July 25, 2012
HSBC BANK USA AS TRUSTEE FOR OMAC 2005-5, PLAINTIFF-RESPONDENT,
DENNIS ULVERSOY, DONALD VINCENT, DEFENDANTS-APPELLANTS, AND MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR OPTEUM FINANCIAL SERVICES, LLC; KEITH SONGILE; JODY DRYALL, INC.; GENERAL PLUMBING SUPPLY, INC.; MOHAWK LUMBER CO., INC.; WILLIAM H. WILSON CONTRACTING CO., INC.; THE STATE OF NEW JERSEY; BUDD BUILT-IN VACUUM CLEANERS; HEINES INSULATORS, INC.; COUNTY CONCRETE CORP.; JEFFERSON LUMBER AND MILLWORK, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-2586-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted August 29, 2011
Before Judges Alvarez and Nugent.
This is a residential mortgage foreclosure action. Defendants Dennis Ulversoy and Donald Vincent (defendants) appeal from the January 8, 2010 Chancery Division order that granted summary judgment to plaintiff, HSBC Bank USA as Trustee for OMAC 2005-5 (HSBC); struck the defendants' answer; and entered a default against defendants. The defendants also appeal from the November 30, 2010 final judgment entered against them, arguing that it should not have been granted because the January 8, 2010 summary judgment motion was wrongly decided. We affirm.
We derive the following facts from the summary judgment motion record. On August 31, 2005, defendants executed a "Fixed/Adjustable Rate Note" (the Note) and a mortgage (the Mortgage) on their Kinnelon, New Jersey residence (the Property) to secure a loan of $568,000 from Opteum Financial Services, LLC (Opteum). Opteum is identified in the Note as the "Lender." Paragraph 11 of the Note provides in part:
In addition to the protections given to the Note Holder under this Note, a Mortgage . . . (the "Security Instrument"), dated the same date as this Note, . . . protects the Note Holder . . . . The Security Instrument describes how and under what conditions I may be required to make immediate payment in full of all amounts I owe under the Note.
The Mortgage explains that "'MERS' is Mortgage Electronic Registration Systems, Inc. MERS is a separate corporation that is acting solely as a nominee for Lender and Lender's successors and assigns. MERS is the mortgagee under this Security Instrument."*fn1 The Mortgage also provides:
Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument.
The Mortgage also includes a provision concerning the sale of the Note and a change in the entity servicing the Note and Mortgage. The provision states:
The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower. A sale might result in a change in the entity (known as the "Loan Servicer") that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Instrument, and Applicable Law.
There also might be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given written notice of the change which will state the name and address of the new Loan Servicer, [and] the address to which payments should be made . . . . If the Note is sold and thereafter the Loan is serviced by a Loan Servicer other than the purchaser of the Note, the mortgage loan servicing obligations to Borrower will remain with the Loan Servicer or be transferred to a successor Loan Servicer and are not assumed by the Note purchaser unless otherwise provided by the Note purchaser.
The Note required defendants to pay interest on the unpaid principal, the interest rate varying in accordance with terms contained in the Note. The interest payments were to be made monthly between October 1, 2005 and September 1, 2015. Thereafter, defendants were required to make monthly payments of principal and interest until September 1, 2035, at which time they were required to pay the outstanding balance of the loan.
The defendants defaulted on September 1, 2008, and have made no payments since. MERS assigned defendants' Mortgage to HSBC. The "Assignment of Mortgage" (the Assignment) designated the assignment date as December 30, 2008. The Assignment was notarized on January 9, 2009, and recorded January 22, 2009. The Assignment recited that MERS assigned to HSBC the Mortgage as well as "the Bond, Note or other Obligation therein described, and the money due and to grow due thereon, with interest."
Meanwhile, on October 24, 2008, an entity named EverHome Mortgage Company (EverHome) sent to defendants a notice of intention to foreclose on the Mortgage. EverHome identified itself as the "Lender," stated that it held a security interest in the property, and required a payment to be made to EverHome no later than November 23, 2008.
On January 13, 2009, HSBC filed a complaint in foreclosure that it amended on March 20, 2009, to join additional defendants, including MERS. The complaint and amended complaint included a paragraph that stated: "The Notice of Intention was mailed to the debtor(s) in compliance with the Fair Foreclosure Act." Defendants timely filed an answer. Subsequently, on HSBC's motion, an order was entered reforming the Mortgage to correct an error in the property description.
