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JIM FULLER, CLERK OF THE COURT, DUVAL COUNTY, FLORIDA vs. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), MERSCORP

JIM FULLER, CLERK OF THE COURT, DUVAL COUNTY, FLORIDA vs. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), MERSCORP


IN THE CIRCUIT COURT, FOURTH
JUDICIAL CIRCUIT, IN AND FOR
DUVAL COUNTY, FLORIDA

JIM FULLER, CLERK OF THE CIRCUIT
COURT, DUVAL COUNTY, FLORIDA,
in his official capacity and on behalf of
all those similarly situated,

Plaintiff,

vs.

MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware corporation; and
MERSCORP, INC., a Delaware Corporation

Defendants.

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U.S. Bank N.A.. v Solorin | NYSC Dismisses Complaint “Abandoned, Steven J. Baum PC Plaintiff Attorney Affirmation”

U.S. Bank N.A.. v Solorin | NYSC Dismisses Complaint “Abandoned, Steven J. Baum PC Plaintiff Attorney Affirmation”


Decided on November 10, 2011

Supreme Court, Queens County

 

U.S. Bank National Association, AS TRUSTEE FOR CSMC 2007-4, 3476 Stateview Boulevard, Ft. Mill, SC 29715, Plaintiff,

against

Ramon M. Solorin, ET.AL., Defendant.

5769/10
Attorney for Plaintiff:

Steven J. Baum, PC

900 Merchants Concourse, Ste. 116

Attorney for Defendant:

R. David Marquez, PC

50 Clinton Street, Ste. 98

Hempstead, New York 11550

Phyllis Orlikoff Flug, J.

The following papers numbered 1 to 4 read on this motion

Notice of Motion1 – 2

Affirmation in Opposition3 [*2]

Reply Affirmation4

Defendant, Ramon Solorin, moves to dismiss plaintiff’s Complaint as asserted against him.

This is an action to foreclose a mortgage on the real property located at 23-11 99th Street, in the County of Queens, City and State of New York.

CPLR 3215[c] provide that “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned . . . unless sufficient cause is shown why the complaint should not be dismissed.”

Plaintiff served the Summons and Complaint on defendant Solorin by substitute service on March 11, 2010. Defendant Solorin filed an answer on May 19, 2010. On May 27, 2010, plaintiff rejected defendant’s answer as untimely, stating that defendant’s time to answer had expired on April 25, 2010.

Although defendant has been in default since April 25, 2010, plaintiff has not yet moved for entry of a default judgment against him. While plaintiff moved on August 3, 2010, for an order appointing a receiver, plaintiff’s notice of motion did not contain any request for a default judgment (See Arriaga v. Michael Laub Co., 233 AD2d 244, 245 [1st Dept. 1996]). In any event, plaintiff voluntarily withdrew that motion on November 18, 2010.

Plaintiff contends that it has demonstrated sufficient cause as to why the complaint should not be dismissed. Specifically, plaintiff contends that its attempts to comply with Administrative Order 548/10 (as amended by AO 431/11) provides a reasonable excuse for its failure to comply with CPLR § 3215[c].

AO 548/10 went into effect on October 20. 2010 and requires that an attorney for plaintiff in a residential foreclosure action certify the accuracy of the papers filed in support of the action by submitting an affirmation from the attorney that he or she communicated with a representative of the plaintiff and was informed that the representative personally reviewed plaintiff’s documents and records relating to the case, reviewed the Summons and Complaint and all other papers filed in support of the foreclosure, and confirmed the accuracy of the court filings and the notarizations contained therein.

As AO 548/10 merely requires that attorneys certify that they have met a minimum standard of diligence, it does not provide plaintiff with a reasonable excuse for delaying approximately sixteen months before moving for default. Indeed, plaintiff’s papers indicate that [*3]they have still been unable to comply with AO 548/10, despite the fact that it had been in effect for nearly ten months at the time of the motion.

Accordingly, defendant’s motion to dismiss is granted, and Plaintiff’s Complaint is dismissed as asserted against him. The parties’ remaining contentions have been rendered moot.

November 10, 2011 ____________________

J.S.C.

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Ka-Booom! Florida Clerk, Jim Fuller of Duval County Sues MERS

Ka-Booom! Florida Clerk, Jim Fuller of Duval County Sues MERS


This is major and pay close attention to the words below

Mortgage Servicing News-

The most recent lawsuit was filed by a county clerk in Florida, and seeks class action status to represent the state’s 67 counties. The complaint alleges the use of MERS does not comply with state property laws and has cost municipalities millions in unpaid recording fees.

Jim Fuller, the clerk of Duval County, filed suit against Merscorp Inc. and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc., on Oct. 31, claiming civil conspiracy, unjust enrichment, as well as fraudulent and negligent misrepresentation. The suit also seeks a hearing to determine the validity of tracking note transfers on the MERS System and a court injunction to prohibit the use of MERS in Florida.

“MERS has usurped the rights and privileges of the Florida Clerks of Court by establishing, maintaining and inducing lenders to use its private recording system, which unlawfully interferes and competes with the public recording system,” the suit, filed in state circuit court, reads.

[…]

Both the note and mortgage are to be recorded. The principle issue we’re trying to get at is the punitive distinction of MERS being the mortgagee while the note is shifted from one to another up through the typical securitization process,” Volpe said in a phone interview. “The principle concern about the disconnect is that the public records are not complete insofar as the true beneficial owner of the mortgage is not reflected in the public records.”

[MORTGAGE SERVICING NEWS]

 

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EMERALD GARDENS CONDO v. U.S. BANK | Washington State Appeals Court “QUIET TITLE BY DEFAULT”

EMERALD GARDENS CONDO v. U.S. BANK | Washington State Appeals Court “QUIET TITLE BY DEFAULT”


IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

EMERALD GARDENS
CONDOMINIUM ASSOCIATION,
Appellant,

v.

U.S. BANK N.A., AS TRUSTEE FOR
THE REGISTERED HOLDERS OF
MASTR ASSET BACKED
SECURITIES TRUST, 2006-AM1,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2006-AM1,
Respondent.

Leach, A.C.J. — Emerald Greens Condominium Association (Association)
appeals a trial court’s decision setting aside an order of default and vacating a
decree quieting title in real property. Because U.S. Bank failed to appear in the
Association’s quiet title action for reasons other than mistake, inadvertence,
surprise, or excusable neglect, and failed to present prima facie evidence of a
defense to the Association’s claim, we reverse and direct the trial court to
reinstate the order of default and decree quieting title in the Association.

FACTS

Elizabeth Swanson secured a purchase money loan from Aames Funding
Corporation, d/b/a Aames Home Loan (Aames), with a deed of trust, recorded in
a first lien position against her condominium unit.

In April 2007, Ocwen Loan Servicing LLC recorded a notice of trustee’s
sale for this property that identified U.S. Bank as the current beneficiary of the
deed of trust. The notice recited that Swanson’s condominium was

subject to that certain Deed of Trust dated 9/9/2005, recorded
10/3/2005, . . . from ELIZABETH SWANSON . . . as Grantor(s), to
KAREN L. GIBBON, PS, as Trustee, to secure an obligation in
favor of AAMES FUNDING CORPORATION DBA AAMES HOME
LOAN, as Beneficiary, . . . the beneficial interest in which was
assigned by AAMES FUNDING CORPORATION DBA AAMES
HOME LOAN to U.S. Bank, N.A., as Trustee for the registered
holders of MASTR Asset Backed Securities Trust.

But this recital was not true. Instead, on May 25, 2007, Accredited Home
Lenders Inc., successor by merger to Aames, assigned “[a]ll beneficial interest”
in the deed of trust to Ocwen Loan Servicing. Then, on June 1, 2007, Ocwen
assigned its interest to U.S. Bank. These two assignments were recorded with
the Snohomish County Auditor on June 15, 2007.

Earlier, on May 15, the Association filed a complaint against Swanson
and Aames, seeking to foreclose a lien for unpaid condominium assessments on
Swanson’s unit. Three days later, the Association recorded a lis pendens
against the property.

The Association served Aames, but it failed to appear in the action. On
July 6, 2007, the Association obtained entry of an order of default against
Aames. On October 12, 2007, the court entered a “Stipulated/Default Judgment,
Order and Foreclosure Decree.” Swanson stipulated to its entry through
counsel. The decree (1) awarded judgment to the Association and declared its
lien valid and exempt from homestead protection, (2) foreclosed the lien and
directed the sheriff to sell the property if the judgment was not promptly paid,
and (3) declared the rights of Aames and all persons claiming under it to be
subordinate to the Association’s lien and foreclosed those rights, except for any
right of redemption.

The Association purchased the condominium unit at a sheriff’s sale held
in February 2009. After the one-year redemption period expired without
redemption by any party, the Association received a sheriff’s deed conveying the
property to it.

U.S. Bank claims that it first became aware of the lien foreclosure
proceedings in February 2010, after it completed foreclosure of its deed of trust.1
Shortly afterward, U.S. Bank’s attorney Kelly Sutherland sent the Association’s
attorney, Patrick McDonald, a letter, stating, “Pursuant to our telephone
conversation, this office is representing [U.S. Bank,] successor beneficiary
holders of the 1st [Deed of Trust] on . . . the subject loan. My clients are
disputing the priority of the Sheriff’s Deed.” Sutherland also asked McDonald to
“provide . . . [a] breakdown of your client’s total amount of Judgment, including
any attorney fees and advances for taxes and other liens on . . . the subject
loan.” McDonald responded by letter a few days later. He wrote,

As you know, Emerald Gardens Condominium Association . . .
properly served the lender of record and foreclosed the lender’s
interest in the above-referenced condominium unit . . . .
As a result, my client bid the full judgment amount at the
sheriff’s sale, the redemption period expired without redemption by
any party, a sheriff’s deed was issued to the Association, and the
Association now owns the property free and clear. Therefore,
there is no judgment balance upon which to give a payoff as you
request.

Two months later, in an effort to remove any potential cloud on the title,
the Association served U.S. Bank with a summons and complaint to quiet title to
the subject property.2 U.S. Bank, the only defendant in the action, failed to
appear or file an answer within the 20 days allowed by CR 4. The Association
then obtained entry of an order of default and an order and decree quieting title
in its favor.

U.S. Bank moved to set aside the default and vacate the decree under
CR 55 and CR 60. A court commissioner granted the relief requested. The trial
court denied the Association’s motion for revision.
The Association appeals.

STANDARD OF REVIEW

When a party appeals an order denying revision of a court
commissioner’s decision, this court reviews the superior court’s decision, not the
commissioner’s.3 We review a trial court’s decision on both a motion for default
judgment and a motion to vacate a default judgment for an abuse of discretion.4
Discretion is abused if it is based on untenable grounds or reasons,5 and a
decision is untenable if it rests on an erroneous application of law.6 We review
questions of law de novo.7

ANALYSIS

We must decide whether the trial court abused its discretion when it
denied the Association’s motion for revision. This requires resolution of three
underlying issues: (1) whether U.S. Bank was entitled to notice of the
Association’s motion for default under CR 55(a)(3), (2) whether U.S. Bank
presented substantial evidence of a prima facie defense available to it in the
quiet title action, and (3) whether U.S. Bank’s failure to appear in the quiet title
action was due to surprise or excusable neglect.

A court will set aside a default judgment entered against a party entitled to
notice who did not receive it.8 The Association argues that U.S. Bank was not
entitled to notice of the motion for default because neither U.S. Bank nor
Sutherland appeared in the quiet title action. In response, U.S. Bank asserts
that Sutherland’s prelitigation contacts with McDonald substantially complied
with any appearance requirement. Thus, according to U.S. Bank, it was entitled
to notice of the Association’s motion for default. We agree with the Association.
CR 55(a)(3) requires notice of a motion for default be given to any party
who has appeared in the action. It states,

Any party who has appeared in the action for any purpose shall be
served with a written notice of motion for default and the supporting
affidavit at least 5 days before the hearing on the motion. Any
party who has not appeared before the motion for default and
supporting affidavit are filed is not entitled to a notice of the motion.

Washington courts apply a substantial compliance test to determine whether CR
55(a)(3) requires notice.9

In Morin v. Burris,10 our Supreme Court held that prelitigation contacts
alone are not sufficient to establish substantial compliance with the appearance
requirements of CR 55(a)(3). Instead, those who are properly served with a
summons and complaint must in some way appear and acknowledge the
jurisdiction of the court after they are served and litigation commences.11
Otherwise, “any party to a dispute [could] simply write a letter expressing intent
to contest litigation, then ignore the summons and complaint or other formal
process and wait for the notice of default judgment before deciding whether a
defense is worth pursuing.”12

As Morin makes clear, Sutherland’s prelitigation contact with McDonald
by itself is not sufficient to show substantial compliance with CR 55(a)(3), even
though it expressed an intent to defend. U.S. Bank had no contact with the
Association or its counsel between the time it was served with the summons and
complaint and the order of default entered. U.S. Bank’s failure to appear during
this interval relieved the Association of any obligation to provide the bank with
written notice of a motion for default.

U.S. Bank disagrees. Citing Sacotte Construction, Inc. v. National Fire &
Marine Insurance Co.13 and Old Republic National Title Insurance Co. v. Law
Office of Robert E. Brandt, PLLC,14 the bank claims it substantially complied with
any appearance requirement because McDonald had prior dealings with
Sutherland and knew that Sutherland represented the bank in related matters.15
But neither case supports U.S. Bank’s position. Instead, Sacotte and Old
Republic apply the rule announced in Morin and rely upon contacts made after
the commencement of litigation to establish substantial compliance with
appearance requirements.

In both Sacotte and Old Republic, the defaulted party made an informal
appearance after the plaintiff commenced the action. In Sacotte, the court held
that a telephone call made after litigation had commenced established
substantial compliance with the appearance requirements of CR 55(a)(3)16
Citing Morin, the court stated, “[S]ubstantial compliance can be accomplished
with an informal appearance if the party shows intent to defend and
acknowledges the court’s jurisdiction over the matter after the summons and
complaint are filed.”17 Old Republic is similar. There, the court also held that a
telephone call made after litigation had commenced substantially complied with
the appearance requirements of CR 55(a)(3).18 The court observed that
enforcement of a default judgment would be inequitable where the defendant’s
attorney called the plaintiff’s attorney after the commencement of the legal action
and informed him of his intent to defend.19

Because the bank was not entitled to notice of the motion for default, we
address whether the bank established grounds for vacating the decree under CR
60(b)(1). Generally a default judgment “will [be] liberally set aside . . . pursuant
to CR 55(c) and CR 60 and for equitable reasons in the interests of fairness and
justice.”20 CR 55(c) provides that default judgment may be set aside “in
accordance with rule 60(b).” Grounds for vacating a default judgment under CR
60(b)(1) include “[m]istake, inadvertence, surprise, excusable neglect or
irregularity.” In White v. Holm,21 our Supreme Court announced four factors
which must be shown by a moving party. These factors are whether (1) there is
substantial evidence to support the moving party’s claim of a prima facie
defense; (2) the moving party’s failure to timely appear in the action was
occasioned by mistake, inadvertence, surprise, or excusable neglect; (3) the
moving party acted with due diligence after notice of entry of the default
judgment; and (4) vacating the default judgment would result in a substantial
hardship to the nonmoving party.22 Where a party fails to provide evidence of
factors (1) and (2), no equitable basis exists for vacating a judgment.23 A trial
court abuses its discretion when it vacates a judgment without evidence of these
two factors.24

U.S. Bank failed to present substantial evidence of a prima facie defense.
The Association recorded its lis pendens for its original foreclosure action on
May 18, 2007. The record shows that U.S. Bank acquired its beneficial interest
in the deed of trust later, on June 1, 2007. U.S. Bank presented no evidence
that it acquired any interest before that date. A party that acquires an interest in
real property after a lis pendens is recorded has “constructive notice” of the
proceeding and “shall be bound by all proceedings taken after the filing of such
notice to the same extent as if he or she were a party to the action.”25 U.S.
Bank, therefore, had constructive notice of the Association’s foreclosure action,
and it is bound by those proceedings. In that proceeding, the court foreclosed
the interest of the bank’s predecessor in interest, Aames, and all persons
claiming under it, subject only to a right of redemption. Thus, U.S. Bank cannot
show that it has any defense to the Association’s quiet title action.

Also, the record does not support U.S. Bank’s claim that its failure to
appear in the quiet title action was due to surprise or excusable neglect. As
explained above, neither U.S. Bank nor Sutherland had any contact with the
court or the Association between the time the bank was served and default
entered. Moreover, U.S. Bank admitted to the trial court that it did not appear
within 20 days because it “uses numerous outside counsel to handle its matters,
[and] it took several weeks before the quiet title pleadings were properly routed
to Mr. Sutherland’s office.” U.S. Bank cites no authority supporting the
proposition that a large corporation’s failure to timely route pleadings to its
attorney is somehow excusable or otherwise warrants setting aside an order of
default. Implicit in the bank’s argument is a notion that large organizations are
entitled to more time to respond to litigation. This notion finds no support in a
legal system that strives to treat all litigants equally.

CONCLUSION

We reverse and remand to the trial court to reinstate the order of default
and decree quieting title to the Association.

WE CONCUR

1 U.S. Bank’s foreclosure proceedings stopped and started several times
due to agreements with Swanson, Swanson’s bankruptcy filing, and efforts to
obtain relief from an automatic stay.

2 The record shows that the Association effected service on May 17 and
filed its complaint on June 10.

3 In re Marriage of Williams, 156 Wn. App. 22, 27, 232 P.3d 573 (2010).
4 Morin v. Burris, 160 Wn.2d 745, 753, 161 P.3d 956 (2007); Hwang v.
McMahill, 103 Wn. App. 945, 949, 15 P.3d 172 (2000).
5 Morin, 160 Wn.2d at 753.
6 State v. Rafay, 167 Wn.2d 644, 655, 222 P.3d 86 (2009) (quoting State
v. Rohrich, 149 Wn.2d 647, 654, 71 P.3d 638 (2003)).
7 Morin, 160 Wn.2d at 753.

8 Morin, 160 Wn.2d at 749.
9 Morin, 160 Wn.2d at 749.
10 160 Wn.2d 745, 757, 161 P.3d 956 (2007).
11 Morin, 160 Wn.2d at 749.

12 Morin, 160 Wn.2d at 757.
13 143 Wn. App. 410, 177 P.3d 1147 (2008).
14 142 Wn. App. 71, 174 P.3d 133 (2007).
15 U.S. Bank alleges that Sutherland represented it in a dispute regarding
the wrongful foreclosure of the property. However, U.S. Bank never filed a
motion to vacate or otherwise challenged the foreclosure decree, which was
adjudicated some three years earlier. Thus, contrary to U.S. Bank’s implication,
no legal action was pending in February 2010.

16 Sacotte, 143 Wn. App. at 416.
17 Sacotte, 143 Wn. App. at 415 (emphasis added).
18 Old Republic, 142 Wn. App. at 73.
19 Old Republic, 142 Wn. App. at 73, 75.

20 Morin, 160 Wn.2d at 749.
21 73 Wn.2d 348, 352, 438 P.2d 581 (1968).
22 White, 73 Wn.2d at 352.
23 Little v. King, 160 Wn.2d 696, 706, 161 P.3d 345 (2007).
24 Little, 160 Wn.2d at 706.

25 RCW 4.28.320; see also Snohomish Reg’l Drug Task Force v. 414
Newberg Rd., 151 Wn. App. 743, 752, 214 P.3d 928 (2009) (once a lis pendens
is filed, any party who subsequently acquires an interest in the property does so
subject to the property’s ultimate disposition in the pending suit), review denied,
168 Wn.2d 1019, 228 P.3d 17 (2010).

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NY Appellate Div. 2nd Judicial Dept. “U.S. Bank did not submit a written assignment of the note…Submitted no evidence to establish physical delivery of the note.”

NY Appellate Div. 2nd Judicial Dept. “U.S. Bank did not submit a written assignment of the note…Submitted no evidence to establish physical delivery of the note.”


Decided on November 1, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

MARK C. DILLON, J.P.
THOMAS A. DICKERSON
CHERYL E. CHAMBERS
ROBERT J. MILLER, JJ.
2010-09895
(Index No. 14370/08)

[*1]U.S. Bank, National Association, etc., respondent,

v

Mohamed Y. Sharif, appellant, et al., defendants.

