Bayview Loan Servicing v. Etreih, A.
3278 EDA 2015
| Pa. Super. Ct. | Nov 1, 2016Background
- In 2007 Adel Etreih executed a promissory Note for $87,500; both Etreih and Raid Albarkawi executed a mortgage (Security Instrument) on commercial property in Philadelphia to secure the debt. Interbay assigned the Note and Mortgage to Bayview.
- In 2009 Bayview and Etreih agreed a Loan Modification increasing the unpaid principal and reducing interest to 6%; Albarkawi did not sign the Note or the Modification but had signed the Mortgage.
- Defendants defaulted when payments ceased after November 1, 2012; Bayview sought foreclosure and recovery of the unpaid balance and fees.
- Following a non-jury trial, the trial court entered an in rem judgment on May 18, 2015 for $178,657.07 and ordered foreclosure and sale; post-trial relief was denied and appeal followed.
- Appellants argued (1) Albarkawi cannot be held on the modified debt because he did not sign the Note or Modification and the Mortgage required written consent to modify, (2) Albarkawi did not ratify the Modification, and (3) Bayview failed to properly prove attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Bayview can obtain an in rem judgment against Albarkawi though he did not sign the Note/Modification | Bayview: Mortgage’s terms secure “debt evidenced by the Note” and “any and all indebtedness now or hereafter owing,” making Albarkawi liable in rem | Albarkawi: He never signed Note/Modification; Mortgage requires written modification signed by the party to be bound; thus he cannot be held for the modified balance | Court: Affirmed — Mortgage’s language makes obligations joint and several and authorizes in rem recovery against Albarkawi for the secured indebtedness (including amounts incorporated by the Modification) |
| Whether Albarkawi ratified the Loan Modification by conduct | Bayview: Albarkawi’s conduct and the mortgage terms support adoption/ratification | Albarkawi: Testimony is equivocal; no specific evidence he knew of or made payments after the Modification | Court: Did not need to decide ratification because Mortgage terms alone supported in rem judgment; trial court’s ratification analysis unnecessary |
| Whether an in rem foreclosure judgment may be entered where personal liability on the modified Note is not established | Bayview: In rem judgment is proper to effect sale of mortgaged property even if personal liability is not proven | Albarkawi: Judgment amount may deprive his interest beyond original liability; improper to enter judgment based on Modification against him | Held: In rem foreclosure may be entered for a sum certain to effect sale; if Albarkawi lacks personal liability, relief is limited to in rem (no deficiency in personam) |
| Whether Bayview proved attorney’s fees sufficiently | Bayview: Presented payoff exhibit showing advanced legal fees and claimed customary 10% fee; fee is reasonable under controlling precedent | Appellants: Bayview failed to produce fee agreement, time records, or detailed proof of fees | Court: 10% fee upheld as reasonable; exhibit showing legal fees plus precedent sufficed to support award |
Key Cases Cited
- Levitt v. Patrick, 976 A.2d 581 (Pa. Super. 2009) (standard of review for non-jury trial verdicts)
- Meco Realty Co. v. Burns, 200 A.2d 869 (Pa. 1964) (foreclosure is an in rem proceeding; in rem judgment may be entered absent personal liability)
- U.S. Bank, N.A. v. Pautenis, 118 A.3d 386 (Pa. Super. 2015) (discussing in rem foreclosure principles)
- Landau v. W. Pennsylvania Nat’l Bank, 282 A.2d 335 (Pa. 1971) (judgment in mortgage foreclosure must be for a sum certain)
- Citicorp Mortg., Inc. v. Morrisville Hampton Vill. Realty Ltd. P’ship, 662 A.2d 1120 (Pa. Super. 1995) (mortgagee entitled to reasonable attorney’s fees; 10% often reasonable)
- Federal Land Bank of Baltimore v. Fetner, 410 A.2d 344 (Pa. Super. 1979) (upholding 10% attorney fee in foreclosure context)
- Allegany Gas Co. v. Kemp, 174 A. 289 (Pa. 1934) (ratification may be shown by conduct indicating acceptance with knowledge of consequences)