Citimortgage, Inc. v. Barbezat, E.

J. A34044/14
2016 PA Super 7

CITIMORTGAGE, INC. : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
v. :
:
EDWARD F. BARBEZAT, : No. 536 MDA 2014
:
Appellant :

Appeal from the Order Entered February 25, 2014,
in the Court of Common Pleas of Berks County
Civil Division at No. 12-211627

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN AND STABILE, JJ.

OPINION BY FORD ELLIOTT, P.J.E.: FILED JANUARY 07, 2016

Appellant Edward F. Barbezat appeals from the order entered

February 25, 2014, in the Court of Common Pleas of Berks County, granting

appellee CitiMortgage, Inc.’s motion for summary judgment in this in rem

mortgage foreclosure action. For the reasons set forth below, we affirm.

On August 15, 2003, in consideration of a loan in the principal amount

of $152,793, appellant executed and delivered a note in favor of and to

Fulton Bank. (See Complaint, 9/25/12, Exhibit B.) To secure his obligations

under the note, appellant concomitantly executed and delivered to Mortgage

Electronic Registration Systems, Inc. (“MERS”) (“solely as nominee for

Lender . . . and Lender’s successors and assigns”), a mortgage for the

property located at 119 Berkley Street, Reading, Berks County,

Pennsylvania, as security for the note. (Id., Exhibit C.) On August 2, 2012,
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MERS assigned the mortgage to appellee, which recorded the same on

August 6, 2012. (Id., Exhibit D.) Appellee also is in possession of the note

endorsed in blank. (Id., Exhibit B.)

On September 25, 2012, appellee filed a mortgage foreclosure

complaint against appellant, requesting judgment against him for,

inter alia, $137,625.55. (See id. at ¶ 9.) In the complaint, appellee

alleged that appellant had failed to make the scheduled payments on the

mortgage since April 1, 2012; and consequently, under the terms of the

mortgage agreement, the entire loan balance became due and payable.

(See id. at ¶ 8.) Moreover, appellee alleged it complied with the

requirements of Act 6 (41 P.S. § 403) by sending appellant a written notice

of intention to foreclose (“the Notice”). (See id. at ¶ 10.) Appellant filed an

answer to the complaint, generally denying appellee’s averments and raising

new matter.

On November 18, 2013, appellee moved for summary judgment

against appellant on the basis that appellant (1) failed to raise a genuine

issue of material fact in his answer and new matter and (2) admitted all

material allegations against him by virtue of his general denials. (See

motion for summary judgment, 11/18/13 at ¶¶ 2, 12.)

Objecting to appellee’s summary judgment motion, appellant raised

two principal defenses. First, he argued appellee failed to comply with Act 6.

Specifically, appellant argued that appellee sent the Notice on June 21,

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2012, when appellee did not own the debt because MERS did not assign the

mortgage to appellee until August 2, 2012. (Appellant’s response to

summary judgment, 12/13/13 at ¶¶ 38-42.) Appellant argued that the

Notice was defective because appellee’s name incorrectly appeared thereon.

Second, appellant argued that appellee lacked standing to bring this

foreclosure action because the mortgage and the note sub judice were

insufficient to establish appellee’s ownership of the debt relating to the

subject property. (Id. at ¶¶ 66-72.)

On February 25, 2014, the trial court granted with prejudice appellee’s

motion for summary judgment. In a memorandum of law accompanying its

order, the trial court determined as meritless appellant’s challenge to the

Notice. Particularly, the trial court concluded Act 6 did not require that the

actual mortgagee be named in the notice. (Trial court memorandum of law,

2/25/14 at 1.) The trial court also concluded that, based on the record,

appellee established its ownership of the debt. In this regard, the trial court

noted appellee was “the holder[] of a valid, recorded assignment of

mortgage.” (Id.) Moreover, the trial court determined that appellant failed

to offer any evidence beyond what was alleged in his pleadings to support

his contention that appellee was not a real party in interest. (Id. at 2.)

Appellant timely appealed to this court. Following appellant’s filing of

a Pa.R.A.P. 1925(b) statement, the trial court issued a Rule 1925(a) opinion,

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wherein it largely incorporated the reasoning set forth in its February 25,

2014 memorandum of law.

