NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0582-16T4
CAPITAL ONE, N.A.,
Plaintiff-Respondent, APPROVED FOR PUBLICATION v. June 18, 2018
JAMES I. PECK, IV, APPELLATE DIVISION
Defendant-Appellant. ___________________________
Argued April 25, 2018 – Decided June 18, 2018
Before Judges Fuentes, Koblitz, and Manahan.
On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-005201-13.
Nicolas A. Stratton argued the cause for appellant (Stratton Stepp, LLP, attorneys; Nicolas A. Stratton, on the brief).
Danielle Weslock argued the cause for respondent (McCarter & English, LLP, attorneys; Joseph Lubertazzi, Jr., of counsel and on the brief; Danielle Weslock, on the brief).
The opinion of the court was delivered by
KOBLITZ, J.A.D. In this appeal of an August 26, 2016 final residential
foreclosure judgment, defendant James I. Peck, IV1 contends that,
after the promissory note, without the mortgage, was sold to
Freddie Mac, and Capital One, N.A. (CONA) became the loan servicer
on behalf of Freddie Mac, CONA could not foreclose on his home
because it did not possess the note and a valid assignment of
mortgage at the time it filed the complaint. He argues that only
Freddie Mac had standing to foreclose. Although we agree that in
these unusual circumstances where one entity owns the note and
another the mortgage, both the note and a valid mortgage assignment
are required to foreclose, we affirm in spite of certain
irregularities.
Freddie Mac's form 10-K annual report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 provides the
following information. The Federal Home Loan Mortgage
Corporation, known as Freddie Mac, is a government sponsored
enterprise (GSE) chartered by Congress in 1970. Its public mission
is to provide liquidity, stability and affordability to the United
States housing market. It does this primarily by purchasing
residential mortgage loans originated by lenders. It does not
1 Peck, who litigated this matter as a pro se attorney, died on July 2, 2016. We continue to refer to defendant as the party in interest in this opinion.
2 A-0582-16T4 originate loans or lend money directly to mortgage borrowers.
United States Securities and Exchange Commission, Form 10-K,
"Federal Home Loan Mortgage Corporation,"
https://www.sec.gov/Archives/edgar/data/1026214/0001026214180000
20/a20174q10k.htm (last visited May 29, 2018).
On March 10, 2005, defendant executed a promissory note to
Chevy Chase Bank, F.S.B., (CCB) which was secured by a residential
mortgage by Mortgage Electronic Registration Systems, Inc. (MERS),
for $258,750.2 On July 28, 2005, CCB sold defendant's note to
Freddie Mac, but retained the mortgage. In July 2009, CCB
converted to a national bank and merged with CONA. Defendant
defaulted on the loan in 2010, and did not pay the mortgage or
taxes after that date. The original mortgage states: "MERS is a
separate corporation that is acting solely as a nominee for
[l]ender and [l]ender's successors and assigns." MERS, which also
states in the "Assignment of Mortgage" that it is "acting solely
as nominee for [CCB], its successors and assigns," assigned the
2 "MERS is a private corporation which administers a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. . . . MERS, as nominee, does not have any real interest in the underlying debt, or the mortgage which secured that debt. It acts simply as an agent or 'straw man' for the lender." Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 332, 347 (Ch. Div. 2010).
3 A-0582-16T4 mortgage to CONA on February 9, 2011, more than one year after CCB
merged into CONA.
At least since July 15, 2009, defendant received repeated
notices that identified CONA as the servicer on the loan, although
Freddie Mac remained the investor. Defendant also conceded that
he made payments to CONA. In June 2012, the court dismissed
without prejudice an earlier foreclosure proceeding initiated by
CONA, F-003445-11, because CONA failed to comply with the court-
ordered deposition of an employee who could provide information
about possible mortgage irregularities. CONA brought the original
note to court in that proceeding. The note was subsequently
returned to Freddie Mac later in 2012.
