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Chase Home Finance, LLC v. Frank P. Cunder


December 14, 2011


On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. F-14067-06.

Per curiam.


Submitted March 23, 2011

Before Judges Axelrad and R. B. Coleman.

In this foreclosure action on a mortgage, defendant Frank P. Cunder, the mortgagor, appeals from orders granting summary judgment in favor of plaintiff Chase Home Finance, LLC, the mortgagee bank, and denying defendant's subsequent motions for relief. We affirm.

On December 2, 1985, defendant obtained from Carteret Savings and Loan a mortgage loan on property located at 1101 Hickory Court in South Brunswick in the amount of $99,000 which was subsequently assigned to plaintiff Chase Manhattan Mortgage. Defendant defaulted on the mortgage loan and a final judgment of foreclosure was entered on January 4, 2004. On July 28, 2004, the mortgaged property was sold at a sheriff's sale to third-party bidder, Nicholas Bouloubasis, and a deed was issued to Bouloubasis on August 11, 2004.

On September 21, 2004, defendant moved to vacate the sheriff's sale, asserting that he had not been notified. On October 4, 2004, Judge Travis L. Francis entered an order vacating the sheriff's sale and declaring that both the sheriff's deed issued to the third-party bidder as well as the County Clerk's recording of that deed were deemed "null and void." The order, however, did not vacate the final judgment. The October 4, 2004 order required defendant to reimburse the third-party bidder for all out-of-pocket expenses in connection with the vacated sale. It was later determined the order was never recorded due to an error by attorneys, the firm of Fein, Such, Khan & Shepard (FSKS), in transmitting it to the County Clerk's office. On November 29, 2004, defendant paid $4,006 to the bidder for out-of-pocket expenses.

Defendant failed again to make timely mortgage loan payments and in March 2005, plaintiff filed a second notice of sheriff's sale on the property. Defendant paid monies due to plaintiff sufficient to reinstate the defaulted mortgage loan and on May 18, 2005, the second sheriff's sale was canceled. On June 30, 2005, the final judgment of foreclosure in connection with the March 2005 complaint was vacated.

From February 1, 2006 forward, defendant failed to make payments to plaintiff on the mortgage loan. On May 19, 2006, plaintiff sent defendant a notice of its intent to foreclose on the defaulted loan. On September 14, 2006, plaintiff notified defendant of options for assistance to mitigate the delinquent status of his mortgage loan.

On October 11, 2006, the trial court issued another order, which corrected the recording reference of the October 4, 2004 order and vacated the earlier sheriff's sale to the third-party bidder. Defendant's counsel recorded a certified copy of the October 4 order with the Clerk of Middlesex County on November 29, 2006.*fn1

Based on defendant's non-payment to the mortgagee, plaintiff filed a new foreclosure complaint. Defendant answered and admitted that he had defaulted on the loan. Plaintiff moved for summary judgment and on August 3, 2007, the trial court granted the unopposed motion and permitted the matter to proceed to final judgment. Ten months after plaintiff's motion for summary judgment was granted, defendant filed a motion to vacate the judgment, arguing that he did not have an opportunity to be heard because he was not advised of a new return date. On August 4, 2008, defendant's motion to vacate the prior summary judgment and re-list the matter for hearing on September 19, 2008 was granted by Judge Frank M. Ciuffani.

Thereafter, defendant's counsel filed opposition to plaintiff's motion for summary judgment alleging that FSKS was responsible for recording the October 4, 2004 order that vacated the sheriff's sale and nullified the deed of the third-party bidder. Defendant also alleged that as a result of FSKS's failure to record the order, he did not have record title and was unable to obtain refinancing from other lenders to lower the 11.875 percent interest rate on his mortgage loan.

On October 21, 2008, Judge Ciuffani issued an oral decision, memorialized in an order of the same date, granting plaintiff summary judgment, striking defendant's defenses, and permitting the matter to proceed to judgment as uncontested. The judge reasoned that: (1) the order of October 4, 2004 automatically gave title of the property to defendant; (2) that FSKS had no legal duty to record the order vacating the sale for defendant's benefit; and (3) that defendant himself or his counsel could have readily recorded the order at any time.

On December 3, 2009, final judgment was entered by Judge Maria M. Sypek foreclosing any equity of redemption and ordering that the property be sold at a sheriff's sale to satisfy the amount due under the defaulted mortgage loan. On May 10, 2010, the Chancery Division denied defendant's motion to stay the sheriff's sale, scheduled on May 12, 2010. Defendant filed an emergent application to stay the sheriff's sale pending appeal, which we denied. The property was sold at the sheriff's sale on May 12, 2010.

