AJAX MORTGAGE LOAN TRUST, ETC. v. KIRK LOURY (F-021065-18, MERCER COUNTY AND STATEWIDE) ( 2022 )

NOT FOR PUBLICATION WITHOUT THE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-1749-20
AJAX MORTGAGE LOAN TRUST
2019-A, MORTGAGE-BACKED
SECURITIES, SERIES 2019-A,
BY U.S. BANK NATIONAL
ASSOCIATION, as Indenture
Trustee,
Plaintiff-Respondent,
v.
KIRK LOURY, a/k/a KIRK E.
LOURY,
Defendant-Appellant,
and
BRENDA J. PASCALE LOURY,
FLEET NATIONAL BANK, n/k/a
BANK OF AMERICA, N.A.,
Defendants.
______________________________
Submitted March 21, 2022 – Decided July 11, 2022
Before Judges Fasciale and Sumners.
On appeal from the Superior Court of New Jersey,
Chancery Division, Mercer County, Docket No.
F-021065-18.
Kirk Loury, appellant pro se.
Friedman Vartolo LLP, attorneys for respondent
(Michael Eskenazi, on the brief).
PER CURIAM
In this residential foreclosure matter, defendant Kirk Loury appeals from
three orders: a January 24, 2020 order dismissing his counterclaim asserting
two claims based on an alleged violation of the Consumer Fraud Act (CFA),
N.J.S.A. 56:8-1 to -20; a September 2, 2020 order denying his motions to vacate
the dismissal order, reinstate the counterclaim, treat the foreclosure action as
contested, and resume a discovery schedule referenced in a case management
order; and a February 11, 2021 final order of judgment of foreclosure. We
affirm.
I
On January 29, 2004, Loury and his wife Brenda J. Pascale Loury 1
(collectively "defendants") executed a non-purchase money mortgage to
refinance their home in Princeton Junction (the property) to the World Savings
1
Brenda is also a defendant in this matter but because she is not a party to this
appeal, we refer to Kirk by his last name.
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2
Bank to secure a $275,100 adjustable-rate mortgage note (Note) commencing
March 8. The Note was a pick-a-payment (PAP) loan with four payment
options: "1) a fully amortizing [thirty]-year payment, 2) a fully amortizing
[fifteen]-year payment, 3) an interest-only payment, and 4) a minimum
payment." Per the Note's terms, the initial interest rate of the loan was 4.871
percent and it stipulated that the interest rate may change starting March 22,
2004 and "on every other Monday thereafter." It also stated the loan had a
lifetime maximum interest rate limit of 11.95 percent.
On April 4, 2007, the parties entered a loan modification agreement (2007
Modification) whereby the loan's adjustable interest rate was temporarily
converted to a fixed interest rate of 5.95 percent.
In 2009, upon defendants' request to change their interest rate from an
adjustable rate of interest to a fixed rate of 4.98 percent, Wachovia Mortgage
(Wachovia)2 sent defendants a conversion notice request form to be completed
and returned. The notice contained the language, "[i]f the loan is currently
payable in biweekly installments, the undersigned understand that the loan will
convert to monthly installments." On July 9, Wachovia accepted the request,
and effective on the August 15 payment due date, defendants' bi-weekly
2
World Savings Bank was succeeded by Wachovia.
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payments were $1,724.51 at a fixed interest rate of 4.98 percent for the
remainder of the loan's term (2009 Conversion).
After defendants failed to make payments for six months, Wells Fargo
Bank (Wells Fargo) 3 filed a complaint on October 18, 2018, seeking foreclosure
on the property and payment of the entire "unpaid principal together with
interest at the initial rate of 4.871[] [percent] pursuant to the terms of the Note,
per annum from April 15, 2018, plus late penalties . . . now due on the Note and
Mortgage plus any sums advanced for the payment of taxes or insurance
premiums."
In their timely-filed pro-se answer, defendants asserted two affirmative
defenses. They contended the complaint's mortgage and Note terms were
incorrect. Specifically: (1) the interest rate was 4.98 percent, not 4.871 percent;
(2) the payment frequency was monthly, not bi-weekly; (3) the payment due date
was the 15th of each month, not "every other Monday thereafter"; and (4) the
payment amount was $1,724.51 each month, not $504.98 every two weeks.
Defendants next contended that prior to filing its complaint, plaintiff initiated a
debt relief program that provided additional terms and conditions to the
3
Wells Fargo was successor by merger to Wells Fargo Bank Southwest, which
succeeded Wachovia.
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mortgage but misrepresented the program because the only option offered to
them was a short sale instead of allowing them to temporarily make lower
monthly payments before making regular full payments to maintain their
ownership of the property.
