Com. ex rel. Corbett v. Snyder
| Decision Date | 09 June 2009 |
| Docket Number | No. 1853 C.D. 2008.,No. 1889 C.D. 2008.,No. 1880 C.D. 2008.,No. 1854 C.D. 2008.,1853 C.D. 2008.,1854 C.D. 2008.,1880 C.D. 2008.,1889 C.D. 2008. |
| Citation | 977 A.2d 28 |
| Parties | COMMONWEALTH of Pennsylvania, Acting By Attorney General Thomas W. CORBETT, Jr. v. Wesley Alvin SNYDER, Sydney Snyder, Jacqueline Hepford-Rennie, Julie Ann Musser, Susan Louise Hunt, Kenneth Roger Bennetch, Cheryl Bennetch and Alyssha Mary Waid Appeal of Kenneth Bennetch. Commonwealth of Pennsylvania, Acting by Attorney General Thomas W. Corbett, Jr. v. Wesley Alvin Snyder, Sydney Snyder, Jacqueline Hepford-Rennie, Julie Ann Musser, Susan Louise Hunt, Kenneth Roger Bennetch, Cheryl Ann Bennetch, Amy Lou Styer and Alicia Mary Waid Appeal of Julie Ann Musser. Commonwealth of Pennsylvania, Acting by Attorney General Thomas W. Corbett, Jr. v. Wesley Alvin Snyder, Sydney Snyder, Jacquelyn Hepford-Rennie, Julie Ann Musser, Susan Louise Hunt, Kenneth Roger Bennetch, Cheryl Ann Bennetch, Amy Lou Styer, and Alicia Mary Waid Appeal of Jacquelyne Hepford-Rennie. Commonwealth of Pennsylvania, Acting by Attorney General Thomas W. Corbett, Jr. v. Wesley Alvin Snyder, Sydney Snyder, Jacqueline Hepford-Rennie, Julie Ann Musser, Susan Louise Hunt, Kenneth Roger Bennetch, Cheryl Ann Bennetch, Amy Lou Styer, and Alicia Mary Waid Appeal of Susan Louise Hunt. |
| Court | Pennsylvania Commonwealth Court |
Robin J. Gray, Reading, for appellants, Kenneth R. Bennetch and Cheryl Ann Bennetch.
Elizabeth L. Long, Philadelphia, for appellant, Jacqueline Hepford-Rennie.
Kathryn L. Simpson, Harrisburg, for appellant, Julie Ann Musser.
Claudia M. Tesoro, Sr. Deputy Attorney General, Philadelphia, and William A. Slotter, Sr. Deputy Attorney General-in-Charge, Allentown, for appellee, Commonwealth of Pennsylvania.
BEFORE: COHN JUBELIRER, Judge, and SIMPSON, Judge, and FRIEDMAN, Senior Judge.
OPINION BY Judge SIMPSON.
In these consolidated appeals, four former mortgage consultants allegedly involved in a huge fraudulent mortgage scheme seek reversal of a preliminary injunction entered by the Court of Common Pleas of Berks County (trial court) in a consumer protection action brought by the Commonwealth, acting by Attorney General Thomas W. Corbett, Jr., (Commonwealth) pursuant to the Unfair Trade Practices and Consumer Protection Law (CPL).1 Kenneth R. Bennetch, Julie Ann Musser, Jacquelyne Hepford-Rennie and Susan Louise Hunt (collectively, Consultants) contend the trial court erred or abused its discretion by enjoining them from working in the mortgage financing or investment products fields pending disposition of the Commonwealth's claims. For the following reasons, we conclude the trial court had reasonable grounds to issue the preliminary injunction.
This consumer protection case arises out of transactions between OPFM, Inc. (OPFM), a now-defunct mortgage brokerage and investment group run by Wesley A. Snyder (Snyder) in Berks and Lancaster Counties,2 and approximately 811 homeowners and 31 mortgage investors (Consumers). Snyder was OPFM's president and sole shareholder. In September 2007, OPFM filed for Chapter 7 bankruptcy. Thereafter, the United States Attorney for the Middle District of Pennsylvania charged Snyder with operating a "Ponzi"3 scheme that defrauded Consumers of more than $29,000,000. In November 2007, Snyder pled guilty in federal court to one count of mail fraud, a violation of 18 U.S.C. § 1341, resulting in a loss somewhere between $15,000,000 and $32,000,000. See Cmwlth. Ex. 3 (Snyder Guilty Plea). Snyder is now serving a 12-year sentence in a federal prison.
Of sole concern in this appeal is the part of the scheme involving the promotion and sale of a purported second mortgage known as a "wrap-around mortgage"4 (Wrap Mortgage) under what OPFM marketed as the "Equity Slide Down Program." Of the 811 Wrap Mortgage Consumers, all but 22 sustained a loss. See Cmwlth. Ex. 3 (Snyder Guilty Plea) at 26. The total loss among the Wrap Mortgage group was approximately $26,600,000. Id. The highest individual loss was $201,897. Id. The average loss for all Wrap Mortgage victims was $29,000. Id.
