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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 22-CV-0548
CAPITAL RIVER ENTERPRISES, LLC, et al., APPELLANTS,
V.
CHRISTOPHER ABOD, et al., APPELLEES.
Appeal from the Superior Court of the District of Columbia (2022-CA-000258-R(RP))
(Hon. Hiram E. Puig-Lugo, Trial Judge)
(Argued March 7, 2023 Decided September 21, 2023)
Brian West, with whom Benjamin G. Chew and Andrew C. Crawford were on the brief, for appellants.
Nathan J. Bresee, David S. Panzer, and Joseph M. Creed, with whom Michael J. Bramnick and David H. Cox were on the brief, for appellees Christopher Abod, Harry Roupas, and BCJCL, LLC.
Spencer B. Ritchie, with whom Richard W. Luchs and Gwynne L. Booth were on the brief, for appellee Premium Title & Escrow, LLC.
Before DEAHL and HOWARD, Associate Judges, and THOMPSON, Senior Judge.
DEAHL, Associate Judge: Capital River was a three-member LLC formed to
buy and sell properties for profit. One of its members, Kuei-Yin Chang Liu, alleges 2
that the other two members defrauded Capital River. Specifically, Liu alleges that
the other two members encumbered Capital River’s property with two loans—after
they forged Capital River’s operating agreement to omit Liu’s ownership interest—
and then kept the money for themselves. In an important twist, Capital River’s true
operating agreement granted those two members the authority to take out the loans
on Capital River’s behalf anyhow, meaning any forgery was immaterial to their
ability to do so. Capital River and Liu sued the grantors of those loans for quiet title
and sued the escrow agent that facilitated them for negligence. The trial court found
that each of their claims failed because the two members who took out the loans
against the properties had the actual authority to enter into those transactions. The
court therefore granted the grantor-defendants’ motion to dismiss and granted the
escrow agent’s motion for summary judgment.
Capital River and Liu now appeal, arguing that the trial court erred in
dismissing their quiet title claim because deeds entered into on the basis of a forged
operating agreement are rendered void ab initio. For that proposition, they rely on
Smith v. Wells Fargo Bank, in which we held that a forged power of attorney renders
a deed void. 991 A.2d 20, 26 (D.C. 2010). We have never extended that rule beyond
powers of attorney, however, and it does not make sense to extend the rule to the
scenario we confront here, so we detect no error. 3
Capital River and Liu also challenge the trial court’s grant of summary
judgment to the escrow agent regarding their negligence claim. They argue that the
escrow agent had a fiduciary duty to inform Capital River of certain information—
namely, that two of its members were attempting to defraud it—and that the escrow
agent failed to do so. Though the trial court technically granted pre-discovery
summary judgment on this claim, the order was effectively a dismissal for failure to
state a claim: the court concluded that Capital River and Liu would not have a viable
claim, regardless of whether they could substantiate all of their factual allegations.
We conclude that this order was erroneous and reverse it.
We affirm the trial court’s grant of the motion to dismiss, and we reverse in
part its grant of the motion for summary judgment as it relates to the negligence
claim.
I.
Kuei-Yin Chang Liu, Napoleon Ibiezugbe, and Kevin Falkner together
formed Capital River Enterprises, LLC, to “purchase, develop and sell” for profit
two parcels of property located at 2318-2322 Nicholson Street Southeast. The terms
governing the LLC were laid out in two documents: an operating agreement and a
memorandum of understanding (MOU), which was incorporated into the operating 4
agreement. These documents stated that, together, they constituted the “entire
agreement among the Members.”
The operating agreement stated that Liu would have a 50% ownership interest,
while Ibiezugbe and Falkner would have 25% each. The parties agreed that Liu
would finance the project, while Ibiezugbe and Falkner would conduct the day-to-
day work of improving the properties. To that end, the MOU stated that Liu would
contribute $1.6 million to the LLC. Around $1.4 million would be used to buy the
property, and the remaining money would be used to pay for costs associated with
development of the property. Meanwhile, Ibiezugbe and Falkner would be
“responsible for . . . all maintenance costs of the property,” “all expenses, costs and
fees incurred after the exhaustion of the Planning and Permitting Funds,” and “all
actions necessary to hire, and fire, architects, engineers, lawyers and related
professionals of their choosing to advance and complete the Project.” Importantly,
the MOU provided that “[a]ll major decisions and choices . . . shall be made by a
two-third[s] majority vote of the Members, each of whom shall have one vote for
each major decision required.”
