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Bank-Fund Staff Federal Credit Union v. Cuellar

March 15, 1994

BANK-FUND STAFF FEDERAL CREDIT UNION, APPELLANT
v.
MILKO CUELLAR, ET AL, APPELLEES. GUILLERMO VIVADO, ET AL, APPELLANTS V. BANK-FUND STAFF FEDERAL CREDIT UNION, ET AL, APPELLEES



Appeals from the Superior Court of the District of Columbia; (Hon. Ricardo M. Urbina, Trial Judge in No. 91-CV-1325), (Hon. Nan R. Shuker,* Motions Judge in No. 92-CV-282) * At the time of the trial Judge Nan R. Shuker was known as Judge Nan R. Huhn.

Before Rogers, Chief Judge, Sullivan, Associate Judge, and Mack, Senior Judge.

The opinion of the court was delivered by: Rogers

ROGERS, Chief Judge: These consolidated appeals involve the right to cure residential mortgage foreclosure defaults under D.C. Code § 45-715.1 (Repl. 1990). *fn1 In the first appeal, No. 91-CV-1325, appellant Bank-Fund Staff Federal Credit Union sued the Vivados, appellees, *fn2 for possession of real property and now appeals from the grant of summary judgment to appellees. The Bank-Fund contends that the trial Judge erred (1) in ruling that the Bank-Fund's statutory notice of foreclosure was deficient for failure to include a statement of the amount necessary to cure the Vivados' loan default, despite a finding that the Vivados had actual notice of the amount needed, and (2) in determining on summary judgment that the mortgage loan was a "residential mortgage" under D.C. Code § 45-715.1 (Repl. 1990). We hold that the foreclosure notice was invalid for two reasons: it erroneously stated that the Vivados did not have a right to cure and it failed to include the cure amount. Consequently, the Bank-Fund lacked standing, as the trial Judge ruled, to obtain possession of the property.

In the second appeal, No. 92-CV-282, the Vivados, *fn3 having obtained a preliminary injunction to prevent the Bank-Fund et al. (and their trustees, employees and agents) from proceeding with the foreclosure on their home, contend that the motions Judge erred in requiring them to pay, as security for the injunction, an amount equal to their monthly mortgage payments under the first and second trusts on the property. While we find no abuse of discretion by the motions Judge in requiring security in such an amount, see Super. Ct. Civ. R. 65(c), consistent with our holding in the first appeal, we hold that the cure amount stated in the foreclosure notice must be accurate, and because the record does not permit us to determine whether the cure amount was accurately stated in the foreclosure notice, a remand is required.

Accordingly, we affirm the grant of summary judgment to the Vivados in the first appeal, No. 91-CV-1325, and we remand the case to the trial court in the second appeal, No. 92-CV-282, to afford the Bank-Fund an opportunity to show that the cure amount stated in the November 25, 1991, foreclosure notice was properly based on amounts secured by the property at issue.

I.

The property at issue is a private, single-family residence in the District of Columbia. It is undisputed that on April 1, 1986, Guillermo and Dalia Vivado borrowed $36,000 from the Bank-Fund in order to pay off a seller take-back second trust given in 1983, when the Vivados originally bought their house at 4313 Embassy Park Drive, N.W. *fn4 It is also undisputed that the Vivados defaulted on their obligations. *fn5 On May 4, 1990, the Bank-Fund instituted foreclosure proceedings by mailing notice to the Vivados in LaPaz, Bolivia and to the Recorder of Deeds for the District of Columbia. The notice, on the Recorder of Deeds' standard form -- "Notice of Foreclosure Sale of Real Property or Condominium Unit" -- stated that $46,397.73 plus expenses was the minimum balance required to cure the default obligation and reinstate the mortgage loan. A foreclosure sale set for June 6, 1990, did not occur as a result of an automatic stay under the bankruptcy laws. It was not until after the bankruptcy court modified the automatic stay, that the Bank-Fund was able to proceed with foreclosure proceedings. *fn6

