Loading...
HomeMy WebLinkAbout2004-1288 Civil PHILIP V. HOFFMAN AND BARBARA D. HOFFMAN, PLAINTIFFS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA V. HOMECOMINGS FINANCIAL NETWORK, INC. and FAIRBANKS CAPITAL CORP., DEFENDANTS 04-1288 CIVIL TERM IN RE: MOTION OF PLAINTIFFS FOR JUDGMENT ON THE PLEADINGS BEFORE BAYLEY. J. AND GUIDO. J. OPINION AND ORDER OF COURT Bayley, J., January 3, 2006:-- On March 25, 2004, plaintiffs, Philip V. Hoffman and Barbara D. Hoffman, filed an action to quiet title against defendants, Homecomings Financial Network, Inc., and Fairbanks Capital Corp. Defendants, with leave of court, subsequently filed an amended answer to plaintiffs' complaint with new matter and counterclaims. Plaintiffs filed a motion for judgment on the pleadings that was briefed and argued on November 23, 2005. Under Pa. Rule of Civil Procedure 1034, the motion may be granted only in cases where no facts are at issue and the law is so clear that a trial would be a fruitless exercise. Beardell v. Western Wayne School District, 91 Pa. Commw. 348 (1985). Consideration of the motion is limited to the well-pleaded facts, admissions and documents properly attached to the pleadings. See Bata v. Central-Penn National Bank of Philadelphia, 423 Pa. 373 (1966). The following facts are pled in plaintiffs' complaint and admitted by defendants. Plaintiffs owned four lots in Reis Acres Estates in Middlesex Township, Cumberland 04-1288 CIVIL TERM County, Numbered B-23, B-24, B-10 and B-11. On June 24, 2002, a mortgage and a Fixed Note, were executed between plaintiffs and People's Choice Home Loan, Inc., on Lot B-23. The mortgage was assigned to Homecomings Financial Network, Inc.1 After plaintiffs failed to make require payments on the obligation secured by the mortgage, an action for mortgage foreclosure was instituted. Judgment was entered against plaintiffs. The Sheriff advertised Lot B-23 for sale. It was sold on December 10, 2003, to Homecomings Financial Network, Inc. The Sheriff executed a deed which was recorded. Defendants subsequently listed Lots B-23, Lot B-24, B-11 and B-10 of Reis Acres Estates for sale. That prompted plaintiffs to file the within complaint to quiet title to Lots B-24, B-11 and B-10, which was not secured by the mortgage or sold by the Sheriff. Defendants aver facts in new matter, which we must accept as true, that on January 30, 1998, plaintiffs gave Keystone Financial Mortgage a first-position mortgage on Lots B-23, B-10, B-11, and B-24, in security for a loan of $380,000. In January 2002, plaintiffs sought to refinance the Keystone mortgage, agreeing that such a loan would be secured by a first-position mortgage on all four lots. The four lots were appraised at $625,000. On June 24,2002, People's Choice Home Loan, Inc., extended the loan in the original principal amount of $480,250 to plaintiffs, which People's and plaintiffs understood and agreed would be secured by a first-position 1 Plaintiffs aver that Fairbanks Capital Corp. is the servicing agent for Homecomings Financial Network, Inc. Defendants aver that the loan servicing has been transferred to -2- 04-1288 CIVIL TERM mortgage on the four lots. The mortgage was executed on June 24, 2002. The amount of $372,375.91 of the loan proceeds went to satisfy the Keystone mortgage. Defendants pled: 53. Although the People's Choice Mortgage was intended to encumber the entire Property, and although it references the correct address and tax parcel number of the entire Property, through a mutual or unilateral mistake with knowledge, the People's Choice Mortgage contained a metes and bounds description of Lot B-23 only. 54. On information and belief, Plaintiffs believed that the People's Choice Mortgage encumbered the entire Property. Alternatively, Plaintiffs knew that the People's Choice Mortgage erroneously contained a metes and bounds description of Lot B-23 only, but intentionally or negligently failed to disclose that error to Defendants or their agents. 64. Upon receipt of the Complaint filed in the Foreclosure Action, counsel for Plaintiff Philip Hoffman, the same counsel who now represents both Plaintiffs in the instant Quiet Title Action, offered to resolve the Foreclosure Action by presenting a deed in lieu of foreclosure to the entire Property in exchange for Plaintiffs' waiver of any deficiency claim. 65. By letter dated April 3, 2003, Plaintiffs' counsel reiterated Plaintiff Philip Hoffman's offer to present a deed in lieu of foreclosure for the entire Property as a resolution to the Foreclosure Action. 67. In order to induce Plaintiffs to accept a deed in lieu of foreclosure to the entire Property, Plaintiff's counsel stated in that April 3, 2003 letter that Plaintiffs did not own any other real property other than the Property which Plaintiff Philip Hoffman was offering to transfer via the deed in lieu of foreclosure. 68. Notably, as part of his offer, Plaintiff Philip Hoffman wanted Defendant Homecomings to assume or pay-off various federal and state tax liens encumbering the entire Property. 