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Stuart v. Decision One Mortgage Company

June 1, 2009

ALAN R. STUART AND ELIZABETH T. STUART, APPELLANTS
v.
DECISION ONE MORTGAGE COMPANY, LLC, AND RFC HOMECOMINGS FINANCIAL, APPELLEES



Appeal from the Order entered July 21, 2008 In the Court of Common Pleas of Chester County, Civil, No. 07-04463.

The opinion of the court was delivered by: Klein, J.

Petition for Reargument Filed June 15, 2009; Petition for Reargument Denied August 5, 2009

BEFORE: STEVENS, KLEIN and KELLY, JJ.

OPINION

¶ 1 Alan R. Stuart and Elizabeth T. Stuart appeal from the decision of the trial court granting defendant's, Decision One Mortgage Company and RFC Homecomings Financial, motion for judgment on the pleadings and refusing to allow rescission*fn1 of a home mortgage under the federal Truth-in-Lending Act (TILA) after there had been a default judgment in foreclosure. We agree with the cogent reasoning of the distinguished trial judge, the Honorable Robert J. Shenkin, that res judicata bars this claim. Therefore, we affirm.

¶ 2 The facts were stated by Judge Shenkin in his order granting the defendants' judgment on the pleadings as follows:

In their amended complaint (which is a part of the record which was remanded to this court) plaintiffs claim that they have validly exercised their right to rescind a transaction with defendants and that defendants must therefore perform their statutorily mandated duties pursuant to such rescission and, in addition, respond in damages to plaintiffs. Plaintiffs concede, however, that a judgment was entered in a mortgage foreclosure action based upon the transaction which defendants claim to have rescinded and that the attempt at rescission was initiated after the judgment had been entered. Furthermore, no effort has ever been made to open or strike the judgment which is now final and unappealable. Because we agree with defendants' contention that rescission will not lie once judgment in mortgage foreclosure has been entered, we grant the motion for judgment on the pleadings.

On January 26, 2004, plaintiffs obtained a mortgage loan from defendant Decision One. A mortgage foreclosure action was instituted on February 28, 2005, and judgment was entered against plaintiffs herein (defendants in the mortgage foreclosure action) on April 20, 2005, for want of an answer. On April 28, 2005, Decision One sold its interest in the judgment to defendant RFC Homecomings. By letter dated May 9, 2005, addressed to Decision One, plaintiffs' counsel attempted to initiate plaintiffs' alleged "right" to rescind the mortgage loan agreement. On May 10, 2007, plaintiffs filed this suit seeking rescission and money damages from defendants.

¶ 3 With respect to an action of rescission, we agree with Judge Shenkin that rescission relates to the very transaction that formed the basis of the foreclosure action to which a default judgment was entered. As noted, no petition was filed to either open or strike the default judgment.

¶ 4 Whether or not the Stuarts raised the claim of violation of the TILA in the foreclosure proceedings, they could have raised the defense by asking for rescission. Res judicata applies not only to claims that were made but also to claims that could have been made. See Wilkes v. Phoenix Home Life Mut. Ins. Co. 902 A.2d 366 (Pa. 2006); Glynn v. Glynn, 744 A.2d 242, 249 (Pa. Super. 2001); Chada v. Chada, 756 A.2d 39, 43 (Pa. Super. 2000).

¶ 5 Del Turco v. Peoples Home Savings Association, 478 A.2d 456 (Pa. Super. 1984), dealt with a claim that various payments were not credited to the mortgagor rather than a violation of the TILA. However, the logic is the same. This Court noted that "Clearly, the litigation of these counts, if successful, would operate to undermine the initial judgment of Peoples Home."

Id.at 463. Likewise, in this case, a successful TILA claim would likewise undermine the initial judgment. The Del Turco Court phrased it as follows:

Therefore, we conclude that the preservation of the integrity of judgments and the principle of finality underpinning res judicata theory requires preclusion from judicial consideration of the averments set forth [of failure to credit payments]. Appellants had full opportunity to ...


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