NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-4201-18T2
THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, AS TRUSTEE FOR THE CERTIFICATEHOLDERS OF THE CWABS, INC., ASSET- BACKED CERTIFICATES SERIES 2004-5,
Plaintiff-Respondent,
v.
DOLORES MARIE DICICCO,
Defendant-Appellant,
and
BOSCOV'S and NEW CENTURY FINANCIAL SERVICES INC.,
Defendants. _____________________________
Argued January 6, 2020 – Decided February 3, 2020
Before Judges Geiger and Natali. On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket No. F- 000714-16.
Lewis G. Adler argued the cause for appellant.
Robert F. Thomas argued the cause for respondent (Pluese, Becker & Saltzman, LLC, attorneys; Stuart H. West, on the brief).
PER CURIAM
In this foreclosure action, defendant Dolores Marie Dicicco appeals from
a July 27, 2016 order granting plaintiff Bank of New York summary judgment,
denying defendant's cross-motion for summary judgment, striking defendant's
answer, deeming the dispute an uncontested foreclosure, and transferring the
matter to the Office of Foreclosure for entry of final judgment. She also appeals
the May 30, 2019 final judgment of foreclosure and an April 12, 2019 order
vacating the court's administrative dismissal of the action and reinstating the
foreclosure complaint.
Defendant contends she had no financial obligations to plaintiff due to her
timely rescission of the loan in accordance with the Truth in Lending Act
(TILA), 15 U.S.C. §§ 1601 to 1667f. She also contends the court abused its
discretion when it reinstated the foreclosure complaint. We disagree and affirm
all three orders.
A-4201-18T2 2 I.
On or about April 21, 2004, defendant executed a six percent fixed rate
note in favor of Full Spectrum Lending, Inc. (Full Spectrum) in the amount of
$277,500, encumbering a residence in Southampton. As security for repayment,
defendant executed a mortgage in the same amount to Mortgage Electronic
Registration Systems, Inc. (MERS) as nominee for Full Spectrum. The
following day defendant sent an April 22, 2004 notice of right to cancel the note,
which she mailed to Full Spectrum. It is unclear from the record when Full
Spectrum received the notice, but it is undisputed that Full Spectrum failed to
unwind the transaction and proceeded to disburse the mortgage funds to
defendant. At closing, defendant used the proceeds to pay off a prior mortgage
in the amount of $226,357.33 and a tax bill in the amount of $1483.66. She also
received a cash payment of $38,457.91.
Defendant made timely monthly payments in accordance with the note for
approximately five years: from June 2004 until she defaulted in March 2009.
MERS, acting solely as nominee for Full Spectrum, assigned defendant's
mortgage to plaintiff on October 19, 2009. Plaintiff mailed defendant a June 11,
2015 notice of default and intent to foreclose stating that as a result of
A-4201-18T2 3 defendant's failure to make her monthly mortgage payments from March 2009
to June 2015, she owed $143,210.78 and was in default.
Plaintiff elected to accelerate the debt consistent with the note and filed a
January 8, 2016 foreclosure complaint. Plaintiff joined Boscov's and New
Century Financial Services, Inc. because of their interest in the foreclosure
arising out of their respective judgments and liens on the property.
Defendant filed an answer and counterclaims demanding judgment
dismissing plaintiff's foreclosure complaint. In her second affirmative defense,
defendant alleged that plaintiff "lack[ed] standing to prosecute the instant case"
because it, or its predecessor in interest, "failed to comply with TILA by failing
to honor . . . [d]efendant's written rescission notices as required by TILA . . .
and Regulation Z."1 More specifically, defendant stated that her "notice [of the
rescission] was sent prior to the disbursement of any funds on the loan" and
pursuant to TILA and Regulation Z, the mortgage and note "are deemed null and
void . . . [and] [d]efendant has no further obligation to pay for the funds. "
1 Defendant specifically referenced sections of Regulation Z that provides in relevant part that "[t]o exercise the right to rescind [under TILA], the consumer shall notify the creditor of the rescission by mail, telegram, or other means of written communication." 12 C.F.R. § 1026.15(a)(2); 12 C.F.R. § 1026.23(a)(2).
