author: LOVECCHIO, J.,

text:
    In re Estate of Rose M. Eiswert

      June 3, 2014
   LOVECCHIO, J.,

— Rose M. Eiswert passed away on April 26, 1995. Fred C. Eiswert, her son, was appointed as executor of her estate on May 16, 1995.

On April 9, 2013, Fred Eiswert, as executor, filed a first and final account and statement of proposed final distribution of the estate. On May 6,2013, Robert J. Miller as executor of the Estate of Alice I. Miller, daughter of the deceased, filed objections to the first and final account. On September 13, 2012, Fred Eiswert as executor, filed an answer to the objections.

A status conference was held before the court on December 10, 2013. Following said conference, an order was entered addressing discovery and scheduling issues. Pursuant to that order dated December 10,2013, on March 14, 2014, the parties filed a joint stipulation of issues and facts. Said joint stipulation of issues and facts withdrew varied objections and identified objections “remaining in dispute.” A hearing on the objections was held on March 19, 2014. Following said hearing, the court directed that the parties informally provide case citations. As well, objectant was given until March 28, 2014 to file his post hearing proposed findings of fact and conclusions of law. The executor was given until April 11, 2014 to file any responsive document.

The record is now closed, the respective proposed findings and conclusions have been filed and the case is ripe for a decision.

Fred Eiswert was first called as a witness on behalf of the objectant. The first issue discussed was the delay between his appointment as executor and the filing of the final accounting and proposed distribution.

During his direct testimony as well as when he was recalled on his own behalf, he referenced various reasons for the delay. He noted that the land was being farmed and was still productive. He referenced a condemnation matter in which Penn DOT condemned 13 acres to build a new road, resulting in extensive litigation. He referenced the fact that given the price of land and interest rates as well as third party interest in purchasing separate lots, it made sense to try to sell off some lots especially when the price of a lot could be close to the price for the entire parcel. He referenced that he tried to settle the estate but once it became clear that his brother-in-law through his niece wanted to purchase the parcel for far less than what it was worth, things became very difficult. He indicated that there was a complete lack of cooperation and that the matter appeared to be headed to court.

Mary Lewis also testified. Her mother Alice passed away in 2007. Her father Robert is the executor of her mother’s estate but because of dementia and other health issues, she has been acting on his behalf through a power of attorney. She did not rebut the testimony of Mr. Eiswert. Rather she indicated that she was interested in purchasing the property at either a private or public sale. She then wanted to resell the property at a premium.

On behalf of her mother’s estate, she did not agree with the remaining siblings who wanted to either hold the property jointly or to buy out her mother’s interests. She indicated that prior to pursuing her objections, there was no contact or correspondence between the parties for a period of five to six years. She indicated as well that her side of the family did not get along with the others. She also indicated that her side of the family was losing out because of the “future income on the property.” She did not believe the property could be held jointly because it “hadn’t worked out previously.” There was “no relationship” between the parties.

Her proposal was to purchase the property in her and/ or her husband’s names. She was willing to pay more for the property. Accordingly, each of the siblings would receive greater monies than if the property were held and eventually sold. She did not wish to keep the property under any circumstances. She intended on purchasing the property and then selling it to a third party at a greater price than for what it was purchased. Documentation was produced at the hearing and entered under separate exhibits. The documentation included letters between counsel on behalf of their respective parties.

The court will address each of the objections separately or group-wise depending upon their nature. The court will also reference the relevant testimony with respect to the objection(s) at issue.

Objections 2, 3, 4, 5 and 7 allege that the executor failed to fulfill his duty to collect, marshal, inventory and distribute the assets of the estate in a reasonable and timely manner and that a surcharge is warranted. The administration of the estate took 18 years to complete and objectant contends that this delay prevented him from possessing and enjoying the real estate, from being able to invest liquid monies he was entitled to, and from receiving benefits from the distribution. Objectant also contends that by the unwarranted delay, the executor used the land for personal and financial gain.

The court cannot conclude that the delay in the administration of the estate was a violation of the executor’s duty to the estate under the circumstances.

An executor is “required to use such common skill, prudence and caution as a prudent man, under similar circumstances, would exercise in connection with the management of his own estate.” Estate of Lohm, 269 A.2d 451, 454 (Pa. 1970).

Contrary to the position of the objectant, the court finds that the reasons for the delay were both reasonable and necessary and in fact worked to the beneficiaries’ benefit. At all times, the executor exercised prudence, skill and caution in the exercise of his duties.

The dispute between the objectant’s family and the remaining families was such that an expeditious resolution was impossible. This is confirmed by the fact that despite years of attempts, the parties have been unable to reach an agreement. Complicating the matters were the Penn DOT litigation, the roller coaster real estate values, the roller coaster interest rates, the health of the sister and then her husband, the fact that the siblings wanted to keep the property and the fact that the objectant wanted to sell the property, the fact that the property was being farmed and producing income, the fact that the property had significant sentimental value and the fact that there is no evidence whatsoever to prove that a loss has been caused to the objectant by the executor.

Rose Eiswert died in 1995. 30 acres were sold in 1996 and then Alice Miller died in 2007. Robert Miller never talked about maintaining the property. He wanted it to be sold immediately but at the time the value was extremely low. Indeed, by not selling the property, its value substantially increased. The oil and gas rights became an unexpected valuable asset, resulting in a substantial increase in the value of the property.

The first time that the executor became aware that the objectant was pursuing legal action related to a gas lease was approximately five to six years ago.

Of further note, the objectant failed to take action on his own behalf to expedite the finalization of the estate. He failed to move for the filing of a final accounting or failed to file any pleading to dispose of the disputed property. He failed to take any action to compel the conclusion of the estate. The only action that he took was once the accounting was filed.

By letter dated January 29, 2010, objectant’s counsel was provided with a copy of the first and partial accounting. A few weeks later, objectant’s counsel responded that the copy was received and requested an estate appraisal. Approximately a year later, objectant’s counsel notified the executor’s counsel that the accounting was reviewed and that they would like “additional information” and an opportunity to discuss the matters further. A full year later, an attempt was made to transfer the property from the estate to all of the siblings. This effort was on behalf of the estate. A few months after that, apparently because the matters stalled, the executor and remaining siblings offered to purchase the objectant’s one-fifth interest. Approximately a month later, estate counsel again sought a response.

It became clear in July of 2012 that the objectant did not wish to accept the offer instead contending that the appraised value demanded more. Furthermore, the issue was referenced regarding the Oil and Gas Lease.

The negotiations continued through early 2013 without the parties being able to come to a resolution.

Also complicating the matters was a Pennsylvania Department of Public Welfare lien on objectant’s estate in the amount of over $300,000.00.

As the executor properly notes in his proposed findings, there is no per se rule in the Commonwealth that the length of time of estate administration automatically results in a surcharge. Estate of Getz, 618 A.2d 456 (Pa. Super. 1992). Because objectant is seeking a surcharge, he bears the burden of proving the executor’s wrongdoing. Estate of Harrison, 745 A.2d 676 (Pa. Super. 2000).

Objectant has not met that burden. Given the many varied circumstances, the court finds that the executor’s actions in administering the estate for the many years was reasonable in all respects. Accordingly, a surcharge will not be imposed.

Objectant next asserts that the attorney’s fees of $32,197.54 incurred by the executor are unreasonable and excessive and would not have been incurred had the executor properly fulfilled his fiduciary duties in a reasonable and timely manner. Objectant’s proof with respect to this claim, however, is lacking. But for the bald assertion that the fees were unreasonable and not necessary in light of the alleged delay, there was no proof whatsoever in support of the objection.

In evaluating a claim contesting legal fees, the court must determine the reasonableness of said fees. Estate of Getz, 618 A.2d at 462. The court must look at many different factors including but not limited to the amount of work performed, the character of the services rendered, the difficulty of problems, and the value and amount of property in question, Getz, Id. at 462. Objectant has again failed to meet his burden. Even if so, the evidence presented by the executor establishes the reasonableness of the attorney fees.

In fact, the executor testified that in his opinion and experience, the fees were reasonable. The attorneys provided legal services in connection with numerous aspects of the estate administration as well as the litigation that arose out of the filing of objections and attempts to resolve the differences between the parties. The attorneys were involved in the sales of the separate parcels, the Penn DOT litigation and the major dispute relating to the disposition of the Dauber Road, Cogan Station property.

Further, the testimony supports the conclusion that the vast majority of the fees were incurred by the estate as a result of the dispute regarding the property and in an attempt to either resolve the dispute or successfully litigate the matter on behalf of the estate. The court finds that the attorney’s fees were reasonably related to the estate administration and estate litigation.

Objectant next asserts that the “fiduciary fees” paid to the executor in the amount of $2,000.00 were unreasonable given the executor’s alleged failure to fulfill his fiduciary duties. Again, the court cannot agree. Objectant’s evidence in support of this claim is lacking. The objectant has failed to prove that the executor fees paid were unreasonable. Wallis Estate, 218 A.2d 732 (Pa. 1966).

The fiduciary fee of $2,000.00 was extremely reasonable in light of the services that the executor provided to and on behalf of the estate. The Will was probated, an inventory was filed, tax returns were filed, there were partial distributions to beneficiaries, litigation was pursued against Penn DOT, the property was partially parceled off and lots were sold, negotiations took place in connection with the Dauber Road property, the executor participated in discovery and actively participated in the litigation.

Moreover, and perhaps determinatively, but for the efforts of the executor, the estate would have been valued at far less than its final value. For example, the Penn DOT litigation in and of itself resulted in an increase in the estate assets of approximately $32,000.00. Executor’s exhibit E. The executor continued receiving farming monies for the estate and eventually obtained CREP payments totaling $56,000.00. The estate was maintained to such an extent that the present appraisal value is $336,000.00, far in excess of what it was appraised of as of the date of death.

Objectant next argues that the executor improperly paid himself $510.00 for “expenses” related to the maintenance and upkeep of the property, improperly paid Lee Eiswert $2,646.36 for similar services to the estate and improperly paid Robert Eiswert $3,591.00 for similar services provided to the estate.

Other than confirming that the amounts were paid, that approval for the services was not obtained from all of the beneficiaries, and that Lee, and Robert Eiswert were paid $1.00 over minimum wage and reimbursed for expenses, no further evidence was provided by objectant in support of his claim.

