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Associates, Trustee 718 Nw Trust v. Bryant Banks and Sheilla Banks

DISTRICT OF COLUMBIA COURT OF APPEALS


June 23, 2011

ASSOCIATES, TRUSTEE 718 NW TRUST, APPELLANT,
v.
BRYANT BANKS AND SHEILLA BANKS, APPELLEES.

Appeals from the Superior Court of the District of Columbia (LTB 10920-08) (Hon. Stephanie Duncan-Peters, Trial Judge)

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

Submitted May 18, 2010

Before RUIZ, BLACKBURNE-RIGSBY and THOMPSON, Associate Judges.

Appellant brought this action seeking a non- redeemable judgment for exclusive possession of the property located at 718 Marietta Place, N.W., Washington, D.C. (the "Property"). Appellees Bryant and Sheilla Banks contend that they are legally entitled to continue living at the Property pursuant to a lease that they executed with the previous owner of the Property, Patricia Speleos. At trial, appellant argued that appellees' lease was void because (1) it was a forgery, and/or (2) Speleos was mentally incapacitated at the time she signed the lease. The trial court, however, upheld the validity of the lease. Specifically, the trial court found that (1) the lease was not forged; and (2) while Speleos was mentally incompetent when she signed it, her incompetence rendered the lease voidable at her election, as opposed to inherently void. Thus, the trial court determined that the lease was subject to ratification or disaffirmance by Speleos' authorized representative. In finding that a contract entered into with a mentally incapacitated individual is voidable and not inherently void, the trial court erred in concluding that the longstanding law of the District of Columbia, first stated in Sullivan v. Flynn, 20 D.C. (9 Mackey) 396, 401 (1892), and subsequently followed in Martin v. Martin, 270 A.2d 141, 143 (D.C. 1970) ("Martin II"), is no longer applicable because it is contrary to the rule followed in a majority of the states.*fn1

Therefore, we are constrained to reverse the trial court's order, declare the lease between appellees and Speleos void as a matter of law, and remand this case to Superior Court for proceedings consistent with this opinion.

I. Background

Appellant first purchased a tax certificate to the Property on July 21, 1997, and was later issued a deed to the Property on August 24, 2001. Before appellant executed the deed to the Property, appellees had signed a lease with Ms. Patricia Speleos, the Property's former owner. Under the terms of the lease, appellees were to pay $500 per month in rent, and they had an exclusive option to purchase the Property at any time for $50,000.

In November 2001, as part of a separate proceeding, Superior Court Judge Kaye K. Christian found that Ms. Speleos, who was then eighty-four years old, was mentally incapacitated, as defined by D.C. Code § 21-2011 (11) (2001). Judge Christian appointed Stephanie Bradley as conservator of Ms. Speleos' estate, and Ms. Speleos' nieces as guardians. Two months after finding Ms. Speleos mentally incapacitated, Judge Christian held a hearing regarding the status of seven real estate properties that Speleos sold in March 2001. At the hearing, Ms. Bradley contended that those sales occurred when Ms. Speleos was already mentally incapacitated.*fn2 Based on the evidence provided by Ms. Bradley, Judge Christian voided all seven of the March 2001 sales.

On August 5, 2003, appellant filed suit against Ms. Speleos (who was in poor health) and her estate to quiet title to the Property, which appellant had acquired at the July 1997 tax sale. Ms. Speleos passed away on July 5, 2005, and her sister, Ann E. Pizzulo, became Personal Representative of the Estate. On October 10, 2006, appellant and the Estate entered into a settlement agreement whereby the Estate promised to provide an affidavit "attesting that there are no current legal tenants and/or occupants in the Property, there are no valid leases regarding the Property, past or present, and that any leaseregarding the Property executed during the period of 1990 through the date of decedent's death is void . . . ." The Estate provided the affidavit, which was prepared by attorney Valerie Geiger and signed by Ms. Pizzulo.