On appeal, appellant argues the trial court erred in granting appellee’s

summary judgment motion because (a) appellee lacked standing to initiate

the action, and (b) appellee served on appellant a deficient Act 6 notice of

intention to foreclose. (Appellant’s brief at 3, 7.)

Against this background, we are mindful that:

[o]ur 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.

Hovis v. Sunoco, Inc., 64 A.3d 1078, 1081 (Pa.Super. 2013), quoting

Cassel-Hess v. Hoffer, 44 A.3d 80, 84-85 (Pa.Super. 2012). Summary

judgment in mortgage foreclosure actions is subject to the same rules as

any other civil action. See Pa.R.C.P. 1141(b).

Appellant’s first argument that appellee lacked standing to bring the

underlying foreclosure action is premised upon appellant’s assertion that

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appellee never owned the alleged debt. Appellant asserts that appellee did

not establish it possessed a valid assignment of the mortgage, and that the

note was never assigned or otherwise transferred to appellee. (Appellant’s

brief at 3, 6.) Appellant therefore asserts that appellee was not the real

party in interest and lacked standing to bring this action. (Id.)

Pennsylvania Rule of Civil Procedure 2002 provides, “[e]xcept as

otherwise provided . . . all actions shall be prosecuted by and in the name of

the real party in interest, without distinction between contracts under seal

and parol contracts.” Pa.R.C.P. 2002(a); see also J.P. Morgan Chase

Bank, N.A. v. Murray, 63 A.3d 1258, 1258 (Pa.Super. 2013) (finding a

debtor’s claim that appellee bank was not a real party in interest to bring

foreclosure action was a challenge to appellee’s standing). “[A] real party in

interest is a [p]erson who will be entitled to benefits of an action if

successful. . . . [A] party is a real party in interest if it has the legal right

under the applicable substantive law to enforce the claim in question.”

U.S. Bank, N.A. v. Mallory, 982 A.2d 986, 993-994 (Pa.Super. 2009)

(citation and quotation marks omitted; some brackets in original).

In a mortgage foreclosure action, the mortgagee is the real party in

interest. See Wells Fargo Bank, N.A. v. Lupori, 8 A.3d 919, 922 n.3

(Pa.Super. 2010). This is made evident under our Pennsylvania Rules of

Civil Procedure governing actions in mortgage foreclosure that require a

plaintiff in a mortgage foreclosure action specifically to name the parties to

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the mortgage and the fact of any assignments. Pa.R.C.P. 1147. A person

foreclosing on a mortgage, however, also must own or hold the note. This is

so because a mortgage is only the security instrument that ensures

repayment of the indebtedness under a note to real property. See

Carpenter v. Longan, 83 U.S. 271, 275 (1872) (noting “all authorities

agree the debt is the principal thing and the mortgage an accessory.”). A

mortgage can have no separate existence. Id. When a note is paid, the

mortgage expires. Id. On the other hand, a person may choose to proceed

in an action only upon a note and forego an action in foreclosure upon the

collateral pledged to secure repayment of the note. See Harper v. Lukens,

112 A. 636, 637 (Pa. 1921) (noting “as suit is expressly based upon the

note, it was not necessary to prove the agreement as to the collateral.”).

For our instant purposes, this is all to say that to establish standing in this

foreclosure action, appellee had to plead ownership of the mortgage under

Rule 1147, and have the right to make demand upon the note secured by

the mortgage.1

Based upon the record evidence produced by appellee in support of its

motion for summary judgment, we reject appellant’s first argument. Here,

appellee not only averred, but also produced evidence that it was the holder

1
The rules relating to mortgage foreclosure actions do not expressly require
that the existence of the note and its holder be pled in the action.
Nonetheless, a mortgagee must hold the note secured by a mortgage to
foreclose upon a property. “The note and mortgage are inseparable; the
former as essential, the latter as an incident.” Longan, 83 U.S. at 274.

