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April 30, 1998



Before Steadman, Schwelb, and Farrell, Associate Judges.

The opinion of the court was delivered by: Steadman, Associate Judge:

This appeal arises out of a dispute between a borrower and lender *fn1 over the disposition of proceeds from the consensual foreclosure of a deed of trust on the borrower's eleven-unit apartment building located at 4811 Minnesota Avenue, N.E. ("4811") in the District of Columbia. The principal issue is whether the lender can recover from the proceeds of the sale (1) the amount the lender paid to satisfy a more than $40,000 water and sewer bill on the property and (2) the attorney's fees incurred in the foreclosure. The trial court held that the lender could not recover either of these items. Because the findings of fact by the trial court in this admittedly complex litigation are insufficient to permit meaningful appellate review, we remand the case for further proceedings.

I. The Facts

The borrower, for all practical purposes, is Christopher R. Binder, general partner of two District of Columbia limited partnerships — Property Partnership and 4811 Minnesota Avenue, N.E. Limited Partnership ("Minnesota Avenue Partnership") — and also the owner of B & B Management Company ("B & B"). The lender is the Estate of Ernest M. Aiken ("Estate"). The Estate retained Concord Enterprises, Inc. ("Concord"), operated by Benjamin H. Aiken, to manage its real estate holdings and promissory note collections. To minimize confusion, we refer to Concord and the Estate as the single entity "Estate/Concord."

The story begins on May 8, 1978, when the Estate sold 4811 to F & M Associates, a partnership consisting of Charles Fadeley and James Monard. Messrs. Fadeley and Monard executed a promissory note in favor of the Estate, secured by a deed of trust, in the principal amount of $79,200 with 8.5% annual interest. The deed of trust provides, inter alia, that (1) failure to pay "proper costs, charges, commissions, half commissions and expenses" constitutes default; (2) the trustee shall deduct such amounts from any foreclosure sale proceeds before applying [710 A2d Page 221]

the proceeds against the note balance; and (3) the note maker shall reimburse the holder for reasonable attorney's fees incurred in enforcing the deed of trust.

The Property Partnership purchased the property from F & M Associates later in 1978 and subsequently sold it to the Minnesota Avenue Partnership in 1982. B & B, controlled by Binder, managed the premises from 1982 until the commencement of this litigation in 1992.

After 1982, various transactions affected both 4811 and another property owned by the Property Partnership located at 4810 Quarles Street, N.E. ("4810") in the District. In 1984, 4810 had outstanding accumulated water and sewer charges totaling $12,446.09. Unable to satisfy this debt, Property Partnership and Estate/Concord, which held a deed of trust on 4810 (as well as 4811), entered into a settlement agreement whereby Estate/Concord agreed to pay the debt contingent on its becoming the successful bidder at a foreclosure auction. In return, Property Partnership allowed Estate/Concord, by methods unrevealed in the record, to add the $12,446.09 sum to the principal balance due on the 4811 promissory note. *fn2

By May 1992, the outstanding water bill for 4811 reached $40,844.12. Again unable to pay, the parties signed a foreclosure agreement on June 5, 1992, pursuant to which Estate/Concord agreed, in pertinent part, to (1) assume management of and initiate foreclosure proceedings on 4811; (2) not pursue any deficiency against Binder or the limited partners of the Minnesota Avenue Partnership with regard to the trust obligation; and (3) "assume responsibility and liability for all outstanding water and sewer bills and charges without recourse against Binder or the limited partners involved in the Minnesota Avenue Limited Partnership." In return, the Minnesota Avenue Partnership agreed, inter alia, to provide relevant management documents, current rent schedules and unit keys; to pay outstanding renovation costs; and to turn over security deposits to Estate/Concord. The agreement specified that its purpose

is to render the transfer of 4811 Minnesota Ave., N.E. to Mr. Ben Aiken et al. as swiftly and as smoothly as possible and to render Mr. Binder and his limited partners as free of outstanding obligations and responsibilities as is possible under this agreement.

In accordance with the June 5 agreement, notice of the prospective 4811 foreclosure sale, advertised as an "all cash" transaction, was issued on June 23, 1992, by Douglas K. Goldsten, Auctioneers, Inc. To facilitate a profitable sale, Aiken contacted Robin Epstein, a real estate agent, to locate interested purchasers. Epstein soon produced Thad Wins who, on July 10, 1992, executed a contract with Estate/Concord to purchase 4811 for $150,000. A first addendum to the contract, signed July 24, 1992, conditioned the sale on Estate/Concord becoming the successful bidder at the foreclosure auction. *fn3 It also provided that Wins would fully assume responsibility for the outstanding water and sewer bill. A third addendum, effective September 15, 1992, clarified the transaction's financing: Wins would make a $35,000 cash down payment and sign a first deed of trust and note in the amount of $115,000 with 10 percent annual interest. This addendum also deleted Wins' responsibility for the nearly $41,000 water and sewer bill, transferring it, instead, to Estate/Concord.

Some weeks prior to the execution of this Third Addendum, on July 27, 1992, 4811 was sold at auction. The parties dispute both the identity of the record purchaser and whether the transaction was "all cash" or for part cash and part long term debt. Thad Wins' name appears on the auctioneer's report as "purchaser" for the amount of $150,000, but [710 A2d Page 222]

both parties agree that Robin Epstein, Estate/Concord's agent, placed the winning bid. There is ample additional evidence to support ...

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