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REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND No. 02098 September Term, 2009

STEVEN J. OCHSE, et ux. v. WILLIAM O. HENRY, et ux.

Woodward, Hotten, Moylan, Charles E., Jr. (Retired, Specially Assigned), JJ.

Opinion by Hotten, J.

Filed: December 21, 2011

Appellants, Steven J. Ochse and Shari Ochse ("the Ochses"), purchased residential property in Dorchester County from Appellees, William O. Henry and Jessie Henry ("the Henrys"). The Ochses filed a "Complaint for Reformation and for Declaratory, Injunctive and Related Relief" in the Circuit Court for Dorchester County against the Henrys regarding references in the deed concerning the ability of others to use the Ochses' driveway. The Ochses joined Dorchester County as a defendant after the Henrys presented a 1919 deed purportedly conveying to Dorchester County a 30-foot wide strip of land over the Ochses' property in fee simple. The Ochses and Dorchester County filed cross-motions for summary judgment. Ruling on the motions, the circuit court held that the county owned a 30-foot wide strip of land at some unidentified location on the Ochses' property that divided the property into two smaller separate parcels. At the conclusion of trial, the court ruled in favor of the Henrys, reserving on the question of attorney's fees. Thereafter, the circuit court entered judgment in favor of the Henrys in the amount of $100,020.00 for attorney's fees. The Ochses timely appealed and posted a cash security in lieu of an appeal bond to stay enforcement of the judgment.1 This Court ordered mediation on February 23, 2010. Dorchester County was

dismissed from the case once the county conveyed its interest in the 30-foot wide strip to the

Pursuant to Maryland Rules 8-431 and 8-501(c), (e), the Ochses filed a Motion to Strike Materials Not of Record Included in the Supplemental Extract of Appellees' Brief and Discussion Thereof, which we hereby grant pursuant to Maryland Rule 8-432(a).

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Ochses. The Ochses present the following issues for our review, which we quote: 1. Did the Trial Court err in determining that the Henrys did not breach their special warranties to the Ochses? 2. Having found that there was a mutual mistake of material fact by the parties as to the existence of a 30-foot strip of land owned in fee simple by the County that bisected the property sold by the Henrys to the Ochses, did the Trial Court err in holding that the contract of sale was merged into the deed? 3. Did the Trial Court err in applying Maryland law to the evidence of record with respect to its finding that the Henrys did not make material misrepresentations to induce the Ochses to enter into the contract to purchase the property from the Henrys? For the reasons that follow, we shall reverse the judgment of the circuit court.2 FACTUAL AND PROCEDURAL BACKGROUND Dorchester County sought to build a new county road to access the properties of several landowners. On March 2, 1919, the county acquired a fee simple determinable interest in a 30-foot wide strip of land from H.B and Nora Messenger through a deed, which in relevant part, stated: if the said road is abandoned by the said County Commissioners of Dorchester County, or their successors in office, the lands hereby conveyed shall revert back to the said grantors, their heirs and assigned, so far as the same are within the bounds of the lands of the respective grantors . . . .

In response to the Ochses' Motion for Limited Reconsideration and Motion to Publish Unreported Opinion, our previously filed opinion in this matter has been clarified to indicate that the Ochses are able to sue on the underlying contract based on mutual mistake or misrepresentation, avoiding merger of the contract with the deed. Because the contract contained an attorney's fees provision, the Ochses are entitled to attorney's fees. While title issues have been resolved, the circuit court must view the case as it appeared when initiated. 2

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On November 23, 1929, H.B. Messenger conveyed by deed his property to Dorchester County following a tax sale, but on June 17, 1930, Dorchester County reconveyed the same property to H.B. Messenger and Esther White Messenger.3 On June 29, 1972, H.B.

