CitiMortgage, Inc. v. Comini ( 2018 )

J-A06028-18
2018 Pa. Super. 92
CITIMORTGAGE, INC. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
VINCENT A. COMINI :
:
:
APPEAL OF: PAUL F. FALETTO AND :
SHARON A. FALETTO : No. 1284 WDA 2017
Appeal from the Order August 7, 2017
In the Court of Common Pleas of Westmoreland County Civil Division at
No(s): No. 2082 of 2012
BEFORE: BENDER, P.J.E., SHOGAN, J., and STRASSBURGER*, J.
OPINION BY SHOGAN, J.: FILED APRIL 20, 2018
Paul F. Faletto and Sharon A. Faletto (collectively, “the Falettos”)
appeal from the order denying their petition to intervene following a
mortgage foreclosure action filed by Citimortgage, Inc. (“Citimortgage”)
against Vincent A. Comini (“Comini”) and granting Citimortgage’s petition for
a corrected deed. We reverse in part and affirm in part.
Citimortgage filed a mortgage foreclosure action against Comini on
April 2, 2012, related to his residence at 135 Buffalo Hill Road, Irwin,
Pennsylvania (the “Property”). A default judgment was entered on July 25,
2012, and Citimortgage filed a writ of execution on September 14, 2012.
After Citimortgage complied with the notice requirements, it purchased the
Property at Sheriff’s Sale on March 7, 2016, and a deed was recorded on
April 22, 2016.
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* Retired Senior Judge assigned to the Superior Court.
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Pursuant to Pa.R.C.P. 3135(b), Citimortgage filed a petition on
January 27, 2017, seeking correction of the April 22, 2016 deed, which
contained language granting a right of first refusal (“ROFR”) to the Falettos.
The ROFR reads as follows:
SHOULD Grantee [Comini] wish to sell the property the subject
hereof or any part of it, Grantee shall first offer in writing to sell
the property to Paul F. Faletto and Sharon A. Faletto, his wife,
who shall have 10 days to accept said offer.
Petition for Correction of Sheriff’s Deed, 1/27/17, at Exhibit A. The ROFR
was in the original deed recorded on July 21, 1992, whereby the Falettos
conveyed the Property to Comini and his wife, Kathleen. The ROFR also
appeared in the deed recorded on February 27, 2009, whereby Kathleen
Comini transferred her interest in the Property to Comini. The ROFR was not
included in the legal description of Comini’s mortgage with Citimortgage.
Upon receiving a copy of Citimortgage’s petition for a corrected deed,
the Falettos presented the trial court with a petition to intervene on April 21,
2017, seeking to preserve their ROFR. The trial court conducted a hearing
on June 1, 2017. On June 9, 2017, the trial court denied the petition to
intervene and granted Citimortgage’s petition for a corrected deed. The
Falettos sought reconsideration, which the trial court granted on July 7,
2017. Following oral argument on July 24, 2017, the trial court again denied
the Falettos’ petition to intervene and affirmed its grant of Citimortgage’s
petition. Order, 8/7/17. This appeal followed. The Falettos and the trial
court complied with Pa.R.A.P. 1925.
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The Falettos raise two issues for our consideration:
1. Whether the lower [c]ourt erred in denying [the Falettos] the
right to be permitted to intervene to object to the removal of
their right of first refusal from [Citimortgage’s] deed.
2. Whether the lower [c]ourt erred in granting approval to
[Citimortgage] to remove the right of first refusal of [the
Falettos] from [Citimortgage’s] deed.
The Falettos’ Brief at 4.
The Falettos first argue that the trial court erred in denying their
petition to intervene. Relying on the bases for allowing intervention set forth
in Pa.R.C.P. 2329, the Falettos assert: (1) their request to secure the ROFR
does not speak to the underlying foreclosure action; (2) their interest is not
adequately represented because they were not party to the foreclosure
action; and (3) they acted promptly after Citimortgage served them with a
copy of its petition for a corrective deed, given the fact that they did not
receive notice of the Sheriff’s Sale. The Falettos’ Brief at 11; N.T., 6/1/17,
at 25. Citimortgage responds that “the Falettos incorrectly focus on
[Pa.R.C.P.] 2329, which sets forth reasons a court may deny an otherwise
proper Petition to Intervene. . . . Nevertheless, the trial court found that the
Falettos failed to meet the threshold requirements to qualify for intervention
under Rule 2327.” Citimortgage’s Brief at 15 (internal citations omitted).
