J-A16020-15


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

WACHOVIA BANK, N.A.                              IN THE SUPERIOR COURT OF
                                                       PENNSYLVANIA
                       v.

COLIN CUMMING AND BENNU REALTY
GROUP, LLC

APPEAL OF: COLIN CUMMING                              No. 2861 EDA 2014


                 Appeal from the Order Entered January 25, 2013
              In the Court of Common Pleas of Philadelphia County
            Civil Division at No(s): December Term, 2008 No. 004646


BEFORE: LAZARUS, OLSON and PLATT,* JJ.

MEMORANDUM BY OLSON, J.:                           FILED OCTOBER 07, 2015

       Appellant, Colin Cummings, appeals from the trial court order entered

on January 25, 2013, granting a motion for summary judgment filed by

Wachovia Bank, N.A. (Wachovia)1 and dismissing Appellant’s counterclaims

without prejudice. Upon review, we vacate and remand for trial.

       The trial court set forth the facts and procedural history of this case as

follows:

           This matter originated out of a loan for $252,781.50 from []
           Wachovia to Lloyd Blagrove on January 10, 2007. Mr.
           Blagrove is the managing member of co-defendant, Bennu

____________________________________________


1
   Wells Fargo Bank, N.A., is the successor by merger to Wachovia. Wells
Fargo filed a brief in opposition to Appellant’s appeal. However, for clarity
and consistency, we will refer to Appellee as Wachovia throughout this
memorandum.




*Retired Senior Judge assigned to the Superior Court.
J-A16020-15


         Realty.[2] The loan was evidenced by a promissory note,
         and secured by the real property located at 445 Olive
         Street, in Philadelphia (“property”). The loan proceeds were
         used by Bennu Realty to buy the property from [Appellant].
         The mortgage document listed [Appellant] as the “grantor”
         and the “mortgagor.”        Mr. Blagrove was listed as the
         “borrower” and Wachovia was the mortgagee “lender.”

         [Appellant] executed the mortgage document on the
         property to secure the loan. However, the deed transferring
         the property to Bennu Realty was never filed of record.
         [Wachovia] never sought payment on the loan from
         [Appellant]. Bennu Realty defaulted on the loan after one
         year, and [Wachovia] filed [a] mortgage foreclosure action
         in December 2008. [Wachovia] named as defendants both
         Bennu [Realty] and [Appellant]. Bennu [Realty] did not file
         an answer to the complaint. [Appellant] filed an answer,
         new matter, cross-claims and counterclaims. [Wachovia]
         contended that [Appellant] was a necessary party in the
         foreclosure action because he remained the owner of the
         property, the deed to Bennu [Realty] having never been
         recorded. [Wachovia] attempted to work with [Appellant]
         by suggesting he transfer the property to Bennu [Realty] by
         quitclaim deed, but [Appellant] declined. [Wachovia] filed a
         separate action to quiet title.       On January 6, 2012
         [Wachovia] obtained a default judgment in the quiet title
         action and Bennu Realty was deemed to be the real owner
         of the property nunc pro tunc to the sale date of January
         10, 2007. In that same action [Wachovia] was granted an
         equitable mortgage lien against the property under the
         same terms and conditions [under] the original mortgage
         document. After title to the property was quieted by a
         judgment entered in the quiet title action, [Wachovia]
         discontinued this foreclosure action against both [Appellant
         and Bennu Realty]. [Appellant] did not discontinue his
         counterclaims against [Wachovia]; nor did he discontinue
         his cross-claims against Bennu [Realty]. [Wachovia] filed
         for summary judgment on the counterclaims, which [the
         trial court] granted without prejudice on January 25, 2013.
         [Appellant] appealed []. On March 7, 2014, [this Court]
____________________________________________


2
    Bennu Realty is not a party to this appeal.



                                           -2-
J-A16020-15


       quashed the appeal and the case was remanded to the trial
       court because [Appellant’s] cross-claims against Bennu
       [Realty] were still pending.

       Thereafter this matter was scheduled for trial and a bench
       trial was held before the Honorable Alice Beck Dubow on
       September 15, 2014 resulting in a finding in favor of
       [Appellant] and against Bennu [Realty] in the amount of
       $80,536.01. Neither post[-]trial motions nor an appeal was
       filed. [Appellant] now appeals [the trial court’s] January
       25, 2013 order which dismissed [Appellant’s] counterclaims
       [against Wachovia].

Trial Court Opinion, 2/3/2014, at 1-3 (superfluous capitalization omitted;

page numbers supplied).

     On appeal, Appellant presents the following issues for our review:

       1. Did the trial court commit an error of law and/or abuse[]
          its discretion by dismissing [Appellant’s] counterclaims
          because [Appellant’s] counterclaims are part of or
          incident to the creation of the mortgage, specifically,
          fraud in the inducement of the mortgage?

