June 27, 2013
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE IN TRUST FOR THE BENEFIT OF THE CERTIFICATEHOLDERS FOR AMERIQUEST MORTGAGE SECURITIES TRUST 2006-R1 ASSET-BACKED PASS-THROUGH CERTIFICATES, SERIES 2006-R1, Plaintiff-Appellant,
KOSTANTINOS VEZERIANNIS, and MARIA VEZERIANNIS; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR LEND AMERICA, A NEW YORK CORPORATION, Defendant-Respondents.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted September 27, 2012
On appeal from the Superior Court of New Jersey, Chancery Division, Atlantic County, Docket No. F-3520-10.
Fein, Such, Kahn & Shepard, P.C., attorneys for appellant (Joshua B. Sears, on the briefs).
Callaghan, Thompson & Thompson, P.A., attorneys for respondents Kostantinos and Maria Vezeriannis (Edward M. Thompson, on the brief).
Carl N. Tripician, attorney for respondent Mortgage Electronic Registration Systems, Inc.
Before Judges Nugent and Haas.
Plaintiff, Deutsche Bank National Trust Company, appeals from the Chancery Division order that entered summary judgment against it, dismissed its foreclosure complaint, and discharged its mortgage on real estate that defendants Kostantinos Vezeriannis and Maria Vezeriannis owned in Atlantic City. We affirm.
The facts are undisputed. On November 10, 2005, defendants Kostantinos Vezeriannis and Maria Vezeriannis (Borrowers) borrowed $325, 000 from Ameriquest Mortgage Company (Ameriquest). In exchange, they signed a promissory note and a mortgage (the Ameriquest mortgage) on property they owned in Atlantic City (the property). The Ameriquest mortgage was recorded in the Atlantic County Clerk's office on April 18, 2006.
Borrowers refinanced the property in January 2009 when they borrowed $375, 000 from defendant Lend America, signed a note evidencing the loan, and signed a mortgage (the Lend America mortgage) on the property to secure the loan. Settlement occurred on January 28, 2009. EAM Settlement Services, Inc. (EAM) was the settlement agent. In that capacity, EAM accepted the obligation to pay from the loan proceeds the funds necessary to discharge the Ameriquest mortgage (the payoff funds). Two days earlier, Lend America had received a payoff letter with the payoff amount.
On January 26, 2009, Ameriquest's attorney-in-fact, Citi Residential Lending, Inc. (Citi), telefaxed payoff instructions to Lend America (the pre-closing fax). A "payoff statement" was attached to the page containing the payoff instructions. The telefax provided in pertinent part:
Attached is the payoff statement you requested.
Please remit payoff funds via wire transfer
Bank of America
New York, N.J. 10001
AEA Number: [XXXXXXXX]
Credit: Citi Residential Lending, Inc.
Account Number: [XXXXX-XXXXX]
LOAN 01378159608 Kostantinos Vezeriannis
To avoid additional interest accruing, and to ensure the timely credit to payoff funds, we encourage you to wire funds. In addition, please confirm accuracy of all wiring information.
The pre-closing fax does not mention Borrowers' names and does not show that a copy was sent to Borrowers. The attached payoff statement includes the Borrowers' names, the address of the mortgaged property, and the Ameriquest loan number.
EAM wired the Ameriquest mortgage payoff funds to Bank of America twelve days after the closing, on February 9, 2009. The "wire" included Citi's account number, so the funds were credited to Citi's account in Bank of America. EAM's wire, did not, however, include a reference to the Borrowers or the loan number.
Two days after EAM wired the payoff funds to Bank of America, on February 11, 2009, the Lend America mortgage was recorded. The mortgage designated defendant Mortgage Electronic Registration Systems, Inc. (MERS) as a "nominee" for Lend America. Thus, on February 11, 2009, Citi had in its Bank of America account the payoff funds for the Ameriquest mortgage, and Lend America's mortgage was recorded. The Ameriquest mortgage, however, was not discharged.
The next day, February 12, 2009, Citi wired the payoff funds, which had been in Citi's bank account for three days, back to EAM. The wire explained: "Unable To Locate Loan [number.]" The next day Citi, as attorney-in-fact for Ameriquest, assigned the Ameriquest mortgage to plaintiff.The assignment was recorded in the Atlantic County Clerk's office on February 17, 2009.
After refinancing the property, Borrowers made no additional payments on the Ameriquest mortgage, believing it had been discharged. Because Borrowers stopped making payments, plaintiff filed the foreclosure complaint against Borrowers and MERS on January 11, 2010. MERS filed an answer "by and through its member and agent, Gateway Bank, F.S.B." Borrowers filed an answer and third-party complaint against EAM. Later, Borrowers filed a fourth-party complaint against MERS and Gateway.
