Court Opinion

ID: 3202137
Source: CourtListenerOpinion
Date Created: 2016-05-10 18:36:44.504696+00
Date Added: 2024-06-11T08:39:40.209632
License: Public Domain

J-A04010-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

WELLS FARGO BANK, N.A.,                        IN THE SUPERIOR COURT OF
                                                     PENNSYLVANIA
                         Appellant

                   v.

WILLIAM T. ZIPF,

                         Appellee                  No. 1680 WDA 2014

                Appeal from the Order September 19, 2014
            In the Court of Common Pleas of Allegheny County
                   Civil Division at No(s): MG-14-000860

BEFORE: FORD ELLIOTT, P.J.E., BENDER, P.J.E., and SHOGAN, J.

MEMORANDUM BY BENDER, P.J.E.:                         FILED MAY 10, 2016

     In this mortgage foreclosure action, Wells Fargo Bank, N.A. appeals

from the order entered September 19, 2014, which sustained preliminary

objections filed by William T. Zipf and dismissed the bank’s complaint with

prejudice. We reverse.

     In June 2007, Monica M. Zipf executed a promissory note in favor of

Accredited Home Lenders, Inc. for the amount of $270,000. The note was

secured by a mortgage, executed by William and Monica Zipf and delivered

to Mortgage Electronic Registration Systems, Inc. on certain real property

located at 7142 Sansue Drive, Bethel Park, PA, 15102.

     In November 2008, Ms. Zipf died, and Mr. Zipf assumed liability under

the note. Thereafter, in February 2010, Mr. Zipf defaulted on his obligations

due under the note by failing to make the required monthly payments.
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      Current mortgagee Wells Fargo commenced this action in June 2014.

In addition to setting forth relevant information, such as the parties and date

of the mortgage, its place of record, a specific averment of default, an

itemized statement of the amount due, and a demand for judgment in rem,

Wells Fargo also averred that the original, promissory note had been lost.

To its complaint, Wells Fargo attached a “lost note” affidavit and a copy of

the note.

      Mr. Zipf filed preliminary objections in the nature of a demurrer.

According to Mr. Zipf, Wells Fargo was unable to establish itself as the holder

of the note because the original was lost. Moreover, as Ms. Zipf is deceased,

Wells Fargo could not authenticate a copy of the note.        Finally, Mr. Zipf

objected that the complaint revealed a gap in the chain of mortgage

assignments.    For these reasons, Mr. Zipf asserted that Wells Fargo could

not establish its interest in the mortgage and, therefore, lacked standing to

pursue an action in foreclosure.

      In response, Wells Fargo suggested that as the last assignee of all

rights in the mortgage, it had standing to prosecute its claim on the

mortgage.     Nevertheless, Well Fargo also supplied a complete chain of

recorded mortgage assignments.      Wells Fargo also suggested that it could

establish its standing to pursue a claim on the note based upon the

provisions of 13 Pa.C.S. § 3309 (“Enforcement of lost, destroyed or stolen

instrument”).    Following argument, the trial court sustained Mr. Zipf’s

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preliminary objections without recorded explanation and dismissed the

complaint with prejudice.        Wells Fargo timely appealed and filed a court-

ordered Pa.R.A.P. 1925(b) statement.

       The trial court’s responsive opinion cited no binding or persuasive

authority, nor any statutory support for its decision. Rather, the trial court

baldy determined that Wells Fargo’s reliance upon 13 Pa.C.S. § 3309 to

establish its right to proceed was misplaced.         See Trial Court Opinion,

02/12/2015, at 7-9. According to the trial court, Wells Fargo’s production of

the original bearer note1 was “critical,” because otherwise Ms. Zipf’s estate

“could be liable to whoever [sic] now is the ‘bearer.’” Id. at 9. Based upon

this fatal flaw, the trial court determined that it had no obligation to permit

amendment of Wells Fargo’s complaint. Id. The court also suggested that

Wells Fargo’s attempt to “fill in the blanks” of the mortgage assignment

chain was insufficient to establish its right to foreclose. Id. at 7.

       Wells Fargo raises several issues on appeal. See Appellant’s Brief at

2-3. Essentially, however, the sole issue before this Court is whether Wells

Fargo lacks standing to pursue its mortgage claim.        See id. (raising three

variations on this theme, as well as a fourth issue suggesting the trial court

failed to accept its well-pleaded facts as true).
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1
  Wells Fargo does not dispute that the note is a bearer note. A note
endorsed in blank “becomes payable to bearer and may be negotiated by
transfer of possession alone until specially indorsed.” 13 Pa.C.S. § 3205.

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     Our standard of review is settled.

     [We must] 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.

     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.

Majorsky v. Douglas, 58 A.3d 1250, 1268-69 (Pa. Super. 2013) (quoting

Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011)).

