Over the course of six months, two Monroe County trial judges took divergent paths in separate cases involving allegations of fraudulent mortgage assignments.

In a ruling issued in January, one trial judge refused to entertain allegations of fraudulent assignment, reasoning that the allegations were made too late because the underlying foreclosure action was already closed.

That decision was markedly different from one issued last summer by another trial judge on the county bench that reopened judgment on a mortgage foreclosure in light of newly uncovered evidence of fraudulent assignment.

In January, Monroe County Common Pleas Court Judge Arthur L. Zulick denied plaintiff Jill Lanese’s action to quiet title against defendant U.S. Bank National Association, which was based on the allegation that the Mortgage Electronic Registration Systems Inc. employee who authorized the assignment of her mortgage to U.S. Bank was not qualified to do so.

Zulick said Lanese’s action was barred because a judgment was already entered in a previous mortgage foreclosure action.

“Lanese could have raised challenges to the assignment of mortgage to U.S. Bank in the underlying mortgage foreclosure action,” Zulick wrote. “The fact that she did not does not mean that she gets an additional chance to do so after the final judgment in mortgage foreclosure.”

But Zulick’s opinion appeared to take an opposite tack from that of Monroe County Common Pleas Court President Judge Ronald E. Vican, who ruled in a separate case last July that defendant Helen S. Lapp’s petition to open judgment on her foreclosure was not time-barred despite having been filed months after being served with a notice of sheriff’s sale.

Vican said that whether the two employees of mortgage owner MERS who authorized the assignment of Lapp’s mortgage to plaintiff Deutsche Bank National Trust Co. had the proper authority to do so was not information Lapp could have easily obtained.

In Lanese v. U.S. Bank National Association , according to Zulick, plaintiff Lanese brought an action to quiet title against U.S. Bank, arguing that the assignment of her mortgage from MERS to U.S. Bank was invalid because the MERS employee who authorized the assignment, Michelle Anderson, was not in fact assistant secretary of MERS, as she had been identified.

U.S. Bank, however, argued that Lanese’s action was precluded by the doctrine of res judicata, since she failed to allege fraudulent assignment in the underlying foreclosure case against her, in which a Monroe County trial judge granted U.S. Bank’s motion for summary judgment in June 2006.

Zulick quoted the 1983 state Superior Court ruling in In re Estate of Hillegass , which held that an action is barred if it shares with a prior action “(1) an identity of the thing sued upon; (2) an identity of the cause of action; (3) an identity of the person and parties to the action; and (4) an identity of the quality or capacity of the parties suing or being sued.”

“The parties in the mortgage foreclosure litigation and this action to quiet title are the same; only their positions in the caption have changed,” Zulick said. “The challenge in this action is to the same assignment of mortgage which was identified in the mortgage foreclosure complaint.”

Lanese, however, argued that she could not have raised allegations of fraudulent assignment in the underlying action, citing the 1980 Erie County Common Pleas Court’s 1980 ruling in First Federal Savings and Loan Association of Erie v. McAfee , which said “any defense must go to the existence and validity of the mortgage,” according to Zulick.

But Zulick disagreed with this contention.

“While this is true as a general statement of law, it does not mean that Lanese was precluded from challenging the standing of a foreclosing creditor who has not properly obtained a mortgage assignment,” Zulick said. “First Federal Savings had nothing to do with an assignment of a mortgage; the defendant there sought to amend to include claims that the creditor’s counsel had a conflict of interest and that the conveyed premises had numerous building defects which were misrepresented to defendants.”

Zulick also noted that the assignment of Lanese’s mortgage was specifically referenced in U.S. Bank’s complaint in the underlying foreclosure action.

Zulick said the Superior Court directly addressed allegations of improper assignment in a mortgage foreclosure case in U.S. Bank National Association v. Mallory , in which the defendant attempted to invalidate a mortgage foreclosure judgment by arguing that the complaint stated that U.S. Bank had been assigned the mortgage but that it was “seeking to formalize the assignment.”

The Superior Court in that case, according to Zulick, found that the complaint had sufficiently put the defendant on notice that U.S. Bank legally owned the mortgage.

Zulick’s hard-line stance against allowing allegations of a fraudulent mortgage transfer to move forward after a foreclosure case had already closed appeared to stand in stark contrast with the opinion Vican issued almost exactly six months earlier.

In Deutsche Bank National Trust Co. v. Lapp , plaintiff Deutsche Bank began a mortgage foreclosure action against defendant Lapp in December 2008 to collect about $127,000 of principal debt in addition to other costs, according to Vican.

In November 2009, the court entered a judgment in favor of Deutsche Bank for about $150,000 and filed a final judgment against Lapp in December 2009, according to Vican.

Vican said Lapp was served with a notice of sheriff’s sale in November 2010, but Lapp filed a petition to open judgment on the mortgage foreclosure and stay execution of the sheriff’s sale in February 2011, alleging Deutsche Bank wasn’t a real party in interest because the mortgage had not been properly assigned to it by MERS.

According to Vican, Lapp took out a mortgage with MERS in July 2006.

In October 2007, according to Vican, MERS and its parent company, MERSCORP Inc., entered into an agreement with Saxon Mortgage Services Inc. and FIS Foreclosure Solutions Inc., after which two FIS employees, Bethany Hood and Christina Allen, were designated “certifying officers” under the certifying agreement, which said that FIS employees would be made assistant secretaries and vice presidents of MERS for the purposes of executing foreclosure documents but did not expressly give them the power to authorize mortgage assignments.

In December 2008, Hood and Allen authorized the assignment of Lapp’s mortgage to Deutsche Bank, according to Vican, but Lapp, in her February 2011 petition, challenged their authority to do so.

Lapp argued that “there was no reason to doubt the validity of the assignment” until suspicions of fraudulent assignment arose in a separate foreclosure matter, according to Vican.

For this reason, Vican said, Lapp’s petition could be considered timely.

“Whether Ms. Hood and Ms. Allen were in fact employees of MERS and had the necessary authority to assign the mortgage is not information easily accessible to the average person and the facts indicate that defendant’s attorney was not aware of the potential issue until a similar transaction arose in a different matter,” Vican said, adding that the certifying agreement authorizing Hood and Allen to execute foreclosure transactions was not included in any of Deutsche Bank’s amended complaints in the underlying foreclosure action.

According to Vican, that document was not brought to light until it was attached to Deutsche Bank’s reply to Lapp’s petition to open judgment.

“Therefore, we find that defendant filed this petition within a reasonable period of time considering he was not apprised of the situation until after the motion for summary judgment had been granted,” Vican said.

Vican ultimately found that Lapp’s claims met all three prongs of the test for granting a petition to open judgment set forth in the 1941 state Superior Court case Caromono v. Garman : timeliness, existence of grounds for opening judgment and the existence of a meritorious defense.

Lanese’s attorney, Philadelphia solo attorney Cheri Robinson , could not be reached for comment at press time.

U.S. Bank’s attorney, Stroudsburg, Pa., solo lawyer John B. Dunn, also could not be reached at press time.

Zack Needles can be contacted at zneedles@alm.com or at 215-557-2493. Follow him on Twitter @ZNeedlesTLI.

( Copies of the eight-page opinion in Deutsche Bank National Trust Co. v. Lapp , PICS No. 12-0221, and the eight-page opinion in Lanese v. U.S. Bank National Association , PICS No. 12-0222, are available from Pennsylvania Law Weekly. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. ) •