September 14, 2011
PROPERTY ASSET MANAGEMENT, INC., PLAINTIFF-RESPONDENT,
BARTHOLOMEW MOMANYI, DEFENDANT, AND MILKA MOMANYI, DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLANT,
ACCREDITED HOME LENDERS, INC., THIRD-PARTY DEFENDANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. F-20687-06.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted August 24, 2011
Before Judges Lihotz and Baxter.
Defendant, Milka Momanyi, appeals from the January 6, 2010 final judgment foreclosing her interest in real property located on Long Street in Jersey City (subject realty). The subject realty was owned by Bartholomew Momanyi, who took title prior to his marriage to Milka.*fn1 Thereafter, Bartholomew vacated the residence while Milka continued to reside in the home, but she was not paying the mortgage.
Foreclosure was commenced by Property Asset Management, Inc., (PAM) a wholly owned subsidiary of Lehman Brothers Bank, FSB (Lehman). PAM is the assignee of the original mortgagee, Accredited Home Lenders, Inc. (AHL). After several procedural motions, Milka was permitted to contest the foreclosure. She filed an answer and counterclaim, asserting PAM lacked standing to proceed, and, relying on N.J.S.A. 3B:28-3, argued that plaintiff's complaint violated her right of joint possession in the marital home. Milka also filed a third-party complaint against AHL alleging violations of the Truth in Lending Act, 15 U.S.C.A. §§ 1601-1667(f) (TILA) and New Jersey's Home Ownership Security Act of 2002, N.J.S.A. 46:10B-22 to -35 (HOSA). The chancery court rejected each of these arguments, dismissed the third-party complaint for failure to state a claim for relief, ordered the summary judgment dismissal of Milka's answer and counterclaim, and entered a final judgment of foreclosure.
On appeal, Milka renews the arguments presented to the trial court. We affirm the trial court's determination that PAM had standing to proceed as the party in interest in the foreclosure. We also conclude the third-party complaint was properly dismissed. However, the record is insufficient to determine whether Milka's claims under N.J.S.A. 3B:28-3 were extinguished. Therefore, in the absence of an adequate factual record, summary judgment was improvidently granted. We reverse the October 20, 2008 order granting summary judgment to PAM as well as the January 6, 2010 final judgment of foreclosure based upon that order. We remand for further proceedings as discussed in this opinion.
The subject realty was purchased by Bartholomew on March 13, 2003. However, the grantee recorded on the March 13, 2003 deed was "Bartholomew Momanyi, married." The initial purchase money mortgage, in the approximate amount of $123,000, was held by Freemont Investment and Loan. Bartholomew and Milka married in a civil ceremony on April 22, 2003, some six weeks after Bartholomew had purchased the property. Milka asserts she provided $22,000 toward the purchase of the subject realty and made the mortgage payments thereafter.
On April 4, 2005, Bartholomew alone refinanced the mortgage obligation, increasing the indebtedness to $233,750. He completed a second refinance on November 23, 2005. In this transaction, Bartholomew, but not Milka, executed an adjustable rate note in the amount of $274,500. The indebtedness was secured by a mortgage held by third-party defendant, AHL, through its nominee Mortgage Electronic Registration Systems, Inc. The recorded mortgage reflects Milka's name had initially been included on the document, but Bartholomew crossed it off and initialed the change. Additionally, Bartholomew executed a corrective deed "[t]he purpose [of which was] to correctly vest title in the proper marital status of Bartholomew Momanyi, unmarried." On December 2, 2005, Bartholomew vacated the residence and Milka continued to reside in the home with the parties' children.
Milka did not remain current on the mortgage obligation and defaulted on August 1, 2006. Since the default, the mortgage has not been paid.*fn2 PAM commenced foreclosure on November 8, 2006. The complaint named "Bartholomew Momanyi and Mrs. Bartholomew Momanyi, his wife" as defendants. After entry of default, a final judgment of foreclosure was filed on February 15, 2007.
During this time another action involving Milka and Bartholomew was pending. Milka filed a complaint for divorce on November 29, 2006. On April 2, 2007, Bartholomew answered and filed a counterclaim for divorce, which stated he resided on Garfield Avenue in Jersey City. Because the parties failed to prosecute their respective claims, the court dismissed the pleadings, without prejudice, on March 20, 2008.
