George C. Papageorge v. Matt Banks ( 2013 )

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 13-CV-333
GEORGE C. PAPAGEORGE, APPELLANT,
V.
MATT BANKS, et al., APPELLEES.
Appeal from the Superior Court
of the District of Columbia
(CAB-924-12)
(Hon. Laura A. Cordero, Trial Judge)
(Argued November 20, 2013 Decided December 19, 2013)
Kenneth C. Crickman, with whom Robert C. Cooper was on the brief, for
appellant.
Jonathan Zucker filed a brief for appellees.
Before THOMPSON and EASTERLY, Associate Judges, and FARRELL, Senior
Judge.
THOMPSON, Associate Judge: In February 2012, appellant George
Papageorge filed a one-paragraph complaint against appellees Matt and Diane
Banks, alleging that they had ―absconded with settlement monies and cashed a
check knowing that most of the funds were liened and intended to go to the
plaintiff.‖ Thereafter, Papageorge sought and obtained a prejudgment writ of
2
attachment against the Bankses, having advised the court that the Bankses had
been paid funds from a settlement agreement with Eastern Savings Bank (―ESB‖),
and that Papageorge was entitled to those funds under a separate agreement (the
―December 9, 2010 Agreement‖ or the ―Agreement‖) with Matt Banks, under
which Papageorge had ―agreed to finance Mr. Banks‘ efforts to protect his rights as
a tenant of certain real property.‖ The Bankses filed a motion to dismiss the
complaint or alternatively for summary judgment, arguing that the Agreement was
―void as champertous.‖1 Considering materials outside the complaint, the trial
court treated the motion as one for summary judgment and entered judgment in
favor of the Bankses, agreeing that the Agreement was champertous and therefore
void in its entirety. Papageorge appeals from the trial court‘s grant of summary
judgment in favor of appellees and from the court‘s denial of his motion for
reconsideration of that ruling. We reverse and remand.
I. Background
1
―Put simply, . . . champerty is maintaining a suit in return for a financial
interest in the outcome[.]‖ In re Primus, 436 U.S. 412, 424 n.15 (1978).
3
This appeal is the latest development in a spate of litigation that erupted after
deed-of-trust holder ESB purchased the property at 2507 33rd Street, S.E. (the
―property‖), at an April 2001 foreclosure sale.2 The factual background set out
below is largely drawn from Papageorge‘s opposition to the Bankses‘ motion to
dismiss or for summary judgment.
Matt Banks was a tenant at the property prior to the April 2001 foreclosure,
and he continued in occupancy for several years after the foreclosure pursuant to
his purported Valentine rights.3 In October 2001, Matt Banks entered into an
agreement with Papageorge, the full text of which provided as follows:
2
See Banks v. ESB, 8 A.3d 1239, 1241 (D.C. 2010); Pappas v. ESB, 911
A.2d 1230 (D.C. 2006); ESB v. Pappas, 829 A.2d 953 (D.C. 2003). We note
tangentially that appellant Papageorge bears the same surname as Frances
Papageorge, one of the heirs who inherited the property from Achilles Pappas upon
his death in 1980. See 911 A.2d at 1232 & 1232 n.1.
3
See Administrator of Veterans Affairs v. Valentine, 490 A.2d 1165 (D.C.
1985) (holding that the District of Columbia Rental Housing Act protected from
eviction the tenant of a defaulting mortgagor who remained in his rental unit after a
foreclosure sale). We say ―purported‖ because a September 28, 2012, District of
Columbia Rental Housing Commission (―RHC‖) Decision and Order contained in
the record suggests that Matt Banks may have swapped units at the property with
another tenant, thus creating some question to whether he and that tenant continued
to enjoy Valentine rights.
4
For valuable consideration I, Matt W. Banks, hereby
assign[] my tenant rights to purchase under D.C. Law in
the lease of 2507 33rd Street S.E.[,] Washington, D.C.
20020 to George C. Papageorge.
Subsequently, on December 9, 2010, Banks and Papageorge executed a
―Memorandum Regarding Banks Lease‖ that affirmed this agreement, providing
that ―[i]t is understood and agreed that[,] with regard to the lease of 2507 33rd
Street S.E.[,] Matt Banks assigned his TOPA rights . . . to George C. Papageorge
under an earlier agreement which shall remain in full force and effect.‖ As that
memorandum reflects, the reference to ―tenant rights to purchase under D.C. Law‖
in the October 2001 agreement was a reference to the opportunity to purchase the
property that the parties expected that Matt Banks qua tenant would have under the
Tenant Opportunity to Purchase Act (―TOPA‖), D.C. Code §§ 42-3404.02 et seq.
(2012 Repl.), before ESB would have been able lawfully to sell the property to a
third party. See id. at § 42-3404.02 (a).4
4
It appears that at the time the assignment was made, there had been no
event that triggered the TOPA process (e.g., an offer by the owner to sell the
property to the tenant(s), or the tenant(s)‘ receipt from the owner of a third-party‘s
contract to purchase the property, giving rise to the tenant(s)‘ right of first refusal).
