First Commonwealth Bank v. Heller

• Decision Date: 16 November 2004
• Citation: 863 A.2d 1153
• Parties: FIRST COMMONWEALTH BANK, Appellee v. Catharine R. HELLER. Appeal of Ameriquest Mortgage Company.
• Court: Pennsylvania Superior Court

863 A.2d 1153

FIRST COMMONWEALTH BANK, Appellee v. Catharine R. HELLER.

Appeal of Ameriquest Mortgage Company.

Superior Court of Pennsylvania.

Submitted September 7, 2004.

Filed November 16, 2004.

Reargument Denied January 21, 2005.

William J. Levant, Blue Bell, for appellant.

Catharine R. Heller, appellee, Pro Se.

Richard B. Tucker, III and Christopher J. Richardson, Pittsburgh, for First Commonwealth.

Before: JOYCE, TAMILIA and POPOVICH, JJ.

TAMILIA, J.:

¶ 1 Ameriquest Mortgage Company appeals the January 30, 2004 Order denying and dismissing its petition to intervene and vacating the stay of a sheriff's sale in this mortgage foreclosure action.

¶ 2 The factual history reveals the following loans were extended to defendant Catharine Heller,¹ all secured by mortgages on a piece of real property titled in Heller's name. In March 1990, Central Bank, the predecessor to plaintiff/appellee First Commonwealth Bank, extended a $73,170 loan. In February 1995, Mid-State Bank and Trust Company (hereinafter "Mid-State") extended a $15,000 line of credit. In November 1997, First Commonwealth Bank extended a $43,588.25 loan. In April 2000, First Commonwealth Bank extended a $76,680.26 loan, proceeds of which were used to pay off the bank's 1997 loan. In August 2001, appellant extended a $119,000 loan, at which time public records would have revealed the following three mortgages on the property:

1. Central Bank's 1990 mortgage

2. Mid-State's 1995 mortgage

3. First Commonwealth Bank's 2000 mortgage

Appellant concedes the existence of these three mortgages, but admits its title search did not reveal the existence of the 2000 mortgage, which it presumes was due to searcher error. Appellant's brief at 7. The proceeds of appellant's 2001 loan were used to pay off Central Bank's 1990 loan and Mid-State's 1995 line of credit. The Mid-State line of credit remained open, however, and so its mortgage on the property remained. Accordingly, the following mortgages remained of record:

1. Mid-State's 1995 mortgage

2. First Commonwealth Bank's 2000 mortgage

3. Appellant Ameriquest Mortgage Company's 2001 mortgage

¶ 3 On March 5, 2003, First Commonwealth Bank filed the instant foreclosure action based upon its April 2000 loan. Two months later, on June 10, 2003, appellant filed the underlying petition to intervene in which it sought to assert a right to equitable subrogation as to Central Bank's 1990 mortgage and Mid-State's 1995 mortgage.² On August 22, 2003, default judgment was entered against Heller and shortly thereafter a writ of execution was issued to the Sheriff of Blair County. On September 29, 2003, appellant filed a petition to stay the sheriff's sale in which it also incorporated and restated its petition to intervene. The court granted the stay on October 22, 2003.

¶ 4 On January 27, 2004, a hearing was held on appellant's petition to intervene and on January 30, 2004, the court entered an Order denying appellant's petition and vacating the stay of the sheriff's sale. Subsequently, the court entered an Opinion in which it explained it had denied appellant's request for intervention since appellant had not demonstrated the existence of the prerequisites necessary for invoking the remedy of equitable subrogation. Appellant's "problem," the court explained, was the result of its own negligence in failing to discover First Commonwealth Bank's mortgage, to which appellant's mortgage could only be secondary. Trial Court Opinion, Peoples, J., 3/18/04, at 4.

¶ 5 In this timely appeal, appellant raises the following questions for our review:

1. Did the trial court abuse its discretion or commit an error of law by denying the proposed intervenor's petition for leave to intervene in this foreclosure action, to assert a claim of equitable subrogation against the plaintiff?

2. Did the trial court abuse its discretion or commit an error of law by dissolving the temporary stay of execution it had previously entered, which would have allowed the proposed intervenor to litigate the separate action to quiet title that it filed against the plaintiff in the trial court at number 03-GN-3844?

3. Was the trial court's stated basis for denying leave to intervene and dissolving the stay both supported by the record and appropriate under the circumstances?

Appellant's brief at 4.

As a general rule, an appeal will not lie from an order denying intervention, because such an order is not a final determination of the claim made by the would-be intervenor. However, in some cases, the order denying intervention has the practical effect of denying relief to which the intervenor is entitled and which he can obtain in no other way. Such an order will be deemed final, and an appeal therefrom will be allowed. In order to determine the appealability of an order denying intervention, therefore, one must examine the ramifications of the order to determine whether it constitutes a practical denial of relief to which the petitioner for intervention is entitled and which he can obtain in no other way.

