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Paretti v. CitiMortgage


July 9, 2007


On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-1379-04.

Per curiam.


Argued: September 13, 2006

Before Judges Cuff, Fuentes and Messano.

In March 2003, plaintiffs Jeffrey and Paula Paretti refinanced their home. Contrary to governing statutes, plaintiffs received a discharge of mortgage from defendant CitiMortgage, Inc. (CitiMortgage) with instructions to file it immediately with the appropriate county clerk. Alleging that CitiMortgage's business practice regarding the discharge and cancellation of mortgages was contrary to the obligations imposed by statute on the mortgagee upon payment and satisfaction of a mortgage and that this practice violated the Consumer Fraud Act, plaintiffs filed a complaint on behalf of themselves and similarly situated persons*fn1 seeking damages, statutory fines, costs of suit and attorneys' fees. Plaintiffs appeal from the order granting summary judgment in favor of CitiMortgage and its subsidiary and agent, defendant Verdugo Trustee Service Co. (Verdugo).

We commence this opinion with a discussion of the statutory framework governing the conduct of mortgagees at the time of payment and satisfaction of a mortgage and mortgagors' remedies in the event of default. In 1975, the Legislature established procedures for cancellation of a mortgage after it had been redeemed, paid and satisfied. The legislation provided penalties for non-compliance. L. 1975, c. 137. In 1991, the statute was amended. L. 1991, c. 289. Relevant to this case, when a mortgage is redeemed, paid or satisfied and the mortgagee is a savings bank, a savings and loan association, a credit union, or other corporation in the business of making or purchasing mortgage loans, the mortgagee must "cause the mortgage to be submitted to the county recording officer for cancellation of record within 30 days of receipt of all fees which are required to be paid by the mortgagor." N.J.S.A. 46:18-11.2b(1)(a). Simultaneously, the mortgagee must send to the mortgagor or the mortgagor's agent a copy of the letter of transmittal requesting cancellation of the mortgage. N.J.S.A. 46:18-11.2b(1)(b). The mortgagee has the right to charge the mortgagor the appropriate filing fees, plus a service charge not to exceed $25.*fn2 N.J.S.A. 46:18-11.2b(2). The mortgagee must notify the mortgagor of the required fees and the mortgagee may collect the service fee at the time the mortgage is executed or at the time of redemption or satisfaction; the fee charged by the county clerk to cancel the mortgage is payable at the time the mortgage is redeemed, paid and satisfied. Ibid.

If the mortgagee fails to comply with N.J.S.A. 46:18-11.2b, the mortgagor may serve a notice of noncompliance and the mortgagee has fifteen days to cure the default. N.J.S.A. 46:18-11.3a(1). If the mortgagor does not comply within fifteen days of receipt of written notice, the mortgagee is subject to a fine of $50 per day. Ibid. The maximum fine may not exceed $1000. Ibid. This fine may be collected by a private citizen in accordance with N.J.S.A. 2A:58-11 (the Penalty Enforcement Law of 1999). N.J.S.A. 46:18-11.3b. In addition, if the mortgagee fails to apply to cancel the mortgage within the fifteen-day cure period, the mortgagor may recover the greater of the mortgagor's actual damages or the $1000 statutory fine, as well as costs of suit and attorneys' fees. N.J.S.A. 46:18-11.3c.

If a mortgagee fails to record the appropriate documents to discharge the mortgage within fifteen days of the notice of default and the mortgagor is required to commence a legal action to cancel the mortgage of record, the mortgagee is liable for the costs of that action, including attorneys' fees. N.J.S.A. 46:18-11.4. No attorneys' fees will be allowed unless written notice is provided to the mortgagee twenty days prior to commencement of the action to cancel the mortgage. Ibid.

In 1999, further amendments were adopted governing the cancellation of residential mortgages. A person entitled to receive payment of a residential mortgage "may execute a discharge, satisfaction-piece, [or] release" and the county clerk shall accept the document for recordation as long as the document indicates that the party executing the document has the authority to do so. N.J.S.A. 46:18-11.6a. A similar provision governs a party which owns or holds the mortgage through an unrecorded assignment. N.J.S.A. 46:18-11.6b. The 1999 amendments also authorize an alternative procedure to an action to cancel a mortgage that allows for recordation of a discharge or satisfaction of mortgage by an attorney or title agent. N.J.S.A. 46:18-11.7.

