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Dist. of Columbia v. Brookstowne Community Development Co.

January 21, 2010

DISTRICT OF COLUMBIA, APPELLANT,
v.
BROOKSTOWNE COMMUNITY DEVELOPMENT COMPANY, APPELLEE.



Appeal from the Superior Court of the District of Columbia (CA4571-04) (Hon. Melvin R. Wright, Trial Judge).

The opinion of the court was delivered by: Washington, Chief Judge

Argued October 28, 2009

Before WASHINGTON, Chief Judge, REID, Associate Judge, andPRYOR, Senior Judge.

The District of Columbia appeals from a judgment entered against it for breach of a contract to sell, pursuant to the District's Homestead Program created by the Homestead Housing Preservation Act of 1986 ("HHPA"), D.C. Code § 45-2701 et seq. (1996),*fn1 a multi-family residential apartment building to Brookstowne Community Development Company ("Brookstowne"), a for-profit entity. On appeal, as before the trial court, the District contends that the HHPA prohibits such sales of property to for-profit entities, so it could not have entered into the Brookstowne contract as a matter of law, and the contract is therefore void and unenforceable ab initio. We hold that the HHPA does not authorize the District to sell property to for-profit entities under the Homestead Program,*fn2 and that the District cannot be estopped from disavowing the Brookstowne contract on that basis. Accordingly, we reverse.

I.

As discussed in greater detail below, the HHPA was enacted to provide the District with a method - in the form of the Homestead Program, administered by the Department of Housing and Community Development ("DHCD") - of developing decaying properties into low and moderately priced family housing while supporting local community development entities. See D.C. Code § 45-2702; and COUNCIL OF THE DISTRICT OF COLUMBIA, REPORT OF THE COMMITTEE ON HOUSING AND ECONOMIC DEVELOPMENT FOR THE "HOMESTEAD HOUSING PRESERVATION ACT OF 1986" at 3 (May 7, 1986) [hereinafter D.C. COUNCIL REPORT]. In keeping with the purpose of the HHPA, in the Spring of 1998, the DHCD issued a request for proposals ("RFP") soliciting buyers to renovate into affordable condominiums a thirty-seven unit multi-family residential apartment building, located at 1831 2nd Street, N.E.*fn3 The RFP laid out the following order of preference and priority to be applied to submitted proposals:

Proposals from tenant associations in occupied buildings will be given first consideration.

If no proposals are received from the tenant associations (or if the building is vacant), proposals from cooperative housing associations and/or individuals forming a condominium association will be considered next.

If no proposal falls within the above categories, next consideration will be given to proposals received from non-profit development companies. If no proposals are received from a non-profit developer, proposals from other entities will be considered.

In response, Brookstowne submitted a proposal for the apartment building in July 1998, which stated that Brookstowne was a sole proprietorship.

On August 6, 1998, DHCD sent a letter to Brookstowne accepting its proposal and selecting it to develop the property at issue. The letter stated that the purchase price for the property was $9,250, and continued: "If you wish to accept this offer, a $250 deposit must be paid . . . to the District of Columbia Treasurer, no later than Thursday, August 20, 1998, at 4:00 p.m., at the Homestead Program Administration . . . ." It then listed the obligations the developer was subject to regarding the building, and stated that "[c]losing must take place no later than Wednesday, September 30, 1998." Brookstowne interpreted this letter as an offer, and paid the $250 deposit to accept. Several other proposals were submitted for the property, but according to the District's response to interrogatories, only Brookstowne's was deemed acceptable.

The closing was delayed past September 30, 1998, when the District failed to convey an unencumbered title because the Water and Sewer Authority ("WASA") held liens on the property. Between January 1999 and early 2003, the District negotiated with WASA to have the liens removed, and having succeeded by early 2003, began to prepare closing documents in May 2003, nearly five years after Brookstowne's initial proposal submission. However, the closing documents, which were originally dated September 1998 but which Brookstowne did not see until May 2003, incorrectly indicated that Brookstowne was a non-profit entity. Brookstowne informed the District of the error, which was corrected. Both parties then signed the documents.

On December 23, 2003, DHCD sent a letter to Brookstowne withdrawing the offer to sell the property and refunding the $250 deposit because Brookstowne's for-profit status had come to light.*fn4 In response, on June 6, 2004, Brookstowne brought suit in the Superior Court on a breach of contract theory, seeking specific performance and damages. The District moved for summary judgment, arguing that the HHPA precluded sales to for-profit entities, so DHCD lacked the statutory authority to enter into the alleged contract. The trial court denied the District's motion, reserving judgment at that time on the issue of capacity to contract, because it felt there were disputed material questions of fact necessitating a trial.

At trial, in addition to testimony and other evidence that DHCD held itself out as having the authority to sell property to for-profit entities and knew that Brookstowne operated for profit, Brookstowne introduced a Homestead Program brochure that expressly listed "for-profit developers" in its order of proposal priority. However, Lynn French, the Administrator of the Homestead Program from 1987 to 2001, testified for the District that she would have rejected Brookstowne's proposal had she noticed that it was a for-profit entity, but this information did not "jump out" at her. However, she also admitted that she did consider for-profit entities under the Homestead Program, but as a lowest ...


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