BSA 77 P STREET LLC, et al., Appellants/Cross-Appellees, v. Antwuan HAWKINS, et al., Appellees/Cross-Appellants, and Sabrina Lymore, Appellee.
Nos. 07-CV-1080, 07-CV-1101, 07-CV-1253.
District of Columbia Court of Appeals.
Decided Nov. 19, 2009.
983 A.2d 988
PRYOR, Senior Judge
Argued Sept. 3, 2009.
So ordered.
William DeVinney, with whom Sean P. Beaty and Joseph M. Saka, Washington, DC, were on the brief, for appellees/cross-appellants.
Andrew J. Sloniewsky, Washington, DC, was on the brief, for appellee Sabrina Lymore.
Before REID and THOMPSON, Associate Judges, and PRYOR, Senior Judge.
PRYOR, Senior Judge:
This appeal results from a failed real estate transaction involving the attempted sale of low-income housing units owned by appellants/cross-appellees BSA 77 P Street LLC, et al. (BSA), a partnership entity. BSA attempted to enter into contracts with tenants Michele and Antwuan Hawkins, Lillian Johnson, Dorothy Paul, and Sabrina Lymore, to sell them their apartments in order to facilitate a sale of the remaining apartments BSA owned to a prospective buyer. We consider three issues on appeal: (1) whether the trial court erred in construing language in BSA‘s contract with its tenants as a condition instead of a promise, (2) whether the court erred in issuing a declaratory judgment that BSA‘s subsequent notice to its tenants to vacate their units violated D.C. housing law, and (3) whether the court erred in denying BSA‘s motion for costs and attorneys fees arising out of a fee-shifting provision in their contracts with the tenants. On the first two issues, we affirm the trial court‘s rulings. On the third issue, we remand for further consideration.
FACTS
BSA owned thirty-seven rental units in thirty separate buildings in the District of Columbia that were collectively known as the Bates Street Properties. In 1982, after renovating the units, BSA entered into a twenty-year Housing Assistance Payment (HAP) agreement, covering all of the units, with the United States Department of Housing and Urban Development (HUD) whereby HUD subsidized housing for low-income tenants. To finance the purchase and renovation of the units, BSA borrowed $1.8 million, utilizing a Federal Housing Authority (FHA) insured blanket mortgage, from a private lender. Riggs Bank was the holder of the mortgage,
In 2001, as the HAP agreement was nearing its end, BSA sought a way to terminate ownership and management of the Bates Street Properties and exit the rental market. Following negotiations with Eagle Point Enterprises, LLC (Eagle Point), BSA signed a contract with Eagle Point on January 7, 2002, whereby Eagle Point would purchase the units and continue to operate them pursuant to the HAP agreement, which would be renewed in Eagle Point‘s name. The contract acknowledged that under the District of Columbia‘s Tenant Opportunity to Purchase Act,
Tenants Michele Hawkins, Antwuan Hawkins, Lillian Johnson, and Dorothy Paul responded to the notices and informed BSA that they intended to purchase their apartments. Several months later, on October 31, 2002, BSA and the tenants signed contracts for the purchase of their respective units with BSA. Appellee Sabrina Lymore signed a contract for the purchase of her unit with BSA on September 15, 2003.
The standard-form contracts presented by BSA to the tenants were substantially identical, and included an addendum containing the following language:
Seller agrees to secure a partial mortgage release from the current mortgagee of the Property and, if necessary, the U.S. Department of Housing and Urban Development, in order to meet the requirements of Purchaser‘s lender, if any. Purchaser and Seller agree that the Sales Contract shall be voidable at the option of either Purchaser or Seller if, on the Settlement Date, the mortgagee has not agreed to release the mortgage which encumbers the Property.
The contracts also each contained the following provision regarding attorneys’ fees: “In any action or proceeding involving a dispute between the Purchaser and the Seller arising out of this Contract, the prevailing party will be entitled to receive from the other party reasonable attorney‘s fees to be determined by the court or arbitrator(s).”
The Hawkins, Johnson and Paul contracts specified a settlement date of December 16, 2002, while the Lymore contract scheduled the settlement date for November 11, 2003. Ultimately, however, BSA did not close with any of the tenants on the purchase of their units. Prior to the settlement dates and for several months thereafter, BSA negotiated with Eagle Point, HUD and Prudential to consummate the sale to Eagle Point and to obtain the release BSA deemed necessary to sell the properties to the tenants. The parties failed to close because, according to BSA, it did not receive the necessary release of the mortgage. BSA continued for some time thereafter its efforts to obtain the release and to conclude the sale to Eagle Point. The Eagle Point sale was not consummated because HUD refused to give Eagle Point a HAP agreement along the desired terms.
