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3511 13th Street Tenants' Association v. 3511 13th Street

April 19, 2007

3511 13TH STREET TENANTS' ASSOCIATION AND STEVEN MADEOY, APPELLANTS/CROSS-APPELLEES,
v.
3511 13TH STREET, N.W. RESIDENCES, LLC, ET AL., APPELLEES/CROSS-APPELLANTS.



Appeals from the Superior Court of the District of Columbia (CA-5320-03) (Hon. Michael L. Rankin, Trial Judge).

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

Argued March 14, 2007

Before FARRELL and RUIZ, Associate Judges, and SCHWELB, Senior Judge.

These consolidated appeals arise from three related actions in Superior Court: a suit for specific performance by Steven Madeoy against the former owner of an apartment building at 3511 13th Street, N.W., who Madeoy alleged had agreed to sell him the building; a counter-suit by the former owner and the purchaser of the building against Madeoy alleging, inter alia, that he had tortiously interfered with their contract for sale of the building; and an action to rescind this contract filed by a tenants' association representing tenants of the building, alleging that they had not been given notice of the sale and an opportunity to purchase their units as required by D.C. Code § 41-3404.02 et seq. (2001).

The trial judge granted summary judgment against Madeoy in his suit for specific performance, concluding that his alleged contract to purchase was not supported by valid consideration. The other two actions were tried to a jury, following which the judge dismissed the counter-suit against Madeoy on motion for judgment as a matter of law, and the jury rejected the tenants' claim that they had not been given the required statutory notice.

On these respective appeals by Madeoy and the tenants' association,*fn1 we hold that the judge erred in concluding as a matter of law that Madeoy had entered into, at most, "an executory contract that was not supported by valid consideration." Triable issues of fact remain concerning whether Madeoy's promise to perform was - in the judge's words - "a mere pretense and not a reality" and whether, assuming a valid contract, Madeoy's failure to make an earnest money deposit as promised was a material breach that excused the seller from performance. We affirm the jury verdict against the tenants' association.

I.

Sonnythia Lewis was the owner of the property in dispute at 3511 13th Street, N.W., a multi-unit apartment building occupied by tenants. Steven Madeoy owned or controlled an adjoining property and wanted to buy the 3511 13th Street building from Lewis, who was having financial problems. When Mark Tillmon, a self-described consultant/finder (or "bird dog") for Madeoy, told him that Lewis was ready to sell the building, Madeoy drew up a contract offer to buy it for $1.3 million in cash. The contract specified a closing date of January 16, 2003, and stated that an earnest money deposit of $25,000 was required and had been "[r]eceived." Lewis signed the contract on January 4, 2003, twelve days before the scheduled closing. According to Madeoy's later deposition, he immediately wrote a check for $25,000 to the "Tillmon Companies" as called for in the contract and gave it to Tillmon to deposit with the settlement company. Tillmon, however, acknowledged at his deposition that he had not deposited the check and in fact had "lost it."

Madeoy claimed that he went to the settlement attorney's office on January 13, 2003, to conclude his side of the transaction, but that settlement could not take place because a cloud on the title had been discovered. In particular, there was an outstanding contract for sale of the property by Lewis to one Arthur Coleman, who later rejected Madeoy's offer of $50,000 for a release of that contract. On April 22, 2003, facing foreclosure on the property, Lewis declared bankruptcy, but on June 14, 2003, she contracted to sell the property to an entity controlled by Christine Nuyen for $1,545,000.*fn2

That same day, Madeoy sued Lewis for breach of contract and specific performance, and sued Nuyen for tortious interference with his contract to purchase from Lewis. Lewis and Nuyen counter-sued Madeoy for interfering with their contractual arrangement (as well as for slander of title for having filed a lis pendens notice). Finally, tenants of 3511 13th Street formed a "tenant organization" under D.C. Code § 42-3404.11 and intervened in Madeoy's suit for specific performance,*fn3 seeking rescission of the Lewis-Nuyen contract on the ground that they had been denied notice of the sale offer and their right of first refusal secured by § 42-3404.08.

After the trial judge entered judgment as a matter of law against Madeoy (and against Lewis and Nuyen on their counter-suit), and the jury returned a verdict against the tenants, these appeals were taken.*fn4

II.

As explained, the judge granted summary judgment against Madeoy because, in the judge's words, his contract to buy the property from Lewis "was not supported by valid consideration." The judge gave essentially two reasons for this conclusion. First, Tillmon, "acting as the go-between for [Lewis] and [Madeoy,] never deposited [the earnest money] check as required by law." Citing the escrow requirements of D.C. Code § 42-1704 (a),*fn5 the judge reasoned that to recognize Madeoy's contract offer as valid when he and his agent neither deposited nor delivered the earnest money check "would circumvent the regulatory scheme." More broadly, the judge relied on the principle that "a stated consideration which is a mere pretense and not a reality is not sufficient; because if in fact no consideration was intended and none given, recital of a consideration cannot make the promise enforceable," quoting Allen v. Allen, 133 A.2d 116, 118 (D.C. 1957). That proposition, in the judge's view, "describes precisely the situation presented [here]," where Madeoy "drew up a contract offer" falsely stating that "Lewis had received $25,000," where, indeed, he did not intend "to give Lewis a negotiable check for $25,000" because he "knew that Lewis was in danger of imminent foreclosure" (and presumably hoped to acquire the property by that route), and where, accordingly, the check Tillmon received as intermediary was not one he could reasonably view as "anything more than a worthless piece of paper."

We hold that neither ground stated by the judge permitted rejection of Madeoy's suit on summary judgment. That relief may not be granted unless "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Woodland v. District Council 20, 777 A.2d 795, 798 (D.C. 2001). Here the depositions and other materials reveal genuine factual issues about whether Madeoy intended to be bound by his promise to buy the property from Lewis or whether his promise was "a mere pretense and not a reality," Allen, supra, and alternatively about whether his alleged failure to deliver the earnest money check would constitute a material breach of the contract excusing Lewis ...


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