First Seneca Bank v. Greenville Distributing Co.

• Decision Date: 04 November 1987
• Docket Number: Nos. 408,s. 408
• Citation: 367 Pa.Super. 558,533 A.2d 157
• Parties: FIRST SENECA BANK, Appellant v. GREENVILLE DISTRIBUTING COMPANY, Robert M. Woods, Patricia M. Woods, William A. Boyce, and Mary Jane Boyce. Pitts. 1985 and 872 Pitts. 1985.
• Court: Pennsylvania Superior Court

Page 157

533 A.2d 157

367 Pa.Super. 558

FIRST SENECA BANK, Appellant v. GREENVILLE DISTRIBUTING COMPANY, Robert M. Woods, Patricia M. Woods, William A. Boyce, and Mary Jane Boyce.

Nos. 408 Pitts. 1985 and 872 Pitts. 1985.

Superior Court of Pennsylvania.

Argued June 3, 1986.

Filed Nov. 4, 1987.

Archie O. Wallace, Greenville, for appellant.

William L. Walker, Meadville, for appellees.

Before ROWLEY, DEL SOLE and CERCONE, JJ.

ROWLEY, Judge:

On September 27, 1977, Greenville Distributing Company (Greenville), the corporate appellee, executed and delivered to First Seneca Bank (Bank), appellant, a mortgage in the amount of $140,000 covering Greenville's warehouse. The mortgage was executed on behalf of Greenville by Robert M. Woods who, at that time, was president of Greenville. On September 30, 1977, Greenville, by Robert Woods its president, as well as Robert and Patricia Woods and William and Mary Jane Boyce, individually, (also appellees herein) executed a corresponding note to the Bank for $140,000. A confession of judgment clause was included in the note. On October 19, 1977, the Bank confessed judgment on the note against the individual appellees only, in the amount of $249,995.28. The judgment against the individual appellees was revived in 1983.

Greenville ceased making payments on the mortgage and note as of April 30, 1983. On December 27, 1983, the Bank filed a two-count complaint. The first count of the complaint was in mortgage foreclosure against Greenville only. The second count of the complaint was in assumpsit against Greenville, Robert and Patricia Woods, and William and Mary Jane Boyce on the note.

By an order filed April 5, 1984, the trial court overruled Greenville's preliminary objection which requested that the second count in assumpsit be stricken or dismissed as improper in a mortgage foreclosure action, but granted what was apparently an oral motion by the Bank for severance of the count in mortgage foreclosure from the count in assumpsit. Shortly thereafter, by an order dated April 21, 1984, the trial court, in accordance with a stipulation of the parties, established the following procedure for the resolution of the case:

1) The Defendants or any of them must answer the first count of the Plaintiff's Complaint which is in Mortgage Foreclosure within twenty (20) days of the Court's Opinion filed April 5, 1985 or they shall be in default in the Mortgage Foreclosure action.

2) The time for filing an answer to the Plaintiff's Complaint in Assumpsit will be extended to a date which is twenty (20) days after any Sheriff's sale of the mortgaged property....

On May 17, 1984, because no answer had been filed to the count in mortgage foreclosure, the trial court, finding that the amount of $93,016.42 plus interest was due, entered a default judgment against Greenville in the mortgage foreclosure action. Execution proceedings on the judgment in the mortgage foreclosure action were initiated and on July 2, 1984, the property was sold at sheriff's sale to the Bank for $60,000 following Greenville's unsuccessful bid of $50,000. The deed to the Bank was recorded on July 24, 1984. On the same day, the Bank filed, in the mortgage foreclosure action, a Petition to Fix Deficiency Judgment against Greenville and the individual appellees. On August 10, 1984, Greenville and the Woods filed a response to the Petition to Fix Deficiency Judgment. Meanwhile, on July 26, 1984, pursuant to the Court's order of April 21, 1984 adopting the parties' stipulations, all of the appellees had filed an answer to the Bank's action in assumpsit which had been severed from the action of mortgage foreclosure.

By a petition dated January 30, 1985, Greenville and the Woods sought to dismiss the deficiency judgment proceedings filed in the mortgage foreclosure action as well as to dismiss the assumpsit action because there was no in personam judgment and more than six months had elapsed since the sheriff's sale. By a separate petition also dated January 30, 1985, appellees sought a release and discharge from the confessed judgment for the same reasons. The trial court signed an order dated February 2, 1985 issuing a Rule to Show Cause based on these two petitions. The Bank filed answers. On February 25, 1985, an evidentiary hearing was held. However, the two petitions of January 30, 1985, the order of February 2, 1985 issuing the rule, and the Bank's answer to the two petitions were not filed until March 15, 1985.

