Wilmington Trust v. Brolley, J. ( 2019 )

J-S12013-19
2019 Pa. Super. 286
WILMINGTON TRUST, NATIONAL : IN THE SUPERIOR COURT OF
ASSOCIATION, NOT IN ITS : PENNSYLVANIA
INDIVIDUAL CAPACITY, BUT SOLELY :
AS TRUSTEE FOR VM TRUST SERIES :
3, A DELAWARE STATUTORY TRUST :
:
:
v. :
: No. 615 MDA 2017
:
UNKNOWN HEIRS, SUCCESSORS, :
ASSIGNS, AND ALL PERSONS, FIRMS :
OR ASSOCIATIONS CLAIMING :
RIGHT, TITLE OR INTEREST FROM :
OR UNDER HELEN A. BROLLEY, :
DECEASED, AND JAMES M. BROLLEY, :
(REAL OWNER) :
:
:
APPEAL OF: JAMES M. BROLLEY :
Appeal from the Order Entered March 9, 2017
In the Court of Common Pleas of Luzerne County Civil Division at No(s):
2985 of 2012
BEFORE: BOWES, J., DUBOW, J., and MUSMANNO, J.
OPINION BY BOWES, J.: FILED: SEPTEMBER 19, 2019
James M. Brolley appeals from the March 9, 2017 in rem judgment in
mortgage foreclosure entered in favor of Wilmington Trust, National
Association, as Trustee for VM Trust Series 3, a Delaware Statutory Trust
(“Mortgagee”). We vacate the judgment and dismiss the action with
prejudice.
The following facts are relevant to our review. On February 7, 2003,
Helen Brolley executed a mortgage and note in the principal amount of
$65,000, in favor of Wells Fargo Home Mortgage, Inc., on her property at 150
J-S12013-19
Laurel Drive, Mountain Top, Pennsylvania 18707 (“the Property”). The
mortgage was duly recorded with the Recorder of Deeds of Luzerne County.
The note provided for interest at an annual rate of 8.250%. On November
13, 2003, she transferred her interest to her son via deed, which was duly
recorded. Helen Brolley died on March 15, 2006.
It is undisputed that no monthly payments of principal and interest were
made on or after April 1, 2006. On August 8, 2007, Wells Fargo filed a
complaint in mortgage foreclosure against James Brolley, seeking the amount
owing from April 1, 2006, and each month thereafter. That action was
docketed at No. 8805 of 2007. By order dated September 9, 2009, an in rem
summary judgment was entered in favor of Wells Fargo and against Mr.
Brolley.1 That judgment was subsequently amended on September 27, 2010,
to $99,263.92 plus interest from August 6, 2010 through the date of sale at
six percent per year. There was no sale of the Property.
On October 28, 2011, Residential Credit Solutions, Inc., the servicer of
the mortgage, sent notice of intent to foreclose on the mortgage addressed to
the Estate of Helen Brolley at the Property. That notice recited that the
____________________________________________
1 The mortgage was assigned several times, the first assignment occurring on
April 29, 2009, from Wells Fargo to EMC Mortgage Corporation. Judgment in
mortgage foreclosure subsequently was entered in favor of Wells Fargo. On
March 22, 2018, Wells Fargo filed a praecipe to mark the judgment to the use
of EMC Mortgage Corporation. Despite the judgment, EMC Mortgage
Corporation subsequently assigned the mortgage to EMC Mortgage LLC on
January 31, 2012, and, on February 11, 2015, EMC Mortgage LLC assigned it
to Wilmington Trust, National Association, not in its Individual Capacity, but
solely as Trustee for VM Trust Series 3, a Delaware Statutory Trust.
-2-
J-S12013-19
mortgage was in serious default, no monthly payment having been made since
April 1, 2006. On March 12, 2012, EMC Mortgage LLC commenced the instant
action at No. 2985 of 2012, by filing a complaint in mortgage foreclosure. Mr.
Brolley filed a pro se answer to the complaint in which he pled that, “a legal
judgment has already been rendered in this matter by Judge Peter Paul
Olszewski.” Answer in Mortgage Foreclosure, 5/17/12, at 1.
On April 22, 2013, EMC Mortgage Corporation filed a praecipe to vacate
and discontinue the prior judgment at No. 8805 of 2007 “without prejudice,”
and thereafter the Mortgagee herein filed two motions for summary judgment,
which the court denied. After a bench trial, the court entered judgment in
favor of EMC Mortgage LLC.