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of the mortgage. Specifically, appellee alleged in its complaint that

“[Appellee] is [a] proper party . . . by way of an Assignment of Mortgage

recorded August 6, 2012 under Instrument 2012032210.” (Complaint,

9/25/12 at ¶ 6.) Appellee produced copies of the original recorded

mortgage and its recorded assignment to appellee. (Id. at ¶ 4-7.) Where

an assignment is effective, the assignee stands in the shoes of the assignor

and assumes all of his rights. See Smith v. Cumberland Group, Ltd., 687

A.2d 1167, 1172 (Pa.Super. 1997). Accordingly, the uncontroverted

evidence of record indicates appellee properly held the mortgage by way of

assignment from MERS. We note also, although appellant argues a lack of

standing in appellee to assert rights under the mortgage, appellant offers no

evidence in opposition to the motion for summary judgment to establish a

genuine issue of material fact as to appellee’s ownership of the mortgage.

Appellant’s argument that appellee cannot establish ownership of the

note, because it was never assigned or otherwise transferred to appellee, is

similarly without merit. The note produced by appellee in this case identifies

appellant as the “Borrower” and Fulton Bank as the “Lender.” The note was

endorsed by Fulton Bank without recourse to the order of Principal

Residential Mortgage Inc. (“PMI”). PMI in turn endorsed the note without

recourse in blank. A note endorsed in blank becomes payable to “bearer”

and may be negotiated by transfer of possession alone until specially

endorsed. See 13 Pa.C.S.A. §§ 3109(a), 3205(b). The note as a negotiable

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instrument entitles the holder of the note to enforcement of the obligation.

See 13 Pa.C.S.A. §§ 3109(a), 3301. Thus, appellant’s argument that

ownership of the note cannot be established in appellee because there was

no formal assignment or transfer is unavailing, because “the chain of

possession by which [a party] c[o]me[s] to hold the [n]ote [is] immaterial to

its enforceability by [the party].” Murray, 63 A.3d at 1266; see Bank of

America, N.A. v. Gibson, 102 A.3d 462, 466 (Pa.Super. 2014) (rejecting

an identical argument). Appellee, as the holder of the note, a negotiable

instrument not challenged herein, was entitled to make demand upon and to

enforce the obligations under the note. Accordingly, given appellee’s

uncontested ownership of the mortgage and possession of the note, the trial

court did not err in concluding that appellee had standing as a real party in

interest to bring the underlying foreclosure action.

We observe that, although this appeal lies from the trial court’s grant

of summary judgment in favor of appellee, appellant anchors his standing

argument on rules governing pleadings. If appellant desired to continue to

challenge appellee’s standing at the summary judgment stage based upon

his assertion appellee did not own the debt, it was incumbent upon the

appellant to produce evidence to demonstrate there was a material issue of

fact in this regard to defeat appellee’s summary judgment motion.

Appellant’s attempt to continue to challenge standing based upon the

averments of his pleadings does not suffice for summary judgment

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purposes. See Pa.R.C.P. 1035.3(a) (an adverse party may not rest upon

the mere averments or denials in its pleadings). Indeed, as the trial court

noted, appellant fails to point to any evidence of record to demonstrate the

existence of any genuine issue of material fact with respect to appellee’s

ownership of the debt at the summary judgment stage. (See trial court

memorandum of law, 2/25/14 at 2 (“[Appellant] rests on [his] pleadings and

does not present any specific facts indicating that a valid assignment does

not exist, nor provides any indication that further discovery would uncover

those facts[.]”).) To successfully defend against appellee’s summary

judgment motion, it was incumbent upon appellant to establish “one or more

issues of fact arising from evidence in the record controverting the evidence

cited in support of the motion or from a challenge to the credibility of one or

more witnesses testifying in support of the motion.” Pa.R.C.P. 1035.3(a)(1);

see Marks v. Tasman, 589 A.2d 205, 206 (Pa. 1991) (decided under

materially similar predecessor Rule 1035(d)). Here, appellant merely alleges

in his new matter and in response to the summary judgment motion that

appellee has not established ownership of the debt. He points to no

evidence in the record to support this bare assertion, despite the

above-recited evidence of record. Accordingly, no dispute exists as to any

genuine issues of material fact with respect to appellee’s ownership of the

debt. Appellee had standing to bring the underlying foreclosure action.

