U.S. Bank Trust, N.A. v. Omid Land Group, LLC

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DISTRICT OF COLUMBIA COURT OF APPEALS
No. 19-CV-0737
U.S. BANK TRUST, N.A., APPELLANT,
V.
OMID LAND GROUP, LLC, ET AL., APPELLEES.
Appeal from the Superior Court
of the District of Columbia
(CAR-6302-18)
(Hon. Hiram Puig-Lugo, Trial Judge)
(Argued March 30, 2021 Decided August 4, 2022)
Melissa O. Martinez, with whom Samantha E. Thompson was on the brief,
for appellant.
Tracy Buck, with whom Stephen O. Hessler and Ian G. Thomas were on the
brief, for appellee Omid Land Group, LLC.
Before MCLEESE and DEAHL, Associate Judges, and KRAVITZ, Associate
Judge, Superior Court of the District of Columbia. ∗
KRAVITZ, Associate Judge: Appellant U.S. Bank Trust, N.A. appeals from
the trial court’s order granting summary judgment in favor of appellee Omid Land
∗
Sitting by designation pursuant to D.C. Code § 11-707(a).
2
Group, LLC. We vacate the order of summary judgment and remand for further
proceedings.
Factual and Procedural Background
Rosslyn Snowden purchased a condominium unit at 701 Delaware Avenue,
S.W. on May 19, 2005. To finance the purchase, Ms. Snowden took out a
mortgage in the amount of $315,000.00 from CTX Mortgage Company, LLC and
executed a promissory note, endorsed in blank. Ms. Snowden and Tyrone E.
Evans executed a deed of trust on the condominium unit as security for the note.
Through a series of assignments, U.S. Bank Trust, N.A. (“U.S. Bank”) later
became the holder of the note and the beneficiary of the deed of trust.
Ms. Snowden defaulted on the note beginning in May 2009 by failing to
make her monthly mortgage payments. In October 2014, Ms. Snowden also
became delinquent on monthly condominium assessments she was required to pay
to Capital Park Condominium Association (“Capital Park”).
Capital Park recorded a lien against Ms. Snowden’s unit on February 18,
2016 based on $12,368.04 in unpaid monthly condominium assessments covering
3
the period October 1, 2014 through December 31, 2016. Capital Park subsequently
recorded a notice on December 12, 2016 stating that it would hold a foreclosure
sale of Ms. Snowden’s unit on January 18, 2017 based on the twenty-seven months
of unpaid condominium assessments specified in the lien. The notice recorded on
December 12, 2016 stated that the amount of unpaid assessments totaled
$14,653.54.
Capital Park published an advertisement for the upcoming foreclosure sale
in the Washington Post on three dates in January 2017. The advertisement stated:
“The property will be sold subject to any prior liens, encumbrances, and/or
municipal assessments if any, including subject to the first mortgage lien.”
The condominium foreclosure sale went forward as scheduled on January
18, 2017. Bidding for Ms. Snowden’s unit began at $16,000.00 and ended with a
winning bid, by Omid Land Group, LLC (“Omid”), of $63,000.00. On March 15,
2017, Omid recorded a trustee’s deed of foreclosure for unpaid condominium
assessments. The deed stated that Omid purchased the unit at the foreclosure sale
for $63,000.00 “subject to any prior liens and mortgages, including the first
mortgage lien.”
4
U.S. Bank filed a verified complaint for judicial foreclosure on August 31,
2018 against Ms. Snowden, Mr. Evans, Omid, and the United States. The bank
alleged in the complaint that Ms. Snowden had been in default on the note since
May 2009 and that she owed $545,769.36 as of the date of filing. The complaint
identified Omid as the owner of record of the unit based on the trustee’s deed of
foreclosure recorded on March 15, 2017 but was otherwise silent regarding the
condominium foreclosure sale. The United States was named as a defendant based
on a federal government lien on the property related to a federal court restitution
order against Mr. Evans in the amount of $126,561.87.
Omid filed an answer to the complaint together with an equitable
counterclaim on October 15, 2018. Omid asserted that it was the record owner of
the property based on the trustee’s deed recorded on March 15, 2017 and that a
break in the chain of title dating back to 2014 rendered its interest in the property
superior to any entity asserting ownership based on an assignment of the note and
deed of trust.
