Court Opinion

ID: 4160941
Source: CourtListenerOpinion
Date Created: 2017-04-18 14:12:47.593483+00
Date Added: 2024-06-11T14:38:15.003358
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

City of Philadelphia,                     :
                          Appellant       :
                                          :
             v.                           :   No. 2626 C.D. 2015
                                          :   Argued: October 20, 2016
Gryphin Coatings, Inc.                    :

BEFORE: HONORABLE MARY HANNAH LEAVITT, President Judge
        HONORABLE P. KEVIN BROBSON, Judge
        HONORABLE DAN PELLEGRINI, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE BROBSON                              FILED: April 18, 2017

             The City of Philadelphia (the City) appeals from an order of the Court
of Common Pleas of Philadelphia County (trial court), authorizing the judicial sale
of real property located in Philadelphia, Pennsylvania, for delinquent real estate tax
liens and municipal liens held by the City. The order denied the City’s petition for
entry of a decree extinguishing an in rem mortgage foreclosure judgment
previously entered by the trial court. The order also set the amount of the decree at
$325,222.03. For the reasons that follow, we reverse the order of the trial court
and remand for further proceedings.
                              I.    BACKGROUND
             The background to this case is somewhat convoluted. This action
arises from a tax foreclosure petition filed by the City against Gryphin Coatings,
Inc. (Gryphin) pursuant to what is commonly known as the Municipal Claims and
Tax Liens Act (MCTLA).1
                                           A. Parties
                The property at issue is a large industrial paint and varnish factory
located at 3501-49 Richmond Street, Port Richmond, Philadelphia, Pennsylvania
(the Property). Gryphin, the prior owner of the Property, defaulted on a loan
issued by First Union Bank and secured by a mortgage on the Property. First
Union assigned the mortgage note to National Loan Investors (NLI), which
obtained an in rem judgment2 against the Property on February 21, 2007. In
June 2007, NLI assigned the judgment to Acorn Fund, LLC (Acorn).                             Acorn
petitioned the trial court to sell the property at a judicial sale. During the pendency
of this appeal, Acorn assigned the judgment and all derivative rights
to 5627-47 Hegerman Street, LLC (Hegerman). On July 12, 2016, this Court
granted Acorn’s and Hegerman’s joint motion to substitute Hegerman as the proper
party to this action.

       1
           Act of May 16, 1923, P.L. 207, as amended, 53 P.S. §§ 7101-7505.
       2
         The trial court and the parties refer to the judgment in mortgage foreclosure as an in rem
judgment; however, this designation is not precisely correct. “Although a mortgage foreclosure
action is often referred to as an action in rem, this designation is not strictly accurate; rather, a
foreclosure action does not determine title to property, and might more correctly be described as
‘de terris.’” Action of Mortgage Foreclosure, Rule 1141. Definition: Conformity to Civil
Action, 4 Goodrich Amram 2d § 1141:1 (2017). For consistency, however, we shall refer to the
judgment herein as an in rem judgment.

                                                 2
                             B.   Factual Background
                   1. The City’s First Code Enforcement Action
             On June 16, 2006, the City of Philadelphia Department of Licenses
and Inspections (L&I) issued a cease operations order against Gryphin and the
Property for failure to correct several violations of the Philadelphia Fire Code (Fire
Code).   On July 21, 2006, the City filed an enforcement action (First Code
Enforcement Action) in the trial court. The trial court held several hearings over
the following four months, at which the City sought injunctions directing Gryphin
to correct the Fire Code violations and Gryphin requested that the trial court lift the
cease operations order. On November 6, 2006, the trial court ordered that, in order
to generate revenue to correct the Fire Code violations, Gryphin would be allowed
to manufacture a limited amount of paint in order to fulfil existing purchase orders,
but it could do so only in a limited area of the Property, and with several other
restrictions. After several additional hearings between November 16, 2006, and
March 14, 2007, the trial court issued an order dated March 15, 2007, directing
Gryphin to correct all outstanding Fire Code violations and comply with any
variances by August 15, 2007. After a hearing held on August 15, 2007, the trial
court found that Gryphin had failed to comply with the March 15, 2007 order. On
August 15, 2007, the trial court ordered that all operations at the Property cease
and desist and the Property be vacated. The August 15, 2007 order also directed
that the costs to the City for the First Code Enforcement Action shall be entered as
a lien in the amount of $10,000 against Gryphin in favor of the City and shall be
payable on the date of a judicial sale, presumably referring to a pending judicial
sale.