On March 27, 2003, plaintiffs executed a note and mortgage on their home in Gibbsboro, Camden County. The purpose of this transaction was to refinance the October 31, 1995 note and mortgage on their home in favor of Collective Bank and held by defendant CitiMortgage in March 2003. Three days prior to the closing date of this transaction, CitiMortgage faxed a payoff statement to the new lender. The $82,422.44 payoff amount consisted of the principle balance of $81,904.92, interest of $502.52 from March 1, 2003 to April 1, 2003, and a statement fee of $15. Plaintiffs were not charged a fee for the recordation of the mortgage discharge with the county clerk. The transaction was completed on March 27, 2003.

By check dated April 1, 2003, the new lender tendered full payment to CitiMortgage. On April 21, 2003, CitiMortgage advised plaintiffs by letter that it would file the discharge of mortgage with the county clerk. The letter stated:

Please find enclosed the final document showing that the above reference loan has been paid off. The release has been forwarded to the county for recording. When release is recorded, it will be available as a public record any time you enter into a real estate transaction.

This mailing also contained a second letter that informed plaintiffs that CitiMortgage would send the release of mortgage or satisfaction of mortgage to the county clerk, if that practice was consistent with individual state guidelines. This letter stated as follows:

Dear CitiMortgage Customer:

Your release/satisfaction will be mailed within thirty days after payoff. These documents will be sent to the remitter of payoff funds (i.e Title Company, Abstract Company, Attorney, or Customer), or the County Recorder of Deeds Office as per state guidelines.

The April 21, 2003 letter also included a copy of a document entitled "Satisfaction, Cancellation or Discharge of Mortgage" dated April 21, 2003. Plaintiffs also received another letter dated April 21, 2003 that informed them that CitiMortgage would not file the discharge. Rather this letter enclosed the mortgage endorsed for cancellation with instructions to plaintiffs to record this document.

Understandably confused by these conflicting communications, plaintiff Jeffrey Paretti called the CitiMortgage Customer Service Department to complain. He was informed by a representative of CitiMortgage that it was company policy that the borrower file the discharge. CitiMortgage confirmed this advice in a letter dated May 13, 2003. Jeffrey Paretti certified that he expressly requested CitiMortgage at this time to file the Satisfaction/Discharge of Mortgage. Contrary to his request, he received another letter from CitiMortgage dated May 14, 2003, that enclosed another copy of the Satisfaction of Mortgage and instructions to file it with the County Clerk. That same day, plaintiffs wrote a check in the amount of $30 and forwarded the document entitled "Satisfaction, Cancellation or Discharge of Mortgage" to the Camden County Clerk. On June 9, 2003, the clerk filed the document.

Defendant Verdugo is a subsidiary of defendant CitiMortgage and is responsible for the preparation and service of mortgage release documents for CitiMortgage. Verdugo was instructed to follow state guidelines in the preparation and transmission of mortgage release documents. According to the Verdugo procedure manual in effect in 2003, release documents were to be prepared or transmitted in accordance with the requirements of each state in which CitiMortgage operated. In 2003, Verdugo employees were instructed to send the mortgage release document to the settlement agent or the customer with instructions for the customer to file the document with the appropriate office. For New Jersey loans, the Verdugo procedure manual provided that the mortgage release documentation would be sent to the mortgagor rather than to the county clerk for recordation.

On February 4, 2004, plaintiffs' attorney sent a letter to CitiMortgage. The attorney complained that Verdugo and CitiMortgage failed to comply with N.J.S.A. 46:18-11.2. One month later, on March 5, 2004, plaintiffs filed a complaint seeking damages and equitable relief for themselves and all other similarly situated persons based on the failure of CitiMortgage and Verdugo to comply with the requirements of the Mortgage Recordation Act, N.J.S.A. 46:18-11.2 to -12, and violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. Specifically, in Count I plaintiffs sought statutory penalties of $50 per day but not to exceed $1000 from defendants based on their failure to record the mortgage discharge documentation directly with the county clerk. In Count II, plaintiffs alleged that defendants' practice to ignore the mortgage recordation requirements of N.J.S.A. 46:18-11.2 violated the CFA. They sought declaratory and injunctive relief, as well as compensatory and exemplary damages, statutory penalties and attorneys' fees.

At the conclusion of discovery, the parties filed cross-motions for summary judgment. Plaintiffs argued that CitiMortgage was required to forward to the county clerk for recordation the mortgage notated as cancelled and that it did not do so. CitiMortgage did not send the simultaneous notice to them that the mortgage had been transmitted to the clerk for cancellation. Furthermore, CitiMortgage had adopted a policy and procedure in direct contravention to the statutory requirements for New Jersey mortgage loans. Plaintiffs contended that the letter of instruction signed by them in the course of this refinancing is invalid because they were never informed that they had a right to have the mortgagor file the appropriate documentation to cancel the loan. Finally, plaintiffs contended that the provision of disparate documents, one advising them that the mortgage had been transmitted for cancellation and the other informing them that they were responsible for filing the appropriate documentation, and telephonic advice that the policy of the mortgagee was contrary to state law is a unlawful business practice in violation of the CFA.

