Schluth v. Krishavtar, Inc.

302 A.3d 96

William SCHLUTH v. KRISHAVTAR, INC. and Barkrushna Panchal, Appellants William Schluth v. Krishavtar, Inc., Appellant

No. 2088 EDA 2021

No. 2089 EDA 2021

Superior Court of Pennsylvania.

Argued May 3, 2022

Filed July 31, 2023

Reargument Denied October 18, 2023

Jonathan J. Sobel, Philadelphia, for appellant.

Amy R. K. Brandt, Philadelphia, for appellee.

BEFORE: BOWES, J., STABILE, J., and McLAUGHLIN, J.

OPINION BY STABILE, J.:

Appellants, Krishavtar, Inc. and Barkrushna Panchal, appeal for the third time in these consolidated cases from the September 7, 2021 order entered in the Court of Common Pleas of Philadelphia County, denying their petitions to mark judgments satisfied as to Krishavtar and Panchal. Following review, we conclude the trial court was without jurisdiction to enter the order and therefore we vacate the order.

Our review of the record informs us of the following summary of the factual and procedural background of this case. In 2008, Krishavtar, through its president Panchal, entered into an agreement of sale with Appellee, William Schluth, for the purchase of a Philadelphia property upon which Schluth operated a gas station for several years. It was Panchal's intent to purchase the property and to operate the gas station as part of his retirement. The purchase price was $695,000, which included an up-front payment of $136,000 and an agreement, subsequently modified, to account for contamination and necessary remediation, to pay the balance in installments. The terms of the payments were set forth in a Note executed by Panchal on behalf of Krishavtar. The Note was secured by a Mortgage on the property between Krishavtar as Borrower and Schluth as Lender. Panchal also executed a personal Guaranty of Mortgage.

Eventually, Krishavtar defaulted on the Mortgage and Panchal breached the terms of the Guaranty by failing to make payments upon Krishavtar's default. Consequently, Schluth filed two actions, one against Krishavtar for mortgage foreclosure ("Mortgage Foreclosure Case"—an in rem action docketed at No. 3382-June Term 2017), and one against both Appellants for breach of contract ("Breach of Contract Case"—an in personam action docketed at No. 2871-June Term 2017). On March 13, 2019, following a non-jury trial, the trial court entered an order in favor of Schluth in the amount of $555,942.96 in the Mortgage Foreclosure Case and directed that the prothonotary may issue a writ of execution for the sheriff to proceed to sale of the real property. In that same order, the court entered an in personam judgment in the amount of $555,942.96 in favor of Schluth and against Panchal in the Breach of Contract Case, representing Panchal's personal liability. ¹ On April 2, 2019, Schluth filed a Writ of Execution in the amount of $555,942.96 in the Mortgage Foreclosure Case. On June 6, 2019, judgments in that amount were entered against Appellants in both cases.

After the denial of post-trial motions, Appellants filed their First Appeal in both cases to this Court on June 6, 2019, that we subsequently consolidated ("First Appeal"). In their First Appeal, Appellants maintained that the court erred by failing to excuse performance based upon Schluth's material breach, that the court erred by failing to allow for rescission of the contract, and that the court erred in calculating damages because it failed to consider the parties’ modification of the payment terms.

In connection with the First Appeal, Appellants also filed an emergency petition on June 24, 2019, under both docket numbers seeking a stay of the sheriff's sale of the property. By order entered on July 3, 2019, the trial court denied the petition. ² Appellants then filed a motion for reconsideration of the stay denial on July 22, 2019. While the motion for reconsideration was pending, the property sold at sheriff's sale on August 6, 2019, to JSW Holdings, LLC ("JSW Holdings"), a limited liability company owned by Schluth for $420,000, as reflected on the Mortgage Foreclosure Case docket. ³ Two days later, on August 8, 2019, the trial court granted Appellant's reconsideration motion and ordered all execution proceedings stayed. The order, however, was entered only under the docket for the Breach of Contract Case. ⁴

On June 30, 2020, this Court in the First Appeal affirmed in part and reversed in part the trial court's March 13, 2019 orders. We vacated the trial court's damages award and remanded the case with direction to the trial court to (1) determine whether the payment terms of the agreement of sale had been modified by the conduct of the parties and (2) enter an amount of damages consistent with those findings. See Schluth v. Krishavtar, Inc. and Panchal , Nos. 2013 and 2014 EDA 2019, 2020 WL 3542236, unpublished memorandum (Pa. Super. filed June 30, 2020), appeal denied , 242 A.3d 1249 (Pa. 2020).

