Wiernik v. PHH US MORTG. CORP.

Decision Date02 August 1999
PartiesE. Jeffrey WIERNIK and Nonnette Wiernik, Individually and on Behalf of all others similarly situated, Appellants, v. PHH U.S. MORTGAGE CORPORATION and Cendant Mortgage, Appellees.
CourtPennsylvania Superior Court

Ronald J. Smolow, Trevos, for appellants.

Joseph F. Yenouskas, Washington, DC, for appellees.

Before CAVANAUGH, JOYCE and OLSZEWSKI, JJ.

OLSZEWSKI, J.:

¶ 1 As the saying goes, sometimes it is not the amount of money at stake, but the principle of the matter that counts. Here, we are presented with a rather unwieldy and confusing case that, in the end, asks whether appellees owe appellants less than $20. After reviewing the central legal issues at hand, it becomes clear that here the principle of the matter means everything.

¶ 2 As summarized by the trial court, the facts of the case are relatively straightforward:

This matter involved a class action in which Plaintiff brings a claim on behalf of himself and others who have entered into mortgage agreements as borrowers with Defendants. Plaintiff entered into a thirty year mortgage with Defendant PHH U.S. Mortgage Company (hereinafter "PHH") on September 23, 1993. Plaintiff asserts that Defendant Cendant Mortgage (hereinafter "Cendant") is a wholly-owned corporation, subsidiary, affiliate or division of PHH and that Cendant assumed servicing of the mortgage.

In addition to requiring Plaintiff to make monthly payments of principal and interest, Plaintiff's mortgage also required Plaintiff to make monthly payments for taxes and insurance premiums. Under the terms of the mortgage, PHH held these additional funds in a non-interest bearing escrow account and paid the taxes and premiums from the escrow funds as they became due. On May 8, 1998, Plaintiff paid Cendant the balance of the loan secured by the mortgage. At this time, there was $6,489.36 in Plaintiff's escrow account. On May 28, 1998, Plaintiff received a check from Defendants in the amount of $6,489.36. Plaintiff's claims arise from his contention that Defendants failed to return his escrow funds "promptly" as required by the mortgage. Plaintiff's Complaint alleges 1) breach of contract, 2) unjust enrichment, 3) breach of fiduciary duty and constructive trust and 4) violation of the Consumer Fraud Act and Unfair Trade Practices and Consumer Protection Law.

Defendants filed Preliminary Objections to the Complaint in the nature of a demurrer. The Court granted Defendants' objections and dismissed the action. Plaintiff appealed to our Superior Court.

Trial court opinion, 2/1/99, at 1-2.

¶ 3 In cases, such as the present case, where appellants challenge the trial court's grant of preliminary objections on demurrer, our scope of review on appeal is well settled. We must accept all material facts set forth in the complaint as well as all inferences reasonably deducible therefrom as admitted and true and decide whether, based on the facts averred, recovery is impossible as a matter of law. See MacElree v. Philadelphia Newspapers, Inc., 544 Pa. 117, 674 A.2d 1050, 1053-54 (1996)

(citations omitted); County of Allegheny v. Commonwealth, 507 Pa. 360, 490 A.2d 402, 408 (1985). In making our decision, we need not consider the pleader's conclusions of law, unwarranted inferences from facts, opinions, or argumentative allegations. See Pennsylvania State Lodge v. Commonwealth, 692 A.2d 609, 613 (Pa. Cmwlth.1997), aff'd without op., 550 Pa. 549, 707 A.2d 1129 (1998); see also Santiago v. Pennsylvania Nat'l Mutual Casualty Ins. Co., 418 Pa.Super. 178, 613 A.2d 1235, 1238-39 (1992). If, however, any doubt exists as to whether a demurrer should be sustained, we must reverse the decision of the court below. County of Allegheny,

490 A.2d at 408.

¶ 4 In the light of the relevant scope of review, appellants present this Court with five questions:

1. Did plaintiffs state a cause of action for interest on their tax and insurance Escrow where their mortgage company, Cendant, was obligated to return the Escrow "Upon [sic] payment in full" of the mortgage loan?

2. Did the trial court err in concluding that 21 Pa.S.C.A. [sic] § 705 extended the agreed-upon time in which the mortgage lender was obligated to return the Escrow?

a. Was 21 Pa.C.S.A. [sic] § 705 applicable to this transaction?

b. Did the trial court err in concluding that 21 P.S.C.A. [sic] § 705 modified the time agreed to by the parties for refunding the Escrow?

c. Did the trial court err in concluding that the legislature intended to give mortgage lenders a 30 day interest free loan?

