Appeal from the Superior Court of the District of Columbia (05-LTB-21144) (Hon. Neal E. Kravitz, Trial Judge)
The opinion of the court was delivered by: Kramer, Associate Judge
Before REID and KRAMER, Associate Judges, and SCHWELB, Senior Judge.
These appeals challenge an order of the Superior Court holding appellants in civil contempt for having filed a landlord and tenant suit for possession based on non payment of rent, even though a receiver had been appointed by the court to administer -- and enforce -- payment of rent by tenants of the rental property. In a thorough and scholarly opinion, Judge Kravitz found that Lanier Associates (the owner of the property) and its former lawyers had violated "the clear and unambiguous directives of the receivership order by prosecuting this nonpayment action," and that none had "established any cognizable defense to civil contempt." Accordingly, the judge dismissed the underlying suit without prejudice and imposed other remedial sanctions "aimed at preventing further violations of this and other receivership orders and at compensating Mr. Stokes for further losses he has sustained as a result of the respondents' contumacious conduct."
The respondents Kenneth Loewinger and Loewinger & Brand, PLLC, have brought this appeal. We affirm the contempt order for the reasons stated by Judge Kravitz, whose opinion we adopt and append hereto. We add only the following brief observations, which assume familiarity with the judge's opinion.*fn1
Appellants question the judge's conclusion that the receivership order was unambiguous, arguing that ambiguity -- and thus a reasonable, if mistaken apprehension by themselves that Lanier Associates could properly sue for nonpayment -- may be inferred by the adoption of Super. Ct. L&T R. 3-I(a) ("No owner or owner's agent may file a complaint for possession of real property based ... on nonpayment of rent if the property is subject to a court-ordered receivership . . . unless authorized by court order in the receivership action.") after appellants' actions in the case. But, like Judge Kravitz, we do not read the rule or its adoption as implying any ambiguity in the statutory prohibition against delegation agreements between receiver and landlord inter se, without court authorization, of the kind at issue here (and this quite apart from the judge's additional finding that appellant's had disregarded terms of the delegation). As the same trial judge explained in a later case, Knott v. Patten, Case No. 06-LTB-3028 (Feb. 1, 2007), Rule 3-I was adopted by the Superior Court not because of a perception that existing law was "unclear" as to the receiver's exclusive role (absent court order) in enforcement of rent obligations, but because illegal pursuit of nonpayment actions by landlords "was going undetected in the receivership actions."
Moreover, the proper response to a seemingly ambiguous court order is not to read it as one wishes: "If a party subject to court order claims not to understand its requirements, he or she may apply to the court for construction or modification . . . . To fail to take such steps is to act at one's peril as to what the court's ultimate interpretation of the order will be." D.D. v. M.T., 550 A.2d 37, 44 (D.C. 1988).
We conclude with Judge Kravitz that "it is inimical to the statutory scheme to suggest that a receiver, by private agreement, can transfer back to the landlord the authority to bring nonpayment actions when it was the landlord's failure to pay its utility bills that necessitated the appointment of a receiver in the first place." Because appellant's actions were in plain violation of the statute, and the receivership order (and, indeed, of the delegation agreement itself), the sanctions imposed by the Superior Court were proper.
SUPERIOR COURT OF THE DISTRICT OF COLUMBIA Civil Division -- Landlord and Tenant Branch
LANIER ASSOCIATES, et al., Plaintiffs v. CLEMENT STOKES, Defendant
MEMORANDUM OPINION AND ORDER
Lanier Associates, the plaintiff in this Landlord and Tenant action, is the owner of a 27-unit "master-metered" apartment building located at 1773 Lanier Place, N.W., in the District of Columbia. The defendant, Clement Stokes, is a tenant who occupies Apartment #23 in the building under a written lease dated December 1, 1999. On November 13, 2001, a judge of this Court placed the building in receivership pursuant to the Prohibition of Electric and Gas Utility Service Termination to Master-Metered Apartment Building Act of 1980, D.C. Code § 42-3301 et seq. (2001), due to the landlord's failure to pay its gas bill. The question currently before the Court is whether Lanier Associates and its former attorneys, Kenneth J. Loewinger, Esquire and the law firm of Loewinger & Brand, PLLC, should be held in civil contempt of court and/or sanctioned under Rule 11 of the Superior Court Rules of Civil Procedure for prosecuting this action in violation of the still-pending receivership order.
