U.S. BANK NATIONAL ASSOCIATION, ETC. VS. ADELE M. GALLAGHER (F-017050-15, GLOUCESTER COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE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-5689-16T1
U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE
FOR RESIDENTIAL FUNDING
MORTGAGE SECURITIES, I INC.,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2007-S1,
Plaintiff-Respondent,
v.
ADELE M. GALLAGHER,
MR. GALLAGHER, UNKNOWN
SPOUSE OF ADELE M. GALLAGHER,
MRS. GALLAGHER, UNKNOWN
SPOUSE OF JOHN P.GALLAGHER,
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC., as
nominee for GMAC MORTGAGE, LLC,
and STATE OF NEW JERSEY,
Defendants,
and
JOHN P. GALLAGHER,
Defendant-Appellant.
_____________________________
Argued March 18, 2019 – Decided July 22, 2019
Before Judges Gooden Brown and Rose.
On appeal from the Superior Court of New Jersey,
Chancery Division, Gloucester County, Docket No. F-
017050-15.
AllynMarie Smedley argued the cause for appellant
(Smedley & Lis, LLC, attorneys; AllynMarie Smedley,
on the briefs).
Barry J. Muller argued the cause for respondent (Fox
Rothschild, LLP, attorneys; Barry J. Muller, on the
brief).
PER CURIAM
John and Adele Gallagher were married for thirty years. John1 worked in
senior management positions since 1990. His job involved extensive travel,
requiring him to be away from home from Monday to Friday each week. As a
result, Adele handled the family's finances. In 1996, the couple purchased
property in Clarksboro (the property) and built a home where they resided
together until 2014. After the home was built, they converted a construction
loan to a mortgage loan, secured by the property. Over the ensuing years, they
refinanced the mortgage, obtaining four separate mortgage loans encumbering
1
To avoid confusion, we use their first names throughout the balance of the
opinion. We intend no disrespect by this informality.
A-5689-16T1
2
the property. In 2013, Adele stopped making payments on the then outstanding
mortgage to plaintiff, U.S. Bank National Association as Trustee for Residential
Funding Mortgage Securities, I Inc. (RFMSI), Mortgage Pass-Through
Certificates, Series 2007-S1 (U.S. Bank). As a result, in 2015, U.S. Bank filed
a foreclosure complaint against the Gallaghers.
In 2014, John allegedly discovered for the first time that Adele had
obtained the refinance mortgages without his knowledge or consent. He claimed
she hid their existence from him by forging his signature and creating two fake
power of attorney documents bearing his forged signature. Following this
discovery, John filed for divorce. A final judgment of divorce (JOD) was
entered on June 17, 2016, incorporating a marital settlement agreement (MSA)
in which John was granted Adele's interest in the property, pending the outcome
of the foreclosure action. John filed a contesting answer to the foreclosure
complaint, including affirmative defenses, counter-claims, and cross-claims,
essentially alleging that the mortgage was obtained through fraud and therefore
unenforceable. On March 23, 2017, the trial court granted U.S. Bank's motion
for summary judgment and struck John's pleadings. On July 17, 2017, final
judgment of foreclosure was entered in U.S. Bank's favor.
A-5689-16T1
3
John now appeals from the July 17, 2017 final judgment, raising the
following points for our consideration:
POINT I[:] THE TRIAL COURT ERRED IN
FINDING THERE WAS NO GENUINE ISSUE OF
MATERIAL FACT IN ENTERING SUMMARY
JUDGMENT AGAINST . . . JOHN . . . , THIS ERROR
WARRANTS THE REVERSAL OF SUMMARY
JUDGMENT AND THE FINAL JUDGMENT OF
FORECLOSURE BEING VACATED. [2]
A. THE TRIAL COURT'S FAILURE TO
CONSIDER THE ALLEGATIONS
RAISED IN THE PARTIES' DIVORCE IN
FINDING THERE WAS NO GENUINE
ISSUE OF MATERIAL FACT AS TO
THE VALIDITY OF THE POWER OF
ATTORNEY, THE MORTGAGE AND
LOAN DOCUMENTS[,] OR [U.S.]
BANK'S MORTGAGE AS TO . . .
JOHN . . . WAS REVERSIBLE ERROR
AND AN ABUSE OF DISCRETION
(NOT ARGUED BELOW).
B. WHETHER OR NOT . . . JOHN . . .
RATIFIED [U.S.] BANK'S MORTGAGE
IS AN ISSUE OF GENUINE MATERIAL
2
John's notice of appeal does not include the March 23, 2017 summary
judgment order. Ordinarily, "it is only the judgments or orders . . . designated
in the notice of appeal which are subject to the appeal process and review."
Pressler & Verniero, Current N.J. Court Rules, cmt. 6.1 on R. 2:5-1 (2019).
Nonetheless, because the July 17, 2017 final judgment was premised on the
summary judgment order, "we will address the propriety of the earlier order,
particularly since [plaintiff] has not argued against our ruling on its validity."
W.H. Indus., Inc. v. Fundicao Balancins, Ltda, 397 N.J. Super. 455, 459 (App.
Div. 2008).
A-5689-16T1
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FACT; THE TRIAL COURT'S FAILURE
TO FIND THIS FACT IN FAVOR OF
[JOHN] WAS AN ABUSE OF
DISCRETION.