The executor credibly testified that the monies were paid for necessary services including cleaning out of culverts, maintenance work, cutting of brush, maintaining roads, generally maintaining the fields and doing “preventative work.” He testified that the work was in fact performed and that payment was made for the hours expended plus expenses. The hourly rate was $1.00 above the minimum wage. He further testified that if other individuals had been hired to perform the work, the estate would have paid much more. He also testified that the work was previously performed by all three individuals while the decedent was living.

Again, the objections fail. The executor fulfilled his statutory duty to preserve the estate. 20 Pa. C.S. § 3311. There is no proof that the monies expended were unreasonable or not necessary. In fact, the expenses for the estate were both reasonable and necessary. Indeed, the court finds credible the testimony of the executor that had the services been contracted out to others, the estate would have paid much more.

Finally, the argument that the monies that were paid were not necessary because the estate should have been resolved in a more timely manner, is rejected by the court. As previously noted, under all of the circumstances, the estate was administered in as timely and reasonable manner as possible.

Objectant also argues that the executor improperly rented the farm between 1996 and 2001. Objectant claims that the rent should not have been reduced between 1997 and 1998 and thereafter, that the lease was unlawful and that the renting of the land prevented the land from being enrolled in the “CRP Program.”

The executor testified that the lease “with the farmer who farmed the land” was an oral lease. The lease had previously been entered into between his parents and the farmer. Prior to his mother’s death, it was farmed by the same individual for 10 or 12 years. According to his mother, the man’s “word was good.” The property was farmed by the farmer until 2005 when the farmer passed away.

Following the farmer’s death, the executor found out about the CREP program. He did not apply to the CREP program prior to that time because he “didn’t know about it” and the farm was continuing to be farmed. No one ever advised him of the CREP program and no one ever objected to the continued farming.

The objections to the farming income fail. No proof has been provided in support of them. The court finds that the executor’s conduct with respect to farming the property was not only consistent with his mother’s wishes and practice but also in the best interest of the beneficiaries. Moreover, the executor cannot be surcharged for choosing to have the property farmed versus enrolling it in the CREP program. He was not advised of it by anyone let alone any beneficiary and cannot be held to have constructive knowledge of it through any other source.

Objectant next argues that the sale of Lot No’s. 3, 4, and 5 for the respective prices of $19,789.00, $19,299.00, and $19,500.00 was improper in that they were not sold for a fair market value. Objectant claims that the executor should be surcharged for the difference between the amount received and the fair market value. Curiously, however, objectant provided no evidence whatsoever as to the fair market value of the lots at the time they were sold. The credible testimony from the executor supports the conclusion that the sale of the lots was both reasonable and in the best interest of the estate and ultimate beneficiaries.

In arriving at a price per lot, the executor “checked to see what lots were going for.” He spoke with a real estate agent who indicated to him that the prices were “too high” and that the lots “would never sell for that price.” The lots were sold to disinterested third parties. The executor had no relationship whatsoever with the purchasers prior to the transactions. Except for a “small break” on a bulk sale of two lots, no concessions were made on the purchase price.

Moreover, in selling the lots, the executor received a premium price that supported a decision to keep the remaining property in the hope that its value would not only increase but that it could be subdivided and sold by separate parcels. In fact, it appears to the court that this was not only a reasonable course of action but the most desirable course of action. The property that had been in the family for years could be kept, lots could be sold for a high price and then the monies could be used to maintain the remaining property and to provide a greater return to the beneficiaries.

The objections with respect to the three lots at issue are clearly without merit. The executor acted reasonably and entirely within his statutory authority. 20 Pa. C.S. § 3351. He acted with prudence and caution. The court further finds that his judgment was not in error. Conversely, it was in the best interest of the estate.

Objectant next argues that the Penn DOT settlement was not reasonable and that the executor should be surcharged for the difference between the amount received and what would be considered a reasonable settlement. Again, however, objectant has not provided any evidence whatsoever as to what “would be considered a reasonable settlement.” In fact, the evidence was clearly in favor of the executor.

The land at issue was condemned by Penn DOT while the deceased was living. Litigation was commenced seeking a reasonable price for the condemned property. A board of view was convened and following the board of view, it was determined that a reasonable price for the condemned property was as set forth in its findings. An allegation that the board of view’s finding was not reasonable is specious without any other proof whatsoever. In fact, the process is specifically designed to produce a reasonable result.

Objectant’s claim is even more frivolous in light of the fact that not only did the estate receive a substantial amount of money for the value of the property at issue but also received a substantial check for interest income on the settlement. (Executor’s exhibit A, schedule G, p. 20).

The executor’s actions with respect to the Penn Dot condemnation were reasonable under all of the circumstances and in the best interests of the estate. Objectant has failed to prove any entitlement whatsoever to a surcharge.

Objectant next argues that the CREP payments in 2006 through 2012 somehow should result in the executor being surcharged for failing to distribute the real estate. Objectant argues that the surcharge should be based off of the annual rent payments from CREP that could have been earned had the executor timely enrolled the land in the program. This issue has been previously addressed in this opinion. The court finds nothing improper in the executor’s failure to enroll the property in the CREP program prior to 2006. The continued farming of the property was consistent with the decedent’s practice and wishes and in the best interest of the estate and beneficiaries.

Objectant also argues that the executor should be surcharged $355.56 which was paid by the estate as interest due on 2007 and 2008 tax returns. Objectant argues that the taxes were not done correctly and, accordingly, the executor should be surcharged this amount.

An executor is not an insurer of the estate. The executor is not held to an exacting standard. An executor is held to a reasonable standard. The executor in this case did not violate that standard.

As the executor credibly testified, he hired “a professional” to prepare the taxes. This professional made a mistake and the mistake was discovered and appropriately corrected. The error on the accountant’s part cannot be attributed to the executor.

In connection with the taxes, the objectant also argues that the executor should be surcharged for approximately $19,000.00 in federal income tax due as the executor allegedly failed to finalize the estate and distribute the assets in a timely manner. Objectant further argues that the 1041 should have distributed the income to the beneficiaries for the beneficiaries to report on their individual income tax, which would provide a more favorable tax consequence to the estate and beneficiaries.

The alleged untimeliness of finalizing the estate has been addressed previously and objectant’s claim is rejected. With respect to the remaining argument regarding “favorable tax consequences” the objectant failed to produce any testimony whatsoever in support of his claim. Objectant failed to meet his burden of proof in contending that the beneficiaries bore a higher tax burden because the income was paid by the estate. Accordingly, such claim will also be rejected.

The final issue to be addressed by the court and as identified by the parties relates to the disposition of the Dauber Road, Cogan Station real estate. As the court noted in its December 10, 2013 Order, the executor and three of the beneficiaries want to buy the remaining beneficiary’s interest. While the court noted in said order that the remaining beneficiaiy, Estate of Alice Miller, desired to purchase the property from the others, the testimony produced at the hearing in this matter demonstrated otherwise.

More specifically, Mary Lewis, daughter of Alice Miller, deceased, wishes to purchase the property and intends on purchasing the property “at any sale.” Her intentions were made crystal clear. She wants to purchase the property as a whole and to then sell the property later to make more money. She claims that by purchasing the property at a premium, she will increase the financial value of the estate for each beneficiary including her mother’s estate. On the other hand, the executor and remaining beneficiaries are desirous of keeping the property and buying out the remaining beneficiary’s interest. They assert that the property has been in the family for many years and should stay in the family. They also argue that by keeping the property its value will only increase and they will continue to get proceeds from the Oil and Gas Lease. They also argue that keeping the property is consistent with their mother’s intent.

All of the parties agree that the property cannot be held jointly. Previously, the relationship between the parties substantially deteriorated. There is no communication between the parties except through attorneys and clearly this litigation and the substantial sums of money expended in litigating the dispute between the parties has further entrenched them in their animosity toward each other. The parties have agreed that this court can direct the disposition of the property.

The fair market value of the real estate at issue is $336,000.00 for the entire estate, including oil and gas rights. In deciding how to distribute this property, the court will consider several factors.

The first factor relates to the history of the property and the intent of the testator. The property has been in the family for decades. It clearly has sentimental value to the living children of the decedent. Unfortunately, Alice Miller passed in 2007,12 years after her mother died. Her husband Robert Miller, contrary to the surviving children, wanted the property to be sold immediately. His health, however, deteriorated and now his daughter, Mary Lewis, has become the decision maker. Her connection to the property is even more remote. She has nowhere near the emotional connection as do the surviving children to Rose Eiswert.

The court will next consider the motivations of the respective parties. The motivation of the estate and beneficiaries is to keep the majority of the property as one parcel for the benefit and use of the remaining siblings, to hopefully increase the value of the property over time with perhaps a premium being made through oil and gas production, and to potentially pass on a much more valuable asset to their surviving heirs. The motivations of Mary Lewis are solely financial.

Her stated motivation, while at first glance appearing to be legitimate, also perhaps veils another motivation. Specifically, by her buying the property in her own name, she essentially double-dips in connection with her father’s estate. She gets the property, a very valuable asset and can sell it with the entire surplus going to her. When her father dies, his assets will be distributed equally amongst his beneficiaries, who are Mary Lewis and her siblings. Alternatively, if the property remains with her mother’s estate, whatever value, will be distributed equally between her and her siblings once her father dies. Moreover, if her mother’s share is brought out, she will again be limited to her proportionate share of her father’s estate. Clearly, Ms. Lewis will benefit more financially through her request to buy the property in her name.

The court will next consider the best interests of the respective beneficiaries. At this time, each beneficiary possesses a value in the property of approximately $67,000.00 if the property would be sold at its present market value of $336,000.00. The estate of Alice Miller has no interest in the property except financial. Her estate would benefit most by a timely distribution to her of as much monies as possible, not wanting to risk any ebb and flow with respect to the real estate market and/or oil and gas production. There is no benefit to her estate with respect to the actual property or the use and enjoyment of it. On the other hand, the remaining living beneficiaries have a direct benefit in the use and enjoyment of the property. Furthermore, they have a direct benefit in the potential upside of the property value increasing and/or increased oil and gas production. Moreover, they have expressed a willingness to accept any risks associated with the ebb and flow of the market and production. Clearly, the best interests of the beneficiaries points to the property being held jointly.

