Krishnan, M. v. Deutche Bank

• Court: Superior Court of Pennsylvania
• Decided: October 18, 2016
• Docket: 3713 EDA 2015
• Status: Unpublished

Opinion

J. A21018/16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

MOHAN KRISHNAN AND : IN THE SUPERIOR COURT OF VASANTHALLAZMI KRISHNAN, : PENNSYLVANIA : Appellants : : v. : : DEUTSCHE BANK NATIONAL TRUST : COMPANY, AS TRUSTEE, : : Appellee : No. 3713 EDA 2015

Appeal from the Order Entered December 3, 2015 In the Court of Common Pleas of Chester County Civil Division at No.: 2013-07246-RC

BEFORE: BENDER, P.J.E., DUBOW, J., and MUSMANNO, J.

MEMORANDUM BY DUBOW, J.: FILED OCTOBER 18, 2016

Appellants, Mohan Krishnan and Vasanthallazmi Krishnan, plaintiffs

below, appeal from the December 3, 2015 Order entered in the Chester

County Court of Common Pleas following a bench trial in this quiet title

action.1 We affirm on the basis of the trial court’s Opinion.

The relevant facts, as gleaned from the trial court’s July 30, 2015

Decision and the certified record, are as follows. On August 6, 2004,

Appellants sold the real property and home located at 1360 Shadow Oak

1 Appellants purport to appeal from the November 4, 2015 Order denying their Post-Trial Motion. Orders denying Post-Trial Motions are interlocutory and generally not appealable; rather, the subsequent Order entering Judgment is appealable. Prime Medica Associates v. Valley Forge Ins. Co., 970 A.2d 1149, 1154 n.6 (Pa. Super. 2009). The caption has been revised accordingly. J. A21018/16

Drive in Malvern, Pennsylvania to Joye McDonald-Hamer (“McDonald-

Hamer”) for $745,000.00. McDonald-Hamer funded the transaction with a

$558,750.00 purchase money mortgage from Long Beach Mortgage

Company (“Long Beach”),2 a $186,250.00 purchase money mortgage from

Appellants, and a $39,389.32 cash assist from Appellants.

Closing occurred, and the HUD-1 settlement statement reflected each

of the mortgages. Appellants and Long Beach recorded their purchase

money mortgages in the Chester County Recorder of Deeds Office on the

same date and at the same time: at 2:11P.M. on August 11, 2004.

Numerous documents compiled in connection with the sale indicated that

Appellants’ purchase money mortgage was second in lien priority. These

included: (1) McDonald-Hamer’s August 6, 2004 Uniform Residential Loan

Application; (2) Long Beach Mortgage Company’s broker loan submission

dated July 30, 2004; (3) Long Beach Mortgage Company’s underwriting

approval sheet; (4) Long Beach Mortgage Company’s pre-defined

underwriting conditions worksheet; (5) the title commitment issued on

August 4, 2004, indicating a first mortgage in favor of Long Beach; (6)

McDonald-Hamer’s USAA homeowner’s insurance policy dated January 7,

2007; (7) Long Beach Mortgage Company’s verification of recording dated

2 Long Beach Mortgage Company was a subsidiary of Washington Mutual Bank. Washington Mutual Bank failed, and both JPMorgan Chase and Deutsche Bank serviced the loan. Here, Appellee Deutsche Bank is trustee for Long Beach Mortgage Company.

-2- J. A21018/16

August 6, 2004; (8) McDonald-Hamer’s attorney’s preliminary certificate and

report on title dated August 4, 2004; and (9) the attorney’s final certificates

dated August 23, 2004. These documents, to which Appellants never

objected, explicitly stated that Long Beach’s mortgage had first priority.

After McDonald-Hamer defaulted on Appellants’ mortgage, Appellant

called Long Beach’s successor at the time, Washington Mutual, four times

during the period from June of 2005 to December of 2006 to determine

whether McDonald-Hamer was making payments on that mortgage. Each

time Appellant identified himself as the holder of a second mortgage on the

property.

In August of 2007, Deutsche Bank (“Appellee”) instituted a mortgage

foreclosure action in Chester County Court of Common Pleas. On August 22,

2008, Appellants instituted their own mortgage foreclosure action. They

subsequently obtained a Judgment by consent, entered on September 17,

2009, in the amount of $260,542.51. At a Sheriff’s Sale of the property on

June 27, 2011, Appellants bid successfully and obtained title to the property.

