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Beard v. Edmondson and Gallagher

January 24, 2002

CHARLES J. BEARD, ET AL., APPELLANTS,
v.
EDMONDSON AND GALLAGHER, APPELLEE.



Appeal from the Superior Court of the District of Columbia CA-15426-92 (Hon. Richard A. Levie, Motions Judge Hon. Henry H. Kennedy, Jr., Trial Judge)

Before Ruiz, Reid, and Glickman, Associate Judges.

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

Argued February 10, 2000

Opinion for the court by Associate Judge Glickman. Concurring opinion by Associate Judge Ruiz.

Edmondson and Gallagher ("E&G"), a real estate development firm, contracted to purchase Alban Towers, an apartment building in Northwest Washington, D.C., from Georgetown University. The deal fell through because E&G no longer could secure adequate financing following a prolonged quiet title action against the Alban Towers Tenants Association ("ATTA"), which had attempted without success to exercise the tenants' right to purchase the building themselves. Three years later, E&G sued ATTA and ATTA's lawyers, Richard A. Gross and his law firm, Foley, Hoag & Eliot LLP ("Foley Hoag"), for interfering with its contract to purchase Alban Towers by clouding title to the property and litigating the quiet title action dishonestly and in bad faith. The case eventually went to trial, and the jury returned a verdict in favor of E&G against Gross and Foley Hoag.

On appeal to this court, Gross and Foley Hoag *fn1 argue for reversal on a number of grounds, one of which is that E&G's tortious interference claim was barred by the applicable three-year statute of limitations. We agree with that contention. E&G waited too long to pursue its claim against ATTA's lawyers, and as a consequence of its delay, we must reverse the judgment in its favor.

I.

On July 1, 1986, E&G entered into a contract with Georgetown to purchase Alban Towers for $16 million. Pursuant to an escalator clause in the contract, the purchase price increased by $35,000 per month for each month that the closing was delayed.

The contract between E&G and Georgetown was subject to the tenants' statutory right of first refusal under the District of Columbia Rental Housing Conversion and Sale Act, D.C. Code §§ 45-1601 to -1663 (1996). That Act provided that before Georgetown could sell Alban Towers to a third party, it had to afford the tenants "an opportunity to purchase the accommodation at a price and terms which represent a bona fide offer of sale." D.C. Code § 42-3404.02 (a) (2001), formerly § 45-1631 (a) (1996). Hoping to take advantage of that opportunity, the tenants of Alban Towers formed ATTA, retained Gross and Foley Hoag, and negotiated their own proposed purchase contract with Georgetown. As a condition of finalizing that contract, ATTA was required to deliver to Georgetown by December 30, 1986 an earnest money deposit of $650,000 in the form of either an irrevocable letter of credit or cash. See D.C. Code § 42-3404.05 (b) (2001), formerly § 45-1634 (b) (1996) (providing that owner may require tenant to pay a deposit of up to 5% of the sales price in order to make a contract). When the deadline arrived, however, ATTA delivered to Georgetown only a check that was not backed by sufficient funds and that carried a notation that it was "to be held for deposit until . . . replaced with a letter of credit." Georgetown refused to accept this unfunded check and informed ATTA that their negotiations were at an end and that it would sell Alban Towers to E&G.

Despite the inadequacy of ATTA's deposit check and Georgetown's termination of negotiations, on January 5, 1987, Gross filed on behalf of ATTA a Notice of Exercise of Rights of First Refusal with the District of Columbia Recorder of Deeds. The resulting cloud on title prevented Georgetown and E&G from closing on their contract. Georgetown promptly commenced an action against ATTA in the District of Columbia Superior Court for a declaratory judgment that it could proceed with the sale of Alban Towers to E&G. Although the Recorder of Deeds expunged ATTA's notice on February 6, 1987, ATTA - represented in the action by Gross and Foley Hoag - opposed Georgetown's complaint and counterclaimed, seeking not only a declaration that the tenants still had the right to purchase Alban Towers but also damages. Thereafter, E&G intervened, joining in Georgetown's request for declaratory relief and, in addition, asserting a claim against ATTA for tortious interference with its contract and business relations.

On October 6, 1988, Judge Henry Greene granted summary judgment to Georgetown and partial summary judgment to E&G, declaring that they were "free to close on their third party contract for the purchase and sale of Alban Towers." *fn2 Judge Greene ruled, inter alia, that ATTA had failed to exercise its statutory rights or enter into a binding contract with Georgetown and that its rights had expired. In reaching that conclusion, Judge Greene stated that "while counsel for [ATTA] argued with force and imagination . . . that the check tendered to Georgetown met the requirements of a `cash deposit,' this court is satisfied as a matter of law that [ATTA's] assertion borders on the frivolous." On appeal, *fn3 this court affirmed in an unpublished opinion issued December 1, 1989, in which we specifically "agree[d] with the trial court that it borders on the frivolous to assert that [ATTA's deposit] check met the requirement of a `cash' deposit."

After obtaining this court's decision, Georgetown formally notified E&G on December 14, 1989, that the closing on their contract of sale would take place on March 1, 1990 (pursuant to a contract provision specifying that the closing date would be ninety days after the expiration of the tenants' rights to buy the property). By this time, however, E&G found itself no longer able to obtain the financing it needed, and the deal collapsed. E&G attributed its inability to obtain sufficient financing to the fact that while the quiet title action was pending for three years, from early 1987 to the end of 1989, its costs had "foreseeably increased" in two major respects. First, the cost of purchasing Alban Towers had risen, by operation of the $35,000/month escalator clause in the contract of sale, from $16,000,000 to $17,365,000. Second, construction costs also had risen. When the cost increases from 1987 to 1989 were factored in, E&G determined that it needed a loan of $28,000,000 to purchase and develop Alban Towers. This was $2,000,000 more than E&G's bank was prepared to lend, based on its updated appraisal of the property.

On December 1, 1992 - three years to the day after this court's decision terminating the quiet title action in favor of E&G and Georgetown - E&G instituted a new lawsuit in Superior Court against ATTA and its lawyers, Gross and Foley Hoag, for tortious interference with contractual relations. *fn4 E&G charged that from 1987 through the end of 1989, the defendants thwarted its purchase of Alban Towers by clouding title to the property and resisting Georgetown's efforts to remove the cloud in the quiet title litigation. E&G charged that Gross in particular maintained and prolonged the lis pendens in bad faith -knowing that ATTA's defense was baseless - and by improper means, including perjury, bribery and falsification of evidence in the quiet title action. *fn5

Prior to trial, ATTA, Gross and Foley Hoag moved to dismiss the complaint or, in the alternative, for summary judgment. They argued that the tortious interference claim was barred by the statute of limitations because it was based on events that took place more than three years before the complaint was filed in December 1992. Superior Court Judge Richard Levie denied the motion, ruling that the defendants' litigation of the quiet title action ...


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