U.S. Bank Nat'l Ass'n v. Watters

• Decision Date: 19 April 2017
• Docket Number: No. 483 WDA 2016,483 WDA 2016
• Citation: 163 A.3d 1019
• Parties: U.S. BANK NATIONAL ASSOCIATION as Trustee FOR the PENNSYLVANIA HOUSING FINANCE AGENCY, Appellee v. Bryan J. WATTERS and Proposed Intervener, Diane Watters, Appellants
• Court: Pennsylvania Superior Court

163 A.3d 1019

U.S. BANK NATIONAL ASSOCIATION as Trustee FOR the PENNSYLVANIA HOUSING FINANCE AGENCY, Appellee

v.Bryan J. WATTERS and Proposed Intervener, Diane Watters, Appellants

No. 483 WDA 2016

Superior Court of Pennsylvania.

Argued November 29, 2016

FILED APRIL 19, 2017

Stephen H. Hutzelman, Erie, for appellant.

John W. Buss, Jr., Pittsburgh, for appellee.

BEFORE: LAZARUS, J., SOLANO, J., and STRASSBURGER, J.^*

OPINION BY SOLANO, J.:

Appellants Bryan J. Watters ("Husband") and Diane Watters ("Wife") appeal from the order entered on March 9, 2016, denying their petition to strike or open a judgment against Husband in an action to foreclose on a mortgage and Wife's application for leave to intervene in that action. We affirm.

On June 7, 2006, Husband signed a note and mortgage for $73,071 to purchase real property in Girard, Erie County ("the Property"). The original mortgagee was American Home Mortgage, which subsequently assigned the mortgage to the Pennsylvania Housing Finance Agency, which in turn assigned the mortgage to Appellee, U.S. Bank National Association ("Bank").

At the time he purchased the Property, Husband was married to Wife, but Wife was not a purchaser of the Property and her name was not placed on the deed. Husband and Wife deliberately chose not to include Wife as a party to the purchase or to the mortgage because she had a poor credit rating. N.T., 3/8/16, at 13–14; Trial Ct. Op., 6/8/16, at 1.

The trial court accurately detailed the subsequent facts and procedural history underlying this action, as follows:

On April 16, 2013, [Husband] filed for divorce from [Wife. N.T. at 14.] After separating, [Husband] moved from the Property and [Wife] continued to reside there. See [id. ]

[Husband] failed to pay the mortgage payment due June 1, 2013 and defaulted on all subsequent installments. The [Bank] filed an action in mortgage foreclosure on February 28, 2014. [N.T. at 14.] On March 10, 2014, [Wife] was served with a copy of the Complaint as an occupant of the Property secured by the Mortgage. [Id.¹ Husband] was personally served with the Complaint on March 13, 2014. [Id. ]

On April 11, 2014, notices that [Husband] must vacate or pay within 10 days were mailed to the Property and to [Husband] at his new address. [Bank's] Brief in Opposition to Petition, p.2. When no action was taken, the [Bank] filed a Praecipe for a Default Judgment against [Husband on April 25, 2014, and notice was sent to Husband on April 28, 2014.]

A Sheriff's sale was scheduled for July 25, 2014. A copy of the Notice of Sale was mailed to [Wife] at the [P]roperty address. [N.T. at 15. Wife] received the Notice of Sale and attempted to work with the [B]ank to stave off the foreclosure. [Id. ] As a result of [Wife]'s actions, the Sheriff's sale was continued to August 22, 2014. [Id. ] The Sheriff's sale was postponed a second time to October 17, 2014 after the [Bank] became aware [Wife] was attempting to obtain financing to purchase the home from [Husband]. [Id. at 15–16.]

The Sheriff's sale occurred on October 17, 2014 and the [Bank] was the successful bidder. [N.T. at 15–16.] A deed was recorded November 10, 2014 transferring title to the [Bank] and extinguishing [Husband's] ownership rights. [Id. at 16.]

Over one year later, on December 3, 2015, the Appellants filed a Petition to Open or Strike Default Judgment, Set Aside Sheriff's [S]ale and Application for Leave to Intervene ("Petition"). [In the Petition, Appellants alleged that Wife held an equitable interest in the Property as a result of the divorce proceeding and hence was a party required to be named in the action under Rule 1144 of the Rules of Civil Procedure, and, as she was not named as a party nor served by the Bank, the trial court lacked subject matter jurisdiction and had been powerless to enter the default judgment. Petition at ¶¶ 26–27, 32–33, ad damnum clause.] The [Bank] filed an Answer on January 8, 2016. After submission of briefs and oral argument, the Petition was denied en toto by Order dated March 9, 2016.

