Established Ownership of Mortgage?

J.P. Morgan Chase Bank, N.A. v. Murray, 2013 PA Super 55, 2013 Pa. Super. LEXIS 142 (2013)

Frank Kosir, Jr., Esquire
fk@muslaw.com

This matter addressed the issue of whether an alleged mortgage holder had established ownership of the mortgage and note in question so as to justify a grant of summary judgment in a mortgage foreclosure proceeding.  On May 6, 2010 Deutsche Bank National Trust Co. as Trustee for Washington Mutual Mortgage Securities Corp. 2000-1 (“Deutsche Bank”) commenced a foreclosure action against Francis X. Murray (“Murray”) pursuant to a residential mortgage.  In its Complaint, Deutsche Bank identified Great Western Bank d/b/a Sierra Western Mortgage Company as the mortgagee, and alleged that, through a series of transfers and mergers, it held title to the mortgage and note.  Following the filing of the Complaint, JP Morgan Chase Bank, N.A. (“Plaintiff”) was substituted as plaintiff in the proceeding by leave of court based upon an allegation that it was the successor in interest to Deutsche Bank.

In response to the Complaint, Murray filed an Answer and New Matter asserting inter alia that, as more than seven (7) years had passed from the execution of the alleged assignment and its recording, the assignment was defective and the foreclosure complaint had to be dismissed.  Murray further asserted that certain assignments in the chain of title were defective, and that the name of the original mortgagee on the mortgage differed from that set forth in the Complaint.  The trial court entered summary judgment for the Plaintiff, concluding that there was no question of material fact as to the Plaintiff’s rights in the Mortgage or Note, or in its right to foreclose.

On appeal, our Superior Court reversed.  In issuing its ruling, the court concluded that a review of the record established several defects in the Plaintiff’s case that warranted the reversal of the trial court’s grant of summary judgment.  First, the Plaintiff had failed to establish that it was in possession of the original note indorsed in blank and, as such, was unable to establish that it had a right to foreclose against Murray.  Although the Plaintiff had produced a note, the parties were unable to agree as to whether the note produced was in fact an original indorsed in blank, thereby creating an issue of material fact prohibiting the entry of summary judgment.  For these reasons, the matter had to be remanded to the trial court for further proceedings to determine, inter alia, whether the note in the Plaintiff’s possession was in fact the original note indorsed in blank, thereby vesting in the Plaintiff the right to foreclose against Francis.  However, the court further concluded that, as the Plaintiff had failed to provide any evidence that it was a rightful successor to the original lender, the trial court had erred in granting the Plaintiff leave to substitute itself as a party in the matter and that, prior to a hearing on remand, the Plaintiff had to establish that it was in fact a successor in interest to the original lender.

Department of Labor Issues New FMLA Interpretations in 2013

Elaina Smiley, Esquire
es@muslaw.com

Attorney Elania Smiley's article "Department of Labor Issues New FMLA Interpretations in 2013" appeared in Issue #4 of the Western PA Healthcare News.  Click here to read Elaina's article.

Business Basics 101 Part 2

Attorney Beth Slagle was interviewed for a second time on Business Basics 101 by Rebecca Harris the Director of the Center for Women’s Entrepreneurship at Chatham University on Radio 90.5 WESA.  In the interview Beth talks about choosing the best business entity, from partnerships to sole proprietorships.  Please click on the following link to hear Beth’s interview in its entirety:  http://wesa.fm/post/business-basics-101-part-2

Beth Slagle (left) and Rebecca Harris (right)

For more information on starting your business please contact Beth Slagle at bas@muslaw.com.

Practical Implementation of the Affordable Care Act for Small Businesses

Meyer, Unkovic & Scott LLP and SMC Insurance Agency are sponsoring a program entitled "Practical Implementation of the Affordable Care Act for Small Businesses" on Thursday, June 6, 2013.  Joseph A. Vater, Jr. and Jason Mettley of Meyer, Unkovic & Scott will be presenting along with Manda Sanders of Highmark.

The Program is intended for business owners, CEOs, presidents, and senior executives responsible for employee health benefit decisions.  The program is split into two sessions: Session A - for businesses not likely to grow past 50 and Session B - for businesses that employ more tan 50 or may get there by the end of 2013.