POINT II[:] THE TRIAL COURT'S
DETERMINATION THAT THE ENTRY OF
SUMMARY JUDGMENT IN FAVOR OF [U.S.]
BANK WAS AUTHORIZED BY MARIONI V. ROXY
GARMENTS DELIVERY [COMPANY,
INCORPORATED], 417 N.J. SUPER. 269 (APP. DIV.
2010)[,] WAS NOT SUPPORTED BY THE
FINDINGS OF FACT AND CONCLUSIONS OF
LAW MADE ON THE RECORD AND THEREFORE
WAS AN ABUSE OF DISCRETION (NOT ARGUED
BELOW).
POINT III[:] THE TRIAL COURT'S FINDING
OF AN EQUITABLE MORTGAGE IN FAVOR OF
PLAINTIFF WAS PLAIN ERROR AND AN ABUSE
OF DISCRETION (NOT ARGUED BELOW).
A. THE TRIAL COURT COMMITTED
PLAIN ERROR BY FAILING TO MAKE
FINDINGS OF FACT AS TO THE EIGHT
FACTORS TO BE CONSIDERED IN
FINDING AN EQUITABLE MORTGAGE
AS SET FORTH IN ZAMAN V. FELTON,
219 N.J. 199 (2014) (NOT ARGUED
BELOW).
B. THE TRIAL COURT ERRED IN
GRANTING AN EQUITABLE
MORTGAGE AS THE EVIDENCE
PRESENTED AT SUMMARY
JUDGMENT WAS NOT SUFFICIENT
TO SUPPORT SUCH A FINDING.
A-5689-16T1
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C. THE TRIAL COURT'S DECISION TO
AWARD AN EQUITABLE MORTGAGE
AND GRANT [U.S.] BANK'S MOTION
FOR SUMMARY JUDGMENT WAS
REVERSIBLE ERROR AND AN ABUSE
OF DISCRETION DUE TO THE COURT
ASSUMING FACTS NOT IN EVIDENCE
BY CONCLUDING THAT THE
PROCEEDS OF THE MORTGAGE AT
ISSUE WERE USED FOR THE
GALLAGHER FAMILY EXPENSES
(NOT ARGUED BELOW).
D. THE TRIAL COURT'S FINDINGS
REGARDING THE BLUE RIBBON
PANEL RECOMMENDATION AND
THE RESULTANT [MSA] ARE NOT
SUPPORTED BY THE RECORD [AND]
WERE AN ABUSE OF DISCRETION IN
AWARDING [U.S.] BANK AN
EQUITABLE MORTGAGE AGAINST
. . . JOHN . . . .
E. THE TRIAL COURT'S FINDING
THAT THERE WAS ONLY ONE
MORTGAGE FORGED BY ADELE . . .
DURING HER MARRIAGE TO JOHN
. . . IS NOT SUPPORTED BY THE
RECORD; THE [TRIAL] COURT'S
RELIANCE ON THE USE OF THE
MORTGAGE PROCEEDS IN ITS
FINDING OF AN EQUITABLE
MORTGAGE WAS PLAIN ERROR (NOT
ARGUED BELOW).
For the reasons that follow, we reverse.
A-5689-16T1
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We confine our review to the motion record before the Chancery Division
judge, see Ji v. Palmer, 333 N.J. Super. 451, 463-64 (App. Div. 2000), viewed
in the light most favorable to the non-moving party. Angland v. Mountain Creek
Resort, Inc., 213 N.J. 573, 577 (2013) (citing Brill v. Guardian Life Ins. Co.,
142 N.J. 520, 523 (1995)).
The Gallaghers were married on October 18, 1986. Three children were
born of the marriage. Since 1990, John worked in senior management positions
for Computer Sciences Corporation (CSC), a government contractor, where he
earned an annual salary of approximately $400,000. His positions required him
to be away from home during the week, leaving on Monday mornings and
returning on Friday nights each week. As a result, Adele was responsible for
running the household and controlled the family's finances, which included
paying all bills. Due to this arrangement, John did not "check[] his financial
status for [twenty] years."
On July 2, 1998, the Gallaghers executed a twenty-year note in the
principal amount of $195,000. To secure the note, they obtained a mortgage
(the first mortgage) encumbering the property, where they built the marital
residence and resided together until 2014. On September 25, 1998, the
Gallaghers executed a second note in the amount of $52,000. To secure the note,
A-5689-16T1
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they obtained another mortgage (the second mortgage) encumbering the
property. On February 8, 2003, the Gallaghers executed a third note in the
amount of $211,000. To secure the note, they obtained another mortgage (the
third mortgage) encumbering the property. The third mortgage satisfied both
the first and second mortgages.
On February 2, 2004, John purportedly executed a power of attorney
granting Adele authority "to act as [his] [a]gent" to "execute any and all
documents, including . . . [m]ortgage or loan documents . . . in connection with
the refinance of [the property], including the right to accept any proceeds, . . .
deposit[,] or withdraw any proceeds." Michael Magee, Esq., signed the power
of attorney as a witness, certifying that John "personally came before [him] and
acknowledged under oath," that John "personally signed [the] document[.]" 3
With the power of attorney, on February 17, 2004, Adele executed a twenty-year
note and mortgage (the fourth mortgage) in the amount of $391,894.48 on behalf
of John and herself. In addition to satisfying the third mortgage, the fourth
mortgage was used to satisfy $162,271.80 in credit card debt and yielded
$15,868.48 in cash proceeds.