69. By letter dated April 8, 2003, counsel for Defendants, . . . explained to Plaintiffs' counsel that a deed in lieu of foreclosure would not "cleanse' the title of the Property of certain encumbrances, and recommended that Plaintiff Philip Hoffman's proposed terms of settlement could be achieved by a Consent Judgment in Rem. 71. At all times material hereto, during the Foreclosure Action, Wilshire Credit Corporation which has replaced Fairbanks as the servicing agent. -3- 04-1288 CIVIL TERM Plaintiffs and their counselled Defendant Homecomings to believe that it was foreclosing the entire Property. 72. At all times material hereto, during the Foreclosure Action, Plaintiffs, and their counsel, knew that the People's Choice Mortgage erroneously contained a metes and bounds description of Lot B-23 only (instead of the entire Property), but intentionally did not disclose that error to Defendants or their agents. 73. Plaintiffs led Defendants to believe that Defendant was foreclosing the entire Property, and intentionally did not disclose the error in the metes and bounds description in the People's Choice Mortgage, in order to induce Defendants to waive their deficiency claim against Plaintiffs. 74. Subsequently, in reliance upon Plaintiffs' counsel's representations that Plaintiffs did not own any other real property other than the Property being foreclosed upon, and that Defendant Homecomings was foreclosing the entire Property, Defendant Homecomings agreed to waive any deficiency claim against Plaintiffs in exchange for Plaintiffs' consent to an in rem judgment ("Settlement Agreement"). 75. As part of the Settlement Agreement, on or about May 12, 2003, Plaintiffs and Defendants, by and through their respective counsel, executed a "Consent Judgment by Stipulation between the Parties" (collectively the "Consent Judgments") whereby Plaintiffs consented to an in rem judgment in the Foreclosure Action, and Defendant Homecomings waived its right to pursue a deficiency claim against Plaintiffs. 82. As a result of the clerical error in the People's Choice Mortgage, all pleadings and documents in the Foreclosure Action contained the incorrect metes and bound description of the Property. 83. At all times material hereto, Defendants believed that the People's Choice Mortgage constituted a first-position lien on the entire Property, properly contained the metes and bounds description of the entire Property, and that they were entitled to foreclose, and had foreclosed upon the entire Property in the Foreclosure Action. 84. Upon information and belief, at all times during the Foreclosure Action, Plaintiffs knew that the metes and bounds description in the People's Choice Mortgage referenced only Lot B-23. 85. Upon information and belief, at all times during the Foreclosure Action, Plaintiffs knew that the Defendants were not aware of the mistake in the metes and bounds description with the People's Choice Mortgage, and knew that Defendant Homecomings mistakenly believed -4- 04-1288 CIVIL TERM that it was foreclosing on the entire Property. 86. At all times during the Foreclosure Action, Plaintiffs intentionally did not disclose to Defendant Homecomings that only Lot B- 23 was being foreclosed in the Foreclosure Action as that Plaintiffs could retain title to the Remaining Lots and Defendants would waive their deficiency claim against Plaintiffs. 87. After Defendants commenced the Foreclosure Action, Plaintiffs intentionally misled Defendant Homecomings into believing that the entire Property was subject to the Foreclosure Action to induce Defendant Homecomings to waive its right to a deficiency claim against Plaintiffs. 88. In reliance upon Plaintiffs' misrepresentations regarding Plaintiffs' ownership of real property other than the Property subject to the Foreclosure Action, Defendant Homecomings agreed to waive its right to a deficiency judgment and proceeded with the foreclosure of the property described in the Foreclosure Action. 89. The incomplete metes and bounds description of the People's Choice Mortgage was the result of a mutual mistake or a unilateral mistake with knowledge. 90. Had Defendant Homecomings known that the People's Choice Mortgage did not contain the complete metes and bounds description of, and did not encumber, the entire Property, Homecomings would have stayed the Foreclosure Action and commenced a separate action to reform the People's Choice Mortgage to reflect the metes and bounds description of the entire Property, and would not have agreed to waive its right to a deficiency claim against the Plaintiffs. 91. Defendant Homecomings proceeded with the Foreclosure Action and agreed to waive its right to a deficiency claim against the Plaintiffs as a result of Plaintiffs' fraudulent conduct in the Foreclosure Action. 