See D.C. Code §§ 42-3404.03 and 42-3404.08 (2012 Repl.).
5
Eventually, ESB sued Matt Banks for possession of his rental unit, asserting
that he had violated a term of his pre-foreclosure lease. The Superior Court
granted ESB a judgment of possession, but, upon Banks‘s appeal, this court, in a
December 2, 2010, opinion, reversed the judgment, holding that, because a new at-
will tenancy commenced by operation of law at the time of the April 2001
foreclosure and Banks‘s pre-existing lease was ―effectively extinguished at that
juncture,‖ Banks‘s putative violation of the pre-foreclosure lease could not form
the basis for a judgment of possession. Banks v. ESB, 8 A.3d at 1243.
A week after this court issued that opinion, Matt Banks, Earl Mitchell
(another former tenant and a holdover occupant of one of the property‘s rental
units5), and Papageorge entered into the December 9, 2010, Agreement that is in
issue in this appeal. That Agreement, a copy of which Papageorge attached to his
opposition to the motion to dismiss or for summary judgment, provided in
pertinent part as follows:
Whereas, Papageorge has financed extensive litigation to
enforce, maintain and protect [Banks‘s and Mitchell‘s]
Valentine rights since 2001.
Whereas, ESB . . . conducted a wrongful eviction on
February 9, 2009 removing Banks [and] Mitchell . . . .
5
See Mitchell v. ESB, 890 F. Supp. 2d 104 (D.D.C. 2012).
6
Whereas, the parties would like to file a wrongful
eviction action against ESB.
Now therefore, the parties agree as follows: Any and all
monies obtained from a suit for wrongful eviction and/or
the relinquishment of tenant rights and/or any other
sources shall be distributed as follows:
First, Papageorge shall be reimbursed for all legal costs
expended since 2001 involving ESB and the subject
property. Second, the remaining sum shall be distributed
as follows:
Papageorge – seventy five percent (75%)
Banks – twelve and one/half percent (12.5%)
Mitchell – twelve and one/half percent (12.5%)
It is further understood and agreed that Papageorge has
financed all rent monies and will be reimbursed at the
rate of 100%.
Papageorge‘s suit against the Bankses was premised on a claim that they had
received a $75,000 payment from ESB ―to settle certain tenant claims,‖ but had
failed to pay Papageorge according to the terms of the December 9, 2010,
Agreement. The Bankses filed their motion to dismiss or for summary judgment
on February 27, 2012, and subsequently argued that the Agreement was
champertous and void in that it gave Papageorge ―a share of Banks‘ wrongful
eviction and L&T litigation to which he did not have an independent interest,‖ and
in that the Agreement constituted ―‗a bargain to divide the proceeds of litigation
7
between the owner of the litigated claim and the party supporting or enforcing the
litigation.‘‖ Defendants‘ Reply to Plaintiff‘s Opposition to Defendants‘ Motion to
Dismiss or Alternatively for Summary Judgment at 2, 4 (quoting Design for Bus.
Interiors, Inc. v. Hersons’s, Inc., 659 F. Supp. 1103, 1107 (D.D.C. 1986) (quoting
14 W. Jaeger, WILLISTON ON CONTRACTS § 1711 at 857 (3d ed. 1972)6)). The
Bankses asserted that the Agreement also ―implicitly contemplated the
maintenance of Banks‘ landlord and tenant case in order to obtain a recovery for
the relinquishment of tenant rights[,]‖ and pointed out that after the mandate issued
in Banks v. ESB, a motion to ―Reinstate [Banks] Into Possession‖ had been filed,
making it ―abundantly clear that [one] purpose of the Agreement . . . was to
maintain Banks‘ right to possession in the landlord and tenant case.‖ Id. at 3
(internal quotations omitted).
In opposing the Bankses‘ motion, Papageorge argued inter alia that the
Agreement was not champertous because he had an independent interest in the
property (as to which he sought ―[o]wnership‖) because of the assignment to him
of Matt Banks‘s TOPA rights and because what Papageorge sought through the
6
The same definition of ―champerty‖ appears in the fourth edition of the
Williston treatise. 7 Samuel Williston & Richard A. Lord, WILLISTON ON
CONTRACTS § 15:1 (4th ed. 2010).
8
Agreement was to recover prior expenditures he had incurred to protect that
interest and to ―preserve his own TOPA rights.‖ The Bankses countered that even
assuming that Matt Banks had made a valid assignment to Papageorge of his mere
expectant opportunity to purchase the property pursuant to TOPA, ―whether Banks
was injured as a result of being wrongfully evict[ed] or whether he was reinstated
into possession, had no [e]ffect on the assignment.‖ Id. at 5. Thus, the Bankses
argued, Papageorge ―had no legitimate interest in the Agreement‘s contemplated
litigation between Banks and ESB except to receive proceeds from it.‖ Id.
