Margaret Williams v. James C, Kennedy

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 17-CV-681
MARGARET WILLIAMS, ET AL., APPELLANTS,
v.
JAMES C. KENNEDY, ET AL., APPELLEES.
Appeal from the Superior Court
of the District of Columbia
(CAR-4028-16)
(Hon. Brian F. Holeman, Trial Judge)
(Argued December 21, 2018 Decided July 11, 2019)
Charles Gormly for appellants.
Dorene Haney for appellees.
David Carpman, Rachel A. Rintelmann, and Jonathan H. Levy were on the
brief for the Legal Aid Society of the District of Columbia, amicus curiae in support
of appellants.
Joel Cohn, Dennis Taylor, Amir Sadeghy, and Umar Ahmed were on the brief
for the District of Columbia Office of the Tenant Advocate, amicus curiae in support
of neither party.
Karl A. Racine, Attorney General for the District of Columbia, Loren L.
AliKhan, Solicitor General, Caroline S. Van Zile, Deputy Solicitor General, and Lucy
E. Pittman were on the brief for the District of Columbia, amicus curiae in support
of appellees.
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Before GLICKMAN and MCLEESE, Associate Judges, and NEBEKER, Senior
Judge.
MCLEESE, Associate Judge: Under the Tenant Opportunity to Purchase Act
of 1980 (TOPA), D.C. Code § 42-3404.01 et seq. (2012 Repl. & 2018 Supp.), tenants
have certain rights if the owner of a rental accommodation wishes to sell the
accommodation, including a right to notice and a right of first refusal. Appellant
Margaret Williams is a tenant in a four-unit housing accommodation. Appellees
James C. Kennedy, Clara Kennedy, and Victor Robinson (“owners”) have an interest
in the accommodation. Ms. Williams claims that she was denied her TOPA rights
in connection with a transaction in 2015 and a proposed transaction in 2016. The
trial court granted summary judgment to the owners, ruling that both transactions
were not covered by TOPA. We affirm.
I. Background
Except as noted, the following facts appear to be undisputed. In 1986, Mr.
Kennedy, Barbara Martin, and Mr. Robinson formed a partnership for the purpose
of purchasing and operating the accommodation. The partnership agreement granted
Mr. Kennedy and Ms. Martin 40% interests in the partnership and Mr. Robinson a
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20% interest in the partnership. In the same year, Mr. Kennedy, Ms. Martin, and
Mr. Robinson purchased the accommodation. The deed of sale specified that Mr.
Kennedy and his wife had a 40% undivided interest in the accommodation as tenants
by the entirety; Ms. Martin and her husband had a 40% undivided interest as tenants
by the entirety; and Mr. Robinson had a 20% undivided interest.
In 2004, Ms. Martin, whose husband had passed away, quitclaimed her 40%
interest in the accommodation to Mr. and Ms. Kennedy. Although it appears that
the partnership agreement was amended in 2004, that amended partnership
agreement is not part of the record in this court. In 2015, the Kennedys and Mr.
Robinson executed a deed conveying some of the Kennedys’ interest in the
accommodation to Mr. Robinson, leaving Mr. Robinson with an undivided 85%
interest in the accommodation and the Kennedys with an undivided 15% interest in
the accommodation, as tenants by the entirety. The tenants of the accommodation
were not given notice of the 2015 transaction.
Finally, in 2016, the Kennedys decided to transfer their remaining interest in
the accommodation to Mr. Robinson. They provided Ms. Williams with notice of
that proposed transaction, but took the position that the transaction was not covered
by TOPA.
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Ms. Williams sued, claiming that the 2015 transaction and the proposed 2016
transaction were sales covered by TOPA and that she had been denied her rights
under TOPA. Ms. Williams had assigned TOPA rights to Christopher Hauser and
Michael Kiefer, and they also are plaintiffs. (For purposes of this appeal, nothing
turns on this assignment, so for ease of reference we hereinafter use “Ms. Williams”
to refer to the plaintiffs.) The owners moved for summary judgment, arguing that
the transactions at issue were not sales within the meaning of TOPA. The trial court
agreed and granted summary judgment to the owners.
II. Standard of Review
“To prevail on a motion for summary judgment, a party must demonstrate that
there is no genuine issue of material fact and that it is entitled to judgment as a matter
of law.” Bartel v. Bank of Am. Corp., 128 A.3d 1043, 1045 (D.C. 2015) (brackets
and internal quotation marks omitted). “This court’s review of orders granting
summary judgment is de novo, with the court conducting an independent review of
the record and applying the same substantive standard used by the trial court. We
construe the record in the light most favorable to the party opposing summary
judgment.” Id.
