Commonwealth Court Cases - Commonwealth Court Case Law from PA - Pennsylvania Commonwealth Court

Microsoft Word - 1436CD04.doc

	ROMINGER LEGAL
		Pennsylvania Court Cases and Opinions - PA Legal Research
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case was taken from the Pennsylvania Courts. Search our site for more cases - CLICK HERE

MOST CURRENT PENNSYLVANIA SUPERIOR COURT CASES

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Sale of Real Estate by Luzerne :
County Tax Claim Bureau situate at :
Harveys Lake Borough
:

:
Manufacturers & Traders Trust
:
Company

:

:

v.

: No. 1436 C.D. 2004

: Submitted: March 4, 2005
Luzerne County Tax Claim Bureau :
and James Pilger

:

:
Appeal of: James Pilger
:
BEFORE: HONORABLE JAMES GARDNER COLINS, President Judge
HONORABLE
DAN
PELLEGRINI, Judge

HONORABLE JAMES R. KELLEY, Senior Judge
OPINION NOT REPORTED
MEMORANDUM OPINION
BY JUDGE PELLEGRINI

FILED: April 15, 2005

James Pilger (Pilger) appeals from an order of the Court of Common
Pleas of Luzerne County (trial court) granting in part Manufacturers & Traders
Trust Company's (Lienholder) petition to set aside a judicial tax sale of property
only to the extent of preserving Lienholder's mortgage lien in full force.

This case involves property located at 1 Rhodes Terrace, Harveys
Lake Borough, Luzerne County, Pennsylvania, owned by Nada and Gregory

O'Neil (Owners). The property had a mortgage recorded against it by
Contimortgage Corporation (Contimortgage) in the Office of Recorder of Deeds of
Luzerne County. The address of record for Contimortgage was 338 South
Warminster Road, Hatboro, Pennsylvania, 19040. In May of 2000, Contimortgage
filed for bankruptcy and vacated its office in Hatboro, and in 2002, it relocated to
Boca Raton, Florida.

In October 2001, after Owners failed to pay their real estate taxes, the
property was exposed to an upset tax sale,1 which failed to garner sufficient bids to
pay the upset price, and the Luzerne County Tax Claim Bureau (Bureau) petitioned
the trial court for permission to conduct a judicial tax sale2 to sell the property

1 Pursuant to Sections 601-609 of the Real Estate Tax Sale Law (Law), Act of July 7,
1947, P.L. 1368, as amended, 72 P.S. §5860.601-5860.609, an upset tax sale is conducted when a
property owner is delinquent in paying taxes. Before the upset tax sale is conducted, notice must
be published in a newspaper and "shall be addressed to the `owners of properties described in
this notice and to all persons having liens, judgments or municipal or other claims against such
properties.' " 72 P.S. §5860.602(d). Additionally, the owner must be notified by certified mail.
72 P.S. §5860.602[e](2). The lienholder(s), if any, are not required to be notified by mail of an
upset tax sale because a person who buys a property at an upset tax sale takes the property
"subject to the lien of every recorded obligation, claim, lien, estate, mortgage, ground rent and
Commonwealth tax lien not included in the upset price ...." 72 P.S. §5860.609. Additionally,
the tax bureau is required to use "reasonable efforts" to discover persons whose property
interests are likely to be affected by an impeding "tax sale." See 72 P.S. §5860.607(a).
2 If the upset price is not bid at the upset tax sale, Section 610 of the Law requires the tax
bureau to petition the trial court for permission to sell the property "free and clear" of all liens in
a judicial tax sale. 72 P.S. §5860.610. Further, after the Bureau presents all required
information in a petition to the trial court, Section 610 of the Law provides that the trial court
"shall grant a rule upon all parties shown to be interested to appear and show cause why a decree
should not be made that said property be sold, free and clear of their respective tax and municipal
claims, liens, mortgages, charges and estates, except separately taxed ground rents." 72 P.S.
§5860.610. In addition, Section 611 of the Law requires:

(Footnote continued on next page...)
2

"free and clear" of all encumbrances. In December 2001, it performed a record
search which revealed that the only lien on record was a mortgage in the name of
Contimortgage for $68,000. After the trial court granted the petition and entered a
rule to show cause why the property should not be sold free and clear of all
encumbrances, the Bureau unsuccessfully attempted to notify Contimortgage of the
pending sale through the Sheriff.3 In August 2002, the Bureau sent notice of the

(continued...)

Service of the rule shall be made in the same manner as writs of
scire facias are served in this Commonwealth. When service
cannot be made in the county where the rule was granted, the
sheriff of the county shall deputize the sheriff of any other county
in this Commonwealth, where service can be made. If service of
the rule cannot be made in this Commonwealth, then the rule shall
be served on the person named in the rule by the sheriff, by
sending him, by registered mail, return receipt requested, postage
prepaid, at least fifteen (15) days before the return day of the rule,
a true and attested copy thereof, addressed to such person's last
known post office address. The sheriff shall attach to his return,
the return receipts, and if the person named in the rule has refused
to accept the registered mail or cannot be found at his last known
address, shall attach evidence thereof. This shall constitute
sufficient service under this act.

