VENEY et al v. CITY OF PHILADELPHIA et al

Filing 31

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JUAN R. SANCHEZ ON 8/23/2017. 8/23/2017 ENTERED AND COPIES E-MAILED.(kp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

JOANNE THORNTON

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v.
CITY OF PHILADELPHIA, et al.

CIVIL ACTION
No. 16-5554

MEMORANDUM
Juan R. Sánchez, J.

August 23, 2017

Plaintiff Joanne Thornton brings this putative class action against the City of
Philadelphia, the Philadelphia Sheriff’s Office, and Philadelphia Sheriff Jewell Williams alleging
she and other class members were denied procedural due process in connection with the
distribution of unused proceeds from sheriff’s sales of the class members’ real property.
After being unable to pay her mortgage, Thornton’s home was foreclosed upon and sold
at a sheriff’s sale to a third-party purchaser for $305,000. The Sheriff’s Office collected the
proceeds and thereafter proposed a Schedule of Distribution, indicating that, after paying liens
and costs associated with the property and sheriff’s sale, the unused proceeds due to Thornton
amounted to $193,795.18. Included in the costs associated with the sheriff’s sale, and thus
deducted from the proceeds, was a title insurance policy in the amount of $1,317.50. The
Sheriff’s Office later amended the Schedule of Distribution to include, among other things, a
$179,454 lien on the property, thus reducing the unused proceeds to $11,968.17. Thornton filed a
claim for the unused proceeds, which have been distributed to her. In her Amended Complaint,
Thornton asserts she was deprived procedural due process in the distribution of the unused
proceeds, and that the Schedule of Distribution should not have been amended and should not
have accounted for the title insurance policy.

Defendants move to dismiss Thornton’s Amended Complaint for failure to state a claim
upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), alleging
Thornton was afforded sufficient process in connection with the distribution of the sheriff’s sale
proceeds and has available to her further process, under Pennsylvania law, to challenge the
calculation and distribution of unused proceeds. Because the Court agrees, Defendants’ motion
will be granted, and Thornton’s Amended Complaint will be dismissed without prejudice.
FACTS1
Thornton previously owned real property located at 1609 Christian Street in Philadelphia.
Thornton was unable to make her mortgage payments. In May 2011, her mortgagee, EverBank,
filed a complaint for mortgage foreclosure in the Court of Common Pleas of Philadelphia
County. In September 2014, Thornton’s property sold at a sheriff’s sale for $305,000 to a third
party purchaser.
The Philadelphia Sheriff’s Office collected the proceeds from the sale and thereafter
issued a Proposed Schedule of Distribution of the proceeds listing taxes, fees, costs, liens, and
mortgages associated with the property, as well as “unused proceeds” from the sale to be
distributed to Thornton. One such deduction includes the cost of a title insurance policy in the
amount of $1,317.50. After accounting for all costs and liabilities from the sale proceeds, the
Proposed Schedule of Distribution listed the unused proceeds as $193,795.18. Sometime
thereafter, the Proposed Schedule of Distribution was amended to include, among other things, a

