Passtou, Inc. v. Spring Valley Center

• Decision Date: 27 November 1985
• Docket Number: No. 84-1628.,84-1628.
• Citation: 501 A.2d 8
• Parties: PASSTOU, INC., et al., Appellants, v. SPRING VALLEY CENTER, Appellee.
• Court: D.C. Court of Appeals

501 A.2d 8

PASSTOU, INC., et al., Appellants, v. SPRING VALLEY CENTER, Appellee.

No. 84-1628.

District of Columbia Court of Appeals.

Argued September 12, 1985.

Decided November 27, 1985.

Gregg Schaaf, with whom Ben Paul Noble, Washington, D.C., was on the brief, for appellants.

Jack C. Sando, Washington, D.C., for appellee.

Before PRYOR, Chief Judge, and ROGERS, Associate Judge, and GALLAGHER, Senior Judge.

PRYOR, Chief Judge:

In this case, attorney Ben Paul Noble represented three tenants of the Spring Valley Center in litigation with their landlord over the correct method for calculating the real estate tax component of their "additional" rent for 1982. At the conclusion of the litigation, the court ruled that the landlord had employed an improper method for allocating the real estate tax component of the tenants' additional rent for 1982. As a result of this ruling, those tenants at Spring Valley Center chargeable with additional rent for 1982, received credits against their additional rent assessments for 1983 totalling $80,317. Noble then requested an award of attorneys' fees and expenses. Citing the common fund or benefit doctrine, Noble sought fees not only from the three tenants he had represented, but also from those tenants at Spring Valley Center who had benefitted from his efforts but had not participated in the original litigation. After a hearing, the trial court denied Noble's motion for attorneys' fees. This appeal followed. Finding no abuse of discretion in the trial judge's ruling, we affirm.

I

Spring Valley Center, a limited partnership (the Partnership), owns property located at 4801 Massachusetts Avenue, N.W. For zoning and real estate tax assessment purposes, the land is divided into two lots. On one lot, the Partnership constructed an office building with a shopping mall named Spring Valley Center and leased space to approximately forty tenants. A supermarket and parking area are located on the second lot.

The leases of approximately 26 tenants at Spring Valley Center contain a provision requiring the annual payment of "additional" rent. This provision operates to pass along certain of the landlord's operating costs to tenants, and provides, in pertinent part, as follows:

In addition to the base monthly rental aforesaid, Tenant will pay its proportionate share of Landlord's cost of operating the building. . . . The costs of operating the Building shall include, inter alia, all fees, charges and expenses which landlord may determine on an accrual basis, relating to servicing, cleaning, maintaining, repairing and protecting the Building and grounds; common utilities; real estate taxes; fire and extended coverage insurance premiums; management fees and leasing commissions. [Emphasis added.]

In 1982, the District of Columbia Department of Finance and Revenue (the District) assessed and collected real estate taxes from the Partnership on the two lots located at 4801 Massachusetts Avenue. In the Partnership's view, however, the District's assessment of taxes on the two lots did not accurately reflect the higher density and thus greater value of the lot containing Spring Valley Center. To correct this perceived imbalance, the Partnership reallocated the taxes as between the two lots in assessing the tenants of Spring Valley Center additional rent for 1982. Because of this reallocation, the total of real estate taxes charged the tenants of Spring Valley Center as additional rent for 1982 was in excess of that assessed by the District.

Upon receiving their additional rent assessments for 1982, all but three tenants at Spring Valley Center paid the amount charged.¹ Three tenants, however, objected to the method used to calculate additional rent and refused to pay.² These three tenants retained Noble to represent them, paying him a fee of $1,050. In the event that litigation should occur, it was recognized that the cost of Noble's services would exceed $1,050; thus, the three tenants agreed that Noble would seek an award of fees and expenses from the court at the conclusion of the case.³

Ultimately, the Partnership brought suit against the three non-paying tenants to collect the additional rent assessed for 1982. The case came to trial on December 19 and 20, 1983, on the sole issue of whether the real estate tax component of the tenants' additional rent should be determined in accordance with taxes actually assessed by the District, or on the basis of the allocation made by the Partnership. At the conclusion of trial, the court ruled that the Partnership was required to allocate real estate taxes in accordance with the District's actual assessment.⁴ Based on this ruling, the parties to the litigation agreed that $80,317 in overcharges would be returned, on a pro-rata basis, to all tenants at Spring Valley Center who had paid additional rent for 1982.⁵

Subsequent to the court's ruling, Noble, on January 6, 1984, requested an award of attorneys' fees. In the motion, Noble asserted that, as a result of the litigation in this case, the tenants at Spring Valley Center had become entitled to a reduction in the additional rent originally charged by the Partnership for 1982. Relying upon the common benefit or common fund doctrine, Noble asserted that all the beneficiaries of the litigation should "be required by the court to pay their fair share of the costs of litigation, including attorneys' fees."