Session A

8:30 - 9:00 Registration/Continental Breakfast

9:00 - 11:00 With the deadline for compliance with the Affordable Care Act inching closer, health care reform is at the forefront of decision making by many small business employee benefit plan advisers. In this session, our subject experts will cover the pros and cons of offering health insurance, as well as how to communicate these changes to your employees. Time will be allowed for questions and answers. This session is intended for businesses not likely to grow past 50.

Click Here to Register for Session A

Session B

12:30 - 1:00 Registration/Refreshments

1:00 - 3:00 As the deadline for compliance with the Affordable Care Act gets closer, the business and benefit decisions you make now through the end of the year can dramatically impact your level of health care reform compliance come January 1, 2014. In this session, our subject experts will cover the definition of FTEs and navigate you through calculations in specific situations. Time will be provided for questions and answers.  This session is provided for businesses that employ more than 50 or those that may get there by the end of the year.

Click Here to Register for Session B

Location:  SMC Business Councils Headquarters, Bldg 801, 1382 Beulah Rd, Pittsburgh, PA 15235-5068

Cost:  SMC Members: No Fee, SMCIA Clients: No Fee, Non-Members/Clients: $50

Meritas Capability Webinar - The Secret to Successfully Bringing Foreign Workers to the US

Joel Pfeffer, Esquire
jp@muslaw.com

All interested Meritas attorneys are welcome to join Meyer, Unkovic & Scott attorney Joel Pfeffer on Tuesday, June 4, 2013 for a Webinar entitled:  The Secret to Successfully Bringing Foreign Workers to the US.

Every Meritas law firm that works with (or expects to work with) U.S. companies having global operations or foreign companies doing business in the U.S. should participate in this webinar. Whether your firm is assisting employers looking to hire foreign nationals for positions in the U.S. or advising multinational companies wanting to transfer workers into the U.S., this briefing will address your concerns and answer your questions. Among the topics addressed will be temporary and permanent visa options for employment; the various categories available for temporary visas; and several existing options for long-term employment. This timely webinar will provide a framework for understanding the law and provide valuable suggestions as to which options are best for your clients.

Date: Tuesday, June 4, 2013

Time: 11:00 - 12:00 p.m. U.S. Central Daylight Time

To register, please click on the following link:  https://cc.readytalk.com/r/r98rnwzydgpp

FINRA Rule 12206: Statute of Repose or Statute of Limitation?

Brian J. Sommer
bjs@muslaw.com

Under the FINRA rules of procedure, the grounds for a pre-hearing dismissal are limited.  FINRA Rule 12206 is one of those limited options.  Rule 12206 states that “no claim shall be eligible for submission to arbitration under the [FINRA] Code when six years have elapsed from the occurrence or event giving rise to the claim.”  Confusion exists as to whether to treat Rule 12206 as a statute of repose, i.e., a substantive limit on the agreement to arbitrate, or as a statute of limitation which can be subject to tolling and the discovery rule.  This is because historically, courts were inconsistent in their treatment of Rule 12206’s NASD predecessors.  Current court decisions suggest the trend towards treating Rule 12206 as a statute of limitations which can be subject to tolling and the discovery rule and thus requiring the hearing of evidence.  As a result, Rule 12206 cannot be utilized, at least in one jurisdiction and potentially others, to dismiss claims on a pre-hearing basis.

Prior to 2002, the issue before most courts was whether or not rules, such as Rule 12206’s predecessor, NASD Rule 10304, were subject solely to their review or solely to the arbitrator’s review.  There were decisions on both sides.  While some courts held that the Rule was solely the purview of the arbitrator and, by extension, could be treated as a statute of limitation and thus subject to tolling and the discovery rule, other courts concluded that Rule 12206’s predecessors were statutes of repose, i.e. substantive limits on the agreement to arbitrate that were not subject to tolling or the discovery rule and thus were within the court’s power to determine whether the claims were time barred or not.  Still the decisions by other courts sought a middle ground approach that started the six-year clock running from events other than the initial purchase, such as a later recommendation to hold onto an investment, continuing breaches of fiduciary duty, and/or the active concealment of wrongdoing can also be an events or occurrences from which a claim can arise thereby not triggering Rule 12206’s six-year limitation.