1

The following facts are drawn from Thornton’s Complaint, the exhibits attached thereto, and
documents filed of record in the underlying foreclosure action, all of which this Court may
properly consider in evaluating the instant motions to dismiss. See Mayer v. Belichick, 605 F.3d
223, 230 (3d Cir. 2010) (holding documents a court may consider in deciding a Rule 12(b)(6)
motion to dismiss include “the complaint, exhibits attached to the complaint, matters of public
record, [and] undisputedly authentic documents if the complainant’s claims are based upon these
documents”).
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Redevelopment Authority of the City of Philadelphia (RDA) mortgage in the amount of
$179,454.
After the amendment, the unused proceeds amounted to $11,968.17. Pursuant to
Pennsylvania law, Thornton filed a Defendant Asset Recovery Team claim for the unused
proceeds in August 2016, about two years after the sheriff’s sale. The Sheriff’s Office disbursed
a check to Thornton for the unused funds.
Thornton brings this putative class action lawsuit against the City, the Sheriff’s Office,
and the Sheriff, asserting she was deprived of procedural due process because she did not receive
the amount of unused proceeds calculated in the original Schedule of Distribution, that the
Sheriff’s Office improperly amended the Schedule of Distribution, and that the sale proceeds
should not have been used to pay for the title insurance policy. In bringing this class action, she
seeks to represent two classes of individuals. As to the first class, Thornton seeks to represent
those individuals “whose real property was foreclosed and sold at sheriff sale for an amount in
excess of the legal credit price plus costs and who did not recover the excess funds remaining
from the proceeds of such sheriff’s sale after all proper liability had been satisfied.” Am. Compl.
¶ 40. As to the second class, Thornton seeks to represent those individuals “who were charged a
premium by Defendants for a title insurance policy insuring Defendants for their actions related
to a sheriff’s sale.” Id.
Thornton also brings claims under Pennsylvania law for breach of contract, negligent
mishandling of funds, unjust enrichment, and conversion. Thornton seeks compensatory and
punitive damages and a declaratory judgment that Defendants’ policies are unconstitutional.
Defendants move to dismiss the Amended Complaint for failure to state a claim upon which
relief may be granted under Federal Rule of Civil Procedure 12(b)(6).

