On March 25, 2021, the D.C. Court of Appeals issued its decision in RFB Properties II, LLC v. Deutsche Bank Company Americas (Nos. 19-CV-0529 and 19-CV-069). This decision has important ramifications on two fronts: (1) whether a party can appeal from a “final order” issued in only one of two consolidated cases; and (2) in the context of a D.C. condominium lien foreclosure, when should the question of an unconscionably low bid price be viewed and determined?
The key facts are becoming all too common to lenders, D.C. condominium associations, and title insurers. In 2005, the condo owner/borrower bought the residential condo for $541,900 and obtained a loan for $476,000 secured by a Deed of Trust. In 2015, there was a foreclosure under the condo lien for unpaid condo fees and, at a bid of $53,000, RFB was the winning bidder. (it’s important to note that at the time RFB made this bid, it was not clear under D.C. law that a condo lien had priority over a lender’s purchase money mortgage.) While that foreclosure process was in motion, Deutsche Bank (Bank) was on the verge of foreclosing under the condo owner/borrower’s assigned Note and Deed of Trust. The Bank bid-in the property. The contest was now set: RFB, the winning bidder at the condo lien foreclosure, contended that, under several recent D.C. appellate cases, the condo lien foreclosure wiped out the Bank’s otherwise superior lien interest. On the other hand, the Bank contended that the winning bid was unconscionably low and should be set aside. Two related actions were then filed: (1) the Bank filed an action for possession; and (2) RFB filed an action seeking a quiet title/declaratory judgment as to its right to ownership and possession free from the Bank’s claimed lien. When RFB lost on summary judgment (the trial court viewed its bid of $53,000 to be unconscionably low when viewed at the time of the litigation was filed), it filed a timely appeal of the trial court’s order. The Bank contended that any such appeal was premature since the two related civil actions had been consolidated at the trial court level and no appeal could be taken until final orders were entered in both cases.
While there is no binding D.C. authority, the Court turned to Federal Civil Rule 42 for guidance on the question of whether an aggrieved party may appeal from a final order entered in a consolidated case. The short answer was: Yes. Relying principally on Hall v. Hall, 138 S. Ct. 1118 (2018), the Court held consolidation does not automatically cause the constituent cases to lose their separate identities. The Court determined that the trial court’s grant of summary judgment in favor of the Bank was an appealable order.
When it came to the merits of the appeal, the Court brushed aside several preliminary arguments advanced by RFB and squarely addressed a critical question left unanswered in its prior series of decisions on condo lien foreclosures in D.C.: when is the question of unconscionability of a condo lien foreclosure bid determined? After reviewing several of its recent decisions (especially the 4700 Conn 305 Trust case) and case law from other jurisdictions, the Court held that the trial court had erred in determining when the question of unconscionability should be viewed and held that the time to view that question – under these facts — is when the 2015 foreclosure sale took place. Under these facts, the $53,000 bid was made when RFB had good reason to believe it was buying subject to the Bank’s loan and so, to this Court, there was no windfall to RFB. It reversed the trial court’s order and remanded the case for further proceedings consistent with its opinion.
A link to the decision can be found here.