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BANK OF NEW YORK v. Cupo | NJ Appellate Div. “plaintiff here does not have standing as an assignee to prosecute this foreclosure action”

BANK OF NEW YORK v. Cupo | NJ Appellate Div. “plaintiff here does not have standing as an assignee to prosecute this foreclosure action”

ALEXANDER T.J. CUPO, Defendant-Appellant,

No. A-1212-10T2.
Superior Court of New Jersey, Appellate Division.

Argued October 5, 2011.
Decided February 28, 2012.
Gerald J. Monahan argued the cause for appellant.

Kristina G. Murtha argued the cause for respondent.

Before Judges Fuentes, Graves and Koblitz.



In this mortgage foreclosure action, defendant Alexander Cupo appeals from the decision of the Chancery Division, General Equity Part, denying his motion to vacate default judgment and dismiss the complaint filed by plaintiff Bank of New York, as Trustees for the Certificate-Holders CWABS, Inc., Asset-Banked Certificates, Series 2006-23. Defendant argues that the trial court erred when it denied his motion because: (1) plaintiff did not have physical possession of the promissory note at the time it filed its complaint for foreclosure; (2) plaintiff did not have standing to prosecute the foreclosure because the original lender, Countrywide Home Loans, assigned the promissory note and mortgage to plaintiff thirty-nine days after the complaint was filed; and (3) both plaintiff and its assignor Countrywide Home Loans failed to satisfy the requirements under N.J.S.A. 2A:50-56.

After reviewing the record before us, we reverse and remand this matter to the General Equity Part for a hearing to determine whether plaintiff has standing to file the complaint. As we made clear in Deutsche Bank Nat’l Trust Co. v. Mitchell, 422 N.J. Super. 214, 224 (App. Div. 2011), a foreclosing mortgagee must demonstrate that it had the legal authority to enforce the promissory note at the time it filed the original complaint for foreclosure. As correctly noted by defendant here, the record shows that the original lender, Countrywide Home Loans, assigned the promissory note and mortgage to plaintiff on May 10, 2007, thirty-nine days after the complaint was filed.

The following facts will inform our analysis of the issues raised by the parties.


On December 22, 2006, defendant signed a promissory note to Countrywide Home Loans, Inc., memorializing a $245,000 loan. To secure payment of the note, defendant executed a mortgage to Mortgage Electronic Registration Systems, Inc. (MERS), acting solely as a nominee for Countrywide Home Loans, Inc. The mortgage was recorded on January 11, 2007. Defendant failed to make the first payment on the loan that was due on February 1, 2007. In fact, to date, defendant has not made any payments on the loan. Pursuant to the terms of the loan, defendant defaulted on March 1, 2007. Countrywide mailed defendant a notice of intent to foreclose dated March 5, 2007.

On May 10, 2007, plaintiff Bank of New York filed a complaint in foreclosure, seeking to sell the mortgaged lands to satisfy the amount due. The complaint indicated that “[b]y assignment of mortgage, Mortgage Electronic Registration Systems, Inc., acting solely as a nominee for Countrywide Home Loans, Inc. assigned its mortgage to Bank of New York as Trustee for the Certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2006-03 which assignment has been sent for recording in the office of the clerk of Hudson County.” Plaintiff served the summons and complaint on defendant on June 14, 2007.

The record shows that MERS assigned its mortgage to Bank of New York as Trustee for the Certificateholders CWABS, Inc., Asset-Backed Certificates, Series 2006-23, on June 19, 2007. The assignment was recorded on July 5, 2007. Plaintiff filed a request to enter default against defendant on August 20, 2007. Plaintiff mailed a notice of intent to enter final judgment on August 29, 2007. In this light, the matter was deemed uncontested and the court entered final judgment by default on November 15, 2007.

Despite the entry of final judgment, plaintiff and defendant continued to discuss a possible settlement of the suit. Sheriff sales were postponed a number of times during these negotiations.[1] The parties eventually proceeded to mediation. After two sessions, the parties reached an apparent impasse. Although a third session was scheduled for September 28, 2010,[2] defendant moved to vacate the default judgment and dismiss plaintiff’s complaint on August 26, 2010, arguing that plaintiff lacked standing to prosecute the foreclosure action, and failed to comply with the notice requirements in N.J.S.A. 2A:50-56. Plaintiff argued that defendant had not established excusable neglect nor raised a meritorious defense. The trial court denied defendant’s motion to vacate the default judgment as well as his subsequent motion for reconsideration.


We start our analysis by reaffirming certain bedrock principles of appellate review. The decision to vacate a judgment lies within the sound discretion of the trial court, guided by principles of equity. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994). Under Rule 4:50-1:

On motion, with briefs, and upon such terms as are just, 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 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 decision to vacate a judgment under Rule 4:50-1 “will be left undisturbed unless it represents a clear abuse of discretion.” Hous. Auth. of Morristown, supra, 135 N.J. at 283 (citing Mancini v. EDS, 132 N.J. 330, 334 (1993)). To vacate a default judgment, the defendant “must show that the neglect to answer was excusable under the circumstances and that he has a meritorious defense.” Marder v. Realty Constr. Co., 84 N.J. Super. 313, 318 (App. Div.), aff’d, 43 N.J. 508 (1964). Because a default judgment is not predicated on a determination that plaintiff has met its burden of proof after providing a defendant his or her day in court, the trial court should review a motion to set aside a default judgment “with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached.” Hous. Auth. of Morristown, supra, 135 N.J. at 283-84 (quoting Marder, supra, 84 N.J. Super. at 318-19).

