DEUTSCHE BANK NAT. v. Mitchell
27 A.3d 1229
| N.J. Super. Ct. App. Div. | 2011Background
- Bethea, victim of a buy-lease-back mortgage rescue, transferred interest in her Plainfield property to Mitchell, who obtained a mortgage from Long Beach for $319,500 plus Bethea secured a $35,500 mortgage.
- Bethea, facing foreclosure for nonpayment, signed a consulting agreement with Elite/French and a lease-to-purchase arrangement with Mitchell, with an escrow reserve and a $25,000 consulting fee to Elite.
- HUD-1 showed Bethea would receive $62,187.02 from the sale proceeds, but those funds funded the consulting fee and escrow reserves instead of Bethea.
- Bethea’s monthly rent rose dramatically at French’s direction, funded by an escrow to cover overages, while Bethea’s income was limited and uncertain.
- In May 2008 Deutsche Bank filed foreclosure; the mortgage was assigned to Deutsche Bank the day after filing (May 14, 2008), and an amended complaint referenced a prior assignment that had not yet been recorded.
- The trial court granted summary judgment for Deutsche Bank, found standing despite proof defects, and transferred Bethea’s third-party complaint; on appeal, the court reversed, vacated the sale, and remanded for a standing determination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to foreclose at filing | Deutsche Bank owned/controlled the note at filing via assignment. | DB lacked note possession at filing and thus lacked standing; amended complaint cannot cure that. | DB lacked standing at filing; reversal and remand required. |
| Holder in due course status | If holder in due course, defenses may be barred; assignment after filing could cure standing. | Nonholder cannot enforce; lack of possession precludes holder in due course status. | Cannot determine holder in due course without possession proven at filing. |
| Effect of amended complaint | Amended complaint cured the defect by asserting the assignment. | Amendment cannot substitute for lack of initial possession/assignment before filing. | Amendment did not cure initial lack of standing; reversal warranted. |
| Adequacy of evidence and rule 1:6-6 | Certifications based on business records suffice to show ownership. | Certifications lacked personal knowledge; the record lacks proper authentication. | Certifications did not meet personal knowledge standard; summary judgment improper on that basis. |
Key Cases Cited
- Wells Fargo Bank, N.A. v. Ford, 418 N.J. Super. 592 (App.Div. 2011) (standing requires ownership or control of the note at filing)
- Bank of N.Y. v. Raftogianis, 418 N.J. Super. 323 (Ch. Div. 2010) (three categories of enforceable interest in a negotiable instrument under UCC)
- In re Foreclosure Cases, 521 F. Supp. 2d 650 (S.D. Ohio, 2007) (foreclosure plaintiffs must show possession of note at filing; dismissal without prejudice if not)