US Bank Nat'l Ass'n v. Guillaume

• Decision Date: 27 February 2012
• Citation: 38 A.3d 570,209 N.J. 449
• Parties: US BANK NATIONAL ASSOCIATION, as Trustee for CSAB Mortgage–Backed Pass–Through Certificates, Series 2006–3, Plaintiff–Respondent, v. Maryse GUILLAUME and Emilio Guillaume, Defendants–Appellants,andCity of East Orange, Defendant.
• Court: New Jersey Supreme Court

209 N.J. 449

38 A.3d 570

US BANK NATIONAL ASSOCIATION, as Trustee for CSAB Mortgage–Backed Pass–Through Certificates, Series 2006–3, Plaintiff–Respondent,

v.Maryse GUILLAUME and Emilio Guillaume, Defendants–Appellants,andCity of East Orange, Defendant.

Supreme Court of New Jersey.

Argued Nov. 30, 2011.Decided Feb. 27, 2012.

Rebecca Schore, Newark, argued the cause for appellants (Legal Services of New Jersey, attorneys; Ms. Schore, Melville D. Miller, Jr., President, Margaret Lambe Jurow, and Engy Abdelkader, on the briefs).

Mark S. Melodia argued the cause for respondent (Reed Smith, attorneys; Mr. Melodia, Diane A. Bettino, Princeton, and Henry F. Reichner, on the briefs).

Linda E. Fisher submitted a brief on behalf of amici curiae Seton Hall University School of Law Center for Social Justice and Center for Responsible Lending (Seton Hall University School of Law Center for Social Justice, attorneys; Ms. Fisher and Kyle L. Rosenkrans, on the brief).Brian C. Nicholas and Jaime R. Ackerman submitted a brief on behalf of amicus curiae Mortgage Bankers Association of New Jersey (Zucker, Goldberg & Ackerman, attorneys).Douglas S. Brierley submitted a brief on behalf of amicus curiae Federal National Mortgage Association (Scarinci & Hollenbeck, attorneys; Mr. Brierley and Frank P. Kapusinski, Lyndhurst, on the brief).Brian C. Nicholas, Jaime R. Ackerman, Edward W. Kirn, Parsippany, Shari A. Seffer, Michael H. Hanusek, Vladimir V. Palma, and Rosemarie Diamond, Mt. Laurel, submitted a brief on behalf of amicus curiae New Jersey Foreclosure Attorneys (Zucker, Goldberg & Ackerman, Power Kirn, Fein, Such, Kahn, Shepard, and Phelan Hallinan & Schmieg, attorneys).Michael M. Horn submitted a brief on behalf of amicus curiae New Jersey Bankers Association (McCarter & English, attorneys; Mr. Horn, William P. Higgins, Jr., and Steven A. Beckelman, Newark, of counsel and on the brief).Justice PATTERSON delivered the opinion of the Court.

In the setting of an unprecedented residential lending crisis in our state, the Court considers the Legislature's foreclosure statutes and federal truth-in-lending law. Seeking relief from a default judgment entered in a foreclosure case, defendants Maryse and Emilio Guillaume attempt to demonstrate excusable neglect and the existence of a meritorious defense, Rule 4:50–1(a), that the trial court's judgment is void, Rule 4:50–1(d), or that this case presents exceptional circumstances, Rule 4:50–1(f). As to the meritorious defenses compelled by Rule 4:50–1(a), the Guillaumes invoke the Fair Foreclosure Act (FFA), N.J.S.A. 2A:50–53 to –68, and the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 to 1667f. They contend that plaintiff U.S. Bank National Association (U.S. Bank) violated the FFA by listing the name and address of a loan servicer—rather than the name of the lender itself—on the Notice of Intention to Foreclose (notice of intention) required by N.J.S.A. 2A:50–56. They argue that TILA authorized them to rescind their loan by virtue of a $120 overcharge of a recording fee.

The trial court concluded that the Guillaumes had not demonstrated excusable neglect for their failure to defend the foreclosure action. Rejecting the Guillaumes' assertion of a meritorious defense to U.S. Bank's foreclosure claim, the court held that U.S. Bank had substantially complied with the FFA, but directed it to issue a corrected notice of intention listing the lender. It further concluded that the $120 overcharge in a recording fee did not permit rescission of the transaction pursuant to TILA. Accordingly, the trial court denied the Guillaumes' motion to vacate the default judgment.

In a per curiam opinion, an Appellate Division panel affirmed, holding that the Guillaumes had failed to demonstrate excusable neglect or a meritorious defense as required by Rule 4:50–1(a), or the existence of exceptional circumstances under Rule 4:50–1(f). The panel held that U.S. Bank's original notice of intention, listing the name of the loan servicer rather than the lender, satisfied the purpose of the FFA, and that because the Guillaumes could not tender the balance due on their loan, TILA provided no meritorious defense to U.S. Bank's foreclosure action.

