Bank-Fund Staff Federal Credit Union v. Cuellar
1994 D.C. App. LEXIS 47, 639 A.2d 561, 1994 WL 99504 (1994)
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Rule of Law:
Under D.C. law, a notice of foreclosure on a residential mortgage is fatally defective if it fails to state the amount required to cure the default and incorrectly asserts that the homeowner has no right to cure, rendering any subsequent foreclosure sale invalid.
Facts:
- On April 1, 1986, Guillermo and Dalia Vivado borrowed $36,000 from Bank-Fund Staff Federal Credit Union, secured by a second deed of trust on their single-family home in Washington, D.C.
- The Vivados subsequently defaulted on their loan obligations.
- In September 1988, Mr. Vivado temporarily left the country for a work assignment, accompanied by his wife, with the full intention of returning to their D.C. home.
- On May 4, 1990, the Bank-Fund sent an initial foreclosure notice stating the cure amount, but that sale was halted by a bankruptcy stay.
- On August 6, 1990, after the stay was lifted, the Bank-Fund sent a new foreclosure notice for a sale scheduled on September 5, 1990.
- This second notice, on the standard government form, did not state a cure amount; instead, it stated 'N/A — not a ‘residential mortgage.’”
- Following an agreement to postpone the sale, the Bank-Fund's counsel advised the Vivados' counsel on September 7, 1990, that reinstatement by curing the default would not be permitted and that the entire loan of $98,753.80 had to be paid off to avoid foreclosure.
- The Vivados were unable to pay off the full loan, and on October 3, 1990, the Bank-Fund purchased the property at the foreclosure sale.
Procedural Posture:
- Bank-Fund Staff Federal Credit Union purchased the Vivados' property at a foreclosure sale.
- The Bank-Fund filed suit for possession against the Vivados in the Superior Court of the District of Columbia, the trial court.
- The Bank-Fund moved for summary judgment, and the Vivados filed a cross-motion for summary judgment.
- The trial court granted the Vivados' cross-motion, ruling that the foreclosure notice was fatally defective and the Bank-Fund therefore lacked standing for its possession action.
- Bank-Fund Staff Federal Credit Union, as appellant, appealed the grant of summary judgment to the District of Columbia Court of Appeals.
- In a separate but related action, the Vivados, as appellants, appealed the terms of a preliminary injunction against a second foreclosure attempt.
- The District of Columbia Court of Appeals consolidated the two appeals for review.
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Issue:
Does a foreclosure notice that omits the amount required to cure a default and erroneously states that the homeowner has no right to cure violate D.C. Code § 45-715.1, thereby rendering the subsequent foreclosure sale invalid?
Opinions:
Majority - Rogers, Chief Judge
Yes, a foreclosure notice that omits the cure amount and erroneously denies the right to cure violates D.C. Code § 45-715.1, rendering the subsequent foreclosure sale fatally defective. The court reasoned that foreclosure statutes must be strictly construed in favor of the homeowner to satisfy due process requirements. The standard form provided by the D.C. Recorder of Deeds requires the cure amount, and its omission deprives the homeowner of vital information needed to prevent the loss of their home. The Bank-Fund's argument that the mortgage was no longer 'residential' because the Vivados were temporarily residing abroad for work was rejected. The court broadly interpreted the statutory term 'principal place of abode' to not require continuous physical presence, especially in a transient community like Washington, D.C., where work-related travel is common. Because the foreclosure notice was defective for both omitting the cure amount and falsely denying the right to cure, the resulting sale was invalid, and the Bank-Fund lacked standing to sue for possession.
Analysis:
This decision solidifies a strict compliance standard for foreclosure notices in the District of Columbia, creating a bright-line rule that protects homeowners. By mandating the inclusion of the cure amount and an accurate statement of rights, the court prevents lenders from creating ambiguity or misleading borrowers. The ruling significantly expands the protection for homeowners by broadly defining 'principal place of abode' to include those temporarily absent for work, a precedent that acknowledges the realities of the local workforce and makes it more difficult for lenders to strip statutory protections based on temporary relocation.
