BALLSTON-VIRGINIA SQUARE

Civic Association Newsletter

March/April 1997 - Volume 20, No. 5



FORT C.F. SMITH LEGAL CONTROVERSY

In the October/November 1994 BVSCA Newsletter, the Association reported that former Secretary Ernie Ragland, who is the current BVSCA President, had interviewed the Hendry family on September 16, 1994, about the historic Fort C.F. Smith property acquired by the Arlington County Board on September 9, 1994. This interview was in response to members interest about the Board's acquisition of 14.7 acres of land in northeast Arlington as a public park, and because it was one of the most significant land acquisitions in the County's history.

The Association reported in this Newsletter, the highlights of the interview with the Hendry family, the negotiated contract terms for the property's use in the future, and the property's historical significance, as described by the Historical Affairs and Landmark Review Board in its report to the County Board dated December 11, 1986. The complete article is available on the Ballston-Virginia Square Civic Association home page, located at "http://www.bvsca.org," under the BVSCA home page link to the October/November 1994 Newsletter electronic file.

Briefly, the Association reported that on September 9, 1994, the Board acquired the property for $5.25 million from the Anne P. Hendry Living Trust and Ernest and Judith Hendry. This property is located at 2411 N. 24th Street and overlooks the Potomac River. This acquisition includes a Victorian farmhouse and one of the best preserved remains of a Civil War fort located in the Washington, D.C. area, Fort C.F. Smith. By purchasing the property, it appears that the County has avoided a constitutional case over the validity of the Historic Designation on the property. This resulted, when a developer in 1987 proffered historic designation of 3 acres including the fort in exchange for increased density for a housing site plan objected to by the owners. Subsequently, in 1988, the Hendrys settled a lawsuit with the developer for $1.5 million. They settled on the advice of their lawyer, for what they later found was a void contract and a fraudulent site plan that was approved by the County Board without the owners authorization.

Also, the Association reported in the article that a malpractice suit against the lawyer was on appeal. In 1989, the Hendrys began to protest their real estate taxes, which the County increased by 84% in one year due to the County Board's approved site plan that the Hendrys did not want. In 1993, 4.3 acres of the Hendry tract was partitioned and sold to Robert Hemphill, of AES, for $2.4 million by other family members. In the Spring of 1994, two half-acre lots were sold. The Hendrys will retain approximately 9,000 square feet of the 20 acre historical tract.

Update on Legal Controversy of Historic Fort C.F. Smith

In December 1996, the Association obtained information about the malpractice suit and the appeals case on the Internet WEB at "http://www.ll.georgetown.edu/Fed- Ct/Circuit/dc/opinions/94-7082a.html" . The WEB shows that the case was Argued November 14, 1995 and Decided January 19, 1996, No. 94-7082, ANNE P. HENDRY, ET AL., APPELLANTS v. FRANCIS J. PELLAND AND SADUR, PELLAND & RUBINSTEIN, P.C., APPELLEES, Consolidated with 94-7083, 94-7084 fees. Ernest S. Hendry, Jr., appearing pro se, argued the cause for appellants, with whom Anne P. Hendry and Judith V. Hendry, appearing pro se, were on the brief. Ellen G. Draper argued the cause for appellees, with whom Joel M. Savits, Francis J. Pelland and Joel S. Rubinstein were on the brief.

Before: GINSBURG, ROGERS and TATEL, Circuit Judges.

The Opinion for the United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT, filed by Circuit Judge TATEL, states "Three clients sued their former attorney and his law firm for breach of fiduciary duty, seeking punitive damages, compensatory damages, and disgorgement of the legal fees they had paid. The attorney's law firm counterclaimed for unpaid legal fees. Applying District of Columbia law, we address three district court rulings made during the jury trial. First, because we agree with the district court that the record contained insufficient evidence for a reasonable jury to find that the attorney wilfully disregarded his clients' rights, we affirm the judgment denying the clients' request for punitive damages. Second, concluding that clients seeking disgorgement of legal fees for a breach of their attorney's fiduciary duty of loyalty need only prove that their attorney breached that duty, not that the breach injured them, and finding that the clients here presented sufficient evidence for a jury to conclude that their attorney breached his duty of loyalty, we set aside the district court's judgment for the lawyer and his law firm on the fiduciary duty claim. Finally, because the clients had a valid claim for breach of fiduciary duty, we set aside the court's ruling precluding them from using that breach as a defense to the law firm's counterclaim for unpaid fees. We therefore remand for a new trial on the clients' breach of fiduciary duty claim and the law firm's counterclaim for legal fees."