Pursuant to our remand order, on March 8, 2021, the trial court issued findings of fact and conclusions of law. While the court found that there was an offer to modify the payment amounts, it found there was no agreement between the parties to modify the Note and/or Mortgage. The court calculated that Schluth was entitled to damages in the amount of $612,878.93 on his claims for breach of the Note. Findings of Fact and Conclusions of Law, 3/8/21 at 4, ¶3. The court also found that the property was sold at sheriff sale on August 6, 2019 for $420,000 to an entity owned by Schluth and, thereafter, resold on September 25, 2020 for $600,000. ⁵ Id. at 4 ¶4. The court then recalculated damages in favor of Schluth by subtracting from its award of $612,878.93 the net sum of $509,090.92, representing the net proceeds from the sale as determined by deducting costs incurred for the sheriff's sale and closing costs, and then adding interest. After making these adjustments, the court determined that the amount then owing by the defendants to Schluth was $92,616.09. Id. On April 3, 2021, judgment was entered on both dockets in the amount of $92,616.09. Appellants then filed their second appeal ("Second Appeal") on April 6, 2021. In their Second Appeal, Appellants challenged the trial court's findings that there was no contract modification based upon the parties’ conduct, and that it erred in calculating damages when they claimed they presented sufficient proof they did not owe any money due to Schluth's putative breach of contract. On March 9, 2022, we affirmed the trial court's March 8, 2021 orders that were entered as judgments on April 3, 2021. See Schluth v. Krishavtar, Inc. and Panchal , Nos. 745 and 746 EDA 2021, 2022 WL 703685, unpublished memorandum (Pa. Super. filed March 9, 2022). ⁶

Meanwhile, on August 9, 2021, after we vacated Schluth's damage award under the First Appeal, and while the March 8, 2021, orders in the Second Appeal were still pending before this Court, Appellants filed identical petitions in the trial court to mark the June 6, 2019 judgments satisfied in both the Mortgage Foreclosure and Breach of Contract Cases. Petitions to Mark Judgment Satisfied, 8/9/21, at ¶¶ 3, 9. In each petition, Appellants represented that on August 5, 2019, the mortgage on the property was assigned by Schluth to JSW Holdings. Id. at ¶ 4. Each petition further reflected the August 6, 2019 sheriff's sale to JSW Holdings for $420,000, and JSW Holdings’ subsequent sale of the property for $600,000 to Posh Real Estate Management, LLC, on September 25, 2020. Id. at ¶¶ 5, 7. Appellants represented that Schluth failed to file a petition to fix the fair value of the property within six months of the sale to judgment creditor JSW Holdings as required by 42 Pa.C.S.A. § 8103(d) and, therefore, Appellants were entitled to have the judgments marked satisfied. ⁷

By order entered September 7, 2021, the subject of this Third Appeal, the trial court denied Appellants’ petitions to mark the judgments satisfied, explaining that a deficiency judgment in the amount of $92,616.09 was properly entered on April 3, 2021 against Krishavtar, Inc. as borrower and against Panchal as guarantor. Therefore, Appellants’ petitions lacked merit. Order, 9/7/21, at 1 n.1. This timely Third Appeal followed. The trial court did not order the filing of a statement of errors pursuant to Pa.R.A.P. 1925(b), but did file an opinion on October 27, 2021, indicating that the reasons for denying Appellants’ petitions were set forth in the September 7, 2021 order. ⁸

Appellants ask us to consider one issue on appeal, which we repeat here verbatim:

Whether the trial court erred in denying Appellants, Krishavtar, Inc. and Barkrushna Panchal's Petition to Mark the Judgment Satisfied where appellee purchased the Appellants’ real estate at a sheriff's sale and then failed to proceed within six months of the sale to petition the court to fix the fair market value of the real estate pursuant to 42 Pa.C.S.A. § 8013 and the judgment against Appellants’ deemed to be fully satisfied as a matter of law, thus entitling Appellants’ to have the judgment marked satisfied of record, especially that the judgment was already been vacated by the Superior Court on Appeal?

Appellants’ Brief at 4.

When reviewing deficiency judgment proceedings, an appellate court is limited to determining whether there is sufficient evidence to sustain the holding of the trial court, or whether the court committed reversible error of law. Bryn Mawr Trust Co. v. Healy , 446 Pa.Super. 501, 667 A. 2d 719 (1995), citing cases.

Relevant to our discussion are the following provisions of the Deficiency Judgment Act ("DJA"):

(a) General rule.-- Whenever any real property is sold, directly or indirectly, to the judgment creditor in execution proceedings and the price for which such property has been sold is not sufficient to satisfy the amount of the judgment , interest and costs and the judgment creditor seeks to collect the balance due on said judgment , interest and costs, the judgment creditor shall petition the court to

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