INDYMAC VENTURE, LLC v. ERNEST HEMSCHOT III

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-04738-14T2

INDYMAC VENTURE, LLC,

Plaintiff-Respondent,

v.

ERNEST HEMSCHOT III,

Defendant-Appellant.

_________________________________

November 9, 2016

Submitted October 20, 2016 Decided

Before Judges Lihotz, Hoffman and Whipple.

On appeal from Superior Court of New Jersey, Chancery Division, Sussex County, Docket No. F-20281-10.

Ernest Hemschot III, appellant pro se.

Powers Kirn, LLC, attorneys for respondent (Katherine Knowlton Lopez, on the brief).

PER CURIAM

On December 30, 2013, the Chancery Division granted summary judgment to plaintiff IndyMac Ventures, LLC, on its foreclosure complaint against defendant Ernest Hemschot. Defendant argues the trial court improperly granted summary judgment because plaintiff failed to send a notice of intention to foreclose, as required by the Fair Foreclosure Act (the Act).1 This claim lacks merit as the trial court correctly held the Act does not apply to defendant's mortgage. Defendant also contends the trial court erred in rejecting his equitable defenses. This claim also lacks merit, as we find no support for this assertion in the record. Finally, defendant challenges the amount of the court's final judgment based upon a mathematical error. Here, defendant's argument finds support in the record. We therefore affirm the order granting summary judgment, but remand to the trial court to amend the amount of its final judgment from $319,093.47 to $309,118.59.

I.

We derive these facts from the record. On January 11, 2008, defendant executed and delivered a $228,750 note and residential construction loan addendum to IndyMac Bank, F.S.B., which assigned the note to plaintiff the same day. The addendum stated plaintiff

may declare the entire unpaid principal balance and accrued interest due and payable under the terms of the Note, as amended by this Addendum if any payment of interest is not made when due during the Construction Period or if default should occur under any covenant, condition or agreement contained in the Loan Documents.

Defendant also executed a loan agreement, stating the "Construction Period" was from January 11, 2008 to February 1, 2009. The agreement stated the borrower would make the "the Property . . . ready for occupancy" and "give notice to the Lender that construction has been completed." The agreement also stated,

if default occurs in observance and performance of any of the covenants, agreements, or obligations of Borrower hereunder or under the Security Instrument or the Note secured hereby; or under any other documents entered in connection with the Loan; . . . all obligation on the part of Lender to make any further advance hereunder or under the Security Instrument shall, at Lender's election, cease and all amounts previously advanced shall, at the option of the Lender, become due and payable under the terms of the Note.

To secure the note, defendant also signed and delivered a mortgage and residential construction loan rider with security agreement and financing statement to IndyMac Bank, F.S.B., for defendant's property in Newton. The mortgage stated, "Borrower shall occupy, establish, and use the Property as Borrower's principal residence within 60 days after the execution of this Security Instrument and shall continue to occupy the Property as Borrower's principal residence for at least one year after the date of occupancy . . . ." The rider further provided

In the case of breach by Borrower of the covenants and conditions of the Agreement, Lender, at Lender's option, with or without entry upon the Property, (a) may invoke any of the rights or remedies provided in the Agreement, or (b) may accelerate the sums secured by this Security Instrument.

A construction official for Newton issued a certificate of continued occupancy to defendant on November 12, 2008. The certificate "serves notice that based on a general inspection of the visible parts of the building there are no imminent hazards and the building is approved for continued occupancy." Defendant certified he sent this certificate to plaintiff, along with "[a]ll payments throughout the initial phase." He also certified he completed the renovations in December 2008 and notified plaintiff of the completion.

Around this time, plaintiff sent defendant a letter and loan modification documents. The letter stated defendant had to execute and return the documents by February 4, 2009, or defendant's construction loan would not "roll into the permanent phase." The loan modification had a principal of $228,750, which is the principal of the original note defendant signed on January 11, 2008.

