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1836 S Street Tenants Association, Inc. v. Estate of Battle

February 5, 2009

1836 S STREET TENANTS ASSOCIATION, INC., APPELLANT,
v.
ESTATE OF B. BATTLE, APPELLEE.



Appeal from the Superior Court of the District of Columbia Civil Division (No. 1297-05) (Hon. Melvin R. Wright, Trial Judge).

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

Argued March 5, 2008

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

This case concerns a purported contract for the purchase of a rental housing property by a tenants' association. In the association's view, it entered into a binding sales contract when it accepted the initial offer of sale the owner was required to make under the District of Columbia Tenant Opportunity to Purchase Act, or TOPA.*fn1 Rejecting that view, the Superior Court granted summary judgment to the owner in the association's suit for specific performance. The tenants' association has appealed. We reverse.

I.

As of 2004, the housing property in dispute, located at 1836 S Street in Northwest Washington, D.C. ("the Property"), was owned by the Estate of B. Battle ("the Estate"). Of the eight units in the Property available for rent, four were occupied and four vacant. In early September 2004, the Estate decided to sell the Property. To comply with TOPA requirements, the Estate delivered to each of the tenants a document dated September 1, 2004, entitled "Offer of Sale & Tenant Opportunity to Purchase Without a Third Party Contract for Housing Accommodations With Five or More Rental Units." This "Offer of Sale" (as we shall refer to it) purported to fulfill the Estate's obligation under TOPA to grant the tenants "an opportunity to purchase" the Property, and to describe the tenants' TOPA rights and responsibilities in connection with that opportunity. The Offer of Sale stated that "[t]he selling price for the accommodation is $1,349,000," and that "[t]he material terms of the sale are as follows: Property to be sold 'as is', all cash at settlement."

Interested in pursuing the Estate's offer, the tenants of the Property organized the 1836 S Street NW Tenants Association, Inc. ("the Association"). The Association was registered with the District of Columbia on September 22, 2004. That same day, the Association's President, Patrick Oot ("Oot"), sent a letter on the Association's behalf to the Estate's agent. The letter bore the heading "Letter of Interest in Purchasing and Acceptance of Offer for Sale" and stated that the Association "hereby accepts the offer of sale" of the Property and "further expresses its interest in purchasing" the Property. Pursuant to TOPA, the letter requested the Estate to provide certain information (e.g., an itemized list of monthly operating expenses, utility consumption rates, and capital expenditures for the two preceding calendar years; a copy of the building floor plan; and any contract with a third party) within seven days "to assist the tenants association in exploring the feasibility of purchasing this property." For every day of delay beyond the seven days, the letter warned, "the period for us to negotiate a contract of sale with you shall be extended one (1) day." In a second letter dated September 23, 2004, and titled "Tenants Association Letter of Acceptance of Offer via Regular Mail and Courtesy Electronic Mail," Oot undertook "to memorialize the contents of both the [A]ssociation's September 22, 2004 correspondence and our meeting with" the Estate's agent. "By [its] letter to you dated September 22, 2004," Oot wrote, "the 1836 S Street NW Tenants Association, Inc. accepted [the Estate's] offer of sale for the property . . . dated September 1, 2004." The September 23 letter did not refer to the Association's earlier request for information to determine whether a purchase would be feasible; instead, the letter stated that the Association was "ready, willing, and able" to make a 5% refundable earnest money deposit upon request.*fn2

In the meantime, however, on September 17, 2004, the Estate had signed a contract to sell the Property to a third party named Farivar S. Mottaghi ("Mottaghi") for $1.5 million. The "Mottaghi Contract" stated that the sale was "contingent" on the tenants' rights to purchase the Property under District of Columbia law. The Estate furnished the Mottaghi Contract to the Association on September 27 -- after the Association's letters of September 22 and 23 -- together with a document entitled "Right of First Refusal Notice for Five or More Rental Unit Housing Accommodations." This notice advised the Association that it would have to match the terms of the Mottaghi Contract, including its $1.5 million purchase price, in order to buy the Property.

No further correspondence was exchanged between the Estate and the Association until January 14, 2005. On that date, the Estate sent a letter to Oot reasserting the validity of the Mottaghi Contract and noting an impending statutory deadline for the consummation of negotiations with the tenants. The Association's counsel responded on February 4 by tendering a contract with a sale price of $1.349 million, reflecting the Association's position that the Estate was bound by the terms set forth in its September 1 Offer of Sale, which the Association had accepted.