An apartment building is "master-metered" and thereby subject to the terms of the Prohibition of Electric and Gas Utility Service Termination to Master-Metered Apartment Building Act of 1980 if (i) it has three or more residential units, (ii) utility costs are included in the rents paid by the tenants of the building, and (iii) at least one utility company bills the landlord directly for services provided to the tenants. D.C. Code §§ 42-3301(1), -3302(a). Under the statute, a utility company may not terminate services to the tenants of a master-metered apartment building on account of the landlord's failure to pay its utility bills. D.C. Code § 42-3302(a). Instead, the company may petition the Superior Court for the appointment of a receiver to collect rents from the tenants. D.C. Code § 42-3303(a)(1). A receiver appointed under the statute is authorized "to take such action as it deems necessary to collect rents or payments for use and occupancy from the tenants . in place of the owner, agent, lessor or manager." D.C. Code § 42-3303(a)(4). The receiver then pays the utility bills incurred after its appointment, deducts its own reasonable fees and costs, and passes along any remaining funds to the landlord. Id. The receivership is to be terminated when the Court finds that the landlord has satisfied the arrearage that was the subject of the utility company's original petition. D.C. Code § 42-3303(b). During the pendency of the receivership, any landlord or agent thereof who collects or attempts to collect rents from the tenants "shall be found, after due notice and hearing, to be in contempt of court." D.C. Code § 42-3303(d). See generally Capitol Terrace, Inc. v. Shannon & Luchs, Inc., 564 A.2d 49, 50-51 (D.C. 1989).
The receivership statute thus serves two legislative purposes. It protects tenants who live in master-metered apartment buildings from the loss of utility services due to the landlord's failure to pay its utility bills, and it protects utility companies from the loss of payment for services they are required by the statute to provide. Shannon & Luchs Co. v. Jeter, 469 A.2d 812, 813 (D.C. 1983).
On November 13, 2001, the Superior Court (Diaz, J.) entered a written order in Washington Gas Light Company v. Lanier Associates, Civil Action No. 01-8264, granting the petition of Washington Gas Light Company to appoint a receiver for 1773 Lanier Place, N.W. Finding, after a hearing, that Lanier Associates had failed to pay $29,729.64 it owed the gas company for gas utility services provided to the tenants of the building, the Court appointed The Jason Corporation to serve as receiver of the tenants' rents and expressly forbade Lanier Associates to "collect any rents or payments for use and occupancy from the tenants of the apartment house . so long as the receiver remains appointed." The Court directed The Jason Corporation to "take such action as it deems necessary to collect all rents or payments for use and occupancy forthcoming from the tenants of the apartment house," including "the power and right to institute, in the Landlord and Tenant Branch of the Superior Court, actions for possession of the premises for nonpayment of rent against any tenant who has not timely paid his rental obligations to the receiver." The Court directed that, in the event the receiver brought such a suit, Lanier Associates "shall be deemed to consent to be joined as a party-plaintiff and shall be subject to any claims, defenses, recoupments, set-offs or counterclaims of the tenant as [it] might have been had the action been initially instituted at [its] own behest." Finally, the Court stated that the appointment of the receiver would remain in effect until the Court made a finding that Lanier Associates had satisfied the original delinquency alleged in the gas company's petition. No such finding has ever been made, and neither Judge Diaz nor any other judge of the Superior Court has ever vacated or modified the order entered on November 13, 2001.
Lanier Associates brought this Landlord and Tenant action on June 27, 2005. In a complaint prepared and filed on its behalf by Loewinger & Brand, PLLC, the landlord alleged that Mr. Stokes had failed to pay $45,000.00 in rent due under his lease between May 1, 2001 and June 30, 2005.