Mr. Brolley filed post-trial motions, which were denied, and a timely
appeal to this Court. In his Rule 1925(b) statement, he asserted that the trial
court erred in failing to consider the affirmative defenses of collateral estoppel
and res judicata that he raised in his pro se answer. The trial court, in its Rule
1925(a) opinion, found the defenses waived as Mr. Brolley failed to plead them
as new matter pursuant to Pa.R.C.P. 1030(a). This Court disagreed, vacated
the judgment, and remanded the matter to the trial court “for consideration
on the merits of [Mr. Brolley’s] affirmative defenses.” EMC Mortgage, LLC
v. Unknown Heirs, 153 A.3d 1110 (Pa.Super. 2016) (unpublished
memorandum at 4).
Following remand, the trial court held a status conference. It issued an
order directing the parties to brief the legal issues and ordering that “the
-3-
J-S12013-19
transcript, evidence, and stipulations of March 31, 2015” be made part of the
new record. Order, 7/13/16, at 1. The order further stated that if the parties
subsequently determined that they needed to present additional evidence,
they could either stipulate to that evidence or request a phone conference
with the court. Id.
Following submission of briefs and argument, the trial court ruled that
the defense of res judicata applied to the prior judgment in mortgage
foreclosure at No. 8805 of 2007, but not to subsequent defaults under the
mortgage. Order, 12/8/16. That same day, the court issued a trial
management order scheduling a non-jury trial for February 3, 2017, and
ordering the parties to submit witness lists, expert reports, exhibit lists,
proposed findings of fact and conclusions of law, and designating portions of
depositions that they intended to offer.
Mr. Brolley filed a motion for reconsideration, alleging that the trial court
erred in not finding the action barred based on res judicata and collateral
estoppel, as well as the lack of Act 91 notice. The court ruled that the motion
was premature as it had not ruled on the specific dates of alleged defaults,
and that the arguments were more appropriate for the scheduled trial. See
Order, 12/29/16, at 1. The parties complied with the pretrial order, and the
caption was corrected to reflect EMC Mortgage LLC’s earlier assignment of the
mortgage to Wilmington Trust, National Association, not in its Individual
Capacity, but solely as Trustee for VM Trust Series 3, a Delaware Statutory
Trust.
-4-
J-S12013-19
Trial proceeded on February 3, 2017, although Mr. Brolley was not
present. N.T., Bench Trial, 2/3/17, at 7. Mortgagee called Kimberly Harmstad
from Shellpoint Mortgage Servicing, the servicer of the loan at issue. Id. at
8. She testified regarding the preparation of a document setting forth the
payment history for the subject loan post-judgment on September 1, 2010,
which was a screenshot marked and admitted as Plaintiff’s Exhibit 9. It
showed that the principal balance as of that date would be $59,859.75 as of
the new default date, for a total payoff of $128,313.64. Mr. Brolley offered
no testimony. Counsel argued, however, that as a result of the res judicata
ruling, the Act 91 notice included with the instant complaint provided incorrect
amounts, and was thus defective. Id. at 29-30. He urged that the complaint
be dismissed on that basis as well.
Shortly after the conclusion of the trial, the court issued an order
directing Mr. Brolley to brief his argument that Mortgagee had failed to comply
with the notice requirements of Act 91 in its October 28, 2011 notice. Order,
2/8/17, at 1. Mr. Brolley complied, representing therein that although he
received Act 91 notice on or about October 28, 2011, the Mortgagee failed to
adduce any evidence that a proper Act 91 notice was sent with the correct
deficiencies and amounts remaining on the mortgage after the court ruled that
res judicata applied. Mortgagee countered that Defendant had admitted that
Act 91 notice complied with the statute, and thus, any objection to notice was
waived.
-5-
J-S12013-19
On March 9, 2017, the court found in favor of Mortgagee and entered
an in rem judgment in the amount of $128,313.64 as of January 31, 2017
with the per diem rate of $14.31 and a monthly late charge of $24.41. The
court found that Mortgagee proved its mortgage foreclosure claim as to Mr.
Brolley’s defaults from October 1, 2010 to date. The court also rejected Mr.
Brolley’s claim that the October 28, 2011 Act 91 Notice was defective, finding
that the notice requirements were temporarily suspended at that time, and
only went back into effect on October 2, 2012, and thus, no notice was
required.
