Hauser Holdings v. The Force Corp. ( 2017 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
HAUSER HOLDINGS, LLC IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
THE FORCE CORPORATION
Appellant No. 1696 MDA 2016
Appeal from the Order Entered September 19, 2016
In the Court of Common Pleas of Columbia County
Civil Division at No(s): 471-CV-2013
BEFORE: SHOGAN, J., MOULTON, J., and STEVENS, P.J.E.*
MEMORANDUM BY MOULTON, J.: FILED OCTOBER 18, 2017
The Force Corporation (“Force”) appeals from the September 19, 2016
order entered in the Court of Common Pleas of the 26th Judicial District
(Columbia County Branch) granting summary judgment in favor of Hauser
Holdings, LLC (“Hauser”) and denying Force’s cross-motion for summary
judgment. We affirm.
The relevant factual and procedural history of this matter is as follows.
On October 17, 1994, Force granted a mortgage to Thomas X. Flaherty on
property located at 501 East Street, Bloomsburg, Columbia County, to
secure a debt of $96,500.00. See Amend. Compl., Ex. B. Sharon K. Babb
signed the mortgage contract in her capacity as president and secretary of
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* Former Justice specially assigned to the Superior Court.
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Force, a Pennsylvania corporation. Also on October 17, 1994, Babb and
Flaherty entered an “Agreement” wherein Babb personally agreed to pay
Flaherty $96,500.00, plus 10% interest per annum, by August 1999 in
exchange for all of Flaherty’s shares1 in Force and another Pennsylvania
corporation, Bar-B Corporation.2 See Amend. Compl., Ex. A.
On October 19, 1999, Babb and Flaherty signed an “Extension
Agreement” and Babb signed a “Mortgage-Promissory Note,” wherein Babb
agreed to pay Flaherty $152,158.22, plus 10% interest per annum, by
September 15, 2000. See First Amend. Compl., Exh. E. Babb and Flaherty
also signed a “Loan Agreement,” dated October 19, 1999, confirming the
loan. On October 22, 1999, Flaherty signed a “Subordination Agreement,”
subordinating his October 1994 mortgage to one held by Equity One, Inc.
See First Amend. Compl., Exh. A.
On December 1, 2011, Flaherty assigned all of his rights, title, and
interests in the above to Mountain View Financial, LLC (“Mountain View”).
See First Amend. Compl., Exh. G. On April 22, 2013, Mountain View
initiated this action by filing a complaint in mortgage foreclosure against
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1While the Agreement states that Flaherty owned 50% of the shares
of each of the corporations, Babb maintains that she has been the sole
owner of both corporations since their inception. See Force’s Br. at 7-8;
Flaherty Aff., Ex. B, at 14.
2As the trial court notes, the certified record contains only the first
three pages of the Agreement, without a signature page.
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Force and Babb. On May 13, 2013, Force and Babb filed preliminary
objections, which the trial court sustained in part and denied in part on July
9, 2013.
On July 29, 2013, Mountain View filed an amended complaint,
removing Babb as an individual defendant, and alleging that Force had not
paid the full amounts due under the loan. Mountain View alleged the
outstanding balance due totaled $376,147.96, including: (1) $156,158.22 in
principal; (2) $214,989.75 in interest from October 19, 1999 to July 26,
2013; and (3) $5,000.00 in counsel fees. Thereafter, on October 10, 2013,
Mountain View assigned its rights, title, and interests to VAI Inc. See
Flaherty Aff., Exh. E. On April 17, 2015, VAI Inc. assigned the same to
Hauser. See Flaherty Aff., Exh. F. On July 17, 2015, Hauser filed a
substitution of successor in this matter.
On June 8, 2016, Hauser filed a motion for summary judgment, and on
July 1, 2016, Force filed a cross-motion for summary judgment. On
September 19, 2016, the trial court granted Hauser’s motion, denied Force’s
cross-motion, and entered judgment in favor of Hauser for $193,000.003
plus $5,000.00 in counsel fees. On September 30, 2016, Hauser filed a
praecipe to enter judgment. On October 11, 2016, Force timely filed a
notice of appeal.
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The trial court entered judgment “only to the maximum lien of
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$193,000.00 authorized by the mortgage.” Trial Ct. Op., 9/19/16, at 7.
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Force raises the following issues on appeal:
I. Did the court err in granting [Hauser]’s motion for
summary judgment as to whether or not [Hauser] is a real
party in interest as there exist defects in the assignment of
the chose [sic] in action by Thomas Flaherty?
II. Did the court err in granting [Hauser]’s motion for
summary judgment as there has been shown to be no
consideration received by [Force], for its alleged mortgage
obligation?
III. Did the court err in failing to grant [Hauser]’s motion
for summary judgment by failing to find that the
extinguishment of underlying bond or note also
extinguishes the mortgage?
IV. Did the court err in failing to determine that
enforcement of the mortgage is time barred by the statute
of limitations?
Force’s Br. at 4-5 (suggested answers and full capitalization omitted).