A-4201-18T2 4 Plaintiff moved for summary judgment, and to strike defendant's answer
and counterclaims. Defendant filed a cross-motion for summary judgment
arguing that plaintiff's foreclosure complaint should be dismissed as a matter of
law because "there does not exist a valid mortgage on the premises as the
transaction was canceled in accordance with TILA and Regulation Z." Relying
on 15 U.S.C. § 1635(b) and Jesinoski v. Countrywide Home Loans, 574 U.S.
259 (2015), defendant argued that Full Spectrum "failed to act within [twenty]
calendar days after [her] tender of the notice of rescission," and thus, she "may
keep the proceeds without any further obligation," as the "loan is void."
At a July 22, 2016 summary judgment hearing, defendant's counsel
explained defendant's five years of timely mortgage payments as acts undertaken
simply to "preserve the status quo" and because defendant "was trying to
preserve her position concerning her loan so that when [Full Spectrum] did
unwind it she would not be behind." Defendant's counsel concluded that "any
payments that she made were . . . at best . . . received as a gift by [Full Spectrum]
. . . and [defendant] has no further obligation."
Plaintiff acknowledged at the summary judgment hearing that it "doesn't
dispute the fact that a valid notice of rescission was sent [by defendant to Full
Spectrum]" and agreed that Full Spectrum received defendant's notice to cancel
A-4201-18T2 5 yet still tendered the mortgage funds to her. Plaintiff also acknowledged that,
under the statute, defendant "was not obligated to return the cash that she
received . . . immediately, because . . . [she was] not obligated to return those
funds until . . . [Full Spectrum] acted."
In a July 27, 2016 order, Judge Paula T. Dow granted summary judgment
in favor of plaintiff and denied defendant's cross-motion. Judge Dow also
entered default against defendant and transferred the matter to the Office of
Foreclosure to proceed as an uncontested matter.
In her accompanying written statement of reasons, Judge Dow found that
plaintiff had possession of the note and mortgage prior to the filing of th e
foreclosure complaint and thus had standing to prosecute the foreclosure action.
Specifically, the court found that the original note and mortgage were "executed
and delivered to Full Spectrum and MERS, as nominee for Full Spectrum, and
ultimately transferred to [p]laintiff by way of assignment, who possessed both
at the time it filed the complaint." Judge Dow concluded that plaintiff
established standing "as an assignee of the [m]ortgage by assignment and
possession of the [n]ote, endorsed in blank, prior to the filing of the complaint."
Judge Dow also found that plaintiff established a prima facie right to
foreclose the property because: "[d]efendant executed the [m]ortgage and
A-4201-18T2 6 [n]ote"; "[p]laintiff is the current holder of the [m]ortgage and [n]ote";
"[p]laintiff has been in such possession since before the commencement of the
current foreclosure action"; "[d]efendant was properly served with a [notice of
intent to foreclose]"; and "[d]efendant defaulted under the terms of the [n]ote
and [m]ortgage on March 1, 2009."
The court further noted that "[t]he only issue of any significant
disagreement is the parties' competing interpretations of [TILA] and the effect
on [d]efendant's [n]otice to [c]ancel on April 22, 2004" and whether "TILA
serves as a bar to foreclosure under these circumstances." Judge Dow first
rejected plaintiff's arguments that defendant's claims under TILA were time
barred by 15 U.S.C. § 1640(e), as "defendant was entitled to raise violations of
TILA as a defense in the present foreclosure action," and 15 U.S.C. § 1635(f),
which she interpreted as merely "extending the typical [three]-day right of
rescission to three years in the event that required information and forms are not
delivered to the borrower."
