4700 CONN 305 TRUST, APPELLANT, v. CAPITAL ONE, N.A., APPELLEE.
No. 16-CV-977
DISTRICT OF COLUMBIA COURT OF APPEALS
September 13, 2018
Appeal from the Superior Court of the District of Columbia (CAR-593-15) (Hon. Ronna Lee Beck, Trial Judge)
Notice: This opinion is subject to formal revision before publication in the Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the Court of any formal errors so that corrections may be made before the bound volumes go to press.
(Argued January 18, 2018 Decided September 13, 2018)
Anthony R. Champ, with whom Benny L. Kass was on the brief, for appellant.
Anand Ramana, with whom Phillip C. Chang was on the brief, for appellee.
Before BECKWITH and MCLEESE, Associate Judges, and FARRELL, Senior Judge.
I.
In 2007, Anusha Putty executed a note for $308,750 to finance the purchase of condominium unit 305 at the Parker House, 4700 Connecticut Avenue, N.W. (“the Unit“). Appellee Capital One, N.A. (“Capital One“) is the current holder of the note (on which Putty later defaulted) and the beneficiary of the related first deed of trust. By December 2012, Putty had fallen into arrears to the Parker House Condominium Association (“the Association“) for some eleven months of unpaid condominium assessments, and in December 2012 the Association recorded a lien on the property in the amount of $6,108.75. The Association‘s Notice of Foreclosure Sale advertised as one term of sale that the Unit would be sold “subject to the first deed of trust, for the original amount of approximately $308,000.00 (as of 12/10/07).” The sale, in which the Association sought to recover the eleven-month balance of unpaid assessments, took place in January 2013. Appellant 4700 Conn 305 Trust (“the Trust“) was the successful bidder at the sale, buying the Unit for $11,000. The Memorandum of Purchase memorializing the sale, as well as the Trustee‘s Deed from the Association to the
In January 2015, Capital One filed a complaint for judicial foreclosure on the Unit in Superior Court. The Trust filed counterclaims to quiet title and for slander of title, asserting that the Association‘s foreclosure on the Unit to enforce its lien for unpaid assessments had extinguished Capital One‘s first deed of trust. On Capital One‘s motion for summary judgment, the trial court determined that, whatever the language of
II.
As our prior decisions have explained,
We now conclude that the result is the same in either case. As we explained in Chase Plaza,
The lien shall also be prior to a [first] mortgage or [first] deed of trust . . . to the extent of the common expense assessments . . . which would have become
due in the absence of acceleration during the [six] months immediately preceding institution of an action to enforce the lien.
That reading, in our view, engrafts a limitation on subsection 13 (a)(2) that its language will not bear. The provision certainly qualifies how much of the condominium assessment lien enjoys super-priority, but it implies nothing about retention or loss of that priority if the foreclosure seeks to enforce the lien for a greater amount of assessments owed. Rather, as we stated in Chase Plaza, the statute “effectively splits condominium-assessment liens into two liens of differing priority,” 98 A.3d at 173, which in turn dictates how the proceeds of a sale to recover the most recent six months’ and additional assessments will be distributed, but reflects no intent to nullify the super-priority lien just because both liens are enforced in the same sale.
Creation of the super-priority lien, as we pointed out in both Chase Plaza and Liu, was intended by the District of Columbia Council to give condominium “associations the maximum flexibility in collecting unpaid condominium assessments.” Chase Plaza, 98 A.3d at 174 (quoting D.C. Council, Report on Bill 8-65, at 3 (Nov. 13, 1990)). That flexibility would be hamstrung if an association were put to the choice of foreclosing to recoup more than six months of assessments (with attendant loss of its super-priority lien) or limiting the forced sale to the most recent six-months of arrearage. Indeed, on Capital One‘s reasoning, the same result would obtain if the association accidentally included in its notice of sale an additional month or more of arrearage; the effect still would be erasure of its super-priority lien as to any part of the sale proceeds. Also, the sums an association may recover via foreclosure include “any late charge or interest due and reasonable attorney‘s fees and costs incurred in connection with the enforcement of the lien.”
Finally, and perhaps most significantly, if by foreclosing for more than the most recent six months of assessments an association relinquished its super-priority lien, this would be tantamount to what the court in Liu held a condominium association may not do expressly or by agreement, namely, “subordinate its super-priority lien to a first deed of trust during a foreclosure sale.” 179 A.3d at 879. That, we stated in Liu, “would effectively constitute a waiver by the . . . association of its super-priority lien, which is not permitted under
We are also unpersuaded by Capital One‘s argument, advanced in its Supplemental Brief, that a 2017 amendment to
III.
The net result of this analysis, in keeping with Chase Plaza and Liu, is that the Association‘s enforcement of its super-priority lien by foreclosure sale of the Unit to the Trust extinguished Capital One‘s first deed of trust. But because, as in Liu also, (a) the sale price was greatly below the amount of the mortgage and apparent value of the Unit, and (b) the sale by its terms was erroneously conditioned on assumption of the first deed of trust, we are confronted with the issue, left open in Liu, of whether the sale should be invalidated on equitable or other grounds. Although the answer to that question would ultimately be subject to our de novo review, see Chase Plaza, 98 A.3d at 172, we conclude that it should properly be addressed by the trial court in the first instance, not least because we need the benefit of that court‘s judgment as to issue preservation. We therefore hold that the order granting summary judgment to the Trust must be vacated and the case remanded for the trial court, aided by the parties, to resolve these issues:
Was the sale invalid under traditional contract or equitable principles, see Chase Plaza, 98 A.3d at 178 & n.8 (stating that a “valid” foreclosure sale terminates lower priority liens and remanding for determination of whether the sale there should be invalidated because the sale price “was unconscionably low“); and
Did Capital One sufficiently preserve a challenge to the sale‘s validity in the trial court?
Following resolution of these issues and re-entry of judgment by the trial court, either party may seek review of that decision by this court.
IV.
The judgment of the Superior Court is vacated and the case is remanded for further
So ordered.