Steven Alexander Biolsi, Forest Hills, N.Y., for appellant.
Shapiro, DiCarlo & Barak, LLC, Rochester, N.Y. (Ellis M.
Oster of counsel), for respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Mohamed Y. Sharif appeals, as limited by his brief, from so much of an order of the Supreme Court, Nassau County (Adams, J.), entered August 20, 2010, as granted those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against him and for an order of reference, and denied those branches of his cross motion, made jointly with the defendant Nazimah Sharif, which were for leave to serve and file an amended answer to assert a defense based on lack of standing and, thereupon, to dismiss the complaint insofar as asserted against him based on lack of standing.

ORDERED that the order is reversed insofar as appealed from, on the law, on the facts, and in the exercise of discretion, with costs, those branches of the plaintiff’s motion which were for summary judgment on the complaint insofar as asserted against the defendant Mohamed Y. Sharif and for an order of reference are denied, and those branches of the cross motion of the defendant Mohamed Y. Sharif, made jointly with the defendant Nazimah Sharif, which were for leave to serve and file an amended answer, and thereupon, to dismiss the complaint insofar as asserted against the defendant Mohamed Y. Sharif based on lack of standing are granted.

” Entitlement to a judgment of foreclosure may be established, as a matter of law, where a mortgagee produces both the mortgage and unpaid note, together with evidence of the mortgagor’s default, thereby shifting the burden to the mortgagor to demonstrate, through both competent and admissible evidence, any defense which could raise a question of fact'” (Zanfini v Chandler, 79 AD3d 1031, 1031-1032, quoting HSBC Bank USA v Merrill, 37 AD3d 899, 900; see Household Fin. Realty Corp. of N.Y. v Winn, 19 AD3d 545, 546; Sears Mtge. Corp. v Yaghobi, 19 AD3d 402, 403; Ocwen Fed. Bank FSB v Miller, 18 AD3d 527, 527). However, “foreclosure of a mortgage may not be brought by one who has no title to it” (Kluge v Fugazy, 145 AD2d 537, 538). Where standing is raised as a defense by the defendant, the plaintiff is required to prove its standing before it may be determined whether the plaintiff is entitled to relief (see U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242). [*2]

Here, the defendant Mohamed Y. Sharif (hereinafter Sharif) initially did not raise a defense based on lack of standing in his answer or in a pre-answer motion to dismiss. “[A]n argument that a plaintiff lacks standing, if not asserted in the defendant’s answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)” (Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d at 242; see JP Morgan Chase Bank, N.A. v Strands Hair Studio, LLC, 84 AD3d 1173, 1173). However, defenses waived under CPLR 3211(e) can nevertheless be interposed in an answer amended by leave of court pursuant to CPLR 3025(b) so long as the amendment does not cause the other party prejudice or surprise resulting directly from the delay (Complete Mgt., Inc. v Rubenstein, 74 AD3d 722, 723; see Nunez v Mousouras, 21 AD3d 355, 356; Aurora Loan Servs., LLC v Thomas, 70 AD3d 986, 987).

After the plaintiff moved for summary judgment, Sharif, with the defendant Nazimah Sharif, cross-moved, inter alia, for leave to serve and file an amended answer to assert a defense based on the plaintiff’s lack of standing, and, upon the assertion of that defense, to dismiss the complaint insofar as asserted against them. “Motions for leave to amend pleadings should be freely granted, absent prejudice or surprise directly resulting from the delay in seeking leave, unless the proposed amendment is palpably insufficient or patently devoid of merit” (Aurora Loan Servs., LLC v Thomas, 70 AD3d at 987; see CPLR 3025[b]; Lucido v Mancuso, 49 AD3d 220, 222). ” Mere lateness is not a barrier to the amendment. It must be lateness coupled with significant prejudice to the other side, the very elements of the laches doctrine'” (Public Adm’r of Kings County v Hossain Constr. Corp., 27 AD3d 714, 716, quoting Edenwald Contr. Co. v City of New York, 60 NY2d 957, 959; see Abrahamian v Tak Chan, 33 AD3d 947, 949).

The Supreme Court improvidently exercised its discretion in denying that branch of Sharif’s cross motion which was for leave to serve and file an amended answer to assert a defense based on lack of standing. In opposition to that branch of the cross motion, the plaintiff failed to demonstrate the existence of any prejudice or surprise that would result from the amendment, or that the proposed amended answer was palpably insufficient or patently devoid of merit (see Aurora Loan Servs., LLC v Thomas, 70 AD3d at 987).

Upon Sharif’s assertion of the defense of lack of standing, the plaintiff was required to demonstrate its standing to prosecute this action (see U.S. Bank, N.A. v Collymore, 68 AD3d at 753). In opposition to that branch of Sharif’s cross motion which, upon the amendment of the answer, was to dismiss the complaint insofar as asserted against him, the plaintiff failed to make any showing that it had standing to maintain this action. The plaintiff did submit an assignment of the mortgage. However, “[w]here a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity” (U.S. Bank, N.A. v Collymore, 68 AD3d at 754; see Merritt v Bartholick, 36 NY 44, 45; Kluge v Fugazy, 145 AD2d at 538). “Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident” (U.S. Bank, N.A. v Collymore, 68 AD3d at 754). In opposing the cross motion, the plaintiff did not submit a written assignment of the note. Moreover, the plaintiff submitted no evidence to establish physical delivery of the note. Accordingly, in the absence of any evidence to demonstrate the existence of a written assignment of the note or physical delivery of the note, the Supreme Court should have granted that branch of Sharif’s cross motion which, upon the amendment of the answer, was to dismiss the complaint insofar as asserted against him for lack of standing (see CPLR 3211[a][3]; Bank of N.Y. v Silverberg, 86 AD3d 274; Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 109; U.S. Bank, N.A. v Collymore, 68 AD3d at 753-754).

DILLON, J.P., DICKERSON, CHAMBERS and MILLER, JJ., concur.

ENTER: [*3]

Matthew G. Kiernan

Clerk of the Court
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MERS Registry Targeted by Local Land Offices Over Lost Fees

MERS Registry Targeted by Local Land Offices Over Lost Fees


I can tell you that this is ONLY the beginning… stay tuned for others to come forward soon.

MERS is done, repeat done.

Nancy Becker – You Go Girl!

Bloomberg-

For Nancy J. Becker, recorder of deeds in Montgomery County, Pennsylvania, outside Philadelphia, property records are practically sacred. So much so that her office keeps digital copies of land records dating to 1784 in four separate databases, including one 1,700 miles (2,735 kilometers) away.

If the county seat were leveled tomorrow, she says, “I could still record documents on my laptop on the street corner with a card table.”

Becker may sound tech-savvy, but to some of her constituents’ dismay, she can’t always call up a property with a keystroke and see who holds its note. That’s because more than 200,000 of her records list the lien holder as MERS, the private service that acts as a proxy for banks that bundle and sell off mortgage securities. That can make it all but impossible for a recorder to determine who really holds the paper, Bloomberg Businessweek reports in its Nov. 7 edition.

[BLOOMBERG]

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Washington County, Pennsylvania Brings Class Action on behalf of PA’s 67 counties to Recover Recording “MERS” Fees Lost to Wall Street

Washington County, Pennsylvania Brings Class Action on behalf of PA’s 67 counties to Recover Recording “MERS” Fees Lost to Wall Street


IN THE COURT OF COMMON PLEAS OF WASHINGTON COUNTY, PENNSYLVANIA

Civil Division

COUNTY OF WASHINGTON,
PENNSYLVANIA, on behalf of itself and all
other similarly situated Pennsylvania Counties,

Plaintiff

vs.

U.S. BANK NATIONAL ASSOCIATION,

Defendant

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FELTUS v. US Bank N.A. | FL 2DCA “Affidavit of Indebtedness Fail, Genuine Issue of Material Fact of Who Owned or Held the Note”

FELTUS v. US Bank N.A. | FL 2DCA “Affidavit of Indebtedness Fail, Genuine Issue of Material Fact of Who Owned or Held the Note”


JULIA FELTUS, Appellant,
v.
U.S. BANK NATIONAL ASSOCIATION, as TRUSTEE of MASTR ADJUSTABLE RATE MORTGAGES TRUST 2007-3, Appellee.

 

Case No. 2D10-3727.
District Court of Appeal of Florida, Second District. 

Opinion filed October 19, 2011.
Jacqulyn Mack of The Mack Law Firm, Englewood, for Appellant.Roy A. Diaz and Diana B. Matson of Smith, Hiatt & Diaz, P.A., Ft. Lauderdale for Appellee.

WHATLEY, Judge.

Julia Feltus appeals a final summary judgment of foreclosure in favor of U.S. Bank National Association, as Trustee of Mastr Adjustable Rate Mortgages Trust 2007-3 (U.S. Bank or the Bank). We reverse because material issues of fact as to which entity holding the promissory note executed by Feltus existed at the time the trial court entered summary judgment.

On August 24, 2009, U.S. Bank filed an unverified complaint seeking to reestablish a lost promissory note and to foreclose the mortgage on Feltus’s home. U.S. Bank attached to the complaint a copy of the note and the mortgage, but both documents showed the lender to be Countrywide Bank, N.A. In the count to reestablish the note pursuant to section 673.3091, Florida Statutes (2009), U.S. Bank alleged that the note was executed by Feltus on February 16, 2007; U.S. Bank is the owner and holder of the note; the original note has been lost and is not in U.S. Bank’s custody or control; the note was continuously in the possession and control of the Bank’s assignor and predecessor from the date of execution until the loss, at which time the assignor and predecessor was entitled to enforce the note; and the note has not been paid or otherwise satisfied, assigned, or transferred, or lawfully seized. Notably, these allegations did not include an allegation that Countrywide had assigned the note to U.S. Bank.

After Feltus filed a motion to dismiss alleging that U.S. Bank had failed to establish that it owned or held the subject note, on November 16, 2009, U.S. Bank filed an affidavit of indebtedness executed by Kathy Repka, an assistant secretary of BAC Home Loan Servicing, L.P., f/k/a Countrywide Home Loan Servicing, L.P. Repka asserted that her affidavit was based on the loan payment records of the servicing agent and her familiarity with those records. After she explained that the purpose of the records was “to monitor and maintain the account relating to a note and mortgage that are the subject matter of the pending case,” Repka asserted that U.S. Bank owns and holds the note described in its complaint. Then on November 18, 2009, U.S. Bank filed another copy of the note as a supplemental exhibit to its complaint. In contrast to the copy attached to the complaint that contained no endorsements, this copy contained two endorsements that were side by side on the last page—the first stated “PAY TO THE ORDER OF: COUNTRYWIDE HOME LOANS, INC. WITHOUT RECOURSE COUNTRYWIDE BANK, N.A.” and the second stated “PAY TO THE ORDER OF: __________ WITHOUT RECOURSE COUNTRYWIDE HOME LOANS, INC.” Notwithstanding this filing, eight days after Feltus filed her answer and affirmative defenses, on May 26, 2010, U.S. Bank filed a motion for summary final judgment alleging that it “owns and holds a promissory note and mortgage” and that the original note had been lost and is not in U.S. Bank’s control. But on June 4, 2010, the Bank filed a reply to Feltus’s affirmative defenses in which it asserted that it is now in possession of the original note, which it attached and which is the same note it filed on November 18, 2009. The Bank further asserted that because the note is endorsed in blank and it is in possession of the note, it is the bearer and entitled to foreclose the mortgage. See Riggs v. Aurora Loan Servs., LLC, 36 So. 3d 932, 933 (Fla. 4th DCA 2010) (noting that pursuant to Uniform Commercial Code, negotiation of note by transfer of possession with blank endorsement makes transferee the holder of the note entitled to enforce it).

We view U.S. Bank’s filing of a copy of the note that it later asserted was the original note as a supplemental exhibit to its complaint to reestablish a lost note as an attempt to amend its complaint in violation of Florida Rule of Civil Procedure 1.190(a). U.S. Bank did not seek leave of court or the consent of Feltus to amend its complaint. A pleading filed in violation of rule 1.190(a) is a nullity, and the controversy should be determined based on the properly filed pleadings. Warner-Lambert Co. v. Patrick, 428 So. 2d 718 (Fla. 4th DCA 1983).

Before a court may grant summary judgment, the pleadings, depositions, answers to interrogatories, admissions, and any affidavits must “`conclusively show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'” Allenby & Assocs., Inc. v. Crown St. Vincent Ltd., 8 So. 3d 1211, 1213 (Fla. 4th DCA 2009) (quoting Fini v. Glascoe, 936 So. 2d 52, 54 (Fla. 4th DCA 2006)). The party moving for summary judgment bears the burden to show conclusively that there is a complete absence of any genuine issue of material fact. Id.

The properly filed pleadings before the court when it heard the Bank’s motion for summary judgment were a complaint seeking to reestablish a lost note, Feltus’s answer and affirmative defenses alleging that the note attached to the complaint contradicts the allegation of the complaint that U.S. Bank is the owner of the note, a motion for summary judgment alleging a lost note of which U.S. Bank is the owner, an affidavit of indebtedness alleging that U.S. Bank was the owner and holder of the note described in the complaint, and U.S. Bank’s reply to Feltus’s affirmative defenses asserting that it was now in possession of the original note, which it attached to the reply. But the note attached to the complaint showed the lender to be Countrywide Bank, N.A. And the complaint failed to allege that “[t]he person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” § 673.3091(a). In addition, the affidavit of indebtedness revealed no basis for the affiant’s assertion that U.S. Bank owns and holds the note. The affiant is an assistant secretary for the alleged servicing agent of the Bank, and she asserted that she had personal knowledge of the loan based on the loan payment records. She did not assert any personal knowledge of how U.S. Bank would have come to own or hold the note. See Shafran v. Parrish, 787 So. 2d 177, 179 (Fla. 2d DCA 2001) (“When affidavits are filed to establish the factual basis of the motion [for summary judgment], they must be made on personal knowledge, demonstrate the affiant’s competency to testify, and be otherwise admissible in evidence.”).

The trial court erred in entering final summary judgment of foreclosure because the documents before it created a genuine issue of material fact of who owned or held the note. Accordingly, we reverse and remand for further proceedings.

CRENSHAW, J., Concurs.

CASANUEVA, J., Concurs with opinion.

CASANUEVA, Judge, Concurring.

I fully concur with the majority opinion and write only to point out further failings in the affidavit of indebtedness.

The affidavit of indebtedness was the sole affidavit offered in support of U.S. Bank’s motion for summary judgment. The affiant was an assistant secretary employed by the Bank’s loan servicing agent. She set forth, under oath, that her direct personal knowledge was restricted to that learned in maintaining the loan payment records of the servicing agent. And, as the majority opinion points out, she did not assert any personal knowledge of how U.S. Bank had come to own or hold the note. Beyond this deficiency noted in the majority opinion, the affiant also stated that U.S. Bank had accelerated the entire principal balance due and had “retained Smith, Hiatt & Diaz, P.A. to represent it in this matter.” Because the affiant’s competency was based only on her review of the loan payment records, she was not competent to aver as to actions of the Bank in accelerating the loan or hiring counsel, and her averments are hearsay and inadmissible at trial. The Bank could have easily established the facts of acceleration of the note and hiring of counsel with affidavits from the Bank’s official in charge of foreclosing this loan and/or the Bank’s counsel to establish the fact of hiring and of the fee arrangement. Such bank official or counsel would have direct personal knowledge, would be competent, and would have presented evidence admissible at trial.

The affidavit the Bank submitted fell woefully short of these requirements and could not aid the Bank in any way to support its motion for summary judgment of foreclosure.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

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The standing issue is back before the Ohio Supreme Court. Fed. National Mtge. Corp. v. Schwartzwald

The standing issue is back before the Ohio Supreme Court. Fed. National Mtge. Corp. v. Schwartzwald


H/T Andrew E.

A motion to reconsider asking the Court to reconsider its dismissal of Duvall as moot has been filed.

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UT Class Action Lawsuit Alleging Fair Debt Collection Violations to Proceed Against Bank of America and Recontrust Company

UT Class Action Lawsuit Alleging Fair Debt Collection Violations to Proceed Against Bank of America and Recontrust Company


KCSG-

US District Judge Dee Benson ruled Tuesday that a class action lawsuit can proceed against ReconTrust and Bank of America (NYSE: “BAC”).

.

IN THE UNITED STATES DISTRICT COURT, DISTRICT OF UTAH,

CENTRAL DIVISION

JEREMY COLEMAN, DWAYNE WATSON, SAMUEL ADAMSON, ETHNA LYNCH,

Plaintiffs,

vs.

RECONTRUST COMPANY, N.A.,

[…]

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Ohio Supreme Court’s Shocking Decision in Landmark Case U.S. BANK v. DUVALL

Ohio Supreme Court’s Shocking Decision in Landmark Case U.S. BANK v. DUVALL


Via: Ohio Fraudclosure

A Simple question was before the OHIO SUPREME COURT JUSTICES:

To have STANDING, as a plaintiff, in a mortgage foreclosure action, must a party show that it owned the NOTE and the MORTGAGE when the complaint was filed?

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U.S. Bank sues WMC Mortgage and Equifirst Corporation in its role as trustee for a $550 million UBS offering

U.S. Bank sues WMC Mortgage and Equifirst Corporation in its role as trustee for a $550 million UBS offering


REUTERS-

U.S. Bank has struck again. Less than a week ago, the bank, acting as securitization trustee, sued Bank of America to demand the repurchase of deficient loans underlying Greenwich Capital MBS offerings. And now U.S. Bank has sued WMC Mortgage and Equifirst Corporation in its role as trustee for a $550 million UBS offering. Here’s the 23-page Minnesota federal court complaint, filed by the recently ubiquitous Kasowitz Benson Torres & Friedman.

There aren’t any bombshells in the complaint, which asserts the all-too-familiar allegations that WMC and Equifirst made false representations and warranties about the mortgage loans it supplied UBS. Instead, the news is that U.S. Bank has suddenly adopted a newly activist role as securitization trustee.

[REUTERS]

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In Re: LIPPOLD | NY Bankruptcy Court Delivers TKO to MERS, US BANK

In Re: LIPPOLD | NY Bankruptcy Court Delivers TKO to MERS, US BANK


IN RE LIPPOLD

In re: MARK RICHARD LIPPOLD, Chapter 7, Debtor.

Case No. 11-12300 (MG).

United States Bankruptcy Court, S.D. New York.

September 6, 2011.

A P P E A R A N C E S:
SHELDON MAY & ASSOCIATES, P.C.

Attorneys for U.S. Bank, N.A.
255 Merrick Road
Rockville Centre, New York 11570
By: Brian P. Nelson, Esq.

MARTIN GLENN
UNITED STATES BANKRUPTCY JUDGE

MEMORANDUM OPINION AND ORDER DENYING MOTION FOR
RELIEF FROM THE AUTOMATIC STAY

In this chapter 7 case of debtor Mark Richard Lippold (the “Debtor”), U.S. Bank National Association (“U.S. Bank”), as trustee, on behalf of the holders of the Asset Backed Securities Corporation Home Equity Loan Trust (the “Trust”), Series AEG 2006-HE1 Asset Backed Pass-Through Certificates, Series AEG 2006-HEI, moves to vacate the automatic stay pursuant to section 362(d)(2) of the Bankruptcy Code to permit it to proceed with foreclosure of the Debtor’s primary residence (the “Property”) located at 3171 Fairmont Avenue, Bronx, NY 10465 (the “Motion”).1 (ECF Doc. #16.)

The issues discussed in this Opinion are neither novel nor complex, but highlight a well-publicized and persistent problem with inadequate mortgage foreclosure documentation. The failure to properly document the transfer of the note and mortgage raises the question whether the movant has standing to seek relief—here, an order vacating the automatic stay, but, if successful here, then a judgment of foreclosure in state court. Neither the Debtor’s counsel nor the Chapter 7 trustee filed an objection to the Motion. But the lack of objection does not relieve U.S. Bank from the burden of establishing its right to relief. The Court denies the Motion because U.S. Bank has not established its standing for stay relief.

