Wachovia Bank v. Cumming, C.

J-A16020-15
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
WACHOVIA BANK, N.A. IN THE SUPERIOR COURT OF
PENNSYLVANIA
v.
COLIN CUMMING AND BENNU REALTY
GROUP, LLC
APPEAL OF: COLIN CUMMING No. 2861 EDA 2014
Appeal from the Order Entered January 25, 2013
In the Court of Common Pleas of Philadelphia County
Civil Division at No(s): December Term, 2008 No. 004646
BEFORE: LAZARUS, OLSON and PLATT,* JJ.
MEMORANDUM BY OLSON, J.: FILED OCTOBER 07, 2015
Appellant, Colin Cummings, appeals from the trial court order entered
on January 25, 2013, granting a motion for summary judgment filed by
Wachovia Bank, N.A. (Wachovia)1 and dismissing Appellant’s counterclaims
without prejudice. Upon review, we vacate and remand for trial.
The trial court set forth the facts and procedural history of this case as
follows:
This matter originated out of a loan for $252,781.50 from []
Wachovia to Lloyd Blagrove on January 10, 2007. Mr.
Blagrove is the managing member of co-defendant, Bennu
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1
Wells Fargo Bank, N.A., is the successor by merger to Wachovia. Wells
Fargo filed a brief in opposition to Appellant’s appeal. However, for clarity
and consistency, we will refer to Appellee as Wachovia throughout this
memorandum.
*Retired Senior Judge assigned to the Superior Court.
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Realty.[2] The loan was evidenced by a promissory note,
and secured by the real property located at 445 Olive
Street, in Philadelphia (“property”). The loan proceeds were
used by Bennu Realty to buy the property from [Appellant].
The mortgage document listed [Appellant] as the “grantor”
and the “mortgagor.” Mr. Blagrove was listed as the
“borrower” and Wachovia was the mortgagee “lender.”
[Appellant] executed the mortgage document on the
property to secure the loan. However, the deed transferring
the property to Bennu Realty was never filed of record.
[Wachovia] never sought payment on the loan from
[Appellant]. Bennu Realty defaulted on the loan after one
year, and [Wachovia] filed [a] mortgage foreclosure action
in December 2008. [Wachovia] named as defendants both
Bennu [Realty] and [Appellant]. Bennu [Realty] did not file
an answer to the complaint. [Appellant] filed an answer,
new matter, cross-claims and counterclaims. [Wachovia]
contended that [Appellant] was a necessary party in the
foreclosure action because he remained the owner of the
property, the deed to Bennu [Realty] having never been
recorded. [Wachovia] attempted to work with [Appellant]
by suggesting he transfer the property to Bennu [Realty] by
quitclaim deed, but [Appellant] declined. [Wachovia] filed a
separate action to quiet title. On January 6, 2012
[Wachovia] obtained a default judgment in the quiet title
action and Bennu Realty was deemed to be the real owner
of the property nunc pro tunc to the sale date of January
10, 2007. In that same action [Wachovia] was granted an
equitable mortgage lien against the property under the
same terms and conditions [under] the original mortgage
document. After title to the property was quieted by a
judgment entered in the quiet title action, [Wachovia]
discontinued this foreclosure action against both [Appellant
and Bennu Realty]. [Appellant] did not discontinue his
counterclaims against [Wachovia]; nor did he discontinue
his cross-claims against Bennu [Realty]. [Wachovia] filed
for summary judgment on the counterclaims, which [the
trial court] granted without prejudice on January 25, 2013.
[Appellant] appealed []. On March 7, 2014, [this Court]
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2
Bennu Realty is not a party to this appeal.
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quashed the appeal and the case was remanded to the trial
court because [Appellant’s] cross-claims against Bennu
[Realty] were still pending.
Thereafter this matter was scheduled for trial and a bench
trial was held before the Honorable Alice Beck Dubow on
September 15, 2014 resulting in a finding in favor of
[Appellant] and against Bennu [Realty] in the amount of
$80,536.01. Neither post[-]trial motions nor an appeal was
filed. [Appellant] now appeals [the trial court’s] January
25, 2013 order which dismissed [Appellant’s] counterclaims
[against Wachovia].
Trial Court Opinion, 2/3/2014, at 1-3 (superfluous capitalization omitted;
page numbers supplied).
On appeal, Appellant presents the following issues for our review:
1. Did the trial court commit an error of law and/or abuse[]
its discretion by dismissing [Appellant’s] counterclaims
because [Appellant’s] counterclaims are part of or
incident to the creation of the mortgage, specifically,
fraud in the inducement of the mortgage?
