Mortgage Forclosure: PA Superior Court holds sheriff sale may be set aside when complaint fails to allege how plaintiff became proper owner of mortgage.

Posted By Cliff Tuttle | December 7, 2010

No. 540

A panel of the Superior Court of Pennsylvania reversed a Common Pleas Court order refusing to set aside a sheriff sale and strike a default judgment when the the record lacked any mention of how the Plaintiff acquired ownership of the mortgage.

In Wells Fargo Bank, NA as Trustee for MLMI Trust Series 2005 – FF6 (appellees) v. Lupori (appellants) 2010 Pa. Super 205 (2010), Wells Fargo entered default judgment in June 2007 and following a sheriff sale, a sheriff’s deed was recorded on July 18, 2008.

On March 10, 2009, some eight months following the recording of the sheriff’s deed, the Lupori’s filed a petition to set aside and strike the default judgment, which the lower court denied.

While the appellants asserted ten grounds for error, the Superior Court focused on one, which it deemed dispositive:

“Whether the lower court erred as a matter of law in denying the motion to set aside sale and strike the default judgment because the record of the case on the date of judgment lacked any evidence whatsoever that Wells Fargo was a real party in interest and possessed standing to prosecute the foreclosure action against the Leporis?”

The Court noted that the Complaint recited that the mortgage had been given to “First Franklin, a Division of National City Bank” and had then been assigned on the record to “First Franklin Financial Corporation”.   But the chain of title recited in the complaint ended there, and it “makes no mention of  any other assignment.  Nowhere in the complaint did Wells Fargo identify itself as the owner of the Luporis mortgage.”

In its brief, the appellee asserted that it had in fact received an assignment of the mortgage, which had not been plead in the complaint.  It argued that it had no duty to do so under US Bank, NA v.Mallory, 982 A.2d 986 (Pa. Super. 2009).  In Mallory, the plaintiff stated that it was the legal owner of the mortgage, but was in the process of formalizing it at the time of preparation of the complaint.  The Superior Court had held that this mode of pleading had been sufficient to put the defendant on notice of the claim of ownership of the mortgage and the averment of a yet-to-be-completed assignment was satisfactory under the Rules. Appellee argued that Mallory held that the Plainrtiff need not assert that the mortgage had been assigned to it.

The Superior Court panel disagreed, holding Mallory was distinguishable.  Since the Plaintiff had not alleged ownership or an assignment to it, the Complaint did not comply with the Rules. Rule 2002(a) requires that the mortgage foreclosure be prosecuted by and in the name of the real party in interest.

It should be noted that the Superior Court struck the judgment and invalidated the sheriff’s sale and thus the sheriff’s deed pursuant to a petition filed months after delivery of the sheriff’s deed.  This has rarely been done and then only for lack of notice (a constitutional ground) or in the case of fraud.

As noted in the post on the equity suit against the Goldbeck law firm, immediately below, defendants are likely to be looking for grounds to strike judgments and set aside sheriff’s sales and sheriff’s deeds.  Poorly-plead complaints (perhaps due to lack of lawyer supervision), sharing the same defect as Lupori, will undoubtedly be a prime target.

CLT

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CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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