November 21, 2007
HOMECOMINGS FINANCIAL NETWORK, PLAINTIFF-RESPONDENT,
WAYNE A. SCHULTZ, AND KIMBERLY K. SCHULTZ, HIS WIFE, DEFENDANTS-APPELLANTS, AND UNITED STATES OF AMERICA, STATE OF NEW JERSEY, JOSE SIERRA, PETRONILA SIERRA-CAMPOS, HIS WIFE, FEDERAL DEPOSIT INSURANCE CORPORATION, SUCCESSOR TO RESOLUTION TRUST CORPORATION IN ITS CAPACITY AS RECEIVER FOR NEWTON SAVINGS BANK, FSB, SUMMIT BANK F/K/A/ UNITED JERSEY BANK, FIRST UNION BANK, NA, CANGER & CASSERA, INC., ARZEE SUPPLY CORP. OF NEW JERSEY, ABBINGTON-NEY ASSOCIATES, ALL-STAR TEMPS, INC., BENEFICIAL NEW JERSEY (DOVER), TAYLOR & FRIEDBERG, ESQS., CHASE MANHATTAN BANK F/K/A/ CHEMICAL BANK NEW JERSEY, GREENWOOD TRUST COMPANY, OXFORD RESOURCES CORP. N/K/A/ NATIONSBANC AUTO LEASING, INC., DEFENDANTS.
On appeal from Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-390-91.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 29, 2007
Before Judges Graves and Sabatino.
Defendants Wayne A. Schultz and Kimberly K. Schultz appeal from an order dated April 3, 2007, denying their application for relief from a judgment of foreclosure dated May 15, 2002. After reviewing the record and applicable law, we affirm.
On appeal defendants present the following arguments:
IT IS THE PUBLIC POLICY OF NEW JERSEY, AS EXPRESSED BY CLEAR LEGISLATIVE LANGUAGE, THAT HOMEOWNERS SHOULD BE GIVEN EVERY OPPORTUNITY TO PAY THEIR HOME MORTGAGES, AND THUS KEEP THEIR HOMES.
LONG-STANDING EQUITABLE PRINCIPLES HOLD THAT HOMEOWNERS SHOULD BE GIVEN EVERY OPPORTUNITY TO PAY THEIR HOME MORTGAGES, AND THUS KEEP THEIR HOMES.
IN FURTHERANCE OF NEW JERSEY STATUTORY AND CASE LAW, MORTGAGORS SHOULD BE GIVEN THE OPPORTUNITY TO BUY THEIR MORTGAGES THROUGH ASSIGNMENT FOR THE SAME PRICE AS UNRELATED THIRD-PARTIES ARE PAYING.
THE DELIVERY OF THE ESCROWED MONEY TO THE PLAINTIFF EFFECTED AN EQUITABLE CONVERSION AND CREATED A CONSTRUCTIVE TRUST FOR THE BENEFIT OF THE DEFENDANTS, AT WHICH TIME THE PLAINTIFF WAS OBLIGATED TO ASSIGN THE MORTGAGE TO THE DEFENDANTS.
GRANTING OF RELIEF FROM JUDGMENT UNDER RULE 4:50-1 IS JUSTIFIED IN THE INSTANT CASE.
We have considered these arguments in light of the applicable legal principles and conclude that they are without sufficient merit to warrant extensive discussion. R. 2:11-3(e)(1)(E). The trial court reasoned as follows: "No case law, or statute, supports relief movant seeks that homeowner can be 'assigned' its own mortgage without payment of all amounts due and owing to the lender." We agree and therefore affirm with only the following comments.
Defendants executed a mortgage on March 11, 1988, as security for loan proceeds they received in the amount of $295,000. After defendants defaulted on payments in May of 1990 the holder of the mortgage filed this foreclosure action on January 8, 1991. The final judgment of foreclosure, dated May 15, 2002, provides that "plaintiff is entitled to have the sum of $687,517.72 together with lawful interest thereon from July 15, 2001 together with costs of this suit to be taxed, including a counsel fee of $7,025.18 raised and paid in the first place out of the mortgaged premises . . . ." Thus, the present holder of the mortgage seeks to have the mortgaged property sold at a sheriff's sale.
Although we have not been provided with a copy of the motion that defendants filed in the Chancery Division, defendants indicate in their appellate brief that they sought an order under R. 4:50-1 requiring plaintiff, Homecomings Financial Network, to "immediately assign" to them, "for no further consideration, the mortgage and/or note held by the [p]laintiff on the rem that is the subject matter of this suit." According to defendants:
The Plaintiff acquired the mortgage at a significant discount about 17 months ago. In the past, the mortgage ha[d] been sold numerous times. Treuhold Capital is the current mortgage-holder. It is believed that Treuhold acquired the mortgage for less than $68,000. On September 20, 2006, the Defendants delivered $68,844 of escrowed funds to Treuhold's attorneys, which fully reimbursed Treuhold for the purchase cost of the mortgage. Treuhold now owns the mortgage for free and is proceeding to foreclose the mortgage in rem. The end result will be that Treuhold has used the homeowners' money to foreclose them and Treuhold will own their house for free. The Defendants argue that 1) the prior mortgage-holder should have offered the Defendants the opportunity to purchase the mortgage for the same price Treuhold was about to pay and, as a consequence of not having done that 2) the Court should establish a constructive trust in favor of the Defendants and Treuhold should now be required to assign the mortgage to the Defendants for the consideration already paid by the Defendants, plus interest.
