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DISTRICT OF COLUMBIA COURT OF APPEALS
Nos. 23-CV-0150 & 23-CV-0151
CHASTLETON COOPERATIVE ASSOCIATION, INC., APPELLANT,
V.
KAWAMOTO NOTES, LLC, et al., APPELLEES.
Appeals from the Superior Court of the District of Columbia (2019-CA-008500-B & 2017-CA-008364-B)
(Hon. William M. Jackson, Motions Judge) (Hon. Ebony Scott, Motions Judge)
(Argued June 6, 2024 Decided August 22, 2024)
Michael J. Goecke for appellant.
Ian G. Thomas, with whom Tracy L. Buck, and Lauren Mullin were on the brief, for appellee Kawamoto Notes, LLC.
Ian G. Thomas, with whom Tracy L. Buck, Lauren Mullin, and Bryan Wallace were on the brief for appellee RFB Properties II, LLC.
Before EASTERLY, MCLEESE, and DEAHL, Associate Judges.
DEAHL, Associate Judge: Chastleton Cooperative Association appeals a grant
of partial summary judgment in favor of appellees RFB Properties II, LLC, and
Kawamoto Notes, LLC. This litigation revolves around a foreclosure sale affecting 2
ownership interests in one of the Chastleton’s units. The central issues in the trial
court were (1) whether that foreclosure sale was invalid because the Chastleton did
not receive the required pre-sale notice of it, and (2) if the sale was valid, the extent
to which the Chastleton could recoup (from the sale proceeds) unpaid rent associated
with that unit prior to the foreclosure sale. The trial court skipped over the first
question and, regarding the second question, granted summary judgment in favor of
RFB and Kawamoto, agreeing with their position that the Chastleton was limited to
recovering just three months of unpaid rent from the sale proceeds.
The Chastleton now appeals and argues that the trial court reversibly erred
when it failed to address the validity of the foreclosure sale in the first instance. We
agree and reverse.
I. Factual and Procedural Background
The facts, except where otherwise noted, are undisputed. The Chastleton is a
housing cooperative. It owns all of the units in its building, and its members buy
shares in the cooperative that entitle them to enter into what is basically an indefinite
lease for as long as they remain in good standing (by paying their rent, real estate
taxes, assessments, etc.). So while a member of the Chastleton might colloquially
say that they own their unit, they would be more precise to say that they own shares
of the Chastleton and have an exclusive right to occupy their unit. Stephanie Sipek 3
became of a member of the Chastleton in 2007, at which point she was issued (1) a
stock certificate reflecting her shares in the co-op and (2) an occupancy agreement
memorializing her indefinite lease with the Chastleton. We call these two
documents, central to this appeal, the “proprietary documents.”
To finance the purchase of her membership shares, Sipek took out a loan from
Bank of America (“BofA”), which in turn acquired a mortgage-like security interest
in Sipek’s proprietary rights in the Chastleton. Because there was no real property
to serve as collateral for BofA’s loan—remember, the Chastleton owns the unit
itself—Sipek’s proprietary documents served as the collateral for the loan. To
facilitate that, the Chastleton itself was a party to the lending agreement, because in
the event that Sipek defaulted on her loan and BofA foreclosed on it, the Chastleton
would have to issue new proprietary documents in the name of any purchaser at a
foreclosure sale. To that end, Sipek, BofA, and the Chastleton entered into a three-
way agreement—called the Recognition Agreement (“the RA”)—that more or less
obligated the Chastleton to issue new proprietary documents to any purchaser at a
valid foreclosure sale, subject to a few requirements that protected the Chastleton’s
rights (which we will get to in a moment). Sipek would eventually fall behind on
her co-op dues and default on her BofA loan. As a result, the Chastleton took 4
physical possession of her unit in 2013 and BofA scheduled a foreclosure sale for
June 2015. 1
Sipek’s default on her loan implicated several important provisions of the RA.
