DEUTSCHE BANK NATIONAL TRUST COMPANY, ETC. VS. NICHOLAS F. FERRARA, JR.(F-013909-09, MONMOUTH COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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-4200-15T3
DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Trustee of the
Indymac INDX Mortgage Loan Trust
2005-AR31, Mortgage Pass-Through
Certificates, Series 2005-AR31
Under the Pooling and Servicing
Agreement, Dated November 1,
2015,
Plaintiff-Respondent,
v.
NICHOLAS F. FERRARA, JR. and
KATHRYN A. FERRARA,
Defendants-Appellants,
and
JPMorgan Chase Bank, N.A.,
Defendants.
_________________________________
Submitted September 14, 2017 – Decided September 28, 2017
Before Judges Nugent and Geiger.
On appeal from Superior Court of New Jersey,
Chancery Division, Monmouth County, Docket No.
F-013909-09.
Schillberg Law, LLC, attorneys for appellants
(Robert F. Schillberg, Jr. and Corey D.
Blaustein, on the briefs).
Duane Morris LLP, attorneys for respondent
(Brett L. Messinger, Stuart I. Seiden and
Kelly K. Huff, on the brief).
PER CURIAM
In this residential mortgage foreclosure action, defendants
Nicholas F. Ferrara, Jr. and Kathryn A. Ferrara appeal from a May
13, 2016 order denying their motion to vacate the final judgment
of foreclosure and to dismiss the complaint. After a review of
the contentions in light of the applicable legal principles, we
affirm.
We discern the following facts and procedural history from
the record on appeal. On December 20, 2004, defendants executed
an $806,000 promissory note and a mortgage in the same amount to
IndyMac Federal Bank, F.S.B. (IndyMac), a federally chartered
savings bank to secure payment of the note. The mortgage granted
a security interest in defendants' residential property located
in Rumson, New Jersey. It was recorded in the Monmouth County
Clerk's Office on January 22, 2005.
The note and mortgage required payment of 360 monthly
installments commencing January 1, 2005. Defendants defaulted on
the loan on January 1, 2009, and have made no subsequent payments
on account.
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On March 19, 2009, OneWest Bank FSB (OneWest) acquired
IndyMac, including all of its assets, from the Federal Deposit
Insurance Corporation (FDIC). OneWest thereby became the owner
of the note and mortgage, giving it authority to foreclose the
mortgage. An assignment of mortgage dated November 22, 2011 was
executed by the FDIC as receiver for IndyMac, assigning the
mortgage to OneWest. On December 5, 2011, OneWest assigned the
mortgage to Deutsche Bank National Trust Company, as Trustee of
the IndyMac INDX Mortgage Loan Trust. Both assignments were
recorded in the Monmouth County Clerk's Office on December 29,
2011.
OneWest served defendants with the required notice of intent
to foreclose more than thirty days prior to filing its foreclosure
complaint on May 4, 2009. The complaint pled that plaintiff had
acquired all assets of IndyMac from FDIC on March 19, 2009,
including the note and mortgage, by way of merger and acquisition.
The merger is a matter of public record.1 Plaintiff thereby owned
and controlled the note and mortgage when the complaint was filed.
Defendants never filed an answer to the complaint or raised
any affirmative defenses in the foreclosure action. Defendants
1
See FDIC, Failed Bank Information: Information for IndyMac Bank,
F.S.B., and IndyMac Federal Bank, F.S.B., Pasadena, CA,
https://www.fdic.gov/bank/individual/failed/IndyMac.html (last
visited September 21, 2017).
3 A-4200-15T3
do not deny the validity of the note or mortgage, their
responsibility for the mortgage debt, or the payment default. They
have filed two bankruptcies while this foreclosure action has been
pending.
On March 18, 2010, OneWest moved for entry of final judgment.
Defendants did not oppose the motion. Final judgment was entered
in favor of OneWest on November 18, 2010.
On January 12, 2012, OneWest's motion to substitute Deutsche
Bank National Trust Company, as Trustee of the IndyMac INDX
Mortgage Loan Trust, as plaintiff was granted. Plaintiff filed a
motion to amend the final judgment and writ of execution on
February 1, 2016, which was also granted.