BACKGROUND

On May 16, 2011, the Debtor filed a voluntary petition under chapter 7 of the Bankruptcy Code (the “Petition”). (ECF Doc. #1.) The Debtor’s schedules disclose $352,617.00 in assets and $708,237.75 in liabilities. Schedule D shows the Property is encumbered by two mortgages, aggregating $461,616.00. Schedule A values the Property at only $350,000.00, admitting the Debtor’s lack of equity in the Property.2 The Debtor’s Statement of Intention states the Debtor’s intent to pursue a loan modification with respect to the Property.3

Aegis Funding Corporation (“Aegis”) was the original mortgage lender. The promissory note (the “Note”) names Aegis as the lender. The accompanying mortgage (the “Mortgage”) lists Mortgage Electronic Registration Systems, Inc. (“MERS”) as the mortgagee solely in its capacity as “nominee” for Aegis and its successors in interest. (Motion Ex. B, at 3.) The Mortgage further provides that MERS “holds only legal title to the rights granted by [Debtor] in [the Mortgage,]” and that “[f]or purposes of recording [the Mortgage],” MERS is the “mortgagee of record.” (Id. at 1, 3.) “MERS (as nominee for [Aegis] and [Aegis’s] successors and successors and assigns) has the right:

(A) to exercise any or all of those rights, including, but not limited to, the right to foreclose and sell the Property; and

(B) to take any action required of [Aegis] including, but not limited to, releasing and canceling [the Mortgage].”

(Id. at 3.)

The Note provides for the Debtor to pay Aegis principal in the amount of $344,000.00 plus interest. (Motion Ex. A.) Unlike the Mortgage, however, Aegis did not confer any rights in MERS with respect to the Note. (Id.)

The Motion is supported by a Corporate Assignment of Mortgage (the “Assignment”), whereby MERS, “as nominee for [Aegis] its successors and assigns at c/o [Select Portfolio Servicing,]” assigned to U.S. Bank, in its capacity as trustee of the Trust, the said Mortgage together with other evidence of indebtedness, said Mortgage having an original principal sum of $344,000.00 with interest, secured thereby, together with all moneys now owing or that may hereafter become due or owing in respect thereof, and the full benefit of all powers and of all the covenants and provisos therein contained, and the said Assignor hereby grants and conveys onto [U.S. Bank], [MERS’s] beneficial interest under the Mortgage.

(Motion Ex. C.)

The Assignment from MERS to U.S. Bank purports to transfer MERS’s rights in the Note; but it does not answer the question of what, if any, rights MERS has in the Note. At an August 30, 2011 hearing on the Motion (the “Hearing”), U.S. Bank’s counsel acknowledged that other than the Assignment, the record contains no evidence of U.S. Bank’s purported ownership of the Note.

DISCUSSION

A. U.S. Bank is Not a “Party in Interest” Under 11 U.S.C. § 362(d)(2)

Section 362(a) of the Bankruptcy Code provides an automatic stay on all litigation against the Debtor, as well as “any act to create, perfect, or enforce any lien against property of the estate.” 11 U.S.C. § 362(a). Under section 362(d)(2) of the Bankruptcy Code—the operative provision relied on by U.S. Bank in seeking relief—”[o]n request of a party in interest . . . the court shall grant relief from the stay . . . if—(A) the debtor does not have an equity in such property; and (B) such property is not necessary to an effective reorganization.” 11 U.S.C. § 362(d)(2) (emphasis added).

In In re Mims, 438 B.R. 52, 55 (Bankr. S.D.N.Y. 2010), this Court explained that the term “party in interest” is not defined in the Bankruptcy Code. Under Second Circuit law, however, “in order to invoke the court’s jurisdiction to obtain relief from the automatic stay, the moving party [must] be either a creditor or a debtor.” Id. (citing In re Comcoach, 698 F.2d 571, 573 (2d Cir. 1983)); see also Agard, 444 B.R. at 245. It follows that U.S. Bank must be a “creditor” to seek relief from the automatic stay.4 Mims, 438 B.R. at 55.

Section 101(10) of the Bankruptcy Code defines a “creditor,” in part, as an “entity that has a claim against the debtor that arose at the time of or before the order for relief concerning the debtor.” 11 U.S.C. § 101(10)(A) (emphasis added). A “claim” is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured or unsecured.” Id. § 101(5)(A) (emphasis added).

Despite the Bankruptcy Code’s broad definition of a “claim,” U.S. Bank “has not demonstrated its `right to payment’ because . . . it lacks the ability to seek the state law remedy of foreclosure.” Mims, 438 B.R. at 56 (citing Johnson v. Home State Bank, 501 U.S. 78, 81 (1991) (finding that a mortgage foreclosure was a “right to payment” against the debtor)).

B. U.S. Bank Lacks Standing to Foreclose on the Property

“Standing is a threshold issue for a court to resolve.” Agard, 444 B.R. at 245. State law governs the determination of property rights in a bankruptcy proceeding. See Butner v. United States, 440 U.S. 48, 54 (1979) (noting that absent an actual conflict with federal bankruptcy law, Congress “has generally left the determination of property rights in the assets of a bankrupt’s estate to state law”); In re Morton, 866 F.2d 561, 563 (2d Cir. 1989). Under New York law, a plaintiff has standing to commence a mortgage foreclosure action “where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced.” Bank of N.Y. v. Silverberg, 926 N.Y.S.2d 532, 536 (2d Dept. 2011) (citing cases). “[F]oreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity.” Kluge v. Fugazy, 145 A.D.2d 537, 538 (2d Dept. 1988) (citing cases); see also HSBC Bank USA, Nat. Ass’n v. Miller, 26 Misc.3d 407, 411-12 (N.Y. Sup. Ct., Sullivan County 2009).

While the transfer of the mortgage without the promissory note is a nullity, once a promissory note is transferred from assignor to assignee, “the mortgage passes as an incident to the note.” Id. at 537; see also In re Escobar, Nos. 11-71114-ast, 11-71135-ast, 2011 WL 3667550, at *9 (Bankr. E.D.N.Y. Aug. 22, 2011) (Trust, J.). An assignment of the note and mortgage can be effectuated by a written instrument or by physical transfer of the instrument from assignor to assignee. Mims, 438 B.R. at 56. In Mims, this Court held that the movant, Wells Fargo Bank, N.A. (“Wells Fargo”), failed to supply proof that it was the owner of a promissory note given as part of a home mortgage loan. Id. Wells Fargo could not show that the note was either physically delivered or assigned pursuant to a written agreement. Id. Wells Fargo supported its motion with a written assignment, but the document only assigned the mortgage, not the underlying debt. Id. at 56-57. Stay relief was denied—since Wells Fargo failed to prove it owned the note, it “failed to establish that it [had] standing to pursue its state law remedies with regard to the Mortgage and Property.” Id. at 57; see also Escobar, 2011 WL 3667550, at *8 (“[A] note or mortgage assignee must demonstrate rights to proceed under state law as against the property at issue to have bankruptcy standing.”) (emphasis added).

Furthermore, the facts of this case are remarkably similar to two cases decided after Mims. In Agard, U.S. Bank, through its servicer, moved for relief from the automatic stay. 444 B.R. at 237. U.S. Bank submitted (i) a note executed by the debtor as borrower, and First Franklin, a Division of Na. City Bank of In. (“First Franklin”), as lender, and (ii) a mortgage executed by the debtor listing First Franklin as lender, and MERS as nominee for First Franklin and its successors and assigns. Id. While MERS was named as a party to the mortgage, it was not a party to the note. Id. at 246. U.S. Bank supplied an assignment of mortgage listing MERS as nominee for First Franklin, as assignor, and U.S. Bank, in its capacity as trustee for a mortgage loan trust, as assignee. Id. Judge Grossman found that U.S. Bank failed to meet its burden of showing that it was the holder of the note by an assignment from First Franklin: MERS was “not a party to the Note” and no evidence was produced demonstrating MERS’s “authority to take any action with respect to the Note.” Id. at 246. Moreover, U.S. Bank did not establish that it retained physical possession of the note to evidence a valid transfer.5 Id.

More recently, in Silverberg, the Appellate Division for the Second Department held that since MERS was not the lawful holder of notes identified in a mortgage and note consolidation agreement, MERS did not have the authority to assign the power to foreclose. 926 N.Y.S.2d at 538. The borrowers had entered into two loan agreements with Countrywide Home Loans, Inc. (“Countrywide”) to purchase residential real property—each loan included a promissory note and a mortgage securing the borrowers’ obligations under the note. Id. at 533-34. The borrowers subsequently executed a consolidation agreement, merging the two notes and mortgages into one obligation in favor of MERS, as mortgagee and nominee of Countrywide. Id. at 534. But Countrywide alone was the named lender and note holder. Id. The consolidation agreement recited that MERS was “acting solely as a nominee for [Countrywide] and [Countrywide’s] successors and assigns. . . . For purposes of recording this agreement, MERS is the mortgagee of record.” Id. Countrywide was not a party to the consolidation agreement. Id. Several months later, MERS, as Countrywide’s nominee, assigned the consolidation agreement to the Bank of New York. Id. When the borrowers defaulted, the Bank of New York commenced a foreclosure action in state court. Id. On appeal, the Second Department concluded that while the consolidation agreement gave MERS the right to assign the mortgages, it did not give MERS the authority to transfer the underlying notes. Id. at 538. MERS’s authority, as “nominee,” was “limited to only those powers which were specifically conferred to it and authorized by the lender.” Id. Since MERS could not transfer the notes, any such assignment exceeded MERS’s authority as the lender’s nominee.6 Id.

In this case, the Mortgage transferred “those rights that are stated in [the Mortgage]” to MERS, solely as Aegis’s nominee, so that “MERS [holds] only legal title to the rights granted by [Debtor] in [the Mortgage].” (Motion Ex. B, at 3.) According to the Mortgage, MERS is the “mortgagee of record[,]” and has the right, inter alia, to foreclose on the Property. (Id. at 1, 3). This language mirrors the terms of the consolidation agreement in Silverberg. At the Hearing, U.S. Bank’s counsel conceded that the facts of this case were “on all fours” with Silverberg.

The language of the Assignment in this case purports to transfer both the Mortgage and the Note to U.S. Bank. But MERS, as the purported assignor, could not legally assign the Note; it only had legal rights with respect to the Mortgage. Aegis did not confer any rights on MERS in the Note—MERS is not a party to the Note nor is there any indication that MERS was authorized to take any action with respect to the Note. See Agard, 444 B.R. at 246. Thus, “assignment of the note[] [is] . . . beyond MERS’s authority as nominee or agent of the lender.” Silverberg, 926 N.Y.S.2d at 538. There is also no evidence in the record showing that U.S. Bank received physical delivery of the Note, or that U.S. Bank is in possession of the Note. Since U.S. Bank failed to “provide satisfactory proof of its status as the owner or holder of the note at issue,” see Escobar, 2011 WL 3667550, at *9, the Court concludes that U.S. Bank does not have standing to obtain stay relief.7

CONCLUSION

For the reasons explained above, U.S. Bank’s motion to lift the automatic stay is denied without prejudice.

IT IS SO ORDERED

Footnotes

1. As an initial matter, the identity of the movant is unclear. In the papers submitted with the Motion, the movant is referred to as either U.S. Bank or Select Portfolio Servicing, Inc. (“Select Portfolio Servicing”)—U.S. Bank’s servicer. For purposes of this Opinion, the Court shall refer to U.S. Bank as the movant. Even if Select Portfolio Servicing is the movant, it is well-established that a mortgage servicer has standing to seek relief from the automatic stay, see, e.g., In re Agard, 444 B.R. 231, 235 n.1 (Bankr. E.D.N.Y. 2011) (citing cases), presuming, however, that the servicer is acting on behalf of a lender that has standing to seek stay relief. Id.

2. U.S. Bank’s lift-stay worksheet (Motion Ex. E), see Local Rule 4001-1(c), lists the value of the Property as $450,000.00.

3. This case does not present the issue whether the same standing analysis should be applied if a debtor’s stated intention is to surrender the property. In such a case the mortgagee can also pretermit the standing analysis with a stipulation to lift the stay with the debtor and any chapter 7 or 13 trustee.The docket does not show that the Debtor ever sought to take advantage of this Court’s Loss Mitigation Program. See SOUTHERN DISTRICT OF NEW YORK LOSS MITIGATION PROGRAM PROCEDURES (available at www.nysb.uscourts.gov).

4. A creditor’s authorized agent, such as a loan servicer, may also seek stay relief. See supra n.1.

5. The Agard court nevertheless granted U.S. Bank’s motion to vacate the automatic stay—the court held that the Rooker-Feldman doctrine applied, barring the debtor’s challenge to U.S. Bank’s standing, because of an earlier state court determination that U.S. Bank was a secured creditor. 44 B.R. at 233-34. But Judge Grossman concluded “in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing before this Court.” Id. at 254.

6. In In re Veal, 450 B.R. 897 (9th Cir. B.A.P. 2011), the court’s ruling substantially mirrors this Court’s ruling in Mims as well as the legal principles stated in Agard and Silverberg—namely, that in order to have standing to obtain stay relief, the moving party must establish ownership or an interest in the note. Id. at 917. The Ninth Circuit Bankruptcy Appellate Panel addressed whether the party seeking stay relief “established its standing as a real party in interest to pursue [relief from the automatic stay].” Id. at 902. The Veal court stated “a party seeking stay relief need only establish that it has a colorable claim to enforce a right against property of the estate.” Id. at 914-15. In order to show a “colorable claim” against the property, the movant “had to show that it had some interest in the Note, either as a holder, as some other `person entitled to enforce [under applicable UCC Art. 3 law],’ or that it was someone who held some ownership or other interest in the Note.” Id. at 917. The court concluded that the movant lacked standing because:without any evidence tending to show it was a `person entitled to enforce’ the Note, or that it has an interest in the Note, [the movant] has shown no right to enforce the Mortgage securing the Note. Without these rights, [the movant] cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.

Id. at 918.

7. U.S. Bank cannot argue that it has standing because the Mortgage states that MERS is the mortgagee of record for purposes of recording. (Motion Ex. B, at 1.) The Silverberg court rejected that very same argument— such language “cannot overcome the requirement that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced.” Silverberg, 926 N.Y.S.2d at 539. Also, since U.S. Bank offered no evidence that it owns any interest in the Note, by assignment, transfer or delivery, this case does not present the issue discussed in Escobar, 2011 WL 3667550, at *7, about the evidentiary threshold for lifting the automatic stay, leaving the issue for state court whether the evidence is sufficient to support granting a foreclosure judgment.

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GONZALEZ v. WILSHIRE CREDIT CORP., U.S. BANK | NJ Supreme Court Affirms Appellate Div. “Fraudulent lending practices, even in a post-judgment setting, may be the basis for a Consumer Fraud Act lawsuit”

GONZALEZ v. WILSHIRE CREDIT CORP., U.S. BANK | NJ Supreme Court Affirms Appellate Div. “Fraudulent lending practices, even in a post-judgment setting, may be the basis for a Consumer Fraud Act lawsuit”


JUSTICE ALBIN delivered an awesome beat down! Kick-Ass! All the named judges below did!

We roundly reject defendants’ argument that the collection activities of a servicing agent, such as Wilshire, do not amount to the “subsequent performance” of a loan, a covered activity under the CFA. The Attorney General and Legal Services, as amici, both have outlined the abusive collection practices of servicing agents for Residential Mortgage Back Securities. We are in the midst of an unprecedented foreclosure crisis in which thousands of our citizens stand to lose their homes, and in desperation enter into agreements that extend credit — post-judgment — in the hope of retaining homeownership. Defendants would have us declare this seemingly unregulated area as a free-for-all zone, where predatory-lending practices are unchecked and beyond the reach of the CFA. Yet, the drafters of the CFA expected the Act to be flexible and adaptable enough to combat newly packaged forms of fraud and to be equal to the latest machinations exploiting the vulnerable and unsophisticated consumer.

GonzalezvWilshireCreditCorp

BLANCA GONZALEZ, Plaintiff-Respondent,

v.

WILSHIRE CREDIT CORPORATION and U.S. BANK NATIONAL ASSOCIATION, as Trustee Under the Pooling and Servicing Agreement dated March 14, 1997 for Cityscape Home Equity Loan Trust 1997-B, Inc., Defendants-Appellants.

No. A-99 September Term 2009 065564.

Supreme Court of New Jersey.

Argued January 18, 2011. Decided August 29, 2011.

Kim A. Watterson, a member of the Commonwealth of Pennsylvania bar, argued the cause for appellants (McElroy, Deutsch, Mulvaney & Carpenter, attorneys; Richard P. Haber and Anthony J. Risalvato, of counsel and on the briefs).

Madeline L. Houston argued the cause for respondent (Houston & Totaro, attorneys).

Janine N. Matton, Deputy Attorney General, argued the cause for amicus curiae Attorney General of New Jersey (Paula T. Dow, Attorney General, attorney; Andrea M. Silkowitz, Assistant Attorney General, of counsel; Ms. Matton and Megan Lewis, Deputy Attorney General, on the brief).

Michael R. O’Donnell submitted a brief on behalf of amicus curiae New Jersey Bankers Association (Riker Danzig Scherer Hyland & Perretti, attorneys; Mr. O’Donnell, Ronald Z. Ahrens, and Anthony C. Valenziano, on the brief).

Rebecca Schore submitted a brief on behalf of amicus curiae Legal Services of New Jersey (Melville D. Miller, Jr., attorney; Mr. Miller, Ms. Schore, Margaret Lambe Jurow, and David McMillin on the brief).

JUSTICE ALBIN delivered the opinion of the Court.

Plaintiff Blanca Gonzalez pledged as collateral the home she jointly owned with Monserate Diaz to secure a loan he obtained from Cityscape Mortgage Corporation. Diaz died, and afterwards plaintiff began making the necessary mortgage payments to the then holder of the loan, defendant U.S. Bank Association. When plaintiff fell behind in making timely payments, the bank secured a foreclosure judgment. The defendant servicing agent for the bank withheld executing on the judgment provided that plaintiff fulfilled the terms of successive agreements into which she entered with the agent. The post-judgment agreements recast the terms of the original loan to Diaz, but included — plaintiff asserts — illicit financing charges and miscalculations of monies due. Plaintiff claims that the servicing agent, knowing that plaintiff had no more than a primary school education and could not speak English, bypassed her legal-services attorney in having her execute a second agreement — an agreement that memorialized predatory and fraudulent lending practices.

Plaintiff alleges that the conduct of the defendant bank and the defendant servicing agent violated the Consumer Fraud Act. Defendants argue that a post-judgment settlement agreement involving a non-debtor mortgagor falls outside the purview of the Act.[1] The trial court agreed and granted summary judgment in favor of defendants. The Appellate Division reversed.

We hold that the post-foreclosure-judgment agreements in this case were both in form and substance an extension of credit to plaintiff originating from the initial loan. Fraudulent lending practices, even in a post-judgment setting, may be the basis for a Consumer Fraud Act lawsuit. For that reason, we affirm the Appellate Division.

I.

A.

In 1994, plaintiff Blanca Gonzalez and Monserate Diaz purchased a home in Perth Amboy as tenants in common;[2] both of their names were placed on the deed.[3] In February 1997, Diaz borrowed $72,000 from Cityscape Mortgage Corporation (Cityscape) and executed a Fixed Rate Balloon Note with an annual interest rate of 11.250 percent. In the note, Diaz agreed to make monthly payments of $699.31 until the loan’s maturity date, March 3, 2012, when a final balloon payment of $61,384.17 would be due. Plaintiff did not sign the note. As security for the loan, plaintiff and Diaz pledged both of their interests in the property by executing a mortgage in favor of Cityscape. The mortgage agreement prepared by Cityscape listed plaintiff and Diaz as “borrower[s].” Although plaintiff was not personally liable on the note signed by Diaz, in the event of nonpayment of the loan, plaintiff’s ownership interest in the home was subject to foreclosure to pay Diaz’s debt.

In March 1997, Cityscape assigned the note and mortgage to U.S. Bank National Association (U.S. Bank). U.S. Bank acquired the note and mortgage in this case, along with a bundle of other like instruments, in the bank’s capacity as trustee, under a pooling and servicing agreement for Cityscape Home Equity Loan Trust 1997-B, Inc. Wilshire Credit Corporation (Wilshire) was U.S. Bank’s servicing agent.[4] The role of a servicing agent generally is to collect payments on the loan and, in the event of default, pursue foreclosure or other alternatives to secure payment of the loan. See Adam J. Levitin & Tara Twomey, Mortgage Servicing, 28 Yale J. on Reg. 1, 15, 23, 25-28 (2011).

