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NON-PRECEDENTIAL DECISION – SEE SUPERIOR COURT I.O.P. 65.37
U.S. BANK NATIONAL ASSOCIATION, : IN THE SUPERIOR COURT OF
AS TRUSTEE FOR STRUCTURED ASSET : PENNSYLVANIA
INVESTMENT LOAN TRUST MORTGAGE :
PASS-THROUGH CERTIFICATES, :
SERIES 2006-BNC3 :
:
v. :
:
CHARLES E. McGOWAN, THE UNITED :
STATES OF AMERICA : No. 1843 WDA 2015
:
APPEAL OF: CHARLES E. McGOWAN :
Appeal from the Order Entered November 2, 2015,
in the Court of Common Pleas of Westmoreland County
Civil Division at No. 3065 OF 2014
BEFORE: FORD ELLIOTT, P.J.E., LAZARUS AND JENKINS, JJ.
MEMORANDUM BY FORD ELLIOTT, P.J.E.: FILED DECEMBER 22, 2016
Charles E. McGowan (“appellant”) appeals the November 2, 2015 order
of the Court of Common Pleas of Westmoreland County that granted the
motion for summary judgment of U.S. Bank National Association, as Trustee
for Structured Asset Investment Loan Trust Mortgage Pass-Through
Certificates, Series 2006-BNC3 (“appellee”), and entered an in rem
judgment in favor of appellee and against appellant in the amount of
$106,412.29 plus interest from April 21, 2015, and other costs and charges
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collectible under the mortgage, for foreclosure and sale of the mortgaged
property.1
On May 22, 2006, appellant made, executed, and delivered a
mortgage for real property located at 1360 Conway Drive, Greensburg,
Pennsylvania, to BNC Mortgage, Inc. (“BNC”). BNC subsequently assigned
the mortgage to appellee. On July 1, 2014, appellee filed a complaint in
mortgage foreclosure and alleged that the mortgage was in default because
monthly payments of principal and interest due January 1, 2012, and each
month thereafter had not been made. Appellee alleged that the amount due
and owing was $97,221.64, which was comprised of the principal balance of
$72,803.72, interest from December 1, 2011 to May 29, 2014 of
$17,252.38, an escrow deficit of $5,593.27, and late charges, property
inspections, appraisal/broker’s price opinion, and prior servicer fees of
$1,562.77. The complaint was verified by Caroline Cochran (“Cochran”),
contract management coordinator for Ocwen Loan Servicing, LLC (“Ocwen”).
In the verification, Cochran explained that appellee delegated the mortgage
1
On October 31, 2014, the trial court entered a consent judgment in which
appellee and the United States of America (“U.S.”) agreed that a judgment
would be entered in favor of appellee and against the U.S. for foreclosure of
the mortgage of appellant and for sale of the mortgaged property of
appellant. It was further ordered that the U.S. shall be notified by appellee
of the date, time, and place for any sheriff’s sale of the real property of
appellant, that the U.S. shall be entitled to payment from the proceeds of
the sheriff’s sale to the extent its proper priority would entitle it to the same,
and the U.S. shall be entitled to redeem the property within 120 days from
the date of sale as provided by 28 U.S.C. § 2410. The U.S. is not
participating in the proceedings before this court.
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servicing responsibility to Ocwen for appellant’s loan. As a result, Ocwen
possessed all the documents and records that supported the statements in
the complaint and appellee lacked sufficient information to make the
verification because it did not maintain the business records for the
mortgage. While initial attempts to effect service were unsuccessful, service
of the complaint was made on July 3, 2014, at 10 Old Clairton Road,
Suite 12A, in Pleasant Hills, Pennsylvania, at a United Parcel Service Store
where appellant maintained a post office box.
On August 25, 2014, appellant preliminarily objected to the complaint
on the basis of allegedly ineffective service of process, the failure to identify
the particulars of default, the failure to identify sufficiently the parties, the
failure to identify the transaction through a note, and that the verification
was spurious. On October 22, 2014, the trial court overruled the preliminary
objections and directed appellant to file an answer.