The Estate rejected the Association's response as both inadequate and untimely, but allowed it an additional seven days to match the deal with Mottaghi. The Association declined to match and instead sued the Estate on February 22, 2005, in Superior Court. The complaint alleged breach of contract, violation of TOPA, and other causes of action, and sought specific performance of the $1.349 million contract.

In due time, the parties filed cross motions for summary judgment. The Estate denied that it was bound by the Association's acceptance of the terms in its September 1 Offer of Sale. It argued that its only pertinent obligation under TOPA was to negotiate with the tenants' association in good faith for a period of 120 days, beginning from the date the Association was created, and then to give the Association a further 15 days to match the third-party contract. Because the 120-day period expired on January 20, 2005 (120 days after the Association was registered) without an agreement, and the contract tendered by the Association on February 4 did not match the purchase price in the Mottaghi Contract, the Estate argued that the Association had failed to exercise its TOPA rights in a timely manner and thereby had lost its opportunity to buy the Property. The Association argued, among other things, that a contract of sale was formed as of September 22 or 23, 2004, when it manifested its acceptance of the Estate's September 1 Offer of Sale. The Superior Court rejected the Association's position and agreed with the Estate, to which it awarded summary judgment on January 9, 2006, without opinion.

II.

Summary judgment is appropriate only if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law."*fn3 A genuine issue of material fact exists if the record contains "some significant probative evidence . . . so that a reasonable fact-finder could return a verdict for the non-moving party."*fn4 The propriety of summary judgment in this case turns on whether an enforceable contract was formed by the Estate's September 1 Offer of Sale and the Association's September 22 and 23 letters of acceptance. The parties have disagreed over whether the Offer of Sale was a firm offer that could be accepted to create a binding contract or merely an invitation to the tenants to negotiate over a possible sale of the Property, and also over whether the letters of September 22 and 23 constituted an unequivocal acceptance by the Association of the terms of the September 1 Offer of Sale.*fn5 In granting summary judgment to the Estate, the trial court necessarily determined that the documents unambiguously did not form a contract, either because there was no genuine offer or no valid acceptance. Thus, this appeal requires us to decide whether the documents are (at the very least) sufficiently ambiguous that a reasonable trier of fact could find they gave rise to a valid, binding contract.*fn6 This is a question of law, as to which our review is de novo.*fn7

Documents forming a putative contract are ambiguous if, and only if, they are "reasonably or fairly susceptible of different constructions or interpretations, or of two or more different meanings."*fn8 They are not ambiguous if we "can determine [their] meaning without any other guide than a knowledge of the simple facts on which, from the nature of language in general, [their] meaning depends."*fn9 In this case, though, the Estate's Offer of Sale purports, on its face, to comply with or implement TOPA. We therefore must construe the document in light of TOPA's requirements,*fn10 for regardless of the parties' actual, subjective intentions, the ultimate issue is whether, by their choice of language including their invocations of TOPA, they objectively manifested a mutual intent to be bound contractually.*fn11 Accordingly, it is germane to ask whether TOPA required the Estate to make a firm offer of sale to its tenants (prior to its acceptance of the Mottaghi Contract). We start our analysis with that threshold question.

III.

Explicating TOPA's requirements is an exercise in statutory interpretation. As always, we begin with the statute's "plain language."*fn12 If the statutory language is unambiguous, we may end there as well.*fn13 "[A] court should look beyond the ordinary meaning of the words of a statute only where there are persuasive reasons for doing so."*fn14 We must, of course, read TOPA as a whole and resist any construction of its words that would render part of the statute a nullity.*fn15 If we do find ambiguity in TOPA's language, the statute itself directs us to resolve it "toward the end of strengthening the legal rights of tenants or tenant organizations to the maximum extent permissible under law."*fn16

TOPA extends a panoply of rights to a residential tenant whose landlord proposes to sell the property or discontinue its use as rental housing. The landlord must "give the tenant an opportunity to purchase the accommodation at a price and terms which represent a bona fide offer of sale."*fn17 The landlord and tenant must bargain in good faith*fn18 and the negotiations must be given a reasonable period in which to reach fruition.*fn19 The tenant also has a right of first refusal on any sale contract the landlord negotiates with a third party.*fn20 If the landlord fails to comply with TOPA, the tenant may "seek enforcement of any right or provision . . . through a civil action in law or equity."*fn21

This case implicates the meaning of the tenant's right to "an opportunity to purchase the [property] at a price and terms which represent a bona fide offer of sale."*fn22 We previously have addressed the meaning of "bona fide" in that clause, explaining that it "simply requires an objectively good faith, honest offer of sale."*fn23 The question we have not yet answered definitively is whether TOPA requires the owner to extend a firm offer to the tenant or, as the Estate contends, merely an invitation to negotiate a sale within a reasonable time period. Nonetheless, we think the answer to this question is not in doubt.

