Court Opinion

ID: 9727135
Source: CourtListenerOpinion
Date Created: 2023-08-26 13:20:50.197578+00
Date Added: 2024-06-11T18:25:33.934417
License: Public Domain

SCHWELB, Associate Judge,
concurring in part and dissenting in part:
Although I believe that the Katyals have prevailed by a razor-thin margin with respect to several issues — whether there was clear and convincing evidence of fraud, whether damages were sufficiently established, and, especially, whether punitive damages are warranted, see, e.g., Feltman v. Sarbov, 366 A.2d 137, 141 (D.C.1976) — I am prepared to join Parts I through VII of the majority opinion. I must, however, respectfully dissent from the holding that Mr. Railan has somehow forfeited his right to a deficiency judgment.1
“[Ujnlike rescission, a remedy founded upon equitable principles, the remedy in tort for fraud is based upon the assumption that the fraudulent transaction is to stand.” Millard v. Lorain Inv. Corp., 184 A.2d 630, 633 (D.C.1962); see also United Sec. Corp. v. Franklin, 180 A.2d 505, 510 (D.C.1962). Here, the Katyals did not seek rescission of the promissory note or of any contractual obligation associated with it. Under their theory of the case, their agreements with the Railans, and especially their obligation under the promissory note, stood, but the Railans were liable to the Katyals in tort for deceiving and defrauding them. Yet the disposition of the case by the majority allows the Katyals to have their cake and eat it too, at least vis-a-vis Mr. Railan. The court holds not only that the Katyals are entitled to an award for fraud — a theory under which the underlying contractual obligation to the noteholder remains in effect — but also that Mr. Railan is precluded from seeking a part of his remedy for the Katyals’ breach of their contract to pay the full amount of the promissory note. In effect, by denying Mr. Railan’s request for a deficiency judgment, the majority has permitted the Katyals to recover damages for fraud in an amount substantially in excess of the verdict returned by the jury.
In holding that Mr. Railan is barred from pursuing his counterclaim for a defi*1017ciency judgment while his wife apparently is not so precluded (because “there is no evidence linking Dr. Railan to her husband’s fraud,” maj. op. at 1016), my colleagues seem to be applying some kind of “unclean hands” reasoning. As I understand the majority’s theory, Mr. Railan is precluded from recovering the deficiency because he defrauded the Katyals, and this result is ordained even though the Katyals’ claim sounds in tort rather than in rescission, and even though the Katyals have been awarded substantial damages for fraud. But the unclean hands doctrine is a “maxim of equity,” while Mr. Katyal’s action to recover damages for breach of contract is a “legal claim for money” to which this equitable doctrine has no application. See, e.g., In re Estate of Barnes, 754 A.2d 284, 288 n. 6 (D.C.2000) (citations and internal quotation marks omitted). As I see the case, the court is effecting a forfeiture. Forfeitures are not favored, however, see, e.g., Ass’n of Am. R.R.s v. Connerton, 723 A.2d 858, 862 (D.C.1999), and I discern no legal basis for ordering one here. I am therefore unable to agree with the majority’s disposition of the Railans’ counterclaim, and I respectfully dissent from Part VIII of the court’s opinion.

. I agree with the majority that we should "give the Railans the benefit of the doubt,” maj. op. at 1014, with regard to the question whether they have waived their deficiency claim.