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HomeMy WebLinkAbout98-1920 civilBASHAR AHMAD, d lb / a PACIFIC LAND EXCHANGE, Plaintiff Ve IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA GEORGE J. ADAMS, CHARLES W. : NO. 98-1920 CIVIL TERM JUNKINS, DAVID J. REMMEL, : t/a Fallowfield Associates, : Defendant : CIVIL ACTION - ACTION : : IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT REMMET. BEFORE HOFFER, P.J., GUIDO, J. ORDER · day of MARCH, 1999, Defendants' Preliminary Objections in the Nature of a Demurrer are DENIED. Defendants are directed to file an answer within twenty (20) days of receipt of this order. By t Edward E. Guido, J. Sheetal R. Shah-Jani, Esquire Lisa D. Blankenburg, Esquire For the Plaintiff John R. Kachur, Esquire James J. Kutz, Esquire For the Defendant :sld BASHAR AHMAD, d/b / a PACIFIC LAND EXCHANGE, Plaintiff Ve IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA GEORGE J. ADAMS, CHARLES W. : NO. 98-1920 CIVIL TERM JUNKINS, DAVID J. REMMEL, : t/a Fallowfield Associates, : Defendant : CIVIL ACTION - ACTION : IN RE: PRELIMINARY OBJECTIONS OF DEFENDANT REMMEL BEFORE HOFFER, P.J., GUIDO, J. OPINION AND ORDER OF COURT The instant action was filed by Plaintiff as a "Complaint for Deficiency Judgment Pursuant to 42 Pa. C.S.A. § 8103". Defendant David J. Remmel filed preliminary objections in the nature of a demurrer. The issues were briefed by the parties and argued before this Court. The matter is now ready for disposition. FACTS The complaint avers the following facts: 1. On November 17, 1986 Defendants executed and delivered a note in the face amount of $600,000 to Plaintiff's predecessor in interest.~ 2. The indebtedness was secured by a mortgage on property located in Cumberland County (hereinafter "the property").~ ~Complaint para. 3. 2Complaint para. 4. NO. 98-1920 CIVIL TERM 3. The note and mortgage were assigned to Plaintiff.3 4. Defendants defaulted on their loan obligations under the note and mortgage by failing to pay principal and interest when due.4 5. On April 4, 1996, Plaintiff filed a complaint in mortgage foreclosure against Defendants in the Court of Common Pleas of Cumberland County docketed to 96-1823 Civil Term.5 6. Between July 18, 1996 and June 5, 1997 in rem judgments in the amount of $783,370.75 were entered against all of the Defendants in the mortgage foreclosure actions.~ 7. On June 5, 1997 Plaintiff filed a writ of execution directing the sheriff to levy upon the property pursuant to the in rem judgment.7 8. On November 5, 1998, Plaintiff purchased the property as judgment creditor at the Sheriff's sale.8 9. Plaintiff received a Sheriff's deed to the property on December 23, 1998.9 10. On March 23, 1998 Plaintiff filed a Petition to Fix Fair 3Complaint para. 5. 4Complaint para. 6. 5Complaint para. 7 and Exhibit C. 6Complaint para. 8-10 7Complaint para. 11. eComplaint para. 12. 9Complaint para. 13. NO. 98-1920 CIVIL TERM Market Value in the foreclosure action.~° 11. On April 8, 1998 Plaintiff filed the instant action against the Defendants DISCUSSION Plaintiff filed an action in mortgage foreclosure at 96-1823 Civil Term in April of 1996. It never pursued an action on the note until the action currently before us. Plaintiff's failure to bring a separate action upon the note before it obtained the judgment in mortgage foreclosure and purchased the propertY at Sheriff's sale has placed the parties in a procedural morass from , which we must now try to extricate them. We first begin with a discussion of the difference between an action in assumpsit based upon the note and an action in mortgage foreclosure based upon the mortgage. An action in assumpsit based upon the note is an in personam action which seeks to impose personal liability upon the makers of the note. First Seneca Bank v. Greenville Distributing Co., 367 Pa. Super. 558, 533 A.2d 157 (1987). An action in mortgage foreclosure based upon the mortgage is an action in rem or de terris. The sole purpose of an action in mortgage foreclosure is to obtain a judgment upon which to effect a judicial sale of the mortgaged property. Meco Realty Co. v. Burns, 414 Pa. 495, 200 A.2d 869 (1964). ~°Complaint para. s 14 & 15. ~See complaint. NO. 98-1920 CIVIL TERM If, as in the instant case, the judgment creditor purchases the mortgaged property at Sheriff's sale pursuant to a writ of execution issued upon the in rem judgment in mortgage foreclosure, the provisions of the Deficiency Judgment Act, (42 Pa. C.S.A. § 8103) come into play. The Deficiency Judgment Act provides in relevant part as follows: ~ 8103. Deficiency judgments (a) General rule.