BANK OF AMERICA

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION


SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0927-11T3



BANK OF AMERICA, N.A. successor by

merger to LaSalle Bank National

Association/as Trustee for the

Registered Certificateholders

of GMAC Commercial Mortgage

Securities, Inc., Mortgage Pass-

Through Certificates Series 2001-

C2, acting by and through Berkadia

Commercial Mortgage L.L.C. as

Special Servicer,


Plaintiff-Respondent,


v.


PRINCETON PARK ASSOCIATES, L.L.C.,


Defendant-Appellant,


and

MD RETAIL CONSTRUCTION, INC. and

SWEETWATER CONSTRUCTION CORPORATION,


Defendants.


____________________________________

November 8, 2012


Submitted October 17, 2012 - Decided


Before Judges Axelrad, Sapp-Peterson and Haas.


On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County, Docket No. F-49373-09.

Greenbaum, Rowe, Smith & Davis, L.L.P., attorneys for appellant (Marc J. Gross, of counsel; Mr. Gross and Christopher J. Ledoux, on the brief).


Zeichner, Ellman & Krause, L.L.P., attorneys for respondent (Philip S. Rosen and Kerry A. Duffy, on the brief).


PER CURIAM

In this commercial mortgage foreclosure action, defendant Princeton Park Associates, L.L.C. (PPA) appeals from the December 17, 2010 order of the Chancery Division, granting summary judgment to plaintiff Bank of America, N.A. (the Bank), and from the March 4, 2011 order denying PPA's motion for reconsideration. PPA argues the Bank did not have standing to file a foreclosure complaint and, if it did have standing, the Bank did not establish there had been a default on the mortgage. After reviewing the record in light of the contentions advanced on appeal, we affirm.

I.

PPA was the owner of an office building (the Building) in South Brunswick. On June 1, 2001, PPA borrowed $19.5 million from GMAC Commercial Mortgage Corporation (GMAC). As collateral security for these funds, PPA executed a promissory note (the Note), promising to pay GMAC or its assigns the principal sum of the loan, plus interest. On that same date, PPA executed and delivered a mortgage and security agreement (the Mortgage Agreement) on the property to secure payment and performance on the Note. On June 22, 2001, GMAC recorded the mortgage.

On June 1, 2001, PPA also executed a Tenant Improvement and Leasing Commission Reserve Agreement (the Improvement Agreement) and delivered it to GMAC. Under the Improvement Agreement, GMAC made an initial $351,906 deposit into a Tenant Improvement and Leasing Commission Reserve Fund (the Improvement Reserve) and PPA was required to make monthly deposits of $22,917 into the Improvement Reserve in repayment. By using monies in the Improvement Reserve, GMAC was to pay or reimburse PPA for the cost of certain tenant improvements or broker commissions in connection with PPA's leases with its tenants at the Building.

The Note, Mortgage Agreement and Improvement Agreement are known collectively by the parties as the Loan Documents. Each of the Loan Documents contained a clause regarding default. The Note provides that, in the event of default, at the lender's option, the outstanding balance of the loan, in addition to all unpaid interest accrued, shall immediately become due and payable. Under the Note, a default occurs "if any payment of principal and interest or any other payment required under this Note is not received by the Lender on or before the date that is five (5) days after the date such payment is due" or "if any default should occur under any of the other Loan Documents which is not fully cured following applicable notice or prior to the expiration of any grace or cure period."

The Mortgage Agreement likewise provides that, in the event of default, the lender can declare the entire unpaid debt to be immediately due and payable, and commence an action to foreclose PPA's rights in the Building. Under the Mortgage Agreement, a default occurs when there is any default under the Note, any violation of specific sections of the Mortgage Agreement, or when any default is not cured within the applicable time periods set forth in the Agreement.

Under the Improvement Agreement, PPA would not be permitted to receive any funds from the Improvement Reserve if it was in default. The Improvement Agreement defines default as any failure to make any monthly deposit payment within five days after the payment is due, failure to comply with the agreement, or failure to cure any default within thirty days notice from the lender. Any default under the Note or Mortgage Agreement also constitutes default under the Improvement Agreement.

The Note also provided that no failure by the lender to accelerate the debt in accordance with these default provisions would constitute a waiver of the lender's right to do so or a waiver of the lender's right to insist on strict compliance with the terms of the Note or any of the other Loan Documents. The Note contained a provision stating the Loan Documents could only be modified by "an agreement in writing." The Mortgage had a similar provision, as did the Tenant Improvement Agreement.

On November 6, 2001, GMAC assigned the Loan Documents to LaSalle Bank, N.A. (LaSalle) as trustee for the Registered Certificate Holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificate Series 2001-C2. This assignment was recorded on November 30, 2001. Significantly, an undated allonge to the Note (the Allonge) provides that GMAC endorsed the PPA loan on the Building to LaSalle.