In October 2009, HSBC moved for summary judgment. In support of its motion, its vice president filed a certification in which he averred that he had "complete knowledge of the amount due for principal and interest on defendant's [sic] obligation and mortgage set forth in the Complaint . . . ." He also certified that he had "examined the records of [HSBC] concerning the above referred to obligation," and found from those records that HSBC was due $635,477.26 plus interest. He did not aver that he had personal knowledge of the other facts contained in his certification, including his assertions that: HSBC was the holder of defendants' Note and Mortgage; those instruments "called for a payment in the initial sum of $3,964.17, per month for interest and principal,*fn2 plus taxes and insurance premiums"; defendants had made no payments since September 1, 2008; defendants' answer disputed neither the validity of the Mortgage nor HSBC's entitlement to a foreclosure judgment; and that there were no debts, setoffs, credits, or allowances due or to become due from HSBC to defendants.
The vice president also certified, on "information and belief," that neither of the defendants was in the military service. He did not identify the source of his "information and belief," and the certification did not comply with the requirements of Rule 1:5-7.
The vice president provided a "supplemental certification" in which he averred that on October 24, 2008, a "Notice of Intent to Foreclose on the defendant[s'] property was sent to the defendant[s] via certified and regular mail." He attached to the certification the notice that EverHome sent to defendants.
HSBC also supported its summary judgment motion with its attorney's certification attaching "a certified true copy" of the Note and "a certified and true copy"*fn3 of the Mortgage, a copy of the recorded Assignment, and a copy of defendants' answer. The copy of the Note included the following on the lower right- hand corner of the last page, beneath the signatures of defendants:
Without recourse, pay to the order of:
Opteum Financial Services, LLC
Karen Shirexxxxx,*fn4 Assistant Vice President
December 2009, defendants filed a cross-motion for summary judgment
and opposition to HSBC's motion. Defendants supported their opposition
and cross-motion with a certification from their attorney*fn5
that attached copies of the Note, Mortgage, and Assignment,
and asserted that those instruments were "true and accurate cop[ies]
of the [documents] which form part of the basis of [HSBC]'s
Complaint." Thus, it was undisputed that the copies of the Note,
Mortgage, and Assignment that were before the Chancery Division
accurately reflected the entire content of the original documents.
On January 8, 2010, the trial court granted HSBC's summary judgment motion, denied defendants' cross-motion, struck defendants' answer, and entered default against defendants. The order required that a "certified copy of [the] Note . . . be provided by plaintiff prior [to] entry of Final Judgment of Foreclosure." The court, in an oral opinion, found that defendants had defaulted on the Note, that the Mortgage was assigned to HSBC, and that HSBC was in possession of the Note endorsed in blank. HSBC subsequently obtained a final judgment and this appeal followed.
We review the trial court's summary judgment order de novo, using the standard set forth in Brill v. Guardian Life Insurance Company of America, 142 N.J. 520, 540 (1995). Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). That standard requires that the court determine "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill, supra, 142 N.J. at 540. However, "if the summary judgment turns on a question of law, or if further factual development is unnecessary in light of the issues presented, then summary judgment need not be delayed." United Sav. Bank v. State, 360 N.J. Super. 520, 525 (App. Div.), certif. denied, 177 N.J. 574 (2003).
Defendants present the following arguments on appeal:
THE COURT ERRED IN GRANTING PLAINTIFF'S SUMMARY JUDGMENT MOTION AS THE REQUIRED STATEMENT OF MATERIAL FACTS FAILED TO PROVIDE CITATIONS TO THE RECORD ESTABLISHING EACH PURPORTED MATERIAL FACT AS REQUIRED BY [Rule] 4:46-2(a).
A MORTGAGE THAT FAILS TO DEFINE THE POWERS, RIGHT'S [SIC] AND RESPONSIBILITIES OF AN ENTITY APPOINTED AS ANOTHER'S "NOMINEE"
CANNOT BE READ TO INCLUDE THE POWER TO TRANSFER NOTES OVER WHICH NO SUCH APPOINTMENT WAS EVER MADE.