Trial Ct. Op., 6/8/16, at 1–3; see also id. at 7.²

The trial court denied Wife's petition to intervene because it concluded that Wife was not a "real owner" of the Property who was required to be named as a party under Rule 1144 of the Rules of Civil Procedure. Pa.R.C.P. 1141 – 1150 govern actions in mortgage foreclosure. Rule 1144(a)(3) states: "The plaintiff shall name as defendants ... the real owner of the property, or if the real owner is unknown, the grantee in the last recorded deed." The court held that a "real owner" is "the original mortgagor or one who takes title for the original mortgagor" and that "[i]ndividuals who have an equitable right to the subject property or those who claim title antagonistic to the mortgagor are not real owners required to be named as defendants." Trial Ct. Op., 6/8/16, at 3–4. Because Wife was not named in the mortgage, note, or deed, she "had at most an equitable interest in the property because it was marital property and the divorce was not yet finalized." Id. at 4. Therefore, the court held, her interest was insufficient to make Wife a real owner for purposes of Rule 1144.³

The trial court held that even if Wife had been required to be named as a defendant in the action, the fact that she received actual notice of the action by personal service of the complaint on her as the resident of the Property enabled her to participate in the action. If she wished to be formally named as a party, she then could have sought to intervene before the sheriff's sale occurred, but she did not do so. Instead, she did not seek to intervene until over a year later, and her application was untimely. Trial Ct. Op., 6/8/16, at 7.

The trial court denied the petition to open the default judgment because the petition was not filed until 584 days after notice of the default was sent to defendant Husband and therefore was untimely; Husband provided no reason for the delay. Trial Ct. Op., 6/8/16, at 7–8. Husband also failed to state a meritorious defense to the action. Id.

Husband and Wife appealed on April 5, 2016, and raise the following issues for our review:

I. Whether any person, other than the holder of a judgment lien or mortgage, who holds a record interest in real property, prior to the commencement of a foreclosure action and who must be joined in a conveyance of real property [before it] may be delivered to the purchaser of the real property, is a "real owner" of the property required to be joined as a Defendant in a foreclosure proceeding against the property pursuant to Rule 1144(a)(3) of the Pennsylvania Rules of Civil Procedure.

II. Whether the term "real owner" of the property in Rule 1144(a)(3) of the Pennsylvania Rules of Civil Procedure is limited to the record owner of property.

III. Whether a spouse whose name is not included in [a] recorded deed to property becomes a "real owner" of property required to be named as a defendant in a mortgage foreclosure against the property under Rule 1144(a)(3) of the Pennsylvania Rules of Civil Procedure when prior to the foreclosure, the spouse becomes entitled to statutory right of equitable division of marital property because of the commencement of an action in divorce by or against that spouse.

IV. Whether the Petition to Open or Strike a Default Judgment and set aside a Sheriff's Sale of real property was filed on a timely basis.

V. Whether the Application to Intervene filed by a person who was not made a party of a foreclosure action, but who contends she is required to be made a party defendant and to be served with process by the Sheriff should be granted.

VI. Whether actual notice of a proceeding by a non-party to the action instead of formal service of process is sufficient notice of the action to a person required to have been named as a party defendant to the proceeding.

Appellants' Brief at 4–5.

Denial of Wife's Petition To Intervene

"Whether to allow intervention is a matter vested in the discretion of the trial court and the court's decision will not be disturbed on appeal absent a manifest abuse of its discretion." Johnson v. Tele–Media Co. of McKean Cty., 90 A.3d 736, 739 (Pa. Super. 2014).

The trial court's main reason for denying Wife's petition to intervene was its conclusion that Wife was not a "real owner of the property" who had to be named as a defendant under Rule 1144(a)(3). Appellants' first three issues challenge that holding.

Appellants contend that Wife is a "real owner" who was required to be joined because she had an equitable interest in the Property pursuant to the Divorce Code. That statute states that "all property acquired by either party during the marriage" is "marital property," 23 Pa.C.S. § 3501(a), and that such property shall be equitably divided by the court if a request to do so is made in a divorce proceeding, id. § 3502(a). See Appellants' Brief at 7, 12–14, 16.

This Court has never addressed whether an individual with a marital interest in real property qualifies as a "real owner" under Rule 1144(a)(3). The mortgage foreclosure rules were adopted in 1949 to replace statutes governing proceedings by scire facias⁴ for the enforcement of a mortgage debt. Under the scire facias statute, the plaintiff in a foreclosure action was required to file "an affidavit setting forth to the best of his knowledge, information, and belief, who are real owners of the land charged, and that all such persons shall be made parties to the writ, and served according to its provisions." Orient Bldg. & Loan Ass'n v. Gould, 239 Pa. 335, 86 A. 863, 863 (1913). The Supreme Court construed a "real owner" (sometimes referred to as a "terre-tenant") under the statute to mean "the real or present owner of the title by and under which the mortgagor claimed the land at the time he assumed to mortgage it." Id. at 864 ; see also Commonwealth Trust Co. v. Harkins, 312 Pa. 402, 167 A. 278, 280–81 (1933) ( "terre-tenant" must be not only in actual possession of property, but also...