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Estate of Georgios Hionidis v. Bank of America


April 21, 2011


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5454-10.

Per curiam.


Argued February 7, 2011

Before Judges Reisner and Alvarez.

We granted leave to appeal from a Law Division order, dated July 23, 2010, denying a motion by plaintiff, the Estate of George Hionidis, to consolidate the Estate's lawsuit against two mortgagees, Bank of America and Federal Home Loan Mortgage Corp. (Federal), with the foreclosure actions those mortgagees had filed against the Estate. We reverse and remand for further proceedings consistent with this opinion.

We need not describe in detail the various procedural glitches that occurred in this case both before and after we granted leave to appeal. Suffice to say that the Estate owns a residential property in Fort Lee. Federal and Bank of America (BA), the first and second mortgagees, respectively, each filed a separate foreclosure action. Bank of Am. v. Hionidis, No. F-004881-09; Fed. Home Loan Mortg. Corp. v. Stratis, No. F-045269-08. The Estate filed an answer and counterclaim to BA's complaint. The Estate's answer alleged breaches of the mortgage contract. Its counterclaim alleged violations of the Fair Foreclosure Act (FFA), 15 U.S.C.A. §§ 1692g and 1692i, as well as other commercially unreasonable conduct, and sought monetary damages.*fn1 But the Estate failed to include the FFA violation claims in the answer portion of its pleading.

Based on the record provided to the Law Division judge, and to us on this appeal, it appears that the foreclosure judge granted summary judgment striking the Estate's answer in the foreclosure action without adjudicating the merits of the FFA claim.*fn2 Each side's attorney submitted a certification to the Law Division judge asserting, or denying, respectively, that the foreclosure judge had addressed the merits. However, neither attorney produced a transcript of an oral opinion or a written statement of reasons from the foreclosure judge supporting their contentions.

This is the record we have. The foreclosure judge granted summary judgment against "Georgios K. Hionidis" on May 28, 2009, in an order indicating that the motion was unopposed. The order did not refer to any statement of reasons. An amended order was entered on July 2, 2009, granting judgment against the Estate, again indicating no opposition.

The Estate then moved for reconsideration. On September 11, 2009, the foreclosure judge entered an order granting the motion in part and denying it in part. A rider to the order indicated that defendant's answer remained stricken and default remained entered. The rider then provided as follows: "That portion of the Court's May 28, 2009 Order that struck defendants' Counterclaim is hereby clarified: the dismissal of defendants' counterclaim is without prejudice to the filing of same in the Law Division." That language plainly implied that the judge had not adjudicated the merits of the counterclaim. Otherwise, re-litigation of the counterclaim would be barred by collateral estoppel or res judicata. See Joan Ryno, Inc. v. First Nat'l Bank of S. Jersey, 208 N.J. Super. 562, 569-70 (App. Div. 1986).

Another order dated November 12, 2009, indicated that the Estate's reconsideration motion was denied "in part"; that summary judgment for plaintiff "is affirmed"; but that the Estate's answer and counterclaim were "stricken without prejudice." The order noted no reasons, but indicated that a settlement conference would be held on December 7, 2009.

The foreclosure case did not settle, and the Estate filed the Law Division action on May 27, 2010. The Estate then filed a motion to consolidate that action with the two pending foreclosure cases. The Law Division judge denied the consolidation motion, reasoning that it appeared to be an attempt to circumvent the foreclosure judge's order granting summary judgment in the BA foreclosure case. The Estate filed an interlocutory appeal from the Law Division order denying consolidation. We granted leave to appeal.

We do not have the complete record of the foreclosure case. However, at oral argument, plaintiff's counsel explained the foreclosure judge's September 11, 2009 order as follows. He advised us that he did not object to the dismissal of his foreclosure answer without prejudice, so long as he was permitted to raise the same claims affirmatively in a Law Division action. That explanation seems to evince a misunderstanding of foreclosure law.

In order to avoid summary judgment or the striking of its answer in the foreclosure action, the Estate needed to file a contesting answer. See R. 4:64-1(c). Therefore, even if the Estate wished to pursue a separate affirmative claim for damages, it should also have raised the FFA violation as a defense in its answer to the foreclosure complaint. More importantly, the Estate needed to insist on receiving an adjudication of that defense in the foreclosure action, to avoid having its answer stricken and having the foreclosure proceed as uncontested.

And, at least on this record, the answer should not have been stricken. Although the Estate raised the FFA claim only as a counterclaim for damages, that claim was also a defense to the foreclosure action. The omission of the FFA contentions from the answer portion of the pleading should not have resulted in the case being considered uncontested. It disserves the interests of justice, and violates the entire controversy doctrine, to let a foreclosure complaint go to final judgment without adjudicating the mortgagor-defendant's claim of a Fair Foreclosure Act violation. See Leisure Technology v. Klingbeil Holding Co., 137 N.J. Super. 353, 356-57 (App. Div. 1975). Likewise, the affirmative defenses pled in the answer, alleging that the bank breached the mortgage contract, were germane and appropriate to be litigated in the foreclosure action. See Sun NLF Ltd. P'ship v. Sasso, 313 N.J. Super. 546, 550-51 (App. Div.), certif. denied, 156 N.J. 424 (1998).

In summary, the Law Division judge's decision was an entirely understandable effort to avoid entering an order that would be inconsistent with prior orders entered by the foreclosure judge. However, we conclude that the interests of justice and judicial economy dictate that these cases should be consolidated so that plaintiff's claims, which are affirmative claims in this lawsuit but which may also constitute defenses to the foreclosure lawsuits, can be heard and decided in one action. See Joan Ryno, Inc., supra, 208 N.J. Super. at 571; Leisure Technology, supra, 137 N.J. Super. at 357.

On remand, neither foreclosure action may proceed to entry of final judgment pending the Law Division judge's adjudication of the Estate's claims which would also be defenses to a foreclosure action. If necessary to avoid confusion in the Foreclosure Unit's docketing system, the Estate may be required to file an answer to the Federal foreclosure complaint, raising as defenses its claims under the FFA and any other germane issues. Otherwise, the Estate's Law Division complaint should also be deemed to be its contesting answer in the Federal foreclosure action.

We reverse the July 23, 2010 order and remand this matter to the Law Division to enter an order consistent with this opinion and for further proceedings.

Reversed and remanded.

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