Court Opinion

ID: 2794117
Source: CourtListenerOpinion
Date Created: 2015-04-15 23:05:03.702182+00
Date Added: 2024-06-11T11:29:08.037647
License: Public Domain

J-S47025-14

                             2015 Pa. Super. 79

EMC MORTGAGE, LLC,                            IN THE SUPERIOR COURT OF
                                                    PENNSYLVANIA
                        Appellee

                   v.

ROBERT D. BIDDLE,

                        Appellant                  No. 2894 EDA 2013

               Appeal from the Order Entered August 26, 2013
            In the Court of Common Pleas of Philadelphia County
         Civil Division at No(s): September Term, 2011, No. 03840

BEFORE: MUNDY, OLSON AND WECHT, JJ.

OPINION BY OLSON, J.:                              FILED APRIL 15, 2015

      Appellant, Robert D. Biddle, appeals from the order entered on August

26, 2013, granting a motion to reassess damages filed by Appellee, EMC

Mortgage, LLC (“EMC”).    Upon careful consideration, we vacate the order

and remand with instructions.

      The trial court summarized the facts and procedural history of this

case as follows:

              The instant matter was initiated by [EMC] on
        September 30, 2011, when it filed a mortgage foreclosure
        complaint against Appellant. [Appellant failed to file a
        pleading in response to EMC’s mortgage foreclosure
        complaint.] After more than a year of conciliation efforts,
        [EMC] entered a default judgment via praecipe on February
        19, 2013 [in the amount of $60,264.10].

            [EMC] filed a motion to reassess damages on June 6,
        2013, stating that additional costs and interest had accrued
        since the entry of judgment, and asking [the trial court] to
        modify the damages accordingly. Appellant filed an answer
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         on June 26, 2013, arguing that the mortgage foreclosure
         judgment was final when entered, and thus, damages were
         fixed at that point in time. Upon consideration of [EMC’s]
         motion and [] Appellant’s response thereto, the [trial court]
         granted the motion to reassess damages through an order
         dated August 6, 2013, and docketed on August 7, 2013,
         thereby allowing the amendment of [EMC’s] writ of
         execution to reflect an updated, total damages amount of
         $78,115.15 [including interest at six percent annum].

Trial Court Opinion, 11/5/2013, at 1-2 (record citations, superfluous

capitalization, and parenthetical omitted). This timely appeal resulted.1

       Appellant presents the following issues for our review:

         A. Did the lower court abuse its discretion in amending the
            default judgment; in the absence of any claim that the
            allegations in the complaint were erroneous or that the
            judgment was entered by mistake at the time it was
            taken or that any miscarriage of justice would occur if
            the judgment was not amended; when there was no
            admissible evidence in the record that supported the
____________________________________________

1
   The reassessed judgment was granted by order dated August 6, 2013 and
docketed on August 7, 2013. The order states that EMC’s motion to
reassess damages is granted “and that the writ is amended to reflect a total
judgment amount, including principal balance, interest through July 1, 2013,
late charges, legal fees, cost of suit and title, property inspections, mortgage
insurance premium, and escrow deficit of $78,115.71, plus interest at six
percent annum.” Trial Court Order, 8/7/2013, at 1. According to the
docket, notice of the judgment was sent to all of the parties by the
Prothonotary, pursuant to Pa.R.C.P. 236, on August 26, 2013. Appellant
filed a notice of appeal on September 25, 2013, or within 30 days after
notice of the judgment was sent by the Prothonotary. Thus, the appeal was
timely. See Reeves v. Middletown Athletic Ass'n, 866 A.2d 1115, 1122
(Pa. Super. 2004) (citation omitted) (“Notice of appeal, filed within thirty
days after the entry of the judgment and the Rule 236(b) notice, was
timely.”). On September 27, 2013, the trial court ordered Appellant to file a
concise statement of errors complained of on appeal pursuant to Pa.R.A.P.
1925(b). Appellant complied timely on October 17, 2013. On November 5,
2013, the trial court issued an opinion pursuant to Pa.R.A.P. 1925(a).

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              higher judgment amount; and when amending the
              judgment simply enabled EMC to circumvent the
              requirement in Pa.R.C.P. 1037(b)(1) that damages on a
              default judgment, which cannot be calculated from the
              allegations in the complaint, be established by a trial
              limited to damages[?]

        B. Did the lower court err as a matter of law when it failed
           to hold a hearing or use other means to develop a record
           to resolve disputed factual issues and when it preferred
           EMC’s unverified version of the facts over [Appellant’s]
           answer to the motion with no evidentiary basis for doing
           so[?]

        C. Did the lower court err as a matter of law by increasing
           the amount of the original judgment to include interest
           allegedly accrued after the date the complaint was filed,
           and before the original judgment was entered, in the
           absence of a [n]ote or anything else in the record
           entitling EMC to any interest or setting forth an interest
           rate[?] Did the court further err by adding other items of
           damages, allegedly incurred after the complaint was
           filed, in the absence of any admissible evidence of their
           existence[?]

        D. Did the lower court err as a matter of law by calculating
           the amounts that allegedly came due after the date the
           default judgment was originally entered as if the
           judgment had never been entered, failing to discriminate
           between pre and post judgment amounts, and by
           allowing EMC to include items post judgment to which it
           was not entitled as a matter of applicable substantive
           law[?]

Appellant’s Brief at 10-12 (suggested answers omitted).

      Initially, we must determine whether this Court has jurisdiction to

consider the merits of Appellant’s appeal. “We address this issue first

because the appealability of an order directly implicates the jurisdiction of

the   court    asked   to   review   the    order.”   Mother's   Rest.   Inc.   v.

