Nofziger Communications, Inc. v. Birks

Citation989 F.2d 1227
Decision Date13 April 1993
Docket NumberNo. 91-7186,91-7186
PartiesNOFZIGER COMMUNICATIONS, INC., a District of Columbia Corporation, Appellant, v. Frederick P. BIRKS, as Trustee of the Wynmark Trust, Respondent.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (Civil Action No. 90cv00602).

Philip L. Sbarbaro, Washington, DC, with whom Lawrence H. Schwartz, Washington, DC, was on the brief, for appellant. Christopher A. Meyers, Lawton, OK, also entered an appearance for appellant.

Philip M. Schwartz, with whom Stephen D. Graeff, Washington, DC, was on the brief, for appellee.

Before MIKVA, Chief Judge; EDWARDS and HENDERSON, Circuit Judges.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Appellant Nofziger Communications, Inc. (NCI) appeals from a summary judgment in favor of appellee Frederick P. Birks, trustee of the Wynmark Trust (Trust). The district court ruled that the language of letters written by the Trust's former trustee purporting to exercise certain options held by the Trust conclusively established that the trustee intended to exercise the option in a capacity other than as trustee and therefore not on behalf of the Trust. Because evidence outside the letters supports a finding that the trustee intended to exercise the options on behalf of the Trust, we reverse the district court's judgment and remand for further proceedings.

The following facts are undisputed. In 1984, NCI purchased from Wynmark Development Corporation (Development) interests in two limited partnerships: a 40% interest in 1640 Wisconsin Avenue Associates (1640) and a 66% interest in 514 Tenth Street Associates (514). Development, which was solely owned by two individuals, Mark Griffin and Richard Naing, retained a 1% interest in and was the sole general partner of each of the limited partnerships.

On April 29, 1987, NCI and Development entered into two written option agreements, each of which granted to Development the option to purchase NCI's limited partnership interest in one of the two partnerships. Each agreement provided that Development was to "exercise the option by paying the option price" and, in the event it did so, to compensate NCI, under an "Investment Recapture" provision, for "any tax liability incurred by [NCI] by virtue of the tax credit recapture caused by Grantee's exercise of this option and purchase of the Limited Partnership interest." Joint Appendix (JA) 47, 48, 50, 51.

On the same day the option agreements were signed, NCI, Development, Trust, 1 Naing and Griffin entered into an "Assignment and Escrow Agreement" under which Development "assign[ed] to Griffin, Naing and the Wynmark Trust all of its right, title and interest" under each option and stipulated that upon exercise of the options the transferred limited partnership interests were to be divided among the three assignees so that Griffin and Naing would each receive 44.5% and the Trust the remaining 10%. 2 JA 55. The agreement also provided that amended limited partnership certificates reflecting the transfers were to be created and held in escrow until such time as the options might be exercised.

In 1988, Griffin wrote two separate letters to NCI purporting to exercise the two options, the first on August 30, 1988, for 1640, and the second on September 22, 1988, for 514. For the purpose of this appeal, it is undisputed that on both of those dates Griffin was both executive vice-president of Development and trustee of the Trust. 3 Each exercise letter was written on Development stationery and bore a similar heading:

Re: Option to Purchase Limited Partnership Interests in [Partnership name] Dated April 29, 1987 ("Agreement") by and between Nofziger Communications, Inc. ("Grantor") and Wynmark Development Corporation ("Grantee")

JA 99, 100. The body of each stated in part:

I am writing to you as executive Vice President of the Grantee. The Grantee hereby exercises its option to purchase Grantor's ... limited partnership interests in [partnership name] pursuant to the terms and conditions of the Agreement effective as of the date of this letter. Enclosed is a check in the amount of [exercise price] which is the option price calculated pursuant to the Agreement.

JA 99, 100. Accompanying each letter was a check drawn on an account in the name of "Wynmark Properties" and a letter from Griffin's lawyer Ed Bloom to NCI's accountant. Each of the two letters from Bloom purported to be written in his "capacity as counsel to Richard Naing and Mark G. Griffin" and states in part:

Pursuant to our telephone conversation yesterday and the enclosed letters from Mark G. Griffin, Wynmark Development Corporation is hereby exercising its option to reacquire ... all of Nofziger Communications, Inc.'s interest in [the named partnership] pursuant to ... that certain Option to Purchase Limited Partnership Interests in [the named partnership] dated April 29, 1987, by and between Nofziger Communications, Inc., and Wynmark Development Corporation. Enclosed herewith are copies of the Agreements and a check made payable to Nofziger Communications, Inc., in the amount of [applicable payment amount].

JA 599, 604. On the same day the 1640 option was exercised, the property was sold to a third party. According to Naing, he sold his interest in 514 to Griffin sometime before March 27, 1989.

It is uncontested that, as a result of losing its interests in the two partnerships, NCI has incurred recapture tax liability of $165,634. On March 16, 1990, NCI filed this action seeking compensation for this amount from the Trust, pursuant to the investment recapture provisions in the option agreements.

On cross-motions for summary judgment, the district court granted judgment in Birks's favor, concluding that because Griffin's letters expressly stated he was acting in his capacity as executive vice president of Development, which had assigned away its right to exercise the options, rather than in his capacity as trustee of the Trust, to which the rights had been assigned, Trust cannot be held accountable for any loss NCI incurred as a result of the exercise. NCI appeals that judgment on the ground that the district court erroneously resolved issues of fact in Birks's favor by ignoring evidence that Griffin actually intended to and did exercise the option on behalf of the Trust, despite the form of the exercise letters. Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A material fact is one "that might affect the outcome of the suit under the governing law" and "the dispute about a material fact is 'genuine' if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). We agree with NCI that the evidence before the district court gave rise to genuine issues of material fact and that the court therefore erred in granting summary judgment in Birks's favor.

In reaching its decision, the district court reasoned that Griffin's letters conclusively established that he was exercising the options on behalf of Development, rather than the Trust, and that the Trust therefore could not be held liable under the investment recapture provisions of the option agreements. The court explained:

While a trustee does not have to state explicitly that he is acting in that capacity for his actions to bind the trust, where the trustee...

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