In 1999, Diaz died intestate.[5] Plaintiff continued to live in the home and make payments on the loan. In 2001, plaintiff was laid off from her factory job at Mayfair Company, where she had been employed for seventeen years. After the layoff, she suffered a heart attack and other health difficulties, and in 2003 was approved for Social Security disability benefits.

Over time, plaintiff fell behind on the loan payments. At some point, Wilshire refused to accept further payments from plaintiff. In March 2003, U.S. Bank filed a foreclosure complaint in the Superior Court, Chancery Division, Middlesex County, naming Diaz’s estate and plaintiff as defendants. In September 2003, the bank forwarded to plaintiff a Notice of Intent to Foreclose, indicating that $8,108.23 was owed on the loan. Plaintiff was unable to pay the amount due.

In April 2004, the chancery court entered judgment in favor of U.S. Bank in the amount of $80,454.71 plus interest and costs, including $954.55 in attorneys’ fees, on the defaulted loan. The court also ordered that the mortgaged premises be sold to satisfy the judgment. A writ of execution was issued, and a sheriff’s sale was scheduled for the next month.

Before the sheriff’s sale, plaintiff entered into a written agreement with Wilshire, U.S. Bank’s servicing agent. In May 2004, Wilshire agreed to forbear pursuing the sheriff’s sale contingent on plaintiff paying arrears, including foreclosure fees and costs, of $17,612.84. Plaintiff agreed to make a lump sum payment of $11,000 and then monthly payments of $1,150 through January 20, 2006.[6] Wilshire added the caveat: “THIS TERM MAY NOT REINSTATE THE LOAN.” Wilshire further agreed to dismiss the foreclosure action when plaintiff made the account current. The agreement ended with the following language: “THIS IS AN ATTEMPT TO COLLECT A DEBT.” In negotiating this agreement with Wilshire, Gail Chester, a lawyer for Central Jersey Legal Services, represented plaintiff.

By the end of September 2005, plaintiff had made payments totaling $24,800 under the agreement — the $11,000 lump sum payment and twelve monthly payments of $1,150. However, plaintiff missed four payments during this period. The trial court calculated, and plaintiff agreed, that she was in arrears $6,461.89 as of October 2005. A sheriff’s sale was scheduled but cancelled because the parties entered into a new written agreement in October 2005. Plaintiff was contacted directly; neither Wilshire nor U.S. Bank notified Ms. Chester, the attorney who represented plaintiff on the first agreement.

In negotiating this second agreement, which was entirely in English, Wilshire dealt solely with plaintiff, who did not speak or read English (Spanish is her native language) and who only had a sixth-grade education. Wilshire’s own notes indicate that “borrower does not speak English[;] negotiating has been difficult,” that plaintiff was disabled and on a fixed income of $600 per month, and that plaintiff did not want to sell the property because it had been in the family for many years.

In this second agreement signed by plaintiff, arrearages, including foreclosure fees and costs, were fixed at $10,858.18.[7] Thus, the arrearages in this agreement were $4,396.29 more than that calculated earlier by the chancery court. Plaintiff agreed to make a lump sum payment of $2,200 and then monthly payments of $1,000 through October 2006. As in the first agreement, Wilshire agreed to discharge the foreclosure action when the mortgage payments became current. This agreement also included the message: “THIS IS AN ATTEMPT TO COLLECT A DEBT.”

In September 2006, the attorney for U.S. Bank copied plaintiff on a letter to the sheriff’s office stating that the previously scheduled sheriff’s sale had been adjourned to October 4, 2006. Yet plaintiff had not missed a single payment required by the 2005 agreement. Indeed, plaintiff had made not only all required payments through October 2006 but also additional payments. Thus, the loan was current, but Wilshire had not dismissed the foreclosure action as promised.

Plaintiff took the letter from U.S. Bank’s attorney to Ms. Chester of Legal Services. Having no knowledge of the second agreement, Ms. Chester wrote to the bank’s attorney that plaintiff had paid $20,569.32 in excess of her regular monthly payment, $699.31, since the May 2004 agreement (the first agreement). Ms. Chester suggested that it was time to return plaintiff to the monthly payment schedule of $699.31. The bank’s attorney did not respond. Rather, in October 2006, Wilshire sent a letter to plaintiff noting that the second agreement was about to expire and that a new agreement needed to be negotiated otherwise it would resume foreclosure on her property. Ms. Chester contacted the Wilshire Loan Workout Compliance Department seeking answers to the status of plaintiff’s obligations. Wilshire then forwarded to Ms. Chester the second agreement. Wilshire could not explain how it had come to the $10,858.18 arrears set in the October 2005 agreement, nor could it explain why plaintiff was not deemed current on the loan.

Additionally, in the period after the chancery court’s entry of the foreclosure judgment in April 2004, plaintiff had given Wilshire proof that her residence was covered by homeowner’s insurance. Nevertheless, Wilshire required her to purchase additional and unnecessary homeowner’s insurance, known as force-placed insurance.[8] The charges for this force-placed insurance — for various non-consecutive periods between December 2004 and September 2009 — totaled $3,346.48.

B.

In July 2007, plaintiff filed a complaint in the Chancery Division, Superior Court, Middlesex County, alleging that defendants Wilshire and U.S. Bank engaged in deceptive and unconscionable practices in violation of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-2. In particular, plaintiff claimed that defendants, knowing that she did not read or speak English and knowing she had previously been represented by an attorney, contacted her directly to negotiate the October 2005 agreement that was written entirely in English. The complaint asserts that Wilshire included in the October 2005 agreement improper costs and fees in calculating her arrearages and demanded amounts that were not due and owing. Plaintiff sought treble damages against Wilshire, attorneys’ fees against both defendants, a declaration stating “the correct principal balance on the mortgage loan” and “that the mortgage loan in issue is not in arrears,” and an order from the court directing “defendants to take the steps necessary to have the judgment of foreclosure vacated.”

After taking some discovery, plaintiff and defendants each moved for summary judgment. The chancery court granted summary judgment in favor of defendants and dismissed plaintiff’s CFA complaint. The court held that the CFA does not apply to “post-judgment settlement agreements entered into to stave off a foreclosure sale.” The court reasoned “that the Legislature never intended the [CFA] to apply to settlement agreements entered into by parties to a lawsuit” and that to read the CFA otherwise “would undermine the settlement of foreclosure actions and potentially the settlement of all lawsuits.” The court characterized plaintiff’s motives as “transparent — the potential ability to win treble damages and attorneys’ fees.” The court concluded that the only “appropriate mechanism for [p]laintiff to seek relief is to file a motion to vacate, modify, or enforce the settlement.”

C.

In an opinion authored by Judge Payne, the Appellate Division reversed and reinstated plaintiff’s CFA claim. Gonzalez v. Wilshire Credit Corp., 411 N.J. Super. 582, 595 (App. Div. 2010). The panel viewed the post-judgment agreements between plaintiff and defendants as “unquestionably contracts” covered by the CFA. Id. at 593 & n.7. The panel rejected the argument that there was no “privity” between plaintiff and Wilshire because the initial loan was executed with Diaz, and further noted that “privity is not a condition precedent to recovery under the CFA.” Id. at 594 & n.9. The panel found that plaintiff’s “status as a signatory to the [post-judgment] agreements . . . with Wilshire provides her with standing under the CFA.” Id. at 594.

It viewed plaintiff’s CFA claim, in essence, as a charge that Wilshire wrongly transformed “the terms of annually or biannually renegotiated agreements . . . into a never-terminating cash cow.” Id. at 590. The panel reasoned that, if proven, the monetary damages suffered by plaintiff from Wilshire’s alleged unconscionable practices met the “ascertainable loss” requirement under the CFA. Id. at 594.

The panel did not hold that most settlements would be subject to the CFA. Id. at 593. However, the panel concluded that in this case CFA coverage would be warranted because the post-judgment agreements signed by plaintiff were similar to the cure-and-reinstatement agreements under the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50-53 to -68, which permits debtor mortgagors to cure a default at anytime until the order of final judgment.[9] Gonzalez, supra, 411 N.J. Super. at 589-90, 593. The panel explained that had plaintiff been the initial debtor and the attempts to cure default occurred before entry of the foreclosure order, this state’s case law would give CFA protection to the agreements. Id. at 593. The panel found “no principled reason to distinguish” the transactions of a non-debtor mortgagor completed after judgment. Id. at 593-94.

The panel disagreed with the chancery court that plaintiff’s only recourse to Wilshire’s allegedly wrongful conduct was to move for a modification of the “settlement” with Wilshire. Id. at 594-95. The panel maintained that the CFA’s remedies were created to address the circumstances that allegedly occurred here. Id. at 595. The purpose of the treble-damages provision was intended to punish those who engage in unconscionable consumer practices and the purpose of the counsel-fee provision was to allow the victim “`to attract competent counsel.'” Ibid. (quoting Wanetick v. Gateway Mitsubishi, 163 N.J. 484, 490 (2000)). The panel concluded that plaintiff could withstand Wilshire’s motion for summary judgment and that the trial court improperly determined that the CFA was inapplicable to plaintiff’s claim. Ibid.

We granted defendants’ petition for certification. Gonzalez v. Wilshire Credit Corp., 202 N.J. 347 (2010). We also granted the motions of the New Jersey Attorney General, the New Jersey Bankers Association, and Legal Services of New Jersey to participate as amici curiae.

II.

Defendants contend that that the Appellate Division erred because “a judgment creditor’s agreement to forbear from conducting a sheriff’s sale in exchange for payments” and the servicing of a “mortgage loan” are not covered transactions under the CFA. Generally, they argue that allowing a non-debtor mortgagor who enters into post-foreclosure-judgment settlement agreements to pursue a CFA action against a mortgagee/judgment holder and its servicing agent “will significantly limit the willingness of lenders to workout loans in foreclosure.” Defendants point out that plaintiff is not protected by the FFA because she was not required “to pay the obligation secured by the residential mortgage,” (quoting N.J.S.A. 2A:50-55), and because “the statutory right to cure and reinstate expires upon the entry of final judgment” (citing N.J.S.A. 2A:50-55). Defendants assert that the Appellate Division, without authority, “has essentially granted Diaz’s rights under the loan to [plaintiff].” They also posit that the entry of the foreclosure judgment extinguished the initial mortgage and note, and therefore the agreements between plaintiff and defendants were not loan transactions that would trigger the CFA under New Jersey’s jurisprudence. According to defendants, ample safeguards are available in the chancery court, and plaintiff “is free to pursue common law claims such as breach of contract and/or fraud,” but not a CFA claim.

Amicus New Jersey Bankers Association urges this Court to reverse the Appellate Division for three principal reasons. It claims that the application of the CFA to post-judgment settlement agreements will: 1) undermine New Jersey’s “public policy of encouraging the settlement of litigation”; 2) discourage banks and lenders from settling with homeowners in foreclosure actions, thus threatening this State’s policy of preserving homeownership; and 3) disrupt foreclosure practices in the chancery courts by allowing settlement agreements to be collaterally attacked by CFA lawsuits. It also maintains that the Legislature expressed its intent to leave “post-foreclosure judgment settlements” unregulated by not applying the “cure and default provisions of the FFA” to such settlements.

Plaintiff counters that unconscionable practices by a lender and its servicing agent in the post-foreclosure-judgment setting — for example, agreeing to accept “installment payments to bring a mortgage current” and then misappropriating those payments — constitute violations of the CFA. According to plaintiff, Wilshire fraudulently converted thousands of dollars of mortgage payments, which should have been applied to interest and principal on the loan, to pay for “force placed insurance on a property that was already insured.” Plaintiff asserts that whether the FFA applies to the facts of this case does not control whether the CFA provides specific remedies for the allegedly fraudulent conduct of defendants. Having the right to proceed with a foreclosure sale, but instead choosing to accept tens of thousands of dollars from plaintiff to pay arrears on interest and principal, did not give defendants a license to violate the CFA at plaintiff’s expense. Plaintiff insists that agreements between a homeowner and a lender and its servicing agent following foreclosure do not “preclude CFA coverage” merely because she might have other remedies, such as enforcement or modification of the unfair agreements. In particular, plaintiff notes that the CFA’s attorneys’ fees provision provides plaintiff with a mechanism for securing counsel to combat fraud. By plaintiff’s accounting, lenders and servicing agents will continue to work with homeowners even after foreclosure because it is in their financial interests to do so; they just cannot violate the CFA with impunity.

Amicus Attorney General of New Jersey professes that because mortgage loan servicing is “the subsequent performance of the initial extension of credit,” it therefore is a protected activity under the CFA. The Attorney General notes that “because most residential mortgages are now securitized,” servicing agents, such as Wilshire, manage the loans rather than the originators of those loans. She observes that the role of the servicer is not just to collect mortgage payments, but also to manage defaulted loans, to oversee foreclosure proceedings, and to attempt a restructuring of the loan for the consumer. She also recognizes that “servicers can inflict unwarranted fees” on consumers, such as force-placed insurance, while those consumers have limited ability to contest questionable practices due to the inherent difficulty in “untangling complicated billing and payment histories and identifying improper charges . . . and errors in calculations.” She believes that loan servicers rely on these constraints and expect that a refund and apology will be satisfactory when the “rare borrower does undertake the effort and finds overcharges.” The Attorney General states that servicing abuses have “exacerbated the foreclosure crisis by making it difficult if not impossible for many delinquent borrowers to qualify for viable permanent modifications” of their loans. The Attorney General concludes that there is a cognizable claim under the CFA when a servicing agent of a loan charges impermissible fees and the consumer suffers an ascertainable loss.[10]

Amicus Legal Services of New Jersey urges this Court to apply the remedies available under the CFA to address the “well-documented and widespread” abuses in “mortgage collection practices” that are threatening homeownership among the most vulnerable in our society. Legal Services targets the mortgage servicing agent as the newly formed entity capitalizing from predatory lending. Legal Services explains that under the traditional mortgage-loan model, the original lender retained and serviced the loan. That model has given way to a new reality in which a mortgage loan is sold by the originating lender and then “bundled into a pool of loans” that are sold for investment as a “Residential Mortgage Back Security.” One such example is Cityscape Home Equity Loan Trust 1997-B, Inc.

A servicing agent is retained to perform various duties on behalf of the trust pursuant to a “Pooling and Servicing” agreement.[11] The servicing agent collects and applies loan payments, manages defaulting loans through foreclosure, and engages in loss mitigation.[12] One way in which the servicing agent receives compensation is through the retention of ancillary fees — late fees, expenses related to the handling of defaulted mortgages, and commissions from force-placed insurance.[13] According to Legal Services, the servicing agent “actually profits from default” and has a “financial incentive to impose additional fees on consumers.”[14] Within this industry, documented abuses include “the misapplication of payments; charging fees that are fabricated, unwarranted and/or not contracted for; and engaging in coercive collection practices.”[15] Because there is little regulation of the servicing agents, Legal Services maintains the consumer-protection remedies of the CFA are a critically important monitoring device.

Legal Services asserts that the repayment agreements at issue here constitute the “subsequent performance of the extension of credit,” an activity covered by the CFA. It insists that the foreclosure judgment and agreements do not provide Wilshire with CFA immunity. Unlike typical settlement agreements, the agreement here “flow[s] from the obligations in the original mortgage,” “reflect[s] a forbearance of a right under an existing CFA-covered agreement in which the lender retains all of the rights it already had,” and “the same property that secured the original obligation continues to secure the modified payment obligation.” Legal Services’s central point is that “deterring overreaching in mortgage settlements . . . will enable homeowners to pay their just debts and remain in their homes.”

III.

We must determine whether the manner in which Wilshire secured and executed the post-foreclosure-judgment agreements, as described by plaintiff, constitutes an unconscionable practice prohibited by the CFA. In doing so, we must first define the general purposes and scope of the CFA. Then, we must decide whether plaintiff’s post-judgment agreements to pay the loan arrears, which included late fees and force-placed insurance, in expectation of the reinstatement of the loan, and Wilshire’s collection efforts, are covered by the CFA.

The Consumer Fraud Act, N.J.S.A. 56:8-1 to -195, provides a private cause of action to consumers who are victimized by fraudulent practices in the marketplace. Lee v. Carter-Reed Co., 203 N.J. 496, 521 (2010). The Attorney General has independent authority to enforce the CFA. Cox v. Sears Roebuck & Co., 138 N.J. 2, 14-15 (1994). The CFA is intended to “be applied broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud,” Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997), and therefore to be liberally construed in favor of the consumer, Cox, supra, 138 N.J. at 15. Because the “`fertility'” of the human mind to invent “`new schemes of fraud is so great,'” the CFA does not attempt to enumerate every prohibited practice, for to do so would “severely retard[] its broad remedial power to root out fraud in its myriad, nefarious manifestations.” Lemelledo, supra, 150 N.J. at 265 (quoting Kugler v. Romain, 58 N.J. 522, 543 n.4 (1971)). Thus, to counteract newly devised stratagems undermining the integrity of the marketplace, “[t]he history of the [CFA] [has been] one of constant expansion of consumer protection.” Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604 (1997).

A consumer who can prove “(1) an unlawful practice, (2) an `ascertainable loss,’ and (3) `a causal relationship between the unlawful conduct and the ascertainable loss,’ is entitled to legal and/or equitable relief, treble damages, and reasonable attorneys’ fees, N.J.S.A. 56:8-19.” Lee, supra, 203 N.J. at 521 (quoting Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009)). An unlawful practice under the CFA is the

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 such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby.

[N.J.S.A. 56:8-2 (emphasis added).]

The term “advertisement” is defined, in pertinent part, as “the attempt . . . to induce directly or indirectly any person to enter or not enter into any obligation or acquire any title or interest in any merchandise or to increase the consumption thereof or to make any loan.” N.J.S.A. 56:8-1(a) (emphasis added). The term “merchandise” includes “goods, commodities, services or anything offered, directly or indirectly to the public for sale.” N.J.S.A. 56:8-1(c).

The broad language of these provisions encompasses “the offering, sale, or provision of consumer credit.” Lemelledo, supra, 150 N.J. at 265. Indeed, the term “advertisement” includes within its breadth “the attempt . . . to induce . . . any person . . . to make any loan.” N.J.S.A. 56:8-1(a); accord Lemelledo, supra, 150 N.J. at 265. The CFA applies to such activities as “lending” and the sale of insurance related to the loan. Lemelledo, supra, 150 N.J. at 259-60, 265-66 (noting that CFA covers practice of loan packing, defined as “increasing the principal amount of a loan by combining the loan with loan-related services, such as credit insurance, that the borrower does not want”). More particularly, the CFA has been held to apply to the unconscionable terms of a home improvement loan secured by a mortgage on the borrower’s home, Assocs. Home Equity Servs., Inc. v. Troup, 343 N.J. Super. 254, 264-65, 278-80 (App. Div. 2001), and to the unconscionable loan-collection activities of an assignee of a retail installment sales contract, Jefferson Loan Co. v. Session, 397 N.J. Super. 520, 538 (App. Div. 2008). Accordingly, collecting or enforcing a loan, whether by the lender or its assignee, constitutes the “subsequent performance” of a loan, an activity falling within the coverage of the CFA. Ibid.; accord N.J.S.A. 56:8-2.

Under the CFA, “[a]ny person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use” of an unconscionable commercial practice may bring a lawsuit seeking, among other things, treble damages. N.J.S.A. 56:8-19 (emphasis added). An ascertainable loss includes, for example, a loss incurred through improper loan packing — forcing a borrower to purchase unnecessary insurance. Cf. Lemelledo, supra, 150 N.J. 259-60, 266.

IV.

In determining whether plaintiff has stated an actionable claim under the CFA, we now apply these principles to the facts before us. We begin by reviewing plaintiff’s status with Cityscape, the initial lender/mortgagee.

A.

Cityscape loaned $72,000 to Monserate Diaz with whom plaintiff co-owned a home. Plaintiff and Diaz secured that loan by mortgaging their home to Cityscape. Clearly, Cityscape’s loan to Diaz was contingent on plaintiff signing the mortgage papers, which listed both as borrowers. Although in any technical sense plaintiff was not a borrower, she was still in a very real sense indebted to Cityscape. The terms of the mortgage obligated plaintiff to surrender her one-half interest in her home in the event of a default and later foreclosure judgment. Plaintiff may not have been personally obligated to pay the loan, but she would not have had a roof over her head unless she did so. A covered activity under the CFA is an “attempt . . . to induce directly or indirectly any person to enter or not enter into any obligation,” N.J.S.A. 56:8-1(a) (defining “advertisement”), concerning “anything offered, directly or indirectly to the public for sale,” N.J.S.A. 56:8-1(c) (defining “merchandise”). As mentioned earlier, the CFA prohibits an “unconscionable commercial practice . . . in connection with the sale or advertisement of any merchandise or real estate.” N.J.S.A. 56:8-2. Extending credit and loan packing are covered by the CFA. Lemelledo, supra, 150 N.J. at 265-66.

