NICHOLAS C. SPATAFORE v. WELLS FARGO BANK, N.A.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-01

A-4265-13T2

NICHOLAS C. SPATAFORE,

Plaintiff-Appellant,

v.

WELLS FARGO BANK, N.A.,

Defendant-Respondent.

___________________________________

WELLS FARGO BANK, N.A.,

Plaintiff-Respondent,

v.

NICHOLAS C. SPATAFORE,

Defendant-Appellant.

____________________________________

September 14, 2016

Argued April 6, 2014 Decided

Before Judges Accurso and Suter.

On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-01523-13 and Chancery Division, Gloucester County, Docket No. F-018242-12.

Nicholas C. Spatafore, appellant, argued the cause pro se.

Siobhan Anne Nolan argued the cause for respondent (Reed Smith, attorneys; Henry F. Reichner, of counsel and on the briefs; Ms. Nolan and Deepa J. Zavatsky, on the briefs).

PER CURIAM

In these back-to-back appeals that we have consolidated into one opinion, Nicholas C. Spatafore (Spatafore) appeals a final judgment of foreclosure and an order dismissing his Law Division complaint against Wells Fargo Bank, N.A. (Wells Fargo). We affirm both decisions.

I.

In October 2007, Spatafore executed a note for $248,000 and a mortgage with World Savings Bank, FSB to refinance a residence. Thereafter, World Savings Bank, FSB changed its name to Wachovia Mortgage FSB and then merged with Wells Fargo.

In February 2011, Wells Fargo increased Spatafore's monthly mortgage payment to $3,044.80 because it advanced $11,645.46 for property taxes that Spatafore did not pay. Spatafore did not remit the new monthly amount. Instead, beginning in April 2011, he made partial payments which, because they did not satisfy the monthly obligation, were placed by Wells Fargo in a suspense account2 until that account accumulated sufficient funds to satisfy a full payment. He paid the mortgage for the months of April and May 2011 in this manner, but defaulted on the loan as of June 1, 2011 by failing to make any more monthly payments. The money in the suspense account remained there until it was credited to him in the final judgment of foreclosure. On October 19, 2011, Spatafore was notified $13,242.71 was required to reinstate the loan.

Spatafore made a partial payment of $73.32 on October 21, 2011, which was placed in the suspense account. On October 29, 2011, with a letter to Wells Fargo's Cashier's Department, Spatafore made one final partial payment of $135 by money order which included the notation "full payment for loan [account number]." Wells Fargo cashed the money order, placed that amount in the suspense account, which brought the total to $334.10. Spatafore contends the payment of $135 constituted an accord and satisfaction of the $248,000 mortgage loan.

Thereafter, Wells Fargo filed a complaint for foreclosure, which Spatafore answered. In ruling on Wells Fargo's summary judgment motion in February 2013, Judge Anne McDonnell rejected Spatafore's accord and satisfaction defense. Citing to the definition of "good faith" in New Jersey's Uniform Commercial Code (UCC), N.J.S.A. 12A:1-101 to -12-26, the court found "[a] $135 check with the [i]ndorsement on the back [saying] that it's in full satisfaction of the loan, [where] the demand . . . to cure the default is $13,242.71 is not in any way good faith and fair dealing." Further, because Spatafore did not dispute he was a member of a class action involving "pick-a-payment loans" and had accepted settlement3 of those claims, he thereby "waived any of the defenses with respect to the origin of . . . the loan documents and certain aspects of consumer fraud allegations." The judge asked Wells Fargo to supply the loan's payment record because Spatafore claimed improper credits had placed the loan in default status; she adjourned the summary judgment motion.

Wells Fargo supplied the payment record in a letter dated February 27, 2013. Spatafore responded that the use of a suspense account to hold money was a "grave legal matter" and in "violation of the law and of the legal agreement."

On March 22, 2013, the judge granted Wells Fargo's motion for summary judgment because Spatafore had accepted the class action settlement and cashed the check. The court found no merit to Spatafore's argument that Wells Fargo "[should] not have paid the property insurance . . . upon review of [Wells Fargo's] payment record." The final judgment of foreclosure was entered on April 4, 2014, over Spatafore's various objections, including a motion for reconsideration.

On October 30, 2013, while the request to enter a final judgment of foreclosure was pending, Spatafore filed a complaint against Wells Fargo in the Law Division, claiming use of the suspense account breached the loan documents, the UCC and New Jersey's Banking Act, N.J.S.A. 17:9A-1 to - 467. He sought damages and the forfeiture of all interest on the note.

On January 31, 2014, Judge Eugene McCaffrey, Jr., dismissed the complaint under the "entire controversy doctrine" because claims about the amount due on the loan had been raised and decided in the foreclosure case. Also, because the suspense account issue had been raised in the foreclosure case, the doctrines of collateral estoppel and res judicata required dismissal.

