Kaufman, H.&S. v. Bank of America ( 2022 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
HERBERT AND SYLVIA KAUFMAN : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
BANK OF AMERICA NATIONAL : No. 1013 MDA 2021
ASSOCIATION :
Appeal from the Order Entered July 1, 2021
In the Court of Common Pleas of Luzerne County Civil Division at No(s):
3026-2018
BEFORE: PANELLA, P.J., STABILE, J., and DUBOW, J.
MEMORANDUM BY PANELLA, P.J.: FILED APRIL 19, 2022
Herbert and Sylvia Kaufman appeal from the order sustaining the
preliminary objections filed by Bank of America, National Association (“Bank
of America”), and dismissing the Kaufmans’ second amended complaint with
prejudice. On appeal, the Kaufmans challenge the promptness of Bank of
America’s recorded satisfaction pieces for various mortgages. We affirm.
Given our standard of review, the following facts are taken from the
Kaufmans’ amended complaint. The Kaufmans owned property located in
Luzerne County. In 1993, the Kaufmans executed two mortgages on the
property in the amounts of $320,000.00 and $40,000.00 with Hazleton
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National Bank (“the Hazleton mortgages”).1 The Kaufmans also executed an
assignment of rents pertaining to the $40,000.00 mortgage. See Second
Amended Complaint, 4/1/21, ¶¶ 9-11. In 2004, the Kaufmans executed a line
of credit secured by the property for $246,200.00 and a mortgage of
$300,000.00, both with Fleet Bank. See id., ¶¶ 12-13. The Kaufmans renewed
their $246,200.00 line of credit with Fleet Bank in 2007. See id., ¶ 14.
The Kaufmans subdivided a portion of the property in 2008, “splitting
off approximately 21.72 acres of land for the construction of a primary
residence.” Id., ¶ 15. The same year, the Kaufmans executed partial releases
on the 2004 Fleet Bank line of credit and mortgage. See id., ¶¶ 17-18.
In 2017, the Kaufmans entered into an agreement for the sale of the
property and residence. See id., ¶ 19. The Kaufmans intended to transfer the
property as part of a Section 1031 exchange.2 During the buyer’s title search,
Fidelity National Title Insurance Company identified six liens against the
property. See id., ¶ 20. The Kaufmans believed only two liens remained active
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1 Bank of America is Hazleton National Bank’s successor-in-interest. We note
that the Kaufmans generally alleged that Bank of America acquired Fleet Bank
and Hazleton National Bank “through a succession of mergers.” Complaint,
6/22/18, ¶ 5. However, the Kaufmans did not specifically identify any
assignments of the mortgages at issue or attach the pertinent documents
evidencing Bank of America’s ownership of the mortgages.
2 Section 1031 of the Internal Revenue Code governs the exchange of real
property used for business or as an investment for property of like kind. See
26 U.S.C.A. § 1031.
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at that time and requested that Bank of America issue a release or satisfaction.
See id., ¶¶ 21-23. Following correspondence with a Bank of America
representative, the Kaufmans were informed that a lien release would not be
processed until all loans had been paid in full.
The settlement took place on February 14, 2018. Due to the existing
liens on the property, the closing agent held a total of $1,212,400.00 in
escrow. See Second Amended Complaint, 4/1/21, Exhibit I (Settlement
Agreement). Additionally, the Kaufmans were unable to participate in a
Section 1031 exchange because the funds could not be released for purchase
of another property. See Second Amended Complaint, 4/1/21, ¶¶ 54-58.
The Kaufmans initiated the instant action by filing a writ of summons.
On June 22, 2018, the Kaufmans filed a complaint alleging Bank of America
failed to satisfy the Hazleton mortgages, in violation of 21 P.S. § 721-6.3 The
Kaufmans also set forth a breach of contract action based on Bank of America’s
failure to terminate the assignment of rents.
Following additional litigation, the Kaufmans sought leave to amend
their complaint. The parties entered a stipulation on the matter, and the
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3 The Mortgage Satisfaction Act provides, “[a]fter the entire mortgage
obligation as well as all required satisfaction and recording costs have been
paid to the mortgagee, the mortgagor may send a notice to the mortgagee to
present for recording a satisfaction piece to avoid damages.” 21 P.S. § 721-
6(a).