Defendants waited until April 26, 2016, the eve of a scheduled
sheriff's sale, and more than five years after the judgment was
entered, to file their motion to vacate the final judgment and to
dismiss the complaint. On April 26, 2016, the motion judge granted
a postponement of the sheriff's sale to June 6, 2016. On May 13,
2016, the motion judge denied defendants' motion. Defendants then
filed this appeal.
Defendants argue that their motion to vacate the foreclosure
judgment and to dismiss the complaint should have been granted
because plaintiff did not own or control the mortgage at the time
the complaint was filed, as evidenced by the mortgage assignments
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executed after the complaint was filed. Defendants maintain that
plaintiff thereby lacked standing to bring the foreclosure action.
The Chancery judge denied defendants' motion, finding that
it was both substantively without merit and time-barred by Rule
4:50-2. In her oral decision, the judge noted that "defendants
did nothing to raise any of these defenses for six years[,]" and
"let more than four years pass before filing this motion to
vacate." The judge concluded that defendants' motion was time-
barred by Rule 4:50-2, stating:
Defendant seeks relief from a final judgment
and . . . pursuant to Rule 4:50-2, the motion
shall be made within a reasonable time and for
Reasons A, B, C of Rule 4:50-1, not more than
one year after the judgment, order, or
proceeding was entered or taken. The
defendant filed this motion in April of 2016.
That's well beyond that one year and it's also
six years after final judgment was entered or
taken.
The judge also addressed the merits of defendants' motion,
finding that defendants had failed to meet the standard imposed
by Rule 4:50-1 for setting aside a default judgment, citing U.S.
Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 466-67 (2012). After
noting that fraud must be pled with particularity, the judge found
that defendants failed to provide "any particulars here." The
judge further determined that there was no fraud or
misrepresentation.
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As to defendants' contention that the judgment should be
vacated because plaintiff lacked standing, the judge explained
that standing is not a jurisdictional issue and a foreclosure
judgment obtained by a party that lacked standing is not void
within the meaning of Rule 4:50-1(d), citing Deutsche Bank Nat'l
Trust Co. v. Russo, 429 N.J. Super. 91, 101 (App. Div. 2012).
The judge further determined that plaintiff had standing to
initiate the foreclosure since it owned or controlled the
underlying debt when the complaint was filed, citing Wells Fargo
Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011).
With regard to the mortgage assignments executed after the judgment
was entered, the judge stated,
it is clear that a formal assignment of
mortgage is not required to maintain a
mortgage foreclosure action. Standing can be
conferred by possession of the note and that
is what the plaintiff showed. All the . . .
assignments that the defendant complained of
were post-judgment, so it . . . really begs
the question. So I find that there is no
reason to vacate the judgment.
I.
Defendants seek relief under Rule 4:50-1, which provides:
On 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; (b) newly discovered
evidence which would probably alter the
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judgment or order and which by due diligence
could not have been discovered in time to move
for a new trial under R. 4:49; (c) fraud
(whether heretofore denominated intrinsic or
extrinsic), misrepresentation, or other
misconduct of an adverse party; (d) the
judgment or order is void; (e) the judgment
or order has been satisfied, released or
discharged, or a prior judgment or order upon
which it is based has been reversed or
otherwise vacated, or it is no longer
equitable that the judgment or order should
have prospective application; or (f) any other
reason justifying relief from the operation
of the judgment or order.
The rule "governs an applicant's motion for relief from default
when the case has proceeded to judgment." Guillaume, supra, 209
N.J. at 466. "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.'" Id. at 467 (quoting Mancini
v. EDS ex rel. N.J. Auto. Full Ins. Underwriting Ass'n, 132 N.J.
330, 334 (1993)).
Relief from judgment under Rule 4:50-1 "is not to be granted
lightly." Bank v. Kim, 361 N.J. Super. 331, 336 (App. Div. 2003).
Moreover, "the showing of a meritorious defense is a traditional
element necessary for setting aside both a default and a default
judgment . . . ." Pressler & Verniero, Current N.J. Court Rules,
comment on R. 4:43-3 (2017). That is so because when a party has
no meritorious defense, "[t]he time of the courts, counsel and
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litigants should not be taken up by such a futile proceeding."