Spatafore appeals the final judgment of foreclosure claiming Wells Fargo violated the National Bank Act, 12 U.S.C.A. 85, and the Consumer Fraud Act, N.J.S.A. 56:8-2, by charging usurious interest. He also asserts there was accord and satisfaction reached when the $135 money order was cashed.

Spatafore separately appeals the dismissal of the Law Division action, claiming it was error to dismiss the case; that the class action settlement did not bar his action because suspense accounts were not included in that settlement; that Wells Fargo violated the National Bank Act by charging usurious interest and that Wells Fargo violated the Consumer Fraud Act.

II.

We review an order for summary judgment using the same standard that governs the trial court. Murray v. Plainfield Rescue Squad, 210 N.J. 581, 584 (2012). We consider "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 536 (1995)).

The trial court did not err by rejecting Spatafore's

affirmative defense of an accord and satisfaction. Under the

UCC, an accord and satisfaction is proven,

(a) [i]f a person against whom a claim is asserted proves that that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, the amount of the claim was unliquidated or subject to a bona fide dispute, and the claimant obtained payment of the instrument, . . . .

[N.J.S.A. 12A:3-311(a).]

An accord and satisfaction requires a clear manifestation that both the debtor and the creditor intend the payment to be in full satisfaction of the entire indebtedness. Zeller v. Markson Rosenthal & Co., 299 N.J. Super. 461, 463 (App. Div. 1997). It arises only where both parties intend for a payment to terminate a controversy which previously existed between them. Louis Schlesinger Co. v. Kresge Found., 388 F.2d 208, 210 (3d Cir. 1968). Spatafore had the burden to prove this affirmative defense. Roberts v. Rich Foods, Inc., 139 N.J. 365, 378 (1995).

The record showed no manifestation that Wells Fargo intended the $135 money order to satisfy Spatafore's outstanding debt. The pre-foreclosure reinstatement quote advised Spataforethat the $13,242.71 was needed to bring the note current and if "lesser funds are received, they may be accepted, but will be accepted only as a partial payment and will not be sufficient to cure the default." There was no evidence the parties negotiatedthe terms of a settlement. Spatafore did not offer anexplanation why Wells Fargo would accept $135 as full payment for the note.

We recognize that

in those cases in which a check bears a notation indicating that it is being tendered in full satisfaction of the disputed debt, we impute to the creditor an intent to be bound to the amount of the check if the creditor deposits the check for collection, notwithstanding the deposit is made "under protest."

[Zeller, supra, 299 N.J. Super.at 463-64.]

However, we agree with Judge McDonnell the money order was not tendered by Spatafore in good faith satisfaction of the claim. "Good faith" under the UCC is defined as "not only honesty in fact, but the observance of reasonable commercial standards of fair dealing." N.J.S.A. 12A:3-311, cmt. 4. Actions are not taken in good faith if they "have the effect of destroying orinjuring the right of the other party to receive the benefits of the contract." Brunswick Hill Racket Club v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). Spatafore intended to impair Wells Fargo's ability to foreclose on the mortgage by sending the money order with the notation; in light of the amount outstanding, it was not offered honestly to resolve the debt. Spatafore showed no evidence contrary to Wells Fargo's claim it paid the property taxes on Spatafore's behalf and that it continued to require payment of the note. Thus, there was ample support for the conclusion Spatafore did not prove an accord and satisfaction.

We are satisfied there was no genuine issue of fact raised about the loan's payment record or suspense account that wouldhave precluded summary judgment. Spatafore contended Wells Fargo charged usurious interest by placing his partial payments in a suspense account instead of applying them to the loan's principal. Although Spatafore relies for support on sections 85 and 86 of the National Bank Act, 12 U.S.C.A 85-86, those sections are not applicable in these circumstances. "Sections 85 and 86 serve distinct purposes. The former sets forth the substantive limits on the rates of interest that national banks may charge. The latter sets forth the elements of a usury claim against a national bank . . . ." Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 9, 123 S. Ct. 2058, 2063, 156 L. Ed. 2d 1, 9 (2003). A national bank may charge interest as allowed by the State where the bank is located. Marquette Nat'l Bank v. First of Omaha Serv. Corp., 439 U.S. 299, 308, 99 S. Ct. 540, 545, 58 L. Ed. 534, 542 (1978). As a South Dakota bank, Spatafore did not dispute Wells Fargo's assertion the State lacked a maximum interest rate if the rate were established by written agreement. S.D. Codified Laws, 54-3-1.1.

Spatafore's mortgage loan included an agreed upon 7.4% fixed interest rate. Spatafore never asserted this rate was usurious.

