ASSOC. OF AMERICAN RAILROADS v. Connerton

• Citation: 723 A.2d 858
• Decision Date: 28 January 1999
• Docket Number: No. 95-CV-1236, No. 96-CV-130.
• Parties: ASSOCIATION OF AMERICAN RAILROADS, Appellant, v. Robert J. CONNERTON, et al., Appellees.
• Court: Court of Appeals of Columbia District

723 A.2d 858

ASSOCIATION OF AMERICAN RAILROADS, Appellant, v. Robert J. CONNERTON, et al., Appellees.

Nos. 95-CV-1236, 96-CV-130.

District of Columbia Court of Appeals.

Argued September 1, 1998.

Decided January 28, 1999.

Philip M. Musolino, with whom Lisa J. Dessel, Washington, DC, was on the brief, for appellant.

Elliot Adler, for appellees. Alexia Morrison and Adam M. Shayne, Washington, DC, filed the brief for appellees.

Before SCHWELB and FARRELL, Associate Judges, and KING, Senior Judge.¹

SCHWELB, Associate Judge:

These appeals arise from a dispute between the Association of American Railroads (AAR), as sublessor, and Connerton, Ray, & Simon, a law firm (Connerton), as subtenant, over the construction of their Sublease. Following a bench trial, the trial judge ruled in Connerton's favor with respect to AAR's contention that Connerton was liable to AAR for a share of certain disputed operating expenses and real estate taxes. The judge also ordered AAR to pay Connerton $73,790 in counsel fees. On appeal, AAR contends that these rulings were erroneous as a matter of law. We affirm.

I. THE PASS-THROUGHS

A. Background.

The eight-story commercial building located at 1920 L Street N.W. in Washington, D.C. consists of office space on floors two through eight, retail space on the first floor, and a garage. On September 11, 1978, 20th & L Associates Limited Partnership, as landlord, leased all of the office space and most of the retail space to AAR pursuant to the terms of the "Master Lease." On January 21, 1987, AAR subleased approximately 12,000 square feet of office space on the fourth floor of the building to Connerton's predecessor-in-interest.

In 1994, after Connerton refused to pay some of the charges claimed by AAR to be due, AAR instituted an action for possession against Connerton in the Landlord and Tenant Branch of the Superior Court's Civil Division. AAR claimed that Connerton had failed to pay its full share of the rent due pursuant to the Sublease. Connerton counterclaimed for a refund of rent previously paid, asserting that AAR had attempted to charge Connerton amounts that were not authorized by the Sublease. On July 24, 1995, in a 27-page order (Order No. 1), the trial judge ruled in favor of AAR on some of the issues disputed by the parties and in Connerton's favor as to other issues. AAR has appealed from the trial judge's disposition of issues relating to the amount Connerton was required to pay as its share of the building's operating costs and real estate taxes. AAR also claims that the trial judge should have dismissed Connerton's counterclaim because, according to AAR, Connerton made the payments voluntarily and with full knowledge of the facts.

B. The Sublease.

Under the terms of the Sublease, Connerton is required to pay a fixed monthly base rent and

its proportionate share of all increases in operating costs (to the extent charged by the Lessor to the Sublessor under the terms of the Master Lease) above an index of $7.25 per resalable square foot, per year. This amount ($7.25 per rentable square foot, per year) will be considered the "Base Operating Costs." Sublessee's proportionate share of operating expenses will be based on the ratio of Sublessee's total square footage to the total square footage of the rentable office space in the building in accordance with Exhibit 1. Sublessee's proportionate share of real estate taxes to be included in operating costs shall be based on the ratio of sublessee's total square footage to the total rentable square footage in the building.

The Sublease further states that "[t]he term `Operating Costs' shall be as defined in Section 34 of the Master Lease." Section 34 of the Master Lease provides, in pertinent part, that "Operating Costs shall mean ... in general, all costs and expenses of operating the Building."

C. Electric bills and real estate taxes attributable to the garage.

Relying on Section 34 of the Master Lease, quoted above, AAR contended in the trial court, and again argues on appeal, that Connerton's obligations in terms of electric bills and real estate taxes must be calculated as a proportionate share of the operating expenses of the entire building. According to AAR, Connerton was required to pay, inter alia, a share of the building's operating costs attributable to the electric bills and real estate taxes of the tenant of the garage.

The Sublease, however, obligates Connerton to pay its share of any increases in operating costs only "to the extent charged by the Lessor to the Sublessor under the terms of the Master Lease." David Barefoot, who negotiated the Sublease on behalf of AAR, conceded that AAR had no responsibility for paying the real estate taxes or electrical costs of the tenant of the garage. Although there was contrary testimony, the judge expressly credited Barefoot's admission, and her finding as to this factual issue was not "clearly erroneous." See Super. Ct. Civ. R. 52(a).