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Kaufmans filed their second amended complaint on April 1, 2021.4 Therein,
the Kaufmans included counts for breach of contract based on Bank of
America’s failure to terminate the assignment of rents, negligent
misrepresentation, detrimental reliance, and violation of Pennsylvania’s Unfair
Trade Practices and Consumer Protection Law (“UTPCPL”), 73 P.S. §§ 201-1 –
201.10. The Kaufmans abandoned their Mortgage Satisfaction Act claim
because Bank of America had recorded satisfaction pieces on the mortgages
in 2018.
Bank of America filed preliminary objections in the nature of a demurrer.
The Kaufmans filed a response. The trial court conducted an argument, at
which time the Kaufmans formally withdrew their breach of contract and
negligent misrepresentation claims. On July 1, 2021, the trial court entered
an order sustaining Bank of America’s preliminary objections and dismissing
the Kaufmans’ second amended complaint with prejudice. The Kaufmans filed
a timely notice of appeal and a court-ordered Pa.R.A.P. 1925(b) concise
statement of matters complained of on appeal
“Preliminary objections in the nature of a demurrer should be granted
where the contested pleading is legally insufficient.” Cooper v. Church of St.
Benedict, 954 A.2d 1216, 1218 (Pa. Super. 2008). A challenge to the grant
of preliminary objections presents a question of law:
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4The Kaufmans did not file a first amended complaint. However, for clarity,
we will refer to the document as titled by the Kaufmans.
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Our standard of review of an order of the trial court
overruling or granting 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.
Liberty Mut. Ins. Co. v. Domtar Paper Co., 77 A.3d 1282, 1285 (Pa. Super.
2013) (citation omitted).
In their appellate brief, the Kaufmans generally claim the trial court
erred in sustaining Bank of America’s preliminary objections and improperly
concluded the Kaufmans did not assert a prima facie case. See Appellants’
Brief at 18-23. In support of their detrimental reliance claim, the Kaufmans
assert Bank of America was required to file a release after each mortgage was
fully paid. See id. at 24. According to the Kaufmans, Bank of America assured
the Kaufmans it would file the satisfaction pieces but failed to do so. See id.
The Kaufmans claim they relied on Bank of America’s promise to record the
releases in February 2018. See id. at 25. The Kaufmans argue their reliance
on Bank of America’s claims resulted in over $1,200,00.00 being held in
escrow following the sale of the property. See id. at 25, 27.
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In their UTPCPL claim, the Kaufmans contend the trial court abused its
discretion by determining the Kaufmans insufficiently pled fraud or deceptive
conduct. See id. at 27-28. The Kaufmans argue Bank of America committed
fraud
by denying liability, by failing to issue discharges of debts under
its control, by failing to act promptly, by causing a delay in the
[Kaufmans] being able to use sale proceeds for the purchase of
another property, and by causing the [Kaufmans] to be liable for
substantial taxes due to their delay in filing discharges.
Id. at 29. As a result, the Kaufmans claim they are entitled to punitive
damages. See id. at 31-32.
As an initial matter, we observe Bank of America correctly points out
that the Mortgage Satisfaction Act is “the exclusive remedy for damages for
failure of a mortgagee to issue and present for recording a satisfaction piece.”
21 P.S. § 721-6(d)(4). Here, the Kaufmans’ claims were premised on Bank of
America’s alleged failure to promptly record the mortgage satisfaction pieces
and inform the Kaufmans when the satisfaction pieces were recorded. These
assertions clearly implicate the Mortgage Satisfaction Act, a claim the
Kaufmans abandoned in their second amended complaint based on Bank of
America’s recording of the satisfaction pieces.5 Nevertheless, we will briefly
address the Kaufmans’ claims as they have been presented.
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5 Even if a claim under the Mortgage Satisfaction Act was properly before us,
it would not entitle the Kaufmans to relief. The Kaufmans’ purported harm was
their inability to participate in a Section 1031 exchange of like-kind property.
(Footnote Continued Next Page)
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In its opinion, the trial court concluded the Kaufmans failed to plead any
facts to establish the existence of a “promise” made by Bank of America to
sufficiently plead a claim of detrimental reliance. See Trial Court Opinion,
9/14/21, at 4. Similarly, the trial court concluded that the Kaufmans failed to
aver fraudulent or deceptive conduct by Bank of America and could not
establish justifiable reliance or causation under the UTPCPL. See id. at 6. The
trial court also stated that, in support of both claims, the Kaufmans improperly
relied on “representations” made by Bank of America in their pleadings. See
id. at 5 n.6, 6.
