WELLS FARGO BANK, N.A. VS. RAYMOND C. HERZINGER (F-004033-17, OCEAN COUNTY AND STATEWIDE) ( 2019 )


Menu:
  •                                  NOT FOR PUBLICATION WITHOUT THE
    APPROVAL OF THE APPELLATE DIVISION
    This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
    internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.
    SUPERIOR COURT OF NEW JERSEY
    APPELLATE DIVISION
    DOCKET NO. A-5141-17T1
    WELLS FARGO BANK, N.A.,
    Plaintiff-Respondent,
    v.
    RAYMOND C. HERZINGER,
    MRS. RAYMOND C. HERZINGER,
    his wife, KATHLEEN D. HERZINGER,
    MR. HERZINGER, husband of
    KATHLEEN D. HERZINGER,
    Defendants-Appellants.
    _________________________________
    Submitted May 20, 2019 – Decided July 19, 2019
    Before Judges Sumners and Susswein.
    On appeal from the Superior Court of New Jersey,
    Chancery Division, Ocean County, Docket No. F-
    004033-17.
    Raymond C. Herzinger and Kathleen D. Herzinger,
    appellants pro se.
    Reed Smith LLP, attorneys for respondent (Henry F.
    Reichner, of counsel and on the brief).
    PER CURIAM
    In this residential foreclosure action, defendants Raymond Herzinger and
    Kathleen Herzinger, appeal from the trial court's order granting plaintiff Wells
    Fargo's motion for summary judgment and denying defendants' cross-motion to
    dismiss the foreclosure complaint. Defendants, who appear before us pro se, do
    not dispute that they were in default of the subject mortgage. Instead, they raise
    two main contentions: first, that Wells Fargo does not have standing to foreclose
    on the mortgage because another financial institution, Wachovia Bank,
    originally made the loan; and second, that Wells Fargo did not serve the Notice
    of Intent to foreclose (NOI) by registered or certified mail with return receipt
    requested as required by the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to
    -68.
    We have considered defendants' contentions in light of the record and
    applicable legal principles. We find that the trial judge did not abuse his
    discretion in concluding that plaintiff had adduced competent, admissible
    evidence that established that Wells Fargo acquired the mortgage loan as a result
    of its merger with Wachovia Bank and therefore had standing to bring this
    foreclosure action. However, we agree with defendants that the record before
    us does not show that Wells Fargo served the NOI by means of certified or
    A-5141-17T1
    2
    registered mail with return receipt requested, which is explicitly required by
    N.J.S.A. 2A:50-56(a)-(b). Because this statutory requirement must be strictly
    enforced, we reverse the grant of summary judgment and order that the
    foreclosure complaint be dismissed, without prejudice.
    I.
    On November 18, 2003, defendants executed and delivered a promissory
    note for $81,200 to Wachovia Bank. To secure the loan, defendants executed a
    mortgage on their home.
    On April 25, 2011, defendants entered into an Installment Loan
    Modification Agreement with plaintiff Wells Fargo. Defendants defaulted on
    the loan three years later.   On October 18, 2016, plaintiff sent NOIs to
    defendants at the mortgaged property by certified and regular mail. Defendants
    never cured the default.
    Plaintiff filed a foreclosure complaint against defendants on February 17,
    2017, and eight months later filed a motion for summary judgment. On October
    23, 2017, defendants filed a cross-motion to dismiss the foreclosure complaint.
    On October 26, 2017, a trial judge granted plaintiff's motion for summary
    judgment.   On November 17, 2017, he denied defendants' cross-motion to
    A-5141-17T1
    3
    dismiss. The trial judge addressed both motions in a combined statement of
    reasons that he issued on November 17, 2017.
    On May 3, 2018, plaintiff moved for entry of final judgment, which was
    granted on May 29, 2018. The following day, defendants filed a motion to fix
    the amount due to zero. The court denied that motion on June 22, 2018.
    II.
