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NEW HOME FEDERAL SAVINGS AND LOAN ASSOCIATION v. JOSEPH A. TRUNK (09/28/84)

filed: September 28, 1984.

NEW HOME FEDERAL SAVINGS AND LOAN ASSOCIATION, FORMERLY WYOMISSING NEW HOME FEDERAL SAVINGS AND LOAN ASSOCIATION
v.
JOSEPH A. TRUNK, AND BARRY J. TIERNEY AND ROSAURA F. TIERNEY, APPELLANTS



No. 2187 Philadelphia, 1982, Appeal from the Judgment of the Court of Common Pleas of Lancaster County, Civil, at No. 94, September Term, 1981.

COUNSEL

John L. Sampson, Lancaster, for appellants.

Paul K. Allison, Lancaster, for appellees.

Rowley, Montemuro and Johnson, JJ.

Author: Montemuro

[ 333 Pa. Super. Page 395]

This is an appeal from the Judgment of the Court of Common Pleas of Lancaster County granting summary judgment in favor of the plaintiff below, New Home Federal Savings and Loan Association (hereafter New Home), and against defendants below, Joseph A. Trunk, Barry J. Tierney and Rosaura F. Tierney. The action was for the foreclosure of a mortgage on the ground that Trunk breached the mortgage agreement. The pertinent facts are as follows:

On February 23, 1979, Trunk purchased 276 W. Walnut Street, Marietta, Pennsylvania, as his residence for the sum of twenty-eight thousand ($28,000.00) dollars. Trunk paid twenty-eight hundred ($2800.00) dollars toward the purchase price and borrowed the balance, twenty-five thousand, two hundred ($25,200.00) dollars from New Home. As security for the loan, Trunk executed a mortgage in

[ 333 Pa. Super. Page 396]

    favor of New Home. The loan was payable over a term of twenty-five (25) years at an interest rate of ten percent (10%) per annum. Trunk lived in his new home until October, 1979, when he moved to Philadelphia to accept a new job.

Trunk attempted to sell his home outright, but he could not find a buyer. He rented the home from October, 1979 to February, 1981. On February 21, 1981, Trunk entered into an Installment Agreement for the Sale of Real Estate with the Tierneys. Under this agreement, Trunk agreed to sell the property to the Tierneys for the sum of thirty-three thousand, nine hundred ($33,900.00) dollars, payable in the following manner: (1) the Tierneys would pay Trunk one thousand ($1000.00) dollars upon the signing of the agreement; (2) two thousand ($2000.00) dollars at settlement, on or before April 1, 1981; (3) the balance of thirty thousand, nine hundred ($30,900.00) dollars, with interest at twelve percent (12%) per annum, payable in monthly installments of three hundred seventeen dollars and eighty-four cents ($317.84) beginning May 1, 1981 and continuing for three years to May 1, 1984; at which time the entire unpaid principal balance would then be due. Upon payment of the principal balance on May 1, 1984, Trunk was to deliver a deed to the Tierneys.

Thereafter, Trunk continued to make timely monthly mortgage payments to New Home, which New Home continued to accept. The Tierneys maintained the property as required and paid all taxes and fire insurance premiums.

On April 29, 1981, after New Home became aware of the installment sale agreement, New Home notified Trunk by letter that he was in default of the mortgage and it intended to foreclose. New Home's letter stated "Your mortgage is in default because you sold the mortgaged property without obtaining our prior written consent."*fn1

[ 333 Pa. Super. Page 397]

The present action was commenced on September 10, 1981. After the close of pleadings, various depositions were taken. New Home then filed a motion for summary judgment, which was countered by a summary judgment motion filed by Trunk and the Tierneys. The issues raised by the parties were thoroughly briefed and argued. On June 23, 1982, the court granted summary judgment in favor of New Home, and against Trunk and the Tierneys. This appeal followed.

Summary judgments are governed by Pa.R.C.P. 1035(b) which provides that a summary judgment will be granted only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Such a disposition is appropriate only in those cases which are clear and free from doubt. Spain v. Vicente, 315 Pa. Super. 135, 461 A.2d 833 (1983). "[T]he court must accept as true all well pleaded facts in the non-moving party's pleading, giving the non-moving party the benefit of all reasonable inferences to be drawn therefrom."

[ 333 Pa. Super. Page 398]

    utilized in Tucker, concluded that the due-on-sale clause, which was "legitimately designed . . . to protect against impairment to the lender's security that is shown to result from a transfer of title . . ." Wellenkamp, supra, at 952, 148 Cal.Rptr. at 385, 582 P.2d at 976, could not be used as a device to maintain its investment portfolio at current interest rates.

The appellants invite us to apply the principles of Tucker and Wellenkamp to the facts of the present case. They point out that in this Commonwealth a restraint on the alienation of property will be enforced only if it is reasonable and limited. Lauderbaugh v. Williams, 409 Pa. 351, 186 A.2d 39 (1962). They contend that a due-on-sale clause, enforced only to maintain investment portfolios at high interest rates, and not to prevent the impairment of security, is not a reasonable and limited restraint on alienation.

New Home counters with several arguments. It asserts that the due-on-sale clause is not an unreasonable restraint on alienation as defined under both Pennsylvania law, Lauderbaugh v. Williams, supra, and the Restatement of Property § 406 (1944). See also, Ministers & Missionaries Benefit Board v. Goldsworthy, 253 Pa. Super. 321, 385 A.2d 358 (1978). Accord, Lipps v. First American Service Corp., 223 Va. 131, 286 S.E.2d 215 (1982). It further seeks to differentiate Tucker and Wellenkamp on the basis that those decisions were based in part on a California statute forbidding unreasonable restraints on alienation. Finally, New Home asserts that the doctrine of federal preemption precludes this court from holding that the due-on-sale clause is an unreasonable restraint on alienation. This final assertion is based on the decision of the United States Supreme Court in Fidelity Federal Savings & Loan Association v. de la Cuesta, 458 U.S. 141, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982).*fn2 Certainly, prior to de la Cuesta, this

[ 333 Pa. Super. Page 400]

    issue was one of substantial disagreement. See, id. at 151 n. 9, 102 S.Ct. at 3021 n. 9.

The decision in de la Cuesta, handed down five days after the trial court's decision in the present action, specifically held that a due-on-sale clause, identical to the one in issue herein, was enforceable by federal savings and loan associations and that any State law to the contrary was preempted by the regulation of the Federal Home Loan Bank Board (FHLBB). The FHLBB, an independent federal regulatory agency vested with the authority to administer the Home Owners Loan Act of 1933, 48 Stat. 128, as amended 12 U.S.C. § 1461 et seq., is empowered to prescribe rules and regulations for the "organization, incorporation, examination, operation and regulation of associations to be known as 'Federal Savings and Loan Associations.'" 12 U.S.C. § 1464(a).

Pursuant to its statutory authority, the FHLBB promulgated a regulation in 1976 governing due-on-sale clause. 12 C.F.R. § 545.11(f) (1980) recodified 12 C.F.R. § 545.8-3(f) (1982), which states in relevant part:

[A federal savings and loan] association continues to have the power to include, as a matter of contract between it and the borrower, a provision in its loan instrument whereby the association may, at its option, declare immediately due and payable sums secured by the association's security instrument if all or any part of the real property securing the loan is sold or transferred by the borrower without the association's prior written consent. Except as [otherwise] provided in . . . this ...


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