In January 2007, prior to dismissal of her divorce complaint, Milka moved to vacate the default judgment entered in the foreclosure action and contested PAM's standing to proceed with foreclosure. Her request to vacate the default was granted and, by order dated January 8, 2008, she was permitted to file a contesting answer. She also filed a counterclaim against PAM and a third-party complaint against AHL. In an amended answer, Milka asserted she retained the statutory right of joint possession in the subject realty provided for in N.J.S.A. 3B:28-3. AHL's motion to dismiss Milka's third-party complaint for failure to state a claim for relief was granted. PAM then filed a motion for summary judgment, which Milka opposed with a motion to dismiss for lack of standing. The trial judge ordered an evidentiary hearing to discern the owner of record of the mortgage debt.
It is common for a mortgage lender to employ a servicing agent to tackle day-to-day tasks regarding a residential loan including the monthly collection of mortgage payments from the borrower, responding to the borrower's inquiries, maintaining the principal and interest allocation, remitting quarterly tax payments and maintaining property and casualty insurance. Oftentimes, loan servicers also address delinquent payments with a borrower and initiate foreclosure actions. In this matter, Jaime Walls, a foreclosure litigation specialist for Wells Fargo Home Mortgage, d/b/a American Servicing Company (ASC), was the only testifying witness during the evidentiary hearing. Walls stated ASC was servicing the loan for PAM, the wholly owned subsidiary of Lehman, through a pooling and service agreement. Walls testified Lehman purchased the loan with a pool of other loans from AHL on June 19, 2006, as reflected in an assignment and conveyance agreement admitted into evidence. AHL then executed an assignment of its interest to PAM on December 4, 2006, which was recorded on March 26, 2007.
Walls stated PAM was owned by Lehman. To support this, Walls identified two documents she obtained: first, a certificate from the Delaware Secretary of State showing PAM had formerly been known as LB Real Properties Corp. II, and second, a statement from Aaron Guth, acting Assistant Secretary of Lehman Brothers Holdings, Inc., a Delaware corporation (LBHI), stating LBHI owns Lehman ALI, Inc. (ALI), a mortgage investment subsidiary of Lehman, which has owned PAM as a wholly owned subsidiary since November 16, 1989. ASC had serviced the loan since August 1, 2006. Walls called its agent and verified the original note was held in the corporate origination file. At the close of evidence, the court reserved its opinion.
On October 20, 2008, the chancery court, in an oral opinion, granted summary judgment in favor of PAM, striking and suppressing Milka's defenses and allowing the complaint to proceed as an uncontested action. Final judgment of foreclosure was entered on January 6, 2010.
On appeal, Milka challenges as error, the trial judge's determination that PAM was the proper party to proceed with foreclosure, noting PAM recorded its assignment after the foreclosure complaint was filed. She also argues her statutory right under N.J.S.A. 3B:28-3 allows her continued occupancy of the subject realty which cannot be defeated by the foreclosure judgment. Further, she maintains her claims under TILA and HOSA as expressed in the third-party complaint, should not have been dismissed.
In conformity with well-established principles, we review the motion court's summary judgment conclusions de novo. Estate of Hanges v. Metro. Prop. Ins. Co., 202 N.J. 369, 382-83 (2010). No deference is given to the legal conclusions reached by the trial judge. City of Atl. City v. Trupos, 201 N.J. 447, 463 (2010). In our review, we apply the same standard as the trial court. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.) (citing Antheunisse v. Tiffany & Co., 229 N.J. Super. 399, 402 (App. Div. 1988), certif. denied, 115 N.J. 59 (1989)), certif. denied, 154 N.J. 608 (1998). The "essence of the inquiry" is "'whether the evidence presents a sufficient disagreement to require submission to a [fact finder] or whether it is so one-sided that one party must prevail as a matter of law.'" Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202, 214 (1986)). Accordingly, after viewing the facts in the light most favorable to the non-moving party, Hodges v. Sasil Corp., 189 N.J. 210, 215 (2007), summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); Brill, supra, 142 N.J. at 528-29.
We first address the threshold issue of standing. Milka challenges PAM's standing to initiate the foreclosure proceeding, arguing the assignment of the mortgage postdated the foreclosure complaint.
The threshold question is whether PAM had a stake in the litigation when it filed this foreclosure matter.