With the money Liu had invested, Capital River bought the Nicholson Street
properties in October 2017, with Premium Title & Escrow, LLC, acting as its escrow 5
agent. About two years later, Ibiezugbe and Falkner took out two loans on behalf of
Capital River, using the properties as security. In April 2019, Ibiezugbe and Falkner
entered into a deed of trust (encumbering the properties) on behalf of Capital River
with Christopher Abod and Harry Roupas, in exchange for a loan of $499,000. In
November 2019, they entered into a second deed of trust on behalf of Capital River
with BCJCL, LLC, in exchange for a loan of $375,000. Premium Title again acted
as the escrow agent for both transactions.
Capital River and Liu 1 now allege that these loans were entered into for
Ibiezugbe and Falkner’s personal gain, that Liu was not aware of the transactions,
and that Capital River did not profit from them. Specifically, Capital River alleges
that Ibiezugbe and Falkner gave the lenders a forged operating agreement that named
Ibiezugbe and Falkner as the sole members of the LLC, omitting any mention of Liu.
Capital River further alleges that Ibiezugbe and Falkner deposited the loan funds
into their personal accounts and that Capital River never received any money from
the loans. According to Capital River, Liu did not find out about the loans until over
a year later. At that time, the three members amended the operating agreement and
MOU. The amendment stated that “the Parties acknowledge that [Ibiezugbe and
1 This opinion refers to Liu and Capital River collectively as “Capital River” unless otherwise specified. 6
Falkner] have breached the [operating agreement] and MOU” and amended the
MOU to give Liu sole decisionmaking power.
Capital River and Liu sued the loan grantors, Abod, Roupas, and BCJCL, and
the escrow agent, Premium Title. Capital River sought quiet title against the grantor-
defendants, asking the court to declare the two deeds void. It brought a claim of
negligence against Premium Title, arguing that Premium Title breached its fiduciary
duty, as an agent of the LLC, to inform the LLC of the alleged forgery. And it
brought claims against all defendants for tortious interference with business
relations, slander of title, and civil conspiracy.
The grantor-defendants filed a motion to dismiss under Rule 12(b)(6). The
Superior Court granted the motion, dismissing all counts against those defendants
on the basis that the plain language of the MOU granted Ibiezugbe and Falkner the
actual authority to enter into the deeds. The court reasoned that this actual authority
meant that “Capital River [wa]s responsible for Ibiezugbe and Falkner’s
agreements,” so even a forged operating agreement would not render the deeds void
ab initio—negating Capital River’s quiet title claim. The court further reasoned that
Ibiezugbe and Falkner’s actual authority to enter into the deeds negated Capital
River’s claims of tortious interference, slander of title, and civil conspiracy, a ruling 7
Capital River does not directly challenge on appeal. See Drake v. McNair, 993 A.2d
607, 615 n.12 (D.C. 2010) (deeming an issue waived where party failed to include
in her brief any substantive argument related to the issue).
Premium Title then filed a pre-discovery motion for summary judgment,
which the court also granted. The court dismissed the tortious interference, slander
of title, and civil conspiracy claims for the same reasons given in its previous order.
And it dismissed the negligence claim, reasoning that because Ibiezugbe and Falkner
had actual authority to enter into the deeds, “Premium Title’s actions were consistent
with Capital River’s MOU and there was no ‘fraud’ perpetrated against Capital River
that Premium Title had a duty to notify Plaintiffs of.” Capital River now appeals.
II.
Capital River makes three arguments. It argues that the trial court erred in
(1) finding that Ibiezugbe and Falkner had actual authority to enter into the deeds;
(2) dismissing its quiet title claim based on a finding that the forged operating
agreement did not automatically void the deeds; and (3) granting Premium Title’s
motion for summary judgment as to the negligence claim. We disagree with the first
two arguments but agree with the third. We address each argument in turn. 8
A.
The trial court found that the MOU granted Ibiezugbe and Falkner the actual
authority to enter into the deeds. Capital River disputes that finding. We agree with
the trial court.
We adhere to the objective law of contracts. 2301 M St. Coop. Ass’n v.
