CAPITAL ONE, N.A. VS. LAURENCE FRANKLIN (F-006480-14, MONMOUTH 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NOT FOR PUBLICATION WITHOUT THE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-0899-18T1
CAPITAL ONE, N.A.,
Plaintiff-Respondent,
v.
LAURENCE FRANKLIN,
Defendant-Appellant,
and
MRS. FRANKLIN, unknown
spouse of LAURENCE FRANKLIN,
TRACY VILLAGE CONDOMINIUM
ASSOCIATION, INC., RARITAN
BAY FEDERAL CREDIT UNION,
DISCOVERY BANK, STATE OF
NEW JERSEY, and TD BANK, N.A.,
Defendants.
_______________________________
Submitted October 21, 2019 – Decided November 4, 2019
Before Judges Sabatino and Geiger.
On appeal from the Superior Court of New Jersey,
Chancery Division, Monmouth County, Docket No. F-
006480-14.
Rubenstein Business Law, attorneys for appellant
(David A. Rubenstein, on the brief).
Milstead & Associates, LLC, attorneys for respondent
(Bernadette Irace, on the brief).
PER CURIAM
In this residential mortgage foreclosure action, defendant Laurence
Franklin appeals from a Chancery Division order denying his motion to vacate
the final judgment and stay the September 24, 2018 sheriff's sale.1 We affirm.
I.
The record reveals the following information. 2 On November 28, 2006,
defendant borrowed $700,400 from Chevy Chase Bank, F.S.B. and executed a
promissory note to evidence the loan. To secure the note, defendant executed a
mortgage affecting his residence in Clarksburg to Mortgage Electronic
Registration Systems, Inc. (MERS), as nominee for Chevy Chase Bank, F.S.B.
The mortgage was recorded on December 12, 2006.
1
In this opinion we refer to Laurence Franklin as "defendant." The other
defendants have not participated in this appeal.
2
The table of contents, statement of facts, and table of other authorities sections
of defendant's brief do not meet the requirements of Rule 2:6-2(a), (c).
A-0899-18T1
2
In January 2012, defendant executed a loan modification agreement ,
which adjusted the unpaid principal balance to $975,444.83 and deferred
$560,366.89 of the principal balance.
On July 1, 2013, defendant defaulted on the loan and has failed to make
any payments since that date. Plaintiff Capital One, N.A. mailed a notice of
intent to foreclose to defendant by certified and regular mail on October 8, 2013.
The mortgage was assigned by MERS to plaintiff on February 3, 2014.
Plaintiff filed the complaint on February 21, 2014. The assignment was
recorded on March 6, 2014. On April 4, 2014, defendant filed a contesting
answer. He subsequently filed an amended answer.
On May 9, 2014, plaintiff moved for summary judgment. On June 6,
2014, defendant moved for summary judgment. The motion judge granted
plaintiff's motion and denied defendant's motion. Defendant's amended answer
and affirmative defenses were stricken with prejudice and the matter was
returned to the Office of Foreclosure as an uncontested foreclosure. Defendant
moved for reconsideration. On August 8, 2014, the motion judge denied
reconsideration.
On October 24, 2014, defendant's motion to stay the foreclosure action
pending appeal was denied. In February 2015, plaintiff moved for entry of
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default judgment. Defendant did not oppose the application. A final judgment
of foreclosure and writ of execution, in the amount of $1,006,681.06, were
entered in favor of plaintiff on April 2, 2015. Defendant did not appeal from
the entry of judgment.
A sheriff's sale of the mortgaged premises was initially scheduled for
December 12, 2016. The sale was adjourned to January 23, 2017, as a result of
defendant utilizing his two statutory adjournments.
On January 23, 2017, defendant filed a Chapter 13 bankruptcy petition in
the United States Bankruptcy Court for the District of New Jersey. It was
dismissed by the Bankruptcy Court on April 10, 2017.
Plaintiff placed the foreclosure on hold from May 2017 to February 7,
2018, while it attempted to pursue loss mitigation options with defendant. When
those efforts proved unsuccessful, on January 2, 2018, plaintiff's Loss
Mitigation Department mailed defendant a notice of action taken advising
defendant it had denied his loan modification request. Plaintiff reactivated the
foreclosure action and obtained an alias writ of execution on February 14, 2018.
A sheriff's sale was then scheduled for April 16, 2018. The sale was
adjourned to May 14, 2018, as a result of defendant, again, utilizing his two
statutory adjournments. The sheriff's sale was then stayed as a result of
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defendant filing a second Chapter 13 bankruptcy petition on May 14, 2018. It
was dismissed by the Bankruptcy Court on August 22, 2018.
The sheriff's sale was rescheduled for September 24, 2018. Defendant
filed an emergent application to stay the sheriff's sale on September 17, 2018.
The stay application was denied by the motion judge that same day. The judge
further declared there shall be no further adjournments of the sheriff's sale. The
sale took place on September 24, 2018, with plaintiff the successful bidder.