Under all of the circumstances, while the estate could have been resolved earlier, the court does not find any merit to the objections filed by the Estate of Alice Miller. It is clear to the court that prior to Alice Miller’s death, there was no dispute between the parties and the siblings had been working together expecting that they would each end up with their one-fifth respective shares.

Upon Alice’s death, however, things dramatically changed. The issue became one solely of financial gain. The estate of Alice Miller, as to be expected, wanted the value of her inheritance. The remaining beneficiaries wanted to maintain the status quo. The parties could not agree and substantial litigation ensued.

The numerous and varied objections filed by the estate seem to be nothing more than a veiled attempt to pressure the estate into negotiating the sale of the property, or at the very least to compel a partition of the property. There was little if any proof in support of the objections. Assertions were made without much if any evidentiary support.

The court finds that the executor performed his duties in a reasonable and necessary manner under all of the circumstances and has not committed any malfeasance whatsoever in connection with his responsibilities to the estate and ultimately to the beneficiaries. Accordingly, the following order will be entered:

ORDER

And now, this 3rd day of June 2014, following a hearing and consideration of the respective briefs filed by the parties, the court denies the objections of the Estate of Alice Miller to the first and final account of Fred C. Eiswert, executor. The proposed statement of distribution is affirmed except that the Dauber Road, Cogan Station, Lycoming Township property known as Lycoming County Tax Parcel No. 27-288-0115 shall be distributed in kind as tenants in common to the beneficiaries Fred Eiswert, Grace Letterman, Lee Eiswert and Robert Eiswert. The estate of Rose Eiswert shall pay $67,200.00 to the Estate of Alice I. Miller in exchange for Alice I. Miller’s proportionate share of the property.


source: Caselaw Access Project

author: LOVECCHIO, /.,

license: Public Domain

text:
    Commonwealth v. Grimes

      Anthony Ciuca, for Commonwealth.

      Jeffrey Frankenburger, for defendant.
    June 5, 2014-
   LOVECCHIO, /.,

OPINION AND ORDER

Defendant is charged with one count of DUI (incapable of safely driving), one count of DUI (highest rate) and three summaries. Defendant’s non-jury trial was held on April 23, 2014 and June 2, 2014. Subsequently, the parties have submitted post trial written case authority and argument. The matter is now ripe for a cerdict.

Stuart Shebest first testified on behalf of the Commonwealth at the April 23, 2014 proceeding. He is the nursing home administrator for HCR Manor Care in Sunbury, PA. On June 29, 2013, he was the facility administrator at Williamsport Manor Care located at 300 Leader Drive in Williamsport.

He related that on June 29, 2013, he was working. At about 12:10 noon, staff mentioned to him that there was somebody lying on the parking lot. He went out to the parking lot with them and found defendant lying in the parking lot “obviously quite intoxicated, impaired.” According to Mr. Shebest, defendant “smelled like alcohol, exhibited slurred speech and was obviously not able to stand.”

Defendant spoke briefly with Mr. Shebest. He indicated to Mr. Shebest that he drove there. Upon request, defendant handed his keys over to Mr. Shebest.

Mr. Shebest asked defendant where his car was located and he pointed to a vehicle “that was parked pretty much right behind him in the parking area,” approximately four or five feet from where defendant was lying on the parking lot.

Mr. Shebest indicated that June 29 was a Saturday and “a slower day for visitors.” He arrived for work at approximately 9:00 a.m. and left the facility for lunch between 11:45 a.m. and noon. He arrived “back at work at about 12:05 or 12:10 p.m.” He did not see defendant’s vehicle when leaving for lunch or returning. He “came across” defendant in the parking lot sometime around 12:15 to 12:20 p.m.

After speaking briefly with defendant, Mr. Shebest and a staff person assisted him into a wheelchair. They wheeled him over to a patio after which Mr. Shebest instructed one employee to call 911. Police officers and EMS personnel eventually arrived.

Justin Rosboschil next testified on behalf of the Commonwealth. He has been employed by the Pennsylvania State Police as a Trooper for “approximately a year and six months.” He was on duty on June 29, 2013 and was dispatched to Manor Care due to a report of a drunken individual found in the parking lot.

According to Trooper Rosboschil, he was dispatched at approximately 12:45 and arrived on scene at approximately 12:50. He made contact with defendant, who was in a wheelchair under an awning-covered patio. He questioned defendant. Defendant noted that he drove there and admitted to drinking.

Defendant exhibited obvious signs of intoxication. It was difficult to get very long answers from defendant because of his slurred speech and slow response. He exhibited a “blank stare” and smelled heavily of alcohol when he spoke.

When Trooper Rosboshcil asked defendant for his license, defendant pulled out his wallet and gave him a credit card. Defendant did not have his license with him. As a result, Trooper Rosboschil needed to identify defendant by running his name and date of birth.

Inside defendant’s vehicle Trooper Rosboschil found an opened bottle of rum, as well as a very large black travel mug which had a “liquid in it, and was believed to be alcohol from the smell.” The bottle of rum was found on the passenger side floor and the travel mug was found in the center console.

After looking inside defendant’s vehicle, Trooper Rosboschil spoke with defendant again. Defendant admitted both that the alcohol in the vehicle was his and that he had drank “before he had driven.” Defendant also admitted that he had been drinking while driving. He admitted consuming “about two quarts of alcohol.”

Trooper Rosboschil administered standard field sobriety tests to defendant, including the walk and turn, and one legged stand test. Defendant “showed pretty much every indication of impairment that the tests are designed to show.” During the one test “EMS or somebody actually had to help” Defendant stand up. On the one legged stand test after being directed to begin the test, defendant just stood there and “didn’t lift any leg.”

The results of the tests indicated that defendant was clearly under the influence of an alcoholic beverage. Trooper Rosboschil testified that he was of the opinion that defendant was under the influence of alcohol to the extent he was not able to safely operate a vehicle. He did not, however, transport defendant to the Williamsport Hospital. Instead, EMS transported defendant because Trooper Rosboschil was concerned about the amount of alcohol in defendant’s system.

Trooper Rosboschil followed the ambulance to the Williamsport Hospital. He read the implied consent warnings to defendant. Defendant signed a consent form and blood was drawn from defendant at 2:10 p.m. At the hospital, Trooper Rosboschil again questioned defendant. Defendant’s responses at the hospital were somewhat better. Defendant admitted that he had been drinking prior to driving and that he traveled to Manor Care to visit his mother. Defendant also kept repeating that “he was wrong in doing what he did.”

When the trial resumed on June 2, 2014, Trooper Rosboschil again testified. He explained that defendant did not leave in the ambulance until approximately an hour after he arrived. He indicated that during that time EMS personnel were evaluating and treating defendant, he spoke with Mr. Shebest, he spoke with EMS personnel and he was involved in identifying defendant, who unfortunately did not have proper identification on him.

Ayako Chan-Hosokawa testified as an expert witness on behalf of the Commonwealth. She is employed by NMS Labs in Willow Grove, PA as a forensic toxicologist and she has significant training and professional experience in that field. She testified in detail as to the procedure by which defendant’s blood was tested and that the results of the testing showed that defendant’s blood alcohol concentration level was .408 %.

The Commonwealth also admitted the following exhibits into evidence in its case in chief: C-l — Sketch of the parking lot where defendant was located; C-2 — Pennsylvania Department of Transportation Vehicle Record Abstract; C-3 — Penn Dot DL-26, Chemical Testing Warnings; C-4 — Susquehanna Health Whole Blood Alcohol Analysis Chain of Custody Form; C-5 — Curriculum Vitae of Ayako Chan-Hosokawa; C-6 — NMS Chain of Custody — Posting History Report; C-l — NMS Chain of Custody — Sample History Report Work Order No.: 13164368; and C-8 —NMS Lab Toxicology Report issued July 5, 2013.

The Commonwealth rested its case, and defendant requested a demurrer with respect to the charge of driving under the influence with highest rate of alcohol, which the court denied. Defendant did not present any evidence.

Defendant argued that the evidence was insufficient to sustain a conviction on the DUI counts, in large part because the evidence was lacking with respect to defendant operating the vehicle and the time in which defendant may have operated the vehicle. The Commonwealth countered that the evidence was sufficient beyond a reasonable doubt to convict defendant of all of the charges and that any delay in obtaining defendant’s blood for chemical testing beyond two hours was reasonable.

The court does not hesitate in concluding that the Commonwealth presented sufficient evidence to prove beyond a reasonable doubt that defendant drove his vehicle to the Manor Care parking lot on June 29, 2013 for the purpose of visiting his mother. The evidence also established beyond a reasonable doubt that defendant drove his vehicle after drinking a sufficient amount of alcohol such that he was rendered incapable of safely driving. As well, the evidence clearly showed that defendant appeared in a public place manifestly under the influence of alcohol to the degree that he endangered himself or annoyed other persons in his vicinity. Further, the evidence proved beyond a reasonable doubt that at the time he drove his vehicle he was not in possession of a valid driver’s license. Finally, the evidence established beyond a reasonable doubt that while defendant was driving his vehicle, he consumed an alcoholic beverage.

Accordingly, the court does not hesitate in finding defendant guilty of counts 1, 3, 4 and 5.

With respect to count 2, driving under the influence with the highest rate of alcohol and as set forth previously in this opinion, the evidence established beyond a reasonable doubt that defendant drove his vehicle after and while drinking an alcoholic beverage.

In order to convict defendant of this charge, however, the Commonwealth must prove that the alcohol concentration in the defendant’s blood was .16% or higher within two (2) hours after he had driven his vehicle.

The credible evidence establishes that defendant’s vehicle arrived in the parking lot no earlier than shortly after 12:05 p.m. and no later than 12:10 p.m. The blood was taken at 2:10 p.m. Accordingly, there is a question whether defendant’s blood was drawn within two (2) hours after he had driven.

