Ocwen Loan Servicing v. Gangadeen, S. ( 2017 )

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NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
OCWEN LOAN SERVICING, LLC IN THE SUPERIOR COURT OF
PENNSYLVANIA
Appellee
v.
SELWYN GANGADEEN
AND SAVITRI GANGADEEN
Appellants No. 723 EDA 2016
Appeal from the Order Entered February 1, 2016
In the Court of Common Pleas of Monroe County
Civil Division at No(s): 2011-10742
BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*
MEMORANDUM BY SOLANO, J.: FILED SEPTEMBER 26, 2017
Appellants Selwyn and Savitri Gangadeen appeal from the trial court’s
order of March 6, 2014, granting Appellee Ocwen Loan Servicing, LLC’s
preliminary objections, and from the February 1, 2016 order granting
summary judgment in favor of Ocwen. We affirm.
On March 11, 2008, the Gangadeens borrowed $184,205 from Avelo
Mortgage, LLC, doing business as Senderra. The loan was secured by a
mortgage on the Gangadeens’ property in Henryville, Monroe County. On
December 1, 2009, the mortgage fell into default due to the Gangadeens’
failure to make monthly payments. After the mortgage went into default,
Avelo sold it to Ocwen.
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*
Retired Senior Judge assigned to the Superior Court.
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On December 15, 2011, Ocwen filed a complaint in mortgage
foreclosure against the Gangadeens, alleging that $233,185.53 was due on
the loan.1 On December 23, 2011, the Gangadeens filed a certification of
participation in the Monroe County Residential Mortgage Foreclosure
Diversion program, and a stay was imposed on judicial action. After
numerous conciliation conferences, the parties were unable to reach an
agreement, and the stay was lifted on September 17, 2013.
On December 2, 2013, the Gangadeens filed an Answer, New Matter,
and Counterclaims. In their Answer, the Gangadeens stated: “The allegation
that the Mortgage is in default is a conclusion of law to which no response is
required . . . . The allegation is, therefore, denied, and if relevant, strict
proof thereof is demanded at trial.” Answer at ¶ 6. In addition, they set
forth numerous defenses and “specifically denied that the sums set forth in
. . . the Complaint are accurate statements of the amount actually due under
the Mortgage, as payments made on behalf of the Defendants have not been
properly credited to the subject loan or account.” Id. at ¶ 7. The
Gangadeens also asserted the following counterclaims: (1) breach of
contract, including breach of a duty of good faith and fair dealing; (2)
violation of the Truth in Lending Act, 15 U.S.C. §§ 1601-1616; (3) violation
of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617; and
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1
This amount included the principal balance of $181,107.92, interest to
date, late charges, escrow advances, fees, costs, and attorneys’ fees.
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(4) violation of the Unfair Trade Practices and Consumer Protection Law, 73
P.S. § 201-1 to 201-9.3. The Gangadeens sought damages in excess of
$50,000, costs of suit, attorneys’ fees, rescission of the loan, and all other
damages deemed recoverable according to law.
On January 3, 2014, Ocwen filed preliminary objections seeking
dismissal of all of the Gangadeens’ counterclaims under Rule of Civil
Procedure 1028(a)(2) (“failure of a pleading to conform to law or rule of
court”) and 1028(a)(4) (“legal insufficiency of a pleading (demurrer)”). Both
parties filed memoranda, and the trial court heard oral argument on
March 3, 2014. On March 6, 2014, the trial court sustained Ocwen’s
preliminary objections and dismissed the Gangadeens’ counterclaims. The
trial court reasoned that the Gangadeens improperly sought money damages
in a mortgage foreclosure action. Order, 3/6/14; Trial Ct. Op., 4/18/16, at
4.
Ocwen filed a reply to the Gangadeens’ New Matter on March 27,
2014, and a motion for summary judgment and supporting memorandum of
law on November 30, 2015. The Gangadeens filed a brief, in which they
argued that summary judgment was improper because (1) they did not
know the amount they owed, and (2) they had raised substantial, material
issues in their New Matter. Br. in Opp’n to Pl.’s Mot. for Summ. J. at 5-6.
They did not attach any exhibits to their brief. After oral argument, on
February 2, 2016, the trial court granted Ocwen’s motion for summary
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judgment and entered judgment in rem in favor of Ocwen and against the
Gangadeens for $316,578.80, together with ongoing interest and other costs
and charges collectible under the mortgage, and for the foreclosure and sale
of the property. On February 23, 2016, Ocwen filed a praecipe for entry of
judgment and assessment of damages. On March 2, 2016, the Gangadeens
filed a timely notice of appeal.
In this appeal, the Gangadeens raise the following issues:
1. Did the Court below err as a matter of law in dismissing the
[Gangadeens’] Counterclaims against [Ocwen] for Breach of
Contract, Failure to Comply with Truth in Lending disclosure
requirements, violations of the Real Estate Settlement
Procedures Act and Failure to comply with Pennsylvania Unfair
Trade Practices and Consumer Protection laws?