Guillaume, supra, 209 N.J. at 469 (quoting Schulwitz v. Shuster,
27 N.J. Super. 554, 561 (App. Div. 1953)).
An appellate court reviews a trial court's order denying a
Rule 4:50-1 motion for relief under an abuse of discretion
standard. Id. at 467. "The trial court's determination under the
rule warrants substantial deference, and should not be reversed
unless it results in a clear abuse of discretion." Ibid. An
abuse of discretion occurs "when a decision is 'made without a
rational explanation, inexplicably departed from established
policies, or rested on an impermissible basis.'" Id. at 467-68
(quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123
(2007)).
A.
Defendants seek relief from the final judgment under Rule
4:50-1(c), claiming that OneWest committed fraud and
misrepresentation in its pleadings and filings because it did not
own or control the note and mortgage at the time of the complaint.2
2
In their reply brief, defendants assert that their argument is
that the judgment is void pursuant to subparts (d) and (f) of Rule
4:50-1, rather than subparts (a), (b) or (c). During oral argument
before the motion judge, however, defendants repeatedly alleged
that plaintiff perpetrated a fraud. Moreover, in their appellate
brief, defendants argued that OneWest committed "unconscionable
fraud" by misrepresenting that it was the holder of the note and
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They rely on the mortgage assignment to OneWest dated November 22,
2011, more than two years after the complaint was filed.
Defendants assert they believed OneWest owned the note and
mortgage when the complaint was filed, claiming that OneWest hid
the true ownership of the note and mortgage from the defendants
and the court. Defendants claim that OneWest did so with the
intent that they rely upon the misrepresentation, which they claim
they reasonably did.
To bring an action in foreclosure, a plaintiff must possess
either the note or an assignment of the mortgage. Deutsche Bank
National Trust Co. v. Mitchell, 422 N.J. Super. 214, 216 (App.
Div. 2011). Here, OneWest acquired all of the assets of IndyMac
from FDIC on March 19, 2009, almost two months prior to the filing
of the complaint on May 9, 2009. The complaint specifically pled
that plaintiff had acquired all assets of IndyMac from FDIC on
March 19, 2009, including the subject note and mortgage, by way
of merger and acquisition. The merger is a matter of public
record. Plaintiff thereby had timely ownership and possession of
the note. Consequently, plaintiff stood in the shoes of IndyMac
with regard to both the note and mortgage and had the right to
mortgage at the time the complaint was filed. In addition to
quoting subsection (c), they stated: "This misconduct is egregious
and exactly the type of fraud that would trigger the use of R.
4:50-1(c) to vacate a judgment."
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enforce the mortgage. See Suser v. Wachovia Mortg., FSB, 433 N.J.
Super. 317, 321 (App. Div. 2013), certif. denied, 227 N.J. 114
(2016) (explaining that the right to enforce a mortgage can arise
from the ownership of assets acquired through merger and
acquisition). Accordingly, plaintiff did not commit fraud or
misrepresentation in its pleadings and motion practice.
B.
Defendants also seek relief under Rule 4:50-1(d) and (f),
alleging that plaintiff lacked standing when the complaint was
filed, rendering the judgment void. We disagree.
In order to have standing, "'a party seeking to foreclose a
mortgage must own or control the underlying debt.'" Ford, supra,
418 N.J. Super. at 597 (quoting Bank of N.Y. v. Raftogianis, 418
N.J. Super. 323, 327-28 (Ch. Div. 2010)). Without ownership or
control of the underlying debt, "the plaintiff lacks standing to
proceed with the foreclosure action and the complaint must be
dismissed." Ford, supra, 418 N.J. Super. at 597 (citing
Raftogianis, supra, 418 N.J. Super. at 357-59). "The essential
holding in Raftogianis was that to establish standing to maintain
a foreclosure action, a plaintiff must generally have had ownership
or control of the underlying debt as of the date of the filing of
the complaint." Id. at 597, n. 1.
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The record does not support defendants' contention that
plaintiff lacked standing. Through merger and acquisition,
plaintiff owned and controlled the note and mortgage at the time
the complaint was filed, giving it standing to initiate the
foreclosure. See Suser, supra, 433 N.J. Super. at 321. The
belated written assignments of the mortgage did not affect
plaintiff's standing. Thus, plaintiff had standing to initiate
the foreclosure.