Appellants then commenced the instant quiet title action, claiming that

Appellee’s mortgage should have been divested at the Sheriff’s Sale

pursuant to 42 Pa.C.S. § 8152 because it was not first in priority.

At the bench trial, Appellant Mohan Krishnan testified. The court

admitted into evidence the documents listed supra showing that Appellants

were second in lien priority.

-3- J. A21018/16

Following the trial, the court concluded that Appellee held a first

mortgage lien on the property. The court also concluded that the evidence

showed that Appellants had never objected to the documents supporting the

sale to McDonald-Hamer, which indicated Long Beach had priority and that

Appellants’ mortgage was a secondary lien.3 See Trial Court Decision, dated

7/30/15, at 5.

Appellants filed a Post-Trial Motion, which the trial court denied on

November 4, 2015. On December 3, 2015, the trial court entered Judgment

in favor of Appellee.

On December 3, 2015, Appellants filed a Notice of Appeal. Both

Appellants and the trial court complied with Pa.R.A.P. 1925.4

Appellants present the following issue for our review:

In the face of contrary language in: i) the final HUD-1 [settlement statement], ii) the title insurance policy, and iii) the single communication, from an institutional lender to an individual lender, addressing priority; and, where no actual evidence of any agreement to subordinate exists, may a Court, nevertheless, assume an agreement and promote the priority of an institutional lenders’ Purchase Money Mortgage, over that of an individual lenders’ Purchase Money Mortgage, simply because

3 In its Pa.R.A.P. 1925(a) Opinion, the court observed: “I will note only that I cited to the apparent agreement between the parties establishing that [Appellants] held the second mortgage. Such agreement was demonstrated by the evidence presented at trial, including testimony, that when faced with evidence, such as the title commitments or the homeowner's insurance, that the [Appellants] held a second mortgage, they did not protest, object or raise any concern.” Trial Court Opinion, dated 1/14/16, at 3. 4 The trial court’s Pa.R.A.P. 1925(a) Opinion dated January 14, 2016, incorporated and attached its July 30, 2015 Decision.

-4- J. A21018/16

the holder of the institutional mortgage is a bank, which desired a senior position?

Appellants’ Brief at 3.

In reviewing a judgment entered in a quiet title action, this Court is

limited to determining “whether the findings of fact are supported by

competent evidence, whether an error of law has been committed, and

whether there has been a manifest abuse of discretion.” Regions Mortg.,

Inc. v. Muthler, 889 A.2d 39, 41 (Pa. 2005) (citation and quotation marks

omitted). This Court “will not reverse a determination of the trial court in a

quiet title action absent an error of law or capricious disregard of the

evidence.” Birdsboro Mun. Authority v. Reading Co. and Wilmington &

Northern R.R., 758 A.2d 222, 225 (Pa. Super. 2000) (citations and

quotation marks omitted).

A sheriff’s sale of an encumbered property affects mortgage liens on

the property as follows:

§ 8152. Judicial sale as affecting lien of mortgage

* * *

(c) Sale on prior lien.—A judicial or other sale of real estate in proceedings under a prior ground rent, or in foreclosure of a prior mortgage, shall discharge a mortgage later in lien.

42 Pa.C.S. § 8152(c). See also Public Federal Sav. & Loan Ass’n v.

Neumann, 483 A.2d 505, 507 (Pa. Super. 1984) (stating sale of real

property does not affect lien if mortgage is prior to all other liens on

property).

-5- J. A21018/16

42 Pa.C.S. § 8141 governs the priority of competing purchase money

mortgage liens against real property. See 42 Pa.C.S. § 8141 (entitled,

“Time from which liens have priority”). “The priority of liens as they appear

on record is prima facie evidence of the manner in which the proceeds are to

be distributed.” Farmers Trust Co. v. Bomberger, 523 A.2d 790, 792 (Pa.

Super. 1987). See also First Citizens Nat. Bank v. Sherwood, 879 A.2d

178, 182 (Pa. 2005) (stating recording of mortgage serves as constructive

notice of mortgage to subsequent purchasers).

