Court Opinion

ID: 4389712
Source: CourtListenerOpinion
Date Created: 2019-04-23 16:40:52.74124+00
Date Added: 2024-06-11T12:05:25.772123
License: Public Domain

J-A03021-19
                               2019 Pa. Super. 123
    IN RE: ESTATE OF ANNA MARIE            :    IN THE SUPERIOR COURT OF
    LEIPOLD, DECEASED                      :         PENNSYLVANIA
                                           :
                                           :
    APPEAL OF: SCOTT M. HINES AND          :
    KELLY A. SCHUELTZ                      :
                                           :
                                           :
                                           :    No. 1192 WDA 2018

                 Appeal from the Order Entered July 19, 2018
            In the Court of Common Pleas of Westmoreland County
               Orphans’ Court Division at No(s): No. 6518-0670

BEFORE:     BOWES, J., SHOGAN, J., and STRASSBURGER*, J.

OPINION BY SHOGAN, J.:                                  FILED APRIL 23, 2019

       Scott M. Hines and Kelly A. Schueltz (“Appellants”) appeal from the

July 19, 2018 order that denied their petition for a judicial sale of real property

that was part of the estate of Appellants’ deceased mother, Anna Marie

Leipold.   For the reasons that follow, we reverse and remand for further

proceedings consistent with this Opinion.

       The orphans’ court provided the following relevant background:

              This matter is before this Court regarding an appeal of an
       order issued by this Court on July 19, 2018, which denied the
       Petition for Judicial Sale of Real Estate in this matter filed by
       Appellants Scott M. Hines and Kelly A. Schueltz, Administrators of
       the Estate of Anna Marie Leipold.

             The estate of Anna Marie Leipold contains real property
       located at 444 North Market Street, Ligonier, Pennsylvania, 15658
       which is presently subject to a mortgage with Quicken Loans

*   Retired Senior Judge assigned to the Superior Court.
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     [Inc.][1] consisting of an outstanding balance of approximately
     $77,129.41 at the time of death of the decedent. Subsequent to
     their appointment as administrators, [Appellants] received an
     offer of $82,000.00 for the sale of the property, and requested
     court approval for the judicial sale of the property, as the selling
     price would not be sufficient to satisfy the mortgage lien and
     outstanding claims against the property.

           [Appellants] requested the sale pursuant to 20 Pa.C.S.A.
     § 3353, which allows the [c]ourt to authorize sales of encumbered
     or otherwise unavailable real or personal property for the proper
     administration and distribution of the estate.

                                   * * *

     Here, Quicken Loans, the mortgage holder and Respondent
     [objected to the petition for judicial sale] at time of presentation
     of [Appellants’ petition].

                                   * * *

     [Appellants] would argue that the sale would be in the interest of
     the proper administration and distribution of the estate[.]
     [Appellants] cite in their [petition for judicial sale] only to a
     hardship in maintaining the property over time and/or difficulty in
     finding a buyer. These concerns are not out of the ordinary in the
     case of any estate involving real property, and they do not justify
     the exceptional relief of a judicial sale over the express and
     continuing objection over the primary lienholder of the at-issue
     mortgage. The Court simply cannot order a free and clear sale of
     the property without the consent of the mortgagee pursuant to 20
     Pa.C.S.A. § 335[7](b)[.]

Orphans’ Court Order Pursuant to Pa.R.A.P. 1925(a), 8/27/18, at 1-2 (internal

quotation marks omitted).

1 Quicken Loans Inc. (“Quicken”) is the mortgagee and a participant in this
appeal.
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        The orphans’ court denied Appellants’ petition, and Appellants filed a

timely appeal. Both the orphans’ court and Appellants complied with Pa.R.A.P.

1925.

        On appeal, Appellants raise the following issue for this Court’s

consideration: “Is a judicial sale under 20 Pa.C.S.A. § 3353 permissible over

the objection of a secured mortgagee?” Appellants’ Brief at 4. After careful

review, we answer this question in the affirmative.

        We review a decision of the orphans’ court under the following standard:

              Our standard of review of the findings of an Orphans’
              Court is deferential.

                    When reviewing a decree entered by the
                    Orphans’     Court,   this    Court    must
                    determine whether the record is free from
                    legal error and the court’s factual findings
                    are supported by the evidence. Because
                    the Orphans’ Court sits as the fact-finder,
                    it determines the credibility of the
                    witnesses and, on review, we will not
                    reverse its credibility determinations
                    absent an abuse of that discretion.

              However, we are not constrained to give the same
              deference to any resulting legal conclusions.