Chromium LLC, 209 A.3d 82, 86 (D.C. 2019). This means that “the contracting
parties’ unexpressed intent at the time the contract was entered into is irrelevant if
the contractual terms are otherwise unambiguous, or unless there is fraud, duress, or
mutual mistake.” Id. (quotations omitted). Likewise, the parol evidence rule
“excludes extrinsic evidence to assist in contract interpretation and limits our
analysis to the plain meaning of the contractual terms if they are otherwise
unambiguous.” Id. at 87. A document is ambiguous only if “the provisions in
controversy are[] reasonably or fairly susceptible of different constructions or
interpretations, or of two or more different meanings.” Sahrapour v. LesRon, LLC,
119 A.3d 704, 708 (D.C. 2015) (quoting Joyner v. Estate of Johnson, 36 A.3d 851,
856 (D.C. 2012)). 2
2 The operating agreement states that Capital River “will be governed under the laws of the Commonwealth of Virginia,” so there is at least an argument that we 9
The plain language of the MOU, incorporated into the operating agreement,
unambiguously grants Ibiezugbe and Falkner the ability to take out loans against
Capital River’s assets. The MOU provides that “[a]ll major decisions and choices
. . . shall be made by a two-third majority vote of the Members, each of whom shall
have one vote for each major decision required.” Ibiezugbe and Falkner are two of
the three members of Capital River, comprising a two-thirds majority. Encumbering
the property with a loan is undoubtedly a “major decision.” While Capital River
counters that the LLC’s members did not contemplate taking out loans against the
property, the plain terms of the MOU do not preclude them from doing so.
Capital River appeals to unwritten understandings between the members and
the amendment that post-dates the loans to support its interpretation, but it may not
look to either source to introduce ambiguity into an unambiguous contract. D.C.
contract law prohibits the use of extrinsic evidence to contradict unambiguous
language. See 2301 M St. Coop., 209 A.3d at 87. And, in any case, the MOU itself
rejects the use of any external sources of interpretation, by stating that it constitutes
should be applying Virginia law when interpreting it. No party makes that argument, however, and only one brief addresses Virginia’s contract law, asserting that it is in accord with the District’s on the above points. See Westmoreland LG&E Partners v. Virginia Elec. & Power Co., 486 S.E.2d 289, 294 (Va. 1997). Because the parties seemingly agree that District law applies, and no party argues Virginia law would point to any different result, we apply the District’s law. 10
“the full and complete terms of agreement by and between the Members.” See Adler
v. Abramson, 728 A.2d 86, 90 (D.C. 1999) (“The absence . . . of a limitation on
which the parties had explicitly bargained, in a final agreement containing an
integration clause (as this one did), is strong indication that the parties reasonably
meant to bind themselves only by the words they employed.”). As the trial court
found, the MOU gave Ibiezugbe and Falkner the actual authority to take out loans
against the properties.
B.
Capital River argues that, even if Ibiezugbe and Falkner had the authority to
enter into the deeds and thereby encumber the properties, the deeds are nonetheless
void ab initio because Ibiezugbe and Falkner relied on an allegedly forged operating
agreement to enter into them. Capital River argues that acquiring property “by
means of a forged instrument relating to the property” renders the deed void—and
that an operating agreement is one such instrument. To support this argument,
Capital River relies on Smith v. Wells Fargo Bank, in which we stated that a forged
power of attorney would render void a deed of trust entered into using that power of
attorney. 991 A.2d at 26. Capital River cites our statement in Smith that “even a
bona fide purchaser cannot acquire a property right by means of a forged instrument 11
relating to the property.” Id. at 31. Appellees counter that for a deed to be void ab
initio, the deed itself must be forged, and Smith broadened that rule only to include
forged powers of attorney—not to any other class of documents. We agree with
them and conclude that the trial court’s dismissal of the quiet title claim was proper.
We review a dismissal for failure to state a claim de novo. See Johnson-El v.
District of Columbia, 579 A.2d 163, 166 (D.C. 1990). “All that is required for a
complaint to be sufficient is ‘a short and plain statement of the claim showing that
the pleader is entitled to relief.’” Scott v. FedChoice Fed. Credit Union, 274 A.3d
318, 322 (D.C. 2022) (quoting Super. Ct. Civ. R. 8(a)(2)).
Declaring a deed void ab initio is a drastic result. The deed is void not only
against the parties to the deed, but also against any subsequent purchasers—even
bona fide purchasers, who are completely innocent as to any wrongdoing that
occurred. Smith, 991 A.2d at 26. As such, the situations that render a deed void ab
initio are narrow: courts typically “have been circumspect at common law in finding
a deed void ab initio and have limited [their] rulings regarding voidness to
circumstances that go to the face of the deed, e.g., forgery.” Julian v. Buonassissi,
997 A.2d 104, 120 (Md. 2010) (footnote omitted); see Smith, 991 A.2d at 26 n.10
(citing cases). 12
This rule has been slightly expanded to include forged powers of attorney.
Smith, 941 A.2d at 26. A power of attorney is a unique document that confers special
powers on its holder and is subject to special regulations. See generally Uniform
Power of Attorney Act, D.C. Code §§ 21-2601.01 to -2604.03. “If . . . the Power of
Attorney was forged, [the] execution of the deed of trust pursuant to the Power of
Attorney is no better than if [the deed of trust] had been directly forged.” In re
Baxter, 320 B.R. 30, 31 (Bankr. D.D.C. 2004).