Defendant appealed. He argues that: (1) plaintiff should not have been permitted to foreclose because of its seriously-flawed prior foreclosure sale that adversely affected defendant's rights; (2) summary judgment was not appropriate as plaintiff did not comply with discovery requests and material issues of fact remained; and (3) plaintiff's actions impeded his rights under the Bankruptcy Code to protect his right from foreclosure. Based on our review of the record and applicable law, we are not persuaded by any of these arguments and affirm substantially for the reasons articulated by Judge Ciuffani.


We first address defendant's contention that plaintiff, as mortgagee, had no right to foreclose since its own actions caused defendant to default on the mortgage payments. In particular, defendant argues that plaintiff's attorneys, FSKS, had a duty to file and record the October 4, 2004 order and as a result of FSKS's failure to do so, defendant was unable to regain title to his property to refinance his mortgage at a lower interest rate. Judge Ciuffani, in granting summary judgment in favor of plaintiff, found that:

It's the failure to record the copy of the order which Mr. Cunder asserts was the responsibility of plaintiff's counsel that is the center point of his defense in this foreclosure action because he . . . alleges as a result of that failure that he was prevented from making payments on his mortgage, or his primary theory is that he was prevented from refinancing, from applying for and obtaining financing from another lender which would be sufficient to pay in full the balance due plus -- plus interest on plaintiff's mortgage in this foreclosure action.. . . .

This court finds on this record that there is no genuine material issue for trial. The claim of Mr. Cunder through his counsel that plaintiff's counsel had an obligation to record the order has no legal basis. Mr. Cunder could have recorded the order, his attorney could have recorded the order, the order itself does not specify whose obligation it is to record the order.

Moreover, the failure to record the order is of no significance . . . . [Defendant] only lost title as a result of the Sheriff's Sale and Sheriff's deed, which was declared null and void nunc pro tunc. Therefore, as a matter of law he had title to the property in question.

Now, he says in a certification to this court that when he went to various different potential lenders to try and refinance he disclosed that he didn't have title. Well, the fact that he was under a mistake, mistake of law, is of no legal significance. In fact he had legal title . . . . That was the substance of the order that was entered by Judge Francis. [T]he ministerial act of . . . recording the copy of the order in the Clerk's Office, as the court observed, was something that very easily could have been taken care of either prior to or -- or even subsequent to a loan closing on any refinancing. He had title as a result of Judge Francis' October 4, 2004 order. He could have proceeded to attempt to obtain refinancing and, if he qualified, as -- and a title search was ultimately leading up to a closing on that new loan and if it disclosed that there was still of record the Sheriff's deed, he had Judge Francis' order, which would have -- could have easily been disclosed to the title company, to the lender and could have very easily been recorded, a copy of that order, removing any reservation that anyone might have as to whether or not Mr. Cunder had title. So his mistake as to the significance of Judge Francis' order is not a valid defense to this foreclosure action.

"The only material issues in a foreclosure proceeding are the validity of the mortgage, the amount of the indebtedness, and the right of the mortgagee to resort to the mortgaged premises." Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993) (citing Cent. Penn Nat'l Bank v. Stonebridge, Ltd., 185 N.J. Super. 289, 302 (App. Div. 1982)). "Both state law and common law have established that a mortgagee maintains the absolute right to foreclose and accelerate against a defaulting mortgagor, so long as the alleged default is not attributable to the mortgagee's conduct." Chase Manhattan Mortg. Corp. v. Spina, 325 N.J. Super. 42, 50 (Ch. Div. 1998), aff'd, 325 N.J. Super. 1 (App. Div. 1999). "[A]ny conduct of a mortgagee known to the mortgagor prior to the institution of a foreclosure that could be the basis of an independent action for damages by reason of the mortgagee having brought the foreclosure could be raised as an equitable defense in the foreclosure." Joan Ryno v. First Nat'l Bank, 208 N.J. Super. 562, 570 (App. Div. 1986).

Here, defendant does not dispute the validity of the mortgage or that he was in default. Rather, he argues plaintiff's attorneys owed a duty to record an order. Defendant claims that this duty was created by communications with FSKS after the October 4 order. In support of this contention, defendant points to the following evidence: (1) at the time plaintiff filed the motion for summary judgment, defendant's counsel distinctly recalled in his certification that "FSKS was to record the Order Vacating Sale"; (2) "FSKS had prepared and recorded the Sheriff's Deed, so it simply made sense that they would prepare and record the Order Vacating Sale"; (3) FSKS promised to calculate the interest owed to third-party bidder in order for defendant to regain title; and (4) defendant called, faxed and visited FSKS after the entry of the order because he was relying upon them to restore title.

