CARR v. ROSE

• Decision Date: 09 October 1997
• Docket Number: No. 94-CV-729,94-CV-729
• Citation: 701 A.2d 1065
• Parties: Oliver T. CARR Jr., et al., Appellants, v. Evans ROSE, et al., Appellees.
• Court: D.C. Court of Appeals

701 A.2d 1065

Oliver T. CARR Jr., et al., Appellants, v. Evans ROSE, et al., Appellees.

No. 94-CV-729.

District of Columbia Court of Appeals.

Argued September 28, 1995.

Decided October 9, 1997.

APPEAL FROM SUPERIOR COURT, STEFFEN W. GRAAE, MOTIONS JUDGE.

William J. Utermohlen, with whom Richard A. Green was on the brief, Washington, DC, for appellants.

Paul R. Monsees, with whom David Barmak and James Sottile IV were on the brief, Washington, DC, for the Rose appellees, the Miskovsky appellees, and appellee Riordan.

Niccolo N. Donzella, with whom Charles S. Fax was on the brief, Washington, DC, for appellees Guinot, Lenzini, Greene and Jost.

J. Thomas Esslinger, Washington, DC, filed a brief for appellees Lieber and McGuinn.

Thomas C. Reed and Stanley R. Geary, Pittsburgh, PA, filed a brief for appellees Angel, Farrell, Geary, Ingram, Moore and Reed.

Before STEADMAN and RUIZ, Associate Judges, and PRYOR, Senior Judge.

STEADMAN, Associate Judge:

This appeal arises from years of effort on the part of appellants (collectively the "landlord") to recover damages for breach of a lease on office space after the tenants decided they no longer wished to occupy the leased space. The great bulk of the tenant appellees were not members of the law firm that executed the lease but rather of a subsequent "consolidated" law firm.

The principal question presented is whether the trial court properly dismissed the landlord's action in its entirety against the tenants on the ground that it is barred under principles of res judicata and collateral estoppel by a final order in a Pennsylvania probate proceeding. The Pennsylvania court had rejected what it determined to be a claim by the landlord against the assets of the probate estate of one of the tenants — a member of the consolidated law firm only — after ruling that the tenant was not liable under the lease agreement. The trial court held that the present claims are precluded by this former litigation. We reverse the trial court's dismissal of the action against those appellees who were members of the original law firm executing the lease. In all other respects, the order of the trial court is affirmed.¹

I. Background

We first describe the lease and the relation of the parties to it. We then recount the series of litigation moves that followed the asserted breach of the lease, with special attention to the Pennsylvania probate proceedings that the trial court in the District of Columbia determined to have preclusive effect on the instant action.

A. The Lease

The landlord's claims are based on a ten-year commercial office space lease entered into in 1983 between the landlord and the original tenant, a law partnership named Chapman, Duff & Paul ("CDP" or "original tenant"). Under the lease, the members of the law partnership were liable, but only to the extent of their respective "percentage interest[s] in the partnership assets of" the lessee. That limitation also applied to the members of any "successor partnership." The term "successor partnership" was defined to mean a partnership in which the members of the original tenant owned or controlled a majority interest.

In 1985, the original tenant and another law firm, Rose, Schmidt, Dixon & Hasley ("RSDH"), a Pennsylvania partnership with a Washington office, entered into an agreement to consolidate their operations. The members of the original tenant firm collectively owned less than a fifty percent interest in the consolidated operation; therefore, it would not be a "successor partnership" as that term was defined in the lease. The exact nature of the consolidation is disputed — members of the original tenant firm characterize the agreement as a merger, while members of the consolidated firm and its successor characterize it as a joint venture. Regardless of the characterizations, however, the consolidation agreement provided that "existing assets, liabilities and obligations of RSDH and CDP as of the close of business on February 28, 1985 shall be assumed by the [consolidated] Firm."

The Washington office of the newly consolidated firm, which called itself Rose, Schmidt, Chapman, Duff & Hasley, took up residence in the original tenant's office space in 1985 with the full knowledge of the landlord. The consolidated firm continued to occupy the space and pay rent until mid 1987, when, with six years still left on the lease term, it announced in a letter to the landlord that the firm had been "dissolved" and would be vacating the premises. In the same letter, the consolidated firm said that its business was "being wound up by Rose, Schmidt, Hasley & DiSalle," which it described as "formerly a part of" the consolidated firm. For the sake of clarity, we shall call Rose, Schmidt, Hasley & DiSalle the"survivor firm." The survivor firm paid rent on the premises through September 30, 1987, at which point the space was vacated.