In an answer filed November 21, 2014, appellant denied the material
allegations. Appellant averred in new matter that the trial court lacked
personal jurisdiction over him because he was not properly served, appellee
failed to state a cause of action because appellee did not identify itself as a
person entitled to enforce the note, did not allege a dishonor on the
promissory note, and that the trial court also lacked subject matter
jurisdiction over him since appellee did not properly assert a default on the
mortgage. Appellant also asserted a host of affirmative defenses.
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On June 26, 2015, appellee moved for summary judgment and alleged
that there were no material facts in dispute regarding appellant’s default on
the mortgage. The motion contained an affidavit from Peter Nocero
(“Nocero”), contract management coordinator from Ocwen, which explained
that the mortgage had been assigned to appellee and that appellant had
failed to make the scheduled payments beginning with the payment that was
due on January 1, 2012. At this point, the amount due and owing according
to Nocero was $106,412.29.
On August 3, 2015, appellant moved to dismiss the motion for
summary judgment and alleged he had never been served with a complaint
and that appellee had not properly sent the motion for summary judgment,
brief in support of summary judgment, and scheduling order.
On August 20, 2015, appellant moved to strike the motion for
summary judgment on the basis that the trial court lacked personal
jurisdiction because appellee had not served appellant with a copy of the
complaint, appellee violated a court scheduling order, appellee failed to show
that it had standing, appellant had not admitted to a default on the
mortgage, the trial court lacked subject matter jurisdiction, the mortgage
contract was void ab initio because it was based upon LIBOR2 rates that are
2
LIBOR stands for the London InterBank Offered Rate. LIBOR is the
annualized, average interest rate at which a select group of large, reputable
banks that participate in the London interbank money market can borrow
unsecured funds from other banks.
(http://fedprimerate.com/libor/index.html.)
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fraudulently manipulated, and appellee violated Section 1692g of the Fair
Debt Collection Practices Act, 15 U.S.C.A. § 1692g, because it did not send
an initial communication to appellant stating that it was a debt collector
trying to collect a debt.
Following oral argument on September 4, 2015, the trial court denied
the motion to dismiss and gave appellant 30 days to file a brief in opposition
to the motion for summary judgment. By order dated November 2, 2015,
the trial court determined that appellee was entitled to summary judgment
and entered an in rem judgment in favor of appellee and against appellant
in the amount of $106,412.29 plus interest from April 21, 2015, and other
costs and charges collectible under the mortgage for foreclosure and sale of
the mortgaged property. On November 20, 2015, appellant appealed to this
court.
On appeal to this court, appellant raises the following issues for our
review:
1. Did Plaintiff/Appellee lack standing to bring this
action because the pre-acceleration notice
required by Paragraph 22 of the Mortgage was
not sent, and because the Act 91 Notice is
defective?
2. Did the [t]rial [c]ourt lack personal jurisdiction
over [appellant] since the Plaintiff/appellee did
not serve [a]ppellant . . . with a copy of the
Complaint as required by Pa.R.C.P. No. 402?
3. Did the [t]rial [c]ourt lack subject matter
jurisdiction in this mortgage foreclosure case
where the Plaintiff/Appellee did not provide
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evidence that it had standing as the Holder in
Due Course to enforce a promissory note
signed by [appellant]?
4. Did the [t]rial [c]ourt err in granting summary
judgment for Plaintiff/Appellee where the
Plaintiff/Appellee did not prove the existence of
a default upon the mortgage?
5. Did the [t]rial [c]ourt err in granting summary
judgment for Plaintiff/Appellee where the
Plaintiff/Appellee’s Motion for Summary
Judgment did not include a Statement of
Undisputed Facts as required by 25 Pa.C.S.A.
[§] 1021.94a(b)(1)(ii) and 25 Pa.C.S.A.
[§] 1021.94a(d)?
6. Is the Summary Judgment void because the
fixed-rate mortgage contract itself is void
ab initio because the interest rate is based
upon the LIBOR rates which are fraudulently
manipulated by the banks?
Appellant’s brief at 6.
This court reviews a grant of summary judgment under the following
well-settled standards:
Pennsylvania law provides that summary
judgment may be granted only in those
cases in which the record clearly shows
that no genuine issues of material fact
exist and that the moving party is
entitled to judgment as a matter of law.
