Court Opinion

ID: 4545287
Source: CourtListenerOpinion
Date Created: 2020-06-30 19:12:18.597775+00
Date Added: 2024-06-11T12:51:18.296349
License: Public Domain

J-S27032-20

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

    FULTON BANK, NA., AUTUMN LANE              :   IN THE SUPERIOR COURT OF
    ASSOCIATES, LLC., AND PREMIER              :        PENNSYLVANIA
    BANK                                       :
                                               :
                                               :
                v.                             :
                                               :
                                               :
    DAVID MERMELSTEIN                          :   No. 3532 EDA 2019
                                               :
                       Appellant               :

                Appeal from the Order Entered October 18, 2019
      In the Court of Common Pleas of Montgomery County Civil Division at
                           No(s): No. 2011-03186

BEFORE:      SHOGAN, J., McCAFFERY, J., and STEVENS, P.J.E.*

MEMORANDUM BY STEVENS, P.J.E.:                            FILED JUNE 30, 2020

        David Mermelstein (“Mermelstein”) appeals from the October 18, 2019,

order foreclosing upon a charging lien and directing the sale of Mermelstein’s

24% limited partnership interest in M & M Realty Partners, L.P. (“M & M

Realty”) in an effort to satisfy an alleged outstanding balance on a confessed

judgment entered against Mermelstein on February 3, 2011.         After a careful

review, we vacate the October 18, 2019, order and remand for proceedings

consistent with this decision.

        The relevant facts and procedural history are as follows: On February 3,

2011, Fulton Bank, NA (“Fulton”), as the successor by merger to Premier

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*   Former Justice specially assigned to the Superior Court.
J-S27032-20

Bank, NA (“Premier”), filed a complaint in confession of judgment against

Mermelstein. Fulton alleged that it was the payee and holder of a promissory

note dated September 12, 2006, in the principal amount of $900,000.00 in

connection with a commercial loan extended to Mermelstein. The commercial

loan was also secured with a mortgage on real property located in Egg Harbor

Township, New Jersey.

      Fulton alleged that Mermelstein defaulted on the commercial loan by

failing to pay the monthly installments of interest due on October 1, 2010,

November 1, 2010, December 1, 2010, and January 1, 2011.              Therefore,

under the terms of the loan agreement and promissory note, Fulton had the

right to accelerate the loan and demand immediate payment of the remaining

balance in full, as well as late charges, costs of the suit, and attorney’s fees.

Accordingly, Fulton sent Mermelstein notice advising him that immediate

payment was demanded, and the loan would be accelerated; however,

Mermelstein failed to repay the loan.

      On February 3, 2011, the prothonotary entered a judgment by

confession in favor of Fulton and against Mermelstein in the amount of

$999,657.78, plus interest at $68.66 per diem from January 19, 2011.

Mermelstein did not file a petition to have the confessed judgment opened or

stricken.

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       Thereafter, Fulton initiated efforts to collect on the confessed judgment.

Such efforts included a garnishment.1 Further, Fulton filed a complaint in

foreclosure upon the mortgage in the Superior Court of New Jersey as to the

Egg Harbor Township property, and on March 4, 2013, a final order in

mortgage foreclosure was entered in New Jersey. The confessed judgment

was assigned from Fulton to Autumn Lane on October 18, 2013, and on May

29, 2014, the sheriff of Atlantic County, New Jersey, sold the Egg Harbor

Township property to Autumn Lane for costs in accordance with the final order

entered in the mortgage foreclosure.

       On November 1, 2016, Mermelstein filed a petition pursuant to 42

Pa.C.S.A. § 8104 to mark the confessed judgment satisfied and discharged. 2

While the petition for satisfaction was pending, on February 8, 2017, Autumn

Lane filed a motion for a charging order on Mermelstein’s 24% limited

partnership interest in M & M Realty.

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1 Fulton Bank garnished a Vanguard account of Mermelstein’s in the amount
of $2,565.95.

2 Specifically, citing to 42 Pa.C.S.A. §§ 8103 and 8104, Mermelstein requested
the trial court mark the confessed judgment satisfied on the basis Autumn
Lane failed to file a petition to set the fair market value of the Egg Harbor
Township property to determine whether a deficiency existed within
Pennsylvania’s statute of limitations, i.e., within six months of the sheriff
delivering the deed to Autumn Lane. Alternatively, Mermelstein requested the
trial court find there is no deficiency, and accordingly, mark the confessed
judgment satisfied in accordance with Sections 8103 and 8104.

