CONSUMERS UNITED INS. CO. v. SMITH
| Decision Date | 14 July 1994 |
| Docket Number | No. 92-CV-1496,No. 93-CV-16,No. 93-CV-61,No. 93-CV-280,No. 93-CV-277,No. 93-CV-726,92-CV-1496,93-CV-16,93-CV-61,93-CV-277,93-CV-280,93-CV-726 |
| Citation | 644 A.2d 1328 |
| Parties | CONSUMERS UNITED INSURANCE COMPANY, Appellant, v. Robert H. SMITH, Robert P. Kogod and Charles E. Smith Management, Inc., Appellees. |
| Court | D.C. Court of Appeals |
APPEAL FROM THE SUPERIOR COURT OF THE DISTRICT OF COLUMBIA, JOHN H. SUDA, J.
THIS PAGE CONTAINED HEADNOTES AND HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.
THIS PAGE CONTAINED HEADNOTES AND HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.
David Epstein and George Miron, Washington, DC, for appellant.
William D. Nussbaum and Jonathan S. Franklin, with whom Karen M. Hardwick, Washington, DC, was on the brief, for appellees.
Charles W. Havens III, Eunice Lin Bumgardner, Washington, DC, Anthony R. Buonaguro, Reston, VA, and John Del Campo, Chicago, IL, filed an amicus curiae brief for the National Organization of Life and Health Ins. Guar. Associations, on behalf of appellant.
Michael E. Surguine, Little Rock, AR, filed an amicus curiae brief for the National Ass'n of Insurance Com'rs, on behalf of appellant.
TABLE OF CONTENTS
Page
INTRODUCTION
I. FACTS AND PROCEEDINGS 1334
II. THE JURY'S VERDICT FOR SMITH 1337
(APPEAL No. 92-CV-1496)
A. Criteria for Judgment Notwithstanding 1338
the Verdict; Specific Question Presented
Jury Instructions; Special Verdict Form
B. Anticipatory Breach of Lease at Common Law; 1340
Measure of Damages
C. Calculation of Damages as of the Date of Breach 1341
D. Relevance of Actual Damages During the Period 1341
Between Date of Breach and Trial
E. Change of Market Conditions Between Date of 1343
Breach and Trial
F. Smith's Evidence of Damages: Was it Sufficient 1343
for Recovery Under § 12.4 of the Lease
1. Smith's Damages Between Date of Breach 1343
and Trial
2. Smith's Estimate of Future (After-Trial) 1345
Damages
3. CUIC's Contention that Smith's Damages Were 1346
Not Properly Discounted
III. CUIC's CHALLENGE TO SMITH'S JUDGMENTS AUTHORIZING 1346
RECOVERY OF COLLATERAL: RESPECTIVE RIGHTS AND
PRIORITIES OF THE JUDGMENT LIEN CREDITOR AND THE
DELAWARE RECEIVER
A. Full Faith and Credit: Clark v. Williard 1347
(I and II)
B. Priority as Between Smith and the Delaware 1348
Receiver: CUIC's Argument Under Huffines v. American
Sec. & Trust Co
C. Priority as Between Smith and the Delaware 1350
Receiver: Smith's Argument Under Herman v. Siney
D. Application of Herman v. Siney: the 1351
Legal Issues
1. Creating Valid Judgment Liens on Personal 1351
Property and on Real Property
2. The Significance, If Any, of the Court's 1352
Role in Creating a Valid Judgment Lien
Under Herman v. Siney
E. Application of Herman v. Siney: Smith's 1354
Judgment of Recovery Against First American Bank
F. Application of Herman v. Siney: Smith's 1356
Judgment Lien on CUIC's Connecticut Avenue
Building
1. Summary Judgment Criteria 1356
2. Fraudulent Conveyances: the Law 1357
3. Fraudulent Conveyances: the Law Applied to 1357
the Facts of This Case
G. Full Faith and Credit Clause Applied to the 1359
Facts of this Case: Required Court 1359
Permission under Huffines v. American. Sec. & Trust Co
for Execution on Collateral Held by Judgment Lien
Creditor Having Priority Over Delaware Receiver
IV. CUIC's POLICY ARGUMENT FOR REJECTING HERMAN v. 1362
SINEY IN FAVOR OF ADOPTING 1362 PRINCIPLES OF UNIFORM
INSURER LIQUIDATION ACT
V. SUMMARY OF DISPOSITIONS 1363
Before FERREN, STEADMAN, and KING, Associate Judges.
