CoreStates Bank, NA v. Cutillo

• Decision Date: 22 January 1999
• Citation: 723 A.2d 1053,1999 PA Super 14
• Parties: CORESTATES BANK, N.A., Successor by Merger to Meridan Bank, formerly know as American Bank Trust Co. of Pa., Appellee, v. Louis J. CUTILLO, Appellant.
• Court: Pennsylvania Superior Court

723 A.2d 1053

1999 PA Super 14

CORESTATES BANK, N.A., Successor by Merger to Meridan Bank, formerly know as American Bank Trust Co. of Pa., Appellee, v. Louis J. CUTILLO, Appellant.

Superior Court of Pennsylvania.

Argued October 21, 1998.

Filed January 22, 1999.

Mark C. Clemm, Plymouth Meeting, for appellant.

Karen F. Longenecker, Reading, for appellee.

Before POPOVICH and HUDOCK, JJ., and CERCONE, President Judge Emeritus.

POPOVICH, J.:

¶ 1 This is an appeal from the judgment entered in favor of appellee, CoreStates Bank, N.A. ("the Bank"), by the Court of Common Pleas of Montgomery County on April 6, 1998, in an in personam action brought by the Bank against appellant, Louis J. Cutillo, to collect a debt following appellant's default under the terms of a promissory note. Upon review, we affirm the summary judgment granted on the Bank's action in assumpsit, but reverse with respect to several counterclaims raised by appellant.

¶ 2 In reviewing a grant of summary judgment, an appellate court may only disturb the order of the trial court where there has been a clear error of law or a manifest abuse of discretion. See Albright v. Abington Mem'l Hosp., 548 Pa. 268, 279-80, 696 A.2d 1159, 1165 (1997)

. Nevertheless, our scope of review is plenary. Id. Summary judgment is proper when no dispute exists as to the material facts and the moving party is entitled to judgment as a matter of law. See Ertel v. Patriot-News Co., 544 Pa. 93, 674 A.2d 1038 (1996). The record is to be viewed in the light most favorable to the nonmoving party, and all doubts as to the existence of material fact must be resolved against the moving party. See Albright, at 280, 696 A.2d at 1165.

¶ 3 The relevant facts and procedural history, set forth in a light most favorable to appellant, are as follows: Between 1986 and 1991, six personal and business loans were made to appellant by the Bank, most of which were secured by mortgages on appellant's residence. The first loan was made on March 11, 1986, on which date appellant executed and delivered a promissory note to the Bank in the original principal amount of $95,000. This note was secured by a mortgage on appellant's residence.¹ The Bank commenced the action underlying this appeal by complaint on September 15, 1994. The Bank's complaint alleged that appellant was in default on the March of 1986 note since he failed to pay the required monthly installments since April of 1991. On January 18, 1995, appellant filed an answer, new matter and counterclaims. In response to the Bank's preliminary objections to his answer, new matter and counterclaims, appellant filed an amended answer, new matter, and counterclaims, to which the Bank again filed preliminary objections.

¶ 4 Appellant maintained in his amended answer, new matter and counterclaims that his loan obligation under the March of 1986 note had been paid and/or satisfied. Specifically, appellant asserted that in January or February of 1991, the Bank orally agreed to lend him $50,000 if he would execute a $50,000 mortgage on his residence in favor of the Bank. Appellant signed a mortgage in favor of the Bank in the amount of $50,000 on February 26, 1991, but the Bank never lent him the money. Appellant claimed that as a result of the Bank's failure to advance him the $50,000 he lost "significant income, lost a significant business opportunity, and suffered significant damages[,]" and, therefore, he was "entitled to a set off in at least the amount allegedly outstanding on the note" underlying the Bank's complaint. Amended Answer, New Matter and Counterclaims, 2/24/95, at ¶¶ 25, 26.

¶ 5 Appellant's amended new matter and counterclaims also asserted that the Bank had improperly failed to satisfy a $110,000 mortgage on a separate note that was executed in March of 1990. This mortgage secured a guaranty given in connection with a loan made by the Bank to a third party to facilitate the third party's purchase of a pharmacy owned by appellant. Appellant alleged that the Bank had orally agreed to satisfy the mortgage if the third party was current in his loan payments for a period of three years. However, after three years of timely payments, the Bank refused to satisfy appellant's accompanying mortgage.

