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Gmac Mortgage, LLC,*Fn1 v. Clyde Fraser and Toye Fraser

December 11, 2012

GMAC MORTGAGE, LLC,*FN1 PLAINTIFF-RESPONDENT,
v.
CLYDE FRASER AND TOYE FRASER, DEFENDANTS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-33127-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted November 27, 2012

Before Judges Reisner and Harris.

This appeal decides whether it was correct to grant summary judgment in favor of plaintiff GMAC Mortgage, LLC (GMAC) in a residential mortgage foreclosure proceeding in the Chancery Division. Defendants Clyde and Toye Fraser appeal from interlocutory orders entered on February 5, 2010 (striking their answer and entering default against them) and April 1, 2010 (denying their motion for reconsideration), as well as from the final judgment entered on January 19, 2012.*fn2 We affirm.

I.

We gather the facts from the pleadings, the motion record, and from our earlier decision in a related matter, GMAC Mortgage, LLC v. Fraser, No. A-4301-08 (App. Div. July 23, 2010).

On May 10, 2005, defendants acquired residential property in Mendham. Defendants defaulted on the payments due for the first and second mortgages, sending the property into foreclosure. On October 3, 2006, defendants obtained replacement mortgage financing from Zurich Mortgage Solutions, LLC (Zurich) and executed a mortgage and note in favor of Zurich in the principal sum of $1.8 million. These monies were used to pay off the first and second mortgages in default and other expenses, and defendants received the balance of $92,428.99.

For the first sixty months of the mortgage, defendants were obligated to make interest-only payments of $18,735 per month on the mortgage and note, with installments of principal and interest due thereafter through November 2036. At the time of this transaction, Zurich was not a licensed financial entity in New Jersey.

On October 11, 2006, Zurich assigned the mortgage and note to American Residential Equities, LLC, which was also not a licensed financial entity in New Jersey. This is what happened next:

Because defendants believed Zurich had charged more than the maximum number of points, defendants contacted the Department of Banking and Insurance, which issued a refund directive to Zurich. Defendants were advised by their private counsel to stop payment on the mortgage and note because Zurich was unlicensed and consequently unable to collect interest and because defendants were owed $108,000 for the six points they were charged at closing, plus interest. On November 7, 2006, the mortgage was transferred to GMAC, a licensed lender in New Jersey.

On July 9, 2007, GMAC commenced this declaratory judgment action against defendants seeking a declaration that it may enforce the mortgage and note against defendants and that, as of July 31, 2007, defendants owed $120,090.42 on the mortgage and note. Defendants, represented by counsel, filed an answer with counterclaims, which was later amended. They sought declarations that the mortgage and note were unenforceable; that they were not obligated to pay interest on the mortgage and note because Zurich was unlicensed; that they were not in default on payments because the payments for the first sixty months were for interest only; and that any amounts determined to be owed on the mortgage and note should be reduced by the $108,000 they had paid in points and the $37,470 they had paid in interest. Defendants also contended that they had refrained from bringing legal action by relying on a promise from GMAC and sought $2 million in damages. [GMAC Mortgage, LLC, supra, slip op. at 2-3.]

GMAC's declaratory judgment action resulted in the Law Division entering a March 10, 2009 summary judgment order that "specifically declare[d] the mortgage and note enforceable; declare[d] that defendants are in default of the mortgage and note; declare[d] that defendants owe GMAC the sum of $2,335,861.29; and dismisse[d] defendants' answer and counterclaims with prejudice." Id. at 6.

On appeal from the Law Division's final order -- after canvassing all of defendants' substantive arguments regarding the enforceability of the note and mortgage by GMAC -- we ultimately disagreed with defendants' chief contention "that because Zurich was unlicensed in New Jersey when the mortgage and note ...


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