Defendant failed to sign and return the loan modification documents, claiming "[t]heir financial calculations were not accurate, and I was being charged too much." Defendant asserted plaintiff presented an incorrect total amount because its website showed its initial disbursement of $133,065 and additional disbursements to defendant of $79,744, which together total $212,809. Defendant certified plaintiff could not explain its calculations; nevertheless, he offered to sign the loan modification documents if plaintiff amended them to agree with his calculation of $212,809, but plaintiff refused. Plaintiff also refused any additional loan payments. Defendant certified he moved into the house in February 2009.2 On June 24, 2009, IndyMac Bank, F.S.B., assigned the mortgage to plaintiff.

On July 24, 2009, plaintiff sent defendant a letter via first class mail, stating he had defaulted on his loan because (1) he had not completed the property for occupancy by the required completion date, (2) he had not paid $4,473.03 of interest, late charges, and costs, and (3) he had allowed $1,492.51 in mechanics and tax liens to encumber the property. Defendant does not claim he attempted to cure any of these defaults.

Plaintiff filed its foreclosure complaint against defendant on March 31, 2010. On May 10, 2011, defendant moved to dismiss plaintiff's complaint, claiming plaintiff lacked standing to file its complaint because it failed to serve him "with a written notice of intent to foreclose as mandated by [the Act]." On July 13, 2011, the court denied defendant's motion, concluding the Act did not apply to defendant's construction mortgage because it was not a "residential mortgage." Therefore, plaintiff was not required to send defendant a notice of intention to foreclose.

On June 29, 2012, plaintiff sent defendant an application for the Home Affordable Modification Program (HAMP), which stated it was "designed to help borrowers retain their homes." Defendant attempted to qualify for the program many times. According to plaintiff, defendant failed to qualify for the program because he had a debt-to-income ratio of over fifty-five percent. Defendant disputed plaintiff's claim, but he failed to provide evidence supporting his contention.

In November 2013, plaintiff moved for summary judgment. The court granted plaintiff's motion on December 30, 2013, concluding (1) defendant defaulted because he did not provide evidence he completed the required improvements or otherwise attempted to cure his default, as plaintiff had requested in its January 24, 2009 letter, (2) defendant failed to provide evidence plaintiff wrongfully contributed to his continued default, and (3) the Act did not apply to defendant's mortgage because his mortgage was a construction loan.

On August 8, 2014, plaintiff sent a notice of application for entry of final judgment to defendant, including a schedule of amount due that totaled $319,093.47. Defendant objected to the application, contending the amounts listed on plaintiff's schedule totaled $309,118.59, not $319,093.47. Notwithstanding this objection, the court entered final judgment against defendant for $319,093.47 on May 11, 2015. This appeal followed.

On appeal, defendant challenges (1) the trial court's grounds for granting summary judgment to plaintiff and (2) the trial court's reliance on a mathematically incorrect amount due schedule.

II.

We review a trial court's grant of summary judgment de novo, using the Brill standard employed by the trial court. See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). That is, we consider whether a party disputes a material fact and, if not, whether the facts viewed in the light most favorable to the non-moving party would permit a decision in that party's favor on the underlying issue. Ibid.

A mortgagee's "right to foreclose is an equitable right inherent in the mortgage." Chase Manhattan Mortg. Corp. v. Spina, 325 N.J. Super. 42, 50 (Ch. Div. 1998) (citation omitted), aff'd, 325 N.J. Super. 1 (App. Div. 1999). The mortgagee has the right to insist upon strict observance of the obligations contractually owed to it, including timely payment. See Kaminski v. London Pub, Inc., 123 N.J. Super. 112, 116 (App. Div. 1973). When a mortgagee provides proof of execution, recording, and non-payment of the note and mortgage, it has established a prima facie right to foreclose. Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952).