We need not address whether Cityscape had a direct relationship with plaintiff, whether called privity or not, that placed plaintiff within the protective ambit of the CFA. See Perth Amboy Iron Works, Inc. v. Am. Home Assurance Co., 226 N.J. Super. 200, 210-11 (App. Div. 1988) (noting that contractual privity between consumer and seller is not required to bring CFA claim), aff’d o.b., 118 N.J. 249 (1990). What is important is that (1) the assignment of the note and mortgage to U.S. Bank (as trustee for Cityscape Home Equity Loan Trust 1997-B) and the appointment of Wilshire as the servicing agent merely substituted those entities for Cityscape in its relationship with plaintiff and that (2) U.S. Bank through its servicing agent, Wilshire, contracted directly with plaintiff in two separate post-foreclosure-judgment agreements. Those agreements clearly establish privity between plaintiff and U.S. Bank and Wilshire.

B.

The key issue before us is whether the CFA governs extensions of credit after a foreclosure judgment.

After Diaz died in 1999, plaintiff continued to make payments on the loan until hard times came upon her. In 2001, she was laid off from the job she held for seventeen years and sometime afterwards she suffered a heart attack. Given her circumstances, in 2003, she was approved for Social Security disability benefits. That year, U.S. Bank filed a foreclosure complaint, and in 2004 U.S. Bank obtained a judgment in the amount of $80,454.71 plus interest and costs, including $954.55 in attorneys’ fees on the defaulted loan. The chancery court ordered that the mortgaged premises — plaintiff’s home — be sold to satisfy the judgment.

Unquestionably, U.S. Bank had the right to proceed with a sheriff’s sale to satisfy its judgment. Had it done so, plaintiff admittedly would have had no reason to complain. But U.S. Bank and its servicing agent, Wilshire, chose a different path. They decided to give plaintiff the opportunity to reclaim her home conditioned on her satisfying the terms of signed agreements with Wilshire. Plaintiff was required to pay, on a monthly basis, arrearages on the loan, which included built-in foreclosure costs, interest, late fees, counsel fees, and force-placed insurance. For plaintiff, the fulfillment of the agreements held out the prospect of the dismissal of the foreclosure judgment and the probable reinstatement of the loan. In both agreements, defendants stipulated that the foreclosure action would be dismissed when plaintiff became current on the loan.

As a practical matter, both the first and second agreements were nothing more than a recasting of the original loan, allowing Wilshire to recoup for its client, U.S. Bank, past-due payments. As a signatory to the agreement, plaintiff was obligated to make the regular monthly payment of $699.31 plus the additional costs already described. Wilshire as the servicing agent was not acting for selfless purposes; it stood to profit through fees it generated by managing the loan. Both agreements stated that Wilshire’s purpose was “AN ATTEMPT TO COLLECT A DEBT.”

Defendants argue that the post-judgment agreements with plaintiff and Wilshire’s collection activities cannot be denominated as the “subsequent performance” of the loan to Diaz, see N.J.S.A. 56:8-2, because that loan merged into the final foreclosure judgment, see Va. Beach Fed. v. Bank of N.Y., 299 N.J. Super. 181, 188 (App. Div. 1997); Wash. Mut., FA v. Wroblewski, 396 N.J. Super. 144, 149 (Ch. Div. 2007). The cited cases support the general rule that a loan no longer exists after a default leads to the entry of a final judgment. But the doctrine of merger is an equitable principle that requires an examination of all the facts and circumstances, 30A Myron C. Weinstein, New Jersey Practice, Law of Mortgages § 31.36 (2d ed. 2000), and “the presumption of merger” can be overcome if it can be shown that the parties had a contrary intent, Anthony L. Petters Diner, Inc. v. Stellakis, 202 N.J. Super. 11, 18-19 (App. Div. 1985). Moreover, equity cannot be invoked by one with unclean hands to do injustice. See Borough of Princeton v. Bd. of Chosen Freeholders of Mercer, 169 N.J. 135, 158 (2001). Here, plaintiff counters that the post-judgment agreements treated the initial loan as a continuing debt to be collected, and therefore Wilshire’s “subsequent” unconscionable collection practices fall within the scope of the CFA.[16] We need not decide this issue because ultimately we conclude that the post-judgment agreements, standing alone, constitute the extension of credit, or a new loan, and that Wilshire’s collection activities may be characterized as “subsequent performance” in connection with the extension of credit. See N.J.S.A. 56:8-2 (prohibiting fraud “in connection with” “subsequent performance” of loan).

C.

The post-judgment agreements between plaintiff and Wilshire were not ordinary settlement agreements; they were forbearance agreements. They retained every characteristic of the initial loan — and more. Plaintiff was still paying off $72,000 in principal that Diaz borrowed at an annual interest rate of 11.250 percent. With both agreements, plaintiff was still making the regular monthly payments of $699.31, along with a host of additional charges: late payment fees, foreclosure costs, attorneys’ fees, insurance fees on the subject property, and interest on the arrearages. The May 2004 agreement involved the payment of a lump sum of $17,612.84 and monthly payments of $1,150 for two years. The October 2005 agreement involved the payment of a lump sum of $2,200 and then monthly payments of $1,000. Once plaintiff satisfied the arrearages and made the loan current, the agreements called for the dismissal of the foreclosure action and presumably for the reinstatement of the loan according to its original terms.

To consider Wilshire’s collection activities concerning these post-foreclosure-judgment agreements as something other than “subsequent performance” in connection with a newly minted loan cannot be squared with either the form or the substance of the agreements. Theoretically, plaintiff could have obtained a loan from a bank to pay off U.S. Bank’s judgment under similar terms as set forth in the May 2004 and October 2005 agreements. If Wilshire were the servicing agent on that loan, it could not engage in unconscionable collection practices without offending the CFA. And if that is true, it is hard to countenance an end-run around the CFA by declaring the present agreements to be something other than the “offering, sale, or provision of consumer credit.” See Lemelledo, supra, 150 N.J. at 265.

D.

We roundly reject defendants’ argument that the collection activities of a servicing agent, such as Wilshire, do not amount to the “subsequent performance” of a loan, a covered activity under the CFA. The Attorney General and Legal Services, as amici, both have outlined the abusive collection practices of servicing agents for Residential Mortgage Back Securities. We are in the midst of an unprecedented foreclosure crisis in which thousands of our citizens stand to lose their homes, and in desperation enter into agreements that extend credit — post-judgment — in the hope of retaining homeownership. Defendants would have us declare this seemingly unregulated area as a free-for-all zone, where predatory-lending practices are unchecked and beyond the reach of the CFA. Yet, the drafters of the CFA expected the Act to be flexible and adaptable enough to combat newly packaged forms of fraud and to be equal to the latest machinations exploiting the vulnerable and unsophisticated consumer. See Lemelledo, supra, 150 N.J. at 265; cf. Gennari, supra, 148 N.J. at 604.

The victims of these unsavory practices are most often the poor and the uneducated, and in many circumstances those with little understanding of English, and therefore the “need” for the protections of the CFA is “most acute” in such cases. See Kugler, supra, 58 N.J. at 544. Accepting as we must the evidence in the light most favorable to plaintiff in the procedural context of this case, Wilshire’s alleged exploitation of Blanca Gonzalez placed her on a credit merry-go-round, a never-ending ride driven by hidden and unnecessary fees that would keep her in a constant state of arrearages. Although plaintiff had been represented by a Legal Services attorney during the foreclosure proceedings and the negotiation of the May 2004 post-judgment forbearance agreement, defendants contacted plaintiff directly in September 2005. Plaintiff had missed making several payments after paying off $24,800 under the May 2004 agreement.

Threatening a sheriff’s sale of her home, Wilshire inexplicably negotiated a new agreement directly with the unrepresented plaintiff, who could neither read nor speak English, who had only a sixth-grade education, and who was disabled and on a fixed income. The chancery court had calculated plaintiff’s arrearages as $6,461.89 as of October 2005, and yet defendants had plaintiff sign an agreement setting the arrearages at $10,858.18. Even though plaintiff had made every payment and was current under that second agreement, defendants nevertheless threatened another sheriff’s sale in October 2006. At this time, plaintiff contacted her Legal Services attorney, Ms. Chester, who asked Wilshire to answer a few simple questions. Wilshire could not explain how it had arrived at the $10,858.18 arrearages figure in the October 2005 agreement. It also could not explain how plaintiff’s loan was not current, given that plaintiff had paid $20,569.32 in excess of the regular monthly payments since May 2004.

Within the October 2005 agreement, plaintiff was paying for force-placed insurance that she did not want or need and for defendant’s counsel fees that had not been adequately justified. The $3,346.48 paid by plaintiff for force-placed insurance — another form of loan packing — could constitute an “ascertainable loss” under the CFA. See Lemelledo, supra, 150 N.J. at 259-60, 265-66; Jeff Horowitz, Ties to Insurers Could Land Mortgage Servicers in More Trouble, Am. Banker, Nov. 10, 2010, available at http://www.americanbanker.com/issues/175_216/ties-to-insurers-servicers-in-trouble-1028474-1.html (last visited July 28, 2011) (noting that force-placed insurance is often not only unwarranted but also often costs homeowners ten times more than typical insurance policies).

Lending institutions and their servicing agents are not immune from the CFA; they cannot prey on the unsophisticated, those with no bargaining power, those bowed down by a foreclosure judgment and desperate to keep their homes under seemingly any circumstances.

We do not agree with defendants that the only option available to plaintiff in this case was to seek relief from the post-judgment agreements in the chancery court or “to pursue common law claims such as breach of contract and/or fraud.” Defendants also argue that a number of federal and state statutes regulate the “mortgage lending and servicing” area, but insist that we declare that the CFA is not an available remedy. That we will not do. The CFA explicitly states that the “rights, remedies and prohibitions” under the Act are “in addition to and cumulative of any other right, remedy or prohibition accorded by the common law or statutes of this State.” N.J.S.A. 56:8-2.13; accord Lemelledo, supra, 150 N.J. at 268.

Moreover, Legal Services is only capable of representing a fraction of those low-income consumers who are similarly situated to Blanca Gonzalez,[17] and the Attorney General has limited resources. The CFA was intended to fill that vacuum. One of the important purposes of the CFA’s counsel-fees provision is to provide a financial incentive for members of the bar to become “`private attorneys general.'” Lemelledo, supra, 150 N.J. at 268 (quotation omitted); accord N.J.S.A. 56:8-19. The cumulative-remedies and counsel-fees provisions of the CFA “reflect an apparent legislative intent to enlarge fraud-fighting authority and to delegate that authority among various governmental and nongovernmental entities, each exercising different forms of remedial power.” Lemelledo, supra, 150 N.J. at 269. The poor and powerless benefit from the guiding hand of counsel offered through the CFA.

The equitable and legal remedies available against violators of the CFA, such as the provision for treble damages, reasonable attorneys fees, and costs of suit, N.J.S.A. 56:8-19, also serve another important legislative purpose. That purpose “is not only to make whole the victim’s loss, but also to punish the wrongdoer and to deter others from engaging in similar fraudulent practices.” Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 12 (2004); accord Cox, supra, 138 N.J. at 21.

Defendants and amicus New Jersey Bankers Association also argue that application of the CFA to post-judgment-foreclosure agreements and corresponding collection efforts by servicing agents will discourage work-outs by lenders and lead to sheriff’s sales, thus in the end diminishing not enhancing the prospect of homeownership. They go even further and posit that applying the CFA to the facts of this case will place in jeopardy all settlement agreements. We do not agree.

The CFA is intended to curtail deceptive and sharp practices that victimize or disadvantage consumers in the marketplace, see Lee, supra, 203 N.J. at 521; it is not intended to curtail commerce itself. Defendants have made no showing that the CFA, which applies to myriad business activities, has dampened enthusiasm for the profit motive. Those businesses dealing with the public fairly and honestly, eschewing unconscionable practices, have nothing to fear, except the occasional frivolous lawsuit for which there are separate remedies. See, e.g., N.J.S.A. 2A:15-59.1(a) (permitting costs and attorneys’ fees for frivolous lawsuits). The Legislature already has made the policy decision that the greater good that flows from the remedies available under the CFA outweighs any negligible negative effect that it might have on commerce. Merchants are still selling their wares long after passage of the CFA.

Lenders extend credit to consumers for purchasing automobiles, houses, home improvements, and for numerous other items despite the applicability of the CFA. See Lemelledo, supra, 150 N.J. at 265; Troup, supra, 343 N.J. Super. at 278. We are confident that lenders and their servicing agents will continue to negotiate work-outs even in a post-foreclosure-judgment setting when it is in their interest to do so. Lenders want a return on their capital, not to buy and sell homes.

Plaintiff has made allegations and presented evidence that still must survive the crucible of a trial. Plaintiff must prove that defendants acted contrary to the permissible standard of conduct under the CFA. Cox, supra, 138 N.J. at 18 (“The standard of conduct that the term `unconscionable’ implies is lack of `good faith, honesty in fact and observance of fair dealing.'” (quoting Kugler, supra, 58 N.J. at 544)).

This case in no way suggests that settlement agreements in general are now subject to the CFA. Here, we are dealing with forbearance agreements. This case addresses only the narrow issue before us: the applicability of the CFA to a post-foreclosure-judgment agreement involving a stand-alone extension of credit. We hold only that, in fashioning and collecting on such a loan — as with any other loan — a lender or its servicing agent cannot use unconscionable practices in violation of the CFA.

V.

For these reasons, we affirm the judgment of the Appellate Division vacating the dismissal of plaintiff’s complaint. We therefore reinstate plaintiff’s cause of action under the CFA and remand for proceedings consistent with this opinion.

CHIEF JUSTICE RABNER and JUSTICES LONG, RIVERA-SOTO and HOENS join in JUSTICE ALBIN’s opinion. JUSTICE LaVECCHIA did not participate.

[1] The parties, the trial court, and the Appellate Division have referred to the post-judgment agreements in this case as “settlement agreements.” The more precise term is “forbearance agreements,” which are agreements to refrain “from enforcing a right, obligation, or debt.” See Black’s Law Dictionary 673 (8th ed. 2004). In summarizing the parties’ arguments and the courts’ opinions, we recite their terminology despite its imprecision.

[2] “A tenancy in common is the holding of an estate by different persons, with a unity of possession and the right of each to occupy the whole in common with the [other]. The interest of a tenant in common may, absent some contractual undertaking, be transferred without the consent of the [other cotentant].” Capital Fin. Co. of Del. Valley, Inc. v. Asterbadi, 389 N.J. Super. 219, 225 (Ch. Div. 2006) (internal citations omitted); accord Burbach v. Sussex Cnty. Mun. Utils. Auth., 318 N.J. Super. 228, 233-34 (App. Div. 1999); Black’s Law Dictionary 1506 (8th ed. 2004). The death of one tenant does not give a legal right to the whole of the property to the surviving tenant. See Weiss v. Cedar Park Cemetery, 240 N.J. Super. 86, 97 (App. Div. 1990).

[3] We present plaintiff’s best case in this statement of facts. We do so because defendants succeeded on their motion to dismiss plaintiff’s complaint on summary judgment, and therefore we “must view the facts in the light most favorable to the non-moving party” — plaintiff. See Bauer v. Nesbitt, 198 N.J. 601, 604-05 n.1 (2009); R. 4:46-2(c) (stating that party’s motion for summary judgment should be granted when “there is no genuine issue as to any material fact challenged and . . . the moving party is entitled to a judgment or order as a matter of law”). A number of the “facts” presented here are disputed by defendants.

[4] At all times material to plaintiff’s complaint, Wilshire was a wholly owned subsidiary of Merrill Lynch Mortgage Capital, Inc., which in turn was a wholly owned subsidiary of Merrill Lynch & Co., Inc. During the pendency of this case, on January 1, 2009, Bank of America Corporation acquired Merrill Lynch & Co., Inc. and its subsidiaries, including Wilshire. As part of that acquisition, Wilshire’s operations have been merged into and assumed by BAC Home Loan Services, LP, an indirectly wholly owned subsidiary of Bank of America and, effective March 3, 2010, BAC Home Loan Services, LP started servicing plaintiff’s post-foreclosure-judgment loan that is the subject of this appeal.

[5] The record does not indicate whether anyone has come forward asserting an interest in Diaz’s portion of their jointly owned property.

[6] After applying the $11,000 lump sum payment, the balance due was $6,612.84. The $1,150 monthly payments consisted of: $699.31, the current monthly payment as it became due; $34.97, a monthly late fee assessed until the account became current; and $415.72, an amount applied to the fixed arrears.

[7] Based on plaintiff’s review of discovery, a substantial amount of her arrears was attributable to legal fees supposedly incurred by defendants. Plaintiff complains that, because the services for those fees are not adequately described, the legitimacy of the fees cannot be determined.

[8] Force-placed insurance is insurance procured by a lending institution on collateral pledged by a borrower if the borrower fails to maintain adequate coverage. Brannon v. Boatmen’s First Nat’l Bank of Okla., 153 F.3d 1144, 1145-46 (10th Cir. 1998). The costs related to the force-placed insurance are added to the borrower’s account. Ibid.

[9] Under the Fair Foreclosure Act,

at least thirty days prior to the filing of a complaint in foreclosure, a mortgage debtor must be given a written notice, among other things, of the intent to foreclose, stating the obligation or real estate security interest; the nature of the default claimed; the right of the debtor to cure the default; the sum of money and interest required to cure the default; the date by which the default must be cured to avoid institution of foreclosure proceedings; and the right to cure after foreclosure proceedings have been commenced.

[Gonzalez, supra, 411 N.J. Super. at 589 (citing N.J.S.A. 2A:50-56).]

[10] At oral argument, the Attorney General argued that plaintiff had an actionable CFA claim under either a theory that the agreements were generated from the original loan and the collection efforts were “subsequent performance” on the loan, or under a theory that the settlement agreements were entirely new extensions of credit.

[11] (Citing Robo-Signing, Chain of Title, Loss Mitigation, and Other Issues in Mortgage Servicing: Before the House Financial Services Committee Subcommittee on Housing and Community Opportunity, 111th Cong. 6 (2010) (written testimony of Adam J. Levitin, Associate Professor of Law, Georgetown University Law Center)).

[12] (Citing ibid.).

[13] (Citing id. at 15; Jeff Horowitz, Ties to Insurers Could Land Mortgage Servicers in More Trouble, Am. Banker, Nov. 10, 2010, available at http://www.americanbanker.com/issues/175_216/ties-to-insurers-servicers-in-trouble-1028474-1.html (last visited July 28, 2011)).

[14] (Citing Robo-Signing, supra note 10, at 15).

[15] (Generally citing Katherine Porter, Misbehavior and Mistake in Bankruptcy Mortgage Claims, 87 Tex. L. Rev. 121 (2008); National Consumer Law Center, Foreclosures: Defenses, Workouts and Mortgage Servicing (3d ed. 2010)).

[16] Plaintiff points out that under New Jersey’s Foreclosure Mediation program, as an alternative to the foreclosure of property, modification of a loan through mediation can be requested even after the entry of final judgment, up until the time of the sheriff’s sale. Administrative Office of the Courts, New Jersey Foreclosure Mediation (2009), available at http://www.judiciary.state.nj.us/civil/ foreclosure/11290_foreclosure_med_info.pdf. With this example, plaintiff contends that a foreclosure judgment may not extinguish a mortgage loan if the lender forbears from proceeding to a sheriff’s sale.

[17] “[T]wo hundred thousand eligible people do seek help from Legal Services each year. Because of inadequate resources, two-thirds must be turned away.” Legal Services of New Jersey, The Civil Justice Gap: An Inaugural Annual Report 5 (2011), available at http://www.lsnj.org/PDFs/The_Civil_Justice_Gap_2011.pdf.

