HSBC BANK USA v. THOMAS BRIAN MANN

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

HSBC BANK USA, NATIONAL ASSOCIATION

AS TRUSTEE ON BEHALF OF THE HOLDERS

OF THE OPTEMAC ASSET-BACKED PASS-

THROUGH CERTIFICATES SERIES 2006-2,

Plaintiff-Respondent,

v.

THOMAS BRIAN MANN,

Defendant-Appellant,

and

V. JAMES MANN, INDIVIDUALLY AND

AS EXECUTOR OF THE ESTATE OF

VINCENT J. MANN; ELIZABETH JANE

SKELETON; THE STATE OF NEW JERSEY; MRS.

MANN, WIFE OF THOMAS BRIAN MANN; UNITED

STATES OF AMERICA,

Defendants.

October 27, 2015

Submitted October 5, 2015 - Decided

Before Judges Maven and Carroll.

On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. F-21680-12.

Andy Winchell, attorney for appellant.

Fein, Such, Kahn & Shepard, attorneys for respondent (Ben Z. Raindorf, on the brief).

PER CURIAM

The sole issue presented in this residential foreclosure case is whether the trial court erred in denying defendant Thomas Brian Mann's motion to vacate default. The court determined that because defendant was unable to show the existence of a meritorious defense, he failed to satisfy the liberal standard necessary to set aside a default under Rule 4:43-3. Defendant appeals, asserting that he was never properly served with the foreclosure complaint, that plaintiff lacked standing to bring this action and failed to comply with the Fair Foreclosure Act, N.J.S.A. 2A:50-53 to -68 (FFA), and that the loan was predatory. We have considered the applicable law and the record and affirm.

The facts are straightforward and undisputed. On April 21, 2006, defendant borrowed $800,000 from Worldwide Financial Resources, Inc. (Worldwide), and executed a note and mortgage securing his residence in West Orange. The mortgage was duly recorded on May 25, 2006, in the Office of the Clerk of Essex County. More than three years later defendant failed to make the installment payment due on November 1, 2009, and all payments thereafter, and the loan went into default.

On December 4, 2009, the loan servicer sent a notice of intent to foreclose (NOI) to the property address. On February 12, 2010, Worldwide assigned the mortgage and note to plaintiff HSBC Bank U.S.A., National Association as trustee on behalf of the holders of the OPTEMAC Asset-Backed Pass-Through Certificates, Series 2006-2. On March 5, 2010, the assignment was duly recorded.

On October 1, 2012, plaintiff filed a foreclosure complaint, which recited the aforementioned history. Plaintiff then unsuccessfully attempted to serve defendant with the complaint at the property address on October 4, 5, 6, 7, 10, and 11. In a Certification of Inquiry dated October 12, plaintiff's counsel detailed the numerous efforts made to ascertain defendant's whereabouts. Through multiple sources, counsel confirmed that defendant resided at the mortgaged premises. Plaintiff then served defendant with the summons and complaint by both regular and certified mail, return receipt requested, on October 12, 2012. The certified mail was returned "unclaimed," but the regular mail was not returned.

Defendant did not file an answer or respond to the complaint. Default was entered by the court on January 4, 2013. On February 8, 2013, plaintiff's counsel sent a notice advising defendant of his right to cure the mortgage default and that if he failed to do so plaintiff intended to apply for final judgment of foreclosure in fourteen days. Defendant took no action, and on March 7, 2013, plaintiff moved to enter final judgment, again serving defendant at the mortgaged premises.

Before judgment was entered, on March 27, 2013, defendant, represented by counsel, moved to vacate default. Defendant certified that he was "never served with any notices or papers with respect to this action" and that he "live[s] alone and often [is] not home during the day and early evening hours." In a later reply certification defendant qualified those statements, indicating that he "never was served with any notices or papers . . . prior to February 2013" and that he "[did] not recall ever receiving the summons and complaint by mail." In addition, counsel submitted a brief in which he argued that defendant had "potential meritorious defenses" to the foreclosure action, including (1) plaintiff was misnamed in the complaint; (2) plaintiff failed to comply with the FFA, and (3) the mortgage loan was predatory.

Following oral argument on May 10, 2013, Judge Kenneth S. Levy denied defendant's motion for the reasons stated orally on the record. In his comprehensive decision, Judge Levy recognized that "[a]n application to vacate a default is required to be viewed with liberality" under Rule 4:43-3. Citing O'Connor v. Altus, 67 N.J. 106, 129 (1975), the judge nevertheless noted that, "before a default is set aside, defendant must at the very least show the presence of a meritorious defense worthy of a judicial determination[.]"