U.S. Bank filed an answer and affirmative defenses to Omid’s counterclaim
on October 23, 2018. The bank denied that the condominium foreclosure sale was
5
valid, contending that the sale was not conducted in compliance with District of
Columbia law and that its terms were unconscionable.
With the agreement of the parties, the trial court entered a Track 2
scheduling order at the initial scheduling conference on December 14, 2018.
Among other dates and deadlines, the scheduling order set April 29, 2019 as the
close of the discovery period and May 28, 2019 as the deadline for the filing of
dispositive motions.
On May 28, 2019, the last day on which dispositive motions could be filed,
U.S. Bank filed a motion for leave to file an amended complaint. Appended to the
bank’s motion was a proposed amended complaint that sought to add Capital Park
as a party defendant and to allege new claims requesting a declaratory judgment
that the bank’s first deed of trust survived the condominium foreclosure sale or,
alternatively, that the condominium foreclosure sale was void as a matter of law
because Capital Park advertised the sale as “subject to any prior liens and
mortgages, including the first mortgage lien” and the sales price was
unconscionably low. The amended complaint also alleged a claim of unjust
enrichment against Capital Park and Omid and claims of equitable estoppel and
breach of contract against Capital Park.
6
Later the same day, May 28, 2019, Omid filed a motion for summary
judgment on both U.S. Bank’s complaint for judicial foreclosure and its own
equitable counterclaim for declaratory relief. Omid argued that the condominium
association’s foreclosure sale to recover unpaid condominium assessments,
including the six months immediately preceding the sale, extinguished the bank’s
mortgage lien and gave Omid free and clear title to the property.
The parties filed oppositions to each other’s motions, and on June 13, 2019,
the trial court issued a written order denying U.S. Bank’s motion for leave to file
an amended complaint and granting Omid’s motion for summary judgment.
Regarding the bank’s motion for leave to amend, the court stated that the case had
been pending for ten months and that the bank had not provided any explanation
for its delay in seeking to amend the complaint despite its knowledge, from the
beginning of the case, of the condominium foreclosure sale and Omid’s claim that
the sale extinguished the bank’s first deed of trust. The court stated further that the
amended complaint proffered by U.S. Bank lacked merit and that an order granting
leave to amend would prejudice Omid because the periods for discovery and
dispositive motions had expired.
7
As to Omid’s motion for summary judgment, the trial court determined that
the amended complaint proffered by U.S. Bank along with its motion for leave to
amend was not part of the summary judgment record because it was never accepted
for filing, given the court’s denial of the bank’s motion. The court thus excluded
the allegations and evidence referenced in the amended complaint from its
consideration and found that U.S. Bank had presented no evidence to support its
assertion, made in opposition to Omid’s motion for summary judgment, that the
condominium foreclosure sale was invalid. The court accordingly entered
summary judgment in favor of Omid on U.S. Bank’s complaint for judicial
foreclosure and ruled in Omid’s favor on its counterclaim for declaratory relief,
determining, as a matter of law, that the bank’s first deed of trust was extinguished
and that Omid obtained free and clear title to the property through its purchase at
the condominium foreclosure sale.
U.S. Bank filed a timely notice of appeal. 1
Discussion
1
No parties other than U.S. Bank and Omid have participated in the
litigation either in the trial court or on appeal.
8
We begin with the trial court’s order granting summary judgment in favor of
Omid. Our review of the order is de novo. Zere v. District of Columbia, 209 A.3d
94, 98 (D.C. 2019). We apply the same standard the trial court was required to
apply in considering whether the motion for summary judgment should be granted.
Kuder v. United Nat’l Bank, 497 A.2d 1105, 1106-07 (D.C. 1985). We view the
evidentiary materials in the record, including any depositions, documents,
electronically stored information, affidavits, declarations, admissions, and
interrogatory responses, in the light most favorable to the non-moving party and
draw all reasonable inferences in that party’s favor. Liu v. U.S. Bank Nat’l Ass’n,
179 A.3d 871, 876 (D.C. 2018); Super. Ct. Civ. R. 56(c). Summary judgment is
properly granted only if the record contains no genuine issue of material fact and
the moving party is entitled to judgment as a matter of law. Radbod v. Moghim,
269 A.3d 1035, 1041 (D.C. 2022); Super. Ct. Civ. R. 56(a).
It is fundamental, moreover, that an order granting summary judgment
cannot stand if the trial court erroneously excluded from its consideration evidence
that, either alone or in combination with other evidence before the court, was
sufficient to create a genuine dispute as to a material fact. See Cormier v. District
of Columbia Water & Sewer Auth., 959 A.2d 658, 663-67 (D.C. 2008). Similarly,
an order of summary judgment must be reversed if the trial court misinterpreted the
9
governing substantive law and a material issue of fact would remain to be tried had
the law been properly applied. Burch v. Amsterdam Corp., 366 A.2d 1079, 1084
(D.C. 1976).