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DISCUSSION
To withstand a motion to dismiss pursuant to Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). A claim is facially plausible when the facts pleaded “allow[] the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. In evaluating a
Rule 12(b)(6) motion, a district court first must separate the legal and factual elements of the
plaintiff’s claims. See Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). The court
“must accept all of the complaint’s well-pleaded facts as true, but may disregard any legal
conclusions.” Id. at 210-11. The court must then “determine whether the facts alleged in the
complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’” Id. at 211
(quoting Iqbal, 556 U.S. at 679).
“To state a claim under § 1983 for deprivation of procedural due process rights, a
plaintiff must allege that (1) he was deprived of an individual interest that is encompassed within
the Fourteenth Amendment’s protection of ‘life, liberty, or property,’ and (2) the procedures
available to him did not provide ‘due process of law.’” Hill v. Borough of Kutztown, 455 F.3d
225, 233-34 (3d Cir. 2006) (quoting Alvin v. Suzuki, 227 F.3d 107, 116 (3d Cir. 2000)).
In evaluating Thornton’s procedural due process claims, the Court must first determine
whether her asserted individual interest is constitutionally protected. See Baraka v. McGreevey,
481 F.3d 187, 205 (3d Cir. 2007). Property interests protected by the Due Process Clause of the
Fourteenth Amendment “are not created by the Constitution.” Cleveland Bd. of Educ. v.
Loudermill, 470 U.S. 532, 538 (1985). Rather, “they are created and their dimensions are defined
by existing rules or understandings that stem from an independent source such as state law.” Id.
(quoting Bd. of Regents v. Roth, 408 U.S. 564, 577 (1972)). To have a protected property interest
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in a benefit, a person must have “more than an abstract need or desire for it” or “a unilateral
expectation of it”; she must have “a legitimate claim of entitlement to it.” Baraka, 481 F.3d at
205 (quoting Roth, 408 U.S. at 577).
The distribution of proceeds generated from a sheriff’s sale is governed by Pennsylvania
Rule of Civil Procedure 3136, which outlines the Sheriff’s duties in connection with a sheriff’s
sale and remedies for interested parties dissatisfied with a schedule of distribution. Rule 3136
sets forth the distribution procedures as follows:
(a) Not later than thirty days after the sale of real property and not later than five
days after the sale of personal property, the sheriff shall prepare a schedule of
proposed distribution of the proceeds of sale which shall be filed in the
prothonotary's office. No schedule of distribution or list of liens need be filed
when the property is sold to the plaintiff for costs only.
(b) When a receipt of the plaintiff or other lien creditor has been accepted on
account of the purchase price the schedule shall set forth the name and address of
the plaintiff or lien creditor, the amount of the judgment or lien, identifying it, and
the amount of credit claimed and allowed upon the purchase price.
(c) In sales of real property the sheriff shall attach to the schedule a list of liens
upon the property sold as certified from the record by the proper officers or a
guaranteed search from any title company authorized to do business within the
county. The cost of certifying the list of liens or the title search, the
acknowledgment, recording and registry of the deed and transfer or documentary
stamps shall be charged as an expense of distribution.
(d) The sheriff shall distribute the proceeds of sale in accordance with the
proposed schedule of distribution, unless written exceptions are filed with the
sheriff not later than ten (10) days after the filing of the proposed schedule.
(e) Upon the filing of exceptions, the sheriff shall transmit them to the
prothonotary together with a copy of the proposed schedule of distribution.
(f) The court shall determine the exceptions, and for this purpose may receive
evidence by deposition or otherwise, or may appoint an auditor to hear the
evidence and report to the court.
(g) The proceeds of sale need not be paid into court by the sheriff but upon
petition of the sheriff or any party in interest, the court may order the proceeds to
be paid into court to await distribution or may order the sheriff to invest the fund
for distribution pending final disposition of the exceptions or an appeal therefrom.
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(h) If the sheriff receives any money for costs or in connection with a stay,
adjournment or postponement of sale or otherwise, the sheriff shall account for it
on returning the writ.
Pa. R. Civ. P. 3136.
Under Pennsylvania law, “[a] defaulting mortgagor of land . . . has the right to receive
from the proceeds of the sale of the mortgaged land the amount, if any, in excess of the mortgage
debt.” In re Evergreen Mem’l Park Ass’n, 308 F.2d 65, 67 (3d Cir. 1982) (citations omitted);
accord W. Sav. Fund Soc’y of Phila. v. Devlin, 61 Pa. D. & C.2d 702, 707 (Pa. Ct. Com. Pl.
1973) (“When the proceeds of a sale upon execution are more than sufficient to satisfy the liens
upon a property sold and the costs of sale, it is the judgment debtor who is entitled to the
surplus.”); cf. In re Sheriff’s Excess Proceeds Litig., 98 A.3d 706, 713 n.2 (Pa. Commw. Ct.
2014) (“When a foreclosure sale generates proceeds in excess of existing tax liens and costs,
[Rule 3136] requires the Sheriff to distribute the excess proceeds to the former property
owner . . . .”).
Although Thornton has a “legitimate claim of entitlement” under Pennsylvania law to the
unused proceeds generated from the sheriff’s sale—implicating a property interest protected by
the Fourteenth Amendment—she does not have a legitimate claim to any proceeds beyond what
she has already received. While the original Proposed Schedule of Distribution calculated unused
proceeds as $193,795.18, that calculation proved incomplete. After taking into account all
liabilities on the property, the Proposed Schedule of Distribution was amended to reflect
$11,968.17 in unused proceeds. Thornton acknowledges she received these unused proceeds, see
Am. Compl. ¶ 24, but nevertheless suggests she is entitled to the amount of unused proceeds as
originally calculated. Thornton’s pleadings, however, belie any attempt to establish a legitimate
claim to additional proceeds, as she fails to assert that the final calculation is incorrect or
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inaccurate. She likewise does not contest the legitimacy of the RDA mortgage, which amounted
to $179,454, or any other amount not accounted for in the original Proposed Schedule of
Distribution. Because Thornton received the unused funds as reflected in the latest Schedule of
Distribution, the Court finds she does not have a legitimate claim of entitled to any additional
funds from the sale. Any procedural due process claim based on the calculation of unused
proceeds in the original, and incomplete, Proposed Schedule of Distribution is meritless.
Thornton also alleges she was deprived of $1,317.50 because the Sheriff’s Office used
that amount of the proceeds from the sale to pay for a title insurance policy. Under Rule 3136,
the Sheriff’s Office is authorized to charge as an expense of distribution the “cost of certifying
the list of liens or the title search, the acknowledgement, recording and registry of the deed and
transfer or documentary stamps.” Pa. R. Civ. P. 3136(c). The cost of title insurance, according to
Thornton, falls outside the scope of costs authorized by Rule 3136 and was thus improperly
deducted from the unused proceeds. Thornton urges the Court to follow Fulton Nat’l Bank of
Lancaster v. Haygood, 65 Pa. D. & C. 2d 120 (Pa. Ct. Comm. Pl. 1973), which found that Rule
3136(c) “neither expressly nor impliedly authorize[s] the sheriff to tax as costs the premium on a
distribution policy of insurance.” Id. at 121.
Thornton’s reliance on Haygood is misplaced.2 The plaintiff in Haygood did not pursue a
procedural a due process claim. Instead, the Haygood plaintiff successfully had the cost of title
insurance “stricken as an item of costs” by taking exception to the Schedule of Distribution.
Haygood, therefore, illustrates that Pennsylvania law affords adequate process for an individual

