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Watergate West, Inc. v. Barclays Bank

September 14, 2000

WATERGATE WEST, INC., APPELLANT,
V.
BARCLAYS BANK, S.A., APPELLEE



Before Steadman, Glickman, and Washington, Associate Judges.

The opinion of the court was delivered by: Steadman, Associate Judge

Appeal from the Superior Court of the District of Columbia (Hon. Richard A. Levie, Trial Judge)

Argued June 29, 2000

This is the third and hopefully final appeal adjunct to litigation arising out of a long-ago defaulted European loan. It pits Watergate West, Inc., a cooperative corporation ("Watergate"), against Barclays Bank, S.A. ("Barclays"). Barclays, which made the loan, is a judgment creditor of a married couple, Basil and Laura Tsakos ("Tsakos"), who guaranteed the loan. Barclays is seeking to satisfy the judgment out of the proceeds of the resale of a leasehold interest in a cooperative apartment formerly held by the Tsakos in the Watergate complex. Watergate is seeking to recover unpaid assessments and other charges due on the apartment prior to the resale.

We hold that Watergate, in a position similar to a mortgagee in possession, had a duty to rent the apartment prior to its eventual resale, but with the right to first apply such rental income to amounts owed to it. We thus reverse the trial court's award of damages to Barclays, which did not recognize that right of Watergate. We further hold that, to the extent that such actual or imputed rental income would be insufficient to satisfy the applicable amounts owed to Watergate, the trial court correctly ruled that principles of res judicata, stemming from the condemnation action brought by Barclays in which Watergate had intervened, barred Watergate from now asserting an interest in the proceeds of the resale superior to that of Barclays.

I. Facts

The facts of this case are complex, and involve several underlying lawsuits, which have come before this court on prior occasions. See Barclays Bank, S.A. v. Tsakos, 543 A.2d 802 (D.C. 1988); First Savings Bank of Virginia v. Barclays Bank, S.A., 618 A.2d 134, 135 (D.C. 1992). While much of the factual background is given in those prior opinions, we will set forth here a sufficient recitation to illuminate the present dispute. Watergate, the appellant, is a cooperative corporation formed under the laws of Delaware that owns a cooperative apartment building in the District of Columbia. All the units in the Watergate are owned by the cooperative corporation. Each resident is the lessee under a proprietary lease which vests in the owner the right to live in a particular apartment in the Watergate for a renewable ninety-nine year term. All owners of proprietary leases for the cooperative apartments become members of the cooperative. Under both the proprietary lease and the by-laws of the corporation, such members are required to pay a pro rata share of monthly cooperative fees and assessments for "capital items, principal and interest payments on mortgages, deeds of trust, or any other indebtedness, ground lease rental, and for operating items, such as taxes, insurance, repairs, betterments and operating expenses, and other incidental or related expenses."

The Tsakos are the former owners of the proprietary lease for Unit 602 in the Watergate complex. The appellee, Barclays, is a French bank *fn1 that provided a loan of 2.5 million Swiss francs to the Tsakos' son, secured by separate guarantees executed by both Mr. and Mrs. Tsakos. When the son defaulted on the loan, Barclays brought actions against the Tsakos in the courts of France, Switzerland, and the District of Columbia. On May 19, 1986, out of concern that the Tsakos were attempting to move their assets beyond the reach of the foreign courts, Barclays obtained a prejudgment attachment on the Tsakos' interest in Unit 602 of the Watergate apartment--the Tsakos' only known asset in the United States.

The Tsakos moved to dismiss the complaint and quash the attachment. At that time, none of the interested parties-including Watergate-disputed that the Tsakos' cooperative interest had been attached. The only dispute focused on whether the District of Columbia had personal jurisdiction, and if so whether the forum was convenient for the action.

On October 9, 1986 the trial court dismissed Barclays' complaint. Barclays appealed, and on November 13, 1986, this court granted Barclays' motion for an emergency stay and enjoined the sale or other disposition of the Tsakos' apartment pending appeal. However, the Tsakos had failed to make monthly cooperative fee and assessment payments to Watergate since February, 1986, in violation of the proprietary lease. Under such circumstances, the lease (and the by-laws) provided a specific remedy:

In the event of default by the Member in the payment of any . . . charges or assessments required to be paid under this agreement . . . the Cooperative, by direction of its Board of Directors, may terminate this agreement on twenty days' written notice to the Member. Unless such default is cured within the twenty-day notice period aforesaid, the Cooperative may immediately or at any time thereafter declare this agreement terminated, and offer for sale a substitute agreement for the apartment or unit at a price determined by the Board of Directors to be its fair market value. Upon sale of the substitute agreement, the Cooperative shall pay to the Member the amount received less any unpaid assessments or charges accrued to the date of disposition, the expenses of sale (which shall include a reasonable brokerage commission) and the estimated cost for placing the apartment covered by the agreement in suitable condition for a new occupant.

Pursuant to this provision, on November 24, 1986, the Board of Directors of Watergate voted to terminate the Tsakos' interest in Unit 602. On March 30, 1987, Watergate informed the Tsakos' lawyer of the termination.*fn2

On September 1, 1987, Watergate filed a motion to intervene on Barclays' appeal. In its motion, Watergate asserted that it had terminated the Tsakos' lease, and therefore, the Tsakos no longer had an interest in the cooperative although they continued to retain an interest in the proceeds of Unit 602's sale. Watergate also represented in its motion that it possessed the interest in Unit 602 and that the court order granting the stay prohibited Watergate from selling the Tsakos' interest.

On October 8, 1987, this court granted Watergate's motion to intervene. Three days later, Watergate entered into a contract with unrelated third parties to rent Unit 602 for an amount equivalent to the monthly cooperative fees and assessments associated with that unit. *fn3 Shortly thereafter, Watergate moved to strike its motion to intervene on the grounds that its "sole purpose in intervening was to request permission of the Court to sell the proprietary interest in apartment 602 of Watergate West as the monthly assessment for the premises was accruing although the apartment was unoccupied. The sale of the apartment, the procedure under these circumstances, had been enjoined by this Court. During the interim, however, arrangements were made to rent the apartment until the Court's stay was lifted, and ...


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