J-A28022-19


                                  2020 PA Super 120

    U.S. BANK NATIONAL ASSOCIATION, AS                IN THE SUPERIOR COURT
    TRUSTEE FOR CITIGROUP MORTGAGE                       OF PENNSYLVANIA
    LOAN TRUST 2006-WFHE3, ASSET-
    BACKED PASS-THROUGH
    CERTIFICATES, SERIES 2006-WFHE3

                             Appellant

                        v.

    KATHERYNE W. DAVIS, AKA KATHERYNE
    WHITNEY DAVIS

                             Appellee                   No. 614 EDA 2019


                Appeal from the Order Entered January 17, 2019
               In the Court of Common Pleas of Delaware County
                      Civil Division at No: CV-2016-007787


BEFORE: PANELLA, P.J., STABILE, J., and COLINS, J.*

OPINION BY STABILE, J.:                                    FILED MAY 20, 2020

        Appellant, U.S. Bank National Association, appeals from the January 17,

2019 order entering summary judgment in favor of Appellee, Katheryne W.

Davis a/k/a Katherine Whitney Davis. We reverse and remand.

        The pertinent facts and procedural history are not in dispute. On July

31, 2006, Appellee borrowed $494,100.00, secured by a mortgage. Appellee

failed to make her March 1, 2013 payment, and she has made no payments

since. The mortgage was assigned to Appellant on May 8, 2013. On October



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*   Retired Senior Judge assigned to the Superior Court.
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2, 2013, Appellant filed a complaint in mortgage foreclosure against Appellee.

On April 29, 2015, after the close of Appellant’s evidence at a trial in that

case, the trial court entered a compulsory nonsuit, finding that Appellant failed

to prove it provided notice of the foreclosure proceeding under Act 91 (35 P.S.

§ 180.401c, et seq.). Appellant filed a timely appeal but later withdrew it.

      Appellant filed a new Act 91 notice on July 8, 2016, followed by the

instant complaint in foreclosure on September 9, 2016. On January 17, 2019,

the trial court granted Appellee’s summary judgment motion, concluding that

the nonsuit in Appellee’s favor in the original foreclosure action barred the

present action by res judicata. This timely appeal followed.

      Appellant offers two reasons it believes the trial court erred.      First,

Appellant claims res judicata does not apply because there was no decision on

the merits in the prior action.   Second, Appellant argues that the present

action pertains to a period of default. Appellant’s Brief at 4.

      “The question of whether summary judgment is warranted is one of law,

and thus our standard of review is de novo and our scope of review is plenary.”

City of Philadelphia v. Cumberland Cty. Bd. of Assessment Appeals, 81

A.3d 24, 44 (Pa. 2013). “Summary judgment may be entered only where the

record demonstrates that there remain no genuine issues of material fact, and




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it is apparent that the moving party is entitled to judgment as a matter of

law.” Id.1

        “Res judicata” means “a thing adjudged” or a matter settled by

judgment. Stoeckinger v. Presidential Fin. Corp. of Delaware Valley,

948 A.2d 828, 832 (Pa. Super. 2008) (quoting McNeil v. Owens-Corning

Fiberglass Corp., 680 A.2d 1145, 1147-48 (Pa. 1996)). It applies on these

conditions: “1) Identity in the thing sued upon; 2) Identity of the cause of

action; 3) Identity of persons and parties to the action; and, 4) Identity of the

quality or capacity of the parties suing or sued.” Stevenson v. Silverman,

208 A.2d 786, 787–88 (Pa. 1965). Thus, “a final judgment rendered by a

court of competent jurisdiction on the merits is conclusive as to the rights of

the parties and constitutes for them an absolute bar to a subsequent action

involving the same claim, demand or cause of action.” Id. (emphasis added).

“For res judicata purposes, a judgment on the merits is one that actually

pass[es] directly on the substance of [a particular] claim before the court.

This has been the law of Pennsylvania for more than a century.” Weinar v.

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1   The Pennsylvania Rules of Civil Procedure provide in relevant part as follows:

        After the relevant pleadings are closed, but within such time as
        not to unreasonably delay trial, any party may move for summary
        judgment in whole or in part as a matter of law

              (1) whenever there is no genuine issue of any material fact
        as to a necessary element of the cause of action or defense which
        could be established by additional discovery or expert report.

Pa.R.C.P. No. 1035.2(1).

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Lex, 176 A.3d 907, 915 (Pa. Super. 2017) (internal citation and quotation

marks omitted), appeal denied, 189 A.3d 944 (Pa. 2018).            Res judicata

presents an issue of law for which our standard of review is de novo. Id.

