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Capital City Corp. v. Johnson

August 11, 1994


Appeal from the Superior Court of the District of Columbia; (Hon. John H. Suda, Trial Judge)

Before Wagner, Chief Judge,* and Terry and Sullivan, Associate Judges.

The opinion of the court was delivered by: Terry

TERRY, Associate Judge: This is an appeal from an order setting aside a foreclosure sale. Appellee Johnson had filed suit in the Superior Court asking that the sale be set aside as "wrongful" and seeking compensatory and punitive damages. Following a two-day non-jury trial, the court voided the foreclosure sale and ordered Johnson to become current on the mortgage payments due and owing to appellant Capital City Corporation. Appellant argues that, because of the absence of an indispensable party, an alleged bona fide purchaser, the trial court erred in failing to dismiss Johnson's suit. Additionally, appellant contends that Mr. Johnson, the husband of the recorded owner of the property, had no standing to file the complaint, and that the suit should have been dismissed for that reason as well. Alternatively, appellant asserts that, contrary to the factual findings of the trial court, the foreclosure sale was valid because proper notice of the sale was given to Mr. and Mrs. Johnson. Because the alleged bona fide purchaser of the property is at least arguably an indispensable party to this litigation, and because the trial court failed to give sufficient consideration to this issue, we remand the case for further proceedings.


A. Background

This action was brought by Edmond Johnson "for the benefit of" his wife, Theora Graves Johnson, under the authority granted to him by his wife in a power of attorney. Mr. Johnson testified that his wife agreed to lend money to Alfred Black and, in order to do so, borrowed $75,000 from appellant Capital City Corporation ("Capital City") in November 1988. Mrs. Johnson's promissory note to Capital City was secured by a deed of trust on a piece of real property which she owned on Hunt Place, Northeast.

In February 1990 Mrs. Johnson received a letter from Capital City's attorney stating that the loan was in default by $13,189.82, and warning that if that sum was not received by Thomas Nash *fn1 before the close of business on March 8, Capital City would "take steps necessary to foreclose on the property." A few days later the Johnsons received a notice of foreclosure, stating that a sale of the property was to take place on March 9, but Mr. Johnson testified that he and his wife "did not consider it a proper notice since it was not certified, receipt requested, as required for proper foreclosure." Since Mr. Black was supposed to make all the payments on the loan, Mr. Johnson called him about the default, and Black assured Johnson "that the note had been paid through December of 1989." Mr. Johnson then called the office of the auctioneer who was to conduct the foreclosure sale, and the person on the-other end of the phone (whose name he could not remember) told him that the sale had been "canceled." He did not ask why, and no one told him the reason for the cancellation.

The foreclosure sale eventually took place, however, on April 5, 1990, but at no point did the Johnsons receive personal notice that it had been rescheduled. On the evening of April 5, after the sale, Mr. Nash telephoned Mr. Johnson and told him that he had just purchased the property. Johnson went to Nash's office the next day to tender the overdue payment, but Nash would not accept it.

Before the date of the sale, the property had been rented by MWM Enterprises, Inc. ("MWM"), whose principal was Corbett McClure. Shortly after Mr. Nash bought the property, he resold it to MWM. In this court Capital City maintains, as it did below, that Mr. McClure is an indispensable party to this litigation.

Thomas Nash, the president of Capital City, testified that his company had sent a notice of foreclosure by certified mail to Mrs. Johnson and that in fact Mr. Johnson had signed for the letter. *fn2 He admitted that "there was no contact [between Capital City and the Johnsons] from the time we started foreclosure back in February to the time of the sale in April." He also acknowledged that after he had bought the property, *fn3 he sold it to the tenant "because the condition of the property. I realized I had a difficult sale, so I approached the tenant [Mr. McClure] to see if he was interested." Mr. McClure was indeed interested, but he had no money available, so Mr. Nash agreed to finance the entire purchase. *fn4 Concerning previous attempts to foreclose on the property, Mr. Nash testified that on two prior occasions, once in the spring of 1989 and again in the fall of 1989, notices of foreclosure were sent to the Johnsons, but that the foreclosure sales were both canceled because of "serious impediments to the title."

B. The Trial Court's Ruling

After hearing the evidence and the arguments of counsel, the trial court made oral findings of fact and Conclusions of law. The court found that on December 15, 1988, Theora Johnson received a $75,000 loan from Capital City which was secured by a deed of trust on Mrs. Johnson's property on Hunt Place. "The starting interest was twenty-four percent, and the ending interest was thirty percent . . . ." The loan would mature on January 1, 2000, at which time the entire amount of the loan had to be repaid to the lender; in the meantime, only the monthly interest had to be paid as it fell due. There were "very large penalties for failure to pay on time," which the court described in great detail. On two occasions in 1989, Capital City sent foreclosure notices to Mrs. Johnson, but both scheduled sales were canceled, and at some later time the Johnsons came up with the overdue payments.

On February 5, 1990, following another default, Capital City notified the Johnsons of another foreclosure sale scheduled for March 9, 1990. The court expressly credited the testimony of Mr. Johnson and a representative of the auctioneer that the foreclosure sale scheduled for March 9 was canceled, not merely postponed. *fn5 On March 22, however, Mr. Nash called the auctioneer and gave instructions to reschedule the foreclosure sale for April 5. It was rescheduled, but no notice was given to Mr. or Mrs. Johnson. The sale took place, and Mr. Nash, acting in his capacity as general partner of Brookville Limited partnership, purchased the property.

In its Conclusions of law, the court first ruled that Mr. Johnson, having a power of attorney from his wife, was entitled to file suit on her behalf. The court then concluded that the notice requirements ...

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