Plaintiff filed a summary judgment motion, and defendants MERS and Gateway filed a motion seeking an order discharging the Ameriquest mortgage. In a written decision dated September 13, 2007, the Chancery Division judge issued a decision granting summary judgment to defendants. The judge determined that EAM had complied with Citi's payoff instructions by wiring the payoff amount to Bank of America. The judge also determined that EAM's transfer of funds to Bank of America complied with the "Uniform Commercial Code – Funds Transfers" provisions of N.J.S.A. 12A:4A-101 to -507 (UCC 4A). Lastly, the judge found that plaintiff's predecessor's "[i]naction and arguably imprudent business judgment . . . result[ed] in the loss of the returned funds." Based on those findings, and after balancing equitable considerations, the judge concluded that "[e]quity demands discharge of the original mortgage." The judge dismissed plaintiff's complaint as well as Borrowers' third and fourth party complaints, but did not preclude plaintiff from pursuing a claim against EAM.
Plaintiff filed a motion for a stay, which the Chancery Division judge denied. Thereafter, plaintiff filed an application for emergent relief with us, which we denied. Plaintiff appealed from the order dismissing the complaint and discharging the mortgage.
Plaintiff presents the following arguments for our consideration:
THE TRIAL COURT'S FIND OF "ADEQUATE IDENTIFYING INFORMATION" ON THE REFINANCE PAYMENT DOES NOT COMPORT WITH THE FACTS IN EVIDENCE; THE TRIAL COURT ERRED IN FINDING A VALID TENDER OF PAYMENT WAS REMITTED BY DEFENDANTS.
A. The Applicable Statute Governing Wire Transfers.
B. The Contents of a Wire Transfer are Integral to its Underlying Purpose.
C. The Contents of the Wire in Issue.
D. The Wire in Issue is not Linked to the Defendants' Mortgage Loan Account with the Beneficiary.
E. The Wire in Issue Does Not Substantially Comply with the Beneficiary's Wiring Instructions.
F. The Wire Transfer Was Not a Valid Tender of Payment.
THE TRIAL COURT ERRED IN DEEMING THE WIRE HAD BEEN ACCEPTED BY THE BENEFICIARY.
A. Return of the Wire in Issue is Mandated by Statute.
B. The Trial Court Erred in Denying Summary Judgment for Plaintiff.
We review summary judgment orders de novo and apply the same standard the motion judge applies under Rule 4:46-2. Liberty Surplus Ins. Corp. v. Nowell Amoroso P.A., 189 N.J. 436, 445-46 (2007); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). When the parties do not dispute any material facts, we decide whether the motion judge's application of the law was correct, Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J.Super. 224, 230-31 (App. Div.), certif. denied, 189 N.J. 104 (2006), giving no special deference to the judge's legal conclusions. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
Plaintiff argues that EAM's wire transfer to Bank of America was a "funds transfer" subject to the provisions of UCC 4A, and because the wire did not identify the Ameriquest Mortgage loan number, Citi was obligated by UCC 4A to return the funds. Plaintiff's arguments are based on the faulty premise that the provisions of UCC 4A apply to Citi's pre-closing telefax to Lend America about the payoff funds, and to the Ameriquest mortgage account number. They do not.
The provisions of UCC 4A apply "to funds transfers defined in [N.J.S.A.] 12A:4A-104." N.J.S.A. 12A:4A-102. The term "'funds tranfers' means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order.'" N.J.S.A. 12A:4A-104(1) (emphasis added). The "originator" is "the sender of the first payment order in a funds transfer." N.J.S.A. 12A-4A-104(3). A "'sender' is the person giving the instruction to the receiving bank, " N.J.S.A. 12A:4A-103(1)(e), and a payment order is "an instruction of a sender to a receiving bank . . . to pay, or to cause another bank to pay, a fixed or determinable amount of money to a beneficiary . . . ." N.J.S.A. 12A:4A-103(1)(a).
Here, the funds transfer began when EAM, the originator, instructed its receiving bank to pay Bank of America an amount of money equivalent to the payoff funds; not when Citi sent the pre-closing fax to Lend America.
The funds transfers process is explained in the "Prefatory Note of National Conference of Commissioners on Uniform State Laws and the American Law Institute" to UCC 4A:
The funds transfer that is covered by Article 4A is not a complex transaction and can be illustrated by the following example which is used throughout the Prefatory Note as a basis for discussion. X, a debtor, wants to pay an obligation owed to Y. Instead of delivering to Y a negotiable instrument such as a check or some other writing . . . X transmits an instruction to X's bank to credit a sum of money to the bank account of Y. In most cases, X's and Y's bank are different banks. X's bank may carry out X's instruction by instructing Y's bank to credit Y's account in the amount X requested. The instruction that X issues to its bank is a "payment order." X is the "sender" of the payment order and X's bank is the "receiving bank" with respect to X's order. Y is the "beneficiary" of X's order. When X's bank issues an instruction to Y's bank to carry out X's payment order, X's bank "executes" X's order. The instruction of X's bank to Y's bank is also a payment order. With respect to that order, X's bank is the sender, Y's bank is the receiving bank, and Y is the beneficiary. The entire series of transactions by which X pays Y is known as the "funds transfer." With respect to the funds transfer, X is the "originator, " X's bank is the "originator's bank, " Y is the "beneficiary" is and Y's bank is the "beneficiary's bank."
