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ISN Bank v. Rajaratnam

Superior Court of Pennsylvania

November 25, 2013

ISN BANK f/k/a INTERSTATE NET BANK, n/k/a CUSTOMERS BANK, Appellant
v.
ARASU RAJARATNAM, Appellee ISN BANK f/k/a INTERSTATE NET BANK, n/k/a CUSTOMERS BANK, Appellant
v.
EMMA RAJARATNAM, Appellee

Appeal from the Order dated January 24, 2013, Court of Common Pleas, Philadelphia County, Civil Division at Nos. August Term, 2009, 00363 and May Term, 2010, 03129

BEFORE: BOWES, DONOHUE and OTT, JJ.

OPINION

DONOHUE, J.

Appellant, ISN Bank f/k/a Interstate Net Bank, n/k/a Customers Bank ("Customers Bank"), appeals from the order of the trial court dated January 24, 2013 denying a motion to consolidate two judgments, one each against Appellees, Arasu and Emma Rajaratnam (together, the "Rajaratnams"). This case presents an issue of first impression for Pennsylvania appellate courts, namely whether separate judgments entered against a husband and wife may be consolidated so that assets held as tenants by the entireties may be executed upon to satisfy a joint indebtedness. For the reasons that follow, we conclude that they may not be consolidated and affirm the trial court's order.

On or about December 21, 2005, ISN Bank, f/k/a Interstate Net Bank ("ISN Bank") made a construction loan to Tower Apartment Partnership, LLP ("Tower") in the maximum amount of $6, 980, 395 to finance the renovation of a property on Morris Street in Philadelphia into a 36 unit condominium development. At that time, Arasu Rajaratnam, the principal of Tower, also executed and delivered a guaranty agreement to ISN Bank (the "2005 Guaranty Agreement"). The Tower loan was originally due and payable in full on December 21, 2007, but on or about October 26, 2007, ISN Bank agreed to extend the maturity of the loan to June 21, 2008. At that time, Arasu Rajaratnam and his wife Emma Rajaratnam both executed a guaranty agreement to ISN Bank (the "2007 Guaranty Agreement").

The loan to Tower eventually went into default, and on August 5, 2009 a judgment by confession was entered in favor of ISN Bank and against Arasu Rajaratnam pursuant to the 2005 Guaranty Agreement, in the amount of $4, 988, 321.05 plus accruing interest and attorneys' fees.

On May 24, 2010, ISN Bank filed a complaint against Emma Rajaratnam based upon her obligations under the 2007 Guaranty Agreement.[1] On July 11, 2011, the Morris Street property was sold at a sheriff's sale and purchased by Customers Bank. Customers Bank filed a Petition to Fix Fair Market Value and Establish Deficiency Judgment, naming, inter alia, the Rajaratnams, as respondents.

On February 29, 2012, the trial court conducted a bench trial in the action against Emma Rajaratnam, after which it found Emma Rajaratnam was bound by the terms of the 2007 Guaranty Agreement and that she was liable in an amount to be determined by resolution of the deficiency judgment petition. On June 19, 2012, the parties disposed of the deficiency judgment petition through a court-approved stipulation of the parties, pursuant to which a deficiency judgment was established in favor of Customers Bank in the amount of $3, 300, 764.53, plus additional interest accruing from and after May 23, 2012 at the legal rate of $515.798 per day.

On December 3, 2012, Customers Bank moved to consolidate the judgments entered against Arasu Rajaratnam individually on the 2005 Guaranty Agreement and against Emma Rajaratnam individually on the 2007 Guaranty Agreement. By order dated January 24, 2013, the trial court denied the motion to consolidate the two judgments.

This appeal followed, in which Customers Bank raises the following issue for our consideration and determination:

Did the trial court err in denying [Customers Bank's] Motion for Consolidation of Judgments where judgments were entered against husband and wife for the same indebtedness and for which husband and wife had agreed in a single document to be jointly obligated?

Brief of Customers Bank at 1.

No procedural mechanism exists in Pennsylvania to consolidate judgments against different people. Rule 3025.1 of the Pennsylvania Rules of Civil Procedure authorizes the consolidation of "two or more judgments entered against the same person in the same county, " Pa.R.C.P. 3025.1, but no similar rule sanctions the consolidation of two or more judgments entered against different people (whether husband and wife, or otherwise). On appeal, Customers Bank cites to two older cases, Appeal of Reed, 7 Pa. 65 (1847), and Appeal of Yeager, 129 Pa. 268, 18 A. 137 (1889), but these cases both involved the consolidation of multiple judgments against the same person, and thus are mere precursors of the current Rule 3025.1.

Customers Bank also contends that the trial court here had the ability to consolidate the two judgments at issue in this case based upon the "inherent power" of trial courts to modify their own judgments. Customers Bank Brief at 5. Pursuant to 42 Pa.C.S.A. § 5505, however, the trial court's broad discretion to modify its orders ceases thirty days after the entry of an order, and thereafter the trial court may exercise discretion to modify an order only upon a showing of extrinsic fraud, lack of jurisdiction over the subject matter, a fatal defect apparent on the face of the record or some other evidence of "extraordinary cause justifying intervention by the court." See, e.g., Verholek v. Verholek, 741 A.2d 792, 798 (Pa.Super. 1999), appeal denied, 563 Pa. 665, 759 A.2d 388 (2000). After the initial thirty-day period, a trial court may modify an order only to correct a clerical error or other formal error which is clear on the face of the record and which does not require an exercise of discretion. See, e.g., Stockton v. Stockton, 698 A.2d 1334, 1337 n.3 (Pa.Super. 1997). The motion to consolidate judgments filed by Customers Bank in this case did not ...


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