                                          3
                   2. The City’s Second Code Enforcement Action
              On August 30, 2011, the City initiated a second enforcement action
(Second Code Enforcement Action) against Gryphin.                    The Second Code
Enforcement Action sought to compel Gryphin to correct Fire Code and Property
Maintenance Code violations on the Property or, in the alternative, to demolish the
buildings situated on the Property. Following a hearing on November 3, 2011, the
trial court concluded that the buildings on the Property were “unsafe and pose[d] a
danger to human life and the public welfare” and, accordingly, authorized the City
to demolish the Property and enter the costs associated with the demolition as a
lien on the Property. (R.R. at 218.) Acorn filed a motion to stay the demolition,
which the trial court denied by order dated December 14, 2011.                   The City
demolished the buildings and incurred costs of approximately $295,000, which
were entered as liens against the Property (demolition liens).
                           3. Mortgage Foreclosure Action
              During the time period relevant to the First Code Enforcement Action,
NLI engaged in foreclosure proceedings relative to the Property.                        On
September 25, 2006, NLI filed a complaint in mortgage foreclosure.3                     On
February 21, 2007, a default judgment was entered in the amount of $471,611.47
in favor of NLI against the Property for failure to answer the complaint. On
June 4, 2007, NLI assigned that judgment to Acorn. Gryphin filed an emergency
motion to postpone the judicial sale scheduled for June 5, 2007.                        On

       3
         We glean the facts relating to the mortgage foreclosure action from the
November 4, 2008 opinion issued by the Honorable G.F. DiVito of the trial court. (Reproduced
Record (R.R.) at 274a-276a.)

                                             4
September 28, 2007, the trial court granted a joint motion by the parties to
postpone the sale again until November 13, 2007.
            On August 23, 2007, Acorn filed an emergency motion to have
Gryphin removed from the Property and to allow it to enter to remedy the
hazardous conditions on the Property. The trial court, on August 24, 2007, ordered
that Gryphin cease all operations in accordance with the August 15, 2007 order and
further instructed Gryphin to allow Acorn access to the Property.               On
October 28, 2007, the trial court granted Acorn’s motion to reassess damages,
increasing the amount of the judgment to $504,844.07 plus interest.
            On November 16, 2007, Acorn filed a motion for contempt, alleging
that Gryphin had failed to comply with the trial court’s August 24, 2007 order. On
December 18, 2007, after a hearing on Acorn’s motion for contempt, the trial court
ordered that all operations on the Property cease and that neither party would be
allowed entry. On that same date, the trial court appointed a master to evaluate the
Property and issue a report. By order dated January 23, 2008, and docketed on
January 30, 2008 (January 30, 2008 order), the trial court, considering the master’s
report and recommendation, reasserted that neither party should enter the Property
and authorized the City to enter the Property to bring it up to code and to place a
lien against the Property for the cost of doing so. The City immediately took
action to remedy hazardous conditions on the Property. The City’s costs were
reduced to liens of approximately $313,000 against the Property (hazard removal
liens).
                4. Appeal of the January 30, 2008 Contempt Order
            On February 29, 2008, Gryphin appealed the January 30, 2008 order
of the trial court to the Superior Court. The appeal of the contempt order was