On April 30, 2008, appellant filed the present action*fn3 in Landlord-Tenant Court seeking a non-redeemable judgment for possession of the Property on the grounds that Speleos lacked the mental capacity to enter into the lease under which appellees claim a right to occupancy,*fn4 whereas appellees maintained that they had a valid lease. In its order of judgment, the trial court found that "Ms. Speleos was incompetent when she entered into the lease agreement with [appellees]." The trial court reached this conclusion after considering all of the following evidence:

(1) Judge Christian's declaration that Ms. Speleos was incompetent to handle her own affairs in November 2001; (2) Judge Christian's decision to void the March 2001 deeds in January 2002; (3) the timing of these deeds, i.e., that they were [] entered into no more than a week after Ms. Speleos leased the subject property; (4) Dr. Lowy's testimony that it is highly unlikely that Ms. Speleos was competent in March 2001 (i.e., the year the lease was entered into); (5) Ms. Bradley's [Speleos' conservator's] prior and current testimony regarding Ms. Speleos' state of mind during the relevant time period; and (6) the fact that Mr. and Ms. Banks [appellees] are the only individuals asserting that Ms. Speleos was competent and they have a vested interest in such a finding.

However, despite finding that a myriad of evidence demonstrated that Speleos was mentally incompetent at the time she entered into the lease with appellees, the trial court ultimately concluded that the lease was not void, but rather voidable. The trial court reached this legal conclusion after characterizing the matter as one of first impression in this jurisdiction. The trial court acknowledged that, while "[h]istorically, a conveyance or contract by an insane or non compos mentis individual was declared void, and not merely voidable . . . [t]he modern view, however, is that such a transaction would be simply voidable."*fn5 The trial court then continued its legal analysis and stated that, "[a]lthough the District of Columbia has not considered this particular issue, several federal and state courts are in agreement that a contract deemed voidable as a result of the incapacity of one party is only voidable at the option of the incompetent, [her] committee thereafter appointed or [her] personal representative . . . ." (citations and quotation marks omitted; alterations in original).

While mostly relying on cases from other jurisdictions, the trial court also attempted to analogize the issue in the present case to issues presented in other contexts and addressed by our decisions. Specifically, the trial court cited Martin v. Martin, 240 A.2d 363, 365 (D.C. 1968) ("Martin I"), for the proposition that "marriages contracted by persons who are mentally incompetent are voidable, not void."*fn6 The trial court also analogized the lease in this case with the facts in Hurwitz v. Barr, 193 A.2d 360, 360 (D.C. 1963), where we held that "the contracts of an infant are voidable at his option . . . ."*fn7 In conclusion, the trial court determined that:

[b]ased on the analogous law found in the District of Columbia, the views espoused by the Second and Eighth Circuits, and in conjunction with the underlying public policy of voidability, the Court finds that contracts entered into by persons who are mentally incompetent are not void, but merely voidable at the election of the incompetent individual, i.e., Ms. Speleos or her representatives.

Thus, the trial court focused on the actions of Speleos and her representatives to determine whether the voidable lease had been subsequently ratified or disaffirmed.

While the trial court acknowledged that there seemed to have been some "confusion" regarding the status of the lease, it ultimately concluded that Ms. Bradley, Speleos' conservator, did not disaffirm the lease because she never made an "unequivocal statement repudiating the lease agreement." Specifically, the trial court noted that while Bradley told appellees they had to vacate the Property, she also said that it "was not the highest priority." The trial court also found that Bradley was not clear about why she refused to accept appellees' rent payments. Finally, the trial court credited appellee Sheilla Banks' testimony that Bradley at one point admitted the lease was valid, and the court noted that Bradley did nothing to have the lease set aside. After weighing all the evidence, the trial court found for appellees, concluding that the lease had not been disaffirmed, and therefore did not award possession of the Property to appellant.

