CAPITAL ONE, N.A. VS. LAURENCE FRANKLIN (F-006480-14, MONMOUTH COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: November 4, 2019
• Docket: A-0899-18T1
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-0899-18T1

CAPITAL ONE, N.A.,

Plaintiff-Respondent,

v.

LAURENCE FRANKLIN,

Defendant-Appellant,

and

MRS. FRANKLIN, unknown spouse of LAURENCE FRANKLIN, TRACY VILLAGE CONDOMINIUM ASSOCIATION, INC., RARITAN BAY FEDERAL CREDIT UNION, DISCOVERY BANK, STATE OF NEW JERSEY, and TD BANK, N.A.,

Defendants. _______________________________

Submitted October 21, 2019 – Decided November 4, 2019

Before Judges Sabatino and Geiger. On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. F- 006480-14.

Rubenstein Business Law, attorneys for appellant (David A. Rubenstein, on the brief).

Milstead & Associates, LLC, attorneys for respondent (Bernadette Irace, on the brief).

PER CURIAM

In this residential mortgage foreclosure action, defendant Laurence

Franklin appeals from a Chancery Division order denying his motion to vacate

the final judgment and stay the September 24, 2018 sheriff's sale.1 We affirm.

I.

The record reveals the following information. 2 On November 28, 2006,

defendant borrowed $700,400 from Chevy Chase Bank, F.S.B. and executed a

promissory note to evidence the loan. To secure the note, defendant executed a

mortgage affecting his residence in Clarksburg to Mortgage Electronic

Registration Systems, Inc. (MERS), as nominee for Chevy Chase Bank, F.S.B.

The mortgage was recorded on December 12, 2006.

1 In this opinion we refer to Laurence Franklin as "defendant." The other defendants have not participated in this appeal. 2 The table of contents, statement of facts, and table of other authorities sections of defendant's brief do not meet the requirements of Rule 2:6-2(a), (c). A-0899-18T1 2 In January 2012, defendant executed a loan modification agreement ,

which adjusted the unpaid principal balance to $975,444.83 and deferred

$560,366.89 of the principal balance.

On July 1, 2013, defendant defaulted on the loan and has failed to make

any payments since that date. Plaintiff Capital One, N.A. mailed a notice of

intent to foreclose to defendant by certified and regular mail on October 8, 2013.

The mortgage was assigned by MERS to plaintiff on February 3, 2014.

Plaintiff filed the complaint on February 21, 2014. The assignment was

recorded on March 6, 2014. On April 4, 2014, defendant filed a contesting

answer. He subsequently filed an amended answer.

On May 9, 2014, plaintiff moved for summary judgment. On June 6,

2014, defendant moved for summary judgment. The motion judge granted

plaintiff's motion and denied defendant's motion. Defendant's amended answer

and affirmative defenses were stricken with prejudice and the matter was

returned to the Office of Foreclosure as an uncontested foreclosure. Defendant

moved for reconsideration. On August 8, 2014, the motion judge denied

reconsideration.

On October 24, 2014, defendant's motion to stay the foreclosure action

pending appeal was denied. In February 2015, plaintiff moved for entry of

A-0899-18T1 3 default judgment. Defendant did not oppose the application. A final judgment

of foreclosure and writ of execution, in the amount of $1,006,681.06, were

entered in favor of plaintiff on April 2, 2015. Defendant did not appeal from

the entry of judgment.

A sheriff's sale of the mortgaged premises was initially scheduled for

December 12, 2016. The sale was adjourned to January 23, 2017, as a result of

defendant utilizing his two statutory adjournments.

On January 23, 2017, defendant filed a Chapter 13 bankruptcy petition in

the United States Bankruptcy Court for the District of New Jersey. It was

dismissed by the Bankruptcy Court on April 10, 2017.

Plaintiff placed the foreclosure on hold from May 2017 to February 7,

2018, while it attempted to pursue loss mitigation options with defendant. When

those efforts proved unsuccessful, on January 2, 2018, plaintiff's Loss

Mitigation Department mailed defendant a notice of action taken advising

defendant it had denied his loan modification request. Plaintiff reactivated the

foreclosure action and obtained an alias writ of execution on February 14, 2018.

