Pennsylvania courts recently made a set of rulings that could provide important context in future cases concerning real estate law.

Defining 'Residential Mortgage'

Frank Kosir Jr. of Meyer Unkovic & Scott.

In Johnson v. Phelan Hallinan & Schmieg, 2019 PA Super 11 (2019), the Pennsylvania Superior Court addressed the definition of “residential mortgage” as defined in the state's Loan and Protection Law (Act 6). Specifically, it examined whether the 2002 or 2009 version of the definition applies.

In 2002, the Johnsons executed a mortgage and an associated note in the amount of $74,000, which mortgage was secured by a property located in Pittsburgh. The mortgage was subsequently assigned to the Bank of New York Mellon Trust (Mellon). In 2008, after the Johnson's defaulted on the mortgage, Mellon, through its counsel, Phelan Hallinan & Schmieg (Phelan), filed a complaint in mortgage foreclosure, asserting, among other things, that the Johnsons owed $1,300 in attorney fees. Judgment was entered in favor of Mellon and the Superior Court affirmed that judgment.

In 2012, while the foreclosure action was pending, the Johnsons initiated a class action against Phelan, asserting that Phelan violated Section 406 of Act 6 by pursuing an award of attorney fees in the mortgage foreclosure action that were not actually incurred. Relying on Section 502 of the act, the Johnsons asserted that they and the other similarly situated mortgagors were entitled to treble damages for excess attorney fees assessed by Phelan.

Phelan demurred, arguing that Section 406 applies solely to “residential mortgage lenders” and not to foreclosure counsel. The trial court sustained Phelan's preliminary objections and the Johnsons thereafter appealed. The Superior Court affirmed that the trial court's order and determined that a “residential mortgage debtor” can only maintain a cause of action under Section 406 against a “residential mortgage lender” and not against their foreclosure counsel.

The state Supreme Court, however, reversed the Superior Court's decision, holding that a borrower may recover from any entity that collects excessive attorney fees in connection with a foreclosure under Section 502 of Act 6—not solely a residential mortgage lender.

On remand to the trial court, Phelan again filed preliminary objections, this time asserting that the Johnsons were barred from pursuing relief under Act 6 because the $74,000 mortgage did not qualify as a “residential mortgage” under Section 101 of the act, as the mortgage exceeded the $50,000 statutory limit in effect at the time it was executed in 2002. The Johnsons maintained that the court should apply the version of Section 101 in effect in 2009, the time the foreclosure action was commenced, which raised the limit for a “residential mortgage” from $50,000 to $217,873.

The trial court sustained Phelan's preliminary objections, finding that the former version of Section 101 was in effect at the time the mortgage was executed. On appeal, the Superior Court affirmed, concluding that the mortgage was not a residential mortgage protected by Act 6 because it failed to meet the 2002 definition of “residential mortgage.”

Well Pad Site Dispute

In Porter v. Chevron Appalachia, 2019 Pa. Super 31 (2019), the Superior Court upheld the trial court's grant of a preliminary injunction in favor of Chevron Appalachia (Chevron).

The Porters own a 76-acre parcel of real property in Lucerne Township, Fayette County, which is subject to an oil and gas lease between the Porters and Atlas America, Chevron's predecessor in interest. Atlas drilled multiple conventional vertical wells on the property that produced oil and gas from the property. In 2017, Chevron notified the Porters it intended to use the property for an unconventional well pad site. In response, the Porters filed a complaint asking for a declaration that Chevron could not use the surface of the property for a well pad or access roads, and also requested preliminary and permanent injunctions.

While those injunctions were pending, Chevron notified the Porters it intended to enter the property for geotechnical testing and staking of the property in order to obtain a DEP permit. When Chevron personnel arrived at the property, the gate to the property was locked, preventing vehicle access. The Chevron personnel left the property after being threatened by the Porters. Chevron then sought injunctive relief to enjoin the Porters from preventing its access to and development of the property.

The trial court held a hearing on Chevron's preliminary injunction motion and granted the requested relief. The Porters appealed, and the Superior Court affirmed, finding that the deprivation of Chevron's contractual right in land supported a finding of an irreparable harm.

Frank Kosir Jr. is an attorney at Pittsburgh-based law firm Meyer, Unkovic & Scott. Kosir can be reached at [email protected].