On February 15, 2013, CONA initiated the present foreclosure
proceedings. The court dismissed the contesting answer on June
9, 2015, and referred the case to the Office of Foreclosure for
entry of final judgment as uncontested. R. 4:64-1. Defendant's
motion for reconsideration was denied on May 5, 2016 and his
subsequent motion for summary judgment was denied on November 25,
2016, after defendant's death.3 Defendant appeals from the entry
of final judgment arguing that CONA lacked standing to foreclose.
3 Defendant apparently filed this final motion shortly before he died. 4 A-0582-16T4 Our review is de novo, applying the same legal standard as
the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017).
Summary judgment must be granted "if the pleadings, depositions,
answers to interrogatories and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact challenged and that the moving party is entitled
to a judgment or order as a matter of law." Templo Fuente De Vida
Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, 224 N.J. 189, 199
(2016) (quoting R. 4:46-2(c)). If all the contesting pleadings
have been stricken or otherwise deemed noncontesting, an action
to foreclose a mortgage is deemed uncontested. R. 4:64-1(c)(3).
Defendant argues that because "Freddie Mac is the owner of
[d]efendant's loan," it "is the only entity with the right to
enforce the mortgage." He further argues that in order to validly
assign a mortgage, the "assignment must contain evidence of the
intent to transfer one's rights." (quoting K. Woodmere Assocs.,
LP v. Menk Corp., 316 N.J. Super. 306, 314 (App. Div. 1998)).
The court found that the material facts in controversy
involved standing, and were limited to possession of the original
note, endorsement of the note, the transfer of the note from CCB
to Freddie Mac, and CONA's right to enforce the note. The trial
court concluded, "[I]t's clear . . . that a bearer of the note
endorsed in blank is the holder of the note [] and entitled to
5 A-0582-16T4 enforce the note pursuant to N.J.S.A. 12A:3-301."
Unquestionably, CONA had possession of the original note during
the earlier foreclosure hearing in 2012.
In Mitchell, we held that a plaintiff may establish standing
either through possession of the note or as an assignee under
N.J.S.A. 46:9-9 "if it . . . presented an authenticated assignment
indicating that it was assigned the note before it filed the
original complaint." Deutsche Bank Nat'l Trust Co. v. Mitchell,
422 N.J. Super. 214, 224 (App. Div. 2011). We emphasized this
holding in Deutsche Bank Tr. Co. Ams. v. Angeles, 428 N.J. Super.
315, 318 (App. Div. 2012). Thus, a plaintiff need not actually
possess the original note at the time of filing in order to have
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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0582-16T4
CAPITAL ONE, N.A.,
Plaintiff-Respondent, APPROVED FOR PUBLICATION v. June 18, 2018
JAMES I. PECK, IV, APPELLATE DIVISION
Defendant-Appellant. ___________________________
Argued April 25, 2018 – Decided June 18, 2018
Before Judges Fuentes, Koblitz, and Manahan.
On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-005201-13.
Nicolas A. Stratton argued the cause for appellant (Stratton Stepp, LLP, attorneys; Nicolas A. Stratton, on the brief).
Danielle Weslock argued the cause for respondent (McCarter & English, LLP, attorneys; Joseph Lubertazzi, Jr., of counsel and on the brief; Danielle Weslock, on the brief).
The opinion of the court was delivered by
KOBLITZ, J.A.D. In this appeal of an August 26, 2016 final residential
foreclosure judgment, defendant James I. Peck, IV1 contends that,
after the promissory note, without the mortgage, was sold to
Freddie Mac, and Capital One, N.A. (CONA) became the loan servicer
on behalf of Freddie Mac, CONA could not foreclose on his home
because it did not possess the note and a valid assignment of
mortgage at the time it filed the complaint. He argues that only
Freddie Mac had standing to foreclose. Although we agree that in
these unusual circumstances where one entity owns the note and
another the mortgage, both the note and a valid mortgage assignment
are required to foreclose, we affirm in spite of certain
irregularities.
Freddie Mac's form 10-K annual report pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 provides the
following information. The Federal Home Loan Mortgage
Corporation, known as Freddie Mac, is a government sponsored
enterprise (GSE) chartered by Congress in 1970. Its public mission
is to provide liquidity, stability and affordability to the United
States housing market. It does this primarily by purchasing
residential mortgage loans originated by lenders. It does not
1 Peck, who litigated this matter as a pro se attorney, died on July 2, 2016. We continue to refer to defendant as the party in interest in this opinion.
