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Psaromatis v. English Holdingsi

March 13, 2008

KYRIAKOS PSAROMATIS, APPELLANT,
v.
ENGLISH HOLDINGSI, L.L.C., APPELLEE.



Appeals from the Superior Court of the District of Columbia (CA-8189-03) (Hon. Geoffrey M. Alprin, Trial Judge).

The opinion of the court was delivered by: Blackburne-rigsby, Associate Judge

Argued March 29, 2007

Before BLACKBURNE-RIGSBY and THOMPSON, Associate Judges, and FERREN, Senior Judge.

In these consolidated appeals, appellant Kyriakos Psaromatis seeks the return of his security deposit after his failure to purchase property offered for sale by English Holdings, LLC. Three issues require our resolution.

First, Mr. Psaromatis contends that the trial court erred in concluding that he was required to settle on the purchase of the property before he received insurable title. Second, Mr. Psaromatis contends that the trial court erred in concluding that he forfeited his deposit paid to English Holdings for the purchase of the property. Third, English Holdings asserts that Mr. Psaromatis was required to compensate it for fees incurred in defending against claims raised by the property's tenants. We reverse as to the first two issues and affirm on the third issue.

In reaching our conclusion, we discuss each issue in turn and conclude that a condition precedent existed by which Mr. Psaromatis's obligation to close was conditioned upon the ability of English Holdings to convey insurable title to Mr. Psaromatis that was free of any tenant's claims. Because English Holdings was not in a position to do this, it was English Holdings -- not Mr. Psaromatis -- that defaulted under the agreement, and the trial court erred in concluding otherwise. Mr. Psaromatis was therefore entitled, under the terms of the agreement, to the return of his deposit. He was also entitled to pursue an equitable action for specific performance in the trial court. Therefore, we must reverse so that the trial court may order a full refund of Mr. Psaromatis's deposit because there was no prejudice to either English Holdings or the Tenants' Association in light of Mr. Psaromatis's reasonable resort to his statutory remedy of a Notice of Lis Pendens. As to English Holdings's claim for counsel fees, we conclude that the trial court did not abuse its discretion in declining to award English Holdings the counsel fees it sought from Mr. Psaromatis. The purchase agreement between English Holdings and Mr. Psaromatis did notauthorize recovery of counsel fees for disputes concerning a third party -- here, the Tenant's Association.

I. FACTUAL BACKGROUND

Appellee, English Holdings, is the owner of a ten-unit four-story walk-up apartment building ("the property") located at 1208 M Street, N.W., Washington, D.C.In 2003, English Holdings retained the firm of Marcus & Millichap for the purpose of listing and selling the property. The firm presented English Holdings with an offer from Mr. Psaromatis to buy the property, and on March 3, 2003, the parties entered into a contract (the "first purchase agreement"). Under the terms of the first purchase agreement, Mr. Psaromatis was to purchase 100% of the member interests of English Holdings for $1,050,000, with an initial deposit of $52,800. Mr. Psaromatis paid the $52,800 deposit to English Holdings on March 4, 2003.

On March 25, 2003, English Holdings and Mr. Psaromatis entered into a second contract ("second purchase agreement") to sell the property itself rather than the "member interests" (as in the first purchase agreement) to Mr. Psaromatis for $1,050,000.*fn2 In April 2003, English Holdings and Mr. Psaromatis entered into an Addendum to the second purchase agreement. The Addendum gave Mr. Psaromatis the right to, inter alia, cancel the purchase agreement and obtain a refundof his deposit if English Holdings failed to deliver marketable fee simple title subject only to exceptions approved by Mr. Psaromatis, or if English Holdings failed to comply with the provisions of the Tenants' Opportunity to Purchase Act ("TOPA"), or if the tenants organized to purchase the property.

By a letter dated April 23, 2003, to English Holdings, counsel for Mr. Psaromatis outlined his objections to the title commitment.*fn3 Among other things, Mr. Psaromatis objected to the following "exception," contained in Scheduled B, Section Two of the title commitment at number eight: "rights of tenants under the Rental Housing Conversion and Sales Act . . . ." Mr. Psaromatis also advised English Holdings in his title objection letter that the "requirements" found in Schedule B, Section One of the title commitment needed to be satisfied, to the extent that those requirements were under English Holdings's control, particularly the requirement to furnish, to the satisfaction of the title company, proof of compliance with the Rental Housing Conversion and Sales Act. Finally, Mr. Psaromatis advised English Holdings that the noted objections "must be answered, cured, or resolved in accordance with the [second purchase] Agreement." English Holdings, through its agent Ms. Lloyd, responded to Mr. Psaromatis's objections the same day via a letter, stating: "All objections detailed in your notice dated April 23, 2003, regarding title commitment for 1208 M Street, Washington, DC will be satisfied prior either to closing or by affidavit at closing." (Emphasis added).