       In its first argument, Appellant claims the trial court did not determine

the prior action on its merits.          The prior action was dismissed because

Appellant failed to comply with Act 91. The trial court explained that it entered

a compulsory nonsuit because of Appellant’s failure to produce admissible

evidence that it sent an Act 91 notice to Appellee.         Trial Court Opinion,

8/28/15, at 3. The trial court found that Appellant’s records custodian could

not establish that Appellant’s Act 91 notice was admissible as a business

record (see Pa.R.E. 803(6)).2 Id. at 4-10.

       Instantly, we must discern whether the trial court passed directly on the

substance of the claim before it, as described in Weinar. We turn for guidance

to our Supreme Court’s decision in Beneficial Consumer Discount Co. v.

Vukman, 77 A.3d 547 (Pa. 2013). There, the trial court set aside a sheriff’s

sale, concluding that the Act 91 notice was deficient and that this deficiency

deprived the court of subject matter jurisdiction over the foreclosure action.

The mortgagee appealed, arguing that a deficient Act 91 notice was merely a

waivable procedural defect. See id. at 548-50. The Vukman Court reversed,


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2  Appellee claims there were evidentiary deficiencies in Appellant’s case in
addition to its inability to authenticate the Act 91 notice. The trial court,
however, issued no findings as to anything other than Appellant’s failure to
prove its compliance with Act 91.

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reasoning that a cause of action in foreclosure does not include the

mortgagee’s compliance with Act 91. Rather, the cause of action arises from

the mortgagor’s default. See id. at 552-53. “The cause of action does not

include the procedural requirements of acting on that cause.”      Id. at 553.

Further, “the Act 91 notice requirements appear to fit comfortably in the

procedural realm as they set forth the steps a mortgagee with a cause of

action must take prior to filing for foreclosure.” Id.

      We recognize that the Vukman Court did not consider the issue

presently before us. Nevertheless, its analysis of Act 91 is of great import

here because res judicata applies only where the prior action produced a

decision on the substance of the claim involved. Vukman establishes that

Act 91 is not part of the substance of a foreclosure cause of action. The trial

court therefore erred in concluding that Appellant’s failure to prove its

compliance with Act 91 in the prior action barred the present action under the

principles of res judicata.

      The trial court also relied on Rule 231(b) of the Pennsylvania Rules of

Civil Procedure: “After the entry of a compulsory nonsuit the plaintiff may not

commence a second action upon the same cause of action.” Pa.R.C.P. No.

231(b). The trial court relied on Albright v. Wella Corp., 359 A.2d 460, 465

(Pa. Super. 1976), in which this Court wrote that a denial to remove a

compulsory nonsuit constitutes a decision on the merits for purposes of

determining whether the nonsuited party can bring a subsequent action.


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There, the plaintiff failed to produce witnesses at arbitration and, by then-

existing rule, was precluded from producing witnesses at a de novo trial,

resulting in entry of nonsuit against her. The plaintiff later sought a jury trial

on the same cause of action, claiming that the rule that precluded her from

producing evidence at the de novo trial had been held to be invalid. Id. at

461-63. There, as here, the plaintiff argued that the prior decision was merely

on procedural grounds and not on the merits, inasmuch as a procedural rule

precluded her from producing at the de novo trial any witness she did not

produce at arbitration.     Id. at 464.     The Albright Court rejected that

argument, reasoning that the procedural rule did not preclude the plaintiff

from introducing evidence. Rather, she chose to introduce no evidence at the

arbitration. Id. Thus, the Albright Court held that the prior nonsuit was a

decision on the merits, and therefore a new trial was barred by res judicata.

Id. at 464-65.

      For reasons we have already explained, we do not consider the prior

decision in this case to be a decision on the merits.       In this case, unlike

Albright, Appellant presented evidence on the merits of its cause of action,

but the trial court declined to address the merits because Appellant failed to

establish its compliance with Act 91. Given our Supreme Court’s treatment of

Act 91 in Vukman, we conclude that the nonsuit in this foreclosure action was

not a decision on the merits. Albright is not controlling here.




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       Nonetheless, the trial court’s reliance on Rule 231 presents another

issue: whether the present case involves the same cause of action as the

prior one. For guidance on this issue we turn to the Supreme Court’s recent

decision in J.P. Morgan Chase Bank, N.A. v. Taggart, 203 A.3d 187 (Pa.

2019). The Taggart Court did not have a res judicata issue before it, but it

examined the need for statutory notice prior to successive foreclosure

complaints.     In Taggart, the mortgagee filed an Act 63 notice prior to

commencing a foreclosure action. The mortgagor filed preliminary objections,

the mortgagee never responded, and the complaint was dismissed.