Section 3 802 (g) of the Vehicle Code, however, provides an exception to the two hour rule, which states:

Notwithstanding the provisions of subsection (a), (b), (c), (e), or (f), where alcohol or controlled substance concentration in an individual’s blood or breath is an element of the offense, evidence of such alcohol or controlled substance concentration more than two hours after the individual has driven, operated or been in actual physical control of the movement of the vehicle is sufficient to establish that element of the offense under the following circumstances: (1) where the Commonwealth shows good cause explaining why the chemical test sample could not be obtained within two hours; and (2) where the Commonwealth establishes that the individual did not imbibe any alcohol or utilize a controlled substance between the time the individual was arrested and the time the sample was obtained.

75 Pa. C.S. § 3802 (g).

The evidence establishes beyond a reasonable doubt that defendant did not imbibe any alcohol between the time he was arrested and the time the sample was obtained. The entire time from when law enforcement arrived until the blood was drawn, defendant was in the presence of either Trooper Rosboschil, EMS personnel and/or hospital personnel. The court does not accept defendant’s argument that defendant could have secreted alcohol on his person and consumed it while in the ambulance or in the hospital.

The determinative issue is whether the Commonwealth has proven beyond a reasonable doubt good cause as to why the test sample could not be obtained within two hours.

In arguing that it established good cause beyond a reasonable doubt, the Commonwealth noted that Trooper Rosboshil performed his duties in as expeditious but reasonable manner as possible. He arrived on the scene within minutes of the dispatch. He took the appropriate steps in connection with the investigation which unfortunately caused him to expend more time than a more routine investigation. More specifically, Trooper Rosboschil needed to speak with witnesses, needed to verify defendant’s identification and needed to search the vehicle. He also needed to take defendant’s severe intoxication into account while performing his duties, including interviewing defendant, administering field sobriety tests, taking defendant into custody and having defendant transported to the hospital by ambulance.

The evidence establishes that defendant was transported to the Williamsport Hospital in a prompt manner and Trooper Rosboschil took the necessary steps to secure a blood test as expeditiously as possible. Indeed, it appears that any delay in this matter was caused by defendant’s severe intoxication. The investigation was delayed because defendant could not produce identification. The interview was delayed because defendant could not initially speak coherently or in complete sentences. The transport was delayed because EMS needed to assess defendant and needed to transport the defendant per Pennsylvania State Police policy. As well, processing at the hospital appeared to be somewhat delayed by virtue of the fact that Trooper Rosboschil needed to review the implied consent warnings and documents with an extremely intoxicated defendant.

The court will not provide a benefit to defendant because of his extreme intoxication. Because Trooper Rosboschil acted as expeditiously as possible, in good faith and with defendant’s health and safety being paramount, the court finds that the Commonwealth has established beyond a reasonable doubt “good cause” why the chemical test sample could not be obtained within two hours. The court also notes that the violation of the two hour rule was de minimis at best. The blood was taken at the most within a few minutes after two hours.

Accordingly, the court finds that the Commonwealth has presented sufficient evidence to conclude beyond a reasonable doubt that defendant drove a vehicle and that his blood alcohol content was significantly above a .16%, namely .408%. Furthermore, the Commonwealth has shown good cause explaining why the chemical test could not be obtained within two hours and that defendant did not imbibe any alcohol between the time he was arrested and by the time the sample was obtained. Therefore, the court also finds defendant guilty of count 2, driving under the influence of alcohol with the highest rate of alcohol.

ORDER

And now, this 5th day of June 2014, following a non-jury trial, the court finds the defendant guilty of count 1, driving under the influence of alcohol (incapable of safely driving), an ungraded misdemeanor; count 2, driving under the influence with the highest rate of alcohol, an ungraded misdemeanor; count 3, public drunkenness, a summary offense; count 4, carrying/exhibiting driver’s license on demand, a traffic summary and count 5, restriction on alcoholic beverages, a traffic summary.

Sentencing is scheduled for August 19,2014 at 9:00 a.m. in Courtroom No. 4 of the Lycoming County Courthouse.

Defendant is directed to contact West Branch Drug and Alcohol Abuse Commission for the purposes of conducting a CRN and Assessment. A copy of this opinion and order shall be provided to West Branch Drug and alcohol abuse commission in order that they may arrange to have a representative contact defendant at his place of incarceration, either the Lycoming County Prison or the Tioga County Prison to conduct such an assessment and evaluation.

Furthermore, the Lycoming County Adult Probation Office shall prepare a Presentence Report.

ORDER

And now, this 5th day of June 2014, defendant having been convicted of DUI and related offenses and defendant’s sentencing being scheduled for August 19, 2014 at 9:00 a.m. in Courtroom No. 4 of the Lycoming County Courthouse, the Sheriff of Lycoming County is directed to proceed to the Tioga County Correctional Facility to transport defendant to the Lycoming County Courthouse on the date of his sentencing in order that he may be sentenced. Following sentencing, the Sheriff is directed to return defendant to the Tioga County Prison.


author: KOURY, J.,

text:
    HSBC Bank USA, N.A. v. Walters

      Brett L. Messinger, for plaintiff.

      Raymond T. Dorizio, defendants.
    June 11, 2014
   KOURY, J.,

— This matter is before the court on the preliminary objections of plaintiff HSBC Bank USA, N.A. (“HSBC”) to the amended counterclaim of defendants Douglas W. Walters, Patricia K. Walters, and Rosemarie Walters (collectively, the “Walters”). For the reasons set forth below, we hold that HSBC’s preliminary objections must be sustained.

BACKGROUND

I. The Mortgage

On October 28, 2005, the Walters obtained a loan in the amount of $125,000 from Delta Funding Corp. (“Delta” or “Lender”), evidenced by a promissory note (the “note”). See compl. ¶ 3, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. May 14, 2012) (“compl.”). The note was secured by a mortgage on the Walters’ property located at 775 Rutt Road, Bangor, Northampton County, Pennsylvania, 18013 (the “property”). See mortgage dated Oct. 28, 2005 Between Delta Funding Corp. and Douglas Walters, Patricia Walters, and Rosemarie Walters at 3, attach, to amended counterclaim, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Jan. 22, 2013) (the “mortgage”). The parties to the mortgage were the Walters and Delta’s nominee, Mortgage Electronic Registration Services, Inc. See id. at 1.

The mortgage provided that the Walters would make monthly payments of principal and interest on the note and certain additional amounts known as “escrow items.” See id. § 1 (“Borrower shall pay when due the principal of, and interest on, the debt evidenced by the Note and any prepayment charges and late charges due under the Note. Borrower shall also pay funds for Escrow Items pursuant to Section 3.”). The “escrow items” included amounts necessary to cover property taxes that would become due on the property. See id. § 3 (“Borrower shall pay to Lender on the day Periodic Payments are due...a sum (the “Funds”) to provide for payment of amounts due for: (a) taxes and assessments and other items which can attain priority over this Security Instrument as a lien or encumbrance on the Property....”).

The Walters’ monthly payments were to be placed into an escrow account, and the Lender agreed to apply the escrow funds to pay the property taxes in a timely manner as they became due, as required by the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. See id. (“Lender shall apply the Funds to pay the Escrow Items no later than the time specified under RESPA.”). The relevant provision of RESPA states as follows:

If the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes, insurance premiums, and other charges in a timely manner as such payments become due.

12 U.S.C.A. § 2605(g).

The mortgage provided that in the event there was a shortage of funds in the escrow account as defined under RESPA, the Lender would notify the Walters, and the Walters would pay the Lender the amount necessary to make up the shortage. See mortgage § 3 (“If there is a shortage of funds held in escrow, as defined under RESPA, Lender shall notify Borrower as required by RESPA, and Borrower shall pay to Lender the amount necessary to make up the deficiency in accordance with RESPA....”).

The mortgage provided that it was to be governed by federal and Pennsylvania law. See id. § 16 (“This security Instrument shall be governed by federal law and the law of the jurisdiction in which the property is located.”). The provisions of RESPA relating to borrower inquiries provide as follows:

Duty of loan servicer to respond to borrower inquiries
(1) Notice of receipt of inquiry
(A) In general
If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.
(B) Qualified written request
For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that —
(1) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.
(2) Action with respect to inquiry
Not later than 30 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower of any qualified written request under paragraph (1) and, if applicable, before taking any action with respect to the inquiry of the borrower, the servicer shall —
(A) make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction (which shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower);
(B) after conducting an investigation, provide the borrower with a written explanation or clarification that includes —
(i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer; and
(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower; or
(C) after conducting an investigation, provide the borrower with a written explanation or clarification that includes —
(i) information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and
(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.

12 U.S.C.A. § 2605(e).

II. The Instant Litigation

HSBC is Delta’s successor in interest on the mortgage. See comply 1. On May 14,2012, HSBC filed a complaint in mortgage foreclosure against the Walters, alleging that the mortgage was in default because the Walters had failed to make the monthly payments due on the note from October 1, 2011 through the date of the filing of the complaint. See compl. ¶¶ 1-5. HSBC alleged that it had sent notice of the default to the Walters in accordance with applicable law and that the Walters had failed to cure the default. See id. ¶¶ 6-7. As a result, HSBC alleged that all sums secured by the mortgage, including the unpaid principal balance and interest and certain additional fees, charges, and costs, were immediately due and payable. See id. ¶¶5-6. HSBC demanded a judgment in rem against the Walters in the amount of $144,526.75, plus accrued interest, costs, and attorneys’ fees, and a sale of the property to satisfy the judgment. See id. at 3. However, HSBC did not attach a copy of the mortgage to its complaint. See id.

On May 14,2012, pursuant to the Residential Mortgage Foreclosure Diversion Program, the court issued an order scheduling a conciliation conference for August 20, 2012. See Case Management Order, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. May 14, 2012). The order did not indicate whether the matter was stayed pending the conciliation conference. See id.

