twice in the circuit court, first with leave to amend and then with prejudice. After the second dismissal the defendants filed a motion for attorneys' Appellants present five questions, which we shall address in the following order:

                fees under Maryland Rule 1-341.   The circuit court granted the motion, awarding total fees of $25,000 to be paid by appellants.   This appeal followed
                

I. Did the trial court err in finding that appellants lacked substantial justification for and acted in bad faith in prosecuting the RICO and fraud counts?

II. Did the trial court err in not applying the doctrine of res judicata to the appellants' motion for Rule 1-341 sanctions after the federal court's denial of Rule 11 sanctions for the same costs and attorneys fees?

III. Did the trial court have jurisdiction to impose Rule 1-341 sanctions for costs and fees charged by appellees while the case was pending in the federal court?

IV. Did the trial court err in awarding sanctions totalling twenty-five thousand dollars ($25,000.00) under the facts of this case?

V. Assuming arguendo that an award of sanctions against Otto Major in the amount of $5,000.00 was justified, did the trial court err in imposing four times that amount against Stuart Alison?

We shall affirm.

This case has been reviewed in varying degrees by two state circuit court judges, two Federal District Court judges, and this Court. ² Many of the facts and issues have been analyzed ad nauseam. As this appeal is only from the trial judge's award of attorneys' fees, we will avoid repeating the painstaking analysis engaged in by the other judges and will, when appropriate, defer to their findings by reference to their orders and memoranda included in appellants' record extract.

THE FACTS

Some background, however, will aid us in reviewing the circuit court's findings that this action was maintained in bad faith and without substantial justification. Veta McAnulty, plaintiff in the underlying case, entered into a marital settlement agreement with her estranged husband. Pursuant to the agreement, he bought her a new car, financing the purchase with an $11,565 loan from Commercial Bank (now First Virginia Bank). The husband executed an installment sales agreement with the bank, while plaintiff executed the sales contract with Harco Oldsmobile, Inc. (Harco). The husband eventually defaulted on the loan. While there was some dispute between the bank and Harco as to whether the security interest in the car was perfected, the bank ultimately assigned the installment sales contract to Harco, who proceeded to repossess and sell the car.

Based on these events, plaintiff, represented by appellants, ³ filed a ten count complaint praying over one million dollars in damages. The complaint alleged violation of federal RICO and state unfair trade practices statutes, conversion, fraud, civil conspiracy, breach of contract, negligence and gross negligence. Appellees removed the case to Federal District Court based on the RICO count and moved to dismiss the entire complaint. Plaintiff was granted a time extension to answer the motion to dismiss. In the order granting that motion Judge Garbis suggested that plaintiff consider voluntarily dismissing the RICO count, and indicated the possibility of sanctions pursuant to Federal Rule of Civil Procedure 11 (Rule 11) if she chose to proceed, as he found the count frivolous. Plaintiff did not answer the motion to dismiss the RICO count.

Three weeks later plaintiff voluntarily dismissed the RICO count. Appellees requested that the federal court retain jurisdiction of the state law claims but the court declined, remanding the case to the Circuit Court for Baltimore City. After remand, appellees moved for Rule 11 sanctions against plaintiff and appellants.

In his December 21, 1990, letter Order Judge Garbis found that adequate grounds existed to grant Rule 11 sanctions, but that because the pleading was originally filed in state court and removed to federal court by the defendants (appellees), it should not be held to a Rule 11 standard. ⁴ Judge Garbis concluded: "Whether the Complaint fails to meet some applicable state court standard is a matter for consideration by the Circuit Court for Baltimore City."

Appellants then filed a motion in federal court for Rule 11 sanctions against appellees, based on the "frivolous" motion for Rule 11 sanctions filed by appellees. Judge Garbis denied the motion, stating that if the Court was "inclined to prolong this totally useless proceeding, it might well, sua sponte," impose sanctions on appellants.

After remand, Judge Byrnes in the circuit court held a hearing on appellees' motion to dismiss. Judge Byrnes dismissed the entire complaint with leave to amend on certain conditions. Those conditions included that the amended pleading be factually detailed and explicit, and that the plaintiff verify the entire complaint under oath, subject to the penalties of perjury.

Plaintiff filed an amended complaint, ⁵ and appellees again moved to dismiss, on the ground, among others, that it did not comply with Judge Byrnes' order. A hearing was held before Judge Noel, in which he dismissed plaintiff's complaint with prejudice. An appeal was noted to this Court upon the complaint's dismissal. During the appeal's pendency, the motion was made for costs and attorneys' fees under Maryland Rule 1-341. Judge Noel held a two-day hearing on the motion and thereafter imposed the sanctions that are the subject of this appeal.

THE LAW

Maryland Rule 1-341 reads:

In any civil action, if the court finds that the conduct of any party in maintaining or defending any proceeding was in bad faith or without substantial justification the court may require the offending party or the attorney advising the conduct or both of them to pay to the adverse party the costs of the proceeding and the reasonable expenses, including reasonable attorney's fees, incurred by the adverse party in opposing it.

The Court of Appeals has expressly adopted a standard of review for an award of attorney's fees under this rule.

... [B]efore imposing sanctions in the form of costs and/or attorney's fees under Rule 1-341, the judge must make two separate findings that are subject to scrutiny under two related standards of appellate review. First, the judge must find that the proceeding was maintained or defended in bad faith and/or without substantial justification. This finding will be affirmed unless it is clearly erroneous or involves an erroneous application of law. Second, the judge must find that the bad faith and/or lack of substantial justification merits the assessment of costs and/or attorney's fees. This finding will be affirmed unless it was an abuse of discretion.

Inlet Associates v. Harrison Inn Inlet, Inc., 324 Md. 254, 267-68, 596 A.2d 1049 (1991). See also Deleon Enterprises, Inc. v. Zaino, 92 Md.App. 399, 415, 608 A.2d 828 (1992); Art Form Interiors, Inc. v. Columbia Homes, 92 Md.App. 587, 593-94, 609 A.2d 370, cert. denied, 328 Md. 567, 616 A.2d 378 (1992).

The trial judge must make explicit findings of fact that a proceeding was maintained or defended in bad faith and/or without substantial justification. Inlet Associates, 324 Md. at 269, 596 A.2d 1049 (citing Zdravkovich v. Bell Atlantic-Tricon Leasing Corp., 323 Md. 200, 210, 592 A.2d 498 (1991)). See also Talley v. Talley, 317 Md. 428, 436, 564 A.2d 777 (1989); Beery v. Maryland...