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Krystkiewicz, 861 A.2d 327, 331 (Pa. Super. 2004) (citation omitted). The

trial court recommends quashing this appeal on grounds that the order

granting the motion to reassess damages was interlocutory, and not subject

to an exception2 or to an appeal as of right.3             Trial Court Opinion,

11/5/2013, at 2-4.        More specifically, the trial court determined that the

order reassessing damages “was not final in nature, as it was issued prior to

satisfaction of the judgment.” Id. at 3. The trial court maintained that the

order is not collateral, necessitating immediate appellate review, because

Appellant may continue to contest the amount of damages until satisfaction

or “can still stay any future sheriff’s sale of the property and, if that fails,

may seek to set aside said sale.” Id.

       Moreover, in January 2014, after the appeal was taken, this Court

entered a per curiam order directing Appellant to respond to a rule to show

cause why the appeal should not be quashed for lack of jurisdiction for

failing to file a petition to strike or open the default judgment. On February

10, 2014, Appellant filed a statement in response to our Court’s order,

arguing that he was “not appealing from the entry of a default judgment

against him, but is appealing the separate and subsequent order amending

____________________________________________

2
   See Pa.R.A.P. 312 (interlocutory appeal by permission); Pa.R.A.P. 313
(collateral orders).
3
    See Pa.R.A.P. 311 (interlocutory appeal by right).

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the judgment to increase the damages.” Appellant’s Statement in Response

to Superior Court Directive, 2/10/2014, at *4.

      Upon review of the applicable law and the procedural posture of this

case, we conclude that the order at issue is a final, appealable order and

Appellant was not required to file a petition to strike or open the reassessed

judgment. “In this Commonwealth, an appeal may only be taken from: 1) a

final order or one certified by the trial court as final; 2) an interlocutory

order as of right; 3) an interlocutory order by permission; or 4) a collateral

order.” Mother's, 861 A.2d at 331 (citation omitted). “To constitute a final

order, the order appealed from must have disposed of all claims and of all

parties, have been defined as final by statute, or have been certified as final

by the trial court.” Id., citing Pa.R.A.P. 341(b).

      Default judgments generally are governed by the Pennsylvania Rules

of Civil Procedure and are entered by prothonotaries and without judicial

involvement. Gotwalt v. Dellinger, 577 A.2d 623, 625 (Pa. Super. 1990).

Such judgments are not judicial orders and are not subject to an immediate

appeal after their entry; rather, to obtain relief, the party against whom the

judgment was entered may either file a petition to strike the default

judgment or file a petition to open the default judgment.      Mother's, 861
A.2d at 336. Once a court of common pleas rules on one of these petitions,

then the aggrieved party has a right to an appeal to a higher court pursuant

to Pennsylvania Rule of Appellate Procedure 311(a)(1).          See Pa.R.A.P.

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311(a)(1) (granting an appeal as of right from any “order refusing to open,

vacate or strike off a judgment”).

      Here,   however,   the   situation    is   markedly   different   from   the

conventional case.   EMC initially obtained a default judgment on February

19, 2013.     Thereafter, EMC, the party in whose favor judgment was

originally entered, moved on June 6, 2013 to reassess its favorable

judgment by adding additional amounts to reflect sums allegedly expended

in obtaining the judgment or subsequent thereto.         Appellant, on June 26,

2013, filed his response to EMC’s motion.        In August 2013, the trial court

entered an order directing the Prothonotary to amend the judgment to

reflect additional principle, fees, and interest as requested by EMC.

Appellant’s June 26, 2013 response did not contest the underlying default

judgment, but simply challenged the supplemental amended amounts

requested by EMC that were ultimately reduced to judgment at the trial

court’s direction.   In this particular case, judgment was not entered

ministerially by the Prothonotary but, instead, the trial court ordered that an

amended judgment be entered.         In such an instance, Appellant was not

required to file a petition to strike or open the judgment.       Moreover, the

trial court granted the only relief requested by EMC and directed the entry of

judgment over Appellant’s objection.       Thus, all of the claims of all of the

parties have been finally addressed by the trial court. See Morgan Guar.

Trust Co. of New York v. Mowl, 705 A.2d 923, 928 (Pa. Super. 1998)

(“The order was a final, appealable order since it denied appellant the only

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relief it then was seeking in a mortgage foreclosure action.”). Accordingly,

the trial court’s order constituted a final order and we have jurisdiction to

entertain Appellant’s appeal.

       In his first issue presented, Appellant claims that the trial court erred

by ordering an upward amendment of the amount of the default judgment

based upon EMC’s unverified, reassessment motion. Appellant’s Brief at 23-

26.   Relying upon Pa.R.C.P. 1037,4 Appellant contends that the trial court

approved “an amendment of a default judgment that enabled [EMC] to avoid

its obligation to prove its damages at trial.”        Id. at 26.    According to

Appellant, EMC’s complaint in mortgage foreclosure stated it “was owed

$60,264.10[,]” but the “complaint was devoid of any exhibit evidencing that

____________________________________________

4
  Rule 1037 of the Pennsylvania Rules of Civil Procedure provides in
pertinent part:

       Rule 1037. Judgment Upon Default or Admission. Assessment
            of Damages.

                                ********

          (b) The prothonotary, on praecipe of the plaintiff, shall
          enter judgment against the defendant for failure to file
          within the required time, a pleading to a complaint . . . for
          any relief admitted to be due by the defendant’s pleadings.

              (1) The Prothonotary shall assess damages for the
              amount to which the plaintiff is entitled if it is a sum
              certain or which can be made certain by
              computation, but if it is not, the damages shall be
              assessed at a trial at which the issues shall be
              limited to the amount of the damages.

