233 A.3d 424
N.J.2020Background
- In 2005 Javier Torres executed a promissory note (Note) secured by a residential mortgage; the Note permitted transfer to a "Note Holder."
- CitiMortgage succeeded the original lender, later discovered it had misplaced the original Note but retained a digital copy, and in 2013 executed a Lost Note Affidavit attesting to the loss and ownership and attaching the digital copy.
- CitiMortgage assigned “all beneficial interest under” the Mortgage (and its interest in the Note) to Investors Bank; Investors thereafter filed for foreclosure.
- Torres challenged Investors’ standing to enforce the Note because Investors did not possess the original instrument and N.J.S.A. 12A:3-309 governs lost instruments.
- Trial court granted summary judgment for Investors and required Investors to indemnify Torres against any future claims on the lost Note; the Appellate Division affirmed; the New Jersey Supreme Court affirmed as modified.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an assignee may enforce a lost negotiable note | Assignment transferred the right to enforce; assignment statutes and common law control | N.J.S.A. 12A:3-309 permits enforcement only by the party who possessed the note when it was lost | Assignee (Investors) may enforce: N.J.S.A. 2A:25-1, N.J.S.A. 46:9-9 and common-law assignment principles govern and authorize enforcement |
| Whether NJ's pre-2002 UCC 3-309 (N.J.S.A. 12A:3-309) bars transferees because NJ did not adopt the 2002 amendment | Silence in 3-309 does not nullify long-established assignment law or the secondary market | Legislative inaction shows intent to bar transferees | Legislative inaction is insufficient; Court declines to infer a rejection of transferee rights; 3-309 does not supplant assignment statutes |
| Admissibility of the Lost Note Affidavit and digital copy as evidence | Affidavit properly authenticated and qualifies as a business record under N.J.R.E. 803(c)(6) | Affidavit is unauthenticated, not contemporaneous, prepared by another entity and untrustworthy | Affidavit was properly authenticated under N.J.R.E. 901 and qualifies as a business record; trial court did not abuse its discretion |
| Protection against double liability and appropriate remedy | Indemnity and other protections satisfy 12A:3-309’s requirement that debtor be protected | Equitable concerns (e.g., enforce possession-based rule) argue against enforcement absent physical note | Trial court’s indemnity requirement adequately protects debtor; Supreme Court affirms judgment without relying on unjust enrichment |
Key Cases Cited
- Aronsohn v. Mandara, 98 N.J. 92 (1984) (contract rights generally assignable absent prohibition or public-policy bar)
- Morris Canal & Banking Co. v. Fisher, 9 N.J. Eq. 667 (E. & A. 1855) (historical discussion of negotiable instruments and delivery)
- Dennis Joslin Co., LLC v. Robinson Broadcasting Corp., 977 F. Supp. 491 (D.D.C. 1997) (interpreted 3-309 to require possession at time of loss)
- In re Caddo Parish–Villas S., Ltd., 250 F.3d 300 (5th Cir. 2001) (assignee may enforce a lost note under a mirror 3-309 provision)
- Deutsche Bank Nat’l Tr. Co. v. Mitchell, 422 N.J. Super. 214 (App. Div. 2011) (an assignee must authenticate assignment predating the original complaint to establish standing in foreclosure)
- Bobby D. Assocs. v. DiMarcantonio, 751 A.2d 673 (Pa. Super. Ct. 2000) (enforced lost note using state counterpart provisions on transfer/delivery)