Ocwen Loan Servicing v. Gangadeen, S.

• Court: Superior Court of Pennsylvania
• Decided: September 26, 2017
• Docket: 723 EDA 2016
• Status: Unpublished

Opinion

J-A04024-17

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

OCWEN LOAN SERVICING, LLC IN THE SUPERIOR COURT OF PENNSYLVANIA Appellee

v.

SELWYN GANGADEEN AND SAVITRI GANGADEEN

Appellants No. 723 EDA 2016

Appeal from the Order Entered February 1, 2016 In the Court of Common Pleas of Monroe County Civil Division at No(s): 2011-10742

BEFORE: SHOGAN, J., SOLANO, J., and PLATT, J.*

MEMORANDUM BY SOLANO, J.: FILED SEPTEMBER 26, 2017

Appellants Selwyn and Savitri Gangadeen appeal from the trial court’s

order of March 6, 2014, granting Appellee Ocwen Loan Servicing, LLC’s

preliminary objections, and from the February 1, 2016 order granting

summary judgment in favor of Ocwen. We affirm.

On March 11, 2008, the Gangadeens borrowed $184,205 from Avelo

Mortgage, LLC, doing business as Senderra. The loan was secured by a

mortgage on the Gangadeens’ property in Henryville, Monroe County. On

December 1, 2009, the mortgage fell into default due to the Gangadeens’

failure to make monthly payments. After the mortgage went into default,

Avelo sold it to Ocwen.

____________________________________________ * Retired Senior Judge assigned to the Superior Court. J-A04024-17

On December 15, 2011, Ocwen filed a complaint in mortgage

foreclosure against the Gangadeens, alleging that $233,185.53 was due on

the loan.1 On December 23, 2011, the Gangadeens filed a certification of

participation in the Monroe County Residential Mortgage Foreclosure

Diversion program, and a stay was imposed on judicial action. After

numerous conciliation conferences, the parties were unable to reach an

agreement, and the stay was lifted on September 17, 2013.

On December 2, 2013, the Gangadeens filed an Answer, New Matter,

and Counterclaims. In their Answer, the Gangadeens stated: “The allegation

that the Mortgage is in default is a conclusion of law to which no response is

required . . . . The allegation is, therefore, denied, and if relevant, strict

proof thereof is demanded at trial.” Answer at ¶ 6. In addition, they set

forth numerous defenses and “specifically denied that the sums set forth in

. . . the Complaint are accurate statements of the amount actually due under

the Mortgage, as payments made on behalf of the Defendants have not been

properly credited to the subject loan or account.” Id. at ¶ 7. The

Gangadeens also asserted the following counterclaims: (1) breach of

contract, including breach of a duty of good faith and fair dealing; (2)

violation of the Truth in Lending Act, 15 U.S.C. §§ 1601-1616; (3) violation

of the Real Estate Settlement Procedures Act, 12 U.S.C. §§ 2601-2617; and

____________________________________________ 1 This amount included the principal balance of $181,107.92, interest to date, late charges, escrow advances, fees, costs, and attorneys’ fees.

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(4) violation of the Unfair Trade Practices and Consumer Protection Law, 73

P.S. § 201-1 to 201-9.3. The Gangadeens sought damages in excess of

$50,000, costs of suit, attorneys’ fees, rescission of the loan, and all other

damages deemed recoverable according to law.

On January 3, 2014, Ocwen filed preliminary objections seeking

dismissal of all of the Gangadeens’ counterclaims under Rule of Civil

Procedure 1028(a)(2) (“failure of a pleading to conform to law or rule of

court”) and 1028(a)(4) (“legal insufficiency of a pleading (demurrer)”). Both

parties filed memoranda, and the trial court heard oral argument on

March 3, 2014. On March 6, 2014, the trial court sustained Ocwen’s

preliminary objections and dismissed the Gangadeens’ counterclaims. The

trial court reasoned that the Gangadeens improperly sought money damages

in a mortgage foreclosure action. Order, 3/6/14; Trial Ct. Op., 4/18/16, at

4.

Ocwen filed a reply to the Gangadeens’ New Matter on March 27,

2014, and a motion for summary judgment and supporting memorandum of

law on November 30, 2015. The Gangadeens filed a brief, in which they

argued that summary judgment was improper because (1) they did not

know the amount they owed, and (2) they had raised substantial, material

issues in their New Matter. Br. in Opp’n to Pl.’s Mot. for Summ. J. at 5-6.

They did not attach any exhibits to their brief. After oral argument, on

February 2, 2016, the trial court granted Ocwen’s motion for summary

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judgment and entered judgment in rem in favor of Ocwen and against the

Gangadeens for $316,578.80, together with ongoing interest and other costs

and charges collectible under the mortgage, and for the foreclosure and sale

of the property. On February 23, 2016, Ocwen filed a praecipe for entry of

judgment and assessment of damages. On March 2, 2016, the Gangadeens

filed a timely notice of appeal.

