Bank of America v. Scott, A.

J-A21026-21
2022 PA Super 39BANK OF AMERICA, N.A. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
Appellant :
:
:
v. :
:
:
ANDRE FREEMAN SCOTT, KNOWN : No. 2167 EDA 2020
HEIR OF BESSIE EMORY A/K/A :
BESSIE LEE EMORY; ESTATE OF :
BESSIE EMORY A/K/A BESSIE LEE :
EMORY; EVELYN SCOTT-DAVIS, :
PERSONAL REPRESENTATIVE OF THE :
ESTATE OF BESSIE EMORY A/K/A :
BESSIE LEE EMORY; UNKNOWN :
HEIRS, SUCCESSORS, ASSIGNS AND :
ALL PERSONS, FIRMS, OR :
ASSOCIATIONS CLAIMING RIGHT, :
TITLE OR INTEREST FROM OR :
UNDER BESSIE EMORY A/K/A BESSIE :
LEE EMORY :
Appeal from the Judgment Entered October 13, 2020
In the Court of Common Pleas of Philadelphia County Civil Division at
No(s): No. 170403149
BEFORE: KUNSELMAN, J., NICHOLS, J., and STEVENS, P.J.E.*
OPINION BY NICHOLS, J.: FILED MARCH 03, 2022
Appellant Bank of America, N.A. appeals from the judgment entered in
favor of the Estate of Bessie Emory A/K/A Bessie Lee Emory (the Estate),
Andre Freeman Scott, and Evelyn Scott-Davis, Personal Representative of the
Estate (collectively, Appellees), following a non-jury trial in this mortgage
____________________________________________
* Former Justice specially assigned to the Superior Court.
J-A21026-21
foreclosure action. The trial court found in favor of Appellees because they
exercised an option under a reverse mortgage to avoid foreclosure and
Appellant rejected Appellees’ proposal. Appellant claims the trial court erred
by concluding that said option applied in this case, finding in favor of
Appellees, and admitting certain evidence. We affirm.
The decedent Bessie Emory (Mortgagor) took out a Federal Housing
Authority-insured (FHA) reverse mortgage1 on the real property located at
4540 North Camac Street in Philadelphia (Property) from Champion Mortgage
Company (Champion), Appellant’s predecessor in interest. R.R. at 79a-91a
(the reverse mortgage), 93a-108a (assignment history of the reverse
mortgage).2
____________________________________________
1 This Court has explained:
Reverse mortgages have been described as a financial planning
device for [those] who are [] house rich, but cash poor. . . . In a
reverse mortgage, as in a conventional mortgage, the mortgagee
or lender advances money to the borrower or mortgagor.
However, in a reverse mortgage the borrower is often times not
obligated to repay any portion of the loan or the interest on the
loan amount until the property is sold, the loan matures or the
borrower dies or experiences an extended absence from the
premises. The interest on the borrowed sums is added to the
principal loan amount and the lender acquires a lien against the
house in the amount of the initial principal and accumulated
interest.
In re Estate of Moore, 871 A.2d 196, 201 n.3 (Pa. Super. 2005) (citations
and quotations marks omitted).
2 We may refer to the reproduced record for the parties’ convenience.
-2-
J-A21026-21
The reverse mortgage set forth several grounds for default under which
it would be come due and payable; one of these was the death of the
Mortgagor. Id. at 82a. Also, the reverse mortgage set forth a number of
alternatives to foreclosure which could be exercised under certain
circumstances, including selling the Property for 95% of its appraised value
and applying the proceeds of that sale against the balance of the mortgage.
Id.The trial court summarized the factual history as follows:
[Appellees] established that upon the death of Bessie Emory,
Champion Mortgage, the mortgage servicer and [Appellant’s]
predecessor in interest, sent a letter to Evelyn Scott Davis, the
appointed Executrix of the Estate of Bessie Emory. In that letter,
dated November 7, 2016 (“the Letter”), Champion Mortgage made
the following statements.
“The reverse mortgage is technically in default due to the
death of [mortgagor].”
* * *
“This default must be resolved by any of the following
methods:
* * *
B. The mortgage will be released and no deficiency
judgment filed if the property sells for the lesser of the debt,
including shared appreciation, or 95% of the appraised
value with the proceeds made payable to Champion
Mortgage, even if the debt is greater than the appraised
value.
> Please contact us for more information if you are
interested in this option and believe that the property value
is less than the outstanding principal balance.
* * *
-3-
J-A21026-21
The Mortgagor or the Mortgagor’s estate may request[] an
appraisal at his or her own expense if an estimate of the
property’s current value is desired. If none of the actions
above are taken in thirty (30) days, Foreclosure will be
initiated by the Servicer within three (3) months, but not
less than one (1) month.
