718 Associates v. Banks

• Decision Date: 23 June 2011
• Docket Number: 09–CV–744.,Nos. 08–CV–1571,s. 08–CV–1571
• Citation: 21 A.3d 977
• Parties: 718 ASSOCIATES, Trustee 718 NW Trust, Appellant,v.Bryant BANKS and Sheilla Banks, Appellees.
• Court: D.C. Court of Appeals

21 A.3d 977

718 ASSOCIATES, Trustee 718 NW Trust, Appellant,

v.Bryant BANKS and Sheilla Banks, Appellees.

Nos. 08–CV–1571

09–CV–744.

District of Columbia Court of Appeals.

Submitted May 18, 2010.Decided June 23, 2011.

Morris R. Battino, Washington, DC, was on the brief for appellant.Jonathan K. Gitlen, Student Attorney (No. 12055), with whom Dorene M. Haney, Supervising Attorney, was on the brief, for appellees.Before RUIZ, BLACKBURNE–RIGSBY and THOMPSON, Associate Judges.BLACKBURNE–RIGSBY, Associate Judge:

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396, 401 (1892), and subsequently followed in Martin v. Martin, 270 A.2d 141, 143 (D.C.1970) (“ Martin II ”), is no longer applicable because it is contrary to the rule followed in a majority of the states. ¹ 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.² 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 lease regarding 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 ³ 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,⁴ 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.” ⁵ 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.” ⁶ 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....” ⁷ 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 lease and 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...