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We decide issues of statutory interpretation de novo. Facebook, Inc. v. Wint,
199 A.3d 625, 628 (D.C. 2019). “We first look to see whether the statutory language
at issue is plain and admits of no more than one meaning. We will give effect to the
plain meaning of a statute when the language is unambiguous and does not produce
an absurd result.” Id. (citation and internal quotation marks omitted). We also
consider statutory context and structure, evident legislative purpose, and the
potential consequences of adopting a given interpretation. E.g., J.P. v. District of
Columbia, 189 A.3d 212, 219 (D.C. 2018); Cherry v. District of Columbia, 164 A.3d
922, 928 (D.C. 2017); Frey v. United States, 137 A.3d 1000, 1004 (D.C. 2016). “We
may also look to the legislative history to ensure that our interpretation is consistent
with legislative intent.” Facebook, 199 A.3d at 628 (internal quotation marks and
brackets omitted).
As we interpret the provisions of TOPA, we are mindful of the D.C. Council’s
directive that the “purposes of [TOPA] favor resolution of ambiguity by . . . a court
toward the end of strengthening the legal rights of tenants or tenant organizations to
the maximum extent permissible under law.” D.C. Code § 42-3405.11. We also
give weight to TOPA’s stated purpose of “strengthen[ing] the bargaining position of
tenants . . . without unduly interfering with the rights of property owners to the due
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process of law.” D.C. Code § 42-3401.02.
III. Analysis
The parties dispute whether the accommodation is properly understood to be
owned by individuals or instead by the partnership. We begin by assuming for
current purposes that Ms. Williams is correct that the accommodation has at all times
been owned by individuals. Proceeding from that assumption, we hold that the
transactions at issue are not sales within the meaning of TOPA, because the
transactions only affected the relative interests of the preexisting owners and did not
result in a new third party obtaining an interest in the accommodation. (We note,
however, that for essentially the reasons that follow, we would reach the same
conclusion if the accommodation were viewed instead as having been owned by a
partnership or a joint venture.)
A. Statutory Language
It is undisputed that Ms. Williams had rights under TOPA only if the
transactions at issue were sales within the meaning of TOPA. TOPA does not
contain a general definition of the terms “sell” or “sale.” Rather, TOPA has three
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more specific provisions addressing the meaning of those terms. First, TOPA
provides that the terms “sell” or “sale”
include, but are not limited to, the execution of any
agreement pursuant to which the owner of the housing
accommodation agrees to some, but not all, of the
following:
(1) Relinquishes possession of the property;
(2) Extends an option to purchase the property for a
sum certain at the end of the assignment, lease, or
encumbrance and provides that a portion of the payments
received pursuant to the agreement is to be applied to the
purchase price;
(3) Assigns all rights and interests in all contracts
that relate to the property;
(4) Requires that the costs of all taxes and other
government charges assessed and levied against the
property during the term of the agreement are to be paid
by the lessee either directly or through a surcharge paid to
the owner;
(5) Extends an option to purchase an ownership
interest in the property, which may be exercised at any
time after execution of the agreement but shall be
exercised before the expiration of the agreement; and
(6) Requires the assignee or lessee to maintain
personal injury and property damage liability insurance on
the property that names the owner as the additional
insured.
D.C. Code § 42-3404.02(b).
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Second, TOPA provides that the terms “sell” or “sale” include
(A) A master lease which meets some, but not all, of the
factors described in subsection (b) of this section or which
is similar in effect; and
(B)(i) The transfer of an ownership interest in a
corporation, partnership, limited liability company,
association, trust, or other entity which owns an
accommodation as its sole or principal asset, which, in
effect, results in the transfer of the accommodation
pursuant to subsection (a) of this section.
D.C. Code § 42-3404.02(c)(1).
Finally, TOPA provides a list of transactions that do not constitute a sale under
TOPA. D.C. Code § 42-3404.02(c)(2).