In this case a Delaware insurance company, doing business in the District of Columbia, stopped paying rent and sued its landlord for rescission of the lease and for damages, claiming the landlord had fraudulently induced it to lease space in a building with dangerous asbestos-containing materials. The landlord filed a counterclaim for nonpayment of rent and related charges. The jury found in all respects for the landlord, and the trial court entered judgment on a verdict against the insurance company for $2,500,000. In an effort to execute on its judgment and obtain a lien on a building that its judgment debtor, the insurance company, owned in the District, the landlord recorded its judgment with the District of Columbia Recorder of Deeds. (The landlord was unaware that, a few days earlier, the insurance company had transferred the building to its parent company.) The landlord also caused the court to issue a writ of garnishment of the insurance company's funds in a District of Columbia bank. Soon thereafter, the Delaware Insurance Commissioner seized the insurance company's assets pursuant to a Delaware court order that enjoined all persons (thereby including the District landlord) from asserting any claim against the insurance company's property. A few weeks later, ignoring the Delaware court's order, the landlord filed a motion in Superior Court for a judgment of recovery against the garnishee bank, seeking the insurance company's funds the landlord had garnisheed. The trial court granted the motion, and the insurance company appealed. Subsequently, the trial court held an evidentiary hearing on the validity of the insurance company's sale of its building (on which the landlord had a judgment lien) to the parent company. The court ruled that the transfer was a fraudulent conveyance and that, in any event, the landlord was entitled to pierce the so-called corporate veil to execute on the building. The insurance company noted another appeal.
Although the insurance company has raised numerous issues, this consolidated appeal presents essentially three questions requiring more than summary treatment: (1) whether, in light of the particular damages formula in the lease, the landlord presented sufficient evidence to support the $2,500,000 judgment on its counterclaim for damages for nonpayment of rent; (2) whether the landlord or the Delaware Insurance Commissioner has priority in claiming the insurance company's bank accounts and building; and (3) if the landlord has priority, whether it must apply to the Delaware receivership court for permission to enforce the judgment liens.
As to the first issue, we conclude that the trial court did not err in denying the insurance company's motion for judgment notwithstanding the verdict, even though the landlord's expert testimony did not exactly track the damages formula in the lease itself.
As to the second issue, we hold — consistent with Supreme Court authority on the Full Faith and Credit Clause — that this court's decision in Herman v. Siney, 190 A.2d 650 (D.C. 1963), requires us to affirm the judgment granting the landlord's claim to the insurance company's building and bank accounts priority over the subsequently appointed Delaware receiver's claim, subject to remand for further proceedings to ascertain the amount of the insurance company's money the landlord's writ of garnishment reached in the bank before the Delaware court issued its seizure order cutting off the landlord's claim.
Finally, we conclude that the Full Faith and Credit Clause does not require the landlord to obtain authority from the Delaware receivership court in order to proceed further in enforcing its judgment liens in the District of Columbia. At most, the Full Faith and Credit Clause would require the landlord to seek permission for release of the collateral from a District of Columbia court, acting in the capacity of an ancillary receiver. That local receivership court, applying Huffines v. American Sec. & Trust Co., 63 App. D.C. 224, 71 F.2d 345 (1934), would have authority — in the insurance company's interest — to stay, but not prevent, enforcement ofthe liens. In this case, however, the insurance company has not argued on appeal, as a fallback, that the trial court should have stayed enforcement of the judgment liens under Huffines.
Accordingly, we affirm in all respects save for a remand to determine the amount of the insurance company's money in the bank the landlord is entitled to reach.
On October 10, 1983, appellant, Consumers United Insurance Company (CUIC), a Delaware corporation, signed a ten year lease — from October 1, 1984 to September 30, 1994 — for commercial office space in a building located at 2100 M Street, N.W. The building was owned by Embassy Associates, a partnership whose general partners are appellees Robert H. Smith and Robert P. Kogod, and was managed by appellee Charles E. Smith Management, Inc. (We refer to appellees, collectively, as "Smith.")
In October 1991, CUIC stopped paying its rent under the lease. As a result, in November 1991, Embassy Associates filed suit against CUIC in the Landlord & Tenant Branch (L & T No. 56768-91), seeking possession of the premises and rent owed under the lease. The following month, on December 4, 1991 — before the Landlord & Tenant Branch had ruled on Smith's claim for possession and rent — CUIC filed suit in the Civil Division (No. 91-CA15359), essentially seeking rescission of the lease, return of all rent payments, and damages allegedly caused by hazardous asbestos-containing building materials (ACBMs) in the building. CUIC's complaint alleged that Smith had fraudulently induced CUIC to enter into the lease by concealing the fact of the ACBMs. CUIC also...
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