It is well-established that “summary judgment is appropriate only in
those cases where the record clearly demonstrates that there is no genuine
issue of material fact and that the moving party is entitled to judgment as a
matter of law.” Truax v. Roulhac, 126 A.3d 991, 996 (Pa.Super.) (quoting
Atcovitz v. Gulph Mills Tennis Club, Inc., 812 A.2d 1218, 1221 (Pa.
2002)), app. denied, 129 A.3d 1244 (Pa. 2015). The moving party bears
the burden of proving that no genuine issue of material fact exists.
Stimmler v. Chestnut Hill Hosp., 981 A.2d 145, 159 (Pa. 2009). “[T]he
trial court must take all facts of record and reasonable inferences therefrom
in a light most favorable to the non-moving party. In so doing, the trial
court must resolve all doubts as to the existence of a genuine issue of
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material fact against the moving party . . . .” Truax, 126 A.3d at 996
(internal citation omitted).
We have explained our standard of review as follows:
[A]n appellate court may reverse a grant of summary
judgment if there has been an error of law or an abuse of
discretion. But the issue as to whether there are no
genuine issues as to any material fact presents a question
of law, and therefore, on that question our standard of
review is de novo. This means we need not defer to the
determinations made by the lower tribunals.
Id. (quoting Weaver v. Lancaster Newspapers, Inc., 926 A.2d 899, 902–
03 (Pa. 2007)).
For ease of analysis, we begin with Force’s third and fourth issues,
which implicate the appropriate statutes of limitations for the instant action.
First, Force alleges that because the statute of limitations has run for
commencement of an action upon the note accompanying the mortgage, the
note has been “effectively extinguished,” Force’s Br. at 23, and thus, an
action on the mortgage itself also is time-barred. We conclude that Hauser’s
ability to foreclose on the property is not affected by the statute of
limitations for commencement of an action on the note, regardless of
whether the note is subject to a four- or twenty-year statute of limitations.
This Court has concluded that the right of action on a mortgage
survives the extinction of a right of action upon the accompanying note, and
the right of action on the mortgage continues until the underlying debt is
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paid or extinguished. See Brackenridge v. Cummings, 18 Pa.Super. 64,
68 (1901).4 Accordingly, Force’s third issue does not merit relief.
Force next claims that enforcement of the mortgage itself is barred by
the statute of limitations. Under section 5529(b) of the Judicial Code, “an
action upon an instrument in writing under seal must be commenced within
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4 In support of its argument, Force relies in part on In re Estate of
Snyder, 13 A.3d 509 (Pa.Super. 2011), in which we held that an appellant
could not collect on the debt on two mortgage liens because his action was
filed after the expiration of the statute of limitations for the underlying
instruments secured by those liens. Snyder, 13 A.3d at 514. We noted
that “[t]he payment of either a mortgage or [an underlying] bond discharges
both, ‘and a release or extinguishment of either, without actual payment, is
a discharge of the other, unless otherwise intended by the parties.’” Id.(quoting Morgan Guar. Trust Co. of New York v. Mowl, 705 A.2d 923,
929 (Pa.Super. 1998)) (alterations in original). In Mowl, the mortgagee
was unable to recover under the bond underlying the mortgage because the
mortgagors had satisfied the judgment entered against them following an
action in mortgage foreclosure, by paying the sheriff the judgment amount
plus costs. 705 A.2d at 925, 929. “[T]he trial court [had] made an explicit
ruling that [the] judgment in the mortgage foreclosure action was satisfied
when [the mortgagors] tendered the face amount on the writ of execution to
the sheriff.” Id. at 928.
We conclude that Snyder is distinguishable because, there, the
appellant did not file an action in mortgage foreclosure. Rather, he sought
to collect on the debt on the mortgage liens, and the record contained no
indication “the parties intended the mortgage liens to be considered separate
from the underlying debts.” Id. Here, in contrast, Hauser filed an action in
mortgage foreclosure, which “is strictly an in rem action and may not include
an in personam action to enforce personal liability.” Insilco Corp. v.
Rayburn, 543 A.2d 120, 123 (Pa.Super. 1988). Thus, because “[t]he sole
purpose of a judgment obtained through mortgage foreclosure is to effect a
judicial sale of the mortgaged real estate, . . . the judgment obtained in a
mortgage foreclosure action is only in rem.” Id. Hauser’s right to foreclose
on the house in rem survives irrespective of its ability to proceed in
personam against Force, so long as the underlying debt remains unpaid.
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20 years.” 42 Pa.C.S. § 5529(b). Because the October 17, 1994 mortgage
“defines the rights, duties, entitlements, and liabilities of the parties
involved,” it is an “instrument” pursuant to section 5529. In re Estate of
Snyder, 13 A.3d 509, 513 (Pa.Super. 2011). Nevertheless, Force argues
that section 5529(b)’s 20-year limitation period does not apply because the
mortgage was not filed “under seal.”
