Scalzitti, G. v. Northwest Savings ( 2015 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
GARY SCALZITTI, ATTORNEY IN FACT IN THE SUPERIOR COURT OF
FOR DONNA STRONG, PENNSYLVANIA
Appellant
v.
NORTHWEST SAVINGS BANK,
Appellee No. 1061 WDA 2014
Appeal from the Order Entered June 26, 2014
In the Court of Common Pleas of Erie County
Civil Division at No(s): 13571-2013
BEFORE: FORD ELLIOTT, P.J.E., PANELLA AND OLSON, JJ.
MEMORANDUM BY OLSON, J.: FILED FEBRUARY 24, 2015
Appellant, Gary Scalzitti in his capacity as attorney-in-fact for Donna
Strong,1 appeals from the order entered on June 26, 2014 in the Civil
Division of the Court of Common Pleas of Erie County that sustained the
preliminary objections filed by Northwest Savings Bank (“Northwest”). We
affirm.
On or around October 17, 2007, Daniel D. Strong, David J. Strong, and
Donna L. Strong entered into a promissory note with Northwest under which
the Strongs obtained a loan in the principal amount of $150,000.00 (the
“October 2007 loan”). Thereafter, on or about June 12, 2008, the Strongs
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1
Appellant became the attorney-in-fact for Donna Strong under a power of
attorney executed on September 13, 2013.
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executed a second promissory note with Northwest whereby they obtained a
loan in the principal amount of $35,000.00 (the “June 2008 loan”). The
Strongs failed to make payments when due under the October 2007 and
June 2008 loans and, on September 14, 2012, Northwest confessed
judgment against the Strongs pursuant to the terms of both loan
agreements. As a result, Northwest obtained judgments against the Strongs
for $162,012.20 on the October 2007 loan and $35,541.14 on the June 2008
loan. None of the Strongs petitioned to open or strike these adverse
judgments and, to date, Northwest has not executed on its judgments.
Notwithstanding the entry of the confessed judgments in favor of
Northwest, the Strongs continued to make payments to the bank. Donna
Strong, through counsel for Appellant, requested that Northwest provide her
with copies of the operative loan documents and an accounting of payments
received on each of the obligations. Under cover of a letter dated December
17, 2013, counsel for Northwest forwarded copies of the account histories
for the October 2007 loan and the June 2008 loan. These account histories
showed remittances for each loan, including payments made after Northwest
confessed judgment against the Strongs. In particular, the account history
for the October 2007 loan showed that Northwest received five payments
totaling $18,396.74 after judgment had been entered. Additionally, the
account summary for the June 2008 loan reflected that Northwest received
six payments totaling $2,110.78 after the bank confessed judgment against
the Strongs.
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On December 16, 2013, Appellant, on behalf of Ms. Strong, filed a civil
complaint against Northwest seeking a declaration of rights and requesting
an accounting.2 The complaint alleged that Ms. Strong, through her
representatives, asked Northwest for “copies of the operative [loan]
documents and an accounting of payments it has received on each of the
obligations.” Appellant’s Complaint (reissued), 2/14/14, at ¶ 5. The
complaint also alleged that Northwest “refused to give an accounting of the
date and amounts of payments made and the application of payments to
[the October 2007 and June 2008 loans].” Id. at ¶ 7. Ms. Strong requested
this information because she “believe[d] … that [her] money [had been]
applied to obligations of her son and her husband for which she [was] not
liable.” Id. at ¶ 6. Appellant’s complaint also alleged that Northwest had
“improperly appl[ied] Donna Strong’s money, received as the result of rents
from property jointly owned with her husband and son, to obligations for
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2
Despite Appellant’s prayers for relief, he did not attach copies of the loan
agreements to the complaint, allegedly because he could not determine
“which [n]otes are operative, which [a]greements are operative and that is
the reason for filing this suit.” Appellant’s Complaint (reissued), 2/14/14, at
¶ 4. Notwithstanding Appellant’s contention, neither the complaint, nor our
review of the certified record, reveals the existence of any loan agreements
between Ms. Strong and Northwest apart from the October 2007 and June
2008 loan obligations.
