J-S27032-20
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
FULTON BANK, NA., AUTUMN LANE : IN THE SUPERIOR COURT OF
ASSOCIATES, LLC., AND PREMIER : PENNSYLVANIA
BANK :
:
:
v. :
:
:
DAVID MERMELSTEIN : No. 3532 EDA 2019
:
Appellant :
Appeal from the Order Entered October 18, 2019
In the Court of Common Pleas of Montgomery County Civil Division at
No(s): No. 2011-03186
BEFORE: SHOGAN, J., McCAFFERY, J., and STEVENS, P.J.E.*
MEMORANDUM BY STEVENS, P.J.E.: FILED JUNE 30, 2020
David Mermelstein (“Mermelstein”) appeals from the October 18, 2019,
order foreclosing upon a charging lien and directing the sale of Mermelstein’s
24% limited partnership interest in M & M Realty Partners, L.P. (“M & M
Realty”) in an effort to satisfy an alleged outstanding balance on a confessed
judgment entered against Mermelstein on February 3, 2011. After a careful
review, we vacate the October 18, 2019, order and remand for proceedings
consistent with this decision.
The relevant facts and procedural history are as follows: On February 3,
2011, Fulton Bank, NA (“Fulton”), as the successor by merger to Premier
____________________________________________
* Former Justice specially assigned to the Superior Court.
J-S27032-20
Bank, NA (“Premier”), filed a complaint in confession of judgment against
Mermelstein. Fulton alleged that it was the payee and holder of a promissory
note dated September 12, 2006, in the principal amount of $900,000.00 in
connection with a commercial loan extended to Mermelstein. The commercial
loan was also secured with a mortgage on real property located in Egg Harbor
Township, New Jersey.
Fulton alleged that Mermelstein defaulted on the commercial loan by
failing to pay the monthly installments of interest due on October 1, 2010,
November 1, 2010, December 1, 2010, and January 1, 2011. Therefore,
under the terms of the loan agreement and promissory note, Fulton had the
right to accelerate the loan and demand immediate payment of the remaining
balance in full, as well as late charges, costs of the suit, and attorney’s fees.
Accordingly, Fulton sent Mermelstein notice advising him that immediate
payment was demanded, and the loan would be accelerated; however,
Mermelstein failed to repay the loan.
On February 3, 2011, the prothonotary entered a judgment by
confession in favor of Fulton and against Mermelstein in the amount of
$999,657.78, plus interest at $68.66 per diem from January 19, 2011.
Mermelstein did not file a petition to have the confessed judgment opened or
stricken.
-2-
J-S27032-20
Thereafter, Fulton initiated efforts to collect on the confessed judgment.
Such efforts included a garnishment.1 Further, Fulton filed a complaint in
foreclosure upon the mortgage in the Superior Court of New Jersey as to the
Egg Harbor Township property, and on March 4, 2013, a final order in
mortgage foreclosure was entered in New Jersey. The confessed judgment
was assigned from Fulton to Autumn Lane on October 18, 2013, and on May
29, 2014, the sheriff of Atlantic County, New Jersey, sold the Egg Harbor
Township property to Autumn Lane for costs in accordance with the final order
entered in the mortgage foreclosure.
On November 1, 2016, Mermelstein filed a petition pursuant to 42
Pa.C.S.A. § 8104 to mark the confessed judgment satisfied and discharged. 2
While the petition for satisfaction was pending, on February 8, 2017, Autumn
Lane filed a motion for a charging order on Mermelstein’s 24% limited
partnership interest in M & M Realty.
____________________________________________
1 Fulton Bank garnished a Vanguard account of Mermelstein’s in the amount
of $2,565.95.
2 Specifically, citing to 42 Pa.C.S.A. §§ 8103 and 8104, Mermelstein requested
the trial court mark the confessed judgment satisfied on the basis Autumn
Lane failed to file a petition to set the fair market value of the Egg Harbor
Township property to determine whether a deficiency existed within
Pennsylvania’s statute of limitations, i.e., within six months of the sheriff
delivering the deed to Autumn Lane. Alternatively, Mermelstein requested the
trial court find there is no deficiency, and accordingly, mark the confessed
judgment satisfied in accordance with Sections 8103 and 8104.