Judge Levy then went on to carefully analyze defendant's contention that he had not been properly served and each of his claimed meritorious defenses. The judge first rejected defendant's argument that substituted service was improper, finding the explanation in his certification "vague." The judge noted the substantial efforts plaintiff undertook to locate defendant and serve him personally. Judge Levy concluded

Here plaintiff made a reasonable and good faith attempt to personally serve defendant including six attempts at personal service and numerous inquiries as to his whereabout[s] after confirmation that defendant resided at the premises[.] [S]ervice[] by mail in accordance with [R]ule 4:4-3(a) was made. Therefore, defendant's lack [of] service argument as a defense fails.

The court then considered defendant's argument that plaintiff lacked standing to bring the foreclosure action. This argument was grounded on defendant's dual contention that "the plaintiff trust is misnamed and [] plaintiff fails to recite the transactions that brought the subject loan into the plaintiff trust." Rejecting this argument, the court noted that the mortgage was assigned to plaintiff before the complaint was filed. The judge found "[t]here is no misnaming of the plaintiff because the mortgage was assigned to HSBC Bank U.S.A., N.A. as trustee on behalf of [the] holder of the Optemac Asset-Backed Pass-Through Certificate Series 2006-2 which is the named plaintiff." The court further found that defendant, as a non-party to the trust's Pooling and Service Agreement (PSA), lacked standing to assert any breach of the PSA.

Next, Judge Levy found that the 2009 NOI, although providing defendant with key loan information such as name, address and contact information, technically violated the FFA because it referenced the loan servicer rather than the lender. Citing U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449 (2012), the court determined that

the technical [FFA] violation . . . [is] not a meritorious defense within the [R]ule 4:43 good cause standard. However, in accordance with Guillaume, this [c]ourt will require plaintiff to serve a corrected [NOI] giving defendant an additional [thirty] days - - in accordance with the timing in . . . the [statute].

Finally, the court rejected defendant's predatory loan defense. Specifically, the judge determined that this was proffered "without any detail or particularity and is thus insufficient for the [c]ourt to consider as a meritorious defense."

On August 27, 2014, the court entered final judgment of foreclosure. This appeal followed. On appeal, defendant raises the same arguments he raised before Judge Levy.

Pursuant to Rule4:43-3 a court may vacate entry of default upon "good cause shown." "[T]he requirements for setting aside a default under Rule 4:43-3 are less stringent than . . . those for setting aside an entry of default judgment under Rule 4:50-1." N.J. Mfrs. Ins. Co. v. Prestige Health Grp., LLC, 406 N.J. Super. 354, 360 (App. Div.)(citation omitted), certif. denied, 199 N.J. 543 (2009). Trial courts should view motions to vacate "with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Marder v. Realty Constr. Co., 84 N.J. Super. 313, 319 (App. Div.)(addressing motion to vacate default judgment), aff'd, 43 N.J. 508 (1964).

"A mere showing of good cause is required for setting aside an entry of default." N.J. Mfrs. Ins. Co., supra, 406 N.J. Super. at 360. In considering whether good cause exists, courts "typically cite three factors . . . [w]hether the default was willful or culpable; [w]hether granting relief from the default would prejudice the opposing party; and [w]hether the defaulting party has a meritorious defense." James W. Moore, et al., 10 Moore's Federal Practice - Civil 55.70[2][a] (3d ed. 2013) (reviewing comparable Fed. R. Civ. P. 55(c), which states "[t]he court may set aside an entry of default for good cause").

In particular, "the showing of a meritorious defense is a traditional element necessary for setting aside both a default and a default judgment[.]" Pressler & Verniero, Current N.J. Court Rules, comment on R. 4:43-3 (2015). As with a motion to vacate a default judgment, there is no point in setting aside an entry of default 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)). We have noted that

This is especially so in a foreclosure case where 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 and Allied Indus. Pension Fund v. Baron Holding Corp., 224 N.J. Super. 485, 488 (App. Div. 1988).]

