Ross v. Hacienda Cooperative, Inc. , 1996 D.C. App. LEXIS 253 ( 1996 )

WAGNER, Chief Judge,

dissenting:

In my opinion, this court can resolve, without remand, the issue raised by appellants, Hacienda Joint Venture Partnership (Sellers), i.e., whether the trial court erred in imposing a constructive trust on the tax refund on the basis that Hacienda Cooperative, Inc. (Purchaser), had failed to prove its legal claims. In my view, the record shows that the trial court erred in granting appellee, Hacienda, equitable relief because it had failed to establish its legal claims for breach of contract and negligence. Equity may intervene where the legal remedy is inadequate, not where the proof at trial is insufficient to sustain the asserted legal claims. See Marshall v. District of Columbia, 458 A.2d 28, 29-30 (D.C.1982) (citations omitted).

Following a bench trial, the trial court found on the facts and applicable law that appellee failed “to sustain its claims in law.” It was on that basis that the trial court considered and granted the Purchaser’s alternate request for equitable relief. In this ruling, the trial court erred. As this court stated in Marshall:

[I]t is axiomatic that equity has no jurisdiction over a controversy for which there is a complete and adequate remedy at law. Chavin v. H.H. Rosin & Co., 246 A.2d 921, 922 (Del.1968). Further, “[i]f it appears that the absence of a remedy at law is due to plaintiffs failure to pursue that remedy, then equity will not intervene and the complaint should be dismissed.” Smaldone v. Kurtz, 450 F.Supp. 1138, 1140 (D.D.C.1980)[1978]; Commissioner v. Shapiro, 424 U.S. 614, 634 n. 15, 96 S.Ct. 1062, 1074 n. 15, 47 L.Ed.2d 278 (1976). Only when it has been impossible despite the plaintiffs best efforts to obtain a decision at law should plaintiff be permitted to overcome the anti-injunction bar and pursue the drastic alternative of equitable relief. Id.

458 A.2d at 29-30 (Second alteration in original).

The Remedy At Law

The Purchaser here sued for $198,000 in damages for breach of contract, contending that the Sellers had failed to deliver the real property it contracted to purchase in the condition it was in when the parties contracted. The Purchaser also sued on a negligence theory for waste, alleging that after the parties contracted, the Sellers negligently allowed the property to deteriorate beyond ordinary wear and tear. According to the Purchaser, the damages resulted from repairs to the roof made by the city prior to settlement because the Sellers had failed to make the repairs after being cited for violations of the housing code. The Sellers defended on the ground that they contracted to sell the property “as is” without any warranties as to the condition of the property.

The rights and responsibilities of the parties for the repairs are governed here by their contract which included at least two written addenda. There was evidence in the record that the parties added to their pre-printed contract a provision that

[t]he property is to be sold in “as is” condition and Seller makes no warranty or representation as to the condition of the property, the improvements thereon or any of the components thereof.

This court has held that such a clause relieves a seller of any obligation to remedy housing code violations which exist before settlement, even though a preprinted clause specifies otherwise. Craven v. Elmo, 442 A.2d 526, 528 (D.C.1982). If there is a bar to the Purchaser’s recovery under this condition, it is because the parties agreed to that condition.

The term “as is” means generally “that the buyer is purchasing property in its present state or condition.” Olmsted v. Mulder, 72 Wash.App. 169, 863 P.2d 1355, 1359 (Div. 1 1993) (citations omitted); see also Pele v. Simmons, 249 Ill.App.3d 852, 189 Ill.Dec. 353, 355, 620 N.E.2d 12, 14 (1993). Such provisions place the risk of loss on the purchaser.¹ Varkell v. United States, 167 Ct.Cl. 522, 334 F.2d 653, 655 (1964).

The trial court determined that the Purchaser was fully aware of the defects in the property on the date of the agreement and that it assumed the risk of loss associated with these defects. Therefore, it found against the Purchaser. The Purchaser has not appealed from the adverse judgment on its legal claims nor argued error in the trial court’s legal ruling as an alternative basis for sustaining the judgment.² Therefore, whether the trial court erred in ruling on the Purchaser’s legal claims is not before us on this appeal. However, it is essential to examine the Purchaser’s legal claims for an understanding of the adequacy or inadequacy of the legal remedies.

