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Mortgage Electronic Registration Systems, Inc., As v. andrew Rader and Sharon Rader


October 17, 2012


On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-15761-09.

Per curiam.


Submitted May 31, 2012 -

Before Judges Sapp-Peterson and Ostrer.

Defendants, Andrew and Sharon Rader, husband and wife, appeal from two orders entered in the Chancery Division: a July 8, 2011 order denying their motion, based upon excusable neglect, to vacate the final default judgment in the amount of $554,660.07 and a writ of execution, and a September 1, 2011 order denying reconsideration of the July 8 order.*fn2 We affirm as to both orders.

The orders arose out of a foreclosure action filed by plaintiff, Mortgage Electronic Registration Systems, Inc. (MERS), in connection with residential property owned by defendants located in Randolph. On July 13, 2007, Andrew*fn3 obtained a loan in the amount of $517,500 from lender EquiFirst Corporation. Defendants secured the loan by executing a non-purchase money mortgage on their Randolph property. The mortgage listed MERS as the nominee for the lender, its successors and assigns. Defendants defaulted the loan on November 1, 2008.

On January 30, 2009, plaintiff served defendants with its Notice of Intent to foreclose on the Randolph property. Although the inside address on the Notice listed Sharon's name, the greeting of the letter only listed Andrew's name. The foreclosure complaint was filed on March 24, 2009. The complaint stated that because Sharon only executed the mortgage, not the note, she bore no financial responsibility for repayment of the note. Defendants failed to answer or otherwise respond to the complaint. Default was entered on August 26, 2009, and a final judgment by default was entered one year later, on August 31, 2010, in the amount of $554,660.07, together with a writ of execution.

Thereafter, defendants obtained two statutory adjournments of the sheriff's sale. The sale was further stayed, at their request, to enable them to participate in loan modification mediation, which was unsuccessful. In early April 2011, defendants filed a pro se motion to vacate the final judgment, discharge the writ of execution, and dismiss the complaint. On the return date of the motion, July 8, only Andrew appeared. He argued that the notice of intent to foreclose was defective as it listed Sharon as the addressee but the salutation in the letter was directed to him. Additionally, he argued that the notice failed to state the lender's name, MERS, as representatives. Specifically, Andrew contended, "[p]laintiff's record show[s] Equifirst sold the loan to Bank of New York Mellon as trustee. Neither plaintiff nor its counsel revealed the name of the trust."

In response, plaintiff's counsel represented that the two different names on the Notice of Intent was a typographical error which "in no way . . . nullifies the Notice of Intent." Next, counsel argued that the MERS website clearly and conspicuously showed Bank of New York Mellon as an investor. Counsel also argued that MERS, as nominee for Equifirst, retains ownership of the original note, which counsel produced at oral argument for inspection by the court and Andrew. Finally, counsel argued that "Page 3 of the mortgage that Mr. Rader signed grants MERS[,] as nominee for Equifirst, 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.'"

Judge Rosemary E. Ramsay denied defendants' motion, finding there was no excusable neglect associated with defendants' failure to file an answer. Rather, she found they "apparently opted instead to seek a modification of the loan." The judge also rejected defendants' "belated challenge to plaintiff's standing" as a basis to vacate the final judgment. She additionally found no "defalcation on the part of plaintiff" in connection with the Notice of Intent and that there was no evidence to support defendants' contention that plaintiff lacked standing to pursue the action against defendants. Defendants subsequently moved for reconsideration. As a result, the court granted defendants' application to stay the sheriff's sale that was pending for July 28, 2011. On September 1, Judge Ramsay denied reconsideration, concluding defendants had failed to meet the requirements for reconsideration. The present appeal followed.

On appeal, defendants contend plaintiff lacked standing to file the foreclosure action and that the Notice of Intent to foreclose on the Randolph property "not given to the mortgagor who holds an ownership interest in the premises is entitled to the dismissal of the complaint." We reject both arguments.


Under Rule 4:26-1, "[e]very action may be prosecuted in the name of the real party in interest[.]" In general, "[s]tanding refers to the plaintiff's ability or entitlement to maintain an action before the court." N.J. Citizen Action v. Riviera Motel Corp., 296 N.J. Super. 402, 409 (App. Div.), certif. granted, 152 N.J. 13, appeal dismissed as moot, 152 N.J. 361 (1998). To determine whether a party has standing, the court must determine "whether the party has a sufficient stake in and real adverseness with respect to the subject matter, and whether the party will be harmed by an unfavorable decision." Stubaus v. Whitman, 339 N.J. Super. 38, 47 (App. Div. 2001) (internal quotation marks and citations omitted), certif. denied, 171 N.J. 442 (2002).