In granting summary judgment in favor of the Bankses, the court ruled first
that Papageorge had no cause of action against Diane Banks, who was not a party
to the December 9, 2010, Agreement. Addressing the complaint against Matt
Banks, the trial court relied on the elements of champerty as articulated in
Marshall v. Bickel, 445 A.2d 606, 609 (D.C. 1982). Paraphrasing Marshall, the
court recited that those elements are that ―the party‘s fee and claim come[] from
success in the [law]suit, the costs and expenses are borne by the party with no
expectation of reimbursement, and the party has no independent interest in the
claim.‖ With regard to the Agreement, the court found that the elements of
champerty were satisfied. First, the court stated, Papageorge had ―agreed to
finance the litigation at his own expense without recovery or reimbursement except
9
from success in the suit.‖ Second, the court concluded, Papageorge‘s ―past
expenses alone‖ for rent and litigation relating to the property did not provide him
an interest in Matt Banks‘s claim against ESB. Nor, the court reasoned, did
Papageorge‘s interest in Matt Banks‘s TOPA rights give him an independent
interest in the contemplated wrongful eviction suit by Banks, because Banks‘s
―TOPA rights would not have been affected by the outcome of any of the litigation
financed by‖ Papageorge.
The trial court further reasoned that under this court‘s opinion in Allman v.
Snyder, 888 A.2d 1161 (D.C. 2005), ―the tenancy status of [a] tenant-assignor ha[s]
no effect on the assigned TOPA right[.]‖ Order Granting Defendants‘ Motion to
Dismiss or Alternatively for Summary Judgment at 8, citing Allman, 888 A.2d at
1170 (stating that the TOPA statute ―says nothing about a tenant having to remain
a tenant in order to sustain the validity of the assignment‖). The court reasoned
that Papageorge‘s assigned TOPA rights would not have been ―cut off by the
assignor ceasing to be an actual tenant‖ and thus ―did not depend on the
continuation of Matt Banks‘ tenancy.‖ ―Most importantly,‖ the court reasoned,
this court‘s decision in Banks v. ESB had already ―established Matt Banks‘
tenancy.‖ Finally, the court ruled, because the Agreement was champertous,
Papageorge was not entitled to recover anything under it — not pre-Agreement
10
litigation expenses, not rents, and not any expense of further litigation as
contemplated in the Agreement.
Papageorge sought reconsideration. He told the court that, contrary to the
court‘s assumption in its summary judgment ruling, no wrongful eviction suit had
been filed, and that the settlement funds retained by the Bankses had come not
from a ―successful recovery from a lawsuit,‖ but from a ―global settlement of
several lawsuits‖ [involving the Bankses and ESB] and the Bankses‘ agreement to
relinquish their tenant rights, including any and all rights they might have with
respect to the property under TOPA. Papageorge attached to his motion for
reconsideration a copy of an unsigned draft of a global settlement, and noted that it
recited that the Bankses and ESB had ―threatened to file additional actions to
determine their respective rights concerning‖ the property (showing, Papageorge
argued, that Banks‘s TOPA rights had been in jeopardy despite the ruling in Banks
v. ESB). Papageorge further noted that the settlement disposed of an action that
ESB had actually filed against the Bankses in the United States District Court for
the District of Columbia (Case No. 1:11-CV-01879 (BH)), in which ESB asserted
that the federal laws governing federal savings banks superseded any District rental
housing law that might otherwise have afforded the Bankses continuing rights in
the property as tenants. Papageorge attached a copy of the complaint in that action
11
to his motion for reconsideration. Papageorge also reasserted that he had an
independent interest to protect that defeated any claim that the Agreement was
champertous, and argued that, at a minimum, there were genuine issues of material
fact regarding whether, among other things, he ―was seeking to protect his own
property interest rather than ‗speculating in lawsuits‘ as the doctrine of champerty
seeks to prohibit.‖
The trial court declined to reconsider its ruling that Papageorge ―agreed to
finance litigation at his own expense predicated on a wrongful eviction claim as set
forth in the Agreement[.]‖ The court reasoned that even if the settlement funds
were not the fruit of the wrongful eviction litigation contemplated in the
Agreement, that did not alter the champertous purpose of the Agreement. The
court also declined to consider any additional documents that Papageorge had
submitted for the first time after the summary judgment ruling and ruled that the
draft documents he had submitted were not ―competent evidence admissible at
trial.‖ Finally, the court cited additional reasons why it rejected Papageorge‘s
argument (which the court characterized as ―circular‖ and self-contradictory) that
the Agreement was premised on his effort to protect his TOPA rights. The court
reasoned that if, as Papageorge claimed, Matt Banks had assigned his TOPA rights
to Papageorge in 2001, Banks ―no longer had any TOPA rights‖ to be defended or
12
―for ESB to . . . extinguish,‖ and Papageorge therefore ―could not further his own
interest by supporting Matt Banks‘ litigation‖ and had ―no valid reason‖ to agree to
fund a suit by Banks. If, on the other hand, the court reasoned, Matt Banks
―actually maintained his TOPA rights and could relinquish them in return for a
settlement from ESB,‖ the result was still that Papageorge ―had no independent
interest in further litigation between Matt Banks and ESB.‖ In addition, the court
found it ―questionable‖ whether Papageorge ―was properly assigned Matt Banks‘
TOPA rights‖ in 2001.
