Investors Bank v. Torres
| Decision Date | 01 July 2020 |
| Docket Number | A-55 September Term 2018,082239 |
| Citation | 233 A.3d 424,243 N.J. 25 |
| Parties | INVESTORS BANK, Plaintiff-Respondent, v. Javier TORRES, Defendant-Appellant, and Mrs. Javier Torres, his wife, and Dora M. Dillman, Defendants. |
| Court | New Jersey Supreme Court |
Adam Deutsch argued the cause for appellant (Northeast Law Group, attorneys; Adam Deutsch, on the briefs).
Joshua N. Howley, Newark, argued the cause for respondent (Sills Cummis & Gross, attorneys; Joshua N. Howley, of counsel and on the briefs, and Matthew L. Lippert, Newark, on the briefs).
Renee Cadmus argued the cause for amicus curiae Legal Services of New Jersey (Legal Services of New Jersey, attorneys; Melville D. Miller, Dawn K. Miller, Maryann Flanigan, and Robert Casagrand, Wayne, on the brief).
Linda E. Fisher argued the cause for amicus curiae Seton Hall Law School Center for Social Justice (Seton Hall Law School Center for Social Justice, attorneys; Linda E. Fisher and Margaret L. Jurow, Montclair, on the brief).
Joseph Lubertazzi, Newark, argued the cause for amicus curiae New Jersey Business & Industry Association (McCarter & English, attorneys; Joseph Lubertazzi, Steven Beckelman, David R. Kott, and Scott M. Weingart, Newark, of counsel and on the brief).
In 2005, defendant Javier Torres signed a promissory note (Note) and executed a residential mortgage (Mortgage) with his wife, defendant Dora M. Dillman. Several years later, Torres defaulted on his obligations under the Note. The entity that had possessed the Note, CitiMortgage, Inc. (CitiMortgage), then discovered that it had lost the original Note but had retained a digital copy setting forth its terms. CitiMortgage assigned the Mortgage and its interest in the Note to plaintiff Investors Bank (Investors).
Investors filed this foreclosure action. Relying on a provision of the Uniform Commercial Code (UCC) adopted in New Jersey, N.J.S.A. 12A:3-309, defendants challenged Investors’ right to enforce the Note, based on the loss of the original. The trial court rejected that challenge, granted summary judgment in Investors’ favor, and ordered Investors to indemnify defendants against any liability in the event that another party were to produce the original Note and attempt to enforce it against Torres.
Defendants appealed the trial court's grant of summary judgment. The Appellate Division declined to interpret N.J.S.A. 12A:3-309 to bar Investors from enforcing the lost Note. Citing New Jersey law recognizing the validity of assignments such as the one at issue here and the equitable principle of unjust enrichment, the Appellate Division affirmed the trial court's judgment. Investors Bank v. Torres, 457 N.J. Super. 53, 57-66, 197 A.3d 686 (App. Div. 2018).
We affirm as modified the Appellate Division's judgment. Relying on two statutes addressing assignments, N.J.S.A. 2A:25-1 and N.J.S.A. 46:9-9, as well as common-law assignment principles, we hold that Investors had the right as an assignee of the Mortgage and transferee of the Note to enforce the Note. We construe N.J.S.A. 12A:3-309 to address the rights of CitiMortgage as the possessor of a note or other instrument at the time that the instrument is lost, but not to supplant New Jersey assignment statutes and common law in the setting of this appeal or to preclude an assignee in Investors’ position from asserting its rights according to the Note's terms. Read together, N.J.S.A. 12A:3-309, N.J.S.A. 2A:25-1, and N.J.S.A. 46:9-9 clearly authorized the assignment and entitled Investors to enforce its assigned Mortgage and transferred Note. We do not rely on the equitable principle of unjust enrichment invoked by the Appellate Division. See Investors Bank, 457 N.J. Super. at 62-63, 197 A.3d 686.
We conclude that the trial court was presented with competent evidence that CitiMortgage had possessed the Note but misplaced it, that there was no genuine issue of material fact as to Investors’ right to enforce the Note, and that the trial court adequately protected Torres from the threat of double liability. We therefore hold that the trial court properly granted summary judgment in Investors’ favor and entered a judgment of foreclosure.
On October 28, 2005, defendant Javier Torres signed the Note. He promised to pay $650,000 plus interest to the order of the lender identified in the Note as AMRO Mortgage Group, Inc. (ABN). The Note confirmed Torres's understanding that ABN was authorized to transfer the Note and memorialized his agreement that ABN "or anyone who takes this Note by transfer and who is entitled to receive payments under this Note" would be considered the "Note Holder." The Note was secured by the October 28, 2005 Mortgage on defendants’ residential property in Woodcliff Lake, New Jersey.