First, the RA provided that in the event of a default, the lender became the owner of
Sipek’s proprietary documents. Second, and most importantly for our purposes, the
Chastleton had an option to purchase those proprietary documents from the lender
by paying off the balance of Sipek’s loan, which it had to exercise within “sixty (60)
days after notice to [the Chastleton] of the availability of the” proprietary documents,
otherwise the option expired. Third, the lender had “no power or right to transfer,
sell, assign, or otherwise dispose of the” proprietary documents unless the
Chastleton approved, though the Chastleton could withhold its approval “only on the
basis of” the transferee’s “failure in meeting reasonable standards of
creditworthiness or written cooperative occupancy standards.” Fourth, if the
proprietary documents were sold at foreclosure, the Chastleton had first priority to
1 Bayview Loan Servicing initiated the foreclosure sale, either on behalf of BofA or on behalf of the Federal Home Loan Mortgage Loan Corporation, which apparently acquired BofA’s interest in the unit before the foreclosure sale. Sorting through these various banking entities, and who was acting when, is not particularly important to this appeal, so we sometimes refer to them collectively as the “lender.” 5
recover various dues from the sale proceeds, but only “up to three month’s unpaid
rent.”
Now comes a critical disputed fact: the Chastleton claims, and there is
evidence that strongly suggests, that the lender never notified the Chastleton about
the anticipated foreclosure sale. We take that as true at this stage of the proceedings.
See Allen v. District of Columbia, 312 A.3d 207, 212 (D.C. 2024) (We review
summary judgments while “viewing the facts in the light most favorable to the non-
moving party.”) (citing Aziken v. District of Columbia, 70 A.3d 213, 218 (D.C.
2013)). The foreclosure sale nonetheless went forward in June 2015, and RFB was
the winning bidder, ostensibly purchasing the proprietary documents. Things then
hit a snag when RFB attempted to close on the sale and the Chastleton refused to
facilitate it, i.e., it would not reissue the proprietary documents in RFB’s name unless
RFB agreed to pay all of Sipek’s outstanding dues, including far more than the three
months of back rent contemplated in the RA. That led to this litigation.
The Chastleton sued RFB and the lender seeking to nullify the foreclosure
sale. It argued that the sale was invalid because the lender “failed to give requisite
and prior notice of the sale to the [Chastleton]” and otherwise “failed to comply with
the [RA].” RFB countersued and asked the court to direct the Chastleton to reissue
the proprietary documents in its name in order to facilitate the sale, and to levy 6
damages against the Chastleton for obstructing the sale to that point. That
counterclaim, which RFB filed as part of a consolidated pleading that included its
answer to the Chastleton’s complaint, included an allegation that the Chastleton was
“[s]ent proper notice of the sale,” though it did not describe how or when such notice
was sent. Chastleton did not file an answer to RFB’s counterclaim. In 2019, the
lender assigned any remaining interest it had in the unit to Kawamoto Notes, and
Kawamoto moved to intervene in the case. When that motion was denied,
Kawamoto sued Chastleton directly, bringing similar claims as those RFB asserted
in its counterclaim, along with a claim for breach of fiduciary duty predicated on
Chastleton’s failure to rent out the unit during the years after it took possession of it
from Sipek in 2013.
RFB filed two motions for summary judgment, both of which were denied at
first by Judge William M. Jackson. RFB filed a motion to reconsider the second
denial, and on reconsideration, Judge Ebony Scott partially granted that second
motion for summary judgment and similarly partially granted Kawamoto’s motion
for summary judgment on the same grounds. The court ruled that the RA governed
the foreclosure sale and that under its terms, the Chastleton was obliged to reissue
the proprietary documents to facilitate the foreclosure sale. It further ruled that the
Chastleton could recover only three months of back rent (plus some real estate taxes
and special assessments) from the proceeds of the sale. The court also granted 7
summary judgment to Kawamoto on its breach of fiduciary duty claim, concluding
that the Chastleton was obligated to attempt to make the unit profitable on behalf of
Kawamoto after the Chastleton took possession of the unit in 2013, but that it failed
to do so. The court reserved judgment on the tortious interference of contract claims
raised by RFB and Kawamoto, however, reasoning that “[t]here are genuine issues
of material facts concerning whether [Chastleton] was aware [of] RFB’s purchase of
the shares and [its] assertions surrounding the closing of the sale.” In other words,
because the Chastleton had raised a genuine issue of material fact regarding whether
it had been notified of the sale, that precluded summary judgment as to the tortious
interference claims.
Chastleton now appeals the summary judgment orders, 2 and those appeals
have been consolidated in this case.
