Papageorge v. Banks

• Decision Date: 19 December 2013
• Docket Number: No. 13–CV–333.,13–CV–333.
• Citation: 81 A.3d 311
• Parties: George C. PAPAGEORGE, Appellant, v. Matt BANKS, et al., Appellees.
• Court: D.C. Court of Appeals

81 A.3d 311

George C. PAPAGEORGE, Appellant,

v.Matt BANKS, et al., Appellees.

No. 13–CV–333.

District of Columbia Court of Appeals.

Argued Nov. 20, 2013.

Decided Dec. 19, 2013.

Kenneth C. Crickman, Washington, DC, with whom Robert C. Cooper was on the brief, for appellant.

Jonathan Zucker filed a brief for appellees.

Before THOMPSON and EASTERLY, Associate Judges, and FARRELL, Senior Judge.

THOMPSON, Associate Judge:

In February 2012, appellant George Papageorge filed a one-paragraph complaint against appellees Matt and Diane Banks, alleging that they had “absconded with settlement monies and cashed a check knowing that most of the funds were liened and intended to go to the plaintiff.” Thereafter, Papageorge sought and obtained a prejudgment writ of attachment against the Bankses, having advised the court that the Bankses had been paid funds from a settlement agreement with Eastern Savings Bank (“ESB”), and that Papageorge was entitled to those funds under a separate agreement (the “December 9, 2010 Agreement” or the “Agreement”) with Matt Banks, under which Papageorge had “agreed to finance Mr. Banks' efforts to protect his rights as a tenant of certain real property.” The Bankses filed a motion to dismiss the complaint or alternatively for summary judgment, arguing that the Agreement was “void as champertous.” ¹ Considering materials outside the complaint, the trial court treated the motion as one for summary judgment and entered judgment in favor of the Bankses, agreeing that the Agreement was champertous and therefore void in its entirety. Papageorge appeals from the trial court's grant of summary judgment in favor of appellees and from the court's denial of his motion for reconsideration of that ruling. We reverse and remand.

I. Background

This appeal is the latest development in a spate of litigation that erupted after deed-of-trust holder ESB purchased the property at 2507 33rd Street, S.E. (the “property”), at an April 2001 foreclosure sale.² The factual background set out below is largely drawn from Papageorge's opposition to the Bankses' motion to dismiss or for summary judgment.

Matt Banks was a tenant at the property prior to the April 2001 foreclosure, and he continued in occupancy for several years after the foreclosure pursuant to his purported Valentine rights.³ In October 2001, Matt Banks entered into an agreement with Papageorge, the full text of which provided as follows:

For valuable consideration I, Matt W. Banks, hereby assign[ ] my tenant rights to purchase under D.C. Law in the lease of 2507 33rd Street S.E. [,] Washington, D.C. 20020 to George C. Papageorge.

Subsequently, on December 9, 2010, Banks and Papageorge executed a “Memorandum Regarding Banks Lease” that affirmed this agreement, providing that “[i]t is understood and agreed that[,] with regard to the lease of 2507 33rd Street S.E.[,] Matt Banks assigned his TOPA rights ... to George C. Papageorge under an earlier agreement which shall remain in full force and effect.” As that memorandum reflects, the reference to “tenant rights to purchase under D.C. Law” in the October 2001 agreement was a reference to the opportunity to purchase the property that the parties expected that Matt Banks qua tenant would have under the Tenant Opportunity to Purchase Act (“TOPA”), D.C.Code §§ 42–3404.02 et seq. (2012 Repl.), before ESB would have been able lawfully to sell the property to a third party. See id. at § 42–3404.02(a).⁴

Eventually, ESB sued Matt Banks for possession of his rental unit, asserting that he had violated a term of his pre-foreclosure lease. The Superior Court granted ESB a judgment of possession, but, upon Banks's appeal, this court, in a December 2, 2010, opinion, reversed the judgment, holding that, because a new at-will tenancy commenced by operation of law at the time of the April 2001 foreclosure and Banks's pre-existing lease was “effectively extinguished at that juncture,” Banks's putative violation of the pre-foreclosure lease could not form the basis for a judgment of possession. Banks v. ESB, 8 A.3d at 1243.

A week after this court issued that opinion, Matt Banks, Earl Mitchell (another former tenant and a holdover occupant of one of the property's rental units ⁵), and Papageorge entered into the December 9, 2010, Agreement that is in issue in this appeal. That Agreement, a copy of which Papageorge attached to his opposition to the motion to dismiss or for summary judgment, provided in pertinent part as follows:

Whereas, Papageorge has financed extensive litigation to enforce, maintain and protect [Banks's and Mitchell's] Valentine rights since 2001.

Whereas, ESB ... conducted a wrongful eviction on February 9, 2009 removing Banks [and] Mitchell....