A mortgagor opposing summary judgment has a duty to present facts controverting the mortgagee's prima facie case. Spiotta v. William H. Wilson, Inc., 72 N.J. Super. 572, 581 (App. Div.), certif. denied, 37 N.J. 229 (1962). Unexplained conclusions and "[b]ald assertions are not capable of . . . defeating summary judgment." Ridge at Back Brook, LLC v. Klenert, 437 N.J. Super. 90, 97-98 (App. Div. 2014) (citations omitted). What is required of the party opposing summary judgment is affirmative evidence competent evidence, not hearsay demonstrating the existence of a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57, 106 S. Ct. 2505, 2514, 91 L. Ed. 2d 202, 216-17 (1986). "Competent opposition requires 'competent evidential material' beyond mere 'speculation' and 'fanciful arguments.'" Hoffman v. Asseenontv.Com, Inc., 404 N.J. Super. 415, 426 (App. Div. 2009) (quoting Merchs. Express Money Order Co. v. Sun Nat'l Bank, 374 N.J. Super. 556, 563 (App. Div. 2005)).

The purpose of the Act is to provide residential mortgage debtors "every opportunity to pay their home mortgages, and thus keep their homes." N.J.S.A. 2A:50-54. Among other items, this Act requires a mortgagee to mail a thirty-day notice to a residential mortgage debtor prior to accelerating the maturity of any residential mortgage obligation and commencing any foreclosure or related proceedings. N.J.S.A. 2A:50-56.

A "residential mortgage" is

a mortgage, security interest or the like, in which the security is a residential property such as a house, real property or condominium, which is occupied, or is to be occupied, by the debtor, who is a natural person, or a member of the debtor's immediate family, as that person's residence. This act shall apply to all residential mortgages wherever made, which have as their security such a residence in the State of New Jersey, provided that the real property which is the subject of the mortgage shall not have more than four dwelling units, one of which shall be, or is planned to be, occupied by the debtor or a member of the debtor's immediate family as the debtor's or member's residence at the time the loan is originated.

[N.J.S.A. 2A:50-55.]

"Where the mortgage obligation has matured, so that all sums secured by the mortgage are immediately due and payable, acceleration is not required in order to foreclose. The [Act's] own terminology makes the notice of intention inapplicable in this instance." 30 New Jersey Practice, Law of Mortgages 24.12, at 264 (Myron C. Weinstein) (2d ed. 2000).

Even more importantly, the express purpose of the notice of intention to foreclose is "to provide notice that makes 'the debtor aware of the situation,' and to enable the homeowner to attempt to cure the default." US Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 479 (2012) (citation omitted) (quoting N.J.S.A. 2A:50-56(c)). In Guillaume, our Supreme Court concluded a trial court was not required to dismiss a foreclosure complaint with a defective notice of intention. Id. at 478. The Court wrote

[D]ismissal without prejudice is not the exclusive remedy for the service of a notice of intention that does not satisfy N.J.S.A. 2A:50-56(c)(11). A trial court adjudicating a foreclosure complaint in which the notice of intention does not comply with N.J.S.A. 2A:50-56(c)(11) may dismiss the action without prejudice, order the service of a corrected notice, or impose another remedy appropriate to the circumstances of the case . . . .

[Id. at 475-76.]

A trial court may therefore tailor its remedy according to the purpose of the notice requirement, and when its purpose has already been fulfilled, no remedy may be necessary.

In this case, neither party disputes the facts material to plaintiff's right to foreclose. Defendant now admits he executed, delivered, and defaulted on the mortgage. See Thorpe, supra, 20 N.J. Super. at 37. Accordingly, he does not present any facts controverting plaintiff's prima facie case. Spiotta, supra, 72 N.J. Super. at 581. Defendant nonetheless contends the trial court should not have granted summary judgment to plaintiff.

First, defendant argues the Act applied to his mortgage and required the trial court to dismiss plaintiff's complaint. We disagree. Plaintiff was foreclosing on the residential construction loan addendum and the residential construction loan rider with security agreement and financing statement, which was a construction mortgage. The Act's purpose is to provide residential mortgage debtors "every opportunity to pay their home mortgages, and thus keep their homes." N.J.S.A. 2A:50-54. Defendant did not live on the property during the "Construction Period," from January 11, 2008, to February 1, 2009. He only moved to the property after he refused to roll the construction loan into a permanent one. We would not further the Act's purpose if we applied it to defendant's mortgage.

The construction loan had also matured when plaintiff filed its complaint. "The [Act's] own terminology makes the notice of intention inapplicable in this instance." 30 New Jersey Practice, Law of Mortgages 24.12, at 264 (Myron C. Weinstein) (2d ed. 2000).