Whichever option that you choose, HUD[3] guidelines require
that we obtain a full appraisal on the property. You may be
receiving a phone call from our appraisal vendor in the
coming weeks to attempt to schedule an appointment to
visit the property.
Notably, this portion of the Letter parrots the language in
Paragraph 9(d) of the mortgage. This language is prescribed by
and mandated for inclusion in reverse mortgages by the
Department of Housing and Urban Development, 24 CFR §
206.125.
Upon receiving the Letter, Ms. Davis sought and obtained an
appraisal. The appraisal Ms. Davis obtained is dated November
16, 2016. According to the appraisal obtained by Ms. Davis, the
value of the property was $28,000. Ms. Davis credibly testified
that the Estate . . . was ready willing and able to pay [Champion]
$26,600 for the property, which was 95% of the appraised value
of the property per the terms of Paragraph B of the November 7,
2016 letter.
Ms. Davis testified that after she obtained the appraisal, she
attempted to make payoff arrangements with Champion
Mortgage. Shortly after contacting Champion Mortgage, Ms. Davis
was advised that the loan had been sold to [Appellant].
After Ms. Davis learned that the loan had been sold to [Appellant],
she was advised via telephone by [Appellant] and/or its mortgage
servicer, Reverse Mortgage Solutions, that she had to obtain
another appraisal, which she did. The second appraisal obtained
by Ms. Davis valued the property at $30,000. Ms. Davis sent this
appraisal to [Appellant]. [Appellant] obtained its own appraisal of
the property, which also valued the property at $30,000. Ms.
Davis offered to pay Bank of America $28,000, which is 95% of
the $30,000 appraised value. According to Ms. Davis, [Appellant]
never accepted [either $26,000 or] $28,000 and instead
____________________________________________
3 The United States Department of House and Urban Development.
-4-
J-A21026-21
demanded payment of $35,000 to resolve the default. There is
no evidence that [Appellant] had obtained its own appraisal to
support the $35,000 payoff quote. [Appellant’s] demand for
$35,000 was the last Ms. Davis heard from [Appellant] before
[Appellant] took steps to initiate this foreclosure action.
Trial Ct. Op., 9/23/20, at 2-4 (citations and footnote omitted, formatting
altered).
Appellant filed a complaint in foreclosure on April 21, 2017. Appellees
filed an answer and new matter on March 16, 2018, asserting, among other
things, that Appellant refused to accept payment equal to 95% of the
appraised value of the Property to prevent a foreclosure and this violated
applicable federal regulations. R.R. at 61a-68a.
On November 25, 2019, Appellant filed a motion in limine seeking to
preclude evidence and testimony regarding Champion’s and Appellant’s loss
mitigation efforts. R.R. at 14a. The trial court denied that motion at the
outset of the non-jury trial. N.T. Trial, 1/21/20, at 4, R.R. at 258a.
By way of further background, the trial court explained:
A non-jury trial was held before th[e trial c]ourt on January 21,
2020. The [c]ourt heard witness testimony and accepted
documentary evidence. Following the presentation of all of the
evidence and argument by both sides, the [c]ourt found in favor
of [Appellees]. The [c]ourt determined that [Appellant] had failed
to sustain its burden that it was entitled to foreclose on the
property. As the fact finder, th[e trial c]ourt made witness
credibility determinations and weighed the importance to give to
the admitted evidence.
* * *
At trial, counsel for [Appellant] extensively cross[-]examined Ms.
Davis and Andre Freeman Scott, who is Bessie Emory’s heir, on
the Estate’s supposed (in)ability to pay the sums necessary to
-5-
J-A21026-21
resolve the default. The [c]ourt concluded that [Appellees]
testified credibly that they were financially in a position to resolve
the default, but that [Appellant] never gave the Estate the
opportunity to do so.
The [c]ourt concluded that the [Appellant’s] “ability to pay”
questions at trial were an attempt by [Appellant] to post hoc
justify why [Appellant] short circuited its own process that it
(through its predecessor Champion Mortgage) set out for
[Appellees] to resolve the default. [Appellant] offered no
testimony or documents showing that [Appellant] ever
meaningfully participated in the process set forth in Paragraph B
of the Letter.
Instead, [Appellees’] testimony at trial — and [Appellant’s] own
Complaint allegations — reflects that after [Appellant] had
purchased the loan from Champion Mortgage, it promptly sent
[Appellees] a foreclosure letter on March 7, 2017 and initiated this
foreclosure action on April 21, 2017.
The Trial Worksheet prepared by the [trial c]ourt finding in favor
of [Appellees] states that [Appellant] had failed to prove a
condition precedent to Paragraph 9(d) of the mortgage.