Whereas, the parties would like to file a wrongful eviction action against ESB.

Now therefore, the parties agree as follows: Any and all monies obtained from a suit for wrongful eviction and/or the relinquishment of tenant rights and/or any other sources shall be distributed as follows:

First, Papageorge shall be reimbursed for all legal costs expended since 2001 involving ESB and the subject property. Second, the remaining sum shall be distributed as follows:

Papageorge—seventy five percent (75%)

Banks—twelve and one/half percent (12.5%)

Mitchell—twelve and one/half percent (12.5%)

It is further understood and agreed that Papageorge has financed all rent monies and will be reimbursed at the rate of 100%.

Papageorge's suit against the Bankses was premised on a claim that they had received a $75,000 payment from ESB “to settle certain tenant claims,” but had failed to pay Papageorge according to the terms of the December 9, 2010, Agreement. The Bankses filed their motion to dismiss or for summary judgment on February 27, 2012, and subsequently argued that the Agreement was champertous and void in that it gave Papageorge “a share of Banks' wrongful eviction and L & T litigation to which he did not have an independent interest,” and in that the Agreement constituted “ ‘a bargain to divide the proceeds of litigation between the owner of the litigated claim and the party supporting or enforcing the litigation.’ ” Defendants' Reply to Plaintiff's Opposition to Defendants' Motion to Dismiss or Alternatively for Summary Judgment at 2, 4 (quoting Design for Bus. Interiors, Inc. v. Herson's, Inc., 659 F.Supp. 1103, 1107 (D.D.C.1986) (quoting 14 W. Jaeger, Williston on Contracts § 1711 at 857 (3d ed.1972) ⁶)). The Bankses asserted that the Agreement also “implicitly contemplated the maintenance of Banks' landlord and tenant case in order to obtain a recovery for the relinquishment of tenant rights[,]” and pointed out that after the mandate issued in Banks v. ESB, a motion to “Reinstate [Banks] Into Possession” had been filed, making it “abundantly clear that [one] purpose of the Agreement ... was to maintain Banks' right to possession in the landlord and tenant case.” Id. at 3 (internal quotations omitted).

In opposing the Bankses' motion, Papageorge argued inter alia that the Agreement was not champertous because he had an independent interest in the property (as to which he sought “[o]wnership”) because of the assignment to him of Matt Banks's TOPA rights and because what Papageorge sought through the Agreement was to recover prior expenditures he had incurred to protect that interest and to “preserve his own TOPA rights.” The Bankses countered that even assuming that Matt Banks had made a valid assignment to Papageorge of his mere expectant opportunity to purchase the property pursuant to TOPA, “whether Banks was injured as a result of being wrongfully evict[ed] or whether he was reinstated into possession, had no [e]ffect on the assignment.” Id. at 5. Thus, the Bankses argued, Papageorge “had no legitimate interest in the Agreement's contemplated litigation between Banks and ESB except to receive proceeds from it.” Id.

In granting summary judgment in favor of the Bankses, the court ruled first that Papageorge had no cause of action against Diane Banks, who was not a party to the December 9, 2010, Agreement. Addressing the complaint against Matt Banks, the trial court relied on the elements of champerty as articulated in Marshall v. Bickel, 445 A.2d 606, 609 (D.C.1982). Paraphrasing Marshall, the court recited that those elements are that “the party's fee and claim come[ ] from success in the [law]suit, the costs and expenses are borne by the party with no expectation of reimbursement, and the party has no independent interest in the claim.” With regard to the Agreement, the court found that the elements of champerty were satisfied. First, the court stated, Papageorge had “agreed to finance the litigation at his own expense without recovery or reimbursement except from success in the suit.” Second, the court concluded, Papageorge's “past expenses alone” for rent and litigation relating to the property did not provide him an interest in Matt Banks's claim against ESB. Nor, the court reasoned, did Papageorge's interest in Matt Banks's TOPA rights give him an independent interest in the contemplated wrongful eviction suit by Banks, because Banks's “TOPA rights would not have been affected by the outcome of any of the litigation financed by” Papageorge.

The trial court further reasoned that under this court's opinion in Allman v. Snyder, 888 A.2d 1161 (D.C.2005), “the tenancy status of [a] tenant-assignor ha[s] no effect on the assigned TOPA right[.]” Order Granting Defendants' Motion to Dismiss or Alternatively for Summary Judgment at 8, citing Allman, 888 A.2d at 1170 (stating that the TOPA statute “says nothing about a tenant having to remain a tenant in order to sustain the validity of the assignment”). The court reasoned that Papageorge's assigned TOPA rights would not have been “cut off by the assignor ceasing to be an actual tenant” and thus “did not depend on the continuation of Matt Banks' tenancy.” “Most importantly,” the court reasoned, this court's...