Consultants worked for OPFM for varying amounts of time as mortgage salespersons. They promoted and sold both conventional mortgages and Wrap Mortgages. Snyder trained Hepford-Rennie, the most senior consultant, who started in 1993. Hepford-Rennie later trained Bennetch, Musser and Hunt. Consultants met with Consumers who responded to OPFM's advertisements. Consultants discussed mortgage options with Consumers, including the Wrap Mortgage and the Equity Slide Down Program. They also took Consumers' applications and handled the ensuing settlements. Although Consultants were not licensed mortgage brokers, they worked for OPFM, a licensed mortgage broker.5
Consultants were paid solely on a commission basis. They received an annual commission over the life of the Wrap Mortgage. The amount of the commission was based on the amount of the Wrap Payment to OPFM's subsidiary, Image Masters. In addition, any prepayments to Image Masters over the life of the Wrap Mortgage increased the amount of Consultants' annual commission. Consultants never disclosed to Consumers that they received commissions based on the Wrap Payment and Wrap Mortgage prepayments.
The Wrap Mortgage scheme worked as follows. OPFM advertised low interest rate mortgages in newspapers in Berks and Lancaster Counties. To obtain the discounted interest rate, Consumers needed to qualify for the Wrap Mortgage program. To qualify, Consumers needed a large down payment or a large amount of equity (at least 20%) in their property to "wrap around" their mortgage. The scheme required Consumers to determine the amount they needed or intended to borrow. Consumers were then convinced to execute a mortgage with a conventional lender for more than they actually needed. These mortgages were recorded in the County Recorder of Deeds' Office.
A few days later, Consumers executed a purported second mortgage (Wrap Mortgage) to OPFM subsidiary Personal Financial Management, and later to OPFM subsidiary Image Masters.6 Consumers then turned over the equity (Wrap Payment or Wrap Money) to Image Masters for Snyder to invest. In exchange, Consumers received an interest rate on the Wrap Mortgage usually one to two points lower than the rate on their conventional mortgages, depending on the size of the Wrap Payment. However, the Wrap Mortgage documents did not include any investment terms. In addition, contrary to normal practice, the Wrap Mortgages were not recorded.
As part of the Wrap Mortgage scheme, an OPFM entity promised to assume responsibility for Consumers' monthly payments on their conventional mortgages. An OPFM entity sent Consumers a commitment letter stating it would convert the conventional mortgage by changing some of its terms and conditions, and by lowering the interest rate. See Cmwlth. Ex. 15. The OPFM entity also required Consumers to sign a "Subrogation Agreement" that purported to render the conventional mortgage subordinate to the Wrap Mortgage. See Cmwlth. Ex. 19. However, OPFM never obtained any subrogation agreement from the conventional lenders. Moreover, as noted, the Wrap Mortgages were not recorded. Consumers signed a settlement statement which indicated Image Masters assumed the conventional mortgages. See Cmwlth. Exs. 30, 37, 48, 68, 76.
OPFM, through Image Masters, mailed monthly statements to Consumers. The first statement reflected a reduction in their Wrap Mortgage equal to their Wrap Payment. However, Consumers never received any statements from their conventional mortgage lenders regarding their conventional mortgage balance.7 At closing, Consultants required Consumers to execute a change of address letter instructing their conventional lenders to forward all information, statements and correspondence regarding their accounts to: "[Consumer], c/o Image Masters, Inc, P.O. Box 144, Dept. 2007041, Oley, PA, 19547."8 See Cmwlth. Exs. 23, 58.
In actuality, neither Image Masters nor its parent, OPFM, used Consumers' Wrap Money to pay down their conventional mortgages.9 In addition, OPFM only invested a very small portion of the money it received. OPFM primarily used the money from new Consumers to pay the conventional mortgages of existing Consumers, thereby keeping the Ponzi scheme alive. OPFM also used Consumers' Wrap Money to pay its employees and expenses.
Further, although the Pennsylvania Department of Banking examined OPFM's mortgage business, it never became aware of the existence of Image Masters or the Wrap Mortgage program. Images Masters was not a licensed mortgage banker or broker. Snyder stored the Wrap Mortgage documents at a separate facility in Reading, Pa., that he owned in his own name to conceal the Wrap Mortgage scheme from Department auditors.
Consultants presented Consumers with the Wrap Mortgage documents at the second closing. The Wrap Mortgage documents consisted of a note and a mortgage. The note consisted of two pages in 12-point type. The mortgage consisted of six pages with 43 paragraphs in 8-point type.
Paragraph 21 of the Wrap Mortgage provided (with emphasis added):
SENIOR MORTGAGE REMAINS IN EFFECT. Notwithstanding anything to the contrary therein contained, Borrower covenants and agrees to keep the present senior mortgage in full force and effect for the entire term of that mortgage notwithstanding any other prepayment provisions there contained, unless you sell or convey the property to any other Person, Firm or Corporation or completely refinance any and all indebtedness owed to Image Masters, Inc. (R.R. at 59a)
However, Consultants did not explain Paragraph 21 to Consumers. In addition, Consultants required Consumers sign a settlement statement, which provided on Line 206, "Loan Assumed-[amount of conventional loan]."10 See Cmwlth. Exs. 30 37, 48, 68, 76. Consultants also...
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