March 16, 1990
MARCUS GRIFFITH, ET AL., APPELLANTS
CORNELIUS BUTLER, APPELLEE
Appeal from the Superior Court of the District of Columbia; Hon. Herbert B. Dixon, Jr., Trial Judge
Before Rogers, Chief Judge, Farrell, Associate Judge, and Mack, Senior Judge.
The opinion of the court was delivered by: Farrell
FARRELL, Associate Judge: Appellee Butler sued to recover possession of real estate which he had leased to appellants, the Griffiths, beginning in 1975. The complaint alleged that the Griffiths had failed to pay the stipulated rent of $900.00 per month from January 1986 through April 1987 when the suit was filed. The Griffiths answered by alleging, inter alia, that the premises (a townhouse) "contained substantial housing code violations that were repaired at the expense of the defendant." Issues at trial focused on the nature and scope of an agreement by which the Griffiths would pay for certain expenses associated with the property for which Butler would reimburse them at some time in the future. The Griffiths, who had kept meticulous records for such expenses since 1977, contended that the parties' "understanding" since 1977 was that Butler would reimburse them for all necessary maintenance and repair of the property, an understanding they asserted Butler had confirmed in a letter to them on January 3, 1985, stating that he would "reimburse [the Griffiths] for expenses incurred by you for maintenance of my property . . . . This statement refers to the entire period of your occupancy." *fn1 Butler, by contrast, contended that the parties had had no such past agreement for reimbursement, that his January 3, 1985 promise was meant to be prospective only, and that prior to that time the parties' understanding had been that the Griffiths, with certain limited exceptions, would bear all expenses of maintaining the townhouse in return for a reduced monthly rent. *fn2
After hearing testimony and reviewing the exhibits submitted by the parties, Judge Dixon found as a fact that the parties had operated under a "very loose agreement" from 1977 to the present whereby Butler would pay personally or reimburse Griffith for water and sewer charges "plus expenses reasonably related to the maintenance of the property," but excluding improvements. The Judge therefore concluded that the Griffiths were entitled to credit for a portion of the expenses they had incurred against the claimed rent arrearage of $18,184.97. Although noting that the Griffiths had not filed a counter-claim but instead had pleaded what amounted to a setoff to Butler's claims for rent due in 1986 and 1987, the Judge found that "it would be inappropriate to limit the credits that the tenant might receive just to 1986 and 1987"; rather, "substantial Justice" and equity required him to consider as credits "reasonable and necessary repairs and maintenance expenses that did not exceed three years prior to the time the complaint was filed." For similar equitable reasons, the Judge took account of expenses that the Griffiths had actually deducted from the rent in the years preceding the three-year statute of limitations period. Examining each of the expenses the Griffiths had incurred from 1977 through 1987, Judge Dixon awarded them credits totaling $3,806.78 against the arrearage of $18,184.97, and ordered them to pay the balance of $14,378.19 plus court costs in order to avoid forfeiture of the premises.
Our review of the trial court's finding as to the parties' agreement concerning reimbursement is governed by the clearly erroneous standard. D.C. Code § 17-305 (1981); see Auxier v. Kraisel, 466 A.2d 416, 418 (D.C. 1983). On this record we cannot say--and the Griffiths do not seriously contend--that Judge Dixon erred in finding that Butler had agreed to reimburse the Griffiths for water and sewer charges and expenses reasonably necessary to maintain (but not improve) the property. In addition, however, the trial court concluded that the Griffiths' claim for credits reaching back beyond April of 1984 was barred by the statute of limitations, *fn3 and this aspect of the court's ruling gives rise to a problem that, we conclude, necessitates a remand to the court for further findings.