The moving party has the burden of
proving that no genuine issues of
material fact exist. In determining
whether to grant summary judgment,
the trial court must view the record in
the light most favorable to the non-
moving party and must resolve all doubts
as to the existence of a genuine issue of
material fact against the moving party.
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Thus, summary judgment is proper only
when the uncontroverted [sic]
allegations in the pleadings, depositions,
answers to interrogatories, admissions of
record, and submitted affidavits
demonstrate that no genuine issue of
material fact exists, and that the moving
party is entitled to judgment as a matter
of law. In sum, only when the facts are
so clear that reasonable minds cannot
differ, may a trial court properly enter
summary judgment.
[O]n appeal from a grant of summary
judgment, we must examine the record
in a light most favorable to the
non-moving party. With regard to
questions of law, an appellate court’s
scope of review is plenary. The Superior
Court will reverse a grant of summary
judgment only if the trial court has
committed an error of law or abused its
discretion. Judicial discretion requires
action in conformity with law based on
the facts and circumstances before the
trial court after hearing and
consideration.
Gutteridge v. A.P. Green Services, Inc., 804 A.2d
650, 651 (Pa.Super. 2002).
Wright v. Allied Signal, Inc., 963 A.2d 511, 514 (Pa.Super. 2008)
(citation omitted). Summary judgment in mortgage foreclosure actions is
subject to the same rules as any other civil action. See Pa.R.C.P. 1141(b).
Initially, appellant contends that the trial court lacked subject matter
jurisdiction to hear this case because there is nothing in the record to
indicate that appellee served him with a Notice of Default as contractually
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required by paragraphs 20 and 22 of the Mortgage Security Contract
Agreement before accelerating the loan and proceeding with foreclosure.
A review of the exhibits attached to the complaint indicates that a
notice of default labeled “Act 91 Notice Take Action to Save your Home from
Foreclosure” was sent to appellant at the address where he received service:
10 Old Clairton Road, Suite 12A, Pleasant Hills, Pennsylvania. The notice
also indicates that it was sent to appellant by first class mail and by certified
mail with the certified mail number indicated on the form. This court does
not agree with appellant’s contention that appellee failed to properly issue a
notice of default so that it lacked standing.
Appellant next contends that the trial court lacked personal jurisdiction
over appellant since appellee did not serve him with a copy of the complaint
as required by the Pennsylvania Rules of Civil Procedure. Appellant asserts
that the Sheriff made only one attempt to serve him at his actual residence:
540 Lisa Drive, West Mifflin, Pennsylvania. As a result, appellant believes
that appellee’s request for alternative service was premature because it only
attempted service at his domicile once. Appellant argues that there is
nothing in the record to indicate that appellee served him with a copy of the
complaint in accordance with the trial court’s November 21, 2014 order
which permitted service by mail and by posting at the property. Appellant
also disagrees with the trial court’s determination that he waived any
objection to lack of service of the complaint when he filed an answer to it.
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Appellant asserts that he filed an answer under threat, duress, and coercion
because he believed that the trial court would enter a default judgment
against him if he did not answer the complaint.
Rule 402 of the Pennsylvania Rules of Civil Procedure provides in
pertinent part:
(a) Original process may be served
(1) By handing a copy to the
defendant; or
(2) By handing a copy
(i) at the residence of the
defendant to an adult
member of the family
with whom he resides;
but if no adult member
of the family is found,
then to an adult person
in charge of such
residence; or
(ii) at the residence of the
defendant to the clerk
or manager of the
hotel, inn, apartment
house, boarding house
or other place of
lodging at which he
resides; or
(iii) at any office or usual
place of business of the
defendant to his agent
or to the person for the
time being in charge
thereof.
Pa.R.C.P. 402(a).