A trial court's ruling on a motion to vacate a default will not be disturbed absent an abuse of discretion. Cf. Guillaume, 209 N.J. at 467 (motion to vacate default judgment under Rule 4:50-1). In our review, we do not "decide whether the trial court took the wisest course, or even the better course, since to do so would merely be to substitute our judgment for that of the lower court. The question is only whether the trial judge pursued a manifestly unjust course." Gittleman v. Cent. Jersey Bank & Trust Co., 103 N.J. Super.175, 179 (App. Div. 1967), rev'd on other grounds, 52 N.J. 503 (1968).

We have considered defendant's arguments in light of the record and applicable legal principles and conclude that they are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We discern no abuse of discretion in this case, and affirm substantially for the reasons Judge Levy expressed in his oral opinion. We add only the following comments.

In his certifications, defendant did not deny signing the loan documents or defaulting on the payments due under the mortgage loan. Where defendant does not challenge the execution, recording, and nonpayment of the mortgage, a prima facie right to foreclose is established. See Thorpe v. Floremore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952). See also Great Falls Bank v. Pardo, 263 N.J. Super. 388, 394 (Ch. Div. 1993), aff'd, 273 N.J. Super. 542 (App. Div. 1994); Central Nat'l Bank v. Stonebridge Ltd., 185 N.J. Super. 289, 302 (Ch. Div. 1982). Additionally, defendant did not certify that the loan was "predatory" or in any way unfair.

With respect to his claim regarding service, defendant also did not deny residing at the mortgaged premises. Plaintiff, through its thorough investigation, clearly established that defendant resided at the property and made numerous attempts to serve him personally at that address. We therefore conclude that plaintiff validly served defendant with the complaint by certified and regular mail in accordance with Rule 4:4-3(a). Defendant's statement that he "did not recall" receiving the mailed service is hardly persuasive and insufficient to establish that service was ineffective or improper.

We discern no merit to defendant's standing argument. Plaintiff presented evidence of the assignment of the mortgage along with its recording before the foreclosure complaint was filed, satisfying the requirement that "either possession of the note or an assignment of the mortgage that predated the original complaint confer[s] standing." Deutsche Bank Trust Co. Ams. v. Angeles, 428 N.J. Super 315, 318 (App. Div. 2012). Although defendant claims confusion as to the proper identity of the trust involved, the assignment clearly referenced plaintiff as assignee. Notably, defendant did not certify that any entity other than plaintiff sought repayment of the mortgage loan.

We are also unpersuaded that defendant has standing to assert a breach of the PSA, an agreement to which he was not a party, and to which he is not a third-party beneficiary. SeeCorreia v. Deutsche Bank Nat'l Trust Co., 452 B.R. 319, 324-25 (B.A.P. 1st Cir. 2011) (stating that debtors lacked standing to object to breaches of PSA because they were neither parties nor third-party beneficiaries); Rajamin v. Deutsche Bank Nat'l Trust Co., 757 F.3d 79, 88-90 (2d Cir. 2014) (holding that mortgagors lacked standing to complain of violation of the securitization trust agreement, and concluding that under 7-2.4 of New York's Estates, Powers and Trusts Law (EPTL),1a trustee's unauthorized

acts are not void, but voidable only at the instance of trust beneficiaries, which are the certificate-holders, not the mortgagors); Flores v. EMC Mortg. Co., 997 F. Supp. 2d 1088, 1104-05 (E.D. Cal. 2014) (stating that borrowers lacked standing to pursue claims arising from securitization agreement); Jenkins v. JP Morgan Chase Bank, NA, 156 Cal. Rptr. 3d 912, 927 (Ct. App. 2013) (stating that borrower "lacks standing to enforce . . . the investment trust's pooling and servicing agreement").

Finally, dismissal of a foreclosure complaint is not the exclusive remedy under the FFA where the NOI improperly references the loan servicer rather than the mortgage lender. Guillaume, supra, 209 N.J. at 471. Here, Judge Levy properly exercised his discretion by ordering plaintiff to serve a corrected NOI, thus affording defendant an additional thirty days to cure the loan default. Defendant did not do so, and final judgment was thereafter entered in plaintiff's favor.

In summary, we conclude that defendant failed to advance a meritorious defense sufficient to negate plaintiff's prima facie right to foreclose. Accordingly, Judge Levy properly exercised his discretion in denying defendant relief.

Affirmed.

1 EPTL 7-2.4 states: "If the trust is expressed in the instrument creating the estate of the trustee, every sale, conveyance or other act of the trustee in contravention of the trust, except as authorized by this article and by any other provision of law, is void."