Williams v. District of Columbia, No. 03-CV-1271.

• Decision Date: 22 June 2006
• Docket Number: No. 03-CV-1271.
• Citation: Williams v. District of Columbia, 902 A.2d 91 (D.C. 2006)
• Parties: Donna L. WILLIAMS, Appellant, v. DISTRICT OF COLUMBIA, et al., Appellees.
• Court: D.C. Court of Appeals

Page 91

902 A.2d 91

Donna L. WILLIAMS, Appellant, v.DISTRICT OF COLUMBIA, et al., Appellees.

No. 03-CV-1271.

District of Columbia Court of Appeals.

Argued December 7, 2005.

Decided June 22, 2006.

Donna M. Doblick, Pittsburgh, PA, with whom Edward J. McAndrew, Washington, DC, was on the brief, for appellant.

James C. McKay, Jr., Senior Assistant Attorney General, with whom Robert J. Spagnoletti, Attorney General for the District of Columbia, and Edward E. Schwab, Deputy Attorney General, were on the brief, for appellees.

Before SCHWELB and FARRELL, Associate Judges, and NEBEKER, Senior Judge.

NEBEKER, Senior Judge:

I.

The Consumers United Insurance Company("CUIC") appeals the Superior Court's decision to grant appelleeDistrict of Columbia's motion for summary judgment.CUIC argues that the District of Columbia defrauded CUIC when the parties entered into an agreement in which the District's agents lacked the authority to bind the District.We detect no error, and therefore, affirm.

II.

In 1985, CUIC entered into a "Tri-Party Agreement"("the Agreement") with the District of Columbia's Department of Housing and Community Development("DHCD") and the Trust for Public Land ("TPL") in order to carry out what the parties called the Parkside Project.The Agreement provided that TPL would purchase a parcel of land in Northeast Washington to prepare for sale to a developer.CUIC would loan TPL the funds to buy the property.Paragraph 3(e) of the Agreement contained a provision whereby, upon CUIC's demand, but no sooner than 18 months after the Agreement was signed, the District was required to purchase the CUIC Note and the CUIC Deed of Trust ("the Note and Deed"), and retake title to the property.¹To this end ¶ 5(e) of the Agreement ("the express warranty") explicitly provided that DHCD had set aside funds for the project, that it had the authority to enter such an agreement, and that performance of the Agreement would not violate any laws.²DHCD also represented to CUIC separately that it had the authority to enter into the Agreement, that the Agreement was legal and enforceable, and that its performance would not violate any law.Madeleine Petty, who at the time was director of DHCD, made specific, written representations to CUIC that the District had committed sufficient funds to perform its obligations under the Agreement.In 1989, David Dennison(who had by then assumed directorship of DHCD) executed an addendum to the Agreement, ratifying the Agreement's original provisions.

In July 1996, CUIC expressed its desire to invoke ¶ 3(e).Only then did DHCD convey its belief that ¶ 3(e) was unenforceable, and that the funds had never, in fact, been set aside in the DHCD annual appropriations in 1985 or ensuing annual appropriations to purchase the Note and Deed.³However, CUIC did not attempt to formally exercise its rights under ¶ 3(e) until February 1999, at which time DHCD refused, claiming that the Agreement was unenforceable.

In July 1999, Donna Williams, as receiver for CUIC, filed a complaint in Superior Court against the District.The complaint contained fourteen counts, including fraud.The District moved to dismiss, on the grounds that CUIC did not comply with the provisions of D.C.Code § 12-309, requiring that tort claimants wishing to sue the District send a letter to the Mayor within six months of the injury, setting forth certain information.The trial court denied the motion.

Both parties then made motions for summary judgment.The trial court found that the provisions in question violated 31 U.S.C. § 1341(2003)(often referred to as the Anti-Deficiency Act), and were therefore void ab initio.The court further rejected CUIC's claim of fraud, concluding in light of settled law that, under the circumstances, CUIC could not reasonably rely on promises by District officials."Nothing,"the court added, "prevented CUIC from demanding evidence of an appropriation covering the [District's contractual commitment] before entering into the transaction."The court, therefore, held in favor of the District.CUIC appealed, but only as to the fraud claim.

III.

We review orders granting summary judgment de novo.Tobin v. John Grotta Co.,886 A.2d 87, 89(D.C.2005).The standard on appeal is identical to that used by the trial court: a motion for summary judgment should be granted where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.Id.