    We first address whether the NOI was served in compliance with the FFA,
    and if not, whether the foreclosure complaint should be dismissed. 1 "On appeal,
    we engage in de novo review from a trial court's decision to grant or deny a
    motion to dismiss filed pursuant to Rule 4:6-2(e)." Smith v. Datla, 
    451 N.J. 1
      The trial judge's written decision on November 17, 2017, treats defendants'
    motion to dismiss as merely revisiting the decision to grant summary judgment
    in plaintiff's favor. We would note that the trial judge's assumption that proper
    service of the NOI was not disputed is incorrect in view of defendant's objections
    to plaintiffs' statement of undisputed facts. See footnote 2. To the extent that
    this material fact is very much in dispute, we question whether the standard for
    summary judgment had been met. See Brill v. Guardian Life Ins. Co. of Am.,
    
    142 N.J. 520
    , 540 (1995). However, we chose to address the NOI service issue
    in the context of defendants' motion to dismiss the foreclosure complaint, rather
    than defendants' opposition to plaintiff's motion for summary judgment. Were
    we merely to reverse the grant of summary judgment, the remedy would be to
    remand the case for trial. As we will explain momentarily, we do not believe
    that is the appropriate remedy in the face of a violation of the FFA.
    A-5141-17T1
    4
    Super. 82, 88 (2017) (citing Rezem Family Assoc., LP v. Borough of Millstone,
    
    423 N.J. Super. 103
    , 114 (App. Div. 2011)).
    We start our analysis by noting that plaintiff asserts that, "the Borrowers
    [defendants] have never denied receipt of the NOI." Defendants refute that
    assertion in their reply brief and note that they denied receiving the NOI in their
    objections and responses to plaintiff's statement of undisputed facts. 2 Because
    we can find nothing in the record to support plaintiff's contention that the NOI
    was actually received, for purposes of this appeal, we assume that the alleged
    defect in the service of the NOI is not an academic issue.
    The FFA promulgates strict foreclosure guidelines that lenders must
    comply with as they attempt to resolve non-performing loans. In U.S. Bank
    Nat'l Ass'n v. Guillaume, 
    209 N.J. 449
    (2012), the Supreme Court emphasized
    the important function of the NOI as part of the foreclosure process, explaining
    that "[t]he [NOI] is a central component of the FFA, serving the important
    legislative objective of providing timely and clear notice to homeowners that
    immediate action is necessary to forestall foreclosure." 
    Id. at 470.
    2
    Plaintiff's Statement of Undisputed Facts asserts that the NOI was "mailed by
    certified mail, return receipt requested, and regular mail. . . ." Defendant's
    Response to that specific assertion was: "Defendants deny this statement." The
    response also states, "There is no return receipt card that supports [p]laintiff's
    assertion."
    A-5141-17T1
    5
    The FFA specifically and explicitly prescribes that a residential mortgage
    lender must serve a NOI to file foreclosure proceedings "by registered or
    certified mail, return receipt requested." N.J.S.A. 2A:50-56(a)-(b) (emphasis
    added). We must assume that when the Legislature included the language
    "return receipt requested" in the FFA, it did so carefully, opting to impose a
    requirement that goes beyond the rule of general application in civil cases that
    permits service by regular mail, and that creates a presumption that a notice was
    received if it was mailed to the correct address. See e.g., Hammond v. City of
    Paterson, 
    145 N.J. Super. 452
    , 456 (App. Div. 1976) (holding that the
    Legislature, in requiring "actual receipt" of notice in the Tort Claims Act when
    certified mail is not used, "clearly did not mean to leave proof of actual receipt
    to a presumption."); see also Intile Realty Co., Inc. v. Raho, 
    259 N.J. Super. 438
    ,
    454 (Law. Div. 1992) (holding that "[n]o presumption of receipt will arise from
    mailing by ordinary mail where the statute prescribes registered mail.").
    In Hammond, we noted that, "[i]t is evident from the tenor of the Tort
    Claims Act that the Legislature considered the receipt of notice of fundamental
    
    importance." 145 N.J. at 455
    . We also observed that it is clear from case law
    "[t]hat statutory requirements for giving notice in a particular fashion must be
    A-5141-17T1
    6
    strictly followed." 
    Ibid. This principle, of
    course, applies not only to the Tort
    Claim Act, but to the FFA as well.
    Indeed, the FFA provision governing the service of notice goes further by
    explicitly requiring not just certified mail, but certified mail return receipt
    requested. It bears noting that this is a special, enhanced requirement as the
    Legislature does not always prescribe that notices and pleadings be mailed with
    a return receipt request as a condition of satisfactory service. In Green v. East
    Orange, 
    21 N.J. Tax 324
    (2004), for example, the Tax Court relied on the fact
    that N.J.S.A. 54:4-34 – a statute governing tax assessment matters – does not
    incorporate a return-receipt requirement, but rather only requires that a tax
    assessor's request for information be made by certified mail. 3 
    Id. at 334.
