McConaghy, D. v. The Bank of New York , 192 A.3d 1171 ( 2018 )

J-A06041-18
2018 PA Super 194DANA J. MCCONAGHY, : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellee :
:
v. :
:
THE BANK OF NEW YORK AS TRUSTEE :
FOR THE CERTIFICATE HOLDERS :
CWALT, INC., ALTERNATIVE LOAN :
TRUST 2006-45T1, MORTGAGE PASS- :
THROUGH CERTIFICATES, SERIES :
2006-45T1 AND MERS ACTING SOLELY :
AS A NOMINEE FOR AMERICA’S :
WHOLESALE LENDER, :
:
Appellants : No. 1247 WDA 2017
Appeal from the Judgment Entered September 20, 2017
in the Court of Common Pleas of Washington County
Civil Division at No(s): C-63-CV-2012-7599
BEFORE: BENDER, P.J.E, SHOGAN, and STRASSBURGER,* JJ.
OPINION BY STRASSBURGER, J.: FILED JUNE 29, 2018
The Bank of New York, and its predecessors and successors in interest
(collectively, BNY), appeal from the September 20, 2017 judgment in favor
of Dana McConaghy and against BNY in this quiet title action. Specifically,
BNY challenges the trial court’s order, which granted relief in favor of
McConaghy and against BNY on its counterclaims for equitable relief.1 We
1 BNY appealed from the August 3, 2017 order denying its post-trial motion.
An appeal does not properly lie from an order denying post-trial motions, but
rather upon judgment entered following disposition of the post-trial motions.
See Mackall v. Fleegle, 801 A.2d 577, 580 (Pa. Super. 2002). Upon order
from this Court, BNY praeciped the trial court prothonotary to enter
(Footnote Continued Next Page)
*Retired Senior Judge assigned to the Superior Court.
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affirm in part, vacate in part, and remand for proceedings consistent with
this opinion.
We glean the following factual history from the record. In 1998,
McConaghy and her husband, Matthew McConaghy (Decedent), purchased a
home on Doubletree Drive, Venetia, Washington County, with the aid of a
$230,000 loan secured by a mortgage from Relocation Financial Services
(Relocation loan/mortgage). Both McConaghy and Decedent signed the
deed for the home and the documents to obtain the Relocation
loan/mortgage.
In February 2004, McConaghy and Decedent obtained a loan secured
by a mortgage from First Franklin Financial Corporation (First Franklin
loan/mortgage) for $342,250, in order to pay off the Relocation
loan/mortgage. Both McConaghy and Decedent signed the documents to
obtain the First Franklin loan/mortgage.
In 2006, McConaghy and Decedent separated. McConaghy moved out
of the home and filed a complaint for divorce, which was never finalized.
Decedent continued to live in the home while it was listed for sale. At that
time, only the First Franklin mortgage encumbered the home.
(Footnote Continued) _______________________
judgment on the order of the trial court. Accordingly, we treat this case as if
timely filed from the September 20, 2017 entry of judgment. Pa.R.A.P.
905(a).
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In August 2006, Decedent alone obtained a $175,000 loan from First
Commonwealth Bank (First Commonwealth loan). In October 2006,
Decedent alone obtained a $200,000 loan secured by a mortgage from
IndyMac Bank (IndyMac mortgage) to pay off the First Commonwealth loan.
Following this transaction, the first lien on the home was still the First
Franklin mortgage, and the purported second lien was the IndyMac
mortgage. However, as noted above, McConaghy did not participate in the
acquisition of the First Commonwealth loan or the IndyMac mortgage. She
signed no mortgage documents.
In November 2006, Decedent alone obtained a $543,600 loan secured
by a mortgage and a $101,925 loan secured by a mortgage from
Countrywide Home Loans (Countrywide loans/mortgages).2 Again,
McConaghy did not participate in the acquisition of the Countrywide
loans/mortgages. The $543,600 loan and a portion of the $101,925 loan
were used to pay off the remaining balance on the First Franklin loan
($336,020.65) and the remaining balance on the IndyMac loan
($201,702.95). Following these transactions, the Countrywide mortgages
purported to take the positions of the First Franklin and IndyMac mortgages
as the first and second liens on the home.