On June 11, 2012, the Walters filed an answer and counterclaim. See defendants’ answer to plaintiff’s complaint with new matter and counterclaim, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. June 11, 2012) (the “counterclaim”). The counterclaim consisted of one claim for unjust enrichment. See id. ¶¶ 20-30. In the counterclaim, the Walters asserted:

22. Plaintiffs have conferred a benefit to [HSBC] in the form of money.
23. Since February 2007 through 2010, [HSBC] has failed to pay the property taxes at 775 Rutt Road from the escrow account of plaintiffs.
24. Instead of paying the property taxes for 775 Rutt Road from that property’s escrow account, [HSBC] has incorrectly paid the property taxes at 755 Rutt Road, a property also owned by the plaintiffs and of which had no association with the mortgage at 775 Rutt Road, thus increasing the monthly payments of plaintiffs because of its error.
25.The taxes at 755 are paid in a separate transaction by plaintiffs; therefore, were unnecessarily paid by [HSBC].
26. Since 2010, [HSBC] has paid the property taxes for both 755 and 775 Rutt Road from the escrow account of 755 Rutt Road and increased the monthly payments being made by plaintiffs to an amount they could no longer afford, thus leaving them subject to foreclosure and also inducing them into agreeing to a loan [modification] in 2010 because of the increased monthly requirement.
27. Plaintiffs have written several letters to [HSBC] about its error; however, those communications were ignored.
28. Plaintiffs conferred the benefits referenced above in reliance upon [HSBC’s] promise to pay for taxes for which they owed under the 775 Rutt Road mortgage.
29. [HSBC] has received the benefit of plaintiffs’ money, but plaintiffs have received no benefit from [HSBC]. In fact, plaintiff is in a worse position due to [HSBC’s] failure to pay for the taxes of the property, thereby increasing their mortgage payment and resulting in this foreclosure action.
30. To permit [HSBC] to receive the benefit of payment without having to submit payment to plaintiffs would be unjust.

Id. ¶¶ 23-30. The Walters demanded judgment in an amount to be determined plus attorneys’ fees, costs, interest, and delay damages. See id. at 5. However, the Walters did not attach a copy of the mortgage to their counterclaim. See id.

On July 6, 2012, HSBC filed preliminary objections to the Walters’ Counterclaim. See plaintiff’s preliminary objections, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. July 6, 2012) (“preliminary objections”). HSBC asserted that under Pa.R.C.P. 1141(a), an action for mortgage foreclosure “shall not include an action to enforce a personal liability.” Id. ¶ 6. HSBC asserted that the Walters’ counterclaim was an in personam claim for damages and therefore could not properly be asserted as a counterclaim in an in rem action for mortgage foreclosure. See id. ¶ 5. Accordingly, HSBC asserted that the Walters’ counterclaim must be dismissed pursuant to Pa.R.C.P. 1028(a)(5) for misjoinder of a cause of action. See id. ¶¶ 4, 7-8. HSBC did not attach a copy of the mortgage to its preliminary objections. See id.

On August 20,2012, the court issued an order directing the parties to confer about the “tax issue” and staying further proceedings pending a conciliation conference. See HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Aug. 20, 2012). On September 24, 2012, following a conciliation conference at which the parties failed to reach an agreement, the court issued an order authorizing HSBC to proceed with the foreclosure action. See HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Sept. 24, 2012).

On November 5, 2012, the Walters filed an answer to HSBC’s preliminary objections to their counterclaim. See defendants’ answer to plaintiff’s preliminary objections, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Nov. 5, 2012). The Walters asserted that their counterclaim for damages for HSBC’s failure to pay their property taxes was permitted by Pa.R.C.P. 1148. See id. ¶¶ 5-8. Rule 1148 states that in an action for mortgage foreclosure, “[a] defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff’s cause of action arose.” Pa.R.C.P. 1148. The Walters further cited Chrysler First Bus. Credit Corp. v. Gourniak, 601 A.2d 338, 342 (Pa. Super. 1992), which states that a defendant may assert a counterclaim under Rule 1148 if it is “part of, or incident to, the creation of the mortgage itself.” Id. The Walters asserted, somewhat inartfully, that “the counterclaim not only arises from the same transaction or occurrence, but also the mortgage payment includes the escrow payments [that] stem from the cause of action [from] which [HSBC’s] claim arose.” Id. However, the Walters did not attach a copy of the mortgage to their answer to HSBC’s preliminary objections. See id.

On January 7,2013, the court issued an order sustaining HSBC’s preliminary objections and striking the Walters’ counterclaim. See HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Jan. 7,2013). The court agreed with the Walters that Rule 1148 creates an exception to Rule 1141(a) and permits assertion of a counterclaim for damages if the counterclaim is “part of, or incident to, the creation of the mortgage itself.” Id. at 5-6. However, because the Walters had not alleged that HSBC’s obligation to pay property taxes was expressly stated in the mortgage and had not attached a copy of the mortgage to their counterclaim, the court could not determine whether the Walters’ counterclaim was “part of, or incident to, the creation of the mortgage.” Id. at 7.

Although the Walters have alleged that HSBC promised to pay for taxes that the Walters owed under the mortgage for the property, there is no allegation indicating that this promise was contained as part of the mortgage itself. If such an allegation were present here, we would agree with the reasoning in the persuasive (but not binding) decision in Mortgage Electronic Registration Systems, Inc. v. Alicea, Civil No. 1:CV-05-2165, 2006 WL 1149236 (M.D. Pa. Apr. 26, 2006), that the allegations here would be sufficient to maintain this counterclaim. However, since there is no such allegation here, we are constrained to dismiss this counterclaim, but we will allow the Walters to file an amended counterclaim within twenty days.

Id.

On January 22, 2013, the Walters filed an amended counterclaim. See amended counterclaim, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Jan. 22, 2013) (“Amended counterclaim”). The amended counterclaim reasserted the Walters’ claim for unjust enrichment but added the following two paragraphs:

5. Defendant, by way of mortgage recorded on November 14, 2005 attached hereto, in Section 3 of the mortgage instrument, plaintiffs were required to pay under the note, periodic payments of amount due including, “taxes and assessments and other items which can attain over this security instrument as a lien or encumbrance on the Property.”
6. Defendant’s obligation to pay property taxes from the payments submitted by plaintiffs arose from the mortgage instrument, as such, defendant’s failure to pay the appropriate taxes caused severe detriment to plaintiffs.

Id. ¶¶ 5-6. Attached to the amended counterclaim was a copy of the mortgage, which reflected the terms and provisions set forth above. See id.

On January 17, 2014, HSBC filed preliminary objections to the Walters’ amended counterclaim. See plaintiff’s preliminary objections to defendants’ amended counterclaim, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Jan. 17, 2014) (“preliminary objections to the amended counterclaim”). HSBC asserted that .the Walters’ amended counterclaim is improper under Rule 1148, because “even the amended allegations clearly do not relate to facts or circumstances surrounding the creation of the mortgage, but rather to an apparent dispute as to the payment of real estate taxes which accrued over the term of the loan.” Id. ¶ 12. However, HSBC did not raise a preliminary objection based on misjoinder of a cause of action under Pa.R.C.P. 1028(a) (5). Rather, HSBC asserted: “Because the counterclaim is improper in this proceeding, ... it is required to be dismissed for failure to state a cause of action upon which relief may be granted and for failure to comply with rule of court pursuant to Pa.R.C.P. 1028(a)(4) and 1028(a)(2), respectively.” Id. ¶ 13.

On February 24, 2014, the Walters filed an answer to HSBC’s preliminary objections to the amended counterclaim. See defendants’ answer to plaintiff’s preliminary objections, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Feb. 24, 2014)(“answer to preliminary objections to amended counterclaim”). The Walters asserted that their amended counterclaim satisfies Rule 1148. See id. ¶ 5. They asserted that because HSBC’s obligation to pay property taxes is set forth in an express provision of the mortgage, their amended counterclaim is “part of, or incident to, the creation of the mortgage” and “arises from the same transaction and occurrence” as HSBC’s claim for foreclosure. See id. (“[Paragraph 3 of the mortgage] clearly requires both the lender and the borrower to comply with terms contained in the document creating the mortgage. As stated in defendants’ counterclaim, this obligation creates a contractual relation from the creation of the mortgage.”). Thus, the Walters asserted that the court should follow the reasoning of the case cited in the court’s January 7, 2013 order, Mortgage Electronic Registration Systems, Inc. v. Alicea, Civil No. 1:CV-05-2165, 2006 WL 1149236 (Apr. 26, 2006), and overrule the preliminary objections to the amended counterclaim. See id. at 2.

DISCUSSION

I. Preliminary Objections

Pa.R.C.P. 1028(a) states:

Rule 1028. Preliminary objections
(a) Preliminary objections may be filed by any party to any pleading and are limited to the following grounds:
(2) failure of a pleading to conform to law or rule of court or inclusion of scandalous or impertinent matter;
(4) legal insufficiency of a pleading (demurrer).

Pa.R.C.P. 1028(a). “Preliminary objections in the nature of a demurrer test the legal sufficiency of the complaint.” Estate of O’Connell ex rel. O’Connell v. Progressive Ins. Co., 79 A.3d 1134, 1137 (Pa. Super. 2013).

When considering preliminary objections, all material facts set forth in the challenged pleadings are admitted as true, as well as all inferences reasonably deducible therefrom. Preliminary objections [that] seek the dismissal of a cause of action should be sustained only in cases in which it is clear and free from doubt that the pleader will be unable to prove facts legally sufficient to establish the right to relief. If any doubt exists as to whether a demurrer should be sustained, it should be resolved in favor of overruling the preliminary objections.

Id. (quoting Feingold v. Hendrzak, 15 A.3d 937, 941 (Pa. Super. 2011)).

HSBC asserts that the Walters’ amended counterclaim is impermissible under Rule 1148, because it is not “part of, or incident to, the creation of the mortgage” and that, as a result, it must be stricken for failure to conform to law or rule of court under Pa.R.C.P. 1028(a)(2) and for legal insufficiency (demurrer) under Pa.R.C.P. 1028(a)(4). See preliminary objections to the amended counterclaim ¶¶ 12-13.

We hold that the Walters’ amended counterclaim is “part of, or incident to, the creation of the mortgage” and is therefore proper under Rule 1148. However, as more fully set forth below, a claim for unjust enrichment cannot be maintained when the basis for the claim is the subject of an express contractual provision. Because the amended counterclaim now seeks relief based on an express contractual provision in the mortgage, see amended counterclaim ¶¶ 5-6, we hold that HSBC’s preliminary objection based on failure to conform to law or rule of court under Pa.R.C.P. 1028(a)(2) and legal insufficiency (demurrer) under Pa.R.C.P. 1028(a)(4) must be sustained.