2. Did the trial court commit an error of law and/or abuse[]
its discretion by granting a motion for summary
judgment when there was undisputed evidence of fraud
committed by Wachovia []?
3. Did the trial court commit an error of law and/or abuse[]
its discretion by granting a motion for summary
judgment wherein there was evidence of negligence
committed by Wachovia []?
4. Did the trial court commit an error of law and/or abuse[]
its discretion by granting a motion for summary
judgment wherein there was evidence of violations of
banking laws committed by Wachovia []?
5. Did the trial court commit an error of law and/or abuse[]
its discretion by granting [Wachovia’s] motion for
summary judgment to [Appellant’s] counterclaims,
because although the court dismissed the counterclaims
without prejudice, [Appellant] does not have a
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jurisdiction to refile his claims as the statute of
limitations may preclude all or some of his
counterclaims?
6. Did the trial court commit an error of law and/or abuse[]
its discretion by granting a motion for summary
judgment that was not ripe as discovery was ongoing?
Appellant’s Brief at 5-6 (superfluous capitalization and suggested answers
omitted).
In all of his issues presented on appeal, Appellant contends that the
trial court abused its discretion by granting summary judgment in
Wachovia’s favor and dismissing his counterclaims to the mortgage
foreclosure action. We will examine the contentions together. First,
Appellant argues, as a matter of law, that a borrower may assert a valid
counterclaim within the context of a mortgage foreclosure action alleging
that execution of the mortgage at issue was fraudulently induced Id. at 13.
Appellant claims “he produced evidence of a fraud as Wachovia created a
mortgage he did not even know about.” Id. at 15. More specifically, he
claims “[t]he buyer [of the property at issue], Bennu Realty, LLC, in
conjunction with Wachovia Bank’s employee, Dana Vernon, utilized
[Appellant’s] good credit and real estate, to purchase the Olive Street
property” and “Bennu Realty obtained in effect an unsecured loan, and Dana
Vernon and Wachovia Bank profited from [that] loan.” Id. at 16. As a
result, Appellant maintains he lost income from residential rentals, after
losing his business privilege license, and he has incurred legal fees due to
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the foreclosure action. Id. at 15. He also claims he still is listed as the
mortgagor and receives real estate bills from the Philadelphia school district,
as well as utility bills for the property. Id. at 22.
Next, Appellant asserts:
If not fraudulent and intentional, it was negligent that
Wachovia’s employees prepared a mortgage for
[Appellant’s] signature, that was filed in the public records,
when not only didn’t he apply for a mortgage, he was the
[s]eller of the home and signed a deed transferring
ownership on the same day as the mortgage was signed.
Moreover, if not fraudulent and intentional, it was negligent
for Wachovia to file the mortgage with the Recorder of
Deeds and to not file the deed signed by [Appellant]
transferring the property. As such, the public record and
internal documents of Wachovia appeared to demonstrate a
home improvement loan was taken by [Appellant], rather
than what actually occurred, the sale of the home from
[Appellant] to Bennu Realty Group, LLC.
Id. at 20. In further support of his claim that he did not enter into a
mortgage, Appellant posits that Wachovia did not send him residential
mortgage debtor disclosures as required under the Truth in Lending Act and
the Real Estate Settlement Procedures Act. Id. at 21. Appellant claims
summary judgment was premature because discovery deadlines were not
established and Appellant requested depositions of key witnesses. Id. at 24.
Finally, Appellant argues that when the trial court dismissed his
counterclaims without prejudice it acknowledged valid claims but suggested
there was a more appropriate venue or jurisdiction. Id. at 25-28. Appellant
argues that he is without recourse on some claims, however, because the
applicable statute of limitations may have already expired. Id. at 25.
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We begin with our standard of review:
[O]ur standard of review of an order granting summary
judgment requires us to determine whether the trial court
abused its discretion or committed an error of law. Our
scope of review is plenary. In reviewing a trial court's grant
of summary judgment, we apply the same standard as the
trial court, reviewing all the evidence of record to determine
whether there exists a genuine issue of material fact. We
view the record in the light most favorable to the non-
moving party, and all doubts as to the existence of a
genuine issue of material fact must be resolved against the
moving party. Only where there is no genuine issue as to
any material fact and it is clear that the moving party is
entitled to a judgment as a matter of law will summary
judgment be entered. All doubts as to the existence of a
genuine issue of a material fact must be resolved against
the moving party.
* * *
Upon appellate review, we are not bound by the trial court's
conclusions of law, but may reach our own conclusions.
Petrina v. Allied Glove Corp., 46 A.3d 795, 797–798 (Pa.
Super. 2012) (internal citations omitted).