    When the Legislature chooses to impose a requirement to use the return-
    receipt-request option for certified mail, as it did in the FFA, we must assume
    that the requirement is significant and cannot be disregarded.       We expect,
    moreover, that financial institutions would have little difficulty complying with
    3
    The court in Green explained the difference between a delivery receipt (which
    is maintained by the United States Postal Service (USPS)) and a return receipt
    (which is returned to the sender). "Return receipt service is not automatically
    part of certified mail service but rather is an optional 
    service." 21 N.J. Tax at 334
    . This optional service provides a mailer with evidence of delivery. 
    Ibid. (quoting 58 Domestic
    Mail Manual § S915.1.1 (2003)).
    A-5141-17T1
    7
    this requirement, or later proving that they had done so simply by retaining the
    USPS receipt indicating that this option had been purchased. That receipt would
    satisfy the service requirements of the FFA even if it should turn out that the
    return is not signed by the addressee. This mailing option thus protects the
    interests of lenders as well as borrowers.
    In GE Capital Mortg. Services, Inc. v. Weisman, 
    339 N.J. Super. 590
    (Ch. Div. 2000), a case involving foreclosure pursuant to the FFA, the Chancery
    Division judge addressed the borrower's challenge to the lender's policy of
    mailing NOIs solely by means of first class mail. 4 The court concluded that the
    lender's inability to provide proof demonstrating service was a violation of the
    FFA.   
    Id. at 592-594.
        The Chancery Division judge determined that the
    appropriate remedy was to order the lender to forward a new NOI by certified
    mail, return receipt requested, within ten days. 
    Id. at 595.
    In E.M.C. Mortg.
    Corp. v. Chaudhri, 
    400 N.J. Super. 126
    , 137 (App. Div. 2008), we rejected that
    approach, noting that "[w]e disapprove of the remedy employed in that case [ GE
    Capital Mortg. Services, Inc.], and reinforce the statutory mandate that lenders
    4
    The FFA violation in GE Capital Mortg. Services, Inc., was the use of regular
    mail rather than certified or registered mail. The court in that case did not have
    occasion to address the use of certified mail without a return receipt request.
    See footnote 3.
    A-5141-17T1
    8
    send proper notice. . . 
    ." 400 N.J. Super. at 139
    . We concluded that the proper
    remedy for the FFA violation in Chaudhri, was dismissal of the foreclosure
    complaint, without prejudice, explaining that, "[w]e concur with the trial judge's
    dismissal, without prejudice, of [a lender's] foreclosure complaint due to the
    failure to send the notice of intent to foreclose prior to commencing suit. As we
    noted, the notice provisions are mandatory." 
    Ibid. We further emphasized
    that,
    "[t]he Legislature specifically intended that lenders faithfully comply with the
    FFA provisions. . . . Accordingly, courts are not free to deviate from the
    unambiguous statute." 
    Ibid. We derive two
    important legal principles from these precedents. First, the
    explicit procedural provisions of the FFA are to be enforced strictly; partial
    compliance (e.g., using certified mail without the return-receipt-requested
    option) is not sufficient. Second, the remedy for a lender's noncompliance is
    dismissal of the foreclosure complaint, without prejudice.
    III.
    We now apply those principles to the case before us. In his November 17,
    2017 statement of reasons for denying defendants' motion to dismiss, the trial
    judge found that "[o]n October 18, 2016, Notices of Intention to Foreclose,
    mailed by certified mail, return receipt requested, and regular mail were
    A-5141-17T1
    9
    forwarded    to   RAYMOND          C.   HERZINGER         and   KATHLEEN          D.
    HERZINGER." (emphasis added). Presumably, the trial judge was relying on
    the plaintiff's Statement of Undisputed Facts.        See footnote 2.    However,
    plaintiff's assertion is not supported by any document or certification that was
    provided in the course of discovery. Plaintiff provided a copy of the NOI, but
    without written proof that it was mailed with return receipt requested.
    Furthermore, plaintiff provided a certification by the Vice President of Loan
    Documentation for Wells Fargo, that states that "[a] notice of intent to foreclose
    was mailed to [defendants'] last known address and, if different, to the address
    of the property by regular and certified mail, at least thirty days before filing of
    the [c]omplaint for foreclosure. A true copy of the [NOI] is attached . . . ."
