CASCO Marina Development LLC v. D.C. Redevelopment Land Agency, et al.

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Notice: This opinion is subject to formal revision before publication in the Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the Court of any formal errors so that corrections may be made before the bound volum es go to press. DISTRICT OF COLUMBIA COURT OF APPEALS No. 02-CV-337 CASCO M ARINA D EVELOPMENT, L.L.C ., A PPELLANT, V. D ISTRICT OF C OLUMBIA R EDEVELOPMENT L AND A GENCY, et al., A PPELLEES. Appeal from the Superior Cou rt of the District o f Colum bia (CA-2128-01) (Hon. Gregory E. Mize, Trial Judge) (Argued March 17, 2003 Decided October 23, 2003) Eric L. Siegel, for appellan t. James C. McKay, Jr., Senior Assistant Corporation Counsel, with whom Arabella W. Teal, Interim Corporation Counsel at the time the brief was filed, and Charles L. Reischel, Deputy Corporation Counsel at the time the brief was filed, were on the brief for appellees. Before R UIZ and G LICKMAN, Associate Judges, and BELSON, Senior Judge. B ELSON, Senior Judge: In this appeal, CASCO Marina Development, L.L.C. ( CASCO ), contends that the trial cou rt erred in gran ting the m otion of app ellees, the District of Columbia Redevelopment Land Agency ( the RLA ) and RLA Board member Mr. Richard L evy, to dism iss CAS CO s co mplaint o n the grou nd that it failed to state a claim upon which relief may be granted, pursuant to Super. Ct. Civ. R. 12 (b)(6). We agree and reverse. 2 I. This appeal arises out of CASCO s attempts to enter into an assignment agreement with MIF Realty Corp. ( MIF ) whereby CASCO would become the tenant of a real estate parcel on the Washington Channel, which was at relevant times owned and leased by the RLA. The RL A was a n agency of the District o f Columbia, charged by statute w ith eliminating blight by administering the procurement, development, redevelopment, and maintenance of real prop erty in the District in a manner that promotes public health, safety, morals, and welfare. D.C. Code § 5-801 et seq. (1981). 1 Pursuant to that authority, the RLA owned and leased out to MIF the subject parcel, Site E, Washington Chann el Waterfront, known as the Ga ngplank Marina ( marina ). The instant action grew out of a June 1999 assignment agreement, whereby MIF, which is not a party to the underlying suit or this appeal, sought to assign its tenancy of the marina to CASCO.2 Section 806 of MIF s lease agreement provided in relevant part that MIF may, subject to the provisio ns of Sectio n 1008 h ereof, sell, assign or transfer an y of its rights, title or interests in and to the [marina] . . . without the prior written consent of the [RLA ] thereto 1 Recodified at D.C. Code § 6-301.01 et seq. (2001). On June 25, 2002, D.C. Act 14398 (2002) was enacted, divesting the RLA of its authority and transferring it to the RLA Revitalization Corporation, a subsidiary of the National Capital Revitalization Corporation. 49 D.C. Reg. 6516 (2002). No motion has been filed seeking to substitute a party. 2 MIF had acquired its tenancy by transfer out of receivership from the previous tenant s 1996 bankruptcy. 3 . . . . That section went o n to pro vide, inter alia, that any assignee shall expressly assume, by written instrument recorded in the Office of the Recorder of Deeds of the District, all of the covenants, agreem ents and obligations of [M IF] under this agreement . . . . MIF was required to furnish or cause to be fu rnished to the [RLA] for its approval a copy of the proposed aforesaid written instrument, and the RLA shall approve the same if it conforms to the provisions of the preceding sentence of this Section (emphasis added). That provision was subject to § 807 of the lease, which read as follows: the RLA (if [MIF] is n ot then in default in respect of any of its other obligations under this Agreement) shall promptly so certify . . . . It did no t addres s wha t is to be d one in th e even t of such default. Section 1008 of the lease provided that, [d]uring the period of the continuance of a default or failure by [M IF] to pe rform o r observ e any c ovena nt pursu ant to S ections . . . 601 or 606 hereof, even if the RLA had not given MIF the required notice of such default or failure, [MIF] shall not be entitled to exercise the rights and privileges granted to it by Sections 801, 802 , 803, and 1101 h ereof. 