                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-6-2007

USA v. Jacono
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-2155




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Recommended Citation
"USA v. Jacono" (2007). 2007 Decisions. Paper 617.
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                                                             NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT


                                   No. 06-2155


                          UNITED STATES OF AMERICA

                                        v.

                    WILLIAM JACONO, Deceased, and any
                      Heirs, Executors or Assigns of said
                               William Jacono

                           TRUSTEE ROBERT MILLER
                              (Intervenor in D.C.)

                              Robert Miller, Trustee,
                                          Appellant


                   Appeal from the United States District Court
                     for the Eastern District of Pennsylvania
                           (D.C. Civil No. 04-cv-03478)
                    District Judge: Honorable John R. Padova


                   Submitted Under Third Circuit LAR 34.1(a)
                                July 12, 2007

           Before: RENDELL, AMBRO and NYGAARD, Circuit Judges.

                             (Filed: August 6, 2007)


                            OPINION OF THE COURT



RENDELL, Circuit Judge.
       Robert Miller appeals the District Court’s order granting the United States’ motion

to amend its complaint and granting its motion for summary judgment in this mortgage

foreclosure action initiated by the United States against the estate of William Jacono. We

will affirm.

                                             I.

       On June 11, 1993, William Jacono (“Jacono”) took out a Home Equity Conversion

Mortgage (“HECM”) from Hart Mortgage Company (“Hart”) on his home located at

4178 Oliver Avenue in Boothwyn, Pennsylvania, in order to secure a home equity line of

credit. The property was also mortgaged in favor of the United States Department of

Housing and Urban Development (“HUD”), which insured the Hart mortgage. When the

Hart mortgage was later assigned to HUD on February 4, 2000, the HUD mortgage was

thereafter released and marked satisfied, although the primary Hart mortgage remained

unsatisfied. Both the Hart mortgage and the HUD mortgage were recorded in the real

estate records of Delaware County, Pennsylvania, on July 1, 1993.

       Under the terms of the loan agreement between Hart and Jacono, Hart agreed to

advance Jacono up to 150% of the appraised value of his home. Jacono in fact received

advances totaling $79,489.03 during his lifetime. In addition, interest, service fees, and

mortgage insurance premiums accrued and were added to the principal. The outstanding

balance on the home equity loan as of March 3, 2006 was $189,754.54. Under the

agreement, the lender could require full and immediate payment of the loan balance upon

Jacono’s death, but could only recover the debt through the sale of the mortgaged

                                             2
property. The lender could not obtain a deficiency judgment against Jacono. Jacono died

on October 11, 2003, and the United States, as the holder of the Hart mortgage, instituted

this foreclosure action against Jacono’s estate in the United States District Court for the

Eastern District of Pennsylvania.

       James Jacono (“James”), the son and only known heir of William Jacono, and

Robert Miller, the current Trustee of the Irrevocable Living Trust of William Jacono (“the

Trust”), argued before the District Court that Jacono conveyed the property at issue to the

Trust on August 11, 1992, prior to the date that he mortgaged the property in favor of

Hart. However, the deed conveying the property from Jacono to the Trust was not

recorded until 2003, after the Hart mortgage had already been recorded.

       The United States moved for summary judgment in the District Court and also

requested permission to amend its complaint to attach the correct mortgage note. The

Court granted the motions and entered a judgment in favor of the United States.1 Miller

appealed.

                                              II.


        1There is some dispute as to whether the District Court’s judgment in this case
should be understood to be a money judgment against defendants, or as a judgment of
foreclosure which states the amount adjudged due under the mortgage. We observe that
the mortgage documents executed by Jacono do not allow the mortgagee to seek a
deficiency judgment against the mortgagor, nor did the United States seek a money
judgment against defendants in its complaint. However, because this issue was raised for
the first time in Miller’s reply brief, we will not address it in this appeal. See United
States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005) (“It is well settled that an appellant’s
failure to identify or argue an issue in his opening brief constitutes waiver of that issue on
appeal.”).