In this appeal, the Gangadeens raise the following issues:

1. Did the Court below err as a matter of law in dismissing the [Gangadeens’] Counterclaims against [Ocwen] for Breach of Contract, Failure to Comply with Truth in Lending disclosure requirements, violations of the Real Estate Settlement Procedures Act and Failure to comply with Pennsylvania Unfair Trade Practices and Consumer Protection laws?

2. Did the Court below err as a matter of law in dismissing the [Gangadeens’] Counterclaims, as they were integral to the entire case, particularly the creation of the mortgage and note, upon which [Ocwen] is relying?

3. Did the Court below err as a matter of law in granting [Ocwen’s] Motion for Summary Judgment?

Gangadeens’ Brief at 4.

The Counterclaims

In their first two issues, the Gangadeens contend that the trial court

erred in granting Ocwen’s preliminary objections to their counterclaims. We

apply the following standard of review:

Our standard of review of an order of the trial court overruling or granting preliminary objections is to determine whether the trial court committed an error of law. When considering the appropriateness of a ruling on preliminary objections, the appellate court must apply the same standard as the trial court.

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Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint. When considering preliminary objections, all material facts set forth in the challenged pleadings are admitted as true, as well as all inferences reasonably deducible therefrom. Preliminary objections which seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the preliminary objections.

Khawaja v. RE/MAX Cent., 151 A.3d 626, 630 (Pa. Super. 2016) (citation

omitted). “A motion to strike the new matter as not pertinent is like a

demurrer to the new matter.” Jefferies v. Hoffman, 207 A.2d 774, 775

(Pa. 1965). “The decision whether to sever a counterclaim lies within the

discretion of the trial court. Thus, the court’s decision will not be overturned

absent an abuse of that discretion.” Chrysler First Bus. Credit Corp. v.

Gourniak, 601 A.2d 338, 340 (Pa. Super. 1992).

The Gangadeens argue that the trial court erred in sustaining Ocwen’s

preliminary objections because their counterclaims were “integral to the

entire case” and arose “from the same transaction or occurrence or series of

transactions or occurrences from which [Ocwen’s] cause of action arose.”

Gangadeens’ Brief at 10. Moreover, the Gangadeens assert that they sought

recoupment and alleged fraudulent inducement, which, they contend, are

permissible counterclaims in a mortgage foreclosure action. Id. at 10, 11.

As noted above, the trial court dismissed the Gangadeens’ counterclaims on

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the basis that they improperly sought money damages in an in rem

mortgage foreclosure action.

Rules of Civil Procedure 1141 to 1150 govern mortgage foreclosure.

Rule 1141(a) provides that a mortgage foreclosure action “shall not include

an action to enforce a personal liability.” “This restriction is equally

applicable to a mortgagee and a mortgagor.” Newtown Village P’ship v.

Kimmel, 621 A.2d 1036, 1037 (Pa. Super. 1993). This Court has

explained:

Mortgage foreclosure in Pennsylvania is strictly an in rem or “de terris” proceeding. Its purpose is solely to effect a judicial sale of the mortgaged property. The holder of a mortgage note can decide whether to file a foreclosure action or to file an in personam assumpsit action on the note, but the actions are not usually combined.

Rule of Civil Procedure 1148, which governs which counterclaims are permissible in a mortgage foreclosure action, states:

A defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff’s cause of action arose.

We have held that this rule is to be interpreted narrowly, and only counterclaims that are part of or incident to the creation of the mortgage relationship itself are to be permitted. Therefore, Rule 1148 does not permit a counterclaim arising from a contract related to the mortgage, such as a contract for sale of real property. Nor does it permit counterclaims where the facts giving rise to the counterclaims occur after the creation of the mortgage and after the mortgagors were in default.

Thus, in Pennsylvania, the scope of a foreclosure action is limited to the subject of the foreclosure, i.e., disposition of property subject to any affirmative defenses to foreclosure or

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counterclaims arising from the execution of the instrument(s) memorializing the debt and the security interest in the mortgaged property.

Nicholas v. Hofmann, 158 A.3d 675, 696-97 (Pa. Super. 2017) (quotation

marks, footnote, and citations omitted).

The Gangadeens claim they were entitled to assert their counterclaims

under Green Tree Consumer Discount Co. v. Newton, 909 A.2d 811 (Pa.

Super. 2006), which allowed the assertion of counterclaims to recoup or set

off damages for claims under the Home Improvement Finance Act with

respect to a home improvement loan. Green Tree has no applicability here.

Indeed, the Court in Green Tree observed that “the general rule is that a

recoupment claim is an improper defense to a mortgage foreclosure.” 909

A.2d at 815. The Court in Green Tree recognized an exception to this

general rule where the mortgage was made as an integral part of the home

improvement loan, incorporated the terms of the home improvement

contract, was recorded with that contract, and was signed by a person

alleged to be incompetent and legally incapable of signing. See id. at 815.