Subsequently, the mortgagee filed a second foreclosure action without filing a

new Act 6 notice. The mortgagor, in seeking to set aside the sheriff’s sale,

relied on the absence of an Act 6 notice. The mortgagee argued that the Act

6 notice from the prior foreclosure action was sufficient.

       Our Supreme Court held that the trial court erred in refusing to set aside

the sheriff’s sale. Concluding that the statutory purpose of Act 6 is to prevent

foreclosures without adequate notice, the Supreme Court concluded, “Act 6

requires a new pre-foreclosure notice each time the lender initiates a

mortgage foreclosure action.” Id. at 195 (emphasis added). The Supreme

Court further explained:


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3 41 P.S. §§ 101-605. Act 6 governs the notice required prior to accelerating
the maturity date of a residential mortgage. Act 91 provides the borrower
with notice of the availability of state-funded emergency assistance; it applies
if the home to be foreclosed on is the borrower’s primary residence.

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               Act 6 notice enables a financially troubled residential
         homeowner to learn exactly what sum of money is necessary to
         cure the mortgage default. This number does not remain static
         as time passes. To the contrary, compounding interest, late fees,
         and missed payments accrue steadily. The amount required to
         cure the default will depend as well upon whether the borrower
         has made any payments, changes in the escrow portion of the
         payments, and fluctuations in adjustable rate mortgages.

Id. (citing Wells Fargo v. Spivak, 104 A.3d 7, 14 (Pa. Super. 2014)).

         While neither Rule 231 nor the doctrine of res judicata was at issue in

Taggart, we find that Court’s analysis to be illuminating as to whether we can

consider a second foreclosure on the same mortgage a new cause of action.

The second action involved a different amount necessary to cure the default,

and the mortgagor was not on notice of that amount because no Act 6 notice

preceded the second action. Thus, the Supreme Court set the sheriff’s sale

aside.

         Instantly, the trial court found the present action barred by res judicata

because Appellant accelerated the same debt under the same mortgage. Trial

Court Opinion, 4/18/19, at 1-3.        Thus, the trial court concluded that res

judicata precluded a second claim to collect the same debt. The trial court

further noted that Appellant withdrew its appeal from the prior action, thus

waiving any challenge to the issues that led to the prior nonsuit. Id.

         We disagree with the trial court’s analysis for the following reasons.

First, as is evident from the Taggart Court’s analysis, a later foreclosure

action can be distinct from an earlier one in several important respects.

Instantly, Appellee has made no payments since before the prior action. As

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the Taggart Court explained, the amount necessary to cure the default

changes over time as a result of interest, late charges, escrow advances,

insurance premiums, and such. Further, the new action in Taggart involved

a different span of time. Here, as in Taggart, a different period of default is

at issue.4 While there is no case in Pennsylvania directly on point, a review of

case law from other jurisdictions provides persuasive authority.

       Several courts within the Third Circuit have concluded that an earlier

foreclosure action does not preclude a later one.      The Third Circuit, in its

unpublished opinion in Fairbank’s Capital Corp. v. Milligan, 234 Fed.Appx.

21 (3d Cir. 2007), held that res judicata did not bar a subsequent foreclosure

action where a prior action had been dismissed with prejudice based on the

parties’ stipulation after settlement. The Third Circuit noted that dismissal

with prejudice constitutes a decision on the merits for purposes of res judicata,

but the Court held that res judicata did not bar the claim before it:

              In Singleton v. Greymar Assocs., 882 So.2d 1004, 1008
       (Fla. 2004), the Florida Supreme Court held that ‘the doctrine of
       res judicata does not necessarily bar successive foreclosure suits,
       regardless of whether or not the mortgagee sought to accelerate
       payments on the note in the first suit.... [T]he subsequent and
       separate alleged default created a new and independent right in
       the mortgagee to accelerate payment on the note in a subsequent
       foreclosure action.    As the Court stated, ‘[i]f res judicata
       prevented a mortgagee from acting on a subsequent default ...,
       the mortgagor would have no incentive to make future timely
       payments on the note.’


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4  Appellant’s Act 91 notice includes late charges, but no escrow advances,
insurance payments, or other items. Complaint, 9/9/16, at Exhibit C.

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Id. at 23 (quoting Singleton v. Greymar Assocs., 882 So.2d 1004, 1008

(Fla. 2004)).     The Third Circuit found the Singleton rationale persuasive,

reasoning that the courts should not allow a mortgagor to escape future

payment obligations by settling a foreclosure action, having the complaint

dismissed, and defaulting again. Id. at 24.

       In Hoffman v. Wells Fargo, 242 F. Supp.3d 372 (E.D.Pa. 2017), the

mortgagee lost an earlier action because its records custodian failed to

authenticate the note. The Eastern District Court found that the mortgagee

had a colorable argument that res judicata did not bar a second foreclosure

action, and therefore the mortgagee did not violate the Federal Debt Collection

Practices Act5 by pursuing one. Id. at 384.

