Wednesday, July 18, 2007

mortgage foreclosure - jurisdiction - service

PNC Bank v. Mathias- Superior Court- July 17, 2007

The trial court did not have jurisdiction to enter a default judgment against the heir of deceased mortgagor, where the plaintiff bank did not serve the heir -- named as a defendant "unknown heir" -- with a copy of the complaint, even though it knew of his existence and location and had corresponded with him by letter and phone.

Despite learning of mortgagor's death, the existence of a potential heir, and correspondence with that person, the bank filed and trial court granted the bank's motion for alternate serve under Rule 430, instead of requiring regular service under Rule 410(a). The heir didn’t learn of the alternate service and never received personal service. In its motion, the bank averred that decedent's heirs were not known.

The appellate court held that the plaintiff "did not effectuate proper service" of the complaint where it had prior written and telephone communications with the heir, knew that the heir represented the mortgagor's estate, and knew that the person was a possible heir to the mortgagor's estate, having said as much in a letter to him. "If the plaintiff has failed to effectuate valid service and if the defendant lacks notice of the proceedings against him, the court has no jurisdiction over the party and is powerless to enter judgment. Entry of a judgment under these circumstances was also held to violate due process.

mortgage foreclosure - deficiency judgment - proof of value

Loukas v. Mathias, et al. - Superior Court - July 12, 2007

Plaintiff in a mortgage foreclosure must offer competent proof of an alleged reduction in value due to "uncertainty of title" in a Deficiency Judgment Act (DFA) case under, 42 Pa CS 8101 . The Superior Court reversed the trial court, which had improperly adopted the unsupported testimony of plaintiff's witness that a supposed uncertainty of title reduced the value of the property by about 10%, thus causing a substantial deficiency judgment and continued liability of the defendant, over and above the value of the real property taken in execution.

The objective of the DFA is "to relieve a debtor of further personal liability to the creditor, if the real property taken by the creditor on an execution has a fair market value... sufficient so that the creditor may dispose of the property to others...without a net loss to the creditor." In this case, the unproven reduction in value, "without factual support in the record," thwarted that purpose. The appellate court's reversal resulted in a surplus in excess of plaintiff-appellee's judgment, thus rendering a deficiency judgment "inappropriate." The court found that the property, bolstered in value by the rejection of an unwarranted deduction due to the alleged uncertainty of title, satisfied defendants' liability to plaintiff.