The trial court observed that Comini’s mortgage did not include the
ROFR language and Citimortgage was not required to name the Falettos in
the mortgage foreclosure action because they were not real owners under
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Pa.R.C.P. 1144 (Parties. Release of Liability). Trial Court Opinion, 10/3/17,
at 5. The trial court also found that the Falettos did not seek to intervene
prior to entry of the default judgment in favor of Citimortgage on July 25,
2012, as required by Pa.R.C.P. 2327. Id.
“Whether to allow intervention is a matter vested in the discretion of
the trial court and the court’s decision will not be disturbed on appeal absent
a manifest abuse of its discretion.” U.S. Bank Nat’l Assoc. for PA Hsg.
Fin. Agency v. Watters, 163 A.3d 1019, 1024 (Pa. Super. 2017). As for
which rule of civil procedure applies, we agree with Citimortgage that only
Pa.R.C.P. 2327 governs this matter, specifically, Pa.R.C.P. 2327(4):
At any time during the pendency of an action, a person not a
party thereto shall be permitted to intervene therein, subject to
these rules if
* * *
(4) the determination of such action may affect any legally
enforceable interest of such person whether or not such person
may be bound by a judgment in the action.
The Falettos’ ROFR is an interest legally enforceable pursuant to
“standard principles of contract construction.” E.R. Linde Const. Corp. v.
Goodwin, 68 A.3d 346, 349 (Pa. Super. 2013). Consequently, the Falettos
have the right to intervene pursuant to Pa.R.C.P. 2327(4). Furthermore, the
Falettos’ petition was timely because they filed it while Citimortgage’s case
for correcting the sheriff’s sale deed by removing the ROFR was ongoing.
Thus, we conclude that the trial court abused its discretion in denying the
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Falettos’ petition to intervene, and we reverse that ruling. However, we need
not remand to allow the Falettos to intervene for two reasons. First, they
had an opportunity to argue the merits of their position at the July 24, 2017
hearing. Second, as discussed below, their argument against Citimortgage’s
request for correction of the deed lacks merit.
The Falettos’ second issue challenges the trial court’s decision to grant
Citimortgage’s petition for a corrected deed. According to the Falettos, the
foreclosure action did not affect their ROFR because it is not a judgment,
lien, or other encumbrance on the Property, “which are not protected by
statute from discharge.” The Falettos’ Brief at 14 (citing 42 Pa.C.S. § 8152
(Judicial sale as affecting lien of mortgage)). The Falettos maintain that
their ROFR is “a valid condition on the title” of which Citimortgage had
notice. Id. at 15. Recognizing that they cannot forestall any sale of the
Property, the Falettos “want the opportunity to repurchase” the Property
when there is a voluntary sale by Citimortgage. Id. at 17.1
Citimortgage counters:
The ROFR does not affect the use of the land, it affects
[Comini’s] personal ability to sell the land; the covenant is
simply a limited restriction on [Comini’s] right of alienation. The
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1 The record reveals that Housing and Urban Development (“HUD”) insured
the underlying mortgage. Pursuant to its agreement with HUD for
reimbursement of Citimortgage’s losses and expenses, Citimortgage was
required to convey clear title to HUD. In order to convey clear title,
Citimortgage sought removal of the ROFR from the Sheriff’s deed. Upon
receipt of clear title, HUD would sell the Property. N.T., 6/1/17, at 9–11.
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Deeds do not contain restrictions on [Comini’s] ability to
mortgage the Property or restrictions on future owners of the
Property. The reciprocal ROFR granted to [Comini] likewise
illustrates the contractual nature of the ROFRs. The bargained-
for exchange between [Comini] and the Falettos included
reciprocal ROFRs, and neither Citimortgage nor its predecessor
[was] a party to that agreement.
Citimortgage’s Brief at 11. Additionally, Citimortgage points out that
“[n]either the Mortgage nor the Complaint contain[s] the ROFRs and
therefore the Sheriff’s Deed contained an ‘erroneous description of the
Property’ relative to this mortgage foreclosure action.” Id. at 13.