    Conspicuously absent from this certification is any mention that Wells Fargo
    used the return-receipt-requested mailing option.
    In sum, our review of the record fails to disclose a basis for the judge's
    finding that the NOI had been sent by certified mail with the return-receipt-
    request option offered by USPS. We therefore conclude that the record on
    appeal fails to establish that plaintiff complied with N.J.S.A. 2A:50-56(a)-(b),
    and fails to establish that defendants actually received the NOI.
    A-5141-17T1
    10
    Plaintiff nonetheless contends that defendants did not make the return -
    receipt-requested argument to the trial court as part of their motion to dismiss,
    thereby waiving that argument and the right to appellate relief for plaintiff's
    noncompliance with the FFA. Before addressing plaintiff's waiver argument,
    we note that the parties do not agree on whether the NOI service issue was raised
    at the trial court level. This dispute cannot be resolved simply by looking at the
    point heading in defendants' pro se appellate brief, which asserts that this issue
    was raised below. See R. 2:6-2(a)(1) (appellant's brief must include a statement
    in parentheses at the end of the point heading if the issue was not raised below).
    Accordingly, we have carefully reviewed the record.
    In the original answer to the foreclosure complaint, defendants asserted as
    an "affirmative defense" that, "[p]laintiff did not plead the facts mailing [sic] a
    'Notice of Intention to Foreclose' to [d]efendants that is in full compliance [with]
    the Fair Foreclosure Act."      In their objections and responses to plaintiff's
    statement of undisputed facts, which defendants filed on October 19, 2017,
    defendants denied plaintiff's statement of undisputed fact that the NOI was
    mailed by certified mail, return receipt requested, and specifically noted that,
    "[t]here is no return receipt card that supports [p]laintiff's assertion."
    A-5141-17T1
    11
    However, it also appears that defendants did not assert the return-receipt-
    request deficiency in the memorandum of law they submitted to the trial court
    on October 19, 2017, in support of their motion to dismiss. Rather, the only
    argument in the memorandum pertaining to the NOI is that it did not disclose
    the actual lender, which seems to be a reiteration of the standing/merger issue.
    Furthermore, the trial court's statement of reasons for denying defendant's
    motion to dismiss makes no mention of a dispute with regard to the method by
    which the NOI was served. To the contrary, as we have already noted, the
    judge's statement of reasons finds that the NOI had been "mailed by certified
    mail, return receipt requested" as if that were an undisputed fact, as plaintiff had
    asserted.
    In these circumstances, and despite defendants' failure to include this
    argument in their memorandum of law, we believe that the trial court was on
    notice that the method of service was disputed by reason of the defendants '
    October 19, 2017, objections to the plaintiff's statement of undisputed facts. The
    court therefore should not have accepted the plaintiff's unsupported claim that
    the NOI had been sent by certified mail, return receipt requested. See footnote
    1 (explaining that the trial court viewed defendants' motion to dismiss as a
    reiteration of their opposition to plaintiff's motion for summary judgment, which
    A-5141-17T1
    12
    ought not have been granted if a material fact was disputed). We nonetheless
    appreciate that as a practical matter, the trial court had no way to know that
    defendants were relying on the defective-service argument as a basis for
    dismissing the foreclosure complaint. Having submitted a memorandum of
    law/brief in support of their motion, it was incumbent upon defendants to present
    this argument in the memorandum, or at least mention it.
    Even if we were to conclude that the issue was not properly raised before
    the trial court as part of defendants' motion to dismiss, we would decline to hold
    that defendants waived their right to challenge the foreclosure based on
    plaintiff's noncompliance with the FFA. Plaintiff cites to N.J. Div. of Youth &
    Family Services v. M.C. III, 
    201 N.J. 328
    (2010), for the general proposition
    that "issues not raised below will ordinarily not be considered on appeal unless
    they are jurisdictional in nature or substantially implicate the public interest."
    
    Id. at 339.
    We agree, of course, that this is the general rule governing appellate
    practice. However, an issue not raised below may be considered if it meets the
    plain error standard, or is otherwise of special significance to the public or the
    goal of achieving substantial justice. See e.g., State v. Romero, 
    191 N.J. 59
    , 80
    (2007). Furthermore, the general rule need not apply where an issue was raised
    in the trial court but the argument before the trial court was based on a different
    A-5141-17T1
    13
    theory from that advanced in the appellate court. See Docteroff v. Barra Corp.
    of America, Inc., 
    282 N.J. Super. 230
    , 237 (App. Div. 1995).