In September of 2003, Eagle Point terminated its contract with BSA for the purchase of units in the Bates Street Properties. BSA thereafter terminated its contracts with appellees Michele and Antwuan Hawkins, Johnson and Paul, returned their deposits, and in a September 30, 2003, letter explained that it had terminated the contracts because the required mortgage release had not been ap-
The Eagle Point sale having been unsuccessful, BSA pursued an alternate plan to transfer the units: to terminate the HAP agreement with HUD and sell the units, after renovation, for home ownership. By letters dated September 30 and October 8, 2003, BSA informed its tenants that it was terminating its HAP agreement and that they had one year under District of Columbia and federal law to obtain housing elsewhere. After BSA terminated its HAP contract, it refinanced its loan with a local Maryland bank, allowing BSA to pay off in full its earlier loan from Riggs Bank. When BSA prepared to sell the units to an alternate buyer, it again offered the tenants the opportunity to purchase their units. This time, several tenants other than appellees contracted to buy their units from BSA.
PROCEDURAL BACKGROUND
On September 10, 2004, tenants Michele and Antwuan Hawkins, Lillian Johnson, and Dorothy Paul filed a civil complaint in the Superior Court of the District of Columbia, claiming that BSA breached its contract with them when it terminated their contracts, and asked the court to grant specific performance.1 On January 5, 2005, BSA issued notices to the tenants to vacate their units under
After several days of trial on these claims, the court instructed the jury that it was to consider whether BSA‘s contracts with the tenants contained a condition and, if so, whether the condition occurred. The court further instructed the jury to determine (1) whether appellee Lymore “proved by a preponderance of the evidence that she accepted BSA‘s contract offer before the offer ended or BSA withdrew the offer,” and (2) if the contract contained a condition that did not occur, whether the appellees proved by a preponderance of the evidence that BSA prevented or substantially prevented the condition—the failure to obtain the partial mortgage release—from occurring.
The jury found that Ms. Lymore did not accept BSA‘s offer before BSA withdrew it. The jury also found that the remaining tenants had not shown, by a preponderance of the evidence, that BSA prevented or substantially contributed to the failure to obtain the mortgage release. The trial court thereafter entered judgment for
On September 7, 2007, BSA moved for costs and attorneys’ fees from the tenants. BSA claimed it was the prevailing party in the litigation and was thus entitled to costs under
DISCUSSION
A.
Although the tenants in this case strenuously contend that BSA made an express promise to obtain a partial mortgage release for the sale of the properties and were obliged, in good faith, to effectuate that result, the trial judge concluded that obtaining a partial mortgage release was instead a condition upon which BSA‘s obligations under the contract depended. The court instructed the jury consistent with this approach. We find no error in this instruction.
Resolution of this issue involves general principles of contract interpretation. See Generally RESTATEMENT (SECOND) OF CONTRACTS § 202 (1981). The proper interpretation of a contract term is a question of law, which this court reviews de novo. See Fort Lincoln Civic Ass‘n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1064 (D.C.2008) (interpretation of the contract itself is a question of law for de novo review); see also Psaromatis v. English Holdings I, L.L.C., 944 A.2d 472, 481 (D.C.2008) (when language of a contract is unambiguous, its interpretation is a question of law requiring de novo review). In interpreting a contract‘s terms, a court must determine “what a reasonable person in the position of the parties would have thought the disputed language meant.” 1010 Potomac Assocs. v. Grocery Mfrs., 485 A.2d 199, 205 (D.C.1984). Additionally, the contract “must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms.” Id.
A condition is a fact, other than the passage of time, which is not certain to occur and which, unless excused, must occur before performance under the contract becomes due. See Bergman v. Parker, 216 A.2d 581, 583 (D.C.1966); RESTATEMENT (SECOND) OF CONTRACTS § 224 (1981). A promise, by contrast, is an express or implied declaration that raises a duty to perform and subjects the promisor to liability
While the parties’ choice of contract language does not lend itself easily to a formulaic approach, no particular form of words is necessary to create an express condition. Washington Properties, Inc. v. Chin, Inc., 760 A.2d 546, 549 (D.C.2000). Additionally, words and phrases such as “if” or “provided that” qualifying a promise commonly indicate that the promise is expressly conditional on a specified event. Id. Here, the agreement by BSA to secure a partial mortgage release from the mortgagee was accompanied by the statement that “the Sales Contract shall be voidable at the option of either Purchaser or Seller if, on the Settlement Date, the mortgagee has not agreed to release the mortgage which encumbers the Property” (emphasis added). This is just the type of language the tenants argue is required for a statement of condition. It would appear that either party can avoid performance under the contract if a particular event, the mortgage release, does not occur.