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EMC is entitled to ongoing interest in any amount[,]” “[t]he mortgage

contains no interest rate[,]” [and,] “[t]here is no note attached as an exhibit

to the complaint.” Id. at 27-28. Hence, Appellant argues, “the trial court

expressly based its decision to amend the default judgment on documents

that do not exist in the record.” Id. at 33. In sum, Appellant asserts, “it

was an abuse of discretion for the trial court to permit EMC to take a default

judgment on the complaint and, four months later, allow it to amend the

default judgment, without evidence, and to thereby circumvent the

requirement that EMC prove at trial its damages in excess of the amount

alleged in the complaint.”   Id. at 32.   As such, Appellant claims that EMC

was required to prove damages at a trial and that the trial court erred to the

extent it permitted EMC to augment its default judgment by way of an

unsupported motion to add interest, fees, and costs. Id. at 28-33.

      In his second issue presented, Appellant argues that EMC’s motion to

amend the default judgment was not verified and, while the mortgage was

attached to the motion as an exhibit and it refers to a note, the note was not

presented. Id. at 34. Thus, Appellant contends that EMC has “submitted

nothing [saying] that it had [a] right to interest in any amount and nothing

setting forth a rate of interest.” Id. at 34-35. Further, Appellant claims he

“filed a response to the motion in which he expressly and specifically denied

all the factual allegations in [EMC’s] motion[,]” including denials “that the

interest calculation was correct; [] that the legal fees were actually incurred

or reasonable; [] that there were any property inspections of his house; and

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[] that there was an escrow deficit in the amount set forth.”   Id. at 35, 39-

40 (footnotes omitted). Relying upon Pa.R.C.P. 208.1-208.4, as well as local

rule Phila.C.R.P. 208.3(b), Appellant contends the trial court failed to follow

the proper procedure for developing a record on disputed facts. Id. at 38.

      In his third issue presented, Appellant argues “the court below relied

upon two lines of cases.” Id. at 44. Appellant claims that the first line of

authority, as established in B.C.Y., Inc., Equip. Leasing Associates v.

Bukovich, 390 A.2d 276, 278 (Pa. Super. 1978), “recognized the authority

of the court to correct errors and to conform the facts of the default

judgment to the facts that existed at the time the judgment was entered and

the damages originally assessed.”     Appellant’s Brief at 44-45.    Appellant

argues that “[t]he other line of cases suggested in dicta that the assessment

on the writ of execution could be amended to reflect post judgment interest

and other post judgment amounts the plaintiff had a right to collect as

additions to the judgment.” Id. at 45, citing Nationsbanc Mortgage Corp.

v. Grillo, 827 A.2d 489, 493 (Pa. Super. 2003). Thus, Appellant claims:

               EMC, without expressly articulating [these two lines of
        authority], asked the court for both kinds of relief. It
        alleged in its motion that when it filed its assessment of
        damages and originally took the judgment on February 19,
        2012, it had assessed the damages only for the amount
        demanded in the complaint and it further alleged that the
        amount alleged in the complaint did not reflect what it was
        due when the judgment was entered [more than one year
        after the complaint was filed].

               In addition[,] EMC alleged in its motion that it was
        entitled to increase the judgment because it incurred

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        attorney[s’] fees and court costs and other costs and
        additional interest after the judgment was entered.

               The order entered by the court below does not
        identify the kind of relief the court provided EMC. That is,
        the order does not indicate the extent to which the original
        assessment is being amended because the original amount
        was entered in error. Nor does the order indicate the extent
        to which the assessment on the writ of execution was being
        amended to add [] post[-]judgment interest[,] costs[,] or
        other amounts, accruing after the February 19, 2013
        original assessment date, that EMC had a right to add to its
        judgment.

                              *         *            *

            Pre-judgment, the mortgage controls the rights and
        obligations of the parties.     Post[-]judgment, they are
        controlled by the judgment, by those mortgage provisions
        that expressly survive the judgment and by those applicable
        rules of court and statutes that provide for amounts which
        can be added to the judgment prior to execution.

            Here, the trial court’s failure to distinguish between pre-
        judgment and post[-] judgment events caused it to err as a
        matter of law in its determination of what EMC was entitled
        to include in the judgment at the time it originally took a
        default and filed its praecipe for default judgment.

Id. at 45-49 (citations omitted; emphasis in original).

      Finally, in his last issue presented, Appellant argues that once the

default judgment was entered, the underlying mortgage was extinguished

and merged with the judgment. Id. at 57. He contends that “[a]fter filing

its praecipe for a default judgment, EMC is entitled to receive for the sale of

[Appellant’s] property, only the judgment, less payments made on account

of the judgment at the legal rate or at some other amount if provided in the

judgment, less payments made on account of the judgment, plus record

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costs which may be added in accordance with the applicable procedural

rules.” Id. at 58.   Citing paragraph 23 of the mortgage, Appellant concedes

that “[t]he only provision of the mortgage that expressly survives the entry

of judgment is the interest rate”. Id. at 59. Appellant again argues that the

rate of interest included in the note was not provided to the court. Id. at

59, n.20. Appellant therefore argues that the trial court erred by failing to

parse pre- and post-judgment interest and costs because:

         The interest rate that is included in the judgment, to the
         extent there is any evidence of an interest rate, is on the
         unpaid principal balance of the mortgage from the date of
         acceleration to the date of the judgment. In contrast,
         interest post[-]judgment allowed by 42 Pa.C.S.A. § 8101 is
         on the entire judgment amount.

