RESIDENTIAL MORTGAGE LOAN TRUST 2013-TT2, BY U.S. BANK NATIONAL ASSOCIATION VS. MORGAN STANLEY MORTGAGE CAPITAL, INC. (C-000108-15, UNION COUNTY AND STATEWIDE)
198 A.3d 1025
| N.J. Super. Ct. App. Div. | 2018Background
- In 2006 Claudinei and Regiane Barros executed a $765,000 note (payable to Wall Street Financial) secured by a mortgage on their house; they defaulted in April 2007.
- The mortgage and note passed through multiple transfers; original assignment documents were lost or unclear; various entities (Wall Street Financial, New Century, Consumer Solutions, Deutsche Bank, Residential Mortgage) claimed interests at different times.
- Two prior foreclosure actions were filed: one by Saxon (dismissed without prejudice in 2012) and one by Deutsche Bank (dismissed in 2013 for lack of proof of standing); Deutsche Bank later assigned its interest to Residential Mortgage.
- Residential Mortgage (by its trustee U.S. Bank) filed a General Equity action (quiet title-style under N.J.S.A. 46:18-13) to establish its status as the holder/owner and obtain standing to foreclose; it joined known potential claimants and sought indemnity protections for the mortgagors.
- The trial court granted summary judgment to Residential Mortgage, declaring it holder/assignee of the note and mortgage, barring other entities from asserting claims, precluding a deficiency action, and ordering Residential Mortgage to indemnify the Barroses.
- Defendants appealed, arguing the quiet title procedure was improper, res judicata barred the suit, material factual disputes existed about the chain of title, and not all interested parties were named.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper procedure to establish right to foreclose (ability to use a General Equity/quiet-title action) | Statute and equity permit an action to establish holder status before foreclosing; N.J.S.A. 46:18-13(b)(2) authorizes such suits | Plaintiff lacked standing to bring anything but a foreclosure; cannot establish standing except in a foreclosure action | N.J.S.A. 46:18-13 permits a civil action to establish holder status; quiet-title/General Equity suit was proper |
| Res judicata from prior Deutsche Bank foreclosure dismissal | Current action seeks to cure the standing defect identified by the prior dismissal without prejudice | Prior foreclosure dismissal precludes relitigation | No res judicata: prior dismissal was without prejudice and court allowed refiling if proof obtained; current suit is not barred |
| Existence of material factual disputes about chain of title (precluding summary judgment) | Residential Mortgage presented a colorable chain, named and served all known potential claimants, and sought indemnity to protect mortgagors | Defendants point to contradictory certifications and missing assignments showing unresolved ownership questions | Despite factual inconsistencies in the record, disputes were not material here: plaintiff identified/served all known claimants; no other entity came forward; summary judgment appropriate |
| Whether all potential claimants were joined and mortgagors protected from future claims | Plaintiff joined all entities shown by the record, obtained relief barring others and requiring indemnity | Defendants argued some unknown claimant might exist and were not joined | Court held plaintiff adequately identified and served known possible claimants; judgment bars post-foreclosure claims and requires plaintiff indemnify defendants |
Key Cases Cited
- Globe Motor Co. v. Igdalev, 225 N.J. 469 (statement of de novo standard of review)
- Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (summary judgment standard)
- Capital One, N.A. v. Peck, 455 N.J. Super. 254 (standing requires proof of ownership/control of note and mortgage)
- Deutsche Bank Nat. Trust Co. v. Mitchell, 422 N.J. Super. 214 (standing and proof in foreclosure actions)
- Deutsche Bank Nat. Trust Co. v. Russo, 429 N.J. Super. 91 (foreclosure plaintiff risks dismissal if cannot prove standing)
- Bank of New York v. Raftogianis, 418 N.J. Super. 323 (same; consequences of deficient standing proofs)