A month earlier, on March 27, 2003, English Holdings had provided its first Notice of Sale and Tenant Opportunity to Purchase to the tenants of the property, advising them of their statutory rights to match the terms of the sales contract with Mr. Psaromatis pursuant to the TOPA.*fn4 On May 1, 2003, the Tenants' Association notified English Holdings that the tenants were interested in purchasing the property and that the Tenants' Association was incorporated on May 1, 2003. Attached to the May 1, 2003, notice was an application for registration, as required by D.C. Code § 42-3404.11 (1).*fn5 However, on July 10, 2003, English Holdings notified the Tenants' Association that it was withdrawing its offer of sale to the tenants. In this letter, Ms. Lloyd, English Holdings's selling agent at the time, stated: "[a]s you may or may not know, the third party contract to purchase [the property] was terminated and I do not wish to sell the property so [I] am withdrawing my offer to sell on behalf of English Holdings . . . ." At trial, Ms. Lloyd testified that she assumed that Mr. Psaromatis had lost interest in purchasing the property because English Holdings received neither a copy of the signed new contract (second purchase agreement), nor any communication that Mr. Psaromatis had posted the required deposit.

On August 21, 2003, English Holdings's listing agent advised Mr. Psaromatis that it had withdrawn its offer to sell the property to the tenants and terminated the second purchase agreement. In response, Mr. Psaromatis advised English Holdings that because the tenants failed to purchase the property, he wished to close on the contract and scheduled a closing date in October 2003.*fn6 English Holdings notified Mr. Psaromatis that it wouldnot close on the designated date because of violations of the contingency for inspection of books and records in the second purchase agreement. But the second purchase agreement did not contain such a books and records inspection contingency, because it was removed from the second agreement pursuant to English Holdings's request.*fn7 Notwithstanding the fact that the second purchase agreement replaced the first purchase agreement and did not contain the inspection contingency as did the first agreement, English Holdings still refused to go to closing on the property.

As a result of English Holdings's refusal to close on the purchase of the property pursuant to the second purchase agreement, Mr. Psaromatis filed a complaint in the Superior Court of the District of Columbia on October 7, 2003, seeking specific performance of the contract and damages arising out of English Holdings's alleged breach of the second purchase agreement. Mr. Psaromatis also filed a Notice of Lis Pendens, pursuant to D.C. Code § 42-1207 (2001)*fn8 on October 14, 2003. English Holdings filed a counterclaim seeking damages for slander of title. During the pendency of this lawsuit, and the pending Notice of Lis Pendens, the parties entered into an interim Settlement Agreement in April 2004.

The Settlement Agreement

Under the terms of the 2004 Settlement Agreement, the Superior Court litigation was stayed, and all claims and defenses the parties had regarding the sale of the property were preserved. Pursuant to Paragraph 1 of the Settlement Agreement, the parties agreed that the terms and conditions of the second purchase agreement would remain the same, except that the time for settlement would be extended to allow English Holdings an opportunity to provide a new offer of sale to the Tenants' Association pursuant to the TOPA. See D.C. Code § 42-3404.02. Pursuant to Paragraph 2 of the Settlement Agreement, English Holdings was required to "proceed under the [TOPA] so that the Property [could] be conveyed to [Mr.] Psaromatis free of any claims by the tenants thereunder." (Emphasis added). Further, paragraph 6 provided that in the event of an unsuccessful sale of the property to Mr. Psaromatis, resulting from the tenants purchasing the property, or the property otherwise not being sold to Mr. Psaromatis, "the [p]arties are free to litigate all claims and defenses against one another regarding the Property and that the stay of the Litigation case will be lifted, with all claims having been preserved."

Additionally, under Paragraph 8 of the Settlement Agreement, the parties agreed "that the tenants could, at some time in the future, file a legal or administrative action to seek a determination of their rights, if any, to purchase the property and, therefore, English Holdings [would] be under no obligation to sell the Property to [Mr.] Psaromatis until such litigation is complete." Although the Settlement Agreement did not explicitly afford Mr. Psaromatis a reciprocal right to delay the purchase of the property, as discussed infra at pp.14-23, it also did not allow English Holdings to pressure Mr. Psaromatis to close on the property before English Holdings acquired marketable and insurable title to convey.

Sales Contract With the Tenants' Association

Pursuant to the Settlement Agreement, and in accordance with the TOPA, English Holdings provided the tenants with a second offer of sale on April 23, 2004. In response, the Tenants' Association and English Holdings negotiated and entered into a sales contract for the purchase of the property on October 6, 2004. Settlement was scheduled for October 29, 2004.

Although Mr. Psaromatis was aware of the purchase agreement between English Holdings and the Tenants' Association, he refused to release the Notice of Lis Pendens, which served as an obstacle that contributed to the Tenants' Association's difficulty in securing the necessary finances to proceed with the purchase of the property. In response to a request from English Holdings's counsel to release the notice, Mr. Psaromatis advised English Holdings that he would release the Notice of Lis Pendens if adequate assurances were provided by English Holdings that proceeds from the sale of the property, or other assets of English Holdings, would be available to satisfy a possible money judgment against English Holdings (such as for return of Mr. Psaromatis's deposit). According to Mr. Psaromatis, he was concerned that if the property was sold to the Tenants' Association, English Holdings would own no assets because the M Street ...


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