Pajic v. Foote Props., LLC, 11–CV–1189.

• Decision Date: 25 July 2013
• Docket Number: No. 11–CV–1189.,11–CV–1189.
• Citation: 72 A.3d 140
• Parties: Kamenko PAJIC, Appellant, v. FOOTE PROPERTIES, LLC, Appellee.
• Court: D.C. Court of Appeals

72 A.3d 140

Kamenko PAJIC, Appellant,

v.FOOTE PROPERTIES, LLC, Appellee.

No. 11–CV–1189.

District of Columbia Court of Appeals.

Argued Nov. 1, 2012.

Decided July 25, 2013.

Julie H. Becker, Legal Aid Society of the District of Columbia, with whom John C. Keeney, Jr., Legal Aid Society of the District of Columbia, was on the brief, for appellant.

Laina Lopez, Washington, DC, for appellee.

Before OBERLY, BECKWITH, and EASTERLY, Associate Judges.

EASTERLY, Associate Judge:

With this opinion, we restate what is already the law in the District of Columbia: Landlords may not include a provision in a lease that requires a tenant to pay court costs or legal fees. Pursuant to District of Columbia municipal regulation, any such provision is void from the outset and unenforceable. Accordingly, the landlord in this case, Foote Properties, acted illegally when it included a fee-shifting provision in Mr. Pajic's lease, and it was error for the trial court to rely on this provision to award Foote Properties almost $45,000 in attorneys' fees in an action to collect unpaid rent from Mr. Pajic. We also conclude that the trial court erred both in granting summary judgment to Foote Properties and in dismissing Mr. Pajic's counterclaim for breach of contract. Resolution of this case by summary judgment was inappropriate in light of the disputes of material fact regarding whether Mr. Pajic made rent payments to Foote Properties and whether the parties agreed to reduce or waive rent payments due to problems with the apartment's plumbing and air conditioning. Moreover, Mr. Pajic, who was proceeding in the trial court pro se, sufficiently made out a counterclaim for a breach of the implied warranty of habitability. We reverse and remand.

I. Facts

On May 8, 2008, Mr. Pajic entered a twelve-month lease agreement with Foote Properties to rent an apartment at 4275 Foote Street, NE in the District for $1,450 per month. Paragraph 23 of the lease contained a provision purporting to commit Mr. Pajic to pay attorneys' fees “[s]hould it become necessary for Landlord to employ an attorney to enforce any of the conditions or covenants hereof, including the collection of rentals.” ¹ Upon signing the lease, Mr. Pajic paid Foote Properties $2,980: $1,030 prorated rent for the remaining days in May 2008, $1,450 for the last month's rent, and a $500 security deposit. Mr. Pajic moved out of the apartment ten months later, on March 7, 2009.

Foote Properties filed the instant claim in July 2010 as a post-tenancy collection action, asserting that Mr. Pajic breached the lease agreement by failing to pay rent and late fees for several months. Foote Properties sought $11,500 in back rent and late fees, as well as attorneys' fees pursuant to paragraph 23 of the lease agreement. Mr. Pajic, proceeding pro se, subsequently filed a verified answer and counterclaim, in which he disputed that he owed Foote Properties $11,500 and asserted that he had made a number of rent payments in cash to the property manager, Frank Chambers. Mr. Pajic also asserted that Foote Properties had failed to address issues with the apartment's air conditioning and plumbing in a timely manner, and that Mr. Chambers had given Mr. Pajic a reduction in rent during the months that the apartment had these habitability issues. Mr. Pajic asserted three counterclaims: (1) breach of contract, for failing to make timely repairs to the problems with the apartment; (2) harassment; and (3) lost wages, pain, and suffering.

After the close of discovery, Foote Properties moved for summary judgment as to both its claim and Mr. Pajic's counterclaims. Foote Properties also requested attorneys' fees, which at that point it calculated to be approximately $11,000. The trial court granted the motion for summary judgment as to Foote Properties' breach of contract claim, but sua sponte converted Foote Properties' motion for summary judgment on Mr. Pajic's three counterclaims into a motion to dismiss. The court then dismissed Mr. Pajic's counterclaims pursuant to Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009),² because it determined these claims did not “plausibly give rise to an entitlement to relief.” Regarding Mr. Pajic's first counterclaim (for breach of contract), the court reasoned that Mr. Pajic had failed to allege either a duty that Foote Properties had breached or damages therefrom. Lastly, the court ruled that “there is no material issue of disputed fact as to the obligation of Defendant to pay the attorneys fees and costs associated with the instant action pursuant to the lease agreement.” Ultimately the court awarded Foote Properties $8,200 in damages plus attorneys' fees, which had risen to $44,519.67.³

II. The Attorneys' Fees Award

Although we determine that the trial court erred in granting Foote Properties summary judgment on its claim for unpaid rent and in dismissing Mr. Pajic's counterclaim for breach of contract, we begin by addressing the challenge to the attorneys' fees award—the issue that prompts us to issue a published opinion in this case. Such fee awards dramatically up the ante for tenants when they seek relief from the courts in disputes with their landlords and they consequently threaten to chill any such litigation. We determine that inclusion of attorneys' fees provisions in leases is prohibited by municipal regulation and consequently, that the award of fees pursuant to Foote Properties' lease agreement was reversible error.

