Opinion
No. 623 C.D. 2013
01-28-2014
In Re: Sale of Real Estate By Monroe County Tax Claim Bureau Appeal of: First Niagara Bank, N.A., successor by merger to Harleysville National Bank and Trust Company
BEFORE: HONORABLE ROBERT SIMPSON, Judge HONORABLE ANNE E. COVEY, Judge HONORABLE JAMES GARDNER COLINS, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION BY JUDGE COVEY
First Niagara Bank, N.A. (First Niagara), successor by merger to Harleysville National Bank and Trust Company (Harleysville), appeals from the Monroe County Common Pleas Court's (trial court) March 15, 2013 order denying First Niagara's Petition to Set Aside Judicial Tax Sale (Petition). First Niagara raises four issues for this Court's review: (1) whether the Monroe County Tax Claim Bureau's (Tax Bureau) notice of the judicial tax sale was inadequate because the Tax Bureau failed to serve First Niagara's counsel of record; (2) whether the Tax Bureau's notice of the judicial tax sale was inadequate because the Tax Bureau allegedly served only the original mortgagee, rather than First Niagara, the original mortgagee's successor by merger; (3) whether the Tax Bureau's judicial tax sale notice was inadequate where the return of service failed to identify the individual served as an authorized agent or employee; and (4) whether First Niagara's mortgage liens remain undischarged. We affirm.
Harleysville extended a loan to John F. Nemeth and Jennifer Nemeth (the Nemeths) and secured a mortgage on Lot No. 425, Section III-B, Pleasant Valley Estates, Polk Township, Monroe County, Pennsylvania (the Property) on April 26, 2005 which was properly recorded. Thereafter, the Nemeths obtained a second loan from Harleysville which was also secured by a mortgage on the Property dated June 7, 2005 and properly recorded on September 28, 2005. Beginning in April 2009, the Nemeths defaulted on the mortgages. On April 9, 2010, Harleysville merged with First Niagara Commercial Bank, forming First Niagara. On August 10, 2010, First Niagara filed a mortgage foreclosure action against the Nemeths and obtained a default judgment on October 25, 2010 in the amount of $189,515.27.
The Nemeths also failed to pay the real estate taxes on the Property. As a result, the Property was subjected to a Tax Upset Sale on September 15, 2010, but did not sell. On January 25, 2011, First Niagara filed a writ of execution in its mortgage foreclosure action. On February 8, 2011, the Tax Bureau filed a petition to subject the Property to judicial sale, and the trial court issued a Rule to Show Cause (Rule) returnable with a hearing scheduled for May 25, 2011. The Tax Bureau's title search revealed Harleysville's mortgages on the Property, but did not reflect First Niagara's default judgment in its mortgage foreclosure action. On April 11, 2011, the Montgomery County Sheriff's Department, on behalf of the Monroe County Sheriff's Department, served the trial court's Rule upon "Harleysville National Bank & Trust Co" at "483 Main Street" in "Harleysville, PA," and the individual served was "Carolyn McFadden, Invest." Return of Service Affidavit (Return). Reproduced Record (R.R.) at 109a. On May 25, 2011, following a hearing, the trial court granted the Tax Bureau's petition to sell the Property at judicial sale, "free and clear of all tax and municipal claims, mortgages, liens, charges and estates of whatsoever kind, except ground rents, separately taxed." Trial Ct. Order, May 25, 2011. On July 6, 2011, the Property was sold at judicial sale to William and Michele Tavormina (the Tavorminas). On December 16, 2011, the Tavorminas sold the Property to Katherine McGonagle (McGonagle).
Pursuant to First Niagara's writ of execution, a sheriff's sale of the Property was scheduled for December 6, 2012, but on September 26, 2012, the Monroe County Sheriff's Department advised First Niagara that the Property had been sold at the July 6, 2011 judicial tax sale. On October 15, 2012, First Niagara filed its Petition with the trial court. A hearing was held on March 4, 2013 and, on March 15, 2013, the trial court denied the Petition. First Niagara appealed to this Court.
"Our scope of review in tax sale cases is limited to a determination of whether the trial court abused its discretion, rendered a decision which lacked supporting evidence, or clearly erred as a matter of law." In re Sale No. 10, 801 A.2d 1280, 1282 (Pa. Cmwlth. 2002) (quoting In re Serfass, 651 A.2d 677, 678 n.6 (Pa. Cmwlth. 1994)).
First Niagara contends that the Tax Bureau failed to comply with the Real Estate Tax Sale Law (Law). Specifically, First Niagara asserts that the Tax Bureau was required by Section 607.1(a) of the Law to take reasonable steps to discover First Niagara's judgment against the Property, and because First Niagara had already secured an in rem judgment against the Nemeths and filed the required documents to list the matter for a sheriff's sale which would have revealed First Niagara's interest in the Property, it is clear that the Tax Bureau failed to exercise reasonable care. First Niagara further argues that a public records search would have disclosed First Niagara's legal counsel's identity and the Tax Bureau should have served process on First Niagara's counsel. We disagree.
