U.S. BANK, N.A. v. DAVID E. WALSH

NOT FOR PUBLICATION WITHOUT THE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-0063-15T1

U.S. BANK, N.A. as Successor
Trustee for Bank of America as
Trustee for Thornburg Mortgage
Securities Trust 2007-3,

        Plaintiff-Respondent,

v.

DAVID E. WALSH and DEBORAH
WALSH,

     Defendants-Appellants.
______________________________

              Argued November 14, 2017 – Decided November 30, 2017

              Before Judges Fasciale and Sumners.

              On appeal from Superior Court of New Jersey,
              Chancery Division, Somerset County, Docket No.
              F-009696-14.

              David E. Walsh and Deborah Walsh, appellants,
              argued the cause pro se.

              Dustin P. Mansoor argued the cause for
              respondent (Houser & Allison, APC, attorneys;
              Gary N. Smith, on the brief).

PER CURIAM

        David and Deborah Walsh (defendants) appeal from a May 8,

2015 order denying their motion to vacate default; and a July 10,
2015 order denying their motion to reconsider or vacate summary

judgment     previously    entered     in    favor   of   U.S.      Bank,    N.A.

(plaintiff).     We affirm.

      Defendants executed a promissory note (the note) to Guardhill

Financial Corp. (Guardhill) with an original principal balance of

$1,950,000.     Defendants secured the note with a mortgage against

the property, naming Mortgage Electronic Registration Systems,

Inc. (MERS) as nominee         for Guardhill, and then recorded the

mortgage.      In May 2007, defendants entered into a modification

agreement.

      MERS assigned the note and mortgage to TMST Home Loans, Inc.

(TMST).      TMST assigned the note and mortgage to Bank of America

as Trustee for Thornburg Mortgage Securities Trust 2007-3 (Bank

of America as Trustee).        Bank of America as Trustee assigned the

note and mortgage to plaintiff.

      In May 2009, defendants defaulted on the note and mortgage.

In   March    2014,   plaintiff    filed    the   foreclosure      action.     In

September 2014, plaintiff filed an amended complaint addressing

the May 2007 modification agreement.              Defendants did not accept

service of the amended complaint and the judge entered default.

Although the judge did not vacate the default, the judge later

substantively     considered      defendants'     challenge   to    plaintiff's

standing to proceed.

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       At the close of extensive discovery, plaintiff moved for

summary      judgment.     On    January    9,    2015,   the    judge    granted

plaintiff's motion for summary judgment and issued a comprehensive

twenty-six page written opinion in which the judge concluded

defendants lacked a meritorious defense to the foreclosure action.

In May 2015, the judge entered final judgment.                  Defendants then

moved to set aside or reconsider the order granting summary

judgment.

       On appeal, defendants argue that they were entitled to relief

under Rule 4:50-1; that they should have the right to challenge

the mortgage and note assignments; and that plaintiff does not

have    standing    for    various    reasons      including     an     allegedly

fraudulent allonge.

       We begin by addressing defendants' contention that the judge

erred   by    denying    their   motion    to    vacate   the   order    granting

plaintiff summary judgment.          On this point, defendants rely on

Rule 4:50-1, which states that

             the court may relieve a party or the party's
             legal representative from a final judgment or
             order for the following reasons: (a) mistake,
             inadvertence, surprise, or excusable neglect;
             (b) newly discovered evidence which would
             probably alter the judgment or order and which
             by due diligence could not have been
             discovered in time to move for a new trial
             under   [Rule]   4:49;   (c)  fraud   (whether
             heretofore     denominated     intrinsic    or
             extrinsic),    misrepresentation,   or   other

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            misconduct of an adverse party; (d) the
            judgment or order is void; (e) the judgment
            or order has been satisfied, released or
            discharged, or a prior judgment or order upon
            which it is based has been reversed or
            otherwise vacated, or it is no longer
            equitable that the judgment or order should
            have prospective application; or (f) any other
            reason justifying relief from the operation
            of the judgment or order.