                                         5
consolidated with a pending appeal of the trial court’s order, dated
October 30, 2007, reassessing damages on the mortgage foreclosure judgment. By
opinion and order dated August 6, 2009, the Superior Court affirmed the trial
court’s October 30, 2007 order reassessing damages but vacated the trial court’s
January 30, 2008 order granting Acorn’s motion for contempt.4 The Superior
Court held that the contempt proceeding fell short of due process, noting that, at
the hearing on the motion for contempt, Gryphin had not been allowed to introduce
testimony rebutting Acorn’s arguments and that the hearing had been cut short
before the parties could fully develop their arguments. Accordingly, the Superior
Court vacated the trial court’s January 30, 2008 order and remanded the matter to
the trial court for a further hearing on the motion for contempt. There is no
evidence in the record that a further contempt proceeding was held.5
               5. The City’s Foreclosure Action Pursuant to the MCTLA
               On March 3, 2015, the City filed the instant tax foreclosure petition
against Gryphin pursuant to the MCTLA. The petition sought to sell the Property
at a judicial sale to satisfy outstanding real estate tax liens, hazard removal liens,
and demolition liens. Gryphin had initially challenged the hazard removal bills by
filing petitions for review with the Philadelphia Tax Review Board (Tax Review

       4
          In its opinion, the Superior Court noted that the trial court issued its December 18, 2007
order in consideration of Acorn’s motion for contempt, but the order did not expressly hold
Gryphin in contempt. For purposes of the appeal of the January 30, 2008 order, the Superior
Court construed the December 18, 2007 order as finding that Gryphin was in contempt, noting
that the portion of the order barring Acorn from the Property and appointing a master exceeded
the scope of a civil contempt order.
       5
          On March 22, 2012, the trial court granted Acorn’s subsequent motion to reassess
damages for the mortgage foreclosure action in the amount of $649,816.97, reflecting accrued
interest. (R.R. 7a.)

                                                 6
Board).    The Tax Review Board, however, dismissed Gryphin’s appeals on
September 24, 2013, for failure to prosecute. The trial court held two hearings on
May 7, 2015, and September 29, 2015, where the City introduced evidence
supporting the real estate tax liens (approximately $34,000), the hazard removal
liens (approximately $313,000), and the demolition liens (approximately
$295,000). (R.R. 185a-193a.) Acorn did not contest the real estate liens, but it did
contest the validity of the hazard removal liens and the demolition liens, arguing
that the Superior Court had invalidated the trial court’s January 30, 2008 order
authorizing the City to remove the hazardous condition and, thus, incur the costs
associated with the liens.
             On November 25, 2015, the trial court entered an order, granting the
City’s request to sell the Property at judicial sale.               Additionally, the
November 25, 2015 order held that the in rem mortgage foreclosure judgment
against the Property would not be extinguished by the judicial sale, and that the
hazard removal lien was invalid because the Superior Court vacated the trial
court’s January 30, 2008 order. Accordingly, the trial court limited the decree
to $325,222.03, excluding the invalidated hazard removal liens, real estate tax
liens, and other municipal liens. The trial court did not provide specific reasoning
in its opinion for the exclusion of the real estate tax liens and other municipal liens.
The trial court’s November 25, 2015 order is the subject of the instant appeal.
                                 II. DISCUSSION
                                A. Issues on Appeal

                                           7
              The City originally raised three issues on appeal to this
Court:6 (1) whether the trial court erred in holding that the in rem mortgage
foreclosure judgment cannot be extinguished upon judicial sale under the
MCTLA; (2) whether the trial court improperly invalidated the hazard removal
lien, or, in the alternative, whether the City had authority to remove the hazardous
conditions on the Property independent of the trial court’s January 30, 2008 order;
and (3) whether the trial court erred in limiting the judicial sale decree to a specific
monetary value or, alternatively, improperly quantifying the value.
              On October 17, 2016, the City submitted to the Court a status update,
indicating that the Property was sold to Hegerman at a mortgage foreclosure
auction on October 4, 2016. The City indicated that:
              If and when the mortgage foreclosure sale is complete
              and title is formally conveyed to Hegerman, the disputed
              in rem mortgage foreclosure judgment will automatically
              be discharged. At that time, the [C]ity’s first issue on
              appeal—whether the trial court erred in excluding the in
              rem mortgage foreclosure judgment from extinguishment
              upon sheriff’s tax sale—will be mooted.