       2. Did the trial court commit an error of law and/or abuse[]
          its discretion by granting a motion for summary
          judgment when there was undisputed evidence of fraud
          committed by Wachovia []?

       3. Did the trial court commit an error of law and/or abuse[]
          its discretion by granting a motion for summary
          judgment wherein there was evidence of negligence
          committed by Wachovia []?

       4. Did the trial court commit an error of law and/or abuse[]
          its discretion by granting a motion for summary
          judgment wherein there was evidence of violations of
          banking laws committed by Wachovia []?

       5. Did the trial court commit an error of law and/or abuse[]
          its discretion by granting [Wachovia’s] motion for
          summary judgment to [Appellant’s] counterclaims,
          because although the court dismissed the counterclaims
          without prejudice, [Appellant] does not have a

                                   -3-
J-A16020-15


            jurisdiction to refile his claims as      the statute of
            limitations may preclude all or            some of his
            counterclaims?

        6. Did the trial court commit an error of law and/or abuse[]
           its discretion by granting a motion for summary
           judgment that was not ripe as discovery was ongoing?

Appellant’s Brief at 5-6 (superfluous capitalization and suggested answers

omitted).

     In all of his issues presented on appeal, Appellant contends that the

trial court abused its discretion by granting summary            judgment in

Wachovia’s favor and dismissing his counterclaims to the mortgage

foreclosure action.     We will examine the contentions together.         First,

Appellant argues, as a matter of law, that a borrower may assert a valid

counterclaim within the context of a mortgage foreclosure action alleging

that execution of the mortgage at issue was fraudulently induced Id. at 13.

Appellant claims “he produced evidence of a fraud as Wachovia created a

mortgage he did not even know about.”        Id. at 15.   More specifically, he

claims “[t]he buyer [of the property at issue], Bennu Realty, LLC, in

conjunction   with    Wachovia   Bank’s   employee,   Dana   Vernon,   utilized

[Appellant’s] good credit and real estate, to purchase the Olive Street

property” and “Bennu Realty obtained in effect an unsecured loan, and Dana

Vernon and Wachovia Bank profited from [that] loan.”         Id. at 16.   As a

result, Appellant maintains he lost income from residential rentals, after

losing his business privilege license, and he has incurred legal fees due to


                                     -4-
J-A16020-15


the foreclosure action.     Id. at 15.    He also claims he still is listed as the

mortgagor and receives real estate bills from the Philadelphia school district,

as well as utility bills for the property. Id. at 22.

      Next, Appellant asserts:

           If not fraudulent and intentional, it was negligent that
           Wachovia’s     employees     prepared     a   mortgage     for
           [Appellant’s] signature, that was filed in the public records,
           when not only didn’t he apply for a mortgage, he was the
           [s]eller of the home and signed a deed transferring
           ownership on the same day as the mortgage was signed.
           Moreover, if not fraudulent and intentional, it was negligent
           for Wachovia to file the mortgage with the Recorder of
           Deeds and to not file the deed signed by [Appellant]
           transferring the property. As such, the public record and
           internal documents of Wachovia appeared to demonstrate a
           home improvement loan was taken by [Appellant], rather
           than what actually occurred, the sale of the home from
           [Appellant] to Bennu Realty Group, LLC.

Id. at 20.      In further support of his claim that he did not enter into a

mortgage, Appellant posits that Wachovia did not send him residential

mortgage debtor disclosures as required under the Truth in Lending Act and

the Real Estate Settlement Procedures Act.            Id. at 21.       Appellant claims

summary judgment was premature because discovery deadlines were not

established and Appellant requested depositions of key witnesses. Id. at 24.

Finally,    Appellant   argues   that    when   the    trial   court    dismissed   his

counterclaims without prejudice it acknowledged valid claims but suggested

there was a more appropriate venue or jurisdiction. Id. at 25-28. Appellant

argues that he is without recourse on some claims, however, because the

applicable statute of limitations may have already expired. Id. at 25.


                                         -5-
J-A16020-15




     We begin with our standard of review:

       [O]ur standard of review of an order granting summary
       judgment requires us to determine whether the trial court
       abused its discretion or committed an error of law. Our
       scope of review is plenary. In reviewing a trial court's grant
       of summary judgment, we apply the same standard as the
       trial court, reviewing all the evidence of record to determine
       whether there exists a genuine issue of material fact. We
       view the record in the light most favorable to the non-
       moving party, and all doubts as to the existence of a
       genuine issue of material fact must be resolved against the
       moving party. Only where there is no genuine issue as to
       any material fact and it is clear that the moving party is
       entitled to a judgment as a matter of law will summary
       judgment be entered. All doubts as to the existence of a
       genuine issue of a material fact must be resolved against
       the moving party.