Almost a year later, on or about November 4, 2019, Loury, believing the
$504.98 bi-weekly payment was inaccurate, filed a pro se counterclaim alleging
fraud under the CFA, N.J.S.A. 56:8-2, and unjust enrichment. Loury asserted
plaintiff "knowingly concealed and suppressed the methods used to generate the
. . . initial [p]rincipal . . . [it] used as a material input for the Converted Note's
amortization schedule to calculate the $1,724.51 monthly payment." He
asserted the Note provided a low initial interest rate that, when combined with
the 7.5 percent annual Payment Cap, kept the subsequent years' payments from
catching up to the previous year's deferred interest, forcing an inflated
accumulation of deferred interest. He claimed the Note included an inflated
principal from the fraudulent processing of deferred interest as additional
principal from March 2004 until the Note's material terms and conditions
terminated in July 2009, resulting in an amount "at least $41,700 higher tha[n]
it should have been at the time plus over $18,000 of interest." Loury argued
plaintiff "laundered the ill-gotten inflated principal and interest through the
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Converted Note and locked-in higher future interest income for its maturity," in
violation of the CFA. Plaintiff, according to Loury, intentionally set the first bi-
weekly payment lower than the amortized payment in an effort to "push unpaid
interest into a '[d]eferred' status" in order to increase its revenue. Finally, he
contended plaintiff did not disclose the payment methodology used to determine
the bi-weekly payment nor did it provide an amortization schedule, and, instead,
"fraudulent[ly]" presented the "[a]ppearance" of "a competent payment
amortization."
Plaintiff moved under Rule 4:6-2(e) to dismiss the CFA counterclaim as
time-barred and for failure to state a cause of action. In his oral decision, the
motion judge explained the counterclaim was time-barred and entered a January
24, 2020 order dismissing it. The judge later denied Loury's motion for
reconsideration, reiterating his initial decision.
On December 3, 2020, plaintiff moved for final judgment under Rule
4:64-1(d)(1). When Loury objected to the judgment amount, the Office of
Foreclosures referred the matter to the trial court pursuant to Rule 4:64-1(d)(3).
On February 11, 2021, another judge issued a final order striking defendants'
objection to amounts due and the judgment of foreclosure.
On appeal, Loury argues:
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POINT I
THE MOTION TO DISMISS EVIDENCE
STANDARD IS TO LIBERALLY ACCEPT
PRESENTED FACTS AND CLAIMS: [THE
MOTION JUDGE] ERRED IN IGNORING THE
MOTION TO DISMISS EVIDENCE STANDARD[.]
POINT II
THE NEW JERSEY FRAUD DISCOVERY RULE
TOLLS THE SIX-YEAR STATUTE OF
LIMITATIONS FOR CFA CLAIMS: [THE MOTION
JUDGE] ADMITTED HIS IGNORANCE OF THE
DISCOVERY RULE YET STILL DISMISSED THE
COUNTERCLAIM[.]
POINT III
THE ONLY BASIS TO GRANT A MOTION TO
DISMISS IS IF THERE IS A FAILURE TO STATE A
CLAIM IN WHICH RELIEF CAN BE GRANTED:
CLAIMS IN THE COUNTERCLAIM AND THE
RELIEF SOUGHT WERE PRODUCED WITH
PARTICULARITY[.]
POINT IV
ADHESION CONTRACT LAW PROVIDES TWO
CORE DOCTRINES—REASONABLE
EXPECTATIONS AND UNCONSCIONABILITY:
[THE MOTION JUDGE] ERRED IN IGNORING
ADHESION CONTRACT LAW AND PLACED A
DUE DILIGENCE STANDARD ON THE
APPELLANT THAT WAS FAR BEYOND THE
SCOPE FOR JUDGING EVIDENCE FOR A MOTION
TO DISMISS[.]
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POINT V
THE FRAUD WAS IN THE NOTE'S
DETERMINATION OF A PAYMENT AMOUNT
THAT WAS IMPOSSIBLE TO CALCULATE FROM
THE NOTE'S STATED TERMS: [THE MOTION
JUDGE] ERRED IN IGNORING THE FRAUD IN
THE PAYMENT AMOUNT AND WRONGLY
PLACED THE FRAUD ALLEGATION ON THE
DEFERRED INTEREST[.]
II
We first address Loury's argument that the motion judge had no legal
authority to dismiss his CFA counterclaim on the basis that it was time-barred
under the CFA because it was not filed within six years of executing the Note.
