Opinion
Argued October 11, 1974
November 20, 1974.
Eminent domain — Distribution of proceeds — Act of 1941, July 16, P. L. 400 — Deficiency judgment petition — Execution sale — Mortgage foreclosure — Eminent Domain Code, Act 1964, June 22, P. L. 84 — Lienholders — Discharge — Presumption of payment.
1. Under provisions of the Act of 1941, July 16, P. L. 400, a debtor is discharged of the liability for a debt if no deficiency judgment petition is filed by an execution creditor within six months of an execution sale of property subject to a lien derived from such debt, and such provisions are also applicable to executions upon judgments taken in connection with the foreclosure of a mortgage. [388-9]
2. Provisions of the Eminent Domain Code, Act 1964, June 22, P. L. 84, require that moneys paid in condemnation proceedings be distributed to lienholders as they exist on the date of the filing of the declaration of taking, but a lienholder on that date whose lien is based upon a debt which is subsequently discharged by operation of the Act of 1941, July 16, P. L. 400, loses all right to share in the proceeds. [389]
3. The Act of 1941, July 16, P. L. 400, creates an irrebuttable presumption that a creditor was paid in full when a deficiency judgment petition was not timely filed following an execution sale. [389]
Argued October 11, 1974, before Judges MENCER, ROGERS and BLATT, sitting as a panel of three.
Appeal, No. 1654 C.D. 1973, from the Order of the Court of Common Pleas of Bucks County in case of In Re: Condemnation by the Commonwealth of Pennsylvania, Department of Transportation, of Right of Way, for Legislative Route 1068, Section 2 R/W, a/k/a Legislative Route 1068, Section AO2 a Limited Access Highway, in Dolyestown and Plumstead Townships. Commonwealth of Pennsylvania, Department of Transportation v. Arthur T. Sturgeon and Betty Ann Sturgeon, his wife, No. 72-2623-04-6.
Declaration of taking filed in the Court of Common Pleas of Bucks County. Estimated just compensation funds paid into court by condemnor. Petitioner filed rule to show cause why payment should not be made to petitioner. Petition denied. BODLEY, J. Petitioner appealed to the Commonwealth Court of Pennsylvania. Held: Affirmed.
John D. Trainer, with him William M. Power, for appellant.
No appearance for appellee.
The issue in this case is whether a mortgagee which has bought in the mortgaged property for its record costs at sheriff's sale on a judgment obtained in an action of mortgage foreclosure is entitled to payment from a fund produced in eminent domain proceedings of money owed on the mortgage in excess of the amount produced by a subsequent private sale of the property where (a) the condemnation of a part of the mortgaged property preceded the execution sale, (b) the mortgagee did not obtain a deficiency judgment, and (c) the fund produced by the condemnation remained undistributed until a time after the mortgagee's right to obtain a deficiency judgment had expired. We hold that it may not.
The sequence of events here was as follows:
February 10, 1972 — the appellant, Federal National Mortgage Association, filed its complaint in mortgage foreclosure.
March 22, 1972 — the appellant took judgment by default in the mortgage foreclosure action.
Eo die — the Commonwealth of Pennsylvania filed a declaration of taking of an easement over a portion of the mortgage premises.
June 9, 1972 — the appellant purchased the mortgaged property at execution sale for its record costs.
October 20, 1972 — the Commonwealth by allowance of Court deposited $3000 estimated just compensation in court.
November 28, 1972 — the appellant filed a petition for rule to show cause why the estimated just compensation should not be distributed to it.
December 10, 1972 — last date on which appellant might have filed a petition to fix the value of the real estate under the "Deficiency Judgment Act," Act of July 16, 1941, P. L. 400, § 7, 12 Pa.C.S.A. § 2621.7.
November 7, 1973 — the court below discharged the appellant's rule and dismissed its petition for distribution to it of the estimated just compensation.
The court below properly held that the appellant was not entitled to share in the fund raised in the eminent domain proceeding. Section 7 of the Act of July 16, 1941, P. L. 400, 12 Pa.C.S.A. § 2621.7, provides that if no petition to fix the value of the property bought in by the execution creditor is filed within six months from the sale "the debtor, obligor, guarantor and any other person liable directly or indirectly to the plaintiff or plaintiffs for the payment of the debt shall be released and discharged of such liability to the plaintiff or plaintiffs." Hence, the mortgagors' liability here was released and discharged as of December 10, 1972, six months following the execution sale on June 9, 1972.
The contention that the Act does not apply to executions upon judgments taken in foreclosure of the mortgages, as distinguished from judgments taken on bonds, was decided against them in Reading Trust Company v. Campbell, 159 Pa. Super. 197, 48 A.2d 72 (1946). See also Hoffman Lumber Company v. Mitchell, 170 Pa. Super. 326, 85 A.2d 664 (1952).
The appellant further contends that Section 521 of the Eminent Domain Code, Act of June 22, 1964, Special Sess., P. L. 84, § 521, as amended, 26 P. S. § 1-521 (Supp. 1974-1975), providing that distribution of money paid into court in eminent domain proceedings shall be distributed to lienholders "as of the date of the filing of the declaration of taking" accords it the right to distribution regardless of the later discharge of the debt by operation of the "Deficiency Judgment Act." This argument is clearly unacceptable. The Act creates "an irrebuttable presumption that the creditor was paid in full in kind." McGrath Estate, 159 Pa. Super. 78, 80, 46 A.2d 735, 736 (1946). To construe Section 521 of the Eminent Domain Code as providing payment to a lienholder whose debt has been irrebuttably presumed to have been paid in full in kind would be as unsound as it would be to declare that it provides for distribution to a lienholder who has been paid in full in cash.
Order affirmed.