A homeowner’s belated attempt to challenge foreclosure, because the bank was not assigned the mortgage until two weeks after filing the complaint, was rightfully thrown out, a state appeals court said Thursday.
“In foreclosure matters, equity must be applied to plaintiffs as well as defendants,” the court said in Deutsche Bank Trust Co. Americas v. Angeles, A-2522-11, a published ruling.
“Defendant did not raise the issue of standing until he had the advantage of many years of delay,” the panel added.
The court distinguished Deutsche Bank National Trust Co. v. Mitchell, 422 N.J. Super. 214 (App. Div. 2011), where the panel said lenders, to establish standing, must demonstrate possession of the note or assignment of the mortgage before filing.
The defendant, Yony Angeles, obtained a $454,400 loan from First Equity Financial Corp. in January 2007 on a home in Maywood, secured by a mortgage.
The note was later transferred to Deutsche Bank. Angeles’ mortgage was held by Mortgage Electronic Registration System Inc. (MERS), a national registry within which participating lenders can transfer mortgage interests to each other.
Angeles paid 10 installments but stopped making payments in February 2008.
That May 29, Deutsche Bank filed a foreclosure complaint, claiming it obtained the note and mortgage prior to drafting the complaint.
But it wasn’t until June 12, two weeks after filing, that MERS assigned the mortgage to Deutsche Bank. Deutsche Bank amended its complaint, and Angeles was served in July.
Angeles never filed a responsive pleading, and Bergen County Superior Court Judge Robert Contillo entered default, and then a final judgment of foreclosure in November 2009.
In February 2010, Contillo stayed the sheriff’s sale and ordered the parties into the judiciary’s Foreclosure Mediation Program, but to no avail. Deutsche Bank purchased the property that summer, and Angeles did not object to the sale.
Contillo twice stayed eviction, so Angeles’ children could finish the school year and to allow time for negotiations on a short sale — which proved unsuccessful — that would have allowed Angeles to buy back the property.
As a last resort, Angeles filed a petition for an order to show cause last November, seeking to vacate the sale and allow him to file an answer to Deutsche Bank’s complaint or have it dismissed for lack of standing.
Contillo denied the application, and Angeles was evicted last January.
Angeles appealed, pointing to Mitchell, where the court said an amended complaint cannot cure initial lack of standing.
Appellate Division Judge Ellen Koblitz, joined by Allison Accurso and Joseph Lisa, said Angeles “raised a valid concern” because the complaint predated assignment of the mortgage.
“In Mitchell, however, the defendant actively engaged in the litigation, filing an answer and counterclaims” and “also contested the plaintiff’s standing to file the foreclosure complaint long before the end of the litigation,” Koblitz said.
Angeles did not raise standing or otherwise fight foreclosure until two years after defaulting and more than three years after the filing, the panel noted.
Also, Deutsche Bank very well could have — as it claimed — had possession of the note when it filed the complaint, which by itself confers standing, the panel said.
Angeles “at no time denied his responsibility for the debt incurred nor can he reasonably argue that Deutsche is not the party legitimately in possession of the property,” Koblitz wrote.
“Rather, when all hope of further delay expired, after his home was sold and he was evicted, he made a last-ditch effort to relitigate the case.”
Randolph solo Gary Grant, Angeles’ lawyer, says the decision is unsurprising given that Angeles was “already on thin ice” and “had a number of bites at the apple.”
Still, the simplest solution to cases like this one, as well as Mitchell, would be a court ruling or legislation that requires proof of note holder status at the outset.
“Why not require the bank to produce the original note as part of the application?” Grant says. “Obviously the court wasn’t willing to go that far in this case.”
That’s “unfortunate,” Grant says, because Deutsche Bank is “notorious in terms of acquiring loans.”
Brian Nicholas of Zucker, Goldberg & Ackerman in Mountainside, Deutsche Bank’s counsel, declines comment.
Somerville solo Peter Ouda, who represented the homeowner in Mitchell, says Thursday’s ruling is good in that it reaffirms Mitchell as good law.
The court’s message, he says, is, “the homeowner is entitled to equity, but so is the bank.”
The lesson for homeowners is to assert a defense quickly or risk losing the opportunity, Ouda adds. “All defenses can be waived if not pled.”
The Mitchell decision, on Aug. 9, 2011, came a day after Bank of New York v. Laks, A-4221-09, was handed down. That case, where the Appellate Division said a defendant is entitled to dismissal without prejudice if the foreclosure notice omits the lender’s name, was another win for homeowners.
Laks, however, was partly overruled last Feb. 27, when the state Supreme Court issued U.S. Bank v. Guillaume, 209 N.J. 449, holding trial judges instead may order service of new documents rather than dismiss the matter.
Mitchell was remanded for a hearing on whether Deutsche Bank was in possession of the note or otherwise had standing, but the parties settled confidentially weeks after the decision, Ouda says. •