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Bank of New York As Trustee For the Certificate Holders Cwalt 2004 26t1 v. Sarah G. Laks and Edward Einhorn

August 8, 2011


On appeal from Superior Court of New Jersey, Chancery Division, Ocean County, Docket No. F-37465-08.



Submitted May 23, 2011

Before Judges A.A. Rodriguez, Grall and LeWinn.

The opinion of the court was delivered by GRALL, J.A.D.

The defendants in an action to foreclose a residential mortgage appeal from the denial of their motion to vacate the judgment of foreclosure and dismiss the complaint without prejudice. We reverse and remand for entry of an order granting that relief.

The central question on this appeal is whether defendants are entitled to relief because plaintiff served a pre-complaint written notice of intention to foreclose that failed to identify the "lender" as required by N.J.S.A. 2A:50-56(c)(11), a provision of the Fair Foreclosure Act (the Act), N.J.S.A. 2A:50-53 to -68. We conclude that they are.

The appeal also raises a second question - the appropriate remedy for violation of the Act's notice of intention provision. The Act does not specify a remedy, and panels of this court have disagreed as to what it should be. Compare Cho Hung Bank v. Ki Sung Kim, 361 N.J. Super. 331, 346-47 (App. Div. 2003) (concluding that a violation can be remedied by permitting service of the requisite notice while the foreclosure action is pending) with EMC Mortgage Corp. v. Chaudhri, 400 N.J. Super. 126, 139 (App. Div. 2008) (concluding that a violation is best addressed by dismissal of the foreclosure complaint without prejudice). We conclude that dismissal without prejudice best effectuates the Legislature's purpose in adopting the Act.

Defendant Sarah Laks made a promissory note payable to the order of BSM Financial, L.P. in August 2004. To secure the note, Laks and her husband, defendant Edward Einhorn, executed a mortgage on their Lakewood home in favor of the Mortgage Electronic Registration System, Inc. (MERS)*fn1 , as nominee for BSM Financial and its successors and assigns.*fn2 BSM Financial later indorsed the note in blank. Plaintiff Bank of New York as trustee for the Certificate Holders CWALT 2004 26T1, a securitized asset trust, claims the note was negotiated to it by physical delivery in October 2004. See N.J.S.A. 12A:3-201(b).

Laks missed her May 2008 payment on the note and every monthly payment thereafter. On August 13, Countrywide Home Loans,*fn3 plaintiff's loan servicer, sent a notice of intention to foreclose to Laks by certified mail, return receipt requested. The notice of intention recited that Countrywide was acting on behalf of the owner of Laks's promissory note, without identifying the owner. The notice of intention also warned that if Laks did not pay $21,279.64 to Countrywide within 30 days, then Laks's noteholder, again not identified, would institute foreclosure proceedings against her. The notice concluded by advising Laks that if she did not agree that default had occurred or if she disputed the amount required to cure her default, she could contact Countrywide at an address and telephone number stated in the notice. Nowhere on the notice was Laks informed that plaintiff was the owner of her promissory note nor was she given plaintiff's address. Three days before the foreclosure complaint was filed, MERS assigned Laks and Einhorn's mortgage to plaintiff.

On September 24, 2008, forty-two days after the notice of intention was mailed, plaintiff instituted foreclosure proceedings, and defendants filed a contesting answer. Laks admitted that she had defaulted, but she contended that plaintiff's notice of intention was defective because it did not state plaintiff's name and address. She also claimed that plaintiff had not proved by competent evidence that it had standing to sue on the note. Plaintiff moved to strike the answer and submitted what its representative asserted was a true copy of the note, which bore one endorsement, that of the originating lender, BSM Financial. The trial court concluded that the notice of intention was adequate and that plaintiff had standing; it therefore struck defendants' contesting answer.

Prior to entry of judgment, defendants moved for reconsideration and to dismiss the complaint, but judgment was entered before that motion was heard. Subsequently, the court denied defendants' motion but directed plaintiff to file proof that it held the note. Plaintiff did not comply, and defendants moved to vacate the judgment and dismiss the complaint. In response to defendants' motion, plaintiff produced a copy of the note that was different than the note it had produced earlier - this one had two additional endorsements, neither of which referred to plaintiff. The judge nonetheless found plaintiff's proofs adequate to establish standing and denied the motion.

On appeal defendants argue, as they did in the trial court, that the notice of intention was deficient for lack of plaintiff's name and address and that plaintiff did not prove by ...

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