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In considering appellant’s second argument, we conclude the trial

court did not err in determining that the Notice sub judice under Act 6 was

proper.

In 1974, the Pennsylvania Legislature enacted Act No. 6, 41 P.S. § 101

et seq., commonly referred to as “Act 6.” Bankers Trust Co. v. Foust,

621 A.2d 1054, 1056 (Pa.Super. 1993), appeal denied, 631 A.2d 1007 (Pa.

1993). “Act 6 is essentially a comprehensive interest and usury law with

numerous functions.” Id. (citation omitted). The Act’s provision regulating

notice of foreclosure for owners of relatively modest homes was intended to

afford homeowners who are in dire economic straits a measure of protection

from overly zealous residential mortgage lenders. Id.

Section 403 of Act 6, setting forth the requirements of a notice of

intention to foreclose, provides as follows:

(a) Before any residential mortgage lender may
accelerate the maturity of any residential
mortgage obligation, commence any legal
action including mortgage foreclosure to
recover under such obligation, or take
possession of any security of the residential
mortgage debtor for such residential mortgage
obligation, such person shall give the
residential mortgage debtor notice of such
intention at least thirty days in advance as
provided in this section.

(b) Notice of intention to take action as specified in
subsection (a) of this section shall be in
writing, sent to the residential mortgage
debtor by registered or certified mail at his last
known address and, if different, at the

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residence which is the subject of the residential
mortgage.

(c) The written notice shall clearly and
conspicuously state:

(1) The particular obligation or real
estate security interest;

(2) The nature of the default claimed;

(3) The right of the debtor to cure the
default as provided in section 404
of this act and exactly what
performance including what sum of
money, if any, must be tendered to
cure the default;

(4) The time within which the debtor
must cure the default;

(5) The method or methods by which
the debtor's ownership or
possession of the real estate may
be terminated; and

(6) The right of the debtor, if any, to
transfer the real estate to another
person subject to the security
interest or to refinance the
obligation and of the transferee's
right, if any, to cure the default.

(d) The notice of intention to foreclose provided in
this section shall not be required where the
residential mortgage debtor, has abandoned or
voluntarily surrendered the property which is
the subject of a residential mortgage.

41 P.S. § 403.

“Residential mortgage lender” means any person
who lends money or extends or grants credit and
obtains a residential mortgage to assure payment of

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the debt. The term shall also include the holder at
any time of a residential mortgage obligation.

41 P.S. § 101.

Appellant claims that he was never properly notified of the foreclosure

action because the Notice named the incorrect lender. (Appellant’s brief at

8.) Appellant argues that appellee did not own the debt at the time the

Notice was served on appellant. (Id.) Appellee sent the Notice on or about

June 21, 2012, but the mortgage was not assigned to appellee until

August 2, 2012. (Id.) Therefore, according to appellant, the Notice cannot

possibly set forth the obligations owed by appellant. (Id.) The listed

obligation is to appellee, which did not own the debt at the time. (Id. at

8-9.) Appellant contends that appellee identifying itself as the mortgagee

prior to the recordation of its assignment of the mortgage, proves defective

under Section 403(c)(1). Appellee does not deny that its name appears on

the Notice rather than the name of the original mortgagee, Fulton Bank.

(Trial court opinion, 5/6/14 at 2.)

Appellant’s claim that the Notice was defective because appellee was

not the “residential mortgage lender” at the time of the June 21, 2012 Act 6

Notice improperly conflates the purposes of the Act 6 Notice with the date

for the recording of the assignment of the mortgage. As stated above, the

purpose of 41 P.S. § 403(a), is to provide a measure of protection to

residential homeowners who are in dire economic straits from overly zealous

residential mortgage lenders. By requiring notice of deficiency and an

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opportunity to cure, mortgage lenders cannot immediately foreclose when a

deficiency occurs. The specific notice requirements are all directed to the

interest of the debtor, identifying the debt, the nature of the default, and

relief and remedies available to the debtor to cure the deficiency.