3 In short, these three provisions taken together allowed MIF to transfer freely its interest in the marina, subject to the condition that MIF not be in default at the time of transfer. If MIF was not in default, then the RLA was bou nd to 3 Sections 806 and 807 are not expressly addressed in § 1008. However, those sections became a part of the a greeme nt by wa y of ame ndmen t. Section 80 6 specifically declares that it is subject to the provisions of § 1008. Section 807 does not refer to § 1008 but, as quoted above, provides specifically that the RLA must certify that the redeveloper [MIF] is not in default if such is the case. 4 approve any agreement that conformed to the requirements of the lease and to produce certification of n on-defau lt. Turning to the MIF-CASCO transac tion, MIF s attempts to assign the lea se to CASCO proceeded as follows. MIF entered into a contract to assign its interest in the marina to CASCO in June 1999. By its terms, the contract was terminable by either party if not closed upon by November 22 of the same year, and would terminate automatically if the RLA should conclusively deny or refuse its consent. On August 17, MIF submitted the required written agreement and requested approval of the assignment contract and of CASC O s financing and a non-default certificate from the RLA. In response, the RLA indicated that it desired more information regarding CASCO s plans, and it scheduled hearings fo r Octobe r 7 and 21 , at which it dis cussed tho se plans an d the contra ct. According to CASCO s complaint, the RLA gave no indication at those meetings or in related corre sponden ce that it consid ered M IF to be in default. In a letter dated November 5, however, an Assistant Corporation Counsel notified MIF that he had concluded that MIF was in default for fa ilure to repair p romptly the damage caused by a 1996 fire, and to dispose properly of insur ance p roceed s. A meeting of the RLA Board was then held on November 18, 1999, at w hich the R LA ann ounced th at MIF w as in default a nd that it wo uld issue a letter to that effect, bu t that it was w illing to overlook the defaults if it could renegotiate the terms of the lease. At that meeting, Mr. Levy expressed the following view: 5 [A]ll we a re attemptin g to do is to se e that the City gets its fair share. In that regard, our counsel does firmly believ e that this lease is in default. This gives us, we believe, the absolute[ly] appropriate opportunity to see that we make up for oversights of this Agency in the past and only to see th at the City gets its fair share as articulated in the lease . . . . I am, in fact moving that we approve an assignment from MIF to CASCO w ith . . . the provision . . . that the lease [be] ren egotiated w ithin approp riate bounds . . . that rectify the overs ight of the R LA in its righ t to have an appraisal and rent reflect the current value of the land and . . . . MIF is in default on the lease and we are looking, quite honestly, at the leverage of getting what the City deserves out of this. The RLA issued a notice of default on November 22, 1999. MIF contested the notice, arguing that it was not in default. Subsequently, MIF terminated the agreement with CASCO pursuant to its terms. CASCO then filed the in stant suit for tortious interference with contract, tortious interference with business advantage, and equita ble estoppe l, naming a s defenda nts both the RLA and Mr. Levy.4 The complaint contained five counts: one count of each tort against each defendant and the count for injunctive relief against only the RLA. It alleged that MIF was not in default, and that appellees asserted default solely in order to realize finan cial gain 4 Initially, CASCO named the District of Columbia as a defendant rather than the RLA. By consent motion, the counts against the District were dismissed, and the RLA was name d in the D istrict s ste ad on th e three c ounts a gainst it. 6 rather than for reasons related to performance under the contract. Appellees filed a motion to dismiss pursuant to Super. Ct. Civ . R. 12 (b)(6) or, in the alternative, for sum mary judgment pursua nt to Su per. Ct. C iv. R. 56 (c). Appellee s argued to the trial court that they were entitled to judgment on the following bases: (1) appellees enjoyed immunity; (2) CASCO had failed to pursue in the Superior Court an appeal from the administrative ruling of the RLA ; and (3) C ASCO had failed to allege sufficien t facts to warrant relief. 5 The trial court, relying on Goddard v. District of Columbia Redevelopment Land Agency, 109 U.S. App. D.C. 304, 287 F.2d 343 (1961) (delays in condemnation proceedings were discretionary and thus protected by imm unity), granted the motion to dismiss pursuant to R . 12 (b)(6), ruling that both appellees enjoyed immunity, and therefore not reaching the issues of whether MIF was in default or whether appellees had acted in bad faith. This appeal followed. II. On appeal, CASCO contends that the trial court erred in ruling that appellees actions were discretionary and therefore immune and, specifically, in relying on Goddard to support that ruling. CASCO further contends that appellees alternative basis for affirmance that CASCO failed to plead adequate facts to withstand appe llees motion to dismiss is also 5 Appellees also argued that the District should be dismissed as an improper party, and that the RLA should be dism issed for improper service . These two issues w ere effectively addressed by the consent motion to ame nd the comp laint and the trial court s grant th ereof an d are no t before us for re view. S ee note 4, supra. 