2 A-0582-16T4 originate loans or lend money directly to mortgage borrowers.
United States Securities and Exchange Commission, Form 10-K,
"Federal Home Loan Mortgage Corporation,"
https://www.sec.gov/Archives/edgar/data/1026214/0001026214180000
20/a20174q10k.htm (last visited May 29, 2018).
On March 10, 2005, defendant executed a promissory note to
Chevy Chase Bank, F.S.B., (CCB) which was secured by a residential
mortgage by Mortgage Electronic Registration Systems, Inc. (MERS),
for $258,750.2 On July 28, 2005, CCB sold defendant's note to
Freddie Mac, but retained the mortgage. In July 2009, CCB
converted to a national bank and merged with CONA. Defendant
defaulted on the loan in 2010, and did not pay the mortgage or
taxes after that date. The original mortgage states: "MERS is a
separate corporation that is acting solely as a nominee for
[l]ender and [l]ender's successors and assigns." MERS, which also
states in the "Assignment of Mortgage" that it is "acting solely
as nominee for [CCB], its successors and assigns," assigned the
2 "MERS is a private corporation which administers a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans. . . . MERS, as nominee, does not have any real interest in the underlying debt, or the mortgage which secured that debt. It acts simply as an agent or 'straw man' for the lender." Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 332, 347 (Ch. Div. 2010).
3 A-0582-16T4 mortgage to CONA on February 9, 2011, more than one year after CCB
merged into CONA.
At least since July 15, 2009, defendant received repeated
notices that identified CONA as the servicer on the loan, although
Freddie Mac remained the investor. Defendant also conceded that
he made payments to CONA. In June 2012, the court dismissed
without prejudice an earlier foreclosure proceeding initiated by
CONA, F-003445-11, because CONA failed to comply with the court-
ordered deposition of an employee who could provide information
about possible mortgage irregularities. CONA brought the original
note to court in that proceeding. The note was subsequently
returned to Freddie Mac later in 2012.
On February 15, 2013, CONA initiated the present foreclosure
proceedings. The court dismissed the contesting answer on June
9, 2015, and referred the case to the Office of Foreclosure for
entry of final judgment as uncontested. R. 4:64-1. Defendant's
motion for reconsideration was denied on May 5, 2016 and his
subsequent motion for summary judgment was denied on November 25,
2016, after defendant's death.3 Defendant appeals from the entry
of final judgment arguing that CONA lacked standing to foreclose.
3 Defendant apparently filed this final motion shortly before he died. 4 A-0582-16T4 Our review is de novo, applying the same legal standard as
the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017).
Summary judgment must be granted "if the pleadings, depositions,
answers to interrogatories and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact challenged and that the moving party is entitled
to a judgment or order as a matter of law." Templo Fuente De Vida
Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, 224 N.J. 189, 199
(2016) (quoting R. 4:46-2(c)). If all the contesting pleadings
have been stricken or otherwise deemed noncontesting, an action
to foreclose a mortgage is deemed uncontested. R. 4:64-1(c)(3).
Defendant argues that because "Freddie Mac is the owner of
[d]efendant's loan," it "is the only entity with the right to
enforce the mortgage." He further argues that in order to validly
assign a mortgage, the "assignment must contain evidence of the
intent to transfer one's rights." (quoting K. Woodmere Assocs.,
LP v. Menk Corp., 316 N.J. Super. 306, 314 (App. Div. 1998)).
The court found that the material facts in controversy
involved standing, and were limited to possession of the original
note, endorsement of the note, the transfer of the note from CCB
to Freddie Mac, and CONA's right to enforce the note. The trial
court concluded, "[I]t's clear . . . that a bearer of the note
endorsed in blank is the holder of the note [] and entitled to
5 A-0582-16T4 enforce the note pursuant to N.J.S.A. 12A:3-301."
Unquestionably, CONA had possession of the original note during
the earlier foreclosure hearing in 2012.
