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acting solely as nominee for




October 5, 2016


Submitted May 2, 2016 Decided

Before Judges Nugent and Higbee.

On appeal from Superior Court of New Jersey, Chancery Division, General Equity Part, Hudson County, Docket No. F-9589-12.

Joseph A. Chang and Associates, L.L.C., attorneys for appellants (Joseph A. Chang, of counsel and on the brief; Jeffrey Zajac, on the brief).

Blank Rome, L.L.P., attorneys for respondent (Donna M. Bates, of counsel and on the brief; Bhaveen R. Jani, on the brief).

The opinion of the court was delivered by


Defendants, Abdelnasser and Islam Musallam,2 applied for a residential loan with IndyMac Bank, F.S.B.3 (IndyMac) in December 2005. On the application, defendants' joint yearly income was listed as $143,250.4 In reality, however, defendants' joint yearly income totaled only $14,300 in 2005 and $18,000 in 2006. The application was prepared over the phone; defendants claim they were unaware of this inflation of their income. The mortgage application is not signed, nor is it dated.

On March 24, 2006, Abdelnasser Musallam executed and delivered a note to IndyMac for the principal amount of $428,000. To secure payment of the note, defendants executed a purchase money mortgage encumbering the property, which was delivered to Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for IndyMac, its successors and assigns that same day. The Mortgage was duly recorded on April 26, 2006.

For approximately four years, regular payments were made without incident. On or around June 1, 2010, defendants defaulted. On July 17, 2010, IndyMac served defendants with a notice of intention to foreclose. This document indicates that "IndyMac Mortgage Services, a Division of OneWest Bank, FSB" is the mortgage holder.

On October 1, 2010, MERS, acting as nominee for IndyMac, assigned the Mortgage to plaintiff OneWest Bank, F.S.B. The assignment was recorded.

The default in payment was not cured and on May 25, 2012, plaintiff filed a foreclosure complaint. Defendants filed an answer and counterclaim, asserting, inter alia, OneWest violated the New Jersey Consumer Fraud Act ("CFA")5 by engaging in unconscionable commercial practices. Cross-motions for summary judgment were filed, and on March 8, 2013, the trial judge entered an order granting plaintiff's motion for summary judgment, striking defendants' answer and counterclaim, and returning the matter to the Office of Foreclosure.

Following the entry of the June 11, 2014 order, the June 25, 2014 order of final judgment was entered against defendants. Defendants now appeal from the March 8, 2013 order granting summary judgment in favor of plaintiff, the June 11, 2014 consent order, and the June 25, 2014 order of final judgment.

We review a trial court's grant of summary judgment de novo, "employing the same standard used by the trial court." Tarabokia v. Structure Tone, 429 N.J. Super. 103, 106 (App. Div. 2012), certif. denied, 213 N.J. 534 (2013). We must first "decide whether there was a genuine issue of material fact, and if none exists, then decide whether the trial court's ruling on the law was correct." Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). In other words, this court "consider[s] whether the undisputed material facts, viewed in the light most favorable to the non-moving party, entitle[s] the moving party to judgment as a matter of law." Tarabokia, supra, 429 N.J. Super. at 106. See also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).

We first address defendants' claim that the trial judge erred by striking defendants' counterclaims alleging that the Mortgage was obtained by OneWest's predecessor via predatory lending practices tantamount to an unconscionable commercial practice under the CFA.

Our analysis begins by determining whether there are any material facts in dispute within the record considered by the trial judge. The determination of a fact's materiality necessarily involves examining the nature of a CFA claim itself. To succeed on a CFA claim, a party "must allege each of three elements: (1) unlawful conduct by the defendant[]; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendant's unlawful conduct and the plaintiff's ascertainable loss." Dabush v. Mercedes-Benz USA, LLC, 378 N.J. Super. 105, 114 (App. Div.) (quoting N.J. Citizen Action v. Schering-Plough Corp., 367 N.J. Super. 8, 12-13 (App. Div.), certif. denied, 178 N.J. 249 (2003)), certif. denied, 185 N.J. 265 (2005). The CFA prohibits

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression, or omission of any material fact with intent that others rely upon [it] . . . in connection with the sale or advertisement of . . . merchandise . . . .

