Opinion
J-S25018-17 No. 3552 EDA 2016
06-13-2017
U.S. BANK N.A., AS TRUSTEE IN TRUST FOR AND F/B/O THE CERTIFICATE HOLDERS OF MULTI-CLASS MORTGAGE PASS-THROUGH CERTIFICATES CHASEFLEX TRUST, SERIES 2006-2 v. DURAND O'MEARA A/K/A DURAND J. O'MEARA Appellant
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
Appeal from the Judgment Entered October 31, 2016
In the Court of Common Pleas of Chester County
Civil Division at No(s): 2013-11842-RC BEFORE: BENDER, P.J.E., and RANSOM, J., and FORD ELLIOTT, P.J.E. MEMORANDUM BY RANSOM, J.:
In this mortgage foreclosure action, Appellant Durand O'Meara appeals from the judgment entered October 31, 2016 awarding an in rem verdict in the amount $1,600,957.43, plus interest and costs in favor of Appellee U.S. Bank N.A., as trustee in trust for and f/b/o the Certificate Holders of Multi-Class Mortgage Pass-Through Certificates Chaseflex Trust, Series 2006-2, (hereinafter "U.S. Bank"). We affirm.
On May 17, 2006, Appellant executed a thirty-year, interest-first, fixed-rate mortgage ("Mortgage") to secure indebtedness on a loan extended by promissory note ("Note") in the sum of $1,045,000 in favor of the lender, Stonebridge Bank. The Note was signed by Linda Tipton, authorized assistant secretary of JP Morgan Chase Bank, N.A., and attorney in fact for Stoneridge Bank. See Note, 5/17/2006, at 3. The Note directed payment to JP Morgan Chase Bank, N.A. Id. On the same date, Stonebridge assigned the Mortgage to JP Morgan Chase Bank, N.A. On July 6, 2006, the assignment of the Mortgage to JP Morgan Chase Bank was recorded.
In June 2010, Appellant defaulted on his payment obligations under the Note. In September 2010, U.S. Bank sent Act 91 notice of default to Appellant. In December 2012, JP Morgan Chase confirmed the assignment of the Mortgage to U.S. Bank in writing. On February 20, 2013, the assignment of the Mortgage to U.S. Bank was recorded. Appellant failed to make further payments on the Note.
In December 2013, U.S. Bank commenced this mortgage foreclosure action. Following preliminary objections, U.S. Bank filed an amended and a second amended complaint. Appellant's third set of preliminary objections was denied. In December 2014, Appellant filed an answer and new matter. In October 2015, U.S. Bank filed a motion for summary judgment, which was denied in February 2016. The case proceeded to a bench trial on June 8, 2016.
On June 21, 2016, the court issued a memorandum and order granting an in rem verdict in favor of U.S. Bank in the amount $1,600,957.43, plus interest, at the per diem rate of $196.66, and other costs for foreclosure and sale of the mortgaged property. See Trial Ct. Decision, 6/21/2016.
Appellant filed a post-trial motion raising challenges to U.S. Bank's standing, the sufficiency of the Act 91 notice, and proof of the amount due under the loan. In September 2016, the court issued an order accompanied by memorandum opinion denying Appellant's post-trial motion. See Trial Ct. Mem., 9/27/2016.
Appellant timely appealed and filed a court-ordered Pa.R.A.P. 1925(b) statement. The court issued a response pursuant to 1925(a), asserting that the issues Appellant raises were addressed in its memorandum opinion denying the post-trial motion.
On appeal, Appellant raises the following issues:
1. Whether the Trial Court committed prejudicial error and abused its discretion when ruling on admissibility of and sufficiency of evidence of Plaintiff's claim of Holder of the subject Note. Rule 1925 Statement, No 1.
2. Whether the Trial Court committed prejudicial and reversible error and abused its discretion by admitting into evidence Notes, allonges, and/or mortgage assignments despite the absence of reliable evidence regarding status or authority of alleged conveying entities. Rule 1925 Statement, No 2.
