The Sentinel Case II

Bid for Lawyers’ Testimony Dropped

Reprinted from The Washington Post

By Ann Mariano
Washington Post Staff Writer
Copyright The Washington Post, September 15, 1984

The attorney for unit owners who are suing the developer of their Alexandria condominium project backed away from asking his rival attorneys in the case to testify under oath this week about the bugging of an owners’ meeting room.

Threatened with the possibility of a mistrial in the complex and increasingly lengthy trial, attorney James C. Brincefield did not follow through on his plan to put lawyers Paul Sheridan and Griffin I. Garnett III on the witness stand.

Garnett, who represents developer John F. DeLuca, and Sheridan, the attorney for DeLuca’s lawyer, Russell S. Rosenberger Jr., said they would ask Judge Donald H. Kent to declare a mistrial if they were called to testify. They said they might be required to reveal contents of confidential conversations with their clients, violating the attorney client privilege of confidentiality. Kent refused a request from Brincefield to rule on whether he would declare a mistrial at the point when Sheridan and Garnett were called to the witness stand and before they testified, as the two lawyers had asked.

Sheridan and Garnett both said in court documents they did not know about the electronic eavesdropping and did not receive or use any information obtained from it.

“The plaintiffs simply cannot take the chance of a mistrial. It would be an emotional and economic disaster to start over,” said Brincefield. The trial began in early May. It is expected to resume’ later this month after a trial a two-week recess.

Owners of 27 condominiums in the Sentinel of Landmark have sued DeLuca, charging fraud, negligence and violations of the Virginia Condominium Act. Rosenberger and real estate brokers Peter Burr and Jeannie B. Honeycutt also were charged with fraud. Before the trial was recessed last week, the Judge dismissed the count of actual, or intentional, fraud against the two brokers, but let stand a charge of constructive fraud, which is a misrepresentation made without knowledge that it was false.

The unit owners discovered a microphone hidden in a ceiling vent and recording equipment in a nearby room in early June when they were meeting at the Sentinel to discuss the lawsuit with Brincefield. David Ralph Thompson, former manager of the Sentinel when DeLuca owned it, has been charged with interception of private oral communications, a felony under Virginia law.

5th Amendment Invoked in Condo Bugging

Reprinted from The Washington Post

By Ann Mariano
Washington Post Staff Writer
Copyright The Washington Post, June 30, 1984

David Ralph Thompson, charged in connection with the bugging of a meeting room In the Sentinel of Landmark condominium project, and John DeLuca, developer of the condominiums, both invoked the protection of the Constitution’s Fifth Amendment in refusing to testify about the incident this week.

Thompson, former manager of the building when DeLuca owned it, was arrested more than two weeks ago after Sentinel residents discovered a concealed microphone and recording equipment during a meeting with their attorney in a community room of the building.

An attorney for Douglas Rose, a resident of the Sentinel, said in court that his client also claimed constitutional protection. James C. Brincefield Jr., the lawyer representing the Sentinel residents, subpoenaed Rose but declined to discuss the reasons.

Owners of 27 units in the Sentinel have sued DeLuca, accusing him of fraud, negligence and violations of the Virginia Condominium Act. They have filed suits against Russell S. Rosenberger Jr., DeLuca’s former lawyer, and real estate brokers Peter Burr and Jeannie B. Honeycutt, who sold units in the building, charging them with fraud.

The residents filed their suits after DeLuca sold 203 of the Sentinel’s 273 units to a real estate syndicate that is renting them out. The owners say they were told when they purchased their condos that no more than 20 percent of the units in the building would be sold to investors as rental property.

Louis Koutoulakos, DeLuca’s attorney, said the developer “was not in any way involved with any bugging, … [and] has no information regarding that situation.”

Rose’s attorney, Stephen Rideout, said his client “declined to respond to questions because police are investigating” the discovery of the recorder.

Thompson, who is free on bail, is charged with interception of private oral communications, a felony under Virginia law. He is scheduled for a court hearing late next month.

A police spokesman would not discuss the investigation into the bugging, which is still in progress, he said.

Attorneys for the other defendants in the case said their clients were not involved and had no knowledge of the bugging.

The Sentinel residents and Brincefield were meeting in the community room to discuss the trial when unit owners decided to check the room. They said that they became suspicious after noticing that a man not associated with the owners or management had been seen at the Sentinel several times when they were meeting with Brincefield.

While the discussion continued, several residents unscrewed the covers of some of the overhead vents and found a microphone behind one of them. They followed the wiring down a hallway and into an electrical equipment room where they found the recording equipment, Brincefield said.

Sentinel Trial Concludes; Defense Wins a Round

Reprinted from The Washington Post

By Ann Mariano
Washington Post Staff Writer
Copyright The Washington Post, October 6, 1984

A complex, six-month long trial centering on charges by unit owners in an Alexandria condominium project that the developer and several of his associates were guilty of fraud and violations of the Virginia Condominium Act wound down this week, with lawyers calling it a landmark case in condo litigation. Circuit Court Judge Donald Kent is expected to issue a ruling soon, but would not indicate when it might come.