“‘[T]his [C]ourt has held, in accord with many cases written by our
Supreme Court, that when a party signs [an instrument] which contains a
pre-printed word ‘SEAL,’ that party has presumptively signed [an
instrument] under seal.’” Snyder, 13 A.3d at 513 (quoting Beneficial
Consumer Discount v. Dailey, 644 A.2d 789, 790 (Pa.Super. 1994)).
Babb signed the 1994 mortgage next to the pre-printed word “SEAL” in
parentheses. See Amend. Compl., Ex. B. The 1994 mortgage is therefore
an instrument in writing under seal, and the statute of limitations for an
action on the mortgage is 20 years. The instant action was filed in 2013 and
thus falls within the statute of limitations.
In sum, we conclude that Force’s third and fourth issues are without
merit. Under either theory, there is no genuine issue of material fact as to
whether Hauser is barred from recovery due to the statute of limitations.
Because we have concluded that Hauser’s right of action on the
mortgage is not time-barred, we turn to Force’s claim that there was no
consideration for the mortgage obligation.
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Pennsylvania’s Uniform Written Obligations Act (“UWOA”) “applies to
notes and mortgages, just as it does to other contract documents.”
Nicholas v. Hofmann, 158 A.3d 675, 690 (Pa.Super. 2017). This Court
has previously explained:
Section 1 of the UWOA, 33 P.S. § 6, reads in its
entirety:
A written release or promise, hereafter made
and signed by the person releasing or
promising, shall not be invalid or unenforceable
for lack of consideration, if the writing also
contains an additional express statement, in
any form of language, that the signer intends
to be legally bound.
Under this provision, if an agreement is accompanied by
an intentional, binding statement, it does not require
further consideration:
Our caselaw has explained that, generally, this
section provides that a written agreement will
not be deemed to be void for lack of
consideration if it contains an express
statement that the signer intends to be legally
bound, Yocca v. Pittsburgh Steelers Sports,
Inc., 578 Pa. 479, 854 A.2d 425, 433 (2004),
and, more explicitly, has interpreted this
provision to supply the necessary consideration
for an agreement. See Morgan’s [Home
Equip. Corp. v. Martucci], 390 Pa. 618, 136
A.2d [838,] at n. 12 [ (1957) ] (parties’
express intention to be legally bound within
meaning of UWOA has the same effect in
importing consideration as a seal on the
agreement). . . . [A]ny party challenging the
validity of a contract containing an express
intent to be legally bound will not be entitled to
relief from the agreement on the basis that the
promises made therein lack consideration.
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Nicholas, 158 A.3d at 689–90. Here, the mortgage document notes that
the mortgagor “stand[s] firmly bound unto the . . . mortgagee.” This
language satisfies 33 P.S. § 6. Thus, because Force is not entitled to relief,
there is no genuine issue of material fact whether there was adequate
consideration for the mortgage obligation.
Finally, Force challenges Hauser’s status as a real party in interest
pursuant to Pennsylvania Rule of Civil Procedure 2002(a), which requires
that actions “be prosecuted by and in the name of the real party in interest.”
Pa.R.C.P. 2002(a). Force argues that there was a defect in the first
assignment between Flaherty and Mountain View. However, we conclude
that Force lacks standing to challenge the validity of the assignment. This
Court has previously stated:
The court [in In re Walker, 466 B.R. 271, 285
(Bankr.E.D.Pa. 2012), found] that the debtor lacked
standing to question the validity of the assignment(s) of
the note:
[The threshold inquiry in analyzing a party’s
standing is to evaluate whether the party can
demonstrate that the party has suffered or will
suffer “injury in fact.”] If a borrower cannot
demonstrate potential injury from the
enforcement of the note and mortgage by a
party acting under a defective assignment, the
borrower lacks standing to raise the issue.
JP Morgan Chase Bank, N.A. v. Murray, 63 A.3d 1258, 1264–65
(Pa.Super. 2013) (quoting Walker, 466 B.R. at 285) (alterations added).
Furthermore,
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a note secured by a mortgage is a negotiable instrument,
as that term is defined by the [Pennsylvania Uniform
Commercial Code], and . . . “[p]ursuant to the PUCC, a
debtor who satisfies his obligations under a negotiable
instrument cannot be required to do so again, even if the
recipient of the debtor’s performance is not the holder of
the note in question.”
Gerber v. Piergrossi, 142 A.3d 854, 862 (Pa.Super. 2016) (quoting
Murray, 63 A.3d at 1263), app. denied, 142 A.3d 854 (Pa. 2017).
Accordingly, “a borrower is not in peril of double liability or injury by an
allegedly defective assignment, for if the assignment to the foreclosing party
had been defective, the borrower would not have to pay on the note to
another party.” Id. Because Force has not demonstrated potential injury
from the enforcement of its obligations under the mortgage even if the
assignment was defective, Force lacks standing to challenge the validity of
the assignment.
Accordingly, we conclude that the trial court properly granted
summary judgment in Hauser’s favor.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/18/2017
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