Opinion
DOCKET NO. A-5044-11T1
07-14-2014
BANK OF AMERICA, NATIONAL ASSOCIATION, Plaintiff-Respondent, v. MEIR WEINRAUB and AMY WEINRAUB, h/w, and each of their heirs, devises and personal representatives and his, her, their or any of their successors in right, title and interest, Defendants-Appellants, and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. as nominee for GMAC MORTGAGE, LLC, Defendant.
Joseph H. Neiman argued the cause for appellants. Henry F. Reichner argued the cause for respondent (Reed Smith, LLP, attorneys; Mr. Reichner, of counsel; Alex G. Gross, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Waugh and Nugent.
On appeal from Superior Court of New Jersey, Chancery Division, Passaic County, Docket No. F-21082-10.
Joseph H. Neiman argued the cause for appellants.
Henry F. Reichner argued the cause for respondent (Reed Smith, LLP, attorneys; Mr. Reichner, of counsel; Alex G. Gross, on the brief). PER CURIAM
This is a residential mortgage foreclosure action. During a bench trial, plaintiff Bank of America, National Association (BOA) was unable to have its sole witness authenticate a Notice of Intent to Foreclose (NOI), and therefore unable to have the document admitted into evidence. The court determined that BOA's failure to establish that it mailed a proper NOI was in turn a failure to establish that it had complied with the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to -68. For that reason, the court dismissed the complaint without prejudice. Defendants Meir Weinraub and Amy Weinraub filed this appeal. Overlooking controlling precedent, defendants argue that the court should have dismissed the complaint with prejudice. We find their claim devoid of merit and therefore affirm.
The record on appeal discloses these facts. In June 2009 defendants defaulted on the $408,000 loan they had obtained in October 2006 from Approved Funding Corp. to buy their home. When they obtained the loan, defendants secured it by signing a note and mortgage, which Approved Funding properly recorded. The mortgage designated Mortgage Electronic Registration Systems, Inc. (MERS) as the mortgagee, but solely as nominee for the lender, Approved Funding.
"MERS is a private corporation which administers a national electronic registry that tracks the transfer of ownership interests and servicing rights in mortgage loans." Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323, 332 (Ch. Div. 2010).
Following closing on the loan and Approved Funding's recording of the note and mortgage, Approved Funding endorsed the note to Wells Fargo Bank, N.A, who in turn sold it to BOA in January 2007. Wells Fargo, however, continued to service the loan. After defendants defaulted on the loan in June 2009, Wells Fargo mailed them an NOI dated July 19, 2009. The NOI did not identify or reference BOA. Wells Fargo mailed a second NOI on February 21, 2010. That NOI did not identify or refer to BOA. Two months later, on April 5, 2010, MERS assigned the mortgage to BOA. BOA filed the mortgage foreclosure complaint the next day, April 6, 2010. Defendants filed an answer two months later.
Motion practice ensued. BOA moved for summary judgment; defendants cross-moved for dismissal. Although it does not appear that defendants disputed that they had defaulted on the loan, the court denied the motions. On an amended order denying BOA's motion, the court noted: "[BOA] has 10 days from the date of this order to re-serve a proper Notice of Intent to Foreclose indicating the name of [BOA] and the servicer of the loan. All action will be stayed on this case for 35 days from the date of this order."
By the time the court entered the amended order, BOA's attorney had mailed to defendants, by certified mail, another NOI. The NOI identified BOA as the lender and Wells Fargo as the servicer.
Five months after mailing the revised NOI to defendants, BOA again moved for summary judgment and defendants cross-moved to dismiss the complaint. The court denied defendants' cross-motion. Although the order denying the cross-motion states that the reasons are "set forth on the record," the parties have not provided the transcript. In any event, a month after entering the order denying defendants' cross-motion, the court issued a second order granting BOA's motion. In an attachment to that order, the court explained: "This Court previously permitted re-service of the [NOI.] [BOA] re-served the NOI and it is in compliance with the Fair Foreclosure Act. Therefore, [BOA's] motion for Summary Judgment is granted."
The case did not end at that time, however, because the following month the court entered a third order vacating the second order. The third order stated: "Having heard oral argument . . . and grant[ed] Summary Judgment to [BOA] due to an administrative error, the Court hereby VACATES the [order granting summary judgment to BOA]." The parties have not included in the appellate record any explanation of the administrative error.
At trial, a judge who had not heard the motions presided. The parties stipulated to the following facts: (1) defendants executed a note in the sum of $408,000; (2) defendants executed the corresponding mortgage; (3) the mortgage was recorded in the Passaic County Clerk's Office; (4) defendants failed to make the scheduled monthly installment payment on June 1, 2009, and the loan remained in default. Notwithstanding those stipulations, defendants asserted BOA did not have standing to foreclose, and had not complied with the notice provisions of the FFA.
Defendants did not testify. BOA called only one witness, Matthew Overton, a vice-president of loan documentation for the servicer, Wells Fargo. Overton was unable to authenticate the NOI that BOA's attorney had sent to defendants by certified mail. BOA did not present the testimony of the attorney who had mailed the NOI.
