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


December 11, 2012


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

Per curiam.


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.


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 were executed, the mortgage and note are illegal." Instead, we held the following:

The statutes expressly provide that a failure to comply with the statutory licensing requirements "shall not affect the validity or enforceability of any mortgage loan or secondary mortgage loan, and no person acquiring such a loan shall be required to ascertain if a licensee has made such a loan in compliance with the provisions of this act." N.J.S.A. 17:11C-46. As a result, the mortgage and note remain enforceable, and we affirm paragraph one of the trial court's order declaring the mortgage and note enforceable. [Id. at 8.]

Notwithstanding our agreement with the Law Division's declaration of rights regarding the enforceability of the note and mortgage, we reversed and remanded the balance of the March 10, 2009 order, declaring, judgment should not have been entered adjudicating GMAC's claims on the amount due and dismissing defendants' defenses and counterclaims. We have allowed to stand the portion of the judgment declaring the mortgage and note enforceable, despite these procedural defects, because that issue involved a question of law and defendants were allowed by the trial court to present their position and arguments on that issue.

As a result, on this issue, they were not prejudiced by the entry of default. However, the trial court did not allow defendants to present arguments on their counterclaims nor their claim for a $108,000 credit.

In light of these circumstances, we affirm only paragraph one of the March 10, 2009 order, which declares the mortgage and note legally enforceable. We reverse the balance of the order, and remand for further proceedings. [Id. at 12-13.]

At the same time that the declaratory judgment action was proceeding, GMAC commenced the instant foreclosure action, initially premised upon defendants' alleged failure to pay obligatory real estate taxes. An amended complaint was later filed, claiming all amounts due under the note and mortgage.

Defendants filed a pro se answer (1) asserting that misrepresentations and fraudulent activities rendered the loan illegal and unenforceable ("GMAC was given over one year and [ten] months to correct their evil ways. They have not."); (2) asserting GMAC owes defendants "at least $2,000,000 in damages"; (3) seeking enforcement of GMAC's "promise" to defendants that it would "not seek a default and will make [defendants] whole by requiring Zurich [to] buy back the mortgage"; (4) explaining that defendants were "pretty sure that no tax liens were levied against [the property]"; and (5) requesting that the court "forgive [defendants] for not recognizing earlier that GMAC was breaking its promise[s]."

Eventually, GMAC moved for summary judgment. It was initially considered by the motion judge on December 4, 2009, when she was presented with an informal application to stay the proceedings. The judge deferred a final decision at that time, writing on her memorializing order, "while [the declaratory judgment court's] March 10, 2009 order appears to bar this action on the basis of res judicata, the court is affording defendants a two month respite in light of their loss suffered last September." Because defendants did not supply a copy of the December 4, 2009 transcript and the parties' appendices only obliquely make reference to the circumstances, the exact nature of the "loss suffered last September" is unclear.

The motion was again considered on February 5, 2010, when the court ruled in GMAC's favor on the basis of the doctrine of res judicata. Defendants' motion for reconsideration was heard and denied on April 1, 2010. This appeal followed.


In reviewing a grant of summary judgment, we apply the same standard under Rule 4:46-2(c) that governs the motion court. See Gray v. Caldwell Wood Prods., Inc., 425 N.J. Super. 496, 499 (App. Div. 2012); see also Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009) ("An appellate court reviews a grant of summary judgment de novo, applying the same standard governing the trial court under Rule 4:46.") (citing Liberty Surplus Ins. Corp. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007)). We must "consider 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 v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). In such review, "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382 (2010) (alteration in original) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

The main thrust of defendants' argument*fn3 is that "the original mortgage broke the higher laws and the Laws of the Higher Court and its Judge." In more secular terms, defendants contend that Zurich's unlicensed status at the inception of the financing arrangement renders GMAC's current efforts to collect on the note and foreclose the mortgage illegal. This is a reprise of the arguments we soundly rejected in GMAC Mortgage, LLC. Plainly, the motion court was correct in applying the doctrine of res judicata.