Id. at 60.

       Our standard of review is as follows.   “A judgment should only be

stricken if the record reveals a defect on its face.” Bukovich, 390 A.2d at

278.    Here, as in Bukovich, we have a validly entered default judgment

with only an alleged error on the amount entered. Id. “The fact that the

judgment was entered is not the mistake and thus the entire judgment

should not be stricken.”    Id.   The trial court has the power to modify a

judgment upon the proper application to the court for amendment.         Id.

(citation omitted); see also Grillo, 827 A.2d at 493 (mortgagee “had every

right to petition the court to amend the writ of execution to include

additional interests and costs prior to” satisfaction.); PNC Bank, N.A., v.

Unknown Heirs, 929 A.2d 219, 227 n.3 (Pa. Super. 2007) (a motion to

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reassess damages “invokes a trial court’s equitable power to enforce the

underlying judgment and to grant relief until the judgment is discharged or

satisfied.”).   We review the trial court’s entry of a modified judgment for an

abuse of discretion. Bukovich, 390 A.2d at 278.

       Based upon the foregoing legal principles, we conclude that the trial

court enjoys the inherent power to amend a judgment until the judgment is

discharged or satisfied.5 In this case, EMC sought amendment prior to either

event. Thus, we discern no abuse of discretion or error of law in the trial

court’s decision to entertain EMC’s request to reassess the default judgment.

       However, we must still assess:              (1) whether the mortgage was

extinguished, either in whole or in part, upon entry of judgment, and; (2)

whether the trial court utilized the proper procedure for recalculating EMC’s

damages.

       As discussed below, upon entry of a default judgment the parties’

mortgage agreement was extinguished. Both parties and the trial court rely

upon the Third Circuit case,6 In re Stendardo, 991 F.2d 1089 (3d Cir.
____________________________________________

5
   Relying on a waiver provision in the parties’ mortgage agreement as well
as In re Phillips Group, Inc., 382 B.R. 876 (Bankr. W. D. Pa. 2008), EMC
also argues that it could seek to amend the default judgment since Appellant
waived the defects in the proceedings. Since we have determined that the
trial court enjoyed the inherent power to amend a judgment, we need not
examine the waiver provision at issue.
6
  We are not bound by decisions of the federal courts, but we may rely on
them for persuasive authority. McEwing v. Lititz Mut. Ins. Co., 77 A.3d
639, 648 n.7 (Pa. Super. 2013).

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1993), in advancing their respective positions regarding the merger of the

mortgage with the default judgment.         Thus, we will examine Stendardo

herein. The Stendardos owned residential property in Philadelphia, secured

by a mortgage that was subsequently assigned to Federal National Mortgage

Association (FNMA).    The Stendardos later filed for bankruptcy and the

bankruptcy court determined that FNMA was entitled to collect real estate

taxes and insurance premiums it paid after filing a mortgage foreclosure

action and obtaining a default judgment against the Stendardos’ property.

     The Stendardos appealed to the district court, which reversed,

reasoning that the Stendardos’ obligations under the mortgage were merged

into the judgment obtained in the foreclosure action:

              [T]he bankruptcy court held that FNMA was entitled to
        include the Post-Judgment Expenses in its proof of claim.
        The court first held that although a mortgage merges into a
        judgment, the lien created by the mortgage remains despite
        the presence of the judgment. Accordingly, the bankruptcy
        court concluded that the doctrine of merger did not render
        null and void the mortgage terms imposing on the
        [Stendardos] the obligation to pay insurance premiums and
        real estate taxes. As a result, FNMA was allowed to add the
        Post-Judgment Expenses to the amount of its secured claim.
        In the alternative, the bankruptcy court held that even if
        such a merger occurred, FNMA could include the Post-
        Judgment Expenses in its secured claim under a theory of
        unjust enrichment because FNMA's payments clearly
        conferred benefits upon the [Stendardos] who retained an
        independent legal obligation to pay these costs.

              The district court vacated and remanded. In order for
        mortgage terms to survive merger into a foreclosure
        judgment, it decided that the language of the mortgage
        must clearly indicate that a term or clause in an agreement
        will remain operative after a judgment is obtained. The

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        language in the Mortgage here only mentions the
        [Stendardos’] obligation to pay the relevant taxes and
        insurance premiums while the Mortgage is in effect. It does
        not provide that this obligation is to continue after a
        judgment is obtained. Based on this reasoning, the district
        court concluded that the Mortgage is unambiguous as a
        matter of law and not reasonably susceptible to the
        bankruptcy court's interpretation that the [Stendardos’]
        obligation to pay the expenses at issue extends beyond the
        date of judgment.

                              *         *           *

              The district court also held that FNMA could not rely
        on the doctrine of unjust enrichment to recover the Post-
        Judgment Expenses because no evidence in the record
        established either that the [Stendardos] benefitted from
        FNMA's payments or that the [Stendardos] had notice that
        FNMA was making the payments and that it expected to be
        reimbursed. Accordingly, the district court refused to allow
        FNMA to include in its secured proof of claim the Post-
        Judgment Expenses.

In re Stendardo, 991 F.2d at 1093-94 (citations, quotations and footnotes

omitted).

