212 A.3d 52
Pa. Super. Ct.2019Background
- Appellants (David Keller and two corporate entities he uses to buy sheriff-sale properties) purchased multiple foreclosed properties at Monroe County sheriff’s sales and paid state/local transfer taxes demanded by the Sheriff.
- Plaintiffs sued the mortgage holders (Bank of New York Mellon, Bank of America, Wells Fargo) seeking recovery of the taxes from the banks, alleging the Sheriff improperly added the transfer tax to the winning bids and that this created a windfall to the banks.
- Plaintiffs asserted claims for unjust enrichment (Restatement Second and Third), declaratory judgment, equitable restitution, conversion, and class relief, but did not file exceptions to the Sheriff’s proposed schedules of distribution under Pa.R.C.P. 3136.
- The Banks filed preliminary objections (demurrers), arguing Rule 3136 provided the exclusive procedural remedy and plaintiffs waived relief by failing to file timely exceptions; trial courts sustained the objections with prejudice and dismissed the complaints.
- On appeal (consolidated), the Superior Court reviewed whether plaintiffs’ failure to use the Rule 3136 remedy barred equitable relief and whether plaintiffs had standing to file exceptions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether purchasers at sheriff’s sales must file exceptions under Pa.R.C.P. 3136 to contest transfer-tax charges | Keller: Rule 3136 inapplicable or inapposite; equitable unjust-enrichment claim should allow recovery without following Rule 3136 | Banks: Rule 3136 provides the proper, exclusive procedural remedy; failure to file exceptions waives challenges | Held: Plaintiffs waived their claims by failing to file timely exceptions under Rule 3136; remedy at law was adequate, barring equitable relief |
| Whether third‑party purchasers have standing under Rule 3136 | Keller: Luckenbach and other authority limit standing, so plaintiffs lacked obligation or standing to file exceptions | Banks: Third‑party purchasers have standing to file exceptions; Rule 3136 and precedent (Knapp) permit relief when exceptions are timely filed | Held: Third‑party purchasers do have standing; Luckenbach is inapposite and Knapp supports that timely exceptions permit relief |
| Whether procedural rules (Rule 3136) can be overcome by common-law unjust-enrichment or Restatement (Third) arguments | Keller: Restatement (Third) and common-law restitution permit equitable recovery despite procedural default | Banks: Procedural rules are controlling; plaintiffs must invoke available statutory remedies first | Held: Pennsylvania has not adopted the Restatement (Third); where an adequate statutory remedy exists, equitable unjust-enrichment claims are barred by failure to use that remedy |
| Whether due process (not being a named party in foreclosure and not served) excuses failure to monitor sheriff’s schedule and file exceptions | Keller: Not served in foreclosure; requiring Rule 3136 compliance violates due process | Banks: Rule 3136 and its comment do not require sheriff notice; parties must monitor schedule and use the ten-day exception window | Held: Due-process argument rejected; Rule 3136 comment governs and plaintiffs were required to monitor and file exceptions timely |
Key Cases Cited
- Northwest Savings Bank v. Knapp, 149 A.3d 95 (Pa. Super. 2016) (third‑party purchaser who filed timely exceptions entitled to reversal where sheriff added transfer taxes)
- Community Federal Savings & Loan Ass'n v. Luckenbach, 261 A.2d 327 (Pa. 1970) (purchasers at sheriff’s sale cannot claim lien‑creditor status to participate in distribution fund for unrelated claims)
- Shafer Elec. & Constr. v. Mantia, 96 A.3d 989 (Pa. 2014) (statutory scheme did not preclude equitable quantum meruit claims where statute did not displace common‑law remedies)
- Federal Nat. Mort. Ass'n v. Citiano, 834 A.2d 645 (Pa. Super. 2003) (failure to pursue procedural remedies under sheriff‑sale rules constitutes waiver)
- Concord‑Liberty Sav. & Loan Ass'n v. NTC Properties, Inc., 312 A.2d 4 (Pa. 1973) (ten‑day rule to file exceptions is mandatory; post‑deed attacks limited to fraud or lack of authority)
- Sklaroff v. Weiner, 203 A.2d 366 (Pa. Super. 1964) (where no fraud alleged, Rule 3136 provides adequate remedy for disputes over lien entitlements)