Verdini v. First Nat'l Bank of Pa.

135 A.3d 616

2016 PA Super 56

Anthony and Paula VERDINI, Appellants

v.FIRST NATIONAL BANK OF PENNSYLVANIA, Appellee.

No. 248 MDA 2015

Superior Court of Pennsylvania.

Argued Aug. 12, 2015.

Filed March 3, 2016.

Gerald S. Berkowitz, Malvern, for appellants.

James D. Young, Hummelstown, for appellee.

BEFORE: BOWES, J., JENKINS, J., and PLATT, J.^*

OPINION BY PLATT, J.:

Appellants, Anthony and Paula Verdini, appeal from the order entered on January 13, 2015 that denied their motion for summary judgment and granted the motion for summary judgment of Appellee, First National Bank of Pennsylvania. We affirm.

The trial court aptly set forth the background facts of this case as follows:

A complaint was filed by [Appellants] on August 15, 2013. The circumstances alleged in [the] complaint are as follows: [Appellants] obtained a second non-purchase money mortgage (“the debt”) ... and later defaulted on the debt; on or about December 31, 2012, [Appellee] ... issued [Appellant] Anthony Verdini a 1099–C form; in 2013, [Appellants] requested the debt be marked satisfied so that the [subject] property ... could be sold and [Appellee] refused to do so until $37,744.73 was paid; [Appellants] paid the amount requested. As a result of their payment of the debt, which they assert [Appellee] had cancelled months prior, [Appellants] raised several claims: (1) breach of contract; (2) violation of the Fair Credit Extension Uniformity Act (hereinafter “FCEUA”); (3) violation of the Unfair Trade Practices and Consumer Protection Law (hereinafter “UTPCPL”); and (4) unjust enrichment.

On September 26, 201[3], [Appellee] answered the complaint.

On September 9, 2014, [Appellee] filed a motion for summary judgment.... [Appellants] filed a response ... and cross-motion for summary judgment on September 17, 2014 ...

(Trial Court Opinion, 1/13/15, at unnumbered pages 1–2) (some capitalization omitted).

On January 13, 2015, the court granted Appellee's motion for summary judgment and denied Appellants' cross-motion after argument thereon. Appellants timely appealed.¹

Appellants raise nine issues for our review:

A. Whether the trial court erred by granting summary judgment for [Appellee], and denying summary judgment for [Appellants?]

B. Whether [Appellee] cancelled [the debt?]

C. Whether [Appellee] had a duty to satisfy the mortgage on [Appellants'] residence after [it] cancelled the [debt?]

D. Whether [Appellee] violated the [FCEUA] by harassing, oppressing and abusing [Appellants] in violation of FCEUA § [ ]2270.4(4), by collection of the [debt] after [it] had been cancelled by [Appellee?]

E. Whether [Appellee] violated FCEUA by falsely representing the character or legal status of the [debt] after its cancellation by [Appellee] in violation of FCEUA § [ ]2270.4(5)[?]

F. Whether [Appellee] violated FCEUA by the use of unfair or unconscionable means to collect the [debt] in violation of FCEUA § [ ]2270.4(6)[?]

G. Whether [Appellee] violated the [UTPCPL] by [its] violations of FCEUA[?]

H. Whether [Appellee] was unjustly enriched when it obtained payment of the [debt] after [it] cancelled the [debt?]

I. Whether the trial court failed to view the record in the light most favorable to the non-moving party, [Appellants], by granting [Appellee's] motion for summary judgment[?]

(Appellants' Brief, at 4–5).

We will address Appellants' first two questions first because they are related where, in addressing them, they argue² that the court erred when it found there was no issue of material fact, and granted summary judgment in favor of Appellee on the basis that Appellants failed to prove that Appellee cancelled the debt.³ (See id. at 4, 12–22; Trial Ct. Op., at unnumbered pages 8–10).

Our standard of review of a court's order granting or denying summary judgment is well-settled:

A reviewing court may disturb the order of the trial court only where it is established that the court committed an error of law or abused its discretion. As with all questions of law, our review is plenary.

In evaluating the trial court's decision to enter summary judgment, we focus on the legal standard articulated in the summary judgment rule. Pa.R.C.P. 1035.2. The rule states that where there is no genuine issue of material fact and the moving party is entitled to relief as a matter of law, summary judgment may be entered. Where the non-moving party bears the burden of proof on an issue, he may not merely rely on his pleadings or answers in order to survive summary judgment. Failure of a nonmoving party to adduce sufficient evidence on an issue essential to his case and on which it bears the burden of proof establishes the entitlement of the moving party to judgment as a matter of law. Lastly, we will view the record in the light most favorable to the non-moving party, and all doubts as to the existence of a genuine issue of material fact must be resolved against the moving party.

Byoung Suk An v. Victoria Fire & Cas. Co., 113 A.3d 1283, 1287–88 (Pa.Super.2015) (case citation omitted).