Messenger deeded a thirty-five acre parcel of land to R.T.R., Inc. The Henrys purchased the thirty-five acre tract from R.T.R., Inc. on March 19, 1987. The Henrys constructed a culvert4 across a branch of Marshy Hope Creek, known as the Miles Branch. The culvert allowed access to Mowbray Creek Road, a private road that ended on the other side of the Miles Branch, from the dirt driveway on the property. The Henrys resided in a farmhouse on the property and constructed a second home on the property. Following an unsuccessful attempt to sell the second residence, the Henrys subdivided a 4.791 acre parcel around the second residence, reserving 15.209 acres on the larger parcel to meet the 20 acre critical area requirement. Dorchester County approved the subdivision on July 22, 1998. The Henrys, thereafter, listed the subdivided parcel for sale as a residence on a 4.791 acre parcel that was owned in fee simple. The Henrys provided disclaimers to prospective purchasers, verifying that there were no recorded or unrecorded easements other than for
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While the rationale behind the conveyance to the county and the county's reconveyance to H.B. and Esther Messenger remains unclear, based on a review of the land records, it appears to be the result of the Messengers paying taxes owed to the county. A culvert is an enclosed drain for carrying water under a road or railroad. Oursler v. Balt. & Ohio R.R. Co., 60 Md. 358, 367 (1883). In this case, the Henrys constructed a road across the Miles Branch with a large pipe perpendicular to and under the road to allow water to pass underneath. 3
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utilities. Mr. Henry gave the Ochses tours of the subdivided property and its boundaries on at least three occasions. On September 13, 2001, the Ochses entered into a contract with the Henrys to purchase the subdivided property. The Henrys conveyed a fee simple interest in approximately 4.791 acres to the Ochses as tenants by the entireties on December 14, 2001. The deed from the Henrys to the Ochses indicated that the interest was "SUBJECT, HOWEVER, to the rights of others legally entitled to the use of a `Driveway,' for purposes of ingress, egress and regress" over the property. At closing, the title company agent advised the Ochses that the reference in the deed to the use of a "Driveway" simply referred to utility easements. On December 11, 2007, the Ochses filed a complaint against the Henrys, seeking reformation of the deed, a declaratory judgment, injunctive relief, and damages for breach of contract, breach of special warranties, and fraud in the inducement. An amended complaint naming Dorchester County was subsequently filed on April 11, 2008. The Henrys filed a counterclaim for attorney's fees based on the underlying contractual provision between the Henrys and the Ochses, which specifically survived any merger with the deed, to which the Ochses responded. On August 4, 2008, the circuit court, in its rulings on cross-motions for summary judgment filed by the Ochses and Dorchester County, declared that Dorchester County owned the 30-foot wide strip of land across the Ochses' property in fee simple. After a two day bench trial, the circuit court concluded that the contract merged into the deed and that

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there was no breach of the special warranties of title.5 The circuit court refused to reform the deed or issue a declaratory judgment with injunctive relief. The court then entered a judgment in favor of the Henrys against the Ochses for attorney's fees in the amount of $100,020.00 based on the "fee-shifting provision" in the parties' contract, which specifically stated that the "fee-shifting provision" did not merge with the deed. Finally, the circuit court denied the Ochses' request for a right-of-way by necessity because the Ochses' property was not landlocked. The Ochses filed a timely appeal, and we ordered mediation. As a result of the mediation, Dorchester County executed a quitclaim deed, giving the Ochses the county's interest in the 30-foot wide strip of land over the Ochses' property. Dorchester County was later dismissed as a party to this appeal. STANDARD OF REVIEW When an action has been tried without a jury, we "review the case on both the law and the evidence." Md. Rule 8-131(c). We, however, "will not set aside the judgment of the trial court 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." Id. "The deference shown to the trial court's factual findings under the clearly erroneous standard does not, of course, apply to legal conclusions." Nesbit v. Gov't Employees Ins. Co., 382 Md. 65, 72 (2004). Where a case involves the "application of Maryland statutory and case law, our Court must

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The circuit court did not address the special covenant against encumbrances. 5

determine whether the lower court's conclusions are `legally correct' under a de novo standard of review." Walter v. Gunter, 367 Md. 386, 392 (2002). DISCUSSION I. Covenants The Henrys presented both a special covenant against encumbrances and a covenant of special warranty of title in the deed to the Ochses, which stated: And the said Grantors do hereby covenant that they have not done or suffered to be done any act, matter or thing whatsoever to encumber the property hereby conveyed; that they will warrant specially the property hereby conveyed; and that they will execute such other and further assurances of the same, as may be requisite. The Ochses argue that the circuit court erred in determining that the Henrys did not breach the special covenant against encumbrances or the covenant of special warranty of title. They contend that the Henrys' execution and recording of the 1998 subdivision plat created serious title problems for the Ochses as purchasers of the subdivided parcel. The Henrys counter that even though the Ochses did not raise the issue of special covenant against encumbrances at trial, the circuit court correctly found no breach because the Henrys were unaware of the 1919 deed and did not act to affect the title or create an encumbrance during their ownership. A. Special Covenant against Encumbrances "An encumbrance is any right or interest held by someone other than the grantee or grantor which diminishes the value of the estate but not so much that it leaves the grantee

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with no title at all." Magraw v. Dillow , 341 Md. 492, 502 (1996) (emphasis added). Though it has no precise meaning, an encumbrance "includes security instruments, leases, mechanics' liens, property tax assessment liens, easements, future interests and covenants running with the land at the time of conveyance, other than those specifically set forth in the deed." Id. A covenant against encumbrances is a "present covenant" that is breached upon delivery of the deed if any encumbrance exists. Marathon Builders, Inc. v. Polinger, 263 Md. 410, 414 (1971). "They do not usually run with the land, but serve only to benefit the covenantee." Magraw , 341 Md. at 502 (citing Levine v. Hull, 135 Md. 444, 447 (1919)). The covenant that the grantor has not encumbered the property has been codified in Md. Code (2010),

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