In determining the rights of parties to a dispute, the trial court must

consider “not only [] the recorded documents, but also [] any agreement by

the parties which affects lien priorities between them.” Farmers Trust,

supra at 793 (citations omitted).

Here, Appellants aver that the trial court improperly concluded

Appellants’ lien was secondary to Appellee’s lien. Appellants’ Brief at 11-12,

17-29. Appellants argue that the trial court ignored some evidence while

improperly crediting other evidence when finding the existence of an

“agreement to subordinate.” Appellants’ Brief at 11-12. They essentially

reargue their case and conclude that the trial court erred in reaching its

conclusion.

Our review of the record and the relevant law indicates that the trial

court’s findings of fact are supported by competent evidence and the trial

court did not err as a matter of law. The Honorable Jeffrey R. Sommer, who

-6- J. A21018/16

presided at trial, has authored a comprehensive, thorough, and well-

reasoned opinion, citing to the record and relevant case law in addressing

Appellants’ challenge. We affirm on the basis of the trial court’s Opinion.

See Trial Court Opinion, dated 1/14/16, at 3-5 (incorporating the detailed

analysis of the 7/30/15 Decision, and concluding that: (1) the trial court

properly followed 42 Pa.C.S. § 8141 in determining mortgage priority and

the trial court did not “greatly expand any basis for revising lien priority[;]”

(2) the evidence at trial, including testimony from Appellant, established

that Appellants held a second mortgage; (3) Appellants had not protested,

objected, or raised any concern at the time of the McDonald-Hamer

transaction when presented with documentary evidence that Appellants held

a second mortgage; and, accordingly, (4) an agreement existed between the

parties that set the statutory lien priority schedule).

The parties are instructed to attach a copy of the trial court’s January

14, 2016 Opinion and the July 30, 2015 Decision to all future filings.

Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 10/18/2016

-7- Circulated 09/30/2016 11:00 AM

1-.--

MOHAN KRISHNAN and IN THE COURT OF COMMON PLEAS VASANTHALAXMI KRISHNAN CHESTER COUNTY, PENNSYLVANIA vs.

DEUTSCHE BANK NATIONAL TRUST NO. 13-07246 CO., as 1 rustee for LONG BEACH MORTGAGE LOAN TRUST 2004-6 CIVIL ACTION

Sommer, J. January I flt ~1/ ?;z~ i -.. . ...·:; -.- .. -·~···: .. ...,._ .;{;.·: . - .:,,;.:·-,: "'() CJ- .. \ :.:;,;; OPINION PURSUANT TO Pa.R.A.P. 192~:~·1 ,- .r,,,,~<''': ~· 0 J. Procedural History C."J

Th.s matter has come before me as a result of a Notice of Appeal filed by

Mohan Krlshnan and Vasanthalaxmi Krishnan (hereinafter "Plalntlffs"), The appeal, filed ~ :!-

on December 3, 2015, was from the Order entered on November 4, 2015, denying

Plalntlff\ Post-Trial Motion following trial on Plaintiffs' action to quiet title whereby

judgment was entered in favor of Defendant, Deutsche Bank National Trust Co., as

Trustee for Long Beach Mortgage Loan Trust 2004-6 (hereinafter "Long Beach" or

"Bank").

Orr December 3, 2015, an Order was issued directing Plaintiffs to file a Concise

Statemer t of Matters Complained Of on Appeal. Plaintiffs timely submitted their

Concise Statement on December 22, 2015. The matter is now ready for

determlnntlon.

IL Facts: .... •.·

The 'relevant facts have been set forth at length in my Decision pursuant to

Pa.R.C.P! 1038, a copy of. which is attached hereto and incorporated herein' t?y

reference.

I~ '~. Ill. Issues:

Plaintiffs' Concise Statement of Matters Complained Of on Appeal consists of

three alleged errors by this Court, as follows: • '\, i I

1. Plaintiffs allege that this Court erred by not following the statutory

scheme set forth in 42 Pa.C.S.A §8141(a) to determine which mortgage was deflvered

first in order to determine priority and then the Court erred by not looking for an a·greement between the parties which might have revised the statutory lien priority. 2. Plaintiffs allege that this Court erred by "greatly expanding the basis for

revising l.en priority to include inquiry into: 1) the policies of a bank, 2) whether or not.a

person expecting to receive a purchase money mortgage had a full understanding of

the statutory lien priories of purchase money mortgages, 3) the actions of third parties,

and numerous other factors well beyond the agreements of the lien holders to modify

statutory Hen priority." v , .' •

3. Plaintiffs allege that this Court erred by purportedly setting priority based

on 111) documents created by third parties such as Insurance pollcles: 2) the fact-that

