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Wachovia Bank, N.A v. Gregory Wright A/K/A


May 12, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket No. F-41972-08.

Per curiam.


Submitted March 2, 2011

Before Judges Lihotz and J. N. Harris.

U.S. Bank National Association (US Bank), as successor in interest to defendant Mortgage Electronic Registration Systems, Inc. (MERS), appeals from a Chancery Division order denying its request to vacate the default judgment against it and foreclosing the interest of MERS in residential realty.*fn1 We affirm.

These facts are taken from the motion record. Defendant Gregory Wright purchased real property on Albridge Way in Mt. Laurel Township (the subject realty) on September 2, 2003. On December 2, 2005, Wright contracted with JP Morgan Chase, N.A. (Chase) for a mortgage and a line of credit secured by a second mortgage on the subject realty. On August 9, 2006, Wright refinanced the Chase debts and withdrew additional equitable value from the realty. He borrowed $210,000 from MERS through its agent, Accredited Home Lenders, Inc. (AHL). Inexplicably, the MERS mortgage was not recorded for over a year, until September 17, 2007.

On September 18, 2006, one month following the refinance with MERS, Wright executed a line of credit with plaintiff Wachovia Bank. N.A. (Wachovia) in the amount of $182,700, secured by a mortgage on the subject property. Wright's loan application did not list the MERS transaction. Wachovia recorded its mortgage on October 27, 2006. On June 4, 2007, Wright executed a home equity mortgage with Wachovia, also secured by the property and recorded on June 21, 2007.

Wright defaulted on his Wachovia debts prompting Wachovia to seek foreclosure. Wachovia filed this action on October 23, 2008. MERS was named as a defendant and was served by certified and first class mail at its Florida corporate offices. On November 14, 2008, MERS assigned the mortgage to US Bank as Trustee for an investment pool. The assignment was recorded on December 10, 2008. When MERS did not answer, Wachovia filed a request for default on December 22, 2008, followed by a request for entry of final judgment.

On August 19, 2009, US Bank entered an appearance in Wachovia's foreclosure action. US Bank moved to amend the action to list it as the proper party in interest rather than MERS and to vacate the default. On August 31, 2009, the final judgment was entered in favor of Wachovia foreclosing the interest of all others. US Bank's motion was heard on October 9, 2009. Judge Michael Hogan denied U.S. Bank's request to vacate the default judgment, finding MERS was properly served prior to assigning the instrument to US Bank and noting a meritorious defense to the relief sought had not been presented.

This appeal ensued. Thereafter, the court stayed a sheriff's sale pending appeal. We note Wachovia has chosen not to participate in this appeal.

"Although courts are empowered to confer absolution from judgments," relief from a final judgment under Rule 4:50-1 "is granted sparingly." DEG, LLC v. Twp. of Fairfield, 198 N.J. 242, 261 (2009) (internal quotation marks and citations omitted). "A motion under Rule 4:50-1 is addressed to the sound discretion of the trial court, which should be guided by equitable principles in determining whether relief should be granted or denied." Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). See also Orner v. Liu, __ N.J. Super. __ (App. Div. 2011) (slip op. at 5). We will not disturb a trial court's determination to grant or deny an application to open a judgment "unless it represents a clear abuse of discretion." Little, supra, 135 N.J. at 283. In our review we do not "decide whether the trial court took the wisest course, or even the better course, since to do so would merely be to substitute our judgment for that of the lower court. The question is only whether the trial judge pursued a manifestly unjust course." Gittleman v. Cent. Jersey Bank & Trust Co., 103 N.J. Super. 175, 179 (App. Div. 1967), rev'd on other grounds, 52 N.J. 503 (1968).

"[T]he rule is a carefully crafted vehicle intended to underscore the need for repose while achieving a just result. It thus denominates with specificity the narrow band of triggering events that will warrant relief from judgment if justice is to be served." DEG, supra, 198 N.J. at 261.