72 P.S. §5860.611. (Emphasis added.)
3 Specifically, the director of the Bureau, Mary V. Augello, testified that the Luzerne
County Sheriff's Office deputized the Montgomery County Sheriff's Office to make service to
Contimortgage of the Bureau's petition and the trial court's order to have a judicial sale of the
property free and clear of encumbrances at 338 South Warminster Road, Hatboro. Because the
Warminster Road address was actually in Delaware County and the Sheriff did not have
jurisdiction to deliver the petition, the Montgomery County Sheriff's Office returned it with "out
of county" written on it. In addition, it informed the Bureau that Contimortgage's address had
changed to 161 East County Line Road, Second Floor. After receiving the "out of county"
return, the Bureau did not request the Sheriff to deputize the Delaware County Sheriff's Office.
In addition, no deputized service of the petition was ever made on Contimortgage at the East
County Line Road address either.
3

sale by certified mail to Contimortgage at 161 East County Line Road, Hatboro,
Pennsylvania, 19040.4 The return receipt was signed by M. Beck, but was dated
September 23, 2002, four days after the actual tax sale.5 On September 19, 2002,6
a judicial tax sale was conducted at which Pilger (Purchaser) purchased the
property free and clear of all liens and encumbrances for $774. Subsequently, a
tax claims deed was issued transferring title to the property to Purchaser.

On January 23, 2003, after the sale, and even though it had
commenced a foreclosure action in 2002, Lienholder purchased the mortgage,
recorded it on February 20, 2003, and on October 24, 2003, petitioned to set aside
the judicial sale. In the petition, Lienholder alleged that the Bureau had failed to
send it notice of the impending sale as required by Section 611 of the Law, and that
the Bureau failed to exercise reasonable efforts required by Section 607(a) of the
Law7 to discover Lienholder's whereabouts and to notify them of the sale.8

4 In addition to failing to pay their real estate taxes on the subject property, the Owners
also failed to make monthly mortgage payments causing Lienholder, prior to purchasing the lien,
to somehow commence a mortgage foreclosure action in June 2002. The Bureau did not conduct
a "bring-down search" of its December 2001 search and, as a result, was not aware of the
pending foreclosure action against the Owners. The Bureau also was not aware that
Contimortgage filed for bankruptcy.
5 Some discussion in the record indicates that the postal service forwarded the mail to
Contimortgage in Boca Raton, Florida. However, it is not clear from the record whether the
certified mail was received in Hatboro or was forwarded to Contimortgage in Boca Raton,
Florida.
6 The trial court's opinion states that the judicial tax sale occurred on September 19,
2003; however, the record clearly shows that it took place on September 19, 2002.
7 Added by the Act of July 3, 1986, P.L. 351. Section 607(a) of the Law, located in the
section of the Law pertaining to upset sales, provides:
(Footnote continued on next page...)
4

Finding that the Bureau failed to provide timely notice of the judicial
tax sale to the original mortgagee or to Lienholder, and that there was no reason
why such notice could not have been reasonably made, the trial court concluded

(continued...)

(a) When any notification of a pending tax sale or a tax sale subject
to court confirmation is required to be mailed to any owner,
mortgagee, lienholder or other person or entity whose property
interests are likely to be significantly affected by such tax sale, and
such mailed notification is either returned without the required
receipted personal signature of the addressee or under other
circumstances raising a significant doubt as to the actual receipt of
such notification by the named addressee or is not returned or
acknowledged at all, then, before the tax sale can be conducted or
confirmed, the bureau must exercise reasonable efforts to discover
the whereabouts of such person or entity and notify him. The
bureau's efforts shall include, but not necessarily be restricted to, a
search of current telephone directories for the county and of the
dockets and indices of the county tax assessment offices, recorder
of deeds office and prothonotary's office, as well as contacts made
to any apparent alternate address or telephone number which may
have been written on or in the file pertinent to such property.
When such reasonable efforts have been exhausted, regardless of
whether or not the notification efforts have been successful, a
notation shall be placed in the property file describing the efforts
made and the results thereof, and the property may be rescheduled
for sale or the sale may be confirmed as provided in this act.

(b) The notification efforts required by subsection (a) shall be in
addition to any other notice requirements imposed by this act.

72 P.S. §5860.607(a). (Emphasis added.)
8 This Court has held that the "reasonable efforts" requirement contained in Section
607(a) of the Law applies to judicial, as well as upset, tax sales. In re Free and Clear Sale
Conducted November 19, 1998 SALE NO. 10, Deed No. 23198, 801 A.2d 1280
(Pa. Cmwlth. 2002).

