CAPITALONE, N.A. v. JAMES I. PECK, IV

 

(NOTE: The status of this decision is Published.)

                   NOT FOR PUBLICATION WITHOUT THE
                  APPROVAL OF THE APPELLATE DIVISION


                                     SUPERIOR COURT OF NEW JERSEY
                                     APPELLATE DIVISION
                                     DOCKET NO. A-0582-16T4

CAPITAL ONE, N.A.,

     Plaintiff-Respondent,
                                         APPROVED FOR PUBLICATION
v.                                            June 18, 2018

JAMES I. PECK, IV,                         APPELLATE DIVISION

     Defendant-Appellant.
___________________________

         Argued April 25, 2018 – Decided June 18, 2018

         Before Judges Fuentes, Koblitz, and Manahan.

         On appeal from Superior Court of New Jersey,
         Chancery Division, Essex County, Docket No.
         F-005201-13.

         Nicolas A. Stratton argued the cause for
         appellant (Stratton Stepp, LLP, attorneys;
         Nicolas A. Stratton, on the brief).

         Danielle   Weslock   argued  the   cause  for
         respondent    (McCarter   &   English,   LLP,
         attorneys; Joseph Lubertazzi, Jr., of counsel
         and on the brief; Danielle Weslock, on the
         brief).

     The opinion of the court was delivered by

KOBLITZ, J.A.D.
      In this appeal    of an August 26, 2016 final residential

foreclosure judgment, defendant James I. Peck, IV1 contends that,

after the promissory note, without the mortgage, was sold to

Freddie Mac, and Capital One, N.A. (CONA) became the loan servicer

on behalf of Freddie Mac, CONA could not foreclose on his home

because it did not possess the note and a valid assignment of

mortgage at the time it filed the complaint.            He argues that only

Freddie Mac had standing to foreclose.        Although we agree that in

these unusual circumstances where one entity owns the note and

another the mortgage, both the note and a valid mortgage assignment

are   required   to   foreclose,   we    affirm    in   spite   of   certain

irregularities.

      Freddie Mac's form 10-K annual report pursuant to Section 13

or 15(d) of the Securities Exchange Act of 1934 provides the

following   information.       The       Federal   Home     Loan     Mortgage

Corporation, known as Freddie Mac, is a government sponsored

enterprise (GSE) chartered by Congress in 1970. Its public mission

is to provide liquidity, stability and affordability to the United

States housing market.       It does this primarily by purchasing

residential mortgage loans originated by lenders.               It does not




1
   Peck, who litigated this matter as a pro se attorney, died on
July 2, 2016.     We continue to refer to defendant as the party
in interest in this opinion.


                                     2                               A-0582-16T4
originate loans or lend money directly to mortgage borrowers.

United    States   Securities    and   Exchange       Commission,        Form   10-K,

"Federal           Home         Loan              Mortgage          Corporation,"

https://www.sec.gov/Archives/edgar/data/1026214/0001026214180000

20/a20174q10k.htm (last visited May 29, 2018).

     On March 10, 2005, defendant executed a promissory note to

Chevy Chase Bank, F.S.B., (CCB) which was secured by a residential

mortgage by Mortgage Electronic Registration Systems, Inc. (MERS),

for $258,750.
2 On July 28, 2005, CCB sold defendant's note to

Freddie    Mac,    but    retained   the       mortgage.     In   July    2009,   CCB

converted to a national bank and merged with CONA.                        Defendant

defaulted on the loan in 2010, and did not pay the mortgage or

taxes after that date.         The original mortgage states: "MERS is a

separate corporation that is acting solely as a nominee for

[l]ender and [l]ender's successors and assigns."                  MERS, which also

states in the "Assignment of Mortgage" that it is "acting solely

as nominee for [CCB], its successors and assigns," assigned the




2
   "MERS is a private corporation which administers a national
electronic registry that tracks the transfer of ownership
interests and servicing rights in mortgage loans. . . . MERS, as
nominee, does not have any real interest in the underlying debt,
or the mortgage which secured that debt. It acts simply as an
agent or 'straw man' for the lender." Bank of N.Y. v. Raftogianis,

418 N.J. Super. 323, 332, 347 (Ch. Div. 2010).


                                           3                                A-0582-16T4
mortgage to CONA on February 9, 2011, more than one year after CCB

merged into CONA.

     At least since July 15, 2009, defendant received repeated

notices that identified CONA as the servicer on the loan, although

Freddie Mac remained the investor.    Defendant also conceded that

he made payments to CONA.     In June 2012, the court dismissed

without prejudice an earlier foreclosure proceeding initiated by

CONA, F-003445-11, because CONA failed to comply with the court-

ordered deposition of an employee who could provide information

about possible mortgage irregularities.   CONA brought the original

note to court in that proceeding.        The note was subsequently

returned to Freddie Mac later in 2012.

     On February 15, 2013, CONA initiated the present foreclosure

proceedings.   The court dismissed the contesting answer on June

9, 2015, and referred the case to the Office of Foreclosure for

entry of final judgment as uncontested.     R. 4:64-1.   Defendant's

motion for reconsideration was denied on May 5, 2016 and his

subsequent motion for summary judgment was denied on November 25,

2016, after defendant's death.3   Defendant appeals from the entry

of final judgment arguing that CONA lacked standing to foreclose.




3
   Defendant apparently filed this final motion shortly before he
died.
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     Our review is de novo, applying the same legal standard as

the trial court.     Conley v. Guerrero, 
228 N.J. 339, 346 (2017).