In Point I, defendants contend that the trial court should have denied HSBC's motion for summary judgment based upon HSBC's failure to comply with Rule 4:46-2(a) because the motion record did not establish that: (1) MERS had the legal authority to transfer the Note and Mortgage; (2) OMAC 2005-5 is a valid trust and HSBC is its trustee; (3) the Note was part of the corpus of the trust; (4) HSBC had standing; (5) defendants had an obligation to make payments to HSBC; (6) defendants had defaulted on the Note and Mortgage, and HSBC had accelerated the payments; and (7) HSBC had possession of the Note when it filed its complaint. In Point II defendants contend that MERS did not have the authority to assign the Note to HSBC.
In reply, HSBC notes that defendants have not contested the validity of either the Mortgage or the Note. HSBC contends that the Assignment was valid, and that HSBC merely needed to be in possession of the Note endorsed in blank to have standing to foreclose.
A party seeking to foreclose a residential mortgage must have standing to commence a mortgage foreclosure action and must comply with the requirements of both the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to -68, and Rule 4:64, which governs mortgage foreclosures among other actions. A party seeking summary judgment must also comply with the requirements of Rule 4:46, concerning summary judgments, and Rule 1:6, concerning motions generally. The FFA and the court rules establish requirements that the foreclosing party must satisfy before filing suit; specify information that must be pled in the foreclosure complaint; and provide the procedures for introducing competent evidence to support summary judgment motions.
To have standing to proceed with a mortgage foreclosure action, "'a party . . . must own or control the underlying debt.'" Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 598 (App. Div. 2011) (quoting Raftogianis, supra, 418 N.J. Super. at 327-28). That is, the plaintiff must own or possess the note when the original complaint is filed. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 216 (App. Div. 2011).
When the underlying debt is evidenced by a negotiable instrument, such as the Note in the case before us, a plaintiff may establish ownership or control by proving that it is a "person entitled to enforce an instrument" under N.J.S.A. 12A:3-301. Ford, supra, 418 N.J. Super. at 597-98. N.J.S.A. 12A:3-301 states that a "[p]erson entitled to enforce" an instrument means the holder of the instrument, a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A:3-309 or subsection d. of 12A:3-418. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
N.J.S.A. 12A:3-201(a) explains how a plaintiff who is not the original lender may become a "holder of the instrument":
N.J.S.A. 12A:3-201(a) provides that for a person other than the one to whom a negotiable instrument is made payable to become the "holder," there must be a "negotiation," and N.J.S.A. 12A:3-201(b) provides in pertinent part that "if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder." [Ford, supra, 418 N.J. Super. at 598.]
Plaintiffs who are not "holders" may nevertheless qualify as a "person entitled to enforce" a note if they can establish their status as "a nonholder in possession of the instrument who has the rights of a holder" under N.J.S.A. 12A:3-301.
Transfer of an instrument occurs "when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument." N.J.S.A. 12A:3-203(a). Such a delivery, "whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument." N.J.S.A. 12A:3-203(b). [Ford, supra, 418 N.J. Super. at 599.]
Lastly, plaintiffs may establish their right to enforce a note if they are "not in possession of the instrument[, but] entitled to enforce the instrument pursuant to 12A:3-309 or subsection d. of 12A:3-418." N.J.S.A. 12A:3-301. N.J.S.A. 12A:3-309 involves enforcement of lost, destroyed, or stolen instruments; and subsection d. of N.J.S.A. 12A:3-418 involves instruments "paid or accepted by mistake and the payor or acceptor recovers payment or revokes acceptance . . . ."
An assignee can also establish standing under N.J.S.A. 46:9-9 by presenting a properly "authenticated assignment indicating that it was assigned the note before it filed the original complaint." Mitchell, supra, 422 N.J. Super. at 225.
A plaintiff seeking to foreclose a residential mortgage must also comply with the FFA.
Enacted in 1995, the FFA was intended to "advance the public policies of the State by giving debtors every opportunity to pay their home mortgages, and thus keep their homes," while ensuring that "lenders will be benefited when debtors cure their defaults and return the residential mortgage loan to performing status." Statement to Assembly Bill No. 1064, at 10 (Jan. 24, 1994). The FFA was intended to expedite foreclosure proceedings to bring "New Jersey in line with its neighboring states," thus encouraging financial institutions to increase their lending activity in New Jersey. Governor's Press Release for Assembly Bill No. 1064, at 1 (Sept. 6, 1995). [US Bank N.A. v. Guillaume, 209 N.J. 449, 469-470 (2012).]