Here, the trial court concluded that, because “the Falettos lacked
standing, were not proper [d]efendants, and were not timely in their Petition
to Intervene, [Citimortgage], as purchaser of the [Property] at Sheriff’s
Sale, was permitted to request the corrected deed.” Trial Court Opinion,
10/3/17, at 5–6. The trial court based its grant of Citimortgage’s petition on
two factors: (1) the language of the ROFR limited activation of the right to a
voluntary sale of the property, and a mortgage foreclosure was not a
voluntary sale; and (2) the ROFR agreement was between Comini and the
Falettos; Citimortgage was not party to that agreement. Id. at 4. In
support of its decision, the trial court referred to Cent. Exec. Com. of
ODWU, Inc. v. Carbon Co. Tax Claim Bureau, 892 A.2d 868 (Pa. Cmwlth.
2005), for guidance. Therein, our sister court held that a claimant who held
a ROFR did not have standing to object to a tax sale. Id. at 872.
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This Court has defined a ROFR, otherwise known as the right to
preemption, as follows:
A right of first refusal constitutes a promise to
offer the res of the right to the promisee for such
consideration as the promisor determines to accept
on the basis of an offer from a third party before
accepting the offer of the third party. A right of first
refusal does not require the promisor to offer the res
at all. The right of first refusal merely requires that
before the promisor accepts an offer of a third party,
the promisor must offer the res to the promisee of
the right for the consideration the promisor is willing
to accept from the third party.
Power Gas Mktg. & Transmission, Inc. v. Cabot Oil & Gas Corp., 948
A.2d 807, 810 (Pa. Super. 2008) (citations and internal brackets omitted).
The Power Gas Court explained the history of rights of first refusal:
Over 150 years ago, our Supreme Court reached the following
conclusion with respect to what have subsequently come to be
defined as rights of first refusal: “Where a lessor has stipulated
with his lessee, in the lease, that when the land was offered for
sale, the first offer shall be made to the lessee upon terms as
favorable as are offered to any other person, this stipulation
gives to the lessee no title to or interest in the land, and
creates only a personal obligation.” Elder v. Robinson, 19
Pa. 364, 366 (1852). This language seemingly defines a right of
first refusal as being “exclusively contractual.” SEPTA,
supra at 20 (citation omitted). This statement of the law was
later cited with approval by our Supreme Court in Driebe v.
Fort Penn Realty Co., 331 Pa. 314, 200 A. 62 (1938).
Id. at 811 (emphases supplied). The Power Gas Court reiterated that a
ROFR does not create an interest in land:
A true right of first refusal does not vest the promisee with any
ability to control when the res subject to the right will be
alienated or under what terms such alienation will occur. A right
of first refusal places no restriction on the promisor’s ability to
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alienate the res at market value. Thus, a right of first refusal is
neither akin to an option which by its very nature prevents the
optionor from freely alienating the property subject to the
option, nor is it akin to a trust condition that prohibits a
beneficiary from freely alienating the corpus of a trust. Rather,
when a right of first refusal is at issue it is the owner of the
property—the promisor—who decides when and how to alienate
the res and not a third party, such as an optionee or settlor.
Given the lack of privileges and incidents the holder of a right of
first refusal has over the res, it is difficult to argue that a right of
first refusal ever concerns a propertied estate.
Id. at 815 (internal citations omitted).2
Notwithstanding the Commonwealth Court’s decision in Cent. Exec.
Com. of ODWU and our Power Gas decision, we observe that the question
of whether a ROFR survives a foreclosure action is an issue of first
impression in Pennsylvania. However, courts in other jurisdictions have
analyzed the involuntary nature of a foreclosure sale, together with the
language of the agreement creating the right, in determining that an existing
ROFR was not triggered.3 See Woodburn v. Rock Solid Ventures, LLC,
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2 In Power Gas, we held that a ROFR regarding oil and gas leases created
an exclusively contractual right and was not subject to the rule against
perpetuities because it “does not function as ‘an impress of land’ nor does it
‘fetter specific property’.” Power Gas, 948 A.2d at 818.