II. Rules Governing Mortgage Foreclosure

Actions for mortgage foreclosure are governed by Rules 1141 through 1150 of the Pennsylvania Rules of Civil Procedure. See Signal Consumer Discount Co. v. Babuscio, 390 A.2d 266, 270 (Pa. Super. 1978). Rule 1141, which defines actions for mortgage foreclosure, states: “As used in this chapter, ‘action’ means an action to foreclose a mortgage upon any estate, leasehold or interest in land...but shall not include an action to enforce a personal liability.” Pa.R.C.P. 1141(a).

However, Rule 1148 is an exception to Rule 1141(a). See Signal Consumer Discount, 390 A.2d at 270. Rule 1148 states: “A defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff’s cause of action arose.” Pa.R.C.P. 1148. The court in Signal Consumer Discount stated:

The very definition of a mortgage foreclosure action under Rule 1141(a) excludes “an action to enforce a personal liability”; this restriction is essential to preserve the “de terris” identity of a mortgage foreclosure action and is equally binding on a mortgagee-plaintiff and a mortgagor-defendant. Rule 1148, which allows a defendant to assert a contractual counterclaim arising out of a mortgage transaction against the mortgagee, constitutes the only exception to this rule.

390 A.2d at 270 (footnote omitted).

“[Rule 1148] has been interpreted as permitting to be pled only those counterclaims that are part of or incident to the creation of the mortgage itself.” Chrysler First Bus. Credit Corp. v. Gourniak, 601 A.2d 338, 341 (Pa.Super. 1992).

“[Rule 1148] restricts every defendant to claims which arise from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff’s cause of action arose.... No defendant may now set off a claim against the plaintiff simply because its nature is contractual or quasicontractual, as allowed in assumpsit actions. The claim must now arise, in some manner from the mortgage relationship.”

Id. (quoting 3 Goodrich-Amram 2d: Procedural Rules Service with Forms §1148:1 at 488) (emphasis added by court).

Courts applying these principles have held that Rule 1148 would permit assertion of a counterclaim for fraud in the inducement of the mortgage. See, e.g., Green Tree Consumer Discount Co. v. Newton, 909 A.2d 811, 814 (Pa. Super. 2006) (allowing counterclaim asserting that mortgagor who executed the mortgage to secure home improvement loan was never informed that he was signing a mortgage document and was mentally incompetent to enter into the mortgage; “Fraud in the inducement of the mortgage is clearly a permissible counterclaim under Rule 1148.”).

However, Rule 1148 would not permit assertion of a counterclaim for fraud in the inducement of the underlying sale of the property, a transaction separate from the mortgage relationship. See id. at 815.

[T]he owners are not allowed to claim that they did not owe an obligation to make their mortgage payments because the seller of the house failed to tell them about a leaky basement. The sale of the home, with all attendant requirements for disclosure regarding the condition of the house, is a separate transaction from obtaining a mortgage. As such, Rule 1148 prevents that counterclaim.

Id.; accord Chrysler, 601 A.2d at 341 (Rule 1148 did not permit mortgagors to assert a counterclaim that the seller had fraudulently induced them to enter into the contract of sale of the property by falsely representing that seller would extend separate financing for rehabilitation of the property and operation of buyers’ business; “[mortgagors’] counterclaim arises from alleged fraudulent misrepresentations which they contend induced them to enter into a contract for the purchase of the real property. This is precisely the type of counterclaim that is not cognizable under Rule 1148.”)(emphasis in original); Mellon Bank, N.A. v. Joseph, 406 A.2d 1055, 1060 (Pa. Super. 1979) (mortgagor could not assert counterclaims seeking (1) damages for the lender’s refusal to accept tender of the mortgage obligation to cure the default; or (2) an order compelling the lender to assign the mortgage; “Here, the counterclaims appellant seeks to assert are remedial; they arose once the mortgage was in default, but were not part of, or incident to, the creation of the mortgage itself.”).

Under the above-cited authorities, in order to determine whether the Walters’ amended counterclaim is permissible under Rule 1148, the court must first identify the basis of their claim for relief. The court must then determine whether the claim is “part of, or incident to, the creation of the mortgage itself.” Chrysler, 601 A.2d at 341.

III. Basis for the Walters’ Counterclaim

In their amended counterclaim, the Walters assert that they defaulted on the mortgage because HSBC breached its obligation to pay their property taxes as they became due and, as a result, increased their monthly payments to an amount they could no longer afford. See amended counterclaim ¶¶ 4-9. They seek damages resulting from HSBC’s breach of its obligation. See id. at 3. In its order of January 7, 2013, this court stated:

[W]e cannot discern from the counterclaim that the failure to pay the property taxes from the escrow account is part of, or incident to, the creation of the mortgage. Although the Walters have alleged that HSBC promised to pay for taxes that the Walters owed under the mortgage for the property, there is no allegation indicating that this promise was contained as part of the mortgage itself. If such an allegation were present here, we would agree with the reasoning in the persuasive (but not binding) decision in Mortgage Electronic Registration Systems, Inc. v. Alicea, Civil No. 1:CV-05-2165, 2006 WL 1149236 (M.D. Pa. Apr. 26, 2006) that the allegations here would be sufficient to maintain this counterclaim. However, since there is no such allegation here, we are constrained to dismiss this counterclaim, but we will allow the Walters to file an amended counterclaim within twenty days.

HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526, at 7 (C.P. Northampton Co. Jan. 7, 2013).

In their amended counterclaim, the Walters have addressed the question raised in the court’s January 7,2013 order, alleging that HSBC’s obligation to pay their property taxes was set forth in the mortgage itself. See amended counterclaim ¶¶ 5-6. The court has reviewed the amended counterclaim and the mortgage attached thereto and finds that HSBC’s obligation to pay the Walters’ property taxes is expressly stated in section three of the mortgage. See mortgage § 3 (“Lender shall apply the funds to pay the Escrow Items no later than the time specified under RESPA.”). The mortgage also contains the provisions that permitted HSBC to increase the Walters’ monthly payments to cover the allegedly increased amounts due for taxes. See id. (“If there is a shortage of funds held in escrow, as defined under RESPA, Lender shall notify Borrower as required by RESPA, and Borrower shall pay to Lender the amount necessary to make up the deficiency in accordance with RESPA.”). We will now review the decision of the United States District Court for the Middle District of Pennsylvania in Alicea to determine whether the Walters’ amended counterclaim is “part of, or incident to, the creation of the mortgage itself.” Chrysler, 601 A.2d at 341.

IV. The Decision in Alicea

In Alicea, as here, the mortgage required the mortgagee to escrow funds from the mortgagors’ monthly payments to pay the mortgagors’ property taxes as they became due. See Mortgage Electronic Registration Systems, Inc. v. Alicea, Civil No. 1:CV-05-2165, 2006 WL 1149236 (M.D. Pa. Apr. 26, 2006). As here, the mortgagee allegedly failed to pay the taxes and, as a result, the property was sold at a tax sale. See id. At the time of the tax sale, the mortgagors were under contract to sell the property to a third party. See id. As a result of losing the property at the tax sale, the mortgagors suffered damages in the amount of the profit they would have received on the sale to the third party. See id. The mortgagee brought an action to foreclose against the mortgagors and the party that had purchased the property at the tax sale. See id. As here, the mortgagors asserted a counterclaim for breach of the mortgagee’s obligation to pay the property taxes. See id. The mortgagors sought damages in the amount of the profit they would have received had they sold the property to the third party. See id. The court stated:

In support of its motion to dismiss, [mortgagee] argues that Pennsylvania law does not permit counterclaims in mortgage foreclosure actions unless they are “part of or incident to the creation of the mortgage...” Chrysler First Bus. Credit Corp. v. Gourniak, 411 Pa. Super. 259, 266, 601 A.2d 338, 342 (1992). See also Cunningham v. McWilliams, 714 A.2d 1054, 1057 (Pa. Super. 1998); Overly v. Kass, 282 Pa. Super. 108, 114 554 A.2d 970, 973 (1989); Mellon Bank, N.A. v. Joseph, 267 Pa. Super. 307, 317 406 A.2d 1055, 1060 (1979). We find that [mortgagors’] counterclaim meets this test. Fairly read, it alleges that the mortgage documents required them to pay to the mortgagee amounts that would cover the tax obligations on the property and that in turn the mortgagee was to pay the taxing authorities. However, although [mortgagors] had remained current on their obligation through 2002, the mortgagee had failed to pay the taxes, resulting in a tax sale in 2004 that prevented [mortgagors] from completing a sale in 2004 that would have netted them $7,000. Since the mortgagee’s obligation allegedly arises from the mortgage documents, the counterclaim does not violate Rule 1148. See Meritor Sav. Bank v. Barone, 399 Pa. Super. 213, 216-17, 582 A.2d 21, 23 (1990) (bank’s failure to obtain the type of disability insurance promised in its disclosure form when mortgagees executed their mortgage was a proper basis for a counterclaim).

Id. (footnote omitted). Thus, the court held that the mortgagors’ counterclaim for damages based on breach of the mortgagee’s obligation to pay the taxes was “part of, or incident to, the creation of the mortgage” and was therefore a proper basis for a counterclaim under Rule 1148. See id.

V. Alicea’s Application of Pennsylvania Law

HSBC asserts that Alicea, a federal case that is not binding on this court, was wrongly decided and should not be followed. See memorandum of law in support of plaintiff’s preliminary objections to defendants’ amended counterclaim at 6-8, HSBC Bank USA, N.A. v. Walters, No. C-48-CV-2012-4526 (C.P. Northampton Co. Jan. 17, 2014) (“HSBC’s Br.”). First, HSBC asserts that a mortgagee’s failure to pay property taxes cannot occur at the inception of the mortgage but can occur only after the passage of time and therefore cannot arise out of the “creation” of the mortgage. See id. at 6 (“[T]here can be no question that defendants’ claims did not exist at the time the mortgage was executed, being that the claim for unjust enrichment is premised on an alleged enrichment that occurred when tax escrow payments were made by defendants, over two years after the origination of the mortgage.”).