-Whenever any real property is sold, directly or indirectly, to the judgment creditor in execution proceedings and the price for which such property has been sold is not sufficient to satisfy the amount of the judgment, interest and cOsts and the judgment creditor seeks to collect the balance due on said judgment, interest and costs, the judgment creditor shall petition the court having jurisdiction to fix the fair market value of the real property sold. The petition shall be filed as a supplementary proceeding in the matter in which the judgment was entered. · · · (d) Action in absence of petition.-If the judgment croditor shall fail to present a potition to fix tho fa±r market value of the roal property sold within tho time after the sale of such real property provided by section 5522 (relating to six months limitation), the debtor.., may file a petition, as a supplementary proceeding in the matter in which the judgment was entered, in the court having jurisdiction, setting forth the fact of the sale, and that no petition has been filed within the time limited by statute after the sale to fix the fair market value of the property sold, whereupon the court, after notice as prescribed by general rule, and being satisfied of such facts, shall direct the clerk to mark the judgment satisfied, rel~eased and discharged. 42 Pa. C.S.A. ~ 8103(a)(d). The purpose of the Deficiency Judgment Act is to relieve a debtor from personal liability when the real property taken by the judgment creditor has sufficient value to allow the judgment creditor to dispose of the property NO. 98-1920 CIVIL TERM without further loss. Horbal v. Moxham Nat'l Bank, 548 Pa. 394, 697 A.2d 577 (1997). Section 8103 contemplates two possible petitions. One is a petition under Section 8103-(a) to fix the fair market value of real estate sold to a judgment creditor on execution. The other is a petition under 8103(d) to have the judgment marked satisfied when the creditor has not timely filed a petition to fix the fair market value of the real estate. Case law has consistently held that a petition to fix fair market value could not be filed as a supplement to an action in mortgage foreclosure which is an in rem proceeding. McDowell Nat'l Bank of Sharon v. Stupka, 310 Pa. Super. 143, 456 A.2d 540 (1983), First Seneca Bank v. Greenville Distributing Co., supra. As .the Superior Court stated in First Seneca Thus mortgagees who .have purchased property at a sheriff's sale after obtaining a judgment in mortgage foreclosure can only recover the deficiency if they obtain a personal judgment, and, in the proceeding in which they have obtained the personal judgment, have filed a petition for deficiency judgment within six months of the execution sale. Where the mortgagee obtains only an in rem judgment in mortgage foreclosure and in the in rem mortgage foreclosure action proceeds to petition for a deficiency judgment, i.e., a personal judgment, the proceedings are "void at law." (citations omitted) 533 A.2d at 161. Prior case law was effectively changed when the Supreme Court of Pennsylvania adopted new Rules of Civil Procedure 3276- NO. 98-1920 CIVIL TERM 3291.~2 Those rules were specifically adopted to "govern proceedings pursuant to Section 8103 of the Judicial Code, 42 Pa. C.S.A. § 8103, relating to deficiency judgments." Pa. R.C.P. 3276. The new rules define "judgment" to include "any judgment which is subject to the provisions of Section 8103 of the judicial code and includes a judgment de terris, a judgment in rem and a judgment in personam." (emphasis added) Pa. R.C.P. 3277. The Note to Pa. R.C.P. 3277 specifically provides that: This changes the practice under prior case law which did not permit the filing of the proceeding supplementary to a matter in which the judgment obtained was not in personam. Clearly under the new rules a petition to fix fair market value pursuant to Section 8103(a) of the Judicial Code can now be filed supplementary to an action in mortgage foreclosure. Defendant's first preliminary objection attacks the validity of the petition to fix fair market value filed to the action in mortgage foreclosure at 96-1823 Civil Term. He argues that the rules allowing such a petition to be filed were not adopted until well after the commencement of the foreclosure action. The Defendant further argues that the procedural change effectuated by the new rules applies only to actions filed after that date.