[Assocs. Home Equity Servs., Inc. v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) (alteration in original) (quoting N.J.S.A. 56:8-2).]

Loans fall under the definition of "advertisement" and "merchandise" in the CFA. Ibid. (citing N.J.S.A. 56:8-1(a), (c)). See also Lemelledo v. Benefit Mgmt. Corp., 150 N.J. 255, 265 (1997) ("By its terms, the CFA is applicable to the provision of credit.").

Unconscionable, as used in the CFA, "must be interpreted liberally." Troup, supra, 343 N.J. Super. at 278. Generally speaking, the CFA's proscription of unconscionable practices aims to promote "'good faith, honesty in fact and observance of fair dealing[,]' and the need for application of that standard 'is most acute when the professional seller is seeking the trade of those most subject to exploitation - the uneducated, the inexperienced and the people of low incomes.'" Ibid. (quoting Kugler v. Romain, 58 N.J. 522, 544 (1971)). This is a fact-sensitive question to be evaluated on a case-by-case basis. Troup, supra, 343 N.J. Super. at 278.

The crux of defendants' CFA counterclaim involves the amount of yearly income indicated on their loan application. Specifically, defendants argue their income was drastically inflated without their knowledge. As a result, defendants argue they were saddled with a loan on which they would inevitably default.

Rule 4:46-5(a) explains that the party opposing summary judgment "may not rest upon the mere allegations or denials of the pleading, but must respond by affidavits . . . ." The content of such an affidavit must be limited to the personal knowledge of facts that the affiant would be competent to testify about. Sellers v. Schonfeld, 270 N.J. Super. 424, 427 (App. Div. 1993). Thus, in arguing summary judgment on a CFA claim, the moving party must allege facts that could lead the fact finder to conclude the nonmoving party engaged in some form of unconscionable conduct.

Evidentiary support for defendants' claim rests on a certification of defendant Abdelnasser Musallam. Musallam certifies he did not personally prepare the loan application, and that his income was reported as $143,244 per year, when in reality his yearly income was only $18,000. Further, defendant certifies that he was unaware of this fabrication.

The question of whether his application was falsified by the original lender is a fact in dispute. Plaintiff's argument in support of summary judgment is that OneWest, as an assignee of the Mortgage, is insulated from any CFA liability potentially incurred by its predecessor, even if it occurred. As such, plaintiff avers no fact regarding the application can properly be described as "material".

Plaintiff is mistaken on this point. Indeed, plaintiff would be liable for a violation of the CFA perpetrated by its predecessor, IndyMac.6 As long as the party seeking enforcement is not otherwise a holder in due course, he or she is subject to any "claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument." See N.J.S.A. 12A:3-305(a)(3), (b). As such, defendants would have standing to bring a CFA claim against OneWest.

The parties' disagreement about the facts, circumstances, and levels of knowledge surrounding the loan application go to the core of defendants' CFA claim. With a material fact in dispute, entry of summary judgment for either party on this point would be inappropriate.

Accordingly, we reverse the trial court's order striking defendants' answer and remand for further proceedings on the CFA claim.

We will address other issues raised in the appeal so as to prevent relitigation of them at trial. Defendants argue plaintiff lacked standing to file the foreclosure complaint in the first place. A prima facie right to foreclose is established by showing proof of an execution, recording, and the non-payment of the mortgage. Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952). The party filing for foreclosure "must own or control the underlying debt." Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592, 597 (App. Div. 2011) (citing Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 327-28 (Ch. Div. 2010)). Accordingly, absent this showing of ownership or control, a plaintiff will lack standing to pursue a foreclosure action. Ford, supra, 418 N.J. Super. at 597 (quoting Raftogianis, supra, 418 N.J. Super. at 357-59). Defendants' attack on standing is twofold, arguing the certification relied upon by plaintiff was insufficient to establish standing, as well as that plaintiff failed to establish it was assigned the note. Both lines of argument are unavailing.