This case, which presents what the Court in Green Tree called “a typical

mortgage foreclosure where the owners have taken out a loan to fund the

purchase of a home and then defaulted on the payments,” id., has none of

the facts that gave rise to Green Tree’s exception to the normal rule.

The counterclaims in this case do not deal with creation of the security

interest in the Gangadeens’ property. The breach of contract claim alleges

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errors with respect to application of payments or computation of interest and

other aspects of mortgage servicing. The statutory claims (none of which

arise under the Home Improvement Finance Act at issue in Green Tree)

relate to creation of the underlying loan. Accordingly, after careful review,

we conclude that the trial court did not err in granting Ocwen’s preliminary

objections to the counterclaims. We agree with the trial court that because

a mortgage foreclosure action is strictly in rem, the Gangadeens’

counterclaims were impermissible. See Trial Ct. Op. at 4; Pa.R.Civ.P.

1141(a); Nicholas, 158 A.3d at 696.

Summary Judgment

The Gangadeens also aver that the trial court erred in granting

summary judgment in favor of Ocwen on its foreclosure claim.

Our scope of review of a trial court’s order granting or denying summary judgment is plenary, and our standard of review is clear: the trial court’s order will be reversed only where it is established that the court committed an error of law or abused its discretion.

Summary judgment is appropriate only when the record clearly shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. The reviewing court must view the record in the light most favorable to the nonmoving party and resolve all doubts as to the existence of a genuine issue of material fact against the moving party. Only when the facts are so clear that reasonable minds could not differ can a trial court properly enter summary judgment.

Michael v. Stock, 162 A.3d 465, 472-73 (Pa. Super. 2017) (citation

omitted). “[P]arties seeking to avoid the entry of summary judgment

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against them may not rest upon the averments contained in their pleadings.

On the contrary, they are required to show, by depositions, answers to

interrogatories, admissions or affidavits, that there is a genuine issue for

trial.” Washington Fed. Sav. & Loan Ass’n v. Stein, 515 A.2d 980, 981

(Pa. Super. 1986) (citing Pa.R.Civ.P. 1035(d)).

“The holder of a mortgage is entitled to summary judgment if the

mortgagor admits that the mortgage is in default, the mortgagor has failed

to pay on the obligation, and the recorded mortgage is in the specified

amount.” Bank of Am., N.A. v. Gibson, 102 A.3d 462, 465 (Pa. Super.

2014), appeal denied, 112 A.3d 648 (Pa. 2015). “[I]n mortgage

foreclosure actions, general denials by mortgagors that they are without

information sufficient to form a belief as to the truth of averments as to the

principal and interest owing [on the mortgage] must be considered an

admission of those facts.” Id. at 467 (citation omitted); see Pa.R.Civ.P.

1029(b), 1141(b).

Applying these rules, the trial court concluded that summary judgment

was proper because the Gangadeens offered only general denials of Ocwen’s

claims, and such general denials must be considered admissions. Trial Ct.

Op. at 4-5, 8. Moreover, the court noted that while Ocwen had submitted

documents in support of its motion for summary judgment, the Gangadeens

“submitted exactly zero exhibits.” Id. at 7-8. After careful review, we agree

with the trial court that Ocwen was entitled to summary judgment on this

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record. The Gangadeens offered only general denials of Ocwen’s averments

regarding their default and the amount due. Such general denials cannot

defeat summary judgment. See Gibson, 102 A.3d at 467.

The Gangadeens argue that the trial court erred in granting summary

judgment in favor of Ocwen because Ocwen’s motion for summary judgment

relied “entirely on its own unsupported declarations.” Gangadeens’ Brief at

16. In asserting this argument, they rely on the so-called “Nanty-Glo rule,”

which stands for the view that summary judgment may not be entered solely

on the basis of the moving party’s oral testimony. See Nanty-Glo v.

American Surety Co., 163 A. 523, 524 (Pa. 1932); see also Pa.R.Civ.P.

1035.2 Note. “An exception to this rule exists, however, where the moving

party supports the motion by using admissions of the opposing party”;

“[a]dmissions include facts admitted in pleadings.” Gibson, 102 A.3d at

466 (quotation marks, ellipses, and citations omitted). Here, the

Gangadeens’ reliance on the Nanty-Glo rule is misplaced because Ocwen

did not rely entirely on its own assertions, but also relied on the

Gangadeens’ own admissions.

The Gangadeens also assert that their Answer, in which they denied

the facts in Ocwen’s complaint, and their New Matter raise issues of fact.

Gangadeens’ Brief at 16-17. However, as the trial court concluded, the

defenses the Gangadeens raised in their New Matter did not preclude

summary judgment because the Gangadeens offered no evidence to support

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them. See Trial Ct. Op. at 7-8; see also Washington Fed. Sav. & Loan,

515 A.2d at 981.

Orders affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq. Prothonotary

Date: 9/26/2017

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