New Jersey cases have historically taken a much more liberal approach on the issue of standing than have the federal cases. A sufficient stake in the matter and a genuine adverseness are the basic requirements of standing. A party need show only a "substantial likelihood" that he or she will experience "some harm" in the event of an unfavorable decision. A financial interest in the outcome ordinarily is sufficient to confer standing. [Strulowitz v. Provident Life & Cas. Ins. Co., 357 N.J. Super. 454, 458-59 (App. Div. 2003), certif. denied, 177 N.J. 220 (2003) (internal citations omitted).]
PAM's submitted documentation verifies the mortgage was sold by AHL to Lehman pursuant to a conveyance document dated June 29, 2006, preceding the foreclosure litigation. The Delaware Secretary of State Office's verification of the name change of the Lehman Brothers' entities from LB Real Properties Corp. II to Property Asset Management, Inc. occurred in 1992. Finally, the documents reflect Lehman placed the asset with PAM, its wholly owned subsidiary.
We determine the evidence sufficiently supports the trial court's finding that PAM in fact became the owner of the note, originally sold to Lehman by AHL. The mortgage securing the debt was assigned on December 4, 2006, prior to the initiation of the foreclosure matter. PAM's financial interest in the note secured by the mortgage sufficiently confers standing to foreclose. Triffin v. Somerset Valley Bank, 343 N.J. Super. 73, 81 (App. Div. 2001).
Further, the actual date the assignment was recorded does not alter the ownership interest of the asset or eviscerate PAM's standing to initiate this action. Even an unrecorded assignment of a mortgage remains valid, and the assignee assumes the estate at the date it was conveyed by the assignor. EMC Mortg. Corp. v. Chaudhri, 400 N.J. Super. 126, 141 (App. Div. 2008); see also N.J.S.A. 46:9-9. We concur with the trial judge's conclusion that PAM was the proper party to pursue foreclosure.
Milka next argues her contribution to the purchase price of the home and her subsequent marriage to Bartholomew triggered a statutory right to joint possession pursuant to N.J.S.A. 3B:28-3(a), which vested prior to the execution of the debt now owed to PAM and remains unaffected by foreclosure. Rather than respond to this issue, PAM bootstraps its argument to the assertion that the court has adjudicated Milka's rights as extinguished. We review the statute at issue, guided by well-settled principles.
Our Supreme Court has emphasized repeatedly that "[i]n the interpretation of a statute our overriding goal has consistently been to determine the Legislature's intent." Young v. Schering Corp., 141 N.J. 16, 25 (1995) (citing Riog v. Kelsey, 135 N.J. 500, 515 (1994)). "[I]t is a general principle of statutory construction that 'statutes are to be read sensibly rather than literally and the controlling legislative intent is to be presumed as consonant to reason and good discretion.'" Parker v. Esposito, 291 N.J. Super. 560, 566 (App. Div.) (internal quotation marks omitted), (quoting Schierstead v. Brigantine, 29 N.J. 220, 230 (1959)), certif. denied, 146 N.J. 566 (1996).
In construing the meaning of a statute, our task is well defined: Construction of any statute necessarily begins with consideration of its plain language. Such language should be given its ordinary meaning, absent a legislative intent to the contrary. The primary task for the Court is to effectuate the legislative intent in light of the language used and the objects sought to be achieved. The Court fulfills its role by construing a statute in a fashion consistent with the statutory context in which it appears. [Municipal Council v. James, 183 N.J. 361, 370-371 (2005) (internal citations and quotation marks omitted).
Finally, "[w]here the Legislature's intent is remedial, a court should construe a statute liberally." Young, supra, 141 N.J. at 25.
Milka's entitlement claims are grounded on the rights bestowed on spouses in the marital residence stated in N.J.S.A. 3B:28-3. The Legislature replaced the rights of dower and curtesy with the statutory right of joint possession as follows:
a. During life every married individual shall be entitled to joint possession with his spouse of any real property which they occupy jointly as their principal matrimonial residence and to which neither dower nor curtesy applies. One who acquires an estate or interest in real property from an individual whose spouse is entitled to joint possession thereof does so subject to such right of possession, unless such right of possession has been released, extinguished or subordinated by such spouse or has been terminated by order or judgment of a court of competent jurisdiction or otherwise.
c. The right of joint possession shall be extinguished by the consent of both parties, by the death of either spouse, by judgment of divorce, separation or annulment, by other order or judgment which extinguishes same, or by voluntary abandonment of the principal matrimonial residence. [N.J.S.A. 3B:28-3 (a), (c).]