None of these provisions specifically addresses transactions in which multiple
individual owners reallocate their interests in an accommodation but do not bring in
a new owner. Other provisions of TOPA, however, indicate that such transactions
are not sales for purposes of TOPA. Specifically, key substantive rights under
TOPA are explicitly tied to the involvement of a third party in the transaction at
issue. See, e.g., D.C. Code §§ 42-3404.08 (tenants have right of first refusal during
fifteen days after owner has provided tenants with “a valid sales contract to purchase
by a third party”), -3404.04 (rights of third parties to purchase are conditional on
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exercise of tenants’ rights under TOPA); -3404.05(a)(1) (owner must offer to sell to
tenant on terms “at least as favorable as th[ose] offered to a third party”). It would
be odd for TOPA to consider transactions as sales for purposes of TOPA if those
transactions do not give rise to substantive rights under TOPA.
In theory, one could argue that a transaction between two preexisting
individual owners of an accommodation is a third-party sale, with the three parties
being the selling owner, the buying owner, and the tenant. We do not find that theory
plausible. Although this court does not appear to have squarely addressed the issue,
authority from other jurisdictions appears to uniformly hold that a transaction
between two individual co-owners is not a third-party transaction triggering rights
such as a right of first refusal. See, e.g., Rucker Props., L.L.C. v. Friday, 204 P.3d
671, 675-76 (Kan. Ct. App. 2009) (“Several other states have addressed the issue of
whether a sale or transfer of property between co-owners triggers a right of first
refusal, and those states have concluded that there must be a transfer for value to a
third party to trigger such a clause.”) (citing numerous cases); Pellandini v. Valadao,
7 Cal. Rptr. 3d 413, 415-18 (Ct. App. 2003) (same; citing cases).
For these reasons, we conclude that TOPA’s text supports a conclusion that
transactions in which multiple individual owners reallocate their interests in an
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accommodation but do not bring in a new owner are not sales within the meaning of
TOPA.
B. Legislative History
Three aspects of TOPA’s legislative history point to the same conclusion.
First, the Committee Report on the bill that became TOPA explicitly described
TOPA as “requir[ing] the owner with an intent to sell [the] accommodation to a third
party, to first offer the accommodation to the tenant or tenants.” D.C. Council,
Report on Bill 3-222 at 5 (May 13, 1980); see also id. at 7 (“This section requires
the owner prior to sale of the accommodation to a third party to first make a bonafide
offer of sale to the tenant.”).
Second, the Council on at least two occasions has considered amending TOPA
to broaden the meaning of “sale” and “sell” in ways that might well have reached at
least some transactions among preexisting individual owners. D.C. Council, Report
on Bill 10-243 at 9 & Attachment B at 6 (Feb. 22, 1994) (proposed amendment
providing that “the term ‘sell’ or ‘sale’ includes any change in fundamental control
of ownership of the accommodation”); D.C. Council, Report on Bill 16-50 at 2, 13,
Attachment at 2 (Mar. 11, 2005) (discussing proposed amendment that would
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“afford[] tenants the opportunity to purchase when the transfer of a controlling
economic interest in a real estate transaction takes place”). Those proposals
generated opposition. Report on Bill 10-243 at 4 (summarizing opposition); Report
on Bill 16-50 at 9 (same). In each case the Council ultimately adopted narrower
language that, as previously noted, does not by its terms reach transactions among
preexisting individual owners. D.C. Council, Proposed Amendment to Bill 10-243
at 1-2 (May 3, 1994) (“The generality of the term ‘change in fundamental control of
ownership’ may be overly broad and may cause unforeseen problems in the
market.”; proposing narrower language adopted in D.C. Law 11-31, § 3(i), 42 D.C.
Reg. 3239 (Sept. 6, 1995) (now codified as amended at D.C. Code § 42-
3404.02(c)(1)(B)(i))); D.C. Law 16-15, § 2(b), 52 D.C. Reg. 6885 (July 22, 2005)
(now codified at D.C. Code § 42-3404.02(b), (c)).
Third, in connection with recent amendments to TOPA, the Council once
again indicated its understanding that the TOPA right of first refusal is limited to
transactions that involve a third party. D.C. Council, Report on Bill 22-315 at 2
(Feb. 23, 2018) (“TOPA requires that owners of residential properties give the tenant
an opportunity to purchase the accommodation at a price and terms which represent
a bona fide offer of sale before they may transfer the property to a third-party.”)
(internal quotation marks omitted).
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The Office of the Tenant Advocate (OTA) relies on a passage in the legislative
history of D.C. Law 16-15 that, according to OTA, indicates that the Council viewed
TOPA as applicable to “any transfer of a controlling economic interest in property.”
Report on Bill 16-50 at 6. In fact, that passage merely summarizes Councilmember
Graham’s opening statement describing the bill as introduced. Id. As we have
explained, Bill 16-50 was not enacted as introduced. D.C. Law 16-15 as enacted
makes no reference to the concept of “controlling economic interest.”
