Opinion ID: 1537146
Heading Depth: 2
Heading Rank: 2

Heading: Whether the purchase price of $584,132 is unconscionable

Text: In the trial court, Namrow argued in closing that the court-ordered price of $584,132 is unconscionable because the building is worth much more than that amount. [19] On appeal, he still argues that the amount is unconscionable, but says that is because it falls short of the $850,000 mortgage, for which he is personally responsible, even though he did not derive any of the tax benefits, which had already lapsed when he took over the partnership. Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Patterson v. Walker-Thomas Furniture Co., 277 A.2d 111, 113 (D.C. 1971). The party invoking unconscionability as a defense to enforcement of a contractual term must prove both elements lack of meaningful choice and terms unreasonably favorable to the other partyexcept that, in an egregious situation, one or the other may suffice. Urban Invs. v. Branham, 464 A.2d 93, 99 (D.C.1983). Whether a contract term is unconscionable is determined as of the time the contract is made. See id. at 100 n. 7 (citing cases); RESTATEMENT (SECOND) OF CONTRACTS § 208 (If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.). Namrow does not claim that the various investment entitiesthe parties to the TLOA that he ownslacked a meaningful choice when they entered into the TLOA or that the terms of the contract were unreasonably favorable to the tenants' association. Nor could he, as the evidence shows that they were a sophisticated group, represented by counsel, that joined the partnership for the purpose of taking advantage of accelerated depreciation deductions by investing in low-income housing. They enjoyed the tax benefits made possible by their investment in KLP. Moreover, there is no reason to believe that Paragraph 11 of the TLOA was so one-sided to benefit the tenants' association where the association's right to purchase at the lower price was contingent upon [the investors' ability] to enjoy the benefits of Section 167 and of operating loss deductions with respect to the Property, and the purchase price was the maximum allowable by the Internal Revenue Code. (TLOA ¶ 11(A)(4)). Namrow's claim of unconscionability rests on his individual circumstances, as they developed after the contract was executed. His claim is based on the fact that he personally will have to bear a loss of $265,868the difference between the refinanced mortgage ($850,000) he claims that he personally guaranteed, see note 8, supra, and the purchase price set out in the contract ($584,132). But Namrow's current predicament is the consequence of his decision to assume the original investors' role in the TLOA. Namrow testified that he was fully aware that they were taking four-to-one write-offs up until 1985 when the tax law changed, and that he knew what [he] was coming [into] when he bought the investors' shares for nothing. Any sympathy one might have for Namrow's plight is legally irrelevant to the unconscionability analysis, as the evidence shows that the parties to the TLOA freely entered into a contract, reasonable at the time, that unambiguously set out the purchase price at which the tenants' association could buy the property after the original investors had taken the accelerated depreciation. As the long-time manager of the property, see note 2, supra, Namrow either knew or should have known of the risk he was taking when he took over the investors' interest in KLP and decided, for his own purpose, to refinance the mortgage and provide a personal guarantee. An unsupported conclusory allegation ... that a contract is unenforceable as unconscionable is not enough. Patterson, 277 A.2d at 114. Namrow has failed to show facts surrounding the `commercial setting, purpose and effect' of a contract at the time it was made ... so that the court may form a judgment as to the existence of a valid claim of unconscionability.... Id. There is no reason why the TLOA should not be enforced according to its terms when the original parties to the agreementthe tenants' association and the investorsknowingly entered into it and are reaping the benefits from the bargain they struck.