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GMAC Mortgage, LLC v. Fraser

July 23, 2010

GMAC MORTGAGE, LLC, PLAINTIFF-RESPONDENT,
v.
CLYDE FRASER AND TOYE MCCASTLE FRASER, DEFENDANTS-APPELLANTS.



On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2009-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted May 24, 2010

Before Judges Rodríguez, Reisner and Chambers.

Defendants Clyde Fraser and Toye Fraser appeal from the order of March 10, 2009, declaring that their mortgage and note held by plaintiff GMAC Mortgage, LLC (GMAC), are legally enforceable and that, as of January 1, 2009, they owe $2,335,861.29 on the mortgage and note. Although we agree with the trial court that the mortgage and note are legally enforceable, we reverse and remand for reconsideration of the balance of the order. We do not retain jurisdiction.

I.

On May 10, 2005, defendants purchased a residence in the Township of Mendham for the sum of $1,534,700. After defendants defaulted on the payments due on their first and second mortgages, the property went into foreclosure. On October 3, 2006, defendants obtained financing from Zurich Mortgage Solutions, LLC (Zurich) and executed a mortgage and note on the premises in the principal sum of $1.8 million in favor of Zurich. These monies were used to pay off the first and second mortgages in default and other expenses, and defendants received the balance of $92,428.99. For the first sixty months of the mortgage, defendants were obligated to make interest only payments of $18,735 per month on the mortgage and note. At the time of this transaction, Zurich was not a licensed financial entity in New Jersey.

On October 11, 2006, Zurich assigned the mortgage to American Residential Equities, LLC (American), which also was not a licensed financial entity in New Jersey. Because defendants believed Zurich had charged more than the maximum number of points, defendants contacted the Department of Banking and Insurance, which issued a refund directive to Zurich.

Defendants were advised by their private counsel to stop payment on the mortgage and note because Zurich was unlicensed and consequently unable to collect interest and because defendants were owed $108,000 for the six points they were charged at closing, plus interest. On November 7, 2006, the mortgage was transferred to GMAC, a licensed lender in New Jersey.

On July 9, 2007, GMAC commenced this declaratory judgment action against defendants seeking a declaration that it may enforce the mortgage and note against defendants and that, as of July 31, 2007, defendants owed $120,090.42 on the mortgage and note. Defendants, represented by counsel, filed an answer with counterclaims, which was later amended. They sought declarations that the mortgage and note were unenforceable; that they were not obligated to pay interest on the mortgage and note because Zurich was unlicensed; that they were not in default on payments because the payments for the first sixty months were for interest only; and that any amounts determined to be owed on the mortgage and note should be reduced by the $108,000 they had paid in points and the $37,470 they had paid in interest. Defendants also contended that they had refrained from bringing legal action by relying on a promise from GMAC and sought $2 million in damages.

Although GMAC filed the complaint in the Chancery Division, the chancery judge transferred the case to the Law Division. GMAC subsequently filed a mortgage foreclosure complaint against the defendants because they had not paid real estates taxes on the property as required by the mortgage. Defendants' motion to consolidate the actions was denied by the chancery judge, and, as a result, the two related actions proceeded separately before two different judges. This appeal is from the declaratory judgment action and not the foreclosure action. The discussion of the procedural history herein thus refers to the declaratory judgment action only. We will not discuss the involved procedural history of the case but only those aspects we find pertinent.

By order dated February 12, 2008, the trial court granted a motion by GMAC to compel defendants, during the pendency of the action, to make interest only payments on the mortgage to GMAC's counsel's trust account. Defendants failed to comply with this order. In June 2008, defendants filed a substitution of attorney indicating they would be appearing pro se. By order dated July 7, 2008, the trial court granted GMAC's motion to hold defendants in violation of litigant's rights for failing to make the payments required by the February 12, 2008 order. Defendants were ordered to pay into GMAC's counsel's trust account the sum of $337,055.94, representing interest only payments from January 2007 to June 2008, and thereafter to pay $18,725 a month.*fn1 The order further provided that if defendants failed to make the requisite payments, GMAC could move ex parte to strike defendants' answer and counterclaims. When defendants failed to make the required payments, GMAC filed an ex parte motion to strike defendants' answer and counterclaims, which the trial court granted on September 2, 2008.

In separate motions, GMAC and defendants separately moved to strike the opposing party's pleadings for failure to provide discovery. By order dated September 3, 2008, the trial court granted GMAC's motion and dismissed defendants' answer and counterclaims without prejudice. The trial court denied defendants' motion to strike.

On January 23, 2009, the trial court heard GMAC's motion for summary judgment and defendants' motion for reconsideration of the February 2008 order. Defendant Clyde Fraser acknowledged that defendants had only made one payment on the mortgage loan in the one and half to two years they had been in the house. By order dated March 10, 2009, the trial court denied defendants' motion for reconsideration of the February 12, 2008 order and granted GMAC's motion for summary judgment. The March 10, 2009 order specifically declares the mortgage and note enforceable; declares that defendants are in default ...


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