Included among the bases for relief, the rule recites "the court may relieve a party or the party's legal representative from a final judgment or order for . . . mistake, inadvertence, surprise, or excusable neglect; . . . or . . . any other reason justifying relief from the operation of the judgment or order."

R. 4:50-1(a) and (f). US Bank relies upon this provision, asserting the failure to answer Wachovia's complaint was a matter of excusable neglect and Judge Hogan abused his discretion in denying its motion. To avail itself of relief under Rule 4:50-1(a), U.S. Bank must show that its neglect "was excusable under the circumstances and that [it had] a meritorious defense." Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964). "Excusable neglect" under Rule 4:50-1(a) has been defined as carelessness "attributable to an honest mistake that is compatible with due diligence or reasonable prudence." Mancini v. EDS, 132 N.J. 330, 335 (1993).

US Bank argues that by the time it learned of Wachovia's foreclosure, default had already been entered. We are not persuaded.

First, although the complaint was filed when MERS was the lienholder of record, US Bank knew or should have known of Wachovia's litigation. While the recordation of its assignment of the mortgage interest was pending, US Bank actually filed its own foreclosure complaint on November 17, 2008, to which Wachovia answered, contesting US Bank's assertion of a priority position.*fn2 US Bank knew of Wachovia's mortgage and knew it had been recorded prior in time to the debt it held. Further, US Bank should have known Wachovia's lis pendens had been recorded on November 5, 2008. Therefore, ordinary due diligence would have discovered the pending litigation.

Additionally, had US Bank filed its motion earlier, at the time it recorded its assignment on December 10, 2008, the motion would have been more favorably reviewed, as a request to vacate entry of default is subject to a less stringent standard than that imposed by Rule 4:50-1 to vacate a default judgment. Pressler & Verniero, Current N.J. Court Rules, comment on R. 4:43-3 (2011); see R. 4:43-3 (stating entry of default shall be set aside upon good cause shown). US Bank's failure to move for relief for more than nine additional months is not excusable.

US Bank also suggests it has complied with the requisites for relief pursuant to R. 4:50-1(f). We disagree.

The catch-all provision of the Rule defies simple categorization. Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966). Application of subsection (f) is restricted to "'exceptional situations.'" Mancini, supra, 132 N.J. at 336 (quoting Baumann v. Marinaro, 95 N.J. 380, 395 (1984)). As the Supreme Court explained, "the very essence of (f) is its capacity for relief in exceptional situations. And in such exceptional cases its boundaries are as expansive as the need to achieve equity and justice." Perillo, supra, 48 N.J. at 341; see Baumann, supra, 95 N.J. at 395 ("[E]ach case must be resolved on its own particular facts."). The purpose of subsection (f) is to afford relief when enforcement of a judgment would be unjust, oppressive, or inequitable. Quagliato v. Bodner, 115 N.J. Super. 133, 138 (App. Div. 1971).

It is undisputed that Wachovia served MERS, not US Bank, with the foreclosure complaint. Unlike the portrait attempted to be painted, however, US Bank learned early on of Wachovia's claimed superior title, when it had filed for foreclosure. The title search immediately prior to its initiation of litigation would have revealed Wachovia's filed lis pendens. The failure to react to this information is far from extraordinary.

We additionally reject US Bank's unsupported contention that service upon MERS's corporate offices, rather than its New Jersey registered agent, defeated the propriety of the service.

US Bank did not deny MERS received the complaint. Moreover, as demonstrated by the time frame of events, it became aware of Wachovia's interest and should have been aware of its lawsuit.

Finally, US Bank's claims of a meritorious defense, "the strength of which can only be developed through discovery[,]" ring hollow. The arguments offered are speculative, not even rising to a colorable defense to Wachovia's claims.

US Bank has failed to establish its entitlement to relief under Rule 4:50-1. The arguments advanced do not support a conclusion that the judgment should be vacated because of excusable neglect or that its enforcement would be unjust, oppressive, or inequitable. We conclude, as did Judge Hogan, that US Bank failed to set forth a claim for relief to set aside the final judgment of foreclosure.


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