Execution Sales vs. Judicial Sales: Clarifying Rule 69(a) and 28 U.S.C. § 2001 in Federal Mortgage Foreclosure

1. Introduction

United States Bank N.A., as Trustee for holders of a commercial mortgage pass-through certificate, sued B R Penn Realty Owner L.P. in the Eastern District of Pennsylvania to foreclose on a defaulted $46 million loan secured by a Philadelphia apartment building. Although U.S. Bank titled its pleading a “complaint in mortgage foreclosure,” it also sought judgment on the underlying loan. After a bench trial, the District Court found Penn Realty in breach and entered a money judgment of roughly $51.4 million. U.S. Bank then pursued sale of the building under Pennsylvania’s execution rules. Penn Realty moved twice to quash the writ of execution and cancel the sale, arguing (1) the District Court should have followed federal judicial-sale statutes (28 U.S.C. § 2001 et seq.) rather than state execution procedure (Fed. R. Civ. P. 69(a)); (2) no court order under § 2001 directed this sale; and (3) service of process was defective. The District Court denied both motions; Penn Realty appealed. The Third Circuit affirms, holds that this was an execution sale under Rule 69(a) (bringing in Pennsylvania law), not a § 2001 judicial sale, and finds service proper under state rules.

2. Summary of the Judgment

The Third Circuit’s opinion, authored by Judge Ambro, establishes these key points:

Although labeled a mortgage‐foreclosure suit, U.S. Bank obtained only a money judgment by suing on the loan agreement rather than entering a separate in rem foreclosure decree.
The subsequent sale of the apartment building to satisfy that money judgment was an execution sale, not a judicial sale under federal statute.
Federal Rule of Civil Procedure 69(a) governs enforcement of money judgments by execution: it imports state law procedure where no federal statute directly applies.
Because no federal statute displaced Pennsylvania’s execution and notice rules, U.S. Bank complied fully with Rule 69(a) by following Pa. R. Civ. P. 3180–3182 (writ of execution) and 3129.1–3129.2 (notice of sale).
Penn Realty received constitutionally adequate notice; service on its counsel met Pa. R. Civ. P. 440(a)(1)(i), and no personal service on the mortgagor was required.
The Third Circuit therefore affirms the District Court’s denial of Penn Realty’s motion to quash the writ and confirms the sale’s validity.

3. Analysis

3.1 Precedents Cited

Beaver County Bldg. & Loan Ass’n v. Winowich (Pa. 1936): Recognized that judgment creditors may use execution sales to satisfy money judgments against debtors’ property.
Yazoo & M.V.R. Co. v. City of Clarksdale (257 U.S. 10, 1921): Distinguished execution sales (ministerial writs on praecipe) from judicial sales (court‐ordered, court‐confirmed) under federal statutes.
Branch Coal Corp. v. United States (3d Cir. 1968): Explained that federal statutory scheme (28 U.S.C. § 2001–07) applies only to judicial sales—those “under order or decree of” a federal court.
United States v. Petty Motor Co. (10th Cir. 1985): Held that a foreclosure ordered by court decree is a judicial sale to which § 2001 applies and Rule 69(a) does not.
Travelers Ins. Co. v. Lawrence (9th Cir. 1974): Took broad view that Rule 69(a) and § 2001 could both govern judicial sales, subject to state law if no conflict arises.

3.2 Legal Reasoning

The Court’s reasoning unfolds in three layers:

Nature of the Judgment. Although U.S. Bank styled its suit as a “mortgage foreclosure,” it simultaneously pled and litigated a breach‐of‐loan claim, attaching the promissory note and seeking a sum certain. Penn Realty never objected to this hybrid pleading form, waiving any limitation to pure in rem foreclosure. The District Court therefore entered a money judgment, not a foreclosure decree.
Type of Sale. To enforce a money judgment, the Bank filed a praecipe for a writ of execution. This process—writ issued by clerk, Marshal’s ministerial levy, public sale—characterizes an execution sale under Rule 69(a), not a court‐directed judicial sale under § 2001.
Applicable Procedure. Rule 69(a)(1) states that enforcement of a money judgment proceeds by execution “unless the court directs otherwise,” and that “the procedure on execution—and in proceedings supplementary to and in aid of judgment . . . must accord with the procedure of the state where the court is located.” No federal statute displaced Pennsylvania’s execution mechanics. Section 2001 et seq. governs only judicial sales—those expressly ordered by and confirmed by court decree—and thus does not apply here.

3.3 Impact

This decision brings long‐needed clarity to the interplay between federal and state procedure in foreclosure contexts:

It cements that execution sales to enforce money judgments adhere to Rule 69(a) + state-law execution rules; they are not subject to the federal judicial‐sale statutes (§ 2001–07).
It distinguishes execution sales from judicial sales under § 2001, which require court-ordered sale terms, appraisal thresholds, and confirmation hearings.
Practitioners now know that election of remedy in foreclosure litigation—money judgment + execution vs. in rem foreclosure decree + judicial sale—carries procedural consequences and notice requirements under distinct statutory regimes.
Lower courts across circuits will lean on this precedent to resolve similar procedural disputes, reducing forum shopping and split authority on Rule 69(a) vs. § 2001 applicability.

4. Complex Concepts Simplified

In Rem vs. In Personam. An in rem foreclosure decree acts directly on the property (the mortgage lien), followed by a court‐ordered sale. An in personam lawsuit on the loan contract yields a money judgment against the borrower, enforceable against any non-exempt property.
Money Judgment vs. Mortgage Decree. A money judgment fixes a sum certain owed by the borrower. A mortgage foreclosure decree also fixes a sum but operates solely on the mortgaged real estate.
Execution Sale. After a money judgment, the creditor files a praecipe for a writ of execution. The clerk issues the writ; the Marshal (or sheriff) levies on the debtor’s property; notice is given per state rules; the property is auctioned ministerially.
Judicial Sale (§ 2001). Initiated by a court’s sale order or decree, with terms, appraisal guidelines, notice and confirmation procedures set by 28 U.S.C. § 2001–07. The marshal’s role is supervisory, not merely ministerial.
Rule 69(a). Governs enforcement of federal money judgments: “A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure . . . must accord with the procedure of the state where the court is located.”

5. Conclusion

US Bank N.A. v. B R Penn Realty Owner L.P. establishes that:

When a lender obtains only a money judgment (despite suing in mortgage foreclosure), enforcement proceeds as an execution sale under Rule 69(a), not as a court‐ordered judicial sale under § 2001.
Rule 69(a) imports state execution procedure; federal judicial‐sale statutes apply exclusively to sales ordered and confirmed by a federal court decree.
Pennsylvania’s writ, service, and notice rules govern the mechanics of sale, ensuring due process if properly followed—here, they were.

This decision resolves a critical procedural puzzle for litigants and lower courts, underscoring the importance of remedy selection and clarifying the boundary between execution and judicial sales in federal mortgage‐foreclosure practice.