Although, in light of the receivership order, Lanier Associates was precluded from collecting rent from Mr. Stokes for almost the entire period covered by the complaint, Lanier Associates alleged that the rent was "due to the landlord," and it stated that "the landlord asks the Court for" a judgment for possession and a money judgment "for rent, late fees, other fees and costs in the amount of $45,500.00." The complaint listed the "Jason Corp." as a co-plaintiff, but it did not identify the co-plaintiff as a court-appointed receiver or contain any signature line for a lawyer or other representative of the receiver.
The case was set for trial before the undersigned judge in the Landlord and Tenant Branch on May 2, 2006. When the case was called on the record, Omar Karram, Esquire, a junior associate at Loewinger & Brand, PLLC, was the only person who appeared. Explaining that the parties were working toward a possible settlement agreement, Mr. Karram made an oral request for a continuance of the trial.
The Court noticed that the complaint listed the "Jason Corp." as a second plaintiff along with Lanier Associates. Aware that The Jason Corporation sometimes serves as a court-ordered receiver for master-metered apartment buildings, the Court inquired whether the landlord's building was subject to a receivership order and, if so, whether the landlord was authorized to prosecute the action. Mr. Karram responded that the building was in receivership. Yet he, and then Mr. Loewinger, who appeared later in the day at the Court's request, both maintained that Lanier Associates had properly brought the action by listing the "Jason Corp." as a co-plaintiff. The lawyers conceded, however, that they had never discussed the case with the receiver or its counsel or even served the receiver with a copy of the complaint.
Because it appeared that Lanier Associates and its counsel had brought this action in violation of the receivership order in Washington Gas Light Company v. Lanier Associates, Civil Action No. 01-8264, the Court issued an order on May 5, 2006 directing Lanier Associates, Kenneth J. Loewinger, Esquire, and the law firm of Loewinger & Brand, PLLC to show cause why they should not be held in civil contempt of court and sanctioned under Rule 11 of the Superior Court Rules of Civil Procedure. The Court subsequently presided over a show-cause hearing on July 6-7, 2006 at which Lanier Associates, represented by newly retained counsel, and Mr. Loewinger and the firm of Loewinger & Brand, PLLC, each also represented by separate counsel, presented the testimony of six witnesses and other evidence in an effort to establish that they had prosecuted this case in accordance with the receivership order. All parties, as well as the receiver and amicus curiae, the Legal Aid Society of the District of Columbia, actively participated in the hearing and filed extensive pre- and post-hearing briefs on the pertinent issues. By the end of the hearing, counsel for Lanier Associates and the receiver conceded that the case had been brought in violation of the receivership order and that the complaint was subject to dismissal. Loewinger and Brand, PLLC and Kenneth J. Loewinger, however, maintained their positions that they acted at all times with proper authority and in substantial compliance with the receivership order and governing law.
For the reasons set forth herein, the Court finds by clear and convincing evidence that Lanier Associates and its former lawyers have violated the clear and unambiguous directives of the receivership order by prosecuting this nonpayment action in the Landlord and Tenant Branch. As the Court also finds that neither Lanier Associates nor any of its former lawyers has established any cognizable defense to civil contempt, the Court concludes, in accordance with D.C. Code § 42-3302(d) and the common law standards for civil contempt, that Lanier Associates, Kenneth J. Loewinger, Esquire, and Loewinger & Brand, PLLC should be adjudicated in civil contempt of court. Pursuant to its contempt finding, the Court will dismiss the case without prejudice and will impose other remedial sanctions aimed at preventing further violations of this and other receivership orders and at compensating Mr. Stokes for the losses he has sustained as a result of the respondents' contumacious conduct. Although Lanier Associates and its former lawyers also are subject to non-monetary sanctions under Rule 11, the Court declines to impose any such sanctions at this time, as they would be duplicative of the sanctions to be imposed as civil contempt remedies.
