Us Bank N.A. v. Mallory

• Decision Date: 14 September 2009
• Docket Number: No. 1924 EDA 2008,1924 EDA 2008
• Citation: 982 A.2d 986
• Parties: US BANK N.A. as Trustee for Residential Funding Co., LLC, Appellee v. Pamela MALLORY and Jamall Roundtree. Appeal of Pamela Mallory, Appellant.
• Court: Pennsylvania Superior Court

982 A.2d 986

US BANK N.A. as Trustee for Residential Funding Co., LLC, Appellee v. Pamela MALLORY and Jamall Roundtree Appeal of Pamela Mallory, Appellant.

No. 1924 EDA 2008

Superior Court of Pennsylvania.

Argued June 10, 2009.

Filed September 14, 2009.

Reargument Denied November 23, 2009.

Kerry E. Smith, Philadelphia, for appellant.

Henry F. Reichner, Philadelphia, for appellee.

BEFORE: STEVENS, KLEIN, and KELLY, JJ.

OPINION BY STEVENS, J.:

¶ 1 This is an appeal from the order entered in the Court of Common Pleas of Philadelphia County denying Appellant Pamela Mallory's¹ petition to strike and/or open the default judgment entered in favor of Appellee U.S. Bank, N.A., as Trustee for Residential Funding Co., LLC. Appellant contends (1) the default judgment should have been stricken since the failure to plead properly an assignment of mortgage in a mortgage foreclosure action is a fatal defect apparent on the face of the record; (2) Appellee did not have standing to bring the instant mortgage foreclosure action, and consequently, the default judgment should be stricken; (3) the trial court erred in denying Appellant's petition to open the default judgment without considering Appellant's defenses to the action and (4) the default judgment should be opened since Appellant met all prongs necessary for the opening of default judgments. We affirm.

¶ 2 The relevant facts and procedural history are as follows: On November 14, 2007, Appellee filed a complaint in mortgage foreclosure against Appellant averring that, on August 15, 2006, Appellant executed a mortgage for residential property located at 6442 North Syndenham Street in favor of Mortgage Electronic Registration Systems, Inc., (hereinafter MERS) as a Nominee for Mortgage Lenders Network USA, Inc., (hereinafter MLN) in the amount of $89,100.00. Appellee averred that it was the legal owner of the mortgage and was in the process of formalizing the assignment thereof. Appellee further averred that Appellant was in default of the mortgage since she had not made any payments since June 1, 2007.

¶ 3 Attached to the complaint was a copy of the subject mortgage, as well as an Act 91 Notice informing Appellant she needed to take action to save her home from foreclosure, explaining how Appellant could cure the default, and encouraging her to contact an attorney. The complaint also contained the requisite Notice to Defend informing Appellant she should respond to the complaint within twenty days and take the complaint to a lawyer at once. The certified docket entries reveal that personal service of the complaint was made upon Appellant on November 19, 2007.

¶ 4 Appellant failed to respond to Appellee's complaint, and on January 3, 2008, upon praecipe of Appellee, the prothonotary entered a default judgment against Appellant and in favor of Appellee in the amount of $96,096.03. The certified docket entries reveal that notice of the default judgment was provided to Appellant on that same date. On January 15, 2008, Appellee filed a motion to reassess damages, as well as a supporting memorandum, averring that, on April 1, 2008, the property was listed for a sheriff's sale and additional expenses had been incurred. As such, Appellee sought judgment in the amount of $101,085.91. The docket entries reveal that service of the motion to reassess damages was made upon Appellant by regular mail on January 30, 2008.

¶ 5 Appellant did not respond, and on February 15, 2008, the trial court entered an order directing the prothonotary to amend the default judgment and the sheriff to amend the writ nunc pro tunc to reflect the amount of $101,085.91, plus interest and the sheriff's commission. The docket entries reveal that the prothonotary provided notice to Appellant on that same date.

¶ 6 Appellant did not respond, and the property was listed for a sheriff's sale for April 1, 2008. However, prior thereto, on March 25, 2008, Appellant filed a praecipe to proceed informa pauperis and a petition to strike and/or open the default judgment, resulting in the sheriff's sale being stayed. In her petition to strike and/or open the default judgment, Appellant averred that the default judgment should be stricken since it is clear on the face of the record that the underlying complaint violated the Rules of Civil Procedure specific to mortgage foreclosure actions in that Appellee did not set forth in the complaint any assignment of the mortgage, including a statement of the date and place of the recording of the assignment, as is required by Pa.R.C.P. 1147(a)(1). Appellant further averred that, pursuant to Pa. R.C.P. 1019(i), it was improper for Appellee to merely assert it was the owner of the mortgage and was "in the process of formalizing assignment of same." Appellant also argued that the default judgment should be stricken since the written assignment conveying the mortgage from MERS to Appellee was not executed until December 28, 2007, after the complaint was filed, and recorded on January 15, 2008, after the default judgment was entered.