Defendant then filed a motion to stay the sale and to vacate the final
judgment. Plaintiff opposed the motion, arguing, in part, that it was time barred
because it was not filed within a reasonable period after the entry of judgment
in April 2015.
The motion judge issued an oral decision denying the motion on
September 28, 2018. The judge made the following findings. Defendant did
not raise the issue of standing before the entry of judgment. "Lack of standing
is not a meritorious defense to a foreclosure when raised post judgment as a
basis to vacate the judgment." Pursuant to Rule 4:34-3, plaintiff is permitted to
continue with the foreclosure despite the transfer of its interest. Defendant did
not dispute that the prima facie requirements for foreclosure were met.
Defendant "could have and should have" raised any argument that plaintiff was
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not permitted to proceed with this foreclosure action "long ago, not in this post
judgment setting." The judgment was entered in 2015. The motion to vacate
the judgment was filed more than three years after it was entered. The judge
rejected defendant's argument that plaintiff violated 12 C.F.R. § 1024.41 (2019),
finding plaintiff advised defendant that his request for loan modification had
been denied by letter dated January 2, 2018. This appeal followed.
Defendant argues he is entitled to have the judgment and sheriff's sale
vacated because he established exceptional circumstances sufficient to require
relief pursuant to Rule 4:50-1(f). He contends plaintiff is barred from bringing
this action because it is a foreign entity not registered to conduct business in
New Jersey pursuant to N.J.S.A. 14A:13-11 and did not file a business activities
report pursuant to N.J.S.A. 14A:13-15. He also contends the sale must be
vacated because plaintiff was in violation of 12 C.F.R. § 1024.1(c), promulgated
by the Consumer Financial Protection Bureau pursuant 12 U.S.C. § 5512 (2018).
Finally, plaintiff contends plaintiff lacked standing to foreclose because the
assignment of the mortgage is invalid.
II.
This case proceeded to the second stage of the default process, entry of a
default judgment pursuant to Rule 4:43-2, before defendant sought relief from
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the order striking his answer and affirmative defenses. Therefore, defendant
must meet the standard of Rule 4:50-1. U.S. Bank Nat'l Ass'n v. Guillaume, 209
N.J. 449, 467 (2012).
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, cmt. on R. 4:43-3 (2020). That is so because when a party has no
meritorious defense, "[t]he time of the courts, counsel and litigants should not
be taken up by such a futile proceeding." Guillaume, 209 N.J. at 469 (quoting
Schulwitz v. Shuster, 27 N.J. Super. 554, 561 (App. Div. 1953)).
Before the trial court and on appeal, defendant relied upon 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.'" Id. 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, 135
N.J. at 289).
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"We review the trial court's decision for abuse of discretion." Deutsche
Bank Nat'l Trust Co. v. Russo, 429 N.J. Super. 98, 101 (App. Div. 2012) (citing
Guillaume, 209 N.J. at 467). "'The trial court's determination under the [Rule
4:50-1] warrants substantial deference,' and the abuse of discretion must be clear
to warrant reversal." Ibid. (quoting Guillaume, 209 N.J. at 467). A reviewing
court "finds an abuse of discretion when a decision is 'made without a rational
explanation, inexplicably departed from established policies, or rested on an
impermissible basis.'" Ibid. (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J.
88, 123 (2007)). On this record, we find no abuse in the trial court's decision.
III.
Defendant contends plaintiff was precluded from obtaining judgment and
proceeding to a sheriff's sale because it is a foreign bank and is not registered to
conduct business in New Jersey pursuant to N.J.S.A. 14A:13-11. We disagree.
Plaintiff was not the original lender. The Foreign Banks section under
Article 44 of The Banking Act of 1948, N.J.S.A. 17:9A-315 to -332, states in
pertinent part:
Nothing in this article shall prohibit a foreign bank
from
....
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(2) contracting in this State with a banking institution
to acquire, and acquiring in this State from such
banking institution, a part interest in or the entire
interest in any loan heretofore or hereafter made by
such banking institution, together with a like interest in
any security and any security instrument heretofore or
hereafter given to such banking institution to secure or
evidence such loan;
(3) enforcing in this State obligations heretofore or
hereafter acquired by it in the transaction of business
outside of this State, or in the transaction of any
business authorized by paragraph (1) or (2) of this
section;
(4) acquiring, holding, leasing, mortgaging, contracting
with respect to, or otherwise protecting or conveying
property in this State heretofore or hereafter assigned,
transferred, mortgaged or conveyed to it as security for,
or in whole or part satisfaction of a loan or loans made
by it or obligations acquired by it in the transaction of
business outside of this State, or in the transaction of
any business authorized by paragraphs (1) or (2) of this
section.
[N.J.S.A. 17:9A-331.]