This interpretation is further compelled by the fact that releasing the mortgage was an event outside the parties’ control. In Bergman, a property owner who had contracted with an architectural firm for the construction of a building agreed to obtain the necessary permits to allow work to commence. Because obtaining the permits was entirely within the owner‘s control and the owner simply “decid[ed] to abandon the project” due to logistical difficulties, we found that the agreement to obtain the permits was a promise. 216 A.2d at 582. Here, obtaining the mortgage release was expressly contingent on Prudential‘s “agree[ment]” to release it, an assent that BSA could not independently obtain. BSA had no decision-making authority over Prudential or HUD. No matter how ardently BSA tried to effectuate the mortgage release, if these independent bodies would not allow it, the mortgage release would not be effectuated.
Notably, the record does not support a finding that BSA acted in bad faith. The jury found that BSA did not prevent or substantially contribute to the failure to obtain the mortgage release. Put another way, the jury found that the failure of the condition was not the result of any lapse on the part of BSA, but rather the result of Prudential‘s and HUD‘s refusals to release the mortgage. Based on the language of the contract at issue here, we cannot say the trial court erred in instructing the jury as to BSA‘s obligations with respect to the partial mortgage release.4
We next turn to BSA‘s contention that the trial court erred when it found BSA‘s notice to vacate invalid pursuant to
(i)(1) A housing provider may recover possession of a rental unit for the immediate purpose of discontinuing the housing use and occupancy of the rental unit so long as:
(A) The housing provider serves on the tenant a 180-day notice to vacate in advance of his or her action to recover possession of the rental unit. The notice to vacate shall comply with and notify the tenant of the tenant‘s right to relocation assistance under the provisions of subchapter VII of this chapter;
(B) The housing provider shall not cause the housing accommodation, of which the unit is a part, to be substantially rehabilitated for a continuous 12-month period beginning from the date that the use is discontinued under this section;
(C) The housing provider shall not resume any housing or commercial use of the unit for a continuous 12-month period beginning from the date that the use is discontinued under this section;
(D) The housing provider shall not resume any housing use of the unit other than rental housing.
In interpreting a statute, we must look first to the language itself. James Parreco & Son v. District of Columbia Rental Hous. Comm‘n, 567 A.2d 43, 45 (D.C.1989). If that language is unambiguous, we must give effect to its plain meaning. Id. Here, the trial court found “the plain meaning to be that BSA shall not resume any housing use of [the tenants‘] units other than for rental housing. As a result, the sale of [the tenants‘] unit[s] by BSA would not comply with this provision of the statute.” We find no error in this reasoning.
BSA argues that it, personally, would not be engaging in non-rental housing use of the property, but merely the subsequent owner-occupier would be. BSA argues that it would not be a “housing provider” within the definition of the statute because it would be selling the property, and that the new owner-occupier would not be a “housing provider” because it would not be receiving or entitled to receive rents. Thus, BSA seeks to avoid the plain meaning of the statute by using a third party to do what it was not allowed to do itself: use the property for non-rental housing. We have held in other settings that this cannot succeed. See, e.g., Myco, Inc. v. Super Concrete Co., Inc., 565 A.2d 293, 301 (D.C.1989) (preventing an independent contractor from receiving indemnity from an employer, where allowing indemnity would contravene statute protecting employer against non-workers’ compensation liability by exposing the employer to liability to a third party sued by the employee).
BSA‘s proffered intention also runs contrary to the purpose of the statute. Section 3501.02, entitled “purposes,” states that the Council sought, inter alia, “... (4) To protect the existing supply of rental housing from conversion to other uses; and (5) To prevent the erosion of moderately priced rental housing....”
BSA‘s argument that the trial court‘s decision renders landlords incapable of escaping the rental housing business is without merit. As the trial court stated, the statute provides a basis for the relief sought. Section 42-3505.01 as a whole provides several ways in which a landlord may exit the rental housing market, and “it is the defendant [BSA] who has chosen to precede [sic] under this section [subsection (i)] for reasons only the defendant knows.” A careful reading of the statute shows it to be not nearly as burdensome as BSA suggests. If in the future the legislature believes the statute to be unduly restrictive on the business opportunities of landlords, the legislature can change the law. Considering the present statute and its stated purpose, we can find no error in the trial court‘s ruling.
C.
BSA sought legal fees and costs from all of the plaintiffs/appellees, including Sabrina Lymore, on the basis of the fee-shifting provision in their contracts with the tenants. That provision stated: “In any action or proceeding involving a dispute between the Purchaser and the Seller arising out of this Contract, the prevailing party will be entitled to receive from the other party reasonable attorney‘s fees to be determined by the court or arbitrator(s).” The trial judge denied BSA‘s motion for an award of costs and attorneys’ fees, without detailed reasons underlying his use of discretion. His order states, “The Court finds defendants [BSA] are not the prevailing party pursuant to
First, as regards appellee Sabrina Lymore, the jury found, and the judge found evidence to support, that she had no contract with BSA because her acceptance was not timely received. Given that she was not a party to any contract with BSA, we find no error in the court‘s denial of attorneys fees from Ms. Lymore based on any contractual provision. We affirm the court‘s ruling as it pertains to appellee Lymore.
