Goldkind v. Snider Bros., Inc.

• Decision Date: 23 September 1983
• Docket Number: No. 82-1027.,82-1027.
• Parties: Abraham GOLDKIND, et al., Appellants, v. SNIDER BROTHERS, INC., et al., Appellees.
• Court: D.C. Court of Appeals

Page 468

467 A.2d 468

Abraham GOLDKIND, et al., Appellants, v. SNIDER BROTHERS, INC., et al., Appellees.

No. 82-1027.

District of Columbia Court of Appeals.

Argued May 24, 1983.

Decided September 23, 1983.

Michael A. Schuchat, Washington, D.C., with whom Diane P. Burka, Washington, D.C., was on brief, for appellants.

Elizabeth J. Haegelin, Washington, D.C., with whom Richard W. Galiher, Washington, D.C., was on brief, for appellees.

Before KERN, FERREN and TERRY, Associate Judges.

TERRY, Associate Judge:

Appellants contest two orders of the trial court, one granting appellees' motion for summary judgment and the other denying appellants' motion for leave to amend their cross-claim. The underlying claim on which the cross-claim is based was before this court in Henderson v. Snider Brothers, Inc., 439 A.2d 481 (D.C.1981) (en banc). The facts in the instant case are largely the same as in Henderson. We affirm the denial of the motion for leave to amend, but we reverse the award of summary judgment and remand the case for further proceedings.

I

In February 1973 six doctors and their wives formed a partnership to purchase the Parkview Towers Apartments in Takoma Park, Maryland. The sellers of the apartments were Abraham and Helen Goldkind and Ely and Lena Weinkranz, appellants in the instant case. The broker for the transaction was Snider Brothers, Inc. Oliver A. Cowan, an employee of Snider Brothers, was also a partner in the purchasers' partnership.

The apartment building was purchased for $1,860,000. The purchasers assumed a $1,450,000 mortgage. They also paid $110,000 in cash and tendered two deferred purchase money notes to the sellers, one for $249,222.54 (note # 1) and another for $50,000 (note # 2). A commission of $75,000, consisting of $25,000 in cash and the $50,000 note # 2, was included in the sale price.

The partners soon became disenchanted with their investment. When they learned in July 1975 that the $50,000 note had been negotiated to their own partner, Cowan, as a commission on the sale, they stopped making payments on the note.¹

In February 1976 the purchasers brought suit in the Superior Court of the District of Columbia against the sellers (the Goldkinds and Weinkranzes), Snider Brothers, Inc., and Cowan.² The complaint alleged that Cowan, as an agent of Snider Brothers, fraudulently induced the buyers to enter into a purchase agreement by representing to them that the investment was a good one, that they would be making a fixed, limited investment for the purpose of acquiring a tax shelter, that the property would be self-sustaining, that he (Cowan) would have no interest in the property other than that of a partner, and that he would be receiving no commission from the sale. Appellants also alleged that the purchase price was $367,000 more than the fair market value of the property.

Three weeks later the trustees on the deed of trust instituted a foreclosure proceeding in a Maryland court. The purchasers did not contest the foreclosure.³ At the ensuing public auction, the sellers bought the property back, subject to the existing encumbrances. The foreclosure sale was ratified by the court in April 1976. After the auditor's report was filed, the purchasers filed exceptions to it and apprised the Maryland court of the pendency of the fraud action in the Superior Court, requesting that any monies awarded to them in the fraud action be considered in reduction of any deficiencies on the promissory notes.

In March 1977 the Maryland court modified and ratified the auditor's report, which found deficiencies of $162,764.14 on note # 1 and $28,758.68 on note # 2. There was no appeal from either the final order approving the foreclosure sale or the order ratifying the auditor's report, as modified.

Thereafter, in the Superior Court fraud action, the sellers filed a cross-claim against their co-defendants, Snider Brothers and Cowan, alleging in their first count:

2. If Snider and/or Cowan made the representations as alleged by plaintiffs, said actions were not authorized by Goldkind and Weinkranz and were not within the scope of any engagement of Snider and/or Cowan.

3. Snider and Cowan are liable to Goldkind and Weinkranz for any amount due plaintiffs as a result of the representations allegedly made by them.

The intention of this count was apparently to indemnify the sellers for any wrongdoing on the part of their brokers. The cross-claim included a second count which stated in part:

6. If Snider and/or Cowan made the representations as alleged by plaintiffs, then said representations were in violation of the duty of good faith, loyalty and honest dealing which Snider and Cowan as agents owed Goldkind and Weinkranz.[⁴]

7. Defendants Snider and Cowan failed to disclose to Goldkind and Weinkranz that they had made representations such as are alleged in the Complaint of plaintiffs.

