CAPITAL ONE, N.A. VS. JAMES I. PECK, IV (F-005201-13, ESSEX COUNTY AND STATEWIDE)
188 A.3d 1105
| N.J. Super. Ct. App. Div. | 2018Background
- In 2005 Peck executed a promissory note to Chevy Chase Bank (CCB) secured by a mortgage recorded in MERS' name; CCB sold the note to Freddie Mac on July 28, 2005 but retained the mortgage.
- CCB converted/merged into Capital One, N.A. (CONA) in July 2009; CONA acted as servicer and Peck made payments to CONA.
- MERS (as nominee) assigned the mortgage to CONA on February 9, 2011, after the CCB→CONA merger.
- CONA brought an earlier foreclosure action in 2011 where it produced the original note; the note was returned to Freddie Mac in 2012.
- CONA filed the present foreclosure complaint in February 2013; Peck contested standing; pleadings were eventually stricken and final foreclosure judgment entered August 26, 2016.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who has standing to foreclose when the note and mortgage are split between different entities? | CONA (as servicer and successor mortgagee) had authority to foreclose; servicers litigate on behalf of Freddie Mac. | Only Freddie Mac, as owner of the note, had the right to enforce the mortgage and foreclose because it owned the loan. | When note and mortgage are split, a foreclosing plaintiff must show both possession of the note and a valid mortgage assignment existing before filing; here affirmed despite irregularities. |
| Is possession of the original note required at filing? | Mitchell allows standing via possession of the note or an authenticated assignment of the mortgage/note before filing. | Peck stressed Freddie Mac’s ownership of the note required Freddie Mac to be the foreclosing party. | A plaintiff need not physically possess the original note at filing if it has an authenticated assignment showing rights prior to filing; but when note and mortgage are separated both note possession and assignment are required. |
| Do servicer/Freddie Mac policies affect standing? | Freddie Mac requires servicers to process foreclosures in servicer’s name; notice to borrower that CONA was servicer supports CONA’s action. | Policy does not substitute for required legal ownership/assignment. | Servicer policy and borrower notice are relevant equities but do not replace the dual requirement when interests are split. |
| Do procedural irregularities (e.g., original note returned to Freddie Mac after being produced earlier) necessitate reversal? | CONA argued prior possession and assignment existed; irregularities were not decisive. | Peck argued irregularities deprived CONA of standing at filing. | Court applied equitable discretion: although note should have been in CONA’s possession at filing, the combination of prior possession, MERS assignment, borrower notice, and Freddie Mac servicer practices made reversal unwarranted. |
Key Cases Cited
- Deutsche Bank Nat'l Tr. Co. v. Mitchell, 422 N.J. Super. 214 (App. Div.) (holding standing can be shown by possession of the note or an authenticated assignment demonstrating rights before filing)
- Deutsche Bank Tr. Co. Ams. v. Angeles, 428 N.J. Super. 315 (App. Div.) (reinforcing Mitchell on standing and equitable relief in foreclosure matters)
- Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323 (Ch. Div.) (discussing MERS' role as nominee and separation of note and mortgage interests)
- Deutsche Bank Nat'l Tr. Co. v. Russo, 429 N.J. Super. 91 (App. Div.) (standing is not a jurisdictional issue in New Jersey foreclosures)
- Conley v. Guerrero, 228 N.J. 339 (2017) (standard of de novo appellate review)
- Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburg, 224 N.J. 189 (2016) (summary judgment standard)