[Comment on N.J.S.A. 4A (immediately preceding N.J.S.A. 12A:4A-101).]
In the case before us, EAM was the originator who sent a payment order to Capital One; Capital One was both EAM's receiving bank and the sender of a payment order to Bank of America; Bank of America was the receiving bank of Capital One's payment order and the beneficiary's bank; and Citi was the beneficiary. The funds transfer ended when an amount of money equivalent to the payoff funds was credited to Citi's account and made available to Citi. The pre-closing fax from Citi to Lend America was not part of the funds transfer and was not subject to UCC 4A.
In an attempt to avoid the indisputable fact that Citi received the payoff funds, plaintiff asserts that UCC 4A, specifically N.J.S.A. 12A:4A-207, "mandates [Citi's] legal obligation to return the wire in the event it refers to a nonexistent or identifiable person or account." Plaintiff reasons that "because of the lack of [d]efendant's account number on the wire[, ]" Citi "was required to return the wire under N.J.S.A. 2A:4A-207(1)." Plaintiff misconstrues the statute.
N.J.S.A. 2A:4A-207 is entitled "[m]isdescription of beneficiary." N.J.S.A. 2A:4A-207(1) provides in pertinent part: "[I]f, in a payment order received by the beneficiary's bank, the name, bank account number, or other identification of the beneficiary refers to a nonexistent or unidentifiable person or account, no person has rights as a beneficiary of the order and acceptance of the order cannot occur." That situation did not occur here. Citi, not Borrowers, was the "beneficiary" of the funds sent by EAM. EAM correctly identified Citi's account with Bank of America. The Borrower's Ameriquest mortgage account number was not needed to identify either Citi or its Bank of America account, and was irrelevant to the application of N.J.S.A. 12A:4A-207(1).
In view of plaintiff's erroneous central premise that the UCC 4A provisions apply both to Citi's pre-closing telefax and to the Ameriquest mortgage account number, its remaining arguments respecting UCC 4A, as well as its arguments respecting the UCC provisions concerning transactions in goods, are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We add only the following comments.
In a summary action to have a court discharge a mortgage, a mortgagor must "[present] satisfactory proof that the principal and interest due on the mortgage have been fully paid[.]" N.J.S.A. 2A:51-1. Here, Borrowers proved that the principal and interest had been fully paid; money equaling the outstanding principal and interest had been deposited into Citi's bank. Citi possessed and controlled the payoff funds to the same extent it possessed and controlled the other money in its account, unrestricted by anything Borrowers could say or do.
Plaintiff argues that there was insufficient information in EAM's wire to identify the funds as the Ameriquest payoff funds. Although plaintiff asserts that, as a result, it would have been unduly time-consuming, burdensome, or contrary to its business practices to cross-reference the payment to its accounts or to contact EAM for clarification -- an assertion unsupported by any evidence in the record -- the assertion must be weighed against countervailing considerations.
Nothing Borrowers did or omitted to do contributed to the loss of the payoff funds. They signed a note evidencing the loan from Lend America and executed a mortgage that created a substantial lien against their property. In exchange, they bargained for a discharge of the Ameriquest mortgage. See Clients' SEC Fund of the Bank. of New Jersey v. Sec. Title and Guar. Co., 257 N.J.Super. 18, 28 (App. Div. 1992), aff'd, 134 N.J. 358 (1993). Neither the Ameriquest mortgage, the note, nor anything else in the record suggests Borrowers had actual notice that Citi had explicitly conditioned its acceptance of payoff funds on the funds being transferred by a wire referencing the Ameriquest mortgage account number. Borrowers were completely innocent and unaware that Citi would find it impractical to attempt to identify the source of the funds. Although inconvenient, Citi had the ability to contact EAM or identify the source of the funds by cross-checking their records, whereas Borrowers did not.
The Chancery Division judge weighed the countervailing considerations, applied appropriate equitable principles, and struck a balance in favor of Borrowers. To the extent he concluded that equitable considerations justified the discharge of the Ameriquest mortgage, we find no basis for concluding that he erred. His confirming order makes clear that plaintiff can pursue a damage claim against EAM or any other entity that may have dissipated the payoff funds after Citi returned them to EAM.