US BANK, NA, ETC. VS. DAVID E. WALSH(F-009696-14, SOMERSET COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-0063-15T1
U.S. BANK, N.A. as Successor
Trustee for Bank of America as
Trustee for Thornburg Mortgage
Securities Trust 2007-3,
Plaintiff-Respondent,
v.
DAVID E. WALSH and DEBORAH
WALSH,
Defendants-Appellants.
______________________________
Argued November 14, 2017 – Decided November 30, 2017
Before Judges Fasciale and Sumners.
On appeal from Superior Court of New Jersey,
Chancery Division, Somerset County, Docket No.
F-009696-14.
David E. Walsh and Deborah Walsh, appellants,
argued the cause pro se.
Dustin P. Mansoor argued the cause for
respondent (Houser & Allison, APC, attorneys;
Gary N. Smith, on the brief).
PER CURIAM
David and Deborah Walsh (defendants) appeal from a May 8,
2015 order denying their motion to vacate default; and a July 10,
2015 order denying their motion to reconsider or vacate summary
judgment previously entered in favor of U.S. Bank, N.A.
(plaintiff). We affirm.
Defendants executed a promissory note (the note) to Guardhill
Financial Corp. (Guardhill) with an original principal balance of
$1,950,000. Defendants secured the note with a mortgage against
the property, naming Mortgage Electronic Registration Systems,
Inc. (MERS) as nominee for Guardhill, and then recorded the
mortgage. In May 2007, defendants entered into a modification
agreement.
MERS assigned the note and mortgage to TMST Home Loans, Inc.
(TMST). TMST assigned the note and mortgage to Bank of America
as Trustee for Thornburg Mortgage Securities Trust 2007-3 (Bank
of America as Trustee). Bank of America as Trustee assigned the
note and mortgage to plaintiff.
In May 2009, defendants defaulted on the note and mortgage.
In March 2014, plaintiff filed the foreclosure action. In
September 2014, plaintiff filed an amended complaint addressing
the May 2007 modification agreement. Defendants did not accept
service of the amended complaint and the judge entered default.
Although the judge did not vacate the default, the judge later
substantively considered defendants' challenge to plaintiff's
standing to proceed.
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At the close of extensive discovery, plaintiff moved for
summary judgment. On January 9, 2015, the judge granted
plaintiff's motion for summary judgment and issued a comprehensive
twenty-six page written opinion in which the judge concluded
defendants lacked a meritorious defense to the foreclosure action.
In May 2015, the judge entered final judgment. Defendants then
moved to set aside or reconsider the order granting summary
judgment.
On appeal, defendants argue that they were entitled to relief
under Rule 4:50-1; that they should have the right to challenge
the mortgage and note assignments; and that plaintiff does not
have standing for various reasons including an allegedly
fraudulent allonge.
We begin by addressing defendants' contention that the judge
erred by denying their motion to vacate the order granting
plaintiff summary judgment. On this point, defendants rely on
Rule 4:50-1, which states that
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 judgment or order and which
by due diligence could not have been
discovered in time to move for a new trial
under [Rule] 4:49; (c) fraud (whether
heretofore denominated intrinsic or
extrinsic), misrepresentation, or other
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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 trial court's determination under [Rule 4:50-1] warrants
substantial deference, and should not be reversed unless it results
in a clear abuse of discretion," namely where the "decision is
'made without a rational explanation, inexplicably departed from
established policies, or rested on an impermissible basis.'" US
Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 467-68 (2012) (quoting
Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 123 (2007)).
Defendants failed to satisfy this standard as to any subsection
of Rule 4:50-1.
In particular, the most relevant sections applicable to
defendants' contentions are Rule 4:50-1(b), (c), and (f). Under
Rule 4:50-1(b), the newly discovered evidence subsection, "the
party seeking relief must demonstrate 'that the evidence would
probably have changed the result, that it was unobtainable by the
exercise of due diligence for use at the trial, and that the
evidence was not merely cumulative.'" DEG, LLC v. Twp. of
Fairfield, 198 N.J. 242, 264 (2009) (quoting Quick Chek Food Stores
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v. Twp. of Springfield, 83 N.J. 438, 445 (1980)). "Moreover,
'newly discovered evidence' does not include an attempt to remedy
a belated realization of the inaccuracy of an adversary's proofs."
Ibid. (quoting Posta v. Chung-Loy, 306 N.J. Super. 182, 206 (App.
Div. 1997), certif. denied, 154 N.J. 609 (1998)). Rule 4:50-1(c)
provides relief for fraud. Rule 4:50-1(f) is reserved for
"exceptional situations" where "truly exceptional circumstances
are present." Hous. Auth. of Morristown v. Little, 135 N.J. 274,
286 (1994) (citations omitted). Defendants have failed to satisfy
any of these criteria.