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which she [was] not liable, in violation of the various agreements between
Donna Strong and [Northwest].” Id. at ¶ 8.3
Northwest filed preliminary objections to Appellant’s complaint on
March 11, 2014, raising two challenges to Appellant’s complaint. First,
Northwest argued that Appellant failed to state a cognizable claim upon
which relief could be granted. Northwest also alleged that Appellant had a
full, complete, and adequate non-statutory remedy at law within the context
of a separate litigation against Ms. Strong’s son that sought an accounting
and appointment of a receiver for certain jointly held property. Northwest
argued that Appellant could issue a subpoena to Northwest for the requested
documents and sworn testimony in that litigation.
The trial court sustained Northwest’s preliminary objections on June
26, 2014, concluding that Appellant’s complaint failed to assert a cognizable
claim for relief and that the information it sought was available through
other means. Trial Court Order, 6/26/14. In a subsequent memorandum,
the court explained that Appellant failed to assert a cognizable claim since
Northwest had reduced the October 2007 and June 2008 loans to judgment
and since the bank had disclosed the requested information by producing
loan histories for both obligations. This appeal followed.
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3
Appellant’s complaint does not identify which agreement Northwest is
alleged to have violated, nor does the complaint set forth breach of contract
as a theory of relief.
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Appellant’s brief raises five issues for our review:
Whether the [trial] court should have held oral argument on
[Northwest’s] [p]reliminary [o]bjections [in so far as] Pa.R.C.P.
211, [] provides, in pertinent part[,] “Any party, or the party’s
attorney, shall have the right to argue any [m]otion and the
[c]ourt shall have the right to require oral argument[?]”
Whether [Appellant’s c]omplaint should have been dismissed
with prejudice without leave to amend without any explanation
of how the cause of action is deficient[?]
Whether [Appellant] is entitled to an explanation of the manner
in which [Northwest] calculates balances on obligations due it[?]
Whether [Appellant] may maintain an independent action
against [Northwest] to determine the balance remaining on the
judgments in favor of [Northwest] where payments on the
judgments have been made since their entry[?]
Whether [Appellant] should have been allowed to take the
deposition of a representative of [Northwest] in order to gain an
explanation of the interpretation of the proprietary documents
attached by [Northwest] to its [p]reliminary [o]bjections[?]
Appellant’s Brief at 4.
We begin our discussion of the contentions raised in this appeal by
first reviewing Appellant’s procedural claim that the trial court erred in
sustaining Northwest’s preliminary objections without permitting oral
argument by the parties. We next address Appellant’s four remaining
claims, which we confront collectively given their interrelated nature.
Appellant asserts that the trial court erred in sustaining Northwest’s
preliminary objections without oral argument in violation of Pa.R.C.P. 211.
Specifically, Appellant argues that Rule 211 required the trial court to hear
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oral argument upon request. Appellant further claims that the court’s failure
to convene oral argument on Northwest’s preliminary objections led it to
misapprehend the facts of this case. We disagree.
In relevant part, Rule 211 provides:
Rule 211. Oral Arguments
Any party or the party's attorney shall have the right to argue
any motion and the court shall have the right to require oral
argument. With the approval of the court oral argument may be
dispensed with by agreement of the attorneys and the matter
submitted to the court either on the papers filed of record, or on
such briefs as may be filed by the parties.
Pa.R.C.P. 211.
This Court has previously held that Rule 211 confers only a qualified
right to oral argument. In Gerace v. Holmes Protection of Phila., 516
A.2d 354 (Pa. Super. 1986), appeal denied, 527 A.2d 541 (Pa. 1987), we
said:
Rule 211 gives every party or his attorney a qualified right to
make an oral argument on any motion. The court by local rule
may regulate the length of time of such arguments. In a given
case the local court may also dispense with oral argument
if it so desires and dispose of the case on the record or
upon briefs. The parties may also waive oral argument unless
it is required by the court.
Gerace, 516 A.2d at 359 (emphasis in original).
