Wells Fargo Bank v. Gilroy, P. ( 2015 )

J-A19020-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
WELLS FARGO BANK, N.A., S/B/M TO IN THE SUPERIOR COURT OF
WELLS FARGO HOME MORTGAGE, INC., PENNSYLVANIA
F/K/A NORTHWEST MORTGAGE, INC.
Appellee
v.
PHYLLIS R. GILROY
Appellant No. 1216 WDA 2014
Appeal from the Order Entered July 17, 2014
In the Court of Common Pleas of Crawford County
Civil Division at No(s): AD 2008-1903
EX-2013-203
BEFORE: BENDER, P.J.E., JENKINS, J., and MUSMANNO, J.
MEMORANDUM BY JENKINS, J.: FILED JULY 22, 2015
Phyllis Gilroy appeals from an order denying her petition to set aside a
sheriff’s sale in this mortgage foreclosure action. We affirm.
The record reveals the following: on December 20, 1996, Gilroy
executed a promissory note in favor of Norwest Mortgage, Inc. (“Norwest”)
in the principal amount of $59,900.00. The note was secured by a purchase
money mortgage on a residence situated on about one acre of land in
Crawford County. Norwest recorded the mortgage in the Crawford County
Recorder of Deeds. Thereafter, Norwest changed its name to Wells Fargo
Home Mortgage, Inc., which then merged into Wells Fargo Bank, N.A.1
____________________________________________
1
We will refer to the mortgagee as “Wells Fargo”.
J-A19020-15
The first page of the mortgage includes a notice providing that: “THIS
LOAN IS NOT ASSUMABLE WITHOUT THE APPROVAL OF THE DEPARTMENT
OF VETERANS AFFAIRS OR ITS AUTHORIZED AGENT.” The mortgage
includes a Veterans Affairs (“VA”) Guaranteed Loan and Assumption Policy
Rider which was executed by Gilroy and recorded with the Recorder of
Deeds. The rider provides that “if the indebtedness secured hereby is
guaranteed or insured under Title 38, United States Code, such Title and
Regulations issued thereunder and in effect on the date hereof shall govern
the rights, duties and liabilities of Borrower and Lender.” [Emphasis added]
Similarly, with respect to the guaranty of the loan by the VA, the rider
provides:
Should the Department of Veterans Affairs fail or
refuse to issue the guaranty in the full amount within
60 days from the date that this loan would normally
become eligible for such guaranty, committed upon
by the Department of Veterans Affairs under the
provision of Title 38 of the U.S. Code, the Mortgagee
may declare the indebtedness hereby secured at
once due and payable and [proceed to] foreclosure
immediately.
The Rider defines an “assumption” as “an authorized transfer … of the
property.”
In June 2008, Gilroy defaulted on her obligations under the note and
mortgage. Wells Fargo sent Gilroy notice of intention to foreclose pursuant
to Act 91, but Gilroy failed to cure her default.
-2-
J-A19020-15
On November 3, 2008, Wells Fargo commenced a mortgage
foreclosure action against Gilroy via complaint with a notice to defend.
Paragraph 1 of the complaint averred that the plaintiff was “Wells Fargo
Bank, N.A., s/b/m to Wells Fargo Home Mortgage, Inc. f/k/a Norwest
Mortgage, Inc.” Paragraph 6 of the complaint set forth an itemized list of
the liquidated amounts that Wells Fargo claimed were due under the
mortgage. Included in this list was the amount of $1,250.00 for attorneys’
fees. Wells Fargo averred that the total amount due under the mortgage,
including attorney fees, was the liquidated sum of $54,002.49. Paragraph 7
of the complaint averred that the attorneys’ fees requested were in
conformity with the mortgage and Pennsylvania law. Paragraph 9 of the
Complaint averred that any notices required under Act 6 of 1974 (“Act 6”),
Notice of Homeowner’s Emergency [Mortgage] Assistance Program pursuant
to Act 91 of 1983 (“Act 91”), as amended in 1998, and/or Notice of Default
as required by the mortgage, as applicable, had been sent to Gilroy.
Paragraph 10 of the complaint averred that Act 6 did not apply to the
foreclosure action because the original mortgage amount exceeded the
dollar amount provided in the statute.