                          *         *           *

       Upon appellate review, we are not bound by the trial court's
       conclusions of law, but may reach our own conclusions.
       Petrina v. Allied Glove Corp., 46 A.3d 795, 797–798 (Pa.
       Super. 2012) (internal citations omitted).

       Rule of Civil Procedure 1035 governs motions for summary
       judgment and provides, 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, or




                                   -6-
J-A16020-15


           (2)   if, after the completion of discovery relevant to
                 the motion, including the production of expert
                 reports, an adverse party who will bear the
                 burden of proof at trial has failed to produce
                 evidence of facts essential to the cause of
                 action or defense which in a jury trial would
                 require the issues to be submitted to a jury.

        Pa.R.C.P. 1035.2. This Court has explained the application
        of this rule as follows:

           Motions for summary judgment necessarily and
           directly implicate the plaintiff's proof of the elements
           of a cause of action. Summary judgment is proper if,
           after the completion of discovery relevant to the
           motion, including the production of expert reports,
           an adverse party who will bear the burden of proof
           at trial has failed to produce evidence of facts
           essential to the cause of action or defense which in a
           jury trial would require the issues to be submitted to
           a jury.     In other words, 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 and the moving party is entitled to
           judgment as a matter of law, summary judgment is
           appropriate. Thus, a record that supports summary
           judgment either (1) shows the material facts are
           undisputed or (2) contains insufficient evidence of
           facts to make out a prima facie cause of action or
           defense.

        Petrina, 46 A.3d at 798.

Criswell v. Atl. Richfield Co., 115 A.3d 906, 908-909 (Pa. Super. 2015).

     Initially, we note that the trial court in this case granted summary

judgment on a procedural consideration which it raised sua sponte.

Specifically, the trial court dismissed Appellant’s counterclaims because it

determined that the counterclaims did not arise from the same transaction



                                    -7-
J-A16020-15



or occurrence as Wachovia’s mortgage foreclosure claims. We also note that

Wachovia never raises this contention in its responsive submissions.     We

first examine whether the trial court properly entered summary judgment

based upon an issue it raised sua sponte. Then, we must determine whether

Appellant properly asserted his counterclaims within the scope of Wachovia’s

mortgage foreclosure action.

      Our Supreme Court has declared:

        [G]ranting summary judgment on an issue raised sua
        sponte is inappropriate. This principle is well established in
        the Superior and Commonwealth Courts. See, e.g.,
        MacGregor v. Mediq, Inc., 576 A.2d 1123 (Pa. Super.
        1990); Wojciechowski v. Murray, 497 A.2d 1342 (Pa.
        Super. 1985); O'Hare v. County of Northampton, 782
        A.2d 7 (Pa. Cmwlth. 2001); Travers v. Cameron County
        School District, 544 A.2d 547 (Pa. Cmwlth. 1988). These
        cases are grounded in a concern that trial courts should not
        “act as the defendant's advocate.” O'Hare, at 15. For a
        trial court to raise an argument in favor of summary
        judgment sua sponte and grant summary judgment thereon
        risks depriving the court the benefit of advocacy on the
        issue, and depriving the parties the opportunity to be heard.
        See Luitweiler v. Northchester Corp., 319 A.2d 899, 901
        n. 5 (Pa. 1974) (holding it inappropriate for trial court to
        raise failure to state claim upon which relief may be granted
        sua sponte).

Yount v. Pennsylvania Dep't of Corr., 966 A.2d 1115, 1119 (Pa. 2009).

Thus, it was improper for the trial court to grant Wachovia’s motion for

summary judgment on an issue it raised sua sponte. Moreover, as discussed

below, the trial court committed an error of law in doing so.

      Regarding counterclaims, Pennsylvania Rule of Civil Procedure 1148

provides:

                                     -8-
J-A16020-15



         A defendant may plead a counterclaim which arises from
         the same transaction or occurrence or series of transactions
         or occurrences from which the plaintiff's cause of action
         arose.

Pa.R.C.P. 1148.

       This Court has previously determined:

         Rule 1148 restricts every defendant to claims which arise
         from the same transaction or occurrence from which the
         plaintiff's cause of action arose.... No defendant may now
         set off a claim against the plaintiff simply because its nature
         is contractual or quasicontractual, as allowed in assumpsit
         actions.

         The claim must now arise, in some manner, from the
         mortgage relationship.