The Loan Documents were also securitized pursuant to a Pooling and Servicing Agreement (PSA). The PSA provided for GMAC to act as Master Servicer and Special Servicer for LaSalle with respect to the securitized loan pool.

The Bank became the trustee of the Loan Documents after it merged with LaSalle. On May 2, 2006, GMAC changed its named to Capmark Finance Inc. (Capmark).

In August 2007, PPA lost its largest tenant. Prior to that, however, PPA was able to re-lease some of that tenant's space to two other tenants. Capmark approved the two leases and, by letters dated May 4, 2007 and July 19, 2007, it confirmed that this "consent shall not be construed to be a modification or waiver of any of the terms or conditions" of the Loan Documents.

PPA defaulted under the Loan Documents on September 10, 2007 by beginning to remit its payments sixty days past due. Thus, the payment due from PPA on September 5, 2007 was not received until November 2007. Thereafter, PPA continued to make the payments sixty days late. As a result, Capmark's Client Relations Manager, Barbara Shaffer, sent PPA a series of letters between September 2007 and March 31, 2008, advising that the loan was in default and demanding payment of the full amount owed, plus interest and late fees. These letters also stated that the lender was not waiving any of its rights under the Loan Documents to foreclose on the loan.

In October 2007, PPA asked Capmark to make certain disbursements to it from the Improvement Reserve. Because PPA was in default, Capmark denied this request on October 23, 2007.

Monthly email correspondence between Shaffer and PPA indicates that PPA continued to make its payments two months late. In April 2008, PPA asked for a meeting with Capmark to discuss the Building. On May 5, 2008, LaSalle, as trustee for Capmark, responded to PPA with a Pre-Negotiation Agreement. The Agreement indicated that, although Capmark would participate in repayment discussions with PPA, the Loan Documents would remain unmodified and in full force and effect.

The parties met on June 12, 2008 and PPA advised Capmark of its efforts to obtain tenants for the Building. It again requested funds from the Improvement Reserve. Capmark agreed to consider the request and subsequently proposed a loan modification.

However, before any action was taken by the parties to modify the Loan Documents in writing, a fire occurred at the Building. Capmark conducted an inspection. Thereafter, it disbursed approximately $2.18 million from the Improvement Reserve to PPA for restoration work.

After August 6, 2008, PPA stopped making payments on the loan. Nevertheless, discussions between PPA and Capmark continued into 2009. By letter dated September 10, 2009, the Bank rejected PPA's proposal to purchase the loan and it made a counter-offer for a $15 million discounted payoff of the $25 million total debt. However, PPA attempted to modify the conditions of the offer and it was never signed by the parties.

On October 16, 2009, the Bank filed a foreclosure complaint against PPA based upon its default. The Bank demanded possession of the property, damages and costs. On December 11, 2009, Capmark sold and assigned its loan servicing operation, including its interest as the Bank's servicer of the PPA loan, to Berkadia Commercial Mortgage L.L.C. (Berkadia).

On January 8, 2010, PPA filed an answer, denying it was in default. Discovery ensued. On September 1, 2010, the Bank filed an amended complaint, replacing Capmark with Berkadia as its special servicer under the loan and making it clear that it asserted PPA defaulted on the loan on September 10, 2007, when it first began to miss payments. PPA filed a timely answer to the amended complaint.

On November 4, 2010, the Bank filed a motion for summary judgment, arguing PPA had defaulted on the loan. PPA filed a response and contended that, because Capmark had accepted its late payments, the terms of the loan had been modified and, therefore, no default occurred. Significantly, PPA did not assert in its written opposition to the motion that the Bank lacked standing to bring its foreclosure action.

On December 17, 2010, Judge Glenn Berman heard oral argument on the Bank's motion. Toward the end of his presentation, PPA's counsel raised the issue of standing for the first time. Counsel noted that a bankruptcy judge had recently issued a decision which held that a bank could not bring a foreclosure action unless it could show it possessed the note underlying the loan. Counsel asserted the Bank had never provided the Note in response to any of PPA's discovery requests.

Judge Berman granted the Bank's motion. The judge found PPA had defaulted on the terms of the Note, the Mortgage Agreement and the Improvement Agreement by failing to make its required payments in a timely fashion. The judge pointed to the specific language in these documents which prohibited the agreements from being modified in any way, except by a written agreement signed by both parties. PPA had presented no evidence that such a written modification had ever occurred. The fact the Bank accepted the late payments, the judge ruled, did not modify the terms of the Loan Documents because the Bank was entitled to these payments and the Bank always made clear to PPA, through letters from Shaffer and Capmark, that its acceptance of the late payments did not constitute a waiver of any of its rights.