Just days before the attorneys’ final arguments, the defendants the condominium developer, his attorney, and real estate agents won a significant round in the case when Kent decided they could not be compelled to pay punitive damages, basing his ruling on a Virginia Supreme Court decision earlier this year. As part of their suits, the 27 unit owners asked for nearly $7 million in damages. They also are asking for the recision of their contracts and return of all money they have put into the property, including moving expenses and the costs of improvements they made to the units.

Although the suits were tried together, the 27 homeowners filed separate actions against developer John F. DeLuca; attorneys Russell S. Rosenberger Jr. and Ronald Proffitt; Rosenberger’s law firm, Bettius, Rosenberger & Carter; real estate agents Peter Burr, Jeannie B. Honeycutt, Kevin Cameron Wade and David Carroll, and two companies headed by Burr. Judge Kent dismissed charges of actual fraud against the real estate agents last month, but let stand the allegations that they were guilty of “constructive fraud,” which the condo owners’ lawyer defines as fraud committed innocently or through negligence.

The unit owners allege they were not told about “material changes” made in condominium documents after they bought their apartments. A major complaint is that they were not informed that DeLuca planned to sell more than 200 of the building’s 272 units to a Boston investor, who operates them as rental units, despite assurances that the building would be predominantly owner occupied. Condominium owners frequently object to tenants in other units because they believe renters do not pull their weight in management and upkeep of the buildings.

The residents also said they did not receive current public offering statements as required by Virginia law. The P0S, designed to be the major protection for condominium purchasers, is supposed to contain complete information on the facilities, maintenance and management of a condo project.

In their closing arguments, attorneys for DeLuca and the real estate agents frequently defended their clients by casting responsibility for improper acts on other defendants, most often on Rosenberger. The attorney acknowledged in testimony and in pretrial depositions that he failed to comply with Virginia law in preparing and recording condominium documents, and that he knew DeLuca was giving prospective purchasers an unregistered public offering statement.

But Rosenberger, “having done things wrong in July 1981, thought he had rallied” and better performed his job, said his attorney, Paul F. Sheridan, in his closing argument of the trial this week. The “maximum level” of the case against Rosenberger is that the unit owners “thought their condominium purchases complied with Virginia law,” he said.

Sheridan argued that the Virginia condominium act provides only for return of a purchaser’s deposit in the case, although he said Judge Kent “could feel that is unfair.” He also argued that the unit owners “had a remedy available 2 1/2 years ago” before they filed the lawsuits. They could have asked for recision of their contracts at that time, Sheridan said.

The unit owners are asking that their mortgages, held by Riggs National Bank, be canceled, but Sheridan said “there’s no evidence that John DeLuca can pay, no evidence that Russell Rosenberger can pay” to buy the loans from the bank. Defense Attorney James C. Brincefield Jr. said the total amount of the original mortgages was more than $1.5 million.

Joseph F. Cunningham, the attorney for the real estate agents, said that “they relied on what they were told by the developer and by the developer’s lawyer” for information they relayed to prospective purchasers, and did not know about defective documents, DeLuca’s plans to sell the majority of the condos to investors, and other actions by the developer the owners say were illegal. He said there was not a “scintilla” of evidence to show the sales agents misrepresented any facts about the Sentinel or acted improperly.

The developer’s attorney, Griffin T. Garnett III, argued, however, that “it was clearly the responsibility of the Realtors to hand out documents. John DeLuca didn’t deal with the purchasers, and Russell Rosenberger didn’t deal with them.” Garnett said he was referring to documents sent to the sales agents by DeLuca.

DeLuca said any improper handling of documents, failure to record them with the state condominium commission and to disclose them to purchasers was done the advice of Rosenberger, according to Garnett. The charge that DeLuca commingled condo association funds with his own money “is a case for another day,” the lawyer added.

Brincefield, the plaintiffs’ lawyer, said the “psychological and emotional” cost to the unit owners, in addition to their financial costs, entitled them to the reimbursement of money they sought and cancellation of their contracts.

Condo Owners Win Court Fight in Sentinel of Landmark Case; Judge Orders Money Returned, Mortgages Canceled

Reprinted from The Washington Post

By Ann Mariano
Washington Post Staff Writer
Copyright The Washington Post, May 13, 1985

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 long and complex trial ended. Kent said that when Northern Virginia John F. DeLuca complies with the court order, he will get the property after the developer 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 casts. 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 Mary 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.