Trial Ct. Op. at 4 (citations omitted).
Appellant filed a timely post-trial motion, which requested judgment
notwithstanding the verdict (JNOV). In its post-trial motion, Appellant
contended that the trial court erred in holding that Paragraph 9(d) of the
mortgage was applicable to the default in this matter, i.e., the death of the
mortgagor. R.R. at 282a-84a. Appellant alternatively claimed that even if
Paragraph 9(d) was applicable to the default resulting from the death of the
mortgagor, Appellant had established that it and Champion had complied with
requirements of that paragraph by providing Appellees with sufficient notice
prior to filing the instant foreclosure action. Id. at 284a-85a.
-6-
J-A21026-21
On August 18, 2020, the trial court held a virtual oral argument on
Appellant’s post-trial motion. The trial court issued an opinion and order
denying the post-trial motion on September 23, 2020.4 Judgment was
entered on October 13, 2020. Appellant then filed a timely notice of appeal.
The trial court did not order Appellant to file a concise statement of
errors pursuant to Pa.R.A.P. 1925(b). The trial court filed its September 23,
2020 opinion denying Appellant’s post-trial motion in lieu of a separate Rule
1925(a) opinion.
Appellant raises the following issues for our review, which we reorder as
follows:
1. Whether the trial court erred and abused its discretion in
allowing testimony regarding loss mitigation by denying
[Appellant’s] motion in limine and overruling [Appellant’s]
objection where the loss mitigation testimony had no bearing
on the execution of the loan documents, default, and amount
due under mortgage.
2. Whether the trial court erred as matter of law and abused its
discretion by entering a verdict in favor of [Appellees] based
upon Paragraph 9(d) of the mortgage where Paragraph 9(d)
____________________________________________
4 We note that Appellant did not request a directed verdict orally or in writing
at the close of evidence at trial. “Ordinarily, to preserve the right to request
judgment notwithstanding the verdict (JNOV), a party must first request a
binding charge to the jury or move for a directed verdict or compulsory non-
suit. A motion for a directed verdict is appropriate even in the non-jury trial
context.” Wag-Myr Woodlands Homeowners Ass’n by Morgan v.
Guiswite, 197 A.3d 1243, 1250 n.10 (Pa. Super. 2018) (citation omitted).
Where the trial court did not find waiver of the appellant’s post-trial motion
for JNOV and addressed the issue, we have declined to find waiver. See id.Here, the trial court did not find waiver. Therefore, we proceed with our
discussion.
-7-
J-A21026-21
was not applicable as the parties stipulated to default under
9(a)(i).
3. Whether the trial court erred as a matter of law and abused its
discretion when denying [Appellant’s] post-trial motion for
judgment as a matter of law and alternative request for a new
trial.
Appellant’s Brief at 4 (formatting altered).
Motion in Limine
Appellant argues that the trial court erred in denying Appellant’s motion
in limine to preclude Appellees from introducing evidence regarding loss
mitigation and payoff. Appellant’s Brief at 34-40. However, before we reach
the merits of this issue, we must determine if Appellant has preserved it for
appeal. See Tucker v. R.M. Tours, 939 A.2d 343, 346 (Pa. Super. 2007)
(stating that this Court “may sua sponte determine whether issues have been
properly preserved for appeal” (citation and formatting altered)).
Rule of Civil Procedure 227.1 provides:
(a) After trial and upon the written Motion for Post-Trial Relief filed
by any party, the court may
(1) order a new trial as to all or any of the issues; or
(2) direct the entry of judgment in favor of any party; or
(3) remove a nonsuit; or
(4) affirm, modify or change the decision; or
(5) enter any other appropriate order.
(b) Except as otherwise provided by Pa.R.E. 103(a), post-trial
relief may not be granted unless the grounds therefor,
(1) if then available, were raised in pre-trial proceedings or by
motion, objection, point for charge, request for findings of fact
-8-
J-A21026-21
or conclusions of law, offer of proof or other appropriate
method at trial; and
(2) are specified in the motion. The motion shall state how the
grounds were asserted in pre-trial proceedings or at trial.
Grounds not specified are deemed waived unless leave is
granted upon cause shown to specify additional grounds.
(c) Post-trial motions shall be filed within ten days after
(1) verdict, discharge of the jury because of inability to agree,
or nonsuit in the case of a jury trial; or
(2) notice of nonsuit or the filing of the decision in the case of
a trial without jury.
If a party has filed a timely post-trial motion, any other party may
file a post-trial motion within ten days after the filing of the first
post-trial motion.
Pa.R.C.P. 227.1.