Judge Dow found that defendant's April 22, 2004 notice to rescind "[did]
not serve as a bar to foreclosure under . . . TILA, given [d]efendant's subsequent
and consistent ratification of the terms of the loan." She emphasized that
following the erroneous distribution by Full Spectrum, defendant "chose to keep
A-4201-18T2 7 the funds and make timely payments for five years." She found that defendant
"considered the [m]ortgage and [n]ote enforceable, as it [was] unlikely
[defendant] would continue sending monthly payments to a creditor she believed
nothing was owed." The court also declined to unjustly enrich defendant stating
that to escape foreclosure on these facts would "render the proceeds of the
[m]ortgage a windfall to [d]efendant, who would be free of any obligation under
the [n]ote" and plaintiff "would be left without recourse to pursue the amount
loaned by their predecessor."
The court also found that defendant's reliance on Jesinoski was misplaced.
According to Judge Dow, Jesinoski "held that TILA does not require the filing
of a suit or return of the funds to effectuate rescission," but here, "there [was]
no question that [d]efendant timely and properly rescinded the loan." The court
clarified that the issue was not whether defendant's rescission was timely, but
whether defendant "ratified the terms of the loan by commencing payment and
continuing to so pay for five years."
Despite the court's July 27, 2016 order, plaintiff did not promptly move
for final judgment and, on September 1, 2017, the action was administratively
dismissed without prejudice for lack of prosecution. Plaintiff moved to reinstate
the foreclosure action on March 18, 2019, which defendant opposed. Judge
A-4201-18T2 8 Kathi F. Fiamingo granted plaintiff's motion in an April 12, 2019 order and in
an accompanying written statement of reasons acknowledged that plaintiff "had
a significant and unexplained delay in moving this matter forward," but reasoned
that "defendant's default occurred more than ten years ago and plaintiff is now
in a position to make application for final judgment." Judge Fiamingo
concluded that "[d]enying plaintiff the relief it requests would be inequitable
under [the] circumstances." The Office of Foreclosure subsequently entered
final judgment on May 30, 2019 in the amount of $445,554.90, plus interest and
costs. This appeal followed.
II.
Our review of a ruling on summary judgment is de novo, applying the
same legal standard as the trial court. Townsend v. Pierre, 221 N.J. 36, 59
(2015). "Summary judgment must be granted if 'the pleadings, depositions,
answers to interrogatories and admissions on file, together with the affidavits, if
any, show there is no genuine issue as to any material fact challenged and that
the moving party is entitled to a judgment . . . as a matter of law.'" Town of
Kearny v. Brandt, 214 N.J. 76, 91 (2013) (quoting R. 4:46-2(c)). We accord no
special deference to the trial judge's conclusions on issues of law. Nicholas v.
Mynster, 213 N.J. 463, 478 (2013).
A-4201-18T2 9 "The only material issues in a foreclosure proceeding are the validity of
the mortgage, the amount of the indebtedness, and the right of the mortgagee to
resort to the mortgaged premises." Great Falls Bank v. Pardo, 263 N.J. Super.
388, 394 (Ch. Div. 1993), aff'd, 273 N.J. Super. 542 (App. Div. 1994). A party
seeking to foreclose must demonstrate "execution, recording, and non-payment
of the mortgage." Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div.
1952).
In addition, the foreclosing party must "own or control the underlying
debt." Deutsche Bank Nat'l Tr. Co. v. Mitchell, 422 N.J. Super. 214, 222 (App.
Div. 2011) (quoting Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597
(App. Div. 2011)). In Mitchell, we held that possession of the note or an
assignment of the mortgage predating the original complaint conferred standing.
Id. at 225. We agree with Judge Dow that plaintiff had standing and also
established a prima facie case to foreclose, rulings defendant does not challenge
on appeal.
III.
TILA permits consumers to rescind specified loans upon timely
notification. 15 U.S.C. § 1635(a). Upon receipt of a rescission notice that
complies with applicable regulations, a creditor must, within twenty days,
A-4201-18T2 10 "return to the obligor any money or property given as earnest money,
downpayment, or otherwise, and shall take any action necessary or appropriate
to reflect the termination of any security interest created under the transaction."
Id. at § 1635(b).