In its prayer for relief, Wells Fargo demanded judgment against Gilroy
in the amount of $54,002.49. On November 12, 2008, Wells Fargo served
the complaint on Gilroy through the sheriff. On December 30, 2008, Wells
Fargo filed a praecipe for entry of default judgment against Gilroy due to her
failure to answer the complaint.
-3-
J-A19020-15
Gilroy filed for bankruptcy, but her bankruptcy case was dismissed.
Wells Fargo began execution proceedings, and on February 7, 2014, the
property was sold at sheriff’s sale. On February 27, 2014, over five years
after entry of default judgment, Gilroy filed a petition “to set aside the
sheriff’s sale.” On July 17, 2014, the trial court denied Gilroy’s petition.
Gilroy filed a timely notice of appeal, and both Gilroy and the trial court
complied with Pa.R.A.P. 1925.
Gilroy raises four issues in this appeal:
1. Do VA foreclosure laws and regulations trump
state laws on the same?
2. Does the record negate the presumption that
Wells Fargo was entitled to enforce the Note?
3. Does the failure to provide Ms. Gilroy the required
VA notice constitute a fatal defect?
4. Can only an Article V court determine an
unliquidated amount and direct it to be included into
a judgment (i.e., does a Prothonotary lack authority
to determine and add an unliquidated amount to a
judgment)?
At the outset, we observe that Gilroy should have filed her petition in
the trial court as a “petition to strike the judgment” instead of a “petition to
set aside the sheriff’s sale.” We raise this point because we apply a different
standard of review to petitions to strike than to petitions to set aside.
A petition to set aside the sheriff’s sale is a request by an interested
party to set aside a sheriff’s sale “upon proper cause shown” where relief is
-4-
J-A19020-15
“just and proper under the circumstances.” Pa.R.Civ.P. 3132. This petition
seeks equitable relief, Bornman v. Gordon, 527 A.2d 109, 111
(Pa.Super.1987), and we review an order deciding this petition for abuse of
discretion. Blue Ball Nat. Bank v. Balmer, 810 A.2d 164, 167
(Pa.Super.2002).
A petition to strike a judgment, on the other hand, alleges that there is
a fatal defect or irregularity on the face of the record. EMC Mortgage, LLC
v. Biddle, 114 A.3d 1057, 1063 (Pa.Super.2015). If the defect is
jurisdictional in nature, the judgment is void and may be stricken at any
time. M & P Management, L.P. v. Williams, 937 A.2d 398, 400
(Pa.2007). If the defect is non-jurisdictional, the judgment is voidable, and
“the application to strike off must be made within a reasonable time, or the
irregularity will be held waived.” Id. A petition to strike does not involve
the discretion of the court; thus, we review an order denying a petition to
strike to determine whether the record is sufficient to sustain the judgment.
Wells Fargo Bank, N.A. v. Lupori, 8 A.3d 919, 920 (Pa.Super.2010). We
will not consider matters outside the record, and if the record is self-
sustaining, the judgment will not be stricken. Id.
In both the trial court and this Court, Gilroy claims that there are fatal
defects on the face of the record. Because these claims are tantamount to a
motion to strike the judgment, the standard of review governing motions to
strike applies to this appeal.
-5-
J-A19020-15
We address Gilroy’s first and third arguments together, because they
involve the same subject. Gilroy contends that VA foreclosure law “trumps”
Pennsylvania law, and therefore Wells Fargo had the duty to send Gilroy a
pre-foreclosure notice that complied with VA foreclosure laws and
regulations. Wells Fargo’s failure to send Gilroy a pre-foreclosure notice that
satisfied VA laws and regulations, Gilroy argues, is a “fatal defect” in the
record. Brief For Appellant, p. 13; see also id., p. 10 (absence of VA notice
is “fatal irregularity”).
Gilroy failed to raise this issue in the trial court. The question thus
becomes whether Wells Fargo’s alleged failure to send a pre-foreclosure VA
notice is a jurisdictional (and thus non-waivable) defect or a non-
jurisdictional (and thus waivable) defect. M & P Management, L.P., 937
A.2d at 400. While there is no decision directly on point, several factors
persuade us that this alleged defect is non-jurisdictional, and thus waivable.
