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Capital One, N.A. v. Finmar Associates

Superior Court of New Jersey, Appellate Division

June 28, 2013

CAPITAL ONE, N.A., a national banking association and successor by merger to North Fork Bank, Plaintiff-Respondent,


Submitted April 8, 2013

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. 3403-11.

Rabner, Allcorn, Baumgart & Ben-Asher, P.C., attorneys for appellants (Dennis H. Sabourin and Eugenie F. Temmler, on the briefs).

McElroy, Deutsch, Mulvaney & Carpenter, LLP, attorneys for respondent (Peter Saad, on the brief).

Before Judges Fasciale and Maven.


Defendants Finmar Associates, Marvin Bram and Claire Bram appeal an April 27, 2012 order denying their request to vacate default judgment in favor of plaintiff Capital One, N.A. (Capital One), successor-in-interest to North Fork Bank. Defendants primarily argue that Capital One lacked standing. We affirm.

On December 14, 2005, defendant Finmar Associates obtained a loan from North Fork Bank in the amount of $1, 085, 000, secured by a Commercial Mortgage on a property located in Audubon, New Jersey. Also on this date, defendants Marvin and Claire Bram executed and delivered personal guaranties of repayment on the commercial loan obligation.

The loan matured on January 1, 2011; however, defendants failed to make any payment. On or about July 5, 2011, Capital One, which had acquired North Fork Bank through a merger on August 1, 2007, [1] filed a complaint against defendants alleging, among other things, breach of contract for default of payment obligations under the note and personal guaranties. The complaint was served on July 20, 2011. When defendants failed to answer, Capital One filed a request to enter default on September 6, 2011. The bank attached a certification from its Vice President, Marcy McLoone, which attested to the amount due on the loan and that defendants had been properly served the complaint. Default was entered on September 7, 2011.

On October 19, 2011, Capital One filed a motion for Default Judgment to which defendants filed an opposition brief. Defendants argued that Capital One failed to establish that Capital One was the current holder of the note in due course or that it had the right to enforce the note and the guaranties in this action. In response, Capital One filed a supplemental certification from McLoone, as well as a copy of the New Jersey Bank Mergers listing from the New Jersey Department of Banking and Insurance website, attesting to the acquisition of North Fork Bank by Capital One. Defendants also sought permission to file an answer to the complaint without filing a notice of motion to file the answer out to of time.

After oral argument on November 18, 2011, Judge Richard F. Wells entered default judgment against defendants in the amount of $1, 087, 015.83.[2] The judge determined that Capital One had standing to enforce the note and defendants failed to satisfy the requisites of Rule 4:43-3. He stated

if the [c]ourt had a concern that Capital One was not the successor in interest in North Fork Bank, I'd be hesitant to grant the relief requested. But based on what's presented, the [c]ourt finds that there's really -- there is not a genuine issue here.
The [c]ourt notes that defendant[s] ha[ve] failed pursuant to [Rule] 4:43-3 to either provide an answer to the complaint or a dispositive motion to vacate default. And although we talked about it[, ] there is really no demonstration of good cause under [Rule] 4:43-3 to warrant the [c]ourt setting aside the default filed. . . .

On April 2, 2012, defendants filed a motion pursuant to Rule 4:50-1 to vacate the default judgment and for permission to file an answer, asserting both excusable neglect and Capital One's alleged lack of standing. At oral argument on April 27, 2012, counsel argued that defendants did not ignore the legal documents received from Capital One, but rather, that they took the documents to their attorney[3] who informed them that he could not assist them in the contract action. Defendants averred in their certification that they did not understand that they "needed to retain separate counsel to file an [a]nswer and deal with the litigation." Counsel was retained by defendants shortly before the November 2011 motion hearing. Defendants argued that such conduct was not "calculated or willful" and should be considered excusable neglect pursuant to Rule 4:50-1(a).

Defendants also contended, as a meritorious defense pursuant to Rule 4:50-1(d), that default judgment was void because Capital One lacked standing to enforce the note. They argued that the complaint did not state that Capital One was the holder or in possession of the note, and McLoone's certification failed to establish that Capital One acquired and possessed the note following the merger and acquisition of North Fork.

After hearing counsel's argument on Capital One's lack of standing, the judge queried defense counsel on their meritorious defense as follows:

THE COURT: Here's the one thing that I don't believe I heard from you either today or the last time you were here with regard to the opposition, I haven't heard anything about a meritorious defense.
THE COURT: What's your meritorious defense?
[DEFENSE COUNSEL]: Our meritorious defense is that . . . given their failure . . . to produce an affidavit that says that they have it, . . . we believe they don't have the original of the note.
THE COURT: [T]hat's not consistent with my understanding of the requirement for a meritorious defense. My . . . understanding of [a] meritorious defense would be . . . we don't owe them any money because it was . . . obtained by fraud, we don't owe them because we paid it in full, we don't owe them because it's some other party, or something like that. It sounds like you don't have that.
[DEFENSE COUNSEL]: In . . . all fairness, Your Honor, as we've said, we're in default on the note. . . .
THE COURT: Okay. So, your response is that . . . you don't have a meritorious defense with regard to the obligation, your defense is that they have not come forward with sufficient proofs of standing. Bottom line?
[DEFENSE COUNSEL]: I think that is a meritorious defense[] . . . .
[DEFENSE COUNSEL]: We owe the obligation to somebody. They haven't proved that we owed it to them.

Judge Wells subsequently denied defendants' motion to vacate the default judgment and permit defendants to file an answer to the complaint. This appeal followed.