Summary judgment must be granted "if the pleadings, depositions,

answers to interrogatories and admissions on file, together with

the affidavits, if any, show that there is no genuine issue as to

any material fact challenged and that the moving party is entitled

to a judgment or order as a matter of law."            Templo Fuente De Vida

Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, 
224 N.J. 189, 199

(2016) (quoting R. 4:46-2(c)). If all the contesting pleadings

have been stricken or otherwise deemed noncontesting, an action

to foreclose a mortgage is deemed uncontested.             R. 4:64-1(c)(3).

     Defendant argues that because "Freddie Mac is the owner of

[d]efendant's loan," it "is the only entity with the right to

enforce the mortgage."     He further argues that in order to validly

assign a mortgage, the "assignment must contain evidence of the

intent to transfer one's rights."            (quoting K. Woodmere Assocs.,

LP v. Menk Corp., 
316 N.J. Super. 306, 314 (App. Div. 1998)).

     The   court   found   that   the       material   facts   in   controversy

involved standing, and were limited to possession of the original

note, endorsement of the note, the transfer of the note from CCB

to Freddie Mac, and CONA's right to enforce the note.                The trial

court concluded, "[I]t's clear . . . that a bearer of the note

endorsed in blank is the holder of the note [] and entitled to


                                        5                              A-0582-16T4
enforce     the     note     pursuant        to    N.J.S.A.       12A:3-301."

Unquestionably, CONA had possession of the original note during

the earlier foreclosure hearing in 2012.

     In Mitchell, we held that a plaintiff may establish standing

either through possession of the note or as an assignee under


N.J.S.A. 46:9-9 "if it . . . presented an authenticated assignment

indicating that it was assigned the note before it filed the

original complaint."       Deutsche Bank Nat'l Trust Co. v. Mitchell,


422 N.J. Super. 214, 224 (App. Div. 2011).             We emphasized this

holding in Deutsche Bank Tr. Co. Ams. v. Angeles, 
428 N.J. Super.
 315, 318 (App. Div. 2012).         Thus, a plaintiff need not actually

possess the original note at the time of filing in order to have

standing to file a foreclosure complaint.             Mitchell, 
422 N.J.

Super. at 225.4

     In   both    Mitchell   and   Angeles    we   dealt   with    the   usual

foreclosure situation where one entity owns both the note and the

mortgage.   As Judge William C. Todd, III said: "It is difficult

to imagine circumstances where one would want to hold a mortgage,




4
  Effective February 18, 2016, three years after the commencement
of this foreclosure action, a new statute required that "[o]nly
the established holder of a mortgage shall take action to foreclose
a mortgage." 
N.J.S.A. 46:18-13(1)(a). Thus to have standing to
foreclose, as of the effective date of this statute, a plaintiff
must have an original mortgage or recorded assignment, or be found
to be the record mortgage holder in a civil action.        
N.J.S.A.
46:18-13(1)(b).
                                     6                               A-0582-16T4
without having the right to act on the underlying debt.       By the

same token, there is no technical reason why the interests could

not be separated in one way or another."     Raftogianis, 
418 N.J.

Super. at 345.   Here we have such a situation: where Freddie Mac

owns the note and CCB, now merged into CONA, retained the mortgage.

To preclude the possibility of one entity foreclosing on the home

while the other enforces the note, we now hold that when the note

is separated from the mortgage, the plaintiff in a foreclosure

action must demonstrate both possession of the note and a valid

mortgage assignment prior to filing the complaint.

     Defendant concedes that Freddie Mac, as owner of the note,

had the right to foreclose on defendant's home.     Defendant argues,

however, that the mortgage was not legally retained by CCB, but

followed the note by force of law.    We reject that analysis.     The

issue is whether CONA, both the successor owner and assignee of

the mortgage, and the loan servicer, had the right to foreclose.

"Foreclosures must normally be processed or litigated in the

[s]ervicer’s   name."   Freddie   Mac,   Bulletin   Number   2013-22,

http://www.freddiemac.com/singlefamily/guide/bulletins/pdf/bll13

22.pdf (October 18, 2013).    Freddie Mac's requirement that the

servicer of the loan litigate a foreclosure in the servicer's name

supports CONA's assertion regarding its authority to bring a

foreclosure action.


                                  7                          A-0582-16T4
       Standing   is   not   a   jurisdictional   issue   in   New   Jersey.

Deutsche Bank Nat'l Tr. Co. v. Russo, 
429 N.J. Super. 91, 101

(App. Div. 2012).       Depending on the equities of the particular

proceeding, a foreclosure judgment may not be reversed, even if

some irregularities in the foreclosure process are demonstrated

by the defendant.        See Angeles, 
428 N.J. Super. at 320 ("In

foreclosure matters, equity must be applied to plaintiffs as well

as defendants.").

       Here, MERS as nominee for CCB and its "successors" did assign

the mortgage to CONA, a formality because CONA is a successor to

CCB.    Thus, CONA had both the original note and an assignment

before filing this foreclosure complaint.         The twist here is that

CONA returned the original note to Freddie Mac, and obtained the

assignment from MERS as nominee of CCB after CCB merged with CONA.

       Given that defendant was provided more than sufficient notice

that CONA was the servicer for Freddie Mac, given that Freddie Mac

is a GSE that publicly declares its policy to foreclose through

its servicers, and given that CONA did possess the note at an

earlier foreclosure proceeding as well as an assignment from MERS,

we do not find the irregularities here sufficient to reverse the

foreclosure judgment. We do not intend by this decision to approve

the way this foreclosure was prosecuted.           The note should have




                                      8                              A-0582-16T4
been in CONA's possession at the time it filed this foreclosure

complaint.

    Affirmed.




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