It was Spatafore's actions in failing to pay property taxes that raised his monthly payment and then his action in making partial payments that initiated use of the suspense account. Under the note, Spatafore defaulted because he did "not pay the full amount of each monthly payment on the date it [was] due, or . . . perform any of [his] promises or agreements under [the] Note or the [Mortgage.]" Paragraph 2(A) of the Mortgage required Spatafore to be responsible for paying all taxes and hazard insurance premiums on the property. Paragraph 7 of the Mortgage established Wells Fargo's ability to protect its rights in the subject property if Spatafore failed to perform his obligations under the agreement, and it obligated him to pay Wells Fargo any amounts it advanced to protect its rights.

Spatafore never showed evidence he paid property taxes or that Wells Fargo did not. The pre-foreclosure reinstatement quote advised Spatafore that partial payments would not be applied to the outstanding debt. The record did not show evidence that Wells Fargo charged or made interest on the funds held in the suspense account. Spatafore failed to account for costs that Wells Fargo incurred when it did not timely receive monies that were due under the loan. The funds in the suspense account were not held indefinitely, but credited to Spatafore when the final judgment amount was calculated. Use of the suspense account was not inconsistent with regulations promulgated by the Consumer Financial Protection Bureau. See 12 C.F.R. 1026.41(d)(5) (2013) (setting forth the content of statements where partial payments are placed in a suspense or unapplied fund account).

The Consumer Fraud Act, N.J.S.A. 56:8-2, afforded no defense against foreclosure to Spatafore. To successfully plead fraud under the CFA requires proof of (1) an unlawful practice by the the accused; (2) an ascertainable loss by the accuser; and (3) a causal nexus between the first two elements. N.J. Citizen Action v. Schering-Plough Corp., 367 N.J. Super. 8, 13 (App. Div.), certif. denied, 178 N.J. 249 (2003). There was nothing commercially unconscionable, however, about a lender, which, having advanced thousands of dollars to pay property taxes that the homeowner has not paid, then places partial payments in a suspense account to preserve them for the homeowner instead of applying them against the property tax advances.4 Spatafore also did not show any ascertainable loss given his own failure to pay the note as required.

III.

Spatafore appeals the order of Judge Eugene McCaffrey that dismissed the Law Division action against Wells Fargo. The judge based the dismissal on the entire controversy doctrine, collateral estoppel and res judicata. We see no error in the dismissal.

We review a motion to dismiss de novo with no deference to the determination of the trial court. J.D. ex rel. Scipio-Derrick v. Davy, 415 N.J. Super. 375, 398 (App. Div. 2010) (citing Cty. of Warren v. State, 409 N.J. Super. 495, 504 (App. Div. 2009)). That said, we agree with Judge McCaffrey that the Law Division action raised claims that were made or could have been made in defense of the foreclosure. Spatafore's answer to the foreclosure complaint claimed that the interest and principal on the loan were not properly calculated; that payments were not fully accounted; that Wells Fargo disregarded and violated the terms of the contract; and that Wells Fargo changed payment terms. Then, after the loan history was provided to the court and prior to summary judgment, Spatafore contended that use of a suspense account to hold partial payments was a "grave legal matter" and that this violated the law and his contract. He unsuccessfully raised the same issues again on reconsideration. Whether we conclude that the suspense account issue was res judicata, because it was the same issue decided averse to Spatafore in the foreclosure action involving the same parties, see Nolan v. First Colony Life Ins. Co., 345 N.J. Super. 142, 152-53 (App. Div. 2001); or barred by collateral estoppel because the same issue was raised in both cases, see Bondi v. Citigroup, Inc., 423 N.J. Super. 377, 423 (App. Div. 2011), certif. denied, 210 N.J. 478 (2012); or was subject to dismissal under the entire controversy doctrine because all aspects of the claim could have been raised in the foreclosure case, see Hobart Bros. Co. v. Nat'l Union Fire Ins. Co., 354 N.J. Super. 229, 240 (App. Div.), certif. denied, 175 N.J. 170 (2002), it is clear that dismissal of the Law Division complaint was fully warranted under any of these legal concepts.

We conclude that any further arguments made in these appeals are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

Affirmed.

1 These are back-to-back appeals consolidated for the purpose of this opinion.

2 "A suspense account is a place to hold payments until enough funds are accumulated to satisfy one monthly payment in full." Payne v. Mortg. Elec. Registration Sys., Inc., 387 B.R. 614, 624 n.8 (Bankr. D. Kan. 2008).

3 The settlement agreement was entered in a case called In Re Wachovia Corp. "Pick-a-Payment" Mortg. Mktg. and Sales Practices Litig., No. M:09-CV-2015-JF (N.D. Cal. Dec. 16, 2010) (slip op. at 2-4), and settled "alleged claims" as defined therein involving three classes of claimants.

4 The loan documents described the order in which the lender would apply monies received with payment to principal being ranked sixth out of seventh in priority, meaning that payments were first applied to prepayment charges then to advances then to shortages in the escrow, all before their application to principal.