On August 6, 1990, the Bank-Fund mailed a foreclosure notice to the Vivados' Bolivian address and to the Recorder of Deeds setting September 5, 1990, as the date of the foreclosure sale. The August 6, 1990 notice, also on the Recorder of Deeds' standard form, unlike the May 4, 1990, notice, did not indicate the "amount to cure." Instead, in the space on the Recorder's standard form designated -- "Minimum balance required to cure default obligation pursuant to D.C. Law 5-82 'Right to Cure a Residential Mortgage Foreclosure Default Act of 1984'" -- the Bank-Fund had written "N/A - not a 'residential mortgage.'"

By letter of September 7, 1990, counsel for the Bank-Fund advised counsel for the Vivados, referring to an agreement reached on September 5, 1990, that in exchange for a payment by them of $20,000 to be applied toward the balance of the loan, the Bank-Fund agreed to postpone the foreclosure sale until October 3, 1990, in order to afford the Vivados a "limited opportunity to pay-off the mortgage loan" on the property. The letter also stated that "it is understood that reinstatement of the mortgage loan account will not be permitted and that no further continuances will be granted." *fn7 The letter stated that the amount required to pay off the loan was $98,753.80. According to the Bank-Fund, the Vivados were unable to raise the necessary funds, and the Bank-Fund purchased the property at the foreclosure sale on October 3, 1990. *fn8 On March 28, 1991, the Embassy Road property was conveyed by deed to the Bank-Fund.

On April 12, 1991, the Bank-Fund filed suit for possession against the Vivados on the ground that they were wrongfully holding over as former owners. A consent protective order was entered by praecipe dated May 8, 1991. *fn9 In their answer to the complaint, the Vivados asserted that the complaint for possession should be dismissed because of defects in the foreclosure sale. The Bank-Fund filed a motion for summary judgment and stated, as material facts not in dispute, that the Vivados were "at all relevant times to these proceedings" living in Bolivia, that they had received the notice of foreclosure required under § 45-715.1(b), and that following proper advertisement the property was sold to the bank at the foreclosure sale on October 3, 1990. The Bank-Fund argued that "upon information and belief, the property was rental property and, therefore, the Bank-Fund loan did not satisfy the definition of a 'residential mortgage' under the statute." Alternatively, the Bank-Fund argued that even if the Vivados were entitled to have their loan reinstated under the statute, the notice was not deficient because the "amount to cure" was not required by § 45-715.1(b) to be in the foreclosure notice. Furthermore, argued the Bank-Fund, the Vivados' counsel had informed the Bank-Fund on September 5, 1990, that they did not have the money needed to cure the default and reinstate the loan. Additionally, the Bank-Fund argued that even if the Vivados had sufficient funds on September 5, 1990, the date of the foreclosure sale, neither the statute nor the loan documents required the Bank-Fund to permit reinstatement at that time. The Bank-Fund also referred to an agreement of September 5, 1990, negotiated by counsel for the parties, whereby the sale was postponed until October 3, 1990, to afford time for the Vivados to pay off the delinquent loan account.

The Vivados opposed the motion for summary judgment on factual and legal grounds. They claimed that the issue of whether the foreclosure was defective because the Bank-Fund denied them their right to cure under § 45-715.1 constituted a material disputed fact. *fn10 The Vivados also argued that the Bank-Fund's motion for summary judgment was deficient under Super. Ct. Civ. R. 12-I(k) since it was unsupported by admissible evidence or references to the record to show, for example, that the Vivados did not have sufficient money on September 5, 1990, to bring current the amount of the loan. In addition, they argued that it was irrelevant whether or not they had the money to cure on September 5, 1990, since the statute afforded them five days within which to come up with the necessary amount. The Vivados further argued that the Bank-Fund was not entitled to judgment as a matter of law because § 45-715.1, and the regulations enacted pursuant to it, indicate that the Mayor, through the Recorder of Deeds, provides the standard disclosure form, which must be completed accurately, subject to criminal penalties. According to the Vivados, the Bank-Fund's August 6, 1990, notice failed to comply with these requirements. Finally, the Vivados argued that the Bank-Fund, by stating in the foreclosure notice that they had no right to cure, denied them the right to reinstate and possibly deprived them of knowledge they needed to get the necessary funds.