"Res judicata, or claim preclusion, insulates courts from the inefficiency of relitigating claims that have already been resolved, thereby protecting the integrity of judgments and preventing the harassment of parties." Bondi v. Citigroup, Inc., 423 N.J. Super. 377, 422 (App. Div. 2011), certif. denied, 210 N.J. 478 (2012). To apply the bar, three elements must be met:

(1) the judgment in the prior action must be valid, final, and on the merits; (2) the parties in the later action must be identical to or in privity with those in the prior action; and (3) the claim in the later action must grow out of the same transaction or occurrence as the claim in the earlier one. [Watkins v. Resorts Int'l Hotel & Casino, 124 N.J. 398, 412 (1991).]


[i]f given preclusive effect, the prior judgment will bar not only the matters actually determined in the previous proceedings, but also all claims that could have been raised in the first action. Mortgagelinq Corp. v. Commonwealth Land Title Ins. Co., 142 N.J. 336, 338 (1995). Conversely, a claim that could not have been presented in the first action, for instance because of the first court's lack of jurisdiction over the claim, will not be barred in the subsequent action. Watkins, supra, 124 N.J. at 413. The reasoning for this exception is that if the [defendants] could not have asserted the two claims "in a single forum, it would be unfair to force [the defendants] to sacrifice the claims that could not be so asserted in order to bring a single action in one forum." Id. at 413-14. [Bondi, supra, 423 N.J. Super. at 422-23.]

The record amply supports the preclusion of defendants' illegality and unenforceability defenses, warranting summary judgment against them. Defendants' citation of numerous state and federal statutory references does not detract from the fact that defendants either raised these contentions in the declaratory judgment action or they were available to be raised. They may neither be re-litigated nor raised anew in this foreclosure action.

Defendants, however, additionally contend that the motion court erred by (1) refusing to rule on claims relating to the ownership of GMAC; (2) failing to acknowledge the administrative actions of the New Jersey Department of Banking and Insurance; (3) refusing to acknowledge GMAC's putative federal law violations; and (4) neglecting to make a finding "pertaining to the death of [defendants'] son [] due to the illegal actions of GMAC." Our review of the record of the summary judgment and reconsideration motions demonstrates that defendants' contentions were either meritless to begin with or were so lacking in evidentiary significance as to mandate the grant of the former and denial of the latter.

"The very object of the summary judgment procedure . . . is to separate real issues from issues about which there is no serious dispute." Shelcusky v. Garjulio, 172 N.J. 185, 200-01 (2002). It obliges motion judges "to determine whether there is a genuine issue for trial." Brill, supra, 142 N.J. at 540 (internal quotation marks omitted); see also R. 4:46-2(c). That determination "does not require a court to turn a blind eye to the weight of the evidence; the 'opponent must do more than simply show that there is some metaphysical doubt as to the material facts.'" Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538, 552 (1986)), cert. denied, 507 U.S. 912, 113 S. Ct. 1262, 122 L. Ed. 2d 659 (1993); see also Triffin v. Am. Int'l Group, Inc., 372 N.J. Super. 517, 523-24 (App. Div. 2004).

What is required of the party opposing summary judgment is affirmative evidence -- competent evidence, not hearsay -- that demonstrates the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202, 216-17. "Competent opposition requires 'competent evidential material' beyond mere 'speculation' and 'fanciful arguments.'" Hoffman v. Asseenontv.Com, Inc., 404 N.J. Super. 415, 426 (App. Div. 2009) (quoting Merchs. Express Money Order Co. v. Sun Nat'l Bank, 374 N.J. Super. 556, 563 (App. Div. 2005)). Defendants' opposition to summary judgment and their allegations in support of reconsideration fail because they rest upon assertions that lack support in the record.

To the extent that we have not addressed the other specific arguments raised by defendants, they lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).


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