7 without m erit.6 1. Standard of Review The standard by which we review the grant of a 12 (b)(6) motion to dismiss for failure to state a claim upon which relief can be g ranted is well settled: like the trial court, we must construe the compla int in the light m ost favorab le to the plaintiff, w hile taking the facts alleged in the complaint as true. Cauman v. George Washington Univ., 630 A.2d 1104, 1105 (D.C. 1993). We will affirm a dismissal only when it appears, beyond doubt, that the plaintiff[] can prove no set o f facts in support of [its] claim w hich wo uld entitle it to relief. Id. (quoting Klahr v. D istrict of Colum bia, 576 A.2d 718, 721 (D.C. 1990) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957))). We review the trial court s disposition of this action on the basis of immunity accordingly; and then consider appellees alternative argument for affirmance that appellant failed to plead sufficient facts to withstand appellees motion by the same standard. Our review of a dismissal on the grounds of governmental immu nity is de novo. Agueho unde v. D istrict of Colum bia, 666 A.2d 443 , 447 (D.C. 1995 ). 6 CASCO s additional cause of action in equitable estoppel is not before us. As appellees observe, CASCO did not respond to appellees arguments to the trial court on this point, nor did it argue the issue to this court in either the opening or reply brief. CASCO therefore ha s waived its equitable es toppel argu ment for p urposes o f this appeal. 8 2. Immu nity Whether immunity is available . . . turns upo n wheth er the act com plained of is discretionary or ministerial. Nealon v . District of Co lumbia, 669 A.2d 685, 690 (D.C. 1995). 7 The inquiry into whether an action is discretionary goes beyond whether the act entailed a choic e amo ng altern atives. It seeks to asc ertain whether the governmental action at issue allows significant enough application of choice to justify official im munity, in order to ensure fearless, vigorous and effective decision making. Moss v. Stockard, 580 A.2d 1011, 1020 (D .C. 1990) (citation and internal pu nctuation omitted). To determine whether the District is immune to liability, we have long relied upon the ministerial-discretionary test. Wade v. District of Colum bia, 310 A.2d 857, 860 (D.C. 1973). Governmental actors have no immunity from suit based upon their ministerial 7 As we explained in Nealon: Generally, discretionary acts involve the formulation of policy, while ministerial acts involve the execution of policy. Discretionary acts have also been defined as acts that require personal deliberation, decision a nd judgm ent. They g enerally have a broad public effect and call for a delicate balancing of competing consideratio ns. Whe re there is room for policy judgment and decision, there is discretion. In contrast, ministerial acts require little or no judgm ent, and ge nerally constitute mere obedien ce to orders or perform ance of a duty in which the [municipal employee] has little or no choice. Id. (internal punctuation and citations o mitted). 9 actions, but they are immune from suit based upon their discretionary actions. Id. While we have observed that identifying what actions are discretionary may at times require thorough analysis, see Moss, supra, 580 A.2d at 102 0-21, performanc e under a lease contract neither requires nor leaves room for discretion. Appellees disagree, arguing that if that were the case, then the amendment to the origina l lease that ena bled the lesse e to transfer his or her estate in the absence of default could not have been achieved. T hat assertion, however, overlooks the fact that the amendment was a mutu al agreement, wh ereas the RLA s demand of renegotiation giving rise to the instan t suit was un ilateral. Wh ile the RLA is free to exercise discretion in initially entering a contract, or in deciding to seek to alter the terms of a contract, it is ministerially bound as a contracting party by the terms of a valid, existing contract un less and un til both parties to the contract agree to amen d it. CASCO argues that under the MIF-RLA lease agree ment, the R LA w as contractu ally obliged to approve an assignment by a lessee who is not in d efault, and w as obliged to determine in an appro priate man ner whe ther a party was in default. It is clear that the RLA s obligation to approve assignments of the lease that fully conformed to the requirements of § 806 of the lease called fo r a ministerial a ct. Althoug h it is not as obviously the case, we are satisfied also tha t the determ ination wh ether MI F was in d efault was also ministerial rather than