Specifically, the Griffiths do not dispute that, in ordinary circumstances, the three-year statute of limitations would apply to their claim for rent credits that reach back beyond the 1986-1987 period covered by the landlord's suit. See Hines v. Sharkey, 449 A.2d 1092, 1093-94 & n.4 (D.C. 1982) (tenant-defendant in landlord's action for possession may counterclaim for rent abatement based upon housing code violations predating period for which landlord claims nonpayment; but such counterclaim is subject to three-year statute of limitations). Appellants contend, rather, that under the doctrine of "acknowledgment", Butler's letter to the Griffiths on January 3, 1985, agreeing to reimburse them for reasonable maintenance expenses for "the entire period of your occupancy," removed the statutory bar of limitations and allowed them to claim expenses for the entire period of the agreement. When appellant argued this point below and cited cases, the Judge's only response was to observe--without explanation--that there is a "difference" between invoking the doctrine when one has filed a complaint (or counterclaim) and relying on it when one has merely answered in the form of a setoff, as the Griffiths had done. Because we can find no basis in law for the Judge's distinction, and because he did not otherwise consider application of the doctrine of acknowledgment, we must remand the case for further consideration of this issue by the trial court.
D.C. Code § 28-3504 (1981) provides in part:
In an action upon a simple contract, an acknowledgment or promise by words only is not sufficient evidence of a new or continuing contract whereby to take the case out of the operation of the statute of limitations . . . unless the acknowledgement or promise is in writing, signed by the party chargeable thereby. . . .
As this court has stated:
The acknowledgment must be made either to the creditor or to someone acting for him, or to some third person with intent that it be known by and influence the action of the creditor. Grass v. Eiker, D.C. Mun. App., 123 A.2d 613 (1956). A distinct and unequivocal acknowledgment of the debt as a still subsisting personal obligation constitutes an implied promise to pay it, and takes the contract out of the statute [of limitations]. Hayden v. International Banking Corp., 59 App. D.C. 313, 41 F.2d 107 (1930); Green v. Reeves, 47 App. D.C. 83 (1917).
Heffelfinger v. Gibson, 290 A.2d 390, 394 (D.C. 1972). No new consideration is necessary for an acknowledgement, for "since the unextinguished original debt remains in foro conscientiae as obligatory, it itself a sufficient consideration for the new promise." Nyhus v. Travel Management Corp., 151 U.S. App. D.C. 269, 280, 466 F.2d 440, 451 (1972). While courts and legislatures have recognized a potential for "fraud and vexing litigation" in the doctrine, that risk is considered sufficiently neutralized by the statutory requirement of a writing signed by the debtor. Id.
In this case, as noted, the trial Judge's only apparent reason for rejecting the Griffiths' claim of acknowledgment was that appellants had cited the past agreement for reimbursement as a setoff rather than in a complaint or counterclaim. We conclude that that distinction has no significance in this context. Historically, a setoff was a claim interposed by the defendant as a "counter demand . . . arising out of a transaction extrinsic of the plaintiff's cause of action." Local 31, Nat'l Ass'n of Broadcast Employees & Technicians v. Timberlake, 409 A.2d 629, 633 (D.C. 1979) (emphasis in original). Generally, a cause of action sounding in tort could not be asserted as a setoff, because of the "requirement that the claim be for a liquidated amount or arise out of a contract or judgment." 6 C. WRIGHT, A. MILLER, M. KANE, FEDERAL PRACTICE AND PROCEDURE, CIVIL 2d § 1401, at 10-11 (2d ed. 1990). In contrast, a counter-claim had to arise from the same transaction that formed the basis of the plaintiff's action, although the claimant was not limited to recovery of a liquidated sum. Id. at 11. We hold that the traditional distinction between a setoff and a counterclaim does not preclude the defendant from invoking the doctrine of acknowledgment in rebuttal when the plaintiff asserts the statute of limitations to bar a counterdemand sounding in contract and relating to the very obligation--here the duty to pay rent--upon which the plaintiff's suit is based. Indeed, because it arose from the same transaction which formed the basis of the landlord's suit, at common law, the Griffiths' counterdemand likely would have been treated as a counterclaim.