Mr. Brolley did not file a post-trial motion following the trial court’s
determination.2 Rather, he appealed to this Court on March 9, 2017, and
thereafter complied with the court’s order to file a Rule 1925(b) concise
statement of errors complained of on appeal. He presents two issues for our
review:
1. Whether the trial court erred and abused its discretion in failing
to address and apply the affirmative defense of collateral
estoppel, a legal doctrine separate and apart from res judicata,
and dismiss the Appellee’s mortgage foreclosure action?
____________________________________________
2 On June 21, 2017, this Court issued a rule to Appellant to show cause why
the appeal should not be dismissed for failure to file post-trial motions
following the March 9, 2017 decision. Appellant filed a timely response in
which he maintained that post-trial motions were not mandated by the Rules
and, further that he filed a set of post-trial motions on June 23, 2017, “[o]ut
of an abundance of caution.” Response of Appellant to Order to Show Cause
of June 21, 2017, 6/30/17, at 4. The rule was discharged and the matter
referred to this Panel for disposition.
-6-
J-S12013-19
2. Did the trial court err and abuse its discretion by applying the
incorrect date concerning when the Appellee should have
issued an Act 91 Notice, 35 PS section 1680.403c, and
erroneously finding that the temporary suspension of such pre-
foreclosure notice applied in this matter?
Appellant’s brief at 4.
Preliminarily, Mortgagee contends that the foregoing issues are waived
as Mr. Brolley failed to file a post-trial motion pursuant to Pa.R.C.P.
227.1(c)(2), following the March 9, 2017 non-jury verdict. Rule 227.1(c)(2)
provides: “Post-trial motions shall be filed within ten days after notice of
nonsuit or the filing of the decision in the case of a trial without [a] jury.”
Post-trial motions preserve issues for appeal because issues not raised in the
lower court are waived. See Chalkey v. Roush, 805 A.2d 491 (Pa. 2002);
see also Newman Development Group of Pottstown, LLC v. Genuardi’s
Family Markets, Inc., 52 A.3d 1233 (Pa. 2012).
Mr. Brolley maintains that he was not required to file a post-trial motion
because Pa.R.C.P. 227.1(i), dealing specifically with cases on remand for
further proceedings, governed. That subdivision provides that:
a motion for post-trial relief relating to subsequent rulings in the
trial court shall not be required unless
(1) The appellate court has specified that the remand is
for a complete or partial new trial, or
(2) The trial court indicates in its order resolving the
remand issues that a motion for post-trial relief is
required pursuant to this rule.
-7-
J-S12013-19
Pa.R.C.P. 227.1(i). The 2015 Explanatory Comment to the Rule explains that
subdivision (i) was added that year to address the gap in the rule where a
matter is remanded for further consideration by the trial court, and “to give
the practitioner certainty as to when a motion for post-trial relief is required
in the remand context.” 2015 Explanatory Comment. Mr. Brolley points out
that this Court did not specifically remand for a new trial or partial new trial.
Nor did the trial court indicate that a motion for post-trial relief was required.
Thus, he contends that, under the express language of subdivision (i), he was
not required to file post-trial motions on the facts herein.
The record confirms that this Court did not order a new trial or partial
new trial upon remand. The trial court, after addressing the subject of the
remand, ordered a new trial. The parties were directed to comply with all
pretrial formalities. Additional testimony was taken; new exhibits were
offered. In our view, the proceedings on remand constituted a trial. However,
after the amendment to Rule 227.1 to include subdivision (i), the issue is not
whether the proceeding on remand constituted a trial. Rather, the proper
inquiry is whether our remand called for “a complete or partial new trial,” or
whether the trial court required Mr. Brolley to file a new post-trial motion.
Since neither occurred, the filing of post-trial motions following remand was
not required in order to preserve issues for appellate review. Hence, we find
no waiver.
-8-
J-S12013-19
Mr. Brolley contends that the instant mortgage foreclosure action is
barred by the doctrines of res judicata and collateral estoppel. He maintains
that the prior in rem judgment in mortgage foreclosure on the note securing
the Property is a bar to the instant action. He argues that the trial court erred
in finding that res judicata only barred recovery for matters covered by the
first judgment and that another action could be maintained based on the
subsequent default. He also claims the trial court should have addressed his
claim that collateral estoppel applied. Mortgagee counters that res judicata
and collateral estoppel do not apply to bar this action because of the
continuing nature of the contractual relationship and the possibility of
numerous defaults. See Appellee’s brief at 3.