Mortgages "provide security for the debtor's obligation to pay an underlying obligation, ultimately permitting the mortgagee to force the sale of the property to satisfy that obligation." Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327 (Ch. Div. 2010). "'As a general proposition, a party seeking to foreclose a mortgage must own or control the underlying debt.'" Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011) (quoting Raftogianis, supra, 418 N.J. Super. at 327-28). Without showing ownership or control, the party lacks standing to proceed with the foreclosure action. Id. at 597.

Defendants argue plaintiff did not own or control the note endorsed in blank at the time of the foreclosure complaint because, although the note submitted with plaintiff's application for final judgment was certified as a true copy of the original, it was not the original. They also contend that plaintiff failed to demonstrate it had possession of the note on the date the complaint was filed.

The note submitted by plaintiff at the time of entry of the final judgment was missing the final page entitled "[N]ote Endorsements," where the note is endorsed in blank. Further, notwithstanding that plaintiff's counsel did not have the original note, an attorney certified the document to be a true copy of the note executed at closing.*fn4 When this deficiency was raised by defendants, plaintiff's counsel produced the original for inspection by the court and defendants during oral argument.

Rule 4:64-2 requires that the party instituting a foreclosure action must attach to its complaint "evidence of indebtedness . . . upon which the claim is based." Unquestionably, plaintiff failed to comply with this requirement. Nonetheless, failure to comply with this requirement does not, in every instance, require dismissal.

This is not a situation where MERS did not have possession of the note at the time the complaint was filed. "In actions involving a negotiable note, [the] plaintiff should generally be in a position to establish that it did have possession of the note as of the date the complaint was filed as required by the UCC." Raftogianis, supra, 418 N.J. Super. at 356.

Nor are the facts in this matter analogous to those in Ford, supra, 418 N.J. Super. at 596, where we held that Wells Fargo, in instituting a foreclosure action against the defendants, failed to establish its standing to pursue the foreclosure action based upon a purported assignment of the mortgage and note by the original mortgagee five days after the defendant executed the mortgage and note. Here, on Page 3 of the original mortgage Andrew executed, MERS is identified as the nominee not only for Equifirst, the original mortgagee, but also for its successor and assigns. Therefore, defendants' claim regarding Equifirst's transfer of the mortgage to Bank of New York Mellon is of no consequence. Plaintiff was named in the original mortgage and there is no evidence in the record that it ever assigned its interest to another party. Therefore, Judge Ramsay properly concluded plaintiff had standing to initiate the action against defendants.

Moreover, dismissal on standing grounds was inappropriate because defendants, unlike the defendants in Ford, supra, 418 N.J. Super. 592, and Raftogianis, supra, 418 N.J. Super. 323, failed to raise the issue of standing promptly and did so only after substantial time had passed and after plaintiffs, in good faith, participated in efforts to resolve the litigation through mediation. Specifically, defendants waited seven months from the entry of the default judgment and two years from the foreclosure complaint to raise the standing issue. Thus, in addition to finding that defendants' challenge to the foreclosure action lacked substantive merit, Judge Ramsay's finding that defendants' motion for relief from judgment on standing grounds was belated is amply supported by the record.


Defendants' argument that the judgment is void because Sharon never received the Notice of Intent is without sufficient merit to warrant extensive discussion in a written opinion. Rule 2:11-3(e)(1)(E). We add the following brief comments.

Under the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to -68, a Notice of Intent to foreclose upon a property was only required to be sent to Andrew, as the "residential debtor," not Sharon. See N.J.S.A. 2A:50-56(a). As stated in the complaint, Sharon "is not personally obligated to pay the sums secured by the mortgage (under the Note)." The FFA defines the "debtor" as "any person shown on the record of the residential mortgage lender as being obligated to pay the obligation secured by the residential mortgage." N.J.S.A. 2A:50-55. Sharon did not execute the note and was not personally obligated to pay the note. Therefore, MERS was not required to serve her with a copy of the Notice of Intent to foreclose on the property.


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