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U.S. Bancorp Sues BofA’s Countrywide, Claims Mortgage Pool Contract Breach

U.S. Bancorp Sues BofA’s Countrywide, Claims Mortgage Pool Contract Breach


Obviously there aren’t many days when I wake up and think positively about the Countrywide acquisition in 2008,” said Brian Moynihan during a conference call arranged by Fairholme Capital Management, one of the bank’s biggest shareholders. 8/2011

Bloomberg-

U.S. Bancorp asked a New York court to force Bank of America Corp. (BAC)’s Countrywide Financial unit to repurchase more than 4,000 loans in a mortgage pool to repair breaches of contract related to improper underwriting.

U.S. Bancorp, Minnesota’s largest bank, sued Countrywide yesterday in state court in New York, saying the lender agreed when it sold the pool in 2005 that it would repurchase all the loans within 90 days of receiving notice of a material breach. U.S. Bancorp is trustee for HarborView Mortgage Loan Trust 2005- 10, which held the pool. The pool’s original value was $1.75 billion, the bank said in court papers.

[BLOOMBERG]

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The Ohio Supreme Court is taking up the question of what a bank needs to prove to force someone from his home

The Ohio Supreme Court is taking up the question of what a bank needs to prove to force someone from his home


To preview the case check out OHIO APPEALS COURT AFFIRMS “NO STANDING TO FORECLOSE” U.S. BANK v. DUVALL

Be sure to listen to audio for the latest SURPRISING TWIST!

WKSU

The Ohio Supreme Court is getting ready to take on what some are calling the biggest issue in state foreclosure law in a century. The question before the justices is what paperwork does a lender need to force an owner out of his home? For Ohio Public Radio, WCPN’s Mhari Saito reports that what the state’s justices decide could have huge implications for the financial services industry.

[WKSU]

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U.S. Bank Natl. Assn. v Mayala | NY Appeals Court 2nd Jud. Dept. Affirms, Consolidated Case “That certain mortgages held by MERS on the subject real property are invalid in their entirety”

U.S. Bank Natl. Assn. v Mayala | NY Appeals Court 2nd Jud. Dept. Affirms, Consolidated Case “That certain mortgages held by MERS on the subject real property are invalid in their entirety”


Decided on August 23, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

REINALDO E. RIVERA, J.P.
JOSEPH COVELLO
ANITA R. FLORIO
PLUMMER E. LOTT, JJ.
2010-00422
2010-00454
2010-08578
(Index Nos. 12884/06, 13809/07)

[*1]U.S. Bank National Association, etc., appellant,

v

Wentz Mayala, et al., defendants, Juan Vega, et al., respondents. (Action No. 1)

Juan Vega, et al., respondents,

v

Wentz Mayala, et al., defendants, MERS, etc., et al., appellants (and a third-party action). (Action No. 2)

Moss & Kalish, PLLC, New York, N.Y. (Mark L. Kalish, Gary
N. Moss, and James Schwartzman of counsel), for appellants.
Simon & Gilman, LLP, Elmhurst, N.Y. (Barry Simon of
counsel), for respondents.

DECISION & ORDER

In an action to foreclose mortgages on certain real property (Action No. 1), and a related action, inter alia, for declaratory relief and the partition and sale of that real property (Action No. 2), which have been consolidated for appeal, (1) the plaintiff in Action No. 1 appeals, as limited by the appellants’ brief, from so much of an order and judgment (one paper) of the Supreme Court, Kings County (Schmidt, J.), dated September 25, 2009, as granted those branches of the motion of the defendants Juan Vega and Sonia Martinez which were for summary judgment on their counterclaim to quiet title to the extent of declaring that they are the owners of a two-thirds interest in the subject real property and that the subject mortgages are invalid in their entirety, and to dismiss the complaint in Action No. 1, and, thereupon, in effect, declared that those defendants are the owners of a two-thirds interest in the subject real property and that the subject mortgage is invalid, and dismissed the complaint in Action No. 1, and (2) MERS and First Central Savings Bank, defendants in Action No. 2 appeal, as limited by the appellants’ brief, from (a) so much of an order and judgment (one paper) of the same court, also dated September 25, 2009, as granted the motion of the plaintiffs in Action No. 2, in effect, for summary judgment on the complaint to the extent of, in effect, declaring that the plaintiffs in Action No. 2 are the owners of a two-thirds interest in the subject real property and that certain mortgages held by MERS on the subject real property are invalid in their entirety, and, thereupon, declared that the plaintiffs in Action No. 2 are the owners of a two-thirds interest in the subject real property and that the mortgages are invalid in its entirety, and (b) so much of an order of the same court dated July 7, 2010, as directed the sale of the subject real property and that two-thirds of the net proceeds of such sale be distributed to the plaintiffs. [*2]

ORDERED that the orders and judgments, and the order, are affirmed insofar as appealed from, with one bill of costs.

Contrary to the appellants’ contention, in opposition to the respondents’ prima facie showing in both Action No. 1 and Action No. 2 that they are and have been the owners of a two-thirds interest in the subject real property since September 1991, the appellants, in their respective opposition papers, failed to raise a triable issue of fact as to the affirmative defenses of adverse possession (see RPAPL 541; Myers v Bartholomew, 91 NY2d 630, 633-635; Culver v Rhodes, 87 NY 348, 355; Perez v Perez, 228 AD2d 161, 162; Perkins v Volpe, 146 AD2d 617, 617-618; Knowlton Bros. v New York Air Brake Co., 169 App Div 324, 334) or laches (see Kraker v Roll, 100 AD2d 424, 432-435). Also contrary to the appellants’ contention, under the circumstances, the Supreme Court properly declared the subject mortgages invalid in their entirety (see Cruz v Cruz, 37 AD3d 754, 754; see also First Natl. Bank of Nev. v Williams, 74 AD3d 740, 742; Johnson v Melnikoff, 65 AD3d 519, 520-521; see generally Filowick v Long, 201 AD2d 893, 893).
RIVERA, J.P., COVELLO, FLORIO and LOTT, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court

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FRASE v. U.S. BANK | WA STATE Grants TRO “The Declaration of Compliance appears to be dated “12.17.13.”, “Serious questions going to the merits”

FRASE v. U.S. BANK | WA STATE Grants TRO “The Declaration of Compliance appears to be dated “12.17.13.”, “Serious questions going to the merits”


UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

MATTHEW L. FRASE,
Plaintiff,

v.

U.S. BANK, N.A., et al.,
Defendants

EXCERPT:

Attached to the Notice of Default is a document entitled, in part, “Beneficiary
Declaration of Compliance With (Or Exception From) RCW 61.24 (Section 2) and
Authorization of Agent (For Notice of Default).” (Compl. Ex. G at 72-73 (“Declaration
of Compliance”).) The Declaration of Compliance, executed on January 31, 2011, states
that U.S. Bank is the “current beneficiary” and purports, on U.S. Bank’s behalf, to
authorize “the trustee, the foreclosing agent and/or their authorized agent to sign on
behalf of the beneficiary, the notice of default containing the declaration required
pursuant to 61.24.030.” (Id. at 73.) The Declaration of Compliance appears to be dated
“12.17.13.” (Id.)

Also attached to the Notice of Default is a document entitled “Declaration of the
Beneficiary as to the actual holder of the Promissory Note.” (Compl. Ex. G at 74
(“Declaration of Beneficiary”).) The Declaration of Beneficiary states, “The undersigned
beneficiary declares that they are the owner and actual holder and has possession of the
promissory note or other obligation secured buy [sic] the Deed of Trust[.]” (Id.) The
Declaration of Beneficiary references the Frases’ recorded Deed of Trust and includes the
address of the Property, but it does not include the name of any beneficiary. (Id.) The
Declaration of Beneficiary was signed on February 24, 2011. (Id.)

On March 23, 2011, MERS executed an assignment of its beneficial interest in the
Deed of Trust to U.S. Bank. (Compl. Ex. D (“Assignment”).) The Assignment was
recorded on May 9, 2011. (Id.)

On April 26, 2011, U.S. Bank executed an Appointment of Successor Trustee in
which it appointed LSI as trustee. (Compl. Ex. C.) The Appointment of Successor
Trustee was recorded on May 9, 2011. (Id.)

On May 9, 2011, LSI recorded a Notice of Trustee’s Sale for the Property.
(Compl. Ex. E (“Notice of Trustee’s Sale”).) The Notice of Trustee’s Sale sets the date
of the sale on August 12, 2011, and states that the Trustee intended to sell the property at
auction unless the Frases took action to cure the default before August 1, 2011. (Id.)
The Notice of Trustee’s Sale states that the total amount in arrears, as of May 2011, was
$20,085.20. (Id.)

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Downey Sav. & Loan Assn., F.A. v Trujillo | NY Judge Schack Slams Ebenezer Scrooge “Under the penalties of perjury, Deceptive trick and fraud upon the Court, “Bah, humbug!”

Downey Sav. & Loan Assn., F.A. v Trujillo | NY Judge Schack Slams Ebenezer Scrooge “Under the penalties of perjury, Deceptive trick and fraud upon the Court, “Bah, humbug!”


Decided on August 12, 2011

Supreme Court, Kings County

.

Downey Savings and Loan Association, F.A., Plaintiff,

against

Dario Trujillo, et. al., Defendants.


22268/08

Plaintiff

Nicholas E. Perciballi, Esq.

Druckman Law Group, PLLC

Westbury Jericho NY

Arthur M. Schack, J.

Plaintiff’s counsel, in this foreclosure action, engaged in possible sanctionable conduct by affirming “under the penalties of perjury” to a false statement. In her January 7, 2011 affirmation, required by Administrative Order (AO) 548/10 of October 20, 2010, plaintiff’s counsel, Margaret E. Carucci, Esq., of DRUCKMAN LAW GROUP PLLC (DRUCKMAN), was required to confirm the accuracy of the subject foreclosure papers, documents and notarizations. Ms. Carucci stated that she confirmed the accuracy by communicating, on December 24, 2010, with Tammy Denson, an “Officer of Downey Savings and Loan.” While Ms. Carucci might have communicated with Tammy Denson on Christmas Eve 2010, plaintiff DOWNEY SAVINGS AND LOAN ASSOCIATION, F.A. (DOWNEY) ceased to exist on November 21, 2008. (See Federal Deposit Insurance Company Press Release 124-2008 of November 21, 2008). [*2]DOWNEY, on December 24, 2010, resided with the Ghost of Christmas Past. Tammy Denson, until November 21, 2008 may have been employed by DOWNEY, but is now employed by DOWNEY’s successor in interest, U.S. BANK NATIONAL ASSOCIATION (US BANK). This Court, as will be explained, gave DRUCKMAN an opportunity to correct their AO 548/10 affirmation, in my May 9, 2010 order, but DRUCKMAN failed to do so. Therefore, because DRUCKMAN violated AO548/10 with a false affirmation and my subsequent May 9, 2010 order, the instant foreclosure action, for procedural reasons, is dismissed with prejudice.

Ms. Carucci affirmed “under the penalties of perjury” that she communicated on Christmas Eve 2010 with an officer of a defunct financial institution. This is a deceptive trick and fraud upon the Court. It cannot be tolerated. This Christmas Eve conduct, in the words of Ebenezer Scrooge, is “Bah, humbug!”

Conduct is frivolous if it “asserts material factual statements that are false,” an apt definition for “humbuggery.” Therefore, Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC, will be given an opportunity to be heard why this Court should not sanction them for making a “frivolous motion,” pursuant to 22 NYCRR §130-1.1.

Background

Plaintiff DOWNEY commenced this foreclosure action for the premises located at 70 Somers Street, Brooklyn, New York (Block 1542, Lot 21, County of Kings), on July 31, 2008, by filing the summons, complaint and notice of pendency with the Kings County Clerk’s Office. Defendant DARIO TRUJILLO (TRUJILLO) never answered. I issued an order of reference for the subject premises on July 15, 2010. Then, plaintiff DOWNEY’s counsel, DRUCKMAN, filed with the Kings County Clerk’s Office, on January 26, 2011, a motion for a judgment of foreclosure and sale.

At the May 9, 2011 oral arguments, on the motion for a judgment of foreclosure and sale, I discovered that the subject TRUJILLO mortgage and note had been assigned to U.S. BANK NATIONAL ASSOCIATION (US BANK) by the Federal Deposit Insurance Company (FDIC) as Receiver for DOWNEY. The FDIC seized DOWNEY’s assets on November 21, 2008 and assigned them to US BANK. Svetlana Kaplun, Esq., of DRUCKMAN, in her January 21, 2011 affirmation in support of the motion for a judgment of foreclosure and sale, stated, in ¶ 13:

The mortgage at issue has been assigned to US BANK NATIONAL

ASSOCIATION, AS SUCCESSOR IN INTEREST TO THE FEDERAL

DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR DOWNEY SAVING AND LOAN ASSOCIATION, F.A. Accordingly, it is

respectfully requested that name of plaintiff be amended to US BANK NATIONAL ASSOCIATION, AS SUCCESSOR IN INTEREST TO THE FEDERAL DEPOSIT INSURANCE CORPORATION AS RECEIVER FOR DOWNEY SAVING AND LOAN ASSOCIATION, F.A. A copy of

the assignment is attached hereto and made a part hereof.

An executed copy of the April 20, 2009 assignment and assumption of interests and obligations from assignor FDIC as Receiver for DOWNEY to assignee US BANK was attached to the motion.

Also attached to the motion was the January 7, 2011 affirmation of Ms. Carucci, as per AO 548/10. According to the October 20, 2010 Office of Court Administration’s press release [*3]about the filing requirements of AO 548/10:

The New York State court system has instituted a new filing

requirement in residential foreclosure cases to protect the integrity

of the foreclosure process and prevent wrongful foreclosures. Chief

Judge Jonathan Lippman today announced that plaintiff’s counsel in

foreclosure actions will be required to file an affirmation certifying

that counsel has taken reasonable steps — including inquiry to banks

and lenders and careful review of the papers filed in the case —

to verify the accuracy of documents filed in support of residential

foreclosures. The new filing requirement was introduced by the Chief

Judge in response to recent disclosures by major mortgage lenders

of significant insufficiencies — including widespread deficiencies in

notarization and “robosigning” of supporting documents — in residential

foreclosure filings in courts nationwide. The new requirement is

effective immediately and was created with the approval of the

Presiding Justices of all four Judicial Departments.

Chief Judge Lippman said, “We cannot allow the courts in

New York State to stand by idly and be party to what we now know

is a deeply flawed process, especially when that process involves

basic human needs — such as a family home — during this period

of economic crisis. This new filing requirement will play a vital role

in ensuring that the documents judges rely on will be thoroughly

examined, accurate, and error-free before any judge is asked to take

the drastic step of foreclosure.” [Emphasis added]

(See Gretchen Morgenson and Andrew Martin, Big Legal Clash on

Foreclosure is Taking Shape, New York Times, Oct. 21, 2010; Andrew

Keshner, New Court Rules Says Attorneys Must Verify Foreclosure Papers,

NYLJ, Oct. 21, 2010).

Ms. Carucci, in her January 7, 2011 AO 548/10 affirmation, affirmed “under the penalties of perjury”:

2. On December 24, 2010, I communicated with the following

representative or representatives of Plaintiff, who informed me that

he/she/they (a) personally reviewed plaintiff’s documents and records [*4]

relating to this case for factual accuracy; and (b) confirmed the

factual accuracy and allegations set forth in the Complaint and

any supporting affirmations filed with the Court, as well as the

accuracy of the notarizations contained in the supporting documents

filed therewith.

NameTitle

Tammy DensonOfficer of Downey Savings and Loan

949-798-6052

3. Based upon my communication with Tammy Denson, as well

as upon my inspection and reasonable inquiry under the circumstances,

I affirm that, to the best of my knowledge, information, and belief, the

Summons and Complaint, and other papers filed or submitted to the

Court in this matter contain no false statements of fact or law . . .

4. I am aware of my obligations under New York Rules of

Professional Conduct (22 NYCRR Part 1200) and 22 NYCRR Part 130.

[Emphasis added]

The Court is concerned that Ms. Carucci affirmed to a falsehood, namely, that Ms. Denson is an Officer of defunct DOWNEY. In the presence of Svetlana Kaplun, Esq., who appeared on behalf of plaintiff’s counsel, DRUCKMAN, I called the above-listed telephone number for Tammy Denson. Ms. Denson did not answer the phone, but a voice mail message stated that she was an officer of US BANK, not DOWNEY. Therefore, I denied the motion for a judgment of foreclosure and sale, and issued, at the May 9, 2011 oral arguments, the following short-form order:

Plaintiff’s motion for a judgment of foreclosure and sale is

denied without prejudice to renew within sixty (60) days of this

decision and order. Plaintiff’s counsel claims to represent plaintiff

Downey, a defunct financial institution. Further it appears that

Margaret E. Carucci, Esq., an attorney for plaintiff possibly filed a

false affirmation with the Court. Ms. Carucci affirms under penalty of

perjury that a Tammy Denson is an officer of plaintiff Downey S & L,

which did not exist on 12/24/10, when she signed a sworn statement

as an “officer.”

The Court called Ms. Denson in the presence of Svetlana

Kaplun, Esq. today and Ms. Denson, in her voice mail, stated she is [*5]

a loan official of US Bank, not Downey S & L.

Plaintiff has 60 days to file an affirmation from an officer

with the officer’s title with US Bank, if it is the true owner of

the subject mortgage and note, as well as a renewed motion for a

judgment of foreclosure and sale.

Then, I received a letter, dated July 8, 2011 (the 60-day deadline for the affirmation from an officer of US BANK and the renewed motion), from Nicholas E. Perciballi, Esq. of DRUCKMAN, about the instant action. Mr. Perciballi stated “[t]his office represents the Plaintiff . . . Please advised that Margaret E. Carucci, Esq. is no longer employed with this firm. With regard to your Short From Order dated May 9, 2011, we respectfully request an additional 60 days so that we may work with our client to produce the documents needed to comply with your Order [sic].” The Court has no idea why DRUCKMAN waited until the last possible day to send me the July 8, 2011-letter. The termination of Ms. Carucci’s employment is not an acceptable excuse for delay. I gave DRUCKMAN, on May 9, 2011, sixty days to file a correct AO 548/10 affirmation. It is a waste of judicial resources to grant plaintiff “an additional 60 days so that we may work with our client to produce the documents needed to comply with your Order.” Court orders are not issued to be flouted.

Moreover, according to the Office of Court Administration’s Attorney Registry, Margaret E. Carucci, Esq., still lists her business address as DRUCKMAN LAW GROUP PLLC, in Westbury, New York. If she is no longer employed by DRUCKMAN, she might be in violation of 22 NYCRR 118.1 (f). This requires an attorney who changes the business address in his or her registration to “file an amended statement within 30 days of such change.”

Dismissal of the instant action

Plaintiff’s counsel, Mr. Perciballi, in his July 8, 2011-letter, did not present a reasonable excuse for the Court to grant a sixty-day extension to produce the documents required in my May 9, 2011 order. The Court does not work for US BANK and cannot wait for the multibillion dollar financial behemoth US BANK, to “produce the documents need to comply with” my May 9, 2011 order. The failure of plaintiff’s counsel, DRUCKMAN LAW GROUP PLLC to comply with two court orders, Chief Administrative Judge Pfau’s October 20, 2010 AO 548/10 and my May 9, 2011 order, demonstrates delinquent conduct by DRUCKMAN LAW GROUP PLLC. This mandates, for procedural reasons, the dismissal with prejudice of the instant action. Failure to comply with court-ordered time frames must be taken seriously and not ignored. There are consequences for ignoring court orders. The Court of Appeals, in Gibbs v St. Barnabas Hosp. (16 NY3d 74, 81 [2010]), instructed:

As this Court has repeatedly emphasized, our court system is

dependent on all parties engaged in litigation abiding by the rules of

proper practice (see e.g. Brill v City of New York, 2 NY3d 748 [2004];

Kihl v Pfeffer, 94 NY2d 118 [1999]). The failure to comply with

deadlines not only impairs the efficient functioning of the courts and [*6]

the adjudication of claims, but it places jurists unnecessarily in the

position of having to order enforcement remedies to respond to the

delinquent conduct of members of the bar, often to the detriment of

the litigants they represent. Chronic noncompliance with deadlines

breeds disrespect for the dictates of the Civil Practice Law and Rules

and a culture in which cases can linger for years without resolution.

