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U.S. Bank National Association v. Providencia Rodriguez


January 23, 2013


On appeal from the Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. F-27454-07.

Per curiam.


Submitted: January 9, 2013

Before Judges Axelrad and Nugent.

In this mortgage foreclosure case, defendant Providencia Rodriguez appeals from a February 2012 order denying her application to vacate the sheriff's sale of her home pursuant to a default foreclosure judgment entered in December 2009. The judge was not persuaded defendant demonstrated any "considerations of equity and justice" to vacate the sheriff's sale or demonstrated excusable neglect or a meritorious defense to vacate the default judgment pursuant to Rule 4:50-1(a). We affirm substantially for the reasons set forth in Judge Margaret Mary McVeigh's statement of reasons appended to the order.

The facts are straightforward and undisputed. On July 28, 2006, defendant borrowed $227,500 from Chase Bank USA, N.A. (Chase), and executed a note and purchase money mortgage securing her residence in Paterson. Defendant's loan went into default after she failed to make the installment payment due on July 1, 2007, and all subsequent payments. Chase assigned the note and mortgage to plaintiff U.S. Bank National Association, as Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2007-MX1.

On October 11, 2007, plaintiff filed a foreclosure complaint against defendant. The pleadings recited the aforementioned history. Plaintiff tried unsuccessfully to personally serve defendant and then served defendant by publication on December 27, 2007. Plaintiff's attorney certified to the following in support of its default application: (1) plaintiff sent a summons and complaint to defendant at the property by certified and regular mail; (2) plaintiff conducted a skip trace that indicated plaintiff's last known addresses was the property, but when private process servers went there, they were told by tenants she did not reside there and they were unaware of her address; (3) plaintiff consulted internet sources, directory assistance, DMV and tax records, and conducted a postal inquiry, social security death search, and surrogate's search, which disclosed no additional information; and (4) plaintiff also sent the notice to absent defendant and complaint to another address in Paterson, which had been a potential lead but did not appear to be a viable address for defendant.

Defendant did not file an answer or respond to the complaint, and plaintiff obtained a default against her on May 16, 2008. Plaintiff sent defendant a Fair Foreclosure Act (FFA) notice on May 22, 2008, and a notice of motion for entry of final judgment on June 3, 2009, both by certified and regular mail to the property.

Plaintiff submitted its proofs to the Administrative Office of Foreclosure, and on December 29, 2009, the court entered a final judgment of foreclosure. Notice of the sheriff's sale scheduled for March 23, 2010 was sent to defendant by certified and regular mail. The sale was adjourned several times as a result of defendant exercising her statutory adjournments and then by virtue of the automatic stay created by defendant's Chapter 13 bankruptcy petition filed on April 19, 2010. Defendant's bankruptcy was dismissed on March 7, 2011, and the sheriff's sale was rescheduled to July 19, 2011. Notice of the final sale date was provided to defendant by certified and regular mail; the certified mail was successfully delivered to defendant's address.

Before the sale date occurred, defendant was working with a realtor and had been to multiple attorneys, including her bankruptcy attorney, to assist her with attempting to negotiate a loan modification or some other method to retain possession of the property. She never filed a motion to vacate the default judgment.

The sheriff's sale was conducted on July l9 and plaintiff successfully bid on the property, and defendant's redemption period expired on July 29. The sheriff's deed was delivered to plaintiff on August 19 and recorded on August 24, 2011.

On August 9, 2011, defendant filed an emergent application to vacate the sheriff's sale and/or extend the redemption period and stay the delivery of the sheriff's deed. Defendant certified that during the litigation she resided at the subject address, was never personally served with the complaint, had terminated her relationship with a law firm on July 14, 2011, was receiving assistance from a realtor whom she had authorized to communicate with plaintiff, began working on a mediation package at some undisclosed time, "did not receive any notification of the pending Sheriff's sale, which was held on July 19, 2011," and was "in complete shock" when she learned about the sale.

Following oral argument on September 16, 2011, the parties submitted supplemental briefs. Defense counsel asserted bad faith by the bank's loan servicer in discussing with the realtor defendant's options regarding her home four days before the scheduled sale and not expressly apprising him of the impending sale. Defense counsel also asserted, for the first time, that plaintiff failed to comply with the FFA pre-action notice requirements and lacked standing because it did not have possession of the note when the complaint was filed.

By order of February 16, 2012, Judge McVeigh denied defendant's application to set aside the sale. In an attached statement, she noted "[t]he Chancery Division has the inherent authority to vacate a sheriff's sale" within the court's discretion, citing First Trust National Assoc. v. Merola, 319 N.J. Super. 44, 49 (App. Div. 1999), but such sale should be set aside only in rare instances, when it is necessary for compelling reasons to remedy a plain injustice. See E. Jersey Sav. & Loan v. Shatto, 226 N.J. Super. 473, 476 (Ch. Div. 1987); Karel v. Davis, 122 N.J. Eq. 526, 529 (E. & A. 1937). The judge found no compelling reason to set aside the sale and, though defendant did not request relief pursuant to Rule 4:50-1(a), no basis to vacate the foreclosure default judgment.