We reject defendants' contention the court erred by denying
their motion to vacate the final judgment under Rule 4:50-1(d),
which permits relief from a final judgment that is void. Any
purported lack of standing does not render the final judgment or
the amended final judgment void. See Russo, supra, 429 N.J. Super.
at 101 (finding that "standing is not a jurisdictional issue in
our State court system and, therefore, a foreclosure judgment
obtained by a party that lacked standing is not 'void' within the
meaning of Rule 4:50-1(d).").
Here, defendants waited more than five years after entry of
the final judgment to assert the defense of lack of standing. As
we further explained in Russo:
Based on our reading of Guillaume and [Ford],
we conclude that, even if plaintiff did not
have the note or a valid assignment when it
filed the complaint, but obtained either or
both before entry of judgment, dismissal of
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the complaint would not have been an
appropriate remedy here because of defendants'
unexcused, years-long delay in asserting that
defense. Therefore, in this post-judgment
context, lack of standing would not constitute
a meritorious defense to the foreclosure
complaint.
[Ibid.]
We agree with the chancery judge that vacating the judgment
and dismissing the complaint more than five years after judgment
was entered based on the purported lack of standing would be
inappropriate. For this additional reason, defendants' motion was
properly denied.
We are also unpersuaded that defendants are entitled to relief
from the final judgment under Rule 4:50-1(f), "which permits courts
to vacate judgments for 'any other reason justifying relief from
the operation of the judgment or order.'" Guillaume, supra, 209
N.J. at 484 (quoting R. 4:50-1(f)). Relief under the subsection
(f) is "available only when 'truly exceptional circumstances are
present.'" Ibid. (quoting Hous. Auth. of Morristown v. Little,
135 N.J. 274, 286 (1994)). Subsection (f) "is limited to
'situations in which, were it not applied, a grave injustice would
occur.'" Ibid. (quoting Little, supra, 135 N.J. at 289).
Based on our careful review of the record and defendants'
arguments, and for the reasons set forth above, we discern no
basis permitting relief from the final judgment under Rule 4:50-
12 A-4200-15T3
1(f). Defendants have not demonstrated any exceptional
circumstances or that a grave injustice will result if the final
judgment is not vacated.
C.
The trial court also ruled that defendants' motion was time-
barred by Rule 4:50-2. We concur.
Motions made under any subsection of Rule 4:50-1 must be
filed within a reasonable time. R. 4:50-2; see Deutsche Bank
Trust Co. v. Angeles, 428 N.J. Super. 315, 319 (App. Div. 2012).
Defendants did not file an answer or responsive pleading asserting
the defense of lack of standing. They first raised that defense
when they filed their motion on April 26, 2016, almost seven years
after the complaint was filed, and more than five years after the
judgment was entered. By any measure, defendants did not raise
the defense or file their motion within a reasonable time.
Accordingly, the motion was time-barred by Rule 4:50-2.
"In addition, Rule 4:50-2 bars relief outright to 'motions
based on Rule 4:50-1(a), (b) and (c)' when filed 'more than one
year after the judgment, order or proceeding was entered or
taken.'" Angeles, supra, 428 N.J. Super. at 319 (quoting Orner
v. Liu, 419 N.J. Super. 431, 436-37 (App. Div.), certif. denied,
208 N.J. 369 (2011)). Defendants allege, in part, that plaintiff
committed fraud or misrepresentation. To that extent, their motion
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falls under Rule 4:50-1(c), and is barred by the one-year time
limit imposed for such motions by Rule 4:50-2.
II.
In summary, the motion judge properly applied the standard
of Rule 4:50-1. Defendants have not met their burden of
demonstrating a meritorious defense based on fraud,
misrepresentation, or lack of standing, and are not eligible for
relief from the judgment on those grounds under Rule 4:50-1. See
Guillaume, supra, 209 N.J. at 467. We discern no error in the
court's May 13, 2016 order denying defendants' motion to vacate
the judgment and to dismiss the complaint.
Affirmed.
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