The Vivados also filed a cross-motion for summary judgment, which included a statement of material facts not in dispute supported by exhibits and an affidavit, to the effect that the second deed of trust was given to refinance the original purchase of their home on Embassy Park Drive and that it was, in fact, their home. An affidavit of appellee Guillermo Vivado, attached to the motion, stated that in September 1988, Mr. Vivado "was caused to temporarily leave the country on a work assignment," and that Mrs. Vivado had accompanied him, "both intending to return to the D.C. house after the assignment was over." The affidavit also stated that the Vivados' son had lived in the house while attending college for the entire time, except for several months in late 1989 and early 1990 when a friend of their son was allowed to live in the house, and that since June 1990, the house had been occupied by family members. Further, the affidavit stated that several months after his return from abroad Mr. Vivado "again had cause to frequently leave the country for work, but was present in D.C. during parts of the foreclosure period." In addition, the affidavit stated that "the Vivados intend to return to the house on a permanent basis once this assignment is finished, which they hope will be later this year."

Although initially granting the Bank-Fund's motion for summary judgment as unopposed, *fn11 the trial Judge held a hearing on the Vivados' motion for reconsideration. *fn12 At the hearing, the Vivados maintained that they had been prejudiced by the failure of the Bank-Fund to include an "amount to cure" in the August 6, 1990, foreclosure notice because they were unaware of the amount of money they needed to collect in order to effect a cure, particularly in view of statements by the Bank-Fund that reinstatement of the mortgage was not an available option. Furthermore, they argued, by short-circuiting the legislative scheme envisioned by § 45-715(b), the Bank-Fund had left the Office of the Recorder of Deeds with insufficient information to be able to alert them that they had a right to reinstate the loan.

While conceding that the loan documents required reinstatement, the Bank-Fund took the position that the Vivados could not fairly claim prejudice as a result of the omission in the August 6, 1990, foreclosure notice because the May 4, 1990, notice had stated that the "amount to cure" was $46,397.73 plus expenses. *fn13 In addition, the Bank-Fund explained the reasons for the omission in the August notice. Following the May 4, 1990, foreclosure notice, counsel told the trial Judge that representatives of the Bank-Fund had visited the property and discovered that a non-family member was living in the house, and the Bank-Fund had, therefore, concluded that the property could no longer be considered a "residential mortgage" under D.C. Code § 45-715.1 (Repl. 1990). The Bank-Fund also argued that even if the Vivados still had a right to reinstate the loan, the issue of whether they could reinstate was moot since they had shown up at the September sale with insufficient funds to do so. *fn14

The trial Judge reasoned that he first had to resolve "whether or not the statute can be reasonably construed to require the cure figure to be placed on the foreclosure form," and if so, then whether its exclusion was fatal to the foreclosure. The trial Judge concluded:

I am satisfied, first of all, that the defendants did have notice or should reasonably have had notice given what was provided in months prior to the actual foreclosure procedure. Nevertheless, it is my experience in these matters that when it comes to matters as fundamental as a person's home and property, that the laws which have been promulgated operate presumptively in favor of the homeowners when the homeowners' interests and that of the creditors come into conflict.

The trial Judge granted the Vivados' motion for reconsideration, *fn15 and although initially stating that there were issues remaining to be resolved, he vacated summary judgment for the Bank-Fund and granted the Vivados' motion for summary judgment on the ground that the Bank-Fund lacked standing to bring an action of possession because the August 6, 1990, notice of foreclosure was defective. *f ...


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