Judge McVeigh comprehensively and succinctly explained the rationale for her decision:

In this case, [d]efendant waited almost four years to address the pending foreclosure. Defendant has not presented excusable neglect or a viable defense. The Judgment Package was fully reviewed before Judgment was entered and found to be in compliance with all rules. Further, there is indication that [d]efendant participated in and was aware of the process by her own admission. Plaintiff has expended almost four years of time, money, and effort in handling this matter[.]

This appeal ensued.

On appeal, defendant asserts there was "a legitimate excuse for the delay and meritorious defenses," and thus "the court should have set aside the sale, opened up the judgment, and allowed [defendant] to defend the action[.]" According to defendant, the facts of the case "clearly demonstrate[]" she had a "legitimate reason for defaulting in the action, through improper service, and that she was taken advantage of by being led to believe that they could negotiate a modification while all along plaintiff intended to go through with the sale."

These arguments are factually and legally unpersuasive. Judge McVeigh's discretionary ruling is amply supported by the record. See U.S. Bank National Ass'n v. Guillaume, 209 N.J. 449, 467 (2012). Plaintiff's efforts to serve defendant satisfied due process. The record reflects defendant had actual knowledge of the foreclosure proceedings. She exhausted her statutory adjournments through the sheriff's office and on the eve of the sheriff's sale filed for bankruptcy, naming plaintiff as a secured creditor and listing foreclosure counsel as attorneys for plaintiff. Defendant consciously chose not to defend the foreclosure or file a motion to vacate default judgment. Instead, defendant forestalled numerous sheriff's sales, filed bankruptcy, and unsuccessfully attempted to negotiate a loan modification four years after she defaulted.

The record does not support defendant's broad-brush claim that she was lulled into negotiations, or the innuendo that it was done fraudulently. Certainly, defendant's non-specific attempt to negotiate at the eleventh hour cannot be viewed as excusable neglect.

It is undisputed defendant "provide[d] security for [her] 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). Defendant defaulted on the loan and failed to assert a timely defense to the foreclosure action. She then failed to act within a reasonable time to vacate the default judgment. See R. 4:50-2 (stating that a motion to vacate judgment shall be made within a reasonable time, and for reasons (a), (b) and (c) of Rule 4:50-1 not more than one year after the judgment). See also Deutsche Bank National Trust Co. v. Russo, ___ N.J. Super. ___, ___ (App. Div. 2012) (slip op. at 5); M & D Assocs. v. Mandara, 366 N.J. Super. 341, 351-52 (App. Div.), certif. denied, 180 N.J. 151 (2004). Defendant asserted the newly-minted defenses of an FFA violation and lack of standing too little and too late.

In Deutsche Bank Trust Co. Americas v. Angeles, 428 N.J. Super. 315, 316 (App. Div. 2012), we affirmed the Chancery Division's dismissal of a motion to vacate a final default judgment of foreclosure under Rule 4:50-1(d) because the defendant did not defend the action or assert a standing issue until two years after default judgment was entered and three-and-one-half years after the complaint was filed. We acknowledged the defendant raised a valid concern under Deutsche Bank National Trust Co. v. Mitchell, 422 N.J. Super. 214 (App. Div. 2011) because the complaint was filed prior to the assignment of the mortgage, but concluded he failed to definitively demonstrate a lack of standing. Angeles, supra, 428 N.J. Super. at 319. We held that equitable considerations may justify a court in rejecting a foreclosure defendant's belated attempt to raise as a defense the plaintiff's lack of standing:

In foreclosure matters, equity must be applied to [the] plaintiffs as well as [the] defendants. [The] [d]efendant did not raise the issue of standing until he had the advantage of many years of delay. Some delay stemmed from the New Jersey foreclosure system, other delay was afforded him through the equitable powers of the court, and additional delay resulted from [the] plaintiff's attempt to amicably resolve the matter. [The] [d]efendant at no time denied his responsibility for the debt incurred . . . . Rather, when all hope of further delay expired . . . he made a last-ditch effort to relitigate the case. The trial court did not abuse its discretion in determining that [the] defendant was not equitably entitled to vacate the judgment.

[Id. at 320.]

In Russo, the plaintiff obtained a final judgment of foreclosure by default in March 2009, and after the defendants filed for bankruptcy and the sheriff's sale was adjourned numerous times, in July 2011, the defendants filed their first pleading in the foreclosure action, an order to show cause seeking to stay the sheriff's sale and vacate the final judgment of foreclosure pursuant to Rule 4:50-1(d) and (f). Supra, slip op. at 3-4. The defendants challenged plaintiff's standing to file the foreclosure complaint because it did not take an assignment of the mortgage until after the complaint was filed. Id. at 4.

We held that based on Guillaume and Angeles, "even if [the] plaintiff did not have the note or a valid assignment when it filed the complaint, but obtained either or both before entry of judgment, dismissal of the complaint would not have been an appropriate remedy here because of [the] defendants' unexcused, years-long delay in asserting that defense." Id. at 11-12. We concluded, "in this post-judgment context, lack of standing would not constitute a meritorious defense to the foreclosure complaint . . . standing is not a jurisdictional issue in our State court system and, therefore, a foreclosure judgment obtained by a party that lacked standing is not "void" within the meaning of Rule 4:50-1(d)." Id. at 12.

Judge McVeigh properly concluded defendant could not meet the high standard necessary to vacate the sheriff's sale. Balancing the equities as demonstrated by the clear record, defendant is not entitled to relief.



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