Opinion ID: 2992012
Heading Depth: 1
Heading Rank: 3

Heading: Which Contract Has Priority?

Text: As indicated earlier, in responding to the Seller’s action for declaratory judgment and to TA’s cross-claim, Davis contests all four trial court rulings. We conclude that the trial court erred when it found that the emails on September 6, and 7, 2012, between Luchs and Rome could be “reasonably interpreted to constitute an extension” of negotiations pursuant to D.C. Code § 42-3404.04 before the September 10, 2012, settlement date lapsed.27 Because this error alone proves fatal to TA’s contract with the Seller and its purported amendment, we need not discuss Davis’s three other claims of error. We elaborate below. We must determine de novo, based on counsels’ email exchange, whether the parties agreed to extend negotiations and waive the initial settlement date.28 The objective indicators establish that on September 7, 2012, TA agreed to wait for 27 See supra note 12. 28 See 1836 S St. Tenants Ass’n, Inc., 965 A.2d at 839 (citations omitted) (interpreting TOPA to require that the parties agree to all material terms and “objectively manifest[] a mutual intent to be bound” to constitute an enforceable contract). 15 an answer from the Seller about TA’s claimed TOPA violations, rather than file suit immediately, but there is no indication that the parties agreed to continue negotiating about revisions of the tenant contract before TA failed to honor the fleeting September 10 settlement date. More specifically, for the eight months after execution of the tenant contract in January 2012, the record contains no evidence of any communication between TA and the Seller. Thereafter, the first contact is attorney Rome’s September 6, 2012, email to attorney Luchs, four days before the parties were scheduled to settle. In that email, Rome, on behalf of TA, declared unequivocally that TA “cannot and will not close under its contract.” That firm declaration, in Rome’s first substantive paragraph of the email message, was not accompanied by any language to suggest that his position was contingent upon some other event, or that TA’s refusal to close on the contract was merely a possibility, open to negotiation. Rome flatly announced TA’s refusal to perform. Having declared that TA would not close on the property under the original contract, Rome went on to allege that the Seller had violated TOPA “in at least (but not limited to)” four enumerated accusations. After commenting about TA’s 16 attempts to “discuss the Seller’s needs in good faith,” Rome again stated that “it is no longer possible” to “close under the terms of the contract,” at that point revealing—apparently for the first time—that TA had failed to locate a financing partner.29 In light of the alleged TOPA violations, Rome said, he “anticipate[d] filing suit on [the matter] next week, seeking Declaratory Relief, Specific Performance, and Damages” absent “any indication of a willingness to talk.” Rome’s email also briefly stated that the “offer remains open at any time” “to attempt to arrive at an accommodation,” but this overture is subordinate to the two, unequivocal declarations that TA would not perform under the agreement, as well as to the direct threat to sue within a week, absent affirmative action by the Seller. The most reasonable reading of this September 6 email, therefore, establishes that TA signaled—quite clearly—that it had moved from a posture of negotiation to one of litigation, and that the negotiations regarding the original contract were at an end. That Rome merely “remain[ed] hopeful that [TA would] hear from [the Seller] on a more productive note” underscores this shift in posture. 29 Rome’s September 6, 2012, email asserted that “until quite recently” TA “believed” that it could “find a [financing] partner that could close under the terms of the contract in order to avoid this controversy.” 17 Luchs’s response to Rome’s overt threat is telling. After asserting that the Seller had operated “in good faith” throughout negotiations, Luchs informed Rome that he would, as Rome knew, be away the next week,30 but that if Rome “fel[t] compelled to file suit before [he] return[ed], so be it.” This statement cannot be read to confirm a mutual agreement to extend the period of negotiation under TOPA. Rather, Luchs’s response can reasonably be read only as an invitation to sue, in effect to “let the chips fall where they may,” particularly given Luchs’s final words, “so be it.” Our conclusion that no agreement to extend was reached is reinforced by the fact that although Luchs had spoken briefly to his client, the Seller, about Rome’s allegations of TOPA violations, Luchs had merely informed Rome that the Seller would “get back to [Luchs]”; Luchs did not imply that negotiations to modify the tenant contract were still open—or even might be. At this point, therefore, Luchs apparently had no authority to keep negotiations alive; the Seller had not agreed on a course of action in response to TA’s allegations. 30 Rome’s awareness of Luchs’s absence suggests that the two had exchanged some communication prior to Rome’s September 6, 2012, email. However, as discussed earlier, there is no record evidence of any prior substantive communication between TA and the Seller. 