By its express terms, TOPA requires the owner to do more than simply invite the tenant to negotiate. The statute explicitly calls for the owner to furnish the tenant with a written "offer" that includes ("at a minimum") the "asking price and material terms of the sale,"*fn24 and thereby to give the tenant the "opportunity to purchase at" that price and on those terms.*fn25 On their face, these requirements appear designed to compel the owner to make a firm offer that is capable of immediate, binding acceptance by the tenant. Closer inspection of the statutory language confirms that reading, for the basic terminology -- "offer," "material terms" -- is drawn from the common law of contracts. When a legislature borrows common law terms of art in writing legislation,"it presumably knows and adopts the cluster of ideas that were attached to [the] borrowed word."*fn26 And at common law, "[a]n offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it."*fn27 In other words, an offer is, by definition, binding on the offeror if it is properly accepted by the offeree. Similarly, at common law the "material terms" are the provisions necessary to create an enforceable contract.*fn28 A valid "offer" must contain all of the material terms of the bargain,*fn29 and if such an offer is accepted, the bargain is enforceable even if the parties never reach agreement on the non-material terms.*fn30 As we have explained, "parties may make an enforceable contract binding them to prepare and execute a subsequent documentary agreement," as long as "agreement shall have been expressed on all essential terms that are to be incorporated in the document."*fn31 TOPA's requirement that the "material terms" of the sale be included in the offer is strong confirmation that a true offer is intended.

Our interpretation of the tenant's right to receive a bona fide offer of sale does not render it in conflict with, or redundant of, the right of first refusal also granted by TOPA.*fn32 Although the owner's dual obligations to extend a bona fide offer of sale and to allow its tenant to exercise a right of first refusal may, in some cases, be satisfied simultaneously, they are conceptually and legally "distinct."*fn33 The right of first refusal does not ripen into the right to receive an offer of sale from the owner unless and until the owner receives an acceptable offer of purchase from a third party.*fn34 In contrast, the right to receive a bona fide offer affording a genuine "opportunity to purchase" arises whenever the owner proposes to sell the property, demolish the premises, or convert the property to non-rental use -- irrespective of the existence of a third-party contract.*fn35

To be sure, TOPA envisions that an offer of sale will be followed, when there is tenant interest, by "bargain[ing] in good faith" and a "reasonable period to negotiate a contract of sale."*fn36

Moreover, where rental properties with fewer than five units are concerned, TOPA specifically provides that interested tenants should respond to the owner's offer of sale with "a written statement of interest" constituting "a clear expression of interest . . . to exercise the right to purchase."*fn37 If the quoted language were taken to imply that the statutorily-required "offer of sale" is subject to the owner's reserved right to bargain over material terms regardless of the tenants' response to the offer, it would mean TOPA does not require a true manifestation by the owner of its willingness to enter into a contract on specified terms. But that is neither a necessary implication nor a plausible one in view of the express statutory language discussed above. In general, the recipient of an offer of sale may accept it, reject it, make a counteroffer, or do nothing. We think TOPA's provisions for statements of interest, bargaining in good faith, and reasonable periods of negotiation simply reflect the drafters' expectation that interested tenants rarely would respond to offers of sale with immediate, unqualified acceptance of all their material terms (and the drafters' intent that tenants not be pressured to do so). But that does not mean tenants may never simply accept an owner's offer of sale without qualification and thereby conclude a deal. (In addition, of course, even where a tenant does accept the owner's offer, a period of negotiation usually will be necessary to reduce the agreement to a written contract and to settle on non-material provisions.)

We recognize that TOPA does carve out one situation in which a tenant may not be able to "dictate the outcome" by accepting the owner's offer of sale.*fn38 This situation arises because D.C. Code § 42-3404.10 allows individual tenants of a two-to-four unit property to respond to an owner's offer of sale with competing expressions of interest. When that happens, the statute grants each interested tenant the right to negotiate separately with the owner for a minimum of ninety days.*fn39

The owner is barred from contracting with any of the competing tenants before the statutory negotiation period has expired for all of them; if the owner were permitted to consummate a sale contract before that time, it would render the negotiation period for the other tenants "meaningless."*fn40 The statute further specifies that "[i]f the owner [was] required to negotiate with more than one tenant . . . , the owner may decide which contract is more favorable without liability to the other tenants."*fn41 In other words, the owner's choice of which tenant to contract with (after the conclusion of good faith negotiations) is essentially unfettered -- which the Council considered it must be for each tenant's right to negotiate to be meaningful.*fn42 It follows that, where tenants are ...


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