3
Magee also notarized the third mortgage, which John later disputed signing.
A-5689-16T1
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On November 21, 2006, John purportedly executed another power of
attorney, granting Adele authority "to act as [his] [a]gent" to "execute any and
all documents, including . . . [m]ortgage or loan documents . . . in connection
with the sale of [the property], . . . including the right to accept any
proceeds, . . . deposit[,] or withdraw any proceeds in connection with . . . [the]
sale." The power of attorney was again witnessed by Magee, who certified that
John "personally came before [him] and acknowledged under oath," that he
"personally signed [the] document[.]" With the power of attorney, on November
22, 2006, Adele executed a note and mortgage (the fifth mortgage) in the amount
of $456,000, on behalf of John and herself, to Mortgage Electronic Registration
Systems, Inc. as nominee for GMAC Mortgage, LLC (GMAC). The fifth
mortgage satisfied the fourth mortgage, $70,474 in credit card debt, and yielded
$5066.26 in cash. Additionally, on that same date, the Gallaghers obtained a
$57,000 home equity line of credit (HELOC) from GMAC, which was used to
satisfy $29,504 in credit card debt as well as provide cash proceeds in the
amount of $27,386. The fifth mortgage (the subject mortgage) was recorded on
December 6, 2006.
A-5689-16T1
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On November 12, 2012, the subject mortgage was assigned to plaintiff,
which assignment was recorded on November 15, 2012. 4 On July 1, 2013, Adele
stopped making payments on the subject mortgage and the HELOC. Plaintiff
sent the Gallaghers a Notice of Intention to Foreclose (NOI) at the property
address on February 22, 2014. When they failed to cure the default, plaintiff
filed a foreclosure complaint against the Gallaghers on May 8, 2015. The
foreclosure litigation led to the unraveling of the alleged fraudulent scheme
Adele had perpetrated against John over the course of the marriage.
In his deposition, John testified he first became aware of the alleged
scheme in April 2014, when his brother notified him that he had several
mortgages and powers of attorney bearing his signature. John's brother had been
looking into purchasing real estate with John and discovered the records using
a land records database. Within a week of the discovery, John filed a revocation
of the powers of attorney with the Gloucester County Clerk's Office. He also
contacted his bank and discovered that the couple's investment account, where
he believed he had accrued over $1.6 million in savings from earnings, bonuses,
4
Howard Handville, a duly authorized senior loan analyst acting on plaintiff's
behalf, later certified that "[p]laintiff ha[d] been in possession of the original
[n]ote since on or before January 12, 2007."
A-5689-16T1
10
and expense reimbursements, was empty. After confronting Adele, John packed
a bag, left the marital residence, and filed for divorce on October 9, 2014.
Beginning with the second mortgage and all subsequent mortgages as well
as the HELOC, John claimed he was unaware of the mortgage loans, did not
apply for them, did not sign any mortgage loan documents, and believed Adele
forged his signature. John also denied signing the powers of attorney, denied
authorizing Adele to sign mortgage loan documents on his behalf, and denied
knowing Michael Magee. Further, John denied obtaining any proceeds from the
loans or even being aware of their existence. According to John, Adele
concocted an elaborate scheme to hide the existence of the loans by presenting
him with fake tax returns, fake mortgage interest statements, and fake mortgage
statements. She also solicited individuals to pose as mortgage or bank
representatives to address any discrepancy in the records. Subsequently, she
would destroy the fake statements and file accurate returns with the Internal
Revenue Service (IRS). In addition, when the couple first purchased the
property, they had set up a post office box while their home was under
construction. After the home was built, Adele insisted on keeping the post office
box. In so doing, she was able to conceal the mortgage statements, bank
A-5689-16T1
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statements, and credit card statements for cards he was unaware of, resulting in
him only seeing what she "wanted [him] to see."
During his deposition, John was confronted with an August 7, 2009
Equifax report addressed to him at the property address. The report responded
to a request to reinvestigate a GMAC mortgage appearing on John's credit
report. John testified that he had no recollection of submitting the request and
added that there was no credit report run for him for work around that time.
Further, in 2011, when Adele's sister told John he had a $4000 mortgage
payment during an argument with her sister, John "laughed" and informed her
he did not have a $4000 mortgage payment. Instead, consistent with their first
mortgage, John believed their mortgage payment was about one-half of that
amount.
During Adele's deposition, she invoked her Fifth Amendment right against
self-incrimination whenever she was questioned about fabricating documents or
forging John's signature on mortgage or power of attorney documents.
However, she admitted she never informed John about any of the refinance
mortgages on the property. She testified that she believed John had authorized
her to act on his behalf based on him expressly authorizing her to take care of
the family's finances. As a result, she posited that if she had signed John's name
A-5689-16T1
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on any of the mortgage or power of attorney documents, she was authorized by
John to do so.