"The trial court's determination under [Rule 4:50-1] warrants

substantial deference, and should not be reversed unless it results

in a clear abuse of discretion," namely where the "decision is

'made without a rational explanation, inexplicably departed from

established policies, or rested on an impermissible basis.'" US

Bank Nat'l Ass'n v. Guillaume, 
209 N.J. 449, 467-68 (2012) (quoting

Iliadis v. Wal-Mart Stores, Inc., 
191 N.J. 88, 123 (2007)).

Defendants failed to satisfy this standard as to any subsection

of Rule 4:50-1.

     In    particular,    the    most   relevant   sections   applicable     to

defendants' contentions are Rule 4:50-1(b), (c), and (f).               Under

Rule 4:50-1(b), the newly discovered evidence subsection, "the

party seeking relief must demonstrate 'that the evidence would

probably have changed the result, that it was unobtainable by the

exercise of due diligence for use at the trial, and that the

evidence    was   not   merely   cumulative.'"      DEG,   LLC   v.   Twp.   of

Fairfield, 
198 N.J. 242, 264 (2009) (quoting Quick Chek Food Stores


                                        4                             A-0063-15T1
v. Twp. of Springfield, 
83 N.J. 438, 445 (1980)).                "Moreover,

'newly discovered evidence' does not include an attempt to remedy

a belated realization of the inaccuracy of an adversary's proofs."

Ibid. (quoting Posta v. Chung-Loy, 
306 N.J. Super. 182, 206 (App.

Div. 1997), certif. denied, 
154 N.J. 609 (1998)).             Rule 4:50-1(c)

provides   relief    for   fraud.     Rule   4:50-1(f)   is    reserved   for

"exceptional situations" where "truly exceptional circumstances

are present."      Hous. Auth. of Morristown v. Little, 
135 N.J. 274,

286 (1994) (citations omitted).       Defendants have failed to satisfy

any of these criteria.

       "The only material issues in a foreclosure proceeding are the

validity of the mortgage, the amount of the indebtedness, and the

right of the mortgagee to resort to the mortgaged premises." Great

Falls Bank v. Pardo, 
263 N.J. Super. 388, 394 (Ch. Div. 1993),

aff'd, 
273 N.J. Super. 542 (App. Div. 1994).             We have held that

"either possession of the note or an assignment of the mortgage

that    predated    the    original   complaint   confer[s]      standing."

Deutsche Bank Tr. Co. Ams. v. Angeles, 
428 N.J. Super. 315, 318

(App. Div. 2012) (citing Deutsche Bank Nat'l Tr. Co. v. Mitchell,


422 N.J. Super. 214, 216 (App. Div. 2011)).        If a plaintiff cannot

establish it owned or controlled the underlying debt at the time

the complaint is filed, it "lacks standing to proceed with the

foreclosure action and the complaint must be dismissed."               Wells

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Fargo Bank, N.A. v. Ford, 
418 N.J. Super. 592, 597 (App. Div.

2011).     "If a debt is evidenced by a negotiable instrument, such

as the note executed by [a] defendant," whether a plaintiff has

established ownership or control over the note "is governed by

Article III of the Uniform Commercial Code (UCC), 
N.J.S.A. 12A:3-

101 to -605, in particular N.J.S.A. 12A:3-301."        Ibid.

     There are "three categories of persons entitled to enforce

negotiable    instruments"   as   described   in   
N.J.S.A.    12A:3-301.

Mitchell, supra, 
422 N.J. Super. at 222-23.

     
N.J.S.A. 12A:3-301 provides:

            "Person entitled to enforce" an instrument
            means the holder of the instrument, a
            nonholder in possession of the instrument who
            has the rights of a holder, or a person not
            in possession of the instrument who is
            entitled to enforce the instrument pursuant
            to [
N.J.S.A.] 12A:3-309 or subsection d. of
            [
N.J.S.A.] 12A:3-418.     A person may be a
            person entitled to enforce the instrument even
            though the person is not the owner of the
            instrument or is in wrongful possession of the
            instrument.