2

The Court notes that Haygood, a forty-year-old case from the Lancaster County Court of
Common Pleas, is not binding on this Court. Because Haygood is the sole case supporting
Thornton’s claim, the Court doubts Thornton can assert a legitimate claim of entitlement to the
proceeds used for the policy. In any event, for purposes of deciding this motion, the Court
assumes Thornton’s legitimate claim of entitlement in these proceeds to conclude the process
afforded and available to her is sufficient.
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to challenge a schedule of distribution and be relieved of any error in the distribution. See also
Pa. R. Civ. P. 3136 (providing procedures for an individual to take exception to a schedule of
distribution). Indeed, the Commonwealth Court of Pennsylvania, in In re Sheriff’s Excess
Proceeds Litigation, reinforced that Pennsylvania Law provides an adequate remedy to correct a
procedural defect in the distribution of unused proceeds from a sheriff’s sale. In that case, the
owners of properties sold at a sheriff’s sale brought a class action complaint against the sheriff’s
office for failure to distribute excess proceeds after tax liens were paid. Addressing whether
pursuing a class action was an appropriate remedy, where statutory remedies are available, the
court assessed the distribution procedure itself, finding the plaintiffs had remedies available
pursuant to Rule 3136 to challenge the distribution of unused proceeds that would “afford the
putative class members full relief.” In re Sheriff’s Excess Proceeds Litig., 98 A.3d at 730.
Moreover, the court agreed with the sheriff’s office that the plaintiffs “could allege procedural
defects in their [Rule] 3136 proceedings.” Id. As in In re Sheriff’s Excess Proceeds Litigation,
Thornton has “not established that [Rule] 3136 . . . [is] inadequate” to afford her relief from any
error in the distribution of unused funds. Because the Court agrees that Pennsylvania law affords
Thornton adequate process to challenge the distribution of proceeds, including challenging the
Sheriff’s use of $1,317.50 from the sale proceeds to pay for a title insurance policy, the Court
finds she was not deprived procedural due process.
Moreover, to the extent that Thornton does not receive the relief she desires from
objecting to, pursuant to Rule 3136, the Sheriff’s use of the sale proceeds to pay for title
insurance, she may appeal such a determination.3 Decisions by the Sheriff’s Office are governed