First, we held in United National Bank of Little Rock v. Cobbs, 567 A.2d
719 (Pa.Super.1989), that a mortgagor “may raise the Bank’s failure to
comply with the servicing provisions of the VA Lenders Handbook as an
equitable defense in the Bank’s mortgage foreclosure action.” Id. at 723
(emphasis added). “Equitable” defenses can and often do raise important
concerns, but they are not jurisdictional in nature. Therefore, they can be
waived. See, e.g., In Re Estate of Trowbridge, 920 A.2d 901, 906
(Pa.Cmwlth.2007) (defendant waived equitable defense of laches). Cobbs’
-6-
J-A19020-15
use of “equitable” suggests that VA regulations are waivable. Second, we
can locate no decision, state or federal, that the requirement of a pre-
foreclosure VA notice is jurisdictional and non-waivable. To the contrary,
one recent decision holds that a mortgagor can waive his rights under VA
mortgage foreclosure regulations. See Bulmer v. MidFirst Bank, FSA, 59
F. Supp. 3d 271, 280-281 (D.Mass.2014) (mortgagor waived condition to
mortgage assignee exercising its power of sale that it comply with VA
regulations requiring holder of loan guaranteed or insured by Secretary to
maintain loan servicing program and make reasonable effort to establish
realistic and mutually satisfactory arrangement for curing default, where
mortgagor accepted forbearance agreement from assignee instead of
asserting his rights under VA regulations). Third, we find guidance from a
recent decision by our Supreme Court that the failure to send a pre-
foreclosure notice under the Homeowner’s Emergency Mortgage Act (Act
91), 35 P.S. §§ 1680.401c et seq., is a mere procedural, and thus waivable,
defect. See Beneficial Consumer Discount Co. v. Vukman, 77 A.3d 547
(Pa.2013). Vukman held that a cause of action for mortgage foreclosure
[does not] include a mortgagee’s compliance with
Act 91’s requirements. A cause of action is ‘a factual
situation that entitles one person to obtain a remedy
in court from another person.’ Black’s Law Dictionary
235 (8th ed. 2004). In foreclosure, this factual
situation includes a mortgagor’s default on a duly
executed mortgage. See Pa.R.C.P. 1147(a)
(itemizing factual averments required in mortgage
foreclosure complaint). The cause of action does not
include the procedural requirements of acting on that
-7-
J-A19020-15
cause. Appellee’s overarching assertion that Act 91
imposes jurisdictional prerequisites on mortgage
foreclosure actions is unsupportable.
Turning to the definitions of ‘procedural law’ and
‘procedure,’ the Act 91 notice requirements appear
to fit comfortably in the procedural realm as they set
forth the steps a mortgagee with a cause of action
must take prior to filing for foreclosure. See Black’s
Law Dictionary 1241 (8th ed. 2004) (Procedural law:
‘The rules that prescribe the steps for having a right
or duty judicially enforced, as opposed to the law
that defines the specific rights or duties themselves.’
Procedure: ‘1. A specific method or course of action.
2. The judicial rule or manner for carrying on a civil
lawsuit or criminal prosecution.’). Contrary to
appellee’s argument, the Act 91 notice requirements
certainly do not sound in jurisdiction as they do not
affect the classification of the case as a mortgage
foreclosure action. See In re Melograne, [812 A.2d
1164,] 1167 [Pa.2002] (citation omitted)
(‘Jurisdiction relates solely to the competency of the
particular court or administrative body to determine
controversies of the general class to which the case
then presented for its consideration belongs.’).
Moreover, the lack of explicit language in Act 91
prescribing that such requirements are jurisdictional
cautions against this Court treating them as such.
Id. at 552-53 (emphasis added). We see no reason (nor does Gilroy provide
any) for treating VA notices differently than our Supreme Court treats Act 91
notices in Vukman.