Act of July 7, 1947, P.L. 1368, as amended, 72 P.S. §§ 5860.101 - 5860.803.
Added by Section 30 of the Act of July 3, 1986, P.L. 351, 72 P.S. § 5860.607a.
First Niagara relies upon In re Sale No. 10, 801 A.2d 1280 (Pa. Cmwlth. 2002), to support its position that the Tax Bureau was required to take reasonable steps in notifying First Niagara, including serving notice upon its legal counsel. However, In re Sale No. 10 involved attempted service by certified mail which was returned as unclaimed. This Court stated that due process required the tax bureau to do more than simply proceed with the judicial tax sale after attempted service was unsuccessful. Id. The Court concluded that Section 607.1(a) of the Law serves to protect the due process rights of individuals with an interest in property subject to upset tax sales and it also applies to judicial tax sales. Id. Section 607.1(a) of the Law states in relevant part:
[Where] such mailed notification is either returned without the required receipted personal signature of the addressee or under other circumstances raising a significant doubt as to the actual receipt of such notification by the named addressee or is not returned or acknowledged at all, then, before the tax sale can be conducted or confirmed, the bureau must exercise reasonable efforts to discover the whereabouts of such person or entity and notify him. The bureau's efforts shall include, but not necessarily be restricted to, a search of current telephone directories for the county and of the dockets and indices of the county tax assessment offices, recorder of deeds office and prothonotary's office, as well as contacts made to any apparent alternate address or telephone number which may have been written on or in the file pertinent to such property.72 P.S. § 5860.607a(a) (emphasis added).
The instant matter is distinguishable from the facts in In re Sale No. 10. Here, service was made by the sheriff rather than by certified mail. The sheriff was directed to serve notice on Harleysville, and the deputy sheriff's Return clearly states that service had, in fact, been properly effectuated. Accordingly, "the mailed notification [was not] returned without the required receipted personal signature of the addressee or under other circumstances raising a significant doubt as to the actual receipt of such notification . . . ." 72 P.S. § 5860.607a(a). Relying upon the Return, the Tax Bureau could reasonably conclude that service had been properly made. Thus, because the Return revealed that service had been made, Section 607.1(a) of the Law required no more of the Tax Bureau.
First Niagara's assertion that the Tax Bureau was required to serve its counsel of record is also without merit. Nothing in Section 611 of the Law, 72 P.S. § 5860.611 (relating to rule service), or Pennsylvania Rule of Civil Procedure No. 424 requires service of process to be made upon the corporation's counsel of record. Had "significant doubt" been raised as to whether the lienholder had received notice, reasonable efforts under Section 607.1(a) of the Law may have included contacting an attorney of record to aid in serving the lienholder. However, given that the Return showed service had been effectuated, such was not the case herein. Thus, First Niagara's argument fails.
Pennsylvania Rule of Civil Procedure No. 424 states:
Service of original process upon a corporation or similar entity shall be made by handing a copy to any of the following persons provided the person served is not a plaintiff in the action:
(1) an executive officer, partner or trustee of the corporation or similar entity, or
(2) the manager, clerk or other person for the time being in charge of any regular place of business or activity of the corporation or similar entity, or
(3) an agent authorized by the corporation or similar entity in writing to receive service of process for it.
First Niagara next contends that because Harleysville ceased to exist upon the completion of the merger, the sheriff could not serve Harleysville, and therefore such service was ineffective. We disagree.
First Niagara asserts that Plank v. Monroe County Tax Claim Bureau, 735 A.2d 178 (Pa. Cmwlth. 1999), compels the conclusion that service in the instant matter was ineffective. In Plank, the purchasers filed a petition to set aside a tax sale when they learned that the mortgage assignee had not been identified as a lienholder and thus had not been served. Plank is distinguishable from the case herein because the mortgage assignee in Plank was an entirely separate company, not a successor by merger.
