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Bayview Loan Servicing, LLC et al v. Law Firm of Richard M. Squire & Associates

May 11, 2011

BAYVIEW LOAN SERVICING, LLC ET AL., PLAINTIFFS,
v.
LAW FIRM OF RICHARD M. SQUIRE & ASSOCIATES, LLC ET AL., DEFENDANTS.



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

MEMORANDUM

Plaintiffs, Bayview Loan Servicing, LLC ("Bayview") and its wholly owned subsidiary IB Property Holdings, LLC ("IB Property"), bring this legal-malpractice action against defendants, the law firm of Richard M. Squire & Associates, LLC (the "Squire Firm") and its employee M. Troy Freedman ("Freedman"). Plaintiffs claim that they lost the right to collect a deficiency from Peter Pugliese, a mortgagor in default, because defendants-who represented plaintiffs in a foreclosure action against Mr. Pugliese and a subsequent action to collect the deficiency-failed to file a petition to fix the fair value of the relevant property within six months of the foreclosure sale, as required under Pennsylvania law.

Plaintiffs have filed a motion for partial summary judgment under Federal Rule of Civil Procedure 56, seeking summary judgment on Counts I and II (breach of fiduciary duty), and Count IV (breach of contract). For the reasons explained below I will deny plaintiffs' motion.

I. Factual and Procedural Background*fn1

In November 2006, Peter Pugliese borrowed $262,500.00 from MetWest Commercial Lender, Inc. ("MetWest"), evidenced by a promissory note and secured by a mortgage on certain real property located in Pennsylvania (the "Property") (Compl. ¶¶ 10-11; Defs.' Mem. in Support of Resp. to Pls.' Mot. Summ. J. ("Defs.' Mem.") 4; see also Defs.' Mem. Ex. B, Ex. 1 (promissory note); Defs.' Mem. Ex. B, Ex. 2 ("Mortgage").) Mr. Pugliese also obtained a liability and casualty insurance policy on the Property, listing MetWest as an additional insured, and pledged the proceeds of that insurance as collateral for his debt to MetWest. (Compl. ¶ 14; Defs.' Mem. Ex. B ("Insurance Action Complaint") ¶¶ 13-17; Mortgage § 3.3.) The note and mortgage were assigned to Bayview in July 2007, and Bayview later assigned them to IB Property. (Compl. ¶ 13; Defs.' Mem. 4.)*fn2

On March 19, 2007, a fire damaged the Property (Freedman Dep. 19:10-14), and Mr. Pugliese ceased making payments on the note beginning July 1, 2007 (Compl. ¶ 17.) The Squire Firm represented IB Property in the ensuing foreclosure action against Mr. Pugliese (the "Foreclosure Action"), before the Court of Common Pleas of Berks County. (Answer ¶¶ 18-19.) The Squire Firm successfully obtained an in rem judgment in favor of IB Property and against Peter Pugliese in the amount of $287,992.56 in the Foreclosure Action on January 24, 2008.*fn3 (Compl. ¶ 18; Certificate of Merit Ex. A ("Opinion") at 2; Defs.' Mem. 4.) IB Property purchased the Property at a sheriff's sale on September 5, 2008. (Compl. ¶¶ 18, 20; see also Freedman Dep. 33:11-20.) IB Property subsequently sold the Property to a third party on December 8, 2008. (Compl. ¶ 20; see also Freedman Dep. 39:9-14.)

On December 4, 2008, plaintiffs instructed defendants to seek a deficiency from Mr. Pugliese. (Compl. ¶ 21, Answer ¶ 21.) Defendants, on behalf of plaintiffs, filed a third lawsuit against Pugliese on March 26, 2009, in the Berks County Court of Common Pleas, seeking the alleged deficiency resulting from the foreclosure sale (the "Deficiency Action"). (Compl. ¶ 25; Answer ¶ 25.) However, defendants had failed to file a petition to fix the fair value of the Property within six months of the sheriff's sale, as required under Pennsylvania law in order to pursue a deficiency, see 42 Pa. Cons. Stat. § 8103(a)-(d). (Pls.' Mem. Ex. B ("Defs.' Admis.") ¶ 2.)