In the absence of persuasive precedent that VA foreclosure regulations
are non-waivable, we conclude that these regulations are procedural, non-
jurisdictional requisites that mortgagors such as Gilroy can waive. Gilroy
waived any protections available under VA foreclosure regulations by waiting
-8-
J-A19020-15
five years after entry of judgment before filing her petition to strike. M & P
Management, L.P., 937 A.2d at 400 (non-jurisdictional irregularities are
waived if not raised within reasonable time). In addition, Gilroy waived this
issue by failing to raise it in her petition or supporting memoranda.
Pa.R.A.P. 302(a) (“issues not raised in the lower court are waived and
cannot be raised for the first time on appeal”).
Even if Gilroy preserved this issue, the rider in Gilroy’s mortgage
provides that federal statutes and regulations only apply “if the indebtedness
secured hereby is guaranteed or insured under Title 38 [of the] United
States Code.” Nothing in the record indicates that the VA actually insured or
guaranteed Gilroy’s loan – and without any VA participation in the loan, we
cannot see how Gilroy is entitled to a pre-foreclosure VA notice.2
____________________________________________
2
In the trial court, and in the body of her brief, Gilroy contended that Wells
Fargo failed to send her an Act 91 notice and a pre-foreclosure notice under
Act 6 of 1974, 41 P.S. § 401 et seq. (“Act 6”). Although Gilroy neglected to
raise these issues in her brief’s Statement of Questions Presented, we
exercise our discretion to overlook this omission and to review these issues
on the merits. PHH Mortgage Corp. v. Powell, 100 A.3d 611, 615
(Pa.Super.2014) (appellant’s failure to comply with appellate rules
governing, inter alia, statement of questions involved did not preclude
appellate review of issues identified in brief which appellant supported with
legal argument).
Gilroy is not entitled to relief under Act 91, because the record reflects that
Wells Fargo sent Gilroy an Act 91 notice over four months before filing a
foreclosure action. Wells Fargo’s Answer To Petition To Set Aside Sheriff’s
Sale, exhibit R.
Nor does Act 6 protect Gilroy. Act 6 provides:
(Footnote Continued Next Page)
-9-
J-A19020-15
In her second issue on appeal, Gilroy argues that Wells Fargo lacks
standing to enforce the note because it failed to establish that Norwest, the
original mortgagee, assigned the note to Wells Fargo. Pennsylvania courts
view the issue of standing as non-jurisdictional and waivable. In re:
Condemnation of Urban Dev. Auth. of Pittsburgh, 913 A.2d 178, 181 n.
6 (Pa.2006). Gilroy waived this issue by delaying five years after entry of
_______________________
(Footnote Continued)
Before any residential mortgage lender may
accelerate the maturity of any residential mortgage
obligation, commence any legal action including
mortgage foreclosure to recover under such
obligation, or take possession of any security of the
residential mortgage debtor for such residential
mortgage obligation, such person shall give the
residential mortgage debtor notice of such intention
at least thirty days in advance as provided in this
section.
41 P.S. § 403(a). By its terms, Act 6 only applies to “residential mortgages.”
Under the current version of Act 6, a residential mortgage is defined as “an
obligation to pay a sum of money in an original bona fide principal amount of
the base figure or less, evidenced by a security document and secured by a
lien upon real property located within this Commonwealth containing two or
fewer residential units …” 41 P.S. § 101. Prior to September 8, 2008, the
base figure was $50,000.00. As of September 8, 2008, the legislature
increased the base figure to $217,873. Notwithstanding the 2008
amendment, courts have looked to the bona fide principal amount set at the
time of the transaction, not at a subsequent date, for determining whether a
residential mortgage comes under Act 6. In re Harris–Pena, 446 B.R. 178,
187 (Bankr.E.D.Pa.2009) (acknowledging 2008 amendment to Act 6, but
applying pre–2008 $50,000.00 principal amount limit for loan that closed in
2001; under pre-2008 limit, lender was not required to send Act 6 notice to
mortgagor). We find Harris-Pena persuasive. When Gilroy entered the
mortgage in 1996, its principal amount of $59,900.00 exceeded $50,000.00,
the limit then in effect. Thus, Wells Fargo was not required to send an Act 6
pre-foreclosure notice to Gilroy.