      In analyzing merger of a mortgage with a default judgment, the Third

Circuit noted:

               Under controlling Pennsylvania law, “[i]t is elementary
        that judgment settles everything involved in the right to
        recover, not only all matters that were raised, but those
        which might have been raised. The cause of action is
        merged in the judgment which then evidences a new
        obligation.” Lance v. Mann, 60 A.2d 35, 36 (Pa. 1948)
        (citations omitted). The doctrine of merger of judgments
        thus provides that the terms of a mortgage are merged into
        a foreclosure judgment and thereafter no longer provide the
        basis for determining the obligations of the parties. In re
        Presque Isle Apartments, 112 B.R. 744, 747
        (Bankr.W.D.Pa. 1990); see In re Herbert, 86 B.R. 433,
        436 (Bankr.E.D.Pa. 1988) (“The Debtor is, in our view,

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       correct in her assertion that ‘[t]he mortgage is merged in a
       judgment entered in a mortgage foreclosure action’ in
       Pennsylvania.”) (quoting 25 P.L.E. 85 (1960); citing Murray
       v. Weigle, 11 A. 781, 782 (Pa. 1888); Hartman v.
       Ogborn, 54 Pa. 120, 122-23 (1867)); see also In re
       Roach, 824 F.2d 1370, 1377 (3d Cir. 1987) (“In New
       Jersey, as in many states, the mortgage is merged into the
       final judgment of foreclosure and the mortgage contract is
       extinguished. As a result of this merger, there is no longer a
       mortgage....”)) (citations omitted).

             For example, bankruptcy courts have consistently held
       that the doctrine of merger under Pennsylvania law entitles
       a mortgagee post-judgment to the legal rate of interest
       rather than the rate specified in the mortgage. Because the
       mortgage merges into the judgment, its terms specifying
       the contractual interest rate no longer exist to bind the
       parties. See, e.g., Presque Isle, 112 B.R. at 747; In re
       Rorie, 98 B.R. 215, 218-19 (Bankr.E.D.Pa. 1989); In re
       Smith, 92 B.R. 127, 129-31 (Bankr.E.D.Pa. 1988), rev'd on
       other grounds, Smith v. Kissell Co., 98 B.R. 708
       (E.D.Pa.1989); Herbert, 86 B.R. at 436.

             There is an exception to this doctrine. Parties to a
       mortgage may rely upon a particular provision post-
       judgment if the mortgage clearly evidences their intent to
       preserve the effectiveness of that provision post-judgment.
       See, e.g., Presque Isle, 112 B.R. at 747 (“Once a claim is
       reduced to judgment, the legal rate of interest applies
       unless the documents evidence a clear intent to continue
       the contractual rate of interest post-judgment.”) (citing In
       re Crane Automotive, Inc., 98 B.R. 233 (Bankr.W.D.Pa.
       1989)); see also Burns Mfg. Co. v. Boehm, 467 Pa. 307,
       356 A.2d 763, 766 n.3 (1976) (parties' intent controlling in
       construing agreement); accord Robert F. Felte, Inc. v.
       White, 302 A.2d 347 (Pa. 1973). The applicability of this
       exception will determine whether the instant [m]ortgage
       clause requiring the [Stendardos] to pay the expenses at
       issue survived the [j]udgment.

In re Stendardo, supra at 1094-1095.

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     Moreover,   the   Stendardo    court   examined   a   prior     decision   in

deciphering whether contractual provisions survive the entry of judgment:

        [In In re Clark Grind & Polish, Inc., 137 B.R. 172
        (Bankr.W.D.Pa. 1992),] specific language in the mortgage,
        also incorporated into the note and the asset purchase
        agreement, provided for survival of the creditor's recovery
        of attorneys’ fees and costs:

           In case [of] default ... foreclosure proceedings may
           be brought ... on this Mortgage and prosecuted to
           judgment, execution and sale for the collection of the
           same, together with costs of suit and an attorney's
           commission for collection of the total indebtedness.

        [Clark] at 174. Accordingly, the court decided in Clark that
        this language demonstrated the parties' intent that the
        creditor was entitled to compensation for attorneys' fees
        and costs in executing its judgment:

           Between the time of judgment and the time the
           secured creditor receives payment, the secured
           creditor may be required to make additional
           expenditures to protect its security interest and its
           collateral. The amount of fees asserted in the
           judgment is not binding where there is an intent to
           allow the secured creditor to recoup its costs in fully
           realizing upon its claim. Such costs include defending
           the claim in bankruptcy proceedings.

           The Mortgage and Asset Purchase Agreement
           contemplate that liability for fees and costs would
           continue until the debt was paid. [The secured
           creditor] may include these charges as part of its
           secured claim subject to this Court's determination
           of the reasonableness of such charges.

        Id. at 175.

Stendardo, 991 F.2d at 1096.

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     In this case, initial judgment was entered based upon EMC’s complaint

in foreclosure, which alleged the following amounts were due, as of June 30,

2011:

        Principal Balance                          $58,227.31
        Interest                                    $1,772.61
        02/01/2011 through 06/30/2011
        Late Charges                                 $231.92

        Property Inspections                         $160.00
        Subtotal                                   $60,391.84

        Escrow Credit                                ($127.74)
        TOTAL                                      $60,264.10

Complaint in Mortgage Foreclosure, 9/30/2011, at ¶ 6.

     Relevant to the issue of whether and to what extent EMC’s default

judgment extinguished the terms of the parties’ agreement, the mortgage

contained the following provisions:

        18. Foreclosure procedure. If [EMC] requires immediate
        payment in full under paragraph 9 [pertaining to
        acceleration of the debt], [EMC] may foreclose this Security
        Instrument by judicial proceeding.       [EMC] shall be
        entitled to collect all expenses incurred in pursuing
        the remedies provided in this paragraph 18,
        including, but not limited to, attorneys’ fees and costs
        of title evidence.

                      *           *            *

        23. Interest Rate After Judgment. [Appellant] agrees
        that the interest rate payable after a judgment is
        entered on the [n]ote or in an action of mortgage
        foreclosure shall be the rate payable from time to
        time under the [n]ote.