In any event, the rationale underlying those decisions that placed the power to decide with the courts, were eviscerated by the U.S. Supreme Court in Howsam v. Dean Witter, 357 U.S. 7985 (U.S. 2002).  In Howsam, the High Court held that NASD Rule 10304 was a matter presumptively for the arbitrator and not for a judge to decide since the time limit rule was more of a gateway question and not a question of arbitrability.  Howsam accordingly overruled the justification used by earlier decisions that held that Rule 12206 and its predecessors were questions of what the parties contractually had agreed was eligible for arbitration and were not therefore statute of limitations subject to tolling.  Consequently, a number of courts have held that post-Howsam, Rule 12206 is not a substantive limit on agreement to arbitrate but rather it is akin more to a statute of limitations subject to interpretations that include tolling provisions or discovery rule.  See Mid-Ohio Securities v. Estate of Burns, 790 F.Supp. 2d 1263, 1271-1272 (D. Nev. 2011).  See also, Oshidary v. Purpura-Androiola, 2012 U.S. Dist. LEXIS 81367 (N.D. Cal. June 12, 2012).

Post-Howsam, at least one appellate court has held that Rule 12206 is in essence a statute of limitations without explicitly saying so.  More critically, that court has held that Rule 12206 cannot be used in Pennsylvania to dismiss claims prior to a hearing on the merits, thereby effectively eliminating Rule 12206 as grounds for a pre-hearing dismissal.

In Andrew v. CUNA Brokerage Services, the Pennsylvania Superior Court considered whether it was appropriate for the arbitrators to dismiss the claimant’s causes of action pursuant to NASD Rule 10304(a) and FINRA Rule 12206 when the arbitrators only conducted a prehearing telephone conference as required by FINRA Rule 12206.  The Superior Court determined that it is inappropriate for arbitrators to dismiss a claim prior to the close of a claimant’s case-in-chief.  976 A.2d 496, 502 (Pa. Super. 2009).  The court noted that where a matter is submitted to arbitration, arbitrators are obliged to abide by the minimal procedural requirements necessary for a common law arbitration which entails granting the parties a full and fair hearing.  Id., infra.  Consequently, in Pennsylvania, there can be no pre-hearing dismissal of claims pursuant to Rule 12206 as there must be a hearing first.

Because Pennsylvania is one of many states that adopted the Uniform Arbitration Act, although not controlling, the rationale of Pennsylvania Superior Court’s decision may have application beyond the keystone state’s borders.  In any event, post-Howsam, the rationale that Rule 12206 is a statute of repose is, at best, on shaky ground.
 

Consequently, it appears that the trend will be to treat Rule 12206 as a statute of limitation and not as a statute of repose.

Who Owns Rights to Marcellus Shale Gas? Mineral Estate Owner or Oil and Gas Estate Owner?

Butler v. Charles Powers Estate, et. al, 2013 Pa. LEXIS 789 (2013)

Frank Kosir, Jr., Esquire
fk@muslaw.com

This matter addressed the issue of whether title to Marcellus shale gas vests in the owner of the mineral estate or the owner of the oil and gas estate.  John E. Butler and Mary Josephine Butler (the “Butlers”) are the owners of a two hundred and forty (240) acre tract of land (the “Property”) situated in Apolacon Township, Susquehanna County, Pennsylvania.  In the early 1900s, the Property was conveyed by Charles Powers to one of the Butlers’ predecessors in interest, the deed of conveyance including a clause reserving, inter alia, “one half the minerals and Petroleum Oils to said Charles Powers his heirs and assigns forever.”  In 2009, the Butlers commenced an action against the Estate of Charles Powers (the “Estate”) and all heirs and assigns thereof, seeking to quiet title to all “minerals and petroleum oils” under the Property based upon their alleged adverse possession thereof.  In response, William H. Pritchard and Craig L. Pritchard (the “Pritchards,”) heirs to the Estate, filed an Answer and a Motion for Declaratory Judgment, contesting the Butlers’ adverse possession claims, and asserting that the reservation clause included Marcellus shale gas.  The Butlers demurred to the declaratory judgment claims asserting inter alia that, as natural gas was not included in the reservation clause, the Pritchards lacked standing.  The trial court, relying upon the long-standing rules of law set forth in the Pennsylvania Supreme Court’s decisions in Dunham and Shortt v. Kirkpatrick, 101 Pa. 36, 1882 Pa. LEXIS 216 (1882) and Highland v. Commonwealth, 400 Pa. 261, 161 A.2d 390 (1960) (holding that, where an exception or reservation in a deed simply reserves “minerals,” and makes no specific reference to oil or natural gas, a rebuttable presumption is created that the grantor did not intend for the reserved “minerals” to include oil or natural gas.”) concluded that natural gas is not classified as a “mineral” under Pennsylvania law, and dismissed the Pritchards’ claims.