- 10 -
J-A19020-15
judgment before filing her petition to strike. M & P Management, L.P.,
937 A.2d at 400.
Even if Gilroy had preserved this issue, it would not entitle her to
relief. The Rules of Civil Procedure require a mortgage foreclosure complaint
to state any assignments of the mortgage. Pa.R.Civ.P. 1147(a)(2). In this
case, however, there was no assignment. The record establishes that Wells
Fargo is the successor by merger to Wells Fargo Home Mortgage, Inc., which
was formerly known as Norwest Mortgage, Inc., the original lender.
Complaint, ¶ 1 (averring that plaintiff is “Wells Fargo Bank, N.A., s/b/m
[successor by merger] to Wells Fargo Home Mortgage, Inc. f/k/a [formerly
known as] Norwest Mortgage, Inc.”). It is well-settled that the surviving
corporation in a merger succeeds to all assets, liabilities and rights of action
held by the merged corporation. Seven Springs Farm, Inc. v. Croker,
748 A.2d 740, 746-47 (Pa.Super.2000) (after merger, surviving corporation
succeeds to the assets and liabilities of merged corporations); CBS, Inc. v.
Film Corp. of Am., 545 F. Supp. 1382, 1388 (E.D.Pa.1982) (applying
Pennsylvania law) (corporation formed by merger of other corporations
succeeds to all rights of action possessed by companies merged into the
survivor corporation); see also Mullins v. Wells Fargo Bank, N.A., 2013
WL 5299181, *13 (E.D.Cal.2013) (“Wells Fargo simply succeeded to World
Savings Bank, FSB’s interest in plaintiff’s loan,” due to merger). Thus, Wells
Fargo succeeded to Norwest’s interests in the mortgage by operation of law.
- 11 -
J-A19020-15
No assignment was necessary. See Rice v. v. Wells Fargo Bank, N.A.,
2014 WL 868785, *7 (D.Mass.2014) (Wells Fargo automatically acquired
ownership at time of merger and “lack of any recorded assignment actually
undermines plaintiff’s claim to the extent that it suggests the mortgage was
not transferred to anyone other than [Wells Fargo]”); Toromanova v.
Wells Fargo Bank, N.A., 2013 WL 6225365, *3 (D.Nev.2013) (“Wells
Fargo is not a ‘stranger’ to the note but rather a valid, legally noticed
successor-in-interest”); Suser v. Wachovia Mortgage, FSB, 78 A.3d 1014,
1016 (N.J.A.D.2013) (rejecting plaintiff’s argument regarding assignment of
mortgage because “Wells Fargo’s right to enforce the mortgage arises by
operation of its ownership of the asset through mergers or acquisitions, not
assignment”).3
In her fourth argument on appeal, Gilroy contends that the judgment
must be stricken because (1) the amount of attorney fees entered by the
prothonotary ($1,250) was a flat fee; (2) the court alone has the authority
to award attorney fees, not the prothonotary; and (3) the court can only
award reasonable attorney fees instead of the flat fee demanded by counsel
____________________________________________
3
Gilroy also suggests that the VA is an indispensable party to this action
because it guaranteed the loan secured by the mortgage. The mortgage
rider expressly provides that the VA may guarantee the loan but that it is
not required to do so. There are no facts of record indicating that the VA
actually guaranteed the loan secured by the mortgage. Absent such facts,
the record does not support the contention that the VA has any interest in
this case, let alone that it is an indispensable party.
- 12 -
J-A19020-15
for Wells Fargo. Once again, this is a non-jurisdictional defect that Gilroy
waived by failing to file a petition to strike until five years after entry of
judgment.
Even if Gilroy preserved this issue, it is not a proper ground upon
which to strike the judgment. “A judgment should only be stricken if the
record reveals a defect on its face.” EMC Mortgage, supra, 114 A.3d at
1063. The entire judgment need not be stricken when there is only an
alleged error on the amount entered. Id. at 1064. The proper remedy in
this circumstance is to modify the amount of the judgment. Id. In this
case, no reason exists to modify the amount of the judgment, because
paragraph 21 of the mortgage expressly permits collection of attorney fees
upon default by the mortgagor, and the prothonotary entered judgment in
the precise amount prayed for in the complaint.
Order affirmed. Motion for leave to submit supplemental authority
denied as moot.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 7/22/2015
- 13 -