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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 1707 September Term, 1995 _______________________________

FAIRFAX SAVINGS, F.S.B.

V.

WEINBERG AND GREEN

_______________________________ Fischer, Wenner, Salmon, JJ. _______________________________ Opinion by Salmon, J. _______________________________ Filed: December 6, 1996

On October 20, 1992, appellant Fairfax Savings, F.S.B. ("Fairfax"), filed a complaint against appellee Weinberg and Green ("the firm") in the Circuit Court for Montgomery County, alleging documents legal and malpractice breach of in the firm's duty drafting in the of loan

fiduciary

firm's

representation of Fairfax during litigation resulting from a default on the loan. Fairfax filed a second amended complaint

on June 20, 1994, adding claims arising out of the firm's fraudulent overbilling of Fairfax. The case was tried before Judge Ann S. Harrington beginning April 10, 1995. At the close of Fairfax's case, Judge

Harrington granted the firm's motion for judgment on several counts, including indemnification and malpractice based on

violation of the advocate/witness rule.1

In this appeal, Fairfax

does not take issue with the court's partial grant of the firm's motion for judgment. After Weinberg and Green presented its

case, Judge Harrington held the case sub curia and, on August

Maryland Rules of Professional Conduct, Rule 3.7, specifies that under certain circumstances lawyers should not act as both advocates and witnesses in the same action. The Rule reads: (a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness except where: (1) the testimony relates to an uncontested issue; (2) the testimony relates to the nature and value of legal services rendered in the case; or (3) disqualification of the lawyer would work substantial hardship on the client. (b) A lawyer may act as advocate in a trial in which another lawyer in the lawyer's firm is likely to be called as a witness unless precluded from doing so by [the conflict of interests rules].

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30, 1995, filed a well-reasoned seventy-four page opinion in which she found that the firm had breached the applicable standard of care in its representation of Fairfax in the loan transaction and had engaged in systematic overbilling of Fairfax. Despite these findings, however, Judge Harrington

entered final judgment in favor of Weinberg and Green on all remaining counts. She determined that the breach of the

applicable standard of care did not proximately cause Fairfax injury and, in any event, all claims were barred either by the statute of limitations or by Fairfax's unclean hands, or had been released or waived by Fairfax. Fairfax noted this timely appeal in which it raises ten issues, which, in large measure, can be answered by responding to five questions: 1. Did the trial court err in finding that Fairfax's claim for transactional malpractice was barred by the three-year statute of limitations? Did the trial court err in holding that Fairfax's claim for fraud or constructive fraud growing out of the firm's overbilling was barred by the statute of limitations? Did the trial judge err in finding that the firm had made full disclosure of the billing fraud? Did the trial judge commit reversible error by requiring that Fairfax prove the inadequacies of the firm's disclosure of its billing fraud? Was the trial judge correct in ruling that the conflict created by Weinberg and Green's continued representation of 2

2.

3.

4.

5.

Fairfax in light of the overbilling was waivable and that it had been waived by Fairfax?

I.

STANDARD OF REVIEW

When an action has been tried without a jury, this Court will not set aside the trial court's judgment "on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses." Md. Rule 8-131(c). A finding of a trial court is

not clearly erroneous if there is competent, material evidence in the record to support the court's conclusion. Maxima Corp.

v. Cystic Fibrosis Found., 81 Md. app. 602, 610, cert. denied sub nom., 6933 Arlington Dev. v. Maxima Corp., 319 Md. 582 (1990). In reviewing the record, we consider all evidence

produced at trial in the light most favorable to the party prevailing below. Maryland Metals, Inc. v. Metzner, 282 Md. 31,

41 (1978); L & P Convertors, Inc. v. Alling & Cory Co., 100 Md. App. 563, 569 (1994). A trial judge's decision "founded upon

sound legal principles and based upon factual findings that are not clearly erroneous will not be disturbed in the absence of a showing of a clear abuse of discretion." 323 Md. 486, 492 n.2 (1991). Domingues v. Johnson,

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II.

THE RECORD EXTRACT

The facts relevant to this case are complicated and were developed in a trial that lasted thirty days. The record is

voluminous, yet the joint record extract prepared by the parties is relatively sparse. Primarily, both parties present the

facts of the case by quoting or paraphrasing the trial court's opinion rather than by making reference to documents or

testimony presented to the trial court.

We view this as an

implicit concession by the parties that as to many of the factual issues in the case the trial judge was justified in her factual conclusions. Therefore, in this opinion we have assumed

that the trial judge's factual findings were justified, unless the appellant 1) challenged a factual finding of the trial judge and 2) supported the challenge by a reference to evidence set forth in either the record or the record extract. 2

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Maryland Rule 8-501(c) states: The record extract shall contain all parts of the record that are reasonably necessary for the determination of the questions presented by the appeal and any cross-appeal. . . .

The record in this case is contained in seventeen boxes filled with transcripts and hundreds of exhibits. We have held that when the record extract "is absolutely devoid of the evidence, oral or physical," necessary for us to rule upon an issue, we may dismiss the appeal as "we are not required to ferret out from the record those materials which counsel should have printed in the abstract." Eldwick Homes Ass'n, Inc. v. Pitt, 36 Md. App. 211, 212 (1977). See also Davis v. Davis, 97 Md. App. 1, 24 (1993), aff'd, 335 Md. 699 (1994) (holding that party waived issue by not including relevant portions of record in extract and by not clearly directing this Court to relevant portions of record). In those instances where appellant has made an argument based on a factual assertion as to what evidence was introduced at trial, we have deemed that assertion waived unless: 1) The assertion is admitted by appellee; 2) the fact or facts are contained in the trial judge's opinion; or 3) appellant makes reference in its brief as to where the evidence can be found in either the joint record extract or the record.