Section 1929(a) of the Business Corporation Law of 1988 (Corporation Law) states, in relevant part:
Upon the merger or consolidation becoming effective, the several corporations parties to the merger or consolidation shall be a single corporation which, in the case of a merger, shall be the corporation designated in the plan of merger as the surviving corporation and, in the case of a consolidation, shall be the new corporation provided for in the plan of consolidation. The separate existence of all corporations parties to the merger or consolidation shall cease, except that of the surviving corporation, in the case of a merger.15 Pa.C.S. § 1929(a). Importantly, Section 1929(b) of the Corporation Law provides:
All the property, real, personal and mixed, and franchises of each of the corporations parties to the merger or consolidation, and all debts due on whatever account to any of them, including subscriptions for shares and other choses in action belonging to any of them, shall be deemed to be vested in and shall belong to the surviving or new corporation, as the case may be, without further action, and the title to any real estate, or any interest therein, vested in any of the corporations shall not revert or be in any way impaired by reason of the merger or consolidation. The surviving or new corporation shall thenceforth be responsible for all the liabilities of each of the corporations so merged or consolidated. Liens upon the property of the merging or consolidating corporations shall not be impaired by the merger or consolidation and any claim existing or action or proceeding pending by or against any of the corporations may be prosecuted to judgment as if the merger or consolidation had not taken place or the surviving or new corporation may be proceeded against or substituted in its place.15 Pa.C.S. § 1929(b) (emphasis added).
This Court has held that "the law governing judicial tax sales is . . . subject to strict interpretation. . . . [T]he [Law] compels strict compliance to ensure that a governmental entity seeking to recover delinquent taxes provides due process before divesting a lienholder of its property." Mfrs. & Traders Trust Co. v. Luzerne Cnty. Tax Claim Bureau, 56 A.3d 36, 39 (Pa. Cmwlth. 2012).
Section 610 of the Law states in relevant part:
Upon the presentation of [a] petition [for judicial sale], accompanied with searches, showing the state of the record and the ownership of the property and all tax and municipal claims, liens, mortgages, ground rents, charges and estates against the same, the court shall grant a rule upon all parties thus shown to be interested to appear and show cause why a decree should not be made that said property be sold, freed and cleared of their respective tax and municipal claims, liens, mortgages, charges and estates, except separately taxed ground rents.72 P.S. § 5860.610 (emphasis added). This Court has held that:
Clearly, the Law requires that a search showing all outstanding claims accompany the Bureau's petition to the trial court; however the Law does not require that that search accompany the Rule to Show Cause which is thereafter issued. The Law instead requires that the Rule, i.e., the notice of the judicial sale, be granted upon all parties shown to be interested; in other words, upon all lienholders uncovered by the search.Capenos v. Lawrence Cnty. Tax Claim Bureau, 613 A.2d 112, 115 (Pa. Cmwlth. 1992).
. . . .
It is true . . . that if there were two liens held by separate lienholders and the search failed to uncover one of the liens, the failure to notify one of the lienholders would result in an undischarged lien. That is not the case here. It is disclosure of the lienholders which must be effected by the title search, and notification of the lienholders which is required by the Law.
In the instant case, the Tax Bureau admitted that the search conducted for the Tax Bureau was defective in that it failed to disclose First Niagara's judgment against the Nemeths in the mortgage foreclosure action. However, given that First Niagara's judgment arose from its successor rights to Harleysville, we hold that the trial court properly found that pursuant to Section 1929(b) of the Corporation Law, 15 Pa.C.S. § 1929(b), the Tax Bureau was permitted to proceed with its claim "as if the merger or consolidation had not taken place . . . ." Id. And, since Harleysville was identified as a lienholder and the sheriff served notice thereon, First Niagara was properly served. Accordingly, we find First Niagara's argument lacks merit.
Next, First Niagara asserts that the Return was inadequate because it failed to identify the individual served as an authorized agent or employee. It further maintains that it is unclear that the individual identified on the Return as having accepted service was authorized to do so and, therefore, service was ineffective. We disagree.
"It is well settled that issues not raised below cannot be advanced for the first time in a 1925(b) statement or on appeal. See Pa.R.A.P. 302(a)[.]" Irwin Union Nat'l Bank & Trust Co. v. Famous, 4 A.3d 1099, 1104 (Pa. Super. 2010). A review of the record confirms that although First Niagara's counsel did state at the hearing that he was unsure who Carolyn McFadden was, and noted that the Return did not identify whether she was a person-in-charge, First Niagara did not argue that notice was inadequate because the Return lacked such information. Therefore, First Niagara did not preserve this issue for appeal and this Court is precluded from addressing it for the first time on appeal.