On December 17, 2010, Judge Berman filed an order memorializing his ruling. The order struck PPA's amended answer to the foreclosure complaint, dismissed PPA's counterclaims against the Bank, and entered default against PPA. The matter was also "transferred to the Foreclosure Unit of the Superior Court in Trenton, New Jersey to proceed as an uncontested matter."

On January 26, 2011, PPA submitted a motion for reconsideration of Judge Berman's decision. In this motion, PPA's exclusive argument was that the Bank lacked standing to foreclose on the Building because it had not demonstrated that it actually held the Note. In response, the Bank produced the Note, the Mortgage Agreement and the Improvement Agreement, together with the Allonge transferring PPA's loan from GMAC to LaSalle which, through a merger, was now the Bank.

Judge Frank M. Ciuffani heard oral argument and denied PPA's motion for reconsideration in a March 4, 2011 written decision and order. The judge found that PPA's motion was untimely and failed to "state with specificity the basis on which it was made." The judge noted PPA had merely cited the unpublished bankruptcy court decision, together with an unpublished Chancery Division decision, that held that a lender must have standing to commence a foreclosure action. However, PPA did not explain why these decisions were applicable to the facts of this case. The judge also ruled, on the merits of the motion, that the Bank, having produced the original Loan Documents, together with the Allonge, had established it had standing to file its foreclosure action against PPA.

On August 1, 2011, the Bank filed a motion for the entry of a Final Judgment in Foreclosure. On August 19, 2011, Judge Ciuffani entered a final judgment of foreclosure.1

II.

On appeal, PPA argues that (1) the trial court erred in denying its motion for reconsideration because the Bank failed to establish it was the holder of the Note it gave to GMAC, and therefore lacked standing to pursue a foreclosure action; and (2) the court erred in granting the Bank's summary judgment motion because PPA was not in default on the loan. We address each of these contentions in turn.

A.

Reconsideration is "'a matter within the sound discretion of the Court, to be exercised in the interest of justice.'" Palombi v. Palombi, 414 N.J. Super. 274, 288 (App. Div. 2010) (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990)). "It is not appropriate merely because a litigant is dissatisfied with a decision of the court or wishes to reargue a motion." Palombi, supra, 414 N.J. Super. at 288.

Initially, we note that PPA correctly asserts its motion for reconsideration was timely. Pursuant to Rule 4:49-2, a motion for reconsideration must be filed within twenty days after service of the order from which reconsideration is sought.

Summary judgment was granted to the Bank in a December 17, 2010 order. However, PPA did not receive a copy of that order from the Bank until, at the earliest, January 6, 2011. PPA's motion for reconsideration was filed on January 26, 2011, which was within twenty days of service of the summary judgment order. PPA's motion was therefore timely.

The trial judge, however, did not abuse his discretion by finding that PPA had failed to state its basis for reconsideration with the degree of specificity required by Rule 4:49-2. In its motion papers, PPA pointed to two, non-precedential, unpublished trial court decisions reiterating the well-settled principle that a party seeking to bring a foreclosure action must have standing to do so. PPA did not explain why either case was factually relevant to the current matter and it did not explain why this argument had not been advanced in greater detail prior to its brief mention at the end of oral argument on the summary judgment motion.

Nevertheless, Judge Ciuffani went on to consider PPA's motion on its merits and, we conclude, correctly denied the motion because the Bank clearly had standing to bring the foreclosure action. The legal conclusions of a trial judge, including on the issue of standing, are reviewed de novo. POG v. Roberts, 397 N.J. Super. 502, 508 (App. Div. 2008).

"'As a general proposition, a party seeking to foreclose a mortgage must own or control the underlying debt.'" Deutsche Bank Nat. v. Mitchell, 422 N.J. Super. 214, 222 (App. Div. 2011) (quoting Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011)). See also Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch. Div. 2010). "In the absence of a showing of such ownership or control, the plaintiff lacks standing to proceed with the foreclosure action and the complaint must be dismissed." Ford, supra, 418 N.J. Super. at 597.

The Bank was entitled to foreclose on the Building as a holder of the Note. Article III of Uniform Commercial Code (UCC), N.J.S.A. 12A:3-101 to -605, governs the enforcement and transfer of a negotiable instrument. N.J.S.A. 12A:3-301 is the UCC provision that addresses who may enforce a negotiable instrument. It provides for three categories of persons entitled to enforce negotiable instruments:

"Person entitled to enforce" an instrument means [1] the holder of the instrument, [2] a nonholder in possession of the instrument who has the rights of the holder, or [3] a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A:3-309 or subsection d. of 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.


[N.J.S.A. 12A:3-301.]


The Bank falls under the "first" category as "the holder of the instrument."2 It had all of the original Loan Documents in its possession.

