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Deutsche Bank National Trust Co. v. Bendex Properties LLC

United States District Court, M.D. Pennsylvania

March 29, 2018

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Morgan Stanley Capital Inc. Trust 2006-HE2 Mortgage Pass-through Certificates, Series 2006-HE2, Plaintiff,
v.
BENDEX PROPERTIES LLC., Defendant.

          MEMORANDUM

          JOSEPH F. SAPORITO, JR. UNITED STATES MAGISTRATE JUDGE

         This is an action for declaratory relief under 28 U.S.C. § 2201. The basis for federal subject matter jurisdiction is diversity of citizenship under 28 U.S.C. § 1332. Accordingly, although federal law governs whether we can properly render declaratory judgment, the substantive law of Pennsylvania applies in this matter. See generally Liberty Mut. Ins. Co. v. Sweeney, 216 F.2d 209, 210 (3d Cir. 1954); Am. Motorists Ins. Co. v. Mack, 248 F.Supp. 1016, 1018 (E.D. Pa. 1965).

         The plaintiff, Deutsche Bank National Trust Company, as Trustee for Morgan Stanley Capital Inc. Trust 2006-HE2 Mortgage Pass-through Certificates, Series 2006-HE2 (“Deutsche Bank”), is the assignee of a mortgage on real property located at 727 N. Lincoln Avenue, Scranton, Pennsylvania, formerly owned by Tiffany F. Buck, the mortgagor (the “Property”). Deutsche Bank filed the complaint in this matter on March 10, 2016, seeking declaratory judgment against defendant Bendex Properties LLC (“Bendex”). (Doc. 1). Bendex is the current owner of the Property, having purchased it at a judicial tax sale on April 20, 2015. A second defendant, the Lackawanna County Tax Claim Bureau (the “Bureau”) was subsequently granted leave to intervene as an additional defendant in this action. (Doc. 20; Doc. 21).

         Deutsche Bank seeks a declaration by this Court that either (a) the judicial tax sale to Bendex is void ab initio because the petition for judicial tax sale, the rule to show cause, and the judicial sale deed identify the Property by the wrong street address; or alternatively (b) Deutsche Bank's lien on the Property was not discharged by the judicial tax sale because it did not receive adequate notice of the judicial tax sale, and thus Bendex took the Property subject to Deutsche Bank's mortgage lien.

         The parties have filed cross-motions for summary judgment. (Doc. 30; Doc. 36). These motions are fully briefed and ripe for disposition.

         I. Material Facts

         The Property is located at 727 North Lincoln Avenue, Scranton, Pennsylvania. The Property is also identified on the county tax maps as Parcel No. 14510-040-030. The prior record owner of the Property was non-party Tiffany F. Buck.

         On December 2, 2005, Buck executed a promissory note in favor of non-party Decision One Mortgage Company, LLC (“Decision One”) in the amount of $108, 000 plus interest. The note was secured by a mortgage on the Property, executed that same day. The mortgage instrument named Buck as mortgagor/borrower, Decision One as the lender, and non-party Mortgage Electronic Registration Systems, Inc. (“MERS”) as the mortgagee. The mortgage instrument identified the address for MERS as “P.O. Box 2026, Flint, MI 48501-2026.” It identified the address for Decision One as “6060 J.A. JONES DRIVE, SUITE 1000, CHARLOTTE, NORTH CAROLINA 28287.” It identified the Property as

the following described property located in the County of Lackawanna:
SEE ATTACHED SCHEDULE “A”
which currently has the address of 727 N LINCOLN AVE[, ] SCRANTON, Pennsylvania 18504 (“Property Address”):
TOGETHER WITH all the improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of the property. All replacements and additions shall also be covered by this Security Instrument. All of the foregoing is referred to in this Security Instrument as the “Property.”. . .

         The attached schedule provided the following legal description of the Property:

ALL that certain lot, piece or parcel of land situate in the 21st Ward of the City of Scranton, County of Lackawanna and State of Pennsylvania, designated and described as follows, to wit:
BEING Lot numbered seven (7), in Block numbered thirteen (13) upon the Northwesterly side of Lincoln Avenue; said Lot being forty (40) feet in width in front on said Lincoln Avenue, the same width in the rear, and one hundred forty-four (144) feet deep to a Court for public use fourteen (14) feet wide, as designated and laid out on the plot or map known as West Park, which map is duty [sic] recorded in the proper office for the Recording of Deeds, etc., in and for said County of Lackawanna, in Map Book Numbered 1, at pages 98 and 99, as by reference thereto had will more fully and at large appear.
BEING Parcel No. 14510-040-030 and Map No. 21-120-7

MERS recorded the mortgage with the Lackawanna County Recorder of Deeds on January 12, 2006, as Instrument Number 200601097.