By an order dated March 12, 1985, and filed March 15, 1985, the trial court gave Greenville a credit against the judgment in the mortgage foreclosure action in the amount of $57,542.26 and found the deficiency in the mortgage foreclosure action to be $35,474.16. On March 27, 1985, judgment was entered on this order against not only Greenville but also Robert and Patricia Woods and William and Mary Jane Boyce. Appellant took its first appeal to this Court at No. 408 Pittsburgh, 1985, from this judgment claiming it was entitled to a deficiency judgment in the amount of $70,474.16 which is the difference between the balance due on the mortgage and the amount appellant claims to be the fair market value of the property.

After the appeal was taken at No. 408 Pittsburgh, 1985 by the Bank, the appellees filed a petition to strike off the deficiency judgment entered March 27, 1985. On June 11, 1985, the trial court filed an opinion and order which struck off the deficiency judgment entered against the appellees on March 27, 1985; dismissed the Bank's petition to fix a deficiency judgment; dismissed the count in assumpsit which had been filed by the Bank; and marked the confessed judgments against Robert and Patricia Woods and William and Mary Jane Boyce satisfied, discharged and released.

On July 1, 1985, the Bank entered judgment on the June 11, 1985 order, and filed therefrom its second appeal to this Court at No. 872 Pittsburgh, 1985. Because the appeal at No. 408 Pittsburgh, 1985 and the appeal at No. 872 Pittsburgh, 1985 involve the same parties and the same mortgage foreclosure proceedings, they have been consolidated for disposition.

APPEAL AT No. 408 PITTSBURGH, 1985

In this appeal, appellant argues that prior to the sheriff's sale, the parties had agreed that the property had a value of only $25,000, and, therefore, Greenville can be released from liability only for the amount agreed to be the fair market value ($25,000) and not for the amount that the bank paid for the property at the sale ($60,000 less costs) under the Deficiency Judgment Act. ¹

Before addressing appellant's arguments, we are required to consider, sua sponte, whether the trial court had subject matter jurisdiction to consider the Bank's petition for a deficiency judgment in the mortgage foreclosure action. See: Pheasant Run Civic Organization v. Board of Commissioners of Penn Township, 60 Pa. Cmwlth. 216, 220, n. 4, 430 A.2d 1231, 1233, n. 4 (1981). Subject matter jurisdiction cannot be conferred by consent, and it cannot be founded upon waiver or estoppel. Appeal of Kramer, 445 Pa. 238, 282 A.2d 386 (1971); Martin v. Soblotney, 296 Pa.Super. 145, 442 A.2d 700 (1982).

The Deficiency Judgment Act provides:

Whenever any real property is sold, directly or indirectly, to the judgment creditor in execution proceedings and the price for which such property has been sold is not sufficient to satisfy the amount of the judgment, interest and costs and the judgment creditor seeks to collect the balance due on said judgment, interest and costs, the judgment creditor shall petition the court having jurisdiction to fix the fair market value of the real property sold. The petition shall be filed as a supplementary proceeding in the matter in which the judgment was entered.

42 Pa.C.S. § 8103(a).

A petition for deficiency judgment pursuant to § 8103 cannot be brought in a mortgage foreclosure action because the judgment obtained in a mortgage foreclosure action is a judgment in rem. Meco Realty Company v. Burns, 414 Pa. 495, 200 A.2d 869 (1964); Valley Trust Company of Palmyra v. Lapitsky, 339 Pa.Super. 177, 488 A.2d 608 (1985); McDowell National Bank of Sharon v. Stupka, 310 Pa.Super. 143, 456 A.2d 540 (1983); National Council of the Junior Order of United American Mechanics of the United States of America v. Zytnick, 221 Pa.Super. 391, 293 A.2d 112 (1972). In Meco, Id. 414 Pa. at 498, 200 A.2d at 871 the Court said:

The sole purpose of the judgment obtained through an action of mortgage forclosure is to effect a judicial sale of the mortgaged property.... Useless resort to the Deficiency Judgment Act of 1941 to establish fair market value and thus the net amount of the deficiency can in no way change the nature of the judgment from a judgment de terris to one in personam.

Thus mortgagees who have purchased property at a sheriff's sale after obtaining a judgment in mortgage foreclosure can only recover the deficiency if they obtain a personal judgment, and, in the proceeding in which they have obtained the personal judgment, have filed a petition for deficiency judgment within six months of the execution sale. Zytnick, supra. Where the mortgagee obtains only an in rem judgment in mortgage foreclosure and in the in rem mortgage foreclosure action proceeds to petition for a deficiency judgment, i.e., a personal judgment, the proceedings are "void at law." Meco, Id.

The only exception to the rule that a deficiency judgment cannot be assessed in an action for mortgage foreclosure is when the mortgagee's complaint in mortgage foreclosure requests both an in personam and an in rem judgment and no objection is made thereto by the mortgagors. Kretschman v. Stoll, 238 Pa.Super. 51, 352 A.2d 439 (1975). In Kretschman, however, the court specifically did not address the issue whether a deficiency judgment could be obtained in a mortgage foreclosure action where the relief requested was for a judgment in personam as well as in rem and the...