Second, HSBC asserts that “the short analysis in Alicea is based on a fundamentally flawed premise, namely that the plaintiff is seeking an in personam judgment against the mortgagors.” Id. at 6. HSBC quotes the following language from an unrelated section of the opinion: “[Tjhat plaintiff seeks an in personam judgment against [mortgagors] here is not a reason to abstain; if anything, it justifies an exercise of continuing jurisdiction.” Id. at 7 (quoting Alicea, 2006 WL 1149236, at 5-6). HSBC states:

While this court previously indicated that it may find the Alicea decision persuasive, in light of the federal court’s apparent misapprehension of the fundamental nature of a Pennsylvania foreclosure, [HSBC] would urge the court to be guided by the long history of case law developed by the courts of the Commonwealth despite the fact that the issue of a counterclaim based on tax escrow payment issues has not been specifically addressed.

Id. We disagree.

First, the statement HSBC quotes from Alicea was made in connection with the court’s analysis of the Rooker-Feldman Abstention Doctrine. See 2006 WL 1149236, at 5-6. There was no indication that the quoted language had any impact on the court’s determination that the mortgagee’s obligation to pay property taxes was “part of, or incident to, the creation of the mortgage” and was therefore a proper basis for a counterclaim under Rule 1148. Second, the Alicea court did not craft its own interpretation of Pennsylvania law but followed the thorough and well-reasoned opinion of the Pennsylvania Superior Court in Meritor Savings Bank, 582 A.2d 21 (Pa. Super. 1990), which was based on similar facts.

In Meritor Savings Bank, the mortgagor executed a mortgage and, at the same time, purchased disability insurance through the mortgagee bank to ensure that his mortgage payments would continue in the event he became disabled. See id. at 22. The bank’s disclosure form, dated the same day as the mortgage, stated that the mortgagor was purchasing disability insurance “in connection with your installment loan.” Id. (emphasis added by court). The disclosure form further stated that (1) coverage would be triggered in the event the mortgagor became “totally disabled”; (2) “[t]otal disability means that you can’t perform your job”; and (3) “[a]fter 30 days, [the policy] pays as long as you remain disabled during your loan term.” Id. However, the bank mistakenly procured insurance for the mortgagor that would cease after twelve months of disability unless the mortgagor was incapable of performing any j ob. See id. As a result, when the mortgagor later became unable to perform his job but could perform less strenuous work, the insurer denied coverage after twelve months, and the mortgage went into default. See id. When the mortgagee brought an action to foreclose, the mortgagor asserted a counterclaim for damages based on breach of the mortgagee’s obligation to provide disability insurance as described in its disclosure statement. See id. The trial court dismissed the counterclaim as improper under Rule 1148, but the Superior Court reversed, stating:

The different definitions of the disability insurance in the disclosure form and in the actual insurance contract form the basis of [mortgagors’] counterclaim. If, as [mortgagors] suggest, the Bank failed to provide them with the insurance it agreed to provide, and if as a result of this failure [mortgagors] have been unable to receive disability payments on their mortgage which has caused it to go into default, then [mortgagors] may be able to recover the sum due and clear their default.
The counterclaim made by [mortgagors] is an appropriate response to the bank’s mortgage foreclosure complaint. Counterclaims in mortgage foreclosure actions are governed by the terms of Pa.R.C.P. 1148, which provides:
A defendant may plead a counterclaim which arises from the same transaction or occurrence or series of transactions or occurrences from which the plaintiff’s cause of action arose.
In Mellon Bank, N.A. v. Joseph, 267 Pa. Super. 307, 406 A.2d 1055 (1979) the court affirmed an order striking the [mortgagors’] two counterclaims. The court ruled: “Here, the counterclaims [mortgagor] seeks to assert are remedial; they arose once the mortgage was in default, but were not part of, or incident to, the creation of the mortgage itself.” 406 A.2d at 1060. Unlike the counterclaims in Mellon Bank, the counterclaim in the instant case arose as part of, or incident to, the creation of the mortgage. The disclosure form, dated the same date as the mortgage document, states:
You, the Borrower, may buy Credit Life Insurance in connection with your installment loan. If you buy Credit Life Insurance, you may also buy Credit Disability Insurance if you are less than age 65.
(emphasis added.)
[Mortgagors’] counterclaim, based upon the Banks’ failure to provide the disability insurance for [mortgagors] outlined in the disclosure form, met the requirements of the rule. In connection with the mortgage the Bank undertook an obligation to provide a defined form of disability insurance. The Banks’ failure to meet this obligation is the proper subject of a counterclaim to the foreclosure action.

Id. at 23. Thus, the Superior Court held that the counterclaim for damages based on breach of a promise made “in connection with” the mortgage was “part of, or incident to, the creation of the mortgage itself.” Id. The court held that the counterclaim therefore could be asserted in the mortgage foreclosure action under Rule 1148. See id.

More recently, the Pennsylvania Superior Court has held that Rule 1148 permits assertion of a counterclaim for recoupment for the mortgagee’s failure to perform its obligations under the mortgage. See Green Tree Consumer Discount Co. v. Newton, 909 A.2d 811, 818 (Pa. Super. 2006) (where a home improvement financing contract was secured by a mortgage on the home, mortgagor was entitled to assert a counterclaim for recoupment for the mortgagee’s failure to perform the purchased home improvements; “[G]iven the mortgagors’ claims of fraud in the inducement of the sales contract and failure to perform under the contract, we cannot say that the facts support [mortgagee] to the point that it is entitled to summary judgment regarding the recoupment claims.”) (emphasis added).

HSBC has not attempted to distinguish Meritor Savings Bank or Green Tree Consumer Discount, both decided by the Pennsylvania Superior Court. HSBC cites several cases stating the general rule that permissible counterclaims must be “part of, or incident to, the creation of the mortgage.” HSBC’s Br. at 4-5. However, the above-cited authorities make clear that breach of a contractual term in a mortgage instrument satisfies that standard. HSBC has cited no authority to the contrary. Therefore, we conclude that Alicea correctly applied Pennsylvania law in holding that a mortgagee’s obligation to pay property taxes is “part of, or incident to, the creation of the mortgage” and that a claim for breach of that obligation is a proper counterclaim under Rule 1148.

VI. Legal Sufficiency of the Amended Counterclaim

A. Assertion of Claim Based on Breach of Express Contract

The allegations in the amended counterclaim make clear that the Walters’ claim is premised on breach of an express contractual provision in the mortgage. See answer to preliminary objections to amended counterclaim ¶ 5 (“[Paragraph 3 of the mortgage] clearly requires both the lender and the borrower to comply with terms contained in the document creating the mortgage. As stated in defendants’ counterclaim, this obligation creates a contractual relation from the creation of the mortgage.”). In HSBC’s preliminary objections to the Walters’ initial counterclaim, HSBC asserted only misjoinder of a cause of action under Pa.R.C.P. 1028(a)(5) based on the alleged impropriety of the counterclaim under Rule 1148. However, in its preliminary objections to the amended counterclaim, HSBC now asserts failure to comply with law or a rule of court under Pa.R.C.P. 1028(a)(2) and legal insufficiency (demurrer) under Pa.R.C.P. 1028(a)(4). As more fully set forth below, a claim for unjust enrichment cannot be maintained when the rights and obligations of the parties are governed by an express contract. Accordingly, we hold that HSBC’s preliminary objections must be sustained.

B. Effect of Express Contract on Claim for Unjust Enrichment

“An action based on unjust enrichment is an action which sounds in quasi-contract or contract implied in law.” Sevast v. Kakouras, 915 A.2d 1147, 1153 n.7 (Pa. 2007). “A quasi-contract imposes a duty, not as a result of any agreement, whether express or implied, but in spite of the absence of an agreement, when one party receives unjust enrichment at the expense of another.” AmeriPro Search, Inc. v. Fleming Steel Co., 787 A.2d 988, 991 (Pa. Super. 2001).

“The Supreme Court of Pennsylvania has concluded that ‘the quasi-contractual nature of unjust enrichment [is] inapplicable when the relationship between the parties is founded on a written agreement or express contract.’” Benefit Trust Life Ins. Co. v. Union Nat’l Bank, 116 F.2d 1174, 1177 (3dCir. 1985) (quoting Schott v. Westinghouse Elec. Corp., 259 A.2d 443, 448 (Pa. 1969)). “Dismissal of an unjust enrichment claim is appropriate upon a motion to dismiss when the relationship between the parties is founded on a written instrument.” Harold ex rel. Harold v. McGann, 406 F. Supp. 2d 562, 579 (E.D. Pa. 2005) (citations omitted).

In accordance with these principles, where the rights and obligations of the parties are governed by the terms of a mortgage, the parties may not maintain claims for unjust enrichment. See Benner v. Bank of America, N.A., 917 F. Supp. 2d 338, 360-61 (E.D. Pa. 2013).

Here, plaintiff has a direct contractual relationship with defendant that is governed by the written home mortgage agreement. The agreement addresses numerous topics, including defendant’s ability to charge for property inspections if plaintiff defaults — as he admittedly did — on his mortgage payments. Plaintiff has a right, of course, to challenge the reasonableness of those charges, but a theory of unjust enrichment is not the proper legal vehicle. The court will therefore dismiss [plaintiff’s claim for unjust enrichment].

Id. at 361; accord First Wisconsin Trust Co. v. Strausser, 653 A.2d 688, 693 n.2 (Pa 1995) (“[T]he existence of the written note and/or mortgage agreement precludes a claim of unjust enrichment.”).

Here, the Walters’ amended counterclaim makes clear that their claim for relief is based on express provisions of the written mortgage agreement. See amended counterclaim ¶ 5 (“[Paragraph 3 of the mortgage] clearly requires both the lender and the borrower to comply with terms contained in the document creating the mortgage. As stated in defendants’ counterclaim, this obligation creates a contractual relation from the creation of the mortgage.”). Based on the authorities cited above, the existence of the mortgage agreement governing the contractual relationship between HSBC and the Walters precludes assertion of a claim for unjust enrichment.