Our Supreme Court has explained that “[u]nder Rule 227.1, a party
must file post-trial motions at the conclusion of a trial in any type of action in
order to preserve claims that the party wishes to raise on appeal.” Chalkey
v. Roush, 805 A.2d 491, 496 (Pa. 2002) (citation omitted and formatting
altered). “Grounds not specified by a party in post-trial motions pursuant to
Rule 227.1 shall be deemed waived on appellate review.” Id. at 494 (citing,
inter alia, Pa.R.C.P. 227.1(b)(2)).
Here, Appellant filed a motion in limine on November 25, 2019, seeking
to preclude evidence and testimony regarding loss mitigation. See R.R. at
14a. The trial court denied that motion at the outset of the trial. See N.T.
Trial at 4, R.R. at 258a. Appellant renewed its objection to the admission of
loss mitigation evidence during trial. See id. at 30, R.R. at 265a. However,
-9-
J-A21026-21
Appellant did not raise the denial of its motion in limine in its post-trial motion.
See R.R. at 282a-85a. Therefore, we conclude Appellant has waived this issue
for appellate review. See Chalkey, 805 A.2d at 494.
The Trial Court’s Verdict
Appellant’s next two issues are related, and therefore, we summarize
them together. Appellant claims that it proved all of the elements necessary
to establish that it was entitled to a judgment in foreclosure and the trial court
erred by concluding that Appellant had failed to meet a condition precedent in
the reverse mortgage. Appellant’s Brief at 16-20, 25-26. Specifically,
Appellant asserts that notwithstanding Champion’s November 7, 2016 letter
to Appellees, which “parrot[ed]” the language of Paragraph 9(d), “[Paragraph]
9(d) is only triggered when mortgage is in default under [Paragraphs] 9(a)(ii)
and (b).” Id. at 22-23; see also id. at 27. Appellant contends that the total
amount owed under the reverse mortgage was due because of Mortgagor’s
death pursuant to Paragraph 9(a)(i). Id. at 20-22. For these reasons,
Appellant further argues that the trial court erred in concluding that Paragraph
9(d) was applicable to the facts of this case. Id. at 20, 22-24, 27; see also
id. at 25 (arguing that under Chandler v. Wells Fargo Bank, 2014 WL
31315 (N.D. Cal. Jan. 3, 2014), when a reverse mortgage is due and payable
because of the mortgagor’s death, the mortgagor’s heirs are not entitled to
notice of and the right to exercise the option to purchase the mortgaged
property for 95% of its appraised value).
- 10 -
J-A21026-21
Appellant alternatively argues that even if it was required under
Paragraph 9(d) to give notice to Mortgagor’s heirs prior to commencing
foreclosure, Champion’s November 7, 2016 letter was adequate notice
because Appellant did not commence this action until more than thirty days
after Champion sent that letter. Id. at 23-24, 27.
Appellant further contends that the trial court’s conclusion “essentially
turned FHA guidelines into an affirmative step or element required to be
proven by [Appellant], which is contrary to the law.” Id. at 24. Appellant
asserts that this Court has previously held that federal regulations and
guidelines do not have the force of law and may not be asserted as an
affirmative defense in a Pennsylvania foreclosure action. Id. at 24-25 (citing
Fleet Real Estate Funding Corp. v. Smith, 530 A.2d 919, 921-24 (Pa.
Super. 1987) (Smith)). Appellant claims that under Smith, an equitable
defense arises “only where the mortgagee fails to service a loan within
reasonable expectations of good faith and fair dealing.” Id. at 25. Appellant
concludes that the “trial court improperly imposed an affirmative condition on
[Appellant] in its foreclosure action based upon FHA guidelines and
regulations” and the verdict in favor of Appellees should be reversed. Id. at
26-27.
For these same reasons, Appellant also argues that the trial court erred
by denying Appellant’s post-trial motion for JNOV or a new trial. Id. at 28-
33.
- 11 -
J-A21026-21
Appellees respond that the mortgagee’s failure to follow applicable HUD
guidelines is an affirmative defense to a mortgage foreclosure action.
Appellees’ Brief at 22-27 (citing, inter alia, Smith, 530 A.2d at 923).
Specifically, Appellees argue that the reverse mortgage in the instant matter
was subject to HUD regulations governing home equity conversion mortgages,
another term for reverse mortgages. Id. at 11-12. Appellees assert that
under 24 C.F.R. § 206.125, the heirs of a deceased mortgagor have the
opportunity to pay off the loan for 95% of the appraised value of the
mortgaged property. Id. at 12-16. Appellees contend that Appellant was
required to comply with the HUD regulations and accept Appellees’ offer to
“pay off the loan for 95% of the appraised value of the property.” Id. at 11-
16; see also id. at 24-26 (citing, inter alia, HUD Handbook 4330.1 §§ 13-33,
13-34 for the proposition that the mortgagor’s estate and heirs are entitled to
notice of the 95% payoff option, and that if the mortgagor’s estate makes
such a payment at any time prior to foreclosure sale, the mortgagee “must
accept it and discontinue the foreclosure proceedings”). Appellees claim that
the trial court found that this 95% payoff procedure is set forth in both the
HUD regulations and Paragraph 9(d) of the reverse mortgage. Id. at 16.
