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Independence Management Co., Inc. v. Anderson & Summers

May 12, 2005


Appeal from the Superior Court of the District of Columbia. No. CA2753-02. Hon. John M. Campbell, Trial Judge.

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

Argued March 17, 2005

Before SCHWELB, RUIZ and REID, Associate Judges.

Independence Management Company, Inc. ("IMC"), appeals from an order of the trial court, entered on September 5, 2003, granting Anderson & Summers, LLC ("A&S"), specific performance of a contract for the sale of real property. IMC argues on appeal that the trial judge erred in concluding that IMC, rather than A&S, was in breach of the agreement between the parties. IMC also contends that, contrary to the trial judge's finding, A&S was not "ready, willing and able" to perform its obligations under the contract at the time contemplated in the instrument. We affirm.


On May 3, 2001, IMC and A&S entered into a contract for the sale of an apartment building located at 501 12th Street, N.E. (the "Property"). The parties agreed to a purchase price of $950,000. The written agreement entered into by the parties can fairly be described as a standard real estate contract. Three provisions of the contract are of particular importance to the resolution of the parties' dispute. Paragraph 8 provided that settlement was to occur ten days from expiration of the Financing Contingency period . . . or as soon thereafter as (a) the report on the title can be secured if promptly ordered by the Purchaser, (b) an appointment for settlement can be arranged with the Title Company, (c) a survey is procured, if one is necessary, and (d) any and all contingencies herein set forth are satisfied. . . .

(Emphasis added.) The "Financing Contingency" referred to in Paragraph 8 provided the purchaser with forty-five days to obtain financing, with an option for a fifteen-day extension. Therefore, if there were no delays (such as those contemplated in sublines (a)-(d)), Paragraph 8 provided for settlement either fifty-five or seventy days from May 3, 2001. The agreement did not otherwise specify a closing date.

Paragraph 13 provided that the contract was subject to the tenants' statutory right to purchase the Property.*fn1 This provision was no doubt included in the agreement in recognition of the rights accorded to the tenants to purchase the Property under the District of Columbia Rental Housing Conversion and Sale Act (the "Act").*fn2 Paragraph 13 did not specify, however, how the tenants' exercise of their statutory rights would affect the other provisions of the contract. Under the terms of Paragraph 13, IMC was required to "keep [A&S] apprised of all negotiations, correspondence, contracts and other developments with respect to the negotiations with the Tenants . . . under the applicable law." Finally, Paragraph 20 stated that the parties "agree that time is of the essence [to] this agreement." (Emphasis added.)

Soon after IMC and A&S entered into the contract of sale for the Property, the tenants began a protracted effort to exercise their statutory rights by forming a Tenants Association.*fn3 A representative of A&S learned of this development on May 14, 2001, while inspecting the Property on behalf of A&S.*fn4 Upon discovering that the Tenants Association had been formed, A&S contacted IMC and learned that, through the Association, the tenants were negotiating to purchase the Property. Because the tenants' intervention obviously placed A&S' own contract to purchase in doubt, A&S suspended its due diligence activities and, in particular, discontinued its efforts to obtain financing.*fn5 On May 21, 2001, A&S sent a letter to IMC communicating its intention to "keep th[e] agreement in place until the tenants' right to purchase issue is resolved." A&S further requested that it be given "60 days after the tenants' right to purchase issue has been resolved to settle on the property." A&S did not receive a response to this request.

On June 20, 2001 (forty-eight days after IMC and A&S entered into their contract), IMC entered into a separate contract with the Tenants Association for the sale of the Property. In a letter dated February 8, 2002, A&S reiterated to IMC that A&S intended to honor its own contract in the event that the proposed sale to the tenants did not come to fruition. A&S again requested that settlement between A&S and IMC occur within sixty days of the expiration of the tenants' contract.*fn6 Once again A&S received no response from IMC. On March 1, 2002, eight months after the tenants signed their agreement with IMC, the proposed sale to the tenants broke down, and the tenants terminated their contract with IMC.*fn7 IMC did not immediately notify A&S that the contract with the Tenants Association had fallen through. Rather, A&S learned of the termination of that contract from one of the tenants on March 20, 2002, some three weeks after the fact.*fn8

Upon learning that the tenants were out of the picture, A&S notified IMC that A&S had renewed its efforts to obtain financing and proposed to proceed towards settlement. In addition, A&S suggested settlement within seventy days "in accordance with the time frames contemplated in the Purchase Agreement." On March 26, 2002, IMC officially notified A&S that the tenants were no longer pursuing their statutory right to purchase the Property, but rejected A&S' proposed closing schedule. Instead, IMC demanded that settlement occur on April 5, 2002, ten days after A&S received official notification. A&S responded by rejecting IMC's proposed closing date, and offered May 10, 2002 as an alternative. IMC held firm to its demand for closing on April 5.

In the meantime, A&S proceeded to make preparations for settlement on May 10. A&S obtained loan commitment letters, and it made arrangements for surveys and for an inspection. On April 5, A&S failed to appear at IMC's closing, and IMC declared A&S to be in default. Although IMC maintained that it suffered substantial damages as a result of A&S' refusal to settle on April 5, IMC proposed merely to terminate the agreement "in the spirit of compromise." On May 10, A&S held its own closing, at which, unsurprisingly, IMC did not appear.

A&S filed suit against IMC for breach of the contract of sale. A&S asked the court to order specific performance. Following a non-jury trial, the trial judge ruled in favor of A&S. The judge found that A&S had performed all of its obligations under the parties' agreement, and that the contract, fairly construed, did not require the purchaser to "stand ready perpetually without any . . . end date in mind, to settle within ten days." In the judge's view, "when no time is specified, a reasonable time is implied. . . ." The judge further found, with respect to the dispute regarding an appropriate closing date, that under the circumstances "[s]ixty to seventy days . . . is a reasonable period of time. . . ." In support of this finding, the judge cited the original contract, which provided for fifty-five to seventy days for closing in the event that no contingencies arose. The judge granted A&S' request for specific performance, noting that specific performance is "almost a presumed remedy in a real estate setting," and that the equities of the case also supported the ...

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