Furthermore, those lawyers who engage their best efforts to comply

with practice rules are also effectively penalized because they must

somehow explain to their clients why they cannot secure timely

responses from recalcitrant adversaries, which leads to the erosion

of their attorney-client relationships as well. For these reasons, it

is important to adhere to the position we declared a decade ago that

[i]f the credibility of court orders and the integrity of our judicial

system are to be maintained, a litigant cannot ignore court orders

with impunity [Emphasis added].” (Kihl, 94 NY2d at 123).

“Litigation cannot be conducted efficiently if deadlines are not taken seriously, and

we make clear again, as we have several times before, that disregard of deadlines should not and will not be tolerated (see Miceli v State Farm Mut. Auto Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York, 2 NY3d 748 [2004]; Kihl v Pfeffer, 94 NY2d 118 [1999]) [Emphasis added].” (Andrea v Arnone, Hedin, Casker, Kennedy and Drake, Architects and Landscape Architects, P.C., 5 NY3d 514, 521 [2005]).As we made clear in Brill, and underscore here, statutory time frames —like court-order time frames (see Kihl v Pfeffer, 94 NY2d 118 [1999]) — are not options, they are requirements, to be taken seriously by the parties. Too many pages of the Reports, and hours of the courts,

are taken up with deadlines that are simply ignored [Emphasis added].” (Miceli, 3 NY3d at 726-726).

Further, the dismissal of the instant foreclosure action requires the

cancellation of the notice of pendency. CPLR § 6501 provides that the filing of a notice of pendency against a property is to give constructive notice to any purchaser of real property or encumbrancer against real property of an action that “would affect the title to, or the possession, use or enjoyment of real property, except in a summary proceeding brought to recover the possession of real property.” The Court of Appeals, in 5308 Realty Corp. v O & Y Equity Corp.[*7] (64 NY2d 313, 319 [1984]), commented that “[t]he purpose of the doctrine was to assure that a court retained its ability to effect justice by preserving its power over the property, regardless of whether a purchaser had any notice of the pending suit,” and, at 320, that “the statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review.”

CPLR § 6514 (a) provides for the mandatory cancellation of a notice of pendency by:

The Court,upon motion of any person aggrieved and upon such

notice as it may require, shall direct any county clerk to cancel

a notice of pendency, if service of a summons has not been completed

within the time limited by section 6512; or if the action has been

settled, discontinued or abated; or if the time to appeal from a final

judgment against the plaintiff has expired; or if enforcement of a

final judgment against the plaintiff has not been stayed pursuant

to section 551. [emphasis added]

The plain meaning of the word “abated,” as used in CPLR § 6514 (a) is the ending of an action. “Abatement” is defined as “the act of eliminating or nullifying.” (Black’s Law Dictionary 3 [7th ed 1999]). “An action which has been abated is dead, and any further enforcement of the cause of action requires the bringing of a new action, provided that a cause of action remains (2A Carmody-Wait 2d § 11.1).” (Nastasi v Nastasi, 26 AD3d 32, 40 [2d Dept 2005]). Further, Nastasi at 36, held that the “[c]ancellation of a notice of pendency can be granted in the exercise of the inherent power of the court where its filing fails to comply with CPLR § 6501 (see 5303 Realty Corp. v O & Y Equity Corp., supra at 320-321; Rose v Montt Assets, 250 AD2d 451, 451-452 [1d Dept 1998]; Siegel, NY Prac § 336 [4th ed]).” Thus, the dismissal of the instant complaint must result in the mandatory cancellation of plaintiff’s notice of pendency against the subject property “in the exercise of the inherent power of the court.”

Possible frivolous conduct by plaintiff’s counsel

Ms. Carucci affirmed “under the penalties of perjury,” on January 7, 2011, to the factual accuracy of the foreclosure papers by communicating with a representative of the defunct plaintiff DOWNEY. The filing of the motion for a judgment of foreclosure and sale by plaintiff’s counsel, with Ms. Carucci’s false statement, appears to be frivolous. 22 NYCRR § 130-1.1 (a) states that “the Court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part, which shall be payable as provided in section 130-1.3 of this Subpart.” Further, it states in 22 NYCRR § 130-1.1 (b), that “sanctions may be imposed upon any attorney appearing in the action or upon a partnership, firm or corporation with which the attorney is associated.”

22 NYCRR § 130-1.1 (c) states that:

For purposes of this part, conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported

by a reasonable argument for an extension, modification or

reversal of existing law;

(2) it is undertaken primarily to delay or prolong the resolution of

the litigation, or to harass or maliciously injure another; or

(3) it asserts material factual statements that are false.

It is clear that Ms. Carucci’s January 7, 2011 affirmation “asserts material factual statements that are false.” Further, Ms. Carucci’s January 7, 2011 affirmation, with its false statement, may be a cause for sanctions.

Several years before the drafting and implementation of the Part 130 Rules for

costs and sanctions, the Court of Appeals (A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 6 [*8][1986]) observed that “frivolous litigation is so serious a problem affecting the

proper administration of justice, the courts may proscribe such conduct and impose sanctions in this exercise of their rule-making powers, in the absence of legislation to the contrary (see NY Const, art VI, § 30, Judiciary Law § 211 [1] [b] ).”

Part 130 Rules were subsequently created, effective January 1, 1989, to give the

courts an additional remedy to deal with frivolous conduct. These stand beside Appellate Division disciplinary case law against attorneys for abuse of process or malicious prosecution. The Court, in Gordon v Marrone (202 AD2d 104, 110 [2d Dept 1994], lv denied 84 NY2d 813 [1995]), instructed that:

Conduct is frivolous and can be sanctioned under the court rule if

“it is completely without merit . . . and cannot be supported by a

reasonable argument for an extension, modification or reversal of

existing law; or . . . it is undertaken primarily to delay or prolong

the resolution of the litigation, or to harass or maliciously injure

another” (22 NYCRR 130-1.1[c] [1], [2] . . . ).

In Levy v Carol Management Corporation (260 AD2d 27, 33 [1st Dept 1999]), the Court stated that in determining if sanctions are appropriate the Court must look at the broad pattern of conduct by the offending attorneys or parties. Further, “22 NYCRR

130-1.1 allows us to exercise our discretion to impose costs and sanctions on an errant party . . .” Levy at 34, held that “[s]anctions are retributive, in that they punish past conduct. They also are goal oriented, in that they are useful in deterring future frivolous conduct not only by the particular parties, but also by the Bar at large.”

The Court, in Kernisan, M.D. v Taylor (171 AD2d 869 [2d Dept 1991]), noted that the intent of the Part 130 Rules “is to prevent the waste of judicial resources and to deter vexatious litigation and dilatory or malicious litigation tactics (cf. Minister, Elders & Deacons of Refm. Prot. Church of City of New York v 198 Broadway, 76 NY2d 411; see Steiner v Bonhamer, 146 Misc 2d 10) [Emphasis added].” The instant action, with DRUCKMAN asserting false statements, is “a waste of judicial resources.” This conduct, as noted in Levy, must be deterred. In Weinstock v Weinstock (253 AD2d 873 [2d Dept 1998]) the Court ordered the maximum sanction of $10,000.00 for an attorney who pursued an appeal “completely without merit,” and holding, at 874, that “[w]e therefore award the maximum authorized amount as a sanction for this conduct (see, 22 NYCRR 130-1.1) calling to mind that frivolous litigation causes a substantial waste of judicial resources to the detriment of those litigants who come to the Court with real grievances [Emphasis added].” Citing Weinstock, the Appellate Division, Second Department, in Bernadette Panzella, P.C. v De Santis (36 AD3d 734 [2d Dept 2007]) affirmed a Supreme Court, Richmond County $2,500.00 sanction, at 736, as “appropriate in view of the plaintiff’s waste of judicial resources [Emphasis added].”

In Navin v Mosquera (30 AD3d 883 [3d Dept 2006]) the Court instructed that when considering if specific conduct is sanctionable as frivolous, “courts are required to

examine whether or not the conduct was continued when its lack of legal or factual basis was apparent [or] should have been apparent’ (22 NYCRR 130-1.1 [c]).” The Court, in Sakow ex rel. Columbia Bagel, Inc. v Columbia Bagel, Inc. (6 Misc 3d 939, 943 [Sup Ct,

New York County 2004]), held that “[i]n assessing whether to award sanctions, the Court must [*9]consider whether the attorney adhered to the standards of a reasonable attorney (Principe v Assay Partners, 154 Misc 2d 702 [Sup Ct, NY County 1992]).”

“Nothing could more aptly be described as conduct completely without merit in

. . . fact’ than the giving of sworn testimony or providing an affidavit, knowing the same to be false, on a material issue.” (Sanders v Copley, 194 AD2d 85, 88 [1d Dept 1993]). The Court, in Joan 2000, Ltd. v Deco Constr. Corp. (66 AD3d 841, 842 [2d Dept 2009]), instructed that “[c]onduct is frivolous it . . . asserts material factual statements that are false.”In Curcio v J.P. Hogan Coring & Sawing Corp. (303 AD2d 357 [2d Dept 2003]), plaintiff’s counsel falsely claimed that the parties orally stipulated to a settlement of an employee discrimination case. The Curcio Court, at 358, held that “the conduct of [plaintiff’s counsel] was frivolous because it was without merit in law and involved the assertion of misleading factual statement to the Clerk of the Supreme Court (see 22 NYCRR 130-1.1 [c] [1], [3]).” (See Gordon v Marrone, supra; In re Ernestine R., 61 AD3d 874 [2d Dept 2009]; Glenn v Annunziata, 53 AD3d 565 [2d Dept 2008]; Miller v Dugan, 27 AD3d 429 [2d Dept 2006]; Greene v Doral Conference Center Associates, 18 AD3d 429 [2d Dept 2005]; Ofman v Campos, 12 AD3d 581 [2d Dept 2004]; Intercontinental Bank Limited v Micale & Rivera, LLP, 300 AD2d 207 [1d Dept 2002]; Tyree Bros. Environmental Services, Inc. v Ferguson Propeller, Inc., 247 AD2d 376 [2d Dept 1998]).

Therefore, the Court will examine the conduct of Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC in a hearing, pursuant to 22 NYCRR § 130-1.1, to: determine if Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC engaged in frivolous conduct; and, allow Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC a reasonable opportunity to be heard.

Conclusion

Accordingly, it is ORDERED, that the instant complaint, Index No. 22268/08, is dismissed with prejudice; and it is further

ORDERED, that the Notice of Pendency filed with the Kings County Clerk on July 31, 2008, by plaintiff, DOWNEY SAVINGS AND LOAN ASSOCIATION,

F.A., in an action to foreclose a mortgage for real property located at 70 Somers Street, Brooklyn, New York (Block 1542, Lot 21, County of Kings), is cancelled and discharged; and it is further

ORDERED, that it appearing that Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC engaged in “frivolous conduct,” as defined in the Rules of the Chief Administrator, 22 NYCRR § 130-1 (c), and that pursuant to the Rules of the Chief Administrator, 22 NYCRR § 130.1.1 (d), “[a]n award of costs or the imposition of sanctions may be made . . . upon the court’s own initiative, after a reasonable opportunity to be heard,” this Court will conduct a hearing affording Margaret E. Carucci, Esq. and DRUCKMAN LAW GROUP PLLC “a reasonable opportunity to be heard” before me in Part 27, on Monday, September 12, 2011, at 2:30 P.M., in Room 479, 360 Adams Street, Brooklyn, NY 11201; and it is further

ORDERED, that Ronald David Bratt, Esq., my Principal Law Clerk, is directed to serve this order by first-class mail, upon: Margaret E. Carucci, Esq., Druckman Law Group PLLC, 242 Drexel Avenue, Suite 2, Westbury, NY 11590; and, DRUCKMAN LAW GROUP PLLC, 242 Drexel Avenue, Suite 2, Westbury, NY 11590. [*10]

This constitutes the Decision and Order of the Court.

ENTER

___________________________

HON. ARTHUR M. SCHACK

J.S.C.

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IN RE MONK | Oregon BK Court “Proof Of Claim, Failure to Respond, LSI Title, Litton, U.S. Bank, PCFS”

IN RE MONK | Oregon BK Court “Proof Of Claim, Failure to Respond, LSI Title, Litton, U.S. Bank, PCFS”


UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF OREGON

IN RE
LESTER G. MONK, and
MARY L. MONK,
Debtors.
___________________
LESTER G. MONK, and
MARY L. MONK,
Plaintiffs

v.

LSI TITLE COMPANY OF OREGON, LLC,
LITTON LOAN SERVICING, LP,
U.S. NATIONAL BANK ASSOC., as Trustee
under a pooling and servicing agreement dated as of
March 1, 2002,
MORGAN STANLEY DEAN WITTER CAPITAL
I INC. TRUST 2002-NCI, and
DOES 1 through 10,
Defendants.

EXCERPTS:

DISCUSSION

A. Litton’s Motion to Dismiss
Defendant Litton has filed a motion to dismiss on the following grounds:
1) Plaintiffs do not have a private right of action under the discharge injunction and no violation of the
discharge injunction occurred under the facts of this case.
2) Plaintiffs’ Chapter 13 Plan did not affect the lien of the Defendants, which rode through bankruptcy
unaffected unaffected by the order disallowing the claim of PCFS, Litton’s predecessor in interest.
3) Plaintiffs entered into a novation of the loan after the discharge order was entered in the Chapter 13 case.
4) The bankruptcy court lacks post-confirmation subject matter jurisdiction over the claims set forth in the
Complaint.
5) Plaintiffs have failed to state a claim for rescission based on the foregoing and the fact that they failed to
plead that they could repay moneys owed to the Defendants in order to completely unwind the transaction.
6) The claim for violation of the FDCPA should be dismissed based on the foregoing and because: a)
Defendants are not “debt collectors” within the meaning of the FDCPA; b) the FDCPA claim is based on
alleged conduct outside the statute of limitations; and c) no FDCPA claim lies for alleged violations of the
discharge injunction.

[…]

Litton also seeks dismissal of the Claim on the basis that under the facts alleged, no violation of the
discharge injunction occurred. To determine whether this is so, some analysis of the actions which occurred
in the case must be made. First, the Trustee filed an objection to the secured claim of PCFS because it had
not provided the information the Trustee had been seeking to verify the secured status and perfection of the
claim. Proper notice was made to PCFS of the objection and order and the fact that it was required to
respond within 32 days or its claim would be “disallowed in full.” When PCFS failed to respond, its claim
was “disallowed.” Litton argues in its second ground for dismissal that PCFS’s lien was unaffected by the
disallowance of its claim and “rode through” bankruptcy unscathed. It is true that a lien will survive
bankruptcy despite the failure of the holder to file a proof of claim for the related claim. See Hamlett v.
Amsouth Bank (In re Hamlett), 322 F.3d 342 (4th Cir. 2003). Here, however, a proof of claim was filed, and
subsequently disallowed on the Trustee’s objection.

Section 506(d)4 provides as follows:

To the extent that a lien secures a claim against the debtor that is not an allowed secured
claim, such lien is void, unless —
(1) such claim was disallowed only under section 502(b)(5) [unmatured support obligation] or
502(e) [certain claims for reimbursement or contribution] of this title; or
(2) such claim is not an allowed secured claim due only to the failure of any entity to file a
proof of claim under section 501 of this title.

Because PCFS’s claim was “disallowed,” it was not an “allowed secured claim,” and the related lien
was void pursuant to § 506(d). Defendant’s claim was not of the type described in § 506(d)(1), and its claim
was disallowed for reasons other than its failure to file a proof of claim. Thus, when the discharge order was
entered in Debtors’ case, Defendant held a “disallowed” claim and a void lien.
Section 1328 provides in part:

(a) As soon as practicable after completion by the debtor of all payments under the
plan, unless the court approves a written waiver of discharge executed by the debtor after the
order for relief under this chapter, the court shall grant the debtor a discharge of all debts
provided for by the plan or disallowed under section 502 of this title, except any debts —
(1) provided for under section 1322(b)(5) of this title.
****

Defendant argues that Debtors did not file an amended Plan after disallowance of its claim and that
the Plan continued to provide for ongoing payments to Defendant on the long-term debt pursuant to ¶ 4, and
that the Plaintiffs did, in fact, continue to make the ongoing payments to PCFS even after the claim was
disallowed. If follows, argues Defendant, that the debt was not discharged under the exception at §
1328(a)(1).

Defendant’s argument fails for the following reason: The debt was disallowed under section 502 and, as provided by § 1328(a), it was discharged. A “debt” is defined at §101(12) as “liability on a claim.” A “claim” is defined as a “right to payment . . . .” §101(5)(A). Once the claim was disallowed, PCFS no longer had a right to payment and thus no longer had a “claim” or a “debt.” As it no longer possessed a “debt,” it follows that it did not have a “debt[] provided for under section 1322(b)(5),” and cannot use § 1328(a)(1) to except its nonexistent debt from discharge.

[…]

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MORRISON v. U.S. BANK | FL 5DCA REVERSES Final Summary Judgment “Notice of Default as Required by Language of Mortgage”

MORRISON v. U.S. BANK | FL 5DCA REVERSES Final Summary Judgment “Notice of Default as Required by Language of Mortgage”


IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT

JULY TERM 2011

DIANNE MORRISON AND
MICHAEL HERBERT,
Appellants,

v.

US BANK, N.A., AS TRUSTEE
FOR CSAB, ETC.,
Appellee.

Case No. 5D10-556

________________________________/
Opinion filed July 29, 2011

Appeal from the Circuit Court
for Seminole County,

Alan A. Dickey, Judge.

Michael E. Rodriguez of Foreclosure
Defense Law Firm, PL, Tampa,
for Appellants.

Andrew D. Manko of Carlton Fields, P.A.,
Tallahassee, Michael K. Winston and
Dean A. Morande of Carlton Fields, P.A.,
West Palm Beach, for Appellee.

PER CURIAM.

Appellants challenge the final summary judgment in foreclosure entered in favor of Appellee. Appellants’ sole argument on appeal is that a disputed issue of material fact exists as to whether Appellee provided notice of default, as required by the language in the mortgage. Appellants denied that the notice had been provided, specifically quoting the language of the mortgage that pertained to the notice. Although Appellee attached a copy of the notice to its motion, the notice was not authenticated by affidavit or otherwise. The trial court overruled Appellants’ objection to the unauthenticated document. Appellee concedes that this was error, but nevertheless, contends that Appellants failed to raise the lack of notice in their pleading with the requisite specificity. We disagree and accordingly reverse and remand this cause for further proceedings.

REVERSED AND REMANDED.

SAWAYA, TORPY and EVANDER, JJ., concur.

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U.S. BANK NA v. KIMBALL | VT Supreme Court Affirms w/Prejudice “AFFIDAVIT FAIL, Jeffrey Stephan, Scott Zeitz, Accredited, Allonge, MERS, RFC, Homecomings, GMAC”

U.S. BANK NA v. KIMBALL | VT Supreme Court Affirms w/Prejudice “AFFIDAVIT FAIL, Jeffrey Stephan, Scott Zeitz, Accredited, Allonge, MERS, RFC, Homecomings, GMAC”


U.S. Bank National Association (2010-169)

2011 VT 81

[Filed 22-Jul-2011]

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports.  Readers are requested to notify the Reporter of Decisions, Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in order that corrections may be made before this opinion goes to press.

2011 VT 81

No. 2010-169

U.S. Bank National Association

Supreme Court




On Appeal from

v.

Grand Isle Superior Court




Christine Kimball

January Term, 2011





Ben W. Joseph, J.

Andre D. Bouffard of Downs Rachlin Martin PLLC, Burlington, for Plaintiff-Appellant.

Grace B. Pazdan, Vermont Legal Aid, Inc., Montpelier, for Defendant-Appellee.

PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

¶ 1. BURGESS, J. Plaintiff US Bank National Association, as trustee for RASC 2005 AHL1, appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice US Bank’s foreclosure complaint for lack of standing.  On appeal, US Bank argues that it had standing to prosecute the foreclosure claim and the court’s dismissal with prejudice was in error.  Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney’s fees.  We affirm the dismissal and remand for consideration of homeowner’s motion for attorney’s fees.

¶ 2. On appeal from a grant of summary judgment, “the nonmoving party receives the benefit of all reasonable doubts and inferences.”  Samplid Enters., Inc. v. First Vt. Bank, 165 Vt. 22, 25, 676 A.2d 774, 776 (1996). We review the decision de novo under the same standard as the trial court.  Id.  Summary judgment is appropriate if there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.  Id.; see V.R.C.P. 56(c)(3).