II. Analysis
We review grants of summary judgment de novo, viewing the evidence in the
light most favorable to the non-moving party and drawing all inferences in that
2 This court generally does not have jurisdiction to hear grants of only partial summary judgment because they are non-final orders that do not dispose of the entirety of the case. But this case fits within an exception to that rule because the orders on appeal “affect[] the possession of property.” D.C. Code § 11-721(a)(2). 8
party’s favor. Katz v. District of Columbia, 285 A.3d 1289, 1301 (D.C. 2022).
While the Chastleton raises a number of issues in this appeal, only two of them
require some discussion here.
First, the Chastleton argues that the trial court erred in granting summary
judgment for RFB and Kawamoto because there was a genuine issue of material fact
regarding whether the Chastleton received the requisite notice of the foreclosure
sale, which in turn casts doubt on the validity of that sale. We agree. The trial court
simply bypassed the Chastleton’s central claim in this litigation, which is that the
foreclosure sale was invalid because the Chastleton had not received prior notice of
that sale. That claim, if true, meant that the Chastleton had not been afforded its
contractual option to purchase the propriety documents, nor had it ever granted its
contractually required approval for a transfer of Sipek’s proprietary rights. Because
this issue raises a threshold matter that affects virtually every other question raised
in this appeal, it renders most of the parties’ other arguments immaterial, save for
one that we preview now.
Second, the Chastleton argues that RFB lacks standing in this case because it
assigned all of its rights to the unit to Russell F. Brown, RFB’s namesake and sole
member, thereby leaving RFB with no stake in the litigation. At the very least, RFB
has standing to defend against the Chastleton’s suit seeking monetary relief from it. 9
Any standing question is thus no impediment to our considering the notice issue
underpinning the Chastleton’s own claims. The only question is whether RFB has
standing to maintain its counterclaims. That is unclear from the record before us, so
we direct the trial court to address it in the first instance on remand.
A. There is a genuine question of material fact regarding whether the Chastleton received the requisite notice of the foreclosure sale.
The Chastleton’s central claim in this case is about notice. Namely, it claims
it never received notice of the foreclosure sale. It argues that the trial court erred
when it failed to so much as address this aspect of its claim, which raises a threshold
matter that affects the validity of the foreclosure sale under the RA.
The Chastleton offers several compelling points in support of that position.
First, the Chastleton’s complaint clearly alleged that it did not receive “prior notice
of the sale” so that BofA and its agents “failed to comply with the” RA’s notice
requirement. In response to that allegation, neither RFB nor Kawamoto has ever so
much as alleged, much less produced any evidence about, the manner or timing of
any notice of sale that was provided to the Chastleton. 3 Second, the Chastleton
3 RFB produced a newspaper advertisement of the sale which it appears ran in the Washington Post on several occasions between May 26 and June 4, 2016. RFB does not seem to suggest that advertisement—run for the first time just fourteen 10
points to an “acknowledgment”—signed by RFB (seemingly at the lender’s
behest)—which states that RFB acknowledges (1) that the Chastleton had to “be
provided with notice of any sale or transfer of the property,” (2) that the Chastleton
had to “approve any transfer or sale of the” proprietary documents issued in
connection with Sipek’s unit, and (3) that the lender “did not obtain this approval
from the [Chastleton] before conveying its interest in the [unit] to RFB” via the
foreclosure sale. Third, the trial court itself seemed to acknowledge that there were
genuine issues of material fact regarding whether the Chastleton received the
requisite notice of the sale: it denied summary judgment on RFB’s and Kawamoto’s
tortious interference claims because there were “genuine issues of material fact . . .
surrounding the closing of the sale because [the Chastleton] was not notified” of it.
The trial court simply failed to consider how that dispute about notice affects roughly
every other aspect of this case: if the sale was invalid because it was in violation of
the Chastleton’s rights under the RA, it stands to reason that the Chastleton cannot
days prior to the foreclosure sale—was itself the requisite notice of sale to the Chastleton. If that is indeed RFB’s argument, it raises a host of questions about whether that advertisement satisfies the notice required by the plain terms of the RA, under which Chastleton’s option to purchase endured for sixty days after it received notice of any anticipated sale. Plus, it is difficult to see how that advertisement alone could be seen as satisfying the Chastleton’s rights to approve, or withhold its approval, of any transferee. 11
be required to uphold its own obligations under the RA in the face of such an invalid
sale.