         Buck fell into arrears on both this mortgage and the real estate taxes due on the Property. On or about September 29, 2014, the Bureau exposed the Property to a public upset sale, but a sufficient minimum bid was not received. See generally 72 P.S. § 5860.601 et seq.

         On or about January 22, 2015, the Bureau filed a Petition to Sell Tax Delinquent Property at Judicial Sale Free and Clear of All Liens and Encumbrances with the Lackawanna County Court of Common Pleas (the “Petition”). The Petition was docketed as No. 15-cv-205, and it described the subject property as “747 North Lincoln avenue, Scranton, PA[, ] Tax Map No. 145.10-040-030[, ] more fully described on Exhibit “A” attached hereto.” Exhibit A to the Petition was a copy of a special warranty deed conveying the Property to Tiffany F. Buck, dated December 2, 2005, and recorded with the Lackawanna County Recorder of Deeds on January 12, 2006, as Instrument Number 200601096. The attached deed provided the following legal description of the Property:

ALL that certain lot, piece or parcel of land situate in the 21st Ward of the City of Scranton, County of Lackawanna and State of Pennsylvania, designated and described as follows, to wit:
BEING Lot numbered seven (7), in Block numbered thirteen (13) upon the Northwesterly side of Lincoln Avenue; said Lot being forty (40) feet in width in front on said Lincoln Avenue, the same width in the rear, and one hundred forty-four (144) feet deep to a Court for public use fourteen (14) feet wide, as designated and laid out on the plot or map known as West Park, which map is duty [sic] recorded in the proper office for the Recording of Deeds, etc., in and for said County of Lackawanna, in Map Book Numbered 1, at pages 98 and 99, as by reference thereto had will more fully and at large appear.
BEING Parcel No. 14510-040-030 and Map No. 21-120-7
BEING THE SAME premises which Betty L. Fletcher, as power of attorney for Marilyn Jean Lewis by Deed dated October 13, 2000 and recorded October 16, 2000 in Book 324, Page 327 in and for Lackawanna County granted and conveyed unto Tiffany F. Panek, GRANTOR HEREIN

         The Petition also included, as an attached exhibit, a record search showing record ownership of the Property and all claims, liens, and encumbrances of record as of January 5, 2015. In addition to the record owner, Tiffany F. Buck, the Petition identified all parties with interests in the Property, so they could be served with appropriate notice. The Petition explicitly listed mortgagee “Mortgage Electronic Registration Systems, Inc.” with an address of “PO Box 2026, Flint MI 48501-2026, ” and lender “Decision One Mortgage Company, LLC” with an address of “6060 J.A. Jones Dr., STE 1000, Charlotte, NC 28287” as interested parties to receive notice of the judicial tax sale.[1] Several other lienholders and interested parties were also identified.

         The Petition requested issuance and service of a Rule to Show Cause why the Property should not be sold free and clear of all tax and municipal claims, liens, mortgages, charges, estates, and encumbrances. That same day-January 22, 2015-a judge signed the Rule.

         On February 6, 2015, the sheriff served the Rule and Petition on MERS by certified mail, return receipt requested, addressed to its Flint, Michigan, address of record. On or about February 17, 2015, the sheriff received a domestic return receipt indicating that the Rule and Petition were received by a “Michael LaLonde” on behalf of MERS. The return receipt did not indicate the date of receipt by MERS, On March 18, 2015, a sheriff's return documenting service of the Rule and Petition upon MERS was filed with the court.

         On February 6, 2015, the sheriff also served the Rule and Petition on Decision One by certified mail, return receipt requested, addressed to its Charlotte, North Carolina, address of record. On or about March 26, 2015, a sheriff's return was filed indicating that this service packet was returned by the Post Office as undeliverable, and the Post Office was unable to forward it.

         On that same day-February 6, 2015-the state court entered an order authorizing advertisement of the judicial tax sale in a local newspaper of general circulation and a local legal journal. The order further provided that this advertisement would be “construed as service upon all owners, mortgage holders, lienholders, or any other party having an interest in the subject properties if service has been attempted by the Sheriff and has been unable to be made, and service has further been attempted by regular first class mail to the last known address of the affected party.” On February 20, 2015, identical advertisements appeared in the Lackawanna Jurist and the Scranton Times-Tribune, stating that a judicial tax sale would take place on March 23, 2015, and that the ...


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