        In re Estate of Harrison, 745 A.2d 676, 678–79 (Pa. Super.
        2000), appeal denied, 563 Pa. 646, 758 A.2d 1200 (2000)
        (internal citations and quotation marks omitted). “The Orphans’
        Court decision will not be reversed unless there has been an abuse
        of discretion or a fundamental error in applying the correct
        principles of law.” In re Estate of Luongo, 823 A.2d 942, 951
        (Pa. Super. 2003), appeal denied, 577 Pa. 722, 847 A.2d 1287
        (2003).

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In re Estate of Whitley, 50 A.3d 203, 206–207 (Pa. Super. 2012). This

Court’s standard of review of questions of law is de novo, and the scope of

review is plenary, as we may review the entire record in making our

determination. Kripp v. Kripp, 849 A.2d 1159, 1164 n.5 (Pa. 2004). When

we review questions of law, our standard of review is limited to determining

whether the trial court committed an error of law. Kmonk-Sullivan v. State

Farm Mutual Automobile Ins. Co., 746 A.2d 1118, 1120 (Pa. Super. 1999)

(en banc).

     Appellants cite to In re Estate of Landis, 85 A.3d 506 (Pa. Super.

2014), in support of their argument that an orphans’ court may permit a

judicial sale of real property encumbered by a mortgage. Appellants’ Brief at

10. Appellants assert that such a sale renders the property free and clear of

any liens or encumbrances, which then attach solely to the proceeds of the

sale. Id. Appellants aver that the orphans’ court may authorize a judicial

sale without the mortgagee’s consent. Id.

     Landis dealt primarily with the priority of a mortgagee’s lien, not the

authority of the orphans’ court to conduct a judicial sale.   In Landis, the

decedent’s real property was encumbered by a mortgage. The decedent died

testate, and his executrix admitted the decedent’s will to probate.      The

Montgomery County Register of Wills granted Letters Testamentary to the

executrix. The mortgage was the only secured lien on the property. One of

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the relevant statutes in the analysis described in Landis, 42 Pa.C.S. § 8152,

states, in part, as follows:

       Judicial sale as affecting lien of mortgage

       (a) General rule.--Except as otherwise provided in this section,
       a judicial or other sale of real estate shall not affect the lien of a
       mortgage thereon, if the lien of the mortgage is or shall be prior
       to all other liens upon the same property[.]

                                      * * *

       (b) Property of a decedent, etc.--A judicial sale of the property
       shall divest the lien of a mortgage to the extent authorized by the
       court pursuant to the following provisions of Title 20 (relating to
       decedents, estates and fiduciaries):

             Section 3353 (relating to order of court).
             Section 3357 (relating to title of purchaser).

42 Pa.C.S. § 8152.

       Pursuant to 20 Pa.C.S. § 3353,2 the executrix filed a petition for leave

of court to sell the mortgaged real property. Landis, 85 A.3d at 508. Similar

2   Section 3353 provides as follows:

                                  Order of court

       When the personal representative is not authorized to do so by
       this title or is denied the power to do so by the governing
       instrument, if any, or when it is advisable that a sale have the
       effect of a judicial sale, he may sell any real or personal property
       of the estate, including property specifically devised, at public or
       private sale, or may pledge, mortgage, lease, or exchange any
       such property, or grant an option for the sale, lease, or exchange
       of any such property, under order of the orphans’ court division of
       the county where letters testamentary or of administration were
       granted, upon such terms and upon such security and after such
       notice as the court shall direct, whenever the court shall find such
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to the case at bar, the estate of the decedent in Landis was facing insolvency.

The orphans’ court issued a preliminary decree and citation to the mortgagee

to show cause why the sale should not be allowed. The mortgagee filed no

objections to the petition or the sale. Thereafter, the orphans’ court issued

an uncontested decree, granting the executrix’s petition, authorizing a

“judicial sale” pursuant to 20 Pa.C.S. § 3353, and discharging all liens on the

real property, which would allow the property to be transferred with a clear

title. The real property was then sold. Landis, 85 A.3d at 508.

       The executrix in Landis filed an account of the estate and listed the

mortgagee as a class six creditor under 20 Pa.C.S. § 3392.3 Thereafter, the

       sale, pledge, mortgage, lease, exchange, or option to be desirable
       for the proper administration and distribution of the estate.

20 Pa.C.S. § 3353.

3   Section 3392 designates the classes of estate creditors.

       If the applicable assets of the estate are insufficient to pay all
       proper charges and claims in full, the personal representative,
       subject to any preference given by law to claims due the United
       States, shall pay them in the following order, without priority as
       between claims of the same class:

             (1) The costs of administration.