Here, PPA had negotiated the loan with GMAC, not the Bank. However, the Bank still had standing. N.J.S.A. 12A:3-201 to -207 governs negotiation, transfer and indorsement of instruments. "'N.J.S.A. 12A:3-201(a) provides that for a person other than the one to whom a negotiable instrument is made payable to become a 'holder,' there must be a negotiation.'" Mitchell, supra, 422 N.J. Super. at 223 (quoting Ford, supra, 418 N.J. Super. at 598). Negotiation is "a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder." N.J.S.A. 12A:3-201(a).

For an instrument payable to an identified person, negotiation requires two things: "transfer of possession of the instrument and its indorsement by the holder." N.J.S.A. 12A:3-201(b). Article III defines "indorsement" as "a signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of negotiating the instrument." N.J.S.A. 12A:3-204(a).

The Bank met these requirements when, in response to PPA's motion for reconsideration, it submitted the Allonge. The Allonge, while undated, specifically refers to the "MORTGAGE NOTE DATE" of "June 1, 2001"; "THE ORIGINAL PRINCIPAL AMOUNT OF: $19,500,000.00"; the property as "Princeton Park Corporate Center"; and the "BORROWERS" as "Princeton Park Associates LLC, a Delaware limited liability company." Thus, there is no mistaking the Allonge refers to the Note PPA gave to GMAC on June 1, 2011.

The Allonge then clearly sets forth the following regarding the transfer of the Note from GMAC to LaSalle (the Bank's predecessor before the merger) and GMAC's indorsement as its holder prior to this transfer:

PAY TO THE ORDER OF


LaSalle Bank National Association, as trustee for the registered holders of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-Through Certificates, Series 2001-C2, 135 South LaSalle Street, Suite 1625, Chicago, IL 60674


WITHOUT RECOURSE


GMAC COMMERCIAL MORTGAGE CORPORATION


The Allonge was signed by Cynthia A. Tann, GMAC's Assistant Vice President.

Thus, Judge Ciuffani properly ruled the Bank had standing. It held the originals of all of the Loan Documents. In addition, it provided the Allonge, which satisfied the UCC requirements concerning transfer and indorsement.

PPA complains the Allonge was not provided by the Bank during discovery or prior to the filing of the motion for reconsideration. However, standing was not an issue in the case until the motion was filed. As soon as PPA made this allegation, the Bank responded with documentary evidence to refute it.

PPA also argues the Allonge was undated and it was not physically attached to the Note when the Bank's attorney located it. This argument lacks merit. At the time PPA made its allegation about the Bank's standing, Berkadia was responsible for servicing the loan. In response to PPA's motion, Berkadia's vice-president, Christopher Hamilton, submitted a certification that the Allonge was delivered to LaSalle on November 6, 2001 and was thereafter kept in the Loan Document files. Thus, the Bank possessed the Loan Documents and the Allonge prior to its filing the foreclosure complaint. The Allonge clearly refers to the Note by date, amount, and name of the borrower. Thus, the fact the Allonge is not dated or was not physically attached to the Note when it was found in the Loan Documents file posed no obstacle to foreclosure.

In sum, Judge Ciuffani did not abuse his discretion in denying PPA's motion for reconsideration.

B.

PPA's argument that Judge Berman erred in granting the Bank's summary judgment motion also lack merit. In conformity with well-established principles, we review the judge's conclusions de novo. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co, 202 N.J. 369, 382-83 (2010). Guided by Rule 4:46-2(c), we consider "whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J.520, 540 (1995).

PPA primarily argues that the judge erred by not finding the Bank lacked standing to bring the foreclosure action. As we have already concluded, however, that argument lacks merit and requires no further discussion.

PPA also argues it was not in default because the terms of the loan were modified when Capmark accepted the late payments. However, the Loan Documents each specifically provided that they could not be modified orally and that a written agreement signed by both parties was needed before any modification could occur. In addition, Capmark continually advised PPA that its acceptance of the late payments would not act to waive the Bank's rights under the Loan Documents to foreclose on the Building.

Finally, PPA's argument that the Bank breached the agreement by failing to make payments to it from the Improvement Reserve lacks merit. The Loan Documents clearly stated that late payments would constitute a default. The Reserve Agreement also provides that PPA was not entitled to receive any monies from the Improvement Reserve if it was in default of the loan. Thus, PPA's argument that the Bank breached its agreement by not releasing funds to it must fail.

Therefore, we find no basis to disturb Judge Berman's decision granting the Bank's motion for summary judgment.

Affirmed.

1 PPA's Amended Notice of Appeal is limited to the December 17, 2010 and March 4, 2011 orders. PPA did not appeal from the August 19, 2011 final judgment of foreclosure.

2 In the two unpublished decisions cited by PPA in its motion for reconsideration, neither lender attempted to claim that it was the actual holder of the loan instruments.