Under the statute, no matter which spouse holds the legal title, when once, as married persons, they together occupy property as their principal marital residence, both have a right to the continued possession of it so long as their marriage endures and neither can affect the right of possession of the other without consent, except by judgment by a court of competent jurisdiction. [Pelow v. Pelow, 300 N.J. Super. 634, 642 n.4 (Ch. Div. 1996).]
The right to joint tenancy, conferred by N.J.S.A. 3B:28-3 "was enacted concurrently with the repeal of dower and curtesy." Arnold v. Anvil Realty Inv., Inc., 233 N.J. Super. 481, 484 (App. Div. 1989). The statute confers a right, which is "more substantial than a mere right to live in the marital dwelling." Id. at 486.
It is clear the statute precludes the unilateral sale of the marital home by the owner of record. Conveyance of the marital residence by the spouse who holds title without the consent of the non-titled spouse will not extinguish the latter's right to joint possession. In re Rosa, 261 B.R. 136, 139 (Bankr. D.N.J. 2001) (citing Arnold, supra, 233 N.J. Super. at 487). Accordingly, "[a] purchaser who takes title with knowledge that the record owner is married, and who does not obtain the consent of the other spouse, is liable in damages to the other spouse on account of the right to joint possession." Ibid. See also Pilone v. Blanda, 226 N.J. Super. 397, 402 (Ch. Div. 1988).
We also agree with Milka that N.J.S.A. 3B:28-3 is not limited to sales of the marital home. Subsection (a) specifically makes the statute applicable to "[o]ne who acquires an estate or interest in real property from an individual whose spouse is entitled to joint possession[,]" an instance that encompasses mortgage encumbrances. N.J.S.A. 3B:28-3(a). Moreover, N.J.S.A. 3B:28-3.1 discusses the event of foreclosure on the non-titled spouse's interest upon the default on the mortgage obligation incurred solely by the titled spouse, stating:
The right of joint possession to the principal matrimonial residence as provided in N.J.S.[A.] 3B:28-3 is subject to the lien of a mortgage, irrespective of the date the mortgage is recorded, provided:
a. The mortgage is placed upon the matrimonial residence prior to the time that title to the residence was acquired by the married individual; or
b. The mortgage is placed upon the matrimonial residence prior to the marriage; or
c. The mortgage is a purchase money mortgage; or
d. The parties to the marriage have joined in the mortgage[.] [N.J.S.A. 3B:28-3.1.]
On the limited record provided, we determine none of the categories enumerated in N.J.S.A. 3B:28-3.1 apply to the facts at hand. Therefore, the question remains whether Milka's rights of joint possession may be extinguished by the final judgment of foreclosure.
Milka cites Arnold, supra, 233 N.J. Super. at 481, asserting her statutory right of joint possession is superior to and unaffected by foreclosure judgment. We determine her reliance on Arnold is not dispositive.
In Arnold, the plaintiff/non-titled spouse sought to join in the parties' divorce action, Anvil Realty Investment, Inc., the buyer of the former marital home, which had been inherited solely by defendant/wife, alleging the buyer accepted the deed knowing the defendant was married. Id. at 483. We affirmed the trial court's award of an equitable distribution interest to plaintiff in the value of the realty along with the order making the buyer, who participated in the alienation of the realty to deprive the plaintiff of his interest, jointly liable with defendant for payment. Id. at 484. We noted N.J.S.A. 3B:28-3 protected a spouse's interest in the marital residence. Id. at 485. We stated "[t]he trial court's ruling . . . that [the wife]'s conveyance of her husband's statutory interest in their principal residence to Anvil Realty was invalid because [it was] made without his knowledge and consent, [which] is required by the spirit of these precedents, [and] . . . by the language and purpose of N.J.S.A. 3B:28-3." Ibid.