To show it controlled the note at the time the foreclosure was initiated, plaintiff submitted the certification of Katelin Mann, the Assistant Secretary of OneWest Bank. In the certification Mann states that, by virtue of her position, she is familiar with OneWest's records. On this point, defendants argue the trial judge improperly admitted this certification as a record of a regularly conducted activity under N.J.R.E. 803(c)(6). We disagree. Mann's certification complies with all aspects of N.J.R.E. 803(c)(6), and is not controverted by any evidence provided by defendants. All attached documents were identified as true copies. The trial judge properly concluded plaintiff demonstrated possession of the note when the foreclosure action was commenced, and in this way, was entitled to a presumption of standing that was never rebutted.

Regarding the validity of the assignment of the mortgage from IndyMac to OneWest Bank, the record is devoid of competent evidence that suggests the assignment was deficient in any way. Considering the above, the trial court did not err in finding plaintiff had standing to initiate the foreclosure action.

Defendants also argue the trial judge erred when he did not dismiss plaintiff's foreclosure action due to a flaw in the July 17, 2010 notice of intention to foreclose (NOI). This flaw, defendant asserts, is in violation of the Fair Foreclosure Act and warranted dismissal without prejudice. We disagree.

The Fair Foreclosure Act, N.J.S.A. 2A:50-53 to -68, provides that a mortgagee's written notice of intent to foreclose "shall clearly and conspicuously state in a manner calculated to make the debtor aware of the situation" certain information, including "the particular obligation or real estate security interest." N.J.S.A. 2A:50-56(c)(1). In this case, the parties agree that the NOI mistakenly listed "IndyMac Mortgage Services, a Division of OneWest Bank, FSB" as the owner of the mortgage, when in reality the mortgage was owned by Fannie Mae at this point in time.

In the leading case in this area, the Supreme Court explained that our court addresses violations of N.J.S.A. 2A:50-56(c) by "fashion[ing] case-specific equitable remedies." US Bank Nat. Ass'n v. Guillaume, 209 N.J. 449, 477 (2012). Guillaume overruled the holding of Bank of N.Y. v. Laks, 422 N.J. Super. 201, which barred a court of equity from imposing any remedy other than dismissal without prejudice. Guillaume, supra, 209 N.J. at 479. While dismissal without prejudice remains a viable option in the Chancery Division, others have simply ordered service of a corrected notice of intention to foreclose. Id. at 477-78. The Supreme Court also explained that other remedies may exist, saying courts of equity "may appropriately balance the interests of lenders and homeowners facing foreclosure." Id. at 478. The express purpose of this portion of the Fair Foreclosure Act is "to provide notice that makes 'the debtor aware of the situation,' and to enable the homeowner to attempt to cure the default." Id. at 479 (quoting N.J.S.A. 2A:50-56(c)).

In his written opinion, the trial judge correctly explained that Guillaume does not mandate dismissal without prejudice. As such, there can be no error in declining to do so, as the defendants' argue on appeal.

Affirmed in part, reversed in part and remanded for further proceedings. We do not retain jurisdiction.

1 The Final Judgment entered on June 25, 2014 refers to appellant as Eslam Musallam, but the Notice of Appeal and the order of March 8, 2013 refers to appellant as Islam Musallam. We refer to appellant by this name.

2 Only Abdelnasser Musallam is the signatory on the Mortgage. His wife, Islam, was not a signatory on the mortgage application but was nonetheless named as a defendant in the foreclosure action.

3 The parties apparently agree that IndyMac was the mortgage originator despite the heading on the mortgage application saying "Optima Home Mortgage."

4 Though these figures nominally refer to defendants' joint income, Islam Musallam does not work and earns no income.

5 N.J.S.A. 56:8-1 to -204.

6 Plaintiff's status is best understood as a "nonholder in possession of the instrument who has the rights of a holder." See N.J.S.A. 12A:3-301. A party is designated as such where it had possession of either the note or an assignment of the mortgage prior to the filing of the foreclosure complaint. Deutsche Bank Nat'l Trust Co. v. Mitchell, 422 N.J. Super. 214, 224-25 (App. Div. 2011).