~ ~2The new rules were adopted on December 6, 1996 and became effective on January 1, 1997. ~3We note that this argument totally disregards Pa.R.C.P. 52(c) which provides: Unless the Supreme Court specifies otherwise, a rule or an amendment to a rule shall apply to actions pending on the effective date. NO. 98-1920 CIVIL TERM However, since the matter is not properly before us, we need not address Defendant'~ arguments. No petition to fix fair market value has been filed in the instant action. Any attack upon the , propriety of filing a petition to fix fair market value in the foreclosure action must be made in that separate action. Defendant further argues that even if the petition to fix fair market value was appropriately filed in the mortgage foreclosure action, it cannot impose personal liability upon him. We agree with this position. The new rules specifically provide that no order fixing the fair market value of property "shall determine whether any respondent is personally liable to the petitioner." Pa. R.C.P. 3286. Therefore, if the Plaintiff wishes to impose personal liability upon any of the Defendants, he must bring an action upon the note. See First Seneca Bank v. Greenville Distributing Co., supra. Plaintiff has titled his complaint as a "Complaint for Deficiency Judgment Pursuant to 42 Pa. C.S.A. § 8103." While we agree with Defendant that no such complaint may be brought under 14 Section 8103 of the Judicial Code, we must still deny his preliminary objections. ~Section 8103(a) of the Judicial Code provides only for a petition "to fix the fair market value of the real property sold." The petition must be filed as a "supplementary proceeding in the matter in which the judgment was entered." Obviously no judgment has been entered in the instant action. Therefore, nothing contemplated by Section 8103(a) can be filed to this term and number at the current time. NO. 98-1920 CIVIL TERM A demurrer may be sustained only if, accepting as true all well pleaded facts and reasonable inferences deducible therefrom, it is clear and free from doubt that no recovery is possible. McMahon v. Shea, 441 Pa. Super. 304, 657 A.2d 938 (1995). If the facts as pleaded state a claim for which relief may be granted under any theory of law then the demurrer must be denied. C.ount¥ of Allegheny v. Commonwealth of Pa., 507 Pa. 360, 490 A.2d 402 (1985). The complaint need only state the material facts upon which the cause of action is based in order to apprise the Defendant of the nature and extent of Plaintiff's claim. Pa. R.C.P. 1019(a). The Plaintiff is not required to identify the legal theory upon which the complaint is based. Weiss v. Equibank, 313 Pa. 'Super. 446, 460 A.2d 271 (1983). Applying the above standards to the case at bar, we are satisfied that Plaintiff has alleged sufficient facts upon which to base an action in assumpsit for nonpayment of the note.~s If Plaintiff is successful in prosecuting the instant assumpsit action based upon the note, he will have the in personam judgment necessary as a first step to collecting a deficiency judgment against Defendant. Whether he can collect that judgment depends upon the outcome of the petition to fix fair market value filed as a supplementary proceeding in the mortgage foreclosure action. If it turns out that the petition was not properly filed, the Defendant may file a petition under ~SSee para.'s 3-6. NO. 98-1920 CIVIL TERM 8103(d) to this term and number to have any judgment entered herein marked satisfied.~6 If the Court does proceed to set the fair market value of the real property in the mortgage foreclosure action, Defendant will then be released from liability to the extent of the value so fixed.~7 If the value of the real property sold is less than the judgment entered to this term and number, the Plaintiff may "proceed by appropriate proceedings to collect the balance of the debt." 42 Pa. C.S.A. § 8103(c) (2). In any event the instant action on the underlying note may move forward independently of the proceedings occurring at 96-1823 Civil Term. Since the complaint states suffi6ient facts upon which to base a cause of action in assumpsit on the underlying note, we must deny Defendant's Preliminary Objections. ORDER AND NOW, this 3~~ay of MARCH, 1999, Defendants' Preliminary Objections in the Nature of a Demurrer are DENIED. , Defendants are directed to file an answer within twenty (20) days of receipt of this order. Sheetal R. Shah-Jani, Esquire Lisa D. Blankenburg, Esquire By the Court, John R. Kachur, Esquire James J. Kutz, Esquire /s/ Edward E. Guido Edward E. Guido, J. :sld ~642 Pa.C.S.A. ~ 8103(d). · ~TSee Pa. R.C.P. 3286(a) and the comments thereto.