We also addressed Anvil's argument that once the plaintiff left the marital home his statutory rights under N.J.S.A. 3B:28-3 were extinguished. Id. at 487. The plaintiff was removed from the residence, following a finding of domestic violence. Id. at 486-87. We did not decide "when and under what circumstances, if any, a husband's or a wife's leaving their principal marital residence" extinguished "his or her legal interest in the dwelling." Id. at 486. We held only that in the circumstances of this case, "that right was not extinguished by [the plaintiff's] leaving, and Anvil had no justifiable reason to believe the contrary." Ibid.
In the matter here presented, the record does not contain evidence of whether PAM's predecessor, AHL, knew Bartholomew was married when he refinanced the mortgage. Bartholomew crossed out Milka's name on the mortgage documents and executed a deed of correction stating he was unmarried. We have not been provided with the reason for these actions. Further, unlike the plaintiff in Arnold, supra, 233 N.J. Super. at 483, Milka did not assert her statutory rights under N.J.S.A. 3B:28-3 in the divorce action while it was pending. Actual knowledge of the mortgagor's marital status bears heavily when examining a mortgagee's role in accepting the mortgage without joining the non-titled spouse. See also Wamco XV Ltd. v. Farrell, 301 N.J. Super. 73, 79 (App. Div. 1997).
We conclude Milka held the statutory right of joint possession in the marital home at the time Bartholomew executed the note and mortgage with AHL. The further issue of whether that right was extinguished cannot be determined on this record.
The trial court focused on Milka's failure to prosecute her divorce claims, stating she allowed the complaint to be administratively dismissed. R. 1:13-7. Based upon this, the trial judge concluded Milka could have enforced her right of joint possession pursuant to N.J.S.A. 3B:28-3, by pressing her claim to receive an equitable share of any value in the former marital home, which would also require allocation of any debts. N.J.S.A. 2A:34-23(h) and N.J.S.A. 2A:34-23.1(m). The trial judge reasoned Milka could not continue to reside in the subject property while not prosecuting her divorce action, "thereby giving the lender no remedy." Consequently he ordered the right of joint possession extinguished.
We reject the trial court's conclusion that Milka's rights are extinguished and conclude the record is insufficient to support that conclusion. In her deposition Milka asserts she had no knowledge of the AHL refinance and claims Bartholomew stated he would be paying the mortgage. Further, whether AHL knew Bartholomew was married at the time the debt was incurred and, if not, what impact that may have on Milka's rights under all facts and circumstances must be determined. Finally, we disagree with the trial judge that PAM is without a remedy. PAM can remit to Milka the value of her interest and proceed with final judgment. The trial court must determine that value.
We agree, however, with the trial judge's finding that equity requires a review of other issues. For example, the court must decide whether the dismissal of the divorce action and the resultant time lapse in Milka's assertion of her right of joint possession equated to sleeping on her rights, amounted to an act of bad faith, or possibly worked a waiver of her interest. See Faustin v. Lewis, 85 N.J. 507, 511 (1981) (holding "that a court should not grant relief to one who is a wrongdoer with respect to the subject matter in suit"). Further, the question of whether any delay prejudiced PAM must be examined, along with a determination of any equitable relief afforded in such instance. Milka never sought leave to appeal from the entry of the October 20, 2008 order, rather she waited until the February 16, 2010 final judgment of foreclosure. The chancery court must examine whether the value of Milka's joint possession interest should be offset by the value she received by occupying the subject property without payment.
Our comments do not suggest we have reached any conclusions on any of these questions. We mention the scenarios only to identify the types of necessary factual determinations not resolvable on the summary judgment record. We remand for further proceedings and, as necessary, an evidentiary hearing to air the party's respective proofs.
Milka additionally asserts the court erred in dismissing her third-party complaint asserting claims under TILA and HOSA. We reject these assertions as without merit. R. 2:11-3(e)(1)(E).
TILA and HOSA protect borrowers and owners respectively from unfair mortgage practices. Under TILA, Milka is not considered a borrower and is not obligated to repay the mortgage. 15 U.S.C.A. § 1601. Further, Milka's interest in the subject realty is not an ownership interest as required by HOSA. N.J.S.A. 46:10B-24.
We affirm the trial court's dismissal of Milka's third-party complaint against AHL and the order concluding PAM is the proper party in interest and has standing to proceed with foreclosure of the subject realty. We reverse the summary judgment dismissal of Milka's answer and counterclaim and remand to the Chancery Division for further proceedings consistent with this decision. We do not retain jurisdiction.
Affirmed in part and reversed and remanded in part.