In this case, we discern no abuse of discretion in the trial court’s
decision not to entertain oral argument on Northwest’s preliminary
objections. The claims alleged in Appellant’s complaint were simple and
straightforward. The two-page, eight-paragraph complaint requested copies
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of Ms. Strong’s “operative” loan documents and an accounting of payments
received by Northwest. Appellant requested this information on behalf of
Ms. Strong because she believed that Northwest improperly applied her
money to obligations of her husband and her son for which she was not
liable. Northwest’s preliminary objections alleged that Appellant was not
entitled to a declaration of rights since the bank had previously reduced the
October 2007 and June 2008 loans to judgment and because Ms. Strong had
never sought to open or strike those judgments. Northwest further alleged
that the documents and information Appellant sought in the complaint were
available through discovery requests that Ms. Strong could pursue in
separate litigation against Daniel Strong. Based upon the parties’
submissions, it is abundantly clear that the sole question that confronted the
trial court was whether Appellant’s complaint stated a cognizable claim for
the requested relief, given Northwest’s prior judgments and the availability
of the discovery process in separate pending litigation between Ms. Strong
and Daniel Strong. Thus, we fail to see in this case how oral argument
would have enhanced the presentation of claims before the trial court and,
therefore, find no prejudice to Appellant.
We turn now to Appellant’s substantive challenges to the order
sustaining Northwest’s preliminary objections. Given the substantially
similar nature of these claims, we address them in a single discussion.
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Our standard of review in considering a challenge to an order
sustaining preliminary objections is well-settled.
[O]ur standard of review of an order of the trial court overruling
or [sustaining] preliminary objections is to determine whether
the trial court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the
appellate court must apply the same standard as the trial court.
Preliminary objections in the nature of a demurrer test the legal
sufficiency of the complaint. When considering preliminary
objections, all material facts set forth in the challenged pleadings
are admitted as true, as well as all inferences reasonably
deducible therefrom. Preliminary objections which seek the
dismissal of a cause of action should be sustained only in cases
in which it is clear and free from doubt that the pleader will be
unable to prove facts legally sufficient to establish the right to
relief. If any doubt exists as to whether a demurrer should be
sustained, it should be resolved in favor of overruling the
preliminary objections.
Richmond v. McHale, 35 A.3d 779, 783 (Pa. Super. 2012) (citations
omitted).
Issues two through five in Appellant’s brief allege that the complaint
filed in this matter set forth viable claims seeking an accounting and a
declaration of Ms. Strong’s rights vis-à-vis Northwest. In support of these
contentions, Appellant points out that Northwest accepted payments on the
October 2007 and June 2008 loans after judgment was entered. Appellant
also claims that the loan histories produced by the bank were
incomprehensible and required explanation. At the very least, Appellant
maintains, the trial court should have permitted amendment of the
complaint to allow Appellant to clarify the issues.
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An equitable accounting is improper where no fiduciary
relationship exists between the parties, no fraud or
misrepresentation is alleged, the accounts are not mutual or
complicated, or the plaintiff possesses an adequate remedy at
law. Equitable jurisdiction does not exist simply because the
petitioner desires information.
Rock v. Pyle, 720 A.2d 137, 142 (Pa. Super. 1998) (citations omitted).
Appellant has not alleged sufficient facts to establish entitlement to an
accounting. There are no allegations that demonstrate a fiduciary
relationship between Appellant and Northwest since Appellant represents Ms.
Strong, a borrower pursuant to an arms-length transaction with a lender.
Further, Appellant has not alleged fraud or misrepresentation by Northwest.
Moreover, in the present case, the loan transactions appear relatively
straightforward and were never administered by Northwest mutually with, or
for the benefit of, Ms. Strong. Lastly, Ms. Strong possessed an adequate
remedy at law in the form of discovery requests that she could pursue within
the context of the litigation against Daniel Strong. Given these
circumstances, equity cannot burden Northwest to supply a formal
accounting simply because Appellant desires information.4 Accordingly,
Appellant's demand for an equitable accounting in this case is improper.
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4
Any right of Appellant to an accounting based upon alleged payments to
Northwest after entry of the confessed judgments would not arise until after
a sheriff’s sale of the encumbered properties. See Pa.R.C.P. 3136 (setting
forth scheme for distribution by sheriff of proceeds from sale of real
property, including procedures for filing and litigation of exceptions to
distribution of proceeds); see also Landau v. Western Pennsylvania Nat.