This appeal followed.
II. Applicable Law
As the Supreme Court observed long ago, ―cases of maintenance and
champerty are founded on the principle that no encouragement should be given to
litigation by the introduction of parties to enforce those rights which others are not
disposed to enforce.‖7 Graham v. R.R. Co., 102 U.S. 148, 156 (1880). The
7
―Maintenance consists in maintaining, supporting or promoting the
litigation of another, with most courts requiring that the maintaining party act as an
officious intermeddler and be without any interest in the litigation.‖ Williston &
(continued…)
13
common law doctrine of champerty developed ―to prevent an attorney from
speculating in lawsuits and gambling in litigation at his or her own expense,‖
Marshall, 445 A.2d at 608; thus, ―[h]istorically, the prohibition against champerty
was largely aimed at preventing attorneys from filing lawsuits for the purpose of
obtaining fees.‖ Columbia Hosp. for Women Med. Ctr., Inc. v. NCRIC, Inc. (In re
Columbia Hosp. for Women Med. Ctr., Inc.), 461 B.R. 648, 677 (Bankr. D.D.C.
2011). Nevertheless, and ―[n]otwithstanding the limited purpose of the original
doctrine, champerty is not only applicable to client-attorney assignments[.]‖ Id. at
678 (acknowledging, however, that ―cases involving attorney-client agreements are
of limited utility when analyzing agreements that do not involve assignments to an
attorney‖). ―If a contract is determined to be champertous, District of Columbia
courts will not enforce it,‖ and will also deny quantum meruit recovery to the party
seeking enforcement. Marshall, 445 A.2d at 609.8
(…continued)
Lord, supra, § 15:1. ―‗Champerty‘ is a species of maintenance, being a bargain
with a plaintiff or defendant to divide the land or other matter being sued for
between them if they prevail at law; whereupon the champertor is to carry on the
suit at his own expense.‖ Johnson v. Van Wyck, 4 App. D.C. 294, 311 (D.C. Cir.
1894).
8
Professor Williston observes that maintenance and champerty are ―viewed
by the courts with less disfavor than formerly,‖ but notes that ―schemes to promote
litigation for the benefit of the promoter rather than for the benefit of the litigant or
the public are regarded as contrary to public policy, and will not be enforced[,]‖and
that ―[p]ublic policy opposes trafficking in lawsuits.‖ Williston & Lord, supra, §§
(continued…)
14
This court has recognized ―three essential elements of common law
champerty: (1) the . . . fee [of the person who would seek to enforce the allegedly
champertous agreement] must come from the recovery in a successful lawsuit; (2)
[that person] must have no independent claim to the recovery fund; and (3) the
costs and expenses must be borne by [that person] with no expectation of
reimbursement from the [other party to the allegedly champertous agreement].‖
Marshall, 445 A.2d at 609. Nevertheless, as Professor Williston explains, ―a
person who is financially interested in the enforcement of a right of action
belonging wholly or partly to another may lawfully undertake to pay the expenses
(…continued)
15:4, 15:5. His treatise suggests that the following observation made over a
century ago remains true today:
Many things, it is true, that were once regarded as
champertous or savoring of maintenance, are no longer
so characterized with us. . . . It is now lawful to stipulate
for contingent fees. And it may be even meritorious to
aid the poor with money in their effort to recover just
legal rights by means of legal proceedings. But from the
fact that some of the things which were once reprobated
on some peculiar ground of existing public policy are
now regarded as perfectly legitimate in view of the
altered conditions of society, it does not follow that the
law regarding champerty and maintenance has therefore
been abolished.
Peck v. Heurich, 6 App. D.C. 273, 282 (D.C. Cir. 1895).
15
of litigation and to share in the recovery.‖ Williston & Lord, supra, § 15:4 (citing
Restatement (First) of Contracts, § 543 (1932)).
Thus, for example, ―a person having an interest in a lease may maintain or
finance litigation relating to the property, even when it appeared that the suit was
being financed by one to whom the plaintiff had bargained to convey an interest in
the leased premises in consideration of his instigating, maintaining and financing
the litigation[.]‖ Id. Courts have held that the interest that is required to prevent
an agreement to finance litigation from being champertous is a party‘s honest and
reasonable belief that he has a legal interest in the subject matter of the litigation,
even if he actually has no such interest. In Smith v. Hartsell, 63 S.E. 172 (N.C.
