Defective PA Act 91 Notice May Subject Pending Foreclosures to Litigation

By Patrick Thomas Woodman, Esq.

On January 30, 2012, the Pennsylvania Superior Court issued an opinion in the Vukmam case (259 WDA 2011 Superior Court of Pennsylvania) affirming a trial court Order that vacated a Sheriff Sale based on what the court found was a defective Act 91 Notice to the borrowers. This decision was issued by a three member panel of the Superior Court (not a full bench decision), and on February 13th a Petition for Re-argument was filed.  Go here to view a copy of the decision.

To summarize the facts, the lender filed a foreclosure complaint against Ms. Vukmam in October, 2006 based on failure to pay monthly mortgage costs. A consent judgment was entered with the parties also agreeing that as long Ms. Vukmam made regular payments, the lender would not execute on the judgment. The settlement was approved on May 7, 2009.

On April 5, 2010 the lender filed an affidavit of default and then filed a Praecipe for writ of execution the next day. The property was sold back to the lender on August 2, 2010.

The borrower then filed a motion to set aside judgment and Sheriff’s sale, arguing that the lender failed to comply with the notice requirements of Act 91. The Trial Court agreed and set aside the judgment and the Sheriff Sale and dismissed the foreclosure complaint without prejudice.  

The lender then appealed the Trial Court’s decision to the Superior Court and argued that the notice that was sent by the lender was the form drafted and promulgated by the PA Housing Finance Agency.  All of the parties agreed that the notice at issue did not meet the requirements of the Act as it was amended in 1998.The Trial Court ruled there was no requirement that the borrower be compelled to prove prejudice by the failure to include the proper language.

The Superior Court reiterated prior decisions that held that the notice requirements pertaining to foreclosure proceedings are jurisdictional and, where applicable, will deprive a court of jurisdiction to act if there is a failure to comply with those provisions.  The court therefore upheld the Trial Court’s decision, finding that the Trial Court did not commit an error of law or abuse of discretion.

The lender has filed a request for re-argument of the case by a full Superior Court panel.  It could be at least another month or more before the Superior Court decides upon the Motion for Re-argument. It is indeed possible that other borrowers and/or their counsel who learn of the decision will seek redress in the courts.

Until there is a full and final end of the appellate process, we can only recommend that our clients be aware of the decision and the potential for litigation regarding Act 91 letters that did not contain the language providing notice to borrowers of the right to meet with the lender within the relevant time period.  We do not read the case as a precedent “yet”, as the case is pending for a re-argument. 

Pending foreclosures may be subject to litigation based on the decision as it stands now, and it may be practical to place these files on hold until the case is decided by the full Superior Court. We might recommend a similar hold for evictions as well.

As always we welcome the opportunity to discuss this important issue with you.

If you have any questions on this matter, please contact Mr. Patrick Thomas Woodman, Esq. Tom is an associate practicing in the Real Estate Default Group focused on foreclosure and eviction services in the Pittsburgh office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 412.338.7106 or pwoodman@weltman.com.

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