As our sister court noted in Robinson v. Frye, 192 A.3d 1225, 1228
(Pa.Cmwlth. 2018), “[t]echnical res judicata (claim preclusion) and collateral
estoppel (issue preclusion) are ‘related, yet distinct’ components of the
doctrine known as res judicata.” We recently reaffirmed that “the decision to
allow or to deny a prior judicial determination to collaterally bar relitigation of
an issue in a subsequent action historically has been treated as a legal issue.”
Rickard v. Am. Nat'l Prop. & Cas. Co., 173 A.3d 299, 304 (Pa.Super. 2017)
(en banc) (quoting Westfield Ins. Co. v. Astra Foods Inc., 134 A.3d 1045,
1049-50 (Pa.Super. 2016). Hence, as with all legal questions, “our standard
of review is de novo and our scope of review is plenary.” Skotnicki v.
Insurance Department, 175 A.3d 239, 247 (Pa. 2017).
-9-
J-S12013-19
Res judicata is a doctrine that operates to foreclose repetitious litigation
by barring parties from re-litigating a matter that was previously litigated or
could have been litigated. The doctrine only applies where four common
elements exist: “(1) identity of issues; (2) identity of causes of action; (3)
identity of persons and parties to the action; and (4) identity of the quality or
capacity of the parties suing or sued.” Wilkes ex rel. Mason v. Phoenix
Home Life Mut. Ins. Co., 902 A.2d 366, 378 n.9 (Pa. 2006). Under the
doctrine of res judicata, a judgment on the merits in a prior suit bars a second
suit on the same cause of action or one that could have been brought in the
prior action. Weinar v. Lex, 176 A.3d 907, 909 (Pa.Super. 2017).
The related doctrine of collateral estoppel or issue preclusion applies if:
“(1) the issue decided in the prior case is identical to the one presented in the
later case; (2) there was a final judgment on the merits; (3) the party against
whom the plea is asserted was a party or in privity with a party in the prior
case; (4) the party or person privy to the party against whom the doctrine is
asserted had a full and fair opportunity to litigate the issue in the prior
proceeding; and (5) the determination in the prior-proceeding was essential
to the judgment.” R. W. v. Manzek, 888 A.2d 740, 748 (Pa. 2005). As
distinguished from res judicata, which bars subsequent claims that could have
been litigated in the prior proceeding, but which were not, collateral estoppel
only bars litigation of issues that were actually litigated in the prior action.
Chada v. Chada, 756 A.2d 39, 43 (Pa.Super. 2000).
- 10 -
J-S12013-19
Upon remand from this Court, the trial court was directed to consider
whether res judicata or collateral estoppel were defenses to the current action
in mortgage foreclosure. The trial court determined that res judicata barred
recovery for default occurring as of the date of the earlier mortgage
foreclosure judgment. However, it reasoned that since the mortgage is an
installment contract, successive actions could be maintained for breach of an
installment. In reaching its conclusion, the trial court cited Fairbanks Capital
Corp. v. Milligan, 234 Fed. Appx. 21 (3d Cir. 2007) (holding doctrines of res
judicata or collateral estoppel did not bar a second mortgage foreclosure
action based on later default where first action was settled and the suit
dismissed with prejudice), and a non-precedential memorandum decision of
this Court where the first action in mortgage foreclosure resulted in a finding
of no default.3 For the reasons that follow, the trial court’s reasoning is flawed.
In relying upon the aforementioned cases, the trial court failed to
appreciate a critical factual distinction: the first mortgage foreclosure action
in those cases did not culminate in a foreclosure, and hence, the mortgage
____________________________________________
3 The trial court’s citation to an unpublished memorandum decision of this
Court was prohibited under Pa. IOP Super. Ct. 65.37 (“An unpublished
memorandum decision shall not be relied upon or cited by a Court or a party
in any other action or proceeding, except that such a memorandum decision
may be relied upon or cited (1) when it is relevant under the doctrine of law
of the case, res judicata, or collateral estoppel, and (2) when the
memorandum is relevant to a criminal action or proceeding because it recites
issues raised and reasons for a decision affecting the same defendant in a
prior action or proceeding.”). That IOP was recently amended to permit
persuasive citation to memorandum decisions filed after May 1, 2019.
- 11 -
J-S12013-19
remained in effect after that proceeding. Accordingly, the mortgagor’s
responsibility for the monthly payments continued, and the potential for
default remained. Those courts reasoned that, in the event of a subsequent
default, mortgagee could file a new foreclosure proceeding limited to amounts
owing after that default.