Adele explained that John "hoarded" money and refused to provide her
with enough money to handle the household expenses. She claimed John was
physically and verbally abusive to her whenever they discussed finances. To
avoid the abuse, she relied on credit cards to compensate for the financial
shortfall and used the money generated by the mortgage refinance loans to pay
off the credit card debt and for other family-related expenses, including college
expenses for the children and the upkeep of the marital residence. She denied
putting the money in any type of secret slush fund and denied having any type
of addiction problem. According to Adele, she concealed her actions from John
out of fear for her safety if he discovered the true state of their finances.
Both John and Adele filed contesting answers to the foreclosure complaint
on July 8 and June 23, 2015, respectively. John's pleadings included twenty-six
affirmative defenses, counter-claims against plaintiff, and cross-claims against
A-5689-16T1
13
Adele 5 and Magee, 6 alleging, among other things, that the subject mortgage was
obtained through fraud. On March 4, 2016, the court granted plaintiff summary
judgment against Adele.
On June 17, 2016, a final divorce judgment was entered. In an effort to
settle the matter without trial, the parties had agreed to forego submitting their
dispute to a matrimonial early settlement panel (MESP) and instead submitted
the matter to a blue ribbon panel of family law experts. After the parties
provided written submissions, a recommendation was issued by the panel which
provided the basis for the MSA that was later incorporated into the JOD. In the
MSA, John was granted exclusive possession of the property, pending the
outcome of the foreclosure action, and Adele was required to vacate the
residence.
On July 22, 2016, on plaintiff's motion, the court ordered Adele to submit
to the court "for in camera inspection" "all documents submitted to the [b]lue
[r]ibbon [p]anel." Following the review, the court allowed plaintiff to view
5
John's October 9, 2014 divorce complaint against Adele alleged fraud,
fraudulent inducement, dissipation of assets, and unjust enrichment.
6
On October 6, 2015, John also filed a five-count complaint against Magee
alleging legal malpractice, negligence, negligent misrepresentation, civil
conspiracy, and fraud.
A-5689-16T1
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designated documents, reasoning that the documents were relevant to "John's
knowledge and ratification of the mortgage; Adele's actual or implied
authorization to enter into the mortgage transaction on behalf of John; the use
of and access to mortgage proceeds by John; and the use of mortgage proceeds
to satisfy legitimate joint marital debts." The court further directed that
"[p]laintiff may not use the arguments made by counsel in their submissions to
the [b]lue [r]ibbon [p]anel as evidence or argument in this case; however,
plaintiff may make any appropriate arguments supported by evidence whether
or not made in the divorce action."
One of the documents generated in the divorce action was a report by
Michael Saccomanno, a forensic accountant hired by John to trace Adele's use
of the money. Saccomanno found that from "July 1, 2006[,] through April 18,
2014[,]" Adele "had access to" approximately $300,395 annually, and based on
her Case Information Statement (CIS), reported "lifestyle expenses" of $19,452
monthly, or $233,424 annually. Thus, according to Saccomanno, assuming
Adele's current CIS expenses were similar to prior years, Adele "had access to
and utilized significantly more funds than what was reasonably required for the
family lifestyle expenses." Saccomanno calculated that Adele had
approximately "$66,971 annually" in excess funds that were misappropriated.
A-5689-16T1
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Additionally, Saccomanno determined that in addition to the annual $66,971 in
excess funds, Adele "incurred debt totaling $679,041" without John's "signature
or consent."
On January 19, 2017, plaintiff moved for summary judgment against John.
During oral argument conducted on March 23, 2017, plaintiff argued that an
equitable mortgage existed because John had "every opportunity to prevent this
by simply monitoring what his wife was doing for the past [twenty] years[.]"
Plaintiff further argued that John "already received reimbursement for [the]
mortgage" through the divorce judgment that gave John "a credit" for what
Adele would "otherwise . . . have been entitled to in equitable distribution."
Plaintiff also asserted there was no doubt that John "expressly authorized his
wife to maintain all of the family's finances[,]" and he was "bound" by that grant
of authority in relation to "third parties," even if Adele "exceeded" its scope.
Additionally, according to plaintiff, John ratified the mortgage because he
had "at least inquiry notice of the mortgage" from the Equifax reinvestigation
report in 2009, and his sister-in-law's comment about his mortgage payment in
2011. Further, he had actual notice in April 2014, but took no action to
"disavow" the mortgage until a year later when he filed his pleadings in the
foreclosure action. Plaintiff continued that at the very least, it was "entitled to
A-5689-16T1
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an equitable lien" for the portion of the mortgage that "was used to pay off the
original mortgage" on the property. Moreover, according to plaintiff, in the
absence of any evidence that the "other debts" extinguished by the proceeds of
the mortgage "were used for anything other than family expenses[,]" "it would
be unjust enrichment for [John] to get th[e] house free of the mortgage with all
of those debts and obligations paid" as well as "money . . . from his wife in the
divorce action."
John opposed the summary judgment motion, asserting "there [were]
triable issues of fact in th[e] case[.]" He urged the court to strike Adele's
deposition testimony as "completely self-serving," and not to rely on the blue
ribbon panel's recommendations, but to look instead to the actual terms of the
MSA. Further, he disputed granting Adele authority to "encumber" the property
and asserted that "the effect of a forgery is that the forged document is null and
void." Thus, according to John, there was no "valid lien on the property" and
"the mortgage itself [was] void."
