Opinion ID: 1540617
Heading Depth: 1
Heading Rank: 7

Heading: Construing the Sale Act

Text: It is clear that the starting point for interpreting a statute is the language of the statute itself, and that, [a]bsent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive. Consumer Product Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980). Moreover, if the words are clear and unambiguous, we must give effect to [the statute's] plain meaning, James Parreco & Son v. District of Columbia Rental Hous. Comm'n, 567 A.2d 43, 45 (D.C.1989) (citations omitted), keeping in mind that the intent of the legislature is to be found in the language which it has used, id. at 46 (citing United States v. Goldenberg, 168 U.S. 95, 102-03, 18 S.Ct. 3, 4, 42 L.Ed. 394 (1897)); Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 753 (D.C. 1983) (en banc), and words should be construed according to the meaning commonly attributed to them. United States v. Thompson, 347 A.2d 581, 583 (D.C.1975). In sum, `[t]he words used, even in their literal sense, are the primary and ordinarily the most reliable source of interpreting the meaning of any writing.' Parreco, supra, 567 A.2d at 46 (quoting Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff'd, 326 U.S. 404, 66 S.Ct. 193, 90 L.Ed. 165 (1945)). [14] In Parreco, supra, 567 A.2d at 45, landlord petitioner sought to overturn the Rental Housing Commission's ruling that equity and interest payments refer only to those mortgages or encumbrances of which the proceeds have been reinvested in the housing accommodation. In finding in favor of landlord, we applied the plain language of the statute, [15] noting both the rent stabilization program's need [t]o protect low and moderate income tenants from the erosion of their incomes from increased housing costs[,] D.C.Code § 45-1502(1) (1986 Repl.), and the sometimes competing goal ... to provide landlords and developers with a reasonable rate of return on their investments. Parreco, supra, 567 A.2d at 44 (citation and internal quotation omitted). Similarly, the tenant-appellant in Gibson v. Johnson, 492 A.2d 574 (D.C.1985), maintained that a father who transferred title in a rental building to his son was still the owner of the premises under the Rental Housing Act's rent-control provisions, arguing that given a liberal definition of the term, [appellee] should not be able to evade rent control provisions by conveying the property to one who qualifies for the exemption. Id. at 577 (footnote omitted). Acknowledging that [t]his court, of course, will not look beyond the plain meaning of a statute when the language is unambiguous and does not produce an absurd result, id. (citation omitted), we held that [a]n examination of the record reveals that [appellee] may have had as one motive in conveying the property to his son the evasion of rent control. And as appellant suggests, this result may not have been desired. Yet, the statute is not ambiguous. It clearly exempts from rent control rental housing of four units or less which is owned by not more than four persons provided the owner(s) has no interest, either directly or indirectly, in any other rental property in the District of Columbia and provided a claim of exemption statement is properly filed with the Rental Accommodations Office. In our view, these criteria have been satisfied. Id. (internal footnotes omitted). The rationale underlying our decision in Gibson is persuasive here. [16] Although at the time the Master Lease was entered into the Council failed to define the word sale, [17] as a leading commentator states, [w]here the legislature has not defined words used in the act, the court must then determine the meaning of the language in accordance with the legislative intent and common understanding to prevent absurdities and to advance justice. 1A NORMAN J. SINGER, SUTHERLAND STATUTORY CONSTRUCTION § 20.08 (5th ed. 1993). Moreover, [i]f a word that should be defined in a statute is not, then its commonly accepted meaning is applied.... 2A SINGER, SUTHERLAND STATUTORY CONSTRUCTION § 47.07 (5th ed. 1992). The use of dictionary definitions is appropriate in interpreting undefined statutory terms. Id. There appears to be an almost universal consensus that, in the context of real property transactions, the word sale signifies an absolute transfer of property. BLACK'S LAW DICTIONARY 1337 (6th ed. 1990) defines sale, inter alia, as A contract whereby property is transferred from one person to another for a consideration of value, implying the passing of the general and absolute title, as distinguished from a special interest falling short of complete ownership. (emphasis supplied). An option contract and a contract of sale are in fact two separate and distinct contracts, namely, an option contract, and the agreement to sell. An option, originally, is neither a sale nor an agreement to sell. 77 AM.JUR.2D. Vendor and Purchaser § 28 (1975) (footnotes omitted); see also 91 C.J.S. Vendor and Purchaser § 5 (1955). [18] Here, by the terms of the Master Lease, (1) GWU must pay a monthly rental for a ten-year period, after which it must vacate the premises (unless it purchases); (2) GWU is restricted from leasing any units for a term running past the expiration date of the Master Lease; (3) GWU must have approval of the Owners prior to commencing with any alterations or renovations; (4) GWU may not assign its rights without the Owners' consent; and (5) the Owners reserve the right to reenter the premises in the event of noncompliance with the lease provisions. The Owners retain record title to the premises. It is true that the lease affords GWU a large measure of control over the premises, including control over equipment, supplies and transferable permits but obligates GWU to pay for such permits. It also obligates GWU to pay real