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Aurora Loan Services, LLC v. Michael A. Pagano and Janet L. Pagano

December 13, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-38136-08.

Per curiam.


Argued: October 19, 2011

Before Judges Axelrad and Ostrer.

Defendants Michael and Janet Pagano*fn1 appeal from an order entered on February 25, 20ll, which denied their second motion to vacate a default judgment of foreclosure entered against them on August 31, 2009. They assert special circumstances for relief, relying on the catchall provision of Rule 4:50-l(f). We affirm substantially for the reasons articulated by Judge William C. Todd, III.

On July l3, 2007, Michael Pagano executed a note to AHM Mortgage securing a loan in the amount of $999,999. The same day, he and his wife Janet executed a mortgage on their property located in Margate to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for AHM Mortgage, to secure repayment of the note. The mortgage was duly recorded on July 23, 2007. Defendants defaulted on or about June l, 2008.

Plaintiff Aurora Loan Services, LLC filed a foreclosure complaint in September 2008. The complaint expressly stated in the First Count that the note and mortgage were assigned to plaintiff, and specifically, the mortgage was assigned by MERS, as nominee for AHM Mortgage, on September 22, 2008, which was unrecorded at the time.*fn2 Michael then filed a Chapter 7 bankruptcy. On May l8, 2009, plaintiff obtained an order from the Bankruptcy Court vacating the automatic stay, and final judgment of foreclosure by default was entered on August 31, 2009.

Defendants filed a pro se motion to vacate default judgment on October 28, 2009, claiming the corporate assignment of mortgage, along with the original note and mortgage, were not properly recorded with the Atlantic County Clerk. Plaintiff filed opposition. Following oral argument, Judge Todd denied defendants' motion. The memorializing order of December l4, 2009 expressly noted that defendants were advised of their right to participate in the Foreclosure Mediation Program and, if they wished to do so, they should proceed promptly.

The record does not reflect whether defendants participated in the program. Through present counsel they filed their second motion to vacate default judgment on December 20, 2010. They challenged plaintiff's standing as the assignee of the note and mortgage originally made in favor of AHM Mortgage and argued there was deficient title, noting they had raised the issue before the Bankruptcy Court and in their first motion to vacate. Defendants sought relief under Rule 4:50-l(f), relying, in large part, on the purported "new law" articulated by Judge Todd in Bank of New York v. Raftogianis, 418 N.J. Super. 323 (Ch. Div. 2010), that had recently been approved for publication. The case involved a MERS transfer and held that for standing, a foreclosing plaintiff must have had ownership or control of the underlying debt as of the date of the filing of the complaint; in that instance, physical possession of the original note. Id. at 327.

Judge Todd issued a tentative letter opinion on January l9, 20ll, and after receipt of supplemental submissions from counsel, conducted oral argument on February l8, 20ll. In his written and oral decisions, Judge Todd denied defendants' motion as time-barred. The judge noted his December 2009 final order denying defendants' motion to vacate default judgment was not appealed and, to the extent the current motion was considered a motion for reconsideration, it was time-barred. See R. 4:49-2 (requiring a motion for reconsideration to be served no later than twenty days after service of the judgment or order). He also found to the extent the motion to vacate was based on excusable neglect, newly discovered evidence or fraud, it was also untimely as it was filed more than one year after entry of the foreclosure judgment. R. 4:50-l (a), (b), (c).

Judge Todd also found no justification for defendants' delay under Rule 4:50-l(f), "any other reason justifying relief from the operation of the judgment or order," holding that Raftogianis was an explication of existing law, not the expression of a change in law. He explained, From my perspective, Raftogianis did not involve a change in the Law. My Opinion addressed a variety of issues based on the provisions of the UCC and existing case law.

I did not conceive my analysis involved a change in the Law. It simply reflected my analysis of what was required under existing Law. To make the point differently, there were no statutes or reported opinions which would have barred anyone from presenting the legal issues which formed the basis for my decision in Raftogianis. I do not conceive the issuance of that Opinion provides any independent basis for relief as suggested by [defendants'] submission.

Judge Todd additionally found the submissions demonstrated the foreclosure proceeded "with the consent generally of the entity or entities that have the authority to act." He was satisfied, consistent with the Raftogianis analysis and concept of equity, that it was appropriate to look at the underlying transaction. The judge determined that, under the totality of the factual and procedural history, possession of the note after the filing of the complaint was not fatal. Judge Todd found defendants were time-barred from raising any technical defects and concluded that "substantively [the present matter] appear[ed] to be an entirely appropriate foreclosure." His ruling was memorialized in an order of February 25, 2011. This appeal ensued.

On appeal, defendants argue that exceptional circumstances are present to justify vacating the foreclosure judgment. They rely on the general recognition by the judiciary of the need to control the integrity of the judicial foreclosure process and protect pro se residential mortgagors evidenced in its issuance of administrative directives and orders in December 2010. This argument and these orders were not presented to Judge Todd, and are thus not appropriately before us. See Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973) (holding that appellate courts will decline to consider issues not properly presented to the trial court when an opportunity for such a presentation is available ...

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