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Bayview Loan Servicing, LLC v. Lindsay

Supreme Court of Pennsylvania

June 1, 2018


          ARGUED: September 13, 2017

          Appeal from the Judgment of Superior Court entered on July 27, 2016 at No. 2364 EDA 2015, affirming the Order entered on July 9, 2015 in the Court of Common Pleas, Philadelphia County, Civil Division at No. 1170 May Term, 2013




         The Loan Interest and Protection Law, commonly referred to as "Act 6, " is a consumer protection statute for residential mortgage debtors that provides an "extensive program designed to avoid mortgage foreclosures." Bennett v. Seave, 554 A.2d 866, 891 (Pa. 1989) (plurality); see also Benner v. Bank of America, N.A., 917 F.Supp.2d 338, 357 (E.D.Pa. 2013). In its section 403(a), Act 6 requires a residential mortgage lender to provide at least thirty days' notice of its intent to foreclose on a residential mortgage to the homeowner, and in section 503(a) it provides for an award of attorneys' fees for any residential mortgage debtor who "prevails in an action arising under this act." 41 P.S. §§ 403(a), 503(a). In this appeal, Appellant Rodger Lindsay ("Lindsay"), a debtor who, in response to a mortgage foreclosure complaint filed by Appellee Bayview Loan Servicing, LLC ("Bayview"), asserted as an affirmative defense in new matter Bayview's failure to provide him with the required thirty days' notice. We are presented with the question of whether, following Bayview's discontinuance of the case, Lindsay is entitled to recover attorneys' fees arising from the assertion of his affirmative defense. We conclude that to be entitled to an award of attorneys' fees under section 503(a), the debtor must commence an "action" asserting a violation of section 403(a) and prevail. Because an affirmative defense is not an "action" for purposes of Act 6, under the facts and procedural history presented here, Lindsay is not entitled to an award of attorneys' fees.

         Enacted in 1974, Act 6 regulates legal rates of interest, 41 P.S. §§ 201, 301, provides various consumer protection provisions, 41 P.S. §§ 401-408; and sets forth various remedies for the violation of its terms. 41 P.S. §§ 501-507. The remedial consumer protective provision at issue in this appeal is set forth in section 403(a), which requires that

[b]efore any residential mortgage lender may accelerate the maturity of any residential mortgage obligation, commence any legal action including mortgage foreclosure to recover under such obligation, or take possession of any security of the residential mortgage debtor for such residential mortgage obligation, such person shall give the residential mortgage debtor notice of such intention at least thirty days in advance as provided in this section.

41 P.S. § 403(a).[1] The remedy provision at issue here is section 503(a), which permits the recovery of reasonable attorneys' fees and other costs and expenses, as follows:

If a borrower or debtor, including but not limited to a residential mortgage debtor, prevails in an action arising under this act, he shall recover the aggregate amount of costs and expenses determined by the court to have been reasonably incurred on his behalf in connection with the prosecution of such action, together with a reasonable amount for attorney's fee.

41 P.S. § 503(a).[2]

         Having set forth the relevant statutory provisions, we turn to the facts of this case. In February 2006, Lindsay and his wife purchased 2115 East Chelten Avenue in Philadelphia (the "Property"). The Property had a storefront commercial unit on the first floor and a residential unit above. To finance this purchase, the Lindsays obtained a $75, 000 mortgage loan from Equity One, Inc. ("Equity One"). The mortgage note indicated that the property was an investment, that the Lindsays would not use it as a primary or secondary residence, and that the Lindsays would notify Equity One in writing of any proposed change of occupancy. On April 29, 2011, Equity One assigned the mortgage to Bayview. At some point after purchasing the Property, Lindsay[3] began using the Property as his primary residence.

         Mortgage payments continued until December 2012, but none were made after that date. On May 14, 2013, Bayview filed a complaint in mortgage foreclosure. In response, Lindsay filed an answer and new matter, in which he asserted, along with three other defenses, [4] that Bayview failed to provide him with pre-foreclosure notice as required by section 403(a) of Act 6. Lindsay's Answer and New Matter, 5/12/2014, at 12-14. On February 2, 2015, Bayview filed a motion for summary judgment. Following oral argument, the trial court denied Bayview's motion for summary relief based upon its finding that there were unresolved issues with regard to whether Bayview was required to provide section 403(a) notice, whether Lindsay was eligible for government programs related to mortgage repayment, and "other facts on [sic] record." Trial Court Order, 4/22/2015.

         One week later, Bayview discontinued the mortgage foreclosure action without prejudice. Lindsay then filed a motion for attorneys' fees under section 503(a), asserting that he was the prevailing party in Bayview's foreclosure action. Supplemental Brief in Support of Motion for Award of Statutory Attorney's Fees and Costs, 6/29/2015, at 1. In support of his motion, Lindsay cited to Gardner v. Clark, 503 A.2d 8 (Pa. Super. 1986), a case in which the Superior Court held that a debtor asserting defenses under Act 6 was entitled to attorneys' fees after the creditor discontinued the action. Id. at 10. According to the Superior Court in Gardner, the debtor was a "prevailing party" because he had "successfully resisted appellant's attempt to enforce the judgment against their residence." Id. The intermediate appellate court further held that it did not matter, for purposes of entitlement to attorneys' fees under Act 6, that the case had not ended in an adverse judgment against the appellant or that the debt remained valid and collectable in a future action. Id. Instead, all that mattered was that the debtor had succeeded "in obtaining substantially the relief sought." Id.

         The trial court disagreed with Lindsay, concluding that Gardner had no applicability in the present circumstances because it involved an award of attorneys' fees in a case involving an attempt to enforce a confessed judgment. Trial Court Opinion, 12/9/2015, at 3. Pursuant to section 407 of Act 6, before levying, executing or garnishing on a confessed judgment with respect to residential real estate, the creditor must first file an action against the debtor and proceed to judgment, at which time the judgment by confession and judgment in the subsequent action are merged and conformed as to amount. 41 P.S. § 407(a). In Gardner, the debtor asserted that the creditor had not filed a separate action as required by section 407(a). Gardner, 503 A.2d at 9. In the present case, the trial court found that the situation in Gardner (involving a confessed judgment) was not sufficiently "comparable to circumstances of the instant proceeding." Trial ...

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