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Maryland Court of Special Appeals Affirms Award of Attorneys’ Fees Against a Party that Fabricated a Sham Contract in order to Avoid Liability

Old Frederick Rd., LLC v. Wiseman
No. 2356 (Md. App. Sept. 4, 2012)
by Wayne C. Heavener, Associate
Semmes, Bowen & Semmes (www.semmes.com)

In Old Frederick Rd., LLC v. Wiseman, Maryland’s intermediate appellate court affirmed an award of attorneys’ fees against a party that fabricated, and introduced into evidence, a sham contract. Writing for the Court of Special Appeals, Judge Zarnoch held that MD. RULE 1-341, which permits the award of attorneys’ fees for conduct made in “bad faith or without substantial justification,” extended to a suit seeking to establish a mechanics’ lien. The Court also held that the trial court did not err in admitting two versions of a contested contract, as both copies were necessary for the trier of fact to determine which version was genuine.

In July of 2009, Old Frederick Rd., LLC (“LLC”) — acting through its sole member, Vincent S. Serio — entered into a contract with John H. Wiseman to build a house in Ellicott City, Maryland. In August of 2010, Mr. Wiseman completed the house. Mr. Wiseman did not receive full payment for his services, and filed a Complaint against the LLC and Mr. Serio, in the Circuit Court for Howard County for the remaining amount owed ($7,609.56). Mr. Wiseman alleged three (3) counts. In his first count, Mr. Wiseman sued to establish a mechanic’s lien against the LLC. In his second and third counts, Mr. Wiseman sought damages for unjust enrichment and breach of contract against both the LLC and Mr. Serio. In response, Mr. Serio’s Answer contended that Mr. Wiseman had submitted a sham contract. As a result, Mr. Wiseman amended his Complaint to seek attorneys’ fees against both the LLC and Mr. Serio, and extend his mechanic’s lien action to include Mr. Serio, individually.

At a bench trial in the Circuit Court for Howard County, both Mr. Wiseman and Mr. Serio produced what each claimed to be the genuine contract. The differences in the two (2) contracts dealt almost exclusively with terms of payment. The Circuit Court admitted both contracts into evidence, over the objection of Mr. Serio. Ultimately, the judge found that Mr. Serio’s contract was a sham, and made solely to avoid the original agreement, which was memorialized by Mr. Wiseman’s copy. The Circuit Court granted the mechanic’s lien, and found both the LLC and Mr. Serio jointly and severally liable for damages arising out of breach of contract and attorneys’ fees, pursuant to MD. RULE 1-341. Both Mr. Serio and the LLC appealed to the Court of Special Appeals, but oral argument was limited to the Circuit Court’s award of attorneys’ fees against Mr. Serio only. Accordingly, the Court of Special Appeals considered only whether the Circuit Court erred in awarding attorneys’ fees against Mr. Serio under MD. RULE 1-341.

The Court of Special Appeals affirmed the Circuit Court’s decision awarding Mr. Wiseman attorneys’ fees against Mr. Serio. The Court rejected Mr. Serio’s argument that Mr. Wiseman had failed to establish in personam jurisdiction due to the fact that the mechanic’s lien was an in rem proceeding. The Court found the language of MD. RULE 1-341 sufficiently broad as to include a mechanic’s lien proceeding. Furthermore, the Court noted that the attorneys’ fees were sought collaterally as a result of Mr. Serio’s misconduct during trial, rather than the simple filing of the lien. Furthermore, Mr. Wiseman amended his Complaint to name Mr. Serio as a party to the mechanics’ lien action after the LLC had transferred the deed to the property to Mr. Serio, individually. Therefore, MD. RULE 1-341 applied to Mr. Serio’s conduct.

Similarly, the Court rejected Mr. Serio’s argument that the attorneys’ fees were premised on inadmissible evidence. The Court found Mr. Serio’s allegation that Mr. Wiseman’s contract was a sham was a factual inquiry, rather than a question of law. Therefore, the question was appropriate for the factfinder, making Mr. Wiseman’s contract conditionally relevant upon the facts adduced at trial and necessary for the trier of fact to consider. Given that the question of which contract was genuine was the crux of the case, the Court found that “each [contract] needed to be admitted because the issue of which one was the authentic contract was properly left to the trier of fact, here the circuit judge.” Old Frederick Rd., LLC v. Wiseman, No. 2356, slip op. at 16 (Md. App. Sept. 4, 2013). Accordingly, the Court affirmed the judgment of the Circuit Court.