A sheriff's sale was then scheduled for April 16, 2018. The sale was

adjourned to May 14, 2018, as a result of defendant, again, utilizing his two

statutory adjournments. The sheriff's sale was then stayed as a result of

A-0899-18T1 4 defendant filing a second Chapter 13 bankruptcy petition on May 14, 2018. It

was dismissed by the Bankruptcy Court on August 22, 2018.

The sheriff's sale was rescheduled for September 24, 2018. Defendant

filed an emergent application to stay the sheriff's sale on September 17, 2018.

The stay application was denied by the motion judge that same day. The judge

further declared there shall be no further adjournments of the sheriff's sale. The

sale took place on September 24, 2018, with plaintiff the successful bidder.

Defendant then filed a motion to stay the sale and to vacate the final

judgment. Plaintiff opposed the motion, arguing, in part, that it was time barred

because it was not filed within a reasonable period after the entry of judgment

in April 2015.

The motion judge issued an oral decision denying the motion on

September 28, 2018. The judge made the following findings. Defendant did

not raise the issue of standing before the entry of judgment. "Lack of standing

is not a meritorious defense to a foreclosure when raised post judgment as a

basis to vacate the judgment." Pursuant to Rule 4:34-3, plaintiff is permitted to

continue with the foreclosure despite the transfer of its interest. Defendant did

not dispute that the prima facie requirements for foreclosure were met.

Defendant "could have and should have" raised any argument that plaintiff was

A-0899-18T1 5 not permitted to proceed with this foreclosure action "long ago, not in this post

judgment setting." The judgment was entered in 2015. The motion to vacate

the judgment was filed more than three years after it was entered. The judge

rejected defendant's argument that plaintiff violated 12 C.F.R. § 1024.41 (2019),

finding plaintiff advised defendant that his request for loan modification had

been denied by letter dated January 2, 2018. This appeal followed.

Defendant argues he is entitled to have the judgment and sheriff's sale

vacated because he established exceptional circumstances sufficient to require

relief pursuant to Rule 4:50-1(f). He contends plaintiff is barred from bringing

this action because it is a foreign entity not registered to conduct business in

New Jersey pursuant to N.J.S.A. 14A:13-11 and did not file a business activities

report pursuant to N.J.S.A. 14A:13-15. He also contends the sale must be

vacated because plaintiff was in violation of 12 C.F.R. § 1024.1(c), promulgated

by the Consumer Financial Protection Bureau pursuant 12 U.S.C. § 5512 (2018).

Finally, plaintiff contends plaintiff lacked standing to foreclose because the

assignment of the mortgage is invalid.

II.

This case proceeded to the second stage of the default process, entry of a

default judgment pursuant to Rule 4:43-2, before defendant sought relief from

A-0899-18T1 6 the order striking his answer and affirmative defenses. Therefore, defendant

must meet the standard of Rule 4:50-1. U.S. Bank Nat'l Ass'n v. Guillaume, 209

N.J. 449, 467 (2012).

Relief from judgment under Rule 4:50-1 "is not to be granted lightly."

Bank v. Kim, 361 N.J. Super. 331, 336 (App. Div. 2003). Moreover, "the

showing of a meritorious defense is a traditional element necessary for setting

aside both a default and a default judgment." Pressler & Verniero, Current N.J.

Court Rules, cmt. on R. 4:43-3 (2020). That is so because when a party has no

meritorious defense, "[t]he time of the courts, counsel and litigants should not

be taken up by such a futile proceeding." Guillaume, 209 N.J. at 469 (quoting

Schulwitz v. Shuster, 27 N.J. Super. 554, 561 (App. Div. 1953)).

Before the trial court and on appeal, defendant relied upon Rule 4:50-1(f),

"which permits courts to vacate judgments for 'any other reason justifying relief

from the operation of the judgment or order.'" Id. at 484 (quoting R. 4:50-1(f)).