We observe that the “American Rule” of litigation contemplates that each party bear the costs and fees associated with bringing a case to court. See, e.g., Peart v. District of Columbia Hous. Auth., 972 A.2d 810, 818 (D.C.2009). The American Rule places a priority on the ideal of public access to the courts without fear of being assessed monetary costs for unsuccessful advocacy. However, the “American Rule is subject to exception premised upon statutory authority, contractual agreement, or certain narrowly defined common law exceptions.” 6921 Georgia Avenue, N.W., Ltd. Partnership v. Universal Cmty. Dev., LLC, 954 A.2d 967, 971 (D.C.2008) (referencing Synanon Found., Inc. v. Bernstein, 517 A.2d 28, 35 (D.C.1986)). It is into one of these exceptions that BSA argues its claim fits, based on the fee-shifting provision in its contract. In the present circumstances, we direct that the trial judge consider these concepts and in his discretion, articulate a basis for the conclusions reached.
Thus we affirm in part, and remand for further consideration regarding attorneys fees.
So ordered.
THOMPSON, Associate Judge, concurring:
I write separately to address the issue discussed in section B of the court‘s opinion, relating to whether the trial court erred in finding that the notice to vacate that BSA gave tenants in reliance on
BSA‘s announced intent and the path that it pursued was to require tenants to vacate, leave the rental units idle for twelve months, and thereafter renovate the units and sell them for use as owner-occupied homes. That plan and course of conduct, appellees contend and the trial court found, sufficed to show that BSA did not actually plan to discontinue housing use of the rental units, but instead planned to resume a housing use other than rental housing. This court‘s opinion adopts a similar interpretation, concluding that “BSA seeks to avoid the plain meaning of
BSA argues that while the statute places “restrictions on the nature of the ‘housing use’ a ‘housing provider’ may pursue in the future,” the restrictions do not apply here because BSA itself would not be resuming any housing use of appellees’ units; rather, once BSA sells the units, it would no longer be a housing provider and would not run afoul of the restriction that “[t]he housing provider shall not resume any housing use of the unit other than rental housing.”
Ultimately, I agree with the majority that BSA did not satisfy the conditions of section 42-3505.01(i), but I am not comfortable arriving at that conclusion by looking merely at the statement of legislative purpose in section 42-3501.02 and at section 42-3505.01. Although the clear purpose of the statute as declared in section 42-3501.02 is to protect the rental housing stock, in my view that does not assist us in interpreting section 42-3505.01(i)(1)(D), the task at hand. There seems to be no dispute that section 42-3505.01(i) would have permitted BSA to give tenants the required notice to vacate, leave the units unused for 12 months, and then sell them for non-housing, commercial use.2 Since section 42-3505.01(i) permits erosion of the rental housing stock, in my view we do not arrive at a reliable answer to the question about whether the sales that BSA actually accomplished or contemplated were consistent with section 42-3505.01(i)(1)(D) by asking whether the end result is protection (instead of depletion) of the supply of rental housing.
Nor, in my view, does the “plain language” of section 42-3505.01(i) dictate that we interpret section 42-3505.01(i)(1)(D) (“The housing provider shall not resume any housing use of the unit other than rental housing“) (italics added) to mean not only that BSA itself may not resume a housing use of the units other than rental housing, but also that BSA may not sell to a third party who intends to put the property to a housing use other than rental housing. That would be the plain meaning if, for example, section 42-3505.01(i)(1)(D) said that “no housing provider” (or, “no person“) “shall resume any housing use of the unit other than rental housing.” Such broad language is used in
However, what does persuade me that BSA‘s plan failed to comply with section 42-3505.01(i) is the language in a different section of the Rental Housing Act—specifically,
No housing provider shall substantially rehabilitate, demolish, or discontinue any housing accommodation unless there has first been served upon each tenant residing in the housing accommodation a written notice of intent to rehabilitate, demolish, or discontinue the housing accommodation in accordance with § 42-3505.01(f), (g), (h), or (i), as appropriate. The notice shall advise the tenants of their right to relocation assistance under this chapter or any other District law, and the procedures for applying for the assistance. The Rental Housing Commission shall prescribe the content of the notice. No tenant may be evicted from a housing accommodation which the housing provider intends to substantially rehabilitate, demolish, or discontinue housing use, or which the housing provider intends to sell to another person who, to the housing provider‘s
knowledge, intends to substantially rehabilitate, demolish, or discontinue housing use, unless the requirements of this section have been met. Nothing contained in this section shall be construed to limit a housing provider‘s right to evict a tenant for nonpayment of rent or violation of an obligation of the tenancy, if the action to evict is in compliance with § 42-3505.01.