# Chastleton Coop. Ass'n, Inc. v. Kawamoto Notes, LLC

> District of Columbia Court of Appeals · August 22, 2024

URL: https://www.frixlaw.com/law-library/cases/10514828

## Case

- **Court:** District of Columbia Court of Appeals
- **Decided:** August 22, 2024
- **Precedential status:** Published
- **Opinion:** Opinion
- **Cited by:** 0 later opinions in the Frix Law Library

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## Opinion text

Notice: This opinion is subject to formal revision before publication in the Atlantic
and Maryland Reporters. Users are requested to notify the Clerk of the Court of
any formal errors so that corrections may be made before the bound volumes go
to press.

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10514828. Public record. Not legal advice.