DEUTSCHE BANK NATIONAL TRUST COMPANY v. MICHAEL TULLY

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

DEUTSCHE BANK NATIONAL

TRUST COMPANY, AS TRUSTEE

FOR GSR MORTGAGE LOAN

TRUST 2007-OAI, MORTGAGE

PASS-THROUGH CERTIFICATES,

SERIES 2007-OIA,

Plaintiff-Respondent,

v.

MICHAEL TULLY and ADRIENNE

TULLY, HUSBAND AND WIFE,

Defendants-Appellants.

___________________________________________

September 9, 2016

Before Judges Hoffman and Currier.

On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. F-25989-13.

Louis A. Simoni argued the cause for appellants.

Stuart I. Seiden argued the cause for respondent (Duane Morris, LLP, attorneys; Brett L. Messinger, Brian J. Slipakoff and Kelly K. Bogue, of counsel and on the brief).

PER CURIAM

Plaintiff Deutsche Bank National Trust Company, as trustee for GSR Mortgage Loan Trust 2007-OAI (Deutsche Bank), initiated this action against defendants Michael and Adrienne Tully, seeking to foreclose on a mortgage issued in connection with a residential loan. Defendants now appeal the November 24, 2014 final judgment of foreclosure issued against them. They also appeal May 23, 2014 orders denying their motion to compel discovery and granting Deutsche Bank's motion for summary judgment. Having reviewed the parties' arguments in light of the record and applicable principles of law, we affirm.

I.

We briefly summarize the relevant facts from the summary judgment record, granting all favorable inferences to defendants as the non-moving parties. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). On January 31, 2007, Michael1 executed a promissory note to Quicken Loans, Inc. (Quicken Loans) in the amount of $376,000. The same day, Michael and Adrienne issued a residential mortgage as security for the note to Quicken Loans, designating Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Quicken Loans. On April 1, 2007, Quicken Loans delivered the promissory note to Deutsche Bank.2 Defendants failed to make their scheduled payments beginning in November 2009, and have been in default ever since. The following year, on March 9, 2010, MERS assigned Quicken Loans' rights in the mortgage to Deutsche Bank.

Deutsche Bank filed a foreclosure complaint in the Chancery Division on July 25, 2013. On the discovery end date, April 15, 2014, Deutsche Bank filed a motion for summary judgment. Defendants opposed this motion, primarily arguing that Deutsche Bank lacked standing to foreclose on their property. Six days later, defendants filed a motion to compel Deutsche Bank to produce additional documents. In their motion, defendants claimed that Deutsche Bank "stonewalled" them during the discovery period by providing "nearly blanket objections" to their discovery requests.

The motions were argued before Judge Patricia Del Bueno Cleary on May 23, 2014. Following arguments, the trial court denied defendants' motion to compel, holding that defendants had failed to demonstrate good cause for their failure to file the motion before the discovery end date. The trial court then granted Deutsche Bank's motion for summary judgment, concluding that Deutsche Bank had standing because it possessed the promissory note long before initiating its foreclosure action. In addition to granting summary judgment for Deutsche Bank, the trial court struck defendants' answer and remanded the case to the Office of Foreclosure to proceed as uncontested. On November 24, 2014, a different judge entered a final judgment of foreclosure against defendants in the amount of $519,212.50. Defendants filed their notice of appeal on December 23, 2014.

II.

On appeal, defendants challenge the Chancery Division orders denying their motion to compel discovery and granting Deutsche Bank's motion for summary judgment, as well as the final judgment of foreclosure.

We begin our analysis by addressing the order denying defendants' motion to compel. Our Rules unambiguously state that "[u]nless the court otherwise permits for good cause shown, motions to compel discovery . . . must be made returnable prior to the expiration of the discovery period." R. 4:24-2. We review decisions on discovery matters, including whether a litigant has demonstrated good cause pursuant to Rule 4:24-2, for an abuse of discretion. State v. Broom-Smith, 406 N.J. Super. 228, 239 (App. Div. 2009), aff'd, 201 N.J. 229 (2010).

Defendants concede that they did not file their motion to compel within the applicable discovery period. However, they argue on appeal that the trial court abused its discretion in denying their motion on the basis that they failed to demonstrate good cause. Defendants argue that they had good cause for the delay because Deutsche Bank "failed to properly respond to discovery, and even worse, failed to timely respond to requests for admissions."

We are not persuaded. On March 26, 2014, Deutsche Bank notified defense counsel that it would not respond further to defendants' discovery demands. Giving defendants the benefit of all favorable inferences, they had approximately twenty days to file a motion to compel prior to the discovery end date. Thus, defendants had sufficient time to file an appropriate motion before the filing deadline. Besides general allegations that Deutsche Bank failed to adequately respond to discovery requests, defendants offer no specific facts or circumstances that would constitute good cause for their failure to file their motion before the close of discovery.

Moreover, we agree with the trial court's conclusion that "[t]here really is no reason to produce any of the documents or the things that are asked in this motion to compel." Defendants seek the production of documents regarding securitization of the mortgage, as well as Deutsche Bank's pooling and servicing agreement. However, defendants do not articulate with specificity how these additional documents would clarify the factual or legal issues in this case. Absent specific references to documents that are integral to resolving this foreclosure action, we discern no reason to overturn the trial court's decision. The trial court did not abuse its discretion by denying defendants' untimely motion to compel.

