City Ctr. Real Estate, LLC v. 1606 7th St. NW, LLC

Decision Date02 December 2021
Docket NumberNos. 18-CV-95 & 18-CV-271,s. 18-CV-95 & 18-CV-271
Citation263 A.3d 1036
Parties CITY CENTER REAL ESTATE, LLC, Appellant, v. 1606 7TH STREET NW, LLC, et al., Appellees.
CourtD.C. Court of Appeals

Kenneth C. Crickman, Washington, with whom Robert C. Cooper was on the brief, for appellant.

Gwynne L. Booth, with whom Richard W. Luchs, Washington, was on the brief, for appellees 1606 7th St NW, LLC, and Donnie V. Hinton.

Timothy G. Casey, Rockville, for appellee Linda M. Low.

Mark H.M. Sosnowsky, with whom Allen V. Farber and Jonathan H. Todt, Washington, were on the brief, for appellee Richard L. McCormack.

Before Beckwith, Associate Judge, and Ruiz and Fisher, Senior Judges.*

Beckwith, Associate Judge:

Sultan Gabre held a lease to 1606 7th Street NW, where he owned and operated a store on the ground floor. After living on the second floor with his family for a few months, Mr. Gabre subleased one of the two rooms, keeping the other room for his personal use. The central question of this case is whether Mr. Gabre continued to use that room as a residential tenant, which would entitle him to rights under the Tenant Opportunity to Purchase Act (TOPA)—a legislative scheme that gives eligible tenants a right of first refusal.1

Richard McCormack, the now-deceased owner of the property, entered an agreement to sell the property to Alex Associates, Inc. (AAI), a sole proprietorship owned by Devin Hinton. In an effort to meet the TOPA requirements, and after consulting his real estate agent, appellee Linda Low, Mr. McCormack submitted an offer of sale to Mr. Gabre and his subtenants. One subtenant assigned his TOPA rights to the appellant, City Center Real Estate, LLC (City Center), and Mr. Gabre assigned his purported TOPA rights to Alex Associates, Inc. Mr. McCormack accepted the bid from Alex Associates, Inc., which assigned the purchase contract to appellee 1606 7th Street NW LLC (1606 LLC), a sole purpose entity co-owned by Devin Hinton and his father, appellee Donnie Hinton.

City Center filed a complaint alleging that because Mr. Gabre was only a commercial tenant, he was not a tenant for TOPA purposes and thus had no TOPA rights to assign to 1606 LLC. The trial court granted summary judgment against City Center, ruling that Mr. Gabre used the upstairs floor for residential occupancy and that there was no genuine dispute of material fact that would require a jury to address the question. We reverse.

I. Background

The record on appeal shows the following facts. Mr. McCormack leased the property, a two-story building, to Mr. Gabre in 2012. The written lease was not produced for the litigation of this case,2 but it is undisputed that the lease gave Mr. Gabre the right to operate a grocery store on the ground level of the building. The parties agreed that the second story consisted of two rooms, and Mr. Gabre testified that one of the rooms was larger than the other. There was no dispute that for the first six months of his tenancy, Mr. Gabre and his family—his three children and their mother—resided in the larger room. Mr. Gabre and his family then moved and rented the larger room to Solomon Woldegebriel and Grmay Temesgen.

A couple of years later, Mr. McCormack entered into a contract to sell the property to Alex Associates, Inc. for $830,000.3 Email correspondence between Mr. McCormack, Devin Hinton, and their real estate agents, "The Linda Low Team" from Long & Foster Real Estate, Inc. (L&F), show the following facts. L&F initially stated that the property was "subject to TOPA" with respect to Mr. Woldegebriel and Mr. Temesgen, but expressed doubt about whether Mr. Gabre lived in the building. Devin Hinton told L&F that Mr. Gabre "claims he is living there with his wife," but the L&F team responded that "according to the two other fellows upstairs he is not living there." L&F later told Devin Hinton that TOPA notice "ha[d] to be issued" to Mr. Gabre because he claimed he was living there. L&F therefore issued an Offer of Sale and Tenant's Opportunity to Purchase to Mr. Gabre, Mr. Woldegebriel, and Mr. Temesgen.

Sima Tessema, the sole owner of City Center, testified that he spoke with Mr. Woldegebriel about the sale of the building, after which Mr. Woldegebriel assigned his TOPA rights to Mr. Tessema. Mr. Tessema agreed to pay Mr. Woldegebriel in exchange for the assignment, contingent on closing. Mr. Woldegebriel notified L&F that he had assigned his right to purchase to City Center. City Center then notified L&F and Mr. McCormack of its status as a TOPA assignee and its interest in exercising its right to purchase the property. City Center provided a purchase contract for $830,000 to match the third party contract. Meanwhile, Mr. Gabre asked the D.C. Department of Housing and Community Development (DHCD) whether he had any rights under TOPA. Mr. Gabre stated in an email that he had a business on the first floor and a "residence" on the second floor and that the realtors had "threaten[ed]" him. DHCD informed Mr. Gabre that he was entitled to TOPA rights if he lived in the residential part of the building. Mr. Gabre forwarded this email exchange to Mr. McCormack, who shared it with the L&F team. L&F forwarded the exchange to Devin Hinton.