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Appellee argues that it properly served appellant when it served
appellant at the UPS store at 12 Old Clairton Road, Suite 12A, Pleasant Hills,
Pennsylvania, in compliance with Pennsylvania Rule of Civil
Procedure 402(a)(2)(iii). Appellee attempted to serve appellant both at the
mortgaged property and at another address for him, 3567 Mountain View
Drive, #122, West Mifflin, Pennsylvania, but the Sheriff of Allegheny County
as deputized by the Sheriff of Westmoreland County found the property
vacant. Appellant established the UPS store as his address. The Sheriff of
Allegheny County served appellant by way of Mr. Nestor, the UPS store
manager, who accepted service on behalf of appellant. Although appellant
argues that Nestor was not authorized to accept service, the sheriff’s
affidavit of service creates a presumption of effective service. See
Hollinger v. Hollinger, 206 A.2d 1 (Pa. 1965) (in the absence of fraud, the
return of service by a sheriff, which is full and complete, is conclusive and
immune from attack by extrinsic evidence). The trial court did not err when
it determined that appellant was properly served.
In addition, the trial court, by order dated November 21, 2014,
directed appellee to serve a copy of the complaint by posting at the
mortgaged property and by first class mail to three “last known addresses”
of appellant which included the UPS store at 10 Old Clairton Road,
Suite 12A, Pleasant Hills, Pennsylvania, as well as the mortgaged premises.
There is no allegation that appellee did not comply with this order.
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Appellant next contends that the trial court lacked subject matter
jurisdiction where appellee did not provide evidence that it had standing as
the holder in due course to enforce a promissory note signed by appellant.
First, appellant argues that none of the pleadings filed by appellee,
subsequent to the filing of the complaint, were verified as required by
Pennsylvania Rule of Civil Procedure 1024. A review of the record including
appellant’s motion to dismiss the motion for summary judgment and his
motion to strike the motion for summary judgment fails to reveal that
appellant raised this point about verification beyond verification of the
complaint before the trial court. Therefore, it is waived. Pennsylvania Rule
of Civil Procedure 302(a) provides that only issues properly raised and
preserved in the trial court will be considered on appeal.
Second, with respect to whether appellee had standing, appellant
argues that appellee failed to offer proof that it was the holder of the
promissory note. Appellant notes that appellee failed to attach a copy of the
note to the complaint though it did when it responded to appellant’s
preliminary objections. Appellant argues that appellee lacked standing
because it failed to prove that it was the holder of a promissory note signed
by appellant. Further, appellant asserts that because appellee did not
possess the note, it could not institute foreclosure proceedings.
Pennsylvania Rule of Civil Procedure 2002 provides, “[e]xcept as
otherwise provided . . . all actions shall be prosecuted by and in the name of
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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). Of course, an original mortgagee may assign its interest
as mortgagee, as was the case here. 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 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
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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.3
Here, appellant alleged that appellee failed to prove that it had
standing to enforce the note because appellee did not establish that it had
possession of the promissory note when it filed its complaint in mortgage
foreclosure. Appellant argues that the note attached to the motion for
summary judgment does not establish that appellee owned the note because
no witness verified the note or testified to its authenticity. Once again,
appellant failed to raise any issue based on verification before the trial court
so any argument based on verification is waived.
3
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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The trial court determined that appellee had been assigned the
mortgage and that the note was endorsed in blank, was negotiable, and was
possessed by appellee prior to the commencement of the foreclosure action.
(Trial court opinion, 12/23/15 at 3.)
Here, the note produced by appellee indicated that appellant was the
borrower and BNC Mortgage, Inc., was the lender. An allonge to the note
was endorsed without recourse in blank by Eleanora Martino, Vice President
of Quality Assurance for BNC Mortgage, Inc. 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 instrument entitles the holder of the note
to enforcement of the obligation. See id. §§ 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 ownership of the mortgage and possession of
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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.
Appellant continues to argue that appellee did not possess the note
and did not prove the existence of endorsements to the note and that
Mortgage Electronic Registration Systems, Inc. (“MERS”), did not have
possession of the note and lacked authority to assign the note.
