It is extremely important for judgment creditors to file a petition to fix fair market value in order to preserve its right to pursue a deficiency judgment.

In an opinion filed on November 21, 2011, the Bucks County Court of Common Pleas decided the case of Atlantic Nat’l Trust v. Fonthill Corp. et al., No. 2004-01944. 

The case has a long and complex factual history, but the basic facts are that a mortgage note holder filed a Complaint in Mortgage Foreclosure after the borrower defaulted on the loan. After the mortgage note holder obtained a judgment against the borrower, the property was sold at sheriff sale and the judgment holder filed a Petition to Fix Fair Market Value in the mortgage foreclosure action. The Court then issued an Order fixing the fair market value as set forth in the judgment holder’s Petition. 

The borrower entity appealed the Order fixing the fair market value to the Pennsylvania Superior Court, arguing that there had been no “in personam” judgment obtained and, therefore, the Court should not have fixed the fair market value. In response to the appeal, the Court of Common Pleas issued this decision. 

In its decision, the lower court thoroughly reviewed the historical case law on the matter and noted that prior law directed that it was necessary for a judgment creditor to obtain a personal judgment against the judgment debtor prior to petitioning to fix the fair market value. However, the requirement for “in personam” judgment was recently superseded by the Pennsylvania Superior Court last year in the case of Home Savings & Loan Corp. v. Irongate Ventures, LLC, 19 A.3d 1074 (Pa. Super. 2011). In that case, the Superior Court affirmed that, under the Deficiency Judgment Act, where a judgment creditor fails to file a Petition to Fix Fair Market Value in the foreclosure action within six (6) months of the foreclosure judgment, the debtor is permitted to have the judgment marked satisfied, released and discharged.

In Home Savings & Loan, the judgment creditor filed its petition to fix fair market value in the separate confession of judgment action, not the mortgage foreclosure action, well after the six (6) month statutory period. This, the Superior Court held, did not preserve the judgment creditor’s right to seek a deficiency judgment.

Based on the Home Savings & Loan case, the Court of Common Pleas held that it was proper for the judgment creditor to file its Petition to Fix Fair Market Value in the mortgage foreclosure action even though a separate “in personam” judgment had not been previously pursued.