3. Whether the Trial Court committed reversible and prejudicial error and abused its discretion concluding the Defendant lacked standing to challenge named Plaintiff as the "holder", in light of an unexplained discrepancy between the named Plaintiff and the entity named in the last assignment and power of attorney documents. Rule 1925 Statement, No 3.
4. Whether the Trial Court committed prejudicial and reversible error and abused its discretion by admitting into evidence the last mortgage assignment. Rule 1925 Statement, No 4.
5. Whether the Trial Court committed prejudicial and reversible error and abused its discretion when it failed to exclude evidence of Notice of Intent to foreclose. Rule 1925 Statement, No 5.Appellant's Br. at 4.
6. Whether the Trial Court committed prejudicial and reversible error and abused its discretion by admitting into evidence the unreliable and untrustworthy evidence of the alleged amount of indebtedness via testimony of Plaintiff's witnesses, Ms. Benight and Mr. Woods. Rule 1925 Statement, No 6.
7. Whether the Trial Court committed prejudicial and reversible error and abused its discretion when it entered a "verdict" in favor of Plaintiff, and an in rem judgment including "other costs and charges collectible under the mortgage and loan documents". Rule 1925 Statement, No 7.
Appellant's first issue challenges U.S. Bank's standing to commence the underlying foreclosure action. Appellant contends that the court erred in finding that U.S. Bank had standing to bring the foreclosure action as a holder in due course or real party in interest based on: 1) irregularities in the evidence presented by U.S. Bank; 2) lack of good faith or consideration given for transfers of the note; 3) flaws in the allonges; 3) endorsements that were "foreign to the original note;" 4) "consistently different" versions of the Note attached to the pleadings; and 5) the lack of "original signatures." See Appellant's Br. at 19-24; id. at 20 (citing in support J.P. Morgan Chase Bank , N.A. v. Murray , 63 A.3d 1258 (Pa. Super. 2013)). Appellant "contests whether the named Plaintiff in this litigation is the same entity to whom the subject Note and Mortgage were allegedly conveyed, because the latter entity is identified as 'Chase Mortgage Finance Corporation Multi-Class Mortgage Pass-Through Certificates ChaseFlex Trust Series 2006-2' and the named Plaintiff does not include 'Chase Mortgage Finance Corporation' in its name." Appellant's Br. at 15. Appellant claims that the court erred in precluding him from presenting evidence and/or testimony to challenge the authenticity of the allonges presented at trial and securitization based on an alleged "discrepancy between the named [Appellee] and the trust to whom [Appellee] alleged the note and mortgage were conveyed." See id. at 25-26. Appellant maintains that harm would result if payment were made to U.S. Bank on an improper basis. Id. at 32.
In response, U.S. Bank asserts that it presented sufficient evidence to establish that it was the proper party to bring the foreclosure action via its possession of the original note at trial. See Appellee's Br. at 8-10. U.S. Bank contends that no pre-recorded assignment was necessary to file a complaint in a foreclosure action. See id. at 11 (citing 13 Pa.C.S. § 3203(b), § 3104(a)); id. at 15 (citing US Bank v. Mallory , 982 A.2d 986, 993 (Pa. Super. 2009)). Further, U.S. Bank contends that Appellant lacks standing to challenge the assignments of the Mortgage, Power of Attorney or PSA because "[t]he validity of the Assignments of Mortgage, Power of Attorney, and PSA does not impact whether [Appellant] owes his obligations under the Note and Mortgage, and there is no danger of [Appellant] being subject to double liability on the note." Appellant's Br. at 14-15. We agree.
In a mortgage foreclosure action, the mortgagee is the real party in interest. See Wells Fargo Bank , N.A. v. Lupori , 8 A.3d 919, 922 n.3 (Pa. Super. 2010); see also Pa.R.C.P. 1147 (requiring a plaintiff in a mortgage foreclosure action to name the parties to the mortgage and any assignments). To establish standing in a mortgage foreclosure action, a plaintiff must plead ownership of the mortgage under Rule 1147, as well as possess the right to make demand upon the note secured by the mortgage. Barbezat , 131 A.3d at 69. A mortgagee must hold the note secured by a mortgage, as the note and mortgage are inseparable. Id. at 75 n.3.