That reasoning is misplaced on the facts herein. In this case, Mortgagee
prevailed in the first mortgage foreclosure action, and a judgment in mortgage
foreclosure was entered at No. 8805 of 2007. Under Pennsylvania law, “[t]he
doctrine of merger of judgments . . . 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.” 4 EMC Mortg., LLC v.
Biddle, 114 A.3d 1057, 1064 (Pa.Super. 2015) (quoting In re Stendardo,
991 F.2d 1089, 1094-95 (3d Cir. 1993)). This is in accord with the general
principle that “[w]hen a mortgage has been validly and completely foreclosed,
it cannot ordinarily be the subject of further foreclosures.” 59 C.J.S.
Mortgages § 722 (West 2018).
____________________________________________
4 Although it is not relevant for the purposes of this appeal, we recognize an
exception to that general rule where the mortgage clearly evidences the
parties’ intent to preserve the effectiveness of a term after entry of judgment.
EMC Mortg., LLC v. Biddle, 114 A.3d 1057, 1064 (Pa.Super. 2015); see,
e.g., In re Presque Isle Apartments, 112 B.R. 744, 747 (Bankr.W.D.Pa.
1990) (“Once a claim is reduced to judgment, the legal rate of interest applies
unless the documents evidence a clear intent to continue the contractual rate
of interest post-judgment.”).
- 12 -
J-S12013-19
The situation herein is remarkably similar to the facts in Faulkner v.
M&T Bank (In re Faulkner), 593 B.R. 263 (Bank.E.D.Pa. 2018). The
mortgagee argued therein that it could institute a second mortgage
foreclosure action even though there was a prior judgment in mortgage
foreclosure because there were subsequent defaults. The bankruptcy court
disagreed, finding that the argument “runs afoul of the merger doctrine.” Id.
at 282. The court reasoned:
The entry of a foreclosure judgment fixes the positions of the
parties: the mortgage merges into the judgment and no further
monthly installments fall due as long as the judgment remained
in effect. The debt secured by the mortgage is accelerated and is
immediately due and payable in its entirety as set forth in the
judgment. In short, there is no mortgage that could be in default
or give rise to a new cause of action in mortgage foreclosure.
Id. at 282 (footnote omitted).
Our recent decision in EMC Mortg., LLC, supra, and the bankruptcy
court’s persuasive analysis in Faulkner, supra, inform our decision herein.
In the case before us, Wells Fargo obtained an in rem judgment in mortgage
foreclosure against the Property at No. 8805 of 2007, and assigned the
judgment to the use of EMC Mortgage Corporation. Accordingly, the mortgage
merged into that foreclosure judgment, and no further monthly payments
were due. Thus, there could be no subsequent default upon which to
foreclose, and the remedy was to execute on the Property and set it for
sheriff’s sale. In this action, Mortgagee is attempting to re-litigate a
completed mortgage foreclosure proceeding in which a judgment was already
obtained.
- 13 -
J-S12013-19
We find that the prior judgment in mortgage foreclosure bars this
subsequent action in mortgage foreclosure.5 It is undisputed that the parties
herein were parties or privies to the parties in the prior action, and that they
are suing and being sued in the same capacities. Both are actions for
mortgage foreclosure based upon default under the same mortgage
instrument. Having concluded that the mortgage merged into the prior
judgment in mortgage foreclosure, and that thereafter, no obligation remained
to make monthly payments, there can be no continuing default upon which to
maintain the current mortgage foreclosure action. This matter was fully and
finally litigated between the parties in the prior action, and the judgment in
mortgage foreclosure entered in that action bars the current action in
mortgage foreclosure.
For these reasons, we need not reach the issue of whether Act 91 notice
was proper. We vacate the judgment and dismiss the action with prejudice.
Judgment vacated. Action dismissed with prejudice.
____________________________________________
5 For purposes of this appeal and the determination whether res judicata or
collateral estoppel barred the instant mortgage foreclosure action, it is
irrelevant whether the praecipe to vacate the earlier judgment in mortgage
foreclosure at No. 8805 of 2007 was legally effective. The subject matter of
the instant foreclosure action was fully and finally litigated between the parties
or their privies, and the judgment on the merits operates as a bar to this
action.
- 14 -
J-S12013-19
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/19/2019
- 15 -