District of Columbia v. Brookstowne Comm., No. 08-CV-264.

• Decision Date: 21 January 2010
• Docket Number: No. 08-CV-264.
• Citation: 987 A.2d 442
• Parties: DISTRICT OF COLUMBIA, Appellant, v. BROOKSTOWNE COMMUNITY DEVELOPMENT COMPANY, Appellee.
• Court: D.C. Court of Appeals

987 A.2d 442

DISTRICT OF COLUMBIA, Appellant, v. BROOKSTOWNE COMMUNITY DEVELOPMENT COMPANY, Appellee.

No. 08-CV-264.

District of Columbia Court of Appeals.

Argued October 28, 2009.

Decided January 21, 2010.

James C. McKay, Jr., Senior Assistant Attorney General, with whom Peter J. Nickles, Attorney General for the District of Columbia, Todd S. Kim, Solicitor General, and Donna M. Murasky, Deputy Solicitor General, were on the brief, for appellant.

Savalle C. Sims, Washington, with whom Eric S. Baxter was on the brief, for appellee.

Before WASHINGTON, Chief Judge, REID, Associate Judge, and PRYOR, Senior Judge.

WASHINGTON, Chief 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),¹ 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,² 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.³ 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.⁴ 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 priority. The District's responses to interrogatories further stated that its "position [is] that it has the authority to transfer the subject property to a for-profit developer."

While the trial court never made an explicit final ruling on the threshold issue of whether DHCD had the statutory capacity to contract with Brookstowne, it did conclude that DHCD had breached its contract to sell the apartment building to Brookstowne and ordered the District to pay $1,395,365.18 in damages. Judgment was entered against the District on November 28, 2007. This timely appeal followed.

II.

We are presented with the question of whether the HHPA permits sales of property to for-profit entities and, if not, whether the District can be estopped from denying the enforceability of a contract on that basis. The District contends that the plain language of the HHPA clearly denies it the authority, and therefore the capacity, to contract to sell property to for-profit entities under the Homestead Program. This is supported, according to the District, by the HHPA's legislative history. In response, Brookstowne argues essentially that the District should be estopped from denying its authority to contract with for-profit entities under the HHPA, that nothing in the HHPA prohibits such sales, and that DHCD regulations expressly allow for "other entities." We address the statutory interpretation and estoppel issues in turn.

As we have noted many times, "[w]e review de novo the trial court's legal conclusions and any issues of statutory construction," Mitchell v. United States, 977 A.2d 959, 968 (D.C.2009), and "[t]he determination whether an enforceable contract exists ... is a question of law," Rosenthal v. National Produce Co., 573 A.2d 365, 369 n. 9 (D.C.1990). We therefore review de novo the trial court's conclusion that the contract was enforceable; the "clearly erroneous" standard of review does not apply. See L.K. Comstock & Co. v. United Engineers & Constructors, Inc., 880 F.2d 219, 221 (9th Cir.1989) ("[F]actual findings as to what the parties said or did are reviewed under the `clearly erroneous' standard, while principles of contract interpretation applied to the facts are reviewed de novo."); United States v. John McShain, Inc., 258 F.2d 422, 103 U.S.App. D.C. 328, 330-31 (D.C.Cir.1958), cert. denied, 358 U.S. 832, 79 S.Ct. 52, 3 L.Ed.2d 70 (1958).

A.

A contract is void or voidable if one of the parties lacked the capacity to enter into it. See CORBIN ON CONTRACTS § 1.4(2), at 1-9 (Desk ed.2009) (hereinafter CORBIN). For government agencies, the extent of the capacity to contract is determined by the scope of their statutorily granted authority. Id. § 27.01, at 27-28 ("Artificial persons such as ... government agencies [a]re traditionally limited to the powers conferred on them by the government that created them. Any attempt by them to contract beyond their conferred powers would be an ultra vires act that would be unlawful and the artificial person could raise its lack of capacity to contract on that basis."). As such, "[i]t is a basic principle of District law that a contracting official cannot obligate the District to a contract in excess of his or her actual authority."⁵ District of Columbia v. Greene, 806 A.2d 216, 222 (D.C.2002) (emphasis added).

Here, the District's authority to contract with Brookstowne pursuant to the Homestead Program is limited to that provided by the HHPA, the enabling statute. As worded at all times relevant to this appeal, the pertinent section of the HHPA, § 45-2706, which is entitled "Program Guidelines," provides the Homestead Program's priority order for transferring large multi-family residential buildings:⁶

(a) Proposals for large multi-family dwellings shall be considered only in accordance...