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U.S. Bank National Association v. Thomas


March 23, 2010


On appeal from the Superior Court of New Jersey, Chancery Division, Somerset County, Docket No. F-39524-08.

Per curiam.


Submitted February 24, 2010

Before Judges Sabatino and J. N. Harris.

Defendants, Verna Thomas and Mosell Thomas, appeal the Chancery Division's February 27, 2009 order entering summary judgment against them in this mortgage foreclosure action.

Defendants are married to one another. The mortgaged premises in question was defendants' long-time residence in Franklin Township. On November 2, 2005, defendants refinanced their then-existing indebtedness on the property. As part of that refinancing, Eastern American Mortgage Company ("Eastern American") issued a loan for $340,000, payable over thirty years, with a fixed interest rate of 6.875 percent (7.176 annual percentage rate ("APR")). The monthly payments of principal and interest due under the associated promissory note were $2,233.56. Approximately $225,000 of the borrowed funds were used to pay off pre-existing debt, and, after closing costs were deducted, $102,226.67 was extended in cash. Apparently, some of those funds were utilized to purchase investment properties.

At the same time, defendants mutually executed a mortgage against the property in favor of the lender, Eastern American. The mortgage specified the lender's right to foreclose upon the property if, among other things, the monthly amounts due under the corresponding note were not timely paid. Defendants admit that the mortgage bears their true signatures.

The mortgage was duly recorded shortly after the November 2, 2005 closing on the refinancing. Eventually, the rights of Eastern American as mortgagee were assigned to plaintiff, U.S. Bank National Association, as Trustee for CSMC Mortgage-Backed Pass-Through Certificates, Series 2006-4.

Defendants made regular monthly payments under the note for approximately two and a half years. However, it is undisputed that as of August 17, 2008, two monthly payments were overdue and the note was in default. Consequently, plaintiff filed a complaint to foreclose on the mortgage in October 2008.

Defendants filed an answer, asserting several defenses. In particular, they claim that they were misled by the mortgage broker about the applicable interest rate when they entered into the refinancing transaction. Defendants claim that they had expected the lender, which had previously refinanced their home, to charge them a lower interest rate, rather than a higher one of 6.875 percent. Defendants further contend that they were overcharged for closing costs.

In addition, defendants point out that while the mortgage admittedly bears both of their signatures, only the wife, Verna Thomas, signed the note and the husband, Mosell Thomas, did not. Defendants also allege that the mortgage should be invalidated under the federal Truth in Lending Act ("TILA"), 15 U.S.C.A. §§ 1601-67f.

Plaintiff moved for summary judgment, which defendants countered with an unsworn response signed by Mosell Thomas raising the points in opposition that have already been described.

After considering the parties' submissions and the relevant transactional documents in light of the applicable law, the Chancery Division judge granted plaintiff's motion and referred the case to the Office of Foreclosure. Defendants now appeal, alleging that the trial court erred in granting summary judgment and thereby authorizing the foreclosure.

The right to foreclose is an equitable right inherent in a mortgage, triggered by a borrower's failure to comply with the terms and conditions of the associated loan. S.D. Walker, Inc. v. Brigantine Beach Hotel Corp., 44 N.J. Super. 193 (Ch. Div. 1957). To obtain relief in a mortgage foreclosure action, the mortgagee (or, as here, its successor in interest) must establish that (1) the mortgage and loan documents are valid; (2) the mortgage loan is in default; and (3) it has a contractual right to foreclose in light of the default. See, e.g., Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993), aff'd, 273 N.J. Super. 542, 545 (App. Div. 1994); Somerset Trust Co. v. Sternberg, 238 N.J. Super. 279, 283-84 (Ch. Div. 1989). The mortgagee has the right to insist upon strict observance of the obligations that are contractually owed to it, including timely payment. Kaminski v. London Pub, Inc., 123 N.J. Super. 112, 116 (App. Div. 1973).

Viewing, as we must, the mortgage documents and the balance of the record in a light most favorable to the non-movant defendants, see Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995), we concur with the trial court that plaintiff was entitled to summary judgment and to foreclose on the mortgage as a matter of law. We therefore affirm the trial court's order, substantially for the cogent reasons expressed in Judge Harriet Derman's eight-page written opinion dated February 5, 2008. Only two brief points are worth observation.

First, defendants' claim that they received assurances from unnamed brokers or agents that their interest rate in the refinancing would be less than 6.875 percent (7.176 APR) is belied by the clear specification of the contractual interest rate within the note itself and in the related loan application. Moreover, the APR is clearly and prominently displayed, along with the monthly payment sum of $2,233.56, in the TILA Disclosure Statement dated November 2, 2005, a key document signed by both defendants. Defendants made those specified monthly payments for more than two years without attempting to correct what they now say is an incorrect interest amount. They also received, at closing, more than $100,000 in cash based on the stated terms of the loan.

Defendants present no relevant documents that corroborate that they were misled in entering into the manifest terms of the transaction. Given these circumstances and the record presented to the trial court, there is simply no genuine issue of material fact here that warrants reversal of the entry of summary judgment.

Second, as Judge Derman rightly noted, it is immaterial to this mortgage foreclosure action that the husband did not co-sign the promissory note with his wife. It is undisputed that both spouses signed the mortgage, which provided the security upon which the lender agreed to advance $340,000. Defendants are under a misimpression that, as a matter of law, the mortgage does not extend to the entire property. To the contrary, under the applicable law and the clear terms of the mortgage itself, the mortgage is effective over the property described in the instrument. Panetta v. Equity One, Inc., 190 N.J. 307, 323 (2007). There is no proof that the husband was unaware when entering into the mortgage of what funds were being loaned and how they were going to be applied, or of his wife's role in the refinancing. In fact, the husband co-signed the U.S. Department of Housing and Urban Development HUD-1 Settlement Statement at the closing, which detailed all of the sums involved.

Although we appreciate that defendants became unable to keep the mortgage current and consequently and sadly lost their home, the law provides them with no basis for relief on this appeal.



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