Appellees argue that there was sufficient evidence to support the trial court’s
finding that Appellees accepted Champion’s offer to pay off the reverse
mortgage for 95% of the appraised value of the Property to resolve the
default, but that Champion and Appellant failed to follow through with
- 12 -
J-A21026-21
Appellees. Id. at 26-28. Appellees further argue that the trial court properly
denied Appellant’s post-trial motion. Id. at 29-34.
Our appellate role in cases arising from non-jury trial verdicts is
to determine whether the findings of the trial court are supported
by competent evidence and whether the trial court committed
error in any application of the law. The findings of fact of the trial
judge must be given the same weight and effect on appeal as the
verdict of a jury. We consider the evidence in a light most
favorable to the verdict winner. We will reverse the trial court
only if its findings of fact are not supported by competent evidence
in the record or if its findings are premised on an error of law.
However, where the issue concerns a question of law, our scope
of review is plenary.
The trial court’s conclusions of law on appeal originating from a
non-jury trial are not binding on an appellate court because it is
the appellate court’s duty to determine if the trial court correctly
applied the law to the facts of the case.
Bank of N.Y. Mellon v. Bach, 159 A.3d 16, 19 (Pa. Super. 2017) (Bach)
(citation omitted).
When reviewing an order resolving a post-trial motion for JNOV, our
standard of review is as follows:
A judgment notwithstanding the verdict can be entered upon two
bases: (1) where the movant is entitled to judgment as a matter
of law; and/or, (2) the evidence was such that no two reasonable
minds could disagree that the verdict should have been rendered
for the movant. When reviewing a trial court’s denial of a motion
for judgment notwithstanding the verdict, we must consider all of
the evidence admitted to decide if there was sufficient competent
evidence to sustain the verdict. In so doing, we must also view
this evidence in the light most favorable to the verdict winner,
giving the victorious party the benefit of every reasonable
inference arising from the evidence and rejecting all unfavorable
testimony and inference. Concerning any questions of law, our
scope of review is plenary. Concerning questions of credibility and
weight accorded the evidence at trial, we will not substitute our
- 13 -
J-A21026-21
judgment for that of the finder of fact. If any basis exists upon
which the [trial] court could have properly made its award, then
we must affirm the trial court’s denial of the motion for judgment
notwithstanding the verdict. A judgment notwithstanding the
verdict should be entered only in a clear case.
Karden Constr. Servs., Inc. v. D’Amico, 219 A.3d 619, 627 (Pa. Super.
2019) (Karden) (citation omitted), appeal denied, 229 A.3d 234 (Pa. 2020).
Our Supreme Court has explained that a judgment notwithstanding the
verdict
should only be entered in a clear case with any doubts resolved in
favor of the verdict winner. An appellate court “stands on a
different plane” than a trial court, and it is the trial court that has
the benefit of an “on-the-scene evaluation of the evidence.” As
such, while the appellate court may disagree with a verdict, it may
not grant a motion for JNOV simply because it would have come
to a different conclusion. Indeed, the verdict must stand unless
there is no legal basis for it.
Menkowitz v. Peerless Publications, Inc., 211 A.3d 797, 804 (Pa. 2019)
(citations omitted).
This Court has explained:
A mortgage is a formal document of specific character and it
should be strictly construed. A mortgage agreement, as a
contract, must be interpreted as a whole. One part of a contract
cannot be interpreted so as to annul another part of the contract.
A contract must be construed, if at all possible, to give effect to
all of its terms. Additionally, a contract’s terms, if ambiguous, are
construed against the drafter.
Second Fed. Sav. & Loan Ass’n v. Brennan, 598 A.2d 997, 999 (Pa. Super.
1991) (Brennan) (citations omitted). Further, it is well settled that “[i]t is
not the province of the court to alter a contract by construction or to make a
- 14 -
J-A21026-21
new contract for the parties; its duty is confined to the interpretation of the
one which they have made for themselves, without regard to its wisdom or
folly.” SBA Towers II LLC v. Wireless Holdings, LLC, 231 A.3d 901, 908
(Pa. Super. 2020) (en banc) (citation omitted), appeal denied, 240 A.3d 105(Pa. 2020).