Appellant then filed a motion for reconsideration, arguing that Bradley had, in fact, disaffirmed the leaseand also emphasizing, in the alternative, that the Estate, through personal representative Pizzulo's signature of the settlement agreement, had disaffirmed the lease. In particular, appellant highlighted the affidavit that the Estate executed as part of the settlement, which said that "there were no valid leases, subleases, verbal rental agreements or permissive tenants permitted or allowed on the property." In denying the motion, the trial court reaffirmed its earlier determination that Bradley had not disaffirmed the lease because she was "never clear about her intentions." Ultimately, the trial court held that the affidavit did not disaffirm the lease because Pizzulo, the Estate's personal representative, "signed the affidavit without any knowledge about whether there were, in fact, any leases, valid or invalid, on the property." The trial court reasoned that because Pizzulo signed the affidavit without knowing whether there were any leases on the Property, she did not know "whether there was a contractual obligation to disaffirm," so the affidavit could not constitute a valid statement of disaffirmance.*fn8

II. Analysis

On appeal, appellant challenges two key factual findings supporting the trial court's legal conclusion that the lease was not disaffirmed: (1) that Bradley never "clearly disaffirmed the lease"; and (2) that the Estate was "without any knowledge about whether there were . . . any leases . . . on the property." Appellant also argues that the trial court erred as a matter of law in reasoning that the Estate could not have disaffirmed the lease without specific knowledge that the lease existed. Lastly, appellant asserts that we should be compelled by Sullivan, the longstanding precedent in this jurisdiction, to void the lease because the trial court found that Speleos was mentally incompetent at the time she signed the lease.*fn9 Because we agree with appellant that Sullivan binds us to a determination that the lease was void as a matter of law, we need not - and do not - reach appellant's other grounds for appeal.

Whether a contract is void or voidable is a matter of law, and therefore our analysis begins with de novo review of the trial court's determination that the lease was not void ab initio, but merely voidable. See DSP Venture Grp., Inc. v. Allen, 830 A.2d 850, 852 (D.C. 2003). In reaching this determination, the trial court relied heavily on cases from outside this jurisdiction, concluding that, "the District of Columbia has not considered this particular issue . . . ." As such, the trial court opted to adopt the modern view, followed by a majority of the states, that "contracts entered into by persons who are mentally incompetent are not void, but merely voidable at the election of the incompetent individual," - here, Ms. Speleos or her representatives. In reaching this conclusion notwithstanding Sullivan and Martin II, the trial court committed legal error.

This is not a matter of first impression in the District of Columbia. In 1892, the Supreme Court of the District of Columbia in General Term decided Sullivan, supra, 20 D.C. (9 Mackey) at 401, and held that "the deed of an insane person is void, and therefore cannot be ratified by acts in pais." While Sullivan may not represent the modern rule in contract law, it is binding upon this court. The United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") has acknowledged the Supreme Court of the District of Columbia in General Term as its predecessor court,*fn10 and we have recognized that the decisions of the D.C. Circuit rendered prior to February 1971, as well as the decisions of this court, "constitute the case law of the District of Columbia." M.A.P. v. Ryan, 285 A.2d 310, 312 (D.C. 1971). As neither this court en banc nor the D.C. Circuit (prior to 1971) has overturned or announced a departure from the holding in Sullivan, it remains the law in the District of Columbia.*fn11

In Sullivan, the heirs of a property owner successfully sought ejectment of the buyer of the owner's property on the grounds that the sale was void due to the fact that the owner was "not apparently sane." Sullivan, supra, 20 D.C. (9 Mackey) at 397-400. The buyer appealed and sought a new trial on the grounds that the trial court wrongly denied its proposed jury instruction that the heirs ratified the sale by accepting the sale's proceeds as part of their inheritance. Id. at 400-01. In affirming the trial court's decision, the Sullivan court relied upon the U.S. Supreme Court's decision in Dexter v. Hall, 82 U.S. (15 Wall.) 9 (1872). In Dexter, the U.S. Supreme Court held that "a power of attorney executed by an insane person, or one of unsound mind, is absolutely void." 82 U.S. (15 Wall.) at 26 (emphasis added). Before ruling that such legal documents were not merely voidable, but rather void, the U.S. Supreme Court reasoned that:

[I]t is difficult to perceive how one incapable of understanding, and of acting in the ordinary affairs of life, can make an instrument the efficacy of which consists in the fact that it expresses his intention, or, more properly, his mental conclusions. The fundamental idea of a contract is that it requires the assent of two minds. But a lunatic, or a person non compos mentis, has nothing which the law recognizes as a mind, and it would seem, therefore, upon principle, that he cannot make a contract which may have any efficacy as such.