2 By a series of assignments, BNY ultimately became the holder of the
Countrywide mortgages.
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In January 2007, the company that conducted the settlement for the
Countrywide mortgages contacted McConaghy and requested that she re-
sign a document for which Decedent had provided a copy during closing.
Upon viewing the document, McConaghy learned that Decedent had, by
among other things, forged McConaghy’s signature, and produced an altered
document that purported to transfer McConaghy’s interest in the home to
Decedent.
In January 2008, Decedent was indicted on criminal charges related to
the Countrywide mortgages. Decedent committed suicide in April 2008,
making McConaghy the sole remaining owner of the former tenant by the
entirety property, which remained encumbered by the Countrywide
mortgages. McConaghy contests the validity of the mortgages and has not
made any mortgage payments. As a result, McConaghy has received
numerous collection letters and foreclosure notices since 2008.
On November 19, 2012, McConaghy filed an action to quiet title,
asserting that the Countrywide mortgages were procured by fraud and were
unenforceable because Decedent “did not have the permission or legal right
to unilaterally encumber the [p]roperty with a [m]ortgage.” Complaint in
Action to Quiet Title, 11/19/2012, ¶¶ 30, 31. BNY filed an answer with new
matter and counterclaims. In its counterclaims, BNY sought relief based on
unjust enrichment for satisfying the First Franklin mortgage, and for paying
the insurance and taxes on the home since November 2006.
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On July 16, 2015, BNY filed a motion for partial summary judgment
asserting the existence of an equitable lien on the property created by BNY’s
satisfaction of the First Franklin mortgage. The trial court denied BNY’s
motion, and the case proceeded to a nonjury trial on March 24, 2017. On
May 19, 2017, the trial court granted McConaghy relief in her quiet title
action, holding that the Countrywide mortgages were void, invalid, and
unenforceable, and denied BNY’s counterclaims for equitable relief because
the trial court found that BNY had unclean hands.
BNY filed a motion for post-trial relief,3 which was denied by the trial
court on August 3, 2017. This timely-filed appeal followed.4 BNY presents
the following issues for our consideration.5
3 Post-trial motions must be filed within ten days after the filing of a nonjury
trial verdict. Pa.R.C.P. 227.1(c). The tenth day fell on a holiday, making the
deadline May 30, 2017. See Pa.R.C.P. 106(b). BNY filed its post-trial
motion on June 1, 2017. Nonetheless, because the motion was filed while
the trial court still had jurisdiction over the matter, McConaghy did not
object to the timeliness of the motion, and the trial court decided the motion
on the merits, we are permitted to ignore the untimeliness of the post-trial
motion. See Ferguson v. Morton, 84 A.3d 715, 718 n.4 (Pa. Super. 2013)
(“[W]hen untimely post-trial motions are filed within the thirty-day period
that the trial court retains jurisdiction over the case, and when the trial court
decides those issues without objection by an opposing party, we will treat
the subsequent appeal as though the post-trial motions were timely filed for
purposes of issue preservation.”).
4 The trial court did not order BNY to file a Pa.R.A.P. 1925(b) statement, and
did not file a Pa.R.A.P. 1925(a) opinion. “Ordinarily, the remedy for non-
compliance with [] Pa.R.A.P. 1925(a) is a remand to the trial court with
directions that an opinion be prepared and returned to the appellate court.”
Commonwealth v. Hood, 872 A.2d 175, 178 (Pa. Super. 2005) (citation
(Footnote Continued Next Page)
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1. Whether the trial court erred as a matter of law and/or
abused its discretion when it held that [BNY] had failed to
establish equitable claims for unjust enrichment, equitable
subrogation, and equitable lien.
2. Whether the trial court erred as a matter of law and/or
abused its discretion when it held that [BNY was] not entitled to
equitable remedies because [Countrywide] allegedly had
engaged in fraudulent conduct, [was] grossly negligent, and had
unclean hands.