Relief under the subsection (f) "is available only when 'truly exceptional

circumstances are present.'" Ibid. (quoting Hous. Auth. of Morristown v. Little,

135 N.J. 274, 286 (1994)). Subsection (f) "is limited to 'situations in which,

were it not applied, a grave injustice would occur.'" Ibid. (quoting Little, 135

N.J. at 289).

A-0899-18T1 7 "We review the trial court's decision for abuse of discretion." Deutsche

Bank Nat'l Trust Co. v. Russo, 429 N.J. Super. 98, 101 (App. Div. 2012) (citing

Guillaume, 209 N.J. at 467). "'The trial court's determination under the [Rule

4:50-1] warrants substantial deference,' and the abuse of discretion must be clear

to warrant reversal." Ibid. (quoting Guillaume, 209 N.J. at 467). A reviewing

court "finds an abuse of discretion when a decision is 'made without a rational

explanation, inexplicably departed from established policies, or rested on an

impermissible basis.'" Ibid. (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J.

88, 123 (2007)). On this record, we find no abuse in the trial court's decision.

III.

Defendant contends plaintiff was precluded from obtaining judgment and

proceeding to a sheriff's sale because it is a foreign bank and is not registered to

conduct business in New Jersey pursuant to N.J.S.A. 14A:13-11. We disagree.

Plaintiff was not the original lender. The Foreign Banks section under

Article 44 of The Banking Act of 1948, N.J.S.A. 17:9A-315 to -332, states in

pertinent part:

Nothing in this article shall prohibit a foreign bank from

....

A-0899-18T1 8 (2) contracting in this State with a banking institution to acquire, and acquiring in this State from such banking institution, a part interest in or the entire interest in any loan heretofore or hereafter made by such banking institution, together with a like interest in any security and any security instrument heretofore or hereafter given to such banking institution to secure or evidence such loan;

(3) enforcing in this State obligations heretofore or hereafter acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by paragraph (1) or (2) of this section;

(4) acquiring, holding, leasing, mortgaging, contracting with respect to, or otherwise protecting or conveying property in this State heretofore or hereafter assigned, transferred, mortgaged or conveyed to it as security for, or in whole or part satisfaction of a loan or loans made by it or obligations acquired by it in the transaction of business outside of this State, or in the transaction of any business authorized by paragraphs (1) or (2) of this section.

[N.J.S.A. 17:9A-331.]

Accordingly, plaintiff was not precluded from obtaining judgment and

proceeding to a sheriff's sale even though it was not registered to do business in

New Jersey pursuant to N.J.S.A. 14A:13-11.

Defendant further argues plaintiff is barred by N.J.S.A. 14A:13-20 from

bringing this foreclosure action because it failed to file a business activity report

in New Jersey pursuant to N.J.S.A. 14A:13-15. We disagree.

A-0899-18T1 9 Our Supreme Court addressed whether a foreign bank may maintain a

mortgage foreclosure action, notwithstanding its failure to comply with the

filing requirements of the Corporate Business Activities Reporting Act (the

Reporting Act), N.J.S.A. 14A:13-14 to -23, by not filing a notice of business

activities report as required by N.J.S.A. 14A:13-15. Am. Bank & Tr. Co. of Pa.

v. Lott, 99 N.J. 32, 33-34 (1985). The Court concluded that "[n]either the terms

of the Reporting Act nor its legislative history suggests that the Legislature

intended to include foreign banks within the definition of 'corporation' contained

in N.J.S.A. 14A:13-17(b)." Id. at 35. The Court also noted that "the Reporting

Act was designed to facilitate the collection of corporate taxes, an endeavor that

has no application to a foreign bank." Id. at 40.

The Court held "the Legislature did not intend the Reporting Act to apply

to foreign banks. Because the Reporting Act does not apply, the requirements

of that Act . . . are irrelevant to the determination whether [the foreign bank] can

maintain the [foreclosure] action." Id. at 34.3 Accordingly, plaintiff's alleged

failure to file a business activity report is not a bar to filing this foreclosure

action and obtaining judgment.