     Wells Fargo contends that, as the mortgagee of record, it has standing

to enforce the Zipf mortgage in this foreclosure action, citing in support,

inter alia, Wells Fargo Bank, N.A. v. Lupori, 8 A.3d 919, 922 n.3 (Pa.

Super. 2010) (“[T]he mortgagee is the real party in interest in a foreclosure

action.”). We agree.

     In a mortgage foreclosure action, the mortgagee is the real party
     in interest. See Wells Fargo Bank, N.A. v. Lupori, 8 A.3d
919, 922 n.3 (Pa. Super. 2010). This is made evident under our
     Pennsylvania Rules of Civil Procedure governing actions in
     mortgage foreclosure that require a plaintiff in a mortgage
     foreclosure action specifically to name the parties to the
     mortgage and the fact of any assignments. Pa.R.C.P. 1147. A
     person foreclosing on a mortgage, however, also must own or
     hold the note. This is so because a mortgage is only the security

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       instrument that ensures repayment of the indebtedness under a
       note to real property. See Carpenter v. Longan, 83 U.S. 271,
       275, 16 Wall. 271, 21 L. Ed. 313 (1872) (noting “all authorities
       agree the debt is the principal thing and the mortgage an
       accessory.”). A mortgage can have no separate existence. Id.
       When a note is paid, the mortgage expires. Id. On the other
       hand, a person may choose to proceed in an action only upon a
       note and forego an action in foreclosure upon the collateral
       pledged to secure repayment of the note. See Harper v.
       Lukens, 271 Pa. 144, 112 A. 636, 637 (1921) (noting “as suit is
       expressly based upon the note, it was not necessary to prove the
       agreement as to the collateral.”). For our instant purposes, this
       is all to say that to establish standing in this foreclosure action,
       appellee had to plead ownership of the mortgage under Rule
       1147, and have the right to make demand upon the note
       secured by the mortgage. FN 1
               1
          FN
              The rules relating to mortgage foreclosure actions do
          not expressly require that the existence of the note and its
          holder be pled in the action. Nonetheless, a mortgagee
          must hold the note secured by a mortgage to foreclose
          upon a property. “The note and mortgage are inseparable;
          the former as essential, the latter as an incident.”
          Longan, 83 U.S. at 274.

CitiMortgage, Inc. v. Barbezat, 131 A.3d 65, 68 (Pa. Super. 2016)

(Barbezat).

       In light of the procedural posture of this case, which requires that we

accept its pleadings as true, Wells Fargo has established that (1) it is the

current mortgagee and (2) it owns and/or holds the underlying note. See

Complaint, 06/26/2014, at ¶¶ 4 (referencing Exhibit A) and 6 (pleading its

status as current mortgagee); see also Majorsky, 58 A.3d at 1268-69. In

our view, this is sufficient to establish Wells Fargo’s standing to proceed.

Barbezat, 131 A.3d at 68. Accordingly, the trial court erred as a matter of

law.

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        In the context of a summary judgment motion or trial on the merits, it

is unclear whether the bank’s lost note affidavit is sufficient evidence to

prove its claim in this in rem action.         However, we need not address that

potential.2      Regardless,     we    observe   that   the   Pennsylvania   Uniform

Commercial Code (PUCC), 13 Pa.C.S. §§ 1101, et seq., governs the note.

See JP Morgan Chase Bank, N.A. v. Murray, 63 A.3d 1258, 1263 (Pa.

Super. 2013) (Murray). Further, the PUCC’s section 3309 provides that “[a]

person not in possession of an instrument is entitled to enforce the

instrument,” provided said person can prove a right to do so. 13 Pa.C.S §

3309.

        The trial court expressed its dual concerns that this foreclosure action

was ill-suited to a section 3309 hearing or inquiry and, in any event,

permitting Wells Fargo to proceed under section 3309 could prejudice Mr.

Zipf to the extent a new bearer should come to possess the note and seek to

enforce it. See Trial Court Opinion at 7-9. These concerns are unfounded.

As to the former, should a section 3309 hearing be overly burdensome

within the context of this foreclosure action, a stay could issue pending

resolution of a separate action in which Wells Fargo seeks to establish its

right to enforce the note.         As to the latter, “a debtor who satisfies his

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2
  Wells Fargo has represented to this Court that it has located the original
promissory note. See Appellant’s Brief at 35. Thus, the issue of the
affidavit’s sufficiency may never arise.

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obligations under a negotiable instrument cannot be required to do so again,

even if the recipient of the debtor’s performance is not the holder of the note

in question.” Murray, 63 A.3d at 1263.

      For these reasons, we conclude that the trial court erred by sustaining

Mr. Zipf’s preliminary objections and dismissing Wells Fargo’s complaint with

prejudice. Accordingly, we reverse the order of court and remand for further

proceedings.

      Order reversed; case remanded; jurisdiction relinquished.

      Judge Shogan joins this memorandum.

      President Judge Emeritus Ford Elliott notes her dissent in this

memorandum.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 5/10/2016

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