3. Whether the trial court’s findings that [BNY] allegedly had
engaged in fraudulent conduct, w[as] grossly negligent, and had
unclean hands were against the weight of the evidence at trial.
BNY’s Brief at 5 (unnecessary capitalization and trial court answers omitted).
We review these issues mindful of the following.
Our review in a non-jury case such as this is limited to a
determination of whether the findings of the trial court are
supported by competent evidence and whether the trial court
committed error in the application of law. Findings of the trial
judge in a non-jury case must be given the same weight and
effect on appeal as a verdict of a jury and will not be disturbed
on appeal absent error of law or abuse of discretion. When this
Court reviews the findings of the trial judge, the evidence is
viewed in the light most favorable to the victorious party below
and all evidence and proper inferences favorable to that party
must be taken as true and all unfavorable inferences rejected.
(Footnote Continued) _______________________
omitted). However, after review of the record, we conclude that the trial
court’s memoranda from May 19, 2017, and August 3, 2017, adequately
apprise us of the trial court’s reasoning in relation to the issues raised
herein. Thus, we need not remand for the filing of a 1925(a) opinion and we
will proceed to review the merits of BNY’s claims. See id.5There is no question that the trial court did not err in granting McConaghy’s
complaint to quiet title. Because she never signed the Countrywide
mortgage documents, they were, as the trial court put it, “void, invalid, and
unenforceable.” Trial Court Opinion, 5/19/2017, at 8, 9.
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***
Conclusions of law, however, are not binding on an appellate
court, whose duty it is to determine whether there was a proper
application of law to fact by the lower court. With regard to such
matters, our scope of review is plenary as it is with any review of
questions of law.
Shaffer v. O’Toole, 964 A.2d 420, 422-23 (Pa. Super. 2009) (internal
quotation marks and citations omitted).
BNY asserts that unless it is granted equitable relief, McConaghy will
be unjustly enriched at BNY’s expense. BNY claims it was entitled to be
equitably subrogated to the rights of First Franklin and thus be awarded an
equitable lien on the Doubletree property. The trial court denied equitable
relief because it held that Countrywide, BNY’s assignor, had unclean hands
in this transaction. We agree with BNY, in part.
Because the issues of unjust enrichment, equitable subrogation,
equitable lien, and unclean hands are all interrelated, we address them
together.
Prior to the Countrywide mortgages, the Doubletree property was
purportedly encumbered by two mortgages, one from First Franklin and the
second from IndyMac. Like the later Countrywide mortgages, the IndyMac
mortgage was fraudulently obtained by Decedent and thus did not bind
McConaghy. However, the First Franklin mortgage was signed by both
Decedent and McConaghy, and was binding on her.
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When Countrywide granted its mortgages in November, 2006, as part
of the deal, it paid off the prior mortgages so it would have a first lien.
McConaghy was not bound by the fraudulent IndyMac mortgage, and thus
derived no benefit from Countrywide’s satisfying that mortgage. However,
McConaghy was bound by the First Franklin mortgage and thus, when
Countrywide satisfied that mortgage, it removed a $336,000 obligation from
McConaghy. Clearly, she was enriched, and it would be unjust for her to
retain this windfall.
As this Court stated in Gutteridge v. J3 Energy Grp., Inc., 165 A.3d
908 (Pa. Super. 2017) (en banc),
[t]he elements of unjust enrichment are benefits conferred on
[one party] by [the other party], appreciation of such benefits by
[one party], and acceptance and retention of such benefits under
such circumstances that it would be inequitable for [one party]
to retain the benefit without payment of value. Whether the
doctrine applies depends on the unique factual circumstances of
each case. In determining if the doctrine applies, we focus not
on the intention of the parties, but rather on whether the [one
party] has been unjustly enriched.
To sustain a claim of unjust enrichment, a claimant must
show that the party against whom recovery is sought either
wrongfully secured or passively received a benefit that it would
be unconscionable for her to retain.
