October 6, 2016
appeal from the Superior Court of New Jersey, Chancery
Division, Passaic County, Docket No. F-27321-09.
Richard A. Herman argued the cause for appellants.
Patel argued the cause for respondent (Law Office of Rajan
Patel and Blank Rome LLP, attorneys; Mr. Patel, on the
Judges Fuentes, Carroll, and Gooden Brown.
Louisa Wuebbens and David Wuebbens appeal from companion
orders entered by the Chancery Division on January 5, 2015,
granting partial summary judgment to plaintiff Ocwen Loan
Servicing, LLC,  and denying defendants' motion for
summary judgment. Applying equitable principles recognized by
this court in Sovereign Bank v. Gillis, 432
N.J.Super. 36 (App. Div. 2013), Judge Margaret Mary McVeigh
granted plaintiff's mortgage a lien priority over
defendants' life estates in the mortgaged property. We
affirm both orders, substantially for the reasons articulated
by Judge McVeigh in her well-reasoned written opinion of
January 5, 2015.
essential facts are undisputed. By deed dated November 12,
2004, defendants conveyed their residential property in
Little Falls to their daughter, Marla Wuebbens Quinn.
Defendants retained a life estate in the property, and agreed
to remain responsible for the maintenance and upkeep of the
property, to pay all taxes assessed upon the property, and to
maintain adequate insurance.
December 2, 2005, Marla Wuebbens Quinn, her husband, Thomas
Francis Quinn, and defendants executed a $260, 000 mortgage
on the property in favor of IndyMac Bank, F.S.B. (the 2005
mortgage). The mortgage loan had a thirty-year term through
December 2035, with an adjustable interest rate initially set
at 1.000% and a maximum cap not to exceed 9.700%. The
mortgage further provided that, because the borrowers were
initially only making limited monthly payments, the addition
of unpaid interest could increase the principal balance to
110% of the $260, 000 loan amount, or $286, 000.
September 21, 2007, Marla Wuebbens Quinn refinanced the
existing mortgage loan by executing a $380, 000 note and
mortgage in favor of IndyMac (the 2007 mortgage). Plaintiff
alleges, and defendants do not dispute, that the title
commitment obtained by IndyMac did not disclose the recorded
life estates held by defendants. Consequently, the title
commitment did not require defendants to execute the 2007
mortgage, and they did not do so. The new mortgage loan had a
thirty-year term, through October 2037, and provided for a
fixed annual interest rate of 6.625%.
title commitment did reveal the existence of two open
mortgages encumbering the property: its own 2005 mortgage,
and a $60, 000 second mortgage executed by the Quinns in 2006
in favor of another lender. Both mortgages were satisfied out
of the proceeds of the 2007 mortgage loan, with Indymac
receiving $265, 269.45 to satisfy the 2005 mortgage, and the
second lender receiving $57, 305.59 to discharge its
mortgage. As a result, the 2007 mortgage to Indymac, signed
only by Marla Wuebbens Quinn and not by defendants, became
the sole mortgage lien on the property.
2009, IndyMac filed a foreclosure action in the Chancery
Division against the Quinns on the defaulted 2007 mortgage.
Subsequent amendments to the complaint by IndyMac's
assignees added defendants as parties to the action and,
among other things, sought to equitably subrogate
defendants' life estate interests in the property to
cross-motions for summary judgment, plaintiff sought an
adjudication that defendants' life estates in the
property were subject and subordinate to the lien of
plaintiff's 2007 mortgage, plus taxes and insurance
advanced by plaintiff and its predecessors while the loan was
in default. In turn, defendants sought dismissal of the
foreclosure complaint against them on the grounds that they
did not sign the 2007 mortgage nor pledge their life estates
in connection with the 2007 loan refinancing.
the "equitable principles of Gillis" and
the principles of replacement and modification recognized in
the Restatement (Third) of Property - Mortgages
(1997) ("the Third Restatement"), Judge
McVeigh granted plaintiff's motion and denied
defendants' motion. Specifically, the judge permitted
plaintiff to step into the shoes of its prior mortgage which
its own funds satisfied. However, the judge
"capped" the amount of plaintiff's priority at
$260, 000, and ruled that "[t]o the extent that the
 refinance exceeds the value of the  mortgage,
such a portion of the refinance does not maintain
priority" over defendants' life estates. Judge