Freedom Mortgage v. Dennis, P.
3423 EDA 2015
| Pa. Super. Ct. | Sep 30, 2016Background
- Patricia Dennis executed a $149,469 mortgage and promissory note on March 29, 2013, recorded April 10, 2013, secured by property in Norristown, PA. MERS was listed as nominee.
- Dennis defaulted by missing payments beginning September 1, 2013; Freedom sent required default/foreclosure notices and filed foreclosure on April 1, 2014.
- MERS assigned the mortgage to Freedom on March 11, 2014; assignment recorded March 25, 2014. Freedom attached the note and mortgage to its complaint.
- Dennis alleged Freedom lacked the original note and standing, and attempted (unsuccessfully) to remove to federal court; a default judgment was opened and she answered asserting defects.
- Freedom moved for summary judgment on June 3, 2015, submitting the assignment, the note, mortgage, and an affidavit stating it possessed the original note; the trial court granted summary judgment on October 26, 2015.
- On appeal, Dennis raised jurisdictional and standing arguments (including that Freedom was a "debt collector," that the mortgage was separated from the note, and that Ginnie Mae held the note); some issues were waived for not being raised below.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state court had subject-matter jurisdiction / federal jurisdiction via FDCPA or diversity | Dennis: Freedom is a New Jersey "debt collector" under FDCPA and thus federal courts have jurisdiction; diversity removal proper | Freedom: It is the original mortgagee collecting its own debt; FDCPA inapplicable; defendant is Pennsylvania citizen so diversity removal improper | Court: State court properly had jurisdiction; FDCPA does not apply to original creditor; removal improper because defendant is in-state |
| Whether Freedom possessed the original note and thus had standing to foreclose | Dennis: Ginnie Mae (LoanCare letter) held the note in Oct 2013; Freedom lacked possession when it sued | Freedom: Produced assignment, attached note, and affidavit averring possession of the original note as of its summary judgment motion | Court: Dennis produced no evidence showing Freedom lacked possession as of June 3, 2015; possession supports enforcement and standing |
| Whether assignment of mortgage alone (separation of note and mortgage) invalidates enforceability | Dennis: Assignment separated mortgage from note, making documents unenforceable | Freedom: Assignment plus possession of the note permits foreclosure; assignment recorded before suit | Court: Assignment alone does not nullify enforceability; Freedom had right to foreclose when suit filed |
| Whether certain issues were preserved for appeal (custodian status, ability to proceed) | Dennis: Raised various challenges including custodian status of Freedom and Ginnie Mae's role | Freedom: Some issues not raised below; thus waived | Court: Fifth and seventh issues were waived for not being raised in trial court or Rule 1925(b) statement |
Key Cases Cited
- Bank of America, N.A. v. Gibson, 102 A.3d 462 (Pa. Super. Ct.) (summary judgment standard in mortgage foreclosures)
- JP Morgan Chase Bank, N.A. v. Murray, 63 A.3d 1258 (Pa. Super. Ct.) (note is negotiable instrument; possessor may enforce)
- Beneficial Consumer Discount Co. v. Vukman, 77 A.3d 547 (Pa.) (scope of courts of common pleas' jurisdiction)
- Police v. National Tax Funding, L.P., 225 F.3d 379 (3d Cir.) (FDCPA does not apply to entities collecting their own debts)
- Mid-City Bank & Trust Co. v. Myers, 23 A.2d 420 (Pa.) (definition and nature of subject-matter jurisdiction)