3 Appellate courts in other jurisdictions have taken the same approach in
non-foreclosure cases. See, e.g., Pecora v. Berlin, 62 So. 3d 28 (Fl. Third
Dis. 2011) (holding that a spouse’s ROFR under the terms of a partnership
dissolution agreement did not apply to the statutory dissolution of a limited
partnership); Royal Oldsmobile Co. v. Heisler Props. L.L.C., 58 So. 3d
483 (La. App. 5th Cir. 2010) (holding United States Marshal’s involuntary
bankruptcy sale of property did not trigger ROFR); Benefit Realty Corp. v.
City of Carrollton, 141 S.W.3d 346 (Tex. App. 2004) (holding that ROFR
(Footnote Continued Next Page)
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882 N.W.2d 872 (Wis. App. 2016) (reviewing the language of the agreement
creating the right, the court held that the ROFR did not apply to a
foreclosure sale); Huntington National Bank v. Cornelius, 914 N.Y.S.2d
327 (N.Y. App. Div. 2010) (explaining that a ROFR was not triggered in the
context of a foreclosure sale because the referee was the seller for the
purposes of the foreclosure action; the word ‘offer’ was intended to cover a
conscious and voluntary choice by the owner to make the property available
for sale; and a foreclosure is an involuntary process resulting in a forced
sale); Tadros v. Middlebury Medical Center, Inc., 263 Conn. 235, 820
A.2d 230 (2003) (holding that a ROFR did not apply in the context of a
foreclosure sale because (1) the court-appointed committee was the seller of
the property; (2) the sale was pursuant to a foreclosure and, therefore, not
voluntary; and (3) the committee did not accept a bona fide written offer to
purchase the property; rather the property was to be sold in accordance with
a court order to conduct a foreclosure sale); Ricketson v. Bankers First
Sav. Bank, FSB, 503 S.E.2d 297 (Ga. App. 1998) (holding that ROFR
agreement did not encumber the land as it was merely contractual and
(Footnote Continued) _______________________
only applied to a voluntary sale and taking of property by condemnation is
involuntary); Pearson v. Schubach, 763 P.2d 834 (Wash. App. 1988)
(holding that court-ordered sale of property to satisfy judgment against
lessor was involuntary sale and did not trigger lessee’s ROFR because
agreement required that lessor be a “willing” seller of the property); In re
Rigby’s Estate, 167 P.2d 964 (Wyo. 1946) (holding that court-ordered sale
of property by estate administrator to a third party was not a voluntary sale
that triggered the lessee’s ROFR).
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personal to the parties; therefore, the ROFR did not affect the involuntary
foreclosure sale by Bankers First to the third party); Henderson v. Millis,
373 N.W.2d 497 (Iowa 1985) (holding that, given language in the
agreement, a ROFR could not be exercised in context of a foreclosure sale);
Draper v. Gochman, 400 S.W.2d 545 (Tex. 1966) (giving the words
“desires to sell” their ordinary meaning, the court held that the phrase does
not include an involuntary sale on the foreclosure of a mortgage).
Applying the rationale of the above cases to the case at hand, we
conclude that the Falettos’ ROFR did not survive Citimortgage’s foreclosure
action. A ROFR is created by contract and, as such, is personal to the
contracting parties; it is not a covenant that runs with the land. Power
Gas, 948 A.2d at 811. Therefore, contrary to the Falettos’ position, the
ROFR does not “bind[] everybody in the future to that same contract.” N.T.,
6/1/17, at 10. Moreover, the agreement between Comini and the Falettos
provides that the Falettos’ ROFR would be activated if and when Comini
desired to sell the Property. “Sale” of property contemplates a vendor and a
buyer, and the voluntary transfer involves payment or promise to pay a
certain price in money or its equivalent. Mericle v. Wolf, 562 A.2d 364
(Pa. Super. 1989). In the foreclosure action, Comini was not the seller of
the Property, and the Sheriff’s Sale was not a voluntary transfer of the
Property; therefore, Citimortgage’s foreclosure action did not trigger the
Falettos’ ROFR. Consequently, the record does not warrant inclusion of the
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ROFR in the Sheriff’s deed. Accordingly, we discern no abuse of discretion or
error of law in the trial court’s conclusion that Citimortgage was entitled to a
corrected deed.
Order reversed in part and affirmed in part.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 4/20/2018
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