There is no requirement that the residential mortgage lender be

specifically identified and a servicing agent can provide such notice. See

Federal National Mortgage Assoc. v. Woody, 25 Pa.D.&C.3d 604, 606

(Phila. 1982) (“Close scrutiny of § 403 of the act fails to reveal any

requirement therein that the actual mortgagee be named in the notice.”).

The chain of possession of the note and the mortgage is not required to be

disclosed. How the holder gained possession of the note and mortgage is

simply not a part of the protections provided to the debtor.2 Section 403

2
This interpretation is consistent with the real world buying and selling of
mortgage instruments. It is not uncommon for a mortgage instrument to
change hands frequently through the life of the mortgage. Such transfers
have little to do with the terms and conditions of the mortgage for the
debtor. As demonstrated by this case, appellant was on notice at the time
of the closing in 2003 that Fulton Bank held the note and that MERS as
nominee for Fulton Bank held the mortgage on his property.

MERS is a national electronic loan registry system
that permits its members to freely transfer, among
themselves, the promissory notes associated with
mortgages, while MERS remains the mortgagee of
record in public land records as “nominee” for the
note holder and its successors and assigns. MERS
facilitates the secondary market for mortgages by
permitting its members to transfer the beneficial
interest associated with a mortgage—that is, the
right to repayment pursuant to the terms of the
promissory note—to one another, recording such

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simply puts the residential homeowner on notice that the delinquent

mortgage is subject to foreclosure at some future date unless the owner

takes some action. It is not a foreclosure action, and therefore the

requirements of such an action are not necessary to establish proper notice.

Furthermore, as appellee states, the date of the recording of the

mortgage assignment is of no consequence. (Appellee’s brief at 9.)

Section 101 defines a residential mortgage lender to include the holder “at

any time” of a residential mortgage obligation. (Id.) Appellee properly pled

ownership of the note and the mortgage in its complaint. As the holder in

due course of a note endorsed in blank, no formal assignment or transfer is

necessary; the chain of possession is immaterial to the note’s enforceability.

As the mortgage follows the note, appellee was the owner of both. 3

transfers in the MERS database to notify one another
and establish priority, instead of recording such
transfers as mortgage assignments in local land
recording offices. It was created, in part, to reduce
costs associated with the transfer of notes secured
by mortgages by permitting note holders to avoid
recording fees.

Montgomery County, Pa. v. MERSCORP Inc., 795 F.3d 372, 374 (3rd Cir.
(Pa.)) (2015) (footnote omitted) (deciding that 21 Pa.C.S.A. § 351 did not
require mandatory recording of assignment of a mortgage in Pennsylvania).
3
Although MERS assigned the mortgage to appellee in August 2012, one
cannot say with certainty when appellee came into possession of the note
and mortgage. One cannot find that such possession did not exist in June
2012 when the Act 6 Notice was sent. Additionally, as set forth in Mallory,
supra, once in possession of the note and mortgage, a lien holder can

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Order affirmed.

Shogan, J. joins the Opinion.

Stabile, J. files a Concurring and Dissenting Opinion.

institute foreclosure proceedings even before a formal assignment of the
mortgage takes place.

The “crux” of Appellant’s argument is that, before
Appellee could file a complaint in mortgage
foreclosure, Appellee was required to have executed
and recorded a written assignment from MERS,
thereby indicating it was the real party in interest.
We reject this argument.

....

In the case sub judice, as Appellee averred in
its complaint, it was the “legal owner” of the
mortgage, thereby indicating it was the holder of the
mortgage’s note. Moreover, prior to the entry of
default judgment, as Appellee indicated in its
complaint it was going to do, an assignment of the
mortgage was executed between Appellee and
MERS. . . . Simply put, contrary to Appellant’s
suggestion, the recording of an assignment of the
mortgage was not a prerequisite to Appellee having
standing to seek enforcement of the mortgage via a
mortgage foreclosure action.

Mallory, 982 A.2d at 993-994 (footnotes omitted). Accord Fusco v. Hill
Financial Savings Association, 683 A.2d 677, 681 (Pa.Super. 1996);

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Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 1/7/2016

Commonwealth, Pennsylvania Game Commission v. H.I. Ulrich, 565
A.2d 859, 862 (Pa.Cmwlth. 1989).

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