In re Gray, 030714 FED3, 13-4001

Docket Nº:13-4001
Opinion Judge:PER CURIAM
Party Name:In re: PATRICIA R. GRAY, Appellant
Judge Panel:Before: AMBRO, SHWARTZ and NYGAARD, Circuit Judges
Case Date:March 07, 2014
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit

In re: PATRICIA R. GRAY, Appellant

No. 13-4001

United States Court of Appeals, Third Circuit

March 7, 2014


Submitted Pursuant to Third Circuit LAR 34.1(a) March 5, 2014

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil Action No. 2:13-cv-02037) District Judge: Honorable John R. Padova

Before: AMBRO, SHWARTZ and NYGAARD, Circuit Judges



The background of this case stretches over thirty years. We will try to highlight only the most relevant details. In 1981, Patricia Gray and her sister, Gwendolyn Jackson, entered into a 30-year mortgage in the amount of $52, 000 secured by a property at 2276-78 North 51st Street in Philadelphia. In 1996, Mellon Bank, N.A., then the holder of the mortgage, instituted foreclosure proceedings against the sisters.1 After many years and an assignment of the mortgage to Credit Based Asset Servicing and Securitization ("Credit Based"), Jackson and Credit Based stipulated to a judgment order that entered summary judgment in favor of Credit Based against Jackson. Gray continued to defend against the suit, and, on January 31, 2006, won a verdict after a non-jury trial.

Subsequently, and after Gray commenced a different bankruptcy action, Credit Based filed a "praecipe to discontinue the mortgage foreclosure action without prejudice." Gray moved to strike the filing. The trial court denied and dismissed her motion. The court further ruled that Credit Based could file a new foreclosure action against Gray but that it was precluded from pursuing an in personam action against her. Gray appealed to the Pennsylvania Superior Court.

The Superior Court ruled in Gray's favor, reversing and remanding for judgment to be entered on the verdict. In doing so, the Superior Court noted that there was no authority "that would countenance discontinuance of a case after a non-jury trial has concluded and the trial court has rendered its decision." Mellon Bank, N.A., v. Jackson, No. 1987 EDA 2008, slip op. at 7 (Pa.Super. Ct. Sept. 9, 2010) (attached to Appellant's Informal Brief at Ex. B). Viewing the discontinuance [which is typically a pre-trial voluntary termination by the plaintiff] as a collateral attack on the verdict, the Superior Court ruled that Credit Based and the trial court were wrong to believe a discontinuance was warranted because an issue remained pending, namely that the trial court had not ruled on whether the defendants were in default on the mortgage. Id. at 8. The Superior Court stated that "the record belie[d] such a conclusion." Id. The Superior Court explained that Jackson was in default and that Gray was not liable. Id. Noting that no post-trial motions challenged the verdict, the Superior Court ruled that "Credit Based should not have been permitted to simply ignore the verdict by filing an untimely motion for discontinuance in order to relitigate a matter finally concluded against it." Id. at 9. On May 11, 2011, pursuant to the Superior Court's order, the trial court entered judgment in favor of Gray and against Credit Based.

On April 25, 2011, shortly before the entry of judgment, Gray filed for Chapter 13 bankruptcy protection. On April 18, 2012, the Bankruptcy Court confirmed Gray's plan, which did not include payments for the North 51st Street mortgage. On September 7, 2012, PennyMac Corp. ("PennyMac"), which had been assigned the mortgage on August 10, 2012, moved for relief from the automatic stay. PennyMac alleged that the "commencement and/or continuation of the mortgage foreclosure proceedings by reason of non-payment of monthly mortgage payments were stayed by the filing of a Chapter 13 Petition." Motion for Relief from the Automatic Stay at ¶ 6. PennyMac further alleged that Gray had failed to make monthly post-petition mortgage payments (such that the total amount necessary to reinstate the loan post-petition was $16, 559.12). Id. at ¶ 7-8. PennyMac sought an order modifying the stay "to proceed with its mortgage foreclosure on the mortgaged premises, and to allow the Sheriff's Grantee to take any legal action to enforce its right to possession of the mortgage premises." Id. at Prayer for Relief. The Bankruptcy Court denied the motion without prejudice, noting at a hearing2 that PennyMac could not proceed against Gray personally in light of the state court proceedings.

PennyMac then filed a motion for in rem relief from the automatic stay under 11 U.S.C. § 362(d)(4)(B).3 PennyMac reiterated that the plan did not provide for payments on the mortgage, which had matured on February 1, 2011. PennyMac noted the foreclosure proceedings instituted in 1996, and stated that continuation of "the foreclosure proceedings by reason of non-payment of the monthly mortgage payments were stayed by the filing of a Chapter 13 Petition." Motion for In Rem Relief from the Automatic Stay at ¶ 8-9. PennyMac asserted that Gray had "an extensive bankruptcy filing history along with her spouse T. Barry Gray and co-mortgagor . . . Jackson that [has] prevented PennyMac from proceeding with its state foreclosure action that has been pending for over sixteen (16) years." Id. at ¶ 11...

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