Plaintiff (an octogenarian, whose first language is not Engtish) seemed to hesitate and

answer questions relating to the legal Impact of documents in an evasive manner; 3)

testimony by a convicted felon to the effect that his wife, the buyer of the property, told

Long Beach Mortgage that the Krishnan mortgage was intended to be a second

mortgage; 4) testimony that Long Beach Mortgage had an underwriting policy. that

required their mortgages to be in a first position; 5) testimony of the Pliantiff that he

identified himself to a representative of JPMorgageChase [sic} as the holder of a

second mortgage, after that representative refused to speak to him unless he so

identified himself; 6) disregarding the fact that the Huo~1 clearly identified· the 2

·-·-. - ---~-..._ -·-· -~· -· ·--- i I I l l I !l Plaintiff's loan as a purchase money obligation; 7) disregarding the fact that the ! I Plaintiffs mortgage was an exception on Long Beach Mortgage's title insurance policy; l and 8) disregarding the fact that there was no actual agreement between Plaintiff and I Long Beach Mortgage or its assignees regarding priority." I IV. Holding:

1. This Court did not err as it followed the appropriate statutory scheme Io

determine mortgage priority and considered, and even cited to, the agreement to I which Plaintiff refers.

2. This Court did not err by "greatly expanding" the basis for revising· lien

priority.

3., This Court did not err by considering the factors set forth by Appellants;

including certain crediblllty factors, as that is the trial court's role.

V. Rationale:

1. The Court followed 42 Pa.C.S.A §8141(1) and gave aoorooriate consideration to any__Mreement between the parties to determine lien priority

My analysis is set forth in great detail in the Decision pursuant to Pa.R:C.P.

1038 and I do not feel that there is any benefit to 'be gained by restating same here. · I

will note only that I clted to the apparent agreement between the parties establishing

that Plaintiffs held the second mortgage. Such agreement was demonstrated by· the evidence presented at trial, includlng testimony, that when faced with evldenoe, such

as the title commitments or the homeowner's insurance, that the Plaintiffs held· a

second mortgage, they did not protest, object or raise any concern. Therefore, I defer

to said Decision and respectfully request that the Superior Court affirm my ruling.

2. The Court did not greatly expand any basis for revising lien priority 3 ! ----· ---·-·--·---------------------------r--

II i!

As required by existing case law, I was required to examine the evidence to I! § determine the existence, if any, of an agreement between the parties that might revise i i the statutory lien priority. I did so. In my evaluation and consideration of the evidence

presented, I determined that an agreement did exist between the parties and that such I, li I agreement evidenced that the Plaintiffs agreed to be the holder of a second mortgage. I I Plaintiffs have cited to no case law that requires such agreement be written. I

Plaintiffs highlight a number of factors that this Court erroneously considered,. in

making lls determination. However, l believe that any consideration of such factors II . l and the 1;,teight afforded to each merely amounts to my analysis of all the evidence !':.

presented· a! trial. This can hardly be an error of law. Accordingly, as thls Court I I determined, the conduct of the parties and various documents evidencing Plaintiffs' I iI status as a second mortgage holder, and lack of objections by Plaintiffs to that status,

constitute sufficient evidence of an agreement between the parties that Plaintiffs I agreed to hold a second mortgage. •

s. The Court did not err in considering varlo.u.s factors. Including credibility of i • ·~ ..

I i

the wltnesses at trial. in making its decision II l Tf'i,e role of the trial court is to assess and determine credibility of the witnesses ! - I and evidence appearing before it, Thus, any credibility determinations of this Court ! I must be :Jiven great weight by the appellate court. I evaluated the credibility of all I wltnessee at trial, including Plaintiff. Specifically, I found Plaintiff's testimony to be

hesitant t.on matters with which he should be famlllar, despite the fact that English Is I not his first language, and evasive on relatively stralqhtlorward inquiries. Moreover,

based in part upon Plaintiff's own testimony whereby he identified himself as the

holder of a second mortgage, I concluded that Plaintiffs indeed held a second

4 L. mortgage, Plaintiffs simply do not get to pick and choose which parts of their

testimonv I am compelled to believe or disbelieve. That is my role as the judge as the fact-finder and assessor of credibility. I considered Plaintiff's testlmony as a whole,

including his demeanor at 1rial, and found his credibility to be lacking .