We conclude that the trial court’s order granting summary judgment in
Omid’s favor must be vacated. The trial court mistakenly excluded from its
summary judgment analysis the amended complaint proffered by U.S. Bank along
with its motion for leave to amend. Although the trial court correctly noted that
the amended complaint had not been accepted for filing as the bank’s operative
pleading, the court erred in deciding that the amended complaint—and the
allegations and evidence referenced therein—were not part of the materials to be
considered in addressing Omid’s motion for summary judgment. U.S. Bank
expressly stated in its opposition to the motion for summary judgment that it “fully
incorporates herein its Motion for Leave to Amend Complaint and its Second
Amended Complaint.” The allegations and evidence referenced in the bank’s
proffered amended complaint therefore were part of the summary judgment
record—and should have been considered by the trial court in determining whether
Omid had established its entitlement to judgment as a matter of law—
notwithstanding the court’s order denying the bank’s motion for leave to file the
amended complaint (an order we will address further below).
10
We could go on to determine whether the evidence the trial court
erroneously excluded from its consideration was sufficient, either alone or in
combination with other evidence in the record, to create a genuine dispute as to any
material fact. We decline to do so, however, because we conclude, in the
circumstances, that certain factual and legal questions raised by recent
developments in the governing law are best addressed by the trial court in the first
instance.
A brief summary of the governing law is helpful here. The District of
Columbia Condominium Act authorizes a condominium association to impose a
lien against a condominium unit for unpaid assessments. D.C. Code § 42-
1903.13(a). The statute grants the association’s lien “super-priority” status, with
priority over even a first mortgage lienholder, when the association’s lien is based
on unpaid assessments within the six-month period immediately preceding the
institution of an action to enforce the lien. Id. at § 42-1903.13(a)(2).
The “super-priority” lien provision of the Condominium Act has been the
subject of several recent decisions of this court. We first addressed the provision
in Chase Plaza Condominium Ass’n v. JP Morgan Chase Bank, N.A., 98 A.3d 166(D.C. 2014), a case decided before the condominium foreclosure sale in the matter
11
now before us. We held in Chase Plaza that when a condominium association
enforces its lien through a foreclosure sale, the association may distribute the
proceeds of the sale first to itself to satisfy the super-priority portion of its lien and
then to other lienholders to satisfy any remaining liens in order of lien priority. Id.
at 172. We held further that a valid foreclosure sale to enforce the association’s
super-priority lien extinguishes all other liens on the property left unsatisfied by
the proceeds of the sale—including a lien based on a first mortgage or first deed of
trust—and thereby grants the purchaser at the foreclosure sale free and clear title to
the property. Id.We returned to the “super-priority” lien provision of the Condominium Act
in Liu v. U.S. Bank National Ass’n, 179 A.3d 871 (D.C. 2018), and 4700 Conn 305
Trust v. Capital One, N.A., 193 A.3d 762 (D.C. 2018), two cases decided after the
condominium foreclosure sale in this case but before the trial court’s order of
summary judgment. We held in Liu that a condominium foreclosure sale to
enforce the association’s super-priority lien extinguishes the first deed of trust even
if the association tried to preserve the first mortgage holder’s lien by advertising
the foreclosure sale as subject to the first mortgage or deed of trust. 179 A.3d at
878-79. We held in 4700 Conn that the result is the same—the extinguishment of
the first deed of trust—even if the association sought to recover more than the most
12
recent six-month portion of the arrearage in assessments entitled to super-priority
status. 193 A.3d at 764.