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       Mermelstein filed a response to the motion on March 27, 2017, and

following a hearing, on May 22, 2017, the trial court granted Autumn Lane’s

motion. Specifically, the trial court’s order relevantly provided the following:

             [U]pon the Motion of Plaintiff, Autumn Lane[], pursuant to
       15 Pa.C.S.A. § 8563, the Answer thereto, oral argument
       thereon[,] and the Briefs of the parties, it is hereby ORDERED that
       a Charging Order is entered against and secured by the limited
       partnership interest of Defendant, David Mermelstein, in the
       following business entity:
       ENTITY            GENERAL PARTNER         PERCENTAGE OF INTEREST
       M & M Realty      A Pro Realty Services   24%
             Upon this Court’s disposition of Defendant, David
       Mermelstein’s, pending Petition to Satisfy Judgment, the limited
       partnership interest, or such portion of it or assets representative
       of it as shall be necessary to pay the unsatisfied amount of
       [Autumn Lane’s] judgment with interest, shall be assigned to
       [Autumn Lane] upon such terms and conditions as th[e] [trial]
       [c]ourt may direct.

Trial Court Order, filed 5/22/17 (bold omitted).

       Thereafter, on July 23, 2019, the trial court denied Mermelstein’s

petition to mark the confessed judgment satisfied. Further, the trial court

purported to set a fair market value of the Egg Harbor Township, New Jersey

property in the amount of $35,800.00, and enter a deficiency judgment of

$738,606.43 in favor of Autumn Lane.3 On August 19, 2019, Mermelstein

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3In determining that a deficiency existed, the trial court calculated the amount
due from Mermelstein as follows: Original Judgment: $999,657.78; Minus
garnished funds of $2,565.85; Minus Fair Market Values of Collateral Property
as of 5/24/2014 of $35,800.00; Minus Balance of Escrow with Egg Harbor
Township of $297,466.80; Plus Property Taxes Not Discharged by Sheriff’s

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filed an appeal from the trial court’s July 23, 2019, order, and this Court

docketed the appeal at 2567 EDA 2019.4

       Meanwhile, on October 18, 2019, in accordance with the May 22, 2017,

charging order, the trial court entered an order foreclosing upon the charging

lien and directing the sale of Mermelstein’s 24% limited partnership interest

in M & M Realty.        The trial court noted Mermelstein could extinguish the

charging order by satisfying the deficiency and filing a certified copy of the

satisfaction in the trial court within twenty days of the order. However, the

trial court noted that, if Mermelstein did not avail himself of this redemption,

the lien created by the charging order would be deemed foreclosed, and within

ninety days, the transferable interest shall be offered at public sale where the

minimum bid would be the amount of the deficiency (“the Upset Price”). If

the transferable interest sold to the highest bidder above the Upset Price, all

proceeds would be credited against the deficiency, and in the event the public

sale should fail to yield the Upset Price, the 25% interest in M & M Realty

would be transferred directly to Autumn Lane.

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sale of Collateral for 2011, plus back taxes and fines, of $25,604.32, and for
2012-13, $49,176.98; Equals a Deficiency Judgment of $738,606.43.

4  On appeal, at 2567 EDA 2019, this Court vacated the trial court’s
determination of the fair market value of the Egg Harbor Township, New
Jersey property, and its alleged deficiency determination. We also held the
trial court properly denied Mermelstein’s petition to mark the confessed
judgment satisfied as he had not met his burden of proving such an
entitlement at this juncture.

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      Mermelstein filed a motion for reconsideration of the trial court’s October

18, 2019 order, and after the trial court denied the motion, Mermelstein filed

a timely appeal to this Court. The trial court did not direct Mermelstein to file

a Pa.R.A.P. 1925(b) statement, and consequently, no such statement was

filed. However, the trial court filed a Pa.R.A.P. 1925(a) opinion on December

18, 2019.

      On appeal, Mermelstein sets forth the following issues in his “Statement

of the Questions Involved” (verbatim):

      1) Whether the trial court erred when it foreclosed upon
         [Mermelstein’s] economic interest in M & M Realty [] pursuant
         to 15 Pa.C.S.A. § 8673(c) without the proper showing by
         [Autumn Lane] that the charging order would be paid off in a
         reasonable amount of time[?]
      2) Whether the trial court erred when it foreclosed upon
         [Mermelstein’s] economic interest in M & M Realty [] pursuant
         to 15 Pa.C.S.A. § 8673(c) when [Autumn Lane] had not
         provided the proper notice that they would seek the sale and
         did not provide sufficient documentation that the proposed sale
         would happen in a fair and just manner[?]
      3) Whether the trial court erred when it foreclosed upon
         [Mermelstein’s] economic interest in M & M Realty [] pursuant
         to 15 Pa.C.S.A. § 8673(c) and directed the transfer of the
         interest to Autumn Lane [] if the upset price was not met
         without first ascertaining that the value of the interest was not
         greater than the judgment[?]

