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07/10/97 ANTHONY HORBAL AND JOHN HORBAL v. MOXHAM

July 10, 1997

ANTHONY HORBAL AND JOHN HORBAL, INDIVIDUALS FOR THE USE AND BENEFIT OF HIGHLAND FINANCIAL LTD., A CORPORATION, AND JAMES R. WALSH, AN INDIVIDUAL,
v.
MOXHAM NATIONAL BANK, A CORPORATION. APPEAL OF: HIGHLAND FINANCIAL LTD. & JAMES WALSH



Appeal from the Order of the Superior Court entered April 10, 1995 at No. 1029PGH93 affirming the order of the Court of Common Pleas of Cambria County, Civil Division entered on June 22, 1993 at No. 1992-735. Composition OF The Court: Mr. Chief Justice John P. Flaherty, Zappala, Cappy, Castille, Nigro, Newman, JJ. Mr. Justice Castille files an Opinion in Support of Affirmance in which Mr. Chief Justice Flaherty and Mr. Justice Zappala join. Madame Justice Newman files an Opinion in Support of Reversal in which Messrs. Justice Cappy and Nigro join.

PER CURIAM:

THE COURT BEING EVENLY DIVIDED, THE ORDER OF THE SUPERIOR COURT IS AFFIRMED.

Mr. Justice Castille files an Opinion in Support of Affirmance in which Mr. Chief Justice Flaherty and Mr. Justice Zappala join.

Madame Justice Newman files an Opinion in Support of Reversal in which Messrs. Justice Cappy and Nigro join.

OPINION IN SUPPORT OF AFFIRMANCE

JUSTICE CASTILLE

DECIDED: JULY 10, 1997

The issue on appeal is whether a bank/judgment creditor who purchases the debtor's real property which has been pledged as collateral for the underlying debt at a sheriff's sale in a mortgage foreclosure action, has the right after the sheriff's sale to liquidate a certificate of deposit assigned to it as security for the same debt without complying with the provisions of the Deficiency Judgment Act, 42 Pa. C.S. § 8103, et seq. Because we find that the bank/judgment creditor, under the circumstances of this case, did not have to comply with the Deficiency Judgment Act before liquidating the certificate of deposit, we affirm the Superior Court order. *fn1

The relevant facts giving rise to this appeal are that on February 4, 1988, Moxham National Bank ("Moxham") loaned $120,000 to John Horbal, Anthony Horbal and Elaine Adams, co-partners t/a Potomac Associates II (collectively, the "Debtors"), for the acquisition of property at 502 Main Street in Johnstown, Pennsylvania. As collateral for the loan, Debtors executed a mortgage on that property in favor of Moxham. On February 11, 1988, the mortgage in favor of Moxham was duly recorded.

On February 18, 1988, John Horbal and Anthony Horbal, in their individual capacities, executed an instrument entitled Assignment of Deposits whereby they assigned a $25,000 Certificate of Deposit ("CD") to Moxham in order to provide additional security for the loan because the value of the property standing alone did not fully secure the loan. The Assignment of Security, in relevant part, provides that:

The undersigned, Anthony Horbal and John Horbal (hereinafter the called "Assignors"), for and in consideration of good and valuable consideration in hand paid, the receipt and sufficiency of all of which is hereby acknowledged, does hereby ASSIGN, TRANSFER and PLEDGE to the Moxham National Bank . . . (hereinafter called "Bank") all of Assignors' right, title and interest, on Certificate of Deposit Number 2005581, in the principal amount of Twenty Five thousand and 00/100 Dollars ($25,000) . . .(all of which is hereafter called the "Account") . . .

This Assignment and security interest is granted to the Bank [Moxham] to secure the prompt and unconditional payment and performance when due of the following (all of which is herein called the "Indebtedness").

Any and all indebtedness, obligations and liabilities of Potomac Associates II (hereinafter the "Debtors") to the Bank, now or hereafter existing or arising, due or to become due.

Assignors hereby constitutes [sic] and appoints [sic] the Bank their true and lawful attorney, with full power of substitution, (i) to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all amounts which may be due or become due and payable under the Account (ii) to execute any and all withdrawal receipts or other orders for the payment of money drawn on the Account, (iii) and/or to withdraw all or part of the Account without notice to or further consent by Assignors.

Upon the complete payment of the indebtedness or upon the mutual agreement of the Assignors and the Bank, the Bank will release or partially release this Assignment.

If for any reason any of the indebtedness is not paid on or before the maturity thereof . . . or if Assignor or Debtors shall default in the performance of any covenant or other agreement of this Assignment or of any other agreement now or hereinafter executed in connection with or as security for any of the indebtedness the Bank shall be entitled to receive or withdraw any or all items or all funds in the Account.

The rights and remedies of the Bank under this Assignment and any other instrument or agreement executed in connection with or as security for any of the Indebtedness shall be cumulative, and the exercise or partial exercise of any such right or remedy shall not preclude the exercise of any right or remedy.

In 1989, Debtors defaulted on the $120,000 loan obligation. On August 31, 1989, Moxham initiated foreclosure proceedings against Debtors in the Cambria County Court of Common Pleas. On October 24, 1989, the common pleas court entered a default judgment in favor of Moxham and against Debtors. On September 7, 1990, the common pleas court issued a Writ of Execution upon the real property of the Debtors (502 Main Street) which was serving as security for the loan.

On December 14, 1990, the real property was sold by the Cambria County Sheriff at sheriff sale to Moxham for $666.40. On January 21, 1991, the Cambria County Sheriff filed and delivered the deed for the real property to Moxham. On January 29, 1991, Moxham liquidated the CD and applied the sum of $26,437 to the Debtors' outstanding loan balance of approximately $116,000. However, Moxham failed to file a petition to fix the fair market value of the real property pursuant to the Deficiency Judgment Act.

On November 15, 1991, John Horbal and Anthony Horbal assigned to Highland Financial Limited and James R. Walsh (collectively, the "appellants") any rights or causes of action they might have by virtue of Moxham's liquidation of the funds of the CD and the application of those funds to Debtors' outstanding loan balance. On November 20, 1991, Moxham was informed of this assignment. On November 27, 1991, appellants made a demand of Moxham to turn over the ...


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