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U.S. 3rd Circuit Court of Appeals Rules Against Montgomery County Recorder of Deeds Nancy Becker

Posted in Uncategorized

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Today the United States Third Circuit Court Of Appeals issued a major ruling against Montgomery County Recorder of Deeds Nancy Becker. Becker filed a class action on behalf of all Recorder of Deeds in Pennsylvania Mortgage Electronic Registration Systems, Inc. (“MERS”) seeking to recover millions in “so called” unpaid recording fees and an order to compel MERS to record and pay fees for recording mortgage assignments. Becker was successful before the United States District Court and today the United States third Circuit Court of Appeals reversed and dismissed Becker’s case.

As background information, MERS is a national electronic loan registry system. It permits its members to freely transfer promissory notes associated with mortgages while MERS remains the mortgagee or mortgage holder of record as nominee for the actual note holder. This system was created, in part, to reduce costs associated with the transfer of promissory notes. Becker was seeking to require that those assignments be recorded and that a fee be paid to the Recorder of Deeds.

The 3rd Circuit Court of Appeals ruled today that the Pennsylvania Recording statute found at 21 Pa.C.S. A. section 351 does not mandate that the assignments be recorded.  According to the 3rd Circuit Court of Appeals, Becker’s class action lawsuit was based upon a flawed premise that the recording statute required the assignments to be recorded. As a result, Becker’s class action should have been dismissed by the United States District Court.

 

Insurer Liable for Failure To Authorize Fair and Reasonable Settlement of Case

Posted in Pennsylvania Supreme Court, Trial Practice

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Yesterday the Pennsylvania Supreme Court issued a decision on an issue of first impression in Pennsylvania. The issue was: “whether an insured forfeits insurance coverage by settling a tort claim without the consent of its insurer, when the insurer defends the insured subject to a reservation of rights, asserting that the claims may not be covered by the policy.” Stated another way: “whether an insurer is liable under its insurance policy for a settlement made by its insured without securing the insurer’s consent, when the insurer is defending the claim subject to a reservation of rights?”

Typically court decisions favor insurance companies and not the insured. The Pa Supreme Court has now changed the landscape in Babcock & Wilcox v. American Nuclear Insurers et. Al.    

  • First, the test is no longer a bad faith test.
  • Second, an insured is entitled to settle a case without the insurers consent.
  • Third, a duty is now imposed on insurance companies to enter into fair and reasonable settlements despite the issuance of a reservation of rights letter;
  • Finally, the insurance company will be liable to the insured for the cost of settlement if the insured demonstrates “that the insurer breached its duty by failing to consent to a settlement that is fair, reasonable and non-collusive.

This case has changed the landscape of cases that are defended by insurance companies under a reservation of rights. Private Counsel advising clients, who are being defended by an insurer under a reservation of rights, need to monitor the cases and when warranted discuss with their client if the case should be settled. Obviously seek permission from the insurer but do not let the lack of permission prevent your client from settling if the settlement is fair and reasonable under the circumstances.

 

Are State Subsidies on the Horizon for Flood Insurance Policyholders in Pennsylvania?

Posted in Flood Issues, Legislation

The sweeping changes to the National Flood Insurance Program imposed by recent federal legislation continue to have a broad impact at the state level. As federal flood insurance subsidies are gradually withdrawn, states are examining how they can close the gap to make the increasing premiums more affordable. In Pennsylvania, the Pennsylvania House of Representatives just introduced House Bill 1299 — the Flood Insurance Premium Assistance Task Force Act (the “Act”). Pennsylvania is one of the most flood-prone states in the nation with about 83,000 miles of waterways. In 2012, as a result of the Biggert-Waters Flood Insurance Reform Act of 2012 and other related legislation in 2014, premiums for flood insurance have skyrocketed making coverage out of reach for many property owners. In addition, FEMA’s continued re-mapping efforts have resulted in the re-designation of properties, once in low to moderate flood risk areas, to high-risk flood zones, resulting in a corresponding increase in flood insurance premiums.