                                      - 17 -
J-S47025-14

Appellant’s Brief, Exhibit D, Mortgage, 12/2/1996, at 7 (emphasis supplied).

     In its motion to reassess damages, EMC alleged:

        5. Additional sums have been incurred or expended on
        [Appellant’s] behalf since the Complaint was filed and
        [Appellant] has been given credit for any payments that have
        been made since the judgment. The amount of damages
        should read as follows:

        Principal Balance                                $58,227.31
        Interest through July 1, 2013                    $10,377.94
        Late Charges                                        $231.92
        Legal Fees                                        $2,300.00
        Cost of Suit and Title                            $1,408.64
        Property Inspections                                $525.00
        Mortgage Insurance Premium to be paid                $61.05
        Escrow Deficit                                    $4,983.85

        TOTAL                                            $78,115.71

        6. [EMC] paid the following in legal fees during the time
        the loan was in default:

        10/12/2011     FORECLOSURE FEE                   $1,300.00

        2/20/2012      Conciliation Conference
                       Mandatory Court Appearance         $250.00

        4/20/2012      Conciliation Conference
                       Mandatory Court Appearance         $250.00

        6/8/2012       Conciliation Conference
                       Mandatory Court Appearance         $250.00

        8/10/2012      Conciliation Conference
                       Mandatory Court Appearance         $250.00

                                            Total Fees   $2,300.00

EMC’s Motion to Reassess Damages, 6/6/2013, at ¶¶ 5-6.

                                   - 18 -
J-S47025-14

      Here, the trial court determined that the language in the mortgage

evinced the parties’ intent to allow the mortgage to govern the parties’

obligations following the entry of judgment. Trial Court Opinion, 11/5/2013,

at 7-8. Relying on paragraph 18 above, the trial court concluded that EMC

was able to collect all of its submitted expenses incurred in the foreclosure,

including “costs, fees, and other expenses stemming from Appellant’s default

and the resulting foreclosure action.”       Id. at 8.   It further found that

“[paragraph] 23 of the mortgage [as set forth above] provides that the

interest rate after judgment shall be at the rate entered on the note.” Id.

Although we acknowledge the trial court’s inherent authority to consider

EMC’s request to amend its judgment, we do not agree with the trial court’s

interpretation of the mortgage agreement or its procedure for reassessing

EMC’s damages.

      We begin our analysis by reciting the legal framework pertaining to

contractual interpretation:

            The interpretation of any contract is a question of law
        and this Court's scope of review is plenary. Moreover, we
        need not defer to the conclusions of the trial court and are
        free to draw our own inferences. In interpreting a contract,
        the ultimate goal is to ascertain and give effect to the intent
        of the parties as reasonably manifested by the language of
        their written agreement. When construing agreements
        involving clear and unambiguous terms, this Court need
        only examine the writing itself to give effect to the parties'
        understanding. This Court must construe the contract only
        as written and may not modify the plain meaning under the
        guise of interpretation.

                                    - 19 -
J-S47025-14

Stephan v. Waldron Elec. Heating & Cooling LLC, 100 A.3d 660, 665

(Pa. Super. 2014).

       In construing the plain meaning of the mortgage, we note that

paragraph 18 clearly and unambiguously states that EMC is “entitled to

collect all expenses incurred in pursuing the remedies [of a foreclosure

action], including, but not limited to, attorneys’ fees and costs of title

evidence.”      (emphasis added).          We read this provision to mean that

recoverable expenses include those that are necessary to the pursuit of the

foreclosure action.      The types of recoverable expenses that are expressly

identified in paragraph 18 support this interpretation, i.e. attorneys’ fees and

costs of title evidence.      Thus, it was not error for the trial court to grant

attorneys’ fees and costs of title as those expenses survived the judgment

under the plain terms of the parties’ security agreement.7

       As for other expenses requested by EMC (e.g., late charges, additional

property inspections, mortgage insurance premiums, and escrow deficits),

however, we must apply a different analysis. Although the mortgage

permitted EMC to recover these sums from Appellant or, alternatively, to

make these expenditures on his behalf (see infra at n.10), the agreement

did not expressly provide that collection of these sums or outlays for these
____________________________________________

7
 Moreover, subject to our more detailed discussion infra, the trial court did
not err in concluding that the interest rate term stated in the note survived
entry of EMC’s default judgment.

                                          - 20 -
J-S47025-14

items survived the default judgment. We note further that EMC never filed

an amended complaint claiming these additional damages prior to the entry

of default judgment.8 For these reasons, EMC’s pre-judgment losses (other

than interest, attorneys’ fees, and title costs) are no longer recoverable.

Moreover, to the extent EMC sought to add post-judgment expenses (other

____________________________________________

8
   As previously stated, default judgments generally are governed by the
Pennsylvania Rules of Civil Procedure and are entered by prothonotaries and
without judicial involvement. Gotwalt, 577 A.2d at 625. “The prothonotary
shall assess damages for the amount to which the plaintiff is entitled if it is a
sum certain or which can be made certain by computation, but if it is not,
the damages shall be assessed at a trial at which the issues shall be limited
to the amount of the damages.” Pa.R.C.P. 1037. Thus, a default judgment
is entered on a sum certain amount. If a plaintiff determines the amount of
damages claimed in the original complaint is incorrect, plaintiff may file an
amended complaint correcting the sum certain amount of damages claimed
prior to the entry of a default judgment. Alternatively, a plaintiff may file an
amended complaint seeking a trial on the lone issue of damages if a sum
certain amount cannot be ascertained. See Reichert v. TRW, Inc., 611
A.2d 1191, 1193 (Pa. Super. 1992) (filing an amended complaint foreclosed
ability for default judgment on the original complaint). Specifically, we note
that

         [a] party, either by filed consent of the adverse party or by
         leave of court, may at any time change the form of action,
         add a person as a party, correct the name of a party, or
         otherwise amend the pleading. The amended pleading may
         aver transactions or occurrences which have happened
         before or after the filing of the original pleading, even
         though they give rise to a new cause of action or defense.
         An amendment may be made to conform the pleading to
         the evidence offered or admitted.

