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NOFZIGER COMMUNS., INC. v. BIRKS

February 21, 1991

NOFZIGER COMMUNICATIONS, INC., Plaintiff,
v.
FREDERICK P. BIRKS, as Trustee of the Wynmark Trust, Defendant



The opinion of the court was delivered by: PRATT

 JOHN H. PRATT, UNITED STATES DISTRICT JUDGE

 Background

 Plaintiff Nofziger Communications, Inc. ("Nofziger") brings this breach of contract action against Frederick P. Birks in his capacity as trustee of the Wynmark Trust (defendant is hereinafter referred to as "Wynmark Trust"). The contracts in question originated when Nofziger entered into option agreements *fn1" with the Wynmark Development Corporation ("Wynmark Development"). In the agreements Nofziger gave Wynmark Development the option of purchasing interests in two limited partnerships that were in the business of acquiring and renovating improved real property located in the District of Columbia. As part of the contracts Wynmark Development agreed to reimburse Nofziger for any additional tax liabilities that Nofziger might incur as a result of the options being exercised. The contracts also provided that they "shall be binding upon, and shall in[]ure to the benefit of and be enforceable by, the respective . . . assigns of the parties hereto." Option Agreements, paragraph 8(a).

 Wynmark Development immediately assigned "all of its right, title and interest" under the options to Mark G. Griffin, Richard W. Naing, and the Wynmark Trust. Assignment and Escrow Agreement, page 3, paragraph 1. In August and September of 1988 these assignees exercised their options to purchase the limited partnership interests from Nofziger. As a result, Nofziger incurred additional tax liabilities, and Nofziger demanded that the assignees reimburse it for the additional tax liability. Wynmark Trust denies that it is liable and has refused to pay. Plaintiff Nofziger now brings this suit for reimbursement. *fn2"

 Presently before this Court is Wynmark Trust's motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("FRCP") and for failure to join a necessary party pursuant to FRCP 12(b)(7) and 19. In the alternative, Wynmark Trust moves this Court to consolidate the case with Nofziger Communications, Inc., et al. v. Griffin, et al., Civil Action No. 89-3130 (D.D.C.) and to stay this proceeding pursuant to Bankruptcy Rule ยง 362 pending the conclusion of the Bankruptcy proceedings of Griffin and Naing. For the reasons set forth below, we deny defendant Wynmark Trust's motion in its entirety.

 Discussion

 I. Failure to State a Claim

 Defendant Wynmark Trust argues that plaintiff has failed to state a claim upon which relief can be granted because as a matter of law Wynmark Development -- not Wynmark Trust or the other assignees -- is liable for the additional tax liability that plaintiff incurred. Defendant asserts that under District of Columbia law assignees of a contract are not liable for obligations of the assignor unless they expressly assume those duties, and that Wynmark Trust did not expressly agree to reimburse Nofziger for its tax liability. Defendant admits that the District of Columbia cases he cites do not factually parallel the case at bar. Nonetheless, defendant argues that it should prevail because they stand for the fundamental principle that the mere assignment of rights does not impute the assumption of obligations by an assignee.

 Establishing the fundamental principle, however, is not sufficient to prove that the express assumption rule applies in this case. Nofziger is not claiming that simply because Wynmark Trust accepted an assignment from Wynmark Development it automatically assumed Wynmark Development's obligations. Instead, Nofziger argues that the circumstances under which the Wynmark Trust accepted the assignment imply such an assumption of liability. Specifically, Nofziger points to two circumstances of the assignment from which it would be possible for the Court to impute an assumption of obligations: (1) the fact that Wynmark Development assigned all of its "rights, title and interest" in the contract to the assignees, and (2) the fact that the original assignment agreement allegedly made obligations of the parties binding on their assignees, and the assignees were aware of this provision when they accepted the assignment. *fn3"

 At this stage of the litigation Wynmark Trust does not argue about whether these circumstances are sufficient to impute an assumption of liability. Instead, Wynmark Trust maintains that courts may not infer that assignees have impliedly assumed the obligations of their assignors. It argues that as a matter of law only an express assumption of obligations is sufficient to impute liability.

 An examination of precedent reveals inadequate authority to support defendant's argument. To the extent that District of Columbia cases have approved and applied the express assumption rule, they have done so only under narrow circumstances not present in the case at bar. Moreover, although some jurisdictions seem to have accepted the express assumption rule as one of general applicability, the weight of that authority is insufficiently persuasive to show that Wynmark Trust's motion to dismiss should prevail. We will first address the District of Columbia cases upon which defendant Wynmark Trust relies, and then we will discuss other persuasive authorities on this issue. Because we deny defendant's motion to dismiss under an assignment theory, we do not reach plaintiff's arguments regarding an implied novation.

 A. District of Columbia precedents

 As support for the express assumption rule, Wynmark Trust cites Rittenberg v. Donohoe Construction Co., 426 A.2d 338, 341 (D.C. 1981), Schneider v. Dumbarton Developers, Inc., 247 U.S. App. D.C. 217, 767 F.2d 1007 (D.C. Cir. 1985), and Dodek v. CF 16 Corp., 537 A.2d 1086 (D.C. 1988). *fn4" A careful reading of those cases reveals that they do not negate the legal effect of an assignee's implied assumption of the assignor's obligations under the contract. At most, they carve out a narrow exception for cases in which a plaintiff attempts to hold an assignee liable for breaches of the contract that the assignor committed ...


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