D. The retail tenant's electric bills.

Section 4B of the Sublease states that Connerton's share of operating expenses was to be based on the ratio of Connerton's total square footage "to the total square footage of the rentable office space in the building." (Emphasis added.) Fred Ezra, who negotiated the Sublease on behalf of Connerton, testified that the intent of this provision was to charge Connerton for its share of the operating expenses incurred in the building's commercial space. The trial judge specifically found that this provision of the Sublease excluded the retail shops on the first floor as well as the garage, and that Connerton therefore was not obliged to pay AAR any part of the electric costs of these entities. We agree, for, viewed in conjunction with the definition in the Sublease of Connerton's "proportional share" of operating expenses, the definition in the Master Lease of overall operating expenses may properly be read to exclude the electrical bills of the garage and the retail stores. The judge's construction of the Sublease, while perhaps not the only possible one, was a reasonable one. See Chang v. Louis & Alexander, Inc., 645 A.2d 1110, 1115 (D.C.1994)

; cf. New Places, Inc. v. Communications Workers of Am., Inc., 619 A.2d 73, 77 (D.C.1993).²

II. WAIVER

In the trial court, AAR moved to dismiss Connerton's counterclaim on the grounds that Connerton's initial payment of the amounts demanded by AAR constituted a knowing waiver. AAR claimed that "monies voluntarily paid with full knowledge of the surrounding facts and circumstances, though paid under a mistaken view of the law, cannot be recovered." Bedell v. Inver Hous., Inc., 506 A.2d 202, 206 (D.C.1986) (quoting Voulgaris v. Press, 116 A.2d 691, 692 (D.C. 1955)). The trial judge denied the motion, finding that the amounts had not been paid voluntarily or with full knowledge of the facts. The judge also found that in 1992, 1993 and 1994, AAR had refused to provide documentation to Connerton, as required by the Sublease.

The judge's finding was not clearly erroneous. Indeed, the record, when viewed, as it must be, in the light most favorable to Connerton, see, e.g., Wright v. Hodges, 681 A.2d 1102, 1105 (D.C.1996) (per curiam)

, supports Connerton's position that it initially paid the full rent under a mistake of fact, for Connerton believed that AAR was charging Connerton no more than AAR was authorized to pass through to its subtenant.

For more than a century, the courts of this jurisdiction have "follow[ed] the established rule that one who pays money to another under an honest mistake of fact may, in the absence of an equitable defense, recover the money so paid." Lanston v. American Sec. & Trust Co., 32 A.2d 482, 483 (D.C.1943) (citing, inter alia, Strauss v. Hensey, 9 App. D.C. 541, 547-48 (1896)). "To [this] rule . . . there is no exception." Prowinsky v. Second Nat'l Bank, 49 App. D.C. 363, 364, 265 F. 1003, 1004 (1920).

These authorities are consistent with this court's recognition that "equity abhors forfeitures," Beard v. Goodyear Tire & Rubber Co., 587 A.2d 195, 203 (D.C.1991); so, indeed, does the law. See Vicki Bagley Realty, Inc. v. Laufer, 482 A.2d 359, 367-68 (D.C. 1984)

. There is no evidence in this case of detrimental reliance by AAR on Connerton's initial payment of the disputed amounts, nor has AAR established any other equitable defense. "If there is any question[, in a case of money paid by the plaintiff under a mistake of fact,] whether it would be inequitable to require the defendant to refund, the burden of proving the fact rests upon him." Hibbs v. Beall, 41 App. D.C. 592, 598 (1914).

AAR contends that Connerton knew or should have known that AAR was passing through to Connerton the charges that Connerton is now challenging. AAR points to the judge's finding that in 1989, 1990 and 1991—years during which Connerton paid without protest the full rent demanded by AAR—Connerton had requested and received from AAR supporting documentation, consisting primarily of invoices. If Connerton had examined these documents, then, according to AAR, Connerton would have realized that AAR was passing through to Connerton the electric bills and real estate taxes attributable to the garage, as well as the electric bills attributable to the retail tenant. AAR thus argues that Connerton's claimed "mistake of fact" was self-created, and that

[a] mistake which authorizes recovery exists only when the payor is unconscious of any error or ignorance, and not where he is conscious of a want of knowledge of the facts, or is uncertain or doubtful or speculates concerning them, or where they are disputed.

70 C.J.S. Payment § 115, at 99 (1987); see also George J. Meyer Mfg. Co. v. Howard Brass & Copper Co., 246 Wis. 558, 18 N.W.2d 468, 474 (1945).

It is not readily apparent from the documents provided to Connerton by AAR prior to 1992 that a reasonable tenant could have readily detected the inclusion in the pass-through of the challenged charges....