Moreover, given that the Return specifically notes that it was served at the mortgagee's address, and identifies the individual served, it must be presumed valid. Our Supreme Court has held, "in the absence of fraud, the return of service of a sheriff, which is full and complete on its face, is conclusive and immune from attack by extrinsic evidence[.]" Hollinger v. Hollinger, 416 Pa. 473, 476, 206 A.2d 1, 3 (1965). The Supreme Court further stated:
The rule of conclusiveness of a return of service of process is based upon the presumption that a sheriff, acting in the course of his official duties, acts with propriety and, therefore, when the sheriff in the course of such official duties makes a statement, by way of an official return, such statement is given conclusive effect. However, both logic and common sense restrict the conclusive nature of a sheriff's return only to facts stated in the return of which the sheriff presumptively has personal knowledge, such as when and where the writ was served; when, in his official return, the sheriff states that he served a writ at a certain time and at a certain place, such facts are known to the sheriff personally and should be given conclusive effect. However, the immutability of a return should not extend (a) to facts stated in the return of which the sheriff cannot be expected to have personal knowledge and which are based upon information obtained through hearsay or statements made by third persons or (b) to conclusions based upon facts known to the sheriff only through statements made by others. When a sheriff's return states that a certain place is the residence or dwelling house of the defendant, such statement is not of a matter ordinarily within the personal knowledge of the sheriff but only a statement based upon that which he has been told by other persons, i.e., he had been instructed by a third person to make service at a certain place which he is told is the residence or dwelling house of the defendant. No sound reason exists for giving a conclusive effect to a statement in the sheriff's return as to a fact or conclusion which arises not from the sheriff's own personal knowledge or observation but from information given him by other persons.Id. at 477-78, 206 A.2d at 3. In Liquid Carbonic Corp. v. Cooper & Reese, Inc., 416 A.2d 549 (Pa. Super. 1979), our Superior Court, relying on Hollinger, held that a sheriff's representation that service had been made on an agent or person-in-charge could be challenged because the responsibilities of the individual served were not within the sheriff's personal knowledge. Therefore, extrinsic evidence could be offered on that issue to contest the return. Based upon evidence presented, which included deposition testimony of the appellant's president and secretary, and testimony of the deputy sheriff who had served process, the Superior Court held that the appellant had not been served, based primarily on the testimony of the deputy sheriff who admitted that he made no attempt to determine whether the person he served was an agent or employee in charge of the appellant's office.
Similarly, in the instant matter, it is not clear that the deputy sheriff who made service upon Harleysville had personal knowledge of Carolyn McFadden's authority to accept service. However, unlike Liquid Carbonic, First Niagara did not offer any evidence calling into question Carolyn McFadden's authority to receive service nor any testimony from the deputy sheriff to determine the relevant circumstances. First Niagara had the burden to overcome the Return's presumptive validity. See Hollinger. First Niagara failed to do so. Accordingly, we find that the sheriff's service on April 11, 2011 was properly effectuated, and that the trial court did not err when it dismissed First Niagara's Petition.
In fact, the deputy sheriff who made service did not mark the box on the Return that the individual served was a person-in-charge.
McGonagle and the Tavorminas assert that, pursuant to Section 5522(b)(5) of the Judicial Code, 42 Pa.C.S. § 5522(b)(5) (providing a 6 month limitations period for actions to set aside judicial sales), First Niagara was required to commence its action to set aside the judicial sale within 6 months of the date of the sale. Because the judicial sale occurred on July 6, 2011, and First Niagara's Petition was not filed until over 15 months later on October 15, 2012, they argue that First Niagara's action is time-barred. Although the issue was presented to the trial court, it was not addressed in the trial court's opinion. Having found that First Niagara was properly served, we agree that the action is time-barred. Even if we had found that service did not comply with the Law's stringent service requirements, we would still conclude that the sheriff's April 11, 2011 presentation of the Rule would have been sufficient to put First Niagara on notice of the potential risk to its liens. Thereby, application of the discovery rule, which "applies to toll the statute of limitations in any case in which a party is reasonably unaware of his or her injury at the time his or her cause of action accrued," would be improper in the instant matter. Gleason v. Borough of Moosic, 609 Pa. 353, 362-63, 15 A.3d 479, 485 (2011). --------
With regard to the last issue as to whether First Niagara's mortgage liens remain undischarged, Section 612(a) of the Law provides in relevant part:
If upon hearing, the court is satisfied that service of the rule has been made upon the parties named in the rule, in the manner provided by this act, and that the facts stated in the petition are true, it shall order and decree that said property be sold at a subsequent day to be fixed by the court, freed and cleared of all tax and municipal claims, mortgages, liens, charges and estates, except separately taxed ground rents, to the highest bidder, and that the purchaser at such sale shall take and thereafter have an absolute title to the property sold free and clear of all tax and municipal claims, mortgages, liens, charges and estates of whatsoever kind, except ground rents, separately taxed.72 P.S. § 5860.612(a). Having determined that the trial court properly dismissed First Niagara's Petition, we find that the trial court's May 25, 2011 order, issued in accordance with Section 612(a) of the Law, resulted in the Property being sold free and clear of First Niagara's mortgage liens.
For all of the above reasons, the trial court's March 15, 2013 order is affirmed.
/s/_________
ANNE E. COVEY, Judge
ORDER
AND NOW, this 28th day of January, 2014, the Monroe County Common Pleas Court's March 15, 2013 order is affirmed.
/s/_________
ANNE E. COVEY, Judge