Importantly, however, we also determined in 4700 Conn that, as a matter of
equity, the holder of a first deed of trust may seek to avoid the extinguishment of
its lien under § 42-1903.13(a)(2) by challenging the validity of a condominium
foreclosure sale on the ground that the unit sold at a price “greatly below the
amount of the mortgage and apparent value of the unit” and pursuant to terms of
sale “erroneously conditioned on [the] assumption of the first deed of trust.” 193
A.3d at 766. More recently, we held in RFB Properties II, LLC v. Deutsche Bank
Trust Co. Americas, 247 A.3d 689 (D.C. 2021), a case decided after the issuance of
the summary judgment order in this case, that where there is a dispute over the
validity of a condominium foreclosure sale based on the condominium
association’s first-priority lien—and thus a dispute over whether the sale
extinguished the first mortgage holder’s deed of trust—the reasonableness of the
price paid for the unit at foreclosure must be considered as of the time of the sale
rather than the time of the litigation. Id. at 692.
We review the trial court’s summary judgment order with these legal rules
and developments in mind.
13
As previously noted, the trial court granted summary judgment in favor of
Omid without considering the allegations and evidence referenced in the amended
complaint proffered by U.S. Bank in support of its motion for leave to amend. The
bank’s amended complaint alleged, among other things, that the condominium
foreclosure sale was invalid in light of the erroneous statement in the Capital
Park’s Advertisement of Sale—that the property was being sold subject to any
prior liens and mortgages, including the first mortgage lien—and what U.S. Bank
asserted was the resulting insufficient and unconscionably low sale price.
The summary judgment record, properly defined, contained evidence
supportive of both factual assertions underlying U.S. Bank’s contention. The
Advertisement of Sale, in the record as part of an exhibit to Omid’s motion for
summary judgment, stated, erroneously, that “[t]he property will be sold subject to
any prior liens, encumbrances, and/or municipal assessments if any, including
subject to the first mortgage lien.” The Trustees’ Deed of Foreclosure for Unpaid
Condominium Assessments, also in the record, both as an exhibit to the bank’s
initial complaint and as part of an exhibit to Omid’s motion for summary
judgment, similarly misrepresented the effect of the foreclosure sale on the bank’s
deed of trust, stating that the property was sold “subject to any prior liens and
mortgages, including the first mortgage lien.” Finally, the note and a computation
14
in the bank’s initial verified complaint for judicial foreclosure showing the amount
owed on the note as of the date the complaint was filed (August 31, 2018)
established that the $63,000.00 sale price was only 20% of the amount of the initial
mortgage on the property ($315,000.00) and a significantly smaller percentage of
the amount owed on the mortgage ($545,769.36) at the time the bank initiated this
litigation.
Under RFB Properties, however, the reasonableness of the sale price paid at
the condominium foreclosure sale must be considered as of the time of the sale
(January 18, 2017) rather than the time of the litigation. Because we had not yet
decided either Liu or 4700 Conn as of the date of the sale, it was unknown to the
parties at the relevant time whether the sale would extinguish U.S. Bank’s first
deed of trust even though the Advertisement of Sale said the sale was subject to all
prior liens, including the first mortgage lien, and even though Capital Park was
foreclosing on the property based on an arrearage in assessments covering more
than the six months immediately preceding the sale. All of these uncertainties, and
perhaps others, could have affected the parties’ respective assessments of the risks
attendant to the sale and, thus, of the reasonableness or unreasonableness of the
sale price. See RFB Properties, 247 A.3d at 697 (“[A] contract to purchase
15
property at a foreclosure sale, like all contracts, involves the assessment of risks.”
(internal quotation omitted)).
It is for the trial court to determine, in the first instance, and based on an
accurate understanding of the summary judgment record and the governing law,
whether Omid has established beyond genuine factual dispute that the sale was
valid so as to extinguish U.S. Bank’s first deed of trust under Chase Plaza and its
progeny. See 4700 Conn, 193 A.3d at 766 (remanding for the trial court to
consider, in the first instance, the validity of a condominium foreclosure sale
challenged on equitable grounds). We accordingly vacate the order granting
summary judgment in favor of Omid and remand for further proceedings.
On remand, the trial court may choose to reopen the summary judgment
record to allow the parties to present evidence relevant to the temporal analysis
required by RFB Properties. The record currently contains virtually no evidence
of the parties’ beliefs and expectations at the time of the foreclosure sale regarding
the likely effect of the sale on U.S. Bank’s first deed of trust, and the trial court
may conclude, in its discretion, that additional evidence will assist its consideration
of the risks facing the parties at the time of the sale and, ultimately, of the
reasonableness or unreasonableness of the sale price.