We now affirm, as modified, the Appellate Division's judgment. We concur with the Appellate Division panel that the Guillaumes have failed to demonstrate excusable neglect or a meritorious defense, and that they are therefore not entitled to relief under Rule 4:50–1(a). We also agree with the Appellate Division that the Guillaumes have failed to establish a meritorious defense under the FFA. We do not concur with the Appellate Division's determination that U.S. Bank's original notice of intention, listing the name of the loan servicer rather than the lender, substantially complied with N.J.S.A. 2A:50–56(c)(11). We hold that N.J.S.A. 2A:50–56(c)(11) requires that foreclosure plaintiffs list on the notice of intention the name and address of the actual lender, in addition to contact information for any loan servicer involved in the mortgage. We further hold that a court adjudicating a foreclosure action in which N.J.S.A. 2A:50–56(c)(11) is violated may dismiss the action without prejudice, permit a cure or impose such other remedy as may be appropriate to the specific case, and that the trial court's decision to order U.S. Bank to cure the defect in its notice of intention was a proper exercise of its discretion. To the extent that Bank of New York v. Laks, 422 N.J.Super. 201, 27 A.3d 1222 (App.Div.2011), holds that the only remedy available to a trial court for a violation of N.J.S.A. 2A:50–56(c)(11) is dismissal without prejudice, it is overruled.

We affirm the Appellate Division's holding that the Guillaumes' other contentions do not satisfy the requirements of Rule 4:50–1. We concur with the Appellate Division panel that because the Guillaumes could not tender the balance due on their loan, there was no abuse of discretion in finding that TILA does not give rise to a meritorious defense to the foreclosure action. We affirm the panel's holding that the Guillaumes' claim that the trial court's judgment was premised upon incompetent evidence is not a foundation for a finding of “exceptional circumstances” under Rule 4:50–1(f). We find no basis to accept the Guillaumes' contention—newly raised before this Court—that the default judgment should be vacated under Rule 4:50–1(d).

I.

On December 30, 1992, the Guillaumes and another individual purchased a home at 542 Prospect Street, East Orange, New Jersey, with a fixed-rate purchase money mortgage. In 1999, after the transfer of the third individual's interest in the property to the Guillaumes, they refinanced to a variable rate mortgage. On September 7, 2006, Maryse Guillaume obtained a $210,000 fixed rate loan from Credit Suisse, with a 6.75% interest rate and a thirty-year term. The Note, signed by Maryse Guillaume on September 7, 2006, was secured by a mortgage on the Guillaumes' home naming Mortgage Electronic Registration Systems Inc. as nominee for Credit Suisse, the mortgagee. The Guillaumes also signed a HUD–1 Settlement Statement, a Uniform Residential Loan Application, and a Federal Truth in Lending Disclosure Statement. The loan proceeds satisfied the Guillaumes' prior mortgage in the amount of $123,189.93, and Maryse Guillaume received $61,719.87 in cash.

On October 1, 2006, Credit Suisse assigned the Guillaumes' mortgage to U.S. Bank through a Pooling and Servicing Agreement. The assignment of the mortgage was executed on July 14, 2008, and recorded on July 31, 2008, with a corrected assignment executed on April 10, 2009, and recorded on April 15, 2009. The Pooling and Service Agreement provided that the servicer of a loan would be responsible for collecting payment, and had the authority to extend payment due dates, waive late payment fees and “effectuate foreclosure” of properties securing affected mortgage loans.

On November 14, 2006, the Guillaumes were informed in writing that America's Servicing Company (ASC) had been assigned responsibility to be the loan servicer for their mortgage. The letter advised that ASC's name would “appear on your monthly statements and other communications related to your mortgage loan.” Between December 2006 and March 2008, the Guillaumes sent their mortgage payments to ASC. However, the Guillaumes failed to make their mortgage payment in early April of 2008, and have made no payments at all since that date. On May 13, 2008, having missed two mortgage payments, Maryse Guillaume contacted ASC and identified a housing counselor as her representative with respect to her loan.

On May 28, 2008, ASC delivered a notice of intention dated May 18, 2008, to the Guillaumes, informing them that they had missed two payments totaling $4,091.88, advising them that they could cure the default by making a payment in the amount of $6,274.02 by June 17, 2008, and providing notice of the lender's intention to file a foreclosure action. The notice of intention urged the Guillaumes to “immediately seek the advice of an attorney(s) of your own choosing concerning this residential mortgage default.” It suggested that the Guillaumes communicate with the New Jersey State Bar Association, the county Lawyers Referral Service or the county Legal Services Offices, provided these organizations' telephone numbers, and also identified agencies with housing counseling services. The notice of intention, issued by ASC's “Default Management Department,” instructed the Guillaumes to direct mortgage payments to “America's Servicing Co., P.O. Box 1820, Newark, NJ 07101–1820.” The notice also identified ASC, with a telephone number, as the entity to contact should the Guillaumes dispute that a default had occurred or the loan servicer's calculation of the payment due. The name and address of the lender, U.S. Bank, did not appear anywhere on the notice of intention.

II.

This action began on July...