The Act is designed to help property owners faced with premium increases. If enacted, the Act will establish a task force charged with reviewing and analyzing the laws and procedures regarding the administration of flood insurance. Within six months of the effective date, the task force is expected to issues a final report to the Governor and the legislature recommending the following:

  1. Potential programs that provide premium discounts;
  2. Potential programs that create incentives for local governments to undertake or continue flood mitigation efforts; and
  3. Implementation of changes in state statutes and practices, policies and procedures relating to the administration of flood insurance

The creation of the task force is just the latest in a series of efforts to minimize the impact of rising flood insurance premiums on consumers. Earlier this year, Representative Thomas P. Murt of Southeastern Pennsylvania also introduced House Bill 1029 — The Flood Insurance Premium Assistance Program Act. House Bill 1029 proposes a program that will provide eligible homeowners with a 15% flood insurance premium subsidy designed to encourage the purchase of flood insurance. Both Bills have been referred to the Legislature’s Insurance Committee and are awaiting a vote. Similar initiatives are being pursued by states throughout the country.

Valet owes no duty to withhold keys from drunk driver!

Posted in Court of Common Pleas, Pennsylvania Superior Court, Trial Practice

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I previously posted on this case when a panel of 3 Superior Court Justices affirmed a Lower Court decision to grant summary judgment in favor of the company who employed a valet service.

Now the Court En Banc has voted 6-3 to affirm the Lower Court decision. In doing so the Court has ruled on a case of first impression in finding that there is no duty owed by a parking valet to withhold keys of an intoxicated driver.  I expect that a Petition for Allowance of Appeal might be filed with the Pa Supreme Court.

Church waives all appellate court issues by failing to file post trial motion

Posted in Civil Procedure, Court of Common Pleas, Pennsylvania Commonwealth Court, Trial Practice

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Today the Pa Commonwealth Court held that New Life Church waived all issues on appeal by failing to file post-trial motions. The impact of the decision is that a former church building located at  2826 through 2846 N. 9th Street in Philadelphia will be demolished by the City of Philadelphia.

At issue on appeal was whether an injunction hearing was a “trial” for purposes of Pa Rule of Civil Procedure 227.1. If it was a trial then post-trial motions were required to be filed to preserve issues for appeal. If it wasn’t a trial then rule 227.1 was inapplicable.  The Pa Commonwealth Court found that the injunction hearing was a trial. Thus the church waived all issues on appeal by failing to file post-trial motions. The city can now proceed to demolish the old church building.

The lesson to be learned is that when in doubt file a post-trial motion. There is no harm.  The harm is greater if you don’t file one as compared to filing one when not required.

 

Old deeds and oil and gas rights in Pennsylvania

Posted in Court of Common Pleas, Pennsylvania Superior Court

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Today the Pa Superior Court issued a published decision in which the Court  went into a detailed analyses of coal, oil and gas rights in Pennsylvania. Part of the decision turned on the Pa Supreme Court decision of US Steel v. Hoge 468 A. 2d 1380 and part turned on the Court’s interpretation of deeds which date back to 1932.

While the decision is interesting the alarming part of the decision is that deeds that were drafted over 75 years ago can have an important impact on oil and gas ownership rights today. Furthermore, when those deeds were drafted the drafters may not have been aware of the value of certain oil and gas rights today.

In summary, as a result of a 1932 deed the Kennedys retained coal and oil and gas rights in a tract of land.  In subsequent deeds the rights to the coal were acquired by Console Energy Inc. (“Console”)  The Kennedys retained the oil and gas rights.  At the time that the coal and oil and gas rights were excepted and reserved in the 1932 deed it was unknown that there was value to methane gas contained in the coal which is referred to as coalbed methane gas.

In recent years Console began to extract the coalbed methane gas since they owned the coal. The Kennedys brought an action to quiet title, among other actions, claiming that they as the owners of the oil and gas rights were also the owners of the coalbed methane gas.  The trial ruled again the Kennedys and the Pa Superior Court affirmed. In doing so, the trial court relied upon the Hoge case which found that the owner of the coal is the owner of the coalbed methane gas.  The Pa Superior Court followed Hoge and in doing so found that Hoge must be followed unless the deed provided that the parties intended that the owner of coalbed methane gas be separate and apart from the owner of the coal.  In this case, the court found that the language in the 1932 deed reserving the oil and gas rights was not specific enough to retain the rights to the coalbed gas.