Several members of the Association, including the President, find it most interesting that the County Board ultimately acquired the Hendry property, especially in light of the details presented in this appeals case on the Internet. Paradoxically, this electronic file shows it was the Board's actions that triggered key events that led to the sale.

The Internet shows that when county officials [the County Board] turned down the retirement home project, the developer proposed amending the agreement with the Hendry family to provide for the construction of a 56-unit residential development. Also, it is interesting to note that this appeals case shows the County approved the site plan for the residential development and that the Hendry family including the mother-refused to sell. The Hendrys refused to sell because they were opposed to residential development of this historic property. "Claiming breach of contract and unjust enrichment, the developer sued them in a Virginia state court [the Arlington Circuit Court]...At a conference shortly before trial, the presiding judge [Arlington Circuit Court] told the parties that although the developer's contractual claims were meritless, the unjust enrichment claim had merit because the developer's efforts in securing County approval of the residential site plan increased the value of the Hendrys' property. He advised the litigants to negotiate a settlement on the unjust enrichment claim. Following the Hendrys' lawyer's advice, the family settled with the developer for $1.5 million."

Specifically, the Internet file, under Section I., of this case, states "Five members of the Hendry family-the mother, her son and daughter, and the daughter's two infant children-owned an historic twenty-acre parcel of land in Arlington County, Virginia as tenants in common. The adult owners of the property, as well as the spouses of the son and daughter, who held rights of dower and curtesy, signed an agreement to sell the property for $4.5 million to a developer who planned to build a retirement home on the land. According to the agreement, if county officials failed to approve zoning changes needed to build the retirement home, the parties would undertake "good faith" negotiations to restructure the transaction. When county officials turned down the retirement home project, the developer proposed amending the agreement to provide for the construction of a 56-unit residential development. Under the proposed amendment, the $4.5 million price was unchanged. Although the son told the developer that he objected to the proposed amendment, his mother and the developer signed the amendment while the son was away on vacation.

Discovering what his mother had done, the son and his wife retained Francis Pelland, a partner in the Washington, D.C. law firm of Sadur, Pelland & Rubinstein. The son explained to the lawyer that he was opposed to the residential development and concerned about his mother's mental capacity. Relying on the agreement's "good faith" clause, Pelland advised his clients not to oppose the residential development. Although the county ultimately approved the site plan for the residential development, all of the owners-now including the mother-refused to sell. Claiming breach of contract and unjust enrichment, the developer sued them in a Virginia state court.

While Pelland originally represented only the son and his wife, he represented all the owners of the property in defending the lawsuit. At a conference shortly before trial, the presiding judge told the parties that although the developer's contractual claims were meritless, the unjust enrichment claim had merit because the developer's efforts in securing county approval of the residential site plan increased the value of the Hendrys' property. He advised the litigants to negotiate a settlement on the unjust enrichment claim. Following Pelland's advice, the family settled with the developer for $1.5 million.

Unhappy with this result, three of the clients-the mother, the son, and his wife-sued Pelland and his law firm in the United States District Court for the District of Columbia based on diversity of citizenship, claiming both professional negligence and breach of fiduciary duty. The Hendrys sought identical relief on both claims: punitive damages; $2,069,000 in compensatory damages (representing the $1.5 million settlement plus amounts for interest, additional property taxes, and remodeling costs); and return of $86,538.62 in legal fees they had paid. The law firm counterclaimed for $37,504.38 in unpaid legal fees."

For additional information about this appeals case, one should go on-line and click-on to "http://www.ll.georgetown.edu/Fed- Ct/Circuit/dc/opinions/94-7082a.html" .



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