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O'Malley v. Chevy Chase Bank

February 08, 2001


Before Terry, Schwelb, and Ruiz, Associate Judges.

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

Appeal from the Superior Court of the District of Columbia (Hon. Michael L. Rankin, Trial Judge)

Argued May 19, 1998

Joseph O'Malley, the pro se mortgagor debtor, appeals the grant of summary judgment for appellees, Chevy Chase Bank, F.S.B., whose loan was secured by the mortgage ("bank" or "Chevy Chase Bank"), and David N. Prensky, the trustee under the deed of trust (the "trustee"). O'Malley also appeals the trial court's order denying his motion for reconsideration. We reverse the grant of summary judgment and remand for further proceedings.

O'Malley filed a complaint against the bank, the trustee, and the successful bidders at a foreclosure sale, *fn1 seeking to invalidate the January 3, 1996, and March 12, 1996, foreclosure sales of his real property by the trustee. He also sought an accounting, the entry of an order allowing him to reinstate the bank loan secured by the property, and other relief. He alleges that at the first sale the trustee impermissibly denied him the right to cure his default and reinstate the loan. He alleges also that the bank's notice of the second foreclosure sale was defective because it failed to note his right to cure or the cure amount and that he was not allowed to bid at the March 12, 1996, foreclosure sale. *fn2

This appeal raises a number of issues, including two of first impression. We summarize our reasoning: First, we hold that the statutory prescription of a right to cure a default to "not more than one time in any two consecutive calendar years," D.C. Code § 45-715.1 (b) (1996 Repl.), does not limit O'Malley's contractual right to cure a default, as provided in the deed of trust between O'Malley, the bank, and the trustee. Thus, as the deed of trust contains no limitation on the number of times a debtor may cure his default, O'Malley had a right to notice of the first foreclosure sale and to cure his default pursuant to the terms of the deed. Because there are disputed issues of fact concerning whether O'Malley was permitted to cure prior to the first foreclosure sale, and whether O'Malley had indicated to the bank that he was unable to effect a timely cure, we remand to the trial court for proceedings to resolve those factual issues which affect a determination of the validity of the first sale. In view of our remand with respect to the first sale, we do not reach the question whether a mortgagor's equity of redemption is transferred to the purchaser upon a successful bid at a foreclosure sale, thereby stripping the original owner-debtor of that property interest.


On February 22, 1984, O'Malley and his wife executed a Deed of Trust for the O'Malleys' single family residence located at 2943 McKinley Street, N.W., with American Security Bank, N.A., as trustee, and B.F. Saul Mortgage Company, the lender, securing a promissory note of that same date, by which O'Malley promised to repay the lender the principal amount of $110,000 and a variable interest. *fn3 Under the terms of the promissory note, if the borrower did not pay the amount payable when due, the entire outstanding principal amount, accrued but unpaid interest and other indebtedness became due and payable. The purchase money deed of trust executed for the benefit of the lender, subsequently substituted by appellee Chevy Chase Bank, irrevocably granted and conveyed the property to the trustee with power of sale.

Since 1988, O'Malley has defaulted on the loan payments on eleven different occasions. The trustee scheduled foreclosure sales for the property on each occasion. Until the foreclosure sale scheduled for June 20, 1995, O'Malley cured his default on each occasion as allowed under the deed, and reinstated his loan, terminating the foreclosure proceedings. Before the tenth scheduled foreclosure sale on June 20, 1995, O'Malley filed a bankruptcy petition which stayed the sale.

The eleventh scheduled trustee's sale, and the first that is the subject of this litigation, was scheduled for January 3, 1996, at 1:00 p.m. ("first sale"). According to appellees, photocopies of the Notice of Foreclosure Sale were sent both to O'Malley and to his wife by certified mail, return receipt requested, on November 13, 1995, to their home and business addresses. The Notice of Foreclosure stated that the default could be cured by payment of $11,212.76.

O'Malley did not cure his loan default before the first sale, and the trustee's foreclosure sale went forward as scheduled. O'Malley attended the sale with a friend, Jessie Willingham, who was the highest bidder, but failed to complete the sale within thirty days from the date of sale, thereby defaulting under the terms of the sale.

Willingham's default under the terms of the January 3, 1996, sale resulted in the trustee scheduling another sale for March 12, 1996 (the "second sale"), which also is challenged in this appeal. The trustee recorded the Notice of Foreclosure Sale of Real Property or Condominium Unit for the second sale with the District of Columbia Recorder of Deeds on February 9, 1996. The Notice did not indicate the minimum balance required to cure the default, but indicated that this provision was "not applicable." The day before the second sale, March 11, 1996, O'Malley spoke to the trustee by telephone and asked about the amount of the required deposit for the sale and whether reinstatement was possible. The trustee informed the debtor that reinstatement was not possible at that time.

O'Malley was present at the March 12, 1996, sale. In order to qualify as a bidder, each potential bidder was required to have in his or her possession a minimum of $10,000 in the form of cash, certified check or cashier's check. A question arose as to whether O'Malley had the required sum to qualify as a bidder. He showed the auctioneer and the trustee a $6000 cashier's check, a $2000 third-party uncertified personal check and some cash. According to the trustee, when he asked O'Malley how much he had in cash, O'Malley either responded that he had $2000 or refused to respond directly to the question, directing the trustee or the auctioneer to count the cash. In his deposition and affidavit, O'Malley says that he had a sufficient deposit, including a certified check in the amount of $6000, a personal check in the amount of $2000, and $4000 in cash. O'Malley further states that he asked the trustee and auctioneer to verify his representation and "count" the cash.

The sale was adjourned until a later time in order to allow O'Malley and another potential bidder to certify the personal checks.

O'Malley left the auctioneer's office and walked to a NationsBank branch located about two or three blocks away. The bank teller informed him that the check could not be certified because it was postdated for the following day. While O'Malley was still at the bank attempting to certify the third-party personal check, the sale was called at 1:18 p.m. and concluded at 1:21 p.m. after the McKinley Street Partnership, which bid $190,000 and tendered the necessary $10,000 deposit, was declared the highest bidder. O'Malley returned to the auctioneer's office at 1:25 p.m. but he did not go inside; instead he went home. On April 17, 1996, O'Malley filed his complaint in the Superior Court.

On December 4, 1996, the bank filed a motion for summary judgment. After considering O'Malley's motion in opposition and the arguments presented by all parties at a hearing on the motion, the trial court entered an order on April 4, 1997, granting summary judgment in favor of the bank and the trustee. The trial court ruled that after a bidder at a foreclosure sale defaults and fails to close the sale, equitable title in the property reverts back to the debtor-in-possession. According to the trial court, after Willingham defaulted, equitable title reverted to O'Malley. The trial judge also concluded, however, that notwithstanding O'Malley's equitable interest, D.C. Code ยง 45-715.1 ...

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