Following the trial court’s determinations, the Pritchards filed an appeal to the Pennsylvania Superior Court asserting inter alia that the trial court had erred in relying upon Dunham and Highland, for several reasons.  First, prior to Dunham, the rule in Pennsylvania had been that any conveyance of “minerals” included natural gas and that, as the deed at issue in Dunham had been executed with that understanding, Dunham was erroneously decided.  Also, both Dunham and Highland involved disputes regarding the ownership of conventional gas, whereas the matter at hand deals with the ownership of Marcellus shale gas, an unconventional gas.  Finally, the Pritchards also asserted that the trial court’s decision was inconsistent with U.S. Steel Corporation v. Hoge, 503 Pa. 140, 468 A.2d 1380 (1983) (holding that title to natural gas found in coal is in the owner of the coal seam, while title to migratory coal bed gas is in the owner of the property to which the gas migrates) contending that, as the natural gas found in Marcellus shale can only be extracted by hydrofracturing, it is not a migratory gas, and title to the Marcellus shale gas is in the owner of the shale.

On appeal, our Superior Court reversed, (2011 Pa. Super. LEXIS 2710 (2011)), and remanded the matter to the trial court for additional proceedings.  In issuing its opinion, the court affirmed Dunham and Highland concluding that, as the reservation clause specifically reserved an interest in “petroleum oil” but failed to specifically reserve any interest in “natural gas,” no natural gas interest had been reserved.  Furthermore, as the record established that none of Charles Powers’ heirs had made any effort to claim any rights in the natural gas, it was evident that Charles Powers had not intended to reserve any interest in the natural gas.  However, the court concluded that the Pritchards’ claims could not be dismissed under Dunham and Highland without additional information regarding whether, inter alia, (1) Marcellus shale constitutes a “mineral” under Pennsylvania law, (2) the rule regarding ownership of coal gas established in Hoge also applies to Marcellus shale gas, and (3) Marcellus shale gas is a conventional gas, the ownership of which is governed by Dunham and Highland.  As the record did not adequately address these issues, the trial court needed to conduct a hearing on the issue of whether Marcellus shale gas was included in the reservation.

On appeal, our Supreme Court reversed.  In issuing its ruling, the court examined the numerous appellate court cases interpreting the Dunham Rule dating back more than one hundred and thirty years, and found no reason to strike or modify the Dunham Rule.  Rather, the court found that the Dunham Rule has been consistently applied and has always stood for the proposition that, absent the inclusion of the terms “oil” or “natural gas,” a reservation of “minerals” in a deed did not reserve oil or gas rights.  Since the reservation in the deed in question did not include the term “natural gas,” the Dunham Rule placed the burden upon the Pritchards to establish, by clear and convincing parol evidence, that the Grantor had intended to reserve natural gas rights, and the Pritchards had failed to provide any such evidence.  Furthermore, numerous prior Pennsylvania appellate court cases have held that minerals must be metallic in nature and, since neither oil or gas are metallic, they could not be classified as minerals.   Finally, the court differentiated its decision in Hoge II noting inter alia that, as the gas at issue therein was coalbed methane gas, a dangerous byproduct of coal production that is actually derived from the mineral and requires proper ventilation, the Dunham Rule was not applied as ownership of the gas had to vest in the owner of the coal in order to assure the safe extraction of the coal.    For these reasons, as there was no evidence to support a conclusion that the Pritchard’s predecessor in interest had intended to reserve any oil or gas rights, no hearing was required on the issue of whether Marcellus shale gas was included in the reservation, and the Superior Court had erred in ordering such a hearing.