We conclude that, taken as a whole, TOPA’s legislative history provides
substantial additional support for the conclusion that transactions in which multiple
individual owners reallocate their interests in an accommodation but do not bring in
a new owner are not sales within the meaning of TOPA.
C. Prior Case Law
This Court has not squarely decided a TOPA case involving a transaction in
which multiple individual owners reallocate their interests in an accommodation but
do not bring in a new owner. Several of our TOPA cases addressing other scenarios,
however, point in favor of the conclusion that such transactions are not sales for
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purposes of TOPA. First, we have indicated that -- barring statutory language or
legislative history dictating otherwise -- this court should interpret TOPA’s statutory
right of first refusal in light of the principles applicable to contractual rights of first
refusal. Wallasey Tenants Ass’n, Inc. v. Varner, 892 A.2d 1135, 1141 (D.C. 2006).
As we have previously noted, the judicial authority involving contractual rights of
first refusal points against finding a right of refusal under TOPA in the circumstances
of this case.
Second, our TOPA cases appear to reflect an assumption that rights under
TOPA are triggered only if there is a sale to a third party. See, e.g., Richman Towers
Tenants’ Ass’n, Inc. v. Richman Towers, 17 A.3d 590, 604 (D.C. 2011) (“[W]hen
the original owner of a rental accommodation transfers absolute title to another
entity, and when he or she does so pursuant to an overarching agreement as a result
of which a third party obtains an interest in the accommodation, then a sale has
occurred for purposes of TOPA.”); Waterside Towers Resident Ass’n Inc. v. Trilon
Plaza Co., 2 A.3d 1084, 1085 (D.C. 2010) (TOPA provides tenants with “a right of
first refusal when the owner has received an acceptable purchase offer from a third
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party”).
D. Policy Considerations
We also consider the practical consequences of including or excluding from
TOPA transactions in which multiple individual owners reallocate their interests in
an accommodation but do not bring in a new owner. See generally, e.g., Expedia,
Inc. v. District of Columbia, 120 A.3d 623, 637 (D.C. 2015) (“[T]he rules of statutory
interpretation in general . . . require consideration of practical consequences when
determining a reasonable construction of the District’s . . . law. . . . [T]he
reasonableness of a construction can often be tested by considering the consequences
of a different one.”) (internal quotation marks omitted). We see two significant
practical concerns that would arise if TOPA were construed to reach such
transactions.
First, there would be a difficult line-drawing question: which transactions
among multiple preexisting owners should be covered? Ms. Williams and amici
appear to suggest that such transactions would be covered under TOPA if they
resulted in the transfer of a controlling interest in the accommodation. There is no
direct textual support in TOPA for that position, however, so it is unclear what the
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precise doctrinal basis would be for that approach. Moreover, as amicus OTA
acknowledges, determining whether a given transaction (or set of transactions)
transferred a controlling interest in a property can be a complicated and uncertain
task. In fact, as we have noted, ante Section III.B, such concerns appear to have led
the Council to twice forego adopting a controlling-interest approach to the terms
“sell” and “sale” under TOPA.
Focusing on Ms. Williams’s theory that this accommodation has at all times
been held by individuals, applying a controlling-interest test would necessitate
inquiry into principles of real-property law. For example, Ms. Williams assumes
that whether an individual has a controlling interest in real property turns on the
percentages of that individual’s undivided interest in the property. Although this
court does not appear to have law on the topic, there is authority for the conclusion
that, to the contrary, joint owners of undivided real property may have equivalent
rights to control of the property even if their interests are unequal. See, e.g., In re
Sturman, 222 B.R. 694, 709 (Bankr. S.D.N.Y. 1998) (“Each tenant in common,
regardless of the percentage of his or her interest, has an equal right to possession of
the real property in which he or she owns his or her undivided interest.”); State v.
Singley, 709 S.E.2d 603, 606 (S.C. 2011) (same).
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Perhaps one could look in addition to the actual conduct of the owners with
respect to the accommodation, or to agreements among the owners -- such as the
partnership agreement in this case -- to further determine which owner had what
degree of legal or factual control over the accommodation at what times. Such
additional inquiries, however, would further complicate matters. With respect to the
partnership agreement in this case, for example, Ms. Williams appears to assume
that the existence of a controlling interest turns on the percentage of the partnership
share. That is not clear either in general or with respect to the original partnership
agreement in this case. See D.C. Code § 29-604.01(l) (2013 Repl.) (“A difference
arising as to a matter in the ordinary course of business of a partnership shall be
decided by a majority of the partners.”); 1986 P’ship Agmt. at 4 (providing that, in
absence of consensus among partners, “the majority will rule”).