. Any further issues raised by Plaintiffs have been addressed by my Decision

pursuant to Pa.R.C.P. 1038 to which I do not feel I cannot further supplement at t~is

time. Therefore, I defer to said Decision and respectfully request that the Superior

Court affirm my ruling.

All of which is respectfully submitted.

BY THE COURT:

-------------~4__. .. R- . . . . .._.__ MOHAN KRISHNAN and IN THE COURT OF COMMON PLEAS VASANTHALAXMl KRISHNAN CHESTER COUNTY, PENNSYLVANIA Vs.

DEUTSCHE BANK NATfONAL TRUST NO. 13-07246 •:;;.•, CO., as Trustee for LONG BEACH ;i . ;~ ~:· {_ MORTGAGE LOAN TRUST 2004-6 CIVIL ACTlON · ri ;:: • ..

. ~...~ . . :.-: ,,; ( . ~-- :!.";

James S. Tupltza, Esquire, on behalf of 1he Plaintiffs Edward J. Hayes, Esquire, on behalf of the Defendant

DECISION PURSUANT TO Pa.R.C.P. 1038

I. Procedural Setting:

This matter comes before us as a result of Mohan and Vasanthalaxml Krishnan's

(hereinafter 1'Plaintiffs") filing of an Action to Quiet Title against Deutsche Bank

National Trust Co., as Trustee for Long Beach Mortgage Loan Trust 2004-6

(hereinafter "Long Beach" or "Bank") on July 25. 2013. On September 26, 2013.

Plaintiffs filed a Praeclpe to enter a default judgment against Defendant as a result of

the alleged failure to respond to the Complaint. on October 1, 2013, Plaintiff filed a

Motion for Default Judgment for failure to respond. On October 7, 2013, Defendant

responded and filed a Petition to Open and Strike the default. On October 17, 20131

thls Cou1i denied Plalntlffs Motlon for Default Judgment.

On December 4, 20131 the parties entered into a Stlpulatlon to open and vacate the

judgment On Pebruary 18, 2014, Plaintlffs filed a Motion for Judgment on the . . Pleading!,. That motion was withdrawn voluntarily. Defendant filed .its Answer·~nd

New Matter on March 14, 2014. Plaintiffs filed- their Reply on March 25, 2014.

Plaintiffs then filed a Motion for Judgment on Pleadings. Fol!owlng the filing bf

...... : ~ .. I

.. Defendant's reply, this Court denied Plaintiffs' motion. The matter was set down for a

trial without a jury on July 9, 2015.

II. Facts; . ij On August 6, 2004, the Plaintiffs sold the real property and home located at.1~60 . ,•

Shadow Oak Drive, Malvern, PA 19355 (herelnaft~r the "Property") to J~ye McDonald-

Hamer (hereinafter "Harner"), for the sum of $745,000.00. The transaction was funded

as follows: $55°8,750.00 ~$ a loan from Long Beach M.ortgage Compan;; $186,250.00

loaned by the Plaintiffs; and, $39,389.32 ln cash from the Plaintiffs. See, Exhibit P-16.

To secure the repayment of the Long Beach loan, Hamer executed and delivered a

mortgage on the Property in favor of the bank. The mortgage was recorded in the .

Office for the Recorder of Deeds of Chester County at Book 6248·, P~ge 2323. In

order to secure the repayment of the Plaintiffs' loan, Hamer executed and delivered a

mortgage on the Property In favor of the Plaintiffs. The amount of the mortgage was ·

for $22fS,OOO.OO. Interestingly, at trial no one could explain why the mortgage amount . I was sig:lificant'ly In exce~s of the loan amount. Wh'en questioned directly by the Court 'I I on the .fasue that perhaps the mortgage amount was that of the combined loan and

cash put up by the Plaintiffs, ·Plaintiff denied a). that he had given a· $39,000 cash . . . assist, b) dented that the addenda reflecting the' cash assist was authentic, and ·c)

denied that his loan plus the aforementioned c~sh assist added up approxlrnately .