-3-
J-S27032-20
Mermelstein filed a response to the motion on March 27, 2017, and
following a hearing, on May 22, 2017, the trial court granted Autumn Lane’s
motion. Specifically, the trial court’s order relevantly provided the following:
[U]pon the Motion of Plaintiff, Autumn Lane[], pursuant to
15 Pa.C.S.A. § 8563, the Answer thereto, oral argument
thereon[,] and the Briefs of the parties, it is hereby ORDERED that
a Charging Order is entered against and secured by the limited
partnership interest of Defendant, David Mermelstein, in the
following business entity:
ENTITY GENERAL PARTNER PERCENTAGE OF INTEREST
M & M Realty A Pro Realty Services 24%
Upon this Court’s disposition of Defendant, David
Mermelstein’s, pending Petition to Satisfy Judgment, the limited
partnership interest, or such portion of it or assets representative
of it as shall be necessary to pay the unsatisfied amount of
[Autumn Lane’s] judgment with interest, shall be assigned to
[Autumn Lane] upon such terms and conditions as th[e] [trial]
[c]ourt may direct.
Trial Court Order, filed 5/22/17 (bold omitted).
Thereafter, on July 23, 2019, the trial court denied Mermelstein’s
petition to mark the confessed judgment satisfied. Further, the trial court
purported to set a fair market value of the Egg Harbor Township, New Jersey
property in the amount of $35,800.00, and enter a deficiency judgment of
$738,606.43 in favor of Autumn Lane.3 On August 19, 2019, Mermelstein
____________________________________________
3In determining that a deficiency existed, the trial court calculated the amount
due from Mermelstein as follows: Original Judgment: $999,657.78; Minus
garnished funds of $2,565.85; Minus Fair Market Values of Collateral Property
as of 5/24/2014 of $35,800.00; Minus Balance of Escrow with Egg Harbor
Township of $297,466.80; Plus Property Taxes Not Discharged by Sheriff’s
-4-
J-S27032-20
filed an appeal from the trial court’s July 23, 2019, order, and this Court
docketed the appeal at 2567 EDA 2019.4
Meanwhile, on October 18, 2019, in accordance with the May 22, 2017,
charging order, the trial court entered an order foreclosing upon the charging
lien and directing the sale of Mermelstein’s 24% limited partnership interest
in M & M Realty. The trial court noted Mermelstein could extinguish the
charging order by satisfying the deficiency and filing a certified copy of the
satisfaction in the trial court within twenty days of the order. However, the
trial court noted that, if Mermelstein did not avail himself of this redemption,
the lien created by the charging order would be deemed foreclosed, and within
ninety days, the transferable interest shall be offered at public sale where the
minimum bid would be the amount of the deficiency (“the Upset Price”). If
the transferable interest sold to the highest bidder above the Upset Price, all
proceeds would be credited against the deficiency, and in the event the public
sale should fail to yield the Upset Price, the 25% interest in M & M Realty
would be transferred directly to Autumn Lane.
____________________________________________
sale of Collateral for 2011, plus back taxes and fines, of $25,604.32, and for
2012-13, $49,176.98; Equals a Deficiency Judgment of $738,606.43.
4 On appeal, at 2567 EDA 2019, this Court vacated the trial court’s
determination of the fair market value of the Egg Harbor Township, New
Jersey property, and its alleged deficiency determination. We also held the
trial court properly denied Mermelstein’s petition to mark the confessed
judgment satisfied as he had not met his burden of proving such an
entitlement at this juncture.
-5-
J-S27032-20
Mermelstein filed a motion for reconsideration of the trial court’s October
18, 2019 order, and after the trial court denied the motion, Mermelstein filed
a timely appeal to this Court. The trial court did not direct Mermelstein to file
a Pa.R.A.P. 1925(b) statement, and consequently, no such statement was
filed. However, the trial court filed a Pa.R.A.P. 1925(a) opinion on December
18, 2019.
On appeal, Mermelstein sets forth the following issues in his “Statement
of the Questions Involved” (verbatim):
1) Whether the trial court erred when it foreclosed upon
[Mermelstein’s] economic interest in M & M Realty [] pursuant
to 15 Pa.C.S.A. § 8673(c) without the proper showing by
[Autumn Lane] that the charging order would be paid off in a
reasonable amount of time[?]
2) Whether the trial court erred when it foreclosed upon
[Mermelstein’s] economic interest in M & M Realty [] pursuant
to 15 Pa.C.S.A. § 8673(c) when [Autumn Lane] had not
provided the proper notice that they would seek the sale and
did not provide sufficient documentation that the proposed sale
would happen in a fair and just manner[?]
3) Whether the trial court erred when it foreclosed upon
[Mermelstein’s] economic interest in M & M Realty [] pursuant
to 15 Pa.C.S.A. § 8673(c) and directed the transfer of the
interest to Autumn Lane [] if the upset price was not met
without first ascertaining that the value of the interest was not
greater than the judgment[?]