The FFA requires that a residential mortgage lender who intends to accelerate the maturity of a residential mortgage note or commence a foreclosure action give a residential mortgage debtor notice of its intention at least thirty days in advance of such action. N.J.S.A. 2A:50-56(a). "The notice of intention is a central component of the FFA, serving the important legislative objective of providing timely and clear notice to homeowners that immediate action is necessary to forestall foreclosure." Guillaume, supra, 209 N.J. at 470. The notice must include "the name and address of the actual lender, in addition to contact information for any loan servicer who is charged by the lender with the responsibility to accept mortgage payments and/or negotiate a resolution of the dispute between the lender and the homeowner." Id. at 475. Further, Rule 4:64-1(c)(b)(13) requires that a plaintiff seeking to foreclose a mortgage state in the complaint whether it has complied with the pre-filing requirements of the FFA.
When a plaintiff seeks a foreclosure remedy by way of summary judgment, it must also satisfy certain procedural requirements. The summary judgment rules require that the assignee provide "a statement of material facts . . . with or without supporting affidavits." R. 4:46-2(a).
The statement of material facts shall set forth in separately numbered paragraphs a concise statement of each material fact as to which the movant contends there is no genuine issue together with a citation to the portion of the motion record establishing the fact or demonstrating that it is uncontroverted. The citation shall identify the document and shall specify the pages and paragraphs or lines thereof or the specific portions of exhibits relied on. A motion for summary judgment may be denied without prejudice for failure to file the required statement of material facts.
The summary judgment motion may be supported by affidavits or certifications, but those affidavits or certifications must be based on personal knowledge. "A certification will support the grant of summary judgment only if the material facts alleged therein are based, as required by Rule 1:6-6, on 'personal knowledge.'"*fn6 Ford, supra, 418 N.J. Super. at 599 (citing Claypotch v. Heller, Inc. 360 N.J. Super. 472, 489 (App. Div. 2003)). The assignee's status as a holder of a note and the authentication of the assignment of the mortgage must be based on personal knowledge and indicate how the affiant obtained the alleged knowledge. See id. at 599-600. "Attorneys in particular should not certify to 'facts within the primary knowledge of their clients'" Mitchell, supra, 422 N.J. Super. at 226 (citations omitted).
In Point I, defendants correctly note that HSBC failed to correlate the numbered paragraphs in its statement of material facts with citations to the portions of the record establishing those facts. Rule 4:46-2(a) provides that a summary judgment motion "may be denied without prejudice for failure to file the required statement of material facts." (Emphasis added). The term "may" connotes discretionary, not mandatory, action. See Hancock v. Borough of Oaklyn, 347 N.J. Super. 350, 362 (App. Div. 2002), appeal dismissed, 177 N.J. 217 (2003). Here, the critical documents - the Note, Mortgage, and Assignment - were submitted by both parties and there was no dispute about their content or validity. The trial court did not misapply its discretion by considering those documents and hearing the motion, notwithstanding HSBC's failure to comply with Rule 4:46-2(a).
Defendants proceed in Point I to argue that seven critical "facts" were unsupported by the motion record, necessitating reversal of the Chancery Division's entry of summary judgment. Three of defendants' substantive arguments involve HSBC's standing. Defendants maintain that because the motion record contained no facts to establish that MERS had the authority to transfer the Note, and because HSBC did not establish that it possessed the Note when it filed the complaint, it did not have standing to pursue the mortgage foreclosure action. We disagree.
The Mortgage designated MERS as Opteum's nominee and the mortgagee; and vested in MERS legal title to the interests granted by defendants in the Mortgage. The Mortgage also vested in MERS the right to exercise "any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling [the Mortgage]." As Opteum's nominee and the mortgagee, MERS was authorized to act on behalf of Opteum, and the authorized actions included assigning the Mortgage. Indeed, that was one of MERS' primary functions. See n.1, supra. When MERS executed the Assignment, it transferred not only the Mortgage, but also the "Note or other Obligation therein described."
Defendants' attack upon MERS' authority to assign the Note with the Mortgage ignores the common understanding of the expression "assignment of mortgage." See Raftogianis, supra, 418 N.J. Super. at 348 (explaining that "commentators have noted the propriety of treating the assignment of a mortgage, [even] without a specific reference to the underlying obligation, as effectively transferring both interests").