Often, it is necessary to examine the merits of an appellant's petition in order to determine whether the court's order results in a practical denial of relief to which the appellant is entitled but which can be secured in no other way.

Luiziaga v. Psolka, 432 Pa.Super. 26, 637 A.2d 645, 646-647 (1994) (citations and quotations omitted); see also Pa.R.A.P. 341, note (providing an Order denying a party the right to intervene is no longer appealable as a final Order). The trial court essentially concluded appellant was not a party entitled to relief. If correct, the Order was not final as to appellant and therefore not appealable and we are required to quash the appeal. To determine whether intervention was properly denied, we must examine the merits of appellant's petition to intervene.

¶ 6 It is well established that a question of intervention is a matter within the sound discretion of the trial court and absent a manifest abuse of such discretion, its exercise will not be disturbed on review. Wilson v. State Farm Mut. Auto. Ins. Co., 512 Pa. 486, 492, 517 A.2d 944, 947 (1986).

¶ 7 Appellant asserts it should have been permitted to intervene pursuant to Pennsylvania Rule of Civil Procedure 2327, Who may intervene, which provides in pertinent part:

At any time during the pendency of an action, a person not a party shall be permitted to intervene therein, subject to these rules, if

...

(4) the determination of such action may affect any legally enforceable interest of such person whether or not such person may be bound by a judgment in the action.

Pa.R.C.P. 2327.³ Appellant bases this allegation, not only on the undisputed fact that appellant holds a mortgage on the property securing its 2001 loan, but also on its alleged right to equitable subrogation as to Central Bank's 1990 mortgage and Mid-State's 1995 mortgage since proceeds from appellant's loan to the debtor were used to pay those debts.

¶ 8 Generally, the priority of a lien is determined by the date on which it was recorded. See 42 Pa.C.S.A. § 8141⁴ and 21 P.S. § 622.⁵ The doctrine of equitable subrogation is recognized in Pennsylvania, see Public Service Mutual Ins. Co. v. Kidder-Friedman, 743 A.2d 485, 488 (Pa.Super.1999), quoting Molitoris v. Woods, 422 Pa.Super. 1, 618 A.2d 985, 989 (1992), and equitable subrogation is a widely-recognized exception to the "first in time" rule. See Restatement (Third) of Property (Mortgages) § 7.6(a); see also e.g., Eastern Savings Bank, FSB v. Pappas, 829 A.2d 953, 956-957 (D.C.App.2003); East Boston Sav. Bank v. Ogan, 428 Mass. 327, 701 N.E.2d 331, 334 (1998); Lamb Excavation, Inc. v. Chase Manhattan Mortg. Corp., 208 Ariz. 478, 95 P.3d 542, 544 (Ct.App.2004). ⁶ Appellant relies heavily upon the Restatement (Third) of Property, Mortgages, § 7.6, Subrogation, (a), which addresses the issue of equitable subrogation in the context of a mortgage and explains:

[o]ne who fully performs an obligation of another, secured by a mortgage, becomes by subrogation the owner of the obligation and the mortgage to the extent necessary to prevent unjust enrichment. Even though the performance would otherwise discharge the obligation and the mortgage, they are preserved and the mortgage retains its priority in the hands of the subrogee.

Put more succinctly, equitable subrogation permits "a person who pays off an encumbrance to assume the same priority position as the holder of the previous encumbrance." Houston v. Bank of America Fed. Sav. Bank, 119 Nev. 485, 78 P.3d 71, 73 (2003),citing Mort v. U.S., 86 F.3d 890 (9th Cir.1996). "The great majority of case law holds that one who pays the mortgage of another and takes a new mortgage as security will be subrogated to the rights of the first mortgagee as against any intervening lienholder." Eastern Savings Bank, supra, at 957, citing G.E. Capital Mortgage Servs., Inc. v. Levenson, 338 Md. 227, 657 A.2d 1170, 1175 (1995). The purpose of this doctrine, according to the Restatement, is to prevent the unearned windfall of one, i.e., the intervening lien holder in the form of an advancement in priority, at the expense of another, i.e., the new mortgagee who paid the previous debt. See Restatement § 7.6, comment a; Eastern Savings Bank, FSB, supra at 960.

¶ 9 The Restatement further explains:

A mortgage debtor may ask another person to discharge the debt. In some circumstances, the payor who does so is warranted in receiving, by subrogation, the benefit and priority of the mortgage paid. The most common context for this sort of subrogation is the "refinancing" of a mortgage loan; that is, the payment of a loan with the proceeds of another loan.

...

Perhaps the case occurring most frequently is that in which the payor is actually given a mortgage on the real estate, but in the absence of subrogation it would be subordinate to some intervening interest, such as a junior lien. Here subrogation is entirely appropriate, and by

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