In furtherance of their position, defendants argue that equitable principles embodied in the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 et seq., and New Jersey Home Ownership Security Act of 2002 (HOSA), N.J.S.A. 46:10B-23 et seq., require that homeowners should be afforded a right of first refusal before their mortgage is sold on the secondary market. Likewise, they cite New Jersey case law suggesting that courts "abhor a forfeiture." Sovereign Bank v. Kuelzow, 297 N.J. Super. 187, 198 (App. Div. 1997) (quoting Brinkley v. W. World, Inc., 275 N.J. Super. 605, 610 (Ch. Div. 1994), aff'd, 292 N.J. Super. 134 (App. Div. 1996)).
Under the FFA, "homeowners should be given every opportunity to pay their home mortgages, and thus keep their homes; and . . . lenders will be benefited when residential mortgage debtors cure their defaults and return defaulted residential mortgage loans to performing status." N.J.S.A. 2A:50-54. To that end, the FFA provides two primary mechanisms governing the debtor/creditor relationship regarding mortgages. First, the FFA places extensive thirty-day notice obligations upon the lender "before any residential mortgage lender may accelerate the maturity of any residential mortgage obligation and commence any foreclosure or other legal action to take possession of the residential property which is the subject of the mortgage." N.J.S.A. 2A:50-56(a). Additionally, the FFA provides the debtor with the right to cure in the event of default at any time up until "final judgment or the entry by the office or court of an order of redemption." N.J.S.A. 2A:50-57(a). To cure a default, the debtor must:
(1) pay or tender to the person identified . . . all sums which would have been due in the absence of default, at the time of payment or tender;
(2) perform any other obligation which the debtor would have been bound to perform in the absence of the default or the exercise of an acceleration clause, if any;
(3) pay or tender court costs, if any, and attorneys' fees in an amount which shall not exceed the amount permitted under the Rules Governing the Courts of the State of New Jersey; and
(4) pay all contractual late charges, as provided for in the note or security agreement.
If the default is cured, it "reinstates the debtor to the same position as if the default had not occurred. It nullifies, as of the date of cure, any acceleration of any obligation under the mortgage, note or bond arising from the default." N.J.S.A. 2A:50-57(d).
Effective May 1, 2003, HOSA was passed to combat "[a]busive mortgage lending" resulting from "the making of loans that are equity-based, rather than income-based," and "the financing of high points and fees." N.J.S.A. 46:10B-23(a). To address these abuses, HOSA prohibits creditors from engaging in practices such as "recommend[ing] or encourag[ing] default on an existing loan or other debt," charging late payment fees "in excess of 5% of the amount of the payment past due," or accelerating the debt "in its sole discretion." N.J.S.A. 46:10B-25(c),(d)(1),(e).
New Jersey law, however, explicitly provides for the assignment of mortgages. Under N.J.S.A. 46:9-9:
All mortgages on real estate in this State . . . shall be assignable at law by writing . . . and any such assignment shall pass and convey the estate of the assignor in the mortgaged premises, and the assignee may sue thereon in his own name, but, in any such action by the assignee, there shall be allowed all just set-offs and other defenses against the assignor that would have been allowed in any action brought by the assignor and existing before notice of such assignment. [Ibid.]
Thus, the assignee of a mortgage takes, in full, the assignor's rights under the mortgage, as well as any defenses the debtor under the mortgage has against the assignor. Gerrold v. Penn Title Ins. Co., 271 N.J. Super. 50, 54 (App. Div. 1994) ("An assignee of a mortgage succeeds to the rights and privileges, as well as to the disabilities of the assignor.") (citing Byram Holding Co. v. Bogren, 2 N.J. Super. 331, 336 (Ch. Div. 1949)). Moreover, the amount paid by an assignee to acquire a mortgage "has no relevancy to the obligation of the makers of the note to pay the unpaid balance in accordance with the terms of the instrument." Metric Inv., Inc. v. Kerner, 145 N.J. Super. 463, 465 (App. Div. 1976).
While the FFA and HOSA, respectively, provide mortgagors with a limited opportunity to cure default and prohibit statutorily defined unscrupulous practices, nothing in either of these legislative initiatives allows debtors to reacquire their mortgages for less then the amount due and owing to the lender. Moreover, defendants' arguments find no support in case law. Defendants' contentions are similar to the arguments we considered but rejected in Midstates Res. Corp. v. Burgess & Fenmore, 333 N.J. Super. 531 (App. Div.), certif. denied, 165 N.J. 676 (2000). In Midstates we determined that "the assignee of a note has a right to be paid what is due from the obligor," and we rejected the argument that the lender was obligated "to sell the note [to the borrowers] at the same discount for which it sold the note to [the assignee]." Id. at 535-36. We concluded that such a requirement "would only encourage non-payment of indebtedness." Id. at 535.
A motion to vacate or modify a judgment pursuant to Rule 4:50-1 should be granted "sparingly, in exceptional situations; the Rule is designed to provide relief from judgments in situations in which, were it not applied, a grave injustice would occur." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 289 (1994). Such a motion "is addressed to the sound discretion of the trial court, whose determination will be left undisturbed unless it results from a clear abuse of discretion." Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 173 (App. Div. 2005) (quotation omitted); see also Del Vecchio v. Hemberger, 388 N.J. Super. 179, 186-87 (App. Div. 2006) (noting that whether a judgment should be vacated for one of the grounds specified in R. 4:50-1 is "a determination left to the sound discretion of the trial court, guided by principles of equity") (quotation omitted). In the present matter, we perceive neither error nor abuse of discretion in the order under appeal.
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