C. Pleading in the Alternative

Although it is sometimes permissible to plead unjust enrichment as an alternative to breach of contract, such alternative pleading “is plausible only when the validity of the contract itself is actually disputed, making unjust enrichment a potentially available remedy.” Grudkowski v. Foremost Ins. Co., _ Fed.Appx. _ (3d Cir. 2014) (citing cases) (“Here, [the parties] had a contractual relationship, the existence and validity of which are not challenged. Thus, [the plaintiff’s] claim for unjust enrichment, even when pled in the alternative, was appropriately dismissed.”); Montanez v. HSBC Mortgage Corp. (USA), 876 F. Supp. 2d 504, 516 (E.D. Pa. 2012) (“Because there is no dispute that the mortgage contract in this case was valid and enforceable, plaintiffs may not assert an unjust-enrichment claim premised on the absence of a contract. Thus, plaintiffs’ unjust-enrichment claim against HSBC mortgage is dismissed.”).

CONCLUSION

Based on the above-cited authorities, the Walters’ amended counterclaim must be stricken for failure to conform to law or rule of court under Pa.R.C.P. 1028(a) (2) and legal insufficiency (demurrer) under Pa.R.C.P. 1028(a)(4). However, the Walters will have a period of twenty (20) days from the date of this order to file a second amended counterclaim.

Wherefore we enter the following:

ORDER OF COURT

And now, this 11th day of June, 2014, upon consideration of the preliminaiy objections of plaintiff HSBC Bank USA, N.A. (“HSBC”) to defendants’ amended counterclaim (“preliminary objections”); the answer to plaintiff’s preliminary objections filed by defendants Douglas W. Walters, Patricia K. Walters, and Rosemarie Walters (the “Walters”); and the briefs and arguments submitted thereon, it is hereby ordered and decreed that HSBC’s preliminary objections are sustained. The Walters shall have a period of twenty (20) days from the filing date of this order to file a second amended counterclaim.

      . Although this court is not bound by federal court opinions interpreting Pennsylvania law, we may consider federal cases as persuasive authority. See Cambria-Stoltz Enter. v. TNT Invs., 747 A.2d 947, 952 (Pa. Super. 2000).


author: JACKSON, J.,

text:
    Colon v. Rapoport

      Andrew R. Spirit, for plaintiff.

      Heather E. Hansen, Christy L. Williamson, Robert E. Dillon, Amalia V. Romanowicz, Barrí A. Orlow, Donald J. Brooks, Jr., Melissa L. Mazur and Francis J. Greek, for defendants.
    June 13, 2014—
   JACKSON, J.,

I. FACTUAL BACKGROUND and PROCEDURAL HISTORY

On June, 2010, Ms. Emeline Colon elected to undergo a bunionectomy procedure by Neil R. Rapoport, D.P.M. She developed an infection in the pin tract which was treated by antibiotics, however, the pain and swelling continued. A bone biopsy confirmed in September, 2010 that ostemyelitis had developed. Following several surgeries on her right foot, Ms. Colon lost part of her big toe. The big toe joint was fused.

In October, 2011, plaintiff-Colon initiated this medical malpractice litigation against Dr. Rapoport and his professional partner, David G. Geltzer, D.P.M. After a weeklong jury trial, on February 4, 2014, plaintiff-Colon was awarded $81,500.00, against defendant-Rapoport only. Dr. Geltzer was found not liable.

The plaintiff filed a motion for post-trial relief seeking a new trial limited to the issue of damages, or, in the alterative additur. The parties submitted memoranda of law and oral argument was held on June 11, 2014. For the reasons set forth below this court concludes that the plaintiff’s motion for post-trial relief is denied. The unopposed motion for delay damages is granted. Judgment will be entered in the amount of $85,865.27 in favor of Emeline Colon.

II. LEGAL DISCUSSION

A. A Jury is Free to Believe All or Part or None of the Evidence

The underlying bases for all of plaintiff-Colon’s post-trial argument is that the award of damages is inadequate. Our case law has consistently held that thejury must believe that a plaintiff suffers pain before it may compensate for pain. Boggavarapu v. Ponist, 542 A.2d 516 (Pa. 1988); Matheny v. West Shore Country Club, 648 A.2d 24 (Pa. Superior Ct. 1994). This is not a case involving an award of no damages.

A review of the itemized verdict sheet and the responses to the special interrogatories makes it clear that the jury understood the serious and permanent nature of plaintiff-Colon’s situation, however, thejury was not persuaded that she plans to undergo future surgeries or related physical therapy. See Court Exhibit “A”, attached hereto.

B. Economic Loss

The parties stipulated that the reasonable value of plaintiff-Colon’s past medical surgeries was $21,794.00. The jury awarded $23,000.00 to Emeline Colon for Past Medical Expenses.

Dr. Steven F. Boc, plaintiff’s treating podiatrist, testified that the one-time cost for a future surgery would be a $15,000.00 hospital fee and a $7,500.00 surgical fee. January 29, 2014, N.T. 104. He went on to explain his patient’s concerns about whether to endure the procedures in the future at N.T. 105-106:

“Plaintiff’s Counsel: Now, the surgery that has been given as an option, when you and Miss Colon had many a heart to heart conversation, what was the feeling of Miss Colon as far as having it?
Dr. Boc: I mean, trepidation is a good word, and some fear, she recognizes that if we go back in and we do grafting and things like that, and we fail, or it gets reinfected, then the amputation will be more likely than not, at this time. So, I think her fear is having to undergo through — undergo more surgery, still risk potential complications, every surgery has complications, obviously, but even more so in a case like hers, and a risk factor that could lead to her still developing the need for an amputation.
Plaintiff’s Counsel: Reasonable fear, going into that surgery?
Dr. Boc: Yes, it is.”

Plaintiff-Colon shared with the jury her “trepidation” and concerns about future surgeries when she testified on January 30, 2014, N.T. 57-60:

“Plaintiff’s Counsel: And did you ever — you mentioned before, and you got ahead of me because you’re quicker, about whether or not you’re better, or you need further surgery, and I want to talk to you about that.
Ms. Colon: Okay.
Plaintiff’s Counsel: And what’s your understanding as far as what your surgical options, or treatment options are at this point.
Ms. Colon: He wants to remove a bone from my hip to put it on my toe, if it will work, and it will take, because the bone that they gave me from the dead did not take...
Plaintiff’s Counsel: Now, what’s your feeling, you said they take a bone from your hip. What are you thinking, as far as having that surgery? Have you ever scheduled it? Are you going to have it? Tell us.
Ms. Colon: We scheduled it twice, but I backed off, I am scared. I don’t want to get it done.
Plaintiff’s Counsel: And you say you don’t want to get it done. Do you anticipate a time where you might, or what’s your thinking as far as having it?
Ms. Colon: I know eventually I am going to have to get it done. But right now I really don’t think I want to go through all that I went through. My son needs me.
Plaintiff’s Counsel: And you say eventually you’re going to have to get it done.
Ms. Colon: Yes.
Plaintiff’s Counsel: Do you have any specific plans, or tell us what you mean by eventually?
Ms. Colon: Dr. Boc said that I am going to have to eventually make up my mind and get it done, because it hurts. So, do I rather go through the whole rest of my life with it in pain, or get the surgery done, and take the chance of even losing my length even more than what it is now.”

The jury considered Dr. Boc’s opinion that plaintiff-Colon would need $ 1,500.00 per year for medical care and treatment in the future. They awarded $1,500.00 for each of the next five years (2014-2018). They also determined that treatments would continue, but at a lesser rate and awarded Ms. Colon $500.00 per year for future medical expenses for twelve years thereafter (2019-2030). This court is unable to conclude that the analysis was arbitrary or capricious. Rather, the per annum award reflects thoughtful consideration of Ms. Colon’s diminishing future medical economic losses.

C. Non-Economic Losses

Plaintiff-Colon has presented arithmetic formulas as a basis for her calculations that the award for non-economic damages is too low, as compared to the economic damage award. The Pennsylvania Supreme Court held many years ago that the particular amount of money expended on medical treatment is not probative of a plaintiff’s pain and suffering. In Martin v. Soblotney, 466 A.2d 1022 (Pa. 1983) at 1025:

“It is immediately apparent that there is no logical or experiential correlation between the monetary value of medical services required to treat a given injury and the quantum of pain and suffering endured as a result of that injury. First, the mere dollar amount assigned to medical services masks the difference in severity between various types of injuries. A very painful injury may be unbeatable, or, on the other hand, may require simpler and less costly treatment than a less painful one. The same disparity in treatment may exist between different but equally painful injuries. Second, given identical injuries, the method or extent of treatment sought by the patient or prescribed by the physician may vary from patient to patient and from physician to physician. Third, even where injury and treatment are identical, the reasonable value of that treatment may vary considerably depending upon the medical facility and community in which care is provided and the rates of physicians and other health care personnel involved. Finally, even given identical injuries, treatment and cost, the fact remains that pain is subjective and varies from individual to individual.”

Ms. Colon walks with a limp and she still has some pain. She no longer uses a walker. January 30, 2014, N.T. 87-88. She is mobile and drives a car. January 30, 2014, N.T. 63-65. The disfigurement and scarring is mitigated when the plaintiff wears a boot or shoes. This court is unable to conclude that the award of $28,000.00 for non-economic damages is a beacon of injustice.

D. Delay Damages

Plaintiff-Colon filed a petition for delay damages pursuant to Rule 238 of the Pennsylvania Rules of Civil Procedure. By correspondence dated March 3, 2014, and confirmed on June 11,2014, defendant-Rapoport indicated no opposition to this motion (Control No. 14022312). Accordingly, delay damages in the amount of $4,365.27 will be added to the verdict award.

III. CONCLUSION

For all of the reasons set forth above, the plaintiff’s motion for new trial and/or additur is denied and the motion for delay damages is granted.

JUDGMENT ORDER

And now, this 13 th day of June, 2014, after considering the motion for post-trial relief filed by plaintiff Emeline Colon, and the responses thereto, and after oral argument held June 11, 2014, and for the reasons set forth in the memorandum filed this date, it is hereby ordered that plaintiff’s motion for post-trial relief is denied, and, plaintiff’s unopposed petition for delay damages is granted, and, judgment is entered in favor of Emeline Colon in the amount of Eighty Five Thousand Eight Hundred and Sixty Five Dollars and Twenty Seven Cents ($85,865.27).