Johnson v. Phelan Hallinan & Schmieg (majority)Annotate this Case
In 2002, Edella and Eric Johnson executed a $74,000 mortgage and associated promissory note, secured by property in Pittsburgh. The instrument was recorded and later assigned to the Bank of New York Mellon Trust Company (“Mellon”). Six years later, the Johnsons defaulted on their mortgage. In March 2009, Mellon, through its debt-collection counsel Phelan Hallinan & Schmieg, LLP (“Phelan”), filed a complaint in mortgage foreclosure. In that complaint, Phelan included a claim for attorneys’ fees of $1,300. Following a non-jury trial, the court entered judgment for Mellon. In March 2012, while the underlying mortgage foreclosure case was still ongoing, the Johnsons filed the instant class action against Phelan. When the Pennsylvania Loan Interest and Protection Law ("Act 6") was enacted in 1974, a “residential mortgage” was defined as “an obligation to pay a sum of money in an original bona fide principal amount of fifty thousand dollars ($50,000) or less.” In 2008, however, the General Assembly amended Act 6’s definition of a “residential mortgage” to increase the principal-amount ceiling to $217,873 - a base figure that automatically was adjusted for inflation annually. This appeal centered on whether that increased principal-amount ceiling should apply to mortgages that were executed before the 2008 amendment to Act 6. Specifically, the question presented was whether the $74,000 mortgage the Johnsons executed should have been considered a "residential mortgage" under Act 6, given that when Appellants' lender initiated foreclosure proceedings in 2009, the increased principal-amount ceiling had gone into effect. Because the Pennsylvania Supreme Court concluded that nothing in the 2008 legislation amending Act 6 demonstrated that the revised figure should have applied retroactively, the Supreme Court affirmed the Superior Court's order.