In cases involving commercial contracts negotiated at arm's length, a plaintiff claiming fraud must establish by clear and convincing evidence that, inter alia,"the defrauded party's reliance [was]reasonable."⁴Hercules & Co. v. Shama Rest. Corp.,613 A.2d 916, 923(D.C.1992)(emphasis in original).Because we hold that under these facts, CUIC failed to show that its reliance was reasonable, we affirm the trial court's grant of summary judgment.⁵

In light of the principles now codified at 31 U.S.C. § 1341,⁶the Supreme Court of the United States and other federal courts have explicitly and repeatedly held that all contracts for future payments of money, in advance of or in excess of existing appropriations, are void ab initio.Hercules Inc. v. United States,516 U.S. 417, 427, 116 S.Ct. 981, 134 L.Ed.2d 47(1996);Goodyear Tire & Rubber Co. v. United States,276 U.S. 287, 66 Ct.Cl. 764, 48 S.Ct. 306, 72 L.Ed. 575(1928);Leiter v. United States,271 U.S. 204, 46 S.Ct. 477, 70 L.Ed. 906(1926);see, e.g., E.I. du Pont de Nemours & Co. v. United States,365 F.3d 1367, 1374(Fed.Cir.2004);RCS Enters. v. United States,57 Fed.Cl. 590, 594(2003).

CUIC claims that the Act is inapplicable here because ample HUD "block grant" funds were available to DHCD in 1999, when CUIC attempted to exercise the ¶ 3(e) provisions.⁷Therefore, urges CUIC, appropriations were unnecessary; the District merely had to distribute some of the HUD entitlement monies to DHCD so that the agency could purchase the Note and Deed.However, this line of reasoning evinces a fundamental misunderstanding of 31 U.S.C. § 1341.Paragraph 3(e) promised a payment whose amount would be determined solely by CUIC at some future, unspecified date (if ever), but no sooner than 18 months after the signing of the Agreement.Because the ¶ 3(e) option could not be exercised within the current fiscal year in which the Agreement was signed, it was voided by the 31 U.S.C. § 1341(a)(1)(B) prohibition on any "payment of money before an appropriation is made."With certain exceptions not relevant here, the government must affirmatively reauthorize its multi-year contracts on an annual basis.Good-year Tire & Rubber Co., supra,276 U.S. at 291-92, 48 S.Ct. 306;Leiter, supra,271 U.S. at 207, 46 S.Ct. 477;see alsoLee by Lee v. United States,124 F.3d 1291, 1295(Fed.Cir.1997)(under 31 U.S.C. § 1502, "funds appropriated for one year may not be used for needs of another subsequent year");Solar Turbines Int'l v. United States,3 Cl.Ct. 489, 495(1983)("Congress appropriates funds for only a single year's obligations, and the Anti-Deficiency Act prohibits anyone from obligating the government in excess of the dollars appropriated by Congress"(footnote omitted)).Here, the record reveals that funds were never appropriated to comply with the Agreement in 1985, and it is undisputed that no such appropriation was made against available funds in 1999.

Moreover, because ¶ 3(e) was never valid in the first place, the existence vel non of any subsequent HUD funds is irrelevant.⁸A contract will only bind the government in subsequent years if appropriations are made in those "out years," and if the government affirmatively renews the contract.Goodyear Tire & Rubber Co., supra,276 U.S. at 291-92, 48 S.Ct. 306;Leiter, supra,271 U.S. at 207, 46 S.Ct. 477;see alsoUnion Pac. R.R. Corp. v. United States,52 Fed.Cl. 730, 734-35(2002).Here, neither condition was present, and ¶ 3(e) is, therefore, void ab initio.⁹

CUIC's reliance on the express warranty at ¶ 5(c) is also unavailing.In accordance with Supreme Courtcase law, this court has repeatedly held that one who contracts with a government agent is constructively notified of the limits of that agent's authority, and any reliance on contrary representations cannot be reasonable.Leonard v. District of Columbia,801 A.2d 82, 86(D.C.2002);District of Columbia v. Greene,806 A.2d 216, 222 n. 7(D.C.2002)("persons dealing with a municipal corporation through its agent are bound to know the nature and extent of the agent's authority")(quotingCoffin v. District of Columbia,320 A.2d 301, 303(D.C.1974));Chamberlain v. Barry,606 A.2d 156, 159(D.C.1992);Strong v. District of Columbia,1 Mackey 265(D.C.Sup.1881).See alsoFederal Crop Ins. Corp. v. Merrill,332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10(1947).¹⁰

A government agent cannot validate a contract merely by averring that she is authorized to enter it, if no such authority exists; the rule applies with equal force even if "the agent himself may have been unaware of the limitations upon his authority."Merrill, supra,332 U.S. at 384, 68 S.Ct. 1.To permit otherwise would eviscerate the very purpose of the Act.Cessna Aircraft Co. v. Dalton,126 F.3d 1442, 1448-49(Fed.Cir.1997)(Anti-Deficiency Act intended to halt practice by which "[government] officials were obligating funds before they were appropriated by Congress, and then making deficiency requests for appropriations that Congress had little choice in deciding because government agencies had basically committed the United States to make good on its promises");Lopez v. Johns Manville,649 F.Supp. 149, 158(D.Wash.1986), aff'd byLopez v. A.C. & S., Inc.,858 F.2d 712(Fed.Cir.1988)("purpose of the statute is to prohibit anyone from obligating the Government in excess of the dollars appropriated by Congress").Therefore, as a matter of law, it was not possible for CUIC to prove the...