The Bankcorp Bank v. Fitzgerald, S.
The Bankcorp Bank v. Fitzgerald, S. No. 1968 EDA 2016
| Pa. Super. Ct. | Jun 20, 2017Background
- Bancorp loaned $1,250,000 to Michmax, LLC for development of Short Street property; Michmax defaulted. Michmax granted Bancorp an open-end mortgage on Short Street lots; John Marusco (a Michmax partner) and Deana Marusco separately gave an open-end mortgage on their Jefferson Avenue investment property as collateral for the same loan.
- Two Short Street lots (730 and 736) were sold at tax sale and purchased by Steve Fitzgerald, LLP (Fitzgerald); Bancorp later filed a foreclosure action against Michmax and Fitzgerald (Short Street action).
- Bancorp separately obtained judgment and sold the Jefferson Avenue property (to Bancorp) in a different foreclosure action against John and Deana Marusco; Bancorp then timely filed a petition to fix fair market value under the Deficiency Judgment Act (42 Pa.C.S. § 8103) in the Jefferson Avenue case.
- Fitzgerald was not named or served in the Jefferson Avenue petition; months later Fitzgerald filed a petition under § 8103(b)/(d) seeking discharge of any liability (arguing entitlement to notice as an "owner of property affected thereby" and claiming potential indirect liability). Trial court denied relief, concluding Fitzgerald has no personal liability on the loan and thus § 8103(b) does not apply.
- Fitzgerald appealed; the Superior Court affirmed, adopting the trial court’s analysis that § 8103 protects only those with personal liability (debtors/obligors/guarantors) and Fitzgerald, as a terre-tenant with no personal obligation on the loan, is not entitled to discharge under § 8103(b).
Issues
| Issue | Bancorp's Argument | Fitzgerald's Argument | Held |
|---|---|---|---|
| Whether § 8103(b) requires personal liability to obtain discharge when not named/served | § 8103(b) discharges only persons who are debtors or otherwise personally liable; notice not required to non-liable landowners | As an owner of property affected by the foreclosure (terre-tenant), Fitzgerald is an "owner" or "person liable directly or indirectly" and was entitled to notice — failure to serve discharges liability | Court held § 8103(b) applies only to persons with personal liability (debtors/obligors/guarantors); Fitzgerald has no personal liability, so § 8103(b) does not apply |
| Whether Fitzgerald could use § 8103(d) to mark judgment satisfied when Bancorp filed petition in different foreclosure action | Bancorp: § 8103(d) inapplicable because Bancorp timely filed its petition in this (Jefferson) action; Fitzgerald’s Short Street interests are in a separate, pending case | Fitzgerald: Because the same underlying loan/debt is at issue, failure to serve Fitzgerald in the Jefferson action should bar Bancorp from pursuing deficiency in the Short Street action | Court held § 8103(d) is inapplicable to Fitzgerald because the properties and proceedings are separate and Bancorp timely filed in the Jefferson case |
| Whether a terre-tenant (purchaser at tax sale) is entitled to notice under § 8103(b) | Not entitled when no personal liability; in rem consequences do not create in personam liability | Terre-tenant contends ownership of mortgaged property subjects it to the statute’s notice protections | Court held mere ownership of property subject to a mortgage lien (terre-tenant) does not create personal liability entitling the owner to § 8103(b) protection |
| Whether trial court abused discretion by entertaining Fitzgerald’s § 8103(b) petition though not served on earlier petition to fix value | Bancorp: No abuse — Fitzgerald had no standing to seek discharge under § 8103(b) because he had no personal liability | Fitzgerald: Denial was error because he had not been served with the petition to fix fair market value and thus should be discharged | Court found no abuse: Fitzgerald lacks standing under § 8103(b) because he is not personally liable; trial court’s denial affirmed |
Key Cases Cited
- Northwest Natl. Bank v. Knapp, 149 A.3d 95 (Pa. Super. 2016) (statutory construction principles for § 8103 analysis)
- Meco Realty Co. v. Burns, 414 Pa. 495 (Pa. 1964) (judgment against land imposes no personal liability)
- Citicorp Mortgage, Inc. v. Morrisville Hampton Village Realty Ltd. Partnership, 690 A.2d 723 (Pa. Super. 1997) (scope of appellate review in deficiency judgment proceedings)
- Fidelity Fed. Sav. & Loan Ass'n v. Capponi, 684 A.2d 580 (Pa. Super. 1996) (effect of failure to file timely deficiency petition on obligors' liability)