Mermelstein’s Brief at 4 (suggested answers omitted).

      Initially, we note that 15 Pa.C.S.A. § 8673, pertaining to charging

orders, relevantly provides the following:

      § 8673. Charging order

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       (a) General rule.--On application by a judgment creditor of a
       partner or transferee, a court may enter a charging order against
       the transferable interest of the judgment debtor for the unsatisfied
       amount of the judgment. A charging order constitutes a lien on a
       judgment debtor’s transferable interest and requires the limited
       partnership to pay over to the person to which the charging order
       was issued any distribution that otherwise would be paid to the
       judgment debtor.
                                        ***
       (c) Foreclosure.--Upon a showing that distributions under a
       charging order will not pay the judgment debt within a reasonable
       time, the court may foreclose the lien and order the sale of the
       transferable interest. The purchaser at the foreclosure sale
       obtains only the transferable interest, does not thereby become a
       partner and is subject to section 8672 (relating to transfer of
       transferable interest).
       (d) Satisfaction of judgment.--At any time before foreclosure
       under subsection (c), the partner or transferee whose transferable
       interest is subject to a charging order under subsection (a) may
       extinguish the charging order by satisfying the judgment and filing
       a certified copy of the satisfaction with the court that issued the
       charging order.
                                        ***
       (g) Exclusive remedy.--This section provides the exclusive
       remedy by which a person seeking, in the capacity of a judgment
       creditor, to enforce a judgment against a partner or transferee
       may satisfy the judgment from the judgment debtor’s transferable
       interest.

15 Pa.C.S.A. § 8673 (bold in original).5

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5 15 Pa.C.S.A. § 8563 was repealed and replaced with 15 Pa.C.S.A. § 8673,
effective February 21, 2017. The trial court determined Section 8673, as
opposed to Section 8563, applies in the instant case. Trial Court Opinion, filed
12/18/19, at 5. However, the trial court noted that, “both laws provide for
charging orders such as the one at issue in this case, and the relief would be
the same under either statute.” Id. at 5 n.3. We agree with the trial court
that, regardless of which version of the statute is applied, the “outcome” of
this appeal is the same; however, as discussed infra, we disagree with the
trial court as to the proper outcome at this juncture.

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      In the case sub judice, there is no dispute that Autumn Lane has a

confessed judgment against Mermelstein.        However, as this Court held in

addressing Mermelstein’s appeal docketed at 2567 EDA 2019, there is an

outstanding dispute as to whether a deficiency exists with regard to the

confessed judgment or whether the judgment has been satisfied by

Mermelstein.

      The trial court’s May 22, 2017, order, which granted Autumn Lane’s

motion for a charging order on Mermelstein’s 24% limited partnership interest

in M & M Realty, was expressly conditioned upon the disposition of

Mermelstein’s November 1, 2016, petition to mark the confessed judgment

satisfied. That is, the charging order was granted to satisfy, only if necessary,

any unpaid balance on the confessed judgment in light of the sale of the

foreign collateral. Thereafter, by order entered on July 23, 2019, the trial

court denied Mermelstein’s request to mark the confessed judgment satisfied

and, further, purported to enter a deficiency judgment of $738,606.43 in favor

of Autumn Lane (the judgment creditor).

      However, as this Court held in the appeal docketed at 2567 EDA 2019,

the trial court erred in concluding a deficiency existed since the trial court did

not have the statutory authority to determine the fair market value of the

foreign collateral at issue. See 42 Pa.C.S.A. § 8103(f.2). Thus, in 2567 EDA

2019, this Court vacated the trial court’s purported deficiency judgment with

further instructions to the parties.

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       Accordingly, inasmuch as the trial court’s October 18, 2019, order,

which foreclosed upon the charging lien and directed the sale of the limited

partnership interest, was premised upon the trial court’s July 23, 2019,

deficiency determination, which this Court vacated in its decision for 2567 EDA

2019, we conclude we must, likewise, vacate the trial court’s October 18,

2019, order.6

       October 18, 2019, Order vacated; Case remanded; jurisdiction

relinquished.

       Judge McCaffery did not participate in the consideration or decision of

this case.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 6/30/2020

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6 We note Mermelstein’s issues on appeal pertain to the validity of the trial
court’s October 18, 2019, foreclosing order/direction of sale. The trial court’s
May 22, 2017, charging order remains valid, and following a proper
determination of whether a deficiency exists or whether the confessed
judgment should be marked satisfied in accordance with our decision docketed
at 2567 EDA 2019, the parties may take the appropriate action with regard to
the charging order.

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