    In this instance, we find that the exception expressly recognized in the
    case that plaintiff relies upon, M.C. III, applies. As the case law makes clear,
    strict compliance with the FFA's procedural provisions is required precisely
    because those requirements substantially implicate the public interest.          In
    Chaudhri, we held in this regard that,
    [t]he Legislature specifically intended that lenders
    faithfully comply with the FFA provisions and
    articulated that "[w]aivers by the debtor of rights
    provided pursuant to [the FFA] are against public
    policy, unlawful, and void, unless given after default
    pursuant to a workout agreement in a separate written
    document signed by the debtor." N.J.S.A. 2A:50-61.
    Accordingly, courts are not free to deviate from the
    unambiguous statute.
    [400 N.J. Super. at 139].
    In view of the precedents that require us to strictly enforce the FFA notice
    requirements, coupled with the explicit text of the FFA that does not allow for
    the implied waiver of its procedural protections, see N.J.S.A. 2A:50-61, we are
    not prepared to hold that pro se defendants relinquished those protections
    because they failed to re-assert the statutory violation in their motion to dismiss
    A-5141-17T1
    14
    after having characterized it as an affirmative defense in the pleadings stage. 5
    Because the record before us does not establish that plaintiff complied with the
    FFA when it served notice of its intention to foreclose, and does not otherwise
    establish that defendants actually received it, we are constrained to reverse the
    grant of summary judgement for plaintiff and remand with instructions to
    dismiss the foreclosure complaint, without prejudice. We note that this remedy
    has no effect on the underlying contractual obligations of the parties and our
    ruling does not bar reinstitution of the same claims in a later action.             See
    
    Chaudhri, 400 N.J. Super. at 140
    .
    IV.
    In view of our decision to dismiss the foreclosure complaint, without
    prejudice, we need only briefly address defendants' argument that plaintiff failed
    to present competent, admissible evidence of a merger between Wells Fargo and
    5
    We recognize that as a general matter, a defense or issue raised in the initial
    pleadings is waived if the party fails to litigate the issue after the pleadings stage.
    See Mancini v. Twp. of Teaneck, 
    179 N.J. 425
    , 433 (2004) ("A mere one-time
    mention of laches in a defendant's answer is insufficient to preserve it through
    the span of litigation."); Williams v. Bell Tel. Laboratories Inc., 
    132 N.J. 109
    ,
    118 (1993) (defendant "waived the statute-of-limitations defense by its failure
    to assert that defense at any stage of the proceedings after pleading t he statute
    in its [a]nswer."). In the circumstances of this case, we view this general
    principle, like the one set forth in M.C. III, to be subject to the caveat that an
    issue need not be deemed to have been waived if that issue substantially
    implicates the public interest.
    A-5141-17T1
    15
    Wachovia. We are satisfied that the trial court did not abuse its discretion when
    it accepted a certification from the Wells Fargo Vice President for Loan
    Documentation, in support of plaintiff's assertion that it was in possession of the
    note prior to the filing of the foreclosure action by reason of the merger of Wells
    Fargo and Wachovia Bank. The certification, the court found, established the
    basis of the affiant's knowledge, identified the source of the knowledge, and
    authenticated the attached documents. The court also found that the certification
    satisfied the business records exception to the hearsay rule under N.J.R.E.
    803(c)(6).
    A trial judge's evidentiary decisions made in the context of a summary
    judgment application are reviewed under the abuse of discretion standard.
    Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 
    202 N.J. 369
    , 383-84 (2010).
    In view of the trial judge's thorough and well-reasoned analysis, we have no
    basis to disturb his conclusion that plaintiff acquired the loan as a result of the
    Wells Fargo-Wachovia merger and therefore had standing to bring the
    foreclosure action. We would only add, from an equity perspective, that it is
    not disputed that defendant entered into an Installment Loan Modification
    Agreement with Wells Fargo in April 2011 – after the merger was completed.
    Having negotiated with Wells Fargo to modify the loan terms, defendants are
    A-5141-17T1
    16
    hard pressed to argue that Wells Fargo had not acquired the loan and the right
    to enforce it.
    To the extent that we have not specifically addressed any arguments raised
    by the parties, we find they lack sufficient merit to warrant discussion in a
    written opinion. R. 2:11-3(e)(1)(E).
    Reverse and remand. We do not retain jurisdiction.
    A-5141-17T1
    17