179 A.3d 871
D.C.2018Background
- In 2007 Jon Michael Lucas took out a mortgage on Unit 1003 at Sonata Condominium; the deed of trust was later assigned to U.S. Bank (the Bank).
- From 2009 Lucas stopped paying mortgage and condominium assessments; Sonata Condominium Ass’n (Sonata) pursued foreclosure under the six-month “super-priority” lien provision of D.C. Code § 42-1903.13(a)(2).
- Sonata held a non-judicial foreclosure sale on June 4, 2014; the unit sold to Ms. Liu for $17,000, of which Sonata applied roughly six months of assessments and related costs.
- Sonata’s sale materials and the trustee’s deed stated the unit was sold “subject to” the Bank’s deed of trust; the Bank attempted to pay assessments but its payment arrived after the sale.
- The Bank sued for judicial foreclosure and joined Liu; the trial court ruled for the Bank, treating the sale as subject to the mortgage and not extinguishing the Bank’s lien.
- On appeal the D.C. Court of Appeals reversed, holding that when a condominium association enforces its six-month super-priority lien at sale, it cannot simultaneously preserve the full first-mortgage lien; if sale proceeds do not satisfy the mortgage, the mortgage is extinguished.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a condo association can foreclose on its six-month super-priority lien while selling the unit subject to a first mortgage | Liu: sale enforced the super-priority lien and purchaser took free of the mortgage | Bank: sale terms showed unit was sold subject to the deed of trust; Sonata elected not to enforce super-priority lien | Court: association may not enforce super-priority lien while preserving full first-mortgage; sale enforcing super-priority lien extinguishes subordinate mortgage if proceeds insufficient |
| Whether the anti-waiver provision bars contracting around super-priority status | Liu: D.C. Code § 42-1901.07 prevents waiver/variation of statutory super-priority rights | Bank: parties and sale terms can preserve mortgage priority by agreement or sale terms | Court: anti-waiver provision prohibits varying or waiving chapter rights; parties cannot validly subordinate the super-priority lien by contract |
| Whether equitable estoppel prevents Liu from claiming she bought free and clear | Bank: Liu accepted terms and did not move to vacate; she should be estopped | Liu: Bank knew law was unsettled and tried but failed to timely pay; no reasonable reliance | Court: equitable estoppel not established; allowing estoppel would defeat statutory scheme and public policy protecting associations |
| Whether non-judicial enforcement or prior sale attempts precluded super-priority foreclosure effect | Bank: super-priority extinguishment requires judicial foreclosure or was barred by prior attempts | Liu: statute and condominium bylaws permit non-judicial power-of-sale; prior cancelled attempts do not bar a later valid foreclosure | Court: non-judicial sale was permissible under statute and bylaws; successive enforcement not barred when no foreclosure action is pending |
Key Cases Cited
- Chase Plaza Condominium Ass’n v. JPMorgan Chase Bank, N.A., 98 A.3d 166 (D.C. 2014) (held condo association foreclosure on six-month super-priority lien can extinguish a first deed of trust when sale proceeds are insufficient)
- Nolan v. Nolan, 568 A.2d 479 (D.C. 1990) (defining elements required to establish equitable estoppel)
- Hudson Trail Outfitters v. District of Columbia Dep’t of Emp’t Servs., 801 A.2d 987 (D.C. 2002) (statutory plain-meaning rule binds courts to clear statutory language)
- Woodland v. Dist. Council 20, 777 A.2d 795 (D.C. 2001) (summary judgment review standards)