March 04, 1999
ROY T. FIELDS, ET AL., APPELLANTS/CROSS-APPELLEES,
GEORGE E. TILLERSON III, ET AL., APPELLEES/CROSS APPELLANTS.
Before Steadman, Farrell and Ruiz, Associate Judges.
The opinion of the court was delivered by: Steadman, Associate Judge
Notice: This opinion is subject to formal revision before publication in the Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the Court of any formal errors so that corrections may be made before the bound volumes go to press.
Appeals from the Superior Court of the District of Columbia (Hon. Lee F. Satterfield, Trial Judge)
Argued September 30, 1998
George E. Tillerson III was a principal in the law firm of Roxborough & Tillerson, Chartered. Appellants obtained a legal malpractice judgment against the firm and Tillerson individually in 1993 in the amount of approximately $300,000. The instant appeal arises out of the Fields' efforts to collect on the judgment by writs of attachment against the rents due on commercial rental property at 3001 Georgia Ave, N.W. The trial court by order dated August 28, 1996, quashed the writs after Tillerson asserted that, following the foreclosure on a second deed of trust, record title to the property was no longer in the name of the law firm but rather in Tillerson and his wife as tenants by the entireties, and thus exempt from execution for his sole indebtedness.
Subsequent to the granting of the order to quash, Tillerson sought further relief by filing a motion for "declaratory relief and protective order" on September 16, 1996. He asserted that a settlement agreement with the other principal of the law firm, Claude Roxborough, had fully satisfied the 1993 judgment and that all attempts of any type to execute upon the judgment should therefore be barred. The trial court denied this motion by order dated October 10, 1996.
The Fields appeal the grant of the motion to quash, contending inter alia that the quashing order was improperly entered without a hearing and without supporting findings of fact. Tillerson cross-appeals the denial of his motion for a protective order, contending that the trial court committed legal error in failing to apply the settlement agreement. We affirm the order denying the motion for a protective order but vacate the order quashing the writs of attachment and remand the case for further proceedings consistent with this opinion.
This dispute has its origins in the 1990 purchase by the Fields of a home in which title difficulties appeared following the closing. The law firm represented the Fields in the transaction. In 1993, the Fields subsequently obtained a malpractice judgment by default against both the firm and Tillerson individually for $292,174.32.
Subsequent to the entry of this judgment, the Fields filed a second suit, this one against Claude Roxborough individually, apparently at the insistence of the firm's malpractice insurer. On June 20, 1995, the Fields and Roxborough entered into a settlement praecipe whereby Roxborough agreed to pay the Fields $90,000. In the praecipe, the Fields also agreed that if a third law suit then pending established that they in fact had good title to the home, they would release the $292,174.32 judgment. The insurance company paid the Fields $75,000, but Roxborough was unable to pay the additional $15,000. Therefore, about a month later, on July 18, 1995, by stipulation of counsel for the Fields and Roxborough acknowledging that "the defendant is unable to comply with the terms of settlement," the praecipe of June 21, 1995, dismissing the Roxborough suit was set aside, the case was reinstated, and a judgment entered for $90,000 against Roxborough, to which the $75,000 was to be a credit. *fn1
Collection efforts by the Fields then resumed on the 1993 judgment. In March 1996, the Fields began filing a series of writs of attachment against the rent due from tenants on the Georgia Avenue property. At the time the judgment was entered against the law firm and Tillerson on November 16, 1993, that property was in the name of the law firm as owner, subject to first and second deeds of trust securing promissory notes executed by the law firm, both dated February 19, 1993. On December 15, 1995, a foreclosure sale was held under the second deed of trust, but the foreclosure was apparently invalid because of a defect in advertising. On or about that date, in a series of events whose details are, to say the least, not clear, *fn2 the Tillersons apparently became the indorsees of the promissory note secured by the second deed of trust and held a renewed foreclosure sale on May 15, 1996. The Tillersons asserted that they purchased the equity interest at this foreclosure sale and received a trustee's deed to the property, subject to the first deed of trust, conveying the property to them as tenants by the entireties. The trustee's deed was recorded on July 11, 1996.