Pa.R.C.P. 1033. In this case, EMC never filed an amended complaint.
Instead, it chose to enter default judgment for the sum certain amount set
forth in its original complaint.

                                          - 21 -
J-S47025-14

than interest, attorneys’ fees, and title costs) to its recovery, then it needed

to demonstrate how its pursuit of a foreclosure remedy necessitated those

outlays. As discussed below, we conclude that the trial court failed to make

these critical inquiries and, as far as legal fees and title costs are concerned,

the court further failed to consider whether EMC’s requested damages were

reasonable.

        With regard to attorneys’ fees, 41 P.S. § 406 allows a residential

mortgage lender such as EMC to charge Appellant with actual and

reasonable attorneys' fees. See 41 P.S. § 406(2) (“Upon commencement of

foreclosure or other legal action with respect to a residential mortgage,

attorney's fees which are reasonable and actually incurred by the residential

mortgage lender may be charged to the residential mortgage debtor.”).

And, as we have said above, the mortgage at issue clearly evinces the

parties’ intention for attorneys’ fees to survive the entry of judgment. We

note,    however,   that   “[a]   determination   of   [the]   reasonableness   [of

attorneys’ fees in a foreclosure action] requires the [c]ourt to engage in a

lodestar analysis which takes into consideration the number of hours

reasonably expended times a reasonable hourly rate increased or decreased

depending upon any additional factors involving case contingency or work

product quality.”    In re McMillan, 182 B.R. 11, 14-15 (Bankr. E.D. Pa.

1995). A claimant must “make an evidentiary record regarding the time and

rate and actual services rendered in connection with its foreclosure action.”

                                       - 22 -
J-S47025-14

Id.   Here, EMC submitted flat fees for services provided on certain dates,

but there is no breakdown of the time, rate, or actual services provided

because there are no invoices, billable hour itemizations, or affidavits from

counsel to confirm EMC’s allegations. On remand, EMC must come forward

with such proof to justify its claim for attorneys’ fees.

      The trial court also awarded EMC $1,408.64 for costs of suit and title.

While paragraph 18 clearly entitles EMC to such costs in pursuing its

foreclosure remedy, EMC failed to submit evidence supporting these

expenses.    Based upon the limited record before us, it is impossible to

confirm whether the costs of title evidence alleged in EMC’s motion to

reassess damages were actually incurred and whether they were reasonable.

Again, on remand, EMC must adduce evidence to support its request for

costs of title evidence.

      The trial court also granted EMC late charges, the costs of additional

property inspections, mortgage insurance premiums, and escrow deficits.

These expenses seem to have been made in accordance with EMC’s rights

under the mortgage agreement.          In fact, EMC admits as much in its

memorandum of law in support of the motion to reassess damages. In its

memorandum, EMC argued:          “Because of the period of time between the

initiation of the mortgage foreclosure action, the entry of judgment and the

[s]heriff’s [s]ale date, damages as previously assessed are outdated and

need to be adjusted to include current interest, real estate taxes, insurance

                                      - 23 -
J-S47025-14

premiums, costs of collection, and other expenses which [EMC] has been

obligated to pay under the Mortgage in order to protect its

interests.”     Memorandum of Law in Support of EMC’s Motion to Reassess

Damages, 6/6/2013, at *2 (emphasis added).9 Essentially, EMC alleged that

these additional expenses arose from its rights and obligations under the

mortgage (which was extinguished -- except as expressly provided --

following entry of judgment) to protect its interests in the subject property.

We therefore examine EMC’s individual requests separately.

       With regard to the performance of additional property inspections, the

mortgage does not specifically identify this right as surviving the entry of

default judgment in foreclosure.          Therefore, if EMC sought to amend its

judgment by adding pre-judgment expenses incurred in performing property

inspections, then it needed to file an amended complaint prior to the entry of

judgment to account for those expenditures.          It failed to take this action.

Thus, pre-judgment expenditures for additional property inspections are no

longer recoverable. However, to recover for post-judgment expenditures on

property inspections, EMC may demonstrate on remand how the pursuit of

its foreclosure remedy necessitated these expenses.10           To recover these

____________________________________________

9
 EMC’s memorandum in support of its motion to reassess is not paginated.
We have supplied page numbers for ease of discussion.
10
   Under the heading of Uniform Covenants, the mortgage obligates
Appellant to pay taxes, hazard insurance premiums, mortgage insurance
(Footnote Continued Next Page)

                                          - 24 -
J-S47025-14

sums, EMC will need to offer proof of when it performed the property

inspections, what it paid for those services, and what purpose was served by

the inspections.