The rule that forged powers of attorney render deeds void has long been
recognized. See Unity Banking & Saving Co. v. Bettman, 217 U.S. 127, 135 (1910).
Smith is simply the latest in that long line of cases. Indeed, Smith’s language
regarding “a forged instrument relating to the property” stems from the 1910
Supreme Court case of Unity Banking & Saving Co. v. Bettman, which held that a
forged power of attorney rendered a deed void. See id. at 135 (“As against the true
owner, a right of property cannot be acquired by means of a forged written
instrument relating to such property.”). That language, in context, referred to powers
of attorney only. See id.; see also In re Baxter, 320 B.R. at 39 (using same language
to discuss power of attorney); Scotch Bonnett Realty Corp. v. Matthews, 11 A.3d
801, 805 (Md. 2011) (same); Shvartser v. Lekser, 308 F. Supp. 3d 260, 265 (D.D.C. 13
2018) (same). We are not aware of any case to have interpreted that language to
apply beyond powers of attorney.
We decline to extend that language to cover forged operating agreements. An
operating agreement, unlike a power of attorney, is not a necessary prerequisite for
entering into a deed; indeed, LLCs are not required to have written operating
agreements at all. See D.C. Code § 29-801.02(10) (contemplating “oral” or
“implied” operating agreements). Moreover, the “strong public policy favoring bona
fide purchasers for value” supports limiting the circumstances in which deeds are
rendered void. See Scotch Bonnett, 11 A.3d at 810. If the forgery of any document
submitted during a real estate transaction could render that transaction void, then
real estate transactions would be significantly more uncertain—including for bona
fide purchasers far removed from the initial forgery. It would also open the system
up for gaming: for instance, a seller could forge a peripheral document in order to
give it the option to unilaterally void the transaction at a later date. For these reasons,
we decline to extend the forgery rule to documents other than powers of attorney
(and the deed itself). 14
C.
Third, Capital River argues that the trial court erred in granting summary
judgment to Premium Title on Capital River’s negligence claim. We agree.
We review a grant of summary judgment de novo. Onyeoziri v. Spivok, 44
A.3d 279, 283 (D.C. 2012). “Our role ‘is not to act as factfinder and to resolve
factual issues,’ but rather to review the record to determine if there is ‘a genuine
issue of material fact on which a jury could find for the non-moving party.’” Id.
(quoting Holland v. Hannan, 456 A.2d 807, 814-15 (D.C. 1983)). Whether the trial
court was correct to grant summary judgment in this case reduces to whether it was
correct to conclude, as a matter of law, that Premium Title had no duty to alert
Capital River of incipient loans that the MOU authorized Ibiezugbe and Falkner to
take out on the LLC’s behalf.
Motions for summary judgment are typically filed after discovery has been
conducted, but they may be filed “at any time” beforehand. Super. Ct. Civ. R. 56.
Here, the trial court ruled pre-discovery because it concluded that Capital River’s
claims failed as a matter of law, even if they were factually substantiated. The trial
court reasoned that “there was no ‘fraud’ perpetrated against Capital River,” and that
“Premium Title could not have violated the applicable standard of care,” because the 15
loans did not violate the terms of the MOU. On appeal, Premium Title defends that
reasoning, stating that “[n]o amount of expert testimony or discovery could rescue
[Capital River’s] deficient claims.” That leaves us to assess the legal basis for the
trial court’s grant of summary judgment, rather than assessing any evidentiary
support for Capital River’s allegations (which is typically at issue when reviewing
grants of summary judgment).
With that background the trial court’s ruling was effectively no different from
a Rule 12(b)(6) dismissal, and we assess whether it was correct to rule—assuming
that Capital River could substantiate all of its factual allegations—that Capital
River’s claims failed as a matter of law. “[A] summary-judgment motion . . . made
on the basis of the pleadings alone . . . functionally is the same as a motion to dismiss
for failure to state a claim or for a judgment on the pleadings.” See 10A Charles A.
Wright & Arthur R. Miller, Federal Practice and Procedure § 2713 (4th ed. Apr.
2023 update) (footnotes omitted). We consider de novo whether, taking Capital
River’s allegations as true, it has “allege[d] the elements of a legally viable claim.”
Chamberlain v. Am. Honda Finance Corp., 931 A.2d 1018, 1022-23 (D.C. 2007).