So what can you learn from this decision.  First, if you are representing a client who is purchasing a property you will need to carefully review any old deeds and determine what rights were and were not retained. Second, in drafting deeds and reserving rights you need to be careful in what rights are and are not reserved. The problem is when this deed was drafted there was no value in coalbed methane gas. However, with modern technology what might be considered waste or a nuisance today might be valuable to someone else tomorrow. A frightening reality!

Expert witnesses should never take their file to the witness stand

Posted in Court of Common Pleas, Evidence, Pennsylvania Superior Court

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Today the Pa Superior Court affirmed a decision and verdict of the Northampton County Court of Common Pleas.  Not a big deal. However in the decision there is mention of the fact that an expert witness brought his file to the witness stand and opposing counsel asked to see the file. Again, not a big deal. However, the expert had communications between himself and counsel in the file. That is a big deal.  The Pa Superior Court determined that the issue was waived below and on appeal so the Court did not address the substantive issue.

This case is an important reminder regarding expert witnesses.  First, they should not be bringing their files up to the witness stand. Second, if they do it should only be because it is necessary for their testimony. If it is necessary then counsel should review that file beforehand and remove any documents subject to the attorney client and/or work product privilege. Even if you prevail on your objection to opposing counsel reviewing the file or you prevail in having documents removed, it is a bad situation. The Jury will not understand the legal objections and will think that you, your client and/or the expert are hiding something.

 

 

Superior Court Rules On Due Diligence Required In Quiet Title Action

Posted in Pennsylvania Superior Court

The Superior Court recently weighed in with an interesting decision involving due diligence in the context of service by publication when potentially interested parties to a litigation cannot be located.  See Sisson v. Stanley, No. 1347 MDA 2013 (Pa. Super. Ct., Jan. 27, 2015).

In 1953, Joseph Stanley transferred all right, title, and interest in real property located in Susquehanna County, Pennsylvania to Pauline Battista, subject to a reservation of mineral and gas rights.  The present owners of the property, Donald R. Sisson and Mary Sisson,  acquired the property in 1986 from Battista subject to the same reservation.

In 2010, a producer of natural gas, Chesapeake Appalachia, LLC, approached the Sissons with a proposed lease to extract shale gas. Chesapeake informed the Sissons of the cloud on title, prompting the Sissons to file a quiet title action in the Susquehanna County Court of Common Pleas in April 2010.  In their quiet title action, the Sissons sought, in part, to extinguish the reservation rights retained by Stanley and/or his heirs.

The Sissons obtained permission to perform service by publication, claiming that they were unable to locate any heirs of Mr. Stanley.  The Sissons submitted an affidavit informing the trial court of the steps taken to locate an heir, which included:

  1.  Checking the public records in the Recorder of Deeds;
  2.  Searching local telephone directories for individuals with similar names; and
  3.  Checking various internet sites for the names and possible locations of Stanley and/or his heirs, executors, and assigns.

In August 2010, the trial court entered a final order quieting title.  Two months later, the last remaining sibling of Mr. Stanley filed a petition to open the judgment claiming improper service.  The trial court granted the petition and opened the judgment. In June 2013, after more than two years of litigation, the trial court entered judgment in favor of the surviving sibling in response to a motion for judgment on the pleadings.  The Sissons appealed to the Superior Court.

In affirming the trial court, the Superior Court held that the Sissons failed to exercise reasonable diligence in locating a living heir of Mr. Stanley.  Among other things, the Sissons failed to:

  • Search public records in the Register of Wills office, which would have revealed Mr. Stanley’s will and beneficiaries;
  • Perform a search of local death records or newspaper archives for Mr. Stanley’s obituary, which identified his surviving relatives; and
  • Set forth in detail efforts taken on internet to identify Mr. Stanley’s heirs.

With respect to the last point, the Superior Court stated:  “[g]iven the ease of identifying and using sophisticated Internet services to trace ancestry and family history, it is inconceivable that counsel, employing good faith efforts, was unable to locate a single . . . heir.”

