Hernandez v. Banks

65 A.3d 59 (D.C. App. 2013)

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Nature of the Case

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Facts

D entered into a lease agreement with Ms. Speleos in March 2001. Ds were obligated to pay $500 per month in rent and were given the exclusive option to purchase the Property at any time for $50,000. In July 1997, 718 Associates purchased a tax sale certificate to the Property for $2,103 and was subsequently issued a tax deed in August 2001. Adult Protective Services found Speleos, who was then eighty-four years old, to be mentally incapacitated. It was alleged that Ms. Speleos was already incapacitated at the time of the transactions, in which she purportedly transferred seven properties with tax-assessed values of over half a million dollars for only $41,000 in recited consideration. Judge Christian voided the transactions but did not rule on the validity of D's lease, which was also entered into prior to Ms. Speleos's adjudication of incapacity. The Judge noted that another hearing would need to be held to address that lease. However, that additional hearing was never held. Ms. Speleos was committed. On August 5, 2003, 718 Associates filed suit against Ms. Speleos's estate to quiet title to the Property, claiming that their tax deed divested all interest and title of the Estate and vested good title to the Property in 718 Associates. Ms. Speleos passed away, and her sister, Ann E. Pizzulo, became Personal Representative of the Estate. The suit to quiet title was resolved in October 2006, when 718 Associates and the Estate entered into a settlement agreement, which resulted in 718 Associates obtaining title to the Property. The Estate provided an affidavit attesting that there were no valid leases or permissive tenants on the Property. In April 2008, P filed the present action seeking a non-redeemable judgment for possession of the Property. P claimed that Ms. Speleos lacked capacity at the time that she entered into the lease transaction and, as a result, the lease was void. The trial court concluded that the lease was voidable. The trial court recognized the binding precedent of the Sullivan case but examined the 'modern view' that such a transaction is voidable, citing to cases from other jurisdictions and discussing the public interest in protecting incapacitated persons' personal and property rights. It held that the contracts entered into by mentally incapacitated persons are voidable, rather than void, and it found that there was 'no ratification or disaffirmance by Ms. Speleos or an authorized representative on her behalf. On appeal to the division, it concluded that it was constrained to apply Sullivan because Sullivan remained binding precedent in the District of Columbia and therefore could only be overruled. D petitioned for a rehearing en banc, and it was granted.