Court Opinion

ID: 9717399
Source: CourtListenerOpinion
Date Created: 2023-08-26 07:02:54.735938+00
Date Added: 2024-06-11T18:23:53.059573
License: Public Domain

PAPADAKOS, Justice,
concurring.
While I concur in the judgment reached by the majority, I write separately to delineate my view that an issue which is closely related to that resolved in the instant case has not been decided and, indeed, must not be prejudiced by our narrow decision today.
Typically, a “mortgage” in modern times involves two closely related yet legally separate obligations. The bor*444rower will sign a “note” evidencing the duty to repay with interest the loan he receives. In Pennsylvania, the “note” has traditionally been in the form of two documents — the bond and the warrant of attorney. The borrower will also pledge real estate, or more properly, his interest or title in real estate, to the lender as security for the repayment of the loan. This second pledge agreement is the mortgage document itself, properly speaking. If the borrower defaults on his loan payments, the lender is entitled to have the real estate seized and sold at a judicial foreclosure sale in order to pay off the delinquent loan. This is what is commonly known as foreclosure, now governed by Pa.R. C.P. 1141-1150. Because of abuses and hardships occasioned by periods of high unemployment and downturns in the economy, our legislature passed, in recent years, Act 6 and Act 91. Both statutes are designed to protect hard-pressed homeowners, that is, owners of residential real estate who fall behind in their mortgage payments. Both statutes impose extensive notice requirements on a lender who seeks to foreclose against residential real property.
The Act 6 notice is designed, in part, to give the borrower the opportunity to cure any defaults that may have occurred in the loan agreement and to take advantage of various consumer protection devices extended by the Act before his home is seized and sold by the sheriff. The Act 91 notice is designed to give a homeowner the chance to apply for a state loan to help pay off the mortgage in situations where the homeowner cannot meet his mortgage payments because of unemployment, before foreclosure occurs. Both statutes have been liberally applied to achieve the salutory public purposes they were designed to achieve.
Because of the fact that real estate loans usually involve both a note and the mortgage itself, a lender in Pennsylvania has never been limited (in his remedies against a delinquent borrower) solely to foreclosure against the real estate itself, or to a single action against the borrower. In addition to, or instead of foreclosure, the lender has always been free to sue the borrower directly in an action on the *445note itself. Once a lender proceeds to judgment in this fashion, he is free to levy execution against any property owned by the judgment debtor, including the real estate that is also the subject of the mortgage. Until recently, a lender would forego suit on the note and, typically, would foreclose first. Often times, the delinquent borrower would have no other asset except his or her interest in the real estate, and proceeding directly to foreclosure would expedite the seizure and sale of that asset. The infrequency of suits directly on the note may be advanced as a plausible explanation for the failure of the court to make either Act 6 or Act 91 applicable to such suits in hoc verba.
It was common in former times for mortgage lenders to “confess judgment” on the note. This type of proceeding did not require prior notice to the borrower, and it constituted a cheap and expeditious alternative to foreclosure. It has fallen into disfavor in recent years because of constitutional infirmities and because Act 6 (passed in 1974) explicitly requires that before such a judgment can be used to seize and sell residential real property, the lender must commence and prosecute an entirely new (and potentially time-consuming) second proceeding against the borrower with appropriate prior notice and an opportunity to be heard. See, 41 P.S. § 407; Pa.R.C.P. 2981-2986. Gray, Pa. Mortgages, §§ 1-3, 3-9.
Unlike execution on a confessed judgment, Act 6 and Act 91 have never been held to require compliance with their notice and cure provisions when a lender proceeds to judgment after a straight forward action on the note and then seeks to levy against the residential real property that is the subject of the underlying mortgage. Our decision today, in my judgment, does not preclude such a possibility. In the instant case, the Appellant-lender took or threatened to take judgment on the note, but it was barred by its own loan agreement from executing on the real property. Hence, residential real estate was never threatened under these facts and we properly hold Act 6 and Act 91 to be *446inapplicable here. In cases where residential real estate may be subject to later levy or execution after a judgment is entered in favor of the lender in an action on the note, however, our opinion today simply does not determine whether Act 6 and Act 91 then become applicable. There is a sound argument available to the effect that both statutes should come into play at that point. After all, a lender should not be permitted to do indirectly what it cannot do directly as a matter of overriding public policy.
I fully expect that in the coming years suits on the note will become more common in the mortgage situation in Pennsylvania. The Internal Revenue Code has recently been amended to make the interest on credit card loans deductible only if the loans are secured by an interest in real estate. The increase in loans secured by a mortgage on the consumer’s home that this provision will produce may well accelerate such suits in Pennsylvania. Before the question arises in litigation, I suspect that the legislature ought to consider whether to amend Act 6 and Act 91 to apply expressly to executions on residential real property after judgment on the note has been obtained. Whether the legislature acts or not, however, I write to make it clear that in my view, our decision today does not prevent this Court, in the future, from applying Act 6 and Act 91, as currently written, to such situations. Subject to the above qualification, I concur in the decision of the majority.