1908), for example, the court considered the validity of an agreement under which
plaintiff, who claimed that a decedent owed him $750 at the time of his death,
agreed with putative heirs that he would ―aid them in every way to recover [under
the] estate‖ in exchange for their agreement to pay him the $750 out of any
recovery. Id. at 173. The court held that it was error to dismiss plaintiff‘s suit to
enforce the agreement on the ground that it was champertous. The court relied on
authorities establishing that:
16
[T]he gist of the offense of maintenance is that the
interference is officious; where, therefore, a party either
has, or honestly believes he has, an interest, either in the
subject-matter of the litigation or in the question to be
determined, he may assist in the prosecution or defense
of the suit, either by furnishing counsel or contributing to
the expenses, and may, in order to strengthen his
position, purchase the interest of another party in addition
to his own. The interest may be either small or great,
certain or uncertain, vested or contingent; but it is
essential that it be distinct from what he may acquire
from the party maintained.
...
If the pecuniary interest of a person, even though he own
no part of the immediate subject-matter of the suit, be so
connected with it collaterally in any way as to be
diminished or increased in value by the result of such
suit, we can perceive no principle of public policy that
ought to forbid such person from taking proper care that
such interest shall be properly protected in the courts.
Id. at 175 (quoting 3 Amer. and Eng. Encyc. Law at 76; Gilman v. Jones, 5 So.
785, 789 (Ala. 1889)). In Thallhimer v. Brinckerhoff, 3 Cow. 623 (N.Y. 1824), an
individual who claimed land as an heir of his father, and who was about to sue
recover the possession of it, entered into an agreement with the plaintiff, who had
married his sister, by which he agreed to give plaintiff one-quarter of any property
recovered, and the plaintiff agreed to bear half of the expenses of prosecuting the
intended suit. The court held that the agreement was not champertous because the
sister ―might become the owner of these lands, as the heir of [the brother,] . . . [a]
17
potential interest [that] was a sufficient reason[] that her husband should join in
measures to recover the lands.‖ Id. at 647, 649. The court reasoned that it was
―immaterial . . . whether the contingencies which must occur before [the] sister
could inherit, were such as to render that event probable or not.‖ Id. at 648-49.
The court applied the principle that:
[A]ny interest whatever in the subject of the suit, is
sufficient to exempt him who gives aid to the suitor from
the charge of illegal maintenance. Whether this interest is
great or small, vested or contingent, certain or uncertain,
it affords a just reason to him who has such an interest to
participate in the suit of another, who also has or claims
some right to the same subject.
Id. at 647; accord, Lewis v. Broun, 14 S.E. 444, 445 (W. Va. 1892) (―The doctrine
of the common law as to champerty . . . cannot be applied to a person having an
interest, or believing that he has an interest, in the subject in dispute, and bona fide
acting in the suit[.]‖) (quoting 2 Story, Eq. Jur. § 1048); Gilman, Son & Co. v.
Jones, 5 So. 785, 787 (Ala. 1889) (―[E]specially is an interference in a law suit
excusable, when it is by one who has, or honestly believes he has, a valuable
interest in its prosecution.‖); Gibson v. Gillespie, 152 A. 589, 593 (Del. Super. Ct.
1928) (―Necessity and justice have . . . forced the establishment of recognized
exceptions to the doctrine of [champerty],‖ including an exception providing that
―interference in a lawsuit [is] excusable when it is by one who has, or honestly
believes he has, a valuable interest in its prosecution‖).
18
III. Discussion
We review de novo Papageorge‘s claim that the trial court erred in granting
summary judgment in favor of Matt Banks.9 Onyeoziri v. Spivok, 44 A.3d 279,
283 (D.C. 2012). We review the trial court‘s denial of Papageorge‘s motion for
reconsideration for abuse of discretion. Perry v. Sera, 623 A.2d 1210, 1217 (D.C.
1993).
Papageorge argues that the Agreement that gave rise to this dispute does not
meet the first element of champerty because ―the source of [his] expected payment
under the Agreement could have been from a source other than a successful
recovery in a lawsuit‖ (e.g., ―the relinquishment of tenant rights and/or any other
sources‖); because the funds he seeks to recover did in fact come from a source
other than a successful recovery in a lawsuit; and because ―no litigation was ever
even filed after the Agreement was signed.‖ Thus, he argues, the trial court erred
9
Diane Banks joined Matt Banks as an occupant of the property on a date
not disclosed by the record, before Papageorge filed the instant lawsuit, but was
not a party to the Agreement under which Papageorge seeks to recover.
Papageorge does not contest the trial court‘s ruling as to Diane Banks; accordingly,
we affirm the trial court‘s entry of judgment in her favor.