property tax and insurance premiums as well as expenses for utilities and maintenance. But such allocations of rights and obligations are common in a so-called triple-net lease, a standard arrangement employed in connection with the use of real property by tenants who are not in any sense purchasers of the real property from which they operate their business. [19] GWU's answers to interrogatories stated, without contradiction, that the lease agreement in question is a standard triple-net lease which in this metropolitan area is a standard commercial lease dictated by the marketplace. [20] In light of the foregoing considerations, it is clear that the Owners have not conveyed their entire interest and title in the West End and, applying the above definitions, we conclude that the Master Lease does not effect the absolute transfer of the West End to GWU and, accordingly, is not a sale under the Sale Act as it was enacted in 1980. The Master Lease is not transformed into a sale by virtue of the included option to purchase. An option to purchase is a contract whereby a property owner, in exchange for valuable consideration, agrees with another person that the latter shall have the privilege of buying property within a specific time on terms and conditions expressed in the option. 1 SAMUEL WILLISTON, A TREATISE ON THE LAW OF CONTRACTS § 5:16 (4th ed. 1990). The commentators clearly distinguish an option from a sale. See 8A GEORGE W. THOMPSON, COMMENTARIES ON THE MODERN LAW OF REAL PROPERTY § 4443, at 257 (1963 Repl.) (The option is not a sale. It is not even an agreement for a sale. At best, it is but a right of election in the party securing the same to exercise a privilege, and only when that privilege has been exercised by acceptance does it become a contract to sell); BLACK'S LAW DICTIONARY 1094 (6th ed. 1990) (An option to purchase ... is not a contract to purchase ..., as optionee has the right to accept or to reject the offer, in accordance with its terms, and is not bound). [21] Notwithstanding the clarity of the statutory language and the Master Lease, appellants argue that we should adopt the rationale of certain courts of other jurisdictions in the few decisions which have construed an option contract to trigger the refusal rights of tenants. In particular, appellants cite Quigley v. Capolongo, 53 A.D.2d 714, 383 N.Y.S.2d 935 (1976), aff'd sub nom., Quigley v. Ithaca College, 43 N.Y.2d 748, 401 N.Y.S.2d 1009, 372 N.E.2d 797 (1977) for the proposition that, despite the denomination given by the parties, an option to purchase is a sale and triggers tenants' rights to purchase. We disagree. In Quigley, Ithaca College entered into a contract to purchase a certain property. Upon discovering that a third party had a previous right of first refusal in the same property, the college withdrew from the contract. The college then entered into a lease with an option to purchase which was to run until after the third party's right of first refusal expired. For this option, the college paid over 20% of the ultimate purchase price at the outset and a rental of only $1,000 annually, clearly a nominal sum for a lease of nine acres. Quigley, supra, 383 N.Y.S.2d at 937. After observing that it is inconceivable that the college would pay such a large sum in relation to the total purchase price if the parties did not contemplate from the outset that a purchase would be consummated, id., the court concluded that in the circumstances of this case it formalized defendant-owners' intention to sell the premises in response to the offer by defendant Ithaca College, thus activating plaintiffs' right of first refusal. Id. Although superficially similar, Quigley is essentially inapposite to the instant action. Whereas Quigley was concerned with a contractual first right of refusal which the parties could circumvent by waiting until it expired, the tenants' right of refusal here is statutorily based and explicitly recognized by the Master Lease as applicable in the event that GWU should opt to exercise its option to purchase. Moreover, unlike the arrangement in Quigley, GWU pays the Owners $300,000 yearly, $200,000 of which is denominated as rental payments while the additional $100,000 pays for the option. The net purchase price at the end of the ten-year term if the option is exercised is $5 million. [22] Appellant has not suggested, nor do we conclude, that either the rental payments or the final asking price are nominal or fail to comport with fair-market value. [23] Ten years after Quigley, the Supreme Court of New York, Appellate Division, held that where the language of the first refusal agreement stated that [l]andlord agrees to give `first refusal' on sale,  a net lease with an option to purchase was not a conveyance amounting to a `sale' of property so as to activate plaintiffs right of first refusal, absent a showing that the net lease was a `sham' or otherwise entered into in bad faith for the purpose of defeating plaintiff's rights. Kings Antiques Corp. v. Varsity Properties, Inc., 121 A.D.2d 885, 503 N.Y.S.2d 575, 576-77 (1986) (emphasis supplied) (citing Quigley, supra ). [24] The court there held: The option contained in the net lease does not violate plaintiff's preemptive right. The right of first refusal on sale does not mature until such time as the net lessees exercise their option to purchase.... Since the plaintiff's lease particularly specified a right of first refusal on sale, the grant of a mere option does not violate the plaintiff's right. Id. 503 N.Y.S.2d at 577 (citation and internal quotation omitted). [25] We are satisfied that the clear import of the Sale Act as it was enacted in 1980 is that the option to purchase in the Master Lease did not trigger Tenants' right of first refusal, and that the trial court was correct in so ruling.