Following oral argument, the court granted plaintiff's motion. In an oral
decision, initially, the court recited the standard for summary judgment and the
requirements for a judgment of foreclosure. Relying on Judson v. Peoples Bank
& Trust Company of Westfield, 17 N.J. 67 (1954), and Brill, 142 N.J. at 529,
A-5689-16T1
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the court noted that while "the non-moving party[] [was] entitled to have all
facts and inferences viewed" in its favor, "[t]he deference granted to the non -
movant [did] not . . . mean that it [could] defeat a [m]otion for [s]ummary
[j]udgment merely by pointing to a disputed fact of an insubstantial nature."
Further, citing Central Penn National Bank v. Stonebridge Limited, 185 N.J.
Super. 289, 302 (Ch. Div. 1982), the court explained that "to obtain a judgment
in a foreclosure action, the mortgagee must establish . . . that the mortgage and
loan documents are valid, . . . that the mortgage loan [was] in default, and . . .
that the mortgagee has a contractual right to foreclose on the property."
Turning to the facts, the court recited the undisputed facts as follows:
Adele . . . and John . . . were married on October 18,
1986. The Gallaghers have three children . . . .
From July 1998 until April 2014, the Gallaghers
resided . . . in Clarksboro. That is the marital property.
In July 1998, the Gallaghers had a [twenty]-year
mortgage on the property in the principal amount of
$19[5],000 with a monthly payment of approximately
$[2400].
. . . [John] has been employed by [CSC] since
1990. [CSC] is a Fortune 500 American multi-national
corporation that provides information technology
services and professional services. It[] [is]
headquartered in Falls Church, Virginia. It has 56,000
employees in over [sixty] countries. Its clients include
[c]ommercial [e]nterprises, the U.S. Federal
A-5689-16T1
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Government, as well as [s]tate, [l]ocal[,] and non-U.S.
[g]overnment [a]gencies.
During various time periods[,] [John] has held
senior management positions with CSC in its North
American Public Sector. The North American Public
Sector is one of the nation's largest information
technology and outsourcing solution providers to the
[f]ederal [g]overnment.
....
[John] has been described as an intelligent man
with an important position at CSC which is pretty high
up the chain. In connection with this and throughout
his employment[,] [John] obtained necessary security
clearances to work on government projects. All such
security clearances require a credit check.
[John] earns approximately $400,000 per year.
[John's] typical work schedule required him to depart
from his home in Clarksboro on Monday morning and
not return until Friday evening. Thus, for
approximately [twenty] years[,] Adele paid all of the
family bills and maintained and controlled all of the
family finances.
....
The Gallaghers ceased making monthly
payments on the mortgage in July 2013. On October 9,
2014[,] after [twenty-eight] years of marriage, [John]
filed for divorce against Adele and alleged the financial
fraud.
On May 8, 2015, U.S. Bank filed this action to
foreclose the mortgage. [John] did not notify the [b]ank
of Adele's alleged fraud and took no formal action to
A-5689-16T1
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repudiate the mortgage until July 8, 2015[,] when he
filed his counter[-]claim in the foreclosure action.
Adele does not dispute the validity of the mortgage and
[s]ummary [j]udgment has been entered against her.
The Gallaghers settled their [divorce] action by
[j]udgment entered June 17, 2016. . . . As part of the
[j]udgment, the Gallaghers agreed to repay all the credit
card debt and loans incurred by Adele except for the
mortgage. As of this date, the Gallaghers remain joint
owners of the mortgage. Adele no longer resides at the
property. [John] resides at the property.
Addressing the disputed facts, the court stated:
[John] disputes [when] he became aware of . . .
the disparity in the mortgage. He believes that he owed
about [$]56,000. He believed that the mortgage was
[$2400] a month. At some point there was an argument
between Adele and her sister where the sister said that
it was [$4000] a month.
In any event, there is a credit report from Equifax
directed to John P. Gallagher at the property address
and dated August 7, 2009[,] which indicates that it[] [is]
a reinvestigation at the request of [John].
Now, I do[] [not] know what inference to draw
from that. It does[] [not] make sense to me that [Adele]
would be checking on her credit. But I can[not] be sure
that if it came to the property address that [John] would
have ever seen it. So I[] [a]m not going to rely on that
as a fact.
I[] [a]m not going to consider Adele Gallagher's
testimony, not just because she[] [has] exercised her
Fifth Amendment right to not answer certain questions,
but more because [of] . . . her lack of transparency . . .
A-5689-16T1
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or actual fraud, which brings us all here today. So it
would not be appropriate to consider her statements
truthful in deciding a [m]otion for [s]ummary
[j]udgment.
The court acknowledged that "[t]his [was] a most unusual case." The
court explained:
I do[] [not] think I [ha]ve seen a mortgage signed by a
[p]ower of [a]ttorney in all my time doing foreclosures.
Nor have I seen a situation where, as in this case, a . . .
husband is making substantial money, $400,000 a year,
but his work duties are such that he leaves home
Monday through Friday. So he[] [i]s only home on
weekends. And it[] [i]s this schedule that he alleges
allowed his wife the opportunity to drain down all the
assets and acquire so much debt.