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III.

BACKGROUND FACTS

The genesis of this appeal came well before Fairfax filed suit against Weinberg and Green in 1992. It began with a loan

guarantied by Charles Ellerin, among others, negotiated by the firm for Fairfax in 1982 (hereinafter referred to as either "the Ellerin loan" or "the Ellerin transaction"). Fairfax alleges

the firm committed malpractice in preparing the loan documents for the Ellerin transaction. Further, Fairfax alleges, and

Weinberg and Green admits, that the firm fraudulently overbilled Fairfax from 1983 to 1987. Finally, Fairfax contends that an

unwaivable conflict of interest existed as a result of Weinberg and Green's representation of it during the Ellerin litigation in light of the overbilling, and as a consequence, the firm must disgorge all fees it earned in that litigation and reimburse Fairfax for all losses incurred as a result of an adverse Ellerin verdict. A. The Ellerin Loan and the Resulting Ellerin Litigation In 1982, Charles Ellerin and Louis Seidel, the General Partners of Sherwood Square Associates ("Sherwood"), sought financing for a real estate development project in Westminster, Maryland. Fairfax agreed to lend Sherwood a total of

$5,700,000, divided into three separate loans.

One was a

conventional loan of $850,000, which was paid back prior to the onset of any litigation. The other two loans were evidenced by

Industrial Revenue Bonds ("IRB's"), acquired through the City of Westminster, in amounts of $3,050,000 and $1,800,000. 5 Weinberg

and Green represented Fairfax in the loan transactions and prepared all documents relating to the loans. A senior partner

in the firm's real estate department supervised the preparation of documents with the assistance of David M. Blum and various other Weinberg and Green attorneys. Fairfax insisted on personal guaranties from the investors in order to protect its investment because the buildings were little more than empty shells when the loans were made.

Fairfax, of course, took back a mortgage on the property but also insisted on a guaranty from Ellerin and Seidel ("the General Partners"). guaranties be signed. Moreover, it required that completion These completion guaranties imposed

personal liability on Charles Ellerin and his wife, Naoma, on Louis Seidel and his wife, "the Gloria, and on the The Tri-Ess General

Corporation

(hereinafter,

guarantors").

Partners and the guarantors were represented in all phases of the loan transaction by R. Bruce Alderman, a Maryland attorney. The obligations of the guarantors under the completion guaranties (as originally drafted by Weinberg and Green) were to complete the building according to the specifications and to secure additional financing to finish the project if necessary. The liability of the General Partners was set out in two loan agreements, one for each IRB. Fairfax submitted drafts of the As originally

loan documents to Alderman on December 22.

drafted, neither the General Partners nor the guarantors had any liability after the buildings 6 were completed. Both the

Completion Guaranty and the loan agreement were changed by Weinberg and Green prior to their execution. How, why, and

under what circumstances these documents were changed was the subject of the litigation that ensued when Sherwood defaulted on the loan. That litigation will be hereafter referred to as the

"Ellerin litigation" or the "Ellerin case."3 The documents prepared by Weinberg and Green and executed at the settlement on December 29 and 30, 1982, provided that neither Sherwood nor the General Partners would be liable for the loans if default occurred "at any time after the termination of the Completion Guaranty (pursuant to Section 8.1 thereof)." Section 8.1 of the new completion guaranties provided that the guarantors' obligations "shall cease and be extinguished . . . when the acquisition of the Facility has been completed and when [Sherwood] has fully complied with and satisfied the Rent Roll Requirement." The Rent Roll Requirement, a new addition to the

As noted in Fairfax Sav., F.S.B. v. Ellerin, 94 Md. App. 685, 691 n.3 (1993), rev'd in part, 337 Md. 216 (1995), the Ellerin litigation involved the trial of several consolidated cases. We said: [The Ellerin Litigation] included Fairfax's claims against Ellerin, et al., based on a Completion Guaranty executed in connection with a $3.05 million loan (85-C63775) (Guaranty case), Fairfax's claims against Ellerin, et al., based on a Completion Guaranty executed in connection with a $1.8 million loan (85-C6-3776) (Guaranty case), the claims of Ellerin et al., against Fairfax based on the Completion Guaranty (85-C6-4168), Fairfax's claims against Ellerin and Seidel as general partners on the $3.05 million loan Agreement (85-C6-3767) (partner case), and Fairfax's claims against Ellerin and Seidel as general partners on the $1.08 million Loan Agreement (85-C6-3768) (partner case).

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completion guaranties, was defined as the leasing of seventy percent of the finished buildings.4 Section 3.1 of the completion guaranties imposed postcompletion liability on the guarantors in the event that

Sherwood "has not fully complied with and satisfied the Rent Roll Requirement," to an aggregate liability of $1,150,000 on each IRB (a total of $2,300,000). the new loan documents, the In short, under the terms of continued to have

guarantors

possible personal liability as guarantors (up to a maximum of 2.3 million dollars) beyond the date the project was physically completed until such time as the property was seventy percent leased. The General Partners, under the revised loan documents,

had potential post-completion liability up to the full amount of the loans. Blum, who in 1982 was a partner at Weinberg and Green, testified at the trial sub judice that he was working on the loan documents on the evening of December 27, 1982, when Jack Stollof, the senior vice president of Fairfax, telephoned and asked what the loan documents provided with respect to the

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We explained in Ellerin v. Fairfax Sav. Ass'ns, 78 Md. App. 92, 97 n.4 The rent roll formula is somewhat complex, and appears in Art. III,

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