The Superior Court also considered the Sissons’ argument that the original 1953 deed could not possibly have intended to reserve rights to Marcellus Shale gas when (a) the existence of Marcellus Shale gas was not known at the time, and/or (b) commercial exploration was not possible in 1953.  The Superior Court rejected this argument holding that a clear reservation of rights referencing “gas” is enough.

Superior Court Reminds Attorneys About The Dangers Of A Lack Of Due Diligence

Posted in Civil Procedure, Pennsylvania Superior Court

On Friday, the Superior Court issued a decision that should serve both as a cautionary tale to attorneys as well as a reminder that foreign corporations must register to do business in Pennsylvania to bring an action in its courts. See Drake Manufacturing Company, Inc. v. Polyflow, Inc., No. 959 WDA 2014 (Pa. Super. Ct., Jan. 23, 2015).

Drake Manufacturing is a Delaware Corporation with operations in Pennsylvania.  Polyflow is a manufacturer of tubing products located in Oaks, Pennsylvania.  Over a period of 8 months in 2008 and 2009, Polyflow entered into multiple contracts with Drake for the purchase of couplings used in Polyflow’s manufacturing process.  In 2009, Drake sued Polyflow in the Warren County Court of Common Pleas alleging a failure to pay for good in accordance with the parties’ contracts.

Polyflow raised the issue of standing in its answer to Drake’s complaint, asserting that Drake failed to obtain a certificate of authority to do business in Pennsylvania.  Section 4121 of the Business Corporation Law provides that “a foreign business corporation, before doing business in this Commonwealth, shall procure a certificate of authority to do so from the Department of State…”  15 Pa.C.S. § 4121(a).  The penalty for failing to do so is set forth in Section 4141 (titled “Penalty For Doing Business Without Certificate Of Authority”), which states that “a nonqualified foreign business corporation doing business in this Commonwealth within the meaning of Subchapter B shall not be permitted to maintain any action or proceeding in any court of this Commonwealth until the corporation has obtained a certificate of authority.” 15 Pa.C.S. §4141(a).

Despite having received notice of the lack of standing issue, Drake failed to obtain a certificate of authority from the Department of State prior to or during trial.  Polyflow moved for compulsory nonsuit at the close of Drake’s case-in-chief.  The trial court denied Polyflow’s motion and entered a verdict in favor of Drake in the amount of $291,766.61.  Polyflow filed timely post-trial motions seeing judgment n.o.v. raising, among other things, the standing issue.  In response, Drake submitted a certificate of authority more than two months after the verdict.  The trial court denied the post-trial motions and Polyflow appealed.

The Superior Court reversed, holding that Drake lacked standing to file a suit in the first instance, and that Drake continued to exhibit a lack of reasonable diligence by failing to obtain a certificate of authority during the pendency of litigation.

Further, although a foreign corporation may comply with Section 4121 by obtaining a certificate of authority “during the course of a lawsuit,” seee.g., International Inventors Inc., East v. Berger, 363 A.2d 1262, 1264 (Pa. Super. Ct. 1976), Drake could not do so during the post-trial motion stage.  The Superior Court held that Drake’s late presentation of a certificate of authority was barred by the Pennsylvania Supreme Court’s decision in Claudio v. Dean Machine Co., 831 A.2d 140 (Pa. 2003), which prohibits a party from submitting evidence in post-trial proceedings that the party failed to submit during trial due to a lack of reasonable diligence.

The Superior Court reduced its 27-page decision to one sentence:

 Although we can understand the trial court’s reluctance to rule in Polyflow’s favor under these circumstances, the fact remains that (1) Polyflow timely raised the defense of Drake’s lack of capacity to sue, (2) Drake failed to cure its lack of a certificate of authority during the next 3½ years, (3) Drake failed to refute this defense at trial, and (4) this defense was fatal to Drake’s case.

Polyflow’s counsel raised the issue of lack of capacity and apparently kept it in his back pocket until conclusion of Drake’s case in chief.  This decision should serve as a reminder to always review and re-review defenses raised in new matter prior to trial, and to be mindful of Section 4121, which is often overlooked by foreign corporations seeking to litigate disputes in Pennsylvania’s courts.