      Likewise, late charges are not specifically exempt from the merger of

the parties’ mortgage into EMC’s judgment.               Once the trial court entered

judgment, the mortgage was extinguished and Appellant ceased owing

payments.      Because Appellant had no obligation to continue making

mortgage payments, there could be no late fees. We simply fail to see how

EMC’s foreclosure action could have necessitated this particular element of

its amended damage claim.            Moreover, we note that the late fees as set

forth in both EMC’s complaint and its motion to reassess damages are for

the exact same amount, $231.92.                  It seems highly suspect that such a

distinct amount for late fees accrued both pre- and post-judgment.               Had

additional late fees accrued after the filing of the complaint, EMC should

have instead filed an amended complaint before the entry of judgment to

include those damages. Again, it did not do this. Because late charges do
                       _______________________
(Footnote Continued)

premiums, late charges, and other expenses. See Appellant’s Brief, Exhibit
D, Mortgage, 12/2/1996, at ¶¶ 1 and 2. In the event that Appellant fails to
make such payments, or in the event of a legal proceeding that significantly
affects EMC’s rights in the property, the mortgage further provides that EMC
“may do and pay whatever is necessary to protect the value of the
[p]roperty and [EMC’s] rights in the [p]roperty, including payment of taxes,
hazard insurance and other items[.]” Id. at ¶ 7. We leave it to the trial
court to consider, on remand, whether the tasks performed and the
expenses incurred by EMC pursuant to this provision should be deemed
necessary because of the commencement of foreclosure proceedings.

                                           - 25 -
J-S47025-14

not expressly survive the mortgage, it was an abuse of discretion for the

trial court to have granted them.

       Regarding the escrow deficit, EMC claimed “the mortgage specifically

provides that the mortgagee may advance the monies for taxes and

insurance and charge these payments against the escrow account.” Id. at

*4.   The mortgage, however, makes no mention that taxes and insurance

survive judgment. Further, EMC alleged a lump sum for Appellant’s “escrow

deficit,” but failed to itemize the amount. Thus, it is impossible to confirm

what items were included in this amount, whether these expenses accrued

before or after the entry of judgment, or whether EMC’s pursuit of a

foreclosure remedy necessitated post-judgment expenditures on these

items.    To the extent these expenditures were made prior to the entry of

judgment, EMC’s failure to file an amended complaint for these damages

precludes any recovery at this time. On remand, therefore, EMC will need to

demonstrate that these expenses accrued after the entry of judgment and

that its foreclosure action required post-judgment outlays for these items.11

       Turning now to EMC’s request for post-judgment interest, under

paragraph 23 of the mortgage, Appellant agreed “that the interest rate

payable after a judgment is entered on the [n]ote or in an action of
____________________________________________

11
    In its motion to reassess damages, EMC requested $61.05 for the
payment of mortgage insurance premiums. On remand, EMC must make a
similar demonstration as described above before obtaining this sum by way
of an amended damage award.

                                          - 26 -
J-S47025-14

mortgage foreclosure shall be the rate payable from time to time under the

[n]ote.”   Appellant’s Brief, Exhibit D, Mortgage, 12/2/1996, at ¶ 23. Thus,

the interest rate set forth in the note survived entry of the default judgment.

However, as Appellant points out, the note is not contained in the certified

record, it was not attached to any pleadings, and there is no interest rate set

forth in the mortgage. In its motion to reassess damages, EMC merely set

forth a blanket amount for the total sum of post-judgment interest it

believed was due “through July 1, 2013.”       In compounding the problem,

neither EMC nor the trial court identified the balance upon which the interest

was to be calculated – the total judgment amount or the balance of the

principal under the mortgage – or the date from which interest was to be

computed. Instead, the trial court entered the order at issue, amending the

judgment “to reflect a total judgment amount, including principal balance,

interest through July 1, 2013, late charges, legal fees, cost of suit and title,

property inspections, mortgage insurance premium, and escrow deficit, of

$78,115.71, plus interest at six percent annum.”            Trial Court Order,

8/6/2013. While the trial court states, in its subsequent opinion, that EMC

“submitted the original mortgage, the note, [and] a calculation of additional

interest consistent with the rate agreed in the mortgage[,]” we are unable to

verify this information based upon the record before us.       See Trial Court

Opinion, 11/5/2013, at 6. Based upon all of the foregoing, we conclude that

the trial court abused its discretion in awarding additional interest payments

                                     - 27 -
J-S47025-14

in response to EMC’s motion to reassess damages.           On remand, the trial

court may award post-judgment interest but, in doing so, it shall supplement

the record to include the note, as well as a computation of its additional

interest award that identifies the applicable interest rate, the operative

dates, and the balance upon which the interest is calculated.

       We believe that an evidentiary hearing is necessary to develop a

record that supports any additional damages that are to be awarded to

EMC.12      We do so because we are reminded that “[g]enerally, default

judgments are not favored.”         Atlantic Credit & Finance, Inc. v. Giuliana,

829 A.2d 340, 343 (Pa. Super. 2003) (citation omitted). It has been stated

in regard to default judgments that:

           [t]he purpose of the rules in authorizing the entry of default
           judgments is to prevent a dilatory defendant from impeding
           the plaintiff in establishing his claim. The rules are not
           primarily intended to provide the plaintiff with a
           means of gaining a judgment without the difficulties
           which arise from litigation....

Id. (emphasis added).         The trial court cannot abbreviate the process for

modifying the amount of the default judgment when factual issues are

present.

____________________________________________

12
   As previously noted, Appellant relies upon Pa.R.Civ.P. 1037(b)(1) in
arguing that EMC must prove its additional damages at a trial. Supra, at 7-
8. We note that Rule 1037 applies in cases in which damages are to be
calculated before default judgment is entered. In this case, EMC is seeking
to modify the amount of damages after default judgment was entered.
Thus, Rule 1037 is not applicable.

                                          - 28 -
J-S47025-14

     Order vacated. Case remanded for an evidentiary hearing to reassess

damages in accordance with this opinion. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 4/15/2015

                                   - 29 -