Rule of Civil Procedure 1035 governs motions for summary
judgment and provides, in relevant part, as follows:
After the relevant pleadings are closed, but within
such time as not to unreasonably delay trial, any
party may move for summary judgment in whole or
in part as a matter of law
(1) whenever there is no genuine issue of any
material fact as to a necessary element of the
cause of action or defense which could be
established by additional discovery or expert
report, or
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(2) if, after the completion of discovery relevant to
the motion, including the production of expert
reports, an adverse party who will bear the
burden of proof at trial has failed to produce
evidence of facts essential to the cause of
action or defense which in a jury trial would
require the issues to be submitted to a jury.
Pa.R.C.P. 1035.2. This Court has explained the application
of this rule as follows:
Motions for summary judgment necessarily and
directly implicate the plaintiff's proof of the elements
of a cause of action. Summary judgment is proper if,
after the completion of discovery relevant to the
motion, including the production of expert reports,
an adverse party who will bear the burden of proof
at trial has failed to produce evidence of facts
essential to the cause of action or defense which in a
jury trial would require the issues to be submitted to
a jury. In other words, whenever there is no
genuine issue of any material fact as to a necessary
element of the cause of action or defense, which
could be established by additional discovery or
expert report and the moving party is entitled to
judgment as a matter of law, summary judgment is
appropriate. Thus, a record that supports summary
judgment either (1) shows the material facts are
undisputed or (2) contains insufficient evidence of
facts to make out a prima facie cause of action or
defense.
Petrina, 46 A.3d at 798.
Criswell v. Atl. Richfield Co., 115 A.3d 906, 908-909 (Pa. Super. 2015).
Initially, we note that the trial court in this case granted summary
judgment on a procedural consideration which it raised sua sponte.
Specifically, the trial court dismissed Appellant’s counterclaims because it
determined that the counterclaims did not arise from the same transaction
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or occurrence as Wachovia’s mortgage foreclosure claims. We also note that
Wachovia never raises this contention in its responsive submissions. We
first examine whether the trial court properly entered summary judgment
based upon an issue it raised sua sponte. Then, we must determine whether
Appellant properly asserted his counterclaims within the scope of Wachovia’s
mortgage foreclosure action.
Our Supreme Court has declared:
[G]ranting summary judgment on an issue raised sua
sponte is inappropriate. This principle is well established in
the Superior and Commonwealth Courts. See, e.g.,
MacGregor v. Mediq, Inc., 576 A.2d 1123 (Pa. Super.
1990); Wojciechowski v. Murray, 497 A.2d 1342 (Pa.
Super. 1985); O'Hare v. County of Northampton, 782
A.2d 7 (Pa. Cmwlth. 2001); Travers v. Cameron County
School District, 544 A.2d 547 (Pa. Cmwlth. 1988). These
cases are grounded in a concern that trial courts should not
“act as the defendant's advocate.” O'Hare, at 15. For a
trial court to raise an argument in favor of summary
judgment sua sponte and grant summary judgment thereon
risks depriving the court the benefit of advocacy on the
issue, and depriving the parties the opportunity to be heard.
See Luitweiler v. Northchester Corp., 319 A.2d 899, 901
n. 5 (Pa. 1974) (holding it inappropriate for trial court to
raise failure to state claim upon which relief may be granted
sua sponte).
Yount v. Pennsylvania Dep't of Corr., 966 A.2d 1115, 1119 (Pa. 2009).
Thus, it was improper for the trial court to grant Wachovia’s motion for
summary judgment on an issue it raised sua sponte. Moreover, as discussed
below, the trial court committed an error of law in doing so.
Regarding counterclaims, Pennsylvania Rule of Civil Procedure 1148
provides:
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A defendant may plead a counterclaim which arises from
the same transaction or occurrence or series of transactions
or occurrences from which the plaintiff's cause of action
arose.
Pa.R.C.P. 1148.
This Court has previously determined:
Rule 1148 restricts every defendant to claims which arise
from the same transaction or occurrence from which the
plaintiff's cause of action arose.... No defendant may now
set off a claim against the plaintiff simply because its nature
is contractual or quasicontractual, as allowed in assumpsit
actions.
The claim must now arise, in some manner, from the
mortgage relationship.