Lanier Associates, Kenneth J. Loewinger, Esquire, and Loewinger & Brand, PLLC all argued in response to the show-cause order that Lanier Associates properly brought this action pursuant to a lawful delegation of the receiver's authority. Specifically, the respondents asserted that in May 2002 the receiver, acting through its then counsel, J. Andrew Chopivsky, authorized Lanier Associates to bring nonpayment actions through Lanier's counsel, Loewinger & Brand, PLLC, as long as the receiver was listed as a party plaintiff in all such actions. The respondents asserted that this delegation of authority was intended to ease the processing of nonpayment suits and to relieve the receiver of the obligation to pay its own counsel to prosecute them. The respondents asserted further that the delegation was a valid exercise of the receiver's authority, set forth in the receivership order, to "take such action as it deems necessary to collect all rents or payments for use and occupancy forthcoming from the tenants of the apartment house." The respondents contended that Lanier Associates never collected any rents from its tenants following the entry of the receivership order and that Lanier intended all along to turn over to the receiver any rents it received as a result of its prosecution of nonpayment actions. The respondents thus argued that The Jason Corporation's delegation of authority to Lanier Associates was fully consistent with the spirit of the receivership order and the holding of Shannon & Luchs Co. v. Jeter, 469 A.2d 812, 818 (D.C. 1983), that a receiver who wishes to prosecute a nonpayment action must join the landlord as a party plaintiff.
The Court is not persuaded by any of these arguments. The receivership order in Washington Gas Light Company v. Lanier Associates, Civil Action No. 01-8264, does not permit The Jason Corporation to delegate to Lanier Associates the authority to institute nonpayment actions in the Landlord and Tenant Branch, and the receiver's purported delegation of its authority was directly at odds with the terms and legislative purposes of the receivership statute. Moreover, even if a receiver were permitted to make the type of delegation of authority suggested by the respondents, the evidence at the show-cause hearing clearly established that Lanier Associates and its lawyers failed to abide by the terms of the purported delegation set by The Jason Corporation's lawyer.
The Court of Appeals made clear in Jeter, 469 A.2d at 815, that the prosecution of a Landlord and Tenant action based upon a tenant's nonpayment of rent constitutes an attempt to collect rent from the tenant. As the Court of Appeals explained, even if the action seeks only possession of the premises, as opposed to a money judgment for unpaid rent, the party bringing the action may end up collecting rent from the tenant because the tenant has the equitable right to redeem his tenancy by paying all back rents owed and otherwise squaring his account with the landlord. Id.; see generally Trans-Lux Radio City Corp. v. Service Parking Corp., 54 A.2d 144, 146 (D.C. 1947).
Therefore, when Judge Diaz entered the receivership order on November 13, 2001 prohibiting Lanier Associates from "collect[ing] any rents or payments for use and occupancy from the tenants of the apartment house . so long as the receiver remains appointed," he necessarily prohibited Lanier Associates from prosecuting actions in the Landlord and Tenant Branch based upon nonpayment of rent. To make this proscription even more clear, Judge Diaz expressly gave The Jason Corporation "the power and right to institute, in the Landlord and Tenant Branch of the Superior Court, actions for possession of the premises for nonpayment of rent against any tenant who has not timely paid his rental obligations to the receiver" and directed that "[i]n such event" Lanier Associates "shall be deemed to consent to be joined as a party-plaintiff."
The receivership statute is equally unequivocal in establishing that the appointment of a receiver divests the landlord of its ability to sue tenants for nonpayment of rent. The statute expressly provides that a court-appointed receiver shall have the authority "to take such action as it deems necessary to collect all rents or payments for use and occupancy from the tenants of the apartment house in question in place of the owner, agent, lessor or manager." D.C. Code § 42-3303(a)(4) (emphasis added). Given the Court of Appeals' determination in Jeter, supra, that the prosecution of a nonpayment action is an attempt to collect rent, this provision of the statute must be understood to mean that the receiver has the authority in place of the landlord to initiate an action based upon a tenant's nonpayment of rent. The statute reinforces this interpretation by providing that "[a]ny owner, agent, lessor or manager who collects or attempts to collect any rent or payment for use and occupancy from any tenant of an apartment house subject to an order appointing a receiver pursuant to this section shall be found, after due notice and hearing, to be in contempt of court." D.C. Code § 42-3303(d).
The Court concludes, accordingly, that the position advanced here by the respondents -- that the receiver could delegate to the landlord the authority to bring nonpayment actions -- is contrary both to the receivership order in this case and to the statute pursuant to which the order was entered.
For the following reasons, the Court also concludes that the respondents' position is at odds with the legislative purposes underlying the receivership statute and with ...