In support of their motion and in response to plaintiffs' motion, defendants argued that plaintiffs signed an instruction letter at closing that directed defendants to send the satisfaction documentation to them for recordation. Defendants also contended that they were entitled to written notice of any default and plaintiffs failed to do so. Finally, the twenty-day notice provided in February 2004 is ineffective because the mortgage had been discharged in June 2003.

By orders dated July 22, 2005, defendants' motion for summary judgment was granted and plaintiffs' motion was denied. Judge Little acknowledged that defendants refused to file the discharge document and that plaintiff filed the discharge after it was sent to them by defendants. He also found that by letters dated March 27 and April 1, 2003, plaintiffs directed defendants to send the discharge of mortgage to them. The judge acknowledged that Jeffrey Paretti provided telephonic notice to defendants that they was required to file the mortgage cancellation, and that N.J.S.A. 46:18-11.3a(1) directs the mortgagor to provide written notice of a default by the mortgagee. He further found that plaintiffs waited eight months before providing written notice of the statutory violation and the late notice deprived defendants of their opportunity to cure the statutory violation. Finally, the judge noted that defendants had changed their practice to conform to this state's statutory procedure. Based on these findings, the judge entered summary judgment in favor of defendants.

On appeal, plaintiffs argue that the statutory requirements, that the mortgagee undertake the cancellation of the mortgage within thirty days of payment and satisfaction and simultaneously notify the mortgagor of this action, are not waiveable. They also contend that the original mortgage, rather than a document entitled release of mortgage or discharge, must be filed with the county clerk. They also contend that, assuming the provisions of N.J.S.A. 46:18-11.2b are waiveable, they did not execute a knowing and voluntary waiver. Finally, they argue that the statute does not require notice and opportunity to cure as a prerequisite to filing suit, and that their CFA claim should not have been dismissed.

Defendants respond that plaintiffs did not satisfy the notice and cure provision of the statute and that defendants had no obligation to record the cancellation documentation because plaintiffs did not pay the requisite fees. They also contend that plaintiffs authorized them to send the appropriate documentation to them for recordation. Finally, defendants argue that the CFA is inapplicable to this situation and, if applicable, plaintiffs cannot establish that they were deceived or misled or that they have sustained an ascertainable loss.

It is undisputed that defendants did not conform to the requirements of N.J.S.A. 46:18-11.2b at the time plaintiffs satisfied the mortgage held by CitiMortgage. In April 2003, defendants' obligation was clear: within thirty days of payment in full of the mortgage held buy it, CitiMortgage or its agent was required to forward the cancelled mortgage to the county clerk and simultaneously forward a copy of the transmittal letter to the mortgagor. The issue before this court is whether that default establishes a cause of action under N.J.S.A. 46:18-11.3a(1) or -11.4 or the CFA.

Defendants argue that plaintiffs waived the statutory requirement that they, rather than the mortgagor, are obliged to forward the mortgage discharge documentation to the appropriate county clerk. In support of this argument they identify two documents, one dated April 1, 2003 and the other dated March 27, 2003, signed by plaintiffs that direct that the discharge be sent directly to them. Plaintiffs concede that they executed the documents but argue that any waiver of their statutory right is unenforceable.

We need not explore whether the obligation imposed on the mortgagee by statute is waiveable, for we are satisfied that the documents relied upon by defendants are ineffective to waive the mortgagee's statutory obligation to file the discharge documentation with the county clerk.

It is axiomatic that a waiver of a right is ineffective unless the waiver is knowing and voluntary. Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 135 (2001). The waiver presumes knowledge of the right that is waived. Ibid. The documents signed by plaintiffs are bereft of any language that informs the mortgagors that the Legislature has imposed the obligation of filing discharge documentation on the mortgagee. Moreover, there is nothing in this record that even suggests that plaintiffs were informed of this obligation at the time they executed these documents.

We do, however, agree with defendants that the enforcement mechanism established by the Legislature requires written notice of the default and provides the mortgagee with an opportunity to cure the default. Here, plaintiffs admit that Jeffrey Paretti telephonically notified defendants that he expected the mortgagee to file the discharge documentation and that written notice was not provided until February 2004, long after the CitiMortgage mortgage had been discharged of record.