In Mitchell, we held that a plaintiff may establish standing
either through possession of the note or as an assignee under
N.J.S.A. 46:9-9 "if it . . . presented an authenticated assignment
indicating that it was assigned the note before it filed the
original complaint." Deutsche Bank Nat'l Trust Co. v. Mitchell,
422 N.J. Super. 214, 224 (App. Div. 2011). We emphasized this
holding in Deutsche Bank Tr. Co. Ams. v. Angeles, 428 N.J. Super.
315, 318 (App. Div. 2012). Thus, a plaintiff need not actually
possess the original note at the time of filing in order to have
standing to file a foreclosure complaint. Mitchell, 422 N.J.
Super. at 225.4
In both Mitchell and Angeles we dealt with the usual
foreclosure situation where one entity owns both the note and the
mortgage. As Judge William C. Todd, III said: "It is difficult
to imagine circumstances where one would want to hold a mortgage,
4 Effective February 18, 2016, three years after the commencement of this foreclosure action, a new statute required that "[o]nly the established holder of a mortgage shall take action to foreclose a mortgage." N.J.S.A. 46:18-13(1)(a). Thus to have standing to foreclose, as of the effective date of this statute, a plaintiff must have an original mortgage or recorded assignment, or be found to be the record mortgage holder in a civil action. N.J.S.A. 46:18-13(1)(b). 6 A-0582-16T4 without having the right to act on the underlying debt. By the
same token, there is no technical reason why the interests could
not be separated in one way or another." Raftogianis, 418 N.J.
Super. at 345. Here we have such a situation: where Freddie Mac
owns the note and CCB, now merged into CONA, retained the mortgage.
To preclude the possibility of one entity foreclosing on the home
while the other enforces the note, we now hold that when the note
is separated from the mortgage, the plaintiff in a foreclosure
action must demonstrate both possession of the note and a valid
mortgage assignment prior to filing the complaint.
Defendant concedes that Freddie Mac, as owner of the note,
had the right to foreclose on defendant's home. Defendant argues,
however, that the mortgage was not legally retained by CCB, but
followed the note by force of law. We reject that analysis. The
issue is whether CONA, both the successor owner and assignee of
the mortgage, and the loan servicer, had the right to foreclose.
"Foreclosures must normally be processed or litigated in the
[s]ervicer’s name." Freddie Mac, Bulletin Number 2013-22,
http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll13
22.pdf (October 18, 2013). Freddie Mac's requirement that the
servicer of the loan litigate a foreclosure in the servicer's name
supports CONA's assertion regarding its authority to bring a
foreclosure action.
7 A-0582-16T4 Standing is not a jurisdictional issue in New Jersey.
Deutsche Bank Nat'l Tr. Co. v. Russo, 429 N.J. Super. 91, 101
(App. Div. 2012). Depending on the equities of the particular
proceeding, a foreclosure judgment may not be reversed, even if
some irregularities in the foreclosure process are demonstrated
by the defendant. See Angeles, 428 N.J. Super. at 320 ("In
foreclosure matters, equity must be applied to plaintiffs as well
as defendants.").
Here, MERS as nominee for CCB and its "successors" did assign
the mortgage to CONA, a formality because CONA is a successor to
CCB. Thus, CONA had both the original note and an assignment
before filing this foreclosure complaint. The twist here is that
CONA returned the original note to Freddie Mac, and obtained the
assignment from MERS as nominee of CCB after CCB merged with CONA.
Given that defendant was provided more than sufficient notice
that CONA was the servicer for Freddie Mac, given that Freddie Mac
is a GSE that publicly declares its policy to foreclose through
its servicers, and given that CONA did possess the note at an
earlier foreclosure proceeding as well as an assignment from MERS,
we do not find the irregularities here sufficient to reverse the
foreclosure judgment. We do not intend by this decision to approve
the way this foreclosure was prosecuted. The note should have
8 A-0582-16T4 been in CONA's possession at the time it filed this foreclosure
complaint.
Affirmed.
9 A-0582-16T4