By its plain language, 14 DCMR § 304.4 expressly bars landlords from placing a provision in a lease shifting to tenants the obligation to pay attorneys' fees should the landlord deem it necessary to resort to litigation. ⁴Section 304.4 states that “[n]o owner shall place (or cause to be placed) in a lease or rental agreement a provision ... requiring that the tenant pay the owner's court costs or legal fees.” 14 DCMR § 304.4 (2012). Further, should such a provision make its way into a leasing agreement, section 304.4 prohibits its enforcement: “Any provision of any lease or agreement contrary to, or providing for a waiver of, the terms of this chapter ... shall be void and unenforceable.” 14 DCMR § 304.1 (2012).

Foote Properties violated section 304.4 by including in its lease a provision that required Mr. Pajic—win or lose—to pay “all expenses,” “[s]hould it become necessary for Landlord to employ an attorney to enforce any of the conditions or covenants hereof, including the collection of rentals.” Pursuant to section 304.1 this provision should have been “void and unenforceable.”

Foote Properties asserts, however, that section 304.4 has no application either to suits for non-payment of rent after a tenancy has ended or to lease provisions where payment of attorneys' fees are conditional. Its arguments do not persuade. Nothing in section 304.4 limits its protection to individuals in ongoing tenancies. Rather, the regulation bars landlords from placing any fee-shifting provisions in a lease in the first instance—that is, when the parties have a landlord and tenant relationship. Likewise, section 304.4 contains no exceptions for conditional fee-shifting provisions.⁵ It bars any fee-shifting provision.

Alternatively, Foote Properties asserts that the attorneys' fees award was authorized under the second sentence of 304.4, which provides that “[t]his subsection shall not preclude a court from assessing court or legal fees against a tenant in appropriate circumstances.” But Foote Properties never asked the trial court to exercise this authority to award it attorneys' fees; instead it cited exclusively to paragraph 23 of the lease. And, unsurprisingly, the trial court never referred to section 304.4 and gave no indication that it was making a discretionary award of attorneys' fees thereunder.⁶ Instead, the trial court made clear that the sole basis for its award of attorneys' fees was the (illegal) fee-shifting provision in the lease.

That the fee-shifting provision in the lease was plainly illegal under the D.C. Municipal Regulations and should not have been enforced does not end our analysis. Mr. Pajic, proceeding pro se, did not make this argument in the trial court. In general, this court's review on appeal is limited to those issues that were properly preserved. District of Columbia v. Helen Dwight Reid Educ. Found., 766 A.2d 28, 33 n. 3 (D.C.2001). The rule is one of discretion, however; thus, “in ‘exceptional situations and when necessary to prevent a clear miscarriage of justice apparent from the record,’ we may deviate from the usual rule.” Id. (quoting Williams v. Gerstenfeld, 514 A.2d 1172, 1177 (D.C.1986)); see also McClintic v. McClintic, 39 A.3d 1274, 1277 n. 1 (D.C.2012). We have repeatedly affirmed our

discretion, in the interests of justice, to consider an argument that is raised for the first time on appeal if the issue is purely one of law, ... the factual record is complete and a remand for further factual development would serve no purpose, the issue has been fully briefed, and no party will be unfairly prejudiced.

Helen Dwight Reid, 766 A.2d at 33 n. 3;see also Fairman v. District of Columbia, 934 A.2d 438, 445–46 (D.C.2007).

We think this is one such case. Whether paragraph 23 contravenes section 304.4 is a pure question of law that has been fully briefed by the parties. Furthermore, paragraph 23 is not only plainly illegal, it also contravenes clear public policy meant to promote tenants' access to the courts. Cf. Fairman, 934 A.2d at 448 (exercising discretion to review unpreserved challenge to regulations that court determined “violate[d] a clear and dominant public policy”). An obvious objective of the prohibition on fee-shifting provisions is to ensure that tenants can come to court to vindicate their rights without the fear of incurring the obligation to pay vast sums of attorneys' fees for the landlords' counsel.⁷ Mr. Pajic's case demonstrates the danger. The trial court determined that Mr....