Sanctions Set Against Sentinel Developer

Reprinted from The Washington Post

By Ann Mariano
Washington Post Staff Writer
Copyright The Washington Post, December 7, 1985

An Alexandria judge has ordered a developer and his attorneys to start paying $5,000 a day in sanctions until they comply with an earlier order to pay more than $750,000 in damages to 25 condominium owners who won a suit against them and another $1.5 million to buy back their units. Circuit Court Judge Donald H. Kent imposed the sanctions this week after developer John DeLuca and his attorneys failed to make the damage payments to the condominium owners by a week ago yesterday, as Kent had ordered them to do.

In addition to the sanctions, Kent ordered DeLuca and his attorneys to pay the condominium owners’ attorneys’ fees and other damages to cover expenses they incur because of the delay in the settlement of the lawsuit.

Last May, Kent ordered DeLuca, developer of the Sentinel of Landmark condominium project, and his lawyers to return the 25 owners’ money, cancel their sales contracts and release them from their mortgages.

But shortly before Thanksgiving, DeLuca, attorneys Russell S. Rosenberger and Ronald C. Proffitt and their law firm, then Bettius, Rosenberger and Carter, told the judge their financing had fallen through and they could not make the payment.

Kent, in deciding the case in favor of the condominium owners, ordered DeLuca and his attorneys to pay the $750,000 In damages, to be divided among the owners to cover their Sentinel down payments, settlement costs and other expenses. In addition, the judge ordered the developer and the attorneys to buy back the 25 units, which are worth about $1.5 million.

Rosenberger told Kent during a hearing this week that a private investor who was expected to be a large contributor to the buyout of the units had withdrawn from the deal. Although the law firm’s insurance company can contribute $350,000 to the settlement, the defendants do not have enough money to cover the full award, the judge was told.

The condominium owners’ attorney, James C. Brincefield, asked Kent during a hearing In early October to require DeLuca and the attorneys to post a bond or provide evidence of their ability to comply with the settlement order. The defendants replied that they would have enough funds by the settlement date, and the judge did not order a bond or other proof that they would meet the settlement terms.

Kent ruled earlier this year that DeLuca and Rosenberger violated Virginia law covering the handling of condominium documents for the building, located at 6300 Stevenson Ave. The judge found Rosenberger was guilty of fraud for failing to properly register the condominium and not giving the unit owners correct public offering statements. Proffitt was found guilty of “constructive fraud,” which Kent said was “innocent and mistaken representation” in settlement of one purchase. Under Virginia law, other partners in the attorneys’ firm are liable although they are innocent of participation In the fraud.

While the judge ruled in favor of the condominium owners, he also ordered them to vacate their apartments by the settlement date last week. They complied with the order and, as a result, several of them said, nearly all of the 25 owners now either have no new home or are in severe financial difficulty.

Brenda Dobbs, whose Sentinel apartment was the first home she has owned, said, “I won. I proved fraud and I’m on the street while they the defendants go home to their comfortable homes every night. It doesn’t make sense. It seems that justice will never be done.”

Dobbs, like several other owners, had signed a contract to buy a new home, expecting to cover the costs of settling the purchase of her town house with proceeds from the Sentinel award. Dobbs moved into the town house two days before she was scheduled to receive the Sentinel proceeds, planning to pay rent until she received the money and completed the new purchase.

Later on the same day she learned of the snag in the Sentinel award. Now her belongings are still in the town house while she stays with a friend. She said she will have to move back into the Sentinel by this weekend because she cannot complete the home purchase.

She said she expects to lose nearly $10,000 she had already paid for upgraded amenities In the town house, moving expenses and costs and fees connected with obtaining her mortgage and closing the sale of the new home. Terry and Cynthia Moore Corner were counting on their share of the Sentinel award to cover the down payment and closing costs for another Alexandria condominium unit they planned to buy, and have signed a $1,000 pre-occupancy agreement on the new apartment so they could move in time to comply with the Sentinel court order.

“We won’t be able to buy here if they the defendants don’t settle with us. We would have to pay for a second move and forfeit our deposits,” Terry Corner said.

Linda J. Desell also has moved to a new home, but is still living in the Sentinel apartment with a cot, one suitcase, and her dog, she said. Like Kathryn Zuba and other owners, she said she cannot carry a new mortgage and continue paying on her Sentinel unit.

The latest twist in the Sentinel saga comes more than three years after owners of 27 units filed separate suits, which then were tried together. Kent dismissed two cases on legal technicalities.

In addition to receiving invalid condominium documents, the Sentinel owners said they were told when they bought their apartments that 80 percent of the 272 units in the building would be owner occupied. DeLuca, however, sold more than 200 of the apartments to a Boston syndicate that operates them as rental units.

Condominium owners often fear that large numbers of renters in their buildings will lower the resale value of their units, because tenants, who have nothing invested in the building, will not shoulder a fair share of maintenance and management costs.

During the trial, DeLuca said he did not deceive anyone, and that “altering the condominium documents was my attorney’s responsibility.” Rosenberger, who surrendered his license to practice law in Virginia last year, acknowledged during the trial that he failed to follow state law in preparing and recording the documents.

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 P0S 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.

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