RFB offers three responses, but none is persuasive.
First, RFB argues that the Chastleton has not adequately preserved its notice
argument because, in its oppositions to summary judgment, it made only fleeting
reference to its lack of notice and appended “no record evidence” substantiating its
claim. We disagree. The Chastleton’s oppositions to summary judgment were quite
clear on the point, to the point of being repetitive. In response to RFB’s claim that
the lender “properly instituted foreclosure proceedings,” the Chastleton’s first
opposition responded, with emphasis, that the lender “failed to give requisite and
prior notice of the sale to the [Chastleton].” The Chastleton repeated the point, again
with emphasis, stating that one of the two core reasons “for bringing this lawsuit was
to establish, judicially, that [the lender] failed to properly institute foreclosure
proceedings.” In its opposition to RFB’s second motion for summary judgment, the
Chastleton repeated the same point again and again, and said little else in that two-
page pleading: (1) the sale was “without [the Chastleton’s] knowledge”; (2) “a
public auction was held, without [the Chastleton’s] knowledge”; (3) “RFB bought
the Note directly from the [lender], and [the Chastleton] was not notified”; and 12
(4) “the sale was not valid given the fact that [the Chastleton] was never notified of”
it. That is as clear as can be.
While it is true that the Chastleton did not append any particular evidence in
support of that claim to its oppositions to summary judgment—it is tough to prove a
negative with documentary evidence—RFB has similarly never provided any
evidence of its own about how or when the Chastleton was purportedly notified of
the sale. But see supra n.3 (discussing advertisement of the sale). In any event,
“summary judgment ha[s] to be based on a review of the ‘entire record,’” not simply
on what is appended to the pleadings. Pope v. Romac Int’l, 829 A.2d 945, 947 (D.C.
2003) (citing Reynolds v. Gateway Georgetown Condo. Ass’n, 482 A.2d 1248,
1251-52 (D.C. 1984)). And there is clear evidence in support of the Chastleton’s
claimed lack of notice by way of RFB’s seeming acknowledgement that the
Chastleton had not received the required notice of the foreclosure sale. On the other
side of the scale, we see nothing supporting RFB’s conclusory claim that the lender
provided the Chastleton with the requisite notice of the sale, a claim which (if true)
would be comparatively easy to establish through documentary or testamentary
evidence.
Second, RFB argues that the Chastleton effectively admitted that it received
proper notice of the sale because it failed to respond to RFB’s counterclaim, in which 13
it had alleged that the Chastleton was “[s]ent proper notice of the sale.” Again, we
disagree. While it is true that a party might be deemed to have admitted a fact alleged
in a complaint or counterclaim if it fails to respond to it, see D.C. Super. Ct. Civ. R.
8(b)(6), we doubt that rule has any application here. The Chastleton had already
alleged in its own complaint—initiating these proceedings and before RFB filed its
countersuit—that it did not receive prior notice of the sale. So it would be a harsh
and strange application of Rule 8 to conclude that the Chastleton admitted a fact by
failing to file a responsive pleading to a counterclaim, when it had previously made
clear (prior to the counterclaim) its position that it was denying that very fact. RFB
cites to no support for applying Rule 8(b)(6) in that scenario.
In any event, RFB’s claim that the Chastleton was “[s]ent proper notice of the
sale” is not truly a factual claim capable of being admitted—it is a legal claim. It
does not allege any manner or timing of notice, but instead offers only the conclusory
legal assertion that some “proper notice” was sent. The “failure to deny conclusions
of law does not constitute an admission of those conclusions” under Rule 8.
Thompson v. DeWine, 976 F.3d 610, 616 n.5 (6th Cir. 2020) (interpreting Fed. R.