Appellant relies upon Murray to support his argument that U.S. Bank does not hold the original note. Appellant argues that Murray held that a plaintiff in a mortgage foreclosure action must provide requisite proof of its right to maintain the action, and questionable documents do not furnish sufficient proof. Appellant's Brief at 15 (citing in support Murray , 63 A.3d at 1268). Murray is distinguishable, as in that case, the plaintiff had not filed of record a copy of the note including the allonge until after the trial court granted summary judgment. Murray , 63 A.3d at 1266-1268. The defendant's assertions were based upon a visual inspection and contradictory evidence of record. Id. The record here is not in question, and the allonges were provided to the trial court for inspection at trial.
Here, the trial court found "[a]t trial, [Appellee U.S. Bank] produced and made available for inspection the original Note. [U.S. Bank] is in possession of the original Note." Findings of Fact ("FOF"), 6/21/2016, at ¶ 9. As the court found that U.S. Bank is the holder of the note, the Mortgage can have no separate existence from the note. See 13 Pa.C.S. § 9203(g). Therefore, U.S. Bank had standing to bring a foreclosure action based on its possession of note "on demand regardless of who previously held the note." Bank of America , N.A. v. Gibson , 102 A.3d 462, 466 (Pa. Super. 2014). Accordingly, we discern no abuse of discretion or error of law by the trial court in making its factual findings with regard to U.S. Bank's standing to bring the foreclosure action as a holder in due course.
In another effort to challenge U.S. Bank's standing, Appellant's second, third, and fourth issues challenge the validity of the assignments. However, these issues are also without merit. In a foreclosure action, the plaintiff must merely own or hold the note to have the right to make a demand for payment and specifically "name the parties to the mortgage and the fact of any assignments." CitiMortgage , Inc. v. Barbezat , 131 A.3d 65, 69 (Pa. Super. 2016) (citing Pa.R.C.P. 1147). "Where an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of his rights." Id. (citing Smith v. Cumberland Group , Ltd., 687 A.2d 1167, 1172 (Pa. Super. 1997)). The recording of an assignment is "not a prerequisite to [a bank's] standing to seek enforcement of the mortgage via a mortgage foreclosure action." Mallory , 982 A.2d at 994.
A note endorsed in blank becomes payable to 'bearer' and may be negotiated by transfer of possession alone until specially
endorsed. See 13 Pa.C.S.A. §§ 3109(a), 3205(b). The note as a negotiable instrument entitles the holder of the note to enforcement of the obligation. See 13 Pa.C.S.A. §§ 3109(a), 3301.Barbezat , 131 A.3d at 69.
As noted by U.S. Bank, Appellant is without standing to challenge the validity of the assignments. If Appellant makes a payment to any assignor, that serves to discharge its obligations under the note. See 13 Pa.C.S. § 3602(a). Thus, Appellant cannot demonstrate potential "injury-in-fact" as there is no danger of double liability on the note. See Trial Ct. Op., 9/27/2016, at 6. As Appellant is not a party to or a third party beneficiary of the assignment, he lacks standing to challenge the validity of the allonges or assignments. Ira G. Steffy & Son , Inc. v. Citizens Bank of Pennsylvaniva , 7 A.3d 278, 287 (Pa. Super. 2010); see also Murray , 63 A.3d at 1264-65 ("If a borrower cannot demonstrate potential injury from the enforcement of the ... note and mortgage by a party acting under a defective assignment, the borrower lacks standing to raise the issue.") (quoting In re Walker , 466 B.R. 271, 285-86 (Bankr. E.D. Pa. 2012)). Accordingly, Appellant's second, third, and fourth issues are without merit.
