Jones v. Meridian Towers Apartments, Inc.

• Decision Date: 23 March 1993
• Docket Number: Civ. A. No. 90-2314 SSH.
• Parties: Beulah JONES, et al., Plaintiffs, v. MERIDIAN TOWERS APARTMENTS, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

816 F. Supp. 762

Beulah JONES, et al., Plaintiffs, v. MERIDIAN TOWERS APARTMENTS, INC., et al., Defendants.

Civ. A. No. 90-2314 SSH.

United States District Court, District of Columbia.

March 23, 1993.

Jeffrey Brian O'Toole, Michael R. Diamond, O'Toole, Rothwell, Nassau & Steinbach, Washington, DC, for plaintiffs.

F. Whitten Peters, Williams & Connolly, Washington, DC, for defendants.

OPINION

STANLEY S. HARRIS, District Judge.

Before the Court are defendants' motion for summary judgment on statute of limitations grounds, plaintiffs' motion for leave to amend and to supplement their opposition to defendants' summary judgment motion, defendants' motion to dismiss the amended complaint, defendants John D. Hagner's and William M. Harvey's motion to dismiss, and the oppositions and replies thereto.¹ Upon consideration of the entire record, the Court grants plaintiffs' motion to amend and to supplement their opposition and finds that a supplemental reply by defendants is unnecessary to resolve the motion for summary judgment.² The Court also denies defendants' motion for summary judgment, denies their motion to dismiss the amended complaint, and grants in part and denies in part the motion of defendants Hagner and Harvey to dismiss. Although "findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56," the Court nonetheless sets forth its analysis. Fed.R.Civ.P. 52(a).

Background

Plaintiffs bring this action alleging fraud, conspiracy to defraud, violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, breach of contract, rescission, and tortious interference with contract.³ These allegations stem from the conversion into condominiums of a building at 2112 New Hampshire Avenue, N.W., in Washington, D.C., ("the building"), in which plaintiffs were, and plaintiffs Foster and Lanning still are, tenants. Until 1980, the building was a 173-unit rental apartment building subject to the District of Columbia rent control laws. Defendants are Meridian Towers Apartments, Inc. ("MTA"), the contract seller of the condominium units at issue here; Dreyfuss Brothers, Inc. ("Dreyfuss"), the managing agent for MTA and for the owners of units in the building; and several individuals. The individual defendants are Joseph R. Schuble, Sr., a shareholder, officer, and director of MTA and an employee of Dreyfuss; Richard M. Aronoff, a shareholder, officer, and director of MTA and, during the relevant times, a partner in the law firm of Aronoff, David, Harvey & Hagner and successor firms representing MTA ("the law firm"); Richard G. David, the managing general partner of Meridian David Associates ("MDA") and a partner in the law firm; Harvey, a partner in the law firm at the times relevant to the amended complaint; Hagner, a partner in the law firm at the times relevant to the amended complaint; and Stanley J. Wrobel, a partner in the law firm at the times relevant to the amended complaint.

Plaintiffs allege that, in or about 1979, defendants devised a plan to convert the building into condominiums in the hope of making significant profits by removing the building from the strictures of the District of Columbia rent control laws. To accomplish this, the amended complaint alleges, defendants induced the tenant-plaintiffs to agree to the conversion by promising them the chance to purchase their units and by entering into purchase agreements with plaintiffs on which defendants never intended to close. In addition, the amended complaint alleges that defendants fraudulently induced plaintiffs to relinquish their rights under the law and their agreements with defendants.

Facts

In the summer of 1979, the tenants of the building formed a tenants association, the Meridian Towers Tenants Association, Inc., ("Tenants Association"), to represent their interests in the building's conversion. The Tenants Association was the authorized representative of the tenants and all of the plaintiffs were members. See Am.Compl., ¶ 36. The Tenants Association solicited offers from a number of developers to join it in converting the building into a cooperative apartment building or a condominium. MTA sent a proposal to the Tenants Association on October 8, 1979. Pursuant to a contract dated November 26, 1979, and its amendments dated June 30, 1980, and July 2, 1980, (referred to collectively as "the 1979 contract"), MTA and the Tenants Association entered into an agreement regarding the building's conversion into condominiums. Under this agreement, each participating tenant (defined as referring "to all persons entitled to legal occupancy of a single Apartment Unit at the Property as of November 1, 1979") had "an exclusive right to purchase an Apartment Unit at the Property." Defs.' Statement of Undisputed Facts, Ex. 3, ¶¶ IB, IIIA. The 1979 contract also states that:

The Tenants Association and each Participating Tenant, by execution of this Agreement, hereby consents to the conversion of the Property to a condominium ... and the Tenants Association shall ... submit to ... District of Columbia public authorities ... an affidavit stating that the Tenants Association, acting on behalf of its members ..., has agreed to the conversion of the Property to a condominium.