Civ. P. 8) (quoting 5 Wright & Miller, Fed. Prac. & Pro. § 1279 (3d ed.)); see also
Elmore v. Stevens, 824 A.2d 44, 46 (D.C. 2003) (“The defendant is not held . . . to
admit conclusions of law.”). So even if we thought Rule 8 applied in this posture,
this is not a point that could be deemed admitted by a failure to respond. 14
Third, RFB argues that any failure of notice was the fault of the lender who
initiated the foreclosure sale, so that the Chastleton should effectively take it up with
them. The Chastleton had in fact done that very thing before it voluntarily dismissed
the lender from this litigation, and in RFB’s view, that “dismissal operates to bar
Chastleton’s position” now. We disagree yet again. RFB’s own claims are
predicated on its position that it was a valid purchaser of the lender’s rights under
the RA, and whether or not that is true turns on whether the Chastleton received the
required notice of the sale. What’s more, there is evidence in the record that RFB
was aware of and acknowledged the fact that the Chastleton had not received prior
notice of the sale, and that RFB assumed the risk that the sale was invalid on that
very basis. It cannot seek to avail itself of its rights under the RA to compel the
Chastleton to reissue the proprietary documents in its name and at the same time
disavow the lender’s obligations under the RA. It is thus RFB, and not the
Chastleton, who must take its complaints up with the lender if in fact it purported to
convey the proprietary documents without the legal authority to do so. It will likely
have a hard time doing that given RFB’s seeming acknowledgment that it was aware
that the lender did not provide the required pre-sale notice. 15
B. It is unclear if RFB is the proper party to pursue its counterclaims.
We briefly address the Chastleton’s additional argument that RFB does not
have standing to maintain its countersuit because it assigned its interest in the unit
to its sole member, Russell F. Brown. At the outset, we note that it is the Chastleton
who initially sued RFB seeking both declaratory and monetary relief on account of
the foreclosure sale being invalid. So there is no question that RFB has standing to
defend against those claims—defendants virtually always have the requisite interest
in defending against a suit, it is only plaintiffs who have to establish standing by
showing the familiar “injury,” “cause,” and “redressability.” See Yellow Pages
Photos, Inc. v. Ziplocal, LP, 795 F.3d 1255, 1265 (11th Cir. 2015) (“[A]ny defendant
against whom relief is sought will generally have standing to defend due to its
exposure to an adverse judgment, the threat of which is imminent.”); Grayson v.
AT&T Corp., 15 A.3d 219, 229 (D.C. 2011) (en banc) (explaining that “the basic
function of the standing inquiry is to serve as a threshold a plaintiff must surmount
before a court will decide the merits”) (emphasis added); California v. Texas, 593
U.S. 659, 668-69 (2021) (“A plaintiff has standing only if he can” satisfy the three
core requirements.) (emphasis added). That means that any standing deficiency is
no impediment to our consideration of the notice issue just discussed: that was
central to the Chastleton’s claims as plaintiffs, and RFB plainly had sufficient
interest to defend against the Chastleton’s claims for monetary relief. 16
The only standing question is thus whether RFB had standing to bring its own
claims via countersuit. The Chastleton says it does not. It points to a statement in
RFB’s counterclaim where RFB asserted that its “interest in the property and
proceedings subject to this action have been assigned to Russell F. Brown,
individually.” RFB counters that this is no basis to disturb the trial court’s ruling
because “there is no other information about the putative assignment, including
when it occurred, what precise rights were assigned, whether it was qualified or
conditional, and when the assignment would take effect.” We agree with RFB that
the factual record regarding its standing to pursue its counterclaims is
underdeveloped. And “[b]ecause the Superior Court did not resolve factual issues
germane to standing, we conclude that a remand is necessary for that court, after
conducting any further proceedings it deems necessary, to resolve the factual
question on which jurisdiction depends.” Moeller v. District of Columbia, 253 A.3d
165, 172 (D.C. 2021).
This issue is likely a tempest in a teapot, however, because if RFB is not the
proper party to maintain the counterclaims—an argument that the Chastleton raises
for the first time on appeal—then RFB must be afforded an opportunity to substitute
Brown as the real party in interest. See D.C. Super. Ct. Civ. R. 17(a)(3) (“The court
may not dismiss an action for failure to prosecute in the name of the real party in 17
interest until, after an objection, a reasonable time has been allowed for the real party
in interest to ratify, join, or be substituted into the action.”).
III. Conclusion
For the foregoing reasons, we reverse the trial court’s grants of summary
judgment and remand for further proceedings.
So ordered.