     Here, plaintiff had standing to pursue the foreclosure case

against defendants. Plaintiff was in possession of the note before

filing the complaint and the trial court repeatedly addressed and

rejected    defendants'   standing   argument.     Plaintiff   presented

defendants with the original note and mortgage at a November 2013




                                     6                            A-0063-15T1
conference   and   defendants   confirmed   their   signatures   on   the

instruments.

     Defendants allege that they have new evidence that the allonge

was fraudulent, but offer no credible explanation as to why their

due diligence did not uncover such purported evidence sooner, when

they were in possession of the discovery.       Furthermore, their so-

called expert report and handwriting analysis, obtained after the

court granted summary judgment to plaintiff, is inconclusive.

Rather,    the   handwriting    analysis    reflects   that   there     is

insufficient information to conclude whether the signature was

valid.    Furthermore, the Guardhill representative's email stating

that Guardhill does not have an allonge on file does not disprove

plaintiff's standing in this case.

     Although defendants recognize they do not have standing under

New Jersey law to challenge a failure to comply with the trust

agreement, they argue that the note and mortgage assignments were

invalid.    Defendants are not parties to or beneficiaries of the

trust, and therefore lack standing to assert violations of the

trust, and even if they did have standing, their assertions would

be an insufficient defense to the foreclosure claim.          See, e.g.,

Reinagel v. Deutsche Bank Nat'l Tr. Co., 
735 F.3d 220, 228 (5th

Cir. 2013) (explaining that even though the trust agreement was

violated, the debtor could not enforce the terms of the trust

                                   7                             A-0063-15T1
agreement unless the debtor is a third-party beneficiary, and even

then, such an argument does not render the assignment void; it

would just allow the debtor to sue for breach of the trust

agreement).

     The judge also appropriately denied defendants relief under

the reconsideration standard.    As an appellate court, we review

the denial of a motion for reconsideration to determine whether

the trial court abused its discretionary authority.    Cummings v.

Bahr, 
295 N.J. Super. 374, 389 (App. Div. 1996).    Reconsideration

should only be used "for those cases which fall into that narrow

corridor in which either 1) the [c]ourt has expressed its decision

based upon a palpably incorrect or irrational basis, or 2) it is

obvious that the [c]ourt either did not consider, or failed to

appreciate the significance of probative, competent evidence."

Id. at 384 (quoting D'Atria v. D'Atria, 
242 N.J. Super. 392, 401

(Ch. Div. 1990)).   Additionally, the decision to deny a motion for

reconsideration falls "within the sound discretion of the [trial

court], to be exercised in the interest of justice."          Ibid.

(quoting D'Atria, supra, 
242 N.J. Super. at 401).

     Although the judge found the motion for reconsideration was

not filed timely, he substantively addressed the motion.         The

judge reviewed defendants' submissions, mostly arguing the same

standing issue, and found that defendants' argument was "a search

                                 8                          A-0063-15T1
for technicalities that ignores the realities of the circumstances

before the [c]ourt. [D]efendants admit they have not paid any

princip[al], interest, real estate tax or insurance payments for

the property since May 1, 2009. . . .          [D]efendants admittedly and

unabashedly continue to live in the premises at no charge."                  The

judge's decision to deny the motion for reconsideration was within

his discretion.      He reviewed and analyzed the probative, competent

evidence,    along    with   non-probative     and   incompetent       evidence

presented by defendants. The judge properly denied both the motion

for reconsideration and the motion to set aside summary judgment.

     We    conclude    the   remainder    of   defendants'   arguments       are

without    sufficient   merit   to   warrant    discussion   in    a   written

opinion.    R. 2:11-3(e)(1)(E).

     Affirmed.




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