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Residential Mortgage Loan Trust 2013-TT2 v. Morgan Stanley Mortgage Capital, Inc.

Superior Court of New Jersey, Appellate Division

December 19, 2018

RESIDENTIAL MORTGAGE LOAN TRUST 2013-TT2, BY U.S.BANK NATIONAL ASSOCIATION, not in its individual capacity, but solely as legal title trustee, Plaintiff-Respondent,

          Argued October 11, 2018

          On appeal from Superior Court of New Jersey, Chancery Division, Union County, Docket No. C-000108-15.

          Roy J. Thibodaux, III argued the cause for appellants (Berkowitz, Lichtstein, Kuritsky, Giasullo & Gross, LLC, attorneys; Roy J. Thibodaux, III, on the briefs).

          Kiera McFadden-Roan argued the cause for respondent (Parker McCay PA, attorneys; Kiera McFadden-Roan and Gene Mariano, of counsel; Stacy L. Moore, Jr., on the brief).

          Before Judges Nugent, Reisner and Mawla. [1]


          REISNER, J.A.D.

         In this foreclosure-related case, defendants Claudinei and Regiane Barros appeal from a September 13, 2017 order, granting summary judgment to plaintiff, Residential Mortgage Loan Trust 2013-TT2 (Residential Mortgage), represented by its trustee, U.S. Bank National Association, and a September 1, 2017 order denying defendants' summary judgment motion.

         The order granting summary judgment deemed plaintiff to be the holder and owner of a $765, 000 note that Claudinei Barros executed in favor of Wall Street Financial Corporation in 2006. The order also deemed plaintiff to be the assignee of the mortgage on defendants' house, which they both executed in 2006 to secure the note. The order barred plaintiff from pursuing a deficiency action against defendants under the note. It also barred the named institutional defendants, or any other entities, from any further interest in the note and mortgage, and required plaintiff to indemnify Claudinei and Regiane Barros against any entity that might in the future assert a claim to enforce the note or mortgage. Lastly, the order declared that plaintiff now had standing to file an action to foreclose the mortgage.

         On this appeal, defendants contend that plaintiff's quiet title lawsuit was procedurally improper. They also argue that the action was barred by res judicata. Additionally, they assert that the case was not appropriate for summary judgment, because there were material factual disputes about the chain of title, and possible interested parties were not named in the complaint.

         Our well-established standard of review is de novo, employing the Brill standard, the same test used by the trial court. See Globe Motor Co. v. Igdalev, 225 N.J. 469, 479 (2016); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). After reviewing the record in light of that standard, we conclude that N.J.S.A. 46:18-13 authorized plaintiff to file an action to establish its right to enforce the mortgage. We also conclude that the lawsuit was not barred by res judicata, the case was ripe for summary judgment, and plaintiff was entitled to prevail as a matter of law. Accordingly, we affirm the orders on appeal.


         To put the first issue in context, in order to foreclose a mortgage, a plaintiff must prove that it owns or controls the mortgage and the underlying note. See Capital One, N.A. v. Peck, 455 N.J.Super. 254, 258-59 (App. Div. 2018); Deutsche Bank Nat. Trust Co. v. Mitchell, 422 N.J.Super. 214, 224 (App. Div. 2011). The required proofs are needed to establish the plaintiff's standing to pursue the action. See Peck, 455 N.J.Super. at 258-59; Mitchell, 422 N.J.Super. at 224-25. However, proof that the plaintiff owns the relevant instruments is also important for the defendant's protection. Otherwise, for example, after the plaintiff forecloses, a second purported owner might come forward and sue the defendant to collect on the note. See Peck, 455 N.J.Super. at 259. Or, if the defendant redeems the property by paying the first plaintiff, the second claimant might seek to foreclose on the property, claiming to be the rightful holder of the mortgage. Consequently, a foreclosure plaintiff risks dismissal of the action if it cannot prove standing. See Deutsche Bank Nat. Trust Co. v. Russo, 429 N.J.Super. 91, 100 (App. Div. 2012) (quoting Bank of New York v. Raftogianis, 418 N.J.Super. 323, 356 (Ch. Div. 2010)).

         Pertinent to that background, this appeal concerns a mortgage and note that were transferred multiple times. At some point, it appears that the original documents were lost. Defendants do not dispute that they defaulted on the mortgage in April 2007. Thereafter, two different entities filed foreclosure actions. The first action, filed by Saxon Mortgage Services, Inc., was eventually dismissed without prejudice on March 30, 2012.[2] The second foreclosure action, filed by Deutsche Bank on April 24, 2012, was dismissed without prejudice in 2013, for lack of proof of standing.

         After its foreclosure complaint was dismissed, Deutsche Bank assigned its rights to plaintiff Residential Mortgage. Thereafter, in October 2015, plaintiff filed a General Equity lawsuit in the nature of a quiet title action, seeking to establish its rights as the holder of the note and mortgage, so that it could file a foreclosure action supported by proof of its standing.

         As in the trial court, defendants contend on appeal that plaintiff had no right to pursue the quiet title action in General Equity, but instead was required to ...

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