¶ 3. So viewed, the record reveals the following facts.  Homeowner purchased property on June 16, 2005.  To finance the purchase, she executed an adjustable rate promissory note in favor of Accredited Home Lenders, Inc. (Accredited) in the amount of $185,520.  The note was secured by a mortgage deed to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Accredited.

¶ 4. On January 12, 2009, US Bank filed a foreclosure complaint for homeowner’s failure to make required payments.  The complaint alleged that the mortgage and note were assigned to US Bank by MERS, as nominee for Accredited, by an instrument dated January 6, 2009.  Attached to the complaint was a copy of the instrument entitled “Assignment of Mortgage,” signed by Jeffrey Stephan, identified therein as Duly Authorized Agent and Vice President of MERS.  The promissory note was also attached to the complaint, and appended to it was an undated allonge[1] signed by a corporate officer of Accredited, endorsing the note in blank.

¶ 5. Homeowner initially filed a pro se answer.  After procuring counsel, homeowner filed an amended answer, claiming, among other things, that US Bank failed to present sufficient evidence that it held homeowner’s note and corresponding mortgage.  Homeowner also filed a counterclaim alleging consumer fraud.  In March 2005, homeowner filed a motion for summary judgment arguing that US Bank lacked standing to bring the foreclosure complaint because it failed to establish that it held an interest in the debt secured by homeowner’s property.  Homeowner argued that US Bank had not established proper assignment of the mortgage because MERS as nominee for Accredited lacked authority to assign the mortgage.  Homeowner further argued that US Bank failed to demonstrate that it held or had a right to enforce the promissory note.  In July 2009, in support of the motion for summary judgment, homeowner submitted an affidavit, averring that in mid-June 2009 she received a letter from her mortgage servicer, Homecomings Financial, notifying her that the servicing rights to her loan were being assigned not to US Bank, but to GMAC Mortgage, LLC effective July 1, 2009.  She also averred that she received a concurrent letter from GMAC, confirming that it was servicing the loan on behalf of Residential Funding Corporation (RFC).  The letters referred to in the affidavit were attached.

¶ 6. US Bank opposed the request and responded with its own cross-motion for summary judgment on the merits, claiming that whatever deficiencies were present in its original complaint were now resolved because it had produced and sent to homeowner “a copy of the fully endorsed note specifically payable to [US Bank].”  In its statement of undisputed facts, US Bank asserted that it had the original note, and that it was endorsed from Accredited to RFC and then to US Bank.  No dates, however, were provided for these endorsements.  In support, US Bank attached an affidavit attesting to these facts, but still devoid of any dates for the purported assignments.  The affidavit was signed by Jeffrey Stephan, the same man who had signed the assignment attached to original complaint, but this time identifying himself as a “Limited Signing Officer” for GMAC, the mortgage servicer for homeowner’s loan.  In the affidavit, Stephan claims that he has “familiarity with the loan documentation underlying the mortgage loan entered at issue in the present foreclosure case.”  The copy of the note attached had an allonge, appearing to be the same allonge previously submitted as endorsed in blank, but this time with “RFC” stamped in the blank spot and containing a second endorsement from RFC to US Bank.  Neither endorsement was dated.

¶ 7. The court held a hearing on the summary judgment motions.  Following the hearing, the court issued a written order on October 27, 2009.  The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.”  Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed.  Therefore, the court held that US Bank lacked standing to bring the foreclosure action.  The court granted homeowner’s motion for summary judgment, dismissed the foreclosure action, and set the matter for hearing on homeowner’s counterclaim.

¶ 8. On November 23, 2009, US Bank moved for reconsideration.[2] US Bank acknowledged that it had created “confusion” by attaching to the complaint “an outdated copy of the note prior to its transfer to [US Bank], and a mortgage assignment that purports to assign the note along with the mortgage.”  It claimed, however, that because it now held the original note, it was entitled to enforce it.  Homeowner did not dispute that US Bank possessed what appeared to be the original note, but she insisted US Bank was required to authenticate the endorsements through credible affidavits and to demonstrate that it had possession when the complaint was filed.  As to this timing issue, US Bank contended that homeowner’s mortgage had been endorsed to it in September 2005.  In support, US Bank submitted an affidavit signed by Scott Zeitz, who is identified as a litigation analyst with GMAC.  In the affidavit, ZeitzZeitz avers that homeowner’s mortgage note was endorsed to RFC and then to US Bank in September 2005.  The affidavit does not explain the obvious inconsistencies with the prior affidavits offered by US Bank or with the letter homeowner received from GMAC identifying RFC as the holder of her note in June 2009.  It also does not explain how obtained this knowledge given that GMAC did not begin servicing the loan until July 1, 2009.  In the alternative, US Bank argued that, even if did not hold an interest in the note at the time the complaint was filed, it could cure the deficiency by now substituting itself as the real party in interest under Rule of Civil Procedure 17(a).  US Bank also filed a motion to amend its complaint to properly reflect the manner in which it now alleged that it acquired an interest in homeowner’s note and mortgage.

¶ 9. Homeowner opposed the motions, contending that the numerous inconsistencies in the information offered by US Bank made it unreliable.  In addition, homeowner argued that the Zeitz affidavit was not based on personal knowledge and therefore insufficient to support the motion.  Homeowner moved for reasonable attorney’s fees under Rule 56(g), claiming that US Bank acted in bad faith by filing affidavits lacking a basis in personal knowledge and contradicting undisputed evidence.[3] Homeowner explained that as a result her attorney “spent numerous hours responding to and refuting the validity of the affidavits.”

¶ 10. Following a hearing, the court denied the motions for reconsideration and to amend the complaint.  The court concluded that US Bank had submitted a defective complaint and the deficiencies therein were not mere technicalities, but essential items, without which the case could not proceed.  The court held that US Bank lacked standing when the complaint was filed, and dismissed the complaint “with prejudice.”  US Bank appeals.

¶ 11. On appeal, US Bank argues that the court erred in (1) dismissing the complaint with prejudice; (2) concluding there was no standing when there was evidence demonstrating that US Bank was the holder of the note before the complaint was filed; and (3) denying US Bank’s request to substitute itself as the real party in interest.  Homeowner cross-appeals, arguing that the court failed to address her request for attorney’s fees and requesting a remand.

¶ 12. We begin with the issue of standing.  “[O]ur review of dismissal for lack of standing is the same as that for lack of subject matter jurisdiction.  We review the lower court’s decision de novo, accepting all factual allegations in the complaint as true.”  Brod v. Agency of Natural Res., 2007 VT 87, ¶ 2, 182 Vt. 234, 936 A.2d 1286.  We have the same standing requirement as the federal courts in that our jurisdiction is limited to “actual cases or controversies.”  Parker v. Town of Milton, 169 Vt. 74, 76-77, 726 A.2d 477, 480 (1998). Therefore, to bring a case “[a] plaintiff must, at a minimum, show (1) injury in fact, (2) causation, and (3) redressability.”  Id. at 77, 726 A.2d at 480 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).  This means a plaintiff “must have suffered a particular injury that is attributable to the defendant,” id. at 77, 726 A.2d at 480, and a party who is not injured has no standing to bring a suit.  Bischoff v. Bletz, 2008 VT 16, ¶¶ 15-16, 183 Vt. 235, 939 A.2d 420.  And, as the U.S. Supreme Court has explained, “standing is to be determined as of the commencement of suit.”  Lujan, 504 U.S. at 570 n.5.

¶ 13. To foreclose a mortgage, a plaintiff must demonstrate that it has a right to enforce the note, and without such ownership, the plaintiff lacks standing.  Wells Fargo Bank, N.A. v. Ford, 15 A.3d 327, 329 (N.J. Super. Ct. App. Div. 2011).  While a plaintiff in a foreclosure should also have assignment of the mortgage, it is the note that is important because “[w]here a promissory note is secured by a mortgage, the mortgage is an incident to the note.”  Huntington v. McCarty, 174 Vt. 69, 70, 807 A.2d 950, 952 (2002). Because the note is a negotiable instrument, it is subject to the requirements of the UCC.  Thus, US Bank had the burden of demonstrating that it was a “ ‘[p]erson entitled to enforce’ ” the note, by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.”  9A V.S.A. § 3-301.  On appeal, US Bank asserts that it is entitled to enforce the note under the first category—as a holder of the instrument.

¶ 14. A person becomes the holder of an instrument when it is issued or later negotiated to that person.  9A V.S.A. § 3-201(a). Negotiation always requires a transfer of possession of the instrument.  Id. § 3-201 cmt. When the instrument is made payable to bearer, it can be negotiated by transfer alone.  Id. §§ 3-201(b), 3-205(a). If it is payable to order—that is, to an identified person—then negotiation is completed by transfer and endorsement of the instrument.  Id. § 3-201(b). An instrument payable to order can become a bearer instrument if endorsed in blank.  Id. § 3-205(b).See Bank of N.Y. v. Raftogianis, 13 A.3d 435, 439-40 (N.J. Super. Ct. Ch. Div. 2010) (reciting requirements for bank to demonstrate that it was holder of note at time complaint was filed). Therefore, in this case, because the note was not issued to US Bank, to be a holder, US Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to US Bank.

¶ 15. US Bank lacked standing because it has failed to demonstrate either requirement.  Initially, US Bank’s suit was based solely on an assignment of the mortgage by MERS.  The complaint did not allege that US Bank held the original note.  US Bank simply attached a copy of the note with an allonge endorsement in blank.  Homeowner challenged this evidence as insufficient to show that US Bank held an interest in her note.  Because homeowner supported her position with an affidavit and documentary evidence, US Bank was required to “come forward with an opposing affidavit or other evidence that raises a dispute as to the fact or facts in issue.”  Alpstetten Ass’n, Inc. v. Kelly, 137 Vt. 508, 514, 408 A.2d 644, 647 (1979). At this point, US Bank abandoned its claim of assignment of the mortgage and instead asserted that it held the original note.  It submitted the note with an allonge containing two undated specific endorsements, one to US Bank.  The supporting affidavit claimed that the note had been endorsed to US Bank, but provided no information about when and failed to explain why a note with a blank endorsement was the basis for the complaint.

¶ 16. Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint.  US Bank failed to allege or demonstrate that it held the original note endorsed in blank when it commenced the foreclosure action.  In fact, US Bank asserted that the note with the blank endorsement was an earlier copy that was mistakenly attached to the complaint.  It also alleged that the blank endorsement was stamped with RFC’s name in 2005.  Therefore, it could not possibly have held the original note with a blank endorsement when the complaint was filed.  Further, there is no evidence to show that US Bank held the original note endorsed to its name before the complaint was filed.  While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement.  Given US Bank’s failure to show it had standing, the foreclosure complaint was properly dismissed.

¶ 17. US Bank argues that whatever shortcomings were present in its earlier filings were cured by the documents attached to its motion to reconsider, and, therefore, the court erred in denying this motion.  We disagree.  The additional affidavit submitted with the motion to reconsider did nothing to establish the timing of the endorsement to US Bank because it was not based on personal knowledge and contained conclusions rather than facts.  Affidavits must be “made on personal knowledge [and] set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.”  V.R.C.P. 56(e). The affiant, Zeitz, declared himself to be an employee of GMAC, the servicer of homeowner’s loan.  Zeitz averred that the note was endorsed to US Bank in September 2005 but provided no explanation of how he gained personal knowledge about this endorsement that supposedly took place several years before his company began servicing homeowner’s loan.  Further, the affidavit failed to explain the obvious contradictions with other evidence.  Specifically, Zeitz did not account for the letter from his company, submitted by homeowner, that identifies RFC, the predecessor-in-interest to US Bank, as the holder of the loan in July 2009, months after the complaint was filed.  Having already failed to succeed on its summary judgment motion, reconsideration of the same issues on new evidence was up to the court’s sound discretion.  See Crosby v. Great Atl. & Pac. Tea Co., 143 Vt. 537, 539, 468 A.2d 567, 568 (1983) (per curiam) (affirming court’s denial of plaintiffs’ motion to reconsider summary judgment ruling using an abuse-of-discretion standard).  Fraught with contradictions and evidently lacking information based on personal knowledge, the affidavit was insufficient to establish that US Bank had an interest in the note prior to the time the complaint was filed.  Thus, it was no abuse of discretion for the court to deny the motion to reconsider.

¶ 18. In the alternative, US Bank argues that even if it did not hold the note at the time the complaint was filed, this should be overlooked because it has now produced the original note with a chain of endorsements ending in US Bank.[4] Thus, US Bank contends it can now be substituted as the real party in interest under Rule 17(a).  US Bank argues that this Court allows liberal substitution of parties, citing Korda v. Chicago Insurance Co., 2006 VT 81, 180 Vt. 173, 908 A.2d 1018.  In that case, the trial court dismissed an estate’s claims against a tortfeasor’s employer’s insurance company where the employer did not assign its rights to the estate until three years after the complaint was filed.  This Court reversed, holding that “where, as here, a plaintiff acquires capacity to sue after the suit is filed, and before the action is dismissed for lack of capacity, the acquisition of capacity relates back to the filing of the action for all purposes, including compliance with the statute of limitations.”  Id. ¶ 16. US Bank contends it is similarly situated and is entitled to substitution as the real party in interest now that it has obtained an interest in the note.

¶ 19. The merit of this argument might have been better received by the trial court had it been supported by the necessary documentation and proffered before summary judgment was granted for defendant.  US Bank had notice of the standing deficiency from the start of the litigation and had an opportunity to prove its case.  It was unable to do so.  Having failed to support its position, the court was not required to give US Bank another opportunity to prove its case following the grant of summary judgment, and did not abuse its discretion in denying the request at that late stage in the proceeding.  See V.R.C.P. 17(a) (directing that action not be dismissed for absence of real party in interest “until a reasonable time has been allowed”).

¶ 20. US Bank argues that for reasons of policy it should be permitted to proceed because it would be wasteful to prevent it from being able to “cure” its standing problem.  While we are sympathetic to the desire to avoid wasteful and duplicative litigation, the source of the unnecessary proceedings in this case was not an overly wooden application of the rules, but US Bank’s failure to abide by them.  It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.[5] Nor is it irrationally demanding to expect the foreclosing party to provide adequate, satisfying proof in response to a motion for summary judgment challenging standing to bring suit.  What should have here been a fairly straightforward, if not a summary, proceeding under the rules, was rendered inefficient by US Bank’s failure to marshal its case before compelling homeowner and the court to waste time and resources, twice, by responding to what could not be proven.  There was nothing inequitable in dismissing this matter.

¶ 21. We turn next to the question of whether the court erred in dismissing the complaint “with prejudice.”  US Bank argues this was in error and homeowner contends that the court’s determination bars US Bank from filing again to foreclose.  At a minimum, the court certainly intended to put an end to US Bank’s instant foreclosure action and dismissal was appropriate because, as another court explained, when a plaintiff is not able to establish that it possessed the note on the date the complaint was filed, the complaint should be subject to dismissal “if only to provide a clear incentive to plaintiffs to see that the issue of standing is properly addressed before any complaint is filed.”  Raftogianis, 13 A.3d at 455.

¶ 22. Nevertheless, and despite the court’s invocation of “with prejudice” in its dismissal order, US Bank cannot be precluded from pursuing foreclosure on the merits should it be prepared to prove the necessary elements.  Although postured as cross-motions for summary judgment, the motion practice addressed only whether the bank had standing for jurisdictional purposes.  The merits of foreclosure were not, and on this record could not have been, litigated.  The court’s dismissal on just jurisdictional grounds was no adjudication on the merits.  See V.R.C.P. 41(b)(3) (providing that any involuntary dismissal, “other than a dismissal for lack of jurisdiction, . . . operates as an adjudication upon the merits” (emphasis added)); see also Wells Fargo Bank, N.A. v. Byrd, 2008-Ohio-4603, ¶¶ 18-20, 897 N.E.2d 722 (Ct. App.) (reversing trial court’s dismissal with prejudice of foreclosure complaint as inappropriate where dismissal was for lack of standing).

¶ 23. Thus, this may be but an ephemeral victory for homeowner.  Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency.  Cf. Indymac Bank, F.S.B. v. Yano-Horoski, 912 N.Y.S.2d 239, 240 (App. Div. 2010) (reversing trial court’s order canceling mortgage and debt).  Homeowner’s arguments supporting a dismissal with prejudice are not convincing.[6] Homeowner relies on Nolen v. State, but that unpublished three-justice decision simply affirmed the trial court’s decision to dismiss with prejudice plaintiff’s constitutional claim for lack of standing without a challenge to or any analysis of the “with prejudice” designation.  No. 08-131, 2009 WL 2411832, at *2 (Vt. May 29, 2009) (unpub. mem.), available at http://www.vermontjudiciary.org/d-upeo/upeo.aspx.New Eng. Educ. Training Serv., Inc. v. Silver St. P’ship, 156 Vt. 604, 613, 595 A.2d 1341, 1345-46 (1991) (affirming dismissal of foreclosure action where recovery on the underlying note would be unconscionable).  While the trial court may have had discretion to exert its equitable powers in this manner, no findings were made to support such a conclusion, and we will not speculate on a matter of such importance. Further, the court’s order does not support plaintiff’s assertion that the court was warranted in dismissing with prejudice on equitable grounds given what homeowner characterizes as inconsistent and “likely fraudulent filings” submitted by US Bank.  See

¶ 24. Finally, we address homeowner’s cross-appeal.  In response to US Bank’s motion to reconsider, homeowner filed a motion for attorney’s fees asserting that US Bank had filed affidavits in bad faith.  We agree that the request for attorney’s fees under Rule 56(g) was timely and properly raised in the trial court, and that the court erred in failing to consider the motion.  Therefore, we remand for consideration of homeowner’s request.

The foreclosure complaint is dismissed and the case is remanded for consideration of defendant’s motion for attorney’s fees.




FOR THE COURT:












Associate Justice




[1] An allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.”  Black’s Law Dictionary 83 (8th ed. 2004).  The Uniform Commercial Code (UCC) accepts the use of such endorsements, explaining that “a paper affixed to the instrument is a part of the instrument.”  9A V.S.A. § 3-204(a). Although at one time an allonge could be used only when there was no room on the original document, the official comment to the UCC explains that now an allonge “is valid even though there is sufficient space on the instrument for an indorsement.”  Id. § 3-204 cmt.

[2] Because final judgment had not yet been entered, the motion was filed pursuant to Rule of Civil Procedure 56.  See Kelly v. Town of Barnard, 155 Vt. 296, 307, 583 A.2d 614, 620 (1990) (holding that trial court retains jurisdiction to modify or rescind order prior to entry of final decree and may grant summary judgment motion after denying prior similar motion).

[3] In pertinent part, Rule of Civil Procedure 56(g) states:


Should it appear to the satisfaction of the court at any time that any of the affidavits presented pursuant to this rule are presented in bad faith . . . , the court shall forthwith order the party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused the other party to incur, including reasonable attorney’s fees, and any offending party or attorney may be adjudged in contempt.

[4] This argument in and of itself underscores the extent of confusion created by US Bank’s evidence.  While, on the one hand, US Bank wishes us to accept that it has uncontroverted evidence that it has held homeowner’s note since September 2005, on the other hand, it argues that it has acquired an interest in the note recently and can now be substituted as the real party in interest.  It appears that even US Bank is unsure of when the note was endorsed to it.

[5] We note that the foreclosure rule as amended now specifically requires a plaintiff to attach to the complaint “the original note and mortgage deed and proof of ownership thereof, including copies of all original endorsements and assignments of the note and mortgage deed.”  V.R.C.P. 80.1(b)(1) (Cum. Supp. 2010); see 2009, No. 132 (Adj. Sess.) § 1.

[6] We note that two cases cited by homeowner to support dismissal of a foreclosure complaint with prejudice have since been reversed.  U.S. Bank N.A. v. Emmanuel, No.  19271/09, 2010 WL 1856016  (N.Y. Sup. Ct. May 11, 2010), reversed by 921 N.Y.S.2d 320 (App. Div. 2011); IndyMac Bank F.S.B. v. Yano-Horoski, 890 N.Y.S.2d 313 (Sup. Ct. 2009), reversed by 912 N.Y.S.2d 239 (App. Div. 2010).

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