ABN subsequently merged into CitiMortgage, which succeeded to its interest in the Note executed by Torres and the Mortgage executed by both defendants.
On September 15, 2008, CitiMortgage and defendants entered into a loan modification agreement which lowered the interest rate on the loan and extended the maturity date on the Note by three years.
On February 1, 2010, Torres defaulted on the Note.
CitiMortgage filed a foreclosure action against defendants on November 8, 2010. While that action was pending, CitiMortgage discovered that it no longer possessed the original Note. Nonetheless, CitiMortgage moved for summary judgment.
The trial court granted in part and denied in part CitiMortgage's summary judgment motion. The court stated that there was a disputed issue of material fact as to CitiMortgage's assertion "that it acquired possession of the Note and Mortgage on September 7, 2007 and that it remains in possession of same." The court scheduled a summary hearing to resolve that question. CitiMortgage then voluntarily dismissed its foreclosure action without prejudice.
On October 22, 2013, a CitiMortgage representative executed a Lost Note Affidavit. The affiant stated that after the Note was executed by Torres and delivered to CitiMortgage, "the original Note was misplaced, lost or destroyed." He further represented that the Note was not found despite a "thorough and diligent search" during which CitiMortgage "[s]earched loan files and imaged documents." The affiant asserted in the Lost Note Affidavit that CitiMortgage was "the lawful owner of the note," and had not "cancelled, altered, assigned or hypothecated the note."
CitiMortgage attached a digital copy of the Note without endorsements to its Affidavit and represented that after the copy was made, the Note had been "properly endorsed." The digital copy set forth the terms of the Note.
On September 2, 2014, in accordance with the Fair Foreclosure Act, N.J.S.A. 2A:50-56, CitiMortgage served on Torres a Notice of Default and Intention to Foreclose (NOI). On the NOI, CitiMortgage listed itself as the loan servicer, and listed Investors as the lender.
On November 20, 2014, CitiMortgage assigned to Investors "all beneficial interest under" the Mortgage, thus conveying its right to enforce the Note and Mortgage to Investors. The assignment provided that "[t]he transfer of the mortgage and accompanying rights was effective at the time the loan was sold and consideration passed to [Investors]." The assignment was recorded in the Bergen County Clerk's Office.
Investors then filed this foreclosure action in the Chancery Division. Defendants filed an answer, asserting as an affirmative defense that Investors "cannot enforce the note because it is neither a possessor of the note, a holder in due course, or a non-holder with a right to enforce."
After the parties conducted discovery, Investors moved for summary judgment pursuant to Rules 4:46-1 and 4:46-2. Investors submitted to the trial court the Lost Note Affidavit and the digital copy of the Note. To support the admissibility of those documents as business records under N.J.R.E. 803(c)(6), Investors submitted a certification by a CitiMortgage executive with responsibility for document control. The certification stated that CitiMortgage's business records that are maintained for the purpose of servicing mortgage loans were "made at or near the time by, or from information provided by, persons with knowledge of the activity and transactions reflected in such records"; that the records were "kept in the course of business activity conducted regularly" by CitiMortgage; and that it was the "regular practice of [CitiMortgage's] mortgage servicing business to make [those] records."
In the certification, CitiMortgage's representative acknowledged that Investors did not have the original Note and referred the court to the Lost Note Affidavit for an explanation of the missing Note. CitiMortgage's representative asserted that, despite the loss of the original Note, Investors had standing to enforce the Note pursuant to N.J.S.A. 12A:3-309.
Defendants opposed Investors’ summary judgment motion. They contested Investors’ standing based primarily on the fact that Investors did not have the original Note. They also asserted that the NOI served by CitiMortgage in advance of the foreclosure action was defective because the NOI prematurely designated Investors as the lender two months before CitiMortgage assigned the Mortgage to Investors.
The trial court granted Investors’ summary judgment motion. The court reasoned that a plaintiff in a foreclosure action must demonstrate either possession of the note or a valid assignment of the mortgage predating the filing of the foreclosure complaint; in its view, Investors had proven that it was assigned the mortgage two months before it filed its action. Without expressly ruling on the admissibility of the documents, the court acknowledged that Investors had provided a Lost Note Affidavit and a digital copy of the Note. It stated that "the Office of Foreclosure will address the lost note when [Investors] files for final judgment."
The trial court, however, agreed with defen...
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