                                              3
       We exercise plenary review over an order granting a motion for summary

judgment and apply the same standard as the District Court. Andreoli v. Gates, 482 F.3d

641, 647 (3d Cir. 2007). Summary judgment is appropriate when “the pleadings,

depositions, answers to interrogatories, and admissions on file, together with the

affidavits, if any, show that there is no genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). We

“must view the facts in the light most favorable to the nonmoving party and draw all

inferences in that party’s favor.” Farrell v. Planters Lifesavers Co., 206 F.3d 271, 278

(3d Cir. 2000).

       Under Pennsylvania’s recording statute, an unrecorded deed is void as to any

subsequent “bona fide purchaser or mortgagee.” 21 PA. CONS. STAT. § 351.2 A “bona

fide purchaser” is “one who pays valuable consideration, has no notice of outstanding

rights of others, and acts in good faith.” Carnegie Natural Gas Co. v. Braddock, 597

A.2d 285, 288 (Pa. Commw. Ct. 1991). “The burden of proving notice is upon the party

asserting unrecorded rights in the property.” Id. Miller argues that there is a genuine

issue of material fact concerning whether Hart had notice that Jacono had conveyed the



        2The statute provides, in relevant part: “All deeds . . . shall be recorded in the
office for the recording of deeds in the county where such lands, tenements, and
hereditaments are situate. Every such deed . . . which shall not be acknowledged or
proved and recorded, as aforesaid, shall be adjudged fraudulent and void as to any
subsequent bona fide purchaser or mortgagee . . . without actual or constructive notice
unless such deed . . . shall be recorded, as aforesaid, before the recording of the deed . . .
under which such subsequent purchaser, mortgagee, or judgment creditor shall claim.”

                                               4
property to the Trust prior to 1993.

       First, Miller contends that Jacono did not receive the face-to-face counseling

“required” by the HUD regulations governing Home Equity Conversion Mortgages

(“HECM”) and that such counseling would have likely brought to light the fact that

Jacono had deeded the property to the Trust.3 Miller argues that a factfinder could

conclude that the mortgagee had constructive notice of the prior conveyance of the

property to the Trust based on evidence that the mortgagee failed to ensure that the

mortgagor received the required counseling and that the mortgagee would have learned

about the conveyance if the required counseling had occurred. However, even if

constructive notice could be proved in this way, there is no evidence that Jacono did not

receive the counseling required under the HUD regulations. The HUD “guidelines” that

Miller references require only that “[h]ousing counselors should make every effort to

provide HECM counseling on a face-to-face basis. . . . Telephone counseling should be an

alternative only where face-to-face counseling is unfeasible.” App. 125. Here, Jacono

contacted the Philadelphia Council for Community Advancement (“PCCA”) for mortgage

counseling. At the time that Jacono sought counseling, there were no agencies in

Delaware County that provided counseling of this kind. Henry Cruz, who was the

Director of Housing Counseling at PCCA, testified that the agency’s procedure was



      3The fact that Jacono signed the counseling certificate on 2/21/93 and the Director
of Housing Counseling signed it on 2/19/93 suggests that the required counseling was
done over the phone.

                                             5
“always to ask if [clients] could come in for a face-to-face, yes. That was always the first

request.” App. 119. There is no evidence from which a factfinder could conclude that

PCCA failed to try to get Jacono to come in for face-to-face counseling prior to

counseling him over the phone or otherwise failed to comply with the HUD regulations

governing HECM.

       Miller further contends that there is a genuine factual dispute as to whether Jacono

told the Hart employee who assisted him in filling out the mortgage loan application that

the property was owned by the Trust. However, the evidence proffered by Miller is

insufficient to allow a factfinder to make this finding. Miller points out that the mortgage

application says “Establish Trust” in the box entitled “Purpose of Refinance.” App. 235.

