The owners of 25 Alexandria condo units in the Sentinel of Landmark, who said they were deceived when they bought their homes, have won a court battle for return of their money, cancellation of their sales contracts and release from their mortgages.
Circuit Judge Donald H. Kent issued his decision Friday, nearly eight months after the long and complex trial ended. Kent said that when Northern Virginia developer John F. DeLuca complies with the court order, he will get the property back.
Kent said DeLuca failed to give the purchasers current condominium documents as required by Virginia law. The judge also found the developer's attorney, Russell S. Rosenberger Jr., guilty of fraud for failing to properly register the condominium, located at 6300 Stevenson Ave., with the Virginia Real Estate Commission and for not giving the unit owners correct public offering statements.
DeLuca was ordered to pay $541,250, to be divided among the condo owners according to a formula Kent established to cover their down payments, settlement expenses, a portion of their monthly expenses and other costs. The total value of the promissory notes that must be returned to the owners is about $1.5 million, according to James C. Brincefield Jr., the owners' attorney.
Condo owner Gary F. Gustafson said he and his wife are "on cloud nine. . . . We are hoping to get out of the building as soon as we can and get on with our lives." Another plaintiff, Judith Mitchell, said she is "very pleased that we won. It's important to me that it was recognized we were wronged." She added that she is "not completely" satisfied with the amount of money homeowners were awarded.
Attorney Ronald C. Proffitt, an associate of Rosenberger who oversaw the sale of four of the condominiums, was found guilty of "constructive fraud," defined by the judge as "innocent and mistaken misrepresentation," in one of the settlements. Their law firm, then Bettius, Rosenberger and Carter, also was found to be liable in the case because, under Virginia law, partners are liable although they are innocent of any participation in the fraud. Whether the partners will have to pay damages has not been determined. After reading the decision, Paul F. Sheridan, Rosenberger's attorney, said the law firm is a corporation, not a partnership.
Real estate sales agents Peter Burr, Jeannie B. Honeycutt, Mary Alice Mathews, David Carroll and Kevin Wade, as well as two real estate sales firms Burr headed, were found not guilty of charges of constructive fraud.
Brincefield said the decision is a "major victory" for Virginia consumers. "This is a first-of-its-kind case and provides a precedent for relief to condominium purchasers where they are deceived."
Lawyers on both sides called it a landmark case, but Sheridan, who defended Rosenberger, said the Sentinel owners may not have been big winners. "Whichever defendant has to refund the money to the condo owners may not feel damaged because of the equity in the units," Sheridan said. Title to the units would revert to DeLuca or Rosenberger, depending on which of them carried out the court order. "Some of the individual plaintiffs may come out ahead financially, and some of them may not," Sheridan added.
DeLuca's attorney, Griffen T. Garnett III, said Sheridan "could very well be right." He said he is "glad there was no finding of actual fraud on John's part," but said he could not comment further until he talked with his client.
One of the most dramatic events of the long-running Sentinel case took place last June. During a meeting of the condominium owners and Brincefield to discuss the lawsuits, several of the owners discovered a microphone hidden in a ceiling vent and recording equipment in a nearby room, according to the attorney and to police. An Alexandria Circuit Court jury later acquitted David Ralph Thompson, a former manager of the Sentinel, of charges that he bugged the meeting.
The homeowners filed 27 separate lawsuits, which were tried together, over a period of several months in 1982 and early 1983. Kent dismissed two of the cases, those filed by Peter Liszewski and the late David J. Spiegel, because each of the condo units had two owners listed in the deeds but only Liszewski and Spiegel appeared in court documents as plaintiffs. The suits were dismissed "without prejudice," meaning that they can be refiled. Spiegel, a widower, died last Tuesday, three days before Kent issued his decision.
In their suits, the homeowners charged they were not told about "material changes" made in condominium documents. They said they were not given proper public offering statements, the principal source of protection for Virginia condominium purchasers. The POS is supposed to contain complete and current information on the facilities, maintenance and management of a condominium project.
Virginia Real Estate Commission Condominium Administrator William I. Thompson wrote in a December 1983 letter on the Sentinel case that "condominium instruments as recorded with the real estate commission and those distributed to the purchasers were materially different."
The condo owners also said they were told when they bought their apartments that 80 percent of the 272 units in the Sentinel would be owner-occupied. Instead, DeLuca sold more than 200 of the apartments to a Boston syndicate that operates them as rental units. Condominium owners typically fear that renters, who have nothing invested in the building, will not do their share of work in the upkeep and management of the project, and that the presence of a large number of tenants in a building will lower the resale value of the units.
DeLuca said he did not deceive anyone, and that "altering the condominium documents was my attorney's responsibility."
The lawyer, Rosenberger, acknowledged during the trial that he failed to comply with Virginia law in preparing and recording the documents. He petitioned the Virginia Supreme Court for permission to surrender his license to practice law in Virginia, and the court accepted his resignation in January 1984.