Mermelstein’s Brief at 4 (suggested answers omitted).
Initially, we note that 15 Pa.C.S.A. § 8673, pertaining to charging
orders, relevantly provides the following:
§ 8673. Charging order
-6-
J-S27032-20
(a) General rule.--On application by a judgment creditor of a
partner or transferee, a court may enter a charging order against
the transferable interest of the judgment debtor for the unsatisfied
amount of the judgment. A charging order constitutes a lien on a
judgment debtor’s transferable interest and requires the limited
partnership to pay over to the person to which the charging order
was issued any distribution that otherwise would be paid to the
judgment debtor.
***
(c) Foreclosure.--Upon a showing that distributions under a
charging order will not pay the judgment debt within a reasonable
time, the court may foreclose the lien and order the sale of the
transferable interest. The purchaser at the foreclosure sale
obtains only the transferable interest, does not thereby become a
partner and is subject to section 8672 (relating to transfer of
transferable interest).
(d) Satisfaction of judgment.--At any time before foreclosure
under subsection (c), the partner or transferee whose transferable
interest is subject to a charging order under subsection (a) may
extinguish the charging order by satisfying the judgment and filing
a certified copy of the satisfaction with the court that issued the
charging order.
***
(g) Exclusive remedy.--This section provides the exclusive
remedy by which a person seeking, in the capacity of a judgment
creditor, to enforce a judgment against a partner or transferee
may satisfy the judgment from the judgment debtor’s transferable
interest.
15 Pa.C.S.A. § 8673 (bold in original).5
____________________________________________
5 15 Pa.C.S.A. § 8563 was repealed and replaced with 15 Pa.C.S.A. § 8673,
effective February 21, 2017. The trial court determined Section 8673, as
opposed to Section 8563, applies in the instant case. Trial Court Opinion, filed
12/18/19, at 5. However, the trial court noted that, “both laws provide for
charging orders such as the one at issue in this case, and the relief would be
the same under either statute.” Id. at 5 n.3. We agree with the trial court
that, regardless of which version of the statute is applied, the “outcome” of
this appeal is the same; however, as discussed infra, we disagree with the
trial court as to the proper outcome at this juncture.
-7-
J-S27032-20
In the case sub judice, there is no dispute that Autumn Lane has a
confessed judgment against Mermelstein. However, as this Court held in
addressing Mermelstein’s appeal docketed at 2567 EDA 2019, there is an
outstanding dispute as to whether a deficiency exists with regard to the
confessed judgment or whether the judgment has been satisfied by
Mermelstein.
The trial court’s May 22, 2017, order, which granted Autumn Lane’s
motion for a charging order on Mermelstein’s 24% limited partnership interest
in M & M Realty, was expressly conditioned upon the disposition of
Mermelstein’s November 1, 2016, petition to mark the confessed judgment
satisfied. That is, the charging order was granted to satisfy, only if necessary,
any unpaid balance on the confessed judgment in light of the sale of the
foreign collateral. Thereafter, by order entered on July 23, 2019, the trial
court denied Mermelstein’s request to mark the confessed judgment satisfied
and, further, purported to enter a deficiency judgment of $738,606.43 in favor
of Autumn Lane (the judgment creditor).
However, as this Court held in the appeal docketed at 2567 EDA 2019,
the trial court erred in concluding a deficiency existed since the trial court did
not have the statutory authority to determine the fair market value of the
foreign collateral at issue. See 42 Pa.C.S.A. § 8103(f.2). Thus, in 2567 EDA
2019, this Court vacated the trial court’s purported deficiency judgment with
further instructions to the parties.
-8-
J-S27032-20
Accordingly, inasmuch as the trial court’s October 18, 2019, order,
which foreclosed upon the charging lien and directed the sale of the limited
partnership interest, was premised upon the trial court’s July 23, 2019,
deficiency determination, which this Court vacated in its decision for 2567 EDA
2019, we conclude we must, likewise, vacate the trial court’s October 18,
2019, order.6
October 18, 2019, Order vacated; Case remanded; jurisdiction
relinquished.
Judge McCaffery did not participate in the consideration or decision of
this case.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 6/30/2020
____________________________________________
6 We note Mermelstein’s issues on appeal pertain to the validity of the trial
court’s October 18, 2019, foreclosing order/direction of sale. The trial court’s
May 22, 2017, charging order remains valid, and following a proper
determination of whether a deficiency exists or whether the confessed
judgment should be marked satisfied in accordance with our decision docketed
at 2567 EDA 2019, the parties may take the appropriate action with regard to
the charging order.
-9-