19
in reasoning that there was ―no agreement for [Papageorge] to be reimbursed in
any way other than through the success of . . . litigation.‖ This argument is not
persuasive. Unless an exception applies, an agreement to finance litigation at
one‘s own expense in exchange for a share of the proceeds is champertous where it
is made for the purpose of stirring up and inducing litigation which otherwise
would not be commenced. See Van Wyck, 4 App. D.C. at 319-20. Because the
December 9, 2010, Agreement contemplated that a wrongful eviction suit would be
filed to redress the rights of Banks (and Mitchell),10 that Banks (and Mitchell)
would not pay the costs therefor, and that Papageorge would take the lion‘s share
of the proceeds of the litigation, the Agreement bore the hallmarks of champerty.
The fact that Papageorge now seeks his bargained-for share from a recovery that
was pursuant to a settlement rather than the contemplated litigation does not
change the fact that (unless an exception applies) the overall bargain involved
champerty. It is irrelevant that the agreement may have contained other, non-
champertous terms.11
10
Papageorge cleared up any doubt regarding this aspect of the bargain
through the affidavit that he filed to support his motion for prejudgment
attachment, in which he characterized their agreement as one ―under which I
agreed to finance Mr. Banks‘ efforts to protect his rights as a tenant of certain real
property.‖
11
Under the principle set out in the Restatement (Second) of Contracts §
184, the portion of the Agreement not involving the (allegedly champertous and
(continued…)
20
Papageorge‘s first argument is unavailing, but we agree with his second
contention: that the court should not have granted summary judgment since
Papageorge claims to have had at the time of the Agreement an interest in Banks‘s
claim against ESB, and in protecting Matt Banks‘s possessory interest in the
property, that rendered the agreement non-champertous. The trial court cited a
number of reasons why it rejected Papageorge‘s claim that he had such an interest.
We conclude, for the reasons that follow, that none of the reasons withstands
scrutiny.
(…continued)
thus unenforceable) promise to finance litigation at Papageorge‘s expense in
exchange for a share of the litigation proceeds might be enforceable ―if the
performance as to which the agreement is unenforceable is not an essential part of
the agreed exchange.‖ Restatement (Second) Contracts § 184 (1). Here, however,
the record suggests no reason to think that Banks and Mitchell would have entered
into an agreement to share the proceeds of a settlement reached without litigation if
Papageorge had not agreed to finance the contemplated litigation at his expense.
That promise appears to have been the consideration for the Agreement and thus to
have been an essential part of the agreed exchange. Cf. Conte v. Woomer (In re
Woomer), Case No. 11-43457, Chapter 7, Adversary No. 12-4017, 2013 Bankr.
LEXIS 4223, *35 (Bankr. E.D. Tex. Oct. 7, 2013) (―The relevant inquiry is
whether or not the parties would have entered into the agreement absent the
unenforceable part. . . . If the intent of the parties is unclear, the court will
presume the promises are dependent rather than independent‖) (internal quotations
omitted).
21
First, we reject the trial court‘s conclusion that Papageorge‘s ―past expenses
alone‖ for rent and litigation relating to the property could not provide him an
interest in Matt Banks‘s potential wrongful eviction claim against ESB. We think
the better rule is as stated in Smith v. Hartsell, Thallhimer v. Brinckerhoff, and
other cases cited above: that a party who has an interest in a plaintiff‘s claim as
basis for repayment of an existing indebtedness or for protecting a contingent
interest is not an officious intermeddler, but instead may agree to support the
plaintiff‘s litigation and share in any recovery without committing champerty.12
We need not pause over whether Papageorge made an adequate showing that he
had an interest because of rent and/or litigation expenses, because the trial court
did not grant summary judgment on the ground (and the Bankses did not argue)
that Papageorge failed adequately to document those putative bases for his interest
in Matt Banks‘s claims.13
12
Cf. Sampliner v. Motion Picture Patents Co., 254 U.S. 233, 239-40
(1920) (reversing a directed verdict entered in favor of the defendants on their
defense of champerty, where ―some substantial evidence strongly tended to show‖
that the plaintiff‘s interest in the litigation through an assignment of rights against
the defendants ―was taken in extinguishment of an existing indebtedness and not
for mere speculation upon the outcome of intended litigation‖); Gibson, 152 A. at
593 (―Any evidence which shows that the plaintiff had a real and proper interest in
the note, would show that the assignment was not champertous.‖).