Appellee produced the note before the trial court. Further, to the
extent that appellant contends that MERS lacked standing to foreclose
because it did not hold the note, this argument is meritless. MERS was not
a party to this litigation, did not seek to enforce an interest in the underlying
loan in the litigation, and was only involved to the extent that it was a
nominee for the original lender. In addition, while appellant asserts that
MERS could not assign the note, appellee never asserted that MERS assigned
the note to appellee. Further, in Murray, 63 A.3d at 1265-1266, this court
held that a note secured by a mortgage was a negotiable instrument
governed by Section 3104 of the Pennsylvania Uniform Commercial Code,
13 Pa.C.S.A. § 3104, such that defects in the chain of possession did not
affect the right of the mortgagee to enforce the note.
Appellant next contends that the trial court erred when it granted
summary judgment because appellee did not prove the existence of a
default upon the mortgage. Appellant argues that because appellee did not
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plead a default upon the promissory note, it could not claim a default on the
mortgage.
Pennsylvania Rule of Civil Procedure 1147 provides in pertinent part:
(a) The plaintiff shall set forth in the complaint:
(1) the parties to and the date of the
mortgage, and of any assignments,
and a statement of the place of
record of the mortgage and
assignments;
(2) a description of the land subject to
the mortgage;
(3) the names, addresses and interest
of the defendants in the action and
that the present real owner is
unknown if the real owner is not
made a party;
(4) a specific averment of default;
(5) an itemized statement of the
amount due; and
(6) a demand for judgment for the
amount due.
Pa.R.C.P. 1147(a).
A review of the complaint reveals that appellee complied with the
requirements of Pa.R.C.P. 1147(a).
Appellant also argues that the affidavit of Nocero does not offer any
evidence of a default to support the motion for summary judgment. Nocero,
a contract management coordinator for Ocwen, states in the affidavit, that
he had access to the business records maintained in the servicing of the
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mortgage in question, that appellant entered into the mortgage with MERS,
the nominee for BNC Mortgage, Inc., that the mortgage was assigned to
appellee, that appellant’s payment was due and owing on January 1, 2012,
and for each month thereafter, and set forth the amounts due. Appellant
argues that Nocero is not a competent witness because he does not go into
detail about his knowledge about the facts to which he attests.
This court does not find any merit in appellant’s claims here. In order
for summary judgment to be proper in a mortgage foreclosure action, the
moving party must establish the amount of the mortgage, that the mortgage
is in default, and that the mortgagor has failed to pay interest on the
mortgage. Cunningham v. McWilliams, 714 A.2d 1054, 1057 (Pa.Super.
1998). Appellee did so. Nocero’s affidavit established how he had access to
the information. Appellant points to no statute, rule, or case law that
requires the degree of specificity demanded by appellant regarding exactly
how Nocero acquired the information.
Furthermore, when responding to the allegations of default listed in
the complaint in his answer, appellant did not provide specific denials as
required under Pennsylvania Rule of Civil Procedure 1029. Rule 1029
provides in pertinent part:
(b) Averments in a pleading to which a responsive
pleading is required are admitted when not
denied specifically or by necessary implication.
A general denial or a demand for proof, except
as provided by subdivision (c) of this rule, shall
have the effect of an admission.
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(c) A statement by a party that after reasonable
investigation the party is without knowledge or
information sufficient to form a belief as to the
truth of an averment shall have the effect of a
denial.
Pa.R.C.P. No. 1029(b)-(c).
In his answer, appellant responded with general denials except for his
argument that appellee lacked standing. The trial court did not err when it
granted summary judgment.
Appellant next contends that the trial court erred when it granted
summary judgment where appellee’s motion for summary judgment did not
include a statement of undisputed facts.
Appellee asserts that appellant waived this issue because he did not
raise it before the trial court. Appellant admits that he did not raise the
issue before the trial court. Accordingly, this issue is waived. See
Pa.R.A.P. 302(b).
Finally, appellant argues that the summary judgment is void because
the fixed rate mortgage contract is void ab initio because the interest rate
is based upon LIBOR which is fraudulently manipulated by the banks.
Appellant argues that a cartel of banks act together criminally to set the
rates such that his mortgage rate was fraudulently established. This
argument has no merit. Regardless of the actions of banks that set the
LIBOR rates, appellant agreed to the rate when he signed the mortgage and
obtained the loan and then defaulted on his obligation.
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Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 12/22/2016
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