Berman v. Watergate West, Inc.

Decision Date06 September 1978
Docket NumberNo. 11145.,11145.
Citation391 A.2d 1351
PartiesEdith A. BERMAN, Appellant, v. WATERGATE WEST, INC., a corporation, and Riverview Realty Corporation, Appellees.
CourtD.C. Court of Appeals

Edith A. Berman, pro se.

Mark P. Friedlander, Washington, D. C., for appellee Watergate West, Inc.

Harlan L. Weiss, Washington, D. C., with whom Leonard C. Greenebaum, Washington, D. C., was on the brief, for appellee Riverview Realty Corp.

Before KELLY, NEBEKER and MACK, Associate Judges.

MACK, Associate Judge:

Appellant is a tenant-shareholder in the Watergate West housing cooperative. Appellees are Riverview Realty Corporation ["Riverview"], which is the company that marketed the cooperative apartments to the public, and Watergate West, Inc. ["Watergate West"], which is the cooperative itself. The suit was filed in 1971 for damages flowing from the breach of express and implied warranties. The complaint alleges that from the time appellant moved into the cooperative in 1969, her apartment was defective in many respects.

In 1976, a jury trial commenced. At the close of appellant's case, before either Watergate West or Riverview had presented their defenses, the trial court directed a verdict for both appellees, ruling that appellant had failed to show any contractual obligation on the part of Riverview, and had failed to prove damages. In addition, the trial court ordered that appellant pay appellees' costs of action. In order to avoid further expense, appellant filed the instant appeal pro se.

From one point of view this is a simple case. It involves a mass-produced product which allegedly reached the ultimate consumer in a defective state and caused property damage. In such circumstances, the law is clear that the consumer has a cause of action against all who participated in placing the product into the stream of commerce. The case, however, has not proved simple. Confusion arose partly because of the way in which the particular product was marketed (through a cooperative) and partly because of the use of one mischievously ambiguous word (warranty). In reversing, we do not pretend to deal with every issue which could be raised on the basis of the facts here. We wish only to clarify that the remedies of the injured consumer in such a situation do "not . . . depend upon the intricacies of the law of sales." Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 64, 27 Cal.Rptr. 697, 701, 377 P.2d 897, 901, (1962) (en banc).


A developer of mass-produced housing has a number of choices as to how to market his completed product. One way in which that product can be marketed is as a cooperative. Where this is done, the developer does not sell the individual housing units directly to the ultimate consumer. Rather, the developer sells the whole building to a corporation [the "cooperative"] of which the ultimate consumer is a stockholder, and from which that consumer then rents an individual unit. The marketing of the Watergate West housing cooperative proceeded as follows.

In 1964, Watergate Improvements Associates ["WIA"], a limited partnership, was formed to sponsor a housing project. A subsidiary of WIA, Watergate Construction Corporation, was formed to build the cooperative. Another subsidiary of WIA, Riverview Realty Corporation, acted as sales agent.

On August 24, 1967, before construction of the building began, Watergate West, the cooperative, was chartered. From that date until June 1969, when an independent board of directors was elected, WIA controlled Watergate West.

On August 25, 1967, a prospectus was issued describing the project. The front page of the prospectus states in bold letters:

                WATERGATE WEST INC
                PRESENTED BY
                  Plan of Cooperative Organization and Subscription
                  and Deposit Agreement
                The closing page of this document states
                DATED THIS 25TH DAY OF AUGUST, 1967.
                ASSOCIATES (a limited partnership)

Persons wishing to buy an interest in the planned cooperative signed the subscription and deposit agreement referred to in the prospectus. The agreement is, on its face, between the subscribing member and the cooperative, Watergate West. Appellant signed such an agreement on September 19, 1967.

In 1969, after the cooperative was constructed, the subscribing members signed a Cooperative Apartment Proprietary Lease and Occupancy Agreement which gave them the right to occupy their apartments for 99 years in exchange for the payment of a monthly assessment. Like the stock subscription agreement, the lease is, on its face, between the subscribing member and the cooperative, Watergate West.