Defs.' Statement of Undisputed Facts, Ex. 3, ¶ VIB.

On various dates in 1981 and 1982, plaintiffs entered into purchase agreements with defendant MTA regarding their respective condominium units. See Defs.' Statement of Undisputed Facts, Ex. 6. These agreements provide in part that:

7. Delay of Closing on Unit. In the event that title is not closed hereunder within 12 months from date of acceptance hereof by Declarant MTA then either Purchaser or Declarant may cancel this Agreement by written notice to the other. If Purchaser or Declarant exercises such option, all sums paid hereunder by Purchaser, including interest earned on the Deposit, shall be returned to Purchaser, this Agreement shall terminate, and neither party shall have any further rights against or obligations to the other. In no such event will Declarant be liable to Purchaser for delays in the closing of title.

Defs.' Statement of Undisputed Facts, Ex. 6., ¶ 7.

In February 1982, an officer of the Tenants Association phoned defendant Schuble inquiring about an extension of the one-year purchase rights. See Defs.' Statement of Undisputed Facts, Ex. 14 (Letter from Joseph R. Schuble to Richard M. Aronoff, dated Feb. 12, 1992). In a letter to defendant Aronoff, defendant Schuble communicated this conversation and stated that he felt "we should generate whatever amendments are necessary to extend the purchase rights of those tenants who took the necessary steps to contract and qualify even though we have not gone to settlement." Id. On April 24, 1992, Steve Otero, sales manager for defendant Dreyfuss Brothers, sent two copies of an addendum to all the contract purchasers with a letter that explained how to execute the addendum and that stated "this addendum extends the date of closing on your unit." See Defs.' Statement of Undisputed Facts, Ex. 16 (Letter from Steve Otero to 2112 Contract Purchasers, dated April 24, 1992). The addendum contained language that modified paragraph 7 above to add the following sentence after the first sentence:

Declarant shall not be entitled to exercise the right of cancellation specified in the prior sentence until after Declarant has notified Purchaser that Declarant is prepared to close on the Unit, and has offered Purchaser an opportunity to close thereon in accordance with the terms of the Unit Purchase Agreement.

Defs.' Statement of Undisputed Facts, Ex. 17.

Only four plaintiffs executed and returned the addendum: Bentley, Hampton, Smith, and Young.

Subsequent to these purchase agreements, MTA entered into a purchase agreement with MDA, dated July 1, 1982, ("the MTA-MDA contract") that transferred to MDA 33 units in the building in exchange for a non-recourse purchase money note in the amount of $2,186,000. See Defs.' Statement of Undisputed Facts, Ex. 7. This group of 33 units included the units on which plaintiffs had entered purchase agreements. Defendants concede, at least for the purposes of the summary judgment motion, that "none of them told the tenants about this sale." See Defs.' Motion for Summary Judgment, at 6. The MTA-MDA contract provided in part that "the Deed will not be immediately recorded. Instead, the Deed will be retained by Declarant in escrow as security for the payment of the Purchase Money Note...." Id. at Ex. 7, addendum at 4. In addition, it also provided that:

Certain of the Apartment Units comprising the Unit the units sold under the MTA-MDA contract are occupied by "Participating Tenants" or "Special Tenants" and are subject to the rental and occupancy rights of the Special Tenants and the purchase rights of the Participating Tenants in accordance with the provisions of the Tenant Agreement of November 26, 1979, as modified by the Modifications dated June 30, 1980. These Apartment Units are sold by Declarant and accepted by Purchaser subject to the rental, occupancy, and/or purchase rights of these Participating Tenants or Special Tenants. Id. at Ex. 7, addendum at 6.

The purchase agreement also provides a mechanism, at least after January 1, 1984, by which MTA could repurchase units to sell to purchaser-tenants:

If any Participating Tenant elects to purchase and qualifies to purchase any Apartment Unit (the "Optioned Apartment Unit"), then and in such event Purchaser MDA agrees to resell and reconvey to Declarant MTA, and Declarant agrees to repurchase from Purchaser, the Optioned Apartment Unit, at a price equal to one hundred five percent (105%) of the purchase price paid by Purchaser for the Optioned Apartment Unit, provided that such repurchase may not occur prior to January 1, 1984. Id. at Ex. 7, addendum at 6.

Although MDA did not record the deed, it filed rent...