discretionary, as it would not involve the formulation of policy, an exercise of judgment or a choice among non-contractual options, but rather would require the correct interpretation o f a contract. Accepting the allegations as true, as we must at this stage, we 10 are satisfied that these obligations of the RLA were ministerial in nature. Thus, the RLA has no immunity from suit based upon its alleged faulty performance or non-performance of these obliga tions unde r the contrac t.8 In this case, the trial court ruled, relying on Goddard, that appellees enjoyed sovereign immunity. Goddard, howev er, is distinguish able from the instant cas e. It involved a claim of misrepresentations by the RLA about its plan s involving condem nation, a m atter express ly excluded from the coverage of the Federal Tort Claims Act, 28 U.S.C. §§ 1346, 2680. It also involved a statute that clearly gave the RLA broad discretion to determine whether and when it was n ecessa ry or ad vantag eous t o use its c ondem nation p ower. Goddard, supra, 109 U.S. App. D.C. at 306, 287 F .2d at 345 (citation and internal pu nctuation omitted). It does not govern the outcome here. In further support of the argument that appellees did not have immunity, CASCO draws our attention to Berkovitz v. United States, 486 U.S. 531 (19 88): [T]he discretionary function exception will not apply when a federal statute, regulation, or policy specifically prescribes a 8 This is not to say, how ever, that if the R LA pro perly decla red a defau lt, its subsequent action in placing conditions on its approval of an assignment of the lease wo uld also be ministerial. Without ruling on the m atter, we observ e that, to th e contra ry, a cogent argument could be made that, in that situation, the RLA could exercise its discretion as to what, if any , conditions it w ould place upon the a ssignme nt. 11 course of action for an employee to follow. In this event, the employee has no rightful option but to adhere to the directive. And if the employee's conduct cannot appropriately be the product of judgment or choice, then there is no discretion in the conduct fo r the discretion ary function exception to protect. Id. at 536 (citation omitted) (emphasis added). Here, there was a comparable municipal regulation. A mo dification subsequent to execution of the Land Disposition Agreement shall be governed by the terms of the agreement. 10 DCMR § 2118.4 (1994). Per the terms of the agreement, the RLA was required (1) to approv e of the form of assignm ent if it reflected an agreement by the assignee to assume fully the assignor s obligations under the lease, and (2) to issue a certificate of non-d efault under the lease. Taking as true CASC O s allegations that the form of the assignment satisfied the terms of the lease, and that M IF was not in default at the tim e of the prop osed assign ment, as we ag ain must, a ppellees failed their obligations under both 10 DCMR § 2118.4 and the lease, thus depriving them of immunity.9 9 Appellee s argue that, b ecause C ASCO did not raise th is point befo re the trial court, it is waived. We disagree. As we have stated, the judgment of the trial court may be affirmed on a ground not raised or considered below. Sheetz v. District of C olumbia , 629 A.2d 515, 519 n.5 (D.C. 1993). In Sheetz, we reasoned that the material brought to our attention on appea l was not n ew evidence , but rath er legal m aterials a vailable for all. Id. The appellants in Sheetz had, as had the appellees now before us, am ple oppo rtunity to respond to the [opponent] s arguments, and have suffered no procedural unfairness. Id. Indeed, as CASC O points out in its reply brief, the regulation was not only available to the RLA, but it was also promulgated by the RLA. Moreover, CASCO s regulation-based argument merely advances the same argument that CASCO has made throughout: that appellees actions were ministerial and not discretionary. 12 3. Failure to Plead Su fficient Fac ts Appellees contend th at, should we disagree with the trial court s conclusion that they are immu ne from s uit, we should nevertheless affirm bec ause CA SCO fa iled to allege fa cts underlying its claim of tortious interference with either contract or business expectancy sufficient to withstand a motion to dismiss. We disagree. We are satisfied that CASCO pleaded facts sufficient to undergird its tortious interference with contract count. This court has stated that the elements of tortious interference with contract are: (1) the existence of a contract; (2) knowledge of the contra ct; (3) intentional procurement of a breach of the contract; and (4) damages resulting from the breach . Paul v. Howard Univ., 754 A.2d 297, 309 (D.C. 2000) (footnote and citation omitted). The only element at issue in the instant case is the third one, intentional procurem ent of a brea ch of the co ntract. Appellees