(Appellant City of Philadelphia’s Status Update to the Court, at 2.)                         On
December 16, 2016, the parties filed a second joint status report, informing the
Court that the mortgage foreclosure sale was complete and, thus, the first issue of
whether the trial court erred in excluding the in rem mortgage foreclosure

       6
          Our review of an appeal taken from a trial court’s order in a tax foreclosure matter is
limited to determining whether the trial court committed an error of law, rendered a decision not
supported by substantial evidence, or abused its discretion. City of Philadelphia v.
Robinson, 123 A.3d 791, 794 n.2 (Pa. Cmwlth. 2015). If a question of law is presented, our
standard of review is de novo and our scope of review is plenary. Pocono Manor Investors, LP
v. Pa. Gaming Control Bd., 927 A.2d 209, 216 (Pa. 2007).

                                               8
judgment from extinguishment upon sheriff’s tax sale became moot. Because the
parties now agree that this issue is moot, we do not address it on appeal.7

                                         B.    Analysis
                          1. Validity of the Hazard Removal Lien
               The City argues that the trial court improperly invalidated the hazard
removal liens because Acorn failed to appeal timely the liens to the Tax Review
Board (Board) and, thus, could not contest the liens in the tax foreclosure action
before the trial court. Hegerman does not contest that Acorn failed to appeal
properly the liens to the Board. Instead, Hegerman argues that the trial court held
that the City presented insufficient evidence to support its claim that it was entitled
to recover the outstanding hazard removal liens. Hegerman further argues that we
should not disturb the trial court’s evidentiary finding absent an abuse of
discretion.
               In its opinion, the trial court stated:

               The City’s [t]ax [p]etition is vague upon the facts and
               law upon which it intends to seek a [d]ecree, as the only
       7
         In the December 16, 2016 joint status report, the parties additionally informed the Court
that Hegerman likely intended to file exceptions to the proposed distribution of the proceeds
from the mortgage foreclosure sale. On December 20, 2016, we ordered the parties to file an
additional joint status report with the Court, including whether exceptions were filed and whether
any additional issues were rendered moot. On March 20, 2017, Hegerman and the City filed
separate status reports, noting that Hegerman had filed exceptions to the proposed distribution of
the proceeds from the mortgage foreclosure sale and that it had filed a separate action in the trial
court contesting additional water charges and liens assessed after the buildings were demolished.
Both the exceptions and the action challenging the additional water charges and liens are pending
before the trial court. In the March 20, 2017 status reports, both parties indicated that they could
not agree that the issue of whether the trial court erred in limiting the judicial sale decree or
improperly quantifying the value of the decree has been rendered moot. Because we do not
conclude that this issue has been rendered moot, we will address it below.

                                                 9
              specific factual averments are by way of lien amounts
              appended as exhibits, with reference to Sections [1 and 6]
              of the [MCTLA, 53 P.S. §§ 7101, 7106]. Section [6 of
              the MCTLA] specifically sets forth that the assessments
              and claims at issue must be ‘lawfully imposed’ and
              ‘lawfully assessed’ against the [P]roperty. Therefore, it
              logically follows that the City must prove that its stated
              assessments are lawful. Here, [the trial court] determined
              that the amounts sought from the vacated
              [January 30, 2008 order] were not lawfully imposed or
              assessed and, thus, could not properly be part of the [t]ax
              [p]etition.

(R.R. at 8a.) While the trial court did note that the petition is “vague upon the
facts,” its holding is founded on the determination that the liens were not “lawfully
imposed or assessed” and, therefore, are not recoverable under the MCTLA. Thus,
the appeal of this issue raises a question of law, our review of which is plenary.
Pocono Manor Investors, 927 A.2d at 216.
              Hegerman argues that, because the Superior Court invalidated the trial
court’s January 30, 2008 order, the City had no authority to remove the hazardous
condition and, consequently, place a lien on the Property for the cost of the
removal. Regardless of whether the trial court’s order authorizing the City to
proceed with the removal was later invalidated, it is uncontested that the City
actually performed the work and assessed a lien against the Property for its cost.8