Id. at 20. Moreover, the Court explained that while contracts with minors were merely voidable, and not inherently void, such a rule was unsatisfactory for the governance of contracts with persons found mentally incapacitated. Id. at 21. While a minor presumably would gain sufficient mental capacity as he or she matured, it was thought (at the time) that similar improvement cannot be expected in the case of a mentally incapacitated person, and, therefore, such a person would have "no protection if his contract is only voidable." Id.; cf. Martin II, supra, 270 A.2d at 143 (noting that, where the record is "completely lacking in evidence that appellant was of sound mind or had the requisite mental capacity to execute any documents, ratify any acts of another, or authorize the signing of his name . . . the previous adjudication of incompetence is presumed to be of continuing validity") (emphasis added).

The appellant in Sullivan sought to differentiate Dexter by arguing that its holding was limited to the specific legal documents at issue in that case, and that the U.S. Supreme Court did not explicitly extend its ruling to other contracts. Sullivan, supra, 20 D.C. (9 Mackey) at 402. However, the Sullivan court rejected that argument. While acknowledging that the U.S. Supreme Court's ruling in Dexter did not explicitly include all contracts, the Sullivan court "nevertheless [felt] bound to recognize, in so full and careful a discussion, a deliberate intention of the court to establish a rule." Id. And so, the then-highest court*fn12 in the District of Columbia held that a deed executed by a mentally incapacitated person is void ab initio and not subject to confirmation. See id. at 401-02.

Moreover, not only have we failed to overturn Sullivan, but we have explicitly followed it. In Martin II, supra, 270 A.2d at 143, we cited to Sullivan - and to Dexter - to support our holding that benefit papers filed by a war veteran who was adjudicated mentally incompetent were inherently void due to the veteran's mental condition. Specifically, we cited to Sullivan for the proposition that, "Appellant, while [mentally incompetent], was incapable of executing contracts, deeds, powers of attorney, or other instruments requiring volition and understanding." Martin II, supra, 270 A.2d at 143 (emphasis added).

Our recognition that Sullivan remains the law of this jurisdiction should not be viewed as a complete rejection of the trial court's thorough analysis of contract jurisprudence in its findings and judgment. We agree with the trial court's conclusion that American contract law has largely evolved since the days of Sullivan, and that the modern rule followed by a majority of states*fn13 is "that such a transaction would be simply voidable." Moreover, as the trial court noted by citing to analogous cases, District of Columbia law adopts the voidable rule in other legal contexts. See Martin I, supra, 240 A.2d at 365 (holding that statute provides that a marriage contracted by a person who was adjudged, and known to have been, mentally incompetent was voidable, but not void ab initio); Hurwitz, supra, 193 A.2d at 360 (acknowledging the general rule that the contracts of a minor are voidable at the minor's option, and extending the rule to contracts between two minors).*fn14 In its order, the trial court explained that allowing persons found mentally incompetent to "void at their election contracts entered into during periods of infancy or incompetency is grounded in the public's interest in demanding legal protection of those individuals' personal as well as property rights . . . ." (internal quotation marks and citation omitted). It may well be that the majority rule that the contracts of persons found mentally incompetent are not inherently void, but merely voidable at their election, better protects both the personal and property rights of those individuals than the holding in Sullivan does. But the D.C. Supreme Court's decision in Sullivan and our own decision in Martin II constrain us from addressing the merits of that question here. We are bound by our own rule that "no division of this court will overrule a prior decision of this court or refuse to follow a decision of the United States Court of Appeals [for the District of Columbia Circuit] rendered prior to February 1, 1971, and that such result can only be accomplished by this court en banc." M.A.P., supra, 285 A.2d at 312. Unless we convene en banc and decide to adopt the majority rule, we remain bound by Sullivan and the contracts of mentally incompetent persons are inherently void in the District of Columbia.

As Sullivan remains the law of the District of Columbia, the lease between Speleos and appellees was void as a matter of law because Speleos was mentally incompetent at the time that she entered into the lease agreement with appellees. In light of Sullivan, we are compelled to hold that the trial court's legal determination, that the lease was voidable instead of void, was in error. Accordingly, we reverse the trial court's order, and we remand for further proceedings consistent with this opinion.*fn15

So ordered.


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