argue that because MIF cancelled the CA SCO-M IF contract p ursuant to its terms, as opposed to breaching it, CASCO cannot recover. T o support th is point, appellees direct our attention to Paul, supra, 754 A.2d at 309, and Sorrells v. Garfinckel s, Brooks Bros., Miller & Rhoads, Inc., 565 A.2d 285, 289-90 (D.C. 1 989). Sorrells, however, actually undermines appellees contention. In Sorrells, the court was faced with a similar situation cancellation of a termin able contract induced by a third party but nevertheless 13 held that the third party had tortiously interfered with Sorrells s contract. Sorrells was an employee of a departm ent store in the District wh o had bee n termina ted at the behest of a supervisory employee for diminished sales performance resulting from unique restrictions placed upon S orrells b y the su perviso ry em ployee . Sorrells filed suit, inter alia, against the department store for wrongful term ination and against the sup ervisor for tortious interference with her employment contract with the department store. The trial court granted the department store s motion for summ ary judgm ent, and the ju ry returned its verdict in favor of Sorrells against the supervisor. On appeal, this court upheld both the ruling and th e judgm ent. We o bserved th at, in the District, employment contracts are at-will unless otherwise specified, and that, accordingly, the department store s termination of Sorrells s e mploym ent did not violate the terms of her e mplo ymen t contrac t. Sorrells, supra, 565 A.2d at 285, 288-89. Thus, there was no brea ch of co ntract. Nevertheless, we affirmed the verdict against the supervisor for tortious interference with the contract for inducing the store s termination of the contract. Id. at 289-91. In doing so, we set forth the following: One who intentionally and imprope rly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contrac t. 14 Id. at 290 (quoting RESTATEMENT (2 D) OF T ORTS § 766 (1979)) (emphasis added; empha sis in original removed). Therefore, while we have articulated the third element of tortious interference as procurement of breach, Sorrells establishes that a breach as such is not required, but merely a failure of perform ance, wh ether by the terms of the contract in question or not. 10 Thus, CASC O s pleadings are sufficient on this count, because they alleged the fa ilure of the pe rforman ce of the C ASCO -MIF as signmen t contract. As to tortious interference with prospective business advantage, we are persuaded that CASCO pled sufficient facts to withstand a motion to dismiss on that count. T he eleme nts of tortious interference w ith prospec tive busines s advantag e mirror tho se of interferen ce with contract. Brown v. Carr, 503 A.2d 1 241, 12 47 (D .C. 198 6). To p revail, ho weve r, a plaintiff obviously need not d emons trate the existen ce of a con tract, but m erely a prospective advantageous busine ss transa ction. See id. The existe nce of suc h a prospe ct is not in contention here. Instead, appellees argue that, for both intentio nal interferen ce counts, th eir actions were privileged, because they were taken merely in furtherance of their economic interests. Appellees draw our attention to case law from the Ninth Circuit and Alaska.11 We disagree. We have specifically held that a landlord may not for economic motives reasonab ly refuse consent to a sublease that fully protects the landlord s bargain under the 10 Paul v. Howard Univ., supra, also relie d upon by app ellees, cites Sorrells and is not to the contrary. 11 Hamro v. Shell Oil Co., 674 F.2d 784 (9th C ir. 1982); RAN Corp. v. Hudesman, 823 P.2d 646 (Alaska 1991). 15 prime lease. 1010 Potomac Assocs. v. Grocery Mfrs. of America, Inc., 485 A.2d 199, 209 (D.C. 1984). It is uncontroverted that CASCO sought to assume in totality the prime lease, thus protecting the RLA s bargain thereunder. If it is established that the RLA withheld its consent merely in order to lev erage a b etter bargain for the Distric t, that would constitute intentional interference with either a contract or business expectancy for purposes of a 12 (b)(6) motion to dismiss. III. We conclude that the trial court erred in ruling favorab ly on appe llees imm unity argume nt. We further conclude that CASCO s complaint stated a cause of action sufficient to withstand a motion to dismiss. We emphasize again the standard under which we have found error in gran ting dismiss al pursuan t to Super. C t. Civ. R. 12 (b)(6): we will affirm such a dismissal only when it appears, beyond doubt, that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief.12 We remand for further proceedings consistent with this opinion. Reversed and remanded. 12 We do not consider appellees alternative argu ment seeking su mmary judgme nt, which the trial court did not reach.

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