Mr. Gabre testified that Devin Hinton came into the store and discussed the sale of the building with Mr. Gabre, who told Mr. Hinton that he lived in the smaller room and that two other renters lived in the larger room. Soon thereafter, Mr. Gabre assigned his TOPA rights to Alex Associates, Inc. in exchange for $30,000. Alex Associates, Inc. notified Mr. McCormack that it wished to exercise its TOPA rights as Mr. Gabre's assignee. Alex Associates, Inc. negotiated the purchase price to $850,000. Mr. McCormack selected Alex Associates, Inc.’s bid and the parties ratified a contract for a purchase price of $850,000. Alex Associates, Inc. later assigned the contract to 1606 LLC—the current owner of the property.

City Center filed a complaint against 1606 LLC, Alex Associates, Inc.,4 Donnie Hinton, Mr. McCormack, Ms. Low, and Mr. Gabre, alleging common law fraud, civil conspiracy, intentional interference with contractual relations, violations of the District's Consumer Protection Procedures Act, intentional interference with business relations, and violations of TOPA. The crux of City Center's complaint was that the parties worked together to falsely represent Mr. Gabre's tenancy as residential, rather than commercial, so that Alex Associates, Inc. would win the contract over Mr. Tessema.

The defendants filed motions for summary judgment, arguing that City Center could not prevail on any of its claims because every claim rested on the theory that Mr. Gabre was not a residential tenant entitled to TOPA rights.5 The trial court granted the motions for summary judgment, ruling that there was no dispute that the "second floor of the property was used exclusively as residential property," that the tenant before Mr. Gabre had used the upstairs "solely for residential purposes," or that Mr. Gabre had "separated the upstairs after moving his family to Virginia so that he could sublet a room to his ‘friends’ while maintaining a residence for his own use or occupancy." This appeal followed.6

II. Analysis

City Center argues that there was a genuine dispute over Mr. Gabre's purported status as a residential tenant, which bears on the question whether Mr. Gabre had TOPA rights that could be assigned to Alex Associates, Inc. Answering that question requires first determining what it means to be a tenant under TOPA.

A.

The question whether summary judgment was properly granted is a question of law, which we review de novo. Allman v. Snyder , 888 A.2d 1161, 1165 (D.C. 2005). Summary judgment is appropriate when, viewing the facts in the light most favorable to the non-moving party, the court determines there is no genuine dispute of material fact and that the moving party is entitled to judgment as a matter of law. See, e.g. , Cormier v. District of Columbia Water & Sewer Auth. , 959 A.2d 658, 663 (D.C. 2008). "If a moving defendant has made an initial showing that the record presents no genuine issue of material fact, then the burden shifts to the plaintiff to show that such an issue exists." Beard v. Goodyear Tire & Rubber Co. , 587 A.2d 195, 198 (D.C. 1991) (citation omitted). The non-moving party cannot meet that burden and avoid summary judgment " ‘merely by impugning [the] honesty’ of the moving party's witness". See Bradshaw v. District of Columbia , 43 A.3d 318, 323 (D.C. 2012) (citing McCullough v. Wyandanch Union Free Sch. Dist. , 187 F.3d 272, 280 (2d Cir. 1999) ) (alterations in original).

TOPA extends a panoply of rights to residential tenants whose landlord proposes to sell the property or discontinue its use as rental housing. See 1836 S St. Tenants Ass'n, Inc. v. Estate of B. Battle , 965 A.2d 832, 838 (D.C. 2009). Such rights include the right of first refusal on any sale contract the landlord negotiates with a third party and the right to assign one's TOPA rights to a third party. See D.C. Code § 42-3404.08 (2020 Repl.); Allman , 888 A.2d at 1167. These rights align with one of the District of Columbia Council's stated purposes of enacting TOPA: "To discourage the displacement of tenants through conversion or sale of rental property, and to strengthen the bargaining position of tenants toward that end ...." Id. § 42-3401.02(1). The Council aimed to empower "tenants who are most directly affected by the conversion" of rental housing units into condominiums or cooperatives, and to "more effectively assure that housing will be preserved at a cost which can be afforded by current tenants who would otherwise be involuntarily displaced." Id. § 42-3401.01(7).

The issue in this case is if Mr. Gabre was a "tenant" entitled to TOPA rights.

Under the definitions that apply to TOPA, a "tenant" is any person "entitled to the possession, occupancy or benefits of a rental unit within a housing...

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