Here, the trial court stated:
During the oral argument on its post-trial motion, counsel for
[Appellant] argued that Paragraph 9(d) of the mortgage is
inapplicable because the mortgage was due and payable under
Paragraph 9(a)(i). [Appellant] made this same claim at trial. The
record, however, does not support this contention.
While counsel for [Appellant] made a passing reference to
Paragraph 9(a) during argument at trial, the testimony
[Appellant] elicited from its own, sole witness only addressed the
payoff figure [Appellant] contended is owed by [Appellees].
[Appellant] did not elicit any testimony from its witness regarding
the reasons for foreclosure, including any facts that would support
foreclosure under Paragraph 9(a)(i), as [Appellant] now contends.
The Letter itself — the first written communication from
[Appellant] to [Appellees] following the death of Bessie Emory —
does not reference Paragraph 9(a)(i) or quote language from that
paragraph. The record simply does not support [Appellant’s]
contention. Furthermore, [Appellant’s] questions at trial on the
Estate’s (in)ability to pay the amount equal to 95% of the
appraised value undermines [Appellant’s] argument in its post-
trial motion that “Paragraph 9(d) does not apply to the default in
this case (i.e. death of [mortgagor]).”
* * *
A reverse mortgage is a contract. The rights and obligations of
the parties are governed by the mortgage documents. In this
case, [Appellees] presented evidence at trial that [Appellant],
upon the death of Bessie Emory, sent [Appellees] an offer to
resolve the default pursuant to Paragraph 9(d) of the mortgage.
[Appellees] timely accepted the “offer” set forth in Paragraph 9(d)
of the mortgage (the Letter repeats Paragraph 9(d) verbatim).
[Appellant] failed to adhere to its obligations because it instituted
- 15 -
J-A21026-21
this foreclosure action instead of allowing [Appellees] to resolve
the default.
Trial Ct. Op. at 5, 7 (citations omitted and formatting altered).
The reverse mortgage states in relevant part:
9. Grounds for Acceleration of Debt.
(a) Due and Payable. [Mortgagee] may require immediate
payment in full of all sums secured by this Security Instrument
if:
(i) A [Mortgagor] dies and the Property is not the principal
residence of at least one surviving [Mortgagor]; or
(ii) All of a [Mortgagor’s] title in the Property (or his or her
beneficial interest in a trust owning all or part of the
Property) is sold or otherwise and no other [Mortgagor]
retains (a) title to the Property in fee simple, (b) a leasehold
under a lease for not less than 99 years which is renewable
or a lease having a remaining period of not less than 50
years beyond the date of the 100th birthday of the youngest
[Mortgagor], or (c) a life estate in the Property (or a
beneficial interest in a trust with such an interest in the
Property).
(b) Due and Payable with Secretary Approval.
[Mortgagee] may require immediate payment in full of all sums
secured by this Security Instrument, upon approval by an
authorized representative of the Secretary, if:
(i) The Property ceases to be the principal residence of a
[Mortgagor] for reasons other than death and the Property
is not the principal residence of at least one other
[Mortgagor]; or
(ii) For a period of longer than twelve (12) consecutive
months, a [Mortgagor] fails to physically occupy the
Property because of physical or mental illness and the
Property is not the principal residence of at least one other
[Mortgagor]; or
(iii) An obligation of the [Mortgagor] under this Security
Instrument is not performed.
- 16 -
J-A21026-21
* * *
(d) Notice to Secretary and [Mortgagor]. [Mortgagee]
shall notify the Secretary and [Mortgagor] whenever the loan
becomes due and payable under this Paragraph 9(a)(ii) and
(b). [Mortgagee] shall not have the right to foreclosure until
[Mortgagor] has had thirty (30) days notice to either:
(i) Correct the matter which resulted in the Security
Instrument coming due and payable; or
(ii) Pay the balance in full; or
(iii) Sell the Property for the lesser of the balance or 95% of
the appraised value and apply the net proceeds of the sale
toward the balance; or
(iv) Provide the [Mortgagee] with a deed in lieu of
foreclosure.
R.R. at 82a.
Here, Paragraph 9(a)(i) provides that the mortgagee may require
immediate payment in full of all sums secured by reverse mortgage if the
mortgagor dies and the Property is not the principal residence of at least one
surviving mortgagor. See id. Mrs. Emory was the sole mortgagor on the
reverse mortgage. See id. At trial, the parties stipulated that the mortgage
was in default due to the death of Mortgagor. See N.T. Trial at 11, R.R. at
260a.