"The only material issues in a foreclosure proceeding are the
validity of the mortgage, the amount of the indebtedness, and the
right of the mortgagee to resort to the mortgaged premises." Great
Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993),
aff'd, 273 N.J. Super. 542 (App. Div. 1994). We have held that
"either possession of the note or an assignment of the mortgage
that predated the original complaint confer[s] standing."
Deutsche Bank Tr. Co. Ams. v. Angeles, 428 N.J. Super. 315, 318
(App. Div. 2012) (citing Deutsche Bank Nat'l Tr. Co. v. Mitchell,
422 N.J. Super. 214, 216 (App. Div. 2011)). If a plaintiff cannot
establish it owned or controlled the underlying debt at the time
the complaint is filed, it "lacks standing to proceed with the
foreclosure action and the complaint must be dismissed." Wells
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Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div.
2011). "If a debt is evidenced by a negotiable instrument, such
as the note executed by [a] defendant," whether a plaintiff has
established ownership or control over the note "is governed by
Article III of the Uniform Commercial Code (UCC), N.J.S.A. 12A:3-
101 to -605, in particular N.J.S.A. 12A:3-301." Ibid.
There are "three categories of persons entitled to enforce
negotiable instruments" as described in N.J.S.A. 12A:3-301.
Mitchell, supra, 422 N.J. Super. at 222-23.
N.J.S.A. 12A:3-301 provides:
"Person entitled to enforce" an instrument
means the holder of the instrument, a
nonholder in possession of the instrument who
has the rights of a holder, or a person not
in possession of the instrument who is
entitled to enforce the instrument pursuant
to [N.J.S.A.] 12A:3-309 or subsection d. of
[N.J.S.A.] 12A:3-418. A person may be a
person entitled to enforce the instrument even
though the person is not the owner of the
instrument or is in wrongful possession of the
instrument.
Here, plaintiff had standing to pursue the foreclosure case
against defendants. Plaintiff was in possession of the note before
filing the complaint and the trial court repeatedly addressed and
rejected defendants' standing argument. Plaintiff presented
defendants with the original note and mortgage at a November 2013
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conference and defendants confirmed their signatures on the
instruments.
Defendants allege that they have new evidence that the allonge
was fraudulent, but offer no credible explanation as to why their
due diligence did not uncover such purported evidence sooner, when
they were in possession of the discovery. Furthermore, their so-
called expert report and handwriting analysis, obtained after the
court granted summary judgment to plaintiff, is inconclusive.
Rather, the handwriting analysis reflects that there is
insufficient information to conclude whether the signature was
valid. Furthermore, the Guardhill representative's email stating
that Guardhill does not have an allonge on file does not disprove
plaintiff's standing in this case.
Although defendants recognize they do not have standing under
New Jersey law to challenge a failure to comply with the trust
agreement, they argue that the note and mortgage assignments were
invalid. Defendants are not parties to or beneficiaries of the
trust, and therefore lack standing to assert violations of the
trust, and even if they did have standing, their assertions would
be an insufficient defense to the foreclosure claim. See, e.g.,
Reinagel v. Deutsche Bank Nat'l Tr. Co., 735 F.3d 220, 228 (5th
Cir. 2013) (explaining that even though the trust agreement was
violated, the debtor could not enforce the terms of the trust
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agreement unless the debtor is a third-party beneficiary, and even
then, such an argument does not render the assignment void; it
would just allow the debtor to sue for breach of the trust
agreement).
The judge also appropriately denied defendants relief under
the reconsideration standard. As an appellate court, we review
the denial of a motion for reconsideration to determine whether
the trial court abused its discretionary authority. Cummings v.
Bahr, 295 N.J. Super. 374, 389 (App. Div. 1996). Reconsideration
should only be used "for those cases which fall into that narrow
corridor in which either 1) the [c]ourt has expressed its decision
based upon a palpably incorrect or irrational basis, or 2) it is
obvious that the [c]ourt either did not consider, or failed to
appreciate the significance of probative, competent evidence."
Id. at 384 (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401
(Ch. Div. 1990)). Additionally, the decision to deny a motion for
reconsideration falls "within the sound discretion of the [trial
court], to be exercised in the interest of justice." Ibid.
(quoting D'Atria, supra, 242 N.J. Super. at 401).
Although the judge found the motion for reconsideration was
not filed timely, he substantively addressed the motion. The
judge reviewed defendants' submissions, mostly arguing the same
standing issue, and found that defendants' argument was "a search
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for technicalities that ignores the realities of the circumstances
before the [c]ourt. [D]efendants admit they have not paid any
princip[al], interest, real estate tax or insurance payments for
the property since May 1, 2009. . . . [D]efendants admittedly and
unabashedly continue to live in the premises at no charge." The
judge's decision to deny the motion for reconsideration was within
his discretion. He reviewed and analyzed the probative, competent
evidence, along with non-probative and incompetent evidence
presented by defendants. The judge properly denied both the motion
for reconsideration and the motion to set aside summary judgment.
We conclude the remainder of defendants' arguments are
without sufficient merit to warrant discussion in a written
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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