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Chase Plaza Condominium Association, Inc. v. JP Morgan Chase Bank, N.A.

Court of Appeals of Columbia District

August 28, 2014

CHASE PLAZA CONDOMINIUM ASSOCIATION, INC. and DARCY, LLC, APPELLANTS,
v.
JPMORGAN CHASE BANK, N.A., APPELLEE

Argued April 17, 2014

Page 167

Appeals from the Superior Court of the District of Columbia. (CA-5826-10). (Hon. Craig Iscoe, Trial Judge).

Robert C. Gill, with whom Carolyn Due was on the brief, for appellant Chase Plaza Condominium Association, Inc.

Rachel Abramson for appellant Darcy, LLC.

Thomas J. McKee, Jr., with whom Michael R. Sklaire was on the brief, for appellee JPMorgan Chase Bank, N.A.

Thomas Moriarty, Jason E. Fisher, Laura M. Gagliuso, Henry Goodman, and Loura Sanchez filed a brief on behalf of the Community Associations Institute as amicus curiae in support of appellant Chase Plaza Condominium Association, Inc.

Before THOMPSON and MCLEESE, Associate Judges, and KING, Senior Judge.

OPINION

Page 168

McLeese, Associate Judge.

Brian York purchased a condominium unit, financing the purchase through a mortgage loan that was secured by a deed of trust on the unit. After Mr. York defaulted on his monthly condominium assessments, appellant Chase Plaza Condominium Association, Inc. foreclosed on the unit. Appellant Darcy, LLC purchased the property at a foreclosure sale. Several months later, appellee JPMorgan Chase Bank, N.A. filed a complaint alleging that the foreclosure sale was void, because the price at the sale was unconscionably low and because the sale impermissibly purported to extinguish the lien created by the deed of trust. The trial court agreed on the latter point and granted summary judgment to JPMorgan. We reverse and remand.

I.

Except as noted, the following facts are undisputed. In July 2005, Mr. York purchased a condominium unit in Washington, D.C. Mr. York financed the purchase by executing a promissory note for $280,000 that was secured by a deed of trust on the unit. The deed of trust named Mr. York as " Borrower," First Financial Services, Inc. as " Lender," Federal Title & Escrow Co. as " Trustee," and Mortgage Electronic Registration Systems, Inc. (" MERS" ) as beneficiary and as a nominee for First Financial Services, Inc. The deed of trust was recorded in August 2005.

By late 2008, Mr. York was delinquent both on his mortgage payments and on the monthly condominium-association payments he was required to make to Chase Plaza. In April 2009, Chase Plaza recorded a condominium-assessment lien on the unit. Chase Plaza also conducted a title search on the unit, which revealed three outstanding liens: (1) the first deed of trust; (2) a second mortgage for $60,000; and (3) the condominium-assessment lien for $9,415.

Chase Plaza subsequently initiated foreclosure proceedings against Mr. York, seeking to recover six months' worth of unpaid assessments. In January 2010, Chase Plaza filed a notice of foreclosure sale, published the notice, and mailed the notice to the parties named in the deed of trust. The notice specified that the foreclosure sale would not be subject to the first deed of trust. In other words, the notice reflected the position that Chase Plaza's lien had a higher priority than the lien created by the first deed of trust and that if the foreclosure sale generated insufficient proceeds to satisfy Chase Plaza's lien, the foreclosure sale would extinguish the lien created by the first deed of trust. See generally, e.g., Pappas v. Eastern Sav. Bank, FSB, 911 A.2d 1230, 1234 (D.C. 2006) (general rule is that valid foreclosure sale extinguishes subordinate liens that cannot be satisfied from proceeds of sale).

In February 2010, Darcy purchased the

Page 169

unit for $10,000 at a foreclosure sale.[1] Darcy was the only bidder at the sale. A deed of trust reflecting Darcy's purchase was executed in March 2010.

In April 2010, JPMorgan commenced foreclosure proceedings against Mr. York for failure to make mortgage payments. After discovering that Chase Plaza had already foreclosed on the unit, JPMorgan filed a complaint against Chase Plaza and Darcy requesting that the trial court set aside the foreclosure sale and declare that JPMorgan held title to the unit. In explaining its interest in the unit, JPMorgan stated that in March 2009 MERS, which was designated as the beneficiary and nominee in the first deed of trust, had assigned its interest in the deed of trust to an entity JPMorgan referred to as Washington Mutual. JPMorgan further stated that it had acquired Washington Mutual in 2008, and that it also was the current holder of the original promissory note.

The trial court granted partial summary judgment to JPMorgan. Specifically, the trial court (1) determined that JPMorgan had standing to bring the action; (2) determined that Chase Plaza could not lawfully extinguish the first deed of trust; (3) voided the foreclosure sale because the unit had not been sold subject to the first deed of trust; and (4) declared that JPMorgan held title to the unit. ...


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