Significantly, Noble's motion for attorneys' fees did not contain a request that the court impound, or otherwise restrain, the distribution of any funds to which the non-party tenants had become entitled as a result of the litigation. Moreover, at no time did Noble ask the court to control the manner in which the Partnership would return the overcharges of additional rent for 1982.

During February 1984, the Partnership mailed notices of additional rent assessments for 1983 to the tenants of Spring Valley Center. In these notices, the Partnership informed each tenant that it was receiving a credit against its 1983 additional rent representing its pro-rata share of the $80,317 in overcharges for 1982.⁶ Thus, the Partnership distributed the overcharges to the non-party tenants in the form of a credit against 1983 taxes not yet collected, and not as a refund of 1982 taxes that had already been paid.

On March 12, 1984, a hearing was held on Noble's request for attorneys' fees.⁷ At the hearing, Noble proposed a method for implementing an award of attorneys' fees from the non-party tenants of Spring Valley Center who had benefitted from the litigation. For those tenants who had not yet paid their additional rent for 1983, Noble suggested that the court order the Partnership to implement an adjusted credit against the additional rent assessment for 1983. For those tenants who had already paid their 1983 additional rent, Noble suggested that the court order an adjusted credit against the additional rent assessment for 1984. In essence, the adjustment suggested by Noble would decrease the credit already implemented by the Partnership in the amount of the tenants' proportionate share of the fee awarded by the court. As Noble later acknowledged, under the proposed method, there would be "37 tenants from [whose] pockets [the Court is] going to be ordering money [paid] to [him]."

Following the hearing a notice of the fee application, dated March 20, 1984, was sent to all non-party tenants at Spring Valley Center.⁸ The notice stated that a hearing on the fee application would be held on April 16, 1984, and that the recipients could appear "and be heard with respect to whether this request should be granted; if so, what amount shall be awarded; and how it shall be allocated among the beneficiary tenants." Noble's statement for services was attached to the notice.

No tenants appeared at the April 16 hearing. After taking the matter under advisement, the trial court, on October 14, 1984, denied Noble's request for attorneys' fees. In so doing, the trial court found that, while Noble had met the criteria for an award of fees, "[t]here is no fund or equivalent mechanism affording the court a method to reach monies with which to pay a fee This appeal followed.

II

Under the "American Rule," a party who prevails in litigation is not entitled to recover attorneys' fees from the losing party. See Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975); Launay v. Launay, Inc., 497 A.2d 443, 449 (D.C.1985); In re Antioch University, 482 A.2d 133, 135 (D.C.1984). While this rule denying fees to a prevailing litigant is "deeply rooted in our history," Alyeska, supra, 421 U.S. at 271, 95 S.Ct. at 1628, exceptions limiting its broad scope have been recognized. Thus, it is now well accepted that attorneys' fees may be recovered when the losing party "has `acted in bad faith, vexatiously, wantonly, or for oppressive reasons. . . .'" Id. at 258-59, 95 S.Ct. at 1622 (quoting F.D. Rich Co. v. United States, 417 U.S. 116, 129, 94 S.Ct. 2157, 2165, 40 L.Ed.2d 703 (1974)); see also In re Antioch University, supra, 482 A.2d at 136; Andrews v. District of Columbia, 443 A.2d 566, 569 (D.C.), cert. denied, 459 U.S. 909, 103 S.Ct. 216, 74 L.Ed.2d 172 (1982). A second exception to the American Rule "permits an award when the legislature has made `specific and explicit provisions for the allowance of attorneys' fees under selected statutes.'" Launay v. Launay, Inc., supra, 497 A.2d at 450 (quoting Alyeska, supra, 421 U.S. at 260, 95 S.Ct. at 1623). A third exception — under which the request for fees is made in this case — permits an award of attorneys' fees to a person who preserves or recovers a fund or property for the benefit of others. Alyeska, supra, 421 U.S. at 257, 95 S.Ct. at 1621; In re Antioch University, supra, 482 A.2d at 136; 6 J. MOORE, W. TAGGART & T. WICKER, MOORE'S FEDERAL PRACTICE § 54.77[2], at 1705 (2d ed. 1985). The common fund or benefit exception...