Dalfonso, T. v. Benson, R.
62 WDA 2016
| Pa. Super. Ct. | Nov 17, 2016Background
- Omni Capital lent $200,000 to United Business Enterprises (UBE) in 1994; the Robidouxs personally guaranteed the debt and entered a 1997 settlement agreement requiring payment of $273,435, secured by mortgages on several properties including McKean County oil, gas, and mineral (OGM) rights.
- After defaults, Omni obtained a 1997 judgment against the Robidouxs; Benson later purchased the McKean County OGM rights at tax sale subject to the mortgages.
- In 2002 Omni and the Robidouxs/UBE executed a new settlement (2002 Agreement) accepting $55,400 in full satisfaction; it contained an integration clause and stated that, on breach, the 1997 judgment would be "deemed to be in full effect" (but did not require mortgages).
- The Robidouxs/UBE defaulted on the 2002 Agreement; Omni sold the debt to Dalfonso in 2004, who purported to acquire the mortgages and later filed to foreclose in 2009.
- The trial court held the 2002 Agreement was a novation that supplanted the 1997 Agreement and thereby extinguished the mortgages; the court entered judgment for Benson. On appeal the Superior Court affirmed, but also held Dalfonso’s Rule 1925(b) statement was too vague and waived certain arguments.
Issues
| Issue | Plaintiff's Argument (Dalfonso) | Defendant's Argument (Benson) | Held |
|---|---|---|---|
| Whether the 2002 Agreement invalidated/extinguished the 1997 mortgages | 1997 Agreement merged into the 1997 judgment, so it could not be novated; alternatively, even if novation occurred, mortgages are separate and survive | 2002 Agreement was a novation that replaced the 1997 Agreement and did not preserve the mortgages; therefore no valid mortgages existed when Dalfonso purchased | Court: Dalfonso’s Rule 1925(b) issues largely waived for vagueness; on merits, the 2002 Agreement was a novation that extinguished the mortgages and foreclosure fails |
| Whether the trial court erred in applying novation doctrine | Argues novation inapplicable because contract merged into judgment and mortgages survive debt extinguishment | Argues parties intended 2002 Agreement to substitute and discharge prior obligations including mortgage security; breach does not revive prior duty to mortgage | Court: Novation elements met (replacement, consideration, consent, intent); extinguishment of secured debt extinguishes associated mortgages |
Key Cases Cited
- First Lehigh Bank v. Haviland Grille, Inc., 704 A.2d 135 (Pa. Super. 1997) (sets elements of novation and burden to prove meeting of the minds)
- Weir v. Potter Title & Mortgage Guarantee Co., 185 A. 630 (Pa. 1936) (if debt is extinguished, the mortgage securing it is likewise extinguished)
- Kaylor v. Cent. Trust Co. of Harrisburg, 36 A.2d 825 (Pa. 1944) (payment or extinguishment of either note or mortgage discharges the other absent contrary intent)
- Nernberg & Laffey v. Patterson, 601 A.2d 1237 (Pa. Super. 1991) (a substituted contract bars revival of the pre-existing duty after breach)
- CitiMortgage, Inc. v. Barbezat, 131 A.3d 65 (Pa. Super. 2016) (to foreclose a mortgage, the foreclosing party must own or hold the note such that assignment of mortgage alone is insufficient)
- Majorsky v. Douglas, 58 A.3d 1250 (Pa. Super. 2012) (Rule 1925(b) statements that are overly vague may result in waiver)