             (2) The family exemption.

             (3) The costs of the decedent’s funeral and burial, and
             the costs of medicines furnished to him within six
             months of his death, of medical or nursing services
             performed for him within that time, of hospital
             services including maintenance provided him within
             that time, of services provided under the medical
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mortgagee filed a petition for distribution of the judicial sale proceeds. The

mortgagee argued that it was entitled to all of the proceeds from the sale

because it was the only secured creditor.        However, the orphans’ court

confirmed the executrix’s account and ordered distribution of the estate

according to the executrix’s proposal.      The orphans’ court held that the

“judicial” sale of the real property extinguished the mortgagee’s lien, along

with its right of first priority to distribution of the net sale proceeds. Landis,
85 A.3d at 509. The mortgagee filed an appeal to this Court.

       On appeal, this Court held that under 20 Pa.C.S. § 3357(b),4 the

orphans’ court may discharge mortgage liens upon the sale property if the

             assistance program provided within that time and of
             services performed for him by any of his employees
             within that time.

             (4) The cost of a gravemarker.

             (5) Rents for the occupancy of the decedent’s
             residence for six months immediately prior to his
             death.

             (5.1) Claims by the Commonwealth and the political
             subdivisions of the Commonwealth.

             (6) All other claims.

20 Pa.C.S. § 3392.

4   Section 3357(b) provides as follows:

       (b) Effect of certain circumstances.--Persons dealing with the
       personal representative shall have no obligation to see to the
       proper application of the cash or other assets given in exchange
       for the property of the estate. Any sale or exchange by a personal
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mortgagee consents in writing and files that consent with the court during the

administration proceedings.    Landis, 85 A.3d at 512.      “If the mortgagee

provides written consent, it is not necessary for the mortgagee to file that

consent before the court enters the preliminary order for the judicial sale.”

Id. (citation omitted).   However, “[e]ven in the absence of a mortgagee’s

consent [in] writing to a judicial sale, the Orphans’ Court may still authorize

the sale and discharge all liens upon the sale property when the judicial sale

purchase price is fair and reasonable.”    Id. (citation omitted).   Thus, “the

mortgagee may waive its right to contest a judicial sale, or a mortgagee can

consent to a judicial sale that divests its lien from the real property, because

Section 3357 serves to benefit the mortgagee and preserves its secured lien.”

Id. at 512-513 (citation omitted). “Additionally, a mortgagee may consent

by accepting payment of the proceeds of the sale.” Id. (citation omitted).

      The Landis Court noted that the mortgagee did not consent in writing

to the judicial sale or the divestiture of the mortgagee’s lien. Landis, 85 A.3d

      representative pursuant to a decree under section 3353 shall have
      the effect of a judicial sale, but the court may decree a sale or
      exchange freed and discharged from the lien of any mortgage
      otherwise preserved from discharge by existing law, if the holder
      of such mortgage shall consent by writing filed in the proceeding.
      No such sale, mortgage, exchange, or conveyance shall be
      prejudiced by the terms of any will or codicil thereafter probated
      or by the subsequent revocation of the letters of the personal
      representative who made the sale, mortgage, exchange, or
      conveyance if the person dealing with the personal representative
      did so in good faith.

20 Pa.C.S. § 3357(b).
                                     -8-
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at 513.   Therefore, the judicial sale removed the mortgagee’s lien but, by

virtue of the sale, the secured lien transferred to the sale proceeds. Id. Thus,

the mortgagee effectively waived objection to the judicial sale but not to

extinction of its lien on the proceeds of the sale. Id.

      Thus, this Court concluded that the orphans’ court erred when it found

that the mortgagee’s lien was extinguished by the judicial sale and approved

the executrix’s proposed distribution schedule that listed the mortgagee as an

unsecured class six creditor. Landis, 85 A.3d at 513. The lien remained a

secured claim against the estate and attached to the sale proceeds, and the

mortgagee’s lien was superior to unsecured claims against the estate following

the judicial sale. Id. Accordingly, this Court vacated the order approving the

distribution of the estate and remanded for further proceedings.

      Appellants reiterate that the Landis decision states: “Even in the

absence of a mortgagee’s consent [in] writing to a judicial sale, the Orphans’

Court may still authorize the sale and discharge all liens upon the sale property

when the judicial sale purchase price is fair and reasonable.” Appellants’ Brief

at 10 (quoting Landis, 85 A.3d at 512).       Appellants extrapolate from this

premise that Landis permits a judicial sale even where the mortgagee

objects. Appellants’ Brief at 10. We agree.

