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).
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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.
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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.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: April 23, 2019
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