Next, we address the order granting Deutsche Bank's motion for summary judgment. We review a grant of summary judgment de novo, applying the same standard as the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). In accordance with Rule 4:46-2, we must determine whether the competent evidence presented, "when viewed in the light most favorable to the non-moving party, [is] sufficient to permit a rational fact finder to resolve the alleged disputed issue in favor of the non-moving party." Brill, supra, 142 N.J. at 540.

Proof of "execution, recording, and non-payment" of a mortgage is sufficient to establish a prima facie case for foreclosure. Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952). Defendants do not dispute the mortgage execution, recordation, or default in this case.3 Rather, they contend that Deutsche Bank lacked standing to foreclose on the property. We disagree.

To have standing, a foreclosure plaintiff must "own or control" the underlying debt obligation. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 222 (App. Div. 2011). Standing to foreclose can be conferred to a third party by either transfer of the promissory note or assignment of the mortgage. Id. at 216, 225. This principle is reflected in N.J.S.A. 12A:3-301, which provides for three categories of persons entitled to enforce negotiable instruments

"Person entitled to enforce" an instrument means the holder of the instrument, a nonholder in possession of the instrument who has the rights of the holder, or 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.

We first conclude that Deutsche Bank had standing to sue under N.J.S.A. 12A:3-301 as a "holder of the instrument." Defendants do not dispute that MERS assigned the mortgage to Deutsche Bank, and that this assignment was recorded on March 8, 2010. Thus, Deutsche Bank acquired the right to foreclose more than three years before initiating suit in 2013. The fact that defendants defaulted on the mortgage in 2009, prior to the assignment to Deutsche Bank, is of no moment.

Even if Deutsche Bank had not been a "holder of the instrument," it would have had standing to bring its foreclosure action under N.J.S.A. 12A:3-301 as a "nonholder in possession of the instrument who has the rights of a holder." We have previously explained that the transfer of an instrument necessarily carries with it a transfer of the right to enforce that instrument

Transfer of an instrument occurs "when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument." N.J.S.A. 12A:3-203(a). Such a delivery, "whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument." N.J.S.A. 12A:3-203(b).

[Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 599 (2011).]

The parties do not dispute that Deutsche Bank had continuous possession of the promissory note since Quicken Loans delivered it to Deutsche Bank in 2007. Pursuant to N.J.S.A. 12A:3-301, Deutsche Bank has had standing to enforce the note since that transfer. See Mitchell, supra, 422 N.J. Super. at 216.

Defendants argue that there is a genuine issue of material fact as to whether the promissory note was indorsed by Quicken Loans at the time of the transfer in 2007. The applicable UCC comments contemplate such a scenario, and provide our basis for rejecting defendants' argument

If the transferee is not a holder because the transferor did not indorse, the transferee is nevertheless a person entitled to enforce the instrument under section 3-301 if the transferor was a holder at the time of transfer. Although the transferee is not a holder, under subsection (b) the transferee obtained the rights of the transferor as holder.

[N.J.S.A. 12A:3-203 Uniform Commercial Code Comment 2.]

Therefore, regardless of whether we consider Deutsche Bank a "holder of the instrument," or merely a "nonholder in possession of the instrument who has the rights of a holder," the outcome of this case remains the same. Deutsche Bank had standing to bring this foreclosure action against defendants, and the trial court did not err in granting summary judgment.

Lastly, we address the final judgment of foreclosure. Defendants argue that the proofs submitted by Deutsche Bank were inadequate to support final judgment, particularly because Deutsche Bank relied on the Rhoads certification, rather than an affidavit from one of its own employees. Defendants also argue that numerical discrepancies between different certifications in the record are "troubling" and warrant reversal. We disagree.

To obtain final judgment in an uncontested foreclosure action as is the case here in light of the trial court's order striking defendants' answer the moving party must file an application for entry of final judgment "accompanied by proofs as required by [Rule] 4:64-2." R. 4:64-1(d)(1). With regards to the proofs necessary to support final judgment, Rule 4:64-2(c) expressly permits foreclosure plaintiffs to supply affidavits by employees of their loan servicers. The certification from an Ocwen employee was therefore permissible. Moreover, we find no numerical discrepancies in Deutsche Bank's proofs that warrant overturning the final judgment. To the extent not addressed, defendants' arguments lack sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

1 For ease of reference, we refer to defendants individually by their first names.

2 The primary evidence in the record reflecting the transfer of the mortgage loan from Quicken Loans to Deutsche Bank is a certification by Stephanie Rhoads (the Rhoads certification), a Contract Management Coordinator employed by Deutsche Bank's loan servicer, Ocwen Loan Servicing, LLC (Ocwen). Rhoads certified that, based on her review of electronic data compilations and imaged documents pertaining to the loan transaction, Deutsche Bank had been in possession of the note since April 1, 2007. Rhoads also confirmed facts regarding the mortgage's execution, recordation, and default.

3 We acknowledge that there is a section of defendants' brief titled "[Deutsche Bank's] proofs fail to establish a prima facie case of foreclosure." However, this section merely rehashes defendants' arguments regarding the assignment to Deutsche Bank, which we address below; they submit no arguments challenging the mortgage execution, recordation, or default.