HARRISBURG - The state Superior Court has ruled that the 1988 mortgages for Center City Apartments that were acquired in 2009 by the Shamokin Housing Authority are valid, a key legal victory in the authority's ongoing dispute with Red Gold Enterprises Inc.
The ruling could result in a new effort by the authority to foreclose on the five-story, 34-unit complex and have it sold at a sheriff's sale, although it's unclear at this point if Red Gold will appeal.
The opinion affirmed a ruling made in Northumberland County Court on Jan. 15, 2010, that determined the validity of more than $1 million in primary and support mortgages.
Red Gold acknowledges that a foreclosure action was filed in 2000 on the Center City mortgage by the Pennsylvania Housing Finance Agency (PHFA) because Red Gold had not made a mortgage payment since February 1998.
However, that case was dismissed "with prejudice" in 2004 after four years of inactivity, which, according to Red Gold, rendered the promissory notes on the mortgages invalid. Even though the authority acquired the notes from PHFA in 2009, it doesn't give the authority ownership, according to Red Gold.
In its May 27 decision, the justices cited a Florida Supreme Court ruling based on Red Gold's argument that the case falls under the doctrine of "res judicata," or that the court's dismissal "with prejudice" is a final judgment and not subject to appeal.
Language in that ruling states, "The doctrine of res judicata does not necessarily bar successive foreclosure suits, regardless of whether or not the mortgagee sought to accelerate payments on the note in the first suit. The subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action."
With that, Red Gold's action to quiet title was dismissed, as the court said it was without merit. And because the dismissal of the 2004 case was not res judicata, the housing authority can now petition the court to exercise its discretion to proceed in a foreclosure action.
The appeal had held up a county sheriff's sale that had been scheduled for the property.
Attorney Clayton Davidson, Harrisburg, who has been representing the authority, did not comment Wednesday on the advice he's offered his client, saying only, "We're moving forward."
Calls to attorney Robert Cravitz, Selinsgrove, counsel for Red Gold, were not returned Wednesday. A person answering the phone Thursday said Cravitz was out until Monday.
Second appeal
A second appeal involving Red Gold and the authority remains before the state Superior Court.
Red Gold has appealed Saylor's May 19, 2010, ruling that said because both parties had a claim for the building, they should share the cost of expenses. Red Gold was ordered to pay 76 percent of all heat, water, sewer, electric, trash, maintenance, real estates taxes and a $500 management fee, and the authority the rest.
Saylor's ruling also put a $5,066 monthly payment on Red Gold to help pay on the mortgage, but the judge amended that ruling a few months later to $2,000 a month.
The two sides met in court April 26, where the authority argued that Red Gold was in arrears $5,777.12 in its payments in part because it had claimed expenses that included $2,000 in legal fees and $500 for health insurance for company owner Eugene Picarella.
Saylor suggested Red Gold cut its payments for legal bills to $1,000 a month, and that it pay an extra $500 to the authority until the arrears are erased.