The record clearly establishes that defendant knew he had defaulted on the loan since at least July 24, 2009, yet took no action to cure the default. Nevertheless, defendant argues plaintiff has "unclean hands" because it precipitated his default when it did not allow him to convert his construction loan into a permanent loan after he defaulted on his construction loan. This claim lacks merit. Plaintiff sent defendant the loan modification documents necessary for him to obtain a permanent loan. Defendant refused to sign and return the documents, claiming he could not find numbers on plaintiff's website adding to the amount stated in the documents. The record does not support defendant's claim. The loan modification was for the same amount as the original note he signed on January 11, 2008. Plaintiff had no obligation to change the principal amount of its loan to defendant, and it rightly declined to receive further payments on the construction loan after defendant refused to sign the loan modification documents. Notwithstanding defendant's claims, the trial court did not allow plaintiff to "benefit by [its] own wrongdoing." Rolnick v. Rolnick, 290 N.J. Super. 35, 45 (App. Div. 1996) (citation omitted) (quoting Rolnick v. Rolnick, 262 N.J. Super. 343, 362 (App. Div. 1993)).

Defendant also argues plaintiff wrongfully denied his HAMP application when it concluded he had a debt-to-income ratio of more than fifty-five percent. Defendant does not claim he had a trial period plan with plaintiff, so he cannot rely on a state law claim under Miller v. Bank of America Home Loan Servicing, L.P., 439 N.J. Super. 540 (App. Div. 2015).3 Moreover, defendant failed to provide evidence his debt-to-income ratio was below 55%. As unexplained conclusions and "[b]ald assertions are not capable of . . . defeating summary judgment," Klenert, supra, 437 N.J. Super. at 97-98, we affirm the trial court's grant of summary judgment to plaintiff.

We next address defendant's claim of a computation error in the amount of the final judgment entered by the trial court. "A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference." Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). Rule 4:64-1(d)(2) requires a foreclosure plaintiff to send a notice of motion for entry of judgment to defendant. The notice must include "a copy of the affidavit of amount due filed with the court." R. 4:64-1(d)(2).

The affidavit shall be made either by an employee of the plaintiff, if the plaintiff services the mortgage, on the affiant's knowledge of the plaintiff's business records kept in the regular course of business, or by an employee of the plaintiff's mortgage loan servicer, on the affiant's knowledge of the mortgage loan servicer's business records kept in the regular course of business . . . .

[R. 4:64-2(c).]

The court may then enter final judgment against the defendant based on the plaintiff's affidavit. R. 4:64-1(d)(4).

Plaintiff's affidavit of amount due does not support the trial court's final judgment for $319,093.47. The affidavit and final judgment attached an amount due schedule listing four items: (1) $227,949.00 of unpaid principal, (2) $37,661.58 of interest on principal, (3) $368.29 of late charges, and (4) $43,139.72 of interest on advances. These items total $309,118.59. This error requires correction. R. 2:10-2. We therefore remand this matter to the trial court for the limited purpose of amending its final judgment from $319,093.47 to $309,118.59.

Any additional issues raised on appeal not specifically addressed were found to lack sufficient merit to warrant discussion in our opinion. R. 2:11-3(e)(1)(E).

Affirmed in part, and vacated and remanded in part for the entry of an amended final judgment consistent with this opinion. We do not retain jurisdiction.

1 N.J.S.A. 2A:50-53 to -68.

2 Paragraph six of the mortgage required defendant to occupy the property as his principal residence within sixty days. By his own admission, this did not occur until thirteen months after the date of the mortgage. Although not cited by the court, this would appear to represent an additional event of default by defendant.

3 In Miller, we concluded the mortgagors were not precluded from pursuing various state law claims, including claims for breach of contract and violation of the Consumer Fraud Act arising from an underlying HAMP trial plan, even though they did not have a private right of action under HAMP. Miller, supra, 439 N.J. Super. at 549. Nevertheless, we further concluded the trial court properly dismissed the claims on summary judgment because the mortgagors failed to provide evidence they had paid the lender as required by the trial plan. Id. at 550.