       In Singleton, the mortgagee’s first action was dismissed with prejudice

after it failed to appear at a case management conference. Singleton, 882

So.2d at 1005.      In addition to the passage quoted above in Milligan, the

Singleton Court rejected the argument that res judicata applied because the

mortgagee relied on the same acceleration clause and alleged the same

principal amount due and owing. The facts underlying the second action were

different because the mortgagee was seeking relief for a different breach. Id.

at 1007.     Thus, an acceleration for an earlier default did not bar another

acceleration for a subsequent one. Several other states have reached similar



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5   15 U.S.C.A. § 1692e.

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conclusions. See Federal Nat. Mortg. Ass’n v. Thompson, 912 N.W.2d

364 (Wis. 2018) (holding that claim preclusion does not bar a second action

for a continuing default on the same note where the prior action was dismissed

because the trial court refused to admit into evidence an alleged copy of the

note); In re Rogers Townshend & Thomas, PC, 773 S.E.2d 101 (N.C. Ct.

App. 2015 (holding that a new foreclosure action was not barred even though

a procedural rule provided that the voluntary dismissal of the prior action

constituted a judgment on the merits; the two actions involved different

periods of default); Afolabi v. Atlantic Mortg. & Inv. Corp., 849 N.E.2d

1170 (Ind. Ct. App. 2006) (holding that res judicata did bar a subsequent

action where the mortgagee voluntarily dismissed an earlier one).

      Appellee relies on U.S. Bank Nat’l Ass’n v. Gullotta, 899 N.E.2d 987

(Ohio 2008), in support of her argument that subsequent periods of default

do not give rise to new causes of action. There, the mortgagee filed two prior

foreclosure actions and voluntarily dismissed both.     By rule, the second

voluntary dismissal constituted a judgment on the merits. Id. at 990-91. The

Gullotta Court concluded that the mortgagor’s continuing failure to pay did

not overcome the bar of res judicata:

             The key here is that the whole note became due upon [the
      mortgagor’s] breach, not just the installment he missed. There is
      a distinction between an action for recovery of installment
      payments under an installment note where the entire principal is
      accelerated, and an action to recover for nonpayment under an
      installment note where only the amount of the principal to date,
      and no future amount, is sought. The general rule that each
      missed payment in an installment loan gives rise to a separate

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      cause of action does not hold true when there is an acceleration
      clause in the loan agreement:

                                          […]

            By agreeing to an acceleration clause, the parties in this
      case have avoided the operation of the general rule that
      nonpayment on an installment loan does not constitute a breach
      of the entire contract. In a contract with an acceleration clause,
      a breach constitutes a breach of the entire contract. Once [the
      mortgagor] defaulted and [the mortgagee] invoked the
      acceleration clause of the note, the contract became indivisible.
      The obligations to pay each installment merged into one obligation
      to pay the entire balance on the note.

Id. at 991-92 (internal citations and quotation marks omitted). The Gullotta

Court noted the result would differ if the mortgage had been reinstated. Id.

at 992.

      Given our Supreme Court’s analysis in Taggart, the federal court

decisions in Milligan and Hoffman, and the Florida Supreme Court’s opinion

in Singleton, we conclude that the present foreclosure action, based on a

different period of default, is distinct from Appellant’s prior foreclosure action.

We find persuasive the concerns expressed in those cases about removing the

defaulting mortgagor’s incentive to make any further payments. Our decision

is consistent with longstanding case law outside of the foreclosure context.

See Callery v. Municipal Auth. Of Blythe Twp., 243 A.2d 385, 388 (Pa.

1968) (holding that causes of action are distinct where they seek recovery for

damages arising from different periods).

      To summarize, we have decided that res judicata does not bar this

action because there was no decision on the merits in the prior action.


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Likewise, Rule 231 does not bar the present action because it is distinct from

the prior action.   We are cognizant that there are many reasons why a

mortgagee’s foreclosure action might fail.    In Hoffman, for example, the

federal district court noted that there was a question as to several unrecorded

assignments, but it did not reach that question. Hoffman, 242 F.Supp.3d at

377. Thus, we do not hold that a prior foreclosure action can never, in any

circumstances, bar a subsequent one. We limit our analysis to the facts before

us—a prior action dismissed on procedural grounds and a mortgagor’s

continuing default on her payment obligations.       For all of the foregoing

reasons, we reverse the order granting summary judgment in favor of

Appellee and remand for further proceedings consistent with this Opinion.

      Order reversed. Case remanded. Jurisdiction relinquished.



Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 5/20/2020




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