LOANCARE, A DIVISION OF FNF SERVICING INC v. ABRAHAM NEGRON

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

LOANCARE, A DIVISION OF FNF

SERVICING, INC.,

Plaintiff-Respondent,

v.

ABRAHAM NEGRON, ALICIA NEGRON,

WILBERT NEGRON a/k/a WIBER

NEGRON,

Defendants-Appellants,

and

MRS. WILBERT NEGRON a/k/a WIBER

NEGRON,

Defendant.

_______________________________________

September 1, 2016

Submitted May 9, 2016 Decided

Before Judges Accurso and Suter.

On appeal from Superior Court of New Jersey,

Chancery Division, Hudson County, Docket No.

F-020767-13.

Tomas Espinosa, attorney for appellant.

McCabe, Weisberg & Conway, attorneys for respondent (Carol Rogers Cobb, on the brief).

PER CURIAM

Abraham, Wilbert, and Alicia Negron (defendants) appeal from the entry of a final judgment of foreclosure in favor of LoanCare, a division of FNF Servicing, Inc. (LoanCare). We affirm.

I.

In 2009, defendants executed a $298,381 note to Lend America, Inc. for the purchase of a residential property in West New York, New Jersey. They also executed a mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for Lend America, Inc., which mortgage subsequently was recorded. The note included an allonge indorsed in blank by a Vice President for Lend America, Inc.

On March 28, 2013, the note was transferred first to Government National Mortgage Association (GNMA) and then to LoanCare. On the same day, the mortgage was assigned by MERS first to GNMA and then by GNMA to LoanCare. Both mortgage assignments were recorded.

By September 2012, however, defendants defaulted on the loan by missing payments. When the default was not cured, LoanCare filed for foreclosure on June 17, 2013, having more than thirty days earlier sent defendants a Notice of Intention to Foreclose (NOI). On January 17, 2014, Judge Hector Velazquez entered an order for summary judgment, striking defendants' answer and defenses. On September 9, 2014, a final judgment of foreclosure was entered in favor of LoanCare.

On appeal, defendants raise the following points

POINT I THE [RESPONDENT] WAS NOT ENTITLED TO ENFORCE THE NOTE AND THE ASSIGNMENTS WERE INVALID

POINT II [RESPONDENT] DID NOT MEET THE PREFORECLOSURE REQUIREMENTS OF THE HUD REGULATIONS FOR FHA LOANS AND WAS PRECLUDED BY OPERATION OF LAW TO FORECLOSE ON APPELLANTS

POINT III THE [RESPONDENT] NEVER COMPLIED WITH THE REQUIREMENTS OF A VALID NOTICE OF INTENTION TO FORECLOSE AND NEVER SERVED A NOTICE ON APPELLANTS THAT CURED THE DEFECTS, THERE WAS NO ORDER ALLOWING THE SERVICE OF THE NOTICE

II.

We review a summary judgment decision de novo, which means that we apply the same standards used by the trial judge. W.J.A. v. D.A., 210 N.J. 229, 237 (2012). The question then is whether the evidence, when viewed in a light most favorable to the non-moving party, raises genuinely disputed issues of fact sufficient to warrant resolution by the trier of fact or whether the evidence is so one-sided that one party must prevail as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). Applying this standard, the record amply supports Judge Velazquez's finding that LoanCare had standing to bring this foreclosure action.

Defendants have not appealed Judge Velazquez's decision that they executed the note and mortgage and defaulted on payment, meaning that LoanCare established a prima facie right to foreclose. See Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952). Defendants appeal the decision that LoanCare had standing to foreclose because they contend the note's allonge1 was not "affixed." As such, defendants contend LoanCare was neither a "holder" or a "non-holder with the rights of a holder" under our Uniform Commercial Code (UCC). N.J.S.A. 12A:1-101 to 12-26.

We review relevant provisions of the UCC to give context to this issue. A party seeking to establish its right to foreclose on a mortgage must generally own or control the underlying debt. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 222 (App. Div. 2011); Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch. Div. 2010). A debt is evidenced by a promissory note, which is a negotiable instrument. N.J.S.A. 12A:3-104.

Article Three of the UCC addresses the enforceability of negotiable instruments. N.J.S.A. 12A:3-101 to -605. A negotiable instrument can be enforced by any person "entitled to enforce." N.J.S.A. 12A:3-301. Such persons can include a "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." Ibid.

A "holder" is defined by the UCC as a person "in possession of a negotiable instrument that is payable . . . to the bearer" or if payable to an identified person, the identified person "is the person in possession." N.J.S.A. 12A:1-201(b)(21)(a). LoanCare says it is the holder of defendants' note because it had possession of the note prior to filing the foreclosure complaint and because the allonge was indorsed in blank.

An indorsement means a signature "made on an instrument for the purpose of negotiating the instrument." N.J.S.A. 12A:3-204(a). "For the purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of the instrument." Ibid.

An indorsement in blank is an indorsement payable to "the bearer." N.J.S.A. 12A:3-205(b). "When indorsed in blank, an instrument becomes payable to the bearer and may be negotiated by transfer of possession alone . . . ." Ibid. Negotiation means "a transfer of possession . . . 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).

Defendants contend LoanCare is not a person entitled to enforce because the allonge was not "affixed" to the note. See N.J.S.A. 12A:3-204(a). We agree with Judge Velazquez, however, that LoanCare had standing to enforce this note. The allonge was indorsed in blank, meaning that it had become bearer paper and its transfer constituted negotiation. The allonge was included with the certified copy of the note. LoanCare certified it was in possession of the note prior to filing the foreclosure complaint. This allonge specified the names of the borrowers, the date the note was executed, the loan number, the address of the property that was the subject of the mortgage, the principle balance of the mortgage and the originating lender. Given this information, the risk of fraud was low. Indeed, defendants did not contend they were pursued by any other lenders.

We agree that these facts distinguish this case from Adams v. Madison Realty & Development, Inc., 853 F.2d 163 (3d Cir. 1988), relied on by defendants, where the indorsements were on separate sheets of paper that were loosely inserted within each note. In that case, utilizing an earlier version of the statute, the Third Circuit declined to accord holder in due course status to the purchaser because the allonge was not "firmly affixed" to the note.2 In the present appeal, there was no evidence the allonge was not attached to the note.

To foreclose, we have held that a plaintiff either must have possession of the promissory note or have been assigned the mortgage at the time it brought the original complaint. See Mitchell, supra, 422 N.J. Super. at 216. There was ample proof here to support the judge's decision that the mortgage was assigned to LoanCare and that the assignment predated filing of the foreclosure complaint, thus providing LoanCare with standing.

We agree with Judge Velazquez that the cited HUD regulations did not preclude entry of the final judgment of foreclosure. These regulations are not a legal prerequisite to foreclosure because they are discretionary and not mandatory. Heritage Bank, N.A. v. Ruh, 191 N.J. Super. 53, 66 (Ch. Div. 1983). Also, defendants made generalized conclusions that did not assert unconscionable or harsh conduct.

We find no error with the judge's decision as it related to compliance with the Fair Foreclosure Act. N.J.S.A. 2A:50-56(a). The NOI that was mailed to defendants referenced LoanCare and its address.

Affirmed.

1 An allonge is "a slip of paper sometimes attached to a negotiable instrument for the purpose of receiving . . . indorsements." Black's Law Dictionary 92 (10th ed. 2014).

2 We decline to address the issue raised for the first time on appeal regarding an alleged electronic signature on the allonge because defendants never raised this issue to the trial court. State v. Robinson, 200 N.J. 1, 20 (2009) (quotations omitted) ("[I]t is well-settled . . . that our appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available.").