$225,000.00. ~\ The· Plaintiff 'Was questioned about the discrepancy and the circumstances

surrounding the settlement. Plaintiff testified that he was not sure why the numbers

were different. Plaintiff could not recall any of the details of the transaction. Plaintiff

2 I I

.. ,, 1

did not agree that the Agreement of ~ale, which contained several Addenda (including l a further seller assist In the amount of $39,000) was an accurate reflection of .the deal: I Plaintiff appeared evasive arid combative on what were- relatively straightforward

questions about the· structure of the transaction. -. This evasiveness also surrounded II the fundamental question about this transaction; what lien position did the partlss I I l believe they were assuming?'.

In the Hamer loan application dated August 61 20041 Hamer dlsclosedlhat she had I I I ! i i agreed .to a second· mortgage with the Plaintiff. See, Exhibit D-5, The broker loan i ~ I t I r• submission which was contained with the Long Beach file states the Bank would 1 I t obtain ei-,,first mortgage and the Plaintiffs would provide secondary financing. See, ·. . . Exhibit './JJ-6. The Bank's underwriting approval sheet Indicates that the mortgage to

Long Beach would· be prtmary and the Plaintiffs would be obtaining a second

mortgage. See, Exhibit D-7. The Bank's pre-defined underwrltfng conditions

worksheet states that the Plaintiffs would obtain a second mortgage on the property.

See, Exhibit D·B.

Both the Plaintiffs and the Bank sought title insurance in connection with their

mortgages.· The title commitment issued to the Bank did not show a moftgage in favor

of the Hlaintlffs. See, Exhibit P-5. The title commitment issued to Harri~r ldentltieoa ' proposed ··first mortgage in favor of the bank. See, Exhibit P-6. Settlement on tbe

property-occurred on· August 6, .2004. ·

At-settle'ment, th~ HUDK1 Sheet reflects each of the mortgages. See, Exhibit P-

16. Fo!lowing the closing, the Bank's paperwork was delivered to :the agent {or

recording. The Plaintiffs received their paperwork for recording. The Bank's mortgage

---------------------------·---··-··-·- -·-- was recorded Immediately at Book 66.19, Page 2030. The Plaintiffs' mortgage was . :, '•

recorded at Book 6248, Page 2334. The date and time stamps show that the Bank's

mortgage was recorded first. .. Each party required Hamer to name them on the horneowner's insurance

policy, in order to protect their interests. The policy designated the Bank as the first

mortgag~ and the Plaintiffs as the second mortgage. The declaration page was

delivere,1 to the Plalntiffs. At no time dld they protest these designatlons.

Harner was eventually sued in the Chester County Court of Common Pleas by

the Bank in a mortgage foreclosure action. Upon receiving notlce, the Plaintiffs began

calling the Bank to determine the status of the action. The business records kept

contemporaneously with the events show that on June 27, 2005, June 12, 2006; June

13, 2006 and December 13, 2006 the Plaintiff telephoned the Bank and identified

himself as the holder of a second mortgage on the Hamer property. See, Exhibit 0~23. On August 22, 2008 Plaintiffs commenced an action. against Hamer seeking kl • foreclose on their mortgage. See, Krishnan v. Hemet, Chester County Court of

Common Pleas 2008~9148-CA. On September 17, 2009, Plaintiffs obtained a

judgmeM by consent in the amount of $260, 542.51. After entering the .Judgment, the

Plalntiffs exposed. the property to Sheriffs Sale. O'n May 19. 2011, the Plaintiffs were

the successful bidders. By deed dated June 271 2011, the Sheriff transferred fhe.tltle

to the. Plaintiffs.

Plaintiffs theri commenced the instant matter seeking to Qulet Title .in i the

property. Plaintiffs argue that the Bank's mortgage should have been dlvested ar-the

Sheriff's Sale and to leave it in place creates a cloud on their title. The Bank takes the

4 • c ' I I ~ fl

position that as a first mortgage lien on the property, it is protected from divestiture at a

Sheriff's Sale by statute. See, 42 Pa.C.S.A. § 8152. Therefore, they are r~quired to

review the facts to determine Whether the Bank's ~ortgage:·is a first mortgage lien on

the property .':

111. ISSUE:

Whether the Bank's mortgage was a firsh11ortgage lien on the property? ·

IV. HOLDING: .···.l,

Yes.the Bank's mortgage was a first mortgage llen on the property.