Appellant's lease agreement is dated January 14, 1969. On January 14, 1969, however, Watergate West did not own the building. As a result, appellant also signed a subsidiary agreement with Riverview whereby she agreed to remit monthly rent payments to Riverview if she should occupy her apartment before the cooperative acquired title to the building. Appellant moved into her apartment on January 28, 1969. The cooperative acquired title to the building on May 1, 1969.


As noted above, the complaint in this case alleges breach of express and implied warranties. More particularly, the complaint alleges that appellees breached these warranties by delivering to appellant an apartment containing numerous defective appliances; that these appliances included a defective air conditioning system; that this air conditioning system caused damage to the parquet floors, the wall, and the wool rug and pad in her bedroom; and "that said breaches of warranty have continued from the date of said agreement, January 14, 1969 to the present . . . [and] have rendered said apartment at least 50% uninhabitable from January 1969 until the present."

Watergate West responded to this complaint as follows:

That on January 14, 1969, when the plaintiff first occupied her apartment . . . she occupied it as a tenant, and at that point all the defects alleged by her to exist, did exist. At that time she dealt exclusively with Riverview Realty Corporation, which was the agent for the promoters of the project. That Watergate West, Inc. did not become the owner of the building . . . until May 1, 1969, long after all of these defects had been noted and objected to.

Riverview answered the complaint by denying the existence of any express or implied warranties. In addition, Riverview filed a motion for summary judgment, supported by an affidavit and memorandum, alleging that Riverview could not be held liable on the contracts between appellant and Watergate West because "Riverview Realty Corporation acted as agent for Watergate West, Inc. in negotiating with the plaintiff and other purchasers of cooperative apartments in said building, and the fact of its agency and the identity of its principal were disclosed to the plaintiff."

Appellee Watergate West, but not appellant, filed a memorandum in opposition to Riverview's motion. In that memorandum, Watergate West contended that Riverview "[had not acted] as agents for Watergate West but [had acted] for themselves and the other promoters." Watergate West then went on to argue that appellant did have a valid cause of action against Riverview, because "at the time the building was conveyed [to Watergate West] it was defective in many respects, including the items alleged by the plaintiff herein."

Riverview's motion for summary judgment was denied and the case went to trial. At trial, appellant recounted the circumstances of her purchase of an interest in the cooperative. She then described the defects she found in the apartment when she moved in, the most serious of which was the malfunctioning of the air conditioning unit. According to appellant's testimony, the air conditioner created such serious humidity in her bedroom that she had to keep the door to that room closed and sleep in her living room for two years, until the unit was repaired. Another witness, a member of the by-then independent board of directors of the cooperative, fully corroborated appellant's testimony in this regard.

At the close of appellant's case, Riverview moved for a directed verdict, arguing as follows:

[COUNSEL FOR RIVERVIEW]: Your Honor, starting in at the beginning we move that there has been absolutely no showing in this case of any liability on the part of Riverview Realty. Backing up one step further, there has been shown no duty on the part of Riverview Realty Corporation.

Your Honor, the complaint in this case alleges the breach of warranties made — allegedly made by Watergate West, Inc.Riverview Realty Corporation. Those warranties — there has been no shred of testimony concerning any warranties made by Riverview.

. . . . .

The two agreements that have been entered into evidence [the stock subscription agreement and the proprietary lease], show on their face, one, that Riverview Realty Corporation was not a party to this agreement. They are not executed by or on behalf of Riverview Realty Corporation. Further, the two agreements show, and these portions were read to the jury, what the various connections were between the parties. The Riverview Realty Corporation was a managing agent for Watergate West, Inc. Watergate West — Riverview was a managing and sales agent and for a disclosed principal. So there has been running no duty.

. . . . .

Further, there is a stipulation among counsel that as used in these agreements, and we read them to the jury, the sponsor, Watergate Improvements, is not a party to this suit. The sponsor presented these documents. Riverview was the managing company for a disclosed principal, Watergate Improvements [emphasis supplied] and Watergate West, Inc. technically wasn't in existence until May 1969,1 so they

THE COURT: It's right there what bothers me. These documents are headed Watergate West, Inc., aren't they?


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