Date: 12-03-2001

Case Style: United Book Press, Inc. v. Maryland Composition Company, Inc.

Case Number: No. 2637, Sept. Term, 2000

Judge: James R. Eyler

Court: Court of Special Appeals of Maryland

Plaintiff's Attorney: Anthony P. Palaigos and Thomas A. Bowden of Blum, Yumkas, Mailman, Gutman & Denick, P.A., Baltimore, Maryland

Defendant's Attorney: Marvin I. Singer and Ira K. Himmel, Baltimore, Maryland

Description: United Book Press, Inc., appellant, brought suit in the Circuit Court for Baltimore County against Maryland Composition Co., Inc., appellee, alleging breach of contract and seeking indemnity. Appellant appeals from a judgment entered in favor of appellee after the circuit court, at trial, granted appellee’s motion for judgment at the close of appellant’s case. In addition to general principles of contract law, including the duty to mitigate damages, the parties have urged consideration of judicial estoppel, equitable estoppel, waiver, merger, accord and satisfaction, and the preclusive effect of a confessed judgment. For reasons that follow, we shall reverse the judgment of the circuit court and remand for a new trial.

Factual Background

Appellant was in the business of manufacturing books. It entered into a contract with Strathmore Directories, Ltd. (Strathmore), to print a “Who’s Who” directory. Strathmore provided appellant with a computer disc containing the text to be included in the book. Appellant entered into a contract with appellee, a typesetter, to typeset the text. Appellant gave the disc to appellee. Appellant presented testimony that appellee was obligated to proof read its work.

Appellee omitted the “K” section from the type that was set, and the error was not discovered until after 4,962 books had been printed and delivered to Strathmore. Strathmore learned of the error from one of its customers. It advised appellant, and appellant advised appellee. According to testimony at trial, appellee acknowledged that the “K” section had been deleted from its typeset and explained that it occurred when the disc was converted to a format that was compatible with its type setting system.

Strathmore refused to pay for the books. Appellant attempted to correct the error in part by providing a limited number of the missing “K” sections to be placed in some of the books. This was done at a cost of $3,000.00. Appellant contacted appellee and asked appellee to split the cost. Appellee agreed and, subject to a $1,500.00 credit, appellant paid appellee’s bill. Strathmore continued to refuse to pay its bill.

On June 30, 1999, appellant filed a complaint in the Circuit Court for Baltimore County against Strathmore. Appellant sought a judgment by confession based on (1) the contract between it and Strathmore which contained a confessed judgment clause; and (2) a supporting affidavit. Appellant alleged in the complaint that, pursuant to the contract between it and Strathmore, appellant provided page proofs to Strathmore for approval prior to printing the books, and the books as printed conformed to the page proofs as approved by Strathmore. Appellant further alleged that it delivered 4,962 books to Strathmore and issued invoices in the total amount of $97,667.64. Appellant asserted that Strathmore refused to pay the invoices based upon the absence of the “K” section in the books even though that section was absent from the page proofs that had been approved by Strathmore. The attached affidavit, in pertinent part, stated that the amounts claimed were “justly due and payable.”

On June 30, 1999, a confessed judgment was entered in favor of appellant in the amount of $97,667.64, attorneys fees in the amount of $14,650.15, and costs. On July 13, 1999, a notice of confessed judgment was served on Strathmore. The notice advised Strathmore, a nonresident, that pursuant to Rules 2-611(c) and 2-321(b)(1), it had 60 days from the date of service to file a motion to open, modify, or vacate the judgment. On August 26, 1999, within that 60 day period, appellant entered into a settlement with Strathmore. Pursuant to the settlement, Strathmore paid appellant $75,000.00 and the parties executed a mutual general release. Appellant released Strathmore from any further liability but did not release any other entities. The confessed judgment was not vacated, and there was no motion filed seeking to vacate it. The judgment was not entered satisfied on the record.

On July 6, 1999, appellant filed a complaint against appellee in the case now before us. The complaint alleged breach of contract and indemnity. In pertinent part, appellant alleged that appellee had breached its contract with appellant by omitting the “K” section from the directory, and as a result, Strathmore had refused to pay for the books. Appellant also alleged that “if it is found that [appellant] breached its contract with Strathmore, then [appellee’s] breach of contract proximately caused [appellant’s] breach”. Appellant sought damages in the amount of $97,667.64, attorneys fees, interest, and costs.

On January 4, 2001, the case was tried non jury. At trial, appellant claimed damages in the amount of $22,667.64, its invoice amount less the $75,000.00 received pursuant to the Strathmore settlement. At the close of appellant’s case, the circuit court granted appellee’s motion for judgment.

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Appellant’s position may be summarized as follows. First, there was uncontradicted evidence that appellee breached its contract with appellant. Second, the confessed judgment against Strathmore was not final when entered, and appellant settled its claim with Strathmore before the judgment became final; thus, the confessed judgment had no preclusive effect. Third, appellant’s settlement with Strathmore represented a reasonable mitigation of damages with respect to its claim against appellee. Appellee asserts that the circuit court judgment should be affirmed based on theories of judicial estoppel, waiver, equitable estoppel, merger, and accord and satisfaction.

