Capital River Enterprise, LLC v. Abod
22-CV-0548
| D.C. | Sep 21, 2023Background
- Capital River Enterprises, LLC formed by Liu (50%), Ibiezugbe (25%), and Falkner (25%); MOU incorporated into the operating agreement and required a two-thirds member vote for "major decisions."
- Liu provided most financing (~$1.6M); Premium Title & Escrow acted as escrow/title agent for the 2017 purchase of Nicholson Street property.
- In 2019, Ibiezugbe and Falkner executed two deeds of trust encumbering the property for loans ($499,000 and $375,000) with Premium Title as escrow; Capital River alleges the operating agreement used then was forged to omit Liu and that loan proceeds were diverted to the two members personally.
- Capital River and Liu sued the lenders (quiet title and related tort claims) and Premium Title (negligence/fiduciary duty to disclose the alleged forgery). Trial court dismissed claims against the lenders, finding the MOU gave Ibiezugbe and Falkner actual authority, and granted Premium Title summary judgment on negligence.
- On appeal the court affirmed dismissal of the lenders (actual authority/contract interpretation) but reversed the pre-discovery summary judgment as to Premium Title’s negligence claim and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ibiezugbe and Falkner had actual authority to encumber LLC property | MOU/unwritten understandings did not authorize loans; members lacked authority to encumber property | MOU’s two-thirds rule and plain terms unambiguously authorized "major decisions" (including loans) by two members | Court: MOU unambiguous; two members formed a two-thirds majority and had actual authority — affirmed |
| Whether deeds are void ab initio because executed using an allegedly forged operating agreement | A deed procured by means of a forged instrument relating to the property (here, the operating agreement) is void ab initio; Smith v. Wells Fargo extends to operating agreements | Rule of voidness applies only to forged deeds and forged powers of attorney; extending it to operating agreements would unsettle bona fide purchaser protections | Court: Declined to extend Smith beyond powers of attorney; forgery of an operating agreement does not automatically void deeds — affirmed dismissal |
| Whether Premium Title owed and breached a duty to disclose knowledge/suspicions of the forgery (negligence) | Premium Title knew or should have known the submitted operating agreement was forged and had a duty to inform Capital River; discovery could prove notice and standard of care breaches | Because Ibiezugbe and Falkner had actual authority, no fraud occurred and Premium Title had no duty to warn; summary judgment proper pre-discovery | Court: Reversed summary judgment; pleaded facts (agent’s prior dealings, same closer, alleged notice) suffice to raise a triable issue on fiduciary duty and negligence — remanded for discovery |
Key Cases Cited
- Smith v. Wells Fargo Bank, 991 A.2d 20 (D.C. 2010) (held forged power of attorney can render deed void)
- Unity Banking & Saving Co. v. Bettman, 217 U.S. 127 (1910) (courts limited voidness to forgeries on deed or powers of attorney)
- 2301 M St. Coop. Ass'n v. Chromium LLC, 209 A.3d 82 (D.C. 2019) (objective contract interpretation; extrinsic evidence excluded for unambiguous terms)
- Sahrapour v. LesRon, LLC, 119 A.3d 704 (D.C. 2015) (contract ambiguity standard)
- Aronoff v. Lenkin Co., 618 A.2d 669 (D.C. 1992) (escrow/title agent’s duty to disclose material information; Restatement §381 cited)
- Wagman v. Lee, 457 A.2d 401 (D.C. 1983) (escrow agents owe fiduciary duty of care)
- Scotch Bonnett Realty Corp. v. Matthews, 11 A.3d 801 (Md. 2011) (cautions against broadening deed-voidness rule beyond powers of attorney)