The Escrow Fund

The parties contracted to place $82,000 of the proceeds from the sale into an escrow account with interest to be credited to the Sellers. The sum was to be held in escrow as indicated on two specific lines in the settlement statement that reflected “Roof Repair Escrow [-] $80,000 and Mechanics Lien Escrow [-] $2,000.” According to the contract, the only condition under which the escrow agent could disburse the funds without the Sellers approval was “if a lien against the Property is recorded which creates a valid claim under the title insurance policies issued by Escrow Agent in connection with sale of the Property.” Otherwise, disbursement required the approval of the Sellers and the Purchaser. The parties’ rights to the escrow fund depend upon the interpretation of these provisions of the contract.³ The trial court determined that the escrow account was intended “to cover the cost of any assessment arising from the replacement of the roof on the Hacienda Apartments then being performed by the District of Columbia.” (Emphasis added.) Thus, it appears that the court interpreted the contract to mean that the funds were set aside only to discharge any lien which might be placed against the property in order for the Sellers to convey clear title, rather than to cover the cost of any repairs. In that case, the funds belonged to the Sellers under the terms of the contract. The fact that the parties obtained that for which they bargained under the contract is not, in itself, a basis for the intervention of equity.

Conclusion

Since the Purchaser has a cause of action for money damages for breach of contract or negligent waste which could be pursued in a suit at law, equitable remedies are not available. See Marshall, supra, 468 A.2d at 29; Chavin, supra, 246 A.2d at 922. That it was unsuccessful in proving its legal claims, either because of insufficiency of the evidence or a legitimate defense based on the terms of the contract, does not entitle the Purchaser to demand equitable relief.⁴ See Marshall, 458 A.2d at 29. Since the Sellers are entitled to the money under the contract, as interpreted by the trial court, there would be no inequity in their retaining it.⁵ Under these circumstances, the Sellers do not withhold unfairly funds from the Purchaser, thereby warranting equitable intervention to prevent unjust enrichment. See Gray v. Gray, 412 A.2d 1208, 1210-11 (D.C.1980). For the foregoing reasons, I respectfully dissent from the opinion of the court.

1 . Even though the risk of loss for deterioration of the property caused by ordinary wear and tear may be on the purchaser, it has been held that “if the seller causes the damage by acts of waste or by negligence in caring for the property, the usual placement of risk of loss on the purchaser does not apply.” Richard R. Powell & Patrick J. Rohan, Powell on Real Property § 881121, 81-111 (1995); Northwest Kansas Area Vocational-Technical Sch. v. Wolf, 6 Kan.App.2d 817, 635 P.2d 1268, 1270 (1981). In light of these considerations, it is doubtful that by inserting an "as is” clause in the contract, a seller can destroy or materially worsen the condition of the property after its execution, through its own fault, without being liable for resulting damages. However, absent the Purchaser’s proof of such circumstances, it would not be entitled to prevail on its legal claim under this exception.

2 . See Group Health Ass'n, Inc. v. Reyes, 672 A.2d 74, 75 n. 1 (D.C.1996); but see Nationwide Ins. Co. v. United States Fidelity & Guar. Co., 304 A.2d 283, 285 n. 5 (D.C.1973).

4 . The Purchaser also would have to prove damages. The law seeks to place the injured party in the same position as if there had been no breach, not in a better position. Fleming v. Twine, 58 A.2d 498, 499-500 (D.C.1948).

5 . This sum formed a part of the purchase price for the property. No doubt, the parties took into account the condition of the property in agreeing upon a price. They also addressed by written agreement the amount to be escrowed and the contingencies to be covered thereby.

3 .We review a contract for ambiguity, "giving [the] language its plain meaning, without reference to any rules of construction." Sacks v. Rothberg, 569 A.2d 150, 154 (D.C.1990) (citation and internal quotations marks omitted). Where the terms are in dispute, this court must "determine what a reasonable person in the position of the parties would have thought the disputed language meant.” Intercounty Constr. Corp. v. District of Columbia, 443 A.2d 29, 32 (D.C.1982). This determination requires consideration of the circumstances surrounding the making of the contract, usages which the parties know or have reason to know, and the intent of the parties entering the agreement. Id. If the terms are still not susceptible to one definite meaning, remaining ambiguities will be interpreted strongly against the drafter. Id. (citations omitted).