B. The Litigation

As might have been expected, the foregoing led to a dispute concerning who owed whom what. According to an affidavit in the record, the landlord undertook settlement negotiations with counsel representing the members of the survivor firm. When those discussions proved unfruitful, in June 1989, the landlord notified opposing counsel of its intention to file suit and requested clarification regarding a list of partners of the survivor firm that counsel had previously provided, for the purpose of naming the appropriate defendants. On August 2, 1989, while the landlord was waiting for a response, members of the survivor firm brought an action in state court in Pittsburgh seeking a declaration that they were not liable on the lease. The landlord removed the case to federal court. The case was never decided because it was voluntarily dismissed, in 1993, by the members of the survivor firm.

At about the same time, the landlord learned of a second action in Pennsylvania, a probate proceeding in the Orphans' Court Division of the Court of Common Pleas in Pittsburgh, resulting from the June 1989 death of Harold R. Schmidt, who had been a name partner in both the consolidated firm and the survivor firm but not the original tenant. On August 7, 1989, the landlord, to preserve its rights in Schmidt's estate, filed a notice of its claim in the amount of $2,036,398 reflecting rents assertedly due under the lease.² In response, on August 11 the executrix of Schmidt's estate, represented by the survivor firm, filed a declaratory judgment action in the Orphans' Court to determine Schmidt's liability to the landlord under the lease. The landlord removed that action to federal court. After her motion for remand to the Pennsylvania state court was denied, the executrix voluntarily dismissed the action in December 1989.

Meanwhile, on August 14, 1989, the landlord filed in the District of Columbia Superior Court one of the complaints in the consolidated cases from which this appeal arises. The complaint named thirty-two past and present members of the survivor firm, of whom twenty-six had been members of the consolidated firm, including Harold Schmidt's estate, and of whom one had also been a member of the original tenant. It also named twelve defendants who had been members of the consolidated firm, but not the survivor firm. Subsequently, in June of 1990, the landlord filed another complaint in the District of Columbia Superior Court, naming ten defendants who had been members of both the original tenant firm and the consolidated firm as well as six additional defendants who had been members of the consolidated firm only. At the landlord's request, the two actions were consolidated. Upon defendants' motion, these proceedings in the District were stayed pending resolution of the federal court action brought in Pennsylvania by the members of the survivor firm.

In January of 1990, Schmidt's executrix filed an accounting of the estate with the Pennsylvania Orphans' Court. The accounting provided for distribution of the estate to the legatees, without any provision for the estate's potential liability to the landlord.³ If approved by the court after audit, that distribution would preclude the landlord's claim under the lease against the estate. The landlord, therefore, objected to the accounting and on January 17, 1990, filed a petition pursuant to 20 PA. CONS.STAT. § 3389⁴ requestingthat the Orphans' Court (1) order the return to the estate of $600,594 in estate assets already paid out in at-risk distributions, and (2) stay the audit of the accounting until the tenants' liability under the lease was resolved, either in the survivor firm's declaratory judgment action then pending in federal court in Pennsylvania or in the landlord's action pending in the District of Columbia.

After a settlement conference sponsored by the Orphans' Court proved unsuccessful, the court announced that it would entertain the claim itself. Not wishing to try its claim under the lease in that forum, the landlord denied having ever requested from the Orphans' Court any judgment against the estate, and furthermore filed a notice withdrawing its claim. On March 22, 1990, the court struck the withdrawal and directed that a trial be held.⁵ The landlord failed to appear at trial, and, after receiving and considering evidence from only those contesting liability under the lease, the Orphans' Court issued an opinion dismissing the lease claim on the merits.

Specifically, the Orphans' Court found that "[t]here was no valid assignment of the Lease to the [consolidated firm] and, therefore, there is no liability of either the [consolidated firm] or the Schmidt Estate. The Lease was neither expressly assigned nor assumed by [the survivor firm] or the [consolidated firm] and no such assignment or assumption occurred by implication or by operation of law." The court concluded that the consolidated firm had been a tenant-by-sufferance between March 1, 1985 and September 30, 1987 pursuant to D.C. Code § 45-220 (1981), and that...