It is undisputed that Appellant, and its predecessor in interest, provided
Appellees notice pursuant to Paragraph 9(d) more than thirty days before
Appellant initiated this foreclosure action. See Trial Ct. Op. at 2-4. The trial
court also concluded that under Paragraph 9(d) of the mortgage, Appellees
could prevent foreclosure by paying Appellant an amount equal to 95% of the
- 17 -
J-A21026-21
appraised value of the Property. See id. at 5, 7. The trial court further found
that Appellees offered to pay Appellant an amount equal to 95% of the
appraised value of the Property to prevent a foreclosure, which Appellant
rejected and demanded a greater amount. See id. at 4.
However, we note that the mortgage does not contain any provision
requiring the mortgagee to comply with the mortgagor’s invocation of any of
the foreclosure alternatives set forth in Paragraph 9(d) after the mortgagee
has provided the thirty days’ notice required under that paragraph. See R.R.
at 79a-87a. Nor do the terms of the mortgage establish a penalty for the
mortgagee or remedy for the mortgagor if the mortgagee refuses the
mortgagor’s invocation of one of Paragraph 9(d)’s foreclosure alternatives,
and the mortgagee instead proceeds to foreclosure after the thirty-day period
has passed. See id. Therefore, we are constrained to conclude that the trial
court erred in finding that Paragraph 9(d) is a condition precedent to
foreclosure insofar as the mortgagee must accept a mortgagor’s offer to sell
the property for 95% of its appraised value after the thirty-day period set
forth in Paragraph 9(d) had expired. See SBA Towers II LLC, 231 A.3d at
908.
As we may affirm on any legal basis, we shall also examine Appellees’
claim that they established an equitable defense based on Appellant’s failure
to follow the applicable federal regulations. See Menkowitz, 211 A.3d at
804; Karden, 219 A.3d at 627.
- 18 -
J-A21026-21
This Court has stated that “federal law does not mandate that a
mortgagee comply with the regulations and [HUD] Handbook provisions prior
to foreclosing on an FHA-insured mortgage[,]” but it has held that “a
mortgagor of an FHA-insured mortgage may raise as an equitable defense to
foreclosure, the mortgagee’s deviation from compliance with the forbearance
provisions of the HUD Handbook and regulations.” Smith, 530 A.2d at 922-
23; accord Bank of New York Mellon for Certificate Holders of CWALT,
Inc., Alternative Loan Tr. 2007-HY6 Mortgage Pass-through
Certificates Series 2007-HY6 v. Brooks, 169 A.3d 667, 672 n.4 (Pa.
Super. 2017) (Brooks) (noting that “a mortgagor’s failure to comply with
federal regulations constitutes an affirmative defense to a foreclosure action”
(citation omitted)).
The applicable HUD regulations concerning reverse mortgages are
codified at 24 C.F.R. §§ 206.1-206.308. At the time of Mortgagor’s death,
Section 206.27 stated “[t]he mortgage shall state that the mortgage balance
will be due and payable in full if a mortgagor dies and the property is not the
principal residence of at least one surviving mortgagor. . . .” 24 C.F.R. §
206.27(c)(1) (subsequently amended eff. Sept. 17, 2017).
Further, the regulations provided:
(a) Initial action by the mortgagee.
(1) The mortgagee shall notify the Secretary whenever the
mortgage is due and payable under the conditions stated in
§ 206.27(c)(1), or one of the conditions stated in §
206.27(c)(2) has occurred.
- 19 -
J-A21026-21
(2) After notifying the Secretary, and receiving approval of the
Secretary when needed, the mortgagee shall notify the
mortgagor that the mortgage is due and payable. The
mortgagee shall require the mortgagor to (i) pay the mortgage
balance, including any accrued interest and MIP, in full; (ii) sell
the property for at least 95% of the appraised value as
determined under § 206.125(b), with the net proceeds of the
sale to be applied towards the mortgage balance; or (iii)
provide the mortgagee with a deed in lieu of foreclosure. The
mortgagor shall have 30 days in which to comply with the
preceding sentence, or correct the matter which resulted in the
mortgage coming due and payable, before a foreclosure
proceeding is begun.
24 C.F.R. § 206.125(a)(1)-(2) (subsequently amended eff. Jan. 19, 2017)
(emphases added). For the purposes of these regulations, the term
“mortgagor” includes both a mortgagor’s estate and personal representative.