Wife, on the other hand, contends that she had to
do what she had to do in order to keep the parties'
lifestyle.
The court continued:
The very essence of this action is . . . the
dysfunctionality of this marriage. The fact that
somebody for [twenty] years could [travel for] . . .
work Monday through Friday. And I do[] [not] know
what he does on the nights when he[] [is] out, but that
he did[] [not] think to occasionally check his bank
account, that he did[] [not] think to occasionally look at
his [m]ortgage [s]tatement is unusual. But again, the
whole facts of this case are unusual.
Finding that "both parties signed the original mortgage," which was
satisfied with the proceeds of a mortgage obtained by Adele "using the improper
A-5689-16T1
21
[p]ower of [a]ttorney," 7 the court concluded that "both the mortgage company
and the husband were the victims of [Adele's] . . . lack of transparency[.]"
However, the court had "difficult[y] . . . understand[ing]" "how you stay married
for [twenty-eight] years and kind of . . . have a bag over your head." Further,
the court pointed out that in addition to satisfying the original mortgage, the
proceeds of the subject mortgage "paid off credit card debts and some [$5000]–
plus went into the parties' joint checking account." Additionally, according to
the court, "compar[ing] the language of the [JOD] . . . with the language of the
[b]lue [r]ibbon [p]anel," it "appear[ed] . . . that after a [twenty-eight]-year
marriage[,] the wife essentially received nothing in equitable distribution and
owed her husband approximately $97,500, which was then used to offset her
interest in his pension." 8
7
This determination by the court ignores the chain of mortgage refinanc e loans
executed over the years.
8
In that regard, the court recounted at length the provisions of the MSA as well
as the recommendations of the blue ribbon panel, which noted that "[o]n a
[twenty-eight-year] marriage with three children[, Adele] may have an alimony
case." However, under the MSA, Adele "waive[d] alimony." Further, based on
John's allegation that the subject mortgage was "obtained without his knowledge
or consent[,]" as well as his "post-[c]omplaint efforts" in contesting the
foreclosure, the MSA provided that if he was "successful" in "sav[ing] the
property from foreclosure, it shall remain his sole property and [Adele] shall
receive nothing by way of equity payment or credit for [John's] retention of this
asset."
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Thus, the court determined:
While objectively it[] [is] almost impossible to believe
that this man would not have checked his financial
status for [twenty] years. It[] [is] what happened. And
the day that he found out that instead of having a house
that[] [is] almost paid off, he[] [has] . . . a house he
owes $400,000 on. And instead of having . . . resources
for retirement, he[] [has] . . . next to nothing.
And that[] [is] what happen[ed] here. But by the
same token, it[] [is] his wife that did this. It[] [is] not
the mortgage company that did this. And at some level
one would think he had a better sense of the value of
money. . . .
So the best . . . way that I think of this is that these
are basically two parties that are affected by the wife's
conduct. . . . [H]owever, [John was] unable to
demonstrate gambling, drugs, alcohol, [or] anything but
lifestyle that this money was spent on. Lots and lots of
credit cards. Lots of cars. Lots of college. And now
based on the marital agreement, it seems to be that
while [John will] never be made whole in the sense that
. . . his whole psyche in life has been affected, his wife
has paid him back for her wrongdoing by virtue of the
. . . no alimony agreement, [and] no equitable
distribution. She gets nothing from the marriage and
she owes him money.
Relying on Marioni 9 for authority, the court concluded:
9
In Marioni, we reversed a Chancery Division judge's fashioning of an
equitable remedy after a five-day trial because the "judge's final adjustment
required plaintiff to pay an entrepreneurial profit inconsistent with the
interloper's position as a constructive trustee." 417 N.J. Super. at 272. However,
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23
[I]t does seem to me that . . . plaintiff is entitled
to [s]ummary [j]udgment, and I do grant it. I do rely on
the broad equitable powers of the [c]ourt to address
particular circumstances of a given case . . . .
. . . [There is] no question the property is
encumbered to the extent Adele['s] . . . legal interest in
the property was subject to the mortgage that she
signed. And I do find that [John's] interest is likewise
subordinate to that of the mortgage holder.
After the court granted plaintiff summary judgment and struck John's pleadings,
plaintiff moved for final judgment of foreclosure, which was granted on July 17,
2017. 10 This appeal followed.
We review a grant of summary judgment applying the same standard used
by the trial court. Steinberg v. Sahara Sam's Oasis, LLC, 226 N.J. 344, 366
(2016). That standard is well-settled.
[I]f the evidence of record—the pleadings, depositions,
answers to interrogatories, and affidavits—"together
with all legitimate inferences therefrom favoring the
non-moving party, would require submission of the
issue to the trier of fact," then the trial court must deny
the motion. On the other hand, when no genuine issue
of material fact is at issue and the moving party is
our standard of review of the judge's decision "in fashioning an appropriate
equitable remedy to fit the particular circumstances" was "abuse of discretion,"
id. at 275, whereas our standard of review on a summary judgment motion is de
novo.
10
Subsequently, John moved for a stay of the court's decision pending appeal,
which was granted on December 15, 2017.
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entitled to a judgment as a matter of law, summary
judgment must be granted.
