In re Fricker

• Decision Date: 05 April 1990
• Docket Number: Adv. No. 89-0704S.,Bankruptcy No. 89-11904S
• Citation: 113 BR 856
• Parties: In re Robert P. FRICKER & Dolores A. Fricker, Debtors. Robert P. & Dolores A. FRICKER, Plaintiffs, v. FIRST PENNSYLVANIA BANK, N.A., Meridian Bank (Successor to Central Penn National Bank), Fidelity Bank, N.A., Hamilton Bank, Acceptance Associates of America, Inc., Herman Neumann, Frank P. Lalley, in his capacity as Sheriff of Montgomery County, and Meritor Savings Bank, Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

113 B.R. 856 (1990)

In re Robert P. FRICKER & Dolores A. Fricker, Debtors Robert P. & Dolores A. FRICKER, Plaintiffs, v. FIRST PENNSYLVANIA BANK, N.A., Meridian Bank (Successor to Central Penn National Bank), Fidelity Bank, N.A., Hamilton Bank, Acceptance Associates of America, Inc., Herman Neumann, Frank P. Lalley, in his capacity as Sheriff of Montgomery County, and Meritor Savings Bank, Defendants.

Bankruptcy No. 89-11904S, Adv. No. 89-0704S.

United States Bankruptcy Court, E.D. Pennsylvania.

April 5, 1990.

COPYRIGHT MATERIAL OMITTED

Mark Kravitz, David M. Still, Norristown, Pa., for debtors.

Stephen Raslavich, Philadelphia, Pa., for Acceptance Associates of America, Inc. and "line banks".

Ross Weiss, Elkins Park, Pa., for Frank P. Lalley, in his capacity as Sheriff of Montgomery County.

Edward Sparkman, Philadelphia, Pa., Standing Chapter 13 Trustee.

Joel Friedman, Media, Pa., for Herman Neumann.

Ellen McDowell, Philadelphia, Pa., for Meritor Sav. Bank.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION

After a seemingly interminable series of preliminary skirmishes, the instant adversary proceeding, in which the Debtors mount a broadside attack on not only a sheriff's sale of their home but also the legality of the underlying obligation default of which was the basis of that sale, is ready for disposition. As we indicated throughout the course of these proceedings, the sheriff's sale, based on a confessed judgment, cannot stand in light of 41 P.S. § 407(a) and the constitutional deficiencies in the Pennsylvania confession of judgment procedures, the inequities of which are again brought home by the instant factual pattern. As we also indicated to the parties, the determination of the rights of the judgment creditor who sold the home cannot be determined with finality until the process of assessing its claims in light of the invalidation of the sheriff's sale occurs. However, we are able to draw several legal conclusions about the Debtors' claims relevant to the underlying obligation: (1) It is a commercial or business transaction, beyond the scope of the federal Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. (hereinafter referred to as "TILA"), and most of the regulatory provisions of Pennsylvania Act 6 of 1974, 41 P.S. § 101 et seq. ("Act 6"); and (2) Certain elements of damages sought by the Plaintiffs (loss of bargain of selling a property adjacent to their home and cashing in savings accounts due to pressure by the creditor) must be rejected; (3) However, their claims that the transaction is violative of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1 et seq. (hereinafter cited by its general description as a law regulating unfair and deceptive acts and practices, "UDAP"), appear to have merit, particularly since the practices of the creditor are closely related to those prohibited under the Pennsylvania Debt Pooling Act, 18 Pa.C.S. § 7312 ("DPA").

B. PROCEDURAL HISTORY

The joint Chapter 13 bankruptcy case underlying this proceeding was filed by ROBERT P. FRICKER and DOLORES A. FRICKER ("the Debtors") on May 24, 1989. The first contested matter relevant to this proceeding was a motion filed by Defendant HERMAN NEUMANN ("Neumann"), the purchaser of the Debtors' residential realty situated at 936 Welsh Road, Huntingdon Valley, Montgomery County, Pennsylvania ("the Home") at a Montgomery County sheriff's sale of April 19, 1989, for a price of $75,000. When the Debtors failed to answer or appear at a hearing of July 6, 1989, conducted by the Honorable Bruce Fox in our absence, Judge Fox entered an Order that day granting relief.

On June 29, 1989, Defendant ACCEPTANCE ASSOCIATES OF AMERICA, INC. ("AAA"), the creditor whose judgment was the basis of the April 19, 1989, sale, filed a motion to dismiss or convert the case to Chapter 7 or obtain relief from the automatic stay in reference to the Home. After a hearing of July 27, 1989, we entered an Order denying the motion to dismiss or convert, declaring the hearing on the stay-relief motion to be a preliminary hearing, and, finding cause therefor, continuing the stay in effect pending a final hearing and a trial on a planned adversary proceeding to be filed by the Debtors attacking the April 19, 1989, sheriff's sale of the Home on August 10, 1989, also the date of a hearing on the Debtor's motion to reconsider the Order of July 6, 1989, on Neumann's motion. The Complaint was to be filed and served on or before July 31, 1989.