¶ 7 With regard to opening the default judgment, Appellant contended she is a low-income single mother who inherited the house located at 6442 North Syndenham Street. Appellant deeded the property to herself and Jamall Roundtree on September 9, 2003, and on that same date, she and Mr. Roundtree took out a mortgage for $60,700.00 from Chase. Appellant and Mr. Roundtree married on June 25, 2004, and on October 6, 2004, Appellant obtained a restraining order against Mr. Roundtree and evicted him from the house. On approximately November 17, 2005, Appellant discovered that the Internal Revenue Service (IRS) had placed a tax lien on the house due to Mr. Roundtree's failure to pay taxes.

¶ 8 In the summer of 2006, Appellant contacted American Mortgage Incorporated (AMI) to inquire about refinancing her mortgage so that she could pay Mr. Roundtree's debts and remove his name from the property's deed. Arlene, an AMI broker, secured for Appellant a $89,100.00 30-year adjustable rate mortgage through MLN. Appellant and Mr. Roundtree signed their names to the mortgage; however, the very next day, Appellant exercised her right to cancel the loan.

¶ 9 Arlene and Arlene's supervisor jointly called Appellant and "berated" her for canceling the mortgage. The AMI employees assured Appellant she could afford the mortgage payments and, fearing she would lose her home, Appellant executed the subject mortgage on August 15, 2006. Appellant averred she was "rushed" through the settlement of the mortgage, she did not review any of the documents, she did not understand the balloon feature of the mortgage, and she was unaware that the mortgage contained a two-year pre-payment penalty. She further averred the Truth In Lending Act disclosure statement for the mortgage understated the finance charge, and while a deed purporting to transfer the subject property to her only was filed, she averred the signature on the deed was a forgery.

¶ 10 She alleged she was a victim of a predatory mortgage broker who exploited her fear of her abusive husband and of losing her home to the IRS due to her husband not paying federal taxes. Appellant averred meritorious defenses, namely, that she lacked a security interest in the property due to her rescission of the loan, the loan should not be enforced since it is a predatory loan, the loan was void due to the broker's violation of Pennsylvania's Credit Services Act, and the loan violated Pennsylvania's consumer protection statute.

¶ 11 Moreover, Appellant averred the judgment should be opened since the petition was timely filed and the delay in filing the petition to open was not unreasonable given Appellant's lack of legal and financial sophistication, as well as her efforts to avoid foreclosure. Appellant averred she struggled to make the mortgage payments, and in the summer or fall of 2007, she contacted a representative of the mortgage company to explain her financial situation. Approximately a week later, Appellant received a letter from the mortgage company denying her loss mitigation assistance claim, and on July 27, 2007, after receiving an Act 91 notice, she made a payment over the phone. On October 30, 2007, Appellant went to Northwest Counseling Services and applied for a Homeowner's Emergency Mortgage Assistance Program (HEMAP) loan. When she received the instant mortgage foreclosure complaint, she called Appellee's attorney and was told she would have to pay $9,000.00 to stop the foreclosure. On December 28, 2007, HEMAP denied Appellant's application for a loan, Appellant filed an appeal, and a hearing was held on February 22, 2008. While reviewing the loan documents, a Northwest housing counselor realized the subject mortgage had the hallmarks of being a predatory subprime loan and, on approximately January 22, 2008, the counselor sent a letter to the Pennsylvania Human Relations Commission (PHRC) and Central Legal Services, Inc. to investigate. The PHRC telephoned Appellant during the last week of January and first two weeks of February of 2008, and a PHRC investigator encouraged Appellant to telephone Community Legal Services, Inc. to avoid a sheriff's sale. On February 11, 2008, Appellant contacted an attorney from Central Legal Services, Inc., and the instant petition to strike and/or open the default judgment was filed on March 25, 2008.

¶ 12 On April 14, 2008, Appellee filed an answer and supporting memorandum to Appellant's petition to strike and/or open the default judgment, and on April 21, 2008, Appellant filed a reply. By order entered on June 4, 2008, the trial court denied Appellant's petition to strike and/or open the default judgment, and this timely appeal followed. The trial court did not order Appellant to file a Pa.R.A.P. 1925(b) statement, and no such statement was filed.² On January 14, 2009, the trial court filed a brief opinion indicating it was relying on the reasoning provided in its...