       8
          In the alternative, the City argues that it had independent authority to abate the
hazardous condition on the Property and thereafter collect the cost for doing so via lien on the
Property. The City argues that its inherent police powers allow it to enact ordinances for the
health, safety, and welfare of its citizens, and to abate unsafe conditions when those ordinances
are not followed. See City of Philadelphia v. Urban Market Dev., Inc., 48 A.3d 520, 523 (Pa.
Cmwlth. 2012). The City further argues that the MCTLA authorized it to enter a lien on the
Property for the cost of abating a nuisance or hazard. See Section 4 of the MCTLA, as
amended, 53 P.S. § 7107. Hegerman does not argue on appeal that the City does not have the
authority to abate a nuisance and enter a lien for costs incurred in doing so. We need not,
(Footnote continued on next page…)

                                               10
It is also uncontested that Gryphin had the opportunity to raise the issue of the
order’s validity before the Board or via writ of scire facias, yet failed to do so.
Accordingly, the lien imposed by the City was legally valid when the City filed its
tax petition.
                We have previously held that the MCTLA provides a specific method
of challenging the entry of a municipal lien. “Where, as here, the legislature
provides for a specific, detailed and exclusive method for the disposition of a
particular dispute, a party seeking relief must adhere to such statutory method.”
North Coventry Twp. v. Tripodi, 64 A.3d 1128, 1133 (Pa. Cmwlth. 2013).
Although the assessment and imposition of the lien occur without any form of
hearing, a property owner may challenge the municipal lien after the lien is
recorded. City of Philadelphia v. Perfetti, 119 A.3d 396, 399 (Pa. Cmwlth. 2015),
appeal denied, 131 A.3d 493 (Pa. 2016). The MCTLA provides no mechanism for
a direct appeal from entry of a municipal lien. Instead, a party challenging a
municipal claim must do so through a scire facias proceeding and cannot seek to
strike the municipal lien on appeal. Section 16 of the MCTLA, 53 P.S. § 7184;
North Coventry Twp., 64 A.3d at 1133.
                There is no indication in the record that Gryphin or Acorn ever
attempted to initiate a scire facias action to contest the validity of the lien. We
note that Gryphin initially attempted to challenge the lien before the Board
pursuant to Section 1702(1) of the Philadelphia Code, Phila. Code § 19-1702(1),

(continued…)

however, decide here if the City rightfully exercised this authority in removing the hazardous
condition from the Property.

                                             11
which provides that a petitioner may challenge “any decision or determination
relating to the liability of any person for any unpaid money or claim collectible by
the Department of Revenue” and that such a petition “shall be filed with the
[Board] within 60 days after the mailing of a notice of such decision or
determination to the petitioner.” Gryphin challenged the hazard removal liens by
filing petitions for review with the Board. Gryphin apparently abandoned the
appeals, however, and the Board dismissed the petitions on September 24, 2013,
for failure to prosecute. Thus, Acorn was precluded from challenging the validity
of the lien before the trial court. See Krug v. City of Philadelphia, 620 A.2d 46, 48
(Pa. Cmwlth. 1993) (holding that taxpayer waived defenses to city’s collection
action by failing to appeal to Board). Accordingly, the trial court erred in holding
that the hazard removal liens were invalid.
        2. Limitation and Calculation of the Monetary Value of the Decree
             The City next argues that the trial court improperly limited the City’s
decree to a specific monetary value and that, by doing so, the trial court
erroneously extinguished the City’s real estate tax liens, its water service liens, and
interest, penalties, fees, and costs, which may accrue during the pendency of the
judicial sale. The City also argues that, even if the trial court intended that only the
demolition liens should be included in the decree, the trial court improperly
calculated the amount of the outstanding liens. The trial court does not cite any
authority in its opinion for limiting the monetary value of the decree, and
Hegerman does not address the issue on appeal.
             In its November 24, 2015 order, the trial court ordered “[t]he request
for the entry of a [d]ecree authorizing the judicial sale of [the Property] for
delinquent real estate taxes is GRANTED. . . Further, [the trial court] has