      As revealed by Landis, 42 Pa.C.S. § 8152, 20 Pa.C.S. § 3353, and 20

Pa.C.S. § 3357 afford the orphans’ court broad power to authorize the

disposition of a decedent’s real estate. The orphans’ court has jurisdiction,

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pursuant to Section 3353, to authorize a judicial sale, but such sale does not

discharge the mortgage lien where consent in writing was not provided

pursuant to Section 3357. Pursuant to Landis and Section 3353, the orphans’

court has the authority to order the judicial sale, allow the real property to be

sold at a fair and reasonable price, and cause mortgagee’s lien to attach to

the proceeds of the judicial sale.

      In the instant case, although the orphans’ court is correct insofar as it

concluded that Appellants’ concerns with the administration of the estate “are

not out of the ordinary in the case of any estate involving real property,”

Orphans’ Court Order Pursuant to Pa.R.A.P. 1925(a), 8/27/18, at 2, we

disagree with its conclusion that it was required to sustain Quickens’ objection.

The orphans’ court found that ordering a judicial sale over the express

objection of the primary lienholder would amount to a “free and clear sale of

the property[.]” Id. This finding is inaccurate. Following the judicial sale,

the lien would attach to the sale proceeds. Landis, 85 A.3d at 513. If the

sale price is not fair and reasonable, the orphans’ court can refuse to authorize

the judicial sale.

      In the case at bar, Appellants averred that the property at issue was in

need of maintenance, and they undertook this responsibility.          Petition for

Judicial Sale of Real Estate, 8/16/18.5 On the advice of counsel, Appellants

5   In the certified record, there is a notation that the originally filed Petition
for Judicial Sale of Real Estate, dated June 25, 2018, was lost, and Appellants
filed a copy on August 16, 2018. Certified Record at docket entry #16.
                                      - 10 -
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obtained an appraisal of the property.         Id.       However, when Appellants

attempted to sell, Quicken objected. Quicken Loans’ Response in Opposition

to Petition for Judicial Sale, 7/10/18.

      As discussed above, Section 3353 permits the personal representative

to sell an encumbered property pursuant to a court order at a judicial sale

when the court determines that such a sale is desirable for the proper

administration and distribution of the estate. 20 Pa.C.S. § 3353. This broad

power afforded to the orphan’s court under Section 3353 permits a judicial

sale even where the mortgagee objects; however, it does not, by itself

extinguish the lien, as the lien would attach to the proceeds. Landis, 85 A.3d

at 513. Sustaining a mortgagee’s objection to a judicial sale when the price

is fair and reasonable would estop a personal representative from the proper

administration of an estate; it would have a chilling effect upon anyone who

is administering an estate from attempting, in good faith, to liquidate

encumbered real property that is in less than pristine and immediately

saleable condition.

      Additionally, prohibiting a good-faith judicial sale of encumbered real

property for a fair and reasonable price based solely on the objection of the

mortgagee would prevent individuals from endeavoring to accept the position

of   personal   representative.    Under      such   a    construct,   accepting   an

administrative position would require the personal representative to pay for

the maintenance, repair, and upkeep of an encumbered property until the

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mortgagee, as opposed to the orphans’ court, deemed the sale price

acceptable. A mortgagee could thus prevent the administration of an estate

in perpetuity. We conclude that the broad powers afforded the orphans’ court

in 42 Pa.C.S. § 8152, 20 Pa.C.S. § 3353, and 20 Pa.C.S. § 3357 prevent a

capricious refusal and permits a judicial sale despite the objection of the

mortgagee. Under the facts presented here, we conclude that the orphans’

court erred in denying Appellants’ petition for a judicial sale based on the

mortgagee’s objection.

      Accordingly, we reverse the order of the orphans’ court and remand for

the orphans’ court’s consideration of a judicial sale of the encumbered

property and administration of the estate. Following any judicial sale of the

property, Quicken’s lien shall remain a secured claim that is superior to

unsecured claims against the estate.          Also, following any judicial sale,

Appellants shall file with the orphans’ court a proposed schedule of distribution

of the estate.6

      Order reversed.      Case remanded with instructions.          Jurisdiction

relinquished.

6  We reiterate the suggestion this Court provided to the parties in Landis:
“At the proceedings, the competing parties might come to some compromise,
in recognition of the efforts of [Appellants] and [Appellants’ counsel] to
maximize the value of the Estate.” Landis, 85 A.3d at 515 n.1.
                                     - 12 -
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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: April 23, 2019

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