13
We note that in the affidavit he submitted in support of his motion for
prejudgment attachment, Papageorge averred that, from the proceeds of Matt
(continued…)
22
But even if Papageorge did not document that interest in a way adequate to
avoid summary judgment, he also claimed an interest based on the assignment to
him of Matt Banks‘s TOPA rights, and he did provide evidence of the assignment
and subsequent memorandum affirming it. That is the backdrop of our second
point: We do not agree with the trial court that it was clear that Papageorge‘s
―TOPA rights could not have been affected by the outcome of any of the litigation
financed by‖ Papageorge. As described above, the court reasoned that under
Allman v. Snyder, ―the tenancy status of [a] tenant-assign[]or ha[s] no effect on the
assigned TOPA right‖ — i.e., that whether Matt Banks remained a tenant or not
was irrelevant to the existence of Papageorge‘s TOPA rights. However, Allman
decided only that a tenant who still had that status at the time the owner sent a
TOPA offer of sale did not lose his TOPA rights merely because he vacated his
rental unit before the TOPA process had concluded. We did not consider in
Allman the quite different issue of whether, where no offer of sale has yet been
made, a tenant must remain in possession (or retain a possessory interest) in order
to accede to TOPA rights when an offer of sale ultimately is made. We need not
decide that issue here; for present purposes, it suffices to conclude, as we do, that it
(…continued)
Banks‘s settlement with ESB, ―$20,000 was paid to [Papageorge‘s] attorney for a
portion of [Papageorge‘s] legal costs.‖
23
would not have been unreasonable for Papageorge to believe that Banks needed to
be restored to possession of the property in order to have his TOPA rights triggered
at the time of an offer of sale by ESB, and further to believe — even if mistakenly
— that without that restoration Papageorge‘s assigned TOPA rights would be in
jeopardy.14 And while the wrongful eviction lawsuit contemplated in the
Agreement presumably would have had as one object the recovery of money
damages, another possible remedy would have been restoration of Matt Banks‘s
possession of the property. Cf. Schwartz v. Certified Mgmt. Corp., 539 N.Y.S.2d
332, 333 (N.Y. App. Div. 1989) (explaining that ―[r]estoration of possession . . . is
a common remedy for wrongful eviction‖).
Third, contrary to the trial court‘s reasoning, this court‘s opinion in Banks v.
ESB did not conclusively establish Matt Banks‘s possessory interest in the property
such that no further litigation on that issue could have been necessary. For one
thing, while this court‘s opinion set the stage for Banks to seek restitution of
possession,15 this court did not order restitution of possession, and thus further
14
As the Bankses‘ brief acknowledges, TOPA rights accrue only to
―person[s] entitled to the possession, occupancy or benefits of a rental unit within a
housing accommodation[.]‖ D.C. Code § 42-3401.03 (17) (2012 Repl.).
15
See Hohensee v. Manchester, 102 A.2d 461, 462 (D.C. 1954).
24
litigation was necessary to achieve that result.16 In addition, the record shows that
even after Banks was restored to possession, ESB filed, on October 26, 2011, a
lawsuit in the United States District Court for the District of Columbia seeking to
eject him from the property on grounds other than those this court rejected in
Banks v. ESB.17 ESB presumably would have relied on the same grounds in
opposing the wrongful eviction suit contemplated in the Agreement. Thus, if Matt
Banks‘s continued occupancy of the property was necessary to protect his
16
The record indicates that Banks applied in the Landlord Tenant Court for
an order restoring him to occupancy of his unit and obtained the requested relief in
September 2011.
17
Papageorge submitted a copy of ESB‘s signed complaint in that lawsuit in
support of his motion for reconsideration. The court declined to consider any
documents that had not been before it at the time of its summary judgment ruling,
but it failed to take into account that, in their Reply to Plaintiff‘s Opposition to
Defendants‘ Motion to Dismiss or Alternatively for Summary Judgment, the
Bankses, too, had drawn the court‘s attention to ESB‘s District Court complaint
and supplied its docket number (telling the court that after the Landlord/Tenant
court reinstated Matt Banks to possession of the property, ―ESB filed suit in
federal court [in Case No. 1:11-CV-01879 (BH)] on October 26, 2011 against
Banks for ejectment[.]‖). Furthermore, while the trial court declined to consider
the draft settlement documents and other unsigned documents that Papageorge
submitted with his motion for reconsideration on the additional ground that they
did not constitute competent and admissible evidence, the court did not explain
why it declined to consider the ESB complaint, of which it was made aware (by
appellees) before entering its summary judgment ruling. That document was
neither a draft document nor unsigned, it bore a District Court date-stamp, and it
was not hearsay (since it was submitted not for the truth of anything ESB asserted
therein, but as evidence that ESB has filed the lawsuit). Declining to consider this
document was an erroneous exercise of the court‘s discretion.
25
expectant TOPA rights (and to protect the benefit Papageorge sought through an
assignment of those rights), the necessity of further litigation was not erased upon
issuance of this court‘s opinion in Banks v. ESB.18
As noted above, in explaining why it concluded that Papageorge did not
have an independent interest in the litigation that the Agreement contemplated, the
trial court also stated that it was ―questionable‖ whether Papageorge ―was properly
assigned Matt Banks‘ TOPA rights‖ in 2001. The court noted that the Rental
Housing Act specifies that an assignment of TOPA rights ―may occur at any time
in the process provided in this subchapter,‖ D.C. Code § 42-3404.06 (2012 Repl.),
which it took to mean ―the period of time during which an offer of sale is made on
the property.‖ The court noted that the assignment to Papageorge was not made in
the context of an offer of sale having been made on the property — and thus, the
court reasoned, its validity was in doubt. This is another issue that we need not
resolve definitively. The question is whether Papageorge could reasonably have
18
In opposing Papageorge‘s motion for reconsideration, the Bankses cited
the September 2012 RHC decision that, it asserted, established that any TOPA
rights Banks may have had were extinguished before the date of the Agreement.