2. Did the Court below err as a matter of law in dismissing the
[Gangadeens’] Counterclaims, as they were integral to the entire
case, particularly the creation of the mortgage and note, upon
which [Ocwen] is relying?
3. Did the Court below err as a matter of law in granting
[Ocwen’s] Motion for Summary Judgment?
Gangadeens’ Brief at 4.
The Counterclaims
In their first two issues, the Gangadeens contend that the trial court
erred in granting Ocwen’s preliminary objections to their counterclaims. We
apply the following standard of review:
Our standard of review of an order of the trial court overruling or
granting preliminary objections is to determine whether the trial
court committed an error of law. When considering the
appropriateness of a ruling on preliminary objections, the
appellate court must apply the same standard as the trial court.
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Preliminary objections in the nature of a demurrer test the legal
sufficiency of the complaint. When considering preliminary
objections, all material facts set forth in the challenged pleadings
are admitted as true, as well as all inferences reasonably
deducible therefrom. Preliminary objections which seek the
dismissal of a cause of action should be sustained only in cases
in which it is clear and free from doubt that the pleader will be
unable to prove facts legally sufficient to establish the right to
relief. If any doubt exists as to whether a demurrer should be
sustained, it should be resolved in favor of overruling the
preliminary objections.
Khawaja v. RE/MAX Cent., 151 A.3d 626, 630 (Pa. Super. 2016) (citation
omitted). “A motion to strike the new matter as not pertinent is like a
demurrer to the new matter.” Jefferies v. Hoffman, 207 A.2d 774, 775
(Pa. 1965). “The decision whether to sever a counterclaim lies within the
discretion of the trial court. Thus, the court’s decision will not be overturned
absent an abuse of that discretion.” Chrysler First Bus. Credit Corp. v.
Gourniak, 601 A.2d 338, 340 (Pa. Super. 1992).
The Gangadeens argue that the trial court erred in sustaining Ocwen’s
preliminary objections because their counterclaims were “integral to the
entire case” and arose “from the same transaction or occurrence or series of
transactions or occurrences from which [Ocwen’s] cause of action arose.”
Gangadeens’ Brief at 10. Moreover, the Gangadeens assert that they sought
recoupment and alleged fraudulent inducement, which, they contend, are
permissible counterclaims in a mortgage foreclosure action. Id. at 10, 11.
As noted above, the trial court dismissed the Gangadeens’ counterclaims on
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the basis that they improperly sought money damages in an in rem
mortgage foreclosure action.
Rules of Civil Procedure 1141 to 1150 govern mortgage foreclosure.
Rule 1141(a) provides that a mortgage foreclosure action “shall not include
an action to enforce a personal liability.” “This restriction is equally
applicable to a mortgagee and a mortgagor.” Newtown Village P’ship v.
Kimmel, 621 A.2d 1036, 1037 (Pa. Super. 1993). This Court has
explained:
Mortgage foreclosure in Pennsylvania is strictly an in rem
or “de terris” proceeding. Its purpose is solely to effect a judicial
sale of the mortgaged property. The holder of a mortgage note
can decide whether to file a foreclosure action or to file an in
personam assumpsit action on the note, but the actions are not
usually combined.
Rule of Civil Procedure 1148, which governs which
counterclaims are permissible in a mortgage foreclosure action,
states:
A defendant may plead a counterclaim which arises from
the same transaction or occurrence or series of
transactions or occurrences from which the plaintiff’s cause
of action arose.
We have held that this rule is to be interpreted narrowly, and
only counterclaims that are part of or incident to the creation of
the mortgage relationship itself are to be permitted. Therefore,
Rule 1148 does not permit a counterclaim arising from a contract
related to the mortgage, such as a contract for sale of real
property. Nor does it permit counterclaims where the facts
giving rise to the counterclaims occur after the creation of the
mortgage and after the mortgagors were in default.
Thus, in Pennsylvania, the scope of a foreclosure action is
limited to the subject of the foreclosure, i.e., disposition of
property subject to any affirmative defenses to foreclosure or
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counterclaims arising from the execution of the instrument(s)
memorializing the debt and the security interest in the
mortgaged property.
Nicholas v. Hofmann, 158 A.3d 675, 696-97 (Pa. Super. 2017) (quotation
marks, footnote, and citations omitted).
The Gangadeens claim they were entitled to assert their counterclaims
under Green Tree Consumer Discount Co. v. Newton, 909 A.2d 811 (Pa.
Super. 2006), which allowed the assertion of counterclaims to recoup or set
off damages for claims under the Home Improvement Finance Act with
respect to a home improvement loan. Green Tree has no applicability here.
Indeed, the Court in Green Tree observed that “the general rule is that a
recoupment claim is an improper defense to a mortgage foreclosure.” 909
A.2d at 815. The Court in Green Tree recognized an exception to this
general rule where the mortgage was made as an integral part of the home
improvement loan, incorporated the terms of the home improvement
contract, was recorded with that contract, and was signed by a person
alleged to be incompetent and legally incapable of signing. See id. at 815.