18 In response, Rome acknowledged that “[o]f course” TA would wait for Luchs to return a week hence, as “dialogue” is preferable to litigation. But Rome’s response concerned TA’s own threat to sue for what Rome alleged to be TOPA violations; his response was not an acknowledgment of a decision by the Seller to extend the negotiation period. Indeed, not once did the Seller address TA’s refusal to close under the January tenant contract, and no further communication between the parties is contained in the record until after the September 10 settlement date had passed. Furthermore, the email exchange between the parties lacks the hallmarks of what we have previously treated as valid agreements between parties to extend the settlement date for real property.31 And, even assuming for sake of argument that 31 See, e.g., Reiman v. International Hosp. Grp., Ltd., 614 A.2d 925, 928 (D.C. 1992) (settlement date was extended by mutual agreement to a specific date in the future, and the agreement stated that payment schedule and closing date would be discussed at the settlement); Landow v. Georgetown-Inland West Corp., 454 A.2d 310, 312 (D.C. 1982) (noting that the parties had “executed” a “written ‘extension agreement’” that “deferred the settlement date” to a specific date in the future, “in exchange for an additional $80,000” and that a second executed extension agreement “increased the purchase price by an additional $150,000 in exchange for a further extension of the closing date” to a specific point in time); Drazin v. American Oil Co., 395 A.2d 32, 33 (D.C. 1978) (an extension for (continued . . .) 19 the email exchange could reasonably be construed to have waived in writing the “time is of the essence” provision in the tenant contract (an issue we need not address), the exchange fails to mention, let alone discuss, any notion of a time limitation on the extension—an omission that is fatal here.32 TOPA requires that any extension granted by the property owner must be “reasonable.”33 Reasonableness is a concept that requires a relatively precise timetable, grounded in industry norms or standard practice34—one that is not unduly distant into the future—in order to assure that the tenants’ right to supplant a third-party contract is not inordinately prejudicial to the third-party purchaser and the property owner. It follows that, to assure the required precision, any extension—a word implying both __________________________________ (. . . continued) settlement granted by the owner of a piece of real property to appellants consisted of a written letter, explicitly stating that the settlement date was extended from October 1 to October 15, 1976, and that if appellants failed to close on that date, the contract would become null and $10,000 would be retained as liquidated damages). 32 See decisions in supra note 31. 33 D.C. Code § 42-3404.04. 34 Cf. Lenkin-N Ltd. P’ship v. Nace, 568 A.2d 474, 478 (D.C. 1990) (concluding that the jury could not properly determine, and was forced to speculate, whether a construction delay “was reasonable” when it received “no guidance on whether [the proposed] time frame could be viewed as an industry standard of reasonableness”). 20 a beginning and an end—must be determined prospectively and set forth a finite period; it cannot simply be an open-ended arrangement. In this case, therefore, it was insufficient for TA and the Seller merely to look back from the date of the revised agreement, November 2, 2012—a period of fifty-three days from the earlier settlement date, September 10—and declare the extension “reasonable” within the meaning of the statute based on hindsight, even though the extension may have been reasonable if determined prospectively.35 Without doubt, the TOPA provision “allowing extensions of time for negotiation and settlement with the tenant is an integral part” of the Act; and “once a tenant has seized his or her opportunity to act, the landlord [as seller] should be able to afford reasonable extensions of time without worrying that the third party will thwart the tenant by suing the landlord.”36 However, these protections presuppose the existence of an agreement to extend negotiations. Here, at the proverbial last minute—only four days before settlement—TA shifted from a 35 See Independence Mgmt. Co. v. Anderson & Summers, LLC, 874 A.2d 862, 867 (D.C. 2005) (affirming trial court’s ruling that a period of sixty to seventy days to close was reasonable when the original contract provided that settlement was to occur within fifty-five to seventy days in accordance with the time frames contemplated in the [initial] purchase agreement). 36 Coburn v. Heggestad, 817 A.2d 813, 822 (D.C. 2003). 21 position of negotiation to one of litigation. TA was therefore signaling, by its words and rationale, that negotiations regarding the original contract were at an end. But in announcing this shift, without seeking in the alternative more time to negotiate a mutually agreeable contract, TA failed to take the required steps readily implicit in the statute: a clear agreement to extend negotiations beyond the agreedupon settlement date and an extension of time that is reasonable—prospectively— and clearly identified by an end date. Interpreting the email messages as a whole, as we must, and “giving a reasonable, lawful, and effective meaning to all [their] terms,”37 we cannot say that “a reasonable and fair-minded person in the position of the parties would . . . have thought” that the disputed language in the emails constituted an agreement to waive the September 10, 2012, settlement date and continue negotiations under the initial tenant contract.38 The objective indicators are that the contract between the Seller and TA terminated when TA advised the Seller on September 6, 2012, that it could not and would not close under the contract, and, in response, the Seller made no overtures to extend discussions on the contract. Accordingly, when the 37 Independence Mgmt. Co., 874 A.2d at 867 (citation omitted). 38 Id. at 867, 869 (citation omitted). 22 September 10, 2012, settlement date came and went without performance, there was “no extension of the contract[;] there was . . . no meeting of the minds between the parties on a number of material terms”; and thus “there was no contractual relationship existing between the parties.”39 We, therefore, must reverse summary judgment for TA.