However, even if the RHC decision was authoritative on that point, that does not
mean that Papageorge could not reasonably have believed on December 9, 2010,
(the date of the Agreement) that Banks continued to have expectant TOPA rights
that would inure to Papageorge, as assignee, upon a triggering event.
26
thought that he had a valid assignment of Banks‘s (purported) TOPA rights. We
think he could have reasonably so believed.
Although the trial court correctly noted the language of § 42-3404.06 (i.e.,
that an assignment of TOPA rights ―may occur at any time in the process provided
in this subchapter‖), the section also specifies that an assignment ―may be
structured in any way the tenant, in the tenant‘s sole discretion, finds acceptable.‖
At least arguably, an assignment of expectant TOPA rights is a permissible
―structure‖ under the statute — or Papageorge could have reasonably so thought.
Further, the legislative history of the statutory amendment that inserted the ―at any
time in the process provided in this subchapter‖ clause shows that the legislative
purpose was to clarify that the Council of the District of Columbia did not intend to
impose limits on tenant assignments such as had been the subject of prior
litigation.19 Given the Council‘s intent to remove impediments to tenant
assignments, we do not think § 42-3404.06 must necessarily be read to restrict
19
See Council of the District of Columbia, Committee on Consumer and
Regulatory Affairs, Report on Bill 11-53, ―Rental Housing Conversion and Sale
Act of 1980 Reenactment and Amendment Act of 1995,‖ Mar. 14, 1995, at 11
(noting that the issue of whether tenants could assign their rights to a private or
public third party had been ―the subject of more litigation than virtually all other
issues under the Act combined,‖ with a ruling in one case that the ―assignment
could only be to a public agency‖).
27
assignments to the period after there has been an offer of sale, if a tenant prefers a
different structure. In addition, while we do not decide the ultimate issue, it would
not have been unreasonable for Papageorge to assume that that an assignment of
anticipated TOPA rights could be made under a principle similar to the doctrine of
after-acquired title. Under that doctrine, ―if a grantor purports to transfer
ownership of real property to which he lacks legal title at the time of transfer, but
subsequently acquires legal title to the property, the after-acquired title inures, by
operation of law, to the benefit of the grantee.‖ Ackerman v. Abbott, 978 A.2d
1250, 1254 (D.C. 2009) (internal quotations omitted); see also Douglas v. Lyles,
841 A.2d 1, 4 (D.C. 2004) (―[A]t common law a presumptive heir can assign to a
third party as ephemeral an interest as his or her expectancy interest.‖); Columbian
Carbon Co. v. Kight, 114 A.2d 28, 32 (Md. 1955) (―The grantor who executes a
deed purporting to convey land to which he has no title or to which he has a
defective title at the time of conveyance will not be permitted, when he afterwards
acquires a good title to the land, to claim in opposition to his deed.‖).
The additional rationales the court cited in concluding that Papageorge did
not have an independent interest in the litigation were that (1) if Matt Banks had
effectively assigned his TOPA rights to Papageorge, then Banks had no standing to
bring suit to protect those TOPA rights, and Papageorge had no valid reason to
28
agree to fund a suit by Banks; and, alternatively, (2) Banks‘s eventual
relinquishment of his TOPA rights as part of his settlement with ESB meant that
Papageorge did not actually have an interest in those TOPA rights. We think these
rationales fail. Again by analogy to the doctrine of after-acquired title, we think it
correct to say that Banks, if he made a valid assignment of his expectant TOPA
rights, retained standing to protect those rights until the moment when they came
into fruition (and immediately thereafter passed to Papageorge). Cf. Ackerman,
978 A.2d at 1254 (―Having conveyed title he did not have, when the grantor finally
does acquire title, the doctrine operates to vest title automatically in the grantee.‖).
The fact that Banks eventually relinquished to ESB an interest he had already
conveyed as an expectancy interest to Papageorge — in breach of the 2001
assignment, Papageorge presumably would claim — does not mean that
Papageorge had no interest at the time of the Agreement, even though it was a
contingent or expectancy interest rather than a vested one.
In sum, on the present record, it appears that Papageorge could reasonably
have believed that he had an independent interest in the property, in Matt Banks‘s
prospective claim for wrongful eviction, and in protecting Banks‘s expectant
TOPA rights, such that Papageorge‘s agreement to finance litigation to protect
these interests was not champertous. Whether Papageorge honestly believed he
29
had such an interest, if that be disputed, was not resolvable on summary judgment.
Accordingly, Matt Banks was not entitled to summary judgment.
Reversed and remanded.