Summary judgment is only appropriate when there are no genuine issues as to the material facts. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 539-40 (1995); Judson v. Peoples Bank & Trust Co. of Westfield, 17 N.J. 67, 73-75 (1954). However, neither fanciful arguments nor disputes as to irrelevant facts will make an issue such as will bar a summary decision. Judson, supra, 17 N.J. at 73-75. Mere sworn conclusions of ultimate facts, without material basis or supporting affidavits by persons having actual knowledge of the facts, are insufficient to withstand a motion for summary judgment. N.J. Mort. & Inv. Corp. v. Calvetti, 68 N.J. Super. 18, 32 (App. Div. 1961). We find that defendant's proffer of evidence are bare assertions insufficient to defeat summary judgment. See U.S. Pipe & Foundry Co. v. Am. Arbitration Ass'n, 67 N.J. Super. 384, 399-400 (App. Div. 1961).

We agree with Judge Ciuffani that plaintiff's former attorneys, FSKS, did not have a duty to record the October 4, 2004 order. In Petrillo v. Bachenberg, 139 N.J. 472, 483-84 (1995), the Court "recognize[d] that attorneys may owe a duty of care to non-clients when the attorneys know, or should know that non-clients will rely on the attorneys' representations and the non-clients are not too remote from the attorneys to be entitled to protection." The existence of such a duty to non-client third parties "depends on balancing the attorney's duty to represent clients vigorously, with the duty not to provide misleading information on which third parties foreseeably will rely." Id. at 479 (citing RPC 1.3 and RPC 4.1). Further, "[t]he determination of the existence of a duty is a question of law for the court." Ibid. (citing Wang v. Allstate Ins. Co., 125 N.J. 2, 15 (1991)). "[T]he basic concept of duty . . . balances 'the relationship of the parties, the nature of the attendant risk, the opportunity and ability to exercise care, and the public interest in the proposed solution.'" Banco Popular N. Am. v. Gandi, 184 N.J. 161, 179 (2005) (quoting Hopkins v. Fox & Lazo Realtors, 132 N.J. 426, 439 (1993)). In Banco Popular, the Court explained:

If the attorney[']s actions are intended to induce a specific non-client[']s reasonable reliance on his or her representations, then there is a relationship between the attorney and the third party. Contrariwise, if the attorney does absolutely nothing to induce reasonable reliance by a third party, there is no relationship to substitute for the privity requirement. [Id. at 180.]

In Stewart v. Sbarro, 142 N.J. Super. 581, 585 (App. Div.), certif. denied, 72 N.J. 459 (1976), an attorney for the buyers of a corporation agreed to obtain the buyers' signatures on a bond indemnifying the sellers against liability for existing corporate debt. The attorney failed to obtain the required signatures. Ibid. As a result, the debt was unsecured. Id. at 586-87. When the buyers filed a bankruptcy petition, the sellers sued their own attorney, the buyers, and the buyers' attorney for the unpaid debt. Id. at 586. We determined that the buyers' attorney could be liable in negligence for breaching a duty to the sellers. Id. at 593. We reasoned that when an attorney should foresee that a third party may rely on the attorney's promise to act, a duty attaches. Ibid.

In LaBracio Family Partnership v. 1239 Roosevelt Avenue, Inc., 340 N.J. Super. 155, 158 (App. Div. 2001), the plaintiff sold its diner and took a mortgage on the property. The purchaser's attorney, Abazia, failed to record the mortgage after the purchaser physically assaulted him and took the file.

Id. at 159. Abazia notified the plaintiff's attorney, Kroop, that the mortgage remained unrecorded. Ibid. The plaintiff's file was then transferred to attorney Burger, who also failed to record the mortgage. Ibid. After the purchaser returned the deed and mortgage, Kroop recorded same in November 2003. Ibid. However, in July and August 2003, the purchaser granted mortgages to two other mortgagees, whose mortgages became superior to the plaintiff's mortgage because they were recorded first. Ibid. The plaintiff sued, and eventually settled with both Kroop and Abazia. Id. at 160. However, one of the attorneys (presumably Abazia) had filed a fourth-party suit against Burger, and the issue remaining for decision was whether Burger was liable for the malpractice committed against the plaintiff. Ibid. We held that there was substantial evidence to show that buyer's second attorney was negligent in failing to record the mortgage, and that he had a duty to sellers to do so even though the sellers were not his clients. Id. at 160-61.

Here, FSKS did not induce a foreseeable reasonable reliance. See Banco Popular, supra, 184 N.J. at 179-80. The order does not direct FSKS to record, and defendant or his counsel, had ample opportunity to record to regain title. Unlike LaBracio, where the buyer was depending on the attorneys to record in order to establish the priority to its mortgage, FSKS did not have a duty to record the order for defendant to regain title.

Moreover, defendant's title was not dependent on the recording of the order and he, or his former counsel, could have recorded the order themselves. Although FSKS may have had a duty not to provide defendant with inaccurate and unreliable information, defendant did not proffer any evidence that FSKS breached that duty or misrepresented any material fact to defendant. In addressing this argument, Judge Ciuffani concluded that:

Even if the court were to find that [FSKS] bore some responsibility to record the order, this court finds as a matter of law the failure to record the order did not prevent Mr. Cunder from applying for refinancing, as he contends. He had an order vesting title in himself. He was the owner of the property. . . . The fact that he misunderstood is . . . of no legal significance[.]

Defendant does not dispute non-payment of the mortgage loan and in turn, plaintiff was within its rights to foreclose on the property. Chase supra, 325 N.J. Super. at 50 ("[A] mortgagee maintains the absolute right to foreclose and accelerate against a defaulting mortgagor, so long as the alleged default is not attributable to the mortgagee's conduct.").

Significantly, defendant cannot prove that he would have even obtained a new loan at a lower interest rate. "Every courtship does not lead to marriage. Every refinancing application does not guarantee acceptance." Nat'l Cmty. Bank of N.J. v. G.L.T., Indus., Inc., 276 N.J. Super. 1, 4 (App. Div. 1994) (declining to enforce an oral agreement to restructure a mortgage). The court should not intervene to halt a foreclosure action "in the interest of justice and equity" where defendant claims an inability to refinance a loan unless "the equities are compelling." Mountain Ridge Building and Loan Assoc. v. M.W. Holding Co., 115 N.J. Eq. 52, 54 (Ch. 1933) (holding "world-wide financial emergency" and the consequent inability of defendants to refinance their mortgage was not a defense to a foreclosure action). In addition, after the 2004 order was properly recorded in October 2006, defendant never attempted to refinance the property.

Next, defendant avers, for the first time on appeal, that plaintiff had unclean hands in the foreclosure process and intentionally obstructed the implementation of the order vacating the sale. Defendant points out that despite fully reimbursing the third-party bidder for his out-of-pocket expenses, FSKS*fn2 insisted that defendant pay accrued interest before regaining title to his property. Defendant's argument has no merit.

"Foreclosure is an equitable remedy governed by the operation of traditional equitable principles and is subject to the defense of unclean hands." N.J. Bank v. Azco Realty Co., 148 N.J. Super. 159, 166 (App. Div.), certif. denied, 74 N.J. 280 (1977). Estoppel is an equitable remedy that only applies when the borrower can show that the mortgagee has acted in bad faith to cause the borrower's default. Prudential Ins. Co. of Am. v. Jackson, 270 N.J. Super. 510, 518-20 (App. Div. 1994).

We agree with Judge Ciuffani that defendant failed to raise an issue of material fact that FSKS acted in bad faith to cause defendant to default on the mortgage loan. Defendant explains that "I do not know how to emphasize enough that I truly believed I was doing everything in my power to regain title. I honestly thought that I needed FSKS to acknowledge that I had complied with the Order and that only FSKS could return title to me." There is no evidence in the record that FSKS intentionally obstructed defendant's right to title of the property to support a claim of unclean hands.


Defendant argues that since discovery was not provided by plaintiff, he was unable to raise a genuine issue of material fact as to whether FSKS intentionally obstructed defendant's right to regain title to his property. Defendant states that he requested FSKS notes, internal FSKS memos, telephone logs and various other documents to support his claim that FSKS's attorneys obstructed his path to regain title of the property. Generally, where discovery is not complete, summary judgment is not appropriate, at least where it is clear that at least one of the parties still wishes discovery. See, e.g., Crippen v. Cent. Jersey Concrete Pipe Co., 176 N.J. 397, 409 (2003). However, "discovery is intended to lead to facts supporting or opposing an asserted legal theory; it is not designed to lead to formulation of a legal theory." Camden Cnty. Energy Recovery Assocs, L.P. v. N.J. Dept. of Envtl. Prot., 320 N.J. Super. 59, 64 (App. Div. 1999), aff'd o.b., 170 N.J. 246 (2001).

Defendant was required to show by competent evidential material that a genuine issue of material fact did exist. James Talcott, Inc. v. Shulman, 82 N.J. Super. 438, 443 (App. Div. 1964). Speculation does not meet the evidential requirements which would allow it to defeat a summary judgment. O'Loughlin v. Nat'l Cmty. Bank, 338 N.J. Super. 592, 606-07 (App. Div.), certif. denied, 169 N.J. 606, (2001). Defendant presents no material basis to support his argument that FSKS acted in bad faith besides his sworn conclusions and presents no basis that plaintiff's discovery was incomplete. This assertion is not sufficient to defeat summary judgment. See U.S. Pipe & Foundry Co., supra, 67 N.J. Super. at 399-400.

The rest of plaintiff's arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).


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