3

In her appeal, Thornton could likewise challenge the Sheriff’s amendment of the Proposed
Schedule of Distribution and the determination she was not entitled to the original calculation of
unused proceeds.
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by Pennsylvania Local Agency Law,4 see Grabfelder v. Cty. of Montgomery, 690 A.2d 1308,
1310 (Pa. Commw. Ct. 1997), which provides appellate rights to those seeking review of an
agency determination:
Any person aggrieved by an adjudication of a local agency who has a direct
interest in such adjudication shall have the right to appeal therefrom to the court
vested with jurisdiction of such appeals by or pursuant to Title 42 (relating to
judiciary and judicial procedure).
2 Pa. Cons. Stat. § 752; see id. § 101 (defining “adjudication” as “[a]ny final order, decree,
decision, determination or ruling by an agency affecting personal or property rights, privileges,
immunities, duties, liabilities or obligations of any or all of the parties to the proceeding in which
the adjudication is made” (emphasis added)). For those seeking to challenge an agency decision,
§ 752 provides “sufficient process to protect . . . property rights.” McDaniels v. Flick, 59 F.3d
446, 461 (3d Cir. 1995); see Gulick v. City of Pittston, No. 12-141, 2012 WL 2154178, at *3
(M.D. Pa. June 13, 2012) (finding § 752 provided adequate process to challenge agency
determination and that plaintiff could not maintain procedural due process claim absent
allegations that process was defective, such as the appeal “was decided by a biased
decisionmaker,” or the § 752 process “is unavailable or patently inadequate”).
Here, Thornton does not allege that her appellate rights under § 752 are unavailable,
defective, or inadequate; indeed, she has not yet availed herself of her rights under § 752. This is
reason enough to deny her procedural due process claim. A due process violation “is not
complete when the deprivation occurs; it is not complete unless and until the State fails to
provide due process.” Alvin v. Suzuki, 227 F.3d 107, 116 (3d Cir. 2000). More than merely allege
a deprivation of a protected interest, Thornton, to state a due process claim, must “take[]

4

Under Pennsylvania law, a “local agency” is a “[a] government agency other than a
Commonwealth agency.” 2 Pa. Cons. Stat. § 101.
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advantage of the processes that are available to . . . her, unless those processes are unavailable or
patently inadequate.” Id. There can be no due process violation, therefore, when the state “has
made procedural protection available and the plaintiff has simply refused to avail” herself to
them. Id.
Notwithstanding the availability of sufficient process, Thornton has failed to avail herself
of it to challenge the Sheriff’s use of the sale proceeds to pay for a title insurance policy.
Thornton cannot “skip that process and use the federal courts as a means to get back what [she]
wants,” id., and, until she does utilize the process available to her, any procedural due process
claim will remain meritless. Because Thornton may yet avail herself of this process, and suffer
some defect therein, the Court will dismiss her procedural due process claim without prejudice.5
Thornton’s remaining state-law claims are likewise dismissed without prejudice. See
Bright v. Westmoreland Cty., 443 F.3d 276, 286 (3d Cir. 2006) (“[W]here the claim over which
the district court has original jurisdiction is dismissed before trial, the district court must decline
to decide the pendent state claims unless considerations of judicial economy, convenience, and
fairness to the parties provide an affirmative justification for doing so.” (alteration in original));
Ward v. Pennsylvania, No.14-17, 2014 WL 4682067, at *7 (E.D. Pa. Sept. 22, 2014) (dismissing
federal claim without prejudice and thus declining to exercise supplemental jurisdiction over
plaintiff’s state law claims and dismissing those claims without prejudice); Pen-Del Mortg.
Assocs. v. F.D.I.C., No. 94-67, 1995 WL 27516, at *1 (E.D. Pa. Jan. 20, 1995) (“The Courts in

5

As Defendants concede, Thornton “had and still has every opportunity to assert her claim
through a local agency appeal.” Defs.’ Reply 4; see also Defs.’ Mot. 7 (“[I]f Plaintiff is
dissatisfied with the distribution made to her by the Sheriff, she has the power of judicial
enforcement available to her under Pennsylvania law.”); id. at 9-10 (arguing “Plaintiff has every
right to take exception to . . . any . . . cost paid for by the proceeds from the sheriff sale” and “has
available to her appellate rights pursuant to local agency law”).
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this district ordinarily decline to exercise supplemental jurisdiction over state law claims when
the federal claims are dismissed.” (internal quotations omitted)).
An appropriate Order follows.

BY THE COURT:

/s/ Juan R. Sánchez .
Juan R. Sánchez, J.

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