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Capital One, N.A. v. Peck

Superior Court of New Jersey, Appellate Division

June 18, 2018

CAPITAL ONE, N.A., Plaintiff-Respondent,
JAMES I. PECK, IV, Defendant-Appellant.

          Argued April 25, 2018

          On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-005201-13.

          Nicolas A. Stratton argued the cause for appellant (Stratton Stepp, LLP, attorneys; Nicolas A. Stratton, on the brief).

          Danielle Weslock argued the cause for respondent (McCarter & English, LLP, attorneys; Joseph Lubertazzi, Jr., of counsel and on the brief; Danielle Weslock, on the brief).

          Before Judges Fuentes, Koblitz, and Manahan.


          KOBLITZ, J.A.D.

         In this appeal of an August 26, 2016 final residential foreclosure judgment, defendant James I. Peck, IV[1] contends that, after the promissory note, without the mortgage, was sold to Freddie Mac, and Capital One, N.A. (CONA) became the loan servicer on behalf of Freddie Mac, CONA could not foreclose on his home because it did not possess the note and a valid assignment of mortgage at the time it filed the complaint. He argues that only Freddie Mac had standing to foreclose. Although we agree that in these unusual circumstances where one entity owns the note and another the mortgage, both the note and a valid mortgage assignment are required to foreclose, we affirm in spite of certain irregularities.

         Freddie Mac's form 10-K annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 provides the following information. The Federal Home Loan Mortgage Corporation, known as Freddie Mac, is a government sponsored enterprise (GSE) chartered by Congress in 1970. Its public mission is to provide liquidity, stability and affordability to the United States housing market. It does this primarily by purchasing residential mortgage loans originated by lenders. It does not originate loans or lend money directly to mortgage borrowers. United States Securities and Exchange Commission, Form 10-K, "Federal Home Loan Mortgage Corporation, " 6214/000102 6214180000 20/a20174q10k.htm (last visited May 29, 2018).

         On March 10, 2005, defendant executed a promissory note to Chevy Chase Bank, F.S.B., (CCB) which was secured by a residential mortgage by Mortgage Electronic Registration Systems, Inc. (MERS), for $258, 750.[2] On July 28, 2005, CCB sold defendant's note to Freddie Mac, but retained the mortgage. In July 2009, CCB converted to a national bank and merged with CONA. Defendant defaulted on the loan in 2010, and did not pay the mortgage or taxes after that date. The original mortgage states: "MERS is a separate corporation that is acting solely as a nominee for [l]ender and [l]ender's successors and assigns." MERS, which also states in the "Assignment of Mortgage" that it is "acting solely as nominee for [CCB], its successors and assigns, " assigned the mortgage to CONA on February 9, 2011, more than one year after CCB merged into CONA.

         At least since July 15, 2009, defendant received repeated notices that identified CONA as the servicer on the loan, although Freddie Mac remained the investor. Defendant also conceded that he made payments to CONA. In June 2012, the court dismissed without prejudice an earlier foreclosure proceeding initiated by CONA, F-003445-11, because CONA failed to comply with the court-ordered deposition of an employee who could provide information about possible mortgage irregularities. CONA brought the original note to court in that proceeding. The note was subsequently returned to Freddie Mac later in 2012.

         On February 15, 2013, CONA initiated the present foreclosure proceedings. The court dismissed the contesting answer on June 9, 2015, and referred the case to the Office of Foreclosure for entry of final judgment as uncontested. R. 4:64-1. Defendant's motion for reconsideration was denied on May 5, 2016 and his subsequent motion for summary judgment was denied on November 25, 2016, after defendant's death.[3] Defendant appeals from the entry of final judgment arguing that CONA lacked standing to foreclose.

         Our review is de novo, applying the same legal standard as the trial court. Conley v. Guerrero, 228 N.J. 339, 346 (2017). Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, 224 N.J. 189, 199 (2016) (quoting R. 4:46-2(c)). If all the contesting pleadings have been stricken or otherwise deemed noncontesting, an action to foreclose a mortgage is deemed uncontested. R. 4:64-1(c)(3).

         Defendant argues that because "Freddie Mac is the owner of [d]efendant's loan, " it "is the only entity with the right to enforce the mortgage." He further argues that in order to validly assign a mortgage, the "assignment must contain evidence of the intent to transfer one's rights." (quoting K. Woodmere Assocs., LP v. Menk Corp., 316 N.J.Super. 306, 314 (App. Div. 1998)).

         The court found that the material facts in controversy involved standing, and were limited to possession of the original note, endorsement of the note, the transfer of the note from CCB to Freddie Mac, and CONA's right to enforce the note. The trial court concluded, "[I]t's clear . . . that a bearer of the note endorsed in blank is the holder of the note [] and entitled to enforce the note pursuant to N.J.S.A. ...

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