In her principal argument on appeal, defendant contends that the trial court
"improperly held that the void mortgage was enforceable after all parties
acknowledge that . . . [d]efendant had properly cancelled the loan." Specifically,
defendant maintains that the aforementioned TILA provision, and its applicable
regulations, along with the Jesinoski and Sherzer holdings, support a conclusion
that "upon rescission the loan was void," and she was "required to tender back
the loan proceeds . . . only after [Full Spectrum] performed its statutory
obligations." The consequence of Full Spectrum's inaction according to
defendant is that she is permitted to "keep the proceeds without any further
obligation." We disagree and affirm substantially for the reasons detailed in
Judge Dow's thoughtful written decision. We offer the following additional
comments.
As Judge Dow correctly concluded, and despite defendant's contentions,
the holding in Jesinoski is inapplicable to the facts here. In Jesinoski, the
Supreme Court resolved whether a borrower properly invoked his right to
A-4201-18T2 11 rescind under TILA by merely providing written notice or whether TILA
required a borrower to sue the lender before the three-year statute of limitations
period lapsed. Jesinoski, 574 U.S. at 259 ("The question presented is whether a
borrower exercises this right by providing written notice to his lender, or
whether he must also file a lawsuit before the [three]-year period elapses.").2
Judge Dow did not conclude that defendant's rescission was ineffective for her
failure to file a timely lawsuit seeking rescission. Rather, defendant's rescission
was deemed ineffective due to the undisputed fact that defendant ratified the
loan by obtaining its benefits, making timely payments thereafter for five years,
and failing to tender the loan proceeds. Jesinoski does not stand for the
proposition seemingly urged by defendant that a creditor under these
circumstances loses all interest in the property resulting in the borrower getting
a free house.
2 We also note that in proceedings conducted upon remand from the Supreme Court, the United States District Court for the District of Minnesota explained that the Supreme Court only reached "the narrow issue of whether [debtors] had to file a lawsuit to enforce a rescission" or "merely deliver a rescission notice within three years of the loan transaction," and "nothing in the Supreme Court's opinion . . . would override TILA's tender requirement." See Jesinoski v. Countrywide Home Loans, Inc., 196 F.Supp.3d 956, 962 (D. Minn. 2016), aff'd, Jesinoski v. Countrywide Home Loans, Inc., 883 F.3d 1010 (8th Cir. Feb. 28, 2018). A-4201-18T2 12 In this regard, TILA also explicitly states that if a "creditor does not take
possession of the property within [twenty] days after tender by the obligor,
ownership of the property vests in the obligor without obligation on his [or her]
part to pay for it." 15 U.S.C. § 1635(b). Here, defendant did not ever tender the
residence or the proceeds of the loan back to Full Spectrum or plaintiff following
the notice of rescission.
Additionally, Jesinoski did not overturn Third Circuit precedent that "a
notice of rescission is not effective if the obligor lacks either the intention or the
ability to perform, i.e., repay the loan." Sherzer v. Homestar Mortg. Servs., 707
F.3d 255, 265 n.7 (3d Cir. 2013). And Jesinoski also did not remove a court's
discretion to modify rescission procedures. See 15 U.S.C. § 1635(b) (stating
that the rescission "procedures prescribed by this subsection shall apply except
when otherwise ordered by a court"); see also 12 C.F.R. 226.23(d)(4) (stating
that the rescission "procedures outlined in paragraphs (d)(2) and (3) of [§
226.23] may be modified by court order").
It is beyond peradventure that defendant had no intention to repay the loan
as she clearly performed in accordance with its terms for years and used its funds
to pay off a prior mortgage, other debts, and also retained $38,457.91 of the
mortgage proceeds. Under these circumstances, the court properly rejected
A-4201-18T2 13 defendant's interpretation of TILA and Jesinoski and determined that defendant's
notice to rescind did not act as a bar to the foreclosure proceedings.