Overly v. Kass, 554 A.2d 970, 973 (Pa. Super. 1989) (internal citation and

brackets omitted). “Thus, our task is to determine whether the facts alleged

in the [Appellant’s] counterclaim are ‘part of, or incident to, the creation of’

the mortgage itself.”      Id.    “This [rule of law] has been held to prevent a

counterclaim for fraud in the inducement of a contract of sale of property,

but allows a claim for fraud in the inducement of the mortgage itself.”3

____________________________________________


3
      Wachovia contends that “in personam claims – like [Appellant’s] are
prohibited from being sought in an in rem foreclosure action.” Appellee’s
Brief at 17. Likewise, the trial court briefly mentions that “[t]he action at
issue herein is an in rem foreclosure on [p]roperty.” Trial Court Opinion,
12/2/2014, at 4 (unpaginated). Generally, a mortgage foreclosure action
may not include an in personam action to enforce a debtor’s personal
liability.  See Newtown Village Partnership v. Kimmel, 621 A.2d 1036
(Pa. Super. 1993). “The very definition of a mortgage foreclosure action
under [Pa.R.C.P.] 1141(a) excludes ‘an action to enforce a personal liability’;
this restriction is essential to preserve the ‘de terris’ identity of a mortgage
(Footnote Continued Next Page)


                                           -9-
J-A16020-15



Green Tree Consumer Disc. Co. v. Newton, 909 A.2d 811, 814 (Pa.

Super. 2006), citing Cunningham v. McWilliams, 714 A.2d 1054, 1057

(Pa. Super. 1998) (“[A] counterclaim in a foreclosure action is cognizable if it

alleges fraud in the inducement to the mortgage, but not if it alleges fraud in

the inducement to the contract of sale.”).

        This Court’s analysis in Overly is instructive. In that case, the Overlys

agreed to sell their farm to the Kasses and the parties executed a mortgage

note.     When the Kasses failed to make payment, the Overlys filed a

complaint against them.           The Kasses filed a counterclaim claiming the

Overlys intentionally withheld information regarding defects to the property

and they were entitled to a set-off. More specifically:

          The Kasses allege[d], inter alia, that the Overlys made
          numerous misrepresentations regarding the condition of the
          premises prior to sale. [] [T]he Kasses wish[ed] to receive a
          set-off against the mortgage obligation by setting forth
          allegations of oral representations. More specifically, the
          representations include[d] that a rusted trailer, a rusted and
          inoperable truck and a dilapidated lean-to would be
          removed from the property by the Overlys; that the Kasses
          would be entitled to about $14,000.00 in consideration of
          the continued use of their property by the Peoples Natural
          Gas Company; and that certain crop subsidies would be
          immediately available to them from the government for
                       _______________________
(Footnote Continued)

foreclosure action and is equally binding on a mortgagee-plaintiff and a
mortgagor-defendant.” Signal Consumer Disc. Co. v. Babuscio, 390 A.2d
266, 270 (Pa. Super. 1978). “Rule 1148, which allows a defendant to
assert a contractual counterclaim arising out of a mortgage transaction
against the mortgagee, constitutes the only exception to this rule.” Id.
(emphasis added). Thus, we reject Wachovia’s claim that Appellant’s
counterclaims are barred because the claims implicate in personam relief.



                                           - 10 -
J-A16020-15


        growing    certain types    of    crops.    These     alleged
        representations concern[ed] the agreement of sale,
        however, and [were] not part of, or incident to, the creation
        of the mortgage.

        The mortgage is an interest in the mortgaged property
        created by a written agreement providing security for the
        payment of a debt or an obligation. None of the facts
        alleged by the Kasses deal[t] even remotely with the
        creation of that security interest; rather, they deal[t] with
        the agreement between the buyers and the sellers of the
        property. Accordingly, the Kasses' counterclaim [did] not
        arise as part of, or incident to, the creation of the mortgage.

Overly, 554 A.2d at 973-974 (footnote omitted).

      By contrast, in this case, Appellant’s counterclaims allege fraud (or,

alternatively, negligence) in the creation of the mortgage instrument and the

mortgagor/mortgagee relationship. Appellant claims that at the closing for

the sale of his property, Wachovia fraudulently (or negligently) obtained his

signature and filed a mortgage in his name. He further avers that Wachovia

filed that mortgage, but did not file the original deed and, thus, Appellant

remained the record owner of the property.         These allegations all relate

directly to the creation of the mortgage itself.   Thus, we reject Wachovia’s

suggestion that Appellant’s “[c]ounterclaims are based solely on the alleged

conduct of [the bank] naming him as a defendant in the foreclosure action,

which action occurred almost two years after the creation of the mortgage.”

Appellee’s Brief at 16. Finally, Appellant alleges that despite Wachovia’s

notice and awareness of the errors, Wachovia still instituted a mortgage

foreclosure action against him. Certainly, Appellant contests being named in

the foreclosure action. However, he has consistently maintained that it was


                                    - 11 -
J-A16020-15



the wrongful creation of the mortgage, unknown to him at the time of its

execution, which, in turn, led to the mortgage foreclosure and his eventual

damages.      As such, Appellant’s counterclaims were permissible in this

mortgage foreclosure action and summary judgment was not appropriate.

     Order vacated.   Case remanded for trial. Jurisdiction relinquished.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 10/7/2015




                                   - 12 -