We shall shortly begin our analysis by addressing the theories advanced by appellee to support the circuit court’s ruling. First, however, we point out an issue that is not before us. After a confessed judgment was entered in favor of appellant against Strathmore, the parties entered into a settlement and executed a mutual release. No order of satisfaction was filed in that case, however, and there was no docket entry marking the case satisfied. Consequently, we do not have before us the effect of such an entry which would give rise to the question of whether a party could go behind that entry and attempt to establish that the judgment was only partially and not completely satisfied. See,e.g., Franzen v. Dubinok, 290 Md. 65 (1981). What we do have before us is the effect of a confessed judgment that was never vacated and was not marked satisfied.

Judicial Estoppel

Appellee contends appellant sought and obtained a judgment against Strathmore for the full amount of the damages claimed on the basis of an assertion, under oath, that Strathmore was solely responsible for the alleged loss. Appellee concludes that appellant is judicially estopped from now asserting a right to collect an amount from appellee which appellant was legally entitled to collect from Strathmore.

Appellee relies on the following cases, which we shall discuss. In Edes v. Garey, 46 Md. 24 (1877), residuary legatees filed a complaint in equity to enforce the personal liability of sureties on a testamentary bond, based on alleged wrongdoing by the executor. In a prior proceeding, the plaintiffs had alleged facts totally inconsistent with the wrongdoing and totally inconsistent with any alleged loss. Edes, 46 Md. at 41. The Court found plaintiffs were estopped from denying those facts. Id. at 42.

In Hall v. McCann, 51 Md. 345 (1879), there was an attack on a lien securing an indebtedness on the ground that the indebtedness had been paid. The Court held that it would not act because the claimant had testified in another proceeding that the plaintiff had no interest in the lien. Hall, 51 Md. at 351.

The Court of Appeals, in Van Royen v. Lacey, 266 Md. 649 (1972), on an appeal from a motion to enforce a judgment (the third appeal in the litigation) applied judicial estoppel where the plaintiff had alleged during the trial and prior appeals that the defendants were joint tenants but subsequently sought to allege a tenancy by the entireties. Van Royen, 266 Md. at 651-52. The plaintiff was estopped from doing so.

In Stone v. Stone, 230 Md. 248 (1962), a widower, during the probate of his wife’s estate, took the position that certain securities were part of the corpus of a trust of which he was trustee. Subsequently, in an action for distribution of the securities upon termination of the trust, he took the position that the securities were his individual property.

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In Wilson v. Stanbury, 118 Md. App. 209 (1997), the plaintiff filed suit as a result of a motor vehicle accident and alleged in the complaint that the accident was caused solely by the named defendant. The plaintiff filed the suit, knowing that the defendant was not negligent, because the plaintiff had missed the statute of limitations with respect to the negligent party. Wilson, 118 Md. App. at 210. Subsequently, after settling that action, the plaintiff filed a malpractice action against his attorney, alleging that the attorney was negligent in missing the statute of limitations. The Court applied judicial estoppel and barred the claim for the express purpose of protecting the courts from being used inappropriately. Id. at 215 (recognizing the similarity between judicial estoppel and the “clean hands” doctrine).

In Kramer v. Globe Brewing Co., 175 Md. 461 (1938), a personal injury action, the defendant stated in a pleading in a prior case that plaintiff was the defendant’s employee, that the injuries arose out of the employment, and that the defendant had complied with workers compensation laws. Kramer, 175 Md. at 464-65. In reliance on that statement, the plaintiff dismissed the action and filed a workers compensation claim. Id. at 465. The Court held that the defendant was estopped to deny in the workers compensation proceeding that the plaintiff was its employee. Id. at 471.

Finally, in WinMark v. Miles & Stockbridge, 345 Md. 614 (1997), the question before the court was whether a debtor’s nondisclosure of a claim as an asset during a reorganization under Chapter 11 of the bankruptcy code barred the debtor from post-confirmation litigation of that claim against defendants not creditors in the bankruptcy action. The Court did not apply judicial estoppel but, as this Court did in Wilson, noted that the policy underlying judicial estoppel is the same as that underlying the clean hands doctrine. WinMark, 345 Md. at 627-28 (citing Manown v. Adams, 89 Md. App. 503 (1991)). The Court explained that the doctrine is to protect the courts from having to reward inequitable conduct. Id. at 628. The Court also recognized the difference between judicial estoppel and equitable estoppel, noting that the former focuses on the connection between litigants and the judicial system, and the latter focuses on the relationship between the parties. Id. at 623 (citing Oneida Motor Freight, Inc. v. United Jersey Bank, 840 F.2d 414, 419 (3d Cir. 1988)).

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Click the case caption above for the full text of the Court's opinion.

Outcome: Our interpretation of the circuit court opinion in this case is that the court ruled that no damages were recoverable against appellee, even if it breached its contract, because of the preclusive effect of the confessed judgment. Consequently, we vacate the judgment and remand for further proceedings consistent with this opinion.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None