On appeal, defendants argue that the judgment must be vacated pursuant to Rule 4:50-1(a), (d), and (f). We conclude that defendants have not demonstrated that they are entitled to relief under any of these sections. As such, the judge did not abuse his discretion in denying the motion.

Our standard of review is well-settled. As Justice Patterson recently reiterated in US Bank National Ass'n v. Guillaume, 209 N.J. 449, 467 (2012), a "party seeking to vacate [a default] judgment" must satisfy Rule 4:50-1, which states, in pertinent, part that

[o]n motion, with briefs and upon such terms as are just, the court may relieve a party or the party's legal representative from a final judgment or order for the following reasons: (a) mistake, inadvertence, surprise, or excusable neglect; . . . (d) the judgment or order is void; . . . or (f) any other reason justifying relief from the operation of the judgment or order.

"The rule is designed to reconcile the strong interests in finality of judgments and judicial efficiency with the equitable notion that courts should have authority to avoid an unjust result in any given case." Ibid. (citations omitted) (internal quotation marks omitted).

We afford "substantial deference" to the trial judge and reverse only if the judge's determination amounts to a clear abuse of discretion. Ibid. An abuse of discretion is when a decision is "made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis." Ibid. (citations omitted) (internal quotation marks omitted).

We begin by addressing defendants' reliance on Rule 4:50-1(a), which requires a showing of excusable neglect and a meritorious defense. Id. at 468. In other words, we will not disturb a default judgment unless the failure to answer or otherwise appear and defend was excusable under the circumstances and unless a defendant has a meritorious defense. Id. at 468-69. Here, defense counsel attempted to oppose Capital One's motion to enter default judgment even though defendants failed to preliminarily seek to vacate the September 2011 default. The judge correctly stated, therefore, that defendants did not satisfy Rule 4:43-3, requiring them to file a motion to vacate default accompanied by a proposed answer. Moreover, the judge found that even if defendants moved to vacate default, they failed to satisfy the good cause standard required by Rule 4:43-3. Nevertheless, the judge considered defense counsel's purported meritorious defense contention that Capital One lacked standing, and rejected it. On this record, we likewise are unable to determine that defendants showed good cause to vacate default, and we conclude that they have not shown excusable neglect to vacate default judgment. More importantly, however, for the reasons that follow, they have not demonstrated a meritorious defense.

We turn next to defendants' contention that the final judgment is void, pursuant to Rule 4:50-1(d), for lack of standing. In support of this claim, defendants rely on recent case law analyzing the interplay between assignments of notes and mortgages and the recently adopted mortgage foreclosure rules. Defendants specifically recite Deutsche Bank National Trust Co. v. Mitchell, 422 N.J.Super. 214 (App. Div. 2011), to assert that Capital One lacks standing because the company "has only alleged that it is the successor to the original holder" and fails "to prove that the original [n]ote is in its possession." This claim lacks merit.

The circumstances in this case are distinguishable from Mitchell, which involved an assignment of the mortgage to defendant Deutsche Bank. Ibid. Here, Capital One acquired North Fork Bank through a merger on August 1, 2007. Capital One evidenced its entitlement under the note and personal guaranties with two certifications from the company's Vice President who stated, in relevant part, that she thoroughly reviewed Capital One's books and records concerning the note and mortgage made subject to the complaint, was fully familiar with the facts and circumstances stated in the certification, and that "[a]t all times, including at the time of the filing of the [c]omplaint and continuing to the present, the [p]laintiff or its predecessor in interest, North Fork Bank, have [sic] possessed the [n]ote in this matter."

After examining these certifications and considering the arguments of counsel, the motion judge noted the affidavits were based on the Vice President's personal review of Capital One's business records. The judge ultimately found:

I'm satisfied [Capital One] has shown that [Capital One] completed its acquisition of the North Fork Bank on August 1, 2007. . . . [I]t's duly supported in the papers. . . .
I'm satisfied that the certification of Marcy McLoone is sufficient under the circumstances. And I'm further satisfied that [Capital One] has established that it possesses this note in this matter.

Upon our review of the record, we are satisfied that Capital One presented sufficient evidence establishing its right to bring an action under the note and guaranties. Capital One's acquisition of North Fork was not contested by appellants. Under the Banking Act of 1948, N.J.S.A. 17:9A-1 to -467, when two or more banks merge, "the corporate existence of each merging bank shall be merged into that of the receiving bank, and the property and rights of each merging bank shall thereupon vest in the receiving bank without further act or deed[.]" N.J.S.A. 17:9A-139. Accordingly, Capital One is vested with the right to sue on instruments previously held by the acquired bank without presenting a separate assignment of the instruments. 12 U.S.C.A. § 215a(e); see also N.J.S.A. 17:9A-132(2); N.J.S.A. 17:9A-148(C). The trial judge did not abuse his discretion by rejecting defendants' claim.

Finally, we disagree that Rule 4:50-1(f) justifies vacation of the judgment. Subsection (f) permits a judge to vacate a default judgment for "any other reason justifying relief from the operation of the judgment or order, " and "is available only when truly exceptional circumstances are present." Guillaume, supra, 209 N.J. at 484 (internal quotation marks omitted). The applicability of this subsection is limited to "situations in which, were it not applied, a grave injustice would occur." Ibid. (internal quotation marks omitted). On this record, defendants have not shown any such "exceptional circumstances."

After a thorough review of the record and consideration of the controlling legal principles, we conclude that defendants' remaining arguments are without sufficient merit to warrant extended discussion in a written opinion. R. 2:11-3(e)(1)(E).


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