Foreclosure: notice under Acts 6 and 91; Effect of Dismissal of Earlier Action; Caution to Counsel; Non-conforming Brief; Numerous Issues

JP Morgan Chase Bank N.A. v Taggart, 2017 WL 3669502 (Pa. Super. 2017) (unreported), allocatur granted Feb. 22, 2018, appeal docket 6 EAP 2018

The Supreme Court granted allocatur to review the Superior Court’s holding that, where a residential mortgagee delivers notice of intent to commence legal action including mortgage forfeiture, then commences a foreclosure action against a mortgagor (“first action”) resulting in dismissal without prejudice for failure to timely respond to preliminary objections (as opposed to voluntary discontinuance), then re-files another foreclosure action for the same premises (“second action”), the lack of a new notice prior to the second action is not fatal to the second action.

Superior Court distinguished this scenario from that presented in Wells Fargo Bank N.A. v. Spivak, 104 A.3d 7, 10 (Pa. Super. 2014), where the mortgagee voluntarily discontinued the first action and then failed to send a new notice prior to filing a second action. Under the facts specific to this case, the court held that the mortgagee was under no requirement to send a new notice to the mortgagor prior to commencing the second action. Judge Lazarus wrote for a panel that also included Judges Ott and Fitzgerald. In addition to the notice issue upon which the Supreme Court granted allocatur, the Superior Court opinion contains a caution to counsel regarding counsel’s advocacy, a note about the consequences of a non-conforming brief, and illustrates that briefing every possible issue does not make for effective appellate advocacy.

The facts are straightforward and not in dispute. As stated by the court:

On July 20, 2005, Taggart executed a promissory note (“Note”) and Mortgage on the property at 7242 Saul Street, Philadelphia, PA 19149, in consideration of his borrowing $120,000 from Chase Bank, USA, N.A. (“Chase”). Both the Note and Mortgage were recorded in the office of the Philadelphia County Recorder of Deeds. On February 29, 2012, Chase assigned the Mortgage and Note to “JP Morgan Chase Bank, N.A.” (“Morgan”). The assignment was recorded on March 8, 2012 in the office of the Philadelphia County Recorder of Deeds.

On September 19, 2013, the rights and interest in the Mortgage were again assigned to “Ventures Trust 2013-I-H-R by MCM Capital Partners, LLC.” The assignment was also recorded on February 19, 2014 in the office of the Philadelphia County Recorder of Deeds.

On January 16, 2015, the rights and interest in the Mortgage were again assigned to “OHA Newbury Ventures, L.P.” On the same day, the rights and interest in the Mortgage were again assigned to Great Ajax. Both assignments were also recorded on February 23, 2015, in the office of the Philadelphia County Recorder of Deeds.

Taggart defaulted under the Mortgage and Note by failing to make payments due March 1, 2009, and each month thereafter. Chase issued a combined Act 6 [41 P.S. § 403(b)]/Act 91 [13 Pa. C.S. § 3205(b)] Notice (Notice) to Taggart, dated April 22, 2010. Morgan filed its complaint in mortgage foreclosure against Taggart on July 26, 2013. On October 29, 2013, Taggart filed an answer to the complaint. [the first complaint filed by Chase on September 10, 2010 was dismissed without prejudice on February 3, 2011 due to Chase’s failure to respond to answer Taggart’s preliminary objections. Chase filed a new complaint in foreclosure on July 26, 2013.]

Slip op. at 2-3 (footnotes omitted).

Following a May 27-28, 2015 bench trial in the Philadelphia Court of Common Pleas, the trial court rendered a verdict for Great Ajax (the then current mortgagee). Taggart appealed to Superior Court and raised 18 issues, addressed by the court as follows:

Only one of Taggart’s 18 issues possibly has merit. That issue challenges the validity of the Notice sent to Taggart prior to Morgan initiating the foreclosure action . . . Judge Powell interprets this issue as ‘alleging Great Ajax violated the Act 6 and Act 91 notice requirements by failing to send a second notice after it was substituted as Plaintiff’ . . . Judge Powell’s interpretation of the claim is incorrect.

Numerous times throughout the protracted course of this litigation, Taggart contended, although haphazardly and incoherently, that the Notice failed to conform to the requirements of Act 6 and Act 91 because it was sent prior to an earlier foreclosure action initiated by Chase in the Philadelphia County Court of Common Pleas docketed September 2, 2010 under Case No. 10-08-04848 . . . The Honorable Judge Idee C. Fox dismissed, on February 3, 2011, the original complaint filed by Chase on September 10, 2010, after Chase failed to answer Taggart’s preliminary objections . . . Chase then filed another complaint in foreclosure on July 26, 2013.

At its heart, Taggart’s argument is that because Chase’s original action failed, Morgan had to send a new notice at least 30 days prior to the filing of the instant action. See Wells Fargo Bank N.A. v. Spivak, 104 A.3d 7, 10 (Pa. [Super.] 2014). The case upon which Taggart relies is distinguishable from the facts here for the plain and simple reason that Chase’s earlier action was not voluntarily discontinued, and was refiled by the same entity five months later, before the note was assigned.