[Ibid. (citation omitted) (quoting R. 4:46-2(c)).]
"An issue of fact is genuine only if, considering the burden of persuasion
at trial, the evidence submitted by the parties on the motion, together with all
legitimate inferences therefrom favoring the non-moving party, would require
submission of the issue to the trier of fact." R. 4:46-2(c). "The practical effect
of [Rule 4:46-2(c)] is that neither the motion court nor an appellate court can
ignore the elements of the cause of action or the evidential standard governing
the cause of action." Bhagat v. Bhagat, 217 N.J. 22, 38 (2014).
If there is no genuine issue of material fact, we must then "decide whether
the trial court correctly interpreted the law." DepoLink Court Reporting & Litig.
Support Servs. v. Rochman, 430 N.J. Super. 325, 333 (App. Div. 2013) (quoting
Massachi v. AHL Servs., Inc., 396 N.J. Super. 486, 494 (App. Div. 2007)). We
review issues of law de novo and accord no deference to the trial court's legal
conclusions. Nicholas v. Mynster, 213 N.J. 463, 478 (2013). "[F]or mixed
questions of law and fact, [we] give[] deference . . . to the supported factual
findings of the trial court, but review[] de novo the [trial] court's application of
any legal rules to such factual findings." State v. Pierre, 223 N.J. 560, 577
A-5689-16T1
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(2015) (first and fourth alteration in original) (quoting State v. Harris, 181 N.J.
391, 416 (2004)).
To obtain relief in a mortgage foreclosure action, the mortgagee must
establish by a preponderance of the evidence that (1) the mortgage and loan
documents are valid; (2) the mortgage loan is in default; and (3) it has a
contractual right to foreclose upon the mortgaged premises in light of the
default. See Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div.
1993), aff'd, 273 N.J. Super. 542 (App. Div. 1994). John argues there are
material disputed facts regarding the validity of the mortgage, whether he
ratified an invalid mortgage, whether an equitable mortgage was created, and
whether Adele was John's duly authorized agent. According to John, the
competent evidential materials presented, when viewed in the light most
favorable to him, demonstrated disputed facts sufficient to withstand summary
judgment. 11 We agree.
11
In its response brief, plaintiff argues John's "[b]rief and [a]ppendix are
primarily comprised of evidence and arguments that were never presented to the
trial court . . . and, therefore, did not constitute part of the record on appeal."
On appeal, "appellate courts will not ordinarily consider evidentiary material
which is not in the record below." Pressler & Verniero, Current N.J. Court
Rules, cmt. 1 on R. 2:5-4 (2019). However, "the issues here do not involve the
receipt of evidence . . . ." Atl. Emp'rs Ins. Co. v. Chartwell Manor Sch., 280
N.J. Super. 457, 467 (App. Div. 1995). Rather, the legal issues presented in this
A-5689-16T1
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"An equitable mortgage is created by agreement of the parties. " Reibman
v. Myers, 451 N.J. Super. 32, 48 (App. Div. 2017).
If a deed or contract, lacking the characteristics of a
common-law mortgage, is used for the purpose of
pledging real property, or some interest therein, as
security for a debt or obligation, and with the intention
that it shall have effect as a mortgage, equity will give
effect to the intention of the parties. Such is an
equitable mortgage.
[J. W. Pierson Co. v. Freeman, 113 N.J. Eq. 268, 270-
71 (E. & A. 1933).]
"Express words are not necessary to create an equitable mortgage;
however, it must be clearly apparent from the instrument or surrounding
circumstances, that the maker of the instrument intended the property to be
security for the obligation." Reibman, 451 N.J. Super. at 49. "When a guarantor
foreclosure action are "based upon all of the documentary proofs, including the
pleadings before the trial [court]." Ibid. (citing R. 4:46-2). The documentary
proofs that are the subject of plaintiff's objection were clearly before the court
as a result of the court's discovery orders and are therefore properly before us
on appeal. While plaintiff is correct that we will not ordinarily consider an issue
raised for the first time on appeal unless it relates to the trial court's jurisdiction
or matters of great public interest, see Nieder v. Royal Indem. Ins. Co., 62 N.J.
229, 234 (1973), because the dispositive issue before the trial court dealt with
plaintiff's right to foreclose on the property, "we need not get caught up in the
question concerning the extent to which [John] ha[s] shifted gears or changed
[his] position" regarding the propriety of the foreclosure and "we will consider
the . . . issues as presented to us, regardless of whether [John's] principal theory
has changed." Docteroff v. Barra Corp. of Am., Inc., 282 N.J. Super. 230, 237
(App. Div. 1995).
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takes property as security for his or her guaranty, an equitable mortgage is
created." Ibid. (citing Zaman, 219 N.J. at 216-17.)
In Zaman, our Supreme Court identified eight factors to assist courts in
determining whether the parties created an equitable mortgage. Those factors
include:
[(1)] Statements by the homeowner or representations
by the purchaser indicating an intention that the
homeowner continue ownership; [(2)] A substantial
disparity between the value received by the homeowner
and the actual value of the property; [(3)] Existence of
an option to repurchase; [(4)] The homeowner's
continued possession of the property; [(5)] The
homeowner's continuing duty to bear ownership
responsibilities, such as paying real estate taxes or
performing property maintenance; [(6)] Disparity in
bargaining power and sophistication, including the
homeowner's lack of representation by counsel; [(7)]
Evidence showing an irregular purchase process,
including the fact that the property was not listed for
sale or that the parties did not conduct an appraisal or
investigate title; [(8)] Financial distress of the
homeowner, including the imminence of foreclosure
and prior unsuccessful attempts to obtain loans.