¶ 6 In its preliminary objections, the Bank demurred to appellant's amended new matter and counterclaims and, alternatively, sought more specific pleadings. On November 22, 1995, following oral argument, the Honorable Lawrence A. Brown entered an order granting the Bank's preliminary objections in the nature of demurrer and striking appellant's amended new matter and counterclaims. On November 17, 1997, the Bank filed a motion for summary judgment, to which appellant responded by setting forth the same arguments raised in his amended new matter and counterclaims. Oral argument on the Bank's motion for summary judgment was held before the Honorable Kent H. Albright, who subsequently granted the Bank's motion. The present appeal followed.

¶ 7 In this appeal, appellant presents two issues for our consideration:

1. Did the lower court err by granting the Bank's motion for summary judgment based on an alleged admission at oral argument that appellant was in default with respect to the promissory note and mortgage at issue? 2. Because appellee brought an in personam action against appellant based upon appellant's alleged default under a mortgage note, was appellant permitted to raise defenses and counterclaims which did not arise directly from the same transaction or occurrence alleged in the complaint?

¶ 8 In his first issue, appellant argues that the lower court erred by granting summary judgment based, in part, on appellant's alleged admission at oral argument that he was in default on the promissory note underlying the Bank's cause of action.² Appellant argues that because his alleged admission at oral argument does not appear of record, Judge Albright's reliance on the statement to establish the material fact of his default was improper. In support of his position, appellant directs us to Claremont Properties, Inc. v. Board of Township Supervisors of Middlesex, 118 Pa.Cmwlth. 527, 546 A.2d 712 (1988). In Claremont Properties, the Commonwealth Court found that a material fact may not be based on "nothing more than [a] judge's memory of a statement by counsel in a nonfactfinding proceeding." Id. 546 A.2d at 715 (emphasis added) (citing Matovich v. Gradich, 123 Pa.Super. 355, 187 A. 65 (1936)).

¶ 9 We find Claremont Properties inapposite. In his brief, appellant admits that at oral argument he informed the lower court that "certain payments had not been made on account of the promissory note[,]" and while appellant argues that his nonpayment does not constitute a default on the note, we disagree. Brief of Appellant, at 10. In an action on a note or bond secured by a mortgage, a plaintiff presents a prima facie case by showing "the execution and delivery of the [note] and its nonpayment...." Philadelphia Workingmen's Sav. Loan & Bldg. Ass'n v. Wurzel, 355 Pa. 86, 90, 49 A.2d 55, 57 (1946). Since appellant does not contest the Bank's assertion that he failed to make payments as required under the terms of the note, we are not persuaded that material facts are in dispute. Therefore, appellant's first claim must fail.

¶ 10 Appellant's second issue stems from Judge Brown's granting of the Bank's preliminary objections to appellant's amended new matter and counterclaims in the form of demurrer.³ Appellant argues that because his amended new matter and counterclaims were otherwise legally sufficient, Judge Brown must have granted demurrer on grounds of the "the procedural issue involving whether or not new matter and counterclaims can be raised in connection with an in rem or in personam proceeding."⁴ Brief of Appellant, at 15. Appellant also contends that Judge Albright's grant of summary judgment was improper because it was based, in part, on Judge Brown's incorrect disposition of the Bank's preliminary objections.⁵ ¶ 11 A defendant in an action of mortgage foreclosure may only plead counterclaims that "arise 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; see also First Wisconsin Trust Co. v. Strausser, 439 Pa.Super. 192, 653 A.2d 688 (1995)

. However, no such pleading limitations exist where a mortgagee brings an action in assumpsit on a promissory note to obtain an in personam judgment against a mortgagor/defendant. See Pa.R.C.P. 1031. Indeed, a defendant in an assumpsit action may set forth under the heading "Counterclaim" any cause of action in assumpsit or trespass which he has against the plaintiff at the time the answer is filed. See id. Therefore, if appellant's amended new matter and counterclaims were stricken simply because they did not arise from the same series of transactions or occurrences as the loan underlying the Bank's complaint, striking them was improper. That being the case, we must consider whether appellant's amended new matter and counterclaims were properly demurred on otherwise valid grounds.

¶ 12 Our Supreme Court has set the standard of review for granting preliminary objections in the form of demurrer as follows:

All material facts set forth in the [pleading at issue] as well as all inferences reasonably deductible therefrom are admitted as true. The question presented by the demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible. Where a doubt exists as to whether a demurrer should be sustained, this doubt should be resolved in favor of overruling it. Mahoney v. Furches, 503 Pa. 60, 66, 468 A.2d 458, 461-62 (1983).

McMahon v. Shea, 547 Pa. 124, 129, 688 A.2d 1179, 1181 (1997). When reviewing a grant of demurrer, we are bound neither by the inferences drawn by the trial court, nor by its conclusions of law. Huddleston v. Infertility Center of America, Inc., 700...