We also conclude that to allow defendant to void the mortgage and escape
foreclosure would lead to her unjust enrichment. "The doctrine of unjust
enrichment rests on the equitable principle that a person shall not be allowed to
enrich himself unjustly at the expense of another." Goldsmith v. Camden Cty.
Surrogate's Office, 408 N.J. Super. 376, 382 (App. Div. 2009) (internal
quotation marks omitted). "To establish a claim for unjust enrichment, 'a [party]
must show both that [the opposing party] received a benefit and that retention
of that benefit without payment would be unjust.'" Iliadis v. Wal-Mart Stores,
Inc., 191 N.J. 88, 110 (2007) (quoting VRG Corp. v. GKN Realty Corp., 135
N.J. 539, 554 (1994)).
Defendant used the disbursed funds to pay off a mortgage, pay outstanding
taxes, and received a $38,457.91 cash payment. She acted in compliance with
the mortgage and note for five years and raised her claim that she rescinded the
mortgage only after facing foreclosure due to her now decade-old, undisputed
default. As we noted in Deutsche Bank Trust Co. Americas v. Angeles, 428 N.J.
Super 315, 320 (App. Div. 2012), "[i]n foreclosure matters, equity must be
applied to plaintiffs as well as defendants."
A-4201-18T2 14 IV.
Defendant's final claim that the court erred in reinstating the complaint is
also without merit. "[A]n application to open, vacate, or otherwise set aside a
foreclosure judgment or proceeding subsequent thereto is subject to an abuse of
discretion standard." United States ex rel. U.S. Dep't of Agric. v. Scurry, 193
N.J. 492, 502 (2008). An "abuse of discretion only arises on demonstration of
'manifest error or injustice,'" Hisenaj v. Kuehner, 194 N.J. 6, 20 (2008) (quoting
State v. Torres, 183 N.J. 554, 572 (2005)), and occurs when the trial judge's
"'decision [was] made without a rational explanation, inexplicably departed
from established policies, or rested on an impermissible basis.'" Scurry, 193
N.J. at 504 (quoting Flagg v. Essex Cty. Prosecutor, 171 N.J. 561, 571 (2002)).
In accordance with Rule 4:64-8, the administrative dismissal for lack of
prosecution was without prejudice. Reinstatement is permitted "only on motion
for good cause shown." R. 4:64-8. Rule 4:64-8 "follows [Rule] 1:13-7."
Pressler & Verniero, Current N.J. Court Rules, cmt. on R. 4:64-8 (2020).
Similar to the analysis under Rule 1:13-7, "reinstatement is ordinarily routinely
and freely granted when plaintiff has cured the problem that led to the dismissal
even if the application is made many months later." Ghandi v. Cespedes, 390
N.J. Super. 193, 196 (App. Div. 2007) (internal quotation omitted). "[A]bsent
A-4201-18T2 15 a finding of fault by the plaintiff and prejudice to the defendant, a motion to
restore under the rule should be viewed with great liberality." Id. at 197.
The court acknowledged that plaintiff "had a significant and unexplained
delay in moving this matter forward," but stated that "defendant's default
occurred more than ten years ago and plaintiff is now in a position to make
application for final judgment," and "[d]enying plaintiff the relief it requests
would be inequitable under these circumstances." The court did not abuse its
discretion in reinstating the complaint as defendant was not prejudiced by the
delay. Defendant had exclusive possession of the mortgaged premises during
the litigation without paying plaintiff as required under the note. Under the
circumstances, there was no principled reason for the court to deny plaintiff's
motion and require it to refile the complaint, re-serve Boscovs and New Century
Financial Services, Inc., and restart the foreclosure proceedings.
In sum, we conclude that the trial court properly determined that
defendant's timely notice to rescind under TILA was not a bar to foreclosure,
and the court did not abuse its discretion when it granted plaintiff's motion to
reinstate its complaint. To the extent we have not addressed any of defendant's
A-4201-18T2 16 arguments it is because we concluded they lacked sufficient merit to warrant
discussion in a written opinion. R. 2:11-3(e)(1)(E).4201-18
Affirmed.
A-4201-18T2 17