On April 27, 2009, Mr. Pugliese's wife Wendy-now his former wife-filed a petition in the Berks County Court of Common Pleas to mark the judgment against Mr. Pugliese in the Foreclosure Action satisfied, released, and discharged, based on plaintiffs' failure to file the required petition to fix fair value.*fn4 (Opinion 3; Defs.' Mem. Ex. D ("Wendy Pugliese Petition").) On May 7, 2009, Freedman sent a letter to President Judge Schmehl, the presiding judge in that action, advising that Bayview had no objection to Wendy Pugliese's petition. (Pls.' Mem. Ex. C (letter from Freedman to President Judge Schmehl); Compl. ¶ 26; Opinion 7-8.) Plaintiffs did not authorize this letter and were not informed of its existence at the time. (Compl. ¶ 26; Answer ¶ 26; Defs.' Admis. ¶¶ 5-6, 8.) President Judge Schmehl granted Wendy Pugliese's petition and issued an order marking the judgment against Mr. Pugliese in the Foreclosure Action satisfied on June 5, 2009. (Pls.' Mem. Ex. D (President Judge Schmehl's order).) Plaintiffs were not informed by defendants of this order until, at the earliest, August 2009. (Freedman Dep. 97:18-98:10; see also Answer ¶ 27; Defs.' Admis. ¶ 7.)

Despite the initial judgment against Peter Pugliese in the Foreclosure Action having been marked satisfied, plaintiffs were initially awarded a default judgment against him in the Deficiency Action for $295,726.05 on July 13, 2009. (Compl. 28; Answer ¶ 28.) Mr. Pugliese petitioned to strike the default judgment, however, because the original judgment in the Foreclosure Action had already been marked satisfied. (Compl. ¶ 30.) On October 4, 2009, Mr. Pugliese's petition was granted and the Deficiency Action was dismissed.*fn5 (Compl. ¶ 32; Answer ¶ 32.)

On October 14, 2009, plaintiffs-apparently with new counsel (see Freedman Dep. 76:16-77:13)-moved to strike or open the order of June 5, 2009 marking the judgment against Mr. Pugliese satisfied. (Opinion 3; Freedman Dep. 76:6-15.) President Judge Schmehl denied plaintiffs' motion on December 3, 2009, and on April 1, 2010, recommended that plaintiffs' appeal to the Pennsylvania Superior Court be denied. (Opinion 3-4, 8.) That appeal was later withdrawn. (Freedman Dep. 93:6-23.)

Plaintiffs filed this malpractice suit against the Squire Firm and Freedman on April 1, 2010. Defendants moved to dismiss the complaint for failure to state a claim, and I denied that motion on December 13, 2010. See Bayview Loan Servicing, LLC v. Law Firm of Richard M. Squire & Assocs., LLC, No. 10-1451, 2010 U.S. Dist. LEXIS 132108, at *1 (E.D. Pa. Dec. 13, 2010). Before the court is plaintiffs' motion for partial summary judgment.

II. Legal Standard

A motion for summary judgment must be granted "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once a party moving for summary judgment has met its initial burden, the nonmoving party may not rely merely on bare assertions, conclusory allegations, or suspicions, see Fireman's Ins. Co. v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982), but instead must present "specific facts showing that there is a genuine issue for trial," Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal quotation marks omitted).

"Facts that could alter the outcome are 'material,' and disputes are 'genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Ideal Dairy Farms, Inc. v. John Labatt, Ltd., 90 F.3d 737, 743 (3d Cir. 1996) (internal quotation marks omitted). "[I]t is inappropriate to grant summary judgment in favor of a moving party who bears the burden of proof at trial unless a reasonable juror would be compelled to find its way on the facts needed to rule in its favor on the law." El v. SEPTA, 479 F.3d 232, 238 (3d Cir. 2007). For elements on which the nonmoving party bears the burden of production, the party must show more than "[t]he mere existence of a scintilla of evidence," but instead must present concrete evidence supporting each essential element of its claim. Anderson v. Liberty Lobby, Inc., 477 ...


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