The Tillersons' original motion to quash, filed on May 17, 1996, was denied by the trial court on July 3, 1996. However, after the Tillersons had recorded their trustee's deed, they filed an "emergency motion to amend order" on July 18, 1996. The Fields filed a response on July 30, 1996, in which they raised their various theories and asked for thirty days additional time to obtain deposition testimony if the trial court was not prepared to deny the motion forthwith. Nonetheless, the trial court granted the motion on August 28, 1996, as to all outstanding writs of attachment not served and answered prior to the recordation date of July 11, 1996. The Fields filed a timely appeal of this order after the denial of their motion for reconsideration (96-CV-1673).
Thereafter, on September 16, 1996, the Tillersons filed a "motion for declaratory relief and for protective order." In the motion, the Tillersons claimed that any obligation arising out of the 1993 judgment had been fully satisfied by the terms of the June 20, 1995, settlement of the suit against Roxborough individually. The trial court denied the motion on October 10, 1996, which is the subject of the cross-appeal (96-CV-1675).
We address first the denial of the motion for declaratory relief, since if that motion should have been granted, it would moot out the direct appeal from the order quashing the writs of attachment.
The Tillersons' theory, in essence, as clarified at oral argument, is that George Tillerson was a third-party beneficiary of the settlement agreement in the Roxborough litigation, and that the stipulated rescission of that settlement was therefore ineffective without his consent. *fn3 He directs our attention to the terms of the praecipe of settlement, signed by the attorney for the Fields and the attorney for Roxborough and filed June 21, 1995, which read:
"The Clerk of said Court will mark this case as settled and dismissed with prejudice and that no post judgment execution proceedings will be taken in case 93ca3675 [the suit against the law firm and Tillerson] and that judgment in 93ca3675 will be released when the issue of the Fields' title is resolved in their favor. The amount of the settlement is Ninety Thousand Dollars ($90,000)[.]"
A third party to a contract "'may sue to enforce its provisions if the contracting parties intend the third party to benefit directly thereunder.'" Johnson v. Atlantic Masonry Co., 693 A.2d 1117, 1122 (D.C. 1997) (quoting Western Union Tele. Co. v. Massman Constr. Co., 402 A.2d 1275, 1277 (D.C. 1979)) (emphasis added); accord District of Columbia v. Campbell, 580 A.2d 1295, 1302 (D.C. 1990); Bay General Industries, Inc. v. Johnson, 418 A.2d 1050, 1055 (D.C. 1980). Whether the parties so intended in this case is a factual issue unresolved by the trial court.
However, although this court has not specifically addressed the legal issue, most jurisdictions adhere to the following corollary to third-party beneficiary rights:
"[T]he parties to a contract entered into for the benefit of a third person may rescind, vary, or abrogate the contract as they see fit, without the assent of the third person, at any time before the contract is accepted, adopted, or acted upon by him, and such rescission deprives the third person of any rights under or because of such contract." 17A Am. Jur. 2d Contracts § 461 (1991). See also Restatement (Second) Contracts § 311(2)&(3) (1981) ("(2) . . . the promisor and promisee retain power to discharge or modify the duty by subsequent agreement. (3) Such a power terminates when the beneficiary, before he receives notification of the discharge or modification, materially changes his position in justifiable reliance on the promise or brings suit on it or manifests assent to it at the request of the promisor or promisee"). An early appellate case in the District of Columbia, Merrick v. Giddings, 1 Mackey 394 (D.C. 1882), aff'd Merrick's Ex'r v. Giddings, 115 U.S. 300 (1885), is consistent with the modern majority rule. That case noted that had the original contract between the contracting parties contained a promise intended to benefit plaintiff third parties, the contracting parties "had a right to modify or rescind it at any time before the [third parties] made themselves privies by accepting and acting upon it." Merrick v. Giddings, supra, 1 Mackey at 416 (citations omitted). Thus, under Merrick and the current majority rule as set forth in the Restatement, which we adopt, *fn4 even assuming that they had intended Tillerson to be a third-party beneficiary, the Fields and Roxborough had the power to modify or rescind the settlement up until the point that Tillerson by some action thereon terminated that power.