16
Before addressing Omid’s motion for summary judgment on remand,
however, the trial court should reconsider its denial of U.S. Bank’s motion for
leave to amend the complaint. Rule 15(a)(3) of the Superior Court Rules of Civil
Procedure provides that a trial judge “should freely give leave [to amend] when
justice so requires.” We have emphasized that Rule 15(a)(3) must be applied
liberally to ensure that cases are “decided upon the merits rather than upon
technical pleading rules.” See Killingham v. Wilshire Invs. Corp., 739 A.2d 804,
807 (D.C. 1999) (quoting Int’l Tours & Travel, Inc. v. Khalil, 491 A.2d 1149, 1152
(D.C. 1985)); see also Pellerin v. 1915 16th St., N.W., Coop. Ass’n, Inc., 900 A.2d
683, 688 (D.C. 2006) (noting “this jurisdiction’s well-established policy favoring
resolution of cases on the merits” (internal quotation omitted)). At the same time,
and as the trial court correctly noted, leave to amend is not automatic, and several
factors must be considered in the exercise of the court’s discretion, including (1)
the number of previous requests to amend, (2) the length of time the case has been
pending, (3) the existence of bad faith or dilatory reasons for the request, (4) the
merit of the proffered amended pleading, and (5) any prejudice to the non-moving
party. Nat’l Ass’n of Postmasters of the U.S. v. Hyatt Regency Washington, 894
A.2d 471, 477 (D.C. 2006) (citing Pannell v. District of Columbia, 829 A.2d 474,
477 (D.C. 2003)).
17
We review a trial court’s decision to grant or deny leave to amend a pleading
only for abuse of discretion, Flax v. Schertler, 935 A.2d 1091, 1105 (D.C. 2007),
and we rarely disturb a ruling if, as here, the trial court identified and addressed the
factors required by our decisions. We are concerned, however, that the trial court
appears to have conducted its analysis of the factors based on an inaccurate
understanding of some of the pertinent facts.
For example, the trial court placed great weight on U.S. Bank’s failure to
provide an explanation for its delay in seeking leave to amend the complaint,
stating that the bank “has known about the Condo Sale for the entirety of this case”
and that “Omid’s Answer included an equitable counter-claim requesting the Court
to enter declaratory judgment in favor of Omid that Plaintiff’s first Deed of Trust
was extinguished and that Omid obtained free and clear title to the subject
property.” It is true that U.S. Bank was aware of Omid’s purchase of the property
at the time the bank filed its complaint. But Omid’s answer did not contain an
equitable counterclaim alleging the extinguishment of the bank’s first deed of trust
under D.C. Code § 42-1903.13(a)(2) and/or Chase Plaza, as the trial court seemed
to believe. To the contrary, Omid’s counterclaim alleged it was a gap in the bank’s
chain of title that gave the condominium association’s lien priority and Omid a
superior ownership interest following the foreclosure sale.
18
We are similarly concerned about the trial court’s consideration of the merit
of U.S. Bank’s proffered amended complaint. The trial court stated summarily that
the bank “did not include any evidence beyond conclusory allegations to show the
Court that there is any merit of the proffered amendments.” This was not an
accurate statement. As discussed previously, the amended complaint alleged,
based on properly authenticated documentary evidence in the record, that the
condominium foreclosure sale was invalid because of Capital Park’s erroneous
statements in the Advertisement of Sale and what U.S. Bank contended was the
insufficient and unconscionable sale price paid by Omid.
The amended complaint, moreover, alleged new claims of unjust
enrichment, equitable estoppel, and breach of contract. The trial court did not even
mention these claims in its one-sentence dismissal of the merit of the amended
complaint. See Johnson v. United States, 398 A.2d 354, 364 (D.C. 1979) (“[T]he
determinations committed to the trial court’s discretion are rational acts of
decision-making. An informed choice among the alternatives requires that the trial
court’s determination be based upon and drawn from a firm factual foundation.
Just as a trial court’s action is an abuse of discretion if no valid reason is given or
can be discerned for it, so also it is an abuse if the stated reasons do not rest upon a
specific factual predicate.” (internal citations omitted)).
19
Conclusion
For the foregoing reasons, the trial court’s order granting summary judgment
in Omid’s favor is vacated and the case is remanded for further proceedings not
inconsistent with this opinion.
It is so ordered.