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4700 Conn 305 Trust v. Capital One, N.A.

Court of Appeals of The District of Columbia

September 13, 2018

4700 Conn 305 Trust, Appellant,
v.
Capital One, N.A., Appellee.

          Argued January 18, 2018

          Appeal from the Superior Court of the District of Columbia (CAR-593-15) (Hon. Ronna Lee Beck, Trial Judge)

          Anthony R. Champ, with whom Benny L. Kass was on the brief, for appellant.

          Anand Ramana, with whom Phillip C. Chang was on the brief, for appellee.

          Before Beckwith and McLeese, Associate Judges, and Farrell, Senior Judge.

          FARRELL, SENIOR JUDGE.

         This appeal requires us to decide an issue left open by our recent decision in Liu v. U.S. Bank Nat'l Ass'n, 179 A.3d 871 (D.C. 2018), which concerned a foreclosure sale initiated by a condominium association to recover on its super-priority lien for unpaid assessments on a condominium unit. The issue is whether, under the controlling language of D.C. Code § 42-1903.13 (a)(2) (2012 Repl.) at the time of the sale in question, "a lien [foreclosed on] covering a period in excess of six months [of arrearage] . . . is properly conceptualized as a split-lien, which includes a six-month portion entitled to super-priority status [under the statute], or as one lien, all of which is considered to be lower in priority to the first mortgage or deed of trust" encumbering the unit. Liu, 179 A.3d at 879 n.9. The question is one of law that we decide de novo. See Chase Plaza Condo. Ass'n v. JP Morgan Chase Bank, N.A., 98 A.3d 166, 172 (D.C. 2014).

         I.

         In 2007, Anusha Putty executed a note for $308, 750 to finance the purchase of condominium unit 305 at the Parker House, 4700 Connecticut Avenue, N.W. ("the Unit"). Appellee Capital One, N.A. ("Capital One") is the current holder of the note (on which Putty later defaulted) and the beneficiary of the related first deed of trust. By December 2012, Putty had fallen into arrears to the Parker House Condominium Association ("the Association") for some eleven months of unpaid condominium assessments, and in December 2012 the Association recorded a lien on the property in the amount of $6, 108.75. The Association's Notice of Foreclosure Sale advertised as one term of sale that the Unit would be sold "subject to the first deed of trust, for the original amount of approximately $308, 000.00 (as of 12/10/07)." The sale, in which the Association sought to recover the eleven-month balance of unpaid assessments, took place in January 2013. Appellant 4700 Conn 305 Trust ("the Trust") was the successful bidder at the sale, buying the Unit for $11, 000. The Memorandum of Purchase memorializing the sale, as well as the Trustee's Deed from the Association to the Trust, explained that the Unit had been sold subject to Capital One's first deed of trust.

         In January 2015, Capital One filed a complaint for judicial foreclosure on the Unit in Superior Court. The Trust filed counterclaims to quiet title and for slander of title, asserting that the Association's foreclosure on the Unit to enforce its lien for unpaid assessments had extinguished Capital One's first deed of trust. On Capital One's motion for summary judgment, the trial court determined that, whatever the language of D.C. Code § 42-1903.13 (a)(2) might dictate, "the only equitable result" was to require the Trust "to abide by the agreement by which it agreed to be bound," namely to purchase the Unit subject to Capital One's original mortgage and deed of trust.

         II.

         As our prior decisions have explained, § 42-1903.13 (a)(2) provides District of Columbia condominium associations with a "super-priority lien" over first mortgage lienholders that permits an association to collect up to six months of unpaid condominium assessments by way of foreclosure on a defaulting unit. In Chase Plaza, supra, where the condominium association had sought and obtained six months of unpaid assessments from foreclosure, 98 A.3d at 168, we held that the effect of this enforcement of the "super-priority lien" is that (a) the association may "distribute the proceeds from the foreclosure sale first to satisfy the condominium-assessment lien and then to satisfy any remaining liens in order of lien priority"; and (b) "[a]ny liens [including a first mortgage or first deed of trust] that are unsatisfied by the foreclosure-sale proceeds are extinguished, and the foreclosure-sale purchaser acquires free and clear title." Id. at 172. In the more recent case of Liu, supra, the issue was whether that result changed when, unlike in Chase Plaza, a condominium association expressly sold the condominium unit "subject to the first mortgage or first deed of trust" on the unit, while at the same time enforcing its super-priority lien. Liu, 179 A.3d at 874. We held that the anti-waiver provision of D.C. Code § 42-1901.07, by "expressly stat[ing] that any right conferred under the Condominium Act may not be waived," "precludes a condominium association from exercising its super-priority lien while also preserving the full amount of the [first mortgage-holder's] unpaid lien." Id. at 878. Because in Liu the condominium association had "collected on only the most recent six months of unpaid assessments," we concluded that it had "enforced its super-priority lien at the sale" and that, "if the proceeds of the sale are insufficient to cover the first deed of trust, then the first deed of trust must be considered effectively extinguished," despite the express effort to preserve it. Id. at 878-79. As stated earlier, Liu did not decide whether the analysis and result would be otherwise if a condominium association sought to recover more than the "six-month portion [of the arrearage] entitled to super-priority status." Id. at 897 n.9.

         We now conclude that the result is the same in either case. As we explained in Chase Plaza, § 42-1903.13 (a) makes condominium assessment liens prior in enforceability to any other lien or encumbrance except, among other things, a previously recorded first mortgage or first trust; but it then "provides the highest priority to liens relating to the most recent six months of condominium assessments," 98 A.3d at 173, by stating:

The lien shall also be prior to a [first] mortgage or [first] deed of trust . . . to the extent of the common expense assessments . . . which would have become due in the absence of acceleration during the [six] months immediately ...

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