The Fields argue that "[t]here is simply nothing in the record to evince an acceptance, adoption, or any form of reliance upon the settlement agreement by Tillerson or the Firm prior to its rescission." They further argue that Tillerson was subject to the Fields' extensive post-judgment execution proceedings in 1995 and the first half of 1996 on the Tillerson judgment after the entry of the consent judgment, and that Tillerson never defended himself during these proceedings, including a 1995 motion for a bench warrant and arrest of Tillerson, on the ground that the settlement agreement was binding. *fn5 This indeed seems to be a strong indication that Tillerson never expected that he was a third-party beneficiary of the settlement agreement or had any ground to challenge its rescission by Roxborough and the Fields in entering the consent judgment. At oral argument Tillerson asserted that his reliance on the settlement is shown by the fact that the law firm brought an action in order to resolve title in the Fields' favor. This argument lacks any persuasive force because the cases regarding the title dispute over the Fields' property were filed long before the settlement praecipe and consent orders came into being. *fn6 So far as we can determine, the record is otherwise void of any reliance by Tillerson on the settlement praecipe prior to entry of the consent order.
In these circumstances, we conclude that the trial court's denial of the motion for declaratory relief must be affirmed.
We now turn to the direct appeal, in which the Fields challenge the trial court's grant of the motion to quash the attachments. The Fields present a range of arguments against this ruling: 1) the second deed of trust note was paid in full at the time of the first foreclosure; 2) the foreclosure transactions were fraudulent conveyances; 3) the May 15, 1996, foreclosure and the trustee's deed were void by reason of George Tillerson's self-dealing; 4) Crystal Tillerson and Claude Roxborough individually were indispensable parties and should have been joined in any such motion and ruling; 5) the Fields were denied reasonable discovery rights and a hearing prior to the ruling; and 6) the order contained no findings of fact or Conclusions of law.
The trial court seems to have proceeded on the assumption that if record title was in the name of someone other than the judgment debtor or, as here, in a form of ownership immune from execution, *fn7 the motion to quash was properly granted as to transactions subsequent to the date of such recordation. This may be true so as to protect persons dealing with the record owner as such owner. See D.C. Code § 45-801 (1996). However, record ownership alone cannot be conclusive so as to shield the record owner and prevent a judgment creditor from demonstrating that, as between the judgment debtor and the record owner, true title is in fact in the judgment debtor and subject to execution. *fn8 See Massey-Ferguson, Inc. v. Finocchiaro Co., 496 F.Supp. 655 (E.D. Pa. 1980) (denying record owner's motion to quash writ of execution against real property where judgment debtor determined to be true owner on theory of fraudulent conveyance), aff'd without opinion, 649 F.2d 859 (3d Cir. 1981); cf. Roberts & Lloyd, Inc. v. Zyblut, supra note 7, (judgment creditor challenge to tenancy by the entireties holding on theory of fraudulent conveyance); Quander v. Dow, 721 A.2d 977 (D.C. 1998) (bank account in name of judgment debtor may be shown to be subject to oral trust). This is the situation at issue here.
The facts (including questions of intent) underlying the series of transactions in which the Tillersons were involved subsequent to the entry of the 1993 judgment are murky and sharply disputed. *fn9 Because no hearing was held and no findings of fact made, we are in no position to make any definitive determination on appeal as to the validity of the Fields' arguments. See Hasden v. Henderson, 521 A.2d 666, 668 (D.C. 1987). Accordingly, we are compelled to vacate the order quashing the writs of attachment and to remand the case for a hearing *fn10 and an order accompanied by any necessary findings of fact and Conclusions of law.