Following Overton's testimony, the court granted the parties' requests to submit written closing statements. After receiving them, the court entered the order dismissing BOA's foreclosure complaint without prejudice. In the accompanying written opinion, the court ruled that BOA had failed to establish that it mailed a curative NOI to defendants. BOA's only witness, Overton, was an employee of the servicer, Wells Fargo. Because either BOA or BOA's counsel wrote and mailed the NOI, Overton was not competent to testify that the NOI had been mailed to defendants. Overton's testimony merely established that the servicer received a copy of the NOI. Consequently, BOA "failed to prove that it complied at all with this 'critical component' of the FFA. . . ." The court concluded that dismissal without prejudice was warranted under those circumstances. Defendants appealed.
Defendants contend that BOA's complaint should have been dismissed with prejudice. They base their argument on their belief that, after a trial, only two results are possible: judgment in favor of the claimant, or dismissal with prejudice of the complaint. They cite no case to support their argument. Their argument is unsustainable under controlling precedent.
The FFA mandates that a residential mortgage lender who intends to commence a foreclosure action notify the residential mortgage debtor "of such intention at least 30 days in advance of such action." N.J.S.A. 2A:50-56(a). The NOI is a "statutory prerequisite[]" to filing a residential foreclosure complaint and a residential mortgage lender must plead specifically that it has complied with the statute. EMC Mortg. Corp. v. Chaudhri, 400 N.J. Super. 126, 143 (App. Div. 2008); N.J.S.A. 2A:50-56(f).
Our Supreme Court has explained that "[t]he [NOI] is a central component of the FFA, serving the important legislative objective of providing timely and clear notice to homeowners that immediate action is necessary to forestall foreclosure." U.S. Bank Nat'l Ass'n v. Guillaume, 209 N.J. 449, 470 (2012). For that reason, and because N.J.S.A. 2A:50-56(c)(11) requires explicitly that the NOI include the name and address of the lender, a lender who does not include such information in the NOI has not complied with the FFA. Id. at 475.
The FFA neither suggests nor mandates a remedy for a residential mortgage lender's failure to mail a proper NOI. We have, however, held that dismissal of the complaint without prejudice is an appropriate remedy, even after the parties have presented their proofs at trial. Chaudhri, supra, 400 N.J. Super. at 139-40. There, we explained that "dismissal of a foreclosure action, without prejudice, has no effect on the underlying contractual obligations of the parties and 'does not bar reinstitution of the same claims in a later action.'" Id. at 140 (quoting Woodward-Clyde Consultants v. Chem. & Pollution Scis., Inc., 105 N.J. 464, 472 (1987)).
Dismissal without prejudice is not the only remedy a trial court may impose for a residential mortgage lender's failure to comply with the NOI requirements of the FFA. Guillaume, supra, 209 N.J. at 479. Rather, when "determining an appropriate remedy for a violation of N.J.S.A. 2A:50-56(c)(11), trial courts should consider the express purpose of the provision: to provide notice that makes the debtor aware of the situation, and to enable the homeowner to attempt to cure the default." Ibid. (citation and internal quotation marks omitted). The trial court's analysis should include consideration of "the impact of the defect in the notice of intention upon the homeowner's information about the status of the loan, and on his or her opportunity to cure the default." Ibid.
Here, defendants neither cite nor discuss Chaudhri. Chaudhri is dispositive of this appeal. In their reply brief, defendants state that "[BOA] had their [sic] adjudication on the merits." Not so. To repeat what we said in Chaudhri, "dismissal of a foreclosure action, without prejudice, has no effect on the underlying contractual obligations of the parties and does not bar reinstitution of the same claims in a later action." Chaudhri, supra, 400 N.J. Super. at 140 (citation and internal quotation marks omitted). That is so because the elements of a prima facie right to foreclose are execution of a mortgage, recording, and non-payment of the mortgage. Thorpe v. Floremoore Corp., 20 N.J. Super. 34, 37 (App. Div. 1952). In the case before us, defendants stipulated to those elements.
The trial court acted well within its discretion when it dismissed BOA's complaint without prejudice. The trial court would also have acted well within its discretion had it fashioned a remedy short of a dismissal without prejudice. The express purpose of N.J.S.A. 2A:50-56(c)(11) — "to provide notice that makes the debtor aware of the situation, and to enable the homeowner to attempt to cure the default," Guillaume, supra, 209 N.J. at 479 (citation and internal quotation marks omitted) — had been satisfied in this case. Defendants did not dispute that they received three NOIs that served those purposes: two that identified Wells Fargo but not BOA, a third that identified BOA but could not be authenticated by a proper witness at trial. Those notices made defendants aware of the situation and afforded them ample opportunity to cure their default.
Moreover, the defect in the NOIs had negligible or no impact upon defendants' "information about the status of the loan, and on [their] opportunity to cure the default." Ibid. And defendants did not dispute that they received the third NOI, which BOA could not authenticate through its trial witness. That NOI was addressed to them, at their mortgaged home, and included two certified mail labels.
Because defendants offered no bona fide dispute either as to whether BOA mailed the third NOI or whether they received it, the court would also have acted well within its discretion if it had admitted the NOI into evidence under N.J.R.E. 101(a)(4) ("If there is no bona fide dispute between the parties as to a relevant fact, . . . [i]n civil proceedings the judge may . . . permit that fact to be proved by any relevant evidence, and exclusionary rules shall not apply, except Rule 403 or a valid claim of privilege."). In any event, defendants' argument is devoid of merit. The court did not err by dismissing the complaint without prejudice.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPEALATE DIVISION