[219 N.J. at 218 (alterations in original) (quoting
O'Brien v. Cleveland, 423 B.R. 477, 491 (Bankr. D.N.J.
2010)).]
Even a mortgage that is deemed void ab initio by an unauthorized
transaction may be ratified. When a party ratifies an obligation to which he
possessed a valid defense, the obligation will be given effect as if o riginally
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28
authorized by that party. Martin Glennon, Inc. v. First Fidelity Bank, N.A., 279
N.J. Super. 48, 60 (App. Div. 1995). However, ratification requires an "intent
to ratify plus full knowledge of all the material facts" and "may be express or
implied[.]" Thermo Contracting Corp. v. Bank of N.J., 69 N.J. 352, 361 (1976).
"The intent to ratify an unauthorized transaction may be inferred from a failure
to repudiate it." Reibman, 451 N.J. Super. at 50 (citing Citizens First Nat'l Bank
v. Bluh, 281 N.J. Super. 86, 98 (App. Div. 1995)). "However, in most cases, the
silence or inaction of a principal will not ratify the agent's unauthorized act
unless it is clear that the principal was fully informed of what the agent did. "
Ibid.
[W]here the silence of a principal may cause loss to a
third person, or give him an advantage, he must,
without unreasonable delay after the fact comes to his
knowledge that his agent has exceeded his authority,
disown his agent's act and afford the other party an
opportunity to protect himself, or he will make his
agent's act his own.
[Bluh, 281 N.J. Super. at 99 (quoting Chetwood v.
Berrian, 39 N.J. Eq. 203, 210 (Ch. 1884)).]
Even in the case of a husband and a wife, "it is the general principle that the
wife is the agent of her husband only by virtue of his authority expressly
conferred or reasonably to be implied from the circumstances." Smedley v.
Sweeten, 11 N.J. Super. 39, 41 (App. Div. 1950).
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29
Here, the court made legal conclusions and granted summary judgment
despite the presence of disputed material facts underlying those determinations.
Notably, the court determined that John was unable to demonstrate that the
money was spent on anything other than family-related expenses to dispute the
fact that he was an equitable mortgagor who reaped the benefits of the subject
mortgage. However, the only evidence that the money was spent on family-
related expenses came from Adele's deposition testimony, which the court
expressly rejected. On the other hand, Saccomanno's report demonstrated that
Adele had misappropriated over $66,000 annually in excess funds after paying
lifestyle expenses. Moreover, the court explicitly acknowledged John's
substantial earnings, from which an inference could be drawn that his earnings
adequately supported the family's lifestyle. "On a motion for summary judgment
the court must grant all the favorable inferences to the non-movant." Brill, 142
N.J. at 536.
Further, although the court did not rely on the Equifax reinvestigation
report to demonstrate that John had inquiry notice of the subject mortgage dating
back to 2009, the court tacitly acknowledged its difficulty believing that John,
an intelligent man who held high-powered positions, never checked his
mortgage statements for over twenty years. However, a summary judgment
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30
motion does not present an opportunity for the court to weigh the evidence or
make credibility findings. Id. at 540 (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249 (1986)).
Moreover, John's deposition testimony disputed the court's impression
that he never checked his mortgage statements for over twenty years. On the
contrary, John testified that Adele provided him with fake documents when he
inquired and presented him with impostors to explain any discrepancies.
Additionally, while acknowledging that a mortgage signed by a power of
attorney was aberrational, the court failed to address the factual disputes
surrounding the validity of a mortgage created with purported forged signatures
and a forged power of attorney, as well as the scope of authority John conferred
upon Adele to act as his agent and John's knowledge of Adele's actions to
support a finding that he ratified her unauthorized acts.
The court also relied heavily on its determination that John was made
financially whole by virtue of the terms of the MSA. However, that too was
disputed by John, who testified at his deposition that he had made significant
concessions in negotiating the MSA, including assuming a significant amount
of credit card debt Adele incurred in his name without his knowledge or consent.
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31
In addition, Adele's fifty percent interest in the property that was conveyed to
John under the MSA was subject to plaintiff's lien.
On a motion for summary judgment, "[i]t [is] not the court's function to
weigh the evidence and determine the outcome but only to decide if a material
dispute of fact existed." Parks v. Rogers, 176 N.J. 491, 502 (2003) (quoting
Gilhooley v. Cty. of Union, 164 N.J. 533, 545 (2000)). The presence of a
genuine issue of material fact precludes summary judgment. Brill, 142 N.J. at
540. Here, the presence of multiple disputed material facts sufficed to withstand
summary judgment. Accordingly, we reverse the grant of summary judgment,
vacate the final judgment of foreclosure, and remand the matter for further
proceedings consistent with this opinion.
Reversed and remanded for further proceedings. We do not retain
jurisdiction.
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