92. As a result of Plaintiffs' fraudulent conduct in the Foreclosure Action, the Sheriff's Sale should be set aside and the Consent Judgments should be opened so that Defendants are permitted to reform the People's Choice Mortgage to reflect the complete metes and bounds of the entire Property. In a counterclaim, defendants aver that as a result of, (1) the mutual mistake, or alternatively, the unilateral mistake with Plaintiffs' knowledge regarding the incomplete metes and bounds description of the property, and (2) Plaintiffs' fraudulent conduct, the -5- 04-1288 CIVIL TERM court should: (a) dismiss Plaintiffs' Action to Quiet Title; (b) set aside the Sheriff's Sale of the Lot B-23; (c) open the Consent Judgments; (d) reform the metes and bound description of the People's Choice Mortgage to reflect the metes and bound description of the entire Property; and (e) grant such other relief that the Court deems just and appropriate. In seeking a judgment on the pleadings, plaintiffs rely on Trachtenberg v. Glen Alden Coal Co., 354 Pa. 521 (1946). In Trachtenberg, appellees owned two parcels of adjoining land. They borrowed money from the First National Bank of Ashley, and gave as security a bond and a mortgage. The mortgage described one of the two lots. Appellees defaulted on the mortgage and the property was sold at Sheriff's sale to First National Bank of Ashley. First National sued to have the description in the mortgage corrected, and to have the sheriff's deed reformed to include both lots. The question addressed by the Supreme Court of Pennsylvania was, "[w]here a mistake in the description of mortgage property has been carried through the foreclosure proceedings and the sheriff's deed, is the purchaser entitled to have a court of equity correct the deed so as to vest in him property which was not expressly included in the mortgage and was not included in the sheriff's advertisement of the property to be sold?" The Court concluded that "after a sheriff's sale of property in a mortgage foreclosure proceeding and after the sheriff's deed is acknowledged delivered, [the deed] cannot be reformed by a court of equity so as to include property not mortgaged and sold." -6- 04-1288 CIVIL TERM Defendants, however, note that the Supreme Court also stated in Trachtenberg: This court has in several cases in which attempts have been made to have sheriff's sales set aside because of inadequacy of the price paid and for certain other irregularities, such as selling the land without an inquisition, consistently held, in the language of Mr. Justice STERN in Knox v. Noggle, 328 Pa. 302, that "a sheriff's sale would not be set aside after the deed was acknowledged and delivered, except for fraud or want of authority to make the sale, in which cases relief might be had through an action in ejectment, or perhaps by a bill in equity, or possibly, under the Act of April 20, 1905, P.L. 239, by way of defense in proceedings for possession." In McLanahan v. Goodman, 265 Pa. 43 at 49, this court said: "Confirmation of a sheriff's deed cures irregularities and defects, which make the sale voidable, but not such fatal defects as render it void; and lack of power in the sheriff to make the sale is a fatal defect." (Citing cases). In Knox v. Noggle, supra, it was stated (though that question was not before the court that "misdescription of the property" would not justify the setting aside of a sheriff's sale. (Footnote omitted.) (Emphasis added.) The allegations of mutual mistake or unilateral mistake with respect to Lots B-24, B-10 and B-11 not being included in People's mortgage when executed, and when subsequently foreclosed upon, can provide no basis for relief to Homecomings. The facts cannot be distinguished from those in Trachtenberg. Notwithstanding, Homecomings has pleaded that plaintiffs' actively committed a fraud by misleading it into believing that when it took a default judgment in foreclosure, it applied against all four lots. Based on that claim, plaintiffs seek to set aside the Sheriff sale, open the default judgment, and reform the mortgage to include the four lots it alleges the parties intended it to include. A Sheriff sale can be set aside after a deed is acknowledged and delivered in the case of fraud. The need to resolve that claim precludes entering judgment on the pleadings for plaintiffs. -7- 04-1288 CIVIL TERM ORDER OF COURT AND NOW, this 3rd day of January, 2006, IT IS ORDERED that the motion of plaintiffs for judgment on the pleadings, IS DENIED. By the Court, Edgar B. Bayley, J. Christopher E. Risch, Esquire 10 East High Street Carlisle, PA 17013 For Plaintiffs David Banks, Esquire 3038 Church Road Lafayette Hill, P A 19444 F or Defendants :sal -8- PHILIP V. HOFFMAN AND BARBARA D. HOFFMAN, PLAINTIFFS IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA V. HOMECOMINGS FINANCIAL NETWORK, INC. and FAIRBANKS CAPITAL CORP., DEFENDANTS 04-1288 CIVIL TERM IN RE: MOTION OF PLAINTIFFS FOR JUDGMENT ON THE PLEADINGS BEFORE BAYLEY. J. AND GUIDO. J. ORDER OF COURT AND NOW, this 3rd day of January, 2006, IT IS ORDERED that the motion of plaintiffs for judgment on the pleadings, IS DENIED. By the Court, Edgar B. Bayley, J. Christopher E. Risch, Esquire 10 East High Street Carlisle, PA 17013 For Plaintiffs David Banks, Esquire 3038 Church Road Lafayette Hill, P A 19444 F or Defendants :sal