                                          12
determined that the amount of the [d]ecree shall be $325,222.03 ($608,206.26 less
$282,984.23).” (R.R. at 1a.) Although the trial court explained that its calculation
of the amount of the decree excluded the costs associated with the
January 30, 2008 order, which was invalidated by the Superior Court,9 it does not
explain how it arrived at the remaining amount. The City asserts that the amount
owing on the 2008 hazard removal liens total $312,665.91. (R.R. 186a-187a.)
Thus, it is unclear how the trial court calculated the total amount of the decree.
              Regardless of the trial court’s calculation of the amount owing, the
MCTLA does not provide for such a limitation on the amount of a decree. To the
contrary, Section 3(a)(1) of the MCTLA, 53 P.S. § 7106(a)(1), provides that all
“charges, expenses and fees[10] incurred in the collection of any delinquent
account” shall be recoverable from the proceeds of the judicial sale. The trial
court’s order does not allow for any charges, expenses, or fees that may be
incurred in collecting the outstanding amounts due, and limiting the amount of the
decree only to the amount owing on the lien contradicts the express language of the
MCTLA. Further, Hegerman has cited no authority and has raised no argument for
the proposition that a trial court may limit the monetary value of a decree under the

       9
         The trial court explained in a footnote to its November 24, 2015 order: “the City was
without proper authority to incur the costs associated with [the January 30, 2008 o]rder given
that it was filed in Acorn’s foreclosure action rather than a separate enforcement, and the
Superior Court vacated [the January 30, 2008 o]rder. The amount of the liens associated with
[January 30, 2008 o]rder were submitted as $282,984.23.”
       10
         The MCTLA defines charges, expenses, and fees to “include all sums paid or incurred
by a municipality to file, preserve and collect unpaid taxes, tax claims, tax liens, municipal
claims and municipal liens, including, but not limited to, prothonotary and sheriff fees, postage
expenses, and title search expenses.” Section 1 of the MCTLA, 53 P.S. § 7101.

                                               13
MCTLA. Accordingly, to the extent the trial court placed an absolute limit on the
monetary value of the decree, we conclude that it erred.
               It is unclear whether the trial court intended to limit expressly the total
amount of the decree or was simply noting that the City was only entitled to
recover the amount owing for the demolition lien. Even if the trial court intended
only to signify that it was limiting the decree to the demolition lien, the City argues
that the trial court failed to address its outstanding real estate tax and water
services tax liens. We note that the amount stated in the trial court’s order does not
include those liens, and, further, the trial court’s opinion cites no reasoning for
their exclusion.11 We will, therefore, remand to the trial court to consider whether
the City is entitled to collect any outstanding real estate tax, water services tax
liens, or other outstanding amounts.
                                    III. CONCLUSION
               For the reasons set forth above, we hold that the trial court erred in
invalidating the hazard removal liens and limiting the decree to the monetary
amount owing under only the demolition lien. We remand the matter to the trial

       11
           In its March 20, 2017 status report, Hegerman asserts that the issue of whether the trial
court erred in limiting the judicial sale decree or improperly quantifying the value of the decree
has been rendered moot. Hegerman suggests that the issue is moot because it did not file
exceptions to the real estate tax lien in the later mortgage foreclosure sale, and it is currently
challenging the water liens in a separate action before the trial court. Because it is unclear to the
Court whether Hegerman’s pending matter in the trial court encompasses the liens at issue in the
instant matter, we remand to the trial court to consider whether the City may recover outstanding
amounts from the proceeds of the judicial sale. As noted by the City in its March 20, 2017 status
report, it would not be entitled to collect specific liens under distributions from both the judicial
sale and the mortgage foreclosure sale. (Appellant City of Philadelphia’s Status Update to the
Court, at 3 n.2.)

                                                14
court to consider whether the City is entitled to recover any other outstanding
amounts from the proceeds of a judicial sale.

                                P. KEVIN BROBSON, Judge

                                        15
           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

City of Philadelphia,                        :
                             Appellant       :
                                             :
                v.                           :   No. 2626 C.D. 2015
                                             :
Gryphin Coatings, Inc.                       :

                                         ORDER

                AND NOW, this 18th day of April, 2017, the order of the Court of
Common Pleas of Philadelphia County (trial court) is hereby REVERSED. The
case is REMANDED to the trial court for further proceedings in accordance with
this opinion.
                Jurisdiction relinquished.

                                   P. KEVIN BROBSON, Judge