Appeal from the Superior Court of the District of Columbia (CAB 2762-04) (Hon. Melvin R. Wright, Trial Judge)
The opinion of the court was delivered by: Glickman, Associate Judge:
Before GLICKMAN, THOMPSON, and OBERLY, Associate Judges.
HSBC Bank USA, N.A. ("HSBC") appeals from the denial of its application pursuant to Superior Court Civil Rule 24 (a)(2) to intervene as of right in a suit for breach of a contract to sell real property.*fn1 By intervening, HSBC seeks to protect its rights under a deed of trust and an equitable lien on the property. We hold that leave to intervene should have been granted.
The litigation before us concerns the disposition of property located at 526 Tuckerman Street in Northwest Washington, D.C. The house at that address was appellee Ana Mendoza's residence. In April 2004, appellee Tina Zewde sued Mendoza in Superior Court for breaching a contract to sell the house. In her complaint, Zewde requested specific performance of the contract or, in the alternative, monetary damages.
At the time the suit was filed, Mendoza had a pre-existing mortgage on the Tuckerman Street property. In June 2004, she refinanced that mortgage by borrowing $170,000 from Chase Manhattan Mortgage Corp. ("Chase") and executing a deed of trust on the property in Chase's favor to secure the loan. Chase promptly recorded its deed of trust in the land records of the District of Columbia. When it did so, Chase may have been unaware of Zewde's lawsuit to compel the sale of the property, and it was not on constructive notice of that suit, because Zewde did not file a notice of lis pendens until several months later, in March 2005.*fn2
The suit still was pending in September 2007, when Mendoza allegedly executed a deed conveying her Tuckerman Street property to one Juan Rodriguez for $370,000. Rodriguez recorded that deed in the District of Columbia land records. To finance his purchase of the property, Rodriguez borrowed $370,000 from HSBC. The loan was secured by a deed of trust signed by Rodriguez and also recorded in the land records. HSBC professes to have been unaware of the lis pendens or the litigation between Zewde and Mendoza when it made the loan and took its security interest in the property.
From the proceeds of HSBC's loan to Rodriguez, $174,807.09 was paid to Chase to release its deed of trust encumbering the Tuckerman Street property. Chase duly recorded a release of its lien and sent the release to Mendoza as the putative seller of the property. In addition, according to the settlement statement from the HSBC-Rodriguez loan closing, another creditor of Mendoza received $12,300.00 of the loan proceeds, and $160,713.21 was disbursed to Mendoza herself.
The validity of Rodriguez's title to the Tuckerman Street property and the deed of trust he granted HSBC is controverted and unresolved. Mendoza, who apparently cannot read or write English, claims that Rodriguez defrauded her; that she did not knowingly sign the deed conveying her property to him; and that she received none of the money that was to have been paid to her from the proceeds of HSBC's loan. She acknowledges that Chase was paid off, but claims she knew nothing of Rodriguez's transactions before Chase notified her that it had released its lien. Mendoza also represents, without contradiction, that Rodriguez disappeared after the loan closing and that the parties have been unable to find him.
Not long after he received the HSBC loan, Rodriguez defaulted on his payments, and the trustees under the deed of trust he provided HSBC commenced a foreclosure action against the Tuckerman Street property. The foreclosure was scheduled to take place on April 3, 2008, but Zewde and Mendoza jointly applied in their pending case in Superior Court for a temporary restraining order ("TRO") to prevent it. That application was served on the trustees. The court granted, and subsequently extended, the TRO, and the trustees cancelled the foreclosure sale.
HSBC, which had not been a party to the TRO proceedings, moved pursuant to Civil Rule 24 (a)(2) to intervene as of right in the lawsuit in order to protect its interest in the Tuckerman Street property. In its motion and accompanying pleading,*fn3 HSBC asserted it had both a security interest in the property granted by its putative owner of record, Rodriguez, and an equitable lien on the property arising, under principles of equitable subrogation,*fn4 from its payment of $174,807.09 to discharge the pre-existing encumbrance held by Chase in return for an encumbrance of equivalent priority. HSBC acknowledged that its deed of trust might be contingent (assuming the validity of the earlier-recorded notice of lis pendens, which HSBC did not challenge) on the outcome of Zewde's suit against Mendoza. But HSBC argued that its equitable lien was not contingent on that outcome, because it had the same priority as the Chase lien it replaced, which Chase had recorded before Zewde recorded her lis pendens. HSBC argued that its ability to protect its interest in the property had been impaired already by the TRO and could be impaired further when the court entered a final judgment in the case.*fn5 Intervention was necessary, HSBC contended, because neither Zewde nor Mendoza could be counted on to represent its interests; indeed, HSBC pointed out, they had moved to enjoin it from foreclosing on the Tuckerman Street property and each of them would benefit from taking title to that property free of encumbrance. Accordingly, in its proposed counterclaim and cross-claim against Zewde and Mendoza, HSBC sought a declaration of the validity of its deed of trust (in the principal amount of $370,000) or, in the alternative, of its equitable lien (in the amount of $174,807.09), among other relief.
In opposition, Mendoza argued that HSBC lacked a significantly protectable interest to justify intervention because, under the doctrine of lis pendens, any security interest it had in the Tuckerman Street property was subject to and contingent on the outcome of the lawsuit.*fn6 Furthermore, she argued, if the court were to allow HSBC to intervene, Rodriguez would become an indispensable party, and the entire action would have to be dismissed because he could not be found and served with process.
In a two-sentence order entered on May 5, 2009, the court denied HSBC leave to intervene on the ground that it "is not an indispensable party and [it] has legal rights which will not be ripe until the litigation in this matter has been resolved." The court did not address HSBC's claim to a non-contingent equitable lien or the ...