WELLS FARGO BANK, N.A. v. PATRICIA C. WHARWOOD

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

WELLS FARGO BANK, N.A.,

Plaintiff-Respondent,

v.

PATRICIA C. WHARWOOD,

Defendant-Appellant.

______________________________________

February 18, 2016

Submitted January 27, 2016 Decided

Before Judges Ostrer and Manahan.

On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. F-38143-09.

Patricia C. Wharwood, appellant pro se.

Reed Smith LLP, attorneys for respondent (Henry F. Reichner, on the brief).

PER CURIAM

In this mortgage foreclosure matter, defendant Patricia C. Wharwood appeals from a July 22, 2014 order entered by the Chancery Division judge denying defendant's motion to vacate final judgment in favor of plaintiff Wells Fargo Bank, N.A., cancel the sheriff's sale, and stay proceedings. We affirm.

On October 10, 2006, defendant executed and delivered an adjustable rate mortgage note to World Savings Bank, FSB (World Savings) in the amount of $525,000. To secure payment, defendant delivered a mortgage against residential real property located in Lincoln Park, New Jersey.

In 2007, Golden West Financial Corporation (the parent company of World Savings) was acquired by the Wachovia Corporation. As a result, World Savings was merged into Wachovia Mortgage, FSB (Wachovia Mortgage), a subsidiary of the Wachovia Corporation. In 2009, the Wachovia Corporation was acquired by Wells Fargo & Company. As a result, Wachovia Mortgage was converted into a national bank and merged into Wells Fargo Bank, N.A., a subsidiary of Wells Fargo & Company.

Defendant defaulted under the terms of the note on November 15, 2008. On July 21, 2009, plaintiff filed a foreclosure complaint, which was served on defendant on September 30, 2009. Defendant defaulted, and a copy of the June 14, 2011 order entering default was served on defendant on June 21, 2011. Nearly two years later, on June 11, 2013, defendant retained counsel to represent her in the foreclosure matter. Although counsel for defendant sent plaintiff a letter of representation, there is nothing in the record suggesting that an appearance was entered by an attorney, nor were any papers filed on defendant's behalf. On January 6, 2014, final judgment was entered in favor of plaintiff. Defendant was noticed of the final judgment on or about May 13, 2014. On July 1, 2014, defendant, appearing on her own behalf, filed an emergency motion to vacate final judgment pursuant to Rule 4:50-1, cancel the sheriff's sale of the Lincoln Park residence, and stay proceedings for sixty days. Defendant based her request for relief on excusable neglect given her counsel's failure to provide competent representation. She also claimed she had a meritorious defense in light of plaintiff's alleged predatory lending and lack of standing. Plaintiff opposed the motion.

The Chancery Division judge denied defendant's motion in a written decision on July 22, 2014. The judge stated, in pertinent part

[D]efendant argues to vacate final judgment for excusable neglect due to her reliance on [defense counsel's] representation that he would handle all correspondence from [p]laintiff and present her claims and defenses. Defendant asserts [defense counsel] did not file any papers in the present case. However, [defense counsel's] mere carelessness and [d]efendant's failure to be vigilant of this matter prior to the entry of final judgment is not a sufficient instance of excusable neglect. See Baumann v. Marinaro, 95 N.J. 380, 394 [(1984)] (finding that among other things, "[]failure to file timely motions are all careless mistakes evidencing a lack of proper diligence" and holding trial attorney's actions did not constitute "excusable neglect" pursuant to [Rule] 4:50-1(a) and holding that defendants were not entitled to relief under this rule).

It must be noted that from September 30, 2009 to June 2013, [d]efendant took no action to defend this foreclosure action. This is not "excusable neglect." For nearly four years, she did nothing and offers no explanation as to the lack of attention. It is by no means clear that if [defense counsel] had aggressively undertaken a defense in 2013[,] the [c]ourt would have permitted it. It is likely that it would not have set aside the default.

The judge continued by noting defendant's failure to attach a proposed answer to her motion, as well as her failure to present a meritorious defense. The judge also concluded that plaintiff established standing. Defendant filed a notice of appeal on September 4, 2014, challenging the judge's July 22, 2014 order.

Defendant raises the following points on appeal

POINT I

THE APPELLATE DIVISION MUST DECIDE WHETHER THE DEFENDANT ESTABLISHED EXCUSABLE NEGLECT TO BE ENTITLED TO RELIEF AS A MATTER OF LAW.

POINT II

THE APPELLATE COURT MUST DECIDE IF WELLS FARGO BANK, N.A. PRESENTED ADEQUATE PROOF IN ITS FINAL JUDGMENT TO ESTABLISH THAT IT HAS [THE] RIGHT TO ENFORCE THE WORLD SAVINGS BANK, FSB MORTGAGE NOTE AS "HOLDER" AT THE TIME THE COMPLAINT WAS FILED AS A MATTER OF LAW.

Defendant does not contest her execution of the loan documents or the availability of foreclosure after default. Instead, she contends her failure to timely contest the foreclosure action was the result of her attorney's failure to provide adequate representation. She also argues that Wells Fargo Bank, N.A. lacked standing and ownership of the note. We disagree.