(Footnote Continued Next Page)
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Appellant’s final claim is that Ms. Strong was entitled to a declaration
of her rights under the October 2007 and June 2008 loan agreements
notwithstanding the fact that Northwest had previously confessed judgment
as to those loan transactions. Neither party has cited, and our own efforts
have failed to uncover, any Pennsylvania authority for such a novel cause of
action. We note, however, that “[a] judgment rendered by a court having
jurisdiction of parties and subject matter, unless reversed or annulled in
some proper proceeding, is not open to contradiction or impeachment, in
respect of its validity, verity, or binding effect, by parties or privies, in any
collateral action or proceeding.” Mangold v. Neuman, 91 A.2d 904, 906
(Pa. 1952) (noting that “[i]t is a rule of law of general application that a
judgment properly entered is not subject to collateral attack[]”). Appellant
summarizes the thrust of the claims alleged in the complaint as follows:
“[Appellant] was within [his] rights to file a declaratory judgment action
seeking a determination of all amounts owed by [Ms. Strong] to
[Northwest]. The entry of the judgment is not conclusive since payments
have been made subsequent to the entry of judgment.” Appellant’s Brief at
14 (emphasis added). This contention confirms that the complaint in this
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(Footnote Continued)
Bank, 282 A.2d 335 (Pa. 1971) (where mortgagee had taken possession of
subject property and was collecting rent and paying expenses in that
capacity, mortgagors were entitled to an accounting but such accounting
was not due until the property had been sold at sheriff's sale and distribution
of proceeds had been made).
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case was a direct challenge to the unreversed, unmodified, and unannulled
judgments obtained by Northwest that were never subjected to a
conventional method of attack, including a petition to open or strike the
judgments. Since those judgments cannot be collaterally challenged in this
fashion, the trial court did not err in sustaining Northwest’s preliminary
objections.
Moreover, under the doctrine of merger of judgments, we further
conclude that Northwest’s confessed judgments on the October 2007 and
June 2008 loan agreements extinguished any rights Appellant or Ms. Strong
may have possessed pursuant to those instruments. The Court of Appeals
for the Third Circuit aptly summarized relevant Pennsylvania law under the
present circumstances:
Under controlling Pennsylvania law, “[i]t is elementary that
judgment settles everything involved in the right to recover, not
only all matters that were raised, but those which might have
been raised. The cause of action is merged in the judgment
which then evidences a new obligation.” Lance v. Mann, 60
A.2d 35, 36 (Pa. 1948) (citations omitted). The doctrine of
merger of judgments thus provides that the terms of a mortgage
are merged into a foreclosure judgment and thereafter no longer
provide the basis for determining the obligations of the parties.
In re Presque Isle Apartments, 112 B.R. 744, 747
(Bankr.W.D.Pa. 1990); see In re Herbert, 86 B.R. 433, 436
(Bankr.E.D.Pa. 1988) (“The Debtor is, in our view, correct in her
assertion that ‘[t]he mortgage is merged in a judgment entered
in a mortgage foreclosure action’ in Pennsylvania.”) (quoting 25
P.L.E. 85 (1960); citing Murray v. Weigle, 11 A. 781, 782 (Pa.
1888); Hartman v. Ogborn, 54 Pa. 120, 122-23 (1867)); see
also In re Roach, 824 F.2d 1370, 1377 (3d Cir. 1987) (“In New
Jersey, as in many states, the mortgage is merged into the final
judgment of foreclosure and the mortgage contract is
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extinguished. As a result of this merger, there is no longer a
mortgage....”) (citations omitted).
In re Stendardo, 991 F.2d 1089 (3d Cir. 1993).5 Once Northwest entered
confessed judgments against Ms. Strong, her rights vis-a-vis Northwest were
governed by those judgments, not the October 2007 and June 2008 loan
agreements. Hence, the only available avenue for obtaining credit for, or
information about, payments forwarded to Northwest after the entry of the
judgments is within the context of execution proceedings as discussed
supra at footnote four.
Order affirmed.
President Judge Emeritus Ford Elliott and Judge Panella concur in the
result.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/24/2015
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5
We are not bound by decisions of the federal courts, but we may rely on
them for persuasive authority. McEwing v. Lititz Mut. Ins. Co., 77 A.3d
639, 648 n.7 (Pa. Super. 2013).
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