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BSA 77 P Street LLC v. Hawkins

November 19, 2009

BSA 77 P STREET LLC, ET AL., APPELLANTS/CROSS-APPELLEES,
v.
ANTWUAN HAWKINS, ET AL., APPELLEES/CROSS-APPELLANTS, AND SABRINA LYMORE, APPELLEE.



Appeals from the Superior Court of the District of Columbia (CAB6839-04) (Hon. Melvin R. Wright, Trial Judge).

The opinion of the court was delivered by: Pryor, Senior Judge

Argued September 3, 2009

Before REID and THOMPSON, Associate Judges, and PRYOR, Senior Judge.

Concurring opinion by Associate Judge THOMPSON at p. 18.

This appeal results from a failed real estate transaction involving the attempted sale of low-income housing units owned by appellants/cross-appellees BSA 77 P Street LLC, et al. (BSA), a partnership entity. BSA attempted to enter into contracts with tenants Michele and Antwuan Hawkins, Lillian Johnson, Dorothy Paul, and Sabrina Lymore, to sell them their apartments in order to facilitate a sale of the remaining apartments BSA owned to a prospective buyer. We consider three issues on appeal: (1) whether the trial court erred in construing language in BSA's contract with its tenants as a condition instead of a promise, (2) whether the court erred in issuing a declaratory judgment that BSA's subsequent notice to its tenants to vacate their units violated D.C. housing law, and (3) whether the court erred in denying BSA's motion for costs and attorneys fees arising out of a fee-shifting provision in their contracts with the tenants. On the first two issues, we affirm the trial court's rulings. On the third issue, we remand for further consideration.

FACTS

BSA owned thirty-seven rental units in thirty separate buildings in the District of Columbia that were collectively known as the Bates Street Properties. In 1982, after renovating the units, BSA entered into a twenty-year Housing Assistance Payment (HAP) agreement, covering all of the units, with the United States Department of Housing and Urban Development (HUD) whereby HUD subsidized housing for low-income tenants. To finance the purchase and renovation of the units, BSA borrowed $1.8 million, utilizing a Federal Housing Authority (FHA) insured blanket mortgage, from a private lender. Riggs Bank was the holder of the mortgage, which was administered by Prudential Asset Resources (Prudential).

In 2001, as the HAP agreement was nearing its end, BSA sought a way to terminate ownership and management of the Bates Street Properties and exit the rental market. Following negotiations with Eagle Point Enterprises, LLC (Eagle Point), BSA signed a contract with Eagle Point on January 7, 2002, whereby Eagle Point would purchase the units and continue to operate them pursuant to the HAP agreement, which would be renewed in Eagle Point's name. The contract acknowledged that under the District of Columbia's Tenant Opportunity to Purchase Act, D.C. Code § 42-3404.01 et seq. (TOPA), BSA would first be required to offer its tenants the opportunity to purchase their individual units. Accordingly, at around the same time BSA entered the contract with Eagle Point, it issued notices to the Bates Street tenants informing them of their rights under TOPA.

Tenants Michele Hawkins, Antwuan Hawkins, Lillian Johnson, and Dorothy Paul responded to the notices and informed BSA that they intended to purchase their apartments. Several months later, on October 31, 2002, BSA and the tenants signed contracts for the purchase of their respective units with BSA. Appellee Sabrina Lymore signed a contract for the purchase of her unit with BSA on September 15, 2003.

The standard-form contracts presented by BSA to the tenants were substantially identical, and included an addendum containing the following language:

Seller agrees to secure a partial mortgage release from the current mortgagee of the Property and, if necessary, the U.S. Department of Housing and Urban Development, in order to meet the requirements of Purchaser's lender, if any. Purchaser and Seller agree that the Sales Contract shall be voidable at the option of either Purchaser or Seller if, on the Settlement Date, the mortgagee has not agreed to release the mortgage which encumbers the Property.

The contracts also each contained the following provision regarding attorneys' fees: "In any action or proceeding involving a dispute between the Purchaser and the Seller arising out of this Contract, the prevailing party will be entitled to receive from the other party reasonable attorney's fees to be determined by the court or arbitrator(s)."

The Hawkins, Johnson and Paul contracts specified a settlement date of December 16, 2002, while the Lymore contract scheduled the settlement date for November 11, 2003. Ultimately, however, BSA did not close with any of the tenants on the purchase of their units. Prior to the settlement dates and for several months thereafter, BSA negotiated with Eagle Point, HUD and Prudential to consummate the sale to Eagle Point and to obtain the release BSA deemed necessary to sell the properties to the tenants. The parties failed to close because, according to BSA, it did not receive the necessary release of the mortgage. BSA continued for some time thereafter its efforts to obtain the release and to conclude the sale to Eagle Point. The Eagle Point sale was not consummated because HUD refused to give Eagle Point a HAP agreement along the desired terms.

In September of 2003, Eagle Point terminated its contract with BSA for the purchase of units in the Bates Street Properties. BSA thereafter terminated its contracts with appellees Michele and Antwuan Hawkins, Johnson and Paul, returned their deposits, and in a September 30, 2003, letter explained that it had terminated the contracts because the required mortgage release had not been approved. BSA also withdrew its offer to Ms. Lymore, on the grounds that the release had not been forthcoming. The evidence presented at trial showed that, while Ms. Lymore signed her contract early in September, 2003, she did not send any notification of acceptance to BSA before she received, on October 9, 2003, notification from BSA that their offer was being revoked.

The Eagle Point sale having been unsuccessful, BSA pursued an alternate plan to transfer the units: to terminate the HAP agreement with HUD and sell the units, after renovation, for home ownership. By letters dated September 30 and October 8, 2003, BSA informed its tenants that it was terminating its HAP agreement and that they had one year under District of Columbia and federal law to obtain housing elsewhere. After BSA terminated its HAP contract, it refinanced its loan with a local Maryland bank, allowing BSA to pay off in full its earlier loan from Riggs Bank. When BSA prepared to sell the units to an alternate buyer, it again offered the tenants the opportunity to purchase their units. This time, several tenants other than appellees contracted to buy their units from BSA.

PROCEDURAL BACKGROUND

On September 10, 2004, tenants Michele and Antwuan Hawkins, Lillian Johnson, and Dorothy Paul filed a civil complaint in the Superior Court of the District of Columbia, claiming that BSA breached its contract with them when it terminated their contracts, and asked the court to grant specific performance.*fn1 On January 5, 2005, BSA issued notices to the tenants to vacate their units under D.C. Code § 42-3505.01 (i)(1) and indicated that they intended to discontinue the tenants' use of the premises for rental housing in order to renovate the units and re-sell them for home ownership.*fn2 Indeed, on January 11, 2005, BSA signed a contract with TMS Investments, LLC (TMS) under which TMS agreed to purchase those units among the Bates Street Properties that were (or would then be) vacant on the date of closing, set for April 1, 2005. In ...


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