Id. at 917 (citations and quotation marks omitted).
The instant case is quite similar to our recent decision in Infante v.
Bank of America, N.A., 130 A.3d 773 (Pa. Super. 2015). In that case,
Infante’s husband purchased a home, with the aid of a loan, secured by a
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2004 mortgage, before they were married. Following their marriage,
Infante’s husband transferred title of the property to himself and Infante as
tenants by the entirety. Thus, Infante was subject to the 2004 mortgage.
In 2008, Infante’s husband, acting alone, obtained a loan, secured by a
mortgage from Countrywide, and used it to pay off the 2004 loan/mortgage.
The 2008 mortgage was later assigned to Bank of America (BOA). Infante
did not sign the 2008 mortgage. Following her husband’s death, Infante
learned of the 2008 mortgage and sought a declaratory judgment that the
mortgage’s lien against the property was invalid. BOA counterclaimed
seeking reformation of the mortgage and equitable subrogation and an
equitable lien. Following a nonjury trial, the trial court denied reformation
but granted BOA’s request for equitable subrogation and an equitable lien.
On appeal, this Court agreed, finding that BOA had a valid claim for
equitable subrogation and an equitable lien because, inter alia, Infante
“would be unjustly enriched if she were permitted to retain the property
without bearing responsibility for the amount of the 2004 mortgage.” Id. at
780.
The parallels are obvious. As Infante was subject to the 2004
mortgage, so was McConaghy bound by the First Franklin mortgage. As BOA
paid off the 2004 mortgage, so too did Countrywide pay off the First Franklin
mortgage. As BOA was equitably subrogated to the rights of the 2004
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mortgagee, and granted an equitable lien, so too is BNY entitled to the same
equitable relief.
Because BNY is seeking equitable relief, it is subject to doctrines that
apply to equity. One of these is unclean hands. “The doctrine of unclean
hands requires that one seeking equity act fairly and without fraud or deceit
as to the controversy in issue.” Terraciano v. Com., Dep't of Transp.,
Bureau of Driver Licensing, 753 A.2d 233, 237–38 (Pa. 2000) (citations
omitted).
The trial court denied equitable subrogation and an equitable lien
because it held that Countrywide acted fraudulently in this matter. That was
error. Clearly, Decedent’s actions were fraudulent. However, as a matter of
law, while Countrywide’s actions may have been negligent, possibly grossly
negligent, they were not fraudulent. Countrywide was suckered by
Decedent, as was McConaghy. See Shapiro v. Shapiro, 204 A.2d 266, 268
(Pa. 1964) (“Application of the unclean hands doctrine is confined to willful
misconduct which concerns the particular matter in litigation.”).
As a subset of its main argument, BNY also claims that the trial court
erred in denying BNY equitable remedies for paying the real estate taxes and
insurance on the home since November 2006. Appellant’s Brief at 36. We
have acknowledged, supra, that but for the Countrywide mortgages
satisfying McConaghy’s obligation to First Franklin, McConaghy would have
been solely responsible, upon Decedent’s death, for mortgage payments to
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First Franklin. However, McConaghy does not live in the home and has
derived little benefit from BNY’s insurance and tax payments. Thus, we find
that the trial court did not abuse its discretion in denying BNY’s equitable
counterclaims for reimbursement.
Accordingly, we affirm the denial of reimbursement for payment of real
estate taxes and insurance. We vacate the trial court’s holding that the
unclean hands doctrine bars relief to BNY to remedy McConaghy’s unjust
enrichment. We grant an equitable lien to BNY in an amount to be
determined on remand.6
Judgment affirmed in part and vacated in part. Case remanded for the
entry of an order consistent with this opinion. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/29/17
6 In its Opinion and Order dated May 18, 2017, the trial court referenced the
very substantial counsel fees McConaghy sustained. It is not clear whether
this factored into the decision to deny an equitable lien to BNY. On remand,
the trial court should determine if the amount claimed by BNY of
$336,020.65 should be reduced by some or all of the counsel fees claimed.
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