Escrow agents owe a fiduciary duty of care to both buyer and seller in a real
estate transaction. Wagman v. Lee, 457 A.2d 401, 405 (D.C. 1983). This includes 16
“a duty of good faith and candor in affairs connected with the undertaking, including
the duty to disclose to the principal ‘all matters coming to [the agent’s] notice or
knowledge concerning the subject [] of the agency, which it is material for the
principal to know for his protection or guidance.’” Aronoff v. Lenkin Co., 618 A.2d
669, 687 (D.C. 1992). Thus, in Aronoff, we said that an escrow agent breached his
duty of care by failing to disclose to the buyer that the title was not in insurable
condition (something he knew because he was also the purchaser’s title insurer). Id.
We cited the Restatement (Second) of Agency § 381, which states that “an agent is
subject to a duty to use reasonable efforts to give his principal information which is
relevant to affairs entrusted to him and which, as the agent has notice, the principal
would desire to have.” See id. The first comment to this section elaborates:
An agent may have a duty to act upon, or to communicate to his principal or to another agent, information which he has received, although not specifically instructed to do so. The duty exists if he has notice of facts which, in view of his relations with the principal, he should know may affect the desires of his principal as to his own conduct or the conduct of the principal or of another agent.
Restatement (Second) of Agency § 381, cmt. a.
In its complaint, Capital River alleged that Premium Title knew the operating
agreement submitted for the loan transactions was forged. The complaint further 17
alleges the following: Premium Title was Capital River’s escrow agent for both its
initial purchase of the properties and for its entry into the deeds of trust one and a
half and two years later. Premium Title received a true copy of the operating
agreement when Capital River initially purchased the properties with the money Liu
had invested, and Premium Title was aware that Liu alone had funded the purchase.
When Premium Title received the forged operating agreements less than two years
later, it “would have, of course, run a check in its system on any prior dealings with
Capital River, and its system would have reflected the 2017 purchase of the Property
as well as the documents associated with that deal (including the real Operating
Agreement).” Indeed, the same person, Lola Shannon, served as the closing agent
for the initial purchase and both loan transactions. Thus, Premium Title “should
have known (and did know) that fraud was taking place,” and was negligent in not
informing Capital River of this fact.
Taking all this as true, Capital River has alleged sufficient facts to make out a
claim of negligence. Information that two LLC members are forging LLC
documents is information that is “relevant to affairs entrusted to [Premium Title],”
especially where Capital River alleged that Premium Title’s duties as escrow agent
included obtaining a copy of the operating agreement and an affidavit identifying 18
the full membership of Capital River. See Restatement (Second) of Agency § 381.
And it is certainly information that Capital River “would desire to have.” See id.
Premium Title makes two arguments in response. First, echoing the trial
court, it argues that it cannot have been negligent because Ibiezugbe and Falkner had
the actual authority to enter into the transaction. This is a non sequitur. The relevant
inquiry is whether Capital River would want to know that its agents were forging
documents. A reasonable factfinder could certainly conclude that it would,
regardless of whether those agents had the authority to act on its behalf or not.
Second, Premium Title argues that there is no reason to believe it knew the
operating agreement was forged because the deeds of trust were entered into years
after Capital River’s initial purchase of the properties (which is when Premium Title
received a true copy of the operating agreement). This might be true, but it is a
factual dispute inappropriate for resolution prior to discovery, and it was not the
basis for the trial court’s pre-discovery ruling. Discovery could uncover whether
Premium Title “ha[d] notice of facts which, in view of [its] relations with [Capital
River], [it] should [have] know[n] may affect [Capital River’s] desires.”
Restatement (Second) of Agency § 381 cmt. a. Capital River also alleged that
“Premium Title was required to obtain and submit an affidavit of members 19
accurately identifying the current membership of the LLC” and that “it is basic
business practice for title companies, when dealing with an LLC party, to request a
unanimous consent of members to take any actions.” These are classic factual
disputes for the factfinder to resolve, perhaps with the aid of expert testimony
elucidating what steps a reasonable escrow agent would take in the present
circumstances. Cf. Beard v. Goodyear Tire & Rubber Co., 587 A.2d 195, 200 (D.C.
1991) (discussing the “requirement that a plaintiff introduce expert testimony to
prove the standard of care where the subject matter is too technical for the lay juror”).
In sum, the trial court erred in granting summary judgment to Premium Title at this
stage.
III.
For the foregoing reasons, we affirm the order granting Abod, Roupas, and
BCJCL’s motion to dismiss and we reverse in part the order granting Premium
Title’s motion for summary judgment as to the negligence claim. We remand for
further proceedings consistent with this opinion.
So ordered.