8. If the plaintiffs prove the allegation of the Complaint, then Snider and Cowan have forfeited any right to commission from Goldkind and Weinkranz.

9. Goldkind and Weinkranz paid in cash and by note to Snider the sum of $75,000, which amount Snider and Cowan have forfeited.

The latter count asserts a separate cause of action against the brokers, Snider Brothers and Cowan, seeking recovery of the commission paid by the sellers. Paragraph 8 seems to suggest, however, that liability for repayment of the commission under count two of the cross-claim may be premised upon a finding of seller or broker liability to the purchasers on the original claim of fraud.

The defendants Snider Brothers, Cowan, and Snider Brothers, Inc., Profit Sharing Trust then moved to dismiss the purchasers' complaint on the ground that the Maryland foreclosure proceeding was res judicata as to the subsequent fraud action. After initially denying the motion, the trial court, relying on the doctrine of collateral estoppel, granted the motion on the fraudulent inducement claims as to all defendants including Cowan, but denied Cowan's motion to dismiss on the fiduciary duty and misrepresentation claims. Although the ruling on Cowan's motion was not a final judgment, the trial court, pursuant to D.C.Code § 11-721(d) (1981), certified that an immediate appeal from the ruling on Cowan's claim would advance the ultimate termination of the case. Cowan's appeal was consolidated by this court with the purchasers' appeal from the dismissal order. The trial court then stayed any further action on the suit pending resolution of the appeals.

A division of this court ruled in Henderson v. Snider Brothers, Inc., 409 A.2d 1083 (D.C.1979), that the Maryland foreclosure decree did not collaterally estop the purchasers from subsequently claiming that they were fraudulently induced to purchase the apartment building, nor did it estop their claims against Cowan for breach of fiduciary duty and misrepresentation. That decision was reversed in part by the full Court in Henderson v. Snider Brothers, Inc., 439 A.2d 481 (D.C.1981) (en banc). The en banc court held that the purchasers were barred by res judicata from litigating their claim of fraud because they had failed to raise it in the Maryland foreclosure proceeding. However, the en banc court upheld the division's ruling that the action against Cowan for misrepresentation and breach of fiduciary duty, which arose from his handling of the partnership assets, was separate and distinct and therefore not barred by res judicata.

After the case returned to the trial court, Snider Brothers, Inc., Cowan, and Snider Brothers, Inc., Profit Sharing Trust moved for summary judgment on the sellers' crossclaim to recover the commission paid. That motion was granted by the court with the following explanation:

First, it appears to the Court as a procedural matter that the cross-claim as it is now articulated is beyond the scope of the proceedings which we have before us.

And, second, on the merits it appears to the Court and the Court does conclude that the defendants [appellees] are entitled to a judgment as a matter of law in that the cross-claimants are collaterally estopped by the proceedings which were held in Maryland to which they were party and as the Court is persuaded, they could have raised the matter which they seek to present here.

The court denied, at the same time, the sellers' motion for leave to file a motion to amend their cross-claim. The sellers appeal.

II

Appellants' primary claim on appeal is that the trial court erred as a matter of law in granting appellees' motion for summary judgment. We agree. The trial court erroneously held that the final judgment in the Maryland foreclosure proceeding collaterally estopped appellants from litigating the agency issues raised in their cross-claim. Before we reach the merits of that ruling, however, we must first address appellants' contention that the failure of appellees to raise the issues of collateral estoppel and res judicata in their answer to the cross-claim constituted a waiver of those defenses.

It is well established that under FED.R. CIV.P. 8(c), an affirmative defense must be specifically pleaded, and that the failure to raise affirmative defenses constitutes a waiver of those defenses. See generally 5 C. WRIGHT & A. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1278 (1969), and cases cited therein. Therefore, a party who attempts to raise an affirmative defense for the first time on appeal will be barred.⁵

Several courts, however, have created an exception to mitigate the harsh effects of Rule 8(c) when the affirmative defense has been raised by a pretrial motion rather than by the answer. Westwood Chemical Co. v Kulick, 656 F.2d 1224, 1227 (6th Cir.1981) (res judicata defense raised not in a pleading but in a motion to quash a subpoena was properly before the court); Funding Systems Leasing Corp. v. Pugh, 530 F.2d 91, 96 (5th Cir.1976); Radio Corp. of America v. Radio Station KYFM, Inc., 424 F.2d 14, 17 (10th Cir.1970); Williams v....