Here, the trial court granted summary judgment on the basis that “charging off the debt ... did not cancel the debt. Similarly, the issuance of a 1099–C form is not an admission that the debt has been cancelled and the issuance of the form does not discharge [Appellants] from further liability.”⁴ (Trial Ct. Op., at unnumbered page 9). We agree.

As a preliminary matter, we observe that this is an issue of first impression in this Court. Our review of the caselaw has revealed no case in either the Pennsylvania Superior or Supreme Court that has addressed the legal consequences of the charge-off of a debt on the debtor's responsibility to pay a remaining balance, or whether issuing an IRS Form 1099–C evidences a debt's cancellation. However, In re Zilka, 407 B.R. 684 (Bankr.W.D.Pa.2009),⁵ provides persuasive, well-reasoned analysis that is consistent with the majority of courts in the United States, and we cite it with approval.

In re Zilka involved a motion to confirm the proofs on claims filed by the bank in a chapter seven bankruptcy action. See In re Zilka, supra at 686. The bank claimed it was owed money on an outstanding, delinquent debt, and the debtor claimed, much like Appellants herein, that the bank was not owed any money because it had charged-off the debt and issued him an IRS Form 1099–C, Cancellation of Debt. See id. at 686. In considering these positions, the court first examined whether the charge-off of a debt is the same as cancelling it.

As an initial matter, the Court holds, as a matter of law, that when a lender issues an account statement to its borrower indicating that an outstanding loan balance equals $0.00 because such loan has been charged off, such “is not the legal equivalent of forgiving [—i.e., discharging liability on—] a debt.” Discover Bank v. Worsham, 176 P.3d 366, 368 (Okla.Civ.App.2007) (“notation on Cardholder's August 30, 2002 statement which reads: ‘Internal charge off’ of $8,823.48 resulting in a zero balance ... [only] reflects Discover's accounting procedure for removing the account from active status”); Unifund CCR Partners v. Urban, 2005 WL 3624541 at *1 (Conn.Super.Ct.2005) (same); Mitchell Bank v. Schanke, 268 Wis.2d 571, 676 N.W.2d 849, 854 n. 7 (2004) (“A ‘write off’ does not mean that the institution has forgiven the debt or that the debt is not still owing”); Central Home Trust Co. of Elizabeth v. Lippincott, 392 So.2d 931, 933 (Fla.Dist.Ct.App.1980) (same)....^{[6 ]}

Id. at 687; see also Kelly v. Wolpoff & Abramson, L.L.P., 634 F.Supp.2d 1202, 1208 (D.Colo.2008) (observing that “ ‘charging off’ essentially amounts to a ledger book reclassification and is an accounting practice” that does not extinguish the debt) (citation omitted).

In this case, Appellee sent Appellants a notice of charge-off months before it ultimately occurred. (See Notice of Charge–Off, 1/07/12, at 1). The notice contained the following express language: “You are aware the charged off balance is your responsibility. It is legally enforceable and collectable [.]” (Id. ). Therefore, based on the relevant caselaw, see In re Zilka, supra at 686, and the language of the express notice provided to Appellants, (see Notice of Charge–Off, 1/07/12, at 1), we conclude that the trial court did not err when it found that Appellee's charge-off of the debt did not cancel their responsibility to pay it. Appellants' argument regarding the effect of a charge-off lacks merit.⁷

Next, we turn to Appellants' allegation that the charge-off and filing of the Form 1099–C cannot be viewed in isolation, but instead that the trial court erred when it found that Appellee's issuance of a Form 1099–C was not further evidence of the debt's cancellation. (See Appellants' Brief, at 18). This claim requires us to consider whether the trial court properly interpreted the language contained in the Internal Revenue Code tax statute, 26 U.S.C.A. § 6050P(a). We conclude that it did.

As observed in In re Zilka :

26 U.S.C. § 6050P(a) provides, in pertinent part, that “[a]ny applicable entity which discharges ... the indebtedness of any person during any calendar year shall make a return ... setting forth ... the name, address, and TIN of each person whose indebtedness was discharged ... [, as well as] the date of the discharge and the amount of the indebtedness discharged.” 26 U.S.C. § 6050P(a)(1)–(2) (West 2007). The information return just referred to shall be a Form 1099–C, which return must be filed with the Internal Revenue Service. See 26 C.F.R. § 1.6050P–1(a)(1) (West 2009). Every applicable entity which makes such a return must also “furnish to each person whose name is required to be set forth in such return a written statement showing ... the name and address of the [applicable] entity ..., and ... the information required to be shown on the return with respect to such person.” 26 U.S.C. § 6050P(d)(1)–(2) (West 2007). The written statement just referred to can be copy B of the Form 1099–C. See 26 C.F.R. § 1.6050P–1(f)(2) (West 200

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