Here, defendant’s argument challenges directly the power of the court to grant the relief requested by plaintiff. Defendant argues that the default judgment obtained by plaintiff is utterly void from its inception because plaintiff did not have standing to prosecute the case at the time it filed the foreclosure complaint.

A mortgagee may establish standing by showing “that it is the holder of the note and the mortgage at the time the complaint was filed.” Deutsche Bank, supra, 422 N.J. Super. at 224-25 (internal quotation marks omitted). Plaintiff must have “presented an authenticated assignment” dated prior to its filing of the original complaint. See id. at 225. Here, the only evidence of the assignment is the assignment document dated June 19, 2007, which is dated thirty-nine days after plaintiff filed the complaint. As was the case in Deutsche Bank, plaintiff here does not have standing as an assignee to prosecute this foreclosure action.

Because the record before us does not include a certified copy of the original promissory note, we do not address plaintiff’s potential standing under the provisions of the Uniform Commercial Code (UCC) governing the transfer of negotiable instruments. N.J.S.A. 12A:3-101 to-605. We thus remand this matter to the trial court to conduct a hearing to determine whether, before filing the original complaint, plaintiff was in possession of the note or had another basis to achieve standing to foreclose, pursuant to N.J.S.A. 12A:3-301.

Finally, defendant argues that plaintiff failed to provide notice, pursuant to N.J.S.A. 2A:50-56(c), that defendant could sell his home prior to going into foreclosure. We reject this argument substantially for the reasons expressed by the trial court.

N.J.S.A. 2A:50-56(c) requires, in relevant part:

The written notice shall clearly and conspicuously state in a manner calculated to make the debtor aware of the situation


(8) the right, if any, of the debtor to transfer the real estate to another person subject to the security interest and that the transferee may have the right to cure the default as provided in this act, subject to the mortgage documents[.]

[(Emphasis added).]

The plain language of the statute only requires inclusion of the right to transfer the real estate if the mortgagor actually has the right to transfer the real estate subject to the security interest. If the mortgage documents do not provide that right, the mortgagee does not have to include that language in its notice of foreclosure.

Here, defendant’s mortgage states:

If all or any part of the Property or any Interest in the Property is sold or transferred… without Lender’s prior written consent, Lender may require immediate payment in full of all sums secured by this Security Instrument.

[(Emphasis added).]

Thus, although the mortgage permits defendant to transfer the property, a nonconsensual transfer is treated as a default, authorizing plaintiff to accelerate the payment of the outstanding principal.

In this light, the trial judge gave the following explanation for rejecting defendant’s argument:

[T]he statute only requires that language to be in [the notice under N.J.S.A. 2A:50-56(c)] if that right exists, and in this case, as I understand it, the mortgage specifically provides that the defendant does not have the right to have anyone else assume the debt or to transfer his interest in the property without the lender’s consent.


There is language in the notice of intent, as I read it…, if you are willing to sell your property, your home, in order to avoid foreclosure, it is possible that the sale of your home can be approved through Countrywide, even if your home is worth less than what is owed on it.

So it tells him he can convey his home, it has to be approved by Countrywide, but to have it sold to anyone or to have someone else assume the debt is precluded by virtue of the mortgage instrument itself.

So… that would actually be misleading if that language were in there, because he doesn’t have that right…. [T]he language that you’re saying should be in the notice of intent is in violation of the mortgage document itself.

We agree with the trial judge’s analysis and ultimate conclusion. N.J.S.A. 2A:50-56(c) does not require the lender to notify the borrower of his or her right to transfer the property; it only requires notice of the right to transfer the property subject to the mortgage. Here, the mortgage document prohibits transfer of the property subject to the mortgage without consent. Under these circumstances, plaintiff was not required to provide defendant with notice of an unequivocal right to transfer the property.

Reversed on the issue of standing and remanded for such further proceedings as may be warranted. We do not retain jurisdiction.

[1] Defendant is an intellectually challenged young man who also suffers from a digestive disorder. His father John Cupo, a realtor, has assumed the responsibility to advocate for his son. The record thus includes a certification by defendant’s father in support of defendant’s application to adjourn a court-ordered sheriff’s sale. According to John Cupo, after extensive negotiations on behalf of his son with representatives of Countrywide, the parties reached a tentative settlement in June 2008, whereby Countrywide agreed to restructure defendant’s outstanding debt “by consolidating the loan balance, late fees and penalties with a[n] 11% interest rate going forward.” John Cupo expressed his frustration that despite “innumerable attempts” to inform the lender of his son’s willingness to accept this settlement, “Countrywide… failed to respond to the acceptance of their proposal….”

[2] The parties met for a third and final mediation session on September 28, 2010. The mediation ended without a settlement.

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