Nor does the fact that the Griffiths sought equitable relief instead of damages compel a different Conclusion. Although the Griffiths did not seek a money judgment, their answer to the complaint asserted "expenditures claimed as credits against rent," which is one basis for a counterclaim specified by Super. Ct. L&T R. 5 (b) (1989). Rule 5 (b) clearly limits all tenants' counterdemands, regardless of whether denominated an equitable defense of recoupment or setoff (used to defeat the landlord's possessory action) or a counterclaim (seeking a money judgment, possibly in excess of the claimed arrearage), to claims related to the demised premises. Id. *fn4 Because all cognizable defensive claims must pertain in some way to the rental obligation or the property, we conclude that the significance of the common law distinction between counterclaim and setoff has no importance in this context. Butler's statute of limitations defense relates to the grounds of the Griffiths' counterdemand--i.e., their contractual right to reimbursement for past expenditures for necessary maintenance--not the relief sought. Because the defense would negate that right no matter how the counterdemand was denominated, we can perceive no reason to bar a rebuttal to the defense based solely upon the nature of the relief sought.
Moreover, functionally, what the Griffiths sought was no different than the rent abatement which the tenant sought by way of counterclaim in Hines, supra, 449 A.2d at 1093. Even appellee recognizes that, in essence, a counterclaim for expenditures claimed as credits against rent "is exactly what the tenants' claim was in this matter."
We conclude, therefore, that the trial court should have reached the question of whether the January 3, 1985 letter from Butler to the Griffiths was an implied (or, indeed, express) promise to reimburse them for reasonable past expenditures in maintaining the house, thereby removing the bar of limitations. The letter is seemingly unequivocal in declaring: "This statement [agreeing to reimbursement] refers to the entire period of your occupancy" (emphasis added). Butler, however, contended that use of the future tense elsewhere in the letter indicated that the promise was prospective only, and that he would have been "insane" to agree to reimburse the tenant for accumulated expenditures going back to 1977. Although the trial Judge found that Butler in fact had agreed since 1977 to reimburse the Griffiths for reasonable maintenance expenses, he did not discuss the January 3 letter and made no finding whether it operated as an acknowledgment. We must therefore remand the case to allow the court to consider whether the letter had the effect of tolling the statute of limitations, and, if so, the temporal scope of any such acknowledgment.
Butler argues that even if the letter amounted to an acknowledgment, "it could only toll the statute [of limitations] for the three-year period immediately preceding its issuance." He cites no authority for this proposition, which appears contrary to law. As noted previously, decisional law regards an acknowledgment as an implied promise to pay a pre-existing debt, supported by past consideration in the form of an obligation to honor the old debt. Nyhus, supra, 151 U.S. App. D.C. at 280, 466 F.2d at 451. The acknowledgment is enforceable as a new promise, and the creditor's rights are measured by it, not the old promise. Ruppert v. Bevans, 2 App. D.C. 298, 302 (1894). Accordingly, its effect on the statute of limitations is to extend the period for enforcing the debt: "the creditor's remedy is not barred by the statute of limitations period until the lapse of the full period commencing with the time of the new promise." United States v. Glen Falls Ins. Co., 546 F. Supp. 643, 645 (N.D.N.Y. 1982) (emphasis added); A. CORBIN, CORBIN ON CONTRACTS § 214, at 289 (1963). The artificial "look-back" rule urged by Butler is thus inconsistent with the rationale for an acknowledgment's effect as a bar to the statute of limitations.
If, however, the trial court on remand finds that the January 1985 letter acknowledged a pre-existing obligation, our Conclusion as a matter of law that the statute of limitations would begin to run anew on that date does not resolve an open question as to how far back in time the obligation memorialized in the letter reached. While the Judge based his rulings allowing the Griffiths certain credits on a "very loose agreement" between the parties from 1977 to the present, he did not indicate whether the 1985 letter played any role in those determinations. Moreover, those rulings were not based on the legal effect of the letter as an acknowledgment--a question the Judge refused to consider--but rather were made by the Judge applying equitable considerations. *fn5 We thus leave to the trial Judge to determine the scope of any acknowledgment represented by the 1985 letter.
The judgment is reversed and the case is remanded for further proceedings in accordance with this opinion.