He argues he was unaware of his claim when he and his wife executed the Note
and mortgage, and only discovered plaintiff's fraud in 2019. Thus, the judge
was premature in dismissing his claim without allowing him to conduct
discovery. Moreover, Loury contends the motion judge failed to comply with
Rule 1:7-4(a) by issuing his findings of fact and legal conclusions in his oral
decision.
Based upon our de novo review of the motion judge's order, accepting the
facts asserted in the counterclaim, and according to Loury all favorable
inferences set forth therein, Watson v. N.J. Dep't of Treasury, 453 N.J. Super.
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42, 47 (App. Div. 2017), we conclude the motion judge properly applied Rule
4:6-2(e) in dismissing the counterclaim.
A claim under the CFA "shall be commenced within six years next after
the cause of any such action shall have accrued." N.J.S.A. 2A:14-1(a). "[T]he
date when a cause of action is deemed to have 'accrued' is 'the date upon which
the right to institute and maintain a suit first arises.'" Belmont Condo. Ass'n v.
Geibel, 432 N.J. Super 52, 82-83 (App. Div. 2013) (quoting Holmin v. TRW,
Inc., 330 N.J. Super. 30, 35 (App. Div. 2000)). Nevertheless, "[t]o determine
when [defendant's] fraud claims accrued, we apply the discovery rule, which
delays the commencement of the limitations period in appropriate cases."
Catena v. Raytheon Co., 447 N.J. Super. 43, 52 (App. Div. 2016). "The
discovery rule is essentially a rule of equity," Lopez v. Swyer, 62 N.J. 267, 273
(1973), "designed 'to avoid harsh results that otherwise would flow from
mechanical application of a statute of limitations,'" Catena, 447 N.J. Super. at
53 (quoting Vispisiano v. Ashland Chem. Co., 107 N.J. 416, 426 (1987)). In
fraud cases, the discovery rule is justified consideration that "the victim's lack
of awareness of the fraud is the wrongdoer's very object. The rule thus prevents
the defendant from benefiting from his own deceit." Id. at 54.
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Under the discovery rule, "a cause of action will be held not to accrue until
the injured party discovers, or by an exercise of reasonable diligence and
intelligence should have discovered that he may have a basis for an actionable
claim." Belmont, 432 N.J. Super. at 83 (quoting Lopez, 62 N.J. at 272). "The
party seeking the rule's benefit bears the burden to establish it applies." Catena,
447 N.J. Super at 53.
Whether a cause of action is barred by a statute of limitations is a question
of law that we review de novo. Id. at 52 (citing Estate of Hainthaler v. Zurich
Com. Ins., 387 N.J. Super. 318, 325 (App. Div. 2006)). "The application of the
discovery rule is for the court, not a jury, to decide." Ibid.Loury maintains that between 2004 and 2009, the Note required a
bi-weekly payment of $504.98, which was lower than the amortized payment
needed to fulfill the Note's principal and accrued interest within the thirty-year
term, constituting fraud under the CFA. We reject his contention that because
he did not discover the fraud until plaintiff filed its foreclosure complaint in
2019, the statute of limitations did not begin to toll until his alleged discovery.
Loury's counterclaim began to accrue when the Note was executed in
2004, because that is when his "exercise of reasonable diligence and intelligence
should have discovered" there may be a basis for an actionable claim. Belmont,
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432 N.J. Super. at 83. The bi-weekly payment, associated terms, and interest
rates were clear on the face of the Note in 2004. It was not until 2019 that Loury
analyzed the Note, leading to his accusation of fraud. Loury even concedes that
"had interest rates remained stable in subsequent years to the 4.871 [] [percent]
rate stated in the Note, . . . deferred interest . . . would still accrue with the
$504.98 bi-weekly payment." Therefore, even without knowing and applying
the future interest rates, Loury would have been able to discover that the initial
payment would accrue deferred interest in 2004. By exercising reasonable
diligence, Loury would have discovered the alleged fraud in 2004 when all the
information he needed for his findings were set forth in the Note he and his wife
executed.
Accordingly, the motion judge was correct that the discovery rule did not
delay the running of the statute of limitations for Loury's CFA counterclaim until
2018, when the foreclosure complaint was served upon him and his wife. The
statute of limitations to file his CFA counterclaim tolled in 2010, six years after
the Note was executed. The judge adequately complied with Rule 1:7-4 and
explained his findings of fact and legal conclusions in his oral decision;
therefore, dismissal of Loury's counterclaim as time-barred was appropriate.
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After our review of the record, as well as controlling law, we conclude
that Loury's other arguments are without sufficient merit to warrant discussion
in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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