N.J.S.A. 46:18-11.3a(1) provides as follows:

If the mortgagee, his agent or assigns fails to comply with the applicable provisions of [N.J.S.A. 46:19-11.2a and b], the mortgagor or the mortgagor's agent may serve the mortgagee or his assigns with written notice of the noncompliance, which notice shall identify the mortgage and the date and means of its redemption, payment and satisfaction. If the mortgagee has not complied within 15 business days after receipt of the written notice from the mortgagor or the mortgagor's agent pursuant to this paragraph (1), the mortgagee or his assignees shall be subject to a fine of $50 per day for each day after the 15-day period until compliance, except that the total fine imposed pursuant to this paragraph (1) shall not exceed $1000.

The plain language of this section allows a mortgagor to seek compliance by the mortgagee in the event that it has not filed the appropriate discharge documentation with the county clerk. If a mortgagor elects to pursue this remedy, the notice of default must be in writing and the mortgagee has a fifteen-day opportunity to cure before a mortgagor may seek the statutory fines. Thus, Jeffrey Paretti's telephonic inquiry was contrary to the prescribed procedure and plaintiffs failure to provide timely written notice deprived defendants of the opportunity to cure. Injunctive relief was also unavailable as defendants had altered their noncompliant business practice in September 2004. Therefore, summary judgment was properly granted on plaintiffs' claim pursuant to N.J.S.A. 46:18-11.3c(1).*fn3

We also hold that summary judgment was properly granted to the extent that plaintiffs premised their complaint on N.J.S.A. 46:18-11.4. We agree with plaintiffs' contention that the twenty-day written notice required by section 11.4 is not a statutory prerequisite to suit but simply a prerequisite to an award of attorneys' fees. Summary judgment, however, was appropriate because the action contemplated by section 11.4 pertains to an action to discharge the mortgage in the event that a mortgagee fails to comply with the provisions of section 11.2b. Here, defendants failed to comply with those provisions but the mortgage had been discharged on June 8, 2003, eight months before plaintiffs commenced suit.

Finally, we address whether the motion judge properly dismissed the claim in Count II of plaintiffs' complaint that alleged a violation of the CFA. The motion judge did not directly address this claim; nevertheless, we are satisfied that summary judgment was properly granted.

We need not address whether N.J.S.A. 46:11-2 to -12 precludes a CFA remedy. Even if the CFA applies, plaintiffs cannot succeed on this claim because they cannot establish that they suffered an ascertainable loss.

N.J.S.A. 56:8-19 provides a private right of action for any person who sustains an ascertainable loss of money or property as a result of a method, act or practice declared unlawful by the CFA. A private person may file suit and recover treble damages, as well as any other appropriate legal or equitable relief, but must meet a higher standard of proof than in enforcement actions instituted by the Attorney General. Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 473 (1988). The ascertainable loss requirement is designed to limit the private cause of action. Ibid. This loss need not be certain and may be subject to dispute, Weinberg v. Sprint Corp., 173 N.J. 233, 251 (2002), but it must be quantifiable or measurable. Thiedemann v. Mercedes-Benz, USA, L.L.C., 183 N.J. 234, 248 (2005). The loss cannot be speculative, hypothetical or illusory. Ibid.

Thus, in Thiedemann, the Supreme Court held that the claim of loss of value to a class of vehicles manufactured by the defendant due to part defect had to be "presented with some certainty demonstrating that it is capable of calculation." Ibid. The Court held that summary judgment was properly granted in favor of the defendant in the absence of such proof. Ibid. Moreover, in Weinberg, supra, the Court held that the plaintiffs' private cause of action for injunctive relief and attorneys' fees was barred because their claim for damages was barred by federal law and could not survive summary judgment in respect of the issue of ascertainable loss. 173 N.J. at 244, 253.

Here, plaintiffs paid $30 to file the discharge of mortgage document. Notably, if CitiMortgage had assumed its statutory obligation, it would have been entitled to collect the filing fee, plus an additional $25 service fee. N.J.S.A. 46:18-11.2b(2). Plaintiffs cite no other loss. The mortgage held by CitiMortgage until March 2003 was discharged and plaintiffs produced clear title when they subsequently sold the Gibbsboro house. Plaintiffs' contention that attorneys' fees incurred in connection with this litigation should be considered an ascertainable loss under the CFA is unavailing because the relief sought was accomplished months before this litigation commenced and without the assistance of an attorney.

We do not condone defendants' failure to assume their statutory obligations, but we cannot ignore the fact that plaintiffs incurred less cost than if defendants did what they were legally required to do. Moreover, they incurred no other costs or attorneys' fees to obtain the discharge of their mortgage. In short, they did not suffer an ascertainable loss and such a loss is a predicate to any claim for damages or other legal or equitable relief by any person who is the victim of a practice or procedure in violation of the CFA.*fn4

We, therefore, affirm the July 22, 2005 summary judgment order in favor of defendants.


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