Accordingly, plaintiff was not precluded from obtaining judgment and
proceeding to a sheriff's sale even though it was not registered to do business in
New Jersey pursuant to N.J.S.A. 14A:13-11.
Defendant further argues plaintiff is barred by N.J.S.A. 14A:13-20 from
bringing this foreclosure action because it failed to file a business activity report
in New Jersey pursuant to N.J.S.A. 14A:13-15. We disagree.
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Our Supreme Court addressed whether a foreign bank may maintain a
mortgage foreclosure action, notwithstanding its failure to comply with the
filing requirements of the Corporate Business Activities Reporting Act (the
Reporting Act), N.J.S.A. 14A:13-14 to -23, by not filing a notice of business
activities report as required by N.J.S.A. 14A:13-15. Am. Bank & Tr. Co. of Pa.
v. Lott, 99 N.J. 32, 33-34 (1985). The Court concluded that "[n]either the terms
of the Reporting Act nor its legislative history suggests that the Legislature
intended to include foreign banks within the definition of 'corporation' contained
in N.J.S.A. 14A:13-17(b)." Id. at 35. The Court also noted that "the Reporting
Act was designed to facilitate the collection of corporate taxes, an endeavor that
has no application to a foreign bank." Id. at 40.
The Court held "the Legislature did not intend the Reporting Act to apply
to foreign banks. Because the Reporting Act does not apply, the requirements
of that Act . . . are irrelevant to the determination whether [the foreign bank] can
maintain the [foreclosure] action." Id. at 34.3 Accordingly, plaintiff's alleged
failure to file a business activity report is not a bar to filing this foreclosure
action and obtaining judgment.
3
In reaching this decision, the Court expressly overruled Bank Leumi Trust
Company v. Schneider, 188 N.J. Super. 423 (App. Div. 1982). Lott, 99 N.J. at
41.
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Defendant also contends plaintiff is barred from moving forward with the
foreclosure because it did not meet the condition precedent imposed by 12
C.F.R. § 1024.41(c). We disagree.
The regulation provides that if a loan servicer receives a completed loss
mitigation application more than thirty-seven days before a foreclosure sale, the
servicer must, within thirty days, evaluate the borrower for all loss mitigations
options available and provide the borrower with written notice "stating the
servicer's determination." 12 C.F.R. § 1024.41(c)(1). Plaintiff received a
completed loss mitigation application from defendant on December 29, 2017.
Plaintiff gave defendant written notice that it could not offer him a loan
modification and provided the other information required by the regulation in
its letter dated January 2, 2018. By doing so, plaintiff timely satisfied the
condition precedent imposed by the regulation. Plaintiff did not undertake the
next step in the foreclosure, obtaining an alias writ of execution, until February
9, 2018. Accordingly, the motion judge correctly determined that plaintiff was
not precluded from moving forward with the foreclosure.
The motion judge determined that plaintiff had standing to initiate the
foreclosure since it owned or controlled the underlying debt when the complaint
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was filed, citing Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App.
Div. 2011). We agree.
In order to have standing, "a party seeking to foreclose a mortgage must
own or control the underlying debt." Ibid. (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." Ibid. "The essential holding of
Raftogianis was that to establish standing to maintain a foreclosure action, a
plaintiff generally must have had ownership or control of the underlying debt as
of the date of the filing of the complaint." Id. at 597 n.1.
The record demonstrates that the note and mortgage were assigned by
MERS to plaintiff three weeks before the complaint was filed. Plaintiff owned
and controlled the note and mortgage at the time the complaint was filed, giving
it standing to initiate the foreclosure. The fact that the assignment was recorded
thirteen days after the complaint was filed did not affect plaintiff's standing. See
EMC Mortg. Corp. v. Chaudhri, 400 N.J. Super. 126, 141 (App. Div. 2008)
(noting that "[t]he fact that assignments of mortgages may be recorded does not
affect the validity of an assignment of a mortgage which has not been recorded")
(alteration in original) (citations omitted); 29 N.J. Practice, Law of Mortgages §
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11.3, at 762 (Myron C. Weinstein) (2001) (noting an assignment of mortgage is
effective even if not recorded). The motion judge correctly decided that plaintiff
had standing to initiate the foreclosure.
In any event, "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)." Deutsche Bank
Nat'l Trust Co. v. Russo, 429 N.J. Super. 91, 101 (App. Div. 2012).
Defendant's remaining arguments lack sufficient merit to warrant
discussion in a written opinion. R. 2:11-3(e)(1)(E).
Based on our careful review of the record in light of the applicable
principles of law, we find no basis for relief from the final judgment or sheriff's
sale under Rule 4:50-1(f). Defendant has not met his burden of demonstrating
a meritorious defense, see Guillaume, 209 N.J. at 467, much less demonstrated
any exceptional circumstances or that a grave injustice will result if the final
judgment and sheriff's sale are not vacated. The denial of defendant's Rule 4:50-
1(f) motion was not an abuse of discretion.
Affirmed.
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