JP Morgan Chase Bank N.A. v. Taggart

• Citation: 203 A.3d 187
• Decision Date: 20 February 2019
• Docket Number: No. 6 EAP 2018,6 EAP 2018
• Parties: JP MORGAN CHASE BANK N.A. (Substituted Plaintiff, Great Ajax Operating Partnership, LP ), Appellee v. Kenneth J. TAGGART, Appellant
• Court: United States State Supreme Court of Pennsylvania

203 A.3d 187

JP MORGAN CHASE BANK N.A. (Substituted Plaintiff, Great Ajax Operating Partnership, LP ), Appellee

v.Kenneth J. TAGGART, Appellant

No. 6 EAP 2018

Supreme Court of Pennsylvania.

Argued: September 26, 2018

Decided: February 20, 2019

OPINION

JUSTICE WECHT

Kenneth J. Taggart ("Taggart") appeals from the order of the Superior Court, which affirmed the trial court's verdict in mortgage foreclosure in favor of Great Ajax Operating Partnership ("Great Ajax"). We conclude that Great Ajax or its predecessors failed to provide pre-foreclosure notice before initiating a second mortgage foreclosure action as required by the Loan Interest and Protection Law, 41 P.S. §§ 101 - 605 ("Act 6"). In reaching this conclusion, we hold that the purposes of Act 6 are served by requiring each action in mortgage foreclosure to be preceded by a separate pre-foreclosure notice. A lender may not recycle a stale pre-foreclosure notice that it issued in connection with a prior complaint in mortgage foreclosure. Because Great Ajax failed to provide a separate pre-foreclosure notice before initiating the second action, we reverse the Superior Court.

On July 20, 2005, Taggart borrowed $ 120,000 from Chase Bank USA "(Chase Bank"). The loan was secured by an adjustable rate note ("Note") and a mortgage ("Mortgage") upon real property in Philadelphia ("the Property"), pursuant to which Taggart pledged the Property as collateral. Taggart later defaulted on the Note by failing to make a timely payment in March 2009 and each month thereafter.

On April 22, 2010, Chase Bank issued a combined pre-foreclosure notice ("Notice") to Taggart pursuant to Act 6 and the Homeowner's Emergency Mortgage Assistance Act of 1983, 35 P.S. §§ 1680.401c - 1680.412c ("Act 91"). Act 6 relates to the foreclosure of residential mortgages, and Act 91 deals with state-funded emergency assistance to residential homeowners who are facing mortgage foreclosure.¹ Both statutes require a residential mortgage holder to provide notice to the borrower of the holder's intent to foreclose. To satisfy this obligation for loans that are covered by both Act 6 and Act 91, lenders issue a combined notice to borrowers to comply with both statutes. Indeed, where both acts apply, the Pennsylvania Housing Finance Agency has created a notice intended to comply with both statutes, which "shall be in lieu of any other notice required by law." 35 P.S. § 1680.403c(b)(1).

Here, the parties agree that Act 91 does not apply, because the Property is not Taggart's principal residence. See 35 P.S. § 1680.401c(a) (providing that Act 91 does not apply if "[t]he property securing the mortgage is not the principal residence of the mortgagor"). Nor do the parties dispute that Act 6 applies.² In relevant part, Section 403 of Act 6 requires pre-foreclosure notice as follows:

(a) Before any residential mortgage lender may accelerate the maturity of any residential mortgage obligation, commence any legal action including mortgage foreclosure to recover under such obligation, or take possession of any security of the residential mortgage debtor for such residential mortgage obligation, such person shall give the residential mortgage debtor notice of such intention at least thirty days in advance as provided in this section.

(b) Notice of intention to take action as specified in subsection (a) of this section shall be in writing, sent to the residential mortgage debtor by registered or certified mail at his last known address and, if different, at the residence which is the subject of the residential mortgage.

(c) The written notice shall clearly and conspicuously state:

(1) The particular obligation or real estate security interest;

(2) The nature of the default claimed;

(3) The right of the debtor to cure the default as provided in section 404 of this act and exactly what performance including what sum of money, if any, must be tendered to cure the default;

(4) The time within which the debtor must cure the default;

(5) The method or methods by which the debtor's ownership or possession of the real estate may be terminated; and

(6) The right of the debtor, if any, to transfer the real estate to another person subject to the security interest or to refinance the obligation and of the transferee's right, if any, to cure the default.

(d) The notice of intention to foreclose provided in this section shall not be required where the residential mortgage debtor[ ] has abandoned or voluntarily surrendered the property which is the subject of a residential mortgage.