24 C.F.R. § 206.123(b) (subsequently amended eff. Sept. 18, 2017).
Likewise, the HUD handbook titled “Administration of Insured Home
Mortgages” (HUD Handbook 4330.1)5 provides that for a due and payable
mortgage, the mortgagee must provide the mortgagor or the mortgagor’s
estate with notice that the mortgagee will foreclose unless the mortgagor pays
the debt in full, sells the property for either 95% of the appraised value or the
debt, whichever is less, or deeds the property to the mortgagee. HUD
Handbook 4330.1 at § 13-33. The Handbook further provides:
If at any time prior to the foreclosure sale, the mortgagor or the
mortgagor’s estate sells the property . . . for 95% of the current
____________________________________________
5 See U.S. Department of Housing and Urban Development, Housing
Handbook 4330.1, https://www.hud.gov/program_offices/administration/
hudclips/handbooks/hsgh/4330.1 (last visited Dec. 16, 2021).
- 20 -
J-A21026-21
appraised value . . . the mortgagee shall discontinue the
foreclosure proceedings and accept the payoff.
Id. at § 13-34(c).
The trial court did not discuss whether the applicable regulations and
HUD Handbook permitted Appellees to avoid foreclosure under the same
conditions as Paragraph 9(d) of the mortgage.
Here, Appellees raised Appellant’s failure to comply with relevant federal
regulations governing reverse mortgages in their New Matter. See R.R. at
61a-68a. Appellant contends that under Smith, an equitable defense arises
“only where the mortgagee fails to service a loan within reasonable
expectations of good faith and fair dealing.” Appellant’s Brief at 25. We
disagree. The Smith Court concluded that a mortgagor may assert as an
affirmative defense the mortgagee’s “deviation from compliance with the
forbearance provisions of the HUD Handbook and regulations.” Smith, 530
A.2d at 923; accord Brooks, 169 A.3d at 672 n.4.6
According to 24 C.F.R. § 206.125(a)(1), the mortgage becomes due and
payable when any of the conditions set forth in Section 206.27(c)(1) occurs.
See 24 C.F.R. § 206.125(a)(1). One of the conditions set forth in Section
206.27(c)(1) is the mortgagor has died and the property is not the principal
____________________________________________
6 To the extent that Appellant relies on Chandler, a decision of the United
States District Court for the Northern District of California, for the proposition
that these regulations are not applicable to this foreclosure action, we
disagree. “Federal district court decisions offer this Court persuasive, but not
binding, authority.” Nicholas v. Hofmann, 158 A.3d 675, 690 n.21 (Pa.
Super. 2017) (citation omitted). Therefore, Chandler is not binding on this
Court. See id.- 21 -
J-A21026-21
residence of at least one surviving mortgagor. See id. § 206.27(c)(1).
Therefore, we conclude Appellees could exercise options to avoid foreclosure
set forth in Section 206.125(a)(2) following the death of Mrs. Emory, the sole
mortgagor. See id. § 206.125(a)(1)-(2); accord HUD Handbook 4330.1 at
§ 13-33. Although Section 206.125(a)(2) states that the mortgagor has thirty
days to exercise any of the foreclosure avoidance options, the HUD Handbook
provides that the mortgagee must accept a payoff in the amount of 95% of
the appraised value of the property at any time prior to the foreclosure sale.
Compare 24 C.F.R. § 206.125(a)(1)-(2), with HUD Handbook 4330.1 at §
13-34(c).
At trial, both Davis and Scott testified that they had informed Appellant
and Appellant’s predecessor-in-interest that they were exercising the option
to sell the Property for 95% of its appraised value to avoid foreclosure, but
Appellant refused to accept this amount, and instead demanded a greater
amount to avoid foreclosure. See Trial Ct. Op. at 2-4; see also N.T. Trial at
39-41, 52-54, R.R. at 267a-68a, 270a-71a. Viewing the evidence in the light
most favorable to Appellees as the verdict winner, we conclude that Appellees
established their affirmative defense that Appellant failed to comply with 24
C.F.R. § 206.125(a)(2) and HUD Handbook 4330.1. See Smith, 530 A.2d at
923; accord Brooks, 169 A.3d at 672 n.4. As we may affirm on any basis,
and because the verdict must stand unless there is no legal basis for it, we
- 22 -
J-A21026-21
affirm the trial court’s denial of Appellant’s motion for JNOV.7 See
Menkowitz, 211 A.3d at 804; Karden, 219 A.3d at 627. For these reasons,
we affirm the trial court’s judgment in favor of Appellees.
Judgment affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/3/2022
____________________________________________
7 Appellant also argued that the trial court erred in denying its request for a
new trial. Our review of the record indicates Appellant did not request a new
trial in its post-trial motion. See R.R. at 285a. Therefore, any claim that
Appellant is entitled to a new trial is waived. See Pa.R.C.P. 227.1(b)(2); cf.
Hall v. Owens Corning Fiberglass Corp., 779 A.2d 1167, 1169 (Pa. Super.
2001) (holding that the appellant waived its claim that it was entitled to JNOV
on appeal where it only requested a new trial in its post-trial motion).
- 23 -