At the August 10, 1989, hearing, it became apparent that the Debtors' counsel had not filed and served the anticipated Complaint by July 31, 1989, and was not prepared for trial, pursuant to our directives. After a lengthy colloquy with counsel, we entered an Order and Pre-Trial Order of August 14, 1989, in which we provided the Debtors with a requested extended period to file an Amended Complaint, scheduling the trial on November 7, 1989. However, due to their failure to comply with our Order of July 27, 1989, and in consideration for giving the Debtors such a long time-period to prepare their Amended Complaint, we granted AAA's motion for relief from the stay and reaffirmed Judge Fox's Order granting Neumann relief on the merits.

In response to the Debtors' Amended Complaint, Neumann filed an Answer contending, inter alia, that the Standing Chapter 13 Trustee, Edward Sparkman, Esquire ("the Trustee"), was an indispensable party. AAA and the "line banks" of the loan from AAA, Defendants FIRST PENNSYLVANIA BANK, N.A., MERIDIAN BANK, FIDELITY BANK, N.A., and HAMILTON BANK,¹ not only filed an Answer, but demanded a jury trial. Also, the Debtors moved for reconsideration of several aspects of the August 7, 1989, Order. These matters led to a hearing of September 21, 1989, in a colloquy at which the Trustee participated and expressed his intention to not become involved in this proceeding but to nevertheless be bound by the disposition achieved by the Debtors;² the Debtors' motion was denied; and the parties were accorded until October 5, 1989, to brief the jury trial issue. When no briefs on this issue were in fact submitted, we ultimately entered an Order of October 23, 1989, striking AAA's jury demand on the ground that the primary relief sought by the Debtors was equitable in nature and that the second "prong" of the three-prong test set forth in Granfinanciera v. Nordberg, ___ U.S. ___, 109 S.Ct. 2782, 2793-94, 106 L.Ed.2d 26 (1989), see In re Light Foundry Associates, Light Foundry Associates v. Alter, 112 B.R. 134, 136-137 (Bankr.E.D.Pa.1990), was not satisfied. We also reiterated that the parties should strictly conform to our Order of August 14, 1989, requiring, inter alia, exchanges of exhibits on or before October 27, 1989, and completion of a Stipulation of undisputed facts and pre-trial Briefs on or before October 31, 1989.

Despite these admonitions, on November 6, 1989, the Debtors' counsel advised that he had not complied with our Order and sought eleventh-hour dispensations. After a conference call in which the Defendants' various counsel unanimously expressed a willingness to proceed the next day despite the lack of submissions from the Debtors' counsel, we went forward. We did ultimately impose a $100 sanction upon the Debtors' counsel in an Order of November 21, 1989, the mildness of the sanction being attributable to his attempts to belatedly comply with our directives thereafter.

The trial was completed on two days, November 7, 1989, and November 17, 1989. A request for a transcript and slightly-tardy submissions of several Briefs delayed the submission of the proceeding to us until March 22, 1990. Since it is an adversary proceeding, we are obliged, pursuant to Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52(a), to submit our decision in the form of Findings of Fact and Conclusions of Law. The latter will be presented as headnotes for the discussions which follows.

C. FINDINGS OF FACT

1. The Debtors are a married couple in their mid-40's, both of whom have graduated from high school, and both of whom are employed as supervisors by the Smith, Kline, and French Co. ("SKF"), earning a combined annual salary of about $74,000 from SKF. In addition, they own a corporation known as Brutus, Inc. ("Brutus"), which operates a delicatessen known as Corned Beef Junction ("CBJ") from realty owned by Brutus at 143 East Wyoming Avenue, Philadelphia. The Husband-Debtor spends most of his time away from his employment at SKF serving as a proprietor at CBJ.

2. On November 16, 1978, the Debtors purchased the Home, giving MERITOR SAVINGS BANK ("Meritor") a first mortgage on the Home in the principal amount of $38,400. The Debtors have continuously resided in the Home since its purchase, and now reside there their two youngest children, aged 11 and 17 years, and the Husband's 83-year-old mother. They also are parents of two children who attend college and a 24-year-old unmarried daughter living elsewhere who previously attended college.

3. As of April, 1985, the Debtors also owned an adjacent home and lot at 900 Welsh Road ("the 900 Property"), on which a balance of a purchase-money mortgage to Pitcairn, Inc. ("Pitcairn") of about $60,000 remained. As of that date, Brutus owned its place of business, which was encumbered by a purchase-money mortgage of about $3,000 to one Dean Boyer ("Boyer"), and about $32,000 owed to Security Pacific Consumer Discount Co. ("Security") on a business loan. The Debtors testified that, while the 900 Property was being rented to friends, it was their intention to make the home available as a residence for the first of their daughters who married.

4. At that time, Pitcairn indicated that, pursuant to an oral understanding which it had with the Debtors, it wished to be paid off. The Debtors therefore approached Bay Associates ("Bay"), a loan broker, to attempt to obtain a loan. As a result, Bay completed an unsigned Loan...