41 P.S. § 403.

The April 22, 2010 Notice, entitled "Act 91 Notice Take Action to Save Your Home from Foreclosure," explained that Taggart had defaulted on his loan and that Chase Bank intended to foreclose; it also specified the nature of the default. See Complaint, Ex. B. The Notice informed Taggart that the mortgage was in default because Taggart had failed to make payments from March 1, 2009, through April 21, 2010, and that the way to cure the default was to "bring it up to date." Id. The Notice identified the sum of the monthly payments that were past due, the accrued late charges and fees, and the amount Taggart would have to pay to cure the default:

  Total Monthly Payments Past Due:        $14911.78
                  Late Charges:                           $687.61
                  Other Fees:                             $250
                  TOTAL AMOUNT DUE TO CURE THE DEFAULT:   $15849.39
                

Id.

The Notice instructed Taggart to cure the default within thirty days by paying the total amount due to Chase Bank. To effectuate payment, Chase Bank provided two of its addresses, one for regular mail and one for overnight mail. The Notice explained that the consequence of non-payment would be a mortgage foreclosure action. Finally, the Notice instructed Taggart how to contact Chase Bank by phone, fax, mail, or email. Id.

Taggart failed to cure the default. On September 2, 2010, Chase Bank filed a complaint in mortgage foreclosure against Taggart (the "2010 Action") seeking $ 133,695.24 in damages. The complaint averred that the lender had provided the requisite Act 6 notice, and it attached the April 22, 2010 Notice.

Taggart filed preliminary objections to the 2010 Action. Chase Bank failed to file a timely response. On February 3, 2011, the trial court sustained Taggart's preliminary objections and dismissed the complaint. On March 8, 2012, Chase Bank assigned the rights and interest in the mortgage to JP Morgan Chase Bank ("JP Morgan"). Neither Chase Bank nor JP Morgan took further action on the docketed complaint. On May 1, 2013, the docket was closed administratively due to inactivity exceeding twenty-four months.

On July 26, 2013, JP Morgan filed a second complaint in mortgage foreclosure against Taggart, under a new docket number, claiming that $ 164,887.53 was due on the Mortgage as of April 9, 2013 (the "2013 Action"). JP Morgan did not send a new Act 6 notice. Instead, the complaint averred that Taggart had received the requisite Act 6 notice, and appended the April 22, 2010 Notice as an exhibit to substantiate this assertion.

During the pendency of this litigation, the rights and interest in the Mortgage were assigned three more times, the last of which was to Great Ajax on February 23, 2015. Also on that date, the trial court permitted Great Ajax to be substituted as plaintiff. On May 27 and 28, 2015, the trial court held a bench trial. On November 25, 2015, the trial court rendered a verdict in favor of Great Ajax. Judgment was entered on December 7, 2015, and, on January 6, 2016, the trial court denied post-trial motions.

Throughout the litigation, Taggart argued that he was not provided the requisite pre-foreclosure notice in connection with the pending foreclosure action. Taggart challenged JP Morgan's and Great Ajax's reliance upon the Notice because that Notice was sent in anticipation of the 2010 Action, which had been dismissed. Following entry of judgment, Taggart filed a notice of appeal, asserting, inter alia, that the Notice was invalid and insufficient to support the initiation of the 2013 Action. In its responsive opinion, the trial court rejected this claim, apparently upon the mistaken belief that the 2013 Action was a continuation of the 2010 Action and upon its misperception of Taggart's argument, which the trial court believed to be that Great Ajax was required to send a new Act 6 notice when it was substituted as plaintiff in 2015.

The Superior Court affirmed the entry of judgment in mortgage foreclosure against Taggart. JP Morgan Chase Bank, N.A. (Substituted Plaintiff, Great Ajax Operating P'ship, LP) v. Taggart , 470 EDA 2016, 2017 WL 3669502 (Pa. Super. Aug. 25, 2017). Before the Superior Court, Taggart argued that, because the 2010 Action was dismissed, JP Morgan was required to send a new Act 6 notice at least thirty days prior to filing the 2013 Action. The Superior Court disagreed, and held that nothing required JP Morgan to send a new Act 6 notice prior to commencing the 2013 Action. The court acknowledged its decision in Wells Fargo Bank, N.A. v. Spivak , 104 A.3d 7 (Pa. Super. 2014), which held that a lender who voluntarily withdraws an action in mortgage foreclosure must issue a new Act 6 notice before filing a new action in mortgage foreclosure. However, according to the court, Spivak did not control, because the lender in this case did not voluntarily withdraw the 2010 Action.

This Court granted Taggart's petition for allowance of appeal in order to resolve "[w]hether a lender/mortgagee whose first complaint in mortgage foreclosure against a borrower/mortgagor was dismissed is required to send a new Notice of Intention to Foreclose pursuant to 41 P.S. § 403(a) (Act 6 Notice) prior to filing a second complaint in mortgage foreclosure." JP Morgan Chase Bank, N.A. (Substituted Plaintiff, Great Ajax Operating P'ship, LP) v. Taggart , ––– Pa. ––––, 180 A.3d 367 (2018) (per curiam ). Because this issue raises a question of law, our standard of review is de novo , and our scope of...