Overly v. Kass, 554 A.2d 970, 973 (Pa. Super. 1989) (internal citation and
brackets omitted). “Thus, our task is to determine whether the facts alleged
in the [Appellant’s] counterclaim are ‘part of, or incident to, the creation of’
the mortgage itself.” Id. “This [rule of law] has been held to prevent a
counterclaim for fraud in the inducement of a contract of sale of property,
but allows a claim for fraud in the inducement of the mortgage itself.”3
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3
Wachovia contends that “in personam claims – like [Appellant’s] are
prohibited from being sought in an in rem foreclosure action.” Appellee’s
Brief at 17. Likewise, the trial court briefly mentions that “[t]he action at
issue herein is an in rem foreclosure on [p]roperty.” Trial Court Opinion,
12/2/2014, at 4 (unpaginated). Generally, a mortgage foreclosure action
may not include an in personam action to enforce a debtor’s personal
liability. See Newtown Village Partnership v. Kimmel, 621 A.2d 1036(Pa. Super. 1993). “The very definition of a mortgage foreclosure action
under [Pa.R.C.P.] 1141(a) excludes ‘an action to enforce a personal liability’;
this restriction is essential to preserve the ‘de terris’ identity of a mortgage
(Footnote Continued Next Page)
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Green Tree Consumer Disc. Co. v. Newton, 909 A.2d 811, 814 (Pa.
Super. 2006), citing Cunningham v. McWilliams, 714 A.2d 1054, 1057
(Pa. Super. 1998) (“[A] counterclaim in a foreclosure action is cognizable if it
alleges fraud in the inducement to the mortgage, but not if it alleges fraud in
the inducement to the contract of sale.”).
This Court’s analysis in Overly is instructive. In that case, the Overlys
agreed to sell their farm to the Kasses and the parties executed a mortgage
note. When the Kasses failed to make payment, the Overlys filed a
complaint against them. The Kasses filed a counterclaim claiming the
Overlys intentionally withheld information regarding defects to the property
and they were entitled to a set-off. More specifically:
The Kasses allege[d], inter alia, that the Overlys made
numerous misrepresentations regarding the condition of the
premises prior to sale. [] [T]he Kasses wish[ed] to receive a
set-off against the mortgage obligation by setting forth
allegations of oral representations. More specifically, the
representations include[d] that a rusted trailer, a rusted and
inoperable truck and a dilapidated lean-to would be
removed from the property by the Overlys; that the Kasses
would be entitled to about $14,000.00 in consideration of
the continued use of their property by the Peoples Natural
Gas Company; and that certain crop subsidies would be
immediately available to them from the government for
_______________________
(Footnote Continued)
foreclosure action and is equally binding on a mortgagee-plaintiff and a
mortgagor-defendant.” Signal Consumer Disc. Co. v. Babuscio, 390 A.2d
266, 270 (Pa. Super. 1978). “Rule 1148, which allows a defendant to
assert a contractual counterclaim arising out of a mortgage transaction
against the mortgagee, constitutes the only exception to this rule.” Id.(emphasis added). Thus, we reject Wachovia’s claim that Appellant’s
counterclaims are barred because the claims implicate in personam relief.
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growing certain types of crops. These alleged
representations concern[ed] the agreement of sale,
however, and [were] not part of, or incident to, the creation
of the mortgage.
The mortgage is an interest in the mortgaged property
created by a written agreement providing security for the
payment of a debt or an obligation. None of the facts
alleged by the Kasses deal[t] even remotely with the
creation of that security interest; rather, they deal[t] with
the agreement between the buyers and the sellers of the
property. Accordingly, the Kasses' counterclaim [did] not
arise as part of, or incident to, the creation of the mortgage.
Overly, 554 A.2d at 973-974 (footnote omitted).
By contrast, in this case, Appellant’s counterclaims allege fraud (or,
alternatively, negligence) in the creation of the mortgage instrument and the
mortgagor/mortgagee relationship. Appellant claims that at the closing for
the sale of his property, Wachovia fraudulently (or negligently) obtained his
signature and filed a mortgage in his name. He further avers that Wachovia
filed that mortgage, but did not file the original deed and, thus, Appellant
remained the record owner of the property. These allegations all relate
directly to the creation of the mortgage itself. Thus, we reject Wachovia’s
suggestion that Appellant’s “[c]ounterclaims are based solely on the alleged
conduct of [the bank] naming him as a defendant in the foreclosure action,
which action occurred almost two years after the creation of the mortgage.”
Appellee’s Brief at 16. Finally, Appellant alleges that despite Wachovia’s
notice and awareness of the errors, Wachovia still instituted a mortgage
foreclosure action against him. Certainly, Appellant contests being named in
the foreclosure action. However, he has consistently maintained that it was
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the wrongful creation of the mortgage, unknown to him at the time of its
execution, which, in turn, led to the mortgage foreclosure and his eventual
damages. As such, Appellant’s counterclaims were permissible in this
mortgage foreclosure action and summary judgment was not appropriate.
Order vacated. Case remanded for trial. Jurisdiction relinquished.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 10/7/2015
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