This case, which presents what the Court in Green Tree called “a typical
mortgage foreclosure where the owners have taken out a loan to fund the
purchase of a home and then defaulted on the payments,” id., has none of
the facts that gave rise to Green Tree’s exception to the normal rule.
The counterclaims in this case do not deal with creation of the security
interest in the Gangadeens’ property. The breach of contract claim alleges
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errors with respect to application of payments or computation of interest and
other aspects of mortgage servicing. The statutory claims (none of which
arise under the Home Improvement Finance Act at issue in Green Tree)
relate to creation of the underlying loan. Accordingly, after careful review,
we conclude that the trial court did not err in granting Ocwen’s preliminary
objections to the counterclaims. We agree with the trial court that because
a mortgage foreclosure action is strictly in rem, the Gangadeens’
counterclaims were impermissible. See Trial Ct. Op. at 4; Pa.R.Civ.P.
1141(a); Nicholas, 158 A.3d at 696.
Summary Judgment
The Gangadeens also aver that the trial court erred in granting
summary judgment in favor of Ocwen on its foreclosure claim.
Our scope of review of a trial court’s order granting or denying
summary judgment is plenary, and our standard of review is
clear: the trial court’s order will be reversed only where it is
established that the court committed an error of law or abused
its discretion.
Summary judgment is appropriate only when the record clearly
shows that there is no genuine issue of material fact and that
the moving party is entitled to judgment as a matter of law. The
reviewing court must view the record in the light most favorable
to the nonmoving party and resolve all doubts as to the
existence of a genuine issue of material fact against the moving
party. Only when the facts are so clear that reasonable minds
could not differ can a trial court properly enter summary
judgment.
Michael v. Stock, 162 A.3d 465, 472-73 (Pa. Super. 2017) (citation
omitted). “[P]arties seeking to avoid the entry of summary judgment
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against them may not rest upon the averments contained in their pleadings.
On the contrary, they are required to show, by depositions, answers to
interrogatories, admissions or affidavits, that there is a genuine issue for
trial.” Washington Fed. Sav. & Loan Ass’n v. Stein, 515 A.2d 980, 981
(Pa. Super. 1986) (citing Pa.R.Civ.P. 1035(d)).
“The holder of a mortgage is entitled to summary judgment if the
mortgagor admits that the mortgage is in default, the mortgagor has failed
to pay on the obligation, and the recorded mortgage is in the specified
amount.” Bank of Am., N.A. v. Gibson, 102 A.3d 462, 465 (Pa. Super.
2014), appeal denied, 112 A.3d 648 (Pa. 2015). “[I]n mortgage
foreclosure actions, general denials by mortgagors that they are without
information sufficient to form a belief as to the truth of averments as to the
principal and interest owing [on the mortgage] must be considered an
admission of those facts.” Id. at 467 (citation omitted); see Pa.R.Civ.P.
1029(b), 1141(b).
Applying these rules, the trial court concluded that summary judgment
was proper because the Gangadeens offered only general denials of Ocwen’s
claims, and such general denials must be considered admissions. Trial Ct.
Op. at 4-5, 8. Moreover, the court noted that while Ocwen had submitted
documents in support of its motion for summary judgment, the Gangadeens
“submitted exactly zero exhibits.” Id. at 7-8. After careful review, we agree
with the trial court that Ocwen was entitled to summary judgment on this
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record. The Gangadeens offered only general denials of Ocwen’s averments
regarding their default and the amount due. Such general denials cannot
defeat summary judgment. See Gibson, 102 A.3d at 467.
The Gangadeens argue that the trial court erred in granting summary
judgment in favor of Ocwen because Ocwen’s motion for summary judgment
relied “entirely on its own unsupported declarations.” Gangadeens’ Brief at
16. In asserting this argument, they rely on the so-called “Nanty-Glo rule,”
which stands for the view that summary judgment may not be entered solely
on the basis of the moving party’s oral testimony. See Nanty-Glo v.
American Surety Co., 163 A. 523, 524 (Pa. 1932); see also Pa.R.Civ.P.
1035.2 Note. “An exception to this rule exists, however, where the moving
party supports the motion by using admissions of the opposing party”;
“[a]dmissions include facts admitted in pleadings.” Gibson, 102 A.3d at
466 (quotation marks, ellipses, and citations omitted). Here, the
Gangadeens’ reliance on the Nanty-Glo rule is misplaced because Ocwen
did not rely entirely on its own assertions, but also relied on the
Gangadeens’ own admissions.
The Gangadeens also assert that their Answer, in which they denied
the facts in Ocwen’s complaint, and their New Matter raise issues of fact.
Gangadeens’ Brief at 16-17. However, as the trial court concluded, the
defenses the Gangadeens raised in their New Matter did not preclude
summary judgment because the Gangadeens offered no evidence to support
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them. See Trial Ct. Op. at 7-8; see also Washington Fed. Sav. & Loan,
515 A.2d at 981.
Orders affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 9/26/2017
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