3. Did the trial court err in dismissing plaintiffs' claims that the mortgage lender's retention of the Escrow for fictitious and groundless reasons was a prohibited pre-payment penalty?

4. Did the trial court err in dismissing plaintiffs' claim for unjust enrichment, breach of fiduciary duty, and violation of Pennsylvania's Unfair Trade Practices and Consumer Protection Law?

5. Should plaintiffs have been given the opportunity to file an amended complaint as requested?

Appellants' brief, at 3-4.

¶ 5 Central to appellants' contentions on appeal is the claim for breach of contract. In their claim for breach of contract, appellants argue that appellees violated ¶ 2 of the Uniform Covenants of their mortgage agreement, which states:

2. Funds for Taxes and Insurance...

Upon payment in full of all sums secured by this Security Instrument, Lender shall promptly refund to Borrower any funds held by Lender.

Uniform Covenants (page 2 of Form 3039), attached as exhibit B to complaint, 8/6/96. In reviewing appellees' preliminary objections, the court below found that, pursuant to 21 P.S. § 705, appellees had, in fact, "promptly" refunded those funds remaining in the escrow account, as § 705 provides that lenders have 30 days to make such refunds. We agree.

21 P.S. § 705 states:

A bank, savings bank, savings and loan association or other lending institution holding a residential mortgage shall send written notification by first class mail to the mortgagor when the mortgage has been fully paid. Any moneys remaining in any escrow account established for the payment of taxes or insurance premiums shall be returned within 30 days to the mortgagor.

Id. Appellants argue that § 705 is not applicable to the case at bar because definitions found in other statutory provisions in other statutory titles adopted separately specifically exclude appellees from the class of lenders considered in the act.

¶ 6 When construing a statute, our objective is to ascertain and effectuate the legislative intent. 1 Pa.C.S.A. § 1921(a); see also Berger v. Rinaldi, 438 Pa.Super. 78, 651 A.2d 553, 557 (1994)

. In so doing, we must begin with a presumption that our legislature did not intend any statutory language to exist as mere surplusage. Id. Accordingly, "whenever possible, courts must construe a statute so as to give effect to every word contained therein." Id.

¶ 7 When faced with a question of statutory interpretation, we must consider the language and spirit of the Statutory Construction Act, which states:

When the words of the statute are not explicit, the intention of the General Assembly may be ascertained by considering, among other matters:

(1) The occasion and necessity for the statute.

(2) The circumstances under which it was enacted.

(3) The mischief to be remedied.

(4) The object to be attained.

(5) The former law, if any, including other statutes upon the same or similar subjects.

(6) The consequences of a particular interpretation.

(7) The contemporaneous legislative history.

(8) Legislative and administrative interpretations of such statutes.

1 Pa.C.S.A. § 1921(c).

¶ 8 Appellants argue that § 705 does not apply to the present case because, once other definitional statutes are considered, it becomes clear that both appellees as institutions and this mortgage in particular fall outside of the scope of the statute. First, appellants contend that appellees are not "other lending institution[s]" based on 40 P.S. § 281, which defines "lending institutions" as: "any institution that accepts deposits and lends money in the Commonwealth of Pennsylvania, including banks and savings and loan associations, but excluding insurance companies." Id. Appellants further argue that § 705 cannot apply to their mortgage because, as defined by 41 P.S. § 101, a "residential mortgage" only includes "an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less, evidenced by a security document and secured by a lien upon real property...." 41 P.S. § 101 (emphasis added).

¶ 9 While appellants cite currently applicable statutory language, we do not believe that reading either definition into the language of § 705 effectuates legislative intent in light of other factors. Neither the definition of "lending institution" or "residential mortgage" arises from the same title, let alone the same statute or act as § 705. Furthermore, none of the cited statutes were considered, adopted, or amended contemporaneous to one another. More importantly, given the scope of § 705 and the general circumstances under which it was passed, we cannot see that the inclusion of either definition serves to effectuate legislative intent. Were we to adopt appellants' reasoning, those institutions that both receive deposits and lend money would be entitled to more protections than the multitude of mortgage lenders that do not accept deposits. Further, those persons who have enough money and credit-worthiness to enable them to take on a residential mortgage for more than $50,000 would be entitled to greater freedom to contract than those persons who are not as financially fortunate. In light of the realities of the real estate and mortgage markets as they existed in 1986 (the year when the legislature adopted § 705), we cannot find grounds to go beyond the plain meaning of the legislative enactment to...

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