The Loan Interest and Protection Law, 41 P.S. §§ 101 et seq. (Act 6), and the Homeowner’s Emergency Mortgage Assistance Act of 1983, 35 P.S. §§ 1680.401c et seq. (Act 91), protect residential mortgage borrowers by requiring residential mortgage lenders to detail ways in which they may bring their mortgages up to date and forestall foreclosure. Section 403 of Act 6 states that ‘[b]efore any residential mortgage lender may accelerate the maturity of any residential mortgage obligation [or] commence any legal action including mortgage foreclosure to recover under such obligation” the lender must give the borrower notice of the lender’s intent at least 30 days in advance. 41 P.S. § 403(a) (emphasis added). Such notice should include, inter alia, “exactly what performance including what sum of money, if any, must be tendered to cure the default’ and the time within which the borrower must cure the default. 41 P.S. § 403(c).

Statutory notice is mandatory, and the failure to provide notice can lead to a foreclosure being set aside. See Spivak, 104 A.3d at 9-10 (citing General Elec. Credit Corp. v. Slawek, 409 A.2d 420, 422-23 (Pa. Super. 1979) and In re Sharp, 24 B.R. 817, 821 (Bankr.E.D.Pa. 1982)). “The purpose of Act 6 . . . is to help residential homeowners reacquire property that has been lost, or to prevent the imminent loss of money or property, because of the impermissible actions of residential mortgage lenders.” Spivak, 104 A.3d at 10 (quoting Benner v. Bank of Am., N.A., 917 F.Supp.2d 338, 357 (E.D.Pa. 2013).

In Spivak, this Court reversed summary judgment in a mortgage foreclosure action when the mortgagee voluntarily discontinued an earlier action and failed to send a new notice prior to launching the second action. Spivak, 104 A.3d at 7. “When a residential mortgagee delivers an Act 6 notice, commences a foreclosure action against a mortgagor (“first action”), discontinues that foreclosure action, and re-files another foreclosure action against a mortgagor for the same premises (“second action”), the lack of a new notice prior to the second action is fatal to the second action.” Id. Spivak is distinguishable from the instant case, however, because the mortgagee did not voluntarily discontinue the first action; it failed to file a timely answer to preliminary objections . . . Morgan was under no requirement to send a new notice to Taggart. The trial court did not err.

Slip op. at 6-9 (record citations omitted). The panel thus affirmed the trial court’s order. The court disposed of the remaining 17 issues it found lacked merit by relying on the trial court’s opinion and concluded that the trial court did not abuse its discretion or err as a matter of law. The trial court opinion is appended to the Superior Court’s opinion available here.

Taggart sought allocatur and on February 22, 2018, the Supreme Court granted review limited to the following issue, rephrased for clarity:

Whether a lender/mortgagee whose first complaint in mortgage foreclosure against a borrower/mortgagor was dismissed is required to send a new Notice of Intention to Foreclose pursuant to 41 P.S. § 403(a) (Act 6 Notice) prior to filing a second complaint in mortgage foreclosure.

Petitioner’s Application to Amend Pleading is also GRANTED.

There are three items of note from this decision beyond the statutory notice issue upon which the Supreme Court granted allocatur. The first involves allegations of fraud and bias by the trial court. The Superior Court panel took a dim view of these allegations as follows:

. . . We also note that Taggart has filed a post-submission communication, see Pa.R.A.P. 2501, titled “Motion for ‘Fraud on the Court’ or Review ‘Findings of Fact’ for Abuse of D[i]scretion & Bias.” We deny this motion. We caution counsel that we do not take lightly allegations of fraud against a public official, in particular unsupported allegations of “bias and fraud” by the trial court. Counsel misapprehends the concept of zealous advocacy. See Pa.R.Prof.Conduct, Preamble and Scope; see also Pa.R.Prof.Conduct 3.1 (“A lawyer shall not . . . . assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous[.]”).

Slip op. at 1-2, fn 1.

The second item worthy of note is the court’s caution to counsel regarding what appears to be a general failure to comply with the Rules of Appellate Procedure. The court again expressed its disapproval as follows:

As an initial matter, we observe Taggart’s brief on appeal to contain many substantial defects, hampering appellate review of his claims. Despite the assistance of counsel, much of Taggart’s brief is incoherent, and although the overall structure conforms to the Rules of Appellate Procedure, the body of each section does not. For example, Taggart’s statement of the case contains significant instances of argument, in contravention of Pa.R.A.P. 2117(b). “When a party’s brief fails to conform to the Rules of Appellate Procedure and the defects are substantial, this Court may, in its discretion, quash or dismiss the appeal pursuant to” Pa.R.A.P. 2101. Giant Food Stores, LLC v. THF Silver Spring Development, L.P., 959 A.2d 438, 443 (Pa. Super. 2008). Although we do not quash Taggart’s appeal on procedural grounds, we find all of the issues he raises are meritless.

Slip op. at 5, fn. 6.

Finally, with regard to the number of issues raised, we pointed out in an earlier post that courts do not favor briefing and arguing every possible issue on appeal and that such advocacy reduces one’s credibility with the tribunal. Certainly, neither Taggart nor his counsel did themselves any favors by the way they conducted their appeal, the allocatur grant notwithstanding.

For more information, contact Kevin McKeon or Dennis Whitaker.