3 In reaching this decision, the Court expressly overruled Bank Leumi Trust Company v. Schneider, 188 N.J. Super. 423 (App. Div. 1982). Lott, 99 N.J. at 41. A-0899-18T1 10 Defendant also contends plaintiff is barred from moving forward with the

foreclosure because it did not meet the condition precedent imposed by 12

C.F.R. § 1024.41(c). We disagree.

The regulation provides that if a loan servicer receives a completed loss

mitigation application more than thirty-seven days before a foreclosure sale, the

servicer must, within thirty days, evaluate the borrower for all loss mitigations

options available and provide the borrower with written notice "stating the

servicer's determination." 12 C.F.R. § 1024.41(c)(1). Plaintiff received a

completed loss mitigation application from defendant on December 29, 2017.

Plaintiff gave defendant written notice that it could not offer him a loan

modification and provided the other information required by the regulation in

its letter dated January 2, 2018. By doing so, plaintiff timely satisfied the

condition precedent imposed by the regulation. Plaintiff did not undertake the

next step in the foreclosure, obtaining an alias writ of execution, until February

9, 2018. Accordingly, the motion judge correctly determined that plaintiff was

not precluded from moving forward with the foreclosure.

The motion judge determined that plaintiff had standing to initiate the

foreclosure since it owned or controlled the underlying debt when the complaint

A-0899-18T1 11 was filed, citing Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App.

Div. 2011). We agree.

In order to have standing, "a party seeking to foreclose a mortgage must

own or control the underlying debt." Ibid. (quoting Bank of N.Y. v. Raftogianis,

418 N.J. Super. 323, 327-28 (Ch. Div. 2010)). Without ownership or control of

the underlying debt, "the plaintiff lacks standing to proceed with the foreclosure

action and the complaint must be dismissed." Ibid. "The essential holding of

Raftogianis was that to establish standing to maintain a foreclosure action, a

plaintiff generally must have had ownership or control of the underlying debt as

of the date of the filing of the complaint." Id. at 597 n.1.

The record demonstrates that the note and mortgage were assigned by

MERS to plaintiff three weeks before the complaint was filed. Plaintiff owned

and controlled the note and mortgage at the time the complaint was filed, giving

it standing to initiate the foreclosure. The fact that the assignment was recorded

thirteen days after the complaint was filed did not affect plaintiff's standing. See

EMC Mortg. Corp. v. Chaudhri, 400 N.J. Super. 126, 141 (App. Div. 2008)

(noting that "[t]he fact that assignments of mortgages may be recorded does not

affect the validity of an assignment of a mortgage which has not been recorded")

(alteration in original) (citations omitted); 29 N.J. Practice, Law of Mortgages §

A-0899-18T1 12 11.3, at 762 (Myron C. Weinstein) (2001) (noting an assignment of mortgage is

effective even if not recorded). The motion judge correctly decided that plaintiff

had standing to initiate the foreclosure.

In any event, "standing is not a jurisdictional issue in our State court

system and, therefore, a foreclosure judgment obtained by a party that lacked

standing is not 'void' within the meaning of Rule 4:50-1(d)." Deutsche Bank

Nat'l Trust Co. v. Russo, 429 N.J. Super. 91, 101 (App. Div. 2012).

Defendant's remaining arguments lack sufficient merit to warrant

discussion in a written opinion. R. 2:11-3(e)(1)(E).

Based on our careful review of the record in light of the applicable

principles of law, we find no basis for relief from the final judgment or sheriff's

sale under Rule 4:50-1(f). Defendant has not met his burden of demonstrating

a meritorious defense, see Guillaume, 209 N.J. at 467, much less demonstrated

any exceptional circumstances or that a grave injustice will result if the final

judgment and sheriff's sale are not vacated. The denial of defendant's Rule 4:50-

1(f) motion was not an abuse of discretion.

Affirmed.

A-0899-18T1 13