5

that the tax sale did not divest the Lienholder's mortgage and Purchaser took the
property subject to the mortgage lien. Purchaser then filed this appeal.9

On appeal, Purchaser contends that Lienholder does not have standing
to petition to set aside the judicial sale in this case because it did not obtain or
record its assignment of the mortgage until after the judicial tax sale. Ignoring the
unexplained foreclosure action that Lienholder inexplicably filed against Owners
prior to its purchasing the mortgage, and even though Lienholder was not entitled
to notice in its own right because it had no lien against the property at the time of
the tax sale, nonetheless, it would still have standing, as successor in interest to
Contimortgage, to challenge whether Contimortgage received the requisite notice.
In any event, Purchaser did not object to Lienholder's appearance before the trial
court, thereby waiving his right to challenge Lienholder's standing. Bullock v.
County of Lycoming, 859 A.2d 518, 523 (Pa. Cmwlth. 2004).

Even if Lienholder has standing, Purchaser then argues that the trial
court erred in holding that Lienholder's mortgage survived the tax sale because the
Bureau tried to send deputized notice of the tax sale to Contimortgage, and any
delay in notice was solely the fault of Contimortgage who relocated without record
notice. What that argument ignores, however, is that the burden of giving notice of
judicial sale upon parties of interest is placed on the Bureau, and where service is
unable to be made at the address of record, the Bureau is required to exercise

9 Our scope of review in tax sale cases is limited to a determination of whether the trial
court abused its discretion, rendered a decision which lacked supporting evidence, or clearly
erred as a matter of law. In re Free & Clear Sale.

6

reasonable efforts10 to discover the whereabouts of the lienholder. 72 P.S.
§5860.607a; 72 P.S. §5860.610; and 72 P.S. §5860.611. See also: In re Free and
Clear Sale.

Under the Law then, to divest any lien, the Bureau was required to
serve deputized notice of the pending judicial sale, and if that could not be
accomplished, notice could then be sent by registered mail at least 15 days before
the judicial tax sale. 72 P.S. §5860. In this case, the Bureau requested the Sheriff
of Luzerne County to deputize the Sheriff of Montgomery County to serve
Contimortgage. After deputized service failed, the Bureau then sent notice of the
sale by certified mail to a new address for Contimortgage, which, however, was
not received by Contimortgage until four days after the judicial sale. Even
assuming then that the certified mail was received by a party authorized to receive
notice on behalf of Contimortgage, such notice could not have divested the
mortgage because it was received after the sale had occurred. Plank v. Monroe
County Tax Claim Bureau, 735 A.2d 178 (Pa. Cmwlth.), petition for allowance of
appeal denied, 560 Pa. 753, 747 A.2d 373 (1999).

Because the Bureau failed to provide timely notice to Contimortgage,
the trial court properly determined that the judicial tax sale could not displace

10 Such reasonable efforts may include a search of telephone directories for the county
and of the dockets and indices of the county tax assessment offices, recorder of deeds office and
prothonotary's office, as well as contacts made to any apparent alternate address or telephone
number which may have been written on or in the file pertinent to such property. 72 P.S.
§5860.607(a). After these or other reasonable efforts are exhausted, the Bureau should make a
note of the efforts taken and attach it to the file, and only then may the judicial sale or
confirmation of the sale take place. Id.
7

Lienholder's interest in the mortgage, and the correct remedy was for Purchaser to
take the property subject to the Lienholder's mortgage lien. Accordingly, the order
of the trial court is affirmed.

_______________________________

DAN
PELLEGRINI,
JUDGE
8

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Sale of Real Estate by Luzerne :
County Tax Claim Bureau situate at :
Harveys Lake Borough
:

:
Manufacturers & Traders Trust
:
Company

:

:

v.

: No. 1436 C.D. 2004

:
Luzerne County Tax Claim Bureau :
and James Pilger

:

:
Appeal of: James Pilger
:

O R D E R

AND NOW, this 15th day of April, 2005, the order of the Court of
Common Pleas of Luzerne County dated April 6, 2004, at No. 374-C of 2002,
granting in part Manufacturers & Traders Trust Company's petition to set aside a
judicial tax sale of property only to the extent of preserving its mortgage lien in full
force and ordering that James Pilger take the property subject to Manufacturers &
Traders Trust Company's interest is affirmed.

_______________________________

DAN
PELLEGRINI,
JUDGE

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
In Re: Sale of Real Estate of Luzerne :
County Tax Claim Bureau situate at :
Harveys Lake Borough
:

:
Manufacturers & Traders Trust
:
Company

:

:
v.

:

:
Luzerne County Tax Claim Bureau :
and James Pilger

:

: No. 1436 C.D. 2004
Appeal of: James Pilger
: Submitted: March 4, 2005

BEFORE: HONORABLE JAMES GARDNER COLINS, President Judge
HONORABLE
DAN
PELLEGRINI, Judge

HONORABLE JAMES R. KELLEY, Senior Judge
OPINION NOT REPORTED
CONCURRING OPINION
BY PRESIDENT JUDGE COLINS

FILED: April 15, 2005

I agree with the majority's resolution of this matter. However, I
merely wish to state that this record is most confusing, particularly since, unless
the legislature has changed the county boundaries, Hatboro, Pennsylvania, is, in its
entirety, located in Montgomery County.

_________________________________________
JAMES GARDNER COLINS, President Judge