In our view, these complications and uncertainties argue against interpreting
TOPA to apply to transactions in which multiple individual owners reallocate their
interests in an accommodation but do not bring in a new owner. Cf. Richman
Towers, 17 A.3d at 615 (rejecting proposed interpretation of TOPA in part because
“the statute as so construed would not be workable”); see generally Republic of
Sudan v. Harrison, 139 S. Ct. 1048, 1061 (2019) (“The difficult line-drawing
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problems that flow from respondents’ interpretation of § 1608(a)(3) counsel in favor
of maintaining a clear, administrable rule.”).
Second, we share the owners’ concern that applying TOPA to transactions
such as those at issue in this case would place undesirable burdens on small groups
of individuals that wish to join together to own rental accommodations. Whatever
the precise form of ownership, if TOPA applies to transactions adjusting the owners’
interests in an accommodation but not bringing in any new owner, then tenants might
be able to compel membership in a partnership or joint venture or to force partition
or sale of the accommodation over the objection of the other remaining owners. See,
e.g., D.C. Code § 16-2901(a) (2012 Repl.) (addressing right of tenant in common to
obtain partition or sale of real property); Arthur v. District of Columbia, 857 A.2d
473, 487 (D.C. 2004) (stating that “a cotenant enjoys a unilateral right of partition”).
E. Ms. Williams’s Objections
Taken together, the foregoing considerations in our view strongly support the
conclusion that TOPA does not apply to transactions in which multiple individual
owners reallocate their interests in an accommodation but do not bring in a new
owner. We are not persuaded by Ms. Williams’s contrary arguments.
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We address three remaining objections raised by Ms. Williams. First, Ms.
Williams suggests that the transactions at issue qualify as sales under TOPA because
they involved a “relinquish[ment] of possession” of the accommodation. D.C. Code
§ 42-3404.02(b)(1). It is true that at least the 2016 proposed transaction involved a
relinquishment of possession, because the Kennedys proposed to completely give up
their interest in the accommodation. But TOPA does not provide that all such
relinquishments are sales for purposes of TOPA. Rather, TOPA identifies
relinquishment of possession as one of a number of factors that in combination may
qualify a transaction as a sale for purposes of TOPA. D.C. Code § 42-3404.02(b)(1)
(“‘sell’ or ‘sale’ include, but are not limited to, the execution of any agreement
pursuant to which the owner of the housing accommodation agrees to some, but not
all, of the following”; listing six factors) (emphasis added). Moreover, it would be
absurd to treat all relinquishments of possession as a sale under TOPA, because then
it would be a sale under TOPA each time the owner of an accommodation leased the
accommodation to a tenant.
Second, Ms. Williams argues that applying TOPA to transactions such as
those at issue in this case is necessary to avoid abuses of TOPA by owners who
might creatively structure transactions to circumvent TOPA. We do not agree. For
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the reasons we have stated, we conclude that TOPA should not be construed to reach
transactions in which multiple individual owners reallocate their interests in an
accommodation but do not bring in a new owner. We do not see how that narrow
ruling could permit the clever structuring of transactions to frustrate TOPA in the
future. The matter might be otherwise if we were also holding TOPA inapplicable
to transactions in which one or more new owners are introduced, but we expressly
limit our holding in this case to transactions in which no new owner is introduced.
Third, Ms. Williams points out that applying TOPA to transactions such as
those at issue in this case would advance one of TOPA’s purposes: “strengthen[ing]
the bargaining position of tenants.” D.C. Code § 42-3401.02. That is true. But for
the reasons we have stated, we conclude that the interpretation of TOPA advocated
by Ms. Williams is unambiguously foreclosed as a matter of law. TOPA itself makes
clear that the Council’s interest in benefitting the interest of tenants must yield when
TOPA unambiguously requires a different result. D.C. Code § 42-3405.11
(directing courts to “resol[ve] ambiguity” in TOPA provisions so as to benefit
tenants to “the maximum extent permissible under law”).
For the foregoing reasons, we conclude as a matter of law that the transactions
at issue in this case were not sales within the meaning of TOPA. We therefore affirm
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the judgment of the Superior Court.
So ordered.