U.S. BANK NATIONAL ASSOCIATION, ETC. VS. SILVANA SOTILLO(F-4359-14, MONMOUTH COUNTY AND STATEWIDE), A-0653-15T3

Background

In 2006 Sotillo executed an adjustable-rate note and mortgage for $279,000; the mortgage was assigned to Wells Fargo in 2006 and later to U.S. Bank (plaintiff) in 2012.
Sotillo fell behind after seeking loan modifications in 2009–2010; she accepted a 2009 modification and later entered a HAMP trial-payment plan and a 2010 modification with Wells Fargo.
Wells Fargo denied Sotillo a HAMP modification (initially for missed trial payments, later corrected to an eligibility issue); Sotillo alleges Wells Fargo pressured her into the less favorable 2010 modification.
Plaintiff filed foreclosure in 2014; Sotillo filed counterclaims including predatory lending, breach of implied covenant, breach of the 2009 modification, and Consumer Fraud Act (CFA) violations.
The trial court struck Sotillo’s counterclaims (treated as a summary-judgment motion because extrinsic materials were considered) and entered final judgment of foreclosure; reconsideration was denied and Sotillo appealed.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Standard for motion to strike/dismiss when extrinsic evidence submitted	Court should dismiss/cut off counterclaims; material outside pleadings converted motion to summary judgment	Sotillo argued counterclaims survived given her certification and documents	The court treated the motion as summary judgment and reviewed de novo; dismissal affirmed
Whether counterclaims were germane and thus permissible in foreclosure	Counterclaims lacked legal merit; dismissal appropriate	Counterclaims arise from the mortgage transaction and are germane	Court agreed claims were germane but lacked merit and were properly dismissed
CFA claim against assignee (U.S. Bank) for Wells Fargo’s alleged misconduct	U.S. Bank not liable as assignee for Wells Fargo’s pre-assignment misconduct	Sotillo argued CFA liability for conduct in servicing and modification process	CFA claim dismissed: CFA targets the actor who committed the unlawful practice; assignee not directly liable for assignor’s prior acts absent its own wrongdoing
Effect of negotiable instrument/holder-in-due-course doctrine on fraud/other defenses	Plaintiff is a holder in due course and thus immune from defendants’ personal defenses/recoupment	Sotillo claimed fraud in inducement regarding the 2010 modification and sought recovery against assignee	Court found plaintiff was a holder in due course; personal defenses (fraud in inducement) and recoupment claims barred as against the holder; dismissal affirmed

Key Cases Cited

Wreden v. Township of Lafayette, 436 N.J. Super. 117 (App. Div. 2014) (standard for de novo review of Rule 4:6-2(e) dismissal)
Nostrame v. Santiago, 213 N.J. 109 (2013) (limited to legal sufficiency of complaint on face)
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739 (1989) (liberal pleading standard; opportunity to amend)
Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995) (summary judgment standard; view evidence in nonmovant's favor)
U.S. Bank Nat'l Ass'n v. Curcio, 444 N.J. Super. 94 (App. Div. 2016) (foreclosure limits: validity, indebtedness, and right to foreclose)
Sun NLF Ltd. P'ship v. Sasso, 313 N.J. Super. 546 (App. Div. 1998) (germaneness requirement for foreclosure counterclaims)
Arias v. Elite Mortg. Grp., Inc., 439 N.J. Super. 273 (App. Div. 2015) (limits on claims for denial of loan modifications)
Miller v. Bank of Am. Home Loan Servicing, L.P., 439 N.J. Super. 540 (App. Div. 2015) (borrower cannot sue when denied HAMP modification for failing to meet HAMP guidelines)
Jefferson Loan Co., Inc. v. Session, 397 N.J. Super. 520 (App. Div. 2008) (assignee liable under CFA only for its own unconscionable conduct)
Carnegie Bank v. Shalleck, 256 N.J. Super. 23 (App. Div. 1992) (negotiable note/mortgage: holder in due course takes free of personal defenses)
Breslin v. N.J. Inv'rs, Inc., 70 N.J. 466 (1976) (policy and protection afforded to holder in due course)