When a party seeks to vacate a default judgment, he or she must satisfy the standard set forth in Rule 4:50-1, which usually requires "a showing of excusable neglect and a meritorious defense." U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 468 (2012); see also Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff'd, 43 N.J. 508 (1964); Pressler & Verniero, Current N.J. Court Rules, comment on R. 4:43-3 (2016) ("[T]he showing of a meritorious defense is a traditional element necessary for setting aside both a default and a default judgment . . . ."). Motions to vacate a default judgment "are to be 'viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached.'" Prof'l Stone, Stucco & Siding Applicators, Inc. v. Carter, 409 N.J. Super. 64, 68 (App. Div. 2009) (quoting Marder, supra, 84 N.J. Super. at 319). This is because there is no point in setting aside an entry of default judgment if the defendant has no meritorious defense. "The time of the courts, counsel and litigants should not be taken up by such a futile proceeding." Guillaume, supra, 209 N.J. at 469 (quoting Schulwitz v. Shuster, 27 N.J. Super. 554, 561 (App. Div. 1953)).

The requirement for establishing a meritorious defense is especially applicable in foreclosure cases. As we have previously observed

[I]n a foreclosure case . . . the mere denominating of the matter as a contested case moves it from the expeditious disposition by the Office of Foreclosure in the Administrative Office of the Courts, R. 1:34-6 and R. 4:64-1(a), to a more protracted treatment by the Chancery Division providing discovery and raising other problems associated with trial calendars. If there is no bona fide contest, a secured creditor should have prompt recourse to its collateral.

[Trs. of Local 478 Trucking & Allied Indus. Pension Fund v. Baron Holding Corp., 224 N.J. Super. 485, 489 (App. Div. 1988).]

The standard of review of a denial of a motion to vacate final judgment is abuse of discretion. Guillaume, supra, 209 N.J. at 467-68. Furthermore, a 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." Id. at 467 (citation omitted).

Here, we find no clear abuse of discretion in the judge's determination. There is no record that a notice of appearance was filed by an attorney on behalf of defendant in the foreclosure, or that any papers were filed on her behalf defending against the complaint. Notwithstanding any engagement of counsel by defendant, the judge properly noted that it took defendant nearly four years to defend against the foreclosure complaint. No explanation was offered for the delay. "Mere carelessness or lack of proper diligence on the part of an attorney is ordinarily not sufficient to entitle his clients to relief from an adverse judgment . . . ." Baumann, supra, 95 N.J. at 394 (quoting In re T, 95 N.J. Super. 228, 235 (App. Div. 1967)). We also note, as the judge did, that defendant failed to attach a proposed answer to her motion and failed to assert a meritorious defense. See Guillaume, supra, 209 N.J. at 469; see also Deutsche Bank Nat'l Trust Co. v. Russo, 429 N.J. Super. 91, 101 (App. Div. 2012) (stating that lack of standing did not constitute a meritorious defense to a foreclosure complaint due to post-judgment context and given the defendant's "years-long delay in asserting that defense.").

We next address defendant's argument that plaintiff lacked standing and ownership of the note. "[A] party seeking to foreclose a mortgage must own or control the underlying debt" at the time the forfeiture complaint was filed. Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011) (quoting Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch. Div. 2010)). If the plaintiff cannot establish ownership or control, it "lacks standing to proceed with the foreclosure action and the complaint must be dismissed." Ibid. "If a debt is evidenced by a negotiable instrument, such as the note executed by defendant," whether the plaintiff 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.

Thus, plaintiff was required to show it fell within one of the "three categories of persons entitled to enforce negotiable instruments" as described in N.J.S.A. 12A:3-301. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 222-23 (App. Div. 2011).

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.

Saliently, under the Banking Act of 1948, N.J.S.A. 17:9A-1 to -467, when two or more banks merge, "the corporate existence of each merging bank shall be merged into that of the receiving bank, and the property and rights of each merging bank shall thereupon vest in the receiving bank without further act or deed[.]" N.J.S.A. 17:9A-139(1).

Here, plaintiff's merger history was documented in both the foreclosure complaint and the motion to substitute plaintiff, which was granted. The judge concluded that plaintiff had standing and had established the elements necessary to obtain judgment in light of the undisputed merger and the acquisition history relating to World Savings, Wachovia Mortgage, and Wells Fargo Bank, N.A. We agree.

In accord with N.J.S.A. 17:9A-139(1), and the requirements set forth in N.J.S.A. 12A:3-301, plaintiff was the "holder of the instrument" and was otherwise vested with the right to sue on instruments previously held by the acquired bank without presenting a separate assignment of the instruments. See also 12 U.S.C.A. 215a(e); N.J.S.A. 17:9A-132(1) and (2); N.J.S.A. 17:9A-148(C). Since plaintiff demonstrated it was the holder of the note and mortgage at the time of the complaint, it was a legitimate party to institute the foreclosure action. Mitchell, supra, 422 N.J. Super. at 224-25 (citation omitted).

Affirmed.