The status of competing liens on the record Is· prime fade evidence of their

respective priorities. See, Farmers Trust Company v. Baumberger, 362 Pa. Super. 92,

523 A.2d 790 (1987). The evidence reveals that the Bank's mortgage and the

Krishnans' mortgage were recorded on the same date. Arguably, they would. hold

equal lierrpriority under 42 Pa.C.S.A. § 8141. However, when determining respective

priorities of competlng liens, this court must give consideration not only to the recorded

documents but to any agreement by the parties which reflect the llen priorities between

them. See, Farmers Trust Company, supra. If one of the two competing lienholders

can establish evidence that It is entitled to prlorlty, then priority will be afforded to that

party. Id.

The P"laintiffs' sole support for their contention is that neither mortgage states on its

face wh~ther. it is a first or a second mortgage. This is true. It is also true that the . documents do not reflect a priority. We know that both mortgages "are purchase

5 ····- -···-----------------------------

money mortgages. We know that the mortgages were signed at the same time 'anc

filed on the same date, although the Bank's mortgage was recorded flrst..

In revlewlng these types of facts In cases, the Superior Court has held: .... ,, The priority of liens as they appear on record ls prima faoie evidence of the manner in which the proceeds are to .be distributed. [citations omitted] However, If th~. acceptant can produce evidence he is equitably entitled to priority, the order of payment of proceeds of a foreclosure will be changed. See, Farmers Trust, Id.

Given tl.at the documents ar~ silent, we then look to give consideration to any

statements and agreements of the parties. The testimony was clear that the original

seller of the property, the Plaintiffs, understood and accepted that they would have ,- a . second mortgage junior to that of the Bank.

All of the evidence that was produced at trial revealed that the Plaintiffs

accepted a second mortgage, knew that it was a second mortgage, and representedto

the Bank that it held. the second mortgage. The testimony clearly revealed that wt:i~n .. faced with evidence, such as the title commitments, or the homeowner's insurance,

that the Plaintiffs· held a second mortgage, they did not protest, _object or raise any

concern.

All of the evidence reflects that at the time· surrounding the purchase of and

settlement on the property, the plaintiffs knew they were taking a second mortgage,

acceptechthat they were taking a second mortgage, represented that they were taking

a second mortgage. Only now does the plaintiffs' story equivocate. The court took

great pains to observe the ·parties as they testified. The Plaintiffs' testimony was

hesitant and evasive. There were times during questioning that the Plalnfiff .1/f~S unnecessary combative and his memory seemed to falter. When asked. dlre'~f!y 6 .. .. •1 ·I·> ~·

I whether he had represented to the Bank and others that he held a second mortgage,

the Plaintiff was evasive and appeared less than forthcoming. I ! It is our conclusion that the evidence Is over.whelming. that the Plaintiffs took a f subordi~iate lien position on the property. They did so knowingly,, and Vv'.ithout I reservation. They represented this knowledge to others, Including the Bank, and only began to assert this "co-equal status" once they had foreclosed on the Hamers.

In Quiet Title' actions, the burden of proof. ls on the plaintiff. See, .Grace Buildi(Jg .v'. .

Parchlm;ky, 467 A.2d 94 {Pa. Cmwlth. 1983). The plaintiff in a Quiet Title action is· i

required. to prove his case by a preponderance of the evidence. See, Grace Buifdi!)g :

v. Parohlnsky, supra.; Moore v. Commonwealth, 566 A.2d 905 {Pa. Cmwlth. 1989).

-The Plaintiffs in the lnstantcasedld not meet that burden of proof. In fact, it was quite

the opposite.

Therefore, we conclude that the Defendant holds a first mortgage. By statutea first

mortgage Is not divested at a Sheriff's Sale. See, 42 Pa.C.S.A. § 8152. By finding as

a fact that the Defendant holds a first mortgage, the Plalntiffs' action to Quiet Title

must. fail.. Therefore, we find for the Defendant, Deutsche Bank National Trust Co..

BY THE COURT: . . .· ,'• ... ~· ; r

J ey~mer . J.

--·······---·----------------------------------_:___)