Our review confirms the trial court’s legal conclusions. In their second
amended complaint, the Kaufmans baldly asserted that Bank of America made
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Pursuant to Section 1031, a taxpayer must identify a property to be received
in the exchange within 45 days after transfer of the property to be relinquished
in the exchange. See 26 U.S.C.A. § 1031(a)(3)(A). The settlement date for
the sale of the property was February 14, 2018. Therefore, under Section
1031, the Kaufmans were required to identify a property to be received in
exchange by April 2, 2018.
To avoid a penalty under the Mortgage Satisfaction Act, a mortgagee
must record a satisfaction piece within 60 days of receiving full payment of
the mortgage and any satisfaction and recording costs, and the first written
request by the mortgagor for the recording of a satisfaction piece. See 21 P.S.
§ 721-6(d)(1). Though the Kaufmans direct our attention to fax
communications between their attorney and the Bank of America
representative, the Kaufmans do not allege that they served upon Bank of
America a notice to satisfy the loans. See generally Second Amended
Complaint, 4/1/21, Exhibits C, D. The Kaufmans did not send a notice in
accordance with Section 721-6(c) until February 13, 2018. Therefore, Bank of
America had until April 16, 2018 to record the satisfaction pieces. Bank of
America executed and recorded the satisfaction pieces prior to that date.
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“representations” that it had no relationship with Hazleton National Bank and
was not responsible for recording mortgage satisfactions. The Kaufmans do
not explicitly explain how these representations then led to damages.
If we look at the Kaufmans’ UTPCPL claim in the second amended
complaint, we glean a possible answer. There, the Kaufmans asserted that
Bank of America “failed to inform [the Kaufmans] regarding whether the
$40,000.00 Hazleton National Mortgage or the $320,000.00 Hazleton National
Mortgage had been satisfied[.]” Second Amended Complaint, 4/1/21, ¶ 89.
The detrimental reliance claim has similar language. Taking the Kaufmans’
allegations as true, as we must under our standard of review, it is clear the
Kaufmans suffered some injury because they did not become aware the
Hazleton mortgages had been marked satisfied until December 2018.
Accordingly, the basis of the Kaufmans’ claims is that Bank of America failed
to timely inform them that the Hazleton mortgages had been marked satisfied.
In order to plead a prima facie case for detrimental reliance, the
Kaufmans were required to allege that Bank of America made a promise that
the Kaufmans relied on to their detriment, and enforcement of the promise is
the only means of avoiding injustice. See V-Tech Servs., Inc. v. Street, 72
A.3d 270, 276 (Pa. Super. 2013). The Kaufmans’ UTPCPL claim also requires
similar allegations, with the primary difference being that Kaufmans would be
required to establish that Bank of America engaged in “fraudulent or deceptive
conduct which creates a likelihood of confusion or of misunderstanding.” 73
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P.S. § 201-2(4)(xxi); see also Gregg v. Ameriprise Fin., Inc., 245 A.3d
637, 649-50 (Pa. 2021).
The second amended complaint is devoid of factual averments that can
establish Bank of America owed the Kaufmans a duty to inform them the
Hazleton mortgages had been marked satisfied. Similarly, the record is devoid
of any evidence that Bank of America actively concealed the status of the
Hazleton mortgages from the Kaufmans. The Mortgage Satisfaction Act does
not require Bank of America to provide any notice of the satisfaction to the
Kaufmans. Nor do the mortgage documents require that Bank of America
provide any notice that the mortgages had been marked satisfied.
On appeal, the Kaufmans do not explicitly reference a right to be
notified, instead muddling their argument with references to Bank of America’s
duty to mark the Hazleton mortgages satisfied. See Appellants’ Brief at 24-
31. As noted above, the Mortgage Satisfaction Act is the sole avenue for relief
on the claim that Bank of America did not timely mark the mortgages satisfied,
and the Kaufmans conceded that Bank of America complied with the
requirements of the Mortgage Satisfaction Act. The Kaufmans therefore have
not established that the trial court erred in concluding that they failed to
establish Bank of America owed them any duty to inform them that the
mortgages had been marked satisfied.
In sum, the record establishes that Bank of America timely marked the
mortgages satisfied under the Mortgage Satisfaction Act. The Kaufmans
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alleged that they suffered damages because they did not learn of the
satisfaction in time to take advantage of certain tax treatments of the sale of
the subject property. However, the Kaufmans failed to establish that Bank of
America had any duty to inform them that the mortgages had been marked
satisfied, and therefore, they did not allege a prima facie case for a violation
of the UTPCPL or detrimental reliance.
Based upon the foregoing, we affirm the trial court’s order sustaining
Bank of America’s preliminary objections and dismissing the Kaufmans’
complaint with prejudice.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 04/19/2022
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