Here, the court found that Linda Tipton, as authorized secretary of JP Morgan Chase Bank endorsed the note as payable to JP Morgan Chase Bank, without recourse. (Findings of Fact ("FOF"), 6/21/2016, at ¶ 4). JP Morgan Chase, N.A. f/k/a The Chase Manhattan Bank endorsed the Note and made it payable to Chase Home Finance, LLC s/b/m Chase Manhattan Mortgage Corporation, without recourse. Id. at ¶ 5. On the same date, Chase Manhattan Mortgage Corporation endorsed the note and made it payable in blank, without recourse. Id . at ¶ 6. In August 2006, a second series of identical endorsements were notated on the note from JP Morgan Chase to Chase Manhattan Mortgage, resulting in a "bearer note" payable in blank.
In his fifth issue, Appellant contends that U.S. Bank failed to comply with Act 91, which requires a mortgagee who desires to foreclose to send notice to the mortgagor advising the mortgagor of his delinquency. According to Appellant, "Section 18 of the Mortgage requires notice to be issued no less than 30 (thirty) days prior to commencement of an enforcement action or acceleration." Appellant's Br. at 40. In addition, he suggests that U.S. Bank failed to send a second notice before filing its amended complaint. Id. at 41.
In support, Appellant relies on HSBC Bank , NA v. Donaghy , 101 A.3d 129, 134 (Pa. Super. 2014), in which this Court held that whether the mortgagor had complied with Act 91 created a factual dispute that precluded summary judgment. Donaghy , 101 A.3d at 134. Because Appellant went to trial in this case, Donaghy is inapposite.
Instantly, we note that Act 91 merely requires that notice be sent "at least thirty (30) days before the mortgagee...begins any legal action, including foreclosure, for money due under the mortgage obligation or to take possession of the mortgagor's security." 35 P.S. § 1680.403c(2)(i). Thus, the premise of Appellant's argument is incorrect. Nevertheless, as noted by the trial court and U.S. Bank, this claim is waived based on Appellant's failure to raise any argument relating to notice via preliminary objections in response to the amended complaint. See Appellee's Br. at 17 (citing in support Roberts v. Estate of Pursely , 700 A.2d 475, 479 (Pa. Super. 1997) (citing Pa.R.C.P. 1028(a)(2) (party must raise failure of a pleading to conform to law or rule of court by preliminary objection); Pa.R.C.P. 1032(a) (party waives all defenses and objections which are not presented by preliminary objection, answer or reply)).
The notice required by Act 91 is a procedural requirement that the mortgagee must satisfy before filing its complaint; however, "a defective Act 91 notice does not deprive the courts of subject matter jurisdiction." Beneficial Consumer Discount Co. v. Vukman , 77 A.3d 547, 203 (Pa. 2013). Accordingly, Appellant waived this argument by failing to timely raise it in his preliminary objections in response to U.S. Bank's second amended complaint. See id.; see also Pa.R.C.P. 1028(a)(2).
In his sixth and seventh issues, Appellant contends that the court erred in admitting evidence at trial with respect to the amount due. Appellant maintains that the testimony and/or business records did not fall within the business records exception to the hearsay rule. See Appellant's Br. at 42-51 (citing Pa.R.Evid. 803(6)). In support of this argument, he challenges the court's factual findings regarding the accuracy of information entered into data systems, the quality control protocols, authority to enter calculations for the charges, and the witnesses' lack of personal responsibility for maintaining the records. Id.
Here, the trial court's opinion summarizes its reasons in support of its decision to admit evidence under the business records exception. See TCO at 7-8 (discussing Pa.R.E. 803(6), 42 Pa.C.S. § 6108). As the trial court's findings are supported by the record, we discern no abuse of discretion. We adopt the relevant portion of the trial court's analysis as our own for purpose of further appellate review. See Trial Ct. Op., 9/27/2016, 7-10.
Specifically, U.S. Bank presented evidence of the amount due through testimony of representatives from both servicers of the Mortgage, Sherry Benight on behalf of SPS, and Samuel Woods on behalf of JP Morgan Chase. Based on their testimony, the court concluded that the records of the amount due were kept as a regularly conducted business activity and overruled Appellants' objections to the exhibits admitted into evidence. --------
Judgment affirmed. Judgment Entered. /s/_________
Joseph D. Seletyn, Esq.
Prothonotary Date: 6/13/2017
Image materials not available for display.