In addition, there is some sketchy notation next to the property address on page 3 of the

application that Miller argues reads “ET.” App. 237. Finally, Miller notes that Jacono

requested that the proceeds of the loan be deposited into a Fidelity account which,

according to the bank statement submitted with Jacono’s mortgage application, is owned

by the Trust rather than Jacono. We agree with the District Court that a factfinder could

not reasonably find, based on the proffered evidence, that Jacono told Hart that the

property was owned by the Trust. If anything, the notation and mention of a trust in the

mortgage application indicated that Jacono intended to use the proceeds of the loan to

establish a trust. Jacono’s request that the loan proceeds be deposited into an account

owned by the Trust is consistent with this intention.

       Finally, Miller argues that there is a genuine factual dispute as to whether James

                                             6
told the mortgagee, after the closing but prior to Jacono’s cashing the first check for the

loan proceeds, that the property was owned by the Trust. He contends that the mortgagee

is not a “bona fide mortgagee” if it has actual or constructive knowledge of the prior

conveyance before the time that the mortgage is recorded and the mortgagee has

advanced money to the mortgagor. Appellant Br. 37. However, the authority that Miller

relies upon for this proposition, Housing Mortgage Corp. v. Allied Construction Inc., 97

A.2d 802, 805-06 (Pa. 1953), concerns the extent to which the lien of a mortgage to

secure future advances has priority over the lien of a purchase money mortgage, not when

a mortgagee is a “bona fide mortgagee” within the meaning of 21 PA. CONS. STAT. § 351.

Housing Mortgage Corp. explains that an “advance made pursuant to a mortgage to

secure future advances which the mortgagee was not obligated to make, is subordinate in

lien to an encumbrance intervening between the giving of the mortgage and the making of

the advance, if the advance was made with actual notice or knowledge of the intervening

encumbrance.” Hous. Mortg. Corp., 97 A.2d at 805-06. Furthermore, 42 PA. CONS.

STAT. § 8143, which concerns mortgages to secure future advances or “open-ended

mortgages,” such as the mortgage at issue in this case, supersedes the decision in Housing

Mortgage Corp. to the extent that it requires the holder of the intervening lien or

encumbrance to provide written notice of its claim to the property to the holder of the

open-ended mortgage in order for the lien of the holder of the intervening mortgage to be

given priority. 42 PA. CONS. STAT. § 8143(b). There is no dispute that James did not

provide any such written notice in this case.

                                                7
       Miller also appeals the District Court’s order granting the United States’ motion to

amend its complaint to attach the correct mortgage note to the Complaint. The Complaint

clearly refers to the first mortgage note between Hart and Jacono as “Exhibit 2,” the

mortgage note at issue in the action. However, the United States attached the note for the

second mortgage between HUD and Jacono to the Complaint as “Exhibit 2.” See App. 27

(“Mortgagor had on June 11, 1993 executed a promissory note memorializing a loan

pursuant to the ‘Home Equity Conversion Mortgage Insurance Program’ from the Hart

Mortgage Corporation . . . (hereinafter Lender), allowing Mortgagor to draw advances

based upon the equity in his residential property located at 4178 Oliver Avenue,

Boothwyn, Pennsylvania 19061. . . . Mortgagor also executed a mortgage . . . on June 11,

1993, granting Lender a lien upon the subject residential property. The mortgage was

recorded in the real estate records of Delaware County, Pennsylvania on July 1, 1993 at

Volume 1113 Page 0933. See Government’s Exhibit 2.”). The District Court granted the

United States’ motion for leave to attach the correct mortgage note to the complaint as

Exhibit 2. We review the District Court’s order granting the motion to amend for abuse

of discretion, Garvin v. City of Philadelphia, 354 F.3d 215, 219 (3d Cir. 2003), and find

no error in the District Court’s order allowing the United States to amend the complaint to

attach the correct mortgage note.

                                            III.

       Accordingly, for the reasons set forth, we will affirm the grant of summary

judgment in favor of the United States and affirm the District Court’s order granting the

                                             8
United States’ request to amend its complaint.




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