Residential Credit Opportunities Trust v. Poblete
245 F. Supp. 3d 91
| D.D.C. | 2017Background
- Residential Credit Opportunities Trust (plaintiff) held the note and deed of trust on property at 4130 16th St NW, D.C.; borrower Luis Poblete defaulted in 2007 and no payments have been received since.
- Plaintiff’s predecessor filed for judicial foreclosure in D.C. Superior Court in 2013; after extended procedural skirmishing and two removals, the case returned to federal court in 2016 with plaintiff seeking judicial foreclosure.
- While the federal action was pending, plaintiff completed a non-judicial foreclosure sale under the Deed of Trust’s power-of-sale provision; the sale closed before a federal ruling on judicial foreclosure.
- Defendant filed a pro se Petition to Cancel Sale and multiple other filings; the district court construed the petition as a challenge to the non-judicial sale but found it procedurally improper as a late counterclaim under Rule 13(e).
- The court concluded that because the non-judicial sale provided the relief plaintiff sought (foreclosure/title), the judicial-foreclosure claim was moot and dismissed the case; the motion to cancel sale was denied without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Mootness after non-judicial foreclosure | Judicial foreclosure still needed to secure marketable title and protect against collateral attack; court ratification would help title underwriting | Non-judicial sale was improper and should be canceled; seeks stay to pursue bankruptcy options | Claim for judicial foreclosure is moot because plaintiff obtained the relief it sought via non-judicial sale; indirect benefits of a judicial decree do not prevent mootness |
| Ability to litigate challenge to non-judicial sale in this case | Plaintiff argued sale completion moots judicial claim; suggested ratification language in proposed order but did not assert sale invalidity here | Poblete sought cancellation of the sale (challenge to propriety) | Defendant’s Petition to Cancel Sale treated as a Rule 13(e) counterclaim; court declined to permit it (would cause delay/confusion) and denied it without prejudice |
| Effect of court “ratification” on title passing | Plaintiff claimed court ratification would allow recording of trustee’s deed and satisfy underwriters | Defendant argued sale was invalid regardless of ratification | Under D.C. law, non-judicial sale passes title on completion without court ratification; court ratification would have no automatic legal effect here |
| Recovery of deficiency on the note after sale | Plaintiff initially sought deficiency in complaint historically | Defendant implied sale resolves dispute over title/payment | Court noted no live deficiency claim was pressed in this action; plaintiff may pursue deficiency in separate suit but not to revive this moot case |
Key Cases Cited
- Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663 (Sup. Ct.) (Article III requires a live case or controversy at all stages)
- Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (Sup. Ct.) (loss of personal stake during litigation renders action moot)
- Szego v. Kingsley Anyanwutaku, 651 A.2d 315 (D.C. 1994) (lender may seek judgment on note and foreclosure; distinction between judicial and nonjudicial foreclosure not controlling for available remedies)
- Rogers v. Advance Bank, 111 A.3d 25 (D.C. 2015) (describing differences between judicial and nonjudicial foreclosure and mediation/notice requirements)
- Gordon v. Lynch, 817 F.3d 804 (D.C. Cir.) (legal status that has automatic effects in other fora can sometimes prevent mootness)
- United States v. Juvenile Male, 564 U.S. 932 (Sup. Ct.) (possible indirect benefits in future litigation do not prevent mootness)
- Conservation Force, Inc. v. Jewell, 733 F.3d 1200 (D.C. Cir.) (court must ensure a justiciable case or controversy exists)
- Jefferson Fed. Sav. & Loan Ass’n v. Berks Title Ins. Co., 472 A.2d 893 (D.C. 1984) (deficiency actions may be pursued after power-of-sale foreclosure)