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MELLON BANK, N.A. v. PASQUALIS-POLITI

July 28, 1992

MELLON BANK, N.A., Plaintiff
v.
MARCELO PASQUALIS-POLITI and MARIANNA PASQUALIS-POLITI, Defendants



The opinion of the court was delivered by: BY THE COURT; D. BROOKS SMITH

 SMITH, District J.

 Before the Court in these consolidated actions are Mellon Bank's motions for summary judgment in mortgage foreclosure and for judgments on notes, and the responses of the defendants. Defendants assert several defenses to Mellon's attempts to obtain judgment on the notes secured by the mortgages and to foreclose on the mortgages to their vacation condominiums in the Blue Knob ski area of Bedford County, Pennsylvania. Defendants assert that because Mellon has failed to respond to discovery requests they are unable to respond adequately to Mellon's motion. After considering defendants' Rule 56(f) request, see Contractors Association of Eastern Pennsylvania v. Philadelphia, 945 F.2d 1260, 1266-67 (3d Cir.1991), I issued an order on June 29, 1992, ruling on several of defendants' requests for document discovery, and permitting any supplemental motions to compel to be filed on or before July 10, 1992. No further request has been made by the defendants for additional discovery. *fn1" It appears that no further discovery is requested or necessary to resolve the outstanding issues in these matters. After considering defendants' defenses on their merits, I conclude that judgment on the notes and in foreclosure must be ordered in favor of plaintiff as a matter of law.

 Familiarity with the related Bhatla v. Resort Development Corporation litigation, see C. A. No. 88-147, slip opinion of June 22, 1992 (W.D.Pa.); see also Bhatla v. Resort Development Corporation, 720 F.Supp. 501 (W.D.Pa.1990); see also Koropey v. Resort Development Corporation, C. A. No. 89-37, slip opinion of June 22, 1992 (W.D.Pa.), is assumed. Plaintiff is a banking corporation that provided construction financing for a vacation resort development in the Blue Knob area of northern Bedford County. Defendants are individuals and partnerships who, in late 1982 and early 1983, purchased condominiums as investments from the Resort Development Corporation, in Phase I of a condominium project known as the Blue Knob Ski & Country Club. Resort Development Corporation assigned the notes and mortgages executed by the defendants when they purchased their condominiums from Resort Development Corporation to an affiliated entity, Capital Finance Corporation, which issued bonds secured by those notes and mortgages. Defendants' notes and mortgages were thereafter assigned by Capital Finance Corporation under a collateral trust indenture to plaintiff Mellon as trustee for the bondholders.

 Defendants, as plaintiffs in the Bhatla litigation, previously alleged a claim based on Mellon's alleged participation in the fraudulent scheme of Resort Development Corporation, Bhatla v. Resort Development Corporation, 720 F.Supp. at 512-13, and as a counterclaim in this matter. See Mellon Bank v. Pasqualis-Politi, C. A. No. 88-426, slip opinion of August 31, 1989 (W.D.Pa.). In both cases their claims were dismissed as barred by the statute of limitations. Now, considered as defenses, defendants' allegations fail to withstand Mellon's motion for summary judgment.

 I. Mellon's Claims

 A. Standard for Summary Judgment

 Federal Rule of Civil Procedure 56(c) requires the entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "This standard provides that the mere existence of some factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248 (1986). (emphasis in original). A fact is "material" if proof of its existence or non-existence would affect the outcome of the lawsuit under the substantive law applicable to the case. Anderson, 477 U.S. at 248. Finally, when a motion for summary judgment is properly supported by affidavits evidencing the absence a material issue of fact, as is the plaintiff's, defendants cannot "rest upon the mere allegations or denials of [their] pleading" but must come forward with evidence showing that there is a genuine dispute of material fact. Fed.R.Civ.P. 56(e); Shulz v. Celotex Corp., 942 F.2d 204, 210 (3d Cir.1991).

 B. Substantive law

 The substantive law of contracts and real property to be followed in resolving these matters is of course that of Pennsylvania. The elements of Mellon's prima facie case in the actions on the notes are

 (1) execution of the notes and mortgages by the defendants;

 (2) Mellon's status as holder of the notes;

 (3) defendants' default on the notes and refusal to pay despite a proper demand; and

 (4) compliance with any applicable notice requirements.

 The elements of Mellon's prima facie case in the foreclosure actions are outlined by Pa.R.Civ.P. 1147, which although characterized as a procedural rule for purposes of state court practice, must be considered substantive for Erie2 purposes and therefore followed in these diversity actions. See e.g. Knight v. Tape, Inc., 935 F.2d 617, 622 n.4 (3d Cir.1991). Mellon's ...


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