But it does not follow that an assignment in terms of the "mortgage" without express reference to the secured obligation is insufficient to transfer the obligation and is therefore a nullity, as some courts have held. As Mr. Tiffany long ago pointed out,
The question is properly one of the construction of the language used, and in arriving at the proper construction, evidence of the sense in which that language is ordinarily used is of primary importance. The expression "assignment of mortgage" is almost universally used, not only by the general public, but also by the Legislature, the courts, and the legal profession, to describe the transfer of the totality of the mortgagee's rights, that is, his right to the debt as well as to the lien securing it, and to hold, as these cases apparently do, that when one in terms assigns a mortgage, he intends, not an effective transfer of his rights as a creditor against the land, but a transfer of his lien alone, which is an absolute nullity, not only ignores this ordinary use of the term "mortgage," but is also in direct contravention of the well recognized rule that an instrument shall if possible be construed so as to give it a legal operation. [Ibid. (quoting 29 N.J. Practice, Law of Mortgages § 11.2 at 754 (Myron C. Weinstein) (2d ed. 2001) (citing 5 Tiffany on Real Property at 428-29 (1920))).]
Defendants essentially argue that MERS exceeded the scope of its authority when it transferred the Note with the Mortgage. The Mortgage vested MERS with the authority to transfer it, and implicitly authorized MERS to transfer the Note as well. Opteum's vice president indorsed the Note in blank, an action consistent with the transfer of the note. In short, the evidence of MERS' authority to transfer the Note, as it did in the Assignment, was so one-sided that HSBC should have prevailed as a matter of law. Brill, supra, 142 N.J. at 540. Defendants' unsupported suggestion that MERS exceeded the scope of its authority when it transferred the Note did not demonstrate a genuinely disputed fact as to that issue.
Defendants correctly assert that HSBC did not submit competent proofs that it had possession of the Note on the day that it filed the complaint. HSBC provided no evidence, based upon personal knowledge, that it possessed the Note when it filed the complaint. See Ford, supra, 418 N.J. Super. at 599-600. But unlike Ford, where the debtor alleged that most of the documents produced by the plaintiff in response to discovery demands were forgeries, and where the plaintiff simply attached a copy of the assignment of the mortgage to its brief, here all parties submitted the Assignment as a true and correct copy of the original. As we have stated previously, there was no dispute about the document or its content.*fn7 Consequently, on the day HSBC filed the complaint, it "presented an authenticated assignment indicating that it was assigned the note before it filed the original complaint." Mitchell, supra, 422 N.J. Super. at 225. For that reason, defendants' argument that HSBC did not have standing when it filed the complaint must fail.
In its next two arguments, defendants contend that HSBC did not establish that it was the trustee of a valid trust, and that the Note was part of the corpus of the trust. We find those arguments to be without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following. Defendants have not challenged the existence of HSBC as a legal entity. The Note and Mortgage were assigned to HSBC. Defendants have not explained how their arguments affect either the validity of the Assignment, or HSBC's standing to pursue a foreclosure action. Parties are required to make an adequate legal argument. 700 Highway 33 LLC v. Pollio, 421 N.J. Super. 231, 238 (App. Div. 2011).
In their last two arguments, defendants contend that HSBC did not establish by competent evidence that they had defaulted on the Note, or that defendants had an obligation to make payments to HSBC. Those arguments are contrary to their attorney's representation during oral argument that "clearly there is a note . . . I think clearly they owe money." Defendants' contention that they do not owe the money to HSBC is premised on the arguments that they made as to why HSBC did not have standing to foreclose the Mortgage. We have previously addressed those arguments.
Our decision should not be construed as condoning HSBC's non-compliance with the FFA and the court rules. The trial court would have acted well within its discretion had it dismissed the summary judgment motion. But in this case, where defendants appeared in the action; where the contents of the Note, Mortgage, and Assignment were undisputed; where HSBC established its standing based upon those undisputed documents; and where defendants did not raise HSBC's failure to identify